RNS Number:2652J
Bionostics PLC
06 December 2007
Embargoed until 07.00 6 December 2007
BIONOSTICS PLC
("Bionostics" or the "Group", formerly Ferraris Group Plc)
Preliminary results for the year to 31 August 2007
Bionostics Plc, the international medical diagnostics group, today announces
preliminary results for the year to 31 August 2007.
HIGHLIGHTS
*The Board of Directors have announced that they have reached agreement on
the terms of a recommended cash offer by NAV Bidco Limited for the entire
issued and to be issued ordinary share capital of Bionostics Plc subject to
approval by the shareholders and the subsequent sanction of the Court.
*New business in the diabetes sector during the second half of the year
led to the two highest revenue months in the history of In Vitro Diagnostics
("IVD").
*IVD grew revenues for the year by 6%, excluding currency fluctuations.
*IVD's Xsera Rapid HIV-1/2 Antibody Controls were selected by the San
Francisco Department of Public Health for exclusive use in an eighteen month
study.
*Oxford Cryosystems ("OC") grew revenues for the year by 8% on the
strength of their recently launched non-liquid nitrogen system, the Cobra,
and renewed interest in the older helium-based cooling systems.
*OC identified a key partner in China to help gain a sales and service
presence in this untapped market.
*Group revenues, as reported in sterling, declined to #13.9m (2006:
#14.1m) as a result of the 9% decline in the dollar.
*Significant savings achieved with the closure of the head office and
reduction in the size of the Board of Directors.
*Group operating profit from continuing operations before goodwill
impairment and exceptional expenses improved to #2.4m (2006: #2.2m) (see
Consolidated Income Statement).
*Total profit after tax improved to #0.7m (2006: #27.8m loss).
*Progress has been made during the second half of the year to reduce debt
- debt has been reduced to #11.2m (2006: #11.4m) and has continued to
reduce.
Dr. Paul Haycock, Chairman, commented:
'The restructured group is well positioned for the new financial year. We have
started the year strongly and above last year's turnover run-rates. IVD has
renewed contracts with major customers and new business is anticipated with
major pharmaceutical players. OC is developing new products that will be
important to the continued growth of that business.'
'Central costs are expected to reduce further, but will continue to reflect the
cost of compliance and regulation that is required of a publicly listed company.
Cash flow is expected to remain strong and is an important component to our debt
reduction efforts and continued strengthening of our balance sheet.'
Enquiries:
Bionostics PLC
Paul Haycock, Chairman 020 7067 0700
Kelly Winn, Finance Director
Weber Shandwick Financial 020 7067 0700
Nick Oborne/Charlie Hooper
Notes to Editors
Bionostics Plc, formerly named Ferraris Group Plc, is a global medical
diagnostic business committed to providing a broad range of products and
services in the liquid control and cryosystem sectors. Bionostics comprises two
divisions:
In Vitro Diagnostics is a leading provider of liquid control solutions used to
confirm the accurate performance of medical diagnostic blood testing devices.
Oxford Cryosystems is the world's leading developer of low temperature devices
for X-ray crystallography, a pivotal technique in markets including drug
discovery, biotechnology and materials science.
Embargoed until 07.00 6 December 2007
BIONOSTICS PLC
("Bionostics" or the "Group", formerly Ferraris Group Plc)
Preliminary results for the year to 31 August 2007
Chairman's Statement
Introduction
Fiscal year 2007 was a time of significant change for Bionostics plc. The
disposal of the Respiratory Group was finalised in November of 2006, followed in
January of 2007 by the closing of the Birmingham head office, the release of all
head office staff, and the transitioning of the remaining head office functions
to the In Vitro Diagnostics (IVD) headquarters in Devens, MA, USA. In February,
concurrent with my assuming the Chairman's role, the Group was renamed
Bionostics plc and the Board of Directors was reduced in size by two members.
Both the closing of the head office and the reduction in the size of the Board
of Directors contributed to substantial cost reduction and a structure which I
believe better reflects the reduced complexity of the ongoing business. Now
comprising IVD and Oxford Cryosystems (OC), Bionostics plc has shown steady
revenue growth , as measured in local currency, throughout the year, allowing us
to reduce debt levels, as promised in February 2007. Consequently, Bionostics
plc is a financially stronger organization, in terms of net assets, and a
commercially healthier organization.
Results
In local currencies, revenue from organic growth in the continuing operations
increased 6% over last year, before the impact of the weaker dollar. After
accounting for the decline in the dollar, revenue is down a little over 1% to
#13.9m from #14.1m last year. Initial savings in central costs more than offset
the slight reduction in margins, improving operating profit from continuing
operations before goodwill impairment and exceptional costs to #2.4m from #2.2m
last year (see Consolidated Income Statement). Total profit after tax improved
to #0.7m (2006: #27.8m loss).
Further details and commentary on the operating results and cash flow is given
in the Review of Operations and the Financial Review.
