Biome Tech Regulatory News (BIOM)

21 Mar 2007 07:03

Stanelco PLC21 March 2007 21st March 2007 Stanelco Plc ("Stanelco","the Company" or "the Group") Preliminary Results for the 14 months ended 31st December 2006 Financial Highlights • Group revenue £6.7m; trading loss before exceptional items (£6.4m) • Exceptional write-offs after strategic review (£8.4m) • Closing Group cash position £12.9m • Loss per share (1.179p) Business Highlights • Strategic review conducted - streamlined focus on core developments with an emphasis on the most viable commercial offerings • Strengthened Board and senior management team • Significantly reduced cost base and maximised operational efficiency • Two successful placings of Ordinary Shares raising a total of £19.6m (before expenses) Martin Wagner, Chief Executive said: "Although challenging, the last fourteen months have seen Stanelco progress itsportfolio of products and developments towards commercialisation. The Boardbelieves that Stanelco is capable of offering packaging applications thatprovide added value and environmental benefits which are more sustainable thanexisting products these replace. "We believe demand for our current and future products will be enhanced byfavourable political and economic policies to reduce environmental damage.Although there may be further challenges ahead, following our strategic reviewwe believe that Stanelco is well placed to maximise opportunities tocommercialise our products." - Ends - For further information please contact: Martin Wagner, Chief Executive, Stanelco plc Tel: +44 (0) 20 7831 3113Clive Warner, Finance Director, Stanelco plc (on 21st March only) Jonathon Brill/Caroline Stewart, Tel: +44 (0) 20 7831 3113Financial Dynamics Chairman's Statement for the 14 months ended 31st December 2006 CHAIRMAN'S STATEMENT The Company has undergone a significant change over the past 14 months as wecontinue to develop our product portfolio towards achieving commercialisation.This included a fundamental review of our business to identify the key areas tomove forward and focus on by determining which are the most viable tocommercialise at the earliest opportunity. The share placing in November 2006 raised £14.5m (net of expenses) to meet ourworking capital requirements. These funds will enable the necessary investmentsto be made and supported as the Company works towards achieving market successwith its portfolio of products. This followed an equity placing in June 2006,when £3.7m was raised (net of expenses) to use as working capital and to meetthe second stage payment for the acquisition of Biotec. Specifically the new funds will be used to: • expand manufacturing capabilities in Germany and the US to meet increasing global demand for Starpol resins; • meet the final stage payment of £1.6m net due in June 2007 to EKI for the Biotec acquisition; • provide sufficient working capital for the Group to fund the next stage of commercial development of the Group's products; and • provide additional funds for joint venture partnerships to capitalise on the Group's intellectual property portfolio. We continue to review our product developments in order to maintain momentum forsuccessful commercialisation. Importantly we also continue to drive both salesof those of our products which are currently commercially available and toextract value from our patent portfolio. The executive team consists of a Chief Executive and Finance Director. Threeexecutive functions have been consolidated into the Chief Executive role and weaim to have a majority of non-executive Directors on the Board in the future. We have strengthened our Board with the appointments of Martin Wagner as ChiefExecutive in November 2005 and Clive Warner as Finance Director in June 2006.Martin was previously Head of Packaging Development at ASDA Stores Limited, andClive, a Chartered Accountant, has previously gained extensive Finance Directorexperience in the leisure & retail sectors. During the period the Board was restructured. Robert Duggan, Terry Robins andGraham Whitchurch resigned from the Board but remained as executives. Alsoduring the period, Ian Balchin, Robert Boardman and Howard White left the Board. Beyond the period end, we announced that John Standen has been appointed as aNon-Executive Director. John will succeed me as Chairman when I step down atthe Annual General Meeting, after four years as Chairman. He is an experiencedDirector of publicly listed companies, following a career in corporate finance.John's knowledge of the City and wide-ranging commercial experience gives theBoard confidence that he will play a key role in the future development of theCompany and we are pleased to welcome him. Group revenue increased to £6.7m during the fourteen month period (12 months to31st October 2005: £1.5m, which included only two months of results fromBiotec). We started