FUL.L Regulatory News (FUL)

9 May 2006 07:01

Fulcrum Pharma PLC09 May 2006 For immediate release 9 May 2006 FULCRUM PHARMA PLC ("the Group" or "the Company") Interim Results for the six months to 28 February 2006 Fulcrum Pharma plc (AIM: FUL), the drug development and strategic outsourcingservices company, today announces its interim results for the six months to 28February 2006 Highlights > Profit before tax of £88,000 (H12005: loss of £350,000) > Group fee income increased by 28% to £3.7 million compared with the same period last year > Earnings enhancing acquisition of Quadramed Ltd, a regulatory consultancy business, completed in February 2006 > Quadramed transaction underlines the Company's strategy of scaling up of the business both organically and by acquisition Commenting on the results, Chairman Prof. Sir Charles George, said: "We are delighted that the Group is profitable and has begun executing its plansto deepen expertise in areas of core competence. We expect the continued scalingup of the business to result in improvements in efficiency and profitability.Finally I would like to thank all of our staff for contributing to the progressFulcrum has made." FOR FURTHER INFORMATION, PLEASE CONTACT: Fulcrum Pharma PLC Tel: 0870 710 7152 Jon Court, Chief Executive Buchanan Communications Tel: 020 7466 5000 Mark Court, Mary-Jane Johnson Fulcrum Pharma PLC Preliminary Results for the Period Ended 28 February 2006 Report of the Chairman and Chief Executive Introduction Fulcrum returned to profitability in the second half of the last financial yearand this trend has continued through the first half of this financial year witha profit before tax of £88,000 compared with a loss of £350,000 in the sameperiod last year. Group fee income has increased by 28% compared with thecorresponding period. Fulcrum has been focussing on growing the scale of the business. An example ofthis has been the earnings-enhancing acquisition of Quadramed Ltd ("Quadramed"),announced on 9 February 2006, which has significantly strengthened Fulcrum'sexisting regulatory services capability. Financial Review The results for the year ended 28 February 2006 show a profit before tax of£88,000 (H12005: loss of £350,000). The basic earnings per share of 0.06pcompares with a loss per share of 0.29p per share in H12005. The Group's balance sheet remains strong with net funds at 28 February 2006 of£1.7 million (2005: £1.5m). Net cash includes £434,000 acquired with Quadramed. The Directors do not propose an interim dividend (H12005: £nil) Operating Review The Group's future strategy was outlined in the 2005 Annual Report and comprised(i) growing the service business in 3 regions and developing the global servicemodel, (ii) increasing scale in our areas of core competence and (iii) addingfurther value through long term and or risk-sharing relationships. The followingsections report on progress made in the latest half year. Business Development and Sales First half Group fee income increased by 28% to £3.7 million compared with £2.9million in the same period last year and with £3.3 million in the second half oflast year. The Group has concentrated on strengthening the Fulcrum brand and has sponsoredand presented at major biotechnology and partnering conferences in the US,Europe and Japan such as BIO 2006, BECIF and BioBusiness. The latter hasresulted in increased customer awareness and client referrals. Establishing long term business relationships Long term business relationships with Celtic Pharma Development Services BermudaLtd ("Celtic Pharma") and NanoCarrier Co Ltd ("NanoCarrier") were announced inApril 2006. Celtic Pharma is a leading global private equity firm focussed on pharmaceuticaland biotechnology products. The three year agreement to provide drugdevelopment services in Europe, the US and Japan to Celtic Pharma is ofsufficient significance that the Group will need to invest in furtherinfrastructure and resources in the second half of the financial year. NanoCarrier is a Japanese R&D-driven biotechnology company. Under the terms ofthe strategic partnership agreement Fulcrum will be responsible for theprovision of resources and expertise to support NanoCarrier to develop certainof its products. Regional Performance Europe The sales pipeline and order book which strengthened throughout last yearcontinues to improve. Fee income has increased by 50% compared with the sameperiod last year. The sales team has been successful in winning new clinicalcontracts. In recognition of the increase in clinical work Dr Robert Miller hasbeen made Chief Medical Officer for the Group. To enable the company to executethe additional work there has been investment in the recruitment of staff,expansion into new office premises in Strasbourg and the opening of an office inEdinburgh. The results include one month's contribution from Quadramed which has performedwell since being acquired in February 2006. Integration of the new businessthrough client project work and joint selling is progressing. The broadenedcapability has been well received by our clients. The relocation of the UK office in Hemel Hempstead, which was planned to takeplace in mid-December 2005, has had to be postponed following the fire at theBuncefield Oil Depot but there has been no interruption to Fulcrum's business asthe Company remains at its original premises; however this has resulted in someforeseen savings not yet being realised. US Although external fee income has decreased by 9% compared with the same periodlast year, the US has provided