ABC.L Regulatory News (ABC)

1 Oct 2007 07:02

ABCAM Plc01 October 2007 For immediate release 1 October 2007 ABCAM PLC ("Abcam" or "the Company") Preliminary results for the year to 30 June 2007 Cambridge UK: Abcam plc (AIM: ABC), the rapidly growing bioscience company thatmarkets antibodies via its own online catalogue, is pleased to announcepreliminary results for the year to 30 June 2007. Highlights • Sales increased 26.6% to £24.5m (2006: £19.4m), representing a 33.8% increase using constant exchange rates. (Average exchange rate applied to US Sales 2007 £1:$1.92, 2006 £1: $1.77) • Pre-tax profits increased 18.1% to £5.7m (2006: £4.8m) • Product range grew to 33,900 antibodies and related products (2006: 23,200) • Three licensing deals agreed giving Abcam exclusive distribution rights to over 4,000 existing and future complementary products • High-throughput production (HTP) laboratory built to boost the number of high-margin in-house products. Operations began on schedule and the first antibodies will be ready for sale later this calendar year • New subsidiary in Tokyo trading well to help Abcam further develop its fast-growing Asia-Pacific business • Net cash and short term investments at 30 June 2007 of £10.7m (2006: £11.9m) • Dividend policy increased from 25% to 33% of profit after tax • Final dividend up 60% to 3.19p per share (2006: 2.0p) • Basic EPS of 11.99p per share (2006: 10.73p). The EPS calculation for the year uses the weighted average of 34,572,810 shares (2006: 31,914,845) David Cleevely, Abcam's Chairman, said: "This has been another highly successfulyear for Abcam. We are entering the current year with an exciting platform forgrowth and our cash generation is such that we have been able to significantlyincrease the distribution of our profits to shareholders by raising our dividendpolicy to 33% of our after-tax profits. Current trading remains strong and theBoard is confident of the outlook for 2008." For further information please contact: Abcam + 44 (0) 1223 696000 Jonathan Milner, Chief Executive OfficerEddie Powell, Chief Financial Officerwww.abcam.com Numis Securities + 44 (0) 20 7260 1000Michael MeadeJames Black Buchanan Communications + 44 (0) 20 7466 5000Mark Court / Mary-Jane Johnson Notes for editors: About Abcam plc Abcam is a producer and distributor of research-grade antibodies headquarteredin Cambridge, UK, with a US office located in Cambridge, Massachusetts, and aJapan office in Tokyo. Abcam was admitted to AIM in November 2005 and tradesunder the ticker symbol ABC. The Company produces and distributes its own andthird party produced antibodies to academic and commercial users throughout theworld with product information provided and ordering available through theCompany's website, www.abcam.com. The antibodies are sold under the Abcam brandname. The Company's vision is to build the largest online antibody resource inthe world while also ensuring that the antibodies are of high quality andcommercially viable. Abcam now has an online catalogue of approximately 35,000products, most of which are antibodies, from over 200 suppliers supported byup-to-date and detailed technical data sheets, which are created by the Company.The Company currently employs 130 staff in its three operating companies. CHAIRMAN'S REVIEW It gives me great pleasure to report on a second outstanding year for Abcam as apublic company. Building on the growth we enjoyed in 2006, we have producedanother excellent set of results whilst making some important investments in theyear, which will serve as a springboard to even greater success in the future. First of all, the construction of our HTP facility in Cambridge UK has beencompleted on schedule and operations have already started. The facility willhelp Abcam to take advantage of new business opportunities, such as a betterpharma/biotech offering and potentially diagnostics. In addition to the HTP facility, we officially opened our new office in Japan inDecember 2006. Located in a prominent business district of Tokyo, the officegives us a strong foothold in one of the most rapidly growing antibody marketsin the world. Having a local presence will greatly improve the quality of thesupport we can provide to Abcam customers in this region. With this goal in mindwe have also enhanced the Japanese version of our website. Whilst these areearly days for the Japanese business, we are encouraged by its performanceduring its first few months. Although we plan to enlarge our portfolio of antibodies produced in-house, wecontinue to build relationships with institutes, academic laboratories andprimary manufacturers that supply products to be sold under the Abcam brand.Over the last financial year we have also acquired the exclusive rights todistribute new antibody product lines with three companies. In August 2006 weannounced an exclusive deal with Triple Point Biologics Inc. for a range of 350antibodies with the delivery of another 360 antibodies over the next threeyears. We followed that by signing similar agreements with Assay BioTechnologyCompany Inc., a US firm that tests, validates and markets research antibodies,and with Diaclone, which is part of the Tepnel Group and develops antibodies andkits in the UK. ABT have already made 500 products available to Abcam onexclusive terms and are committed to adding a further 3,000 to our portfolioover the next five years; Diaclone has made 341 products available withexclusive distribution rights in the Americas and Japan. Since our last annual report we have continued to attract top-quality staff. Wenow employ 27 PhDs out of 131 full-time employees and are currently in the midstof a recruitment drive as we increase production at the HTP facility. Last Julywe announced the appointment of two new Non-Executive Directors: Tim Dye andMark Webster. Both have proven