CRX.L Regulatory News (CRX)

9 Mar 2005 07:00

Cyprotex PLC09 March 2005 Press Release 9 March 2005 Cyprotex PLC ("Cyprotex" or "the Company") Preliminary Results for year ended 31 December 2004 Cyprotex PLC, a drug discovery technology and information company, today reportsits preliminary results for the year ended 31 December 2004. Highlights • Revenue increased over 100% to £2.12 million from £1.05 million • Gross profits more than doubled to £1.7 million up from £0.8 million • Gross margins rose to 80%, compared with 76% • Cash resources were carefully guarded. Year end net cash amounted to £1.84m, compared with £0.49m for the previous year, despite significant capital investment in new laboratory capabilities • Basic loss per share almost halved to 1.04p compared with 2.05p • The customer base, ranging from global pharmaceutical groups to the smallest biotechnology companies, continued to expand rapidly; the largest of which contributed less than 14% of total revenues in 2004 Commenting on the results, Robert Morrisson Atwater, Chairman and ChiefExecutive Officer of Cyprotex PLC, said: "2005 has started strongly. "Recognising the continued expansion of its core customer base and the extent ofrepeat/longer-term contracts, Cyprotex expects to significantly outpace theunderlying growth of its sector again in 2005. "Despite a major expansion of its operational facilities during 2004, managementhas continued to carefully guard its cash resources. Cyprotex expects to finditself moving cash flow positive, on a monthly basis, in 2005. Existingoperations are now considered to have sufficient resources to fund their ownexpansion going forward." For further information, please contact: Cyprotex PLC Robert Atwater, Chairman & Chief Executive Officer Tel: +44 (0) 207 398 7700 rmatwater@cyprotex.com www.cyprotex.com Media enquiries: Abchurch Henry Harrison-Topham/ Heather Salmond Tel: +44 (0) 207 398 7700 heather.salmond@abchurch-group.com www.abchurch-group.com Chairman and Chief Executive's Statement 2004 was a watershed year for Cyprotex. In the course of just one year the company has moved from a position ofrecognising the true scope and potential of its market, to being able to graspopportunities at the commercial, intellectual and operational forefront of itssector. The immediate task for 2004 was to allow the Group to secure these opportunitiesby completing its transition into high throughput Cloe Screen assays, gainingmarket acceptance of its predictive computational capabilities and tosignificantly expand its customer base whilst carefully guarding cash resources.With the support, loyalty and drive of its staff, all were achieved. A year of major investment. Cyprotex was rewarded with more than a doubling ofits core client base having opened a sales office in North America, started adirect drive into Japan and strengthened its European marketing. With momentumbuilding strongly, detailed planning ensured scalability of all Groupactivities. The seamless expansion of its leading-edge laboratory capabilitieswhich began in the second half, is expected to guarantee the operationalcapacity, execution and reliability demanded by major customers beyond 2006.This was entirely financed through existing cash resources. Capitalrequirements are expected to fall significantly in 2005. The first rewards from the Group's high commitment for Research and Developmenthave also been seen. This is demonstrated by the ability to repeatedly servicesome of the world's most demanding customers, ranging from the largest globalpharmaceutical companies to the smallest biotechnology company, in a suitablyeconomical, timely and sophisticated manner. Moreover, the uptake of its 'virtual human' pharmacokinetic technology clearly places Cyprotex at theintellectual forefront of its sector. Relative Research and Developmentinvestment costs will diminish in 2005. 2005 has started strongly. Recognising the continued expansion of its core customer base and the extent ofrepeat/longer-term contracts, Cyprotex expects to significantly outpace theunderlying growth of its sector again in 2005. Despite a major expansion of its operational facilities during 2004, managementhas continued to carefully guard its cash resources. Cyprotex expects to finditself moving cash flow positive, on a monthly basis, in 2005. Existingoperations are now considered to have sufficient resources to fund their ownexpansion going forward. Financial Highlights of 2004 • Revenue for the year ended 31st December 2004 was £2,117,321, against £1,052,953 for the comparable period in 2003, representing more than a 100% year-on-year increase • Gross profit more than doubled for the year to £1,684,880, up from £803,101 in 2003 • Gross margins rose to 80%, compared with 76% • The loss on ordinary activity after taxation, for the year was £1,299,107, down from a loss of £1,860,145 in 2003, representing a reduction of more than 30% year-on-year • Cash resources were