TIDMBQE
RNS Number : 7092H
Bioquell PLC
18 March 2015
18 March, 2015
Bioquell PLC announces its 2014 preliminary results
Bioquell PLC (LSE symbol: BQE), the provider of specialist
microbiological control technologies to the international
Healthcare, Life Science and Defence markets today announces its
2014 preliminary results.
Highlights
-- Group revenues increased by 2% to GBP45.3 million (2013:
GBP44.6 million) - TRaC up 7% to GBP18.0 million; Bio division down
2% to GBP27.3 million (up 1% in constant currency)
-- Pre-tax profits before previously announced non-cash
exceptional costs were GBP2.5 million (2013: GBP3.1 million).
-- Exceptional items comprise a pre-tax GBP3.9 million non-cash
impairment charge relating to capitalised product development and
patent costs
-- Pre-tax loss (including non-cash exceptional costs) of GBP1.4
million (2013: profit of GBP3.1 million)
-- Basic pre-exceptional earnings per share of 4.9p (2013:
7.3p)
-- Proposed dividend per share of 3.3p (2013: 3.3p)
-- Net cash at the year end was GBP1.1 million (2013: GBP2.0
million)
-- Strong revenue growth in Healthcare and Defence markets was
offset by a decline in Life Sciences revenues in the Bio
division
-- Proposed disposal of TRaC for GBP44.5 million in cash was
announced on 12 March, 2015; the majority of the net cash proceeds
will be returned to shareholders in due course
Nigel Keen, Chairman of Bioquell PLC, said:
"Whilst 2014 was a challenging year for our Bio division, we
have made a number of important changes that put us in a strong
position to deliver growth in 2015. We have improved our product
portfolio, reduced our cost base, strengthened our management teams
and refocused our sales & marketing activities."
"The proposed sale of TRaC will unlock substantial value for
shareholders and enable us to focus on building our core Bio
business."
"The fundamental drivers underlying our Bio business are strong
and we are looking forward to delivering significant value from
this business to shareholders in 2015."
Enquiries: 01264 835 900
Nigel Keen: Chairman
Nick Adams: Group Chief Executive
Michael Roller: Group Finance Director
CHAIRMAN'S STATEMENT
Future of the Group post the sale of TRaC
Last week, on 12 March, we announced the proposed disposal of
our subsidiary TRaC Global Limited ("TRaC") for GBP44.5 million in
cash. The transaction is expected to complete at the end of April
2015 and is expected to give rise to an exceptional profit before
expenses of approximately GBP35.4 million. The Board expects that
the majority of the net cash proceeds arising from the disposal
will be returned to shareholders in due course.
The timing of the disposal reflects, among other things: (i) a
desire by the Board to address Bioquell's weak share price which
did not reflect the underlying value of our two core businesses;
(ii) recent strong interest from trade and financial buyers in
TRaC; and (iii) improving prospects for our Bio division - and our
belief that it represents an attractive standalone business with
interesting prospects.
The Bio division comprises a business with revenues in 2014 of
GBP27.3 million and EBITDA of GBP3.9 million (2013: GBP4.1
million), selling biological contamination control services and
equipment into the international Life Sciences, Healthcare and
Defence markets. (EBITDA means pre-exceptional earnings before
interest, tax, depreciation and amortisation.)
The year saw significant changes being made to the business,
including targeted cost reductions and the completion of a
substantial new product development programme. These changes
coupled with improving market conditions in its core sectors mean
that the Bio division is now well placed to deliver growth through
the sale of an innovative and modern range of products and
services.
In some respects the division's business model is becoming
increasingly similar to TRaC: with service businesses - required by
customers who need to meet onerous, international regulations -
which require specialist equipment and highly trained
technicians.
By necessity, this document refers to the historic financial
performance of both the TRaC and Bio division; however, we are, of
course, now totally focussed on driving forwards the strategy and
financial results for the Bio division or 'pure Bioquell'.
