Bioquell Regulatory News (BQE)

12 Sep 2007 07:01

Bioquell PLC12 September 2007 TO: CITY EDITORS FOR IMMEDIATE RELEASE 12 September, 2007 BIOQUELL PLC 2007 interim results BIOQUELL PLC ("BIOQUELL"), the UK leader in specialist bio-decontaminationtechnology and testing / compliance services, announces its interim results forthe six months ended 30 June 2007. The highlights are: • Substantial organic growth in revenues, profit and positive cashflow • Revenues up 30% to £15.8 million (H1 2006: £12.2 million) • Bio-decontamination division revenues up 52% to £10.5 million (H1 2006 £6.9 million); TRAC division revenues up 2% to £5.3 million (H1 2006 £5.2 million) • Pre-tax profit up 400% to £2.0 million (H1 2006: £0.4 million) • Earnings per share up 378% to 4.3p (H1 2006: 0.9p) • Net cash from operating activities up 211% to £2.8 million (H1 £0.9 million) • Net cash on balance sheet of £1.6 million (31 December, 2006: net debt: £ (0.6) million) • Continuing strong levels of orders and revenues from defence-related NBC filtration products within the bio-decontamination division • Significant level of orders for the new BIOQUELL Z, launched earlier in the year • Key investment in research and development continuing, including new wound healing technology • Increasing success in promoting a broader range of the TRAC division's services into large military and aerospace groups Commenting on the interim results, John Salkeld, Chairman of BIOQUELL PLC said: "These are a good set of interim results with significantly increased levels ofrevenues, profitability and positive cashflow. Sales into the defence sectorwere strong and this will continue into next year. Orders were also robust forthe Group's specialist bio-decontamination products and we are seeing increasingoverseas demand from the Group's expanding international distributor network.The TRAC division continues to increase the level of cross selling of itsservices to blue-chip multinationals and identify further opportunities forgrowth, although its results in the first half were adversely affected by amajor facilities move. Overall we are expecting further good progress in thesecond half." Enquiries: John Salkeld BIOQUELL PLC 01264 835 900Nick AdamsMark Bodeker Sam Robbins Redleaf Communications 020 7955 1410Adam Leviton BIOQUELL PLC - 2007 INTERIM RESULTS Chairman's statement Overview The BIOQUELL Group comprises two divisions: Bio-decontamination (which includesspecialist hydrogen peroxide vapour bio-decontamination equipment for thepharmaceutical, life sciences and healthcare sectors and nuclear, biological andchemical ("NBC") filtration products for the Defence sector) and TRAC (whichcomprises testing, regulatory and compliance services). Financial results Revenues for the Group increased by 30% to £15.8 million (H1 2006: £12.2million). The Bio-decontamination division revenues increased by 52% to £10.5million (H1 2006: £6.9 million) and TRAC revenues increased by 2% to £5.3million (H1 2006: £5.2 million). The proportion of the Group's revenues whichwere derived from overseas sales increased significantly to 54% (H1 2006: 32%). The increase in revenues was derived from organic growth. The largest element ofgrowth came from defence-related NBC specialist filtration products sold intothe US defence sector. Strong order activity was also seen for the Group'sspecialist hydrogen peroxide vapour ("HPV") bio-decontamination equipment,although manufacturing capacity constraints arising from the large defenceorders meant that HPV equipment revenues were down year-on-year. The TRACdivision recorded overall revenue growth of 2%; the revenues were adverselyaffected by temporary disruption from the move of one of the division's EMCtesting service businesses. The consolidated Group gross margin increased to 41% (H1 2006: 38%) reflectinghigher levels of activity and improved product mix. Gross expenditure on product development in the period was £0.6 million (H12006: £0.6 million), reflecting ongoing research and development related to newhydrogen peroxide vapour products and wound healing technology. Sales and marketing costs increased by 7% to £1.6 million (H1 2006: £1.5million) reflecting increasing levels of support for the Group's internationalsales into new territories. Profit before tax increased by 400% to £2.0 million (H1 2006: £0.4 million). Thesubstantially increased level of profit reflects a combination of factorsincluding increased sales of higher margin products, a largely unchanged costbase and significantly improved manufacturing recoveries as a result of higherlevels of manufacturing throughput in the Group's Andover-based manufacturingfacility, principally related to defence activity. Earnings per share increased by 378% to 4.3 pence (H1 2006: 0.9 pence). TheGroup has, under IAS 12, calculated a deferred tax charge (which does