FUL.L Regulatory News (FUL)

18 May 2005 07:00

Fulcrum Pharma PLC18 May 2005 For immediate release 18 May 2005 Fulcrum Pharma plc ("Fulcrum" or "the Group") Interim Results for the six months to 28 February 2005 Fulcrum Pharma PLC (AIM: FUL), the independent drug development company thatoffers virtual drug development and strategic outsourcing services to thepharmaceutical and biotechnology industries, today announces its interimunaudited results for the six months ended 28 February 2005. Highlights • Loss before tax and exceptionals of £350,000 • Performance improved compared with the half year ended 31 August 2004 (H2 2004: loss before tax and exceptionals of £766,000) • Group fee income was flat compared with the same period last year • US subsidiary profitable with 30% growth in fees compared with same period last year • Europe has signed a long term agreement with Syngenta Biopharma • Cross sales from Japan continue to grow • Strategy to improve performance taking effect • Net cash remains strong at £1.6 million at 28 February 2005 and £1.8 million at 30 April 2005 Commenting on the results, Chairman Prof. Sir Charles George said: "I am pleasedto report that our strategy to improve performance is beginning to deliverresults, underlined by the progress shown over the second half of last year. Thegrowth in US sales was particularly encouraging as were the level of cross salesfrom Japan into Europe and the US. Operational efficiencies and careful costcontrol give us confidence that we can return the Group to profitability." For further information, please contact: Fulcrum Pharma PLC Tel: 0870 710 7152Jon Court, Chief Executive Buchanan Communications Tel: 0207 466 5000Mary-Jane Johnson FULCRUM PHARMA PLC Interim Results for the six months ended 28 February 2005 REPORT OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER INTRODUCTION We are pleased to announce the interim results to 28 February 2005. Fulcrum hasbeen implementing its strategy for recovery following the disappointingperformance in the second half of last year. We are pleased to report that ourstrategy to improve performance is beginning to take effect. The Group has focussed on sales growth, particularly in the US where the Groupplans to expand the US subsidiary to deliver more than 50% of Group sales.Cross sales from Japan, that is sales to Japanese companies delivered by the USand European subsidiaries, continue to grow compared with the same period lastyear. However, Group fee sales overall were flat as pricing pressures in Europe,related to the weak US dollar and the funding environment, continue and salesgrowth in Japan was lower than expected. The sales strategy has been to securelong term relationships with clients through risk sharing and partnerships. Progress has been made in improving operational efficiency and reducing the costbase in Europe. Careful management of costs in all operating regions hasimproved the ratio of overheads to fees and improved the Group performance overthe second half of last year. We believe that the Group continues to position itself to deliver our vision ofbuilding a global, scalable, outsourcing business that is both profitable andsustainable. FINANCIAL REVIEW The results for the six months ended 28 February 2005 show a loss before tax andexceptional items of £350,000 (first half 2004: loss of £96,000; full year 2004:loss of £862,000). The loss includes exchange losses of £32,000 (2004:£117,000). The basic loss per share of 0.29p compares with a 0.30p basic lossper share in H1 2004. Dividend The Directors do not propose an interim dividend (2004:0.2p per share). OPERATIONAL REVIEW Commercial strategy Sales and marketing The reorganisation of Sales and Marketing on a regional basis is having apositive impact on sales and has resulted in a strengthening of the pipeline inEurope where there has been an increase in the number of new clients. We areexecuting a targeted campaign to increase client awareness in the emergingpharma and biotech communities. This campaign includes sponsorship of, andpresentations at, major biotechnology and partnering conferences in the US,Europe and Japan. Establishing long term business relationships A core of long term partnerships has been established in Europe, which isexpected to contribute two thirds of European sales in the current financialyear. We are delighted that a long term agreement has been signed with SyngentaBiopharma. Fulcrum is providing drug development expertise and embeddingcritical tools and processes from Fulcrum's "Document Driven Drug Development"platform into the client organisation. In addition, Fulcrum's partnership withAddex Pharmaceuticals continues to support the delivery of Addex's portfolio ofnovel positive and negative allosteric modulators for CNS diseases. Addex andFulcrum delivered a joint presentation on the value created by the relationshipat Biobusiness 2005 in Geneva. The Group plans to develop further long termbusiness relationships to bring long term contracts and upside through risksharing. Cross sales with Japan Our investment in business development in Japan continues to improve cross salesfrom Japan into Europe and the US. Cross sales represent 13% and 17% of sales inEurope