Bioquell Regulatory News (BQE)

14 January, 2013

BIOQUELL PLC

Pre-close update on the year ended 31 December 2012

Bioquell PLC ("Bioquell") (LSE symbol: BQE) - provider of specialist bio-decontamination technologies to the international Healthcare, Life Sciences & Defence markets, and specialist testing services in the UK via its TRaC division - today announces an update on its trading performance for the year ended 31 December, 2012.

Highlights

§ Group orders of £44.6 million (2011: £44.4 million)

o Group orders ex defence activities of £43.8 million (2011: £38.2 million), up 15%

§ Group revenues of £41.0 million (2011: £41.3 million)

o Group revenues ex defence activities of £40 million (2011 : £37 million), up 8%

§ TRaC orders £17.6 million (2011: £ 14.9 million), up 18%

§ TRaC revenues £15.1 million (2011: £13.6 million), up 11%

§ Record monthly Group revenues and orders (excluding defence activities) in December 2012

§ Net cash of £2.0 million (2011: £4.0 million)

§ Encouraging levels of demand for recently launched new products including ICE-pod, QUBE and Bioquell's 'Triple-lock' range of consumables

§ Recent publication of a research paper by Johns Hopkins (one of America's top hospitals) showing a 64% reduction in hospital acquired infection in Hopkins' Intensive Care Units associated with the use of Bioquell's hydrogen peroxide vapour technology

§ Robust and confident performance from TRaC, which enters 2013 with good momentum

Revenues for 2012 are expected to be £41.0 million (2011: £41.3 million). Notwithstanding record monthly orders (excluding 'lumpy' defence contracts) and revenues in December, we experienced a slight shortfall at the end of the year in orders expected for immediate shipment to Life Sciences customers based in continental Europe. Also we decided not to ship prior to year end a number of orders from customers in the emerging markets which we had received (and had forecast to despatch) but for which we were unable to satisfy ourselves as to the robustness of the associated credit arrangements. In addition our defence invoicing in 2012 was held back at the very end of the year on one large defence contract due to slippage on matters unrelated to Bioquell's activities. Our business is highly operationally geared and such a reduction in revenues has a significant effect on our profitability. We estimate that the aggregate revenue effect relating to these matters will be approximately £0.9 million.

Excluding the effect of our 'lumpy' defence business, the Group showed good progress during the year with orders up by 15% to £43.8 million (2011: £38.2 million) and revenues up by 8% to £40.0 million (2011: £37.0 million). TRaC also performed well throughout the year with orders up 18% to £17.6 million (2011: £14.9 million) and revenues up 11% to £15.1 million (2011: £13.6 million).

The Group enters 2013 with a 12% increase in its opening order book of £17.2 million (2011: £15.4 million) - with no significant change year-on-year in the defence order book. The Bio-decontamination division order book totalled £12.3 million (72% of the total order book) and TRaC represented £4.9 million (28%).

Bioquell also starts 2013 with a substantially enlarged range of bio-decontamination products and services which benefit from attractive usage-based revenues, and which are generating increasing levels of interest from our client base. In parallel, TRaC, the Group's specialist testing business is well positioned for further growth this year.

We are expecting growth in 2013 from our Bio-decontamination division as a result of our recently launched Infection Control Enclosure (ICE-pod) - which enables hospitals to convert open "Nightingale" wards into single rooms and which can also be rapidly and efficiently 'bioquelled'. A number of evaluation ICE-pods have been erected in NHS hospitals and we already have fee-paying ICE-pods erected in a leading London teaching hospital. Feed-back from the initial users of the ICE-pods has been positive and we are beginning to see high levels of demand for this technology from NHS hospitals. We are also beginning to receive requests for information on our ICE-pod technology from overseas hospitals.

A research paper written by a team from Johns Hopkins Hospital, Baltimore, MA was recently published in the scientific journal Clinical Infectious Diseases. http://cid.oxfordjournals.org/content/early/2012/10/01/cid.cis839.short This paper showed, among other things, that Bioquell's hydrogen peroxide vapour ("HPV") technology was associated with a 64% reduction in hospital acquired infection ("HAI") in certain of Hopkins' Intensive Care Units. Johns Hopkins has recently signed a five year service bio-decontamination contract with Bioquell and has also purchased Bioquell HPV equipment. We anticipate that the adoption by Johns Hopkins of our HPV technology, in parallel with the publication of the scientific evidence supporting the use of HPV technology to reduce HAI, will significantly assist our growth prospects in the US healthcare market and elsewhere.

