RNS Number:2577P
Provalis PLC
02 September 2003
Meetings scheduled for the day are :
Analysts : 10.00am
Press : 11.30am
There is also a web cast facility running during the 10.00 am meeting. To
connect to the web cast facility please go to the following internet address
approximately 10 minutes (09:50am) before the start of the briefing: http://
radio.buchanan.uk.com.
This presentation will also be available on the Provalis website later that day
at: www.provalis.com.
Both meetings will be held at Buchanan Communications, 107 Cheapside, London
EC2V 6DN.
For Immediate Release 2 September 2003
Preliminary Results for Year Ended 30th June 2003
Provalis plc (LSE: PRO; NASDAQ: PVLS), the diversified Healthcare Group,
announces Group turnover increased by 49% to #14.0 million in 2003 driven by
sales of Glycosal(R) in the USA and Diclomax(R) in the UK market. Gross profit was
#7.7 million, an increase of #2.4 million over last year, giving a margin on
sales of 55%. After accounting for an exceptional gain of #3.4 million from the
variation of the distribution agreement with Dr Falk Pharma, Provalis reports
its first profit before tax of #1.3 million and a profit per share of 0.4 pence.
The Group reduced its operating loss for its' continuing businesses from #4.2
million in 2002 to #1.7 million in 2003.
The Company's cash position remained healthy at #6.6 million, and will further
benefit from additional payments of up to #3.5 million from Dr Falk Pharma
(which result from the variation of the Dr Falk distribution agreement) which
are due by January 2005, and the stopping in November 2004 of the monthly
payments of more than #380,000 to Pfizer for Diclomax(R) .
Highlights
Sound financial results
* Group sales climbed to #14.0m, a 49% advance over 2002
* Group generated a pre-tax profit of #1.3m, after exceptional contribution
of #3.4m from variation of agreement with Dr Falk Pharma (2002: loss
#5.2m)
* Group gross profit advanced 45% to #7.7m (2002: #5.3m)
* Group operating loss for its continuing businesses reduced substantially to
#1.7m (2002: #4.2m)*
* Group profitable at the EBITDA level at #0.3m for its continuing businesses
(2002: loss #2.4m)**
* Profit (loss) per share before and after exceptional items of (0.6)p (2002:
(1.7)p) and 0.4p (2002: (1.9)p) respectively***
* Cash position remains healthy at #6.6m (2002: #10.4m) with #1.5m due from
Dr Falk Pharma in January 2004 and up to a further #2.0m due in January
2005 and with monthly payments of greater than #380,000 to Pfizer for
Diclomax(R) due to end in November 2004
Strong product performance
* Diagnostics product sales grew substantially to #3.1m (2002: #0.9m) led
by the sales of Glycosal(R) in the USA
* Pharmaceutical product sales grew 33% to #10.9m (2002: #8.2m)
* Diclomax(R) sales were #6.4m with growing market share
* Irish sales business began in February 2003 and generated sales of #0.5m
* Rapolyte(R) launched in UK in May 2003
Good product pipeline
* G5 diagnostics technology progressed towards product completion and
preparation for clinical trials in testing HbA1c
* Development programmes defined for a number of additional point of care
products using the G5 platform
* Diclomax(R) regulatory approval in Ireland received August 2003
* Further product licensing opportunities under discussion for pharmaceutical
sales business to leverage existing sales force
*See Note 2 below
**See Note 5 below
***See Note 6 below
Commenting on these full year results, Mr Frank Harding, Chairman of Provalis,
said "2003 was a year of real progress for Provalis. Both businesses achieved
substantial sales growth, with Glycosal(R) making an important breakthrough in the
valuable US diabetes market for Provalis' medical diagnostics business and
Diclomax(R) transforming the sales and profitability of our pharmaceutical
business."
Dr Phil Gould, Chief Executive Officer, added "Provalis had a strong year in
2003. The challenge for the Group is to continue to grow sales and to develop
new products in both of our businesses. I believe that Provalis' key assets of
novel technological platforms, an expanding distribution network and dynamic and
experienced sales and marketing capabilities, can be leveraged to build a
stable, significant and growing, diversified, healthcare company."
Provalis' Internet Website; http://www.provalis.com
"Safe Harbor" Statement under the US Private Securities Litigation Reform Act of
1995: Statements in this announcement that relate to future plans, expectations,
events, performances and the like are forward-looking statements as defined in
the US Private Securities Litigation Reform Act of 1995. Actual results of
events could differ materially from those described in the forward-looking
statements due to a variety of factors. Such factors include, among others: the
rate at which operating losses are incurred; the rate of net cash utilisation
within the Group and, hence, the Group's possible need for additional capital in
the short, medium and/or long term; the execution of development, licensing,
research, manufacturing and other collaboration agreements with third parties;
the progress of the Group's continuing research and development activities;
uncertainties related to future trial results and the viability of the Group's
products, which are at various stages of development; the generation of
sufficient operating cash flow by the Group's healthcare and medical diagnostics
divisions to finance the ongoing development of these businesses as well as the
Group's research and development activities; the impact of future laws,
regulations and policies; availability and level of reimbursement for the
Group's products from government health administration authorities or other
third-party payors; the Group's intellectual property position and the success
of patent applications for its products and technologies; stock market trends in
the Group's sector; the Group's dependence on key personnel; general business
and economic conditions; and other factors beyond the Group's control that may
cause the Group's available capital resources to be used more quickly than
expected. These and other factors that could affect the Company's future results
are more fully described in its filings with the US Securities and Exchange
Commission, in particular the latest 20-F filing, copies of which are available
from the Company Secretary at the Company's registered address.
