Bioquell Regulatory News (BQE)

28 August, 2013

Bioquell PLC - 2013 interim results

Well positioned for growth following major reconfiguration of the Bio-decon division and strong performance from TRaC in the first half

Bioquell PLC ("Bioquell") (LSE symbol: BQE) - provider of specialist bio-contamination control technologies to the international Healthcare, Life Sciences & Defence markets; and specialist testing services in the UK via its TRaC division, today announces its interim results for the six months period ended 30 June, 2013.

Highlights:

§ Increase in orders by 22% to £25.6 million (2012: £20.9 million) - and revenues by 10% to £21.2 million (2012: £19.3 million)

§ One-off non-recurring costs associated with re-configuration of the Group (announced in May 2013) lower than expected at £0.9 million, with annualised savings of c. £1.2 million

§ Pre-tax profit after charging re-configuration costs £0.8 million (2012: £1.5 million)

§ Pro forma pre-tax profit before re-configuration costs £1.7 million (2012: £1.5 million)

§ Earnings per share 1.6p (2012: 2.7p)

§ Net cash £1.4 million (2012: £2.3 million); net assets £30.4 million (2012: £27.6 million)

§ Encouraging demand seen for recently launched QUBE (Life Sciences) and ICE-pod (Healthcare) products - as well as increasing contribution from consumable sales

§ TRaC continues to grow and is trading strongly

Commenting on the 2013 interim results, Nigel Keen, Chairman of Bioquell PLC, said:

"It was encouraging to see growth in orders and revenues in the Bio-decon division despite the major re-configuration and cost reduction exercise we executed in the first half."

"Early signs of demand for ICE-pod and QUBE are encouraging - and we are making good progress to increase the proportion of revenues generated from consumables and service."

"TRaC continues to perform well and is seeing further opportunities for growth."

"We have completed a significant reconfiguration of our Bio-decon division which should, when combined with the associated reduction in our overheads and robust trading from TRaC, position the Group well for increased revenues and profitability in the future."

Enquiries:

Nigel Keen Chairman Bioquell PLC 01264 835900

Nick Adams Group Chief Executive

Mark Bodeker Chief Operating Officer and Finance Director

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Notes to editors:

§ Bioquell is a UK-headquartered, international technology company with two divisions:

o Bio-decon (www.bioquell.com) which sells specialist bio-contamination control products and services into the Healthcare, Life Sciences and Defence sectors, with most of its revenues generated from overseas customers; and

o TRaC (www.tracglobal.com) which provides specialist Testing, Regulatory and Compliance services - including EMC, environmental and safety testing - principally to UK corporates.

§ Bioquell's bio-contamination control technology is principally based around hydrogen peroxide vapour ("HPV") - which is highly efficacious at eradicating micro-organisms such as bacteria and viruses at room temperature - and is subsequently broken down using specialist catalysts to water vapour and oxygen (hence an extremely 'green' technology) at the end of the bio-decontamination process.

§ For the last two years Bioquell has invested substantial sums in developing a new product range which has been designed to increase the proportion of recurring revenues from its HPV technology - and hence increase its quality of earnings; this range of new products was launched in the second half of 2012.

§ Bioquell's bio-contamination control technology:

o is used by bio-pharmaceutical, biotechnology and research institutions to provide sterile equipment and/or sterile working environments;

o is used to eradicate "superbugs" from hospitals; independent scientific research has demonstrated that 'bioquelling' hospital equipment and facilities reduces significantly the rates of hospital acquired infection;

o is used to provide single rooms to hospitals (via the ICE-pod) which currently only have open, multi-bed "Nightingale" ward structures

o has been incorporated in a wound-care product - BioxyQuell - which has received regulatory approval for use on chronic wounds in the European Union; and

§ Bioquell currently has overseas operations in the USA, France, Ireland, Singapore, China and Brazil.

TRaC sells its specialist services to the product development departments of a broad range of companies, principally based in the UK, with a particular focus on organisations operating in the aerospace and defence sectors.

