Synectics Regulatory News (SNX)

6 Jun 2006 07:03

Synexus Clinical Research PLC06 June 2006 SYNEXUS CLINICAL RESEARCH PLC Preliminary Results for the year ended 31 March 2006 Synexus Clinical Research plc ("Synexus" or "the Company"), which providesclinical trials services for the global pharmaceutical industry, today announcesits preliminary results for the year ended 31 March 2006. HIGHLIGHTS • Profit before tax, and goodwill was £1.45 million - in line with market expectations. (2005: Loss of £ 0.85 million)• Successful flotation on AIM in November 2005 raised £3.5 million of new funds for the Company.• Significant progress made in line with our strategy to replicate our well established UK model in Eastern Europe and Asia • Establishment of strategic alliance in Mumbai, India. This business has already won its first trials with a major international pharmaceutical company • Acquisition of Polish clinical trials business, Skandynawskie Centrum Medyczne Sp. Zo.o., in January 2006 established our first site in Continental Europe. • Office opened in Sofia, Bulgaria. • Acquisition of Diagnostic Units Hungary announced today• The total number of patient visits for the year was over 30,000 - an increase of almost 50% over 2004/5• Current investment in our UK infrastructure will improve operational efficiency and increase capacity by 50%• Net cash at year end was £1.7 million (2005: Debt of £5.7 million)• The Board is confident of meeting expectations for the current financial year. Commenting on the results, Executive Chairman, Mike Redmond said, "We are seeing increasing acceptance by our larger pharmaceutical clients of ourmodel which provides large numbers of high quality patients for the lowestindustry cost. We continue to seek acquisitions to enhance our network and toenable us to offer an international solution for our major pharmaceuticalclients. With a significant proportion of this year's budgeted income alreadycontracted, we are confident of achieving market expectations for the currentyear." Press enquiries Synexus Clinical Research plc Tel: +44 (0)1257 230723Michael Redmond, ChairmanMichael Fort, Chief Executive Biddicks - Financial Public Relations Tel: +44 (0)20 7448 1000Zoe Biddick Brewin Dolphin Securities Tel: +44 (0)845 270 8600Mark Brady/Sarah Kent Chairman's Statement This is the first Annual Report and Accounts since the successful flotation ofthe Company on AIM in November 2005. I am pleased to report that the results forthe financial year ended 31 March 2006 have met expectations at the time of thefloat. Financial Results Turnover in the year was £9.54 million against £9.77 million in the previousyear. Although total sales were down by £0.23 million, total investigator feesof £8.1 million were ahead by 9% over the 2005 result of £7.4 million, partiallyexplaining the increase in margins. Profit before tax, excluding theamortisation of goodwill, for the year was £1.45 million, compared to a loss inthe previous year of £0.85 million. Profit before tax was £1.23 million (2005:loss of £1.06 million)This significant turnaround reflects both improvedoperating performance, and the restructuring of the balance sheet immediatelyprior to float, resulting in the elimination of debt. Net cash at year-endamounted to £1.7 million compared with net debt of £5.7 million at 31 March2005. Dividend The Board is not proposing payment of a dividend. Shareholder value at thispoint will be better served by retaining cash in the business to help drive theacquisition and expansion programme. Strategy In our prospectus, we stated that the strategy of the Group was to build amulti-country operation replicating our UK capability of recruiting largenumbers of patients into later stage clinical trials for the pharmaceuticalindustry. Concentrating initially on Eastern European countries and India, weplanned to have a number of clinical research hub sites, all operating to thesame standards as our UK research sites. We made our first acquisition of an established profitable business in Poland inJanuary 2006 and, subsequent to the year-end closing, we have acquired a secondsimilar business in Hungary. In addition, we have established a new site inMumbai, India, which has already won its first clinical research contracts witha major international pharmaceutical company. April saw the opening of ouroffice in Sofia, Bulgaria, to capitalise on the increasing amount of businessfrom that area of Eastern Europe. In short order, therefore, we have commenced the multi-country build-upenvisaged in our strategy. This has resulted in increased and higher-levelexposure within pharmaceutical clients. Established methods of recruitingpatients into clinical trials evolve over time; in recent months we have seenincreased interest by pharmaceutical clients in the Synexus concept of a groupof research hub sites with large patient throughput. This contrasts withtraditional, and hugely inefficient, methods of using many part-time clinicalinvestigators, each recruiting a few patients. Your Board is confident, therefore, that the strategy we are pursuing