For further information:-
Dr Phil Gould, Provalis plc, Tel: 01244 833463
Mr Peter Bream, Provalis plc, Tel: 01244 833552
Mr Lee Greenbury, Provalis plc, Tel: 01244 833402
Lisa Baderoon, Buchanan Communications, Tel: 020 7466 5000
Notes to Editors
Provalis plc (LSE:PRO and NASDAQ:PVLS) is a diversified healthcare group with
two operating divisions:-
* Medical Diagnostics - develops and sells to world markets medical
diagnostic products for chronic disease management. The division's
principle products are Glycosal(R) and Osteosal(R) in the areas of diabetes
and osteoporosis respectively.
* Pharmaceuticals - sells and markets its own, and third party, branded,
prescription medicines in the UK and Ireland to GPs and hospitals through
its own regionally managed sales force. The division's principle product is
Diclomax(R), a medicine for use in the treatment of musculo-skeletal
disorders, and it also sells products in the areas of gastroenterology,
osteoporosis, migraine and dermatology.
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S REPORT
Provalis had a strong year in 2003. Sales grew significantly to #14.0m, the
Group operating loss was reduced from #5.4m to #2.1m and the Group became EBITDA
("Earnings Before Interest, Tax, Depreciation and Amortisation" (see note 5
below)) excluding discontinued activities positive for the first time. Following
the recognition of an exceptional profit of #3.4m from the variation of the
distribution agreement with Dr Falk Pharma, the Group declared a pre-tax profit
of #1.3m - a first for the Group - against a loss of #5.2m in 2002.
The year saw a notable success in the USA with Cholestech Corporation, our point
of care partner in this key market, beginning to sell Glycosal(R), our diabetes
diagnostic product. Cholestech's sales were kick started by immediate sales to
Abbott Laboratories which were then followed by further good progress in the
year. The Medical Diagnostics division had record sales of #3.1m as a result of
this sales progress and has now supplied over 7,100 instruments and approaching
two million test cartridges since the product was introduced in 2000. The
directors believe that, with Glycosal(R), Provalis has the leading product in the
point of care testing of glycated haemoglobin ("HbA1c"). This market continues
to expand in the USA as tests that would have been carried out as part of the
$1bn laboratory market are beginning to be carried out in the near patient
setting.
The Group's pharmaceutical sales business made good progress in the year with
record sales of #10.9m and a major advance in profitability to #2.5m. Through
focused promotion, it generated sales of Diclomax(R) of #6.4m, successfully
initiated its business in Ireland with #0.5m sales, launched Rapolyte(R) onto the
UK market and completed a variation of its distribution arrangement with Dr Falk
Pharma for its products for the UK market. The directors recognise the
importance of replacing the income stream from the Dr Falk Pharma products, and
discussions are on-going with third parties which have products available.
Encouraging progress has been made in product development, with the continued
investment in G5, the Group's next generation, patient focused, diagnostics
technology. The diabetes HbA1c product using this platform is now coming to the
end of its development and is being readied for clinical trials to allow it to
be registered for prescription home use status with the FDA in the USA.
The cash position and future cash flows of the Group have benefitted from a
number of factors; the margin from the growing sales business, stopping
significant expenditure on the vaccines business, the availability of a #0.95m
grant from the Welsh Development Agency to support capital expenditure related
to manufacturing expansion, and the variation of the Dr Falk Pharma distribution
agreement yielding up to a further #3.5m cash by January 2005. Importantly, the
weekly instalments payable to Pfizer for Diclomax(R) stop in November 2004,
resulting in substantial cash flows being generated by Diclomax(R) thereafter.
The further successful development of Provalis in 2003 was due to the efforts of
all employees, and to the loyalty and support of our customers, commercial
partners and shareholders alike. We thank them all for their efforts.
Thanks must also be given to Neil Kirkby, Finance Director, who left the Company
in April 2003 to pursue other interests. We welcome Peter Bream into the role,
who comes to the Company with considerable experience.
Sales in the first two months of the new financial year are ahead of those in
the same two months last year. As would be expected, sales by Medical
Diagnostics are lower than the same period last year, because that period was
dominated by the initial sales, through Cholestech Corporation, to Abbott
Laboratories, but are expected to progress satisfactorily for the remainder of
this year. The Pharmaceutical division is trading ahead of last year, in line
with the Group's internal expectations.
Frank Harding Philip Gould
Chairman Chief Executive
OPERATING REVIEW
Products and markets
Provalis' two key products are the diabetes management diagnostic Glycosal(R) and
the anti-arthritis medication Diclomax(R).