the period with a cash position of £4.4m and closed with£12.9m in cash, which includes the funds raised within the period. We report aloss per share of 1.179p. The underlying trading loss before exceptional items for the period, £6.4m, wasin line with management's expectations at the time of the placing in November2006. A strategic review of the business identified a series of measures whichwere taken during the period and has resulted in the charge of a number ofone-off largely non-cash items. The Board viewed these measures as importantfor the long-term benefit of the Company. The net loss following thesedecisions is £14.8m. The Board do not recommend any dividend. We expect to further strengthen the non-executive presence on the Board in duecourse to ensure we have the best advice from experienced people in order thatthe Company can achieve its strategic objectives. I would also like to takethis last opportunity as Chairman to thank the shareholders, employees and otherBoard Members for their continued support. I believe that although there will be further challenges ahead, the Board hasthe breadth of skills and relevant experience to further develop the Company'sportfolio of global market products successfully over the financial year ahead. Philip LovegroveChairman21st March 2007 Chief Executive's Statement for the 14 months ended 31st December 2006 CHIEF EXECUTIVE'S STATEMENT Stanelco's business model has transformed from being only a manufacturer ofequipment to concentrating on developing a range of packaging and relatedproducts which address today's demands for sustainable packaging and the widergreen issues facing consumers. Much of this is derived from our groundbreakingresearch and development facilities in both Germany and the UK. The Group's philosophy is that new products and processes must offer solutionsand applications which provide added value and environmental benefits and whichare more sustainable than those products they replace. The management team isconcentrating on developing our technologies towards a profitable andenvironmentally sustainable range of products. We continue to be an active member of the WalMart Sustainable Value Network andwe are developing close relationships with our fellow members. We now have twoStarpol products on WalMart shelves in the US with a third imminent. We areexcited about the opportunities that being part of this network has created. Inaddition, we are in discussions with other members regarding Aquasol's productrange. At the start of the period we had high expectations of our GREENSEAL technology.As previously indicated, the time taken to commercialise this technology andthe ongoing hurdles have proved to be a major disappointment. Over this period,commercial trials have identified areas for improvement which have beenundertaken to make it operational in a factory environment. These trialscontinue. The Board believes that there will be significant value within its portfolio ofproducts. A comprehensive review has been conducted in order to assess thepriorities and to determine the appropriate cost and management structure. Strategic Review This review resulted in three major divisions - Biotec, Aquasol and RFdevelopments (including GREENSEAL). Measures taken following this strategic review include: • strengthening the Company's sales function. David Wetters was appointed as Sales Director on the management board in November 2006. David has particular expertise in the sale of technical machinery and compounding resins and has experience of working across the global market; • reduction of the UK and US cost base by 40%; • reduction in the UK and US employee headcount by over 40%; • closure of the US office - this move does not compromise our ability to engage with US partners as we maintain a presence in the US; and • closure of Adept Polymers' PVOH manufacturing facility. Supplies of PVOH are being sourced externally. The Board believes these measures will help Stanelco to deliver on its potentialfor the benefit of its shareholders. The Company is balancing short-termdeliverables with long-term opportunities. We now have a stronger teamdedicated to delivering our goals. Operational Review BIOTEC Biotec is responsible for researching, developing and manufacturing a range ofbiodegradable products from its base in Germany, led by its Managing Director,Harald Schmidt. It is a subsidiary jointly-owned in equal shares with SPhere, aEuropean manufacturer of household products. Development of the Biotec group of products remains core for the Company andthis division continues to grow strongly, having doubled its sales in theperiod. We are delighted that the relationship with SPhere has developedpositively to the continuing benefit of both parties. There is considerable demand for Biotec's range of products. However, the paceat which we can deliver