willdeliver strong business growth and resultant shareholder value. People The last twelve months have been an exciting time for all employees in theGroup, whose efforts have resulted in a financially strong business. The Boardis appreciative of the collective efforts of all our staff. Since the year endwe are delighted to welcome Malcolm Hughes who has joined the Board as seniornon-executive directorSince flotation, we have moved also to strengthen the management team withexternal recruitment to provide the capability to deliver on our expansionplans. Current Trading and Prospects Existing signed contracts give the Board confidence that its expectations forthe current financial year will be met. Longer term, the increasing acceptanceof the Synexus model by pharmaceutical clients, gives support for continuedgrowth. Mike Redmond, Chairman, 6 June 2006 Chief Executive's Statement I am delighted to report on your Company's first results as a public companysince flotation on AIM in November last year. The capital restructuring of thebusiness and the subsequent fund raising has allowed significant progress to bemade across a number of areas of the operation. Business Development and the Market The Group's offering, particularly to our larger pharmaceutical clients,continues to enjoy increasing levels of acceptance and we are seeing widerdemand for the Group's model which provides large numbers of high qualitypatients for the lowest industry cost. The pharmaceutical industry is itself nowrecognising the need to change the way patients are recruited into clinicaltrials. As demand increases for longer term safety and screening studies, so theindustry is accepting the need to modernise a process that has until now, beencarried out as a cottage industry using literally thousands of GP and consultantsites across the world. In a market for outsourced investigator fees that isworth over US$2 billion per annum (source: CenterWatch) it is imperative thatthe pharmaceutical companies partner with operators of sites that can deliverhigh quality and high volumes. Our industry is extremely conservative and changetakes time, however, Synexus is at the forefront of this change and is leadingthe move to streamline patient recruitment in the clinical trials market. We continue to achieve new milestones. During the last nine months we haverecruited almost 2000 patients for a single study. This follows on from thevolume successes of previous years in Impaired Glucose Tolerance, ProstateCancer Prevention, Obesity and Osteoporosis among many others bringing the totalnumber of patients recruited by Synexus to 15,000 in the last four years. Thisbrings the total patients currently on trials with the Group to almost 5,000reflecting the increasingly longer-term nature of our revenue streams.Similarly, the total number of patient visits for the year exceeded 30,000, anincrease of almost 50% over the previous year. The Group's expansion into Eastern Europe and India has given Synexus a seriousedge in a global market where large numbers of previously untreated patients canbe accessed. This significantly improves the feasibility and deliverability ofclinical trials, the result being not only a quicker achievement of study endpoints for clients, but also significant cost savings due to large economies ofscale, particularly in study monitoring. To build further on this success, we are now extending our business developmentreach into North America. We are increasingly in regular contact with the majordecision makers within the pharmaceutical industry with very encouragingresults. A larger number of enquiries and requests for proposals for biggerpatient group studies across a wider range of therapeutic areas has been thedirect result of this strategy. These should have a direct influence on revenuetowards the end of the current financial year. I am also particularly pleased toreport we are currently successfully recruiting patients for a 'flu vaccinestudy; vaccines being an area previously not majored on by the Company. The very unfortunate Northwick Park Hospital incident earlier in the year hasheightened the profile of clinical trials not only in the home market butinternationally as well. Synexus does not carry out Phase I "first in man"trials, concentrating instead on later Phase II and Phase III trials intoefficacy and safety. As a result of increased contact with patients currently onclinical trials, this has had a minimal impact on the business Centre Expansion and Development Mainland Europe I am very pleased to be able to report the completion of the purchase ofDiagnostic Units Hungary (DUH), which is a high quality clinic and the majorrecruiter of patients in Hungary. DUH is in a very exciting position bothgeographically and strategically and will dovetail well into the company'sEuropean group, which has seen the purchase of SCM in Wroclaw, Poland and theopening of an office in Sofia, Bulgaria. The prospects from these centres aloneare excellent as they allow the company to offer a wider European solution toour clients. Additionally, the centres have varying