Glycosal(R)
The major advance for Glycosal(R) this year has been in the USA - the world's
largest diagnostics market - where sales of the instrument and the pull-through
of the test cartridges have been pleasing. The product has been particularly
well received by the smaller doctors' practices.
In the year the Group supplied over one million Glycosal(R) test cartridges for
sale and shipped twice as many instruments as in the previous two years
combined. Our distributors report that 200 to 300 instruments continue to be
placed with doctors in the USA each month and that test cartridge volumes have
been building steadily. Provalis estimates its installed base of machines now
stands at over 6,000. The Group believes that Glycosal(R) is now the leading CLIA
waived doctors' office diabetes HbA1c product in the USA market.
Sales of Glycosal(R) continue to advance in the other markets into which it is
sold by our two key distributors, Cholestech Corporation, which sells the
product as the "GDX", and Bio-Rad Laboratories, which sells it as the "MicroMat
II".
The number of countries in which Glycosal(R) is sold continues to increase. In
particular, Cholestech has recently launched the product in Canada, another high
value market, where over 2.2m people are estimated to have the disease, and in
June the first shipment was made to Bio-Rad to service the Japanese market which
is the second largest HbA1c market in the world. In addition, Bio-Rad is
establishing a number of direct marketing opportunities for Glycosal(R) in
developing markets.
Glycosal(R) also received a number of technical acknowledgments in the year. As
well as receiving the enhanced National Glycohemoglobin Standardisation
Programme Certification ("NGSP") registration, Glycosal(R) scored highly in the
independent assessment of diabetes HbA1c tests assessed by the Medical Devices
Agency in the UK.
One disappointment in the year has been the level of sales of Glycosal(R) to the
UK NHS under Provalis' direct selling scheme. The Group has suspended its direct
selling efforts in the UK and is now seeking to progress the product in the UK
through initiatives with pharmaceutical companies, as exemplified by our
relationship with Takeda, or via sub-distributors. Our view on this may be
revised in 2004/5 once the recent diabetes initiative with the UK NHS is fully
underway and the new GP's contract rewarding surgeries for patient diabetes
monitoring becomes fully implemented.
Nevertheless, Glycosal(R) is well placed to continue its penetration of the
multi-billion pound diabetes market.
Diclomax(R)
Diclomax(R) was acquired from Pfizer in late 2001 and this year represented the
first full year of sales by Provalis in the UK. It has been promoted heavily by
the representative sales force and with focused advertising. Sales were #6.4m,
slightly below internal expectations, despite an increased share of the
declining NSAID market which continues to be affected by the new COX2
inhibitors. A minor effect on sales was also seen with a period of wholesaler
de-stocking during January and February 2003. Diclomax(R) remains the most
important product for the Pharmaceutical division. In the year ahead the Group
expects to see growth of Diclomax(R) sales through both its registration in
Ireland and other marketing initiatives.
Other pharmaceutical products
Good sales progress was made with the other core products in the Pharmaceutical
range, Calceos(R), Clotam Rapid(R) and products in the Dr Falk Pharma range
(Ursofalk(R), Budenofalk(R) and Salofalk(R)), and all showed growth in the year.
Pharmaceutical sales UK
Growth in
Sales the year
Product Area (#'m) %
--------------------------------------------------------------------------------
Falk range Gastro-enterology 2.2 9
Calceos(R) Osteoporosis 0.9 29
Clotam Rapid(R) Migraine 0.3 9
--------------------------------------------------------------------------------
Pharmaceutical sales in the Republic of Ireland
Sales of the Dr Falk Pharma range in the Republic of Ireland started promisingly
with a contribution of #0.5m in the period from February to June 2003.
Inevitably some of the sales were pipeline stocking but we expect the Irish
market to be a driver of growth for the Pharmaceutical division in the year
ahead.
Several new product launches are planned for the Republic of Ireland market in
the forthcoming months, including Diclomax(R) in October 2003.
The Dr Falk Pharma deal
Provalis has agreed to vary its distribution agreement with Dr Falk Pharma for
the Falk range of products. Provalis was due to distribute these products in the
UK until 2010 but has agreed that the agreement will now terminate in December
2004. In return for this reduction in the distribution agreement term, the
agreement was immediately extended to include Ireland (which had established
sales of #0.5m per year), Provalis received #1.5m in February 2003 and will
receive up to a further #3.5m in cash by January 2005.
R&D review
R&D spend
2003 was a year of change for Provalis in terms of its approach to R&D and
product development. Significant expenditure on the vaccine R&D business was
stopped early in the first half of the year. However, Provalis retained the
valuable licensing deal with GlaxoSmithKline on a number of antigens as well as
the intellectual property on certain other programmes which will be maintained
at minimal cost whilst commercial partners are sought.
R&D spend in the year was #2.0m, 14% of Group turnover, #1.6m of which was
focused on diagnostics. The directors believe this level remains commensurate
with the Group's cash flows and stage of development. In 2004, forecast
expenditure on R&D to complete the new G5 HbA1c product is some #1.5m.
