Nanoco Regulatory News (NANO)

7 Sep 2007 07:00

Evolutec Group PLC07 September 2007 07 September 2007 Interim Results for the six months ended 30 June 2007 Evolutec Group plc (AIM: EVC) announces Interim Results for the six months ended30 June 2007. The document is also published in full on the Company's web site. Highlights • Cash and held to maturity investments of £6.2 million at 30 June 2007 (31 December 2006: £8.7 million) • Loss for the period was £2.1 million (Year to 31 December 2006 : £11.8 million) • Evolutec is now an investment company under AIM rules • Cost base of the Company minimised by terminating contracts of all employees • Reading office closed • Gordon Hall and Mark Hawtin joined the Board; Mark Carnegie Brown, Nicholas Badman, John Burke and Malcolm Darvell resigned • The Company is actively seeking a single investment opportunity Enquiries: Evolutec: 07771 525 875David Bloxham, Chairman: www.evolutec.co.uk Numis Securities: 0207 260 1277Michael Meade www.numiscorp.com Chairman's review of operations Following the disappointing clinical results with rEV131at the end of 2006 andthe subsequent collapse of the Company's share price, the Company undertook areview of its strategic options and discussed these with its shareholders. Itbecame clear that there was no appetite for the risk involved in continuing theCompany as an independent entity and it was decided to look for alternativesolutions. Numis Securities Limited was appointed to assist the Company with the review ofits strategic options, merging with another company being the most obvious.After an exhaustive search and the identification of a potential merger partner,these discussions collapsed at the last minute. The Company was then left witha very difficult decision. After further consultation with major institutionalshareholders it was felt that the majority opinion was in favour of a return ofcash by way of a Member's Voluntary Liquidation. The Board felt that theproposed distribution of net cash by way of liquidation provided shareholderswith certainty as to quantum and timing. Appropriate steps were taken to begin this process and on 6 June the Companysent out a Circular convening an Extraordinary General Meeting (EGM) for 6thJuly 2007. During this period the Company took all steps to reduce itsexpenditure to the minimum and to settle all its outstanding debts. Thisinvolved ending the contracts of all employees and terminating the lease on theCompany's premises in Reading. Effectively the Company became a cash shell witha listing on the Alternative Investment Market (AIM). After sending the Circular, the Board received written confirmation fromGartmore Investment Limited (Gartmore) that they had increased their holding inEvolutec through market purchases and that they held 23.9 per cent of the issuedshare capital of Evolutec. Furthermore, Gartmore advised the Board that theywould not vote in favour of the Resolutions proposed in the Circular. TheResolutions were special and extraordinary requiring the approval ofthree-quarters of those shareholders voting in person or by proxy. As anotherinstitutional shareholder indicated that it too would vote against theResolutions, the Board was of the view that the Resolutions would not be passed.This proved to be the case when the EGM was held. Following the EGM, NicholasBadman, Dr Mark Carnegie Brown, John Burke and Malcolm Darvell resigned asDirectors of the Company. Graeme Hart and I have continued as Directors and in addition Gartmore proposedthat Gordon Hall and Mark Hawtin should join the Board to assist the Companywith its future. These appointments were subsequently confirmed. It is apleasure to welcome Gordon and Mark to the Board. They have considerableexperience in the healthcare and fund management fields, respectively, and thiswill be of considerable benefit to the Company in reviewing futureopportunities. Gartmore have proposed that Evolutec continues as a listed entity with a view toconsidering possible transactions which would involve reversing another businessinto Evolutec. The regulatory team at AIM have confirmed that Evolutec will be classed as aninvestment company under the AIM Rules pending any further transaction. TheBoard intend that the investment policy of Evolutec will be to seek a singleinvestment, most probably of a UK or European business, in either thetechnology, healthcare or service related sectors. The Board believes that itwill have the necessary experience in order to evaluate any potentialacquisitions and any proposed acquisition will be subject to shareholderapproval. If no transaction is