INTRODUCTION

Bioquell comprises two divisions: the Bio-decontamination ("Bio-decon") division and TRaC.

The Bio-decon division develops and sells innovative products & services, which incorporate Bioquell's proprietary peroxy chemistry-based bio-decontamination technology, and which are used to eradicate micro-organisms, including bacteria and viruses. These products & services are used throughout the world principally by organisations within the Life Sciences and Healthcare sectors. The Bio-decon division also incorporates specialist filtration expertise and manufacturing.

TRaC - the Group's Testing, Regulatory and Compliance division - provides specialist testing services, including electromagnetic compatibility and environmental testing, to clients principally located in the United Kingdom. TRaC is also building its consultancy activities which draw heavily upon the specialist skills and experience of its test engineers.

On 13 May, 2013, we announced in the Group's Interim Management Statement ("IMS") the reconfiguration of the Group's Bio-decon division. This reconfiguration comprised a number of elements including: the reallocation of engineering resources to support and expand the new Bioquell ICE-pod service for hospitals; the reduction in investment in research & development ("R&D"); the re-alignment of our sales & marketing resources towards the ICE-pod and the new Bioquell QUBE; the reconfiguration of our Andover-based manufacturing facilities for QUBE and ICE-pod production; and ceasing the production of some low margin commoditised laboratory equipment to make available additional manufacturing space. At the time of the IMS we estimated that the annualised cost savings, including a reduction in the Group's headcount by some 40 employees, would be approximately £1.2 million and the one-off cost to effect this reconfiguration would be approximately £1.3 million. We have achieved the reconfiguration with lower one-off costs, principally as the headcount reduction across four countries was achieved with materially lower legal and associated severance costs. Accordingly the one-off costs associated with the reconfiguration charged to the profit & loss account in the first half were £0.9 million (2012: zero).

GROUP FINANCIAL RESULTS

Orders

The Group enjoyed strong order intake in the first half of the year, totalling £25.6 million (2012: £20.9 million), some 22% higher than a year ago. The Bio-decon division saw orders increase by 12% to £13.7 million (2012: £ 12.2 million). TRaC achieved a 37% increase in orders in the period to £11.9 million (2012: £ 8.7 million), although this did include a one-off contract with one aerospace client which is worth some £2.1 million over five years.

Revenues

Group revenues increased 10% to £21.2 million (2012: £ 19.3 million). Notwithstanding the disruption associated with the reconfiguration announced in the May IMS, Bio-decon revenues increased by 5% to £12.5 million (2012: £11.9 million). Bio-decon equipment revenues were £7.0 million (2012: £6.7 million) and service-related revenues were £5.5 million (2012: £5.2 million). TRaC revenues increased by 18% to £8.7 million (2012: £7.4 million).

Profitability

Gross margin in the period was unchanged at 45% (2012: 45%). Total overheads amounted to £8.5 million (2012: £7.3 million). These figures incorporate £0.9 million of one-off non-recurring costs relating to the reconfiguration of the Bio-decon division described above. Moreover, the reduction in the cost base arising from the reconfiguration - which we estimate will give rise to annualised savings of some £1.2 million - did not materially benefit the first half results.

Profit before tax was £0.8 million (2012: £1.5 million). Pro forma profit before tax after adjusting for the one-off reconfiguration costs was £1.7 million (2012: £1.5 million).

Capital expenditure

In the first half purchases of property, plant and equipment totalled £1.3 million (2012: £1.9 million) - of which £0.8 million related to Bio-decon and £0.5 million related to TRaC. Expenditure on product development totalled £1.5 million (2012: £1.6 million). Capital additions decreased for both the Bio-decon division: £2.2 million (2012: £2.7 million) and for TRaC: £0.5 million (2012: £0.8 million). We are expecting to see the aggregate expenditure on new product development to continue to reduce in the future for the Bio-decon division.

Balance sheet

We continue to have a strong balance sheet with net assets of £30.4 million (2012: £27.6 million) and net cash of £1.4 million (2012: £2.3 million) at the period end.