G5: Next generation diagnostics platform
The major project in R&D has been the development of a new diagnostics
technology, code named G5, intended initially for use by healthcare
professionals at the point of care and then by the consumer at home. The product
uses the same concept as Glycosal(R) - an instrument reader and test cartridge -
and uses the same well proven chemistry to measure HbA1c but being fully
automated will be easier and quicker to use.
G5 is at the final manufacturing prototype stage and has undergone the first
phase of testing. Moulding of the test cartridge at commercial scale proved
problematic given the high precision, multiple components and optically clear
moulding involved. This held the programme up for a number of months but
successful technology transfer has occurred and we now have an established and
qualified European manufacturing supply base for the cartridge. The manufacture
of the instrument is being transferred to our Far East supplier. Although this
was slowed by the recent SARS outbreak, assembly of the first instruments using
industrialised mouldings is now underway. These difficulties being resolved,
final cartridges and instruments are due to be delivered in the autumn to allow
Provalis to initiate clinical trials suitable for filing of the "home use" FDA
marketing application in the USA.
The Group is now in advanced stages of discussions with a number of parties
regarding the commercialisation of G5. These discussions initially focused on
the diabetic patient market where the product has significant market potential,
but have also highlighted that potential partners may require additional chronic
disease related tests such as glucose on the product as well as enhanced data
connectivity for the unit. Incorporation of these additional features on the
product, although possibly delaying its introduction until the second half of
calendar year 2004, will give the patient, doctor, partner and Provalis enhanced
and longer term value.
Other tests using the G5 platform
To address this requirement, additional diagnostics tests are planned for the G5
platform. The feasibility of the G5 technology to conduct a number of additional
assays using a wide variety of diagnostic test methodologies, including
turbidimetry, enzymatic and immunological types of diagnostics assays, has now
been demonstrated.
The selection of the final tests for development will be made from an analysis
of point of care physician needs, potential sales volumes and likely
reimbursement levels. Consideration will also be given to the needs of the
eventual commercial partner who may require additional tests to strengthen the
point of care diabetes management offering with the product.
To meet these development needs the diagnostics R&D effort on G5 will be
expanded significantly in the year ahead.
Micro G
The planning for the over the counter HbA1c system, Micro G, has been initiated
and a project brief developed following a period of market research. Much of the
technology for Micro G will be based on the core G5 technology and significant
work will begin from early 2004 once the G5 product has completed its final
trial phase. As preparation for the start of the Micro G programme the Company
is already in discussion with a number of research institutes to help prepare
for the development programme.
Licensing and product acquisition
During May the Pharmaceuticals business launched Rapolyte(R), which is a cost
effective fruit flavoured oral rehydration therapy, onto the UK market. The
response to the product by doctors has been encouraging and wholesaler
restocking has occurred more quickly than anticipated.
Further products in the Falk range are due for introduction into the UK market
over the next few months. These new products, coupled with Diclomax(R), are due
for launch in Ireland shortly.
Further products for this highly profitable Pharmaceutical business are
currently being identified.
Partner and distributor management
Provalis recognises that the success of its Medical Diagnostics business, at
least in the short term, must come from the success of its selected commercial
partners or distributors. During the year it managed a significant order for
Glycosal(R) with Abbott Laboratories, cemented its relationship with Bio-Rad
Laboratories Inc. and Cholestech Corporation for Glycosal(R) and continued its
supply of Osteosal(R) to Aventis.
The Group prides itself on its partnering arrangements and believes it has much
to offer to ensure mutual commercial success in the long term. Strong
intellectual property, timely product supply, high and consistent product
quality, regulatory compliance and the flexibility to allow commercial
opportunities to be pursued, are considered important for success and are
attributes that Provalis is dedicated to achieve. In return, Provalis seeks
rapid market feedback on product performance from customers, and an
understanding of the key elements of the sales process in its target markets to
guide future product development and commercialisation.
Manufacturing and product supply
2003 has been a year in which Provalis has built a strong product supply base
for its diagnostics business.
The Glycosal(R) test cartridge manufacturing facility at Deeside is now fully on
stream, and in April 2003 became fully automated. This gave manufacturing
efficiencies, lower cycle times per cartridge and lower production costs ready
for a greater volume of supply in 2004. Manufacturing output in 2003 was four
times that of 2002 and over one million test cartridges were produced in the
year. These improvements should begin to further increase profitability of the
Medical Diagnostics division during the current financial year.
The Far East supply of Glycosal(R) instruments began in the year providing both
margin and capacity improvement for the Group. This was important for both
supplying the key US market and meeting the order from Abbott Laboratories.
Provalis has built its product supply network with its distributors and in April
2003 opened a new Healthcare and Diagnostics logistics centre some five miles
from Deeside. This centre has allowed the expansion of the recent Deeside
manufacturing area to begin to make space for the G5 cartridge filling equipment
that will be installed in 2004. Provalis anticipates that over #1m will be
committed to G5 manufacturing equipment in 2004 with support coming from the
grant given to Provalis by the Welsh Development Agency.
Outlook
The challenge for the Group is to continue to grow sales and to develop new
products in both operating businesses.