announced prior to the next annual generalmeeting of the Company, the Board intends to propose a resolution at suchmeeting for shareholders to consider in relation to the future strategy of theCompany. If any transaction is announced, such a transaction is likely to be areverse takeover and would be conditional on shareholder approval. Evolutec willcontinue to remain as a company listed on AIM. I would like to take this opportunity to thank all the former employees ofEvolutec for their continued efforts during this period on behalf of the Companydespite the considerable personal and professional difficulties that they faced. The Board will continue to seek ways to enhance the value of its shares and toreturn value to shareholders. We have begun the process of looking for reverseopportunities and it is our intention to bring one of these to a fruitfulconclusion prior to the next AGM of the Company. Dr David P Bloxham Financial Review Evolutec had cash and cash equivalents of £6.2 million as at 30 June 2007. Theoperating loss for the six month period was £2.1 million (6 months to 30 June2006: £5.7 million). The principal expenditure in the period related to closurecosts of the operating business and settlement of outstanding obligationsrelating to the completion of the clinical trials. . All known closure costshave been included in these financial statements. Balance Sheet Share Capital No further equity was issued during the period. Upon the termination of thestaff contracts, they all signed Compromise Agreements and these terminated allexisting options. The majority of these options were cancelled prior to vestingand the cancellation has been accounted for by reversing employment costs of£0.5 million. Liquidity The Group had cash and cash equivalents of £6.2 million as at 30 June 2007 ascompared to £8.7 million as at the 31 December 2006. This decrease reflects theexpenditure involved in completing the two clinical trials involving rEV131 andterminating the contracts of employees. The net cash outflow from operatingactivities was £2.7 million (6 months to 30 June 2006: £4.5 million) reflectingthe Group's expenditure for the period. The Group had no borrowings during the year. Treasury As at 30 June 2007 the Group had £6.1 million on Treasury deposit. The Group'spolicy is to split its deposits between two banks each with a minimum creditrating of F1/A. The objective is to derive the maximum interest whilstsafeguarding the asset. Given that the cost base of the Group has been reducedsubstantially it is anticipated that interest from the Treasury deposit shouldcover its expenditure and therefore the cash asset should be reasonably stable. Cash Flow Net cash outflow from operating activities in the period was £2.7 million (sixmonths to 30 June 2006: £4.5 million). The principal cash inflow items were netinterest receipts of £0.2 million (six months to 30 June 2006: £0.33 million).There was no capital expenditure and the entire cash outflow representedoperating expenditure. Income Statement Revenue The Group received revenue of £15k during the period in connection with itscollaboration with Merial. Selling and Marketing Costs in this area amounted to £0.2 million and related to costs incurred inlicensing discussions for rEV576. Research and Development The costs in this area were related to completion costs for the clinical trialswith rEV131 in rhinitis and post-cataract inflammation. The Group also hadcosts related to the termination of its manufacturing agreement for rEV576carried out by Wacker Biotech GmbH. Interest receivable and interest payable Interest receivable in the period was £0.2 million (6 months to 30 June 2006:£0.33 million). The decrease in interest reflects the reduced average cashbalance during 2007. Taxation No significant research and development tax credit is expected in this period. INDEPENDENT REVIEW REPORT TO EVOLUTEC GROUP PLC INTRODUCTION We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated incomestatement, consolidated balance sheet, consolidated cash flow statement,consolidated statement of changes in shareholders equity and the related notes 1to 6. We have read the other information contained in the interim report whichcomprises only the Chairman's Review and the Financial Review and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Our responsibilities do not extend to any otherinformation. This report is made solely to the Company in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to them in a review report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the company for our review work, for this report, or