Alliance Pharma Regulatory News (APH)

23 Mar 2006 07:03

Alliance Pharma PLC23 March 2006 FOR IMMEDIATE RELEASE 23 MARCH 2006 ALLIANCE PHARMA PLC ("Alliance Pharma" or "the Company") Preliminary Results for the 10 month period ended 31 December 2005 Alliance Pharma plc (AIM: APH), the emerging speciality pharmaceutical company,is pleased to announce its preliminary results for the ten month period ended 31December 2005. The results cover a 10 month period owing to a change to theCompany's year end to 31 December 2005, bringing the Company's year end intoline with that of its peers. Financial Highlights • Sales for the 10 month period of £12.28 million (12 months to 31 December 2004: £11.83m) • Sales growth on an annualised basis of 24.6% • Gross margin improvement to 54.3% (2004: 52.4%) • Operating cashflow remains strong at £1.79 million (2004: £1.57m) • Earnings before interest and tax of £2.17 million (2004: £2.26m) • Pre-tax profit of £0.66 million (2004: £0.41m) Operational Highlights • Launch of Dental Products division and promotion of Periostat for periodontitis • Launch of International Division for marketing of Periostat and Forceval • Start of Phase III clinical trials of Posidorm for sleep disorders • Acquisition of Hydromol dermatology range post the year end Commenting on the results, Michael Gatenby, Alliance Pharma's Chairman, said: "During the period under review, Alliance has moved closer to its goal ofdelivering substantial and growing revenue streams from brands both acquired anddeveloped in-house. All our efforts will continue to be directed towardsachieving this goal." For further information: Alliance Pharma plc + 44 (0) 1249 466966John Dawson, Chief ExecutiveMaddy Scott, Finance Directorwww.alliancepharma.co.uk Buchanan Communications + 44 (0) 20 7466 5000Mark Court/Lisa Baderoon/Rebecca Skye Dietrich Notes to editors About Alliance Pharma Alliance Pharma, founded in 1996, is an AIM listed emerging specialitypharmaceutical company based in Chippenham, Wiltshire, UK. The company has astrong track record of acquiring the rights to established niche brands andowns, or shares, the rights to 30 branded pharmaceutical products and continuesto explore opportunities to expand the range. Alliance Pharma's products are prescribed in the treatment of a wide range ofconditions and include brands used in periodontitis (a serious gum disease), theprevention of heart disease, in Parkinson's disease, in nutrition, in nasalinfections, in the treatment of dermatological conditions and in childbirth.Alliance Pharma's sales are mainly prescription driven. Its products aredistributed to hospitals directly and to pharmaceutical wholesalers whichservice both hospital and retail pharmacies with their prescriptionrequirements. Alliance Pharma is also developing novel products for sleep disorders and theinduction of labour. Alliance Pharma joined the AIM market of the London Stock Exchange in December2003 and trades under the symbol APH. Chairman's Statement OVERVIEW During 2005, the Company has made considerable progress, reinforcing theattractiveness of the Company's business model in which the cashflow from theCompany's portfolio of prescription products is being used towards fundingpotentially transformational though relatively low risk opportunities. Theprescription product portfolio comprises Core Brands, which have enjoyed stableand predictable sales over many years, and Growth Brands which offer, given theappropriate level of promotional investment, significant growth. We have made progress across our business in the period under review, in termsof broadening our routes to market and entering new geographic regions viadistribution and co-promotional agreements; strengthening our management inareas such as regulatory affairs; and forming new divisions to spearhead ourinvolvement in the dental and international markets. The selective acquisitionof reputable prescription brands remains a key part of our strategy and I ampleased to report that we have made further strategic acquisitions since theyear end. DEVELOPMENT PROJECTS During the period, we have made significant progress with our developmentprojects, particularly with the commencement in July of Phase III trials in theUK of Posidorm(TM), our novel therapy for sleep disorders. The Phase III trialsfocus on the use of the drug, a synthesised version of the naturally occurringhormone that controls the sleep/wake cycle, on two patient