We continue to see increasing interest for our recently launched and innovative QUBE product which allows users to manipulate products, components and reagents under sterile conditions. This product incorporates novel manufacturing techniques developed by Bioquell. We are seeing demand for the QUBE from the Life Sciences sector for sterility test and general bio-pharmaceutical research activities. We are also seeing interest for the QUBE in the Healthcare sector from hospital and compounding pharmacies, including in the USA which has recently experienced a major problem associated with microbiologically-contaminated intravenous drugs prepared by a compounding pharmacy based in Massachusetts.

As expected, we received a large influx of orders from customers in the Life Sciences sector towards the end of 2012 for products needing to be shipped prior to the end of the year. These orders resulted in record order intake (excluding defence activities) and revenues in the month of December. Although we were able to satisfy substantially all of the demand for these late orders in December from stock, we decided not to ship a small number of high value orders, principally from customers in the emerging markets, where, contrary to our expectation, we were unable to agree, or put in place, satisfactory payment guarantees; we anticipate that these orders (with associated revenues) will be fulfilled in the first quarter of 2013. In addition, a small number of orders expected from clients in the Life Sciences sector in continental Europe were not received prior to year end.

In addition to the new products launched last year, we see good growth prospects for our existing range of HPV products, in part from collaboration agreements with third party manufacturers of equipment which require Bioquell's specialist low temperature residue-free bio-decontamination technology. A number of these collaboration agreements were put in place in 2012.

During 2012 a number of Life Science organisations reported problems relating to unreliable biological indicators ("BIs") which are used to confirm the efficacy of bio-decontamination cycles, often for formal regulatory purposes. These BI-related issues have forced a number of organisations to cease, or delay, research and production activities. The Group recognised the strategic importance of BIs to its HPV technology over two years ago and started investing in a development programme which culminated in the launch of Bioquell's own range of BIs at the end of 2012. Given the significant issues that many Life Sciences organisations have been experiencing with third party BIs, we are seeing strong interest in our new HPV-BI consumable range. Moreover we are promoting our new BIs alongside our recently launched chemical indicators (HPV-CI) and our expanding range of proprietary hydrogen peroxide cartridges (HPV-AQ) within our 'Triple-lock' assurance programme. We anticipate strong growth in this business stream in 2013.

As previously announced in our interim results, our 2012 Group performance was adversely affected by the 'lumpy' nature of our defence business. Defence orders in 2012 were £0.8 million (2011: £6.2 million) and Defence revenues were £1.0 million (2011: £4.0 million). During 2012 we took a number of steps to try and reduce the fluctuations in our defence business, although it is too early to assess how successful these various actions have been.

TRaC

TRaC had an excellent 2012 with orders and revenues up 18% and 11%, respectively. TRaC exited last year seeing robust ongoing demand across its broad range of specialist testing, regulatory and compliance services. In particular, activity from the aerospace sector remains strong. We are anticipating a number of drivers of growth for TRaC in 2013 including as a result of recent investments relating to the expansion of its marketing resources as well as the ongoing tightening of European regulatory requirements, which should generate additional work for TRaC across a number of sectors.

Work also continues on expanding the services offered by TRaC in the UK with, for example, investment underway in the expansion of its service offerings to the UK medical devices sector. We continue to enjoy attractive returns from the ongoing investments we have been making in highly specialist testing equipment which enables TRaC to expand its specialist service offerings.

Outlook & prospects

2012 was a challenging year for our Bio-decontamination division as we made major changes to our business model. This included the launch of a number of new products which benefit from captive consumable revenues or other recurring revenues, and which should increase significantly the quality of the Group's earnings as well as being margin enhancing. In 2013 the Bio-decontamination division is expected to increase markedly its revenues generated from the Healthcare sector and hence reduce its current primary reliance on the Life Sciences sector.

TRaC is well positioned for further growth and is benefiting from real momentum entering 2013.

The Group had net cash of £2.0 million at the year end and also has undrawn overdraft facilities in place; accordingly we have the financial resources available to support high levels of organic growth.

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Commenting on the pre-close statement, Nigel Keen, Chairman of Bioquell PLC said:

"After a challenging 2012 for our Bio-decontamination division we are starting 2013 with a substantially expanded product range with attractive recurring revenues which is generating encouraging levels of interest from our clients. We anticipate that these new products will be key drivers of growth and should also enable us to increase the proportion of our revenues generated from the international Healthcare sector."

"TRaC is in great shape and we expect it to continue to perform well in 2013."

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Note the information contained in the announcement above is unaudited and has been prepared from unaudited internal management accounting information.

- Ends -

Enquiries:

Bioquell PLC 01264 835 900

Nigel Keen Chairman

Nick Adams Group Chief Executive

Mark Bodeker Chief Operating Officer / 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-decontamination 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-decontamination 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-decontamination 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 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 military sectors.