Financial performance in 2014
Consolidated revenues increased by 2% to GBP45.3 million (2013:
GBP44.6 million). TRaC revenues increased by 7% to GBP18.0 million
(2013: GBP16.8 million) and Bio declined by 2% to GBP27.3 million
(2013: GBP27.9 million), held back largely by operational
difficulties in our US and Asian operations. In constant currency,
Group revenues increased 3%, TRaC increased 7% and Bio increased
1%. (Constant currency revenue is calculated by retranslating
current period revenues at the average exchange rate ruling in the
comparative period.)
The Group's service revenues totalled GBP29.3 million (2013:
GBP26.9 million), representing 65% of total Group revenues (2013:
60%). Overseas sales amounted to GBP23.3 million representing 51%
of total revenues (2013: 55%).
Within our Bio division, 2014 revenues were split 54% (2013:
56%) equipment sales, 41% (2013: 39%) services and 5% (2013: 5%)
consumables. We are actively seeking to drive up the proportion of
our service revenues. Overseas sales in the Bio division were 79%
(2013: 81%).
Gross margin for the Group declined 1% to 45% (2013: 46%) and
pre-exceptional operating expenses totalled GBP17.6 million (2013:
GBP17.7 million).
As announced in the Group's pre-close statement on 15 January,
2015, the Board has reviewed the Group's portfolio of capitalised
product development and patent costs and has decided that an
aggregate non-cash impairment charge of GBP3.9 million should be
made. This is presented as an exceptional item in the information
below.
Pre-tax profits (before exceptional items) were GBP2.5 million
(2013: GBP3.1 million). The pre-tax loss including exceptional
items was GBP(1.4) million (2013: profit GBP3.1 million). Basic
earnings per share pre-exceptional items were 4.9p (2012:
7.3p).
In cash terms, expenditure on research & development
declined in the year by 37% to GBP1.9 million (2013: GBP3.0
million). Capital expenditure on tangible fixed assets declined by
39% to GBP2.4 million (2013: GBP3.9 million).
The Group continues to have a strong balance sheet. Net cash at
the year end was GBP1.1 million (2013: GBP 2.0 million) and has
subsequently increased to GBP3.4 million at the end of February
2015. Shareholders' funds were GBP31.1 million (2013: GBP33.3
million.)
The Board is recommending the payment of a dividend of 3.3 pence
(2013: 3.3 pence) per share on 2 July, 2015 to shareholders on the
register on 5 June 2015. Following the proposed disposal of TRaC
the Board intends to rebase its dividend payout. Accordingly next
year the Board will consider, among other things, an appropriate
dividend cover and associated payout for the refocused Group.
Activities
2014 was a year of mixed fortunes. Our TRaC division performed
strongly and finished the year with good momentum. In contrast, our
Bio division encountered significant headwinds in its Life Sciences
business activities - particularly in Asia and the USA - and a
number of significant management changes were made during the year
to address certain operational issues.
In the Bio division, our Healthcare revenues increased by 26% to
GBP4.3 million (2013: GBP3.4 million), assisted by our new single
patient room Pod product as well as increased interest in our
hydrogen peroxide vapour ("HPV") technology as a result, in part,
of our decontamination service activities during the global Ebola
outbreak. Our Defence revenues more than doubled to GBP4.1 million
(2013: GBP1.7 million). However, our Life Sciences revenues,
particularly from equipment sales, reduced by approximately 17% to
GBP18.9 million (2013: GBP22.7 million).
In TRaC, revenues were strong across substantially all of our
services - with particularly good results from our environmental
and EMC (electromagnetic compatibility) services helped by high
levels of aerospace activity.
Employees
On behalf of the Board, I would like to thank all the employees
within the Group for their hard work and commitment during
2014.
Outlook
In the future the Group will comprise a focused biological
contamination control business selling into the international Life
Sciences, Healthcare and Defence markets.
In the Life Sciences sector growth is expected due to increased
sales of, and investment in, biologics and biosimilars, which
require the use of aseptic principles during research as well as
the manufacturing process.
The imposition of more demanding regulations and compliance
requirements in the Life Sciences and Healthcare sectors is also
expected to increase demand for products and services such as
ours.