Dividend
The Directors do not recommend a final dividend and did not make an interim
dividend. The Directors consider that expected cash flows are best used to
further reduce debt and invest modestly in the ongoing business.
Operational Highlights
IVD finished the year exceptionally strong realising nearly 60% of revenues and
nearly 70% of profits in the second half of the year. After a slow start by two
of the largest diabetes diagnostics manufacturers, IVD reduced headcount and
restructured to better align the business to meet customer needs. New IVD
business was initiated in the second half of the year which contributed to
record levels of both revenues and profits. The anticipated decline in the blood
gas sector did not materialise and new business in the diabetes sector was
exceptionally strong in the final three quarters. Steady growth in the recently
introduced control solutions for HIV-1 and HIV-2 has increased our visibility in
this market. And, at the time of record product recalls by toy manufacturers due
to excessively high levels of lead in painted toys imported from China, IVD has
recently begun to distribute products for blood lead testing and has also
launched a control solution for use with the lead testing device.
OC benefited from renewed interest in its helium based system this year.
Development continues on three new cryocooler systems to cover a variety of
x-ray analysis techniques. The order book continues to look strong moving into
the new financial year.
Board & Management
Consistent with the plan to reduce the complexity of the group, several changes
were implemented during the year. Michael Thomas, Group Chief Executive, has
completed his first year leading the group. At the AGM in January 2007, I
assumed the role of Chairman and reduced the size of the Board as previously
described. Simon Dighton, the Group Finance Director, resigned in April 2007,
concluding the head office closure plan. The Directors consider that while
maintaining corporate governance requirements, the reduced size of the Board
more closely aligns with the less complex group following the disposal of the
Cardiac Division and Respiratory Division.
Employees
Our employees have faced a year of significant changes. They have adjusted to
the Board and Management changes, the restructuring and redirection of the
businesses, and they remain focused on the operations of the business. I thank
them for their hard work and continued support.
Outlook
The restructured group is well positioned for the new financial year. We have
started the year strongly and above last year's turnover run-rates. IVD has
renewed contracts with major customers and new business is anticipated with
major pharmaceutical players. OC is developing new products that will be
important to the continued growth of that business.
Central costs are expected to reduce further, but will continue to reflect the
cost of compliance and regulation that is required of a publicly listed company.
Net cash flow is expected to be positive and is an important component to the
continuing reduction of the Group's debt, and therefore, the continuing
strengthening of our balance sheet.
Recommended Cash Offer
As detailed in Note 1, the Directors have announced that they have reached
agreement on the terms of a recommended cash offer by NAV Bidco Limited ("NAV
Bidco") for the entire issued and to be issued ordinary share capital of
Bionostics Plc subject to approval by the shareholders and sanction by the
court. The recommended cash offer of 30 pence per share is to be implemented by
means of a scheme of arrangement pursuant to section 425 of the Companies Act
1985 (involving a reduction of capital under section 135 of the Companies Act
1985). The scheme of arrangement requires the approval of the Shareholders at a
meeting convened by the Court and the subsequent sanction of the Court.
Additionally, since the current banking facilities require repayment upon a
change of ownership, replacement banking facilities have been agreed subject to
execution of financing documents customary for this type of transaction and will
become effective after Shareholder approval and completion of the scheme of
arrangement which is expected on 31 January, 2007.
In the event that the scheme of arrangement is not approved by shareholders and
is not sanctioned by the court, the Group's existing banking facilities are due
to expire on 30 June 2008. The directors recognise that these uncertainties may
cast doubt on the Group's ability to continue as a going concern. The directors
expect that the current banking negotiations will conclude such that replacement
banking facilities will be in place prior to the expiry of the current
facilities.
As a consequence of this significant uncertainty, together with any events that
may arise up to the date that the accounts are to be signed, at the date of
issuing this statement the auditors have indicated to the directors that their
audit report is likely to be unqualified but modified to include an emphasis of
matter paragraph on this uncertainty which may cast significant doubt on the
group's ability to continue as a going concern.
Paul Haycock
Non-executive Chairman
Review of Operations
In-Vitro Diagnostic Controls
President: Michael Thomas
2007 2006 % change
---------------------------------------------------------------
Revenue:
($'000) 22,605 21,365 5.8%
(#'000) 11,510 11,892 -3.2%
---------------------------------------------------------------
exchange rate $/# 1.964 1.797 9.3%
Revenues in local currency grew year over year by approximately 6%. This helped
to mitigate a greater than 9% weakening of the dollar from FY'06 to FY '07,
netting a 3% revenue decline. Following a very slow start by two of the IVD
division's largest customers, new business in the diabetes sector grew rapidly
throughout the balance of the year, producing record sales and profits,
including the two highest revenue months in the history of the IVD division.
With full year revenue from these new contracts, prospects in the new financial
year appear strong.
Business in the blood gas sector remained strong despite an anticipated decline.