In order to have available the necessary funding to support a significant uptake in demand for our ICE-pod rental product we have recently increased our banking facilities from an overdraft facility of £2.6 million, which has been unchanged for many years, to a combination of revolving credit facility, overdraft facility and other asset finance amounting to £8.2 million. This increase in debt finance capability would enable us to fund, among other things, significant growth in our rental programme for supplying ICE-pods to health-care systems around the world.

BIO-DECONTAMINATION DIVISION

Life Sciences

Life Sciences revenues in the period were £10.3 million (2012: £9.9 million). We continue to build our global bio-decontamination business in the Life Sciences sector on the back of the recently launched QUBE - which comprises a specialist sterile work-station manufactured using proprietary plastics technology and which incorporates Bioquell's unique hydrogen peroxide vapour ("HPV") bio-decontamination technology. Although the QUBE is a highly complex piece of equipment, it provides our customers with an elegant, simple-to-use, modular solution for a wide number of aseptic workstation applications. These include sterility test (required by certain regulators), the preparation of cytotoxic (anti-cancer chemotherapy) drugs and new biologically-derived drugs (e.g. stem cell / gene therapy drugs) as well as the potential for use in clinical trials. The order book for the QUBE continues to build and we have recently started to ship completed QUBEs.

We also made good progress in the period with the expansion of our consumables business which includes biological & chemical indicators and hydrogen peroxide consumable cartridges. Building our recurring revenues remains a key part of the Group's strategy.

Encouragingly in the first half we saw signs of increased activity in the US Life Sciences market, although we experienced fluctuating activity levels from various Asian territories.

Healthcare

Eradication of pathogens from the environment which cause hospital acquired infection

Our healthcare practice continues to grow in hospitals around the world, principally on the back of three micro-organisms:

§ Clostridium difficile remains a significant problem for hospitals in North America and Europe. C.difficle is a tough spore-former which is difficult to eradicate from the hospital environment using conventional methods and is resistant to the alcohol-based hand rubs which are now widely used in hospitals for hand hygiene purposes. Moreover, C.difficile is thought to be the pathogen responsible for most deaths linked to hospital acquired infection ("HAI") in the United States;

§ new strains of highly antibiotic resistant - and in some cases untreatable - Gram-negative bacteria are causing increasing concern within Intensive Care Units (and other high risk departments) in the Middle East, Asia and Latin America. Further, the UK's Chief Medical Officer has highlighted the risk that these highly drug-resistant bacteria represent to the provision of modern clinical care within the NHS; and

§ norovirus is a highly infectious virus which, unlike most conventional HAI-related pathogens, can infect doctors and nurses as well as patients. Norovirus is also difficult to eradicate from the hospital environment. Hospitals can incur substantial direct and indirect costs associated with a Norovirus outbreak.

We continue to build our HPV-based healthcare business to help hospitals combat these HAI pathogens using a mixture of service provision and equipment sales. For example, during the period we achieved our first substantial sale of HPV equipment into a hospital in Asia and our emergency RBDS (Room Bio-Decontamination) service continues to increase in the USA. Revenues in the period were £1.7 million (2012: £1.5 million).

ICE-pod

Many hospitals in the UK and the emerging markets have multi-bed units ('Nightingale wards') which have been demonstrated to contribute to high HAI rates. The Bioquell ICE-pod (Infection Control Enclosure) was launched at the end of last year and has been designed to help hospitals improve patient flows, reinforce standard infection control measures and enable hospitals to 'bioquell' individual bed spaces.

Since the beginning of the year we have been working closely with a number of NHS hospitals which have been beta testing the ICE-pod. This product-refinement work has enabled us to understand better how the ICE-pod can, or should, be used optimally in the hospital setting - which in turn is enabling us to improve our selling proposition to hospitals in the UK and overseas. We are also in the process of optimising various elements of our international deployment techniques and have recently despatched two ICE-pods to a hospital in the Middle East.