Within the Healthcare sector hospitals face increasing
difficulties treating patients who contract bacterial infections
which no longer respond to antibiotics. (The first O'Neill report,
published in December 2014, estimated that by 2050 more people will
die as a result of antimicrobial resistance than cancer - and the
loss in world GDP would be some US$100 trillion.) Bioquell's
technology has been shown in published scientific studies to reduce
hospital acquired infection rates. The imminent launch into the
healthcare sector of the BQ-50 - a new, small, fully automated
product to rapidly eradicate pathogens from surfaces in hospitals -
should also help drive revenues in this sector.
Tensions in Eastern Europe and the Middle East are creating
opportunity for our Defence business.
During the past year we reduced the cost base in our Bio
division substantially, particularly in relation to our engineering
resources, and also made significant changes to the management of
our American and Asian subsidiaries. The results of these changes
will be seen in the financial performance of the Bio division in
2015.
The year has started well for both our Bio and TRaC divisions.
We are looking forward, post the disposal of TRaC, to our business
becoming a focussed biological contamination control group serving
clients in three large, international sectors with demanding
regulatory requirements. Given the changes we have made to the Bio
division during last year and the attractive valuation we were able
to secure for TRaC, we believe that we are well positioned to
deliver further significant value to shareholders in 2015.
Nigel Keen
Chairman
Bioquell PLC
18 March, 2015
Notes to Editors
-- Bioquell is a UK-headquartered, international technology
company which sells specialist biological contamination control
products and services into the Healthcare, Life Sciences and
Defence sectors, with most of its revenues generated from overseas
customers
-- Bioquell's bio-contamination control technology is
principally based around hydrogen peroxide vapour (HPV) - which is
highly efficacious at eradicating micro-organisms such as bacteria
and viruses at room temperature - and is subsequently broken down
using specialist catalysts to water vapour and oxygen at the end of
the bio-decontamination process.
-- Over recent years Bioquell has invested substantial sums in
developing new products - comprising rental, service and
consumables - which have been designed to increase the proportion
of the Group's recurring revenues (cf. capital equipment
sales).
-- Bioquell's bio-contamination control technology:
o is used by bio-pharmaceutical, biotechnology and research
institutions to provide sterile equipment and/or sterile
facilities;
o is used to eradicate "superbugs" from hospitals including
Clostridium difficile and carbapenemase producing
Enterobacteriaceae (CPE) - sometimes referred to as
carbapenem-resistant Enterobacteriaceae (CRE). Independent
scientific research from a team at Johns Hopkins, one of America's
top hospitals, has demonstrated that 'bioquelling' hospital
equipment and facilities resulted in a 64% reduction in the risk of
patients contracting hospital acquired infection; and
o is used to provide single patient rooms via its Pod product on
open-plan, multi-bed units.
-- Bioquell currently has overseas operations in the USA,
France, Ireland, Singapore and China.
TRaC (www.tracglobal.com) is a subsidiary of Bioquell which
provides specialist Testing, Regulatory and Compliance services -
including EMC (electromagnetic compatibility), environmental,
safety, ATEX (explosive atmospheres) radio and telecoms testing -
principally to UK corporates. (The proposed disposal of TRaC is
expected to complete at the end of April 2015.)
STRATEGIC REPORT
This report should be read in conjunction with the Chairman's
statement which provides information on the proposed disposal of
TRaC Global Limited as well as the financial performance of the
Group in 2014.
Following the disposal of TRaC, the Group will comprise a
biological contamination control business with a business model
which benefits from stringent regulatory standards and which
incorporates the sale & rental of equipment, consumable sales
and the provision of a range of speciality services to the
international Life Sciences, Healthcare & Defence markets.
The Board believes that the Group has developed a unique and
world class range of technologies for the markets it serves. The
primary strategic objective for the business is now to increase its
revenues via improved and more effective selling of its
market-leading range of products & services which meet the
bio-decontamination needs of its Life Sciences and Healthcare
customers.
Given the complexity of the Bio division - and the significant
changes that we have made to the business over the last year - the
Board monitors progress on its strategy by reference to only two
key performance indicators at the current time: revenues and
pre-tax profit.