The combination of general price increases and increased demand for some of IVD
's boutique products has resulted in overall higher margins for these blood gas
products. Additionally, IVD launched several new control products, under the RNA
Medical brand name, in diagnostic areas such as lead concentration, haemoglobin,
and haemoglobin A1c. Further, IVD gained market recognition as a result of the
selection by the San Francisco Department of Public Health of Xsera Rapid HIV-1/
2 Antibody Controls for exclusive use in an eighteen month study. New business
gains, both in the Western United States and internationally, are anticipated to
result from additional resources directed to these locations.
Oxford Cryosystems
President: Richard Glazer
2007 2006
#'000 #'000 % change
-----------------------------------------------------------------
Revenue: 2,348 2,178 7.8%
-----------------------------------------------------------------
OC revenue increased by nearly 8% to #2.3m. Key factors driving the revenue
growth included the solid demand for the recently launched non-liquid nitrogen
system, the Cobra, and renewed interest in the older helium-based cooling
systems. Also this year, OC identified a key partner in China that can help gain
a sales and service presence in this untapped market. Further, a sales and
service manager was added to increase the focus on the market in the USA.
Development continues on several new systems which will provide access to a
larger market. These changes should ensure strong continued growth for the OC
division in the new financial year.
Risks and Uncertainties
Some of the unique characteristics of the business also carry certain risks. The
group has established procedures for identifying, monitoring, and mitigating
these risks. The main areas of risk identified by the Directors are as follows:
Regulatory
The in vitro diagnostic controls business is closely regulated by the FDA in the
USA. The main risks are:
* Failing to comply with FDA regulations;
* Changes to the regulations eliminating the requirement for certain
products;
* Failure to satisfy the FDA on new product submissions causing product
launches to be delayed or cancelled.
Customer Base
The In Vitro Diagnostic controls business is dominated by a handful of large
pharmaceutical customers. The loss of any one of these dominant customers is
likely to have a significant short term adverse effect on the business. The
Company has contracts with most of these large customers which contain
provisions for an orderly withdrawal to occur over a period of time thus
mitigating the impact of a withdrawal.
General Market Conditions
The IVD business is anticipating a gradual decline in blood gas controls as new
analyzers are introduced that do not use glass ampoule quality control testing.
The business will be required to mitigate this decline by developing products in
new sectors such as lead care, infectious disease, and related services. The
opportunities in these areas are promising but failure to successfully expand
the product range may adversely affect future trading.
OC provides products to support crystallography which is a specialized market.
Its ability to expand is dependent on adapting its products to serve related
areas.
Interest Rates
The Group finances its operations through bank loans, overdrafts and hire
purchase facilities principally at variable rates at negotiated margins using
pooling of the Group's requirements to achieve this.
Foreign Currency
The Group's main exposure to exchange rate fluctuations arises on the
translation of overseas net assets and profits into sterling for reporting
purposes. The Group has investments principally in the US dollar associated with
its overseas based businesses. Wherever practical, translation exposures arising
on consolidation of the Group's overseas net assets are minimized by matching
assets with borrowings in dollars. In managing this exposure, the Group's
objectives are to maintain a low cost of capital and to retain some potential
for currency appreciation while partially hedging against currency depreciation.
To this end the Group has arranged its facilities in US dollars as its principal
future earnings are expected to be in US dollars.
Summary
The group has procedures in place to identify risks and mitigate them to the
extent possible. Despite efforts to address these risks, they cannot be
eliminated entirely.
Michael Thomas
Group Chief Executive
Financial Review
Introduction
The continuing group comprises IVD and OC. Discontinued activities are the
results of the Respiratory Division until its disposal on 10 November 2006. The
results of the continuing group together with all central costs are shown in the
consolidated income statement.
Continuing Operations
Both IVD and OC experienced steady organic growth this year. As measured in
local currencies, revenues at IVD increased by 6% and revenues at OC increased
by 8%. Since IVD contributes nearly 83% of the Group revenues and is transacted
in US $ the impact of the 9% decline in the dollar was significant. As a result
of the adverse impact of currency translation, the Group revenues declined a
little more than 1% to #13.9m (2006: #14.1m). However, due to the reduction of
operating expenses, operating profit from continuing operations before goodwill
impairment and exceptional expenses improved to #2.4m (2006: #2.2m). Total
profit for the period increased to #0.7m from a loss last year of #27.8m.
Selling and Distribution costs were at largely the same levels as last year.
Research and Development expenses declined slightly to #0.6m (2006: #0.7m) as
the result of lower supply costs and a delay in hiring research staff. General
and administrative expenses before exceptional costs reduced to #3.0m (2006:
#3.4m). This improvement was primarily the result of reductions in central
costs. Head office costs were reduced to #1.0m (2006: #1.7m), however, the
savings were partially offset by increases in general and administrative costs
at IVD.
The Group benefited from a tax credit of #0.1m (2006: #0.3m) as the result of
the utilisation of deferred tax assets that arose in prior periods.
Goodwill and exceptional items
Goodwill is tested annually for impairment and adjustments to the carrying value
of goodwill are made if deemed necessary. There were no impairment charges to
goodwill.