carefully guarded. Year-end net cash amounted to £1.84m, despite significant capital investment in new laboratory capabilities • A rapidly expanding customer base has ensured the Group does not have a high dependence on any single client, the largest of which contributed less than 14% of total revenues in 2004 Product Development Cyprotex has significantly increased the robustness and automation of its CloeScreen assays, through a transition into high throughput screening without anyloss of 'classical laboratory' quality. Extensive commercial and scientificvalidation has been rewarded by strengthening customer relations and obtainingrepeat business. Cyprotex's product offering was expanded further to areas where additionalrevenue can be rapidly generated; one such development being the Cloe ScreenhERG channel inhibition assay, which was validated earlier this year. Inaddition, a restructuring of metabolite profiling and identification offeringsis underway, with a view to efficiently leveraging new laboratory facilities,whilst new offerings for in-vitro safety toxicology have also been prioritised. Good acceptance has been registered for the Group's integrated products, thatcombine experimental screening with 'virtual human' predictive modelling inorder to forecast the pharmacokinetics of drug candidates. The first long termcontract for Cloe PK has provided the opportunity for further refinement of thisoffering. Evaluation projects and subscription discussions are continuing witha series of global pharmaceutical companies for similar contracts. The Group also continued to invest heavily in the next generation of predictivemodelling systems. The rapid evolution of these products will allow progressiveoffering of propriety 'in-silico' technologies, as a further step to offeringits customers a 'one-stop-shop' in discovery ADMET/PK. Customer Development Cyprotex's marketing drive during 2004 was rewarded with more than a doubling ofits core customer base. Revenue generating contracts were secured during theperiod from a very wide range of customers, including global names such as,Roche, Serono, Solvay, Altana, AstraZeneca, Elan, Shire, Novo Nordisk andJohnson & Johnson. In recognition that the single largest market opportunity for Cyprotex'stechnology remains in North America, a sales office was opened on the east coastduring 2004. The Group has already closed significant deals and identifiedmajor new customer opportunities in the area. Further representation on thewest coast will be considered during 2005. Recognising also Japan as a furtherarea to benefit from a direct sales effort, late in 2004 the Group began amarketing drive into the region. The Group actively participated in a large number of global conferences,seminars and workshops during 2004, such as the World Pharmaceutical Congressand Drug Discovery Technology World Congress. Promotional activity in thecurrent year will also include the further raising of Cyprotex's technologicalprofile through publication of scientific papers, the activity of our ScientificAdvisory Board and market-focused editorials and news releases. Laboratory Expansion Detailed planning has ensured the scalability of the Group's unique laboratoryoperations. In commissioning a series of new 'state-of-the art' instruments(mass spectrometer, automated planar-patch clamp for hERG channel inhibition,high-throughput liquid handling robot, etc.) in its highly automatedenvironment, Cyprotex has anticipated the capacity, turnaround and reliabilityrequirements of its expanding customer base beyond 2006. Without anticipating any deterioration of the exceptional gross margin enjoyedby the Group's in-vitro facilities, Cyprotex remains confident of its ability tocontinue to significantly outpace its own expanding market place. Operational Premises Cyprotex's operational headquarters in Macclesfield, which house all of theGroup's laboratory and UK administration offices, were offered for sale on theopen market during 2004. The management carefully considered the economic and shareholder benefits oftendering for the building's purchase. The property in Beech Lane wassubsequently secured, on 17 January 2005, at a discount to its valuation forvacant possession. The Group is now freed from historical obligations derived from the terms of its'full repairing' lease whilst approximately halving its annual cost ofoccupation. Additional benefits include added security for staff, significantscope to expand operational space on the half-acre site and the medium-termdevelopment potential of this town centre location. The property was financedwith existing cash resources and an 80% mortgage arranged through our principalbankers. Robert Morrisson AtwaterChairman and Chief Executive Officer9 March 2005 Cyprotex PLCConsolidated Profit and Loss Accountfor the year ended 31 December 2004 Notes 2004 2003Continuing activities £ £ TURNOVER 3 2,117,321 1,052,953Cost of sales (432,441) (249,852) GROSS