groups: the elderlyand shift workers. Posidorm is a very substantial opportunity for the Companyas it addresses a market currently estimated at £0.5 billion but which isexpected to treble in the next decade. Our Phase III clinical trials on Isprelor(TM), our intra-vaginal misoprostol forinduction of labour, opened in January with the expectation that they would becompleted during 2005. Site set-ups were prolonged and patient recruitment hasbeen slower than planned. To address this, the number of sites is currentlybeing expanded and the trials are now expected to be completed in the secondhalf of 2006, with the product's launch taking place in 2007. This product hasalready attracted significant professional interest on an international scale. PEOPLE We have made a series of important senior appointments during the period underreview and post the period end. Glynys Davies, an experienced dental sectorsales and marketing executive, was appointed in April 2005 as head of AlliancePharma's Dental Products Division. At the same time, Alexander Scholtens Weert,an executive with considerable international marketing experience, was appointedas head of the Company's International Division. In September 2005, Dr VeronicaFarrell-Lecomte joined the Company as Director of Regulatory Affairs. FINANCIAL As indicated at the time of our Interim announcement, we have changed ourfinancial year end from February 28 to December 31, with the result that thefinancial year just ended was a ten month period. Thus, comparisons with theprevious year are not straightforward; however, on an annualised basis our salesof £12.3 million represented an increase of some 24.6%. Also, at 54.3%, ourgross margin continues to rise and was more than one percentage point above thecomparable figure for last year. Of the sales growth, some 20.0% was attributedto the acquisition in November 2004 of Forceval, a prescription multivitamin,and Periostat, a treatment for severe gum disease. Across the rest of our brandportfolio, both the Core and Growth sectors performed well and in line withexpectations. Profit after tax on an IFRS basis was £0.66 million - an increase of 62.1% overthe previous (12 month) period. This was a creditable performance for the 10month period, particularly as the underlying business growth was held back bytwo special factors. First we are already bearing substantial revenue costs inrespect of our development projects; and secondly the results were adverselyaffected by the one-off price decrease imposed by the NHS in January 2005,although we hope this will give us price stability up to 2011. OUTLOOK In summary, this has been a year of challenges successfully met, which has takenAlliance closer to its goal of establishing substantial and growing revenuestreams from brands, both acquired and developed in-house. All our effort willcontinue to be directed to advance this during the current year. Michael GatenbyChairman22 March 2006 Chief Executive Review STRATEGIC OVERVIEW The 10 months to 31 December 2005, our second year as a publicly quoted company,have in many respects been a period during which the foundations of the Companywere strengthened to support the growth of the Company in the current year andbeyond. The Company has developed both in breadth and in depth, particularly interms of improvements in infrastructure. This momentum has been maintained postthe period end, notably with the acquisition of the Hydromol range of prescribeddermatology products in February 2006. It was also a period that provided further evidence of the robustness ofAlliance's business model and the strength of the Company's core skills. These skills are highlighted by our first year achievements with Periostat andForceval, both of which were acquired in November 2004. Periostat is a treatment for the severe gum disease periodontitis, which wasacquired for regions outside North America for $3.3 million. Following thelaunch of our promotional activities in August 2005, Periostat sales respondedsuch that in the fourth quarter of 2005 they were averaging £33,000 per monthcompared to £24,000 for the first half of the year, an increase of 37.5%,indicating a successful promotional launch in the UK. We have built a dentaldivision around the product and have begun to roll out the product in regionsoutside the UK. Periostat, as the first and only approved prescription medicinefor the chronic, adjunctive treatment of periodontitis, has significant