27 Feb 2009 07:00
TEPNEL LIFE SCIENCES PLC
Preliminary results for the year ended 31 December 2008
Substantial increase in revenues and profits
Manchester, UK, 27 February 2009: Tepnel Life Sciences plc (AIM: TED), the international Molecular Diagnostics and Research Products and Services Group, announces preliminary results for the year ended 31 December 2008.
2008 Highlights
Revenue from continuing operations increased to £24.4m from £17.8m, an increase of 37% compared to the prior period and 28% on a constant currency basis
Gross profit increased 43% to £14.5m compared to £10.1m in 2007
An increase of 103% in operating profit to £2.8m from £1.4m in 2007
EBITDA increased 87% to £3.8m from £2.0m in 2007
Operating cash inflow increased to £4.2m from £1.7m in 2007
Tepnel continued to deliver significant and sustained growth in both revenue and operating profit across both divisions in line with its strategic and operational plans:
- Research Products and Services revenue increased by 35% (on a constant currency basis) driven by the strong demand for its pharmaceutical outsourcing services from its new state-of-the-art facility in Livingston and newly introduced Biopharmaceutical and Genotyping service lines
- Molecular Diagnostics revenue increased by 23% (on a constant currency basis) driven by sales of the LifeMatch product line and the Elucigene kits for genetic predisposition testing
Recommended cash offer for Tepnel Life Sciences plc from Gen-Probe. The offer values each Tepnel share at 27.1p and the fully diluted share capital of Tepnel at approximately £92.8m.
"This has been an outstanding year for Tepnel with significant growth in revenues and profits. Our pharmaceutical services business has exceeded expectations with strong demand for our newly launched biopharmaceutical and genotyping services. Our immunological products and food safety ranges have also demonstrated steady growth in Europe and the USA through direct sales and strengthening of our global distribution network.The Molecular Diagnostics division has gone from strength to strength attributed to the growth in sales of the LifeMatch range of products and Elucigene genetic predisposition tests" comments Ben Matzilevich, Tepnel's Chief Executive Officer.
Commenting on the recent recommended offer from Gen-Probe to acquire Tepnel, Ben Matzilevich said, "We believe Gen-Probe's offer represents significant value for Tepnel's shareholders and recognises our past achievements and our future potential in molecular diagnostics and pharmaceutical services."
| Continuing operations | Year ended 31 December2008 £'000 | Year ended 31 December 2007 £'000 | Change |
| Group revenue | £24.4m | £17.8m | +37% |
| EBITDA | £3.76m | £2.01m | +87% |
| Operating profit | £2.82m | £1.39m | +103% |
| Profit after tax | £2.76m | £1.37m | +102% |
| Operating cash inflow | £4.20m | £1.72m | +144% |
| Basic EPS | 1.19p | 0.59p | +102% |
For further information, please contact:
Tepnel Life Sciences plc
Ben Matzilevich, Chief Executive Officer
Michael Slater, Group Finance Director
Tel: +44 161 946 2200
Capital MS&L
Mary Clark / Joey Whineray
Tel: +44 20 7307 5330
Seymour Pierce
Mark Percy / Tom Sheldon / Christopher Wren
Tel: +44 20 7107 8000
About Tepnel Life Sciences plc
Tepnel Life Sciences (AIM:TED) is an international life sciences products and services group with two divisions, Molecular Diagnostics and Research Products and Services. The Company has laboratories, manufacturing and operations in the USA, UK and France with over 200 employees.
Tepnel provides test kits, reagents and services to two highly synergistic markets, these being Molecular Diagnostics and Biomedical Research.
The Company's strategy has been to identify high growth niche opportunities within these multi-billion pound markets. Tepnel focuses on these opportunities with internally developed products, patents, expertise and know-how as well as strategic acquisitions, to develop a leadership position within these defined market segments.
This announcement is for information purposes only and does not constitute an offer to sell or invitation to purchase any securities or the solicitation of any vote for approval in any jurisdiction, nor shall there be any sale, issue or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law. Any response in relation to the Offer should be made only on the basis of the information contained in the Scheme Document or any document by which the Offer is made. This announcement does not constitute a prospectus or prospectus equivalent document.