KEY STRATEGIC DRIVERS
Microorganisms - bacteria, viruses and fungi - are ubiquitous
and cause significant problems across a number of sectors around
the world. Bioquell's strategy is to generate revenues from the
provision of novel, cost-effective technology-based solutions,
which are supported by increasingly onerous regulations, for
contamination control and microorganism eradication in the Life
Sciences, Healthcare and Defence sectors. Historically our product
offerings for Life Sciences and Healthcare were based solely around
hydrogen peroxide vapour ("HPV") - but over recent years we have
added a number of complementary products and services which enable
us to offer a more holistic or application-based solution to our
customers.
Increasing antibiotic resistance - and problems for hospitals
worldwide
Antibiotic resistance is a growing problem. The issue of
antibiotic resistance was highlighted during 2014 by a number of
high profile individuals or organisations including: the World
Health Organisation, the US President and the UK Prime Minister who
subsequently commissioned Jim O'Neill to chair a review on the
antimicrobial resistance (the first O'Neill report was published in
December 2014: amr-review.org ). This report estimated that
antimicrobial resistant infections will result in an additional 9.3
million deaths per year by 2050 with a loss in world GDP of US$ 100
trillion. Although relatively well known pathogens such as MRSA and
C.difficile are still responsible for a significant proportion of
Hospital Acquired Infection ("HAI"), there are a number of classes
of antibiotics which can be used to treat them. However, over
recent years highly antibiotic resistant - and increasingly
'untreatable' (i.e. resistant to all antibiotics) - Gram-negative
organisms such as Klebsiella pneumoniae, Pseudomonas aeruginosa and
Acinetobacter baumannii have been creating major clinical issues
for hospitals, particularly intensive care units ("ICUs"), around
the world. In short, the 'superbug' problem is getting worse as the
antibiotics are ceasing to work for certain bacteria, principally
the Gram-negatives - and there is no obvious, feasible solution.
For example, earlier this year, 11 patients were reported to have
died in a German hospital from an antibiotic resistant bacteria and
two US hospitals on the West coast have admitted to patient deaths
from the highly resistant CRE strain of Gram-negative bacteria.
Significant role of the regulators
Bioquell's Life Science and Healthcare customers operate in
highly regulated markets. In many areas the regulators are becoming
more concerned about the adverse consequences of microbial
contamination and the regulations are becoming more onerous.
Biologics and biosimilars
Biological products are generally derived from a living
organism. They can come from many sources, including humans,
animals, microorganisms or yeast.
Biological products include a wide range of products such as
vaccines, blood and blood components, allergenics, somatic cells,
gene therapy, tissues and recombinant therapeutic proteins.
Biologics are isolated from a variety of natural sources - human,
animal, or microorganism - and may be produced by biotechnology
methods and other cutting-edge technologies. For example,
gene-based and cellular biologics are often at the forefront of
biomedical research, and may be used to treat a variety of medical
conditions for which no other treatments are currently
available.
In contrast to most conventional drugs that are chemically
synthesized and their structure known, most biologics are complex
mixtures that are not easily identified or characterised.
Biological products, including those manufactured by biotechnology,
tend to be heat sensitive and susceptible to microbial
contamination. As a result it is necessary to use aseptic
principles during research and throughout the manufacturing process
(in contrast to most conventional drugs which are often terminally
sterilised). This requirement for aseptic processing is a powerful
driver of demand for Bioquell's products and services.
A biosimilar product is a biological product that is approved
based on showing that it is highly similar to an already-approved
biological product, known as a reference product. The biosimilar
must also show it has no clinically meaningful differences in terms
of safety and effectiveness from the reference product. Only minor
differences in clinically inactive components are allowable in
biosimilar products.
The Biologics Price Competition and Innovation Act of 2009 (BPCI
Act) was passed as part of the Affordable Care Act (often referred
to as 'Obamacare') that President Obama signed into law in March
2010. The BPCI Act created a shortened and less stringent
regulatory approval pathway for biological products shown to be
"biosimilar" to or "interchangeable" with an FDA-licensed
biological product (i.e. the "reference product"). This shortform
regulatory pathway enables a biosimilar product to be licensed
based on less onerous preclinical and clinical data although the
facilities where biosimilars are manufactured must also meet the
FDA's standards for biologics production. This shortform approach
was designed to encourage investment in biosimilars by
bio-pharmaceutical companies to reduce the cost of these
treatments.