growthpotential for the Company. Indeed when one considers that more than 3 millionadults in the UK suffer from periodontitis, we take enormous encouragement fromthe initial response to our promotional campaigns and look forward eagerly toreaping the rewards of our decision to acquire the brand and invest in it. Inbrief Periostat shows our ability to find the right acquisition, to agreecommercially favourable terms, to create the appropriate infrastructure and thento promote the product effectively to develop the sales potential. Forceval, a prescribed nutritional supplement, was acquired for £7.0 millionfrom the Administrators of Unigreg Ltd for all territories apart from China.Consistent customer care has led to the turnaround of the brand such that saleswere 39.9% higher than the previous 12 months. This formula is reproducible. We are continually seeking and evaluating newopportunities but completing deals only when they make sense commercially andfinancially. Our track record speaks for itself: including Hydromol, we havesuccessfully completed nine acquisitions in eight years. With the combination of developments such as Posidorm and the ongoing capabilityto build up the business base, Alliance has created a low risk growth strategywith considerable upside potential. PROGRESS IN 2005 Sales Sales progress has been very pleasing indeed. For the ten month period toDecember 2005 sales were £12.28 million, compared to £11.83 million for thetwelve months to February 2005. On an annualised basis, sales for the 10 month period ended 31 December 2005represented growth of 24.6% over the 12 months to February 2005. Had it not beenfor the 7% price decrease imposed from January 2005 in the UK under thePharmaceutical Price Regulation Scheme 2005 (PPRS), sales for the twelve monthsto December 2005 would have grown by 33.7% and exceeded £15 million. It is veryreassuring to know that our past strategic measures have enabled us to absorbthis decrease and still report an extremely credible growth rate. Unwelcome andunjustified though this PPRS price decrease was, it does mean that we can planin confidence that our UK prices are now secure until 2011. Sales of Symmetrel, our specialist product for Parkinson's disease, continuedtheir upward trend growing by 18.7% to £1.56 million for the twelve months endedDecember 2005. Similarly sales of Nu-Seals, our enteric coated low dose aspirin achieved salesof £3.36 million with 6.8% growth in the Republic of Ireland, where the brandwas promoted for part of the year. Our dermatology portfolio recorded sales of £1.75 million for the twelve monthsto December 2005, showing nominal growth over the same period in 2004 of 1.0%.However for competitive reasons our dermatology portfolio bore an over-weightedshare of the PPRS price decrease; at constant prices the real growth would havebeen 9.2% which has been achieved by the careful execution of a minimalpromotional investment. As mentioned earlier we are pleased with Periostat's growth since August 2005.In the twelve months to December 2005 we achieved sales of £311,000, which wasconsiderably higher than that achieved by the previous stewards of the brand. Equally pleasing was the turnaround achieved on Forceval, our nutritionalsupplement acquired from the Administrators of Unigreg Ltd in November 2004.The £2.42 million achieved for the twelve months to December 2005 comparesfavourably with £1.73 million for the twelve months to December 2004,representing growth of 40.0%. Our Core Brands, which we do not promote, and which provide cash towards ourexpansionary projects, remained stable as expected. Looking forward we take justified confidence from a strong and growing portfolioof quality brands which provides us with numerous growth opportunities on theone hand and inherent stability on the other. Development pipeline Our two products in Phase III clinical trials - Posidorm for sleep disorders andIsprelor for induction of labour - each made substantial progress during theperiod under review. Posidorm is a controlled release tablet containing a synthesised version of thenaturally occurring hormone melatonin, which regulates the sleep/wake cycle andwhose deficiency is the main cause of many sleep disorders. It presents a majorcommercial opportunity for Alliance as around 20 million people throughoutEurope suffer from melatonin related sleep disorders. In July 2005 we began Phase III trials in two groups of patients in