FUL.L Regulatory News (FUL)

17 May 2007 07:01

Fulcrum Pharma PLC17 May 2007 FULCRUM PHARMA PLC ("the Group" or "the Company") Interim Results for the six months to 28 February 2007 Fulcrum Pharma plc (AIM: FUL), the drug development and strategic outsourcingservices company, today announces its interim results for the six months to 28February 2007. Highlights• Group fee sales up 32% to £4.9million (HI 2006: £3.7million)• EBITDA up by 80% to £304,000 (H1 2006: £169,000)• Profit before tax up by 32% to £66,000 (H12006: £50,000)• Growth strategy being implemented. Further acquisition announced.• Strong sales growth in Europe, Japan and Regulatory Services Note: The Company has adopted FRS20 "Share-based payments" in these interimresults. The adoption of this accounting standard represents a change inaccounting policy and the comparative figures have been restated accordingly.The EBITDA figures are stated before these charges. Commenting on the results, Chairman Prof. Sir Charles George, said: "We continue to implement our plan to scale up our global business through acombination of M&A and organic growth. This is enabling Fulcrum to expand itspharmaceutical Development and Regulatory Services and drive sales growth.Finally the Board would like to thank all of our staff for contributing to theprogress Fulcrum has made". For further information, please contact: Fulcrum Pharma PLCJon Court, Chief Executive Tel: 0870 710 7152 Seymour PierceJonathan Wright/ Liam O'Donoghue Tel: 0207 107 8000 Fulcrum Pharma PLC Interim Results for the Period Ended 28 February 2007 Report of the Chairman IntroductionI am pleased to report that our trading performance continues to improve. Inparallel, we have successfully implemented the next stage of our growth strategyto increase scale through acquisition and organic growth. Strategic ReviewWe have recently acquired Unicus Regulatory Services Ltd ("Unicus"), a UK basedregulatory services business. This acquisition and the successful integration ofQuadramed Ltd ("Quadramed"), which was acquired in February 2006, establishesFulcrum as a leading independent provider of Regulatory Services in Europe . Inaddition we have grown organically to increase the size of our globalpharmaceutical Development Services business. Group headcount, excluding Unicus,has increased by 50% since 28 February 2006. Fulcrum will use its enlargedbusiness to capitalise on the Pharma and Biotech industries' increasing demandfor development and regulatory services. Globally R&D outsourcing is growing at15% with specialist areas expanding even faster. Financial ReviewThe results for the half year ended 28 February 2007 show a profit before tax of£66,000 (H12006: profit of £50,000). Group fee sales have risen by 32% to£4.9million compared with the corresponding period. Earnings before interest,tax, depreciation and amortisation ("EBITDA") were £304,000 (H12006£169,000).The basic earnings per share of 0.05 pence compares with 0.03 penceper share in H12006. The Company has adopted FRS20 "Share-based payments" in these interim results.The adoption of this accounting standard represents a change in accountingpolicy and the comparative figures have been restated accordingly. The EBITDAfigures are stated before these charges. The balance sheet has net cash of £1.5million as at 31 March 2007 havingimproved from £0.7million as at 28 February 2007 (H12006: £1.7million). . Postperiod end, the strength of the balance sheet has been maintained by funding theacquisition of Unicus through the issue of shares and a bank loan. As part ofthe funding, £500,000 was raised to increase working capital. The directors do not propose a dividend but will keep under review thepossibility of a dividend payable out of future profits (H12006: £nil). Unicus AcquisitionThe Company completed the acquisition of the entire issued share capital ofUnicus on 18th April 2007. Under the acquisition agreement, the initialconsideration of £2.5million was satisfied in cash. An earn out consideration,up to a maximum £2.5million, will be paid on a pro-rata basis for fees earned byUnicus in excess of £3.2 million up to an upper limit of £5.3million. The earnout is based on Unicus fee sales from 1 April 2007 to 31 March 2008. The earnout consideration, if fully earnt, will be satisfied with £1,050,000 in cash and£1,250,000 in convertible loan notes. The loan notes are convertible intoordinary shares at a price of 6 pence per ordinary share at the option of thenoteholder. The convertible loan notes will attract interest at a rate of 2 percent over Bank of England base rate up to a maximum of 7.5 per cent. per annum. The Company has funded the acquisition by raising £2.1 million (before expenses)through a placing, conducted by Seymour Pierce, of 49,411,758 Ordinary Shares ata price of 4.25 pence per share. In addition 6,426,399 Ordinary Shares wereplaced on 23 March 2007. The remainder of the placing, comprising 42,985,359Ordinary Shares was placed on 16 April 2007 following the passing of aresolution at the Company's Extraordinary General Meeting on 12th April 2007. Inaddition the Company has agreed a loan facility of £1 million with the Group'sbankers. Operating Review Commercial, Sales and Business DevelopmentGroup fee sales increased by 32% to £4.9 million compared with £3.7million inthe same period last