Shareholders in the United States should note that the Scheme relates to the shares of a UK company and will be governed by English law. Neither the proxy solicitation nor the tender offer rules under the US Securities Exchange Act of 1934, as amended, will apply to the Scheme. Moreover, the Scheme will be subject to the disclosure requirements and practices applicable in the UK to schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules and tender offer rules. Financial information included in the Scheme documentation with respect to Tepnel has been or will have been prepared in accordance with IFRS and may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with US GAAP.No listing authority or equivalent has reviewed, approved or disapproved of this announcement or any of the proposals described herein.
Dealing Disclosure Requirements
Under the provisions of Rule 8.1 of the Code, all “dealings” in “relevant securities” of Tepnel by Gen-Probe or Tepnel, or by any of their respective “associates”, must be disclosed by no later than 12.00 noon (London time) on the Business Day following the date of the relevant transaction.
Chairman's Statement
2008 has been a truly outstanding year for Tepnel. The Group has delivered an exceptional set of results and continued to make excellent progress against its strategic plans. Revenue has grown by 37% to £24.4m and operating profits have more than doubled to £2.8m.
Significant growth has been achieved across Tepnel's Molecular Diagnostics and Research Products and Services divisions and is testament to the successful implementation of the Group's strategic plans to build leadership positions in niche markets within both of these sectors.
Revenue for the year ended 31 December 2008 increased to £24.4m from £17.8m, an increase of 37% on the prior period and 28% on a constant currency basis. Operating profit increased by over 100% to £2.8m from £1.4m in 2007 and operating cash flow increased to £4.2m compared to £1.7m for the prior year.
Tepnel has made significant progress on a number of fronts across the Group.
Research Products and Services
The Research Products and Services division provides outsourcing services for the pharmaceutical, biotechnology and healthcare industries, immunological reagents and food safety products.
This division boasts an excellent year with rapid growth in revenue of 39% (35% on a constant currency basis) to £10.5m. This growth was driven by the demand for its new genotyping and biopharmaceutical services which were launched in March 2008 on completion of Phase II of the construction of its state-of-the-art laboratory facilities in Livingston, Scotland.
As anticipated, the launch of these new services has enabled Tepnel to offer a wider portfolio of services to existing clients and gain access to new customers, particularly within the biopharmaceutical arena. In addition the knowledge and expertise behind these new services enhance the product development opportunities for the Molecular Diagnostics division.
In October 2008 Tepnel announced that it had further expanded its genotyping capabilities with the addition of a high-throughput Illumina iScan System, positioning Tepnel as the first commercial provider of iScan services within the UK. Accelerating and expanding its genetic analysis services at such a rapid pace reflects Tepnel's commitment to its long term strategy of building its market presence within the fast-growing sectors of pharmacogenomics and genetic disease disposition testing.
Over the year Tepnel has continued to build relationships with some of the largest pharmaceutical companies in the world. In May 2008, for example, Tepnel announced it had extended its preferred supplier agreement with AstraZeneca for DNA extraction services providing the opportunity to compete for further business from AstraZeneca.
Tepnel has continued to grow the immunological reagent line. Growth has been driven by demand for bulk antibodies from some of the world's leading diagnostic companies and by demand for custom development work. Tepnel further strengthened its global reach in May 2008 by signing a two year extension to its licensing agreement with Abcam, the world's largest online supplier of antibody products, ensuring that Tepnel's immunological products reach the broadest possible audience.
Tepnel's food safety business has continued to make good progress with growth in direct sales in the UK, Europe and particularly the USA as well as through its distributor network and direct sales team. In October 2008 Tepnel expanded its range of allergen test kits with the launch of the Walnut Assay Kit, the first commercially available ELISA test kit for Walnut control and it is anticipated that this will help to bolster sales into 2009.
Molecular Diagnostics
Tepnel's Molecular Diagnostics division focuses on the organ transplant monitoring, foetal diagnostic testing and genetic predisposition testing markets. Its innovative product line includes the LifeMatch transplant monitoring assays and the Elucigene kits and reagents for the analysis of human genetic disorders.