to be extremely valuable additions to the Board. After almost eight years as Finance Director, a period including Abcam'ssuccessful IPO in 2005, Eddie Powell has indicated his desire to leave theCompany to allow him to take a career break and subsequently to be available forconsulting positions. We are already well under way in appointing Eddie'ssuccessor. Eddie will be stepping down from the Board on 20 November 2007,following which we will retain his services as an adviser. We owe him a debt ofgratitude for his valuable contribution to building the Company and wish himwell for the future. Abcam is becoming increasingly visible on the world stage as an importantcontributor to the field of antibodies and related medical disciplines. Ourmarket reach makes us attractive to suppliers, and our customer base now extendsacross almost 60 countries, thanks largely to our reputation for reliability andtrust in the marketplace. A recent internally commissioned independent reportnamed Abcam as one of the top five research antibody companies in the world, andin some of our Core Focus Areas (CFAs), such as chromatin research, we believewe are the market leader. With the landmarks we have reached this year, and the initiatives we haveunveiled, Abcam has laid solid foundations for expansion in the future. Weremain firmly committed to our mission to build the largest online catalogue ofthe best antibodies in the world. Once again I am grateful to all of our staff for their efforts during the yearand take the opportunity to thank our customers, suppliers and shareholders fortheir continued support. Dividends The Directors' policy since the IPO in November 2005 has been to distribute 25%of earnings as dividends. However, in view of the continuing strong cashflow andgrowing success of the Group, the Directors have decided to increase thedistribution to 33% of earnings. An interim dividend of 0.8p per share was paidin April 2007 and the Directors are therefore recommending a final dividend of3.19p per share, making a total for the year of 3.99p. Subject to shareholderapproval at the annual general meeting in November, this dividend will be paidon 7 December 2007 to shareholders on the register on 9 November 2007. Outlook We are entering the current year with an exciting platform for growth andcurrent trading in the first few months of the year has been strong. The Boardis confident of the outlook for 2008. David CleevelyChairman28 September 2007 CEO'S REVIEW Abcam has enjoyed another impressive year with sales increasing by 26.6% to£24.5m. This growth came despite the weakening dollar, without which sales wouldhave grown by 33.8%.(Average exchange rate applied to US Sales 2007 £1:$1.92,2006 £1: $1.77) This success is due to the introduction of new products and the performance ofthe existing catalogue. Taken across the catalogue, average unit sales continueto increase the longer a product is listed - a trend we attribute in part to thesheer quantity of product information we are able to gather and publish overtime. We should also not underestimate the contribution made by our highlyskilled and committed staff, who make Abcam such a dynamic and motivatingorganisation. We now have almost 34,000 products in our online catalogue, up from 23,200 atthe end of June 2006. As well as listing over 25,000 antibodies, we sell morethan 8,000 related products, including proteins, peptides and kits. The rapidexpansion of our product portfolio has been fuelled by a growing number ofpartnerships with leading OEM suppliers worldwide and by our acquisition of theexclusive rights to distribute antibodies developed by some leadinginternational manufacturers over the last financial year. Major contributions to revenue have come from our US operation, where longeropening hours and a push on sales and marketing activities have helped us toachieve a high rate of growth. In Europe a similar focus on marketing in the second half of the year haspropelled a 58.8% year on year increase in the volume of business over thecorresponding period last year. Our virtual European offices are promoting theuse of French and German so that many European customers can now contact usdirectly in their own language. Despite significant investments for the future, profit before taxation increasedto £5.7m from £4.8m in 2006. While margins remain strong, overall profitabilityhas been affected by the investment in the new Japanese office, the impact ofthe weaker US$, increased research and development costs, early-stage costs forthe exclusive distribution deals and the full-year effect of the costs ofoperating as a listed company. Work on the HTP facility, meanwhile, was finished in June 2007. The antibodieswe develop ourselves have typically been among our best sellers. Whilst only 6%of the products sold under the Abcam brand are produced in-house, theserepresent 16% of our sales by value and generate proportionately higher margins.We expect that the new facility will allow us to dramatically increase our rangeof in-house products over the next few years and will lead to increased sales aswell as improved gross margins. Abcam is expert at identifying the areas of research with the most promise andoffering products specifically tailored to meet associated demands. Theseproducts fall within our Core Focus Areas (CFAs). Externally we have presentedat conferences and run marketing activities around these CFAs, while internallywe have vertically integrated our technical service, marketing, businessdevelopment and sales departments to take full advantage of them. We have foundthis to be a highly successful strategy for capturing market share by segment,and plan to develop more CFAs in the future. We are now becoming a leading player in an important and exciting market. Wehave a scaleable business based around our state-of-the-art