FUL.L Regulatory News (FUL)

22 May 2008 07:00



FULCRUM PHARMA PLC

("the Group" or "the Company")

Interim Results for the six months to 29 February 2008

Fulcrum Pharma plc (AIM: FUL), the drug development and regulatory services company, today announces its interim results for the six months to 29 February 2008. 

Highlights

Sales up by 12% to £7.4 million (compared to H2 2007 and 53% compared to H12007)

Operating profit has more than doubled to £218,000 (H1 2007: £107,000). 

Net cash generation of £451,000 (after £618,000 of loan repayments)

EBITDA up 73% to £409,000 (H1 2007: £236,000)

Note: The Company has adopted International Financial Reporting Standards (IFRS) in these interim results. The adoption of this accounting standard represents a change in accounting policy and the comparative figures have been restated accordingly.

Commenting on the results, Chairman Prof. Sir Charles George said: 

"We continue to implement our plan to grow and develop our global business through a combination of M&A and organic growth. This is enabling Fulcrum to expand its pharmaceutical development and regulatory services and drive sales growth and profitability. We were pleased to announce the appointment on 1 April 2008 of Dr Frank Armstrong as CEO. He will be conducting a review of the business to deliver a strategy for further future profitable growth. The Board would like to thank Dr Jon Court, who retired as CEO, and to all of our staff for contributing to the progress Fulcrum has made".

For further information, please contact:

  Fulcrum Pharma PLC

Interim Results for the Period Ended 29 February 2008

Report of the Chairman

Introduction

I am pleased to report continued growth in sales and operating profit and significant cash generation during the first half of the year.  

Strategic Review

The group strategy to develop the business with a combination of organic growth and M&A has resulted in significant growth in sales and operating profit. The Group appointed a new Chief Executive, Dr Frank Armstrong, on 1 April 2008. Dr Armstrong brings extensive experience of the pharma and biotech industries in Europe and the US. He is leading the management team and the Board in an exercise to determine how Fulcrum will be best placed to develop the business.

Financial Review

The Group has adopted International Financial Reporting Standards (IFRS) in these interim results. The adoption of this accounting standard represents a change in accounting policy and the comparative figures have been restated accordingly. The impact of adoption of IFRS on the Group's income statement for the period ended 29 February 2008 has been to reduce the UK GAAP profit for the period by £50,000 (H1 2007: increase of £42,000) as a result of the changes in accounting for employee benefits, business combinations and lease inducements. Revenue is reported under IFRS as essentially the fee sales excluding passthrough sales, where costs are passed through with no margin.

The results for the half year ended 29 February 2008 show sales have risen by 53% to £7.4 million, compared with the corresponding period, in line with increased headcount of 134 (2007: 90). Operating profit has increased to £218,000 (H1 2007: £107,000). Retained profit is £66,000 (H1 2007: £108,000). The results include a provision against available-for- sale financial assets of £99,000, which represents the director's estimate of the permanent diminution in value of the investment in NanoCarrier Co Ltd.

Earnings before interest, tax, depreciation and amortisation ("EBITDA") were £409,000 (H1 2007: £236,000). Earnings per share were 0.04p (H1 2007:0.07p)

The balance sheet remains strong with an increase in net cash during the period of £451,000 to £2.7 million at 29 February 2008, after £618,000 of loan repayments.

The directors do not propose a dividend but will keep under review the possibility of a dividend payable out of profits for the full year (H1 2007: £nil).

Operating Review

Commercial, Sales and General Business Development 

Group sales increased by 12% to £7.4 million compared to the second half of 2007 at £6.6 million and by 53% compared with £4.9 million for the same period last year. We expect to see the seasonal increase in sales in the second half year. 

Europe

Fulcrum Pharma (Europe) Ltd was formed on 1st April 2008 as the single trading company in Europe. This legally integrated the acquired subsidiary companies, Quadramed Ltd and Unicus Regulatory Services Ltd ("Unicus"), with Fulcrum Pharma Developments Limited. This is part of the group's strategic plan for organic growth.

Sales have grown by 47% to £5.0 million in the period to 29 February 2008 (H1 2007: £3.4 million) reflecting the strong contribution from Unicus which was acquired in March 2007. The initial issues experienced in Unicus in the quarter following its acquisition have been resolved and the sales performance endorses the Group strategy to invest in regulatory services.

As part of the MHRA's routine audit schedule Fulcrum has undergone three audits, two for Good Clinical Practice and one for Pharmacovigilance in the reporting period.

US

The recovery of the US business has continued. Sales in the period to 29 February 2008 have more than doubled to £1.2 million (H1 2007: £588,000) and are 37% higher than the second half of last year. Demand has been strong for non-clinical services and, in order to satisfy this demand, a new office was opened in Ann Arbor, Michigan in November 2007. The next step is to build upon the existing base of non-clinical services and establish strong clinical and regulatory services.

Japan 

Domestic sales and profits have grown strongly in the first half of this year. Sales are 44% higher than for the same period last year and 7% higher than the second half of last year. Demand for Fulcrum's specialist oncology development services continues to grow, with new clients being added to a substantial repeat client base. Fulcrum now has an established position as the development partner of choice for early clinical studies in oncology in Japan. Sales activity on behalf of the Fulcrum affiliates in Europe and the United States continues to deliver substantial business from Japanese clients for the operating groups in both those regions.

Future Strategy and Outlook

The Group intends to pursue optimising the business through the remainder of the 2008 financial year and will look to further develop the offerings by continued organic growth and selective acquisition.

Finally I would like to thank all of our staff for contributing to the progress Fulcrum has made, particularly Dr Jon Court, who has now stepped down from the Board, for his years of leadership of the Fulcrum business. 