The Molecular Diagnostics division has demonstrated strong growth with a 35% increase in revenues compared to the prior year and by 23% on a constant currency basis. The LifeMatch range of products continues to gain market share and increased sales through new customers and a broadening product range. It continues to develop new products using the Luminex xMAP technology providing a strong base for future growth.
Sales of the Elucigene product line have also continued to grow which can be partly attributed to the recently launched QST*R kit for the rapid detection during pregnancy of common genetic abnormalities which has been gaining momentum across Europe.
In August 2008, Tepnel launched a new DNA test for the early detection of Familial Hypercholesterolaemia (FH), a genetic condition that predisposes 1 in 500 individuals to high blood cholesterol levels and increased risk of cardiovascular disease. Tepnel introduced its innovative test kit just ahead of the release of clinical practice guidelines on FH by the influential National Institute for Clinical Excellence (NICE).
Tepnel was pleased to announce in November that its Elucigene cystic fibrosis assay had been chosen by the Illinois Department of Public Health as part of a new mandate to screen all newborns for the disease. The successful implementation of the assay in the screening programme demonstrates the ease and utility of the Elucigene product and it is hoped will encourage more states to implement statewide screening programs in the future.
Tepnel is continuously expanding its pipeline of new technologies for molecular diagnostics and in June 2008 announced it had been awarded a BBSRC (Biotechnology and Biological Sciences Research Council) grant to develop a technology enabling the rapid detection and identification of pathogenic micro-organisms which can cause potentially fatal infections in humans and animals. This research enables Tepnel to explore this innovative technology and to assess its potential for animal and human applications. It also demonstrates Tepnel's commitment to expanding its product pipeline and entering new markets.
Future Prospects
Following the strategic reorganisation of the business in 2004, the Tepnel Group has been transformed through building leadership positions in defined markets in the Molecular Diagnostics and Research Products and Services sectors.
The Molecular Diagnostics division is focused on key growth markets, principally organ transplant monitoring and foetal distress diagnostics and developing products which utilise technologies for new markets such as the blood bank market. Through significant investment in its new pharmaceutical services facility in Livingston and recently launched services, the Research Products and Services division is well placed to access the growing biopharmaceutical and genotyping markets.
Whilst the strategy has proven successful, the Board is cognisant that in future years Tepnel will require additional capital investment, access to certain technologies and an expansion of its capabilities. With this in mind, Tepnel announced on the 30 January 2009 that it had reached agreement on the terms of a recommended cash acquisition by Gen-Probe Incorporated. The acquisition is to be implemented by means of a Scheme of Arrangement (the 'Scheme').
The Tepnel Directors believe that the offer price of 27.1 pence per Tepnel share reflects Tepnel's strong future prospects and growth opportunities and is in the best interests of Tepnel Shareholders as a whole.
The Scheme requires approval of the Scheme Shareholders at the Court Meeting and of the Tepnel Shareholders at the General Meeting, both of which have been convened for 16 March 2009. If approved, it is expected that the Scheme will become effective on or around 8 April 2009.
I would like to thank all of our employees for their effort and commitment in driving Tepnel's success over the past year, as well as our investors whose valued support has provided a stable platform for continued strong growth.