We believe that appropriate use of the ICE-pod can help a hospital optimise its patient flows and bed utilisation rates which will result in better patient care and lower costs. These matters have been highlighted as being causes of concern for the NHS and accordingly we anticipate working closely with NHS hospitals in the coming months to see how the ICE-pod can help the NHS during this winter's 'flu season.

Wound-care and BioxyQuell ("BxQ")

During the first half we started to treat patients with venous leg ulcers using BxQ at a clinic set up in our headquarters in Andover. This is enabling us to build "real world" data on how best to use BxQ to treat patients with chronic wounds. We are also re-engineering elements of the BxQ technology to enable us to reduce the per-treatment costs and increase the gross margin potential for each treatment carried out.

We have started to work with a number of different organisations in the UK to see how best to commercialise BxQ, in the UK as well as overseas.

Defence

CBRN filtration and environmental control systems

In the first half we saw reasonable activity levels from our defence customers in the Middle East and Eastern Europe. However, the US defence market remains subdued - largely it would appear due to 'sequestration'.

During the period our defence-related orders increased substantially to £1.3 million (2012: £0.4 million) and our defence order book remains healthy at £5.8 million (2012: £5.3 million). Revenues in the period were £0.5 million (2012: £ 0.4 million).

TRaC DIVISION

Testing, Regulatory and Compliance

TRaC had a strong first half with an 18% increase in revenues to £8.7 million (2012: £7.4 million) and robust trading from most of its specialist sub-divisions. Particular progress was made in increasing activity levels associated with our Hull-based engineers who have specialist skills in telecoms, radio and software.

We were also successful in building on our strategy of securing long term partnership contracts with large "blue-chip" multi-nationals which we are able to supply with a broad range of bespoke specialist services. This included the signing of a five year contract worth some £2.1 million with a multi-national aerospace group.

The UK commercial aerospace market appears to be strong and has more than made up for the decline in military-related activity which we have experienced since the winding down of the British Army's presence in Afghanistan and Iraq.

TRaC continues to explore ways of leveraging the highly specialist expertise of its engineers by developing advisory / consultancy activities. We are targeting a number of sectors to try and extend complementary revenue streams.

We also continue to invest selectively in specialist equipment which enables us to capture and retain large clients as well as expand the range of services we can provide to the market.

We have recently completed the freehold purchase of TRaC's headquarters in Malvern for approximately £0.9 million which secures for TRaC the use of its specialist facilities for the future.

OUTLOOK AND PROSPECTS

We are continuing to see interesting and growing opportunities in the UK and overseas for our recently launched QUBE and ICE-pod products which are highly complementary to our existing Life Sciences and Healthcare product ranges. At the same time we remain focussed on building the proportion of the Bio-decon division's recurring revenues, arising from consumable-related sales or service activities. In addition, there are encouraging signs of increased activity levels in the USA although trading in Asia remains difficult to predict.

TRaC is well positioned for further growth from its expanding range of services - and is trading well.

We have completed a significant reconfiguration of our Bio-decon division which should, when combined with the associated reduction in our overheads and robust trading from TRaC, position the Group well for increased revenues and profitability in the future.

Nigel Keen

Chairman

Bioquell PLC

28 August, 2013

Consolidated income statementUnaudited results for the six months ended 30 June 2013

All amounts are derived from continuing operations.

Notes

1. The financial information for the six months ended 30 June 2013 and the comparative figures for the six months ended 30 June 2012 have not been reviewed or audited by the Group's auditors and have been prepared on the basis of the accounting policies adopted by the Group under IFRS. In the current financial year the Group has adopted the amendments to IAS1 'Presentation of Other Comprehensive Income' and IFRS 13 'Fair Value Measurement'. Otherwise the same accounting policies and methods of computation are followed in the interim financial report as published by the Company on 11 April 2013 in its annual financial statements, which are available on the Company's website on www.bioquellplc.com. The items in the statement of comprehensive income that may be reclassified to profit and loss in accordance with IFRS have been identified. IFRS 13 requires the disclosure of financial instruments at fair value in the interim statement, it has not impacted the fair value measurement of the Group's financial instruments.