Exceptional costs of #0.7m included redundancies as the result of the closure of
the head office and the reduction, by two non-executive directors, of the Board
of Directors.
Discontinued operations
Discontinued operations represents the operating result of the Respiratory
Division for ten weeks until its disposal on 10 November 2006. While the FY2006
charges for asset impairment and goodwill impairment of #26.3m were included in
the total loss from discontinued operations of #29.2m, the FY2007 charge for
discontinued operations was only #0.3m and resulted from Respiratory Division
operating losses.
Earnings per Share
Earnings per share on continuing operations before goodwill impairment and
exceptional costs increased to 3.2p (2006: 2.7p). After accounting for
exceptional costs and the losses incurred from the disposed divisions the total
earnings per share was 1.4p (2006: 55.6p loss).
Dividend
As it is the intention of the group to use cash flows to further reduce debt
levels, no final dividend is proposed (2006: #nil). Since there was no interim
dividend, the full year dividend is therefore #nil (2006: #nil).
Balance Sheet and Shareholders' Funds
Net assets increased to #8.7m (2006: #7.4m) primarily as a result of the growth
in continuing operations following the disposal of the Cardiac Division and
Respiratory Division. All costs associated with the disposals have now been paid
resulting in a reduction in current trade and other payables to #1.8m (2006:
#4.9m).
Inventories rose only slightly to #1.3m (2006: #1.2m) even as business levels
increased during the last half of the year. Trade receivables increased to #2.2m
(2006: #1.9m) primarily as a result of the strong trading at the end of the
year.
Fixed asset expenditure for the continuing group was #0.1m (2006: #0.6m). Major
expenditures included investment in software to run the manufacturing processes
at IVD and several pieces of production equipment.
Banking and Treasury
Debt at 31 August 2007 was #11.2m (2006: #11.4m). Debt rose to #11.5m by 28
February 2007 primarily as the result of the payment of the expected and agreed
clawback and working capital adjustment of #2.5m relating to the Cardiac
disposal. Profitability has improved during the last half of the financial year
and progress has been made to reduce debt levels. Debt has already been reduced
by #0.3m since 28 February 2007 to #11.2m at 31 August 2007 and continued steady
reduction is anticipated.
The group's borrowings are denominated in US $ to act as a natural hedge against
exchange rate movements now that more than 80% of the group's trading is
transacted in US $.
Gearing at 31 August 2007 measured 114% (2006:119%) - see note 5. During the
year, gearing had increased significantly as payments were made relating to
disposal costs and the payment of exceptional costs related to the closure of
the head office and reduction of the size of the Board of Directors. During the
second half of the year gearing improved substantially as a result of cash flow
from increased trading and profitability. The interest cover covenants and cash
flow covenants have also improved over this period. Covenants are anticipated to
improve significantly during the new financial year as cash flow steadily
improves.
The Group's existing banking facilities are due to expire on 30 June 2008. The
directors recognise that expiration of these banking facilities, if not
refinanced, raises a material uncertainty that may cast doubt on the Group's
ability to continue as a going concern. The directors have reached agreement on
the terms of a recommended cash offer by NAV Bidco for the entire issued and to
be issued share capital of Bionostics Plc subject to approval by the
shareholders and sanction by the court. As a consequence of the uncertainty over
the approval of the scheme and the refinancing of the banking facilities the
auditors have indicated to the directors that their audit report is likely to be
unqualified but modified as reflected in the Chairman's statement.
BIONOSTICS PLC (formerly Ferraris Group Plc)
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the year ended 31 August, 2007
Year to 31 August, 2007 Year to 31 August, 2006
Before Before
Goodwill & Goodwill & Goodwill & Goodwill &
exceptional exceptional exceptional exceptional
items items* Total items items Total
Notes #'000 #'000 #'000 #'000 #'000 #'000
Continuing operations
Revenue 2 13,858 - 13,858 14,070 - 14,070
Cost of sales (6,684) - (6,684) (6,571) - (6,571)
---------------------------------------------------------------------------------------------------------
Gross Profit 7,174 - 7,174 7,499 - 7,499
Selling and distribution
expenses (1,175) - (1,175) (1,226) - (1,226)
Research and development
expenses (585) - (585) (701) - (701)
General and
administrative expenses (3,014) (724) (3,738) (3,379) - (3,379)
---------------------------------------------------------------------------------------------------------
Operating profit/(loss) 2 2,400 (724) 1,676 2,193 2,193
Financial income 18 - 18 107 - 107
Financial expense (903) - (903) (1,278) - (1,278)
---------------------------------------------------------------------------------------------------------
Profit/(loss) before tax 1,515 (724) 791 1,022 - 1,022
Tax 98 106 204 328 - 328
---------------------------------------------------------------------------------------------------------
Profit/(loss) for the
period from continuing
operations 1,613 (618) 995 1,350 - 1,350
Discontinued operations
Loss for the period from
discontinued operations 2 (297) - (297) (2,878) (26,280) (29,158)
---------------------------------------------------------------------------------------------------------
Profit/(loss)
for the period 1,316 (618) 698 (1,528) (26,280) (27,808)
---------------------------------------------------------------------------------------------------------
Earnings per share 3 Pence Pence Pence Pence
From continuing
operations:
- Basic 3.2 2.0 2.7 2.7
- Diluted 3.2 2.0 2.7 2.7
From continuing and
discontinued operations:
- Basic 2.6 1.4 (3.1) (55.6)
- Diluted 2.6 1.4 (3.1) (55.5)
* Goodwill and exceptional items in 2007 were #724,000 before the effect of tax
and discontinued operations. This was attributable to the closure costs of an
administrative office and the reduction of the Board of Directors. There were
no goodwill impairment charges in 2007. In 2006, goodwill and exceptional
items relating to discontinued operations were #26,280,000 comprising
#21,517,000 impairment of goodwill and #4,763,000 impairment of assets.