notrepresent a current cash liability) in the interim results of £0.3m,representing an anticipated effective tax rate for the year of 13.1%. Thischarge reflects the accounting treatment required for the offset of broughtforward losses and tax assets (principally associated with share based payments)against increased levels of profitability within the Group. The Group believesit is unlikely to incur a corporation tax charge representing a current cashliability in 2007 due to the utilisation of brought forward tax losses. An increasing proportion of the Group's revenues are dollar denominated and theweakness of the dollar against sterling in the first half reduced slightly theGroup's reported profitability. However, the Group has hedged a significantproportion of its anticipated 2007 dollar denominated revenues at rates morefavourable than the current dollar / sterling rate. Capital expenditure was £0.4 million (H1 2006: £0.6 million); substantially allof this expenditure related to the purchase of new, highly specialist testingequipment for the TRAC division. Depreciation of property, plant and equipmentwas £0.5 million (H1 2006: £0.5 million) and amortisation of intangibles was£0.3 million (H1 2006: £0.3 million). Cash inflow after expenditure on productdevelopment and before capital investment and acquisitions was £2.4 million (H12006: £0.5 million). Net cash at 30 June, 2007 was £1.6 million (31 December, 2006: net debt: £(0.6)million). The increase in the Group's cash balances was achieved despitesignificant demand for working capital relating to the increased level ofrevenues. Net assets at 30 June 2007 were £13.4 million (31 December, 2006:£11.5 million). Bio-decontamination division The Group's defence business enjoyed robust NBC filtration system orders andrevenues in the first half, principally from US vehicle manufacturers supplyingnew mine resistant, ambush protected ("MRAP") vehicles to the United StatesDepartment of Defence ("DOD"). The Group has received further MRAP-relatedorders in the second half. The Group has also recently won a substantial NBCfiltration and crew cooling defence order from a Middle Eastern customer.Deliveries against this order will commence at the beginning of 2008 andcontinue until the end of the first quarter of 2009. BIOQUELL's specialist low temperature, residue-free hydrogen peroxide vapourbased bio-decontamination equipment saw increased activity in the firsthalf, principally from the pharmaceutical and life sciences sector. In part,this was due to the launch of the new BIOQUELL Z room / zone decontaminationequipment which has started to sell well. Demand remains robust across Europeand the US - and we anticipate increasing order levels from the Far East,particularly as our expanding international distributor network starts to takemarket share. We were not able to fulfil all the HPV-related orders in the firsthalf due to manufacturing capacity constraints; however, we anticipate this willreverse in the second half. Demand for the Group's RBDS HPV bio-decontaminationservice was satisfactory and we are expecting increased levels of demand in thesecond half. It is increasingly clear that Clostridium difficile ("C.diff") - and inparticular the new hyper-virulent NAP1/BI/027 strain - is causing more troublefor hospitals in the UK and US than any other "superbug", including MRSA. It isalso now generally accepted that environmental contamination plays a substantialrole in the transmission of C.diff, particularly on high touch surfaces.However, hospitals - and their senior management - remain acutely sensitive tothe whole subject of hospital acquired infection ("HAI"), in part due to theissues associated with adverse media coverage / PR and liability, and areaccordingly often reluctant to discuss the scale of the challenges facing them.Moreover, as a rule the healthcare profession remains slow to change, suspiciousof 'new' technologies, reluctant to discuss issues with non-clinicians andrequires high quality scientific research to demonstrate the efficacy of any newintervention. Occasionally this requirement for 'high quality' scientificresearch ends up being used as an excuse to do nothing. The structure ofhospitals is also important - with single rooms helping to reduce "superbug"infection transmission. In the US most hospitals have single or double rooms; inthe UK large 'nightingale' open wards are prevalent in the NHS which can containmore than 50 beds - and which make the deployment of BIOQUELL's technology (andeffective infection control) substantially more challenging. In the US BIOQUELLis about to start further "superbug" related research in a leading US hospitalusing its HPV technology. In the UK BIOQUELL continues to increase the level ofHPV bio-decontamination service activity it is undertaking in the NHS - withincreasing levels of repeat orders