The directors expect sales of Glycosal(R) to continue to grow, albeit at a more
modest rate than in the last year. The directors also anticipate growing the
sales and market penetration of Diclomax(R) in the UK, augmenting this by
launching the product in Ireland from October 2003, and achieving sales growth
for the remainder of the pharmaceutical product portfolio.
In addition to this organic growth, the directors will continue to evaluate and
pursue opportunities to grow both the Group and its two businesses through the
acquisition of complementary products and businesses.
Completion of the development of the G5 platform, obtaining regulatory approvals
for the use of this platform for point of care HbA1c testing (particularly for
the key US market), developing further tests for use on the platform and
developing the product for use in the consumer market are key to the Group's
future. Accordingly, this financial year will be a time of major investment in
G5, in both research and development and capital expenditure for plant and
equipment, readying the product for launch before the end of 2004.
The Group's cash position remains satisfactory with the payments and future
receipts arising from the variation of the agreement with Dr Falk Pharma, and
the scheduled cessation in November 2004 of the payments to Pfizer for Diclomax(R)
which are currently in excess of #380,000 per month.
The directors believe that Provalis' key assets of novel technological
platforms, an expanding distribution network and dynamic and experienced sales
and marketing capabilities, can be leveraged to build a stable, significant and
growing healthcare company.
Consolidated Profit and Loss Account
For the year ended 30 June 2003
Before Exceptional Before Exceptional
exceptional items exceptional items
items note 4 Total items note 4 Total
2003 2003 2003 2002 2002 2002
#'m #'m #'m #'m #'m #'m
------------------------------------------------------------------------------------------
Turnover
- Continuing 14.0 - 14.0 9.1 - 9.1
activities
- Discontinued - - - 0.3 - 0.3
activities
------------------------------------------------------------------------------------------
14.0 14.0 9.4 9.4
Cost of (6.3) - (6.3) (4.1) - (4.1)
sales
------------------------------------------------------------------------------------------
Gross 7.7 - 7.7 5.3 - 5.3
profit
Selling and
distribution
expenses (3.1) - (3.1) (3.2) - (3.2)
Administration expenses
------------------------------------------------------------------------------------------
Amortisation of
intangible assets (1.5) - (1.5) (0.9) (0.5) (1.4)
Administration (3.2) - (3.2) (2.8) - (2.8)
costs
Research and
development costs (2.0) - (2.0) (3.3) - (3.3)
------------------------------------------------------------------------------------------
(6.7) - (6.7) (7.0) (0.5) (7.5)
------------------------------------------------------------------------------------------
Operating
loss
- Continuing (1.7) - (1.7) (3.7) (0.5) (4.2)
activities
- Discontinued (0.4) - (0.4) (1.2) - (1.2)
activities
------------------------------------------------------------------------------------------
(2.1) (2.1) (4.9) (0.5) (5.4)
Loss on termination
of
discontinued - (0.2) (0.2) - - -
activities
Profit on variation
of
distribution
agreement
- continuing - 3.4 3.4 - - -
activities
------------------------------------------------------------------------------------------
Profit (loss) on
ordinary
activities before (2.1) 3.2 1.1 (4.9) (0.5)
interest
Interest receivable
and similar
income 0.2 - 0.2 0.2 - 0.2
------------------------------------------------------------------------------------------
Profit (loss) on ordinary
activities
before taxation (1.9) 3.2 1.3 (4.7) (0.5) (5.2)
Tax on loss on
ordinary
activities - - - 0.4 - 0.4
------------------------------------------------------------------------------------------
Profit (loss)
for the
financial (1.9) 3.2 1.3 (4.3) (0.5) (4.8)
year
------------------------------------------------------------------------------------------
Profit (loss) per
share
- basic and (0.6)p 1.0p 0.4p (1.7)p (0.2)p (1.9)p
diluted
------------------------------------------------------------------------------------------
Consolidates Balance Sheet
At 30 June 2003
2003 2002
#'m #'m
----------------------------------------------------------------------------
Fixed assets
Intangible assets 12.5 14.0
Tangible assets 1.6 1.6
Investments - restricted - 4.9
deposits
----------------------------------------------------------------------------
14.1 20.5
----------------------------------------------------------------------------
Current assets
Stocks 1.9 1.4
Debtors 4.0 2.4
Cash and deposits 6.6 10.4
----------------------------------------------------------------------------
12.5 14.2
Creditors: Amounts falling due within (7.7) (7.5)
one year
----------------------------------------------------------------------------
Net current assets 4.8 6.7
----------------------------------------------------------------------------
Total assets less current 18.9 27.2
liabilities
Creditors: Amounts falling due after more (1.8) (6.4)
than one year
Provisions for liabilities and - (4.9)
charges