key resources to support European contracts. Theclose relationship with the European team is in keeping with our strategy todeliver services globally. Japan Fee income in Japan has increased by 22% over the same period last year. Ourspecialist oncology Clinical Research Organisation has developed into asustainable, profitable business providing CRO services for domestic Japaneseand international clients. In addition Japan has delivered significantinternational sales to the Group. Board Changes The company announced its intention at the year end to strengthen the Board withmore expertise from the service sector. Dr Angus Bell, who previously heldsenior management positions at Quintiles, the global leader in pharmaceuticalservices, joined the Board in March 2006. Dr David Clough, who has been aNon-executive Director since the company was listed on AIM in 2000, retires on 9May 2006 and the Board would like to thank him for his contribution to Fulcrum'sgrowth. Future Strategy and Outlook The Group is focussed on building the business to a sufficient scale to achievesustainable profits. The investment in further growth could impact profitabilityin the short term. Growth of our regulatory business is planned in Europe andthe US both organically and by making acquisitions where suitable opportunitiesarise. Fulcrum is continuing to recruit staff to strengthen its services inareas of core competence in drug development. The acquisition of Quadramed andthe signing of strategic agreements with Celtic and NanoCarrier are key elementsin the execution of the Group's ongoing strategy and will underpin the scale upof the business. Consolidated Profit and Loss Accountfor the period ended 28 February 2006 Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 Unaudited Unaudited Audited Notes £'000 £'000 £'000 Turnover 2 7,699 6,330 12,626Cost of sales (5,836) (5,090) (10,014) Gross profit 1,863 1,240 2,612Selling expenses (299) (381) (654) Administrative expenses (1,493) (1,229) (2,320)Exceptional administrative credit/(expenses) 3 - - 239 Total administrative expenses (1,493) (1,229) (2,081) Operating profit/(loss) 71 (370) (123)Interest receivable and similar income 25 27 56Interest payable and similar charges (8) (7) (9) Profit/(loss) on ordinary activities beforetaxation 88 (350) (76)Tax on profit/(loss) on ordinary activities 4 (10) - (13) Profit/(loss) attributable to shareholders 78 (350) (89)Proposed dividend 5 - - - Retained profit/(loss) for the period 78 (350) (89) Earnings/(loss) per share (pence)Basic 6 0.06p (0.29)p (0.07)pAdjusted basic 6 0.06p (0.29)p (0.23)pDiluted 6 0.06p (0.29)p (0.07)p Adjusted earnings per share excludes the effect of the exceptional items. All items included in the profit and loss accounts relate to continuingoperations. Statement of Total Group Recognised Gains and Lossesfor the period ended 28 February 2006 Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 Profit/(loss) on ordinary activities after taxation 78 (350) (89)Exchange adjustments offset in reserves 1 (22) (8) Total recognised gains and losses since last annual report 79 (372) (97) Consolidated Balance Sheetas at 28 February 2006 28 February 28 February 31 August 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000Fixed assetsIntangible assets 859 - -Tangible assets 471 526 460Investments 172 85 172 1,502 611 632 Current assetsDebtors 4,133 3,536 3,335Short term investments 624 1,298 1,193Cash at bank and in hand 1,357 678 678 6,114 5,512 5,206Creditors: amounts falling due within one year (3,840) (3,012) (2,481) Net current assets 2,274 2,500 2,725 Total assets less current liabilities 3,776 3,111 3,357Creditors: amounts falling due after more than one year (149) (52) (31) Net assets 3,627 3,059 3,326Capital and reservesCalled up share capital 1,285 1,219 1,219Share premium 4,547 4,370 4,370Merger reserve (454) (454) (454)Profit and loss account (1,751) (2,076) (1,809) Equity shareholders' funds 3,627 3,059 3,326 Consolidated Cash Flow Statementfor the period ended 28 February 2006 Period Period Year ended ended ended 28 February 28 February 31 August 2006 2005 2005 Unaudited Unaudited Audited Notes £'000 £'000 £'000 Net cash inflow/(outflow) from operating 7 (9) (533) (493)activities Returns on investments and servicing of financeInterest received 25 27 56Interest paid (8) (7) (9) Net cash inflow from returns on investments and 17 20 47servicing of finance TaxationCorporation tax received/(paid) 51 (1) (3) Capital expenditure and financial investmentPurchase of tangible fixed assets (95) (43) (69)Purchase of own shares for employee share optionsand awards (20 __ (29)Purchase of equity investments - - (87) Net cash outflow from capital expenditure andfinancial investment (115) (43) (185) Acquisitions and disposalsPurchase of subsidiary undertakings (includingcosts) (1,165) - -Net cash acquired with subsidiary 445 - - Net cash outflow from acquisitions and disposals (720) - - Net cash outflow before management of liquid (776) (557) (634)resources and financing Management of liquid resourcesDecrease in short term investments 569 125 230 FinancingIncrease in bank borrowings - 98 100Capital element of finance lease payments (21) (19) (37)Bank loan repayments (36) (14) (26)Proceeds of issue of loan notes 700 - -Proceeds of ordinary shares issued less costs 243 - - Net cash inflow from financing 886 65 37 Increase/(decrease) in cash 7 679 (367) (367) Reconciliation of net cash flow to movement in net funds Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 Unaudited Unaudited