year and with £4.7million in the second half of last year.The US dollar and the Japanese Yen have weakened considerably against the poundcompared with the same period last year. This has reduced sales by £200,000 buthas had no adverse effect on overall profitability. We expect to see a strongerperformance in the second half following the investments in infrastructure andstaff made during the first half. Following expansion of the Group, the management team has concentrated onintegrating our selling approach and streamlining our global service offerings.The latter is resulting in new business opportunities and the broadening of ourclient base through the acquisitions of Quadramed and Unicus. Fulcrum Regulatory ServicesSales continue to grow strongly under the leadership of Phil Birch. Performancehas been stimulated by the successful integration of Quadramed and realisationof cross-selling opportunities with our Development Services. As part of theFulcrum group, Quadramed's fee sales improved by 50% compared with the sameperiod last year. Future organic growth in regulatory services has beensupported by further grant assistance of up to £130,000 from the ScottishExecutive. This will be used to expand the existing Fulcrum office in Edinburgh.The addition of Unicus strengthens Fulcrum's existing regulatory consulting andelectronic publishing services and brings new capabilities in pharmacovigilanceand product information management. Fulcrum Development ServicesEuropeThis region has continued to deliver strong sales growth. Fee sales haveincreased by 20% compared with the same period last year. The General Managerfor Europe, Sarah Arbe-Barnes, has focussed staff on the operational delivery ofclient work and is now engaged in strengthening the sales team. USThe recovery in the US is taking longer than anticipated. A review of thebusiness has been conducted by John Seman who was recruited to the position ofUS General Manager last year. Consequently, resources and skillsets in the USoffice have been realigned to match both domestic market needs and therequirements of our customers in Europe and Japan. JapanUnder the leadership of Teruyoshi Okuda and Kiyoshi Fujimaru the specialistoncology clinical research organisation and regulatory businesses has evolvedfurther to optimise staff utilisation and improve profitability. Over the periodJapan has continued to make a good contribution to the Group both from domesticfee sales which have grown by 18% at constant currency and through signature ofcontracts to deliver fee sales for the European and North American offices. Future Strategy and Outlook In the immediate future the company plans to expand its, global DevelopmentServices through its offices in Europe, North America and Japan and consolidateits position as a leading independent provider of Regulatory Services in Europeand build a strong regulatory presence in the US. The Board intends to continueimplementation of its plan to scale up the Group through a combination of M&Aand organic growth and to deliver sustainable profits and value to ourshareholders.Finally I would like to thank all of our staff for contributing to the progressFulcrum has made. Prof. Sir Charles George,Chairman17th May 2007 Consolidated Profit and Loss Accountfor the period ended 28 February 2007 Period ended Period ended Year ended 28 February 28 February 31 August 2007 2006 2006 Unaudited Unaudited Audited (restated) (restated) Note £'000 £'000 £'000----------------------- ------ --------- --------- --------Turnover 2 8,266 7,699 15,451Cost of sales (6,166) (5,836) (11,438)----------------------- ------ --------- --------- --------Gross profit 2,100 1,863 4,013Selling expenses (212) (299) (563)Administrative expenses (1,867) (1,531) (3,459)Other operating income 45 - 65----------------------- ------ --------- --------- --------Operating profit 65 33 56Interest receivable andsimilar 20 25 59incomeInterest payable and similarcharges (19) (8) (42)----------------------- ------ --------- --------- --------Profit on ordinary activitiesbefore taxation 66 50 73Tax on profit on ordinaryactivities 3 - (10) (12)----------------------- ------ --------- --------- --------Profit attributable toshareholders 66 40 61Proposed dividend 4 - - ------------------------ ------ --------- --------- --------Profit for the period 66 40 61----------------------- ------ --------- --------- --------Earnings per share (pence)Basic 5 0.05p 0.03p 0.05pDiluted 5 0.05p 0.03p 0.05p----------------------- ------ --------- --------- -------- 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 2007 Period ended Period ended Year ended 28 February 28 February 31 August 2007 2006 2006 Unaudited Unaudited Audited £'000 £'000 £'000---------------------------- --------- --------- --------Profit on ordinary activities aftertaxation 66 58 100Exchange adjustments offset inreserves 22 1 (27)---------------------------- --------- --------- --------Total recognised losses for theperiod 88 59 73---------------------------- --------- --------- --------Prior year adjustment - FRS 20 171---------------------------- --------- --------- --------Total recognised gains and lossessince last annual report (83)---------------------------- --------- --------- -------- Consolidated Balance SheetAs at 28 February 2007 28 February 28 February 31 August 