whomprevious research in the medical literature has shown melatonin to be ofbenefit. These are a) elderly patients reporting problems with sleeping, whereno obvious cause exists and b) shiftworkers who need to sleep during the day,when their melatonin levels would be naturally low. Current progress suggeststhe launch of the product in the first quarter of 2008. Our Phase III clinical trials on Isprelor, our intra-vaginal misoprostol forinduction of labour, began at the beginning of the period under review but siteset-up and patient recruitment was initially slower than at first anticipated.To compensate for this, the number of sites has been expanded and we now expectcompletion in the current year. Interest in the product from the medical community has been encouraging and anAlliance sponsored symposium on the use of misoprostol in obstetrics at the 6thInternational Scientific Meeting of the Royal College of Obstetricians andGynaecologists in Cairo in September was very well attended. Owing to the size of the opportunity with Posidorm, we have begun out-licensingdiscussions for Continental Europe with a number of potential partners and lookforward to providing further details of progress during the course of thecurrent year. Profitability Our profit before tax of £0.66 million for the ten months to December 2005compares favourably with £0.41 million for the twelve month financial period toFebruary 2005. This is a particularly good result when one considers that thedevelopment expenditure charged in the P&L is £0.62 million greater than thatcharged in the previous financial year. Additionally the 7% compulsory PPRSprice decrease in the UK commencing January 2005 removed £0.61 million of profitfrom the ten month financial period ending December 2005. Thus it can bereadily seen that the underlying operational strength of our trading businessimproved markedly in real terms during the past financial period. This is areflection of: a) our past strategic measures judiciously to expand in our portfolio; b) our finely tuned decisions selectively to invest in its growth; and c) the hard work and dedication of our extremely skilled team. Organisation and infrastructure We have strengthened our infrastructure significantly during the course of thepast year with appointments across the Company in areas including sales andmarketing, regulatory, clinical development, acquisitions management andfinance. First and foremost was the creation of our Dental Products division in April2005 to drive forward our exploitation of the transformational opportunityafforded by the acquisition of Periostat in November 2004. This resulted in ourcommencement of promotional campaigns to dentists from August 2005 and thesubsequent growth of the brand. Another important expansion of our sales and marketing capabilities was thecreation of our International Division in May 2005, principally to develop andmanage the overseas business for Forceval and Periostat, but also to exploitother international opportunities within the rest of the portfolio. One of thefirst successes was the appointment in July 2005 of a distributor for Periostatin Turkey, an important dental market. In September we appointed a new Director of Regulatory Affairs to ensure thequality of our regulatory submissions primarily for our development projects,Posidorm and Isprelor, but also for line extensions and other filings. We havealso appointed a Clinical Projects Manager to add further managerial strengthbehind our development programmes. Additionally we have recruited an expert inPharmacovigilance to manage the increasing demands affecting the whole of theIndustry in this area. Our Finance function has been reorganised and strengthened with specificpositions covering financial accounting, management accounting and corporateadministration, the latter role also including investor relations. This newstructure now facilitates our Finance Director's involvement on strategicfinancial matters. We have created the position of Director of Acquisitions Integration,underlining our intention to maintain the pace of acquisitions at the Company.This is an innovative role that is dedicated to organising the planning andintegration of acquisitions, so that they are embedded into the Company'soperations with minimal disturbance to ongoing activities. This move is alreadyshowing its worth with the ongoing integration of the Hydromol range ofdermatologicals, acquired on 9 February 