In the Life Sciences sector the US Food & Drug
Administration ("FDA") continues to influence heavily biologics and
biosimilar drug research, production and sales around the world.
For example, on 6 March 2015, the FDA approved the launch of the
first biosimilar onto the US market. (There are already a number of
biosimilars approved for the European market.) We anticipate that
regulatory oversight in these areas is likely to increase, in part
due to the greater number of biologics and biosimilar drugs coming
onto the market. The increased numbers of biologics and biosimilars
on the markets should drive demand for Bioquell's products and
services.
In the Healthcare sector the relevant regulators, such as the
Joint Commission in the USA and the CQC in the UK, are becoming
increasingly sensitised to the threat to patient safety from, as
well as the concomitant costs of, HAI. These regulators are able to
impose economic sanctions on hospitals which have inadequate
measures for the prevention of HAI. For example, the US Affordable
Care Act imposes financial penalties starting in 2017 on hospitals
with poor HAI performance.
Evolving business model
Until recently Bioquell's business model, particularly in the
Life Sciences sector, was largely predicated on equipment sales -
with limited associated consumable or service revenues. However,
since 2010 we have been developing products and services for this
sector which generate, directly or indirectly, a higher proportion
of recurring revenues.
All our new HPV-related products have been engineered to
incorporate the use of captive hydrogen peroxide consumable
cartridges. We made good progress during the year in increasing the
number of regulatory approvals for our hydrogen peroxide
consumables around the world. Moreover, we extended our supply
chain to enable us to supply consumables cost effectively to a
greater proportion of international customers.
We have also taken a number of steps to repackage certain of our
technologies to enable us to migrate from an equipment-based
offering to increase, directly or indirectly, the provision of
specialist decontamination services. This should help improve our
quality of earnings and increase the proportion of recurring
revenues.
Historically our strategy and growth was developed around the
use of HPV to eradicate microorganisms. However, over the last
three years we have reduced our dependency on HPV by developing
complementary products such as the QUBE (for Life Sciences) and the
Pod (for Healthcare). These products incorporate novel
manufacturing techniques developed at our facilities in
Andover.
We are in the process of launching a new HPV product: the BQ-50.
This product is designed both for use in hospitals and for the
provision of decontamination services by our network of
international distributors. This novel product draws heavily on
certain of the technologies and components which we developed for a
US military development programme a few years ago, including fast
cycles, smaller size, reduced weight and sophisticated automated
cycle calculations. We anticipate that this product will help us
increase our equipment and service revenues in the Healthcare
sector in 2015.
Defence sector
We produce specialist chemical, biological, radiological and
nuclear ("CBRN") filtration systems and environmental control
equipment for military vehicles and fixed systems. We have taken a
number of steps to try and reduce the 'lumpiness' of our defence
orders, in large part by extending the range of applications for
our products.
Interest in our CBRN products has been helped over the last year
by increased sectarian conflicts in the Middle East as well as
instability in Eastern Europe close to the Russian border. In
addition, the use of chemical weapons by the Assad regime was a
stark reminder that chemical warfare agents still exist; and are
used.
Principal challenges
Our strategy is to promote the use of Bioquell's technology to
solve a broad range of microorganism-related problems for customers
in the Life Sciences and Healthcare sectors. The strategy for our
defence business is to increase the number of customers selecting
our CBRN systems. Our prospective markets are large, international
and growing. Microorganism-related problems are becoming more
challenging, largely due to increasing antimicrobial resistance and
a better appreciation of the role of biofilms. Many new, on-patent
biologics drugs are susceptible to bioburden contamination which
can create patient safety and regulatory compliance problems.
Moreover, the international regulators are becoming more demanding
in terms of enforcing the relevant regulations.