and enquiries from new hospitals. However,penetration of this market remains slower than we would like. Nonetheless, thehealthcare market remains a potentially substantial market for BIOQUELL'sbio-decontamination technology and the Group will continue to increase itssales, marketing and research resources in this sector. BIOQUELL continues to invest in research and development ("R&D"). In addition toongoing "superbug" related R&D referred to above, the Group is carrying outdevelopment work to broaden its range of HPV bio-decontamination and defenceequipment. In addition significant sums are being invested in the development ofnew wound healing technology - and BIOQUELL is expecting a large scale clinicaltrial to start next month in order to obtain scientific data to support itsefficacy and associated regulatory claims for this new technology. The Groupalso invested considerable resources in the first half in relation to the DOD'stender for the Joint Material Decontamination System in conjunction with a largeUS Defence group. The result of this tender is expected shortly. The number of BIOQUELL specialist HPV bio-decontamination units in the field isincreasing significantly, particularly internationally, and in order to meetincreased levels of demand the Group is strengthening the management and ITsystems of its after-sales service business. The Group continues to sell its original Astec and Microflow range of laboratoryfiltration equipment in the UK and overseas; however, pricing and margins remainextremely competitive in this sector, in part due to the prevalence of overseasmanufacturers with dollar denominated cost bases. TRAC division The integration of the specialist testing, regulatory and compliance servicebusinesses within the TRAC division - and under 'TRAC' branding - continues. TRLCompliance, EMC Projects and Cape Engineering are beginning to win larger ordersfrom multinational aerospace and defence groups, as they demonstratesubstantial, well equipped facilities under the TRAC "umbrella". In the first half TRL Compliance moved its largest EMC testing facility into anew state-of-the-art headquarters in Malvern. Inevitably this move caused adegree of disruption including a year-on-year reduction in revenues; however,now that this move is complete the management team has been able to re-focus ongrowing the business. (The TRAC division has two more moves planned over thenext twelve months to complete the re-configuration and rationalisation of thedivision's facilities.) Cape Engineering made reasonable progress in the first half - with hard workfrom the new senior management team resulting in increased and more consistentprofitability; however, there is more work to be done to increase Cape's profitmargins. KTL - the TRAC division's telecoms business - had a satisfactory first half. Webelieve that this business has the greatest growth prospects in the TRACdivision. The telecoms market continues to evolve rapidly with increasingconvergence of wireless and wireline technology as well as a plethora of newcommunications-related technologies such as ZigBee, VDSL, VoIP, WiMAX and Femto.One of the challenges facing KTL is to ensure that it invests in the technologymost likely to generate substantial testing revenues. In parallel, KTL's USoperations based in Silicon Valley, California has been increasing its marketpenetration and developing relationships with the key hardware manufacturerslocated in and around the San Jose area. Activity levels are increasing and theprospects for consistent and profitable growth from KTL are improving. Prospects The prospects for the Group are good - and are continuing to improve. Activitylevels for the defence and HPV bio-decontamination equipment have continued atan encouraging level into the second half. R&D continues well - with efficientinput from an increasingly confident and competent technical team. The TRACdivision is likely to have a better second half than first half despite furtherplanned facility moves. The good start to the year is continuing into the secondhalf. John SalkeldChairmanBIOQUELL PLC12 September, 2007 Consolidated income statementunaudited interim results for the six months ended 30 June 2007 6 months 6 months 12 months to to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 -------- -------- ----------Revenue 15,823 12,171 25,238Cost of sales (9,298) (7,593) (15,521) -------- -------- ----------Gross profit 6,525 4,578 9,717 41% 38% 39%Operating expenses: -------- -------- ----------Sales & Marketing costs (1,557) (1,469) (2,952)Administration costs (1,975) (1,875) (4,082)R&D and Engineering costs (932) (790) (1,362) -------- -------- ----------Profit from operations 2,061 444 1,321 -------- -------- ----------Finance costs (66) (74) (164) -------- -------- ----------Profit before tax 1,995 370 1,157Tax (charge)/credit on