2006. I am therefore pleased that Alliance enters the current year with a team thathas the capability, capacity and enthusiasm to deal with the opportunities andchallenges ahead. Acquisitions Post the period end, we acquired the Hydromol range of prescriptiondermatological products for eczema and other skin conditions for a cashconsideration of £3.25 million. The acquisition was significant not leastbecause it delivers critical mass to the Company's existing dermatologyfranchise. The addition of key sales executives has strengthened Alliance'sdermatology team. The Hydromol range includes ointments, creams and bath oils and sales aregrowing strongly at over 30.0% pa. It is our intention to increase salesfurther by expanding the products' range with line extensions and by extendingthe geographic distribution via the Company's network of internationaldistributors. Hydromol adds to Alliance's current dermatology portfolio that includes brandssuch as Aquadrate, Alphaderm, Occlusal, Pentrax, Meted and Acnisal. Looking forward The Company enters the current year with a stronger business base than at anyother time in its history and I am pleased to report that current trading is onplan. Among our priorities in the current year will be to drive the growth ofPeriostat and to integrate the Hydromol acquisition. The current year is likelyto be one in which dermatology will have a much higher profile in the business. Whilst it is impossible to forecast the outcome of clinical trials andregulatory submissions we believe that the two compounds - one being based on analready marketed molecule and the other being a copy of a naturally occurringhormone - represent a balance of risk and reward that is tipped in the favour ofour shareholders. Our strengthened infrastructure means that we are well placed to exploit oursignificant growth opportunities and to accommodate further acquisitions shouldwe find products that fit into our clearly defined acquisition criteria. John DawsonChief Executive22 March 2006 Financial Review In relation to the presentation of the results for Alliance Pharma plc, twosignificant events have happened. Firstly we made the decision to adoptInternational Financial Reporting Standards (IFRS) in advance of the requireddate for AIM listed companies to align ourselves with other companies in thesector and to maintain our stance of seeking to be at the forefront of theindustry in terms of best practice. Secondly, after listening to ourshareholders, and considering the positive impact on the Company, we changed theyear end date from 28 February to 31 December. Consequently we are reportingboth transitional IFRS adjustments and a 10 month period; the impact of bothwill be illustrated throughout this review. Figures under the heading December2005 relate to the 10 months period to 31 December 2005, those under February2005 relate to the year ended 28 February 2005 and those under "Annualised"relate to the December 2005 figures annualised, to twelve 10ths of the results. Equally, we are reporting, in more detail, the operations of the Group undersegmental reporting. The Group is segmented into three areas, the first two ofwhich are currently revenue producing: • Core brands - those with no promotional investment, the sales being driven by prescribing habit • Growth brands - those with growth potential and behind which we put our promotional effort • Development brands - the products Isprelor and Posidorm which are currently under clinical development with a view to a launch. Investments are being made, some of which are capitalised, some of which are revenue expenses which have the effect of reducing the profitability of the revenue producing segments IFRS The approach taken to the IFRS transition was the establishment of a workinggroup and the preparation of a report to assess the implications ofInternational Accounting Standards and to prepare the restatement and confirmthe accounting policies under the new regime. The main areas identified asaffecting the financial statements of the Group are Intangible Assets (IAS 38),Share Based Payments (IFRS 2), Financial Instruments (IAS 39) and SegmentalReporting (IAS 14). • An impairment review was performed on all intangible assets which established that their future contributions were greater than the initial investment by the Group. As a result, none of these assets were judged to be impaired and they remain in the Balance Sheet at the same value