website. By offeringcustomers access to detailed and up-to-date technical information on ourproducts, much of which is derived from customers' own reviews, we have built astrong reputation for trust and reliability. In addition, with our large andgrowing database of users, we can now tailor our marketing activities accordingto customer interest. The investment we have made in systems to link the websiteto product ordering and accounting has improved our efficiency, and gives us theconfidence that we will continue to manage our growth effectively. Jonathan MilnerCEO28 September 2007 MANAGING DIRECTOR'S REVIEW The construction of our HTP facility in Cambridge UK was a major project thisyear, and I am delighted to report it was completed on time and within budget.At this facility we will develop a highly automated monoclonal antibodyproduction system and continue to produce polyclonal antibodies. We expect it tobecome one of the most advanced antibody production facilities in the world,further proving our commitment to build scaleable business processes andproducts of the highest standard. The facility is expected to add over 35,000new quality high-margin monoclonal antibodies to our catalogue over the nextfive years. The robotic stock storage and retrieval system that has been so successful inthe UK has now been replicated in the US, and it is delivering similar resultsin terms of the speed and reliability of order delivery. Using leading-edgestorage and handling facilities, we have successfully cut our shipping times andincreased our rate of output without incurring additional expenditure onstaffing and conventional refrigeration systems. Extended opening times and Saturday working in the US have further improvedservice levels to customers and we are now trialling a key-account marketinginitiative, selling to targeted market areas in the country. In the UK, werecently launched a new service promising same-day delivery of antibodies toscientists based in the Cambridge area at no extra cost. We have successfully developed and deployed a Japanese-language version of ourwebsite to take full advantage of our local presence in our Tokyo office.Priorities in the Far East include improving our technical support and speedingup the delivery of our products to customers. Japan is a challenging market andso far we have been delighted with the performance of the business, which hasgenerated Y160m (£680k) in revenue in the second half of the year. We continue to improve the performance of our website in general, focusing onthe speed of access to our global market. We are now deploying a content cachingand delivery solution so that our website can be served locally from over 25,000servers across 69 countries. This important initiative will help stabilise thewebsite and improve response times for users, supporting the continued expansionof our geographical reach. Growth of the scale we are achieving relies in large part on the continuedcommitment of staff. We place strong emphasis on responsibility for andcommunication with employees. Through a programme of weekly updates, quarterlydepartmental and annual strategy and budget presentations, we ensure that eachemployee understands his or her objectives and targets and how these relate tothe Group as a whole. The success of the programme is demonstrable in theenthusiasm and creativity which drives the Group. Jim WarwickManaging Director28 September 2007 FINANCIAL REVIEW Gross margin Gross margins reported for the period under review are 59.1% compared with 61.3% for the previous year. The difference results partly from an increasedallocation of costs to cost of sales and lower margins in the early stages ofthe exclusive product distribution deals signed in the year. As sales ofproducts from these deals grow we expect margins to exceed those of the rest ofthe catalogue. Part of the remit of our Business Development team is to obtain best terms fromour suppliers and price increases in the year have been modest overall. As theGroup's sales grow we are buying more from our suppliers and consequently arenow able to negotiate some price reductions. Administrative expenses Although administrative expenses rose from £6.2m to £7.6m, they fell as apercentage of sales, from 31.9% to 30.9%. The costs for the year include thoseincurred in relation to the opening of the Japanese office, spending our firstfull-year as a public company and as explained below, from the application ofFRS 20. The accounting standard FRS 20 on share-based payments has been applied to theCompany's accounts for the first time, and this has resulted in a charge of£162,000 for the period. As the first application of this standard is a changeof accounting policy, the results for the same period last year have beenrestated by including a corresponding charge in the expenses for that period of£72,000. US$ impact The weakening dollar has had an adverse impact on revenue. Had the rate remainedthe same as the previous year, sales would have been higher at £25.9m andoperating profit would have been £0.4m higher based on an average exchange rateapplied to US Sales 2007 £1:$1.92, 2006 £1: $1.77) Research and Development expenditure Research and Development expenditure increased to 7.0% of sales from 6.3% in2006 and this is reflected in the growing number of products which are producedin-house. Profit Operating profits increased 15.3% from £4.5m in the year ended June 2006 to£5.2m. The decrease as a percentage of sales from 23.3% to 21.2% reflects theimpact of the additional costs outlined above. Interest income rose as the Company benefited from full-year availability offunds raised from the IPO. Tax The consolidated tax charge for the year was £1.6m or 27.3% of profit beforetax. The effective tax charge for 2006 was 29.1%, reflecting the increasedamount of