----------------------------------------------------------------------------
Net assets 17.1 15.9
----------------------------------------------------------------------------
Capital and reserves
Called-up share capital 3.3 3.3
Share premium account 24.1 24.1
Merger reserve 96.3 96.3
Profit and loss account (106.6) (107.8)
----------------------------------------------------------------------------
Equity shareholders' 17.1 15.9
funds
----------------------------------------------------------------------------
The accounts were approved by the Board of directors on 1 September 2003 and
were signed on its behalf by:
P Gould P Bream
Chief Executive Officer Finance Director
Consolidated Cash Flow Statement
For the year ended 30 June 2003
2003 2002
#'m #'m
-----------------------------------------------------------------------------
Net cash outflow from operating (0.7) (3.7)
activities
-----------------------------------------------------------------------------
Returns on investments and servicing of
finance
Interest received 0.2 0.2
-----------------------------------------------------------------------------
Net cash inflow from returns on investments
and
servicing of finance 0.2 0.2
-----------------------------------------------------------------------------
Taxation
Research and development tax credit 0.6 0.1
received
-----------------------------------------------------------------------------
Net cash inflow from taxation 0.6 0.1
-----------------------------------------------------------------------------
Capital expenditure and financial
investment
Purchase of intangible fixed (4.6) (3.9)
assets
Purchase of tangible fixed (0.5) (0.8)
assets
Proceeds on variation of distribution 1.5 -
agreement
-----------------------------------------------------------------------------
Net cash outflow from capital
expenditure and financial (3.6) (4.7)
investment
-----------------------------------------------------------------------------
Acquisitions and disposals
Termination of discontinued (0.2) -
businesses
-----------------------------------------------------------------------------
Net cash outflow from acquisitions and (0.2) -
disposals
-----------------------------------------------------------------------------
Net cash outflow before
management
of liquid resources and (3.7) (8.1)
financing
-----------------------------------------------------------------------------
Management of liquid
resources
Decrease (increase) in short 3.5 (0.5)
term deposits
-----------------------------------------------------------------------------
Net cash inflow (outflow)
from
management of liquid 3.5 (0.5)
resources
-----------------------------------------------------------------------------
Financing
Issue of ordinary shares - 10.8
Share issue costs - (0.7)
Unsecured loan repayments (0.1) (0.3)
-----------------------------------------------------------------------------
Net cash (outflow) inflow from financing (0.1) 9.8
-----------------------------------------------------------------------------
(Decrease) increase in cash (0.3) 1.2
-----------------------------------------------------------------------------
Statement of Total Recognised Gains and Losses
For the year ended 30 June 2003
2003 2002
#'m #'m
-----------------------------------------------------------------------------
Profit (loss) for the financial year 1.3 (4.8)
Currency translation differences on foreign currency (0.1) -
net investments
-----------------------------------------------------------------------------
Total recognised gains and losses
relating to the year 1.2 (4.8)
-----------------------------------------------------------------------------
Reconciliation of Movements in Shareholders' Funds
For the year ended 30 June 2003
2003 2002
#'m #'m
-----------------------------------------------------------------------------
Shareholders' funds at the beginning of the year 15.9 10.6
Share capital issued - 10.8
Share issue costs - (0.7)
Profit (loss) for the financial year 1.3 (4.8)
Currency translation differences on foreign
currency net investments (0.1) -
-----------------------------------------------------------------------------
Shareholders' funds at the end of the year 17.1 15.9
-----------------------------------------------------------------------------
Notes to the Preliminary Results
For the year ended 30 June 2003
1. Accounting policies
The financial information in this announcement does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. The results in
respect of the year ended 30 June 2002 are an abridged version of the full
accounts for that year which received an unqualified report from the auditors
and which were delivered to the Registrar of Companies.
The preliminary financial information has been prepared using accounting
policies consistent with those adopted in the previous statutory accounts (to 30
June 2002).
Statutory accounts for the year ended 30 June 2003, in respect of which KPMG
Audit Plc have made an unqualified report, will be delivered to the Registrar of
Companies and sent to shareholders. A copy will be available from the Company's
registered office at Newtech Square, Deeside Industrial park, Deeside,
Flintshire, CH5 2NT in due course.