forthe conclusion we have formed. DIRECTORS' RESPONSIBILITIES The interim report including the financial information contained therein is theresponsibility of, and has been approved by, the directors. They areresponsible for preparing the interim report and ensuring that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards of Auditing (UK & Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTSOXFORD(Date) Unaudited consolidated income statement For the six-month period ended 30 June 2007 Notes Six months Six months Year ended 31 ended 30 June ended 30 June December 2007 2006 2006 £000 £000 £000 Revenue 2 15 14 14Cost of sales (1) (1) (1) _____ _____ _____Gross profit 14 13 13Selling and marketing costs (158) (52) (189)Research and development expenditure (1,045) (5,087) (10,509)Administrative expenses (1,088) (1,007) (2,172) _____ _____ _____Operating loss (2,277) (6,133) (12,857)Finance income 3 196 339 749Finance costs 3 (13) (137) (364) _____ _____ _____Loss before tax (2,094) (5,931) (12,472)Taxation - 251 645 _____ _____ _____Loss for the period (2,094) (5,680) (11,827) _____ _____ _____ Basic and diluted loss per ordinary share 6 (8.1)p (24.1)p (49.3)p The results for the period are derived from discontinued activities. The notes on pages 11 to 13 form part of these consolidated interim financialstatements. Unaudited consolidated balance sheet As at 30 June 2007 30 June 30 June 31 December 2006 2007 2006ASSETS Notes £000 £000 £000Non-current assetsProperty, plant and equipment - 152 140 _____ _____ _____ - 152 140 _____ _____ _____Current assets - 251 645 Research and development tax creditsTrade and other receivables 4 100 746 203Held-to-maturity investments - 2728 -Cash and cash equivalents 6,164 10,512 8,682 _____ _____ _____ 6.264 14,237 9,530 _____ _____ _____Total assets 2 6,264 14,389 9,670 _____ _____ _____ EQUITYCapital and reserves attributable to the equityholders of the CompanyShare capital 27,037 24,402 27,037Other reserves 8,561 8,948 9,083Retained deficit (29,933) (21,692) (27,839) _____ _____ _____Equity shareholders' funds 5,665 11,658 8,281 _____ _____ _____ LIABILITIESNon current liabilities 5 1 - 34 Trade and other payablesCurrent liabilitiesTrade and other payables 5 598 2,731 1,355 _____ _____ _____Total liabilities 599 2,731 1,389 _____ _____ _____Total equity and liabilities 6,264 14,389 9,670 _____ _____ _____ The notes on pages 11 to 13 form part of these consolidatedinterim financial statements. Unaudited consolidated cash flow statement For the six-month period ended 30 June 2007 Six months Six months Year ended ended 30 June ended 30 June 31 December 2007 2006 2006 Notes £000 £000 £000 Cash flows from operating activitiesLoss for the period (2,094) (5,680) (11,827)Taxation - (251) (645)Depreciation 140 40 87Interest received (196) (339) (595)Unrealised foreign exchange losses - 138 81Share options - value of employee services (reversed) (522) 155 290Decrease in trade and other receivables 103 73 616Increase/(decrease) in trade and other payables (790) 816 (526) _____ _____ _____Cash used by operations (3,359) (5,048) (12,519)Taxation credit received 645 502 502 _____ _____ _____Net cash outflow from operating activities (2,714) (4,546) (12,017) _____ _____ _____ Cash flows from investing activitiesPurchase of property, plant and equipment. 2 - (31) (66)Interest received 3 196 339 595Decrease in held-to-maturity investments - 13,118 15,877 _____ _____ _____Net cash generated from investing activities 196 13,426 16,406 _____ _____ _____ Cash flows from Financing activitiesProceeds from issuance of shares - - 2,635Net cash generated from financing activities - - 2,635 _____ _____ _____ Net increase/(decrease) in cash and cash equivalents (2,518) 8,880 7,024 Cash and cash equivalents at the start of the period 8,682 1,739 1,739Exchange losses on cash and cash equivalents - (107) (81) _____ _____ _____Cash and cash equivalents at the end of the period 6,164 10,512 8,682 _____ _____ _____ The notes on pages 11 to 13 form part of these consolidated interim financialstatements. Unaudited consolidated statement of changes in shareholders' equity For the six-month period ended 30 June 2007 Share Share Other Retained Total Capital Premium reserves deficit £000 £000 £000 £000 £000 Balance at 31 December 2005 2,359 22,043 8,793 (16,012) 17,183 _____ _____ _____ _____ _____Loss for the period - - - (5,680) (5,680)Fair value of share-based payments - - 155 - 155 _____ _____ _____ _____ _____Balance at 30 June 2006 2,359 22,043 8,948 (21,692) 11,658 _____ _____ _____ _____ _____Loss for the period - - - (6,147) (6,147)Issue