2007 2006 2006 Unaudited Unaudited Audited £'000 £'000 £'000--------------------------- --------- --------- --------Fixed assetsIntangible assets 1,245 859 1,216Tangible assets 605 471 552Investments 469 172 469--------------------------- --------- --------- -------- 2,319 1,502 2,237--------------------------- --------- --------- --------Current assetsDebtors 4,707 4,133 3,657Short-term investments 19 624 524Cash at bank and in hand 927 1,357 1,571--------------------------- --------- --------- -------- 5,653 6,114 5,752Creditors: amounts falling due withinone year (3,882) (3,840) (3,874)--------------------------- --------- --------- --------Net current assets 1,771 2,274 1,878--------------------------- --------- --------- --------Total assets less current liabilities 4,090 3,776 4,115Creditors: amounts falling due aftermore than one year (392) (149) (545)--------------------------- --------- --------- --------Net assets 3,698 3,627 3,570--------------------------- --------- --------- -------- Capital and reservesCalled up share capital 1,285 1,285 1,285Share premium 4,547 4,547 4,547Merger reserve (454) (454) (454)Profit and loss account (1,680) (1,751) (1,808)--------------------------- --------- --------- --------Equity shareholders' funds 3,698 3,627 3,570--------------------------- --------- --------- -------- Consolidated Cash Flow Statementfor the period ended 28 February 2007 Period Period Year ended ended ended 28 28 31 February February August 2007 2006 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000------------------------- ----- --------- --------- --------Net cash (outflow)/inflow fromoperating activities 6 (323) (108) 795------------------------ ------ --------- --------- --------Returns on investments andservicing of financeInterest received 20 25 59Interest paid (19) (8) (42)------------------------ ------ --------- --------- --------Net cash inflow from returns oninvestments and servicing offinance 1 17 17------------------------ ------ --------- --------- --------TaxationCorporation tax (paid)/received (7) 51 (72)------------------------ ------ --------- --------- --------Capital expenditure and financialinvestmentPurchase of tangible fixedassets (236) (95) (310)Purchase of own shares for employeeshare options and awards - (20) (114)Purchase of equity investments - - (297)------------------------ ------ --------- --------- --------Net cash outflow from capitalexpenditureand financial investment (236) (115) (721)------------------------ ------ --------- --------- --------Acquisitions and disposalsPurchase of subsidiaryundertakings (including costs) - (123) (123)Net cash acquired withsubsidiary - 445 445------------------------ ------ --------- --------- --------Net cash inflow fromacquisitions and disposals - 322 322------------------------ ------ --------- --------- --------Net cash (outflow)/inflow beforemanagement of liquid resourcesand financing (565) 167 341------------------------ ------ --------- --------- --------Management of liquid resourcesDecrease in short-terminvestments 505 569 669------------------------ ------ --------- --------- --------FinancingIncrease in bank borrowings 4 - -Capital element of finance leasepayments (13) (21) (30)Bank loan repayments - (36) (87)Loan note repayments (575) - ------------------------- ------ --------- --------- --------Net cash outflow from financing (584) (57) (117)------------------------ ------ --------- --------- --------(Decrease)/increase in cash 6 (644) 679 893------------------------ ------ --------- --------- -------- Consolidated Cash Flow StatementFor the period ended 28 February 2007 Period ended Period ended Year ended 28 February 28 February 31 August 2007 2006 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000------------------------ ------ --------- --------- --------(Decrease)/increase in cash 6 (644) 679 893(Increase)/decrease in bankloans 6 (4) 35 87Bank loan acquired withsubsidiary 6 - (11) (11)Decrease in short-terminvestments 6 (505) (569) (669)Decrease in finance leases 6 13 21 30------------------------ ------ --------- --------- --------Change in net funds resultingfrom cash flows (1,140) 155 330Net funds at start of period 6 1,868 1,538 1,538------------------------ ------ --------- --------- --------Net funds at end of period 6 728 1,693 1,868------------------------ ------ --------- --------- -------- Notes to the financial statementsFor the period ended 28 February 2007 1. Accounting policiesThe interim results for the six months ended 28 February 2007 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 2006. The comparative informationcontained in the report for the year ended 31 August 2006 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. The 2007 financial year is the first year in which the Company has adopted FRS20 - "Share-based payments". In accordance with this standard, the cost of shareoptions awarded to employees under the Group's share option schemes is measuredby reference to their fair value at the date of grant. This cost is recognisedover the vesting period of the options based on the number of options, which inthe opinion of the Directors, will ultimately vest. The impact in the six monthsto 2007 is a charge of £40,000 (2007: 38,000). The charge for the year ended 31August 2006 is £81,000 and the aggregrate charges