PROFIT 1,684,880 803,101 Administrative expenses (3,255,104) (2,838,223) OPERATING LOSS (1,570,224) (2,035,122) Interest receivable 107,697 38,875Interest payable (1,762) (53,154) LOSS ON ORDINARY ACTIVITIES BEFORE (1,464,289) (2,049,401)TAXATIONTaxation 4 165,182 189,256 LOSS FOR THE PERIOD (1,299,107) (1,860,145) Loss per shareBasic 7 (1.04)p (2.05)p The accompanying notes are an integral part of this consolidated profit and lossaccount. Cyprotex PLCConsolidated Statement of Total Recognised Gains and Lossesfor the year ended 31 December 2004 2004 2003 £ £ Loss for the financial period (1,299,107) (1,860,145)Exchange difference on the re-translation of net assets of subsidiary undertaking 20,266 52,649Total recognised gains and losses relating to the period (1,278,841) (1,807,496) Cyprotex PLCConsolidated Balance Sheetat 31 December 2004 2004 2003 Notes £ £Fixed AssetsTangible Assets 915,124 661,557Investments - - 915,124 661,557Current AssetsStocks 86,028 67,766Debtors 770,863 407,837Cash at bank and in hand 1,839,800 491,230 2,696,691 966,833 Creditors: amounts falling due within one year (563,085) (405,151) Net current assets 2,133,606 561,682 Net assets 3,048,730 1,223,239 Capital and ReservesCalled up share capital 8 127,312 94,914Share premium 8 9,616,721 6,544,787Merger reserve 8 128,070 128,070Profit and loss account 8 (6,823,373) (5,544,532) Equity shareholders' funds 8 3,048,730 1,223,239 The accompanying notes are an integral part of this balance sheet. Cyprotex PLCConsolidated Cash Flow Statementfor the year ended 31 December 2004 2004 2003 Notes £ £ Net cash outflow from operating activities 5 (1,487,748) (2,303,390) Returns on investments and servicing of financeInterest received 107,697 38,875Interest paid (75) (51,407)Interest element of finance leases and hire purchase contracts (1,687) (1,747) 105,935 (14,279) TaxationUK corporation tax received 163,141 179,460 Capital expenditurePayments to acquire tangible fixed assets (545,432) (3,812)Receipts from sales of tangible fixed assets 16,702 256,126Net cash (outflow)/ inflow from capital expenditure (528,730) 252,314 Net cash outflow before financing (1,747,402) (1,885,895) Management of liquid funds (1,742,580) 330,000 FinancingIssue of ordinary share capital 3,104,332 769,500Net movement in short term borrowings - (166,315)Net movement in long term borrowings - (383,685)Repayment of finance leases and hire purchase contracts (8,360) (105,551) Net cash inflow from financing 3,095,972 113,949 Decrease in cash 6 (394,010) (1,441,946) The accompanying notes are an integral part of this consolidated cash flowstatement. Consolidated Cash Flow Statement (continued) Reconciliation of net cash flows to movement in net funds 2004 2003 £ £ Decrease in cash during the year (394,010) (1,441,946)Cash outflow/(inflow) to short term deposits 1,742,580 (330,000)Cash outflow from decrease in short term loans - 166,315Cash outflow from decrease in long term loans - 383,685Repayment of finance leases and hire purchase contracts 8,360 105,551 Movement in net funds during the period 1,356,930 (1,116,395) Net funds at the start of the period 482,870 1,599,265 Net funds at period end 1,839,800 482,870 1. Basis of preparation The preliminary statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. The principal accounting policies of the group have remained unchanged from those set out in the group's 2003 annual report and accounts. International Financial Reporting Standards ('IFRS') were set to replace United Kingdom generally accepted accounting practice ('UK GAAP') for consolidated reporting in 2005. However, on 7 October 2004 the London Stock Exchange announced that following changes to existing AIM rules that AIM companies can continue until financial periods commencing on or after 1 January 2007 to report in either UK GAAP or International Accounting Standards 'IAS'. These preliminary statements have been prepared under UK GAAP. The preliminary statements are prepared on a going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future. 2. Basis of consolidation and presentation of preliminary statements The preliminary statements comprise the accounts of Cyprotex PLC and its subsidiary undertakings for the year ended 31 December 2004. 3. Turnover and segmental analysis Turnover represents the amounts derived from the provision of goods and services which fall within the Group's ordinary activities and is stated net of value added tax and trade discounts. The Group operates in one principal area of activity, that of providing in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity/ Pharmacokinetic) information to the pharmaceutical industry. The turnover and operating result for the periods are derived from the Group's principal activity. 