these products is currently being influenced by ashortage of one of its core ingredients, PLA (polylactic acid) resin. TheCompany is pursuing several options to obtain further material and is alsotrialling alternative materials. Until such alternatives are in place, therewill be some delay with investment in manufacturing facilities in the US. The products commercially available, including Starpol NS, Starpol 2000 and WRAP100, are being used to make a full range of products, from flexible film to foodtrays and golf tees. Other products being developed within this division are: • Starpol 3000 - over the period we have completed the initial stages of development and we are working with a number of companies in order to undertake full commercial trials. • Starpol 4000 - this is a blend of biodegradable and conventional plastics. We are currently working on hybrid solutions to deliver specific materials required in the global market place. We continue to develop the starch cigarette filter technology and will providean update when the filtration trials have reached a more advanced stage. AQUASOL The Company is optimistic that this division has a range of packaging andrelated products which have a strong market potential. We have a small,energetic team, led by David Edwards, who is well respected globally in thisparticular sector. The Company has appointed Pricewaterhouse Coopers to review a number of Aquasolpatents. They have been engaged to determine the relevant markets, the extentof competition and potential revenues, and will then advise on the best routesto market and commercialisation. Examples of Aquasol products currently available include FrogPack, Pulsline anda range of third party manufactured products earning royalties. FrogMat, a fully biodegradable and sustainable protective product withexceptional cushioning properties and many other features, continues to bedeveloped. We have commissioned ShrinkWrap, a packaging machinery company, todesign and manufacture machines and we are working with a US partner to produceand sell the product. Good progress is being made. Royalty and commission agreements are in place for Quantum Finish with ReckittBenckiser, for FrogPack with Merlin Products and for Pulsline with BerkshireLabels. Revenues being received are increasing and are expected to continue todo so. The existing sales in this division generate sufficient revenue to cover thecosts of development. We expect that current developments will enable us togrow sales from this division significantly in the future. The Board believes that developing joint ventures will be key to the future ofthis division. RF DEVELOPMENTS There are two main areas within this division - traditional applications (beingradio frequency thermal processing equipment) and GREENSEAL. RF Applications Our traditional RF business has provided Stanelco with a presence in marketsincluding mobile welders, fibre optics, zirconia tubes and general parts andservicing. This is a core business which provides a steady revenue stream withcurrent customers BNFL and Nextrom. We believe there is scope for growth in theglobal market, particularly in the US and Japan. GREENSEAL GREENSEAL is an environmentally friendly sealing solution used for food trays inthe retail marketplace. Trials have been ongoing since 2005 with several majorpackaging companies and a number of original equipment manufacturers have beenmonitoring our progress. In particular, the trials with Hitchen Foods areongoing. Co-ordinating opportunities for prolonged trials with packaging processors hasproved more difficult than anticipated. The complexities are associated withtooling and the changing demands from retailers. We have been frustrated by the time taken to exploit this technology and wecontinue to explore different opportunities to effect the roll out. However,this will take longer, and the revenues generated will be less, than originallyindicated. Sealed Air, one of the world's largest packaging companies, is undertakingvarious trials at Marchwood. It is examining the potential use of RF technologyapplications within its group. Financial Review Following the acquisition of Biotec, the Company's financial year-end waschanged in line with Biotec's year-end to 31st December. These accountstherefore cover the fourteen month period from 1st November 2005. The Group's revenue increased to £6.7m during the fourteen month period (12months to 31st October 2005: £1.5m). This has been largely driven by Biotec,where volumes have increased following the post-acquisition investment in themanufacturing facilities and a full year of trading as part of Stanelco. The opening cash position was £4.4m. The Company has raised £18.2m (post £1.4mexpenses) which is being used as working capital, stage payments for the Biotecacquisition and capital expenditure. The closing cash position