In implementing this strategy we encounter a number of
challenges, including:
-- our markets are international - with the UK representing a
relatively small proportion of global spend. Accordingly, we are
required to establish, expand and manage an extensive network of
sales distributors around the world which is expensive and requires
significant resources. Further, different selling partners are
usually needed for our two different target sectors (Life Sciences
& Healthcare) in each territory;
-- many of our customers are highly conservative, adopt new
technologies slowly, can be difficult to engage with at a senior
level and are generally resistant to change. Accordingly it can
take some time and substantial sales and marketing investment to
see increased revenues linked to the launch of a new product or
service;
-- some customers, particularly in large organisations, find it
easier, and at times lower risk, to 'do nothing';
-- in order to supply the breadth of products as well as the
short response times for our services, we require a large facility
in the UK which has high fixed costs and associated operational
gearing. This facility currently has significant under-utilised
capacity which could be used to generate high margin incremental
revenues;
-- in the Life Sciences sector, the research market is becoming
more fragmented as 'big-pharma' does less research itself and it
can be harder, or require different sales & marketing
strategies, to access the smaller research organisations,
"spin-offs" and "start-ups" now becoming more prevalent in this
sector; and
-- in the Healthcare sector, many customers are extremely
reluctant to discuss the scale of their antibiotic resistance
problems due to the potentially substantial adverse effect such
disclosure could have on their hospitals (i.e. a reduction in
revenues from lower patient numbers). In addition, some customers
have, to date, been reluctant to acknowledge the severity of the
antibiotic resistance challenge and have adopted a 'good enough' or
'do nothing' approach. This can create significant marketing and
selling challenges for us.
ACTIVITIES BY SECTOR
Life Sciences sector
Demand for pharmaceutical products continues to grow, driven by
an aging population and the increasing wealth of the middle classes
in the emerging markets. This underlying growth in demand is being
seen in research & development, clinical trials and production
in the Life Sciences sector.
Aseptic manufacture of biologics and biosimilar products
The need for aseptic manufacture of biologics has resulted in
heightened, international regulatory oversight. For example, the
regulators require manufacturers to introduce sterility test
procedures which are used to help demonstrate that a given product
batch has been manufactured under sterile conditions. Bioquell's
innovative QUBE aseptic work station is able to incorporate
market-leading sterility test equipment. The requirement for
sterility testing was an important driver of the growth we saw for
QUBE sales in 2014.
Bioquell's products and technologies for the Life Sciences
sector
Over recent years it has become clear that having novel and
highly efficacious HPV-based bio-decontamination technology
represents only part of the solution needed by our Life Science
customers. Increasingly our customers' requirements are focussed
around satisfying the relevant regulators that they have put in
place appropriately validated and documented contamination control
processes. In order to help our customers achieve rapid regulatory
approval, we have developed HPV-optimised biological indicators
("BIs") and chemical indicators ("CIs"). We have also developed
hydrogen peroxide consumable cartridges ("HP consumables") to
optimise our HPV decontamination process, including the use of our
BIs and CIs.
The development of BIs, CIs, HP consumables and associated
validation documentation has also been aligned with our strategic
decision to reduce our reliance on capital equipment sales and to
increase, wherever possible, the proportion of recurring revenues,
by the sale of services or consumables. We saw strong growth in our
consumable revenues in the Life Sciences sector in 2014.
Healthcare sector
Bioquell's healthcare strategy is to provide technology-based
solutions which help hospitals reduce their HAI rates and combat
the significant issues associated with antibiotic resistance.
Background
Bioquell has invested substantial time and resources working
with a number of leading international hospitals and associated Key
Opinion Leaders ("KOLs") to demonstrate that the bacteria
responsible for HAI can survive in the inanimate hospital
environment for many months. Equally, we have worked
collaboratively with a number of hospitals to show that the
eradication of bacteria from the hospital environment can result in
a reduction in the HAI rate. A research paper (Passaretti C.L. et
al., Clinical Infectious Diseases 2013;56(1):27-35) from a group at
Johns Hopkins Hospital in Baltimore, one of America's top
hospitals, showed that patients who were admitted into rooms that
had been 'bioquelled' were 64% less likely to become infected with
a multi-drug resistant organism.