2. Continuing/discontinued activities
2003 2002
Continuing Discontinued Total Continuing Discontinued Total
#'m #'m #'m #'m #'m #'m
------------------------------------------------------------------------------------------
Turnover 14.0 - 14.0 9.1 0.3 9.4
Cost of (6.3) - (6.3) (4.1) - (4.1)
sales
------------------------------------------------------------------------------------------
Gross 7.7 - 7.7 5.0 0.3 5.3
profit
Selling and
distribution
expenses (3.1) - (3.1) (3.2) - (3.2)
Administration
expenses
------------------------------------------------------------------------------------------
Amortisation of
intangible -------------------------------------------------------------------
Administration (3.2) - (3.2) (2.8) - (2.8)
costs
Research and
development -------------------------------------------------------------------
costs (1.6) (0.4) (2.0) (1.8) (1.5) (3.3)
--------------------------------------------------------------------
(6.3) (0.4) (6.7) (6.0) (1.5) (7.5)
------------------------------------------------------------------------------------------
Operating (1.7) (0.4) (2.1) (4.2) (1.2) (5.4)
loss
------------------------------------------------------------------------------------------
3. Segmental analysis
(a) Analysis by geographical segment
The analysis by geographical segment of the Group's turnover, profit on ordinary
activities before taxation and net assets is set out below:
Turnover
By destination By origin
2003 2002 2003 2002
#'m #'m #'m #'m
-----------------------------------------------------------------------------
UK 10.6 8.4 14.0 9.3
Europe 0.5 0.2 - -
US 2.8 0.6 - -
Rest of World 0.1 0.2 - 0.1
-----------------------------------------------------------------------------
14.0 9.4 14.0 9.4
-----------------------------------------------------------------------------
2003 2002
#'m #'m
----------------------------------------------------------------------------
UK 1.1 (5.4)
Rest of World - -
----------------------------------------------------------------------------
1.1 (5.4)
Net interest receivable 0.2 0.2
----------------------------------------------------------------------------
1.3 (5.2)
----------------------------------------------------------------------------
Net assets
2003 2002
#'m #'m
-----------------------------------------------------------------------------
UK 10.4 5.4
Rest of World 0.1 0.1
-----------------------------------------------------------------------------
Net operating assets 10.5 5.5
Unallocated assets including cash and 6.6 10.4
deposits
-----------------------------------------------------------------------------
Net assets 17.1 15.9
-----------------------------------------------------------------------------
(b) Analysis by class of business
The analysis by class of business segment of the Group's turnover, profit on
ordinary activities before taxation and net assets is set out below:
Turnover
2003 2002
#'m #'m
------------------------------------------------------------------------------
Continuing activities
- Medical Diagnostics 3.1 0.9
- Pharmaceuticals 10.9 8.2
------------------------------------------------------------------------------
14.0 9.1
- Discontinued activities - 0.3
------------------------------------------------------------------------------
14.0 9.4
------------------------------------------------------------------------------
Profit (loss) on ordinary activities before taxation
2003 2002
-------------------------------------------------------------------------------------------
Ordinary Exceptional Ordinary Exceptional
activities items Total activities items Total
#'m #'m #'m #'m #'m #'m
-------------------------------------------------------------------------------------------
Continuing
activities
- Medical (2.3) - (2.3) (3.4) - (3.4)
Diagnostics*
- 2.5 - 2.5 1.3 (0.5) 0.8
Pharmaceuticals
- Common costs (1.9) - (1.9) (1.6) - (1.6)
- Net interest 0.2 - 0.2 0.2 - 0.2
receivable
Profit on
variation of
distribution - 3.4 3.4 - - -
agreement
-------------------------------------------------------------------------------------------
(1.5) 3.4 1.9 (3.5) (0.5) (4.0)
Discontinued (0.4) - (0.4) (1.2) (1.2)
activities**
Loss on
termination of
discontinued - (0.2) (0.2) - - -
activities**
-------------------------------------------------------------------------------------------
(1.9) 3.2 1.3 (4.7) (0.5) (5.2)
-------------------------------------------------------------------------------------------
* Medical Diagnostics' loss is stated inclusive of R&D spend of #1.6m (2002:
#1.6m).
** Discontinued activities relate to programmes in the vaccines research
business of Therapeutics R&D, which closed during the period. The costs of
closure have been included in the "Loss on termination of discontinued
activities".
Net assets
2003 2002
#'m #'m
------------------------------------------------------------------------------
- Medical Diagnostics 0.5 1.6
- Pharmaceuticals 7.2 3.9
------------------------------------------------------------------------------
7.7 5.5
Unallocated assets including cash and deposits 9.4 10.4
------------------------------------------------------------------------------
17.1 15.9
------------------------------------------------------------------------------
4. Exceptional items
2003 2002
#'m #'m
------------------------------------------------------------------------------
Profit on variation of distribution agreement - 3.4 -
continuing activities (1)
Loss on termination of discontinued activities (2) (0.2) -
Pennsaid(R) write off(3) - (0.5)
------------------------------------------------------------------------------
Notes
1. This relates to profit recognised on payments arising from the variation of
the distribution agreement with Dr Falk Pharma. #1.5m was received in
February 2003, #1.5m is due to be received in January 2004 and a further
#0.4m in January 2005. Up to a further #1.6m may be received in January
2005 contingent on the levels of sales of Falk products in calendar year
2004.
2. This relates to the redundancy and closure costs of Therapeutic R&D's
Vaccine programmes.
3. This charge writes off the cost of Pennsaid(R) including both the cost of
acquisition of the UK distribution rights and the value of the remaining
stock holding. The legality of early termination of Provalis' rights under
the distribution agreement by Dimethaid, the Canadian owner of Pennsaid(R),
is currently being challenged by Provalis.
4. There are no taxation consequences of the above exceptional items due to
the availability of tax losses.