research and development undertaken this year and the consequent taxcredits. The tax charge for 2006 has been restated from £1.2m to £1.4m as aresult of the adoption of FRS20 (see note 22) Inventories Inventory levels have increased somewhat faster than sales partly because ofinventory purchased as part of the product line agreements that provide Abcamwith exclusive distribution rights to certain products and partly because of theincrease in the number of Abcam products developed in-house, which involve batchsizes larger than required for immediate sale. Debtors The majority of sales continue to be on credit and credit control is a keyfunction. Debtor days have increased slightly to 47 days (2006: 45 days).Historically the Group has experienced a low level of bad debt. Creditors Total creditors rose from £3.0m to £3.8m. These now include amounts owing inrelation to the deferred settlement arrangements on product line acquisitionsconcluded during the year. These have been allocated between creditors duewithin one year and amounts falling due after one year. Provisions for Liabilities and Charges represents deferred tax balances whichhave increased due to the level of expenditure during the year on capitalequipment relating to the HTP facility. Cashflow The Group's cashflow continues to be strong, with £4.9m (2006: £3.5m) generated from trading in the period. Consequently, despite spending £1.8m onacquiring distribution rights and £2.3m on facilities and equipment, the Group'scash and short term investments balances only decreased by £1.2m. Accounting standards The results for the period ended 30June 2007 have been produced on the samebasis as the restated statutory accounts at 30 June 2006. These accounts conformwith UK Generally Accepted Accounting Principles. Abcam will move to reportunder International Financial Reporting Standards for the year ending 30 June2008 but this is not expected to have a material impact on the Group's reportedresults. EPS Whilst post tax profit grew by 21.1%, the growth in basic EPS was only 11.74%reflecting the impact of the significant number of shares which were issued onthe Company's IPO in November 2005 (see note 9). Currency exposure The Group continues to generate significant amounts of surplus dollars and eurosand has hedging arrangements in place to reduce the exposure. During the year to30 June 2007 the Company had forward exchange contracts in place to sell $9.6mand €3.6m at average rates of £1 to $1.79 and £1 to €1.47 respectively. For theyear ending 30 June 2008 the Company has contracts in place to sell forward$7.8m and €6.5m. These contracts are at average rates of £1 to $1.92 and £1 to€1.47. Eddie PowellFinance Director28 September 2007 ABCAM PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 30 June 2007 Year to Year to 30.6.06 30.6.07 Restated* Note £'000 £'000 £'000 £'000 TURNOVER 2 24,519 19,362Cost of sales (10,020) (7,485) GROSS PROFIT 14,499 11,877 Administrative expenses (7,584) (6,178)Research and development expenses (1,709) (1,226) (9,293) (7,404) 5,206 4,473Other operating income - 42OPERATING PROFIT 4 5,206 4,515 Interest receivable and similar income 495 313PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5,701 4,828 Tax on profit on ordinary activities 6 (1,554) (1,403) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 20 4,147 3,425 EARNINGS PER SHARE Basic earnings per share 9 11.99 p 10.73 p Diluted earnings per share 9 11.67 p 10.36 p Dividends paid per share 8 3.99 p 5.95 p All activities derive from continuing operations. The statement of movements on reserves is shown in note 20. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESYear ended 30 June 2007 Year to Year to 30.6.07 30.6.06 £'000 £'000 Profit for the financial year (before restatement) 4,147 3,679 Currency translation differences on foreign currency net investments (28) (24) Total recognised gains and losses relating to the year 4,119 3,655 Prior year adjustment (see note 22) (254) Total recognised gains and losses recognisedsince last annual report 3,865 *Restated for the effects of FRS 20 "Share based payment" as explained in note22. ABCAM PLCCONSOLIDATED BALANCE SHEET 30 June 2007 Note 30.6.07 30.6.06 £'000 £'000 Restated*FIXED ASSETSIntangible assets 10 1,691 77Tangible assets 11 2,832 1,094 4,523 1,171CURRENT ASSETSStocks 13 3,102 2,358Debtors 14 4,327 2,762Short term investments 16 8,500 11,000Cash at bank and in hand 16 2,209 884 18,138 17,004CREDITORS: amounts falling duewithin one year 15 (3,404) (3,023) NET CURRENT ASSETS 14,734 13,981 TOTAL ASSETS LESS CURRENT LIABILITIES 19,257 15,152 CREDITORS: amounts falling due 15 (386) -after more than one year PROVISIONS FOR LIABILITIES AND CHARGES 18 (444) (85) NET ASSETS 18,427 15,067 CAPITAL AND RESERVESCalled up share capital 19 346 345Share premium account 20 10,619 10,573Other reserves 20 251 89Foreign exchange reserve 20 (36) (8)Profit and loss account 20 7,247 4,068 TOTAL SHAREHOLDERS' FUNDS 21 18,427 15,067 *Restated for the effects of FRS 20 "Share based payment" as explained in note 22. These financial statements were approved by the Board of Directorsand authorised for issue on 28 September 2007 Signed on behalf of the Board of Directors Dr E W Powell28 September 2007 ABCAM PLC COMPANY BALANCE SHEET 30 June 2007 Note 30.6.07 30.6.06 £'000 £'000 Restated*FIXED ASSETS Intangible assets 10 1,691 77Tangible assets 11 2,459 901Investments 12 16 16 4,166 994CURRENT ASSETSStocks 13 3,089 2,348Debtors 14 4,572 2,676Short term investments 8,500 11,000Cash at bank and in hand 1,555 312 17,716 16,336CREDITORS: amounts falling duewithin one year 15 (3,218) (2,705) NET CURRENT ASSETS 14,498 13,631 TOTAL ASSETS LESS CURRENT LIABILITIES 18,664 14,625 CREDITORS: amounts falling due 15 (386) -after more than one year PROVISIONS FOR LIABILITIES AND CHARGES 18 (444) (77) NET ASSETS 17,834 14,548 CAPITAL AND RESERVESCalled up share capital 19 346 345Share premium account 20 10,619 10,573Other reserves 20 89 251Profit and loss account 20 6,618 3,541 TOTAL EQUITY SHAREHOLDERS' FUNDS 17,834 14,548 *Restated for the effects of FRS 20 "Share based payment" as explained in note 22. These financial statements were approved by the Board of Directorsand authorised for issue on 28 September 2007 Signed on behalf of the Board of Directors Dr E W Powell28 September 2007 ABCAM PLC CONSOLIDATED CASH FLOW STATEMENTYear ended 30 June 2007 Year to Year to 30.6.06 30.6.07 Restated* Note £'000 £'000 £'000 £'000 Net cash inflow from operating activities A 4,898 3,547 Returns on investments and servicing of financeNet Interest received 495 313 Net cash inflow from returns on investments and servicing 495 313of finance Taxation Corporation tax paid (1,473) (954) Tax paid (1,473) (954) Capital expenditure and financial investment Payments to acquire tangible fixed assets (2,316) (597) Payments to acquire intangible fixed assets (1,848) (100) Receipts from sales of tangible fixed assets 2 6 Net cash outflow from capital expenditure and financial (4,162) (691)investment Equity dividends paid (968) (1,153) Net cash outflow before management of liquid resources and (1,210) 1,062financing Management of liquid resourcesDecrease/ (increase) in short term deposits 2,500 (10,000) Net cash inflow/(outflow) from management of liquid 2,500 (10,000)resources Financing Issue of ordinary share capital 47 9,322 Net cash inflow from financing 47 9,322 Increase in cash B/C 1,337 384 *Restated for the effects of FRS 20 "Share based payment" as explained in note 22. ABCAM PLC NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTYear ended 30 June 2007 Reconciliation of operating profit to net cash inflow from operating A activities Year to Year to 2006 2007 Restated* £'000 £'000 Operating profit 5,206 4,515 Depreciation and amortisation 795 355 Profit on sale of tangible fixed assets - (3) Movement on share based compensation reserve 162 72 Increase in stocks (745) (1,171) Increase in debtors (1,565) (850) Increase in creditors 1,045 629 Net cash inflow from operating activities 4,898 3,547 B Analysis of net funds At Cash Exchange At 01.07.06 Flow Movement 30.06.07 £'000 £'000 £'000 £'000 Cash in hand and at bank 884 1,337 (12) 2,209 Current asset investments 11,000 (2,500) - 8,500 Total 11,884 (1,163) (12) 10,709 C Reconciliation of net cash flow to movement in net funds 30.6.07 30.6.07 30.6.06 30.6.06 £'000 £'000 £'000 £'000 Increase in cash in the year 1,337 384 Cash (inflow)/ outflow from (increase)/decrease in liquid (2,500) 10,000 resources Change in net funds resulting from cash flows (1,163) 10,384 Translation difference (12) (10) Movement in net funds in the year (1,175) 10,374 Net funds at start of year 11,884 1,510 Net funds at end of year 10,709 11,884 *Restated for the effects of FRS 20 "Share based payment" as explained in note 22. ABCAM PLC NOTES TO THE ACCOUNTSYear ended 30 June 2007 1 ACCOUNTING POLICIES The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 30 June 2007 or 2006, but is derived fromthose accounts. Statutory accounts for 2006 have been delivered to the Registrarof Companies and those for 2007 will be delivered following the company's annualgeneral meeting. The auditors have reported on those accounts; their reportswere unqualified and did not contain statements under s237(2) or (3) CompaniesAct 1985. Tangible fixed assets Tangible fixed assets are stated at cost less depreciation and any provision forimpairment. Depreciation is provided at cost in equal instalments over the estimated livesof the fixed assets. The depreciation rates generally used are shown below: Office equipment, fixtures and fittings 20% per annumLaboratory equipment 20% per annumComputer equipment 33% per annum Depreciation is accelerated if assets are deemed to have been impaired or thereis a change in the residual economic life. Intangible assets Payments made to acquire distribution rights from certain suppliers arecapitalised and are amortised over the period of the agreement. The Group acquires hybridomas for generating monoclonal antibodies either bylicensing them in or by developing them itself. The up-front fees paid forlicensing in hybridomas and the cost of developing hybridomas are capitalised inline with FRS 10 and SSAP 13 respectively. They are then amortised over theirestimated minimum useful lives of 3 years. Investments Investments held as fixed assets are stated at cost less provision for anyimpairment in value. Stocks Stocks are stated at the lower of cost and net realisable value. The cost of Abcam own manufactured stock includes material, direct labour and anattributable ortion of production overheads based on normal levels ofactivity.Net realisable value is based on the estimated selling price lessfurther costs expected to be incurred to completion and disposal. Provision ismade for obsolete, slow moving or defective items where appropriate. Taxation Current tax including UK corporation tax and foreign tax is provided at amountsexpected to be paid (or recovered) using the tax rates and laws that have beenenacted by the balance sheet date. Deferred taxation is provided in full on timing differences which represent anobligation at the balance sheet date to pay more tax or a right to pay less taxat rates expected to apply when they crystallise based on current tax rates andlaw. Timing differences arise from the inclusion of items of income andexpenditure in taxation computations in periods different from those in whichthey are included in financial statements. Deferred tax assets and liabilitiesare not discounted. Pensions The Group operates a defined contribution pension scheme in the UK, which isopen to all employees and directors