Prof. Sir Charles George, 

Chairman

20th May 2007

Consolidated Income Statement

For the period ended 29 February 2008

All items included in the profit and loss accounts relate to continuing operations.

Consolidated statement of recognised income and expense

Consolidated Balance Sheet

For the period ended 29 February 2008

Consolidated cash flow statement

For the period ended 29 February 2008

Notes to the financial statements

For the period ended 29 February 2008

1. Basis of preparation

The Company has adopted International Financial Reporting Standards (IFRS) for the accounting period commencing

1 September 2007. The Company will apply IFRS in its consolidated financial statements for the year ending 31 August 2008.

2. Accounting policies

The interim results for the six months ended 29 February 2008 are unaudited and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 August 2007 were prepared under UK GAAP and have been reported on by the Company's auditors, PricewaterhouseCoopers LLP, and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act.

The accounting policies adopted are consistent with those of the Financial Statements for the year ended 31 August 2007. In addition, the Company has adopted the following IFRS standards and the previously reported figures for the six months ended 28 February 2007 and the year ended 31 August 2007 have been restated to reflect:.

Transitional arrangements

Under the provisions of IFRS 1 "First time Adoption of IFRS" specific exemptions may be applied in certain areas as part of the transition of the financial statements to IFRS. The Group has elected to apply the following exemptions:

IRFS 3 "Business Combinations"

IFRS 3 has been adopted from the transition date and is only being applied to acquisitions made on or after 1 September 2006.

IFRS also requires goodwill to be carried at cost with impairment reviews carried out at least annually. The Group has applied the standard from the transition date and so the net carrying value of goodwill at 31 August 2006 has been brought forward as the cost at 1 September 2006, with no amortisation charge from that date.

IAS 21 "The Effects of Changes in Foreign Exchange Rates"

Under IAS 21 cumulative translation differences arising on the consolidation of overseas subsidiaries are being accumulated for each individual subsidiary from the date of transition to IFRS and not from the original acquisition date.

The transition from UK GAAP to IFRS is disclosed in note 9.

2a IFRS 3 "Business Combinations"

IFRS 3 deals with accounting for business combinations including goodwill and intangible assets.

Under UK GAAP, the Group adopted FRS 10 "Goodwill and intangible assets" from March 2000 and goodwill arising on acquisitions after this date was capitalised and amortised over its useful economic life, which was presumed to be ten years. Goodwill arising before this date was eliminated against reserves. In addition, the Group tested for impairment when there was an indication that the carrying value of an asset might be impaired.

Under IFRS 3 this policy has been replaced by impairment tests performed annually or whenever there is an indication that the carrying value of an asset might be impaired. Goodwill amortisation has also ceased.

At the transition date, the Group had goodwill assets with a net book value of £1,216,000, which under the transitional arrangements laid out in IFRS 1 was deemed to be the costs carried forward for these assets from that date.

Although the Group has adopted IFRS 3 from the transition date, 1 September 2006, the Group completed the acquisition of Unicus Regulatory Services Limited on 19 March 2007.

The accounting treatment of this acquisition has therefore been reviewed in accordance with the requirements of IFRS 3. As a result of this review, intangible assets have been separately identified, and goodwill has been reduced by the corresponding net amount. The newly identified intangible assets are being amortised over 1 to 3 years.

2b IAS 17 "Leases"

IAS 17 requires companies to make an adjustment with respect to 'Rent Free' periods. 

2c IAS 18 "Revenue"

Under IAS 18 companies are required to eliminate turnover where the company acted as principal, but the substance of the transaction was that the company acted as agent, as costs were passed through with no margin.

2d IAS 19 "Employee Benefits"

IAS 19 requires companies to make an accrual for holiday pay. 

The transition from UK GAAP to IFRS does not change the cash flows of the Group nor does it impact Group strategy or commercial decisions. 

3. Turnover

Geographical analysis by origin

4. Tax on profit on ordinary activities

4. Tax on profit on ordinary activities (continued)

The tax charge for the period differs from the standard rate of corporation tax in the UK of 30% (2007: 30%). The differences are explained below:

5. Dividends

The Directors do not propose to pay an interim dividend (H1 2007: £nil per share).

6. Earnings per share

The basic earnings per share is based on the Group's profit for the half year of £165,000 (H12007: £108,000) divided by the number of ordinary shares in issue, excluding those shares held by the ESOP Trust. 

  7.  Notes to the consolidated cash flow statement

 Analysis of net funds

8. Movement in shareholders' funds

9. Explanation of transition to International Financial Reporting Standards

Reconciliation of the consolidated income statement for the period ended 29 February 2008 from UK GAAP to IFRS

9. Explanation of transition to International Financial Reporting Standards (continued)

Reconciliation of the consolidated balance sheet as at 29 February 2008 from UK GAAP to IFRS

9. Explanation of transition to International Financial Reporting Standards (continued)

Reconciliation of the consolidated income statement for the year ended 31 August 2007 from UK GAAP to IFRS

9. Explanation of transition to International Financial Reporting Standards (continued)

Reconciliation of the consolidated balance sheet as at 31 August 2007 from UK GAAP to IFRS 

9. Explanation of transition to International Financial Reporting Standards

Reconciliation of the consolidated income statement for the period ended 28 February 2007 from UK GAAP to IFRS

9. Explanation of transition to International Financial Reporting Standards (continued)

Reconciliation of the consolidated balance sheet as at 28 February 2007 from UK GAAP to IFRS

9. Explanation of transition to International Financial Reporting Standards (continued)

Reconciliation of the consolidated balance sheet as at 1 September 2006 from UK GAAP to IFRS