as the prior period • The early marketing and infrastructure expenses invested in the development projects are expensed through the Income Statement, however the clinical development spend is capitalised as required under IAS 38 as the criteria for the capitalisation are met in that o The projects and expenditure attributable to them are separately identifiable o Future economic benefits can be demonstrated o There are adequate resources to complete the development and the Group intends to use or sell the completed asset • The approach to the Share Based Payments valuation was by way of a financial model based on the volatility of the share price, the number of options issued, time to expiry and the risk free rate of return • The Interest Rate Swaps which fix the rate on borrowings for a specified period were valued independently by the Bank of Scotland Treasury Department, taking into account time to expiry and market factors Turnover The turnover for the 10 months to December 2005 of £12.28 million represented anincrease of 3.8% over the 12 months to February 2005 (£11.83m), however,annualising the 10 month result demonstrates a 24.6% increase on the period toFebruary 2005. Analysing this further, Core Brands make up 54.0% of ourportfolio, with £6.63m turnover (10 months), whilst Growth Brands deliver £5.65million being the remaining 46.0%. In terms of geographical split, the UnitedKingdom makes up 70.7% of total turnover based on the 10 months to 31 December2005, with Republic of Ireland accounting for 21.8% and the Rest of the Worldbeing 7.5%. Annualised 10 months to December 12 months to 2005 February 2005 £m £m £mTurnover 14.74 12.28 11.83Growth 24.6% 3.8% Growth was tempered by the 7% price decrease imposed on the pharmaceuticalindustry in the UK by the Pharmaceutical Price Regulation Scheme "PPRS" inJanuary 2005. Gross Profit As anticipated our gross margin improved from 52.4% to 54.3% due toproportionately greater growth of our higher margin brands. This rate ofimprovement can be expected to continue. Operating Profit Investment in the future growth of the Group has necessitated in an increase inoperating expenses, notably some £1.14 million of marketing and infrastructurerevenue expenses in the 10 month period connected with the development ofPosidorm and Isprelor. The 10 months to 31 December 2005 deliver an operatingprofit of £2.17 million being 4.2% below the 12 month period to February,however, if the development expenditure charged to the P&L is excluded, theoperating profit for the trading segments, being the Growth Brands and CoreBrands, would be £3.08 million being a 6.6% increase over the 12 months toFebruary 2005. 10 months to 12 months to December 2005 February 2005 £m £mSales revenue 12.28 11.83Gross profit 6.67 6.20 54.3% 52.4%Trading Business Expenses (3.59) (3.31)Trading Segment profit 3.08 2.89Non Recurring Items 0.23 (0.11)Trading profit 3.31 2.78Development Projects (1.14) (0.52)Operating profit before finance costs 2.17 2.26 Finance Costs These consist of the interest payments on the debt provided by Bank of Scotlandto fund the acquisitions of the Brands, the interest on the convertibleunsecured loan stock and amortised issue costs. Also shown here is the change infair value of the Interest Rate Swaps. These financial instruments reduce ourexposure to interest rate movements by fixing the interest rate for a period oftime. The valuation is determined independently and assesses the differencebetween the fixed rate and expected future interest rates. 10 months to 12 months to December 2005 February 2005 £m £mInterest paid (1.37) (1.66)Other finance costs (0.08) (0.19)Change in fair value of derivative financial instruments (0.06) - Profit Before Tax A profit before tax of £0.66 million has been achieved in the 10 months toDecember 2005, an improvement on £0.41 million being the profit for the periodto February 2005 under IFRS. If the effects of the IFRS adjustments are removedfrom the calculations, the profit would be £0.74 million against £0.42 millionfor the previous reporting period. 