Pod: single patient rooms
Notwithstanding the numerous academic publications supporting
the use of Bioquell's HPV technology to reduce HAI rates, it has
become clear that a significant number of hospitals outside the
United States encounter practical difficulties using our HPV
technology (or indeed any form of automated room disinfection
technology) due to the widespread use of open-plan, multi-bed
units. Multi-bed units are common in the UK and also in the
emerging markets, particularly within ICUs. In the United States
and France substantially all hospital beds, particularly in high
acuity units such as ICUs, are located in single patient rooms.
Open plan multi-bed units are a problem for managing HAI as they
have been shown to have higher HAI rates than equivalent units with
single patient rooms.
In order to facilitate the 'bioquelling' of bed-spaces, at the
beginning of 2013 we launched the Bioquell Pod, initially as a
rental-only product, focussed on the UK (NHS) market. The Pod
system comprises a bespoke single patient room which can be easily
and quickly installed around a pre-determined bed space in an open
plan unit. We have worked closely and collaboratively with early
adopters in the NHS to understand better how the Pod can be used
optimally within UK hospitals. We have also invested in hardware
and software to help the rapid design, production and deployment of
Pods.
Following feedback from prospective customers - particularly
from overseas - we now offer the Pod as a product which can be
purchased or rented. For example in 2014 we sold 20 Pods into an
ICU in Saudi Arabia. We believe that customers in the emerging
markets will be keener to purchase the Pod whilst hospitals in the
UK are typically keener to rent the Pod. We are now focussing on
maximising the number of Pod units deployed around the world
irrespective of payment method.
Increasing antibiotic resistance - and the specific threat from
CRE
Emerging markets in Asia, Latin America and the Middle East are
facing substantial clinical challenges associated with antibiotic
resistant bacteria, particularly in ICUs and principally from
highly resistant Gram-negative bacteria, especially the CREs (known
as CPEs in the UK) - or carbapenem-resistant Enterobacteriaceae.
The Director of the US Centers for Disease Prevention and Control
(CDC), Dr Tom Frieden, has described CRE as being "nightmare
bacteria".
In most countries in the emerging markets there has been poor
stewardship (and hence misuse) of antibiotics for many years which
has resulted in the emergence of widespread antibiotic resistance.
Particularly dangerous is the growing pan-resistance of some
Gram-negative organisms such as Klebsiella pneumoniae or
Acinetobacter baumannii. In addition, air travel has resulted in
patients, originating in the emerging markets, being admitted to
North American or European hospitals - and consequently introducing
highly resistant strains of bacteria to these hospitals.
The clinical consequences of such problems are becoming far more
severe. In the past, pan-drug resistance was perceived to be an
academic and somewhat notional threat. Today we are seeing patients
being admitted to acute care hospitals in a number of US and
European cities contracting, or bringing with them, strains of
highly drug resistant bacteria with high associated mortality rates
and costs.
The economics and financial consequences of antibiotic
resistance
Although some of the latest antibiotics can be expensive, the
principal cost associated with HAI is the extended length of stay
in hospital for patients who contract such an infection. Numerous
academic studies have shown that patients who contract a HAI tend
to stay in hospital significantly longer than those who do not -
particularly in the case of ICU patients.
ICUs are both expensive and critical for the revenues of most
large, acute care hospitals. Complex surgery and advanced cancer
treatments typically require access to ICU facilities. Moreover,
such complex surgery is often high profile and generates
significant fee income for surgeons (and associated attending
physicians) as well as substantial revenues for the hospital.
Accordingly, an ICU which is contaminated with highly resistant
bacteria can severely and adversely affect patient care, which in
turn can result in reduced revenues for the hospital and its
medical professionals. There is also the associated risk of
substantial reputational damage with concomitant loss of revenues
if the hospital becomes linked publicly to high HAI rates.
Even in the emerging markets where labour costs are still
relatively low, a single bed-day in an ICU in a private hospital
can cost, on a fully loaded basis, several thousand US dollars.