was £12.9m. TheCompany has taken a firm control on its expenditure and over the period hasreduced its UK and US cost base by 40%. This has been through reducingheadcount and costs to align the expenditure to the current business model. The underlying trading loss for the period, £6.4m, was in line with management'sexpectations at the time of the placing in November 2006. However, the measurestaken as part of the strategic review resulted in the following one-off items inthe period: • review of intangible assets for GREENSEAL and other technologies has resulted in a write down of £5.5m; • closure of Adept's manufacturing facility resulted in a write off of £1.2m; • redundancies and restructuring costs following the re-organisation has resulted in a charge of £0.5m; and • review of the net book value of assets and valuation of stock, especially in the GREENSEAL division, has resulted in a write off £1.1m. While the Company is aware that these one-off charges have had a significantimpact on the period's results, the Directors believe these measures have beennecessary for the long-term benefit of the Company. The net loss following these one-off items is £14.8m. The resulting loss pershare is 1.179p. The Board do not recommend any dividend. Employees I would like to thank our employees and partners for their continued support inimproving the efficiency and effectiveness of our business during a period ofimportant change for Stanelco. I also look forward to continuing to improve theperformance of the Company during 2007. Outlook We believe demand for our current and future products will be enhanced byfavourable political and economic policies to reduce environmental damage.Although there may be further challenges ahead, following our strategic reviewwe believe that Stanelco is well placed to maximise opportunities tocommercialise its products. Martin WagnerChief Executive21st March 2007 Consolidated income statementFOR THE PERIOD ENDED 31 DECEMBER 2006 Note 14 Months ended 12 Months ended 31 December 2006 31 October 2005 as restated £'000 £'000_________________________________________________________________________________________________________ REVENUE 3 6,670 1,454Cost of sales (4,668) (889) --------- ---------GROSS PROFIT 2,002 565Distribution costs (220) (67)Administrative expenses 3 (8,201) (3,200) --------- ---------LOSS FROM OPERATIONS BEFORE EXCEPTIONAL ITEMS (6,419) (2,702) Exceptional items 4 (8,416) (690) --------- ---------LOSS FROM OPERATIONS AFTER EXCEPTIONAL ITEMS (14,835) (3,392) Investment revenue 134 168Finance costs (163) (35) --------- ---------LOSS BEFORE TAXATION (14,864) (3,259)Taxation 446 37 --------- ---------LOSS FOR THE PERIOD (14,418) (3,222) ========= =========Attributable to: Equity holders of the parent (14,289) (3,150) Minority interest (129) (72) --------- ---------RETAINED FOR THE PERIOD (14,418) (3,222) ========= =========Basic and diluted loss per share - pence 5 (1.179) (0.363) ========= ========= All transactions arise from continuing operations. All recognised gains and losses are included in the income statement. Consolidated balance sheetAS AT 31 DECEMBER 2006 At 31 December 2006 At 31 October 2005 as restated Note £'000 £'000 £'000 £'000_________________________________________________________________________________________________________ NON-CURRENT ASSETSGoodwill 14,067 13,930Other intangible assets 979 5,755Property, plant and equipment 4,018 3,235 ------- ------- 19,064 22,920CURRENT ASSETSInventories 1,854 2,604Trade and other receivables 1,152 1,155Amounts due on part disposal of subsidiary 1,597 3,531Corporation tax 439 60Cash and cash equivalents 12,916 4,396 ------- ------- 17,958 11,746 ------- -------TOTAL ASSETS 37,022 34,666 ======= =======CURRENT LIABILITIESTrade and other payables 1,479 1,581Amounts due to third party in respect ofpurchase of subsidiary 3,194 3,531Promissory notes 5,205 5,168Tax liabilities - 8Obligations under finance lease 40 38Bank overdrafts and loans 5 21Short term provisions 7 857 1,453 ------- ------- 10,780 11,800 ------- -------NON-CURRENT LIABILITIESAmounts due to third party in respect ofpurchase of subsidiary - 3,531Obligations under finance lease 27 36Bank loans - 111 ------- ------- 27 3,678 ------- ------- TOTAL LIABILITIES 10,807 15,478 ======= =======NET ASSETS 26,215 19,188 ======= ======= Consolidated balance sheet (continued)AS AT 31 DECEMBER 2006 At At 31 December 2006 31 October 2005 as restated £'000 £'000____________________________________________________________________________________________________________ EQUITYShare capital 2,978 929Share premium account 37,932 19,899Shares to be issued 800 1,050Share options reserve 1,016 393Hedging and translation reserves 243 19Retained losses (19,826) (5,600) --------- ---------EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 23,143 16,690 