specialities in their domestic marketsallowing us to widen the therapeutic areas offered to our clients. We willcontinue to look for similar types of acquisition opportunities in a number ofother European countries over the coming months, with the active encouragementof our larger pharmaceutical customers. UK The UK home market during 2005/6 has been the main contributor to revenues andremains a growth area for us. The financial resources introduced into theCompany on flotation and generated through improved trading have enabled us toinvest in the restructuring of our original network of 12 centres into 8 major"hub" sites in order to achieve significantly greater operational efficienciesand to achieve the operational milestones mentioned above. This streamlining,expected to be completed by the end of September 2006, will result in fivesignificantly larger single unit "super hub" sites in Scotland (Glasgow),Lancashire (Bolton), Merseyside (Liverpool), West Midlands (Birmingham) andThames Valley (Reading). Additionally there will remain three further hub sitesin Manchester, Cardiff and Wolverhampton. The investment made into our siteswill allow for an increase in throughput of up to 50%. This will enable us tocontinue to exploit our position as the only company to be able to carry outlarge-scale clinical trials on an international basis.India The company entered into a franchise agreement in December 2005 with itspartners in Mumbai, India, IRL. Following very successful visits from ourclients after the setting up of the centre, we have won our first trials from amajor European pharmaceutical company. We are very pleased with the developmentof this site both in terms of the quality of its employees and the localinfrastructure as demand for studies to be conducted in India remains high. TheGroup now has the foundations on which to build a successful business. People We are delighted to have been able to announce the strengthening of ouroperational board with the recruitment of a number of key individuals. DominicClavell joined the company from Novartis Pharmaceuticals in May 2006 asInternational Operations Director. Dominic takes key responsibility for all thesites, and having been a customer of ours for the last 5 years, will setextremely high standards. Chris Lee joins in August from AjinomotoPharmaceuticals as Business Development Director. Chris held the position ofInternational Medical Director at Ajinomoto for 5 years prior to this and hisappointment considerably strengthens our international offering as well asbringing significant experience to the operating board. Our additional financial capability has enabled us to review managementthroughout the organisation. As a result, both at the hub sites and centrally,we have strenghtened our mangement team to enable us to take the business to thenext stage. Our staff at all levels have been a major stength during the last 12 months, aperiod of significant change, enabling the company to achieve its objectives inan effective manner. The Board offers its sincere thanks to all for theirefforts. Financial The Group has generated a maiden operating profit as a listed company of £1.53million (2005: loss of £0.52 million) as the benefits of negotiating contractsfrom a strengthening commercial position have flowed through in improved grossmargins. The flotation was accompanied by a restructuring of the Group's debtwhich has resulted in a reduction of the interest charge for the year from £0.54million to £0.30 million. The Group's profit before tax was £1.23 millioncompared with a loss of £1.06 million in 2005. Strong trading in the last quarter of the financial year led to an increase intrade debtors of £0.73 million and trade creditors have reduced by £0.20million. Whilst we have seen an investment of nearly £1 million in workingcapital, the net funds from the flotation of £0.8 million and retained cash fromtrading have enabled the Group to increase cash to £1.98 million from £0.43million last year. A key element of the Group's strategy is to acquire profitable patientrecruitment companies in emerging economies. In January 2006 we announced theacquisition of Skandynawskie Centrum Medyczne Sp. Z o.o. (SCM) in Poland for aninitial consideration of £0.85 million satisfied by the issue of 1.04 millionshares at a price of 81.5 pence per share. SCM achieved a profit after tax of£100,000 in the year ended 31 December 2005 after three years of loss makingsince its incorporation. Further consideration is payable on an earn-out, basedon profits after tax of £150,000 and above. As already mentioned, since the year end we have acquired the share capital ofDiagnostic Units Hungary (DUH) for an initial consideration of 1.5 million euroswhich was satisfied by a payment of 1 million euros in cash and the balance bythe issue of 362,976 shares in Synexus at 95 pence each. DUH is a successfulbusiness and made a profit after tax of £142,000 in the year ended 31 December2005. On the first anniversary after completion 0.5 million euros of deferredconsideration is payable in cash. A further 0.75 million euros