Alec Craig
Chairman
26 February 2009
Group Income Statement
for the Year Ended 31 December 2008
| | Note | Year ended31 December 2008 | Year ended 31 December 2007 | ||
| | | | £’000 | | £’000 |
| | | | | | |
| Revenue | 1 | | 24,355 | | 17,819 |
| Cost of sales | | | (9,890) | | (7,676) |
| Gross profit | | | 14,465 | | 10,143 |
| | | | | | |
| Selling and distribution costs | | | (3,563) | | (2,813) |
| Research and development costs | | | (2,738) | | (2,069) |
| Administrative expenses | | | (5,342) | | (3,871) |
| Operating profit – continuing operations 1 | | 2,822 | | 1,390 | |
| | | | | | |
| Finance income | | | 173 | | 115 |
| Finance expense | | | (208) | | (232) |
| Profit before taxation – continuing operations | | 2,787 | | 1,273 | |
| Tax (charge)/credit | | | (23) | | 95 |
| Profit for the year – continuing operations | | 2,764 | | 1,368 | |
| Loss for the year – discontinued operations | | - | | (124) | |
| Profit for the year | | | 2,764 | | 1,244 |
| | | | | | |
| | | | | | |
| Basic EPS – continuing operations | 2 | | 1.19p | | 0.59p |
| Diluted EPS – continuing operations | 2 | | 1.07p | | 0.55p |
| Basic EPS – profit for the year | 2 | | 1.19p | | 0.54p |
| Diluted EPS – profit for the year | 2 | | 1.07p | | 0.50p |
Group Statement of Recognised Income and Expense
for the Year Ended 31 December 2008
| | Year ended 31 December 2008 | Year ended 31 December 2007 |
| | £’000 | £’000 |
| Income and expense recognised directly in equity | | |
| Exchange differences on retranslation of foreign operations | 961 | 77 |
| Profit for the year | 2,764 | 1,244 |
| Total recognised income and expense for the year | 3,725 | 1,321 |
Group Balance Sheet
at 31 December 2008
| | Note | 31 December 2008 £’000 | 31 December 2007 £’000 |
| Non-current assets | | | |
| Property, plant and equipment | | 6,817 | 5,567 |
| Intangible assets | | 1,625 | 2,047 |
| Deferred tax asset | | 400 | 140 |
| | | 8,842 | 7,754 |
| Current assets | | | |
| Inventories | | 4,270 | 2,586 |
| Trade and other receivables | | 5,828 | 4,514 |
| Income tax receivable | | 229 | 168 |
| Cash and short-term deposits | | 6,546 | 3,499 |
| | | 16,873 | 10,767 |
| Total assets | 1 | 25,715 | 18,521 |
| | | | |
| Current liabilities | | | |
| Trade and other payables | | (9,585) | (8,075) |
| Financial liabilities | | (580) | (216) |
| Income tax payable | | (535) | (242) |
| | | (10,700) | (8,533) |
| Non-current liabilities | | | |
| Financial liabilities | | (1,764) | (1,274) |
| Provisions | | ( 90) | (120) |
| Total liabilities | 1 | (12,554) | (9,927) |
| | | | |
| Net assets | 1 | 13,161 | 8,594 |
| | | | |
| Capital and reserves | | | |
| Equity share capital | 3 | 37,500 | 36,878 |
| Foreign exchange reserve | 3 | 980 | 19 |
| Retained losses | 3 | (25,319) | (28,303) |
| Total equity | | 13,161 | 8,594 |
Group Cash Flow Statement
for the Year Ended 31 December 2008
| | | Year ended 31 December 2008 £’000 | Year ended 31 December 2007 £’000 |
| Operating activities | | | |
| Profit after taxation | | 2,764 | 1,244 |
| Adjustments to reconcile group profit after tax to net cash | | | |
| inflow from operating activities: | | | |
| Tax charge/(credit) | | 23 | (95) |
| Net finance costs | | 35 | 117 |
| Depreciation of property, plant and equipment | | 915 | 606 |
| Amortisation of intangible fixed assets | | 22 | 12 |
| Share based payments | | 220 | 100 |
| Increase in trade and other receivables | | (674) | (1,390) |
| Decrease/(increase) in inventories | | (965) | 95 |
| Increase in trade and other payables | | 1,921 | 984 |
| Cash generated from operating activities | | 4,261 | 1,673 |
| Income tax (paid)/received | | (59) | 44 |
| Net cash inflow from operating activities | | 4,202 | 1,717 |
| Investing activities | | | |
| Interest received | | 162 | 102 |
| Government grants received | | - | 100 |
| Purchase of subsidiary undertakings | | - | (75) |
| Cash held by subsidiary undertakings on acquisition | | - | 48 |
| Investment in fixed deposit | | - | 200 |
| Payments to acquire property, plant and equipment | | (2,148) | (2,092) |