of ordinary shares 236 2,399 - - 2,635Fair value of share-based payments - - 135 - 135 _____ _____ _____ _____ _____Balance at 31 December 2006 2,595 24,442 9,083 (27,839) 8,281 _____ _____ _____ _____ _____Loss for the period - - - (2,094) (2,094)Fair value of share-based payments - - (522) - (522) _____ _____ _____ _____ _____Balance at 30 June 2007 2,595 24,442 8,561 (29,933) 5,665 _____ _____ _____ _____ _____ The notes on pages 11 to 13 form part of these consolidated interim financialstatements. NOTES TO THE FINANCIAL STATEMENTS For the six-month period ended 30 June 2007 1 Accounting policies These interim financial statements have been prepared in accordance with IAS 34and in accordance with the recognition measurement principles of IFRS as adoptedin the European Union ("EU"). The interim financial information has not been audited and does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985but has been reviewed by the auditors in accordance with Bulletin 1999/4 issuedby the Auditing Practices Board. The Company's statutory accounts for the yearended 31 December 2006, prepared under IFRS as adopted in EU, have beendelivered to the Registrar of Companies; the report of the auditors on theseaccounts was unqualified and did not contain a statement under Section 237 (2)or (3) of the Companies Act 1985. 2. Segment information Primary reporting format - business segments In the six months to 30 June 2007, the Group operated one business segment,which is the research and development of a range of pharmaceutical productcandidates. Analysis of revenue by category Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 £000 £000 £000Sale of goods - - -Collaborative agreements 15 14 14 _____ _____ _____Total 15 14 14 _____ _____ _____ Secondary reporting format - geographical segments The Group operates in four main geographical areas, even though it is managed ona worldwide basis. The home country of the Company, and of Evolutec Limited - which is the mainoperating company - is the United Kingdom The area of operation is primarilyresearch and development of a range of pharmaceutical product candidates. Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006Revenue £000 £000 £000 United Kingdom - - -Rest of Europe - - -North America 15 14 14Rest of the World - - - _____ _____ _____Total 15 14 14 _____ _____ _____ Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006Total Assets £000 £000 £000 United Kingdom 6,264 14,389 9,670Rest of Europe - - -North America - - -Rest of the World - - - _____ _____ _____Total 6,264 14,389 9,670 _____ _____ _____ Total assets are allocated based on where the assets are located. Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006Capital Expenditure £000 £000 £000 United Kingdom - 31 66Rest of Europe - - -North America - - -Rest of the World - - - _____ _____ _____Total - 31 66 _____ _____ _____ Capital expenditure is allocated based on where the assets are located. 3. Finance income and charges Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 £000 £000 £000Interest receivable and other similar incomeInterest on cash, cash equivalents and held-to-maturity 196 339 595assetsExchange gains on held-to-maturity assets - - 154 _____ _____ _____Total 196 339 749 _____ _____ _____ Interest payable and other similar chargesExchange losses on held-to-maturity assets (13) (137) (364) _____ _____ _____Total (13) (137) (364) _____ _____ _____ 4. Trade and other receivables Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 £000 £000 £000 Trade debtors 7 - -Other debtors 51 89 24Prepayments and accrued income 42 657 179 _____ _____ _____ 100 746 203 _____ _____ _____ 5. Trade and other payables Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 £000 £000 £000 Provision for NI on share options 1 - 34 _____ _____ _____ Non-current trade and other liabilities 1 - 34 _____ _____ _____ Trade creditors 116 1,130 165Taxation and social security payable 330 49 136Accruals 152 1,552 1,054 _____ _____ _____ Current trade and other liabilities 598 2,731 1,355 _____ _____ _____ Total trade and other liabilities 599 2,731 1,389 _____ _____ _____ 6. Loss per ordinary share Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 £000 £000 £000 Attributable loss (2,094) (5,680) (11,827) _____ _____ _____Weighted average number of shares in issue (000) 25,950 23,591 24,011 _____ _____ _____Loss per share (basic and diluted) (8.1)p (24.1)p (49.3)p _____ _____ _____ The calculation of earnings per share is based on the weighted average number ofordinary shares in issue during the period. 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