BIONOSTICS PLC (formerly Ferraris Group Plc)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 31 August, 2007
2007 2006
Notes #'000 #'000
Non-current assets
Goodwill 16,880 16,880
Other intangible assets 118 137
Property, plant and equipment 846 1,180
Other investments - 3
Trade and other receivables 92 92
Deferred tax asset 42 350
------------------------------------------------------------------------------
17,978 18,642
------------------------------------------------------------------------------
Current assets
Inventories 1,254 1,206
Trade and other receivables 2,169 1,936
Cash and cash equivalents 791 1,803
------------------------------------------------------------------------------
4,214 4,945
------------------------------------------------------------------------------
Assets held for sale - 3,998
------------------------------------------------------------------------------
Total assets 2 22,192 27,585
Current liabilities
Trade and other payables (1,838) (4,893)
Current tax liabilities (105) (98)
Bank overdrafts and loans (11,218) (434)
Hire purchase and lease liabilities (13) (79)
Provisions - (263)
Liabilities directly associated with assets
held for resale - (3,006)
------------------------------------------------------------------------------
(13,174) (8,773)
------------------------------------------------------------------------------
Non-current liabilities
Bank loans - (10,888)
Hire purchase and lease liabilities - (13)
Trade and other payables (351) (478)
------------------------------------------------------------------------------
(351) (11,379)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total liabilities 2 (13,525) (20,152)
------------------------------------------------------------------------------
Net assets 8,667 7,433
==============================================================================
Equity
Share capital 4 12,602 12,602
Share premium account 4 454 454
Merger reserve 4 4,603 11,075
ESOP reserve 4 (457) (642)
Translation reserve 4 508 50
Retained earnings 4 (9,043) (16,106)
------------------------------------------------------------------------------
Total equity 4 8,667 7,433
==============================================================================
BIONOSTICS PLC (formerly Ferraris Group Plc)
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the year ended 31 August, 2007
2007 2006
Notes #'000 #'000
Net cash from operating activities
Cash generated by operations 5 437 2,439
Tax received 184 107
---------------------------------------------------------------------------------------
Net cash from operating activities 621 2,546
---------------------------------------------------------------------------------------
Investing activities
Interest received 18 19
Disposal of subsidiary 2,050 12,800
Proceeds on disposal of investments 3 43
Proceeds on disposal of property, plant and equipment 4 31
Purchase of property, plant and equipment (133) (553)
Purchase of other intangibles (2) (21)
Deferred consideration and costs relating
to the disposal of subsidiaries (4,278) (657)
---------------------------------------------------------------------------------------
Net cash (used in)/from investing activities (2,338) 11,662
---------------------------------------------------------------------------------------
Financing activities
Dividends paid - (1,798)
Interest paid (838) (1,454)
Repayment of borrowings (1,955) (5,706)
Repayment of hire purchase loans and leases (79) (2,533)
New bank loans raised 1,201 5,562
Issue of shares - 88
Increase/(decrease) in bank overdraft 1,201 (6,275)
---------------------------------------------------------------------------------------
Net cash used in financing activities (470) (12,116)
---------------------------------------------------------------------------------------
Net (decrease)/increase in cash and cash equivalents (2,187) 2,092
Cash and cash equivalents at the beginning of period 1,803 820
Cash associated with assets held for sale 1,000 -
Effect of foreign exchange rate changes on loan balances (552) (109)
Effect of foreign exchange rate changes all other 727 -
---------------------------------------------------------------------------------------
Cash and cash equivalents at the end of period 791 2,803
---------------------------------------------------------------------------------------
BIONOSTICS PLC (formerly Ferraris Group Plc)
CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE (UNAUDITED)
For the year ended 31 August, 2007
2007 2006
#'000 #'000
Currency translation gains/(losses) 458 35
--------------------------------------------------------------------------------------
Net income/(expense) recognised directly in equity 458 35
Profit/(loss) for the period 698 (27,808)
--------------------------------------------------------------------------------------
Total recognised income/(expense) for the period 1,156 (27,773)
--------------------------------------------------------------------------------------
Attributable to:
Equity holders of the parent 1,156 (27,773)
Minority interest - -
--------------------------------------------------------------------------------------
1,156 (27,773)
--------------------------------------------------------------------------------------
BIONOSTICS PLC
1. Notes to the preliminary results
The unaudited results for the full year ended 31 August 2007 have been prepared
in accordance with International Accounting Standards and International
Financial Reporting Standards (collectively 'IFRS') as adopted by the European
Union at 31 August 2007 and the financial information contained herein is
presented on a consistent basis with the IFRS accounting policies of Bionostics
Plc.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs nor does it constitute statutory accounts of the Group within
the meaning of Section 240 of the Companies Act 1985. The audit of the statutory
accounts for the year ended 31 August 2007 is not yet complete. These accounts
will be finalised on the basis of the financial information presented by the
directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the company's annual general meeting. Statutory
accounts for the year ended 31 August 2006, which were prepared under accounting
practices generally accepted in the UK, have been filed with the Registrar of
Companies. The auditors' report on those accounts was unqualified and did not
contain any statement under Section 237 (2) or (3) of the Companies Act 1985.