of the company. The amount charged to the profit and loss account in respect of pension costs isthe contribution payable in the year. Any differences between contributionspayable in the year, and contributions actually paid are shown either asaccruals or prepayments in the balance sheet. The amount included in the profit and loss account in the year in respect of thepension scheme was £253,000 (2006 - £105,000). The amounts included in creditorsat 30 June 2007 in relation to the defined contribution pension scheme is£38,000 (2006 - £10,000). Research and development Research and development expenditure, other than the development costs forinternally produced hybridomas (see intangible assets above), is charged to theprofit and loss account as incurred. Leases Rentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Foreign exchange Transactions denominated in foreign currencies are recorded at the rates ofexchange ruling at the dates of the transactions. Monetary assets andliabilities denominated in foreign currencies at the balance sheet date areretranslated at the rates ruling at that date or, if appropriate, at the forwardcontract rate. These translation differences are dealt with in the profit and loss account. The results of the operations of the company's overseas subsidiaries, Abcam Incand Abcam KK, are translated at the average rate of exchange during the periodand their balance sheets at the rates ruling at the balance sheet date.Exchange differences arising on the translation of the opening net assets andresults of operations are reported in the statement of total recognised gainsand losses. All other exchange differences are included in the profit and lossaccount. Derivative financial instruments The Group uses derivative financial instruments to reduce exposure to foreignexchange risk and interest rate movements. The Group does not hold or issuederivative financial instruments for speculative purposes. Government grants Amounts receivable under government grants are credited to the profit and lossaccount as the related expenditure is incurred, and is included in otheroperating income. £nil has been recognised in the profit and loss account in theyear (2006 - £42,000) in relation to a grant for the Epitron project, which isfor the research and technological development of an epigenetic treatment forneoplastic disease. 2 TURNOVER Turnover represents the amounts derived from the provision of goods and serviceswhich fall within the Group's ordinary activities after deduction of tradediscounts and value added tax. Revenue is recognised on despatch to the customer. 4 OPERATING PROFIT Operating profit is after charging/(crediting): £'000 £'000Depreciation - owned assets 561 332Profit on disposal of fixed assets - (3)Amortisation of intangible assets 234 23Auditors remuneration:Fees payable to the Group's auditors forthe audit of the annual accounts 79 51Fees payable to the Group's auditors forother services to the group, being tax services 73 84R & D expenditure 1,709 1,226Rentals under operating leases:Land and buildings 237 246 6 TAX ON PROFIT ON ORDINARY ACTIVITIES Year to Year to 2006 30.6.07 Restated* £'000 £'000 Current tax UK corporation tax at 30% (2006 - 30%) 1,146 871 Foreign tax 324 256 Adjustments in respect of prior periods - UK tax - (9) Total current tax 1,195 1,393 Deferred tax Timing differences origination and reversal - UK tax 366 7 Timing differences origination and reversal - foreign tax (7) 3 Total deferred tax 359 10 1,554 1,403 The standard rate of current tax for the year is 30% (2006 - 30%). The current tax charge for the year reconciles to the standard rate as follows: £'000 £'000 Profit on ordinary activities before tax 5,701 4,828 Tax on profit on ordinary activities at standard rate of 30% 1,710 1,448 Factors affecting charge for the year: Capital allowances for year in excess of depreciation (411) (23) Other timing differences 13 5 Expenses not deductible for tax purposes 8 51 Revenue items capitalised (2) (2) R&D tax credit uplift (199) (120) Deduction for exercise of share options (35) (22) Adjustment in respect of prior years - (9) Losses in foreign subsidiary not subject to tax 27 - Differences in tax rates 84 65 Current tax charge for the year 1,195 1,393 In March 2007 the UK Government announced that they would introduce legislation that would reduce the corporation tax rate to 28% with effect from 1 April 2008. This legislation has been substantively enacted in June 2007. In future any deferred tax balances will be stated at 28% of those amounts. The effective tax rate for the year to 30 June 2008 is expected to reduce accordingly. 8 DIVIDENDS Year to Year to 30.6.07 30.6.06 £'000 £'000 Final interim dividend for the year ended 30 June 2006 of 2.0p 691 912 (2006: 3.25p) per share Interim dividend for the year ended 30 June 2007 of 0.80p (2006: 277 241 0.70p) per share 968 1,153 Proposed final dividend for the year ended 30 June 2007 of 3.19p 1,105 689 (2006: 2.0p) The proposed dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 9 EARNINGS PER SHARE The calculation of the basic and diluted earnings per share is based on the following data: Year to Year to 30.06.07 30.06.07 £'000 £'000 Restated* Profit for the financial year 4,147 3,425 Number Number of shares of shares Weighted average number of shares: Basic earnings per share 34,572,810 31,914,845 Assumed exercise of share options 943,674 1,135,585 Fully diluted earnings per share 35,516,484 33,050,430 10 INTANGIBLE ASSETS Group and Company Development costs and up-front licence fees for monoclonal Distribution antibodies Rights Total Cost £'000 £'000 £'000 As at 1 July 2006 100 - 100 Additions in the year 50 1,798 1,848 At 30 June 2007 150 1,798 1,948 Accumulated amortisation As at 1 July 2006 23 - 23 Charge for the year 45 189 234 At 30 June 2007 68 