for prior periods up to 31August 2006 is £171,000. The prior period financial statements have beenadjusted to reflect this. 2. TurnoverGeographical analysis by origin Period ended Period ended Year ended 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000------------------------- ---------- --------- ---------Europe 3,437 2,181 5,162USA 588 683 1,349Japan 834 815 1,831------------------------- ---------- --------- ---------Total fee sales 4,859 3,679 8,342Pass through costs 3,407 4,020 7,109------------------------- ---------- --------- --------- 8,266 7,699 15,451------------------------- ---------- --------- --------- 3. Tax on profit on ordinary activities Period Period Year ended ended ended 28 28 31 February February August 2007 2006 2006 £'000 £'000 £'000---------------------------- --------- --------- --------Current taxationUK corporation tax at 30% - 10 10Overseas taxationCorporation taxes - - 2---------------------------- --------- --------- --------Tax on profit on ordinary activities - 10 12---------------------------- --------- --------- -------- The tax charge for the period differs from the standard rate of corporation taxin the UK of 30% (2006: 30%). The differences are explained below: Period Period Year ended ended ended 28 28 31 February February August 2007 2006 2006 (restated) (restated)---------------------------- --------- --------- -------- £'000 £'000 £'000---------------------------- --------- --------- --------Profit on ordinary activitiesbefore tax 66 50 73---------------------------- --------- --------- --------Profit/on ordinary activities before tax andexceptional items multiplied by the standard rate of corporation tax inthe UK of 30% (2006: 30%) 20 15 22Effects of:Capital allowances in excess ofdepreciation 5 (7) (7)Expenses not deductible for taxpurposes 38 19 48Tax losses for the period notrelieved 5 21 51Research and development taxcredits (68) (38) (112)---------------------------- --------- --------- --------Current tax charge for the period - 10 12---------------------------- --------- --------- -------- 4. DividendsThe Directors do not propose to pay an interim dividend (H1 2006: £nil pershare). 5. Earnings per share Period ended Period ended Year ended 28 February 28 February 31 August 2007 2006 2006 (restated) (restated)------------------------- --------- --------- --------- £'000 £'000 £'000------------------------- --------- --------- ---------Profit on ordinary activitiesafter taxation for basic earnings pershare 66 38 61------------------------- --------- --------- ---------Weighted average number of shares 128,528,985 122,414,806 125,478,759Weighted average number of sharesheld by the ESOP Trust (3,885,099) (1,318,966) (2,013,839)------------------------- ---------- ---------- ----------Weighted average number of sharesfor basic earnings per share 124,643,886 121,095,840 123,464,920Number of dilutive shares underoption 1,865,532 490,180 1,640,253------------------------- ---------- ---------- ----------Weighted average number of sharesfor diluted earnings per share 126,509,418 121,586,020 125,105,173------------------------- ---------- ---------- ---------- The basic earnings per share is based on the Group's profit for the half year of£66,000 (H12006: £38,000) divided by the number of ordinary shares in issue,excluding those shares held by the ESOP Trust. 6. 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 2007 2006 2006 £'000 £'000 £'000-------------------------- --------- --------- --------Operating profit 65 33 56Amortisation of intangible fixedassets 70 7 51Depreciation of tangible fixedassets 129 93 197FRS 20 Share option charge 40 38 81Loss on disposal of fixed assets 47 - 15Exchange loss 27 1 (13)Increase in debtors (1,053) (693) (216)Increase in creditors 352 413 624-------------------------- --------- --------- --------Net cash outflow from operatingactivities (323) (108) 795-------------------------- --------- --------- -------- (b) Analysis of net funds As at As at 1 September 28 February 2006 Cash flow 2007 £'000 £'000 £'000-------------------------- --------- --------- --------Cash at bank and in hand 1,571 (644) 927Bank loans (194) (4) (198)Short-term investment 524 (505) 19Finance leases (33) 13 (20)-------------------------- --------- --------- -------- 1,868 (1,140) 728-------------------------- --------- --------- -------- 7. Movement in shareholders' funds Period ended Period ended Year ended 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000-------------------------- --------- --------- --------Profit for the period 66 40 61FRS 20 Share option charge 40 38 81Issue of ordinary shares - 243 243Purchase of own shares for ESOT - (20) (114)Unrealised exchange profit/(loss)on consolidation 22 - (27)-------------------------- --------- --------- --------Net increase in shareholders' fundsfor the period 128 301 244Opening shareholders' funds 3,570 3,326 3,326-------------------------- --------- --------- --------Closing shareholders' funds 3,698 3,627 3,570-------------------------- --------- --------- -------- 8. Copies of unaudited interim reportCopies of this report are being sent to shareholders and are also available atthe registered office of Fulcrum Pharma plc, Hemel One, Boundary Way, HemelHempstead, Hertfordshire HP2 7YU. 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