| Payments to acquire intangible assets | | (4) | (6) |
| Net cash outflow from investing activities | | (1,990) | (1,723) |
| Financing activities | | | |
| Interest paid | | (190) | (41) |
| Proceeds from issue of share capital | | 828 | - |
| Repayment of capital element of finance leases | | (342) | (85) |
| New borrowings | | 433 | - |
| Repayment of borrowings | | (126) | (43) |
| Net cash inflow/(outflow) from financing activities | | 603 | (169) |
| Increase/(decrease) in cash and cash equivalents | | 2,815 | (175) |
| Cash and cash equivalents at the beginning of the period | | 3,499 | 3,657 |
| Effect of exchange rates on cash and cash equivalents | | 232 | 17 |
| Cash and cash equivalents at the end of the period | | 6,546 | 3,499 |
The following tables present revenue, profit and certain assets and liability information regarding the Group’s business segments for the years ended 31 December 2008 and 31 December 2007:
| | Continuing operations | Discontinued | |||||
| | RPS 31 December 2008 | MD 31 December 2008 | Total 31 December 2008 | operations 31 December 2008 | Total 31 December 2008 | ||
| | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| Segment revenue | 10,460 | 13,895 | 24,355 | - | 24,355 | ||
| | | | | | | ||
| Results | | | | | | ||
| Segment result | 1,519 | 2,744 | 4,263 | - | 4,263 | ||
| Central costs | | | (1,441) | - | (1,441) | ||
| Operating profit | | | 2,822 | - | 2,822 | ||
| Net finance costs | | | (35) | - | (35) | ||
| Profit before taxation | | 2,787 | - | 2,787 | |||
| Tax charge | | | (23) | - | (23) | ||
| Profit for the year | | | 2,764 | - | 2,764 | ||
| | | | | | | ||
| | | | | | | ||
| | Continuing operations | | Discontinued | ||||
| | RPS 31 December 2007 | MD 31 December 2007 | Total 31 December 2007 | operations 31 December 2007 | Total 31 December 2007 | ||
| | £’000 | £’000 | £’000 | £’000 | £’000 | ||
| Segment revenue | 7,538 | 10,281 | 17,819 | 518 | 18,337 | ||
| | | | | | | ||
| Results | | | | | | ||
| Segment result | 733 | 1,967 | 2,700 | (124) | 2,576 | ||
| Central costs | | | (1,310) | - | (1,310) | ||
| Operating profit/(loss) | | | 1,390 | (124) | 1,266 | ||
| Net finance costs | | | (117) | - | (117) | ||
| Profit/(loss) before taxation | | 1,273 | (124) | 1,149 | |||
| Tax credit | | | 95 | - | 95 | ||
| Profit/(loss) for the year | | | 1,368 | (124) | 1,244 | ||
All segment revenue is from external customers
| | | RPS 31 December 2008 | MD 31 December 2008 | Total 31 December 2008 | ||||
| | | £’000 | £’000 | £’000 | ||||
| Assets and liabilities | | | | | ||||
| Segment assets | | 11,414 | 7,126 | 18,540 | ||||
| Central assets | | | | | ||||
| - cash | | | | 6,546 | ||||
| - income and deferred tax assets | | | | 629 | ||||
| Total assets | | | | 25,715 | ||||
| | | | | | ||||
| Segment liabilities | | (5,231) | (4,444) | (9,675) | ||||
| Central liabilities | | | | | ||||
| - financial liabilities | | | | (2,344) | ||||
| - income tax liabilities | | | | (535) | ||||
| Total liabilities | | | | (12,554) | ||||
| | | | | | ||||
| Net assets | | | | 13,161 | ||||
| | | | | | ||||
| | | | | | ||||
| | | RPS 31 December 2007 £’000 | MD 31 December 2007 £’000 | Total 31 December 2007 £’000 | ||||
| | | |||||||
| | | |||||||
| Assets and liabilities | | | | | ||||
| Segment assets | | 9,477 | 5,237 | 14,714 | ||||
| Central assets | | | | | ||||
| - cash | | | | 3,499 | ||||
| - income and deferred tax assets | | | | 308 | ||||
| Total assets | | | | 18,521 | ||||
| | | | | | ||||
| Segment liabilities | | (4,945) | (3,250) | (8,195) | ||||
| Central liabilities | | | | | ||||
| - financial liabilities | | | | (1,490) | ||||
| - income tax liabilities | | | | (242) | ||||
| Total liabilities | | | | (9,927) | ||||
| | | | | | ||||
| Net assets | | | | 8,594 | ||||
Geographical Segments (Secondary Reporting Format)
The following table presents revenue, expenditure and certain asset information regarding the Group's geographical segments for the years ended 31 December 2008 and 31 December 2007.