Audited Note £'000 £'000 £'000 Increase/(decrease) in cash 7 679 (367) (367)Decrease/(increase) in bank loans 7 35 (84) (74)Decrease in short term investments 7 (569) (125) (230)Decrease in finance leases 7 21 19 37Other non-cash movements - - (7) Change in net funds resulting from cash flows 166 (557) (641)Bank loan acquired with subsidiary 7 (11) - - Net funds at start of period 7 1,538 2,179 2,179 Net funds at end of period 7 1,693 1,622 1,538 Notes to the Financial Statementsfor the period ended 28 February 2006 1. Financial information The interim results for the six months ended 28 February 2006 are unaudited anddo not constitute statutory accounts within the meaning of section 240 of theCompanies Act 1985. They have been drawn up using accounting policies andprinciples consistent with those applied in the preparation of the auditedaccounts for the year ended 31 August 2005. The comparative informationcontained in the report for the year ended 31 August 2005 does not constitutethe statutory accounts for the financial period. Those accounts have beenreported on by the Company's auditors, PricewaterhouseCoopers LLP, and deliveredto the Registrar of Companies. The report of the auditors was unqualified anddid not contain a statement under section 237(2) or (3) of the Companies Act. 2. Turnover Geographical analysis by origin Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 £'000 £'000 £'000 Europe 2,181 1,458 3,082USA 683 747 1,524Japan 815 667 1,571 Total fee income 3,679 2,872 6,177Pass through costs 4,020 3,458 6,449 7,699 6,330 12,626 3. Exceptional items Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 £'000 £'000 £'000 Profit/(loss) on ordinary activities before tax 88 (350) (76)Exceptional administrative credit - - (239) Profit/(loss) on ordinary activities before taxation and 88 (350) (315)exceptional items The Group has reported a profit before tax and exceptional items of £88,000(H12005: loss of £350,000). The exceptional credit in 2005 represented theincome from the surrender of the lease on the UK office less the costsassociated with relocation to new premises. 4. Tax on profit/(loss) on ordinary activities Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 £'000 £'000 £'000Current taxationUK corporation tax at 30% 10 - -Adjustment in respect of prior period - - - 10 - -Overseas taxationCorporation taxes - - 13 Total current taxation 10 - 13Deferred taxationOrigination and reversal of timing differences - - - 10 - 13 The tax charge for the period differs from the standard rate of corporation taxin the UK of 30% (2005: 30%). The differences are explained below: Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 £'000 £'000 £'000 Profit/(loss) on ordinary activities before tax 88 (350) (76) Profit/(loss) on ordinary activities before tax andexceptional items multiplied by the standard rate ofcorporation tax in the UK of 30% (2005: 30%) 26 (105) (23)Effects of:Capital allowances in excess of depreciation (7) (2) 23Expenses not deductible for tax purposes 8 4 11Adjustment in respect of foreign taxes - - 5Tax losses for the period not relieved 21 129 97Research and development tax credits (38) (26) (77)Exceptional credit in excess of capital gain - - (23) Current tax charge for period 10 - 13 5. Dividends The Directors do not propose to pay an interim dividend (H1 2005: £nil pershare). 6. Earnings/(loss) per share Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 £'000 £'000 £'000 Profit/(loss) on ordinary activities after taxation for basic 78 (350) (280)earnings per shareExceptional credit - - 191 Profit/(loss) on ordinary activities after taxation for adjusted 78 (350) (89)earnings per share Weighted average number of ordinary shares for earnings per share 121,095,840 120,901,541 121,185,914 The weighted average number of shares is calculated excluding those held by theEmployee Share Ownership Plan, which are treated as cancelled. Diluted earnings per share is based on the profit for the period of £78,000 andon 136,385,411 shares of 1p each being the weighted average number of shares inissue during the period after allowing for the dilutive effect of the conversioninto ordinary shares of options outstanding during the period. For the periodended 28 February 2005 and the year ended 31 August 2005 the basic and dilutedloss per share were the same as there are no potential ordinary shares thatwould increase the loss per share in the periods. 7. Notes to the consolidated cash flow statement (a) Reconciliation of the operating profit to net cash outflow from operatingactivities Period ended Period ended Year ended 28 February 28 February 31 August 2006 2005 2005 £'000 £'000 £'000 Operating profit/(loss) 71 (370) (123)Depreciation and amortisation 99 93 197Shares in ESOT written down - - 21Exchange loss 1 (14) (8)(Increase)/decrease in debtors (693) (184) 17Increase/(decrease) in creditors 513 (58) (597) Net cash outflow from operating activities (9) (533) (493) (b) Analysis of net funds As at As at 1 September 28 February 2005 Cash Flow Acquisition 2006 £'000 £'000 £'000 Cash at bank and in hand 678 234 445 1,357Bank loans (270) 35 (11) (246)Short term investment 1,193 (569) - 624Finance leases (63) 21 - (42) 1,538 (279) 434 1,693 8. Copies of unaudited interim report Copies of this report are being sent to shareholders and are also available atthe registered office of Fulcrum Pharma plc, Kodak House, Station Road, HemelHempstead, Hertfordshire HP1 1JY. This information is provided by RNS The company news service from the London Stock Exchange