189 257 Net book value At 30 June 2007 82 1,609 1,691 At 30 June 2006 77 - 77 11 TANGIBLE FIXED ASSETS Laboratory Office and equipment, Computer Operations fixtures and equipment Equipment fittings Total £'000 £'000 £'000 £'000 Group Cost At 1 July 2006 251 717 674 1,642 Additions in year 207 1,824 285 2,316 Disposals in year (1) (1) (2) - Exchange difference (3) (9) (10) (22) At 30 June 2007 454 2,531 949 3,934 Accumulated depreciation At 1 July 2006 136 134 278 548 Charge for the year 214 262 561 Disposals in year - (1) - (1) Exchange difference (3) (1) (2) (6) At 30 June 2007 218 346 538 1,102 Net book value At 30 June 2007 236 2,185 411 2,832 At 30 June 2006 115 583 396 1,094 Company Cost At 1 July 2006 206 599 579 1,384 Additions in year 139 1,690 171 2,000 Disposals in year (1) (3) - (4) At 30 June 2007 344 2,286 750 3,380 Accumulated depreciation At 1 July 2006 115 123 245 483 Charge for the year 170 204 439 Disposals in year - (1) - (1) At 30 June 2007 180 292 449 921 Net book value At 30 June 2007 164 1,994 301 2,459 At 30 June 2006 91 476 334 901 12 FIXED ASSET INVESTMENTS The Company's subsidiaries at 30 June 2007 are: Proportion Proportion Nature of Country of of shares of voting business incorporation owned power held Abcam Inc Sale and distribution USA 100% 100% of antibodies Abcam KK Sale and distribution Japan 100% 100% of antibodies Camgene Dormant UK 100% 100% As at 30 June 2007 the called up share capital and reserves of Camgene were £10 (2006 - £10). The company is dormant. 13 STOCKS Group Company Group Company 30.6.07 30.6.07 30.6.06 30.6.06 £'000 £'000 £'000 £'000 Goods for resale 3,102 3,089 2,308 2,298 Work in progress - - 50 50 3,102 3,089 2,358 2,348 14 DEBTORS Group Company Group Company 30.6.07 30.6.07 30.6.06 30.6.06 £'000 £'000 £'000 £'000 Trade debtors 3,315 1,708 2,386 1,164 Owed by subsidiary undertaking - 1,461 - 1,165 Other debtors and prepayments 1,012 1,403 376 347 4,327 4,572 2,762 2,676 All amounts are due within one year. 15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Group Company Group Company 30.6.07 30.6.07 30.6.06 30.6.06 £'000 £'000 £'000 £'000 Trade creditors 1,382 1,324 1,160 1,133 Corporation tax 284 279 562 411 Other taxes and social security 124 124 89 89 Other creditors 337 321 127 98 Accruals and deferred income 1,277 1,170 1,085 974 3,404 3,218 3,023 2,705 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Group Company Group Company 30.6.07 30.6.07 30.6.06 30.6.06 £'000 £'000 £'000 £'000 Other creditors 386 386 - - 16 FINANCIAL INSTRUMENTS The Group does not undertake any speculative trading in financial instruments.Financial instruments comprise cash and short term investments together withdebtors, creditors and accruals. The risks that arise from these instruments arecurrency exposure, interest rate and liquidity, and the policies followedthroughout the year are as follows: Currency risk:The Group trades in US dollars and euros as well as in sterling, having bothincome and expenses in all of these currencies, and this trading results in asurplus of dollars and euros. The Group hedges these surpluses at the start ofeach financial year in order to minimise the impact on that year's trading fromexchange rate fluctuations. This is done by arranging forward exchange contractsmonth by month to sell a portion of the expected surpluses. Interest rate risk:The Group places most of its liquid assets on deposit for periods of between oneand six months. These deposits are with recognised UK high street banks. Duringthe year the average interest rate received on these deposits was 5.12%(2006:4.45%) Liquidity risk:Liquidity is maintained by placing cash on deposit having regard to the Group'sliquidity requirements which are assessed on a regular basis. At 30 June the Group held the following liquid assets: 30.6.07 30.6.06 £'000 £'000 Sterling cash deposits 8,500 11,000 Cash - sterling 1,017 205 Cash - US dollars 697 610 Cash - euros 40 59 Cash - yen 455 10 10,709 11,884 At the balance sheet date Abcam plc was contracted to sell $7,750,000 (2006 -$9,624,000) and • 6,450,000 (2006 - • 3,577,000). The directors consider thereto be no material difference between the book value and the fair value of theGroup's financial assets as at the balance sheet date. Credit risk:Credit risk is primarily attributable to the Groups's trade debtors.The averagecredit period taken on sales goods is 47 days.An allowance has been made forpotential bad debts in arriving at the amounts stated in the balance sheet. TheGroup has no significant concentration of credit risk in its debtors as theexposure is spread over a very wide range of customers. 18 DEFERRED TAX Company and GroupDeferred taxation provided is as follows: Group Company 30.6.07 30.6.06 30.6.07 30.6.06 Restated* Restated* £'000 £'000 £'000 £'000 Accelerated capital allowances 549 152 534 110 Other timing differences (105) (67) (90) (33) Deferred tax liability 444 85 444 77 Group £'000 At 1 July 2006 85 Charge in year 359 At 30 June 2007 444 Company £'000 At 1 July 2006 77 Charge in year 367 At 30 June 2007 444 19 CALLED UP SHARE CAPITAL 30.6.07 30.6.06 £'000 £'000 Authorised 100,000,000 (2006 - 100,000,000) ordinary shares of 1p each 1,000 1,000 Called up, allotted and fully paid 34,623,384 (2006 - 34,464,584) ordinary shares of 1p each 346 345 The Company operates a number of share option schemes for certain employees ofthe Group. The share based compensation charge is made up from option awardsfrom the EMI plan, Unapproved share option plan, the US employees share optionplan and the SAYE plan. Information is shown for these schemes in aggregate. The vesting period is from 1 - 3 years other than for those options withperformance criteria, which vest when the criteria are met. If the optionsremain unexercised after a period of ten years from the date of grant