Minority interest 3,072 2,498 --------- ---------TOTAL EQUITY 26,215 19,188 ========= ========= Consolidated statement of changes in equityAS AT 31 DECEMBER 2006 Share Share Shares to Share Hedging & capital premium be issued options translation account reserve reserves £'000 £'000 £'000 £'000 £'000_____________________________________________________________________________________________________________ Balance at 1 November 2004 832 5,209 2,500 71 - -------------------------------------------------------Exchange differences arising on translation of overseas operation - - - - 19 -------------------------------------------------------Net income recognised directly in equity - - - - 19Loss for the period - - - - - -------------------------------------------------------Total recognised income and expense for the period - - - - 19New share capital subscribed 97 14,498 - - -Share premium on new shares subscribed in subsidiary - 192 - - -Shares issued in respect of purchase of subsidiary - - (500) - -Adjustment to contingent consideration on purchase of subsidiary - - (950) - -Minority interest arising on part disposal of subsidiaries - - - - -Share option charges in period - - - 325 -Share options exercised in period - - - (3) - -------------------------------------------------------Balance at 31 October 2005 929 19,899 1,050 393 19 =======================================================Balance at 1 November 2005 929 19,899 1,050 393 19 -------------------------------------------------------Exchange differences arising on translation of overseas operation - - - - 224 -------------------------------------------------------Net income recognised directly in equity - - - - 224Loss for the period - - - - - -------------------------------------------------------Total recognised income and expense for the period - - - - 224New share capital subscribed 2,049 18,033 - - -Minority share of increase in subsidiaries capital reserve - - - - -Shares issued in respect of purchase of subsidiary - - (400) - -Adjustment to contingent consideration on - - 150 - -purchase of subsidiaryShare option charges in period - - - 686Share options exercised in period - - - (63) - -------------------------------------------------------Balance at 31 December 2006 2,978 37,932 800 1,016 243 ======================================================= Consolidated statement of changes in equity (continued)AS AT 31 DECEMBER 2006 Retained ATTRIBUTABLE TO Minority TOTAL losses EQUITY HOLDERS OF interest EQUITY THE PARENT £'000 £'000 £'000 £'000 Balance at ------------------------------------------------------ 1 November 2004 (2,453) 6,159 23 6,182 ------------------------------------------------------Exchange differences arising on translation of overseas operation - 19 - 19 ------------------------------------------------------Net income recognised directly in equity - 19 - 19Loss for the period (3,150) (3,150) 72 (3,078) ------------------------------------------------------Total recognised income and expense for the period (3,150) (3,131) 72 (3,059)New share capital subscribed - 14,595 - 14,595Share premium on new shares subscribed in subsidiary - 192 13 205Shares issued in respect of purchase of subsidiary - (500) - (500)Adjustment to contingent consideration on purchase of subsidiary - (950) - (950)Minority interest arising on part disposal of subsidiaries - - 2,390 2,390Share option charges in period - 325 - 325Share options exercised in period 3 - - - ------------------------------------------------------Balance at 31 October 2005 (5,600) 16,690 2,498 19,188 ------------------------------------------------------Balance at 1 November 2005 (5,600) 16,690 2,498 19,188 ------------------------------------------------------Exchange differences arising on translation of overseas operation - 224 21 245 ------------------------------------------------------Net income recognised directly in equity - 224 21 245Loss for the period (14,289) (14,289) (129) (14,418) ------------------------------------------------------Total recognised income and expense for the period (14,289) (14,065) (108) (14,173)New share capital subscribed - 20,082 - 20,082Minority share of increase in subsidiaries capital reserve - - 682 682Shares issued in respect of purchase of subsidiary - (400) - (400)Adjustment to contingent consideration on purchase of subsidiary - 150 - 150Share option charges in period - 686 686Share options exercised in period 63 - - - ------------------------------------------------------Balance at 31 December 2006 (19,826) 23,143 3,072 26,215 ------------------------------------------------------ Consolidated cash flow statementAS AT 31 DECEMBER 2006 12 Months ended 14 Months ended 31 October 2005 31 December 2006 As restated Note £'000 £'000________________________________________________________________________________________________________________________________________________________________________________________________________________________ NET CASH OUTFLOW FROM OPERATING ACTIVITIES 8 (6,926) (4,138)____________________________________________________________________________________________________________INVESTING ACTIVITIESInterest received 134 168Proceeds on disposal of property, plant andequipment 34 25Investment in intangible assets (1,406) (3,436)Purchase of property, plant and equipment (2,067) (807)Purchase of Biotec Holdings GmbH (3,438) (7,082)Part disposal of Biotec Holdings GmbH 1,719 3,372Cash at bank acquired with Biotec HoldingsGmbH - 65____________________________________________________________________________________________________________ NET CASH USED IN INVESTING ACTIVITIES (5,024) (7,695)____________________________________________________________________________________________________________FINANCING ACTIVITIESDividend paid - (1)Repayment of loan capital (132) (15)Repayment of obligations under finance lease (83) (19)Proceeds of issue of ordinary share capital 19,682 14,287Proceeds of issue of shares in subsidiary tominority interest 682 1,015New finance lease 76 42____________________________________________________________________________________________________________ NET CASH FROM FINANCING ACTIVITIES 20,225 15,309____________________________________________________________________________________________________________ NET INCREASE IN CASH AND CASH EQUIVALENTS 8,275 3,476 CASH AND CASH EQUIVALENTS AT BEGINNING OFPERIOD 4,396 920Effect of foreign exchange rate changes 245 -____________________________________________________________________________________________________________ CASH AND CASH EQUIVALENTS AT END OF PERIOD 12,916 4,396 ======== ======== NOTES TO THE PRELIMINARY STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2006 1. CHANGES IN ACCOUNTING POLICIES The principal accounting policies of the Group have remained unchanged as statedin the Group's 2005 Annual Report and Financial Statements with the exception ofthose set out in the Transition Statement which was published with the InterimConsolidated accounts on 13 July 2006 to reflect changes required as a result ofadopting IFRS. The financial information for the year to 31 October 2005 has been extractedfrom the Group's IFRS transitional document, which was based on the 2005 AnnualReport. 2. CHANGE OF ACCOUNTING PERIOD The Group has changed its financial accounting period to end on 31 December tobring it into line with its German subsidiary. These Financial Statementstherefore report results for a 14 month period and as a result comparativeamounts in the income statement, changes in equity, cash flows and related notesare not comparable. 3. REVENUE AND LOSS FROM OPERATIONS BEFORE EXCEPTIONAL ITEMS AND TAXATION 14 Months ended 12 Months ended 31 December 31 October 2005 2006 as restated £'000 £'000_______________________________________________________________________________________________________RevenueSales are made from the United Kingdom into the followinggeographical markets:United Kingdom 631 492Europe 231 121Asia 285 142North America 284 430Rest of world 57 7 ----- ----- 1,488 1,192 ===== =====Sales are made from Germany into the following geographicalmarkets:United Kingdom 14 -Europe 5,154 262North America 14 - ----- ----- 5,182 262 ===== ===== ----- -----Total revenue 6,670 1,454 ===== ===== The world-wide activities of Stanelco plc are highly integrated and,accordingly, it is not possible to present geographical segment information forloss before taxation without making internal allocations, some of which arenecessarily subjective. 14 Months ended 12 Months ended 31 December 31 October 2005 2006 as restated £'000 £'000_______________________________________________________________________________________________________ Net AssetsNet assets of the Group are located in the followinggeographical markets:United Kingdom 14,820 8,536Europe 11,386 10,596North America 9 56 ------- ------- 26,215 19,188 ======= ======= 14 Months ended 12 Months ended 31 December 31 October 2005 2006 as restated £'000 £'000______________________________________________________________________________________________________ The loss on operations before exceptional items and taxation is stated after charging/(crediting):Depreciation, amortisation and impairment:Other intangible fixed assets, owned 503 422Property, plant and equipment, owned 607 202Property, plant and equipment, leased 13 14Loss on disposal of property, plant and equipment 9 10Auditors' remuneration:audit work 82 75non-audit work 90 37Hire of plant and machinery 34 20Operating lease rentals: Land and buildings 217 140(Gain) / loss on foreign exchange transactions (187) 317Charge for share based payments 686 325Bad debt provision 6 2 ======= ======= 4. EXCEPTIONAL ITEMS 14 