profiton ordinary activities (262) - 4 -------- -------- ----------Profit for the periodattributable to equityholders of the parent 1,733 370 1,161 -------- -------- ----------Earnings per share- basic 4.3p 0.9p 2.9p- diluted 3.9p 0.9p 2.6p -------- -------- ---------- All amounts are derived from continuing operations. Notes: 1. The financial information for the six months ended 30 June 2007 and thecomparative figures for the six months ended 30 June 2006 have not been reviewedor audited by the Group's auditors and have been prepared on the basis of theaccounting policies adopted by the Group under IFRS. The same accountingpolicies and methods of computation are followed in the interim financial reportas published by the company on 26 March 2007 in its annual financial statements,which are available on the company's website on www.bioquellplc.com. 2. The comparative figures for the 12 months to 31 December 2006 have beenprepared under IFRS. They do not constitute statutory accounts within themeaning of section 240 of the Companies Act 1985. The unqualified auditedaccounts for the 12 months ended 31 December 2006 have been filed with theRegistrar of Companies and they did not contain statements under section 237(2)or (3) of the Companies Act 1985. 3. The tax charge shown on the income statement represents a deferred taxliability. The charge is based on the Group's effective tax rate for the fullyear, the calculation of which primarily includes the use of brought forwardlosses and tax assets arising from share based payments, offset by thecapitalisation of Research and Development expenditure. 4. Earnings per share for the half-year has been calculated on the loss onordinary activities after taxation, after deducting dividends on non-equity(preference) shares due but not paid, divided by the weighted average number ofordinary shares in issue during the period. The Group's diluted earnings pershare are calculated by including 'live' share options in the denominator. 5. The report was approved by the Board on 12 September 2007. 6. Copies of this statement will be available to members of the public atthe company's registered office: 34A Walworth Road, Andover, Hampshire SP10 5PYand on the Group's website at www.bioquellplc.com Consolidated statement of recognised income and expense 6 months to 6 months 12 months to 30 June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 --------- --------- ---------- Net profit for the period 1,733 370 1,161 Actuarial gain on definedbenefit pension scheme - - 56 Exchange differences on thetranslation of foreignoperations (161) (89) (225) --------- --------- ---------- Total recognised income sincelast annual report 1,572 281 992 --------- --------- ---------- Consolidated balance sheet 30 June 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 --------- --------- ----------Non-current assetsGoodwill 730 665 730Other intangible assets 6,166 5,816 6,108Property, plant & equipment 3,492 3,236 3,596 --------- --------- ---------- 10,388 9,717 10,434 --------- --------- ----------Current assetsInventories 2,288 1,872 1,415Trade and other receivables 5,775 5,967 5,570Deferred tax - 55 100Cash and cash equivalents 2,390 - 306 --------- --------- ---------- 10,453 7,894 7,391 --------- --------- ----------Total assets 20,841 17,611 17,825 --------- --------- ---------- Current liabilities (5,302) (4,137) (4,072)Trade and other payables (145) (103) (205)Obligations under finance leases - (922) -Bank overdraft (162) - -Deferred tax (844) (924) (1,136)Provisions --------- --------- ----------Net current assets 4,000 1,808 1,978 --------- --------- ---------- Total non-current liabilities (963) (918) (955) --------- --------- ---------- Total liabilities (7,416) (7,004) (6,368) --------- --------- ----------Net assets 13,425 10,607 11,457 --------- --------- ---------- EquityShare capital 4,115 4,053 4,069Share premium account 10,750 10,435 10,506Equity reserve 584 483 525Capital reserve 255 255 255Translation reserve (435) (120) (274)Retained earnings (1,844) (4,499) (3,624) --------- --------- ----------Equity attributable to equity holders of theparent 13,425 10,607 11,457 --------- --------- ---------- Consolidated cash flow statementsix months ended 30 June 2007 ----------- ----------- ------------ 6 months to 6 months to 12 months to 31 30 June 2007 30 June 2006 December 2006 £ 000 £ 000 £ 000 ----------- ----------- ------------Net cash fromoperatingactivities 2,768 941 3,505 ----------- ----------- ------------Investing activities Proceeds on disposal ofproperty, plant &equipment 1 78 20Purchases of property, plant &equipment (389) (551) (933)Expenditure on productdevelopment (373) (432) (1,031) ----------- ----------- ------------Net cash used ininvesting activities (761) (905) (1,944) ----------- ----------- ------------ Financing activitiesProceeds on