theoptions expire. Options are forfeited if the employee leaves the Group beforethe options vest. Details of the share options outstanding during the year are as follows: 2007 2006 No.of Weighted No.of Weighted Share options average Share options average exercise price exercise price Pence Pence Outstanding at beginning of period 4,999,210 19.02 5,552,850 17.44 Granted during the period 683,672 274.40 347,640 50.54 Forfeited during the period - - (14,040) 12.50 Exercised during the period (133,120) 38.75 (887,240) 16.71 Outstanding at the end of the period 5,816,002 42.28 4,999,210 19.02 Exercisable at end of period 162,080 35.75 76,360 34.12 Under the Company's Enterprise Management Incentive Scheme employees of Abcamplc held options at 30 June 2007 for 966,191 unissued 1p ordinary shares (2006- 728,480). During the year options for 117,440 1p ordinary shares wereexercised.and 37,089 1p ordinary shares lapsed. The options outstanding at the end of theyear were as follows: Date of grant Number of 1p per share Vesting shares Apr-03 8,280 12.5p Apr-05 Jun-03 64,000 25.0p to 50.0p Jun-07 Jul-04 61,920 25.0p Nov-05 Dec-04 220,000 25.0p Nov-07 Jul-05 196,840 62.5p Jul-07 Sep-05 60,000 62.5p Sep-07 Sep-06 321,368 280.0p Sep-09 Mar-07 33,783 296.0p Mar-10 Employees of Abcam plc also held options under an unapproved scheme at 30 June2007 for 427,504 unissued ordinary shares (2006 - 261,360) at exercise prices of62.5p to 296p per share. 1,360 options for 1p ordinary shares were exercisedduring the year, 742 options 1p ordinary shares lapsed and 168,246 options for1p ordinary shares were granted. The options vest over the period January 2006to March 2010. Employees of Abcam Inc also held options under an unapproved scheme at 30 June2007 for 104,207 unissued 1p ordinary shares (2006 - 55,320) at an exerciseprice between $1.125 and $5.26. During the year 42,020 options for 1p ordinaryshares lapsed and 90,907 options for 1p ordinary shares were granted.The optionsvest over the period July 2007 and September 2009. An option for 40,000 1p ordinary shares granted to a scientific advisor in 2003was exercised at a price of 25p per share. The option was exercised in July2006. During the year the company issued 1p ordinary shares as follows: Date issued Number Exercise Total of shares Price Paid £ £ Jul-06 40,000 0.25 10,000 Sep-06 20,000 0.25 5,000 Sep-06 36,000 0.25 9,000 Sep-06 3,360 0.25 840 Sep-06 4,320 0.25 1,080 Nov-06 20,000 0.25 5,000 Mar-07 1,360 0.625 850 Mar-07 2,160 0.625 1,350 Mar-07 1,960 0.625 1,225 Apr-07 4,320 0.25 1,080 May-07 2,160 0.625 1,350 May-07 4,000 0.25 1,000 May-07 6,720 0.625 4,200 Jun-07 5,200 0.625 3,250 Jun-07 3,240 0.625 2,025 Jun-07 4,000 0.25 1,000 158,800 48,250 Fair value calculation: The fair value of the options schemes has been calculated using the Trinomialmodel, other than those options with market based perfomance criteria. Theinputs into the Trinomial model are as follows: 30.6.07 30.6.06 Weighted average share price £2.74 £1.82 Weighted average exercise price £0.90 £0.60 Expected volatility 30%-40% 30% Expected 2 - 5 years 3 years life Expected dividend yield 1.10% 1.10% Risk free rate 3.97%-5.08% 4.31 - 4.72% The fair value of options issued in September 2006 with market based performancecriteria, are calculated using the Monte Carlo model.The inputs into the Monte Carlo model are as follows: 30.6.07 30.6.06 Weighted average share price £2.80 - Weighted average exercise price £2.80 - Expected volatility 12% - 30% - Expected 3 years - life Expected dividend yield 1.10% - Risk free rate 4.57% - 20 STATEMENT OF MOVEMENTS ON RESERVES Share Other Foreign Profit premium reserves exchange and loss account Restated* reserve account Restated* £'000 £'000 £'000 £'000 GROUP As at 1 July 2006 10,573 89 (8) 4,068 Retained profit for the year - - - 4,147 Dividends paid (note 8) - - - (968) Premium on shares issued 46 - - - Share based compensation charge - 162 - - Currency translation difference on foreign currency net investments - - (28) - At 30 June 2007 10,619 251 (36) 7,247 Profit Share Other and loss premium reserves account COMPANY account Restated* Restated* £'000 £'000 £'000 As at 1 July 2006 10,573 89 3,541 Retained profit for the year - - 3,776 Dividends paid (note 8) - - (968) Dividend received - - 269 Share based compensation charge - 162 - Premium on shares issued 46 - - At 30 June 2007 10,619 251 6,618 21 RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS 2007 2006 Restated* £'000 £'000 Profit for the year 4,147 3,425 Other recognised gains and losses relating (28) (24) to the year (net) 4,119 3,401 Dividends paid (1,153) (968) Current tax charge on share based - 204 compensation charge Share based compensation reserve 162 89 Issue of shares net of issuing costs 47 9,322 Net addition to shareholders' funds 3,360 11,863 Opening shareholders' funds 15,067 3,204 Closing shareholders' funds 18,427 15,067 22 PRIOR YEAR ADJUSTMENT The group adopted FRS 20 "Share based payment" for the year ended 30 June 2007.This resulted in a prior period adjustment to expense the fair value of the optionsgranted being £162,000 for the year ended 30 June 2007 and £89,000 for theprior periods.The effects of this change is summarised below: Group and Company 2006 £'000 Profit and loss account: Administrative expenses as previously stated 6,106 Share based compensation charge 72 Administrative expenses as restated 6,178 Taxation as previously stated (1,221) Share based compensation charge (182) Taxation as restated (1,403) Balance sheet: Provisions for liabilities and charges as previously stated (112) Deferred tax on share based compensation charge 27 Provisions for liabilities and charges as restated (85) *Restated for the effects of FRS 20 "Share based payment" as explained in note 22. 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