and the US respectively. Our Japanese clients include large pharma andemerging biotechs such as NanoCarriers Co., Ltd. These companies utilise ourskillsets and resources in the European and US subsidiaries. We have alsoachieved cross sales into Japan from emerging European companies seeking theopportunity to create value in the Japanese market. Regional performance Europe The sales pipeline and order book have strengthened following the reorganisationof Sales & Marketing in September 2004. The business development team hassuccessfully won new clients and delivered several core contracts which areresourced from our European office. The team has also delivered cross sales tothe US office including a contract with Lorantis Ltd to perform work in the US. We have also taken steps to reduce the cost base to enable a return toprofitability. In this financial year, cost savings of circa £250,000 areanticipated, with the majority of these savings occurring in the second half ofthe year. Of this, £220,000 represents permanent annual savings, the majority ofwhich relates to the reorganisation and the remainder to the relocation of theUK office. US The US subsidiary has continued to grow through its domestic customer base, fromcross sales from Japan and from the provision of resources to the Europeansubsidiary. The latter has allowed efficient use of global resources. OverallUS fee sales have grown by 30% compared with the same period last year. Thissales growth together with good cost control has resulted in a profit in thefirst half year. It is planned to increase investment in the US when the groupreturns to overall profitability, so that our goal of the US subsidiarydelivering greater than 50% of Group fee sales can be realised. Japan Japan had a slow start to the year due to an expected major contract notconverting, resulting in a loss in the first half year. Since then themanagement team has effected a recovery and at the start of the second half hassecured two large domestic contracts and several cross sale contracts fromEurope. As a result, the prospects for the second half year are encouraging. PROSPECTS We remain focussed on returning the Group to profitability through sales growth,cost control and operational efficiency across the three operating regions. InEurope an exceptional profit of £250,000 will occur in the second half of thefinancial year in respect of a lease settlement agreement with the currentlandlord, which has prompted the relocation of the UK office. We intend to continue to invest in our US subsidiary, increase cross salesbetween the regions and develop further risk-sharing opportunities andrelationships with our clients. Consolidated Profit & Loss Account for the period ended 28 February 2005 Six months Six months Year ended ended ended 28 February 29 February 31 August 2005 2004 2004 Unaudited Unaudited Audited Notes £'000 £'000 £'000 Turnover 2 6,330 5,490 11,085 Cost of sales (5,090) (3,726) (8,434) Gross profit 1,240 1,764 2,651 Selling expenses (381) (385) (810) Administrative expenses (1,229) (1,500) (2,752) Exceptional administrative expenses 3 - (312) (348) Total administrative expenses (1,229) (1,812) (3,100) Operating loss (370) (433) (1,259) Interest receivable and similar income 27 29 58 Interest payable and similar charges (7) (4) (9) Loss on ordinary activities before taxation (350) (408) (1,210) Tax on loss on ordinary activities 4 - 43 88 Loss attributable to shareholders (350) (365) (1,122) Proposed dividend 5 - (244) (244) Retained loss for the period (350) (609) (1,366) Loss per share (pence) Basic 6 (0.29)p (0.30)p (0.93)p Adjusted basic 6 (0.29)p (0.04)p (0.69)p Adjusted loss 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 losses for the period ended 28 February 2005 Six months Six months Year ended ended ended 28 February 29 February 31 August 2005 2004 2004 Unaudited Unaudited Audited £'000 £'000 £'000Loss on ordinary activities after taxation (350) (365) (1,122)Exchange adjustments offset in reserves (22) (95) (82)Total recognised gains and losses since last annual (372) (460) (1,204)report Consolidated Balance Sheet as at 28 February 2005 28 February 29 February 31 August 2005 2004 2004 Unaudited Unaudited Audited £'000 £'000 £'000 Fixed assets Tangible assets 526 590 584 Investments 85 96 85 611 686 669 Current assets Debtors 3,536 3,278 3,351 Short term investments 1,298 1,355 1,423 Cash at bank and in hand 678 743 1,045 5,512 5,376 5,819 Creditors: amounts falling due within one year (3,012) (1,788) (2,831) Net current assets 2,500 3,588 2,988 Total assets less current liabilities 3,111 4,274 3,657 Creditors: amounts falling due after more than one year (52) (63) (226) 3,059 4,211 3,431 Capital and reserves Called up share capital 1,219 1,219 1,219 Share premium 4,370 4,370 4,370 Merger reserve (454) (454) (454) Profit and loss account (2,076) (924) (1,704) Equity shareholders' funds 3,059 4,211 3,431 Consolidated Cash Flow Statement Six months Six months Year ended ended ended 28 February 29 February 31 August 2005 2004 2004 Unaudited Unaudited Audited Notes £'000 £'000 £'000Net cash outflow from operating activities 7 (533) (1,291) (843)Returns on investments and servicing of financeInterest