| Revenue by destination Continuing operations | Year ended 31 December 2008 £'000 | Year ended 31 December 2007 £'000 |
| UK | 8,191 | 5,759 |
| Rest of Europe | 7,799 | 4,959 |
| US | 5,582 | 4,252 |
| Asia | 1,477 | 1,715 |
| Rest of World | 1,306 | 1,134 |
| Total segment revenue | 24,355 | 17,819 |
Revenue from discontinued operations is £ nil (2007: £518,000 relating to sales made in the United States).
2 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing net profits attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period adjusted for the effects of dilutive options and warrants.
| Year ended 31 December 2008 £'000 | Year ended 31 December 2007 £'000 | |
| Earnings attributable to ordinary shareholders: | ||
| - continuing operations | 2,764 | 1,368 |
| - discontinued operations | - | (124) |
| Total | 2,764 | 1,244 |
| 000's | 000's | |
| Weighted average number of shares | 231,450 | 230,211 |
| Dilutive effect of - options | 2,805 | 2,284 |
| - warrants | 24,587 | 16,864 |
| Diluted weighted average number of shares | 258,842 | 249,359 |
| Basic earnings per share - continuing operations | 1.19p | 0.59p |
| Diluted earnings per share - continuing operations | 1.07p | 0.55p |
| Basic earnings per share - profit for the year | 1.19p | 0.54p |
| Diluted earnings per share - profit for the year | 1.07p | 0.50p |
The Group has granted additional share options to employees that were not classified as being dilutive during the period but which may become dilutive in the future.
3 Statement of changes in equity
| Equity Share Capital | Foreign Exchange Reserve | Retained Losses | ||
| £'000 | £'000 | £'000 | ||
| At 1 January 2008 | 36,878 | 19 | (28,303) | |
| Total recognised income and expense | 622 | 961 | 2,764 | |
| Share-based payments | - | - | 220 | |
| At 31 December 2008 | 37,500 | 980 | (25,319) | |
Equity share capital
The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company's equity share capital, comprising 1p ordinary shares.
Foreign exchange reserve
The foreign exchange reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
4 Additional financial information
| Continuing operations | Year ended 31 December 2008 £'000 | Year ended 31 December 2007 £'000 |
| Operating profit | 2,822 | 1,390 |
| Depreciation | 915 | 603 |
| Amortisation | 22 | 12 |
| EBITDA | 3,759 | 2,005 |
5 Constant currency sales growth
2008 results compared with 2007 at constant 2007 exchange rates
| Year ended 31 December 2008 | Year ended 31 December 2007 | % change | |
| Continuing operations | £'000 | £'000 | |
| Research Products and Services | 10,147 | 7,538 | 35% |
| Molecular Diagnostics | 12,661 | 10,281 | 23% |
| Revenue | 22,808 | 17,819 | 28% |
Foreign currency
The principal exchange rates used in the preparation of the Group accounts were as follows:
| Continuing operations | Year ended 31 December 2008 | Year ended 31 December 2007 | |
| US dollar - average | 1.86 | 2.00 | |
| - closing | 1.45 | 1.99 | |
| Euro - average | 1.26 | 1.46 | |
| - closing | 1.03 | 1.36 |
6 Dividends
The Directors do not recommend the payment of a dividend.
7 Accounting policies
The preliminary results for the year ended 31 December 2008 have been prepared on the basis of accounting policies consistent with those applied in the 2007 financial statements.
The preliminary results for the year ended 31 December 2008 have been approved by the Directors. Our auditors have issued an unqualified audit report on the results for the year ended 31 December 2008 under section 235 of the Companies Act 1985. The accounts for the year ended 31 December 2008 will be delivered to the Registrar of Companies in due course. The financial information set out above does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985.