is payable basedon the trading performance of DUH in the year ending 31 March 2007 with themaximum payable if DUH generates profit after tax in the region of £259,000 inthat period. Since the flotation the Group's financial position has been substantiallystrengthened with closing net assets at 31 March 2006 of £6.64 million andnegligible gearing. This increase in net assets of over £9.0 million from theprevious year gives a sound base on which to build the Group's finances movingforward. Current Trading and Prospects The value of the order book at the year end, including remaining revenues fromexisting contracts, is £16.3million (2005: £13million) and gives the boardconfidence in achieving the internal forecasts for the coming year. Theopportunity to now leverage our position in bidding for studies internationallyrather than on a single country basis offers our clients real economies of scalewhich we are confident will increase the size, quality and therapeutic spread ofstudies. Prospects at each of our sites are good and your Board is optimisticthat the foundations laid down in 2005/6 have established a good platform forthe further development and acceptance of the Synexus model internationally. Your Board will continue to look to grow not only as a result of the investmentin infrastructure described above, but also via acquisition, in both mainlandEurope and beyond where a number of interesting strategic opportunities remainwhich would enhance our offering to the global pharmaceutical industry. Wecontinue to enjoy the support of our customers who are among the largestcompanies in the world and who are increasingly buying in to the Synexus modelof patient recruitment and management on a volume basis. Michael Fort, Chief Executive Officer, 6 June 2006 Synexus Clinical Research plcConsolidated profit and loss accountFor the year ended 31 March 2006 2006 2005 Notes £'000 £'000 TurnoverContinuing operations 9,448 9,771Acquisitions 94 - ------ ------ 9,542 9,771Cost of sales (4,719) (7,071) ------ ------ Gross profit 4,823 2,700 ------ ------ Operating expensesAmortisation of goodwill (213) (205)Other operating expenses (3,079) (3,018) ------ ------ Total operating expenses (3,292) (3,223) ------ ------ Operating profit /(loss)Continuing operations 1,510 (523)Acquisition 21 - ------ ------Total operating profit 1,531 (523) Net Interest (299) (535) ------ ------ Profit/(loss) on ordinary activities before taxation 1,232 (1,058)Taxation 3 29 13 ------ ------ Retained profit / (loss) for the financial year 1,261 (1,045) ====== ====== Basic earnings per share 2 6.8p (10.4)p Consolidated statement of total recognised gains and lossesFor the year ended 31 March 2006 The Group has no recognised gains or losses for the year/period other than thosestated above and therefore no separate statement of total recognised gains andlosses has been presented. The results above also represent the historical costprofit/(loss) Synexus Clinical Research plcConsolidated balance sheetsAs at 31 March 2006 2006 2005 Notes £'000 £'000Fixed assetsIntangible assets 5 3,881 3,147Tangible assets 514 378 ------ ------- 4,395 3,525 ------ ------- Current assetsDebtors 2,428 1,607 Deferred tax 103 74Cash at bank and in hand 1,982 428 ------ ------- 4,513 2,109Creditors: amounts falling due within one year (2,020) (4,918) ------ ------- Net current assets/(liabilities) 2,493 (2,809) ------ ------- Total assets less current liabilities 6,888 716Creditors: amounts falling due after more than one (251) (3,393)year ------ ------- Net assets/ (liabilities) 6,637 (2,677) ====== ======= Capital and reservesCalled up share capital 2,279 1,000Share premium account 2,491 296Merger reserve 1,253 515Capital redemption reserve 2,661 -Profit and loss account (2,047) (4,488) ------ ------- Equity shareholders' funds / (deficit) 6,637 (2,677) ====== ======= Synexus Clinical Research PlcConsolidated cash flow statementFor the year ended 31 March 2006 Notes 2006 2005 £'000 £'000Net cash inflow/(outflow) from operating activities 6 899 (528) ------ ------Return on investments and servicing of financeNet Interest (28) (41) ------ ------Capital expenditure and financial investmentPurchase of tangible assets (71) (45) ------ ------ Acquisitions and disposalsPurchase of subsidiary undertakings (60) -Net cash acquired with subsidiary 7 - ------ ------Net cash outflow from acquisitions 4 (53) - ------ ------ Cash inflow/ (outflow) before financing 747 (614) ------ ------ FinancingIssue of share capital (net of issue costs) 2,734 -Repayment of loans (1,927) -Capital element of finance lease payments - (2) ------ ------Net cash inflow/ (outflow) from financing 807 (2) ------ ------ Increase / (decrease) in cash in the period 7 1,554 (616) ====== ====== Notes to the Financial Information 1. Basis of preparation and financial information The financial information in this preliminary announcement has been prepared inaccordance with the accounting policies set out in the financial statements ofSynexus Clinical Research Plc for the year ended 31 March 2005, which haveremained unchanged for the financial year ended 31 March 2006. The financial information in this document does not constitute the Company'sstatutory accounts for the year ended 31 March 2006, but is derived from thoseaccounts. Statutory accounts for 2006 will be delivered to the Registrar ofCompanies following the company's Annual General Meeting. The auditors havereported on these accounts; their reports were unqualified and did not containstatements under sections 237 (2) or (3) of the Companies Act 1985. 