Basis of preparation - going concern
------------------------------------
These preliminary financial results are prepared on a going concern basis. The
Board has prepared projected cash flow information for the period ending 12
months from the date of approval of these preliminary financial results.
In preparing the projected cash flow information, the directors recognise that
there are material uncertainties that may cast significant doubt on the Group's
ability to continue as a going concern. These uncertainties are as follows:
* the Group's existing banking facilities are due to expire on 30 June
2008 and the effective date of the new facilities is contingent upon the
successful approval of the scheme of arrangement by shareholders and
subsequent sanction by the court;
* the existing facilities contain covenants which require repayment of the
facility upon a change in ownership of the Company; and
* the directors have announced that they have reached agreement on the
terms of a recommended cash offer by NAV Bidco for the entire issued and to
be issued ordinary share capital of Bionostics Plc.
The projected cash flow information includes certain key assumptions made by the
directors including:
* satisfactory continuation of the level of trading, profitability and
cash flows in line with Directors' expectations;
* continuation of the ability of the Group to operate within the existing
banking facilities and comply with the associated covenants until the
replacement facility is unconditional and approved;
* upon the effective date of the approved scheme of arrangement, the
proposed replacement loan facility comprising a $24m five-year term loan and
a $5m revolver will be funded as part of the change in ownership and
refinancing of the Group as outlined above;
* in the event that the scheme of arrangement is not approved by
shareholders and is not sanctioned by the court, the Directors believe that
the current negotiations to replace these facilities will conclude such that
the long term financing needs of the Group are met;
* shareholder approval of the recommended offer for the purchase of the
Company's shares; and
* any change in ownership over the forecast period does not materially
alter the projections.
The Directors have announced that they have reached agreement on the terms of a
recommended cash offer by NAV Bidco for the entire issued and to be issued
ordinary share capital of Bionostics Plc. The recommended offer of 30 pence per
share is to be implemented by means of a scheme of arrangement pursuant to
section 425 of the Companies Act 1985 (involving a reduction of capital under
section 135 of the Companies Act 1985). The Scheme requires the approval of the
Shareholders at a meeting convened by the Court and the subsequent sanction of
the Court. Additionally, since the current banking facilities require repayment
upon a change of ownership, replacement banking facilities have been agreed
subject to execution of financing documents customary for this type of
transaction and will become effective upon the effective date of the scheme.
Having taken into account the uncertainties outlined above and the negotiations
currently underway, the directors consider that the cash flow projections have
been compiled on a reasonable basis and that it is appropriate that the
financial information should be prepared on a going concern basis.
The financial information does not contain any adjustments that would be
required in the event that the going concern basis be deemed inappropriate as a
result of the inability to achieve a satisfactory outcome to the uncertainties
mentioned above. Such adjustments would include providing for any further
liabilities that may arise and writing down the carrying value of assets,
including goodwill, to their recoverable amounts.
2) Business and geographical segments
Business segments
The group is organised into two operating segments, IVD Controls and
Cryosystems. Management sold the Cardiac and Respiratory segments on 31 July,
2006 and 10 November, 2006 respectively and therefore, in accordance with
IFRS 5, these segments have been classified as discontinued. The net assets
of the Cardiac and Respiratory segments have been shown as "assets held for
resale".