received 27 29 58Interest paid (7) (4) (9)Net cash inflow from returns on investments and 20 25 49servicing of financeTaxationCorporation tax (1) (10) 176Capital expenditure and financial investmentPurchase of tangible fixed assets (43) (156) (293)Purchase of shares by ESOP - (43) -Equity dividends paid to shareholders 5 - - (244)Net cash outflow before management of liquid resources (557) (1,475) (1,283)and financingManagement of liquid resourcesDecrease in short term investments 125 1,470 1,402FinancingNew finance leases - - 58Bank loan received 98 - 152Capital element of finance lease payments (19) (11) (32)Bank loan repayments (14) (12) (23) 65 (23) 155(Decrease)/increase in cash 7 (367) (28) 274 Reconciliation of net cash flow to movement in netfunds Six months Six months Year ended ended ended 28 February 29 February 31 August 2005 2004 2004 Unaudited Unaudited Audited Notes £'000 £'000 £'000(Decrease)/increase in cash 7 (367) (28) 274(Increase)/decrease in bank loans (84) 12 (129)Decrease in short term investments 7 (125) (1,470) (1,402)Decrease/(increase) in finance leases 19 11 (26)Change in net funds from cash flows (557) (1,475) (1,283)Net funds at start of period 7 2,179 3,462 3,462Net funds at end of period 7 1,622 1,987 2,179 1. Financial information The interim results for the six months ended 28 February 2005 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 2004. The comparative informationcontained in the report for the year ended 31 August 2004 does not constitutethe statutory accounts for the financial period. Those accounts have beenreported on by the Company's Auditors, PricewaterhouseCoopers, and delivered tothe Registrar of Companies. The report of the Auditors was unqualified and didnot contain a statement under section 237(2) or (3) of the Companies Act. 2. Turnover Geographical analysis by region Six months to Six months to Year ended 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000Europe 1,458 1,564 3,414US 747 573 1,305Japan 667 782 1,192Total fee income 2,872 2,919 5,911Passthrough costs 3,458 2,571 5,174 6,330 5,490 11,085 3. Exceptional items Six months to Six months to Year ended 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000Loss on ordinary activities before tax (350) (408) (1,210)Exceptional administrative expenses - 312 348Loss on ordinary activities before taxation and (350) (96) (862)exceptional items The Group has reported a loss before tax and exceptional items of £350,000. TheCompany recorded an exceptional charge of £nil in the current period (H1 2004:£312,000). The exceptional charges in 2004 represented the cost of the Group'sventure Fulcrum Ventures Ltd. 4. Tax on loss on ordinary activities Six months to Six months to Year ended 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000Current taxationUK corporation tax at 30% - - (63)Adjustment in respect of prior period - - 18 - - (45)Deferred taxationOrigination and reversal of timing differences - (43) (43) - (43) (88) The tax charge for the period differs from the standard rate of corporation taxin the UK of 30% (2004: 30%). The differences are explained below: Six months to Six months to Year ended 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000Loss on ordinary activities before tax (350) (408) (1,210)Loss on ordinary activities before tax multiplied (105) (122) (363)by the standard rate of corporation tax in the UKof 30% (2004: 30%)Effects of:Capital allowances in excess of depreciation (2) (16) 17Expenses not deductible for tax purposes 4 4 22Tax losses for the period not relieved 129 134 377Adjustment in respect of prior period - - 18Research and development tax credits (26) - (116)Current tax credit for period - - (45) 5. Dividends The directors do not propose to pay an interim dividend (H1 2004: 0.2p pershare). 6. Loss per share Six months Six months Year ended ended ended 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000Loss on ordinary activities after taxation for basic loss (350) (365) (1,122)per shareExceptional costs - 312 348Loss on ordinary activities after taxation for adjusted loss (350) (53) (774)per shareWeighted average number of ordinary shares for earnings per 120,901,541 121,401,451 121,151,541share The weighted average number of shares is calculated excluding those held by theEmployee Share Ownership Plan, which are treated as cancelled. 7. Notes to the consolidated cash flow statement (a) Reconciliation of the operating profit to net cash outflow from operatingactivities Six months to Six months to Year to 28 February 29 February 31 August 2005 2004 2004 £'000 £'000 £'000Operating loss (370) (433) (1,259)Depreciation 93 107 238Shares in ESOT written down - - 59Exchange loss (14) (96) (82)(Increase)/decrease in debtors (184) (354) (549)(Decrease)/increase in creditors (58) (515) 750Net cash outflow from operating activities (533) (1,291) (843) (b) Analysis of net funds As at As at 1 September 29 February 2004 Cash flow 2005 £'000 £'000 £'000Cash at bank and in hand 1,045 (367) 678Bank loan (196) (84) (280)Short term investment 1,423 (125) 1,298Finance leases (93) 19 (74) 2,179 (557) 1,622 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. 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