2. The comparative figures for the twelve months to 31 December 2012 have been prepared under IFRS. They do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The unqualified audited accounts for the twelve months ended 31 December 2012 have been filed with the Registrar of Companies and they did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3. The tax charge shown on the income statement represents a combined corporation tax charge and deferred tax liability. The charge is based on the Group's anticipated effective tax rate for the full year.

4. Earnings per share for the half year have been calculated on the profit on ordinary activities after taxation divided by the weighted average number of ordinary shares in issue during the period. The Group's diluted earnings per share are calculated by including dilutive share options in the denominator.

5. There have been no related party transactions that have occurred during the first six months of the financial year that have materially affected the financial position or performance of the Group during that period and there have been no changes in the related party transactions described in the last Annual Report that could do so.

6. Copies of this statement will be available to members of the public at the Company's registered office: 52 Royce Close, West Portway, Andover, Hampshire SP10 3TS and on the Group's website at www.bioquellplc.com.

Principal risks and uncertainties

The Board believes that the principal risks and uncertainties facing the Group have not changed materially from those described in the 2012 Annual Report, including the summary of risks and uncertainties set out on pages 12 to 14. The Group provides complex equipment and specialist services to a large number of clients in the UK and internationally. Accordingly the Group is subject to a broad range of strategic, operational and financial risks and uncertainties, including but not limited to: competition, technological, regulatory, reliance on suppliers, loss of key personnel, currency and credit risks.

Going concern

The Group has sufficient financial resources to cover budgeted future cash flows, together with contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Directors confirm that they have a reasonable expectation that the Group has adequate finance resources to continue to trade for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the financial statements.

Responsibility statement

We confirm that to the best of our knowledge: (i) the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; (ii) the financial statements give a true and fair view of the assets, liabilities, financial position and profit of the undertakings, included in the consolidation as a whole as required by DTR 4.2.4R; (iii) the Interim Management Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and a description of principal risks and uncertainties for the remaining six months of the year); and (iv) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

NicK Adams Mark Bodeker

Group Chief Executive Chief Operating Officer and Finance Director

28 August 2013

Consolidated statement of comprehensive incomeUnaudited results for the six months ended 30 June 2013

* May be reclassified subsequently to profit or loss in accordance with IFRS

Consolidated statement of changes in equity

unaudited results for the six months ended 30 June 2013

Consolidated balance sheetUnaudited results at 30 June 2013

Consolidated cash flow statementunaudited results for the six months ended 30 June 2013

Notes to the cash flow statementunaudited results for the six months ended 30 June 2013

Business segments

Segment information about these businesses is presented below:

For management purposes the Group is currently organised into two operating divisions: Bio-decon and TRaC ("Testing, Regulatory and Compliance). These divisions are consistent with the internal reporting as reviewed by the Chief Executive. These reportable divisions remain unchanged from the 31 December 2012 consolidated accounts.

Dividends

The final dividend for the year ended 31 December 2012 was approved by shareholders at the Annual General Meeting held on 13 May 2013 and is therefore included in current liabilities in the balance sheet.

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts within 70 to 80% of the exposure generated. The Group also enters into forward foreign contracts to manage the risk associated with anticipated sales and purchase transactions out to six months within 40 to 50% of the exposure generated. Forward exchange contracts are carried at fair value through profit and loss.

At the balance sheet date, total notional amount of outstanding forward foreign exchange contracts that the Group has committed are as below:

At 30 June 2013, the fair value of the Group's currency derivatives is estimated to be approximately £(158,000) (2012: £167,000). The fair value has been calculated as the present value of future expected cash flows at market related rates, which are current at the balance sheet date. The value is calculated using readily available market data and represents a level 2 measurement in the fair value hierarchy under IFRS 7.

Other financial assets

Analysis of net cash