Year to 31st August 2007
------------------------
IVD Total Eliminate
Controls Cryosystems Respiratory Group Discontinued Total
#'000 #'000 #'000 #'000 #'000 #'000
Revenue
External sales 11,510 2,348 3,356 17,214 (3,356) 13,858
Inter-segment sales - - 325 325 (325) -
---------------------------------------------------------------------
Total revenue 11,510 2,348 3,681 17,539 (3,681) 13,858
---------------------------------------------------------------------
Segment result 2,893 514 (297) 3,110 297 3,407
Unallocated corporate expenses (1,007)
-------
Operating profit before exceptional
items 2,400
Exceptional items * (724)
-------
Operating profit after exceptional
items 1,676
Finance costs (885)
-------
Profit before tax 791
Tax 204
-------
Profit for the period from continuing
operations 995
Loss for the period from discontinued
operations (297)
-------
Profit after tax and discontinued
operations 698
-------
Segment assets 20,280 1,676 - 21,956 - 21,956
Unallocated corporate assets 236 - 236
-------------------------------
22,192 - 22,192
-------------------------------
Segment liabilities (1,028) (323) - (1,351) - (1,351)
Unallocated corporate liabilities (12,174) - (12,174)
-------------------------------
(13,525) - (13,525)
-------------------------------
Other segment items:
Capital expenditure 116 17 - 133 - 133
Unallocated corporate capital expenditure - - -
-------------------------------
133 - 133
-------------------------------
Depreciation and amortisation (371) (17) (93) (481) 93 (388)
Unallocated corporate depreciation and
amortisation (5) - (5)
-------------------------------
(486) 93 (393)
-------------------------------
* exceptional items related to the closure of the head office in the UK and
the reduction in the size of the Board of Directors.
2) Business and geographical segments (continued)
Year to 31st August 2006
--------------------------
IVD Total Eliminate
Controls Cryosystems Cardiac Respiratory Group Discontinued Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Revenue
External sales 11,892 2,178 17,001 17,982 49,053 (34,983) 14,070
Inter-segment sales - - 200 1,618 1,818 (1,818) -
-------------------------------------------------------------------------------
Total revenue 11,892 2,178 17,201 19,600 50,871 (36,801) 14,070
-------------------------------------------------------------------------------
Segment result 3,379 483 (510) (873) 2,479 1,383 3,862
Unallocated corporate
expenses (1,669)
------
Operating profit before
goodwill & exceptional 2,193
Finance costs (1,171)
------
Profit before tax 1,022
Tax 328
------
Profit for the period from
continuing operations 1,350
Loss for the period from
discontinued operations (29,158)
------
Loss after tax and discontinued
operations (27,808)
------
Segment assets 20,438 1,566 - 3,998 26,002 - 26,002
Unallocated corporate
assets 1,583 - 1,583
-------------------------------
27,585 - 27,585
-------------------------------
Segment liabilities (2,031) (262) - (3,006) (5,299) - (5,299)
Unallocated corporate
liabilities (14,853) - (14,853)
-------------------------------
(20,152) - (20,152)
-------------------------------
Other segment items:
Capital expenditure 341 13 879 257 1,490 - 1,490
Unallocated corporate capital
expenditure 2 - 2
-------------------------------
1,492 - 1,492
-------------------------------
Depreciation and amortisation (408) (17) (686) (612) (1,723) - (1,723)
Unallocated corporate depreciation
and amortisation (90) - (90)
-------------------------------
(1,813) - (1,813)
-------------------------------
2) Business and geographical segments (continued)
Geographical segments
The Group's operations are located in the UK and North America. The UK is the
home country of the parent.
The following table provides an analysis of the Group's sales by geographical
market, irrespective of the origin of the goods/services, along with the
carrying amount of segment assets and capital expenditure, analysed by the
geographical area in which the assets are located:
Revenue: Continuing Discontinued Total
2007 2006 2007 2006 2007 2006
#'000 #'000 #'000 #'000 #'000 #'000
United Kingdom 531 552 337 7,532 868 8,084
Europe 1,665 1,364 690 9,809 2,355 11,173
North America 9,297 9,922 2,134 15,783 11,431 25,705
Rest of World 2,365 2,232 195 1,859 2,560 4,091
---------------------------------------------------
13,858 14,070 3,356 34,983 17,214 49,053
---------------------------------------------------
Assets and capital expenditure: Segment assets Capital
Expenditure
2007 2006 2007 2006
#'000 #'000 #'000 #'000
United Kingdom (10,656) (11,474) 17 918
Europe - 224 - 90
North America 19,323 18,683 116 484
----------------------------------
8,667 7,433 133 1,492
----------------------------------
3) Earnings per share
The calculation of the basic and diluted earnings/(loss) per share is based
on the following data:
From continuing and discontinued operations
Year to Year to
31st 31st
August August
2007 2006
#'000 #'000
Earnings/(loss):
Earnings/(loss) for the purposes of basic & diluted earnings/(loss)
per share being net profit/(loss) attributable to equity
shareholders of the parent 698 (27,808)
Add back goodwill impairment & exceptional items 618 26,280
---------------------------------------------------------------------------------------
Earnings/(loss) per share before goodwill impairment &
exceptional items 1,316 (1,528)
---------------------------------------------------------------------------------------
no. of no. of
shares shares
Number of shares:
Weighted average number of ordinary shares for the purposes of
basic earnings/(loss) per share 50,138,068 49,983,334
Effect of dilutive potential ordinary shares - share options and
awards 155,744 90,504
-----------------------------------------------------------------------------------------
Weighted average number of ordinary shares for the purposes of
diluted earnings/(loss) per share 50,293,812 50,073,838
-----------------------------------------------------------------------------------------
EPS: p p
Basic - before goodwill impairment and
exceptional items 2.6 (3.1)
- after goodwill impairment and
exceptional items 1.4 (55.6)
Diluted - before goodwill impairment and
exceptional items 2.6 (3.1)
- after goodwill impairment and
exceptional items 1.4 (55.5)
From continuing operations
Year to Year to
31st 31st
August August
2007 2006
#'000 #'000
Earnings/(loss) attributable to equity holders of the
parent 698 (27,808)
Adjustment to exclude profit/(loss) for the period from
discontinued operations 297 29,158
-----------------------------------------------------------------------------------------
Earnings from continuing operations for the purpose of basic &
diluted earnings per share 995 1,350
Add back goodwill impairment & exceptional items 618 -
-----------------------------------------------------------------------------------------
Earnings from continuing operations for the purpose of basic &
diluted earnings per share before goodwill 1,613 1,350
-----------------------------------------------------------------------------------------
The denominators used are the same as those detailed above for both basic and
diluted earnings per share from continuing and discontinued operations.