issueof ordinary shares 290 63 150Repayment ofborrowings - - (20)Obligations underfinance leases (62) 144 (132) ----------- ----------- ------------Net cash from/(used in)financing activities 228 207 (2) ----------- ----------- ------------ ----------- ----------- ------------Increase in cash &cash equivalents 2,235 243 1,559 ----------- ----------- ------------Cash/(overdraft)at beginning ofperiod 306 (1,076) (1,076)Effect of foreignexchange ratechanges (151) (89) (177)Cash/(overdraft)at end of period 2,390 (922) 306 ----------- ----------- ------------ Note to the cash flow statement 6 months to 6 months to 30 12 months to 31 30 June 2007 June 2006 December 2006 £ 000 £ 000 £ 000 ----------- ----------- ------------Profit fromoperations 2,061 444 1,321 ----------- ----------- ------------Adjustments for:Depreciation of property,plant & equipment 480 509 1,042Amortisation of intangibleassets 316 282 589Share basedpayments 106 118 188Loss/(profit) on disposal offixed assets 11 (9) (11)(Decrease)/increase inprovisions (292) 104 251 ----------- ----------- ------------Operating cashflowsbefore movements inworking capital 2,682 1,448 3,380 ----------- ----------- ------------(Increase)/decrease ininventories (873) 275 732(Increase) inreceivables (105) (394) (42)Increase/(decrease) inpayables 1,392 (314) (383) ----------- ----------- ------------Cash generatedby operations 3,096 1,015 3,687 ----------- ----------- ------------Deferred taxcharge (262) - -Non-equity preferenceshare dividends paid (6) (6) (11)Interest paid (60) (68) (171) ----------- ----------- ------------Net cash from operatingactivities 2,768 941 3,505 ----------- ----------- ------------ Business segments For management purposes the Group is currently organised into two operatingdivisions - 'Bio-decontamination Solutions' and 'Testing Regulatory andCompliance'. These divisions are the basis on which the Group reports itsprimary segment information. Segment information about these businesses is presented below. Six months ended 30 June 2007 Bio-decontamination Testing, Consolidated regulatory & compliance £000 £000 £000Revenue Total revenue 10,518 5,305 15,823Result Segment result 1,980 738 2,718 ----------- ----------- -----------Head officecosts (657) -----------Profit from operations 2,061 -----------Finance costs (66) -----------Profit before tax 1,995 ----------- Revenue Geographically (Market)UK 3,037 4,280 7,317EU 1,717 351 2,068ROW 5,764 674 6,438 ----------- ----------- ----------- 10,518 5,305 15,823 ----------- ----------- ----------- Six months ended 30 June 2006 Bio-decontamination Testing, Consolidated regulatory & compliance £000 £000 £000Revenue Total revenue 6,931 5,240 12,171Result Segment result 168 678 846 ----------- ----------- -----------Head office costs (402) -----------Profit from operations 444 -----------Finance costs (74) -----------Profit before tax 370 ----------- Revenue Geographically (Market)UK 3,496 4,725 8,221EU 1,270 118 1,388ROW 2,165 397 2,562 ----------- ----------- ----------- 6,931 5,240 12,171 ----------- ----------- ----------- Year ended 31 December 2006 Bio-decontamination Testing, Consolidated regulatory & compliance £000 £000 £000Revenue Total revenue 14,607 10,631 25,238Result Segment result 749 913 1,662 ----------- ----------- -----------Head office costs (341) -----------Profit from operations 1,321 -----------Finance costs (164) -----------Profit before tax 1,157 ----------- Revenue Geographically (Market)UK 5,574 9,248 14,822EU 3,129 239 3,368ROW 5,904 1,144 7,048 ----------- ----------- ----------- 14,607 10,631 25,238 ----------- ----------- ----------- Analysis of net cash/(debt) 6 months to 30 6 months 12 months to June to 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 ---------- ---------- ---------- Cash / (bank overdraft) 2,390 (922) 306 Finance Leases - due withinone year (145) (103) (205) - due after one year (258) (148) (260) Bank Loan - due after one year (412) (421) (410) ---------- ---------- ---------- Net cash/(debt) 1,575 (1,594) (569) ---------- ---------- ---------- Reconciliation of movements in shareholders' funds 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 £'000 £'000 £'000 ---------- ---------- ----------Profit for the period 1,733 370 1,161 Movements in period: Issued share capital 46 21 37Issued sharepremium 244 42 113Credit to equity reservefor share based payments 70 118 188Exchangedifferences (125) (89) (243)Actuarial gainon defined benefitpension scheme - - 56 ---------- ---------- ----------Net increase in equityshareholders' 1,968 462 1,312 ---------- ---------- ---------- Equity shareholders'funds at beginning ofperiod 11,457 10,145 10,145Equity shareholders'funds at endof period 13,425 10,607 11,457 ---------- ---------- ---------- This information is provided by RNS The company news service from the London Stock Exchange