2. Earnings per shareEarnings per share is calculated on the basis of the profit for the year dividedby the weighted average number of shares in issue for 2006 of 18,656,563 (2005:10,000,000). An adjusted earnings per share , which excludes goodwill amortisation, has beencalculated to allow shareholders to gain a greater understanding of the tradingperformance of the Group: Earnings Weighted Pence per share Earnings Weighted Pence per share attributable to average number attributable to average number ordinary of shares ordinary of shares shareholders shareholders £'000 £'000Basic earnings 1,261 18,656,563 6.8 (1,045) 10,000,000 (10.4)per share Amortisationof goodwill 213 - - 205 - - Adjustedearnings pershare 1,474 18,656,563 7.9 (840) 10,000,000 (8.4) 3. Taxation 2006 2005 £'000 £'000UK Corporation tax Current tax - -Deferred tax (29) (13) ------- -------Tax on profit on ordinary activities (29) (13) ======= ======= Taxable losses available for relief against future taxable profits in the UKamount to approximately £962,000 (2005: £3,512,000). Factors affecting the tax charge for the yearThe differences are explained below: 2006 2005 £'000 £'000 Profit/(loss) on ordinary activities before taxation 1,232 (1,058) Profit/(loss) on ordinary activities multiplied by the rate ofcorporationtax in the UK at 30% (2005: 19%) 370 (201) Effect of:Capital allowances in excess of depreciation (22) 21Goodwill amortisation 61 39Permanent timing differences 10 18Losses (414) 123Other (5) - ------- ------- Current tax charge for year - - ======= ======= 4. AcquisitionsOn 31 January 2006 the Company acquired the entire issued share capital ofSkandynawskie Centrum Medyczne Sp. Z o.o.(SCM). The initial consideration of£850,000 was satisfied by the allotment of 1,042,945 ordinary shares at a priceof 81.5 pence per share. A further £1,400,000 could become payable in cash and ordinary shares dependenton the level of the profit after tax of SCM for the year ending 31 March 2007.Based on current expectations of performance the directors do not expect to makea payment of deferred consideration. The certified accounts for SCM for the year ended 31 December 2005 show turnoverof £0.47 million, profit before tax of £0.12 million and taxation of £0.02million. The unaudited accounts for the month of January 2006 indicate thatSCM's turnover was £0.07 million, a loss of £7,000 and there was no taxation. The acquisition has been accounted for using the acquisition method ofaccounting and goodwill arising on acquisition has been capitalised and will beamortised over a period of 20 years which is its expected life.The assets and liabilities acquired are set out below: Book value Adjustment Fair value £'000 £'000 £'000Intangible assets 1 (1) -Fixed assets 176 - 176Debtors 77 7 84Cash 7 - 7Trade creditors and taxes (37) (3) (40)Loans (264) - (264) -------- -------- -------Net liabilities (40) 3 (37) -------- -------- Goodwill 947 --- --- -------Total consideration and cost 910 --- --- ------- Satisfied by:Issue of shares 850Costs 60 ------- 910 =======5. Intangible fixed assets Goodwill £'000CostAt 1 April 2005 4,100Additions 947 --------At 31 March 2006 5.047 ======== AmortisationAt 1 April 2005 953Charge for year 213 --------At 31 March 2006 1,166 ======== At 31 March 2006 3,881 ======== At 1 April 2005 3,147 ======== 6. Reconciliation of operating profit/(loss) to operating cash flows 2006 2005 £'000 £'000 Operating profit/(loss) 1,531 (523)Depreciation and amortisation charges 324 323(Increase) in debtors (737) (60)(Decrease) in creditors (219) (268) ------- ------- Net cash inflow/(outflow) from operating activities 899 (528) ======= ======= 7. Reconciliation of net cash flow to movement in net debt 2006 2005 £'000 £'000 Increase/(decrease) in cash during the period 1,554 (616)Cash outflow from decrease in debt and lease financing 1,927 2 ------- ------- Change in net debt resulting from cash flows 3,481 (614)Debt acquired with subsidiary (264) -Debt capitalised into share capital 3,297 -Interest accrued (271) (493)Interest waived 1,172 ------- ------- Movement in net debt in the period 7,415 (1,107)Net debt at 1 April 2005 (5,684) (4,577) ------- -------Net cash/(debt) at 31 March 2006 1,731 (5,684) ======= ======= 8. Copies of the preliminary announcement are available from the company's Registered Office at Sandringham House, Ackhurst Park, Chorley, Lancashire, PR7 1NY. The Annual Report and Accounts for the year ended 31 March 2006 will be posted to shareholders on or before 30 June 2006 This information is provided by RNS The company news service from the London Stock Exchange