Year to Year to
31st 31st
August August
2007 2006
p p
Basic - before goodwill impairment and
exceptional items 3.2 2.7
- after goodwill impairment and
exceptional items 2.0 2.7
Diluted - before goodwill impairment and
exceptional items 3.2 2.7
- after goodwill impairment and
exceptional items 2.0 2.7
From discontinued operations
Year to Year to
31st 31st
August August
2007 2006
p p
Basic (0.6) (58.3)
Diluted (0.6) (58.2)
4) Movements in equity
Group: Contingent Cumulative
Share Share Share Merger ESOP Translation Retained Minority
Capital Capital Premium Reserve Reserve Reserve Earnings Interest Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
-------------------------------------------------------------------------------------------
Balance at 1
September, 2005 12,574 - 394 11,075 (642) 15 13,500 - 36,916
-------------------------------------------------------------------------------------------
Currency translation
adjustments - - - - - 35 - - 35
Loss for the period - - - - - - (27,808) - (27,808)
Dividend - - - - - - (1,798) - (1,798)
Issue of share capital 28 - 60 - - - - - 88
-------------------------------------------------------------------------------------------
Balance at 31 August
2006 12,602 - 454 11,075 (642) 50 (16,106) - 7,433
-------------------------------------------------------------------------------------------
Currency translation
adjustments - - - - - 458 - - 458
Income for the period - - - - - - 698 - 698
Reserves movement - - - (6,472) - - 6,472 - -
Issue of shares from
ESOP Reserve - - - - 185 - (185) - -
Share option charge - - - - - - 78 - 78
-------------------------------------------------------------------------------------------
Balance at 31 August
2007 12,602 - 454 4,603 (457) 508 (9,043) - 8,667
-------------------------------------------------------------------------------------------
5) Notes to the cash flow statement
2007 2006
#'000 #'000
Operating profit before discontinued, exceptional items
& goodwill 2,400 2,193
Adjustment for:
Exceptional items & goodwill on continuing operations (724) -
-------------------------------------------------------------------------
1,676 2,193
Discontinued operating loss before exceptional items &
goodwill (297) (1,382)
Exceptional items & goodwill on discontinued
operations - (26,280)
-------------------------------------------------------------------------
1,379 (25,469)
Adjustments for:
Depreciation/impairment of property, plant and
equipment 379 1,813
Amortisation of intangible assets 14 14
Impairment of goodwill and net assets - 26,280
Loss/(profit) on disposal of property, plant and
equipment 28 (193)
Share option charge 78 -
-------------------------------------------------------------------------
Operating cash flows before movements in working
capital 1,878 2,445
Increase in inventories (59) (510)
(Increase)/decrease in receivables (321) 1,405
Decrease in payables (686) (901)
Change in working capital from discontinued
operations (375) -
-------------------------------------------------------------------------
Net Cash (used in)/generated by operations (437) 2,439
-------------------------------------------------------------------------
Cash and cash equivalents (which are presented as a single class of assets
on the face of the balance sheet) comprise cash at bank.
Gearing Measurement 2007 2006
#'000 #'000
Bank overdrafts and loans < 1year (11,217) (434)
Bank loans > one year - (10,888)
Hire purchase and lease liabilities < 1 year (13) (79)
Hire purchase and lease liabilities > 1 year - (13)
-------------------------------------------------------------------------
Total Debt (11,230) (11,414)
Cash 791 1,803
-------------------------------------------------------------------------
Total Net Debt (10,439) (9,611)
Net Assets 8,667 7,433
Adjustment to add back ESOP Reserve 457 642
-------------------------------------------------------------------------
Adjusted Net Assets for Calculation of Gearing 9,124 8,075
Gearing 114% 119%
This information is provided by RNS
The company news service from the London Stock Exchange
END
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