Months ended 12 Months ended 31 December 31 October 2005 2006 As restated £'000 £'000_____________________________________________________________________________________________________ The loss from operations after exceptional items and before taxation is stated after charging /(crediting):Exceptional items:Best estimate of liabilities in relation to conclusion ofpatent defence - 690Charges following strategic review:Bad debt provision 66 -Impairment of other intangible assets 5,529 -Impairment of inventories 1,416 -Impairment and disposal of property, plant and equipment 696 -Provision for costs relating to strategic review 709 - ------- ------- 8,416 690 ======= ======= Further details of these items are explained in the Chief Executive Officer's statement. 5. EARNINGS PER SHARE The calculation of earnings per share is based on the loss after tax for theyear of £(14,418,000) (2005: £(3,222,000)) and a weighted average of1,223,004,193 (2005: 888,097,434) ordinary shares in issue. 6. DIVIDEND The directors do not recommend the payment of a dividend. 7. PROVISIONS FOR LIABILITIES AND CHARGES Warranty Other Total provision provisions £'000 £'000 £'000 At 1 November 2004 12 1,081 1,093Utilised in the year (12) (444) (456)On acquisition 99 - 99Provided in year 2 715 717 ----- ----- -----At 31 October 2005 as restated 101 1,352 1,453 ===== ===== ===== At 1 November 2005 101 1,352 1,453Utilised in the period (3) (1,302) (1,305)Provided in period - 709 709 ----- ----- -----At 31 December 2006 98 759 857 ===== ===== ===== Warranty Provision The warranty provision is for expected warranty claims on products sold duringthe financial period. It is expected that this expenditure will be incurred inthe next financial year. Other provisions The provision brought forward at 1 November 2005 relates primarily to bestestimates of the liabilities incurred in respect of action in defence ofpatents. On 9th February 2006 Stanelco Plc announced that it had reached asettlement of the legal dispute between two of their subsidiaries withBioProgress Plc. Stanelco plc agreed to issue to BioProgress new ordinary 0.1pshares and/or cash up to a maximum market value of £1,000,000. Stanelco Plcsubsequently announced that these shares had been issued and sold by BioProgressPlc and that this represents full and final settlement of the dispute. Amountsutilised in the year offset the settlement and legal costs associated with thismatter. The Board have made provision during the year against the estimated liabilitiesassociated with the strategic review. This provision of £709,000 includesestimates of costs related to the departure of Directors and employees and alsoother operational obligations. The Board considers that disclosure of moredetailed information would be prejudicial to the business in concluding thesematters. 8. NOTES TO CONSOLIDATED CASH FLOW STATEMENT 14 Months ended 12 Months ended 31 December 2006 31 October 2005 £'000s as restated £'000__________________________________________________________________________________________________________ Loss from operations and exceptional items (14,835) (3,393)Adjustment for:-Amortisation and impairment of intangible fixed assets 6,032 422Depreciation of property, plant and equipment 1,276 216Share based payments 686 325Loss on disposal of property, plant and equipment 49 10(Decrease)/increase in provisions (596) 262 ---------- ----------Operating cash flows before movement in working capital (7,388) (2,158) Decrease / (increase) in inventories 750 (1,504)Decrease / (increase) in receivables 218 (172)(Decrease) in payables (461) (261) ---------- ----------Cash utilised by operations (6,881) (4,095) Corporation tax received/(paid) 59 (10)Interest paid (104) (33) ---------- ----------Net cash (outflow) from operating activities (6,926) (4,138) ========== ========== Additions to property, plant and equipment during the period amounting to £76kwere financed by new finance leases. 9. CONTINGENT LIABILITIES An un-quantified claim has been made against the Company by an individualfollowing their departure from the Company during the period. The Boardstrenuously believe the claim is unfounded, and accordingly no provision hasbeen made. 10. REPORT AND FINANCIAL STATEMENTS The financial information set out in this preliminary announcement does notconstitute the group's statutory accounts for the period ended 31 December 2006or the year ended 31 October 2005. The statutory accounts for 2006 will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the group's Annual GeneralMeeting. The information relating to the year ended 31 October 2005 is extracted from theaudited accounts that have been filed at Companies House and on which theauditors issued an unqualified opinion. The above financial information does not constitute statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange