Avacta Group plc. Unaudited Preliminary Results for the year to 31 July 2008

Transcription

1 Avacta Group plc Unaudited Preliminary Results for the year to 31 July 2008 Avacta Group plc ( Avacta, the Group or the Company ) which develops detection and analysis technology and services aimed at the pharmaceutical, healthcare, security and industrial sectors, announces its unaudited preliminary results for the year to 31 July Highlights: All development milestones of the Company s first products met Optim and MIDAS on schedule for launch 2009 Revenue growth within the contract services business of 120% to 0.47m (2007: 0.21m) Operating loss was 1.65m (2007: loss 1.27m) Cash at bank of 1.10m (2007: 2.53m) Loss before tax of 1.57m (2007 : loss 1.22m) Loss per share flat at 0.18p (2007: loss 0.18p) Alastair Smith, CEO commented: We have met our product development milestones and are poised to launch several products during 2009, both directly ourselves and through commercial partners. We are anticipating the forthcoming year as one in which Avacta continues to deliver to plan and demonstrates good growth in commercial and shareholder value. The Company s Unaudited Preliminary Results are available on its website 4 November 2008 Enquiries: Avacta Group plc Alastair Smith, Chief Executive Officer Tim Sykes, Chief Financial Officer Daniel Stewart & Company plc Lindsay Mair / Chloe Ponsonby Novum Securities Limited Henry Turcan/Michael Brennan Haggie Financial LLP Nicholas Nelson / Kathy Boate

2 Chairman s and Chief Executive Officer s Report Business overview The Company has made considerable progress during the past year having continued to meet the commercial and developmental targets set at the time of the admission to AIM in August The Company s overall objective is to bring technology products to market and deliver high value services, based on unique in-house technologies and expertise, which enable the very early stage identification and analysis of drug compounds, chemicals or organisms. Such technologies have commercial relevance in a range of high value sectors, notably drug development, point of care medical diagnosis and defence & security. The Company s lead product, Optim, is expected to launch in early 2009 and the Company s first diagnostics product, MIDAS, into the veterinary market shortly afterwards, ahead of schedule. With these product launches and a pipeline of future product developments over the coming few years, Avacta is making strong progress towards its target to become a leading provider of high value technology products and services to the broad Life Sciences sector. Technology products Biopharmaceutical development tools Avacta s flagship technology product under development, Optim, has proceeded on schedule and a system is now ready to demonstrate to lead customers over the coming months. Optim provides drug developers with a solution to their urgent need to know, at the very earliest stages, the likelihood of a compound developing successfully into a viable biological drug product. This ability to measure or predict in advance a host of potential biophysical problems that could occur down-stream, is highly valuable to drug development companies. Indeed it is estimated that of all the compounds they identify for onward development, 80% fail at a later stage due to unforeseen problems at the outset, some of which could be identified by Optim. The unique selling point of Optim is that it can provide detailed analysis and characterisation of critical properties of biological drug compounds using tiny amounts of material, thus making such crucial analysis possible at an early stage and reducing product development risk. Once launched, the Company anticipates strong demand based on interest shown during pre-launch marketing in what is essentially a virgin market without any known direct competition. The Company has plans to expand the Optim product range to address further customer needs which have been identified through the Company s regular communication and interaction with biopharmaceutical developers and manufacturers via its contract services business, Avacta Analytical. Point of care diagnostics Avacta s core technologies of laser analysis and fluid handling are being applied to the growing market in point of care diagnostics for human and animal healthcare. Avacta regards the diagnostics market and particularly the point of care market, as an area of immense potential value for the Company and it has several products and pipeline opportunities for this market. The Company has developed a prototype of a rapid immunodiagnostic device ( MIDAS ) which can detect markers of disease in biological fluids such as blood and urine. The Company s immediate focus is on short term revenues from the veterinary diagnostics application of MIDAS and it expects to launch the product with a veterinary diagnostics partner in the first half of A pipeline of animal health tests will be developed to run on MIDAS and will be distributed commercially through the same channels. Whilst MIDAS is proven in the veterinary field, Avacta will be developing and clinically validating human diagnostic applications and it is already in early stage discussions with several companies with human diagnostic tests which could be delivered at point of care by MIDAS. Avacta s strong belief in the value of point of care and non-invasive technologies was a key driver in its decision to acquire Oxford Medical Diagnostics Limited ( OMD ) in late OMD has an exclusive licence from Oxford University to commercialise proprietary methods for breath analysis using infra-red spectroscopy. OMD has agreed a collaboration agreement with V&F Medical Development in Austria with whom clinical gas analysis systems to rapidly identify bacterial infections will be researched and developed. OMD is expecting to generate near term revenues from industrial applications of gas analysis and recently signed a commercialisation deal

3 with a leader in toxic gas detection for a system to be sold into the petrochemical sector. Homeland defence and security The Company is working in collaboration with the UK Ministry of Defence ( MOD ) in developing detection and analysis technology for hazardous materials. The underlying technology using laser based analysis, is an application of the core optics expertise which the Company has developed. Excellent progress has been made in this area and on 11 July 2008, the Company announced that a mobile device aimed at the detection of hazardous chemicals, had reached the prototype stage which was delivered to the MOD laboratories at Porton Down for onward testing before completion of development into a ruggedised field device. There are further opportunities for Avacta s technologies within the broader field of homeland defence and security and Avacta intends to exploit these opportunities further with appropriate partners through licensing deals. Avacta Analytical Avacta Analytical has further established its presence and expertise in the provision of protein characterisation services to the biopharmaceutical industry. This progress is usefully illustrated through the growth in revenues of 120% to 0.47m (2007: 0.21m) as result of an increasing client base. Indeed the recognition of expertise, particularly in the speciality analysis of higher order structure and aggregation, is resulting in the Company being regularly invited to speak at major scientific conferences and industry workshops. The range of service offering has been enlarged by the internal development of new services utilising biophysical techniques such as a high throughput formulation screening service, QPCR, for the detection of host cell, viral and other potential contaminants and further expansion of the protein chemistry services offered to GMP regulatory standards. Avacta Analytical is rapidly moving the business toward "full circle protein characterisation" by providing all of the elements required by clients for their product development from early stage to final product quality control. Further strategic alliances, the continuing development of the service range and high value Master Service Agreements from international clients for formulation development services have given the business increasing exposure to the market on which the Group, as a whole, intends to capitalise. Group financial overview The continued investment in our technological progress has increased the reported operating loss of the Group to 1.65m (2007: loss 1.27m) which is in line with the Board s expectations. Revenues grew by approximately 120% to 0.47m (2007: 0.21m), demonstrating the attractiveness of the Group s offering. The increased revenues enabled the Avacta Analytical business to breakeven in its second full year of operation and, with continued investment in marketing and operations, positions the business well for further growth. Operating cash outflow was 0.30m better than the operating loss due to non-cash charges for share-based payments and through strong working capital management. The Group has recognised 0.11m in respect of R&D tax credits, including 0.08m received since the year end. Loss per share has remained flat at 0.18p (2007: 0.18p). The Group has reported under IFRS for the first time. The impact on the reported numbers has not been significant. Staff Avacta s headcount has increased from 10 in August 2006 to the current level of 30 having recruited some outstanding individuals in the fields of both science and commerce. The Board thanks all staff for their dedication, commitment and innovation over the past year. Outlook We have met our product development milestones and are poised to launch several products during 2009, both

4 directly ourselves and through commercial partners. We are anticipating the forthcoming year as one in which Avacta continues to deliver to plan and demonstrates good growth in commercial and shareholder value. Gwyn Humphreys Chairman 4 November 2008 Alastair Smith Chief Executive Officer

5 Consolidated Income Statement for the year ended 31 July Notes Revenue Operating costs (2,118) (1,482) Operating loss before non-recurring expenses and share-based payment charges (1,529) (1,137) Non-recurring administrative expenses 3-83 Share-based payment charges Operating loss (1,652) (1,270) Finance income Finance expenses (4) (2) Loss before taxation (1,573) (1,219) Taxation Loss for the year attributable to equity holders of the company (1,468) (1,219) Loss per ordinary share : - Basic / diluted 4 (0.18p) (0.18p)

6 Consolidated Balance Sheet as at 31 July Non-current assets Property, plant & equipment Intangible assets 7,144 3,563 7,434 3,711 Current assets Trade and other receivables Income taxes 84 - Cash and cash equivalents 1,097 2,527 1,273 2,697 Total assets 8,707 6,408 Current liabilities Trade and other payables (234) (164) Finance lease obligations (11) (11) (245) (175) Non-current liabilities Finance lease obligations (30) (41) (30) (41) Total liabilities (275) (216) Net assets 8,432 6,192 Equity attributable to equity holders of the Company Called up share capital Share premium account 6,524 4,882 Other reserve 1,834 1,834 Capital reserve 1,899 - Retained earnings (2,725) (1,380) Total equity 8,432 6,192

7 Consolidated statement of changes in equity for the year ended 31 July 2008 Share capital Share premium Other reserve Capital reserve Retained earnings At 1 August ,549 (1,869) - (211) Shares issued 154 3, Costs of issuing shares - (271) Arising on the reverse takeover - - 3, Result for the period (1,219) Share based payment charges At 31 July ,882 1,834 - (1,380) Shares issued during the year as 44 1, consideration for business combinations and in settlement of operating expenses Shares to be issued as consideration ,899 - for business combinations Result for the period (1,468) Share based payment charges At 31 July ,524 1,834 1,899 (2,725)

8 Consolidated Cash Flow Statement for the year ended 31 July Operating activities Loss before tax (1,573) (1,219) Depreciation Share based payment charges Net finance income (79) (51) Operating cash outflow before changes in working capital (1,472) (1,200) Movement in trade and other receivables 78 (124) Movement in trade and other payables Operating cash outflow from operations (1,352) (1,248) Finance income received Finance expense paid (4) (2) Income tax received 21 - Net cash flow from operating activities (1,252) (1,197) Investing activities Purchase of plant and equipment (138) (130) Acquisition of subsidiaries 5 (69) 192 Net cash flow from investing activities (207) 62 Financing activities Proceeds from issue of shares 40 3,435 Inception of new finance leases - 58 Capital repayment on finance leases (11) (6) Net cash flow from financing activities 29 3,487 Net (decrease) / increase in cash and cash equivalents (1,430) 2,352 Cash and cash equivalents at the beginning of the year 2, Cash and cash equivalents at the end of the year 1,097 2,527 Notes 1. The financial information set out herein does not constitute the Group s statutory accounts for the year ended 31 July 2008 or the year ended 31 July 2007 but is derived from those accounts. The 2008 statutory accounts have not been finalised but this preliminary announcement has been prepared by the Directors based on the results and position which they expect will be reflected in the statutory accounts. The comparative information in respect of the year ended 31 July 2007 has been derived from the audited statutory accounts for the year ended on that date upon which an unqualified audit opinion was expressed and which did not contain a statement under section 237 (2) or (3) of the Companies Act The audited accounts will be posted to all shareholders in due course and will be available on request by contacting the Company Secretary at the Company s Registered Office. 2. Basis of preparation The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).

9 In the current year, the Group has adopted IFRS 7 Financial Instruments: Disclosures for the first time. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the financial results presented for the year ended 31 July Full details of the change will be disclosed in the statutory accounts for the year ended 31 July The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 3. Non-recurring administrative expenses Professional and other charges related to the Admission to AIM and to the Placing Basic and diluted loss per ordinary share The calculation of earnings per ordinary share is based on the profit or loss for the period and the weighted average number of equity voting shares in issue as follows. The number of shares in issue in the comparative period has been restated to reflect the reverse acquisition of the Company and therefore the number of shares in the comparative period is the aggregate of the weighted average of the actual number of shares in issue and the shares issued by the Company to acquire Avacta Limited Loss for the year ( 000) (1,468) (1,219) Non-recurring administrative expenses ( 000) Loss before non-recurring administrative expenses ( 000) (1,468) (1,136) - Weighted average number of shares (number 000) 801, ,426 - Basic and diluted loss per ordinary share (pence) (0.18)p (0.18)p - Loss before exceptional items per ordinary share (pence) (0.18)p (0.16)p - 5. Acquisitions Oxford Medical Diagnostics Limited On 14 December 2007, the Company acquired the entire issued Ordinary share capital of Oxford Medical Diagnostics Limited by way of a share for share exchange. The Company allotted and issued 43,908,070 new ordinary shares of 0.1p fully paid to the holders of the Ordinary shares of Oxford Medical Diagnostics Limited as consideration. Oxford Medical Diagnostics Limited has 50,000 Preference shares which hold equivalent rights as the Ordinary shares. These Preference shares are the subject of a put option at the option of the current preference shareholders, to convert to 12,054,696 new ordinary shares of 0.1p fully paid. Tangible fixed assets 61 Cash in hand and at bank 41 Debtors 72 Creditors (63) 000

10 Net assets acquired 111 Purchase consideration Fair value of shares issued and to be issued 3,546 Costs Goodwill 3, Cash outflow on acquisition (69) The fair values of the assets and liabilities acquired, as detailed above, were equal to their book values.