10 months to December 12 months to February 2005 2005 £m £mUK GAAP Profit on ordinary activities before taxation 0.74 0.42Share based payments (0.02) (0.01)Change in fair value of derivative financial instruments (0.06) 0.00Profit for the period under IFRS 0.66 0.41 During the year, Uniflu, one of the brands acquired in November 2004, which didnot fit our existing portfolio, was divested for £0.50 million giving rise to aprofit of £0.35m, and is included in the profit shown above within the nonrecurring items. Cashflow The cash inflow from operating activities was £1.79 million in the 10 months to31 December 2005 (£1.59 million February 2005). This was reinvested into theGroup by way of £1.85 million on the clinical development spend for Isprelor andPosidorm, an increase on £0.99 million spent in the year to February 2005.Interest and capital repayments on the debt funding amounted to £1.43 millionand £1.12 million respectively, £1.82 million and £2.14m being the interest andcapital repayments for the previous period, excluding short term fundingarrangements in place for the acquisition of Forceval. During the year £0.50million was raised with the divestment of Uniflu. Non-current assets During the period, a further £1.85 million was invested and capitalised in thedevelopment of Isprelor and Posidorm, bringing the total to £3.07m. These costshave been capitalised, having met the criteria set by IAS 38. Each project hasbeen re-examined to ensure that it has technical feasibility and ultimatecommercial viability. Financial liabilities and convertible debt The financial liabilities decreased to £22.90 million (£23.89 million February2005), including the Convertible Unsecured Loan Stock at £7.17 million, thechange being principally due to the capital repayments of the funding from Bankof Scotland. Of the total financial liabilities, 89.6% is subject to long termfixed interest rates resulting from interest on the Convertible Unsecured LoanStock being fixed and for other debt, we have in place interest rate swaps whichreduce the exposure to interest rate fluctuations. The currency risk is reducedby using a debt facility denominated in euros which matches revenues arising inthe Eurozone. Madeleine ScottFinance Director22 March 2006 Consolidated income statement 10 months Year ended ended 28 February 31 December 2005 2005 Note £ £Revenue 12,275,888 11,826,292Cost of sales (5,601,143) (5,624,857)Gross profit 6,674,745 6,201,435 Operating expensesAdministration and marketing expense (4,716,258) (3,820,470)Share based employee remuneration (19,083) (10,304) (4,735,341) (3,830,774) Operating profit pre non recurring items 1,939,404 2,370,661Non recurring items 227,731 (109,504)Operating profit before finance costs 2,167,135 2,261,157 Finance costsInterest paid 3 (1,366,747) (1,661,487)Other finance costs 3 (76,373) (191,715)Change in fair value of derivative financial (62,846) -instruments (1,505,966) (1,853,202) Profit on ordinary activities before taxation 2 661,169 407,955Taxation - -Profit for the year attributable to equity 661,169 407,955shareholdersEarnings per shareBasic and diluted (pence) 0.45 0.33 All of the activities of the company are classed as continuing. Consolidated balance sheet 31 December 31 December 28 February 28 February 2005 2005 2005 2005 £ £ £ £AssetsNon-current assetsGoodwill 1,128,973 1,128,973Intangible fixed assets - Product licences 25,501,988 25,620,433 - Development costs 3,075,200 1,345,609Property, plant and equipment 280,977 306,573 29,987,138 28,401,588Current assetsInventories 2,739,869 2,469,363Trade and other receivables 3,034,240 2,149,613Cash and cash equivalents - 1,275,460 5,774,109 5,894,436 Total assets 35,761,247 34,296,024 EquityOrdinary share capital 1,473,559 1,473,559Share premium account 9,030,959 9,030,959Share option reserve 31,506 12,423Reverse takeover reserve (329,349) (329,349)Retained earnings (2,702,117) (3,363,286)Total equity 7,504,558 6,824,306 LiabilitiesNon-current liabilitiesLong term financial liabilities 14,794,873 14,293,913Convertible debt 7,167,100 7,132,423Other liabilities 177,778 177,778 22,139,751 21,604,114Current liabilitiesCash and cash equivalents 899,066 -Financial liabilities 933,749 2,459,910Trade and other payables and provisions 4,284,123 3,407,694 6,116,938 5,867,604 Total liabilities 28,256,689 27,471,718 Total equity and liabilities 35,761,247 34,296,024 Consolidated statement of changes in shareholders' equity Share Share Shares to Reserves Retained Total capital premium be issued earnings equity £ £ £ £ £ £ Balance 1 March 2005 1,473,559 9,030,959 12,423 (329,349) (3,363,286) 6,824,306 Costs of share issue - - - - - -reclaimedEmployee benefits - - 19,083 - - 19,083Profit for the period - - - - 661,169 661,169 Balance 31 December 2005 1,473,559 9,030,959 31,506 (329,349) (2,702,117) 7,504,558 Balance 29 February 2004 1,107,939 5,214,638 2,119 (329,349) (3,771,241) 2,224,106 Costs of share issue - 7,123 - - - 7,123reclaimedIssue of shares 365,620 - - - - 365,620Premium on shares issued - 3,809,198 - - - 3,809,198Employee benefits - - 10,304 - - 10,304Profit for the - - - - 407,955 407,955period Balance 28 February 2005 1,473,559 9,030,959 12,423 (329,349) (3,363,286) 6,824,306 Consolidated cashflow For the 10 month period ended 31 December 2005 Group 10 months Year ended ended 31 December 28 February 2005 2005 Note £ £ Cash flows from operating activitiesCash generated from operations 4 1,788,157 1,585,204Tax paid - (12,747)Cash flows from operating activities 1,788,157 1,572,457 Investing activitiesInterest received 61,215 161,726Payment of deferred consideration - (128,399)Development costs capitalised (1,849,860) (858,499)Purchase of tangible assets (82,778) (245,948)Proceeds from divestment of Uniflu 500,000 -Transactions costs on divestment of Uniflu (32,000) -Purchase of other intangible assets (1,555) (9,248,913)Net cash used in investing activities (1,404,978) (10,320,033) Financing activitiesNet proceeds from the issue of shares - 4,181,941Interest paid and similar charges (1,426,319) (1,820,209)Other finance charges paid (1,643) (3,004)Receipt from borrowings - 6,875,000Repayment of borrowings (1,115,839) (3,763,859)Finance lease payments (13,904) (26,031)Net cash used in financing activities (2,557,705) 5,443,838 Net movement in cash and cash equivalents (2,174,526) (3,303,738) Cash and cash equivalents at 1 March 2005 / 1,275,460 4,579,19829 February 2004 Cash and cash equivalents at 31 December 2005 / (899,066) 1,275,46028 February 2005 1. Basis of preparation The financial information set out in the announcement does not constitute thegroup's statutory accounts for the periods ended 31 December 2005 or 28 February2005. The financial information for the year ended 28 February 2005 is derivedfrom the statutory accounts for that year which have been delivered to theRegistrar of Companies, as subsequently restated under IFRS as published on thegroup's website on 21/06/2005. The auditors reported on those accounts; theirreport was unqualified and did not contain a statement under s.237(2) or (3)Companies Act 1985. The statutory accounts for the period ended 31 December2005 will be finalised on the basis of the financial information presented bythe directors in this preliminary announcement and will be delivered to theRegistrar of Companies. 2. Profit before taxation: 10 months Year ended ended 31 December 28 February 2005 2005 £ £After charging Auditors' remuneration - Group - audit services 30,500 29,500 - non-audit services 53,574 60,561Auditors' remuneration - Company - audit services 8,500 8,500 - non-audit services 1,300 2,200Non recurring items - Project costs in relation to aborted acquisition - 109,504Employee benefit expense 19,083 10,304Depreciation of tangible assets 108,374 115,229Operating lease rentals 37,196 42,816Loss on foreign exchange transactions 12,547 -After crediting Non recurring items - Gain on disposal of Uniflu less impairment of intangibles 227,731 -Profit on foreign exchange transactions - 37,653 Included within non-audit services are tax advice and compliance fees of£16,310, advice on the implementation of IFRS £15,609 and other of £21,655. 3. Finance costs - net 10 months Year ended ended 31 December 28 February 2005 2005 £ £Net interest and similar charges On loans and overdrafts (1,426,319) (1,820,209) Finance lease interest (1,643) (3,004) Interest income 61,215 161,726 (1,366,747) (1,661,487)Other finance charges Foreign exchange movement on long term Euro denominated debt (2,263) (117,727) Amortised finance issue costs (74,110) (73,988) (76,373) (191,715)Finance costs - net (1,443,120) (1,853,202) 4. Cash generated from operations Group 10 months Year ended ended 31 December 28 February 2005 2005 £ £Result for the period before tax and finance 2,167,135 2,261,157costsDepreciation of property, plant and equipment 108,374 115,229Change in inventories (270,506) (729,847)Change in trade and other receivables (884,627) (165,521)Change in trade and other payables 876,429 93,882Write-off intangible assets 120,269 -Gain on divestment of Uniflu (348,000) -Share options charges 19,083 10,304Cash flows from operating activities 1,788,157 1,585,204 This information is provided by RNS The company news service from the London Stock Exchange