3. Turnover and segmental analysis (continued) The geographic analysis of turnover by destination is as follows: 2004 2003 £ £ United Kingdom 808,820 463,397 Rest of Europe 1,183,168 553,646 USA 125,333 35,910 2,117,321 1,052,953 The geographical analysis of turnover by source and the geographical analysis of operating loss and loss on ordinary activities before taxation are as follows: Segmental Turnover profit/(loss) 2004 2003 2004 2003 £ £ £ £ United Kingdom 2,117,321 1,049,584 (1,570,224) (2,040,247) USA - 3,369 - 42,526 2,117,321 1,052,953 (1,570,224) (1,997,721) Common costs - (37,401) Operating loss (1,570,224) (2,035,122) Net interest receivable/(payable) 105,935 (14,279) Loss on ordinary activities before (1,464,289) (2,049,401) taxation The geographical analysis of net assets and liabilities is as follows: United Kingdom USA 2004 Total 2003 Total £ £ £ £ Net assets/(liabilities) - 2004 1,049,485 (5,737) 1,043,748 - 2003 601,494 (24,266) 577,228 The net assets/(liabilities) are reconciled to shareholders' funds as follows: Cash at bank and in hand 1,839,800 491,230 Corporation tax recoverable 165,182 163,141 Obligations due under leases and hire purchase - (8,360) contracts 3,048,730 1,223,239 4. Taxation on loss on ordinary activities The current tax credit for the period is lower than the standard rate of corporation tax at 30% due to the differences explained below: 2004 2003 £ £ Loss on ordinary activities before taxation (1,464,289) (2,049,401) Loss on ordinary activities multiplied by the standardrate of corporation tax in the UK of 30% (2003 30%) 439,287 614,820 Effects of:Expenses not allowable for tax purposes (4,680) (2,070)Capital allowances in excess of depreciation 42,874 (23,570)Short term timing differences (1,460) 2,168Tax losses current period (269,544) (387,422)Difference in tax rates on losses surrenderedfor research & development tax credit (41,295) (40,785)Adjustment to charge in respect of prior periods - 26,115 Current tax credit for the period 165,182 189,256 The Group has tax losses arising of £4,453,857 (2003 £3,758,944) that are available for offset against future taxable profits. 5. Reconciliation of operating loss to net cash flow from operating activities 2004 2003 £ £ Operating loss (1,570,224) (2,035,122) Depreciation of tangible fixed assets 272,641 269,784 Loss/(profit) on sale of tangible fixed assets 2,522 (42,606) Increase in stocks and work in progress (18,262) (16,983) (Increase)/decrease in operating debtors and prepayments (360,985) 5,908 Increase/(decrease) in operating creditors and accruals 166,294 (495,562) Exchange rate differences 20,266 11,191 Net cash outflow from operating activities (1,487,748) (2,303,390) 6. Analysis of movement in net funds At 31 At 1 January Cash December 2004 Flow 2004 £ £ £ Cash at bank and in hand 491,230 (394,010) 97,220 491,230 (394,010) 97,220 Short term deposits - 1,742,580 1,742,580 Finance leases (8,360) 8,360 - 482,870 1,356,930 1,839,800 Short term deposits are included within cash at bank and in hand in the balance sheet. 7. Loss per ordinary share Basic loss per ordinary share is calculated based on the loss for the period of £1,299,107 (2003 loss £1,860,145) and on 125,338,821 ordinary shares (2003 90,623,382 ordinary shares), being the weighted average number of ordinary shares in issue during the period. The loss for the period and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per share are the same as for the basic earnings per share calculation. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of Financial Reporting Standard No. 14 (FRS 14). 8. Reconciliation of shareholders' funds and movement on reserves Share Share Merger Profit and 2004 2003 Capital Premium Reserve Loss Account Total Total £ £ £ £ £ £ At 1 January 2004 94,914 6,544,787 128,070 (5,544,532) 1,223,239 2,261,235 Issue of shares 32,398 3,129,858 - - 3,162,256 810,000 Issue costs - (57,924) - - (57,924) (40,500) Loss for the period - - - (1,299,107) (1,299,107) (1,860,145) Exchange difference on - - - 20,266 20,266 52,649 retranslation of net assets At 31 December 2004 127,312 9,616,721 128,070 (6,823,373) 3,048,730 1,223,239 9. The annual report will be posted to shareholders on the 30 March 2005. Further copies will be available on request from the Company Secretary, Cyprotex PLC, 15 Beech Lane, Macclesfield, Cheshire, SK10 2DR. 10. The Annual General Meeting will be held at 10:00 am on Wednesday, 1 June 2005 at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED. 11. The financial information set out in this preliminary announcement does not constitute full accounts within the meaning of section 240 of the Companies Act 1985. The balance sheet at 31 December 2004 and the consolidated profit and loss account, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2004 statutory financial statements upon which the auditors opinion is unqualified and does not included any statement under section 237 of the Companies Act 1985. These financial statements have not yet been delivered to the Registrar of Companies. This information is provided by RNS The company news service from the London Stock Exchange