5. Earnings before interest, taxation, depreciation and amortisation
("EBITDA")
Before Before
exceptional Exceptional Year exceptional Exceptional Year
item year item year ended item year item year ended
ended ended 30 June ended ended 30 June
30 June 30 June 2003 30 June 30 June 2002
2003 2003 Total 2002 2002 Total
#'m #'m #'m #'m #'m #'m
-----------------------------------------------------------------------------------------------
Loss on
ordinary
activities
before
taxation (1.9) 3.2 1.3 (4.7) (0.5) (5.2)
Interest (0.2) - (0.2) (0.2) - (0.2)
Amortisation 1.5 - 1.5 0.9 0.5 1.4
Depreciation 0.5 - 0.5 0.4 - 0.4
Profit on variation
of
distribution - (3.4) (3.4) - - -
agreement
-----------------------------------------------------------------------------------------------
EBITDA (0.1) (0.2) (0.3) (3.6) - (3.6)
Operating loss
from
discontinued 0.4 - 0.4 1.2 - 1.2
activities
Loss on termination
of
discontinued - 0.2 0.2 - - -
activities
-----------------------------------------------------------------------------------------------
EBITDA excluding
discontinued 0.3 - 0.3 (2.4) - (2.4)
activities
-----------------------------------------------------------------------------------------------
6. Earnings per share ("EPS")
2003 2002
#'m p #'m p
------------------------------------------------------------------------------
Earnings per share are based
on:
Profit (loss) after
exceptional items
attributable to ordinary 1.3 0.4 (4.8) (1.9)
shareholders
Exceptional items (3.2) (1.0) 0.5 0.2
------------------------------------------------------------------------------
Loss before exceptional
items
attributable to ordinary (1.9) (0.6) (4.3) (1.7)
shareholders
------------------------------------------------------------------------------
2003 2002
------------------------------------------------------------------------------
Basic and diluted weighted average
number of ordinary shares 330,360,181 258,294,428
------------------------------------------------------------------------------
7. Intangible fixed assets
Group
product rights
and licences
#'m
----------------------------------------------------------------------------
Cost
At 1 July 2002 15.4
Termination of distribution (0.5)
agreement
----------------------------------------------------------------------------
At 30 June 2003 14.9
----------------------------------------------------------------------------
Amortisation
At 1 July 2002 1.4
Charge for year 1.5
----------------------------------------------------------------------------
Impairment related to termination of distribution (0.5)
agreement
----------------------------------------------------------------------------
At 30 June 2003 2.4
----------------------------------------------------------------------------
Net book value
At 30 June 2003 12.5
----------------------------------------------------------------------------
At 30 June 2002 14.0
----------------------------------------------------------------------------
The intangible assets represent the total cost of acquisition of Diclomax(R)
from Parke Davis, a subsidiary of Pfizer Inc., on 3 December 2001, for #14.9m
(including #0.4m of transaction costs). The asset is being amortised over a
period of ten years and the Consolidated Profit and Loss Account for the year
ended 30 June 2003 contains amortisation of #1.5m (2002: contained first seven
months' amortisation of #0.9m). The intangible asset of #0.5m, representing the
cost of investment in Pennsaid(R) which was fully provided against in 2002
following an impairment review, has been written off following the termination
of the distribution agreement.
The cash flow associated with the acquisition of Diclomax(R) was #4.6m in the
year. The remaining #6.4m of acquisition cost is held within creditors (with
#1.8m of this due in greater than one year) and will be payable in weekly
instalments until November 2004. As security for the payment of the deferred
consideration Parke Davis has a fixed and floating charge over the assets
(excluding book debts) of Provalis Healthcare Limited. The security offered by
Provalis plc lapsed on 3 December 2002 but Provalis plc will continue to
guarantee the debt of Provalis Healthcare Limited to Parke Davis Limited.
8. Cash flow information
(a) Reconciliation of operating loss to operating cash flows
2003 2002
#'m #'m
----------------------------------------------------------------------------
Operating loss (2.1) (5.4)
Depreciation and impairment of tangible 0.5 0.4
fixed assets
Amortisation and impairment of intangible 1.5 1.4
fixed assets
(Decrease) increase in trade 0.5 (0.1)
creditors
Decrease in other creditors and (0.3) (0.1)
accruals
Increase in stocks (0.5) (0.6)
Decrease (increase) in trade debtors (0.3) 0.3
Decrease in other debtors and - 0.4
prepayments
----------------------------------------------------------------------------
Net cash outflow from operating (0.7) (3.7)
activities
----------------------------------------------------------------------------
(b) Reconciliation of net cash flow to movements in net funds
2003 2002
#'m #'m
------------------------------------------------------------------------------
(Decrease) increase in cash in the year (0.3) 1.2
Repayments of unsecured loan 0.1 0.3
(Decrease) increase in short term deposits (3.5) 0.5
------------------------------------------------------------------------------
Movement in net funds in the year (3.7) 2.0
Net funds at 1 July 2002 10.3 8.3
------------------------------------------------------------------------------
Net funds at 30 June 2003 6.6 10.3
------------------------------------------------------------------------------
(c) Analysis of changes in net funds
As at As at
1 July 30 June
2002 Cash flow 2003
#'m #'m #'m
----------------------------------------------------------------------------
Cash 1.9 (0.3) 1.6
Short term 8.5 (3.5) 5.0
deposits
----------------------------------------------------------------------------
Cash and 10.4 (3.8) 6.6
deposits
Unsecured loan due in under (0.1) 0.1 -
one year
----------------------------------------------------------------------------
Net funds 10.3 (3.7) 6.6
----------------------------------------------------------------------------
Short term deposits have a maturity of more than 24 hours but less than 12
months. They are repayable on demand subject, in some instances, to the
repayment of certain expenses. Cash includes cash in hand and deposits repayable
on demand.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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