Hence an extended length of stay for a patient who contracts a HAI
in an ICU setting can readily cost the healthcare system tens of
thousands of US dollars. The debate is ongoing as to who should pay
for these substantial costs. Typically the hospitals try to pass
the costs onto the patients or their insurers. However, the
insurers are becoming more sensitised to this issue and are
increasingly reluctant to pay for the additional costs associated
with HAI.
The 2014 Ebola outbreak and use of Bioquell's technology
Bioquell's HPV technology was used by a significant number of
hospitals in the United States and Europe during the 2014 Ebola
outbreak. In short, when hospitals wanted to be absolutely sure
that there were no viable Ebola viral particles left in the
hospital then they turned to Bioquell's technology and services. We
were pleased that many years of careful research enabled us to
demonstrate the efficacy of our decontamination technology against
the Ebola virus. The Ebola outbreak in West Africa is not yet over.
In March 2015 we are still seeing healthcare workers with Ebola
being repatriated to Europe or the US - and we are currently
'bioquelling' hospitals where suspected Ebola patients have been
admitted.
We believe that the widespread adoption of Bioquell's technology
by hospitals in the USA and Europe during the Ebola crisis will
make it easier for us to sell services to hospitals encountering
other severe bacterial or viral problems in the future.
BioxyQuell - novel, topical treatment of wounds
Bioquell has been developing BioxyQuell ("BxQ"), Bioquell's
novel peroxy-chemistry based wound treatment technology for a
number of years. The technology has regulatory approval in the EU
and we have been working on the commercialisation of BxQ in the
UK.
Over recent years the bio-chemistry of wound healing has become
better understood. In particular, it is increasingly clear that
biofilms can significantly hinder wound healing or cause major
clinical issues in certain procedures. Moreover, biofilms have been
shown to stop wounds healing, giving rise to chronic wounds.
Given the increasing issues with antimicrobial resistance, we
believe that there are substantial opportunities for our BxQ
technology - as it appears to be efficacious against biofilms and
assists in the treatment of chronic wounds. However, unfortunately
we have found it difficult to commercialise this technology in the
current hospital funding environment and we have decided to
'mothball' the technology as we believe we have better commercial
opportunities within our portfolio of products and services.
Accordingly the Board has decided to impair the value of the
capitalised development costs of this technology (which was
announced at the beginning of 2015). Notwithstanding this
(non-cash) impairment, we continue to believe that as antimicrobial
resistance becomes more problematic our BxQ technology may have an
important role to play.
Defence
Our defence business uses specialist filtration systems and
other engineering solutions to provide customers with CBRN
filtration systems as well as environmental control systems.
Together these are referred to as collective protection
("COLPRO").
As we announced in our interim results, during the year we
ceased working on a contract to develop COLPRO solutions for a new
vehicle for the British Army. Subsequent to the cessation of this
contract we essentially halved the size of our engineering team.
This was a difficult decision and we estimate that the contract
cessation alone cost us some GBP0.3 million. Due to the
self-evident risks associated with such programmes, we have taken
the decision not to carry out large defence-related development
contracts in the future.
We did manage to secure other COLPRO contracts relating to our
standard CBRN equipment from customers in the Middle East and
Eastern Europe. A proportion of these contracts was delivered in
2014 and, based on the orders already on our order book, they will
continue to generate revenues into 2015.
Conclusion: the Group
The Group has robust strategies in place to generate attractive
organic growth - which has been demonstrated in recent years by its
TRaC division. Moreover, the substantial and 'extraordinary' phase
of significant capital investment in new products and services in
the Bio division (e.g. QUBE, Pod, BQ-50, consumables) is
essentially over. Going forwards we would expect to see product
line extensions and technology updates but a markedly lower
requirement for capital expenditure. Accordingly we would expect
the Bio division to start to generate cash.
Sales into the Life Sciences sector currently remain key to the
profitability of the Bio division - and we have taken clear and
robust steps to address the specific issues we encountered in 2014,
particularly in the US and Asian Life Science markets. At the same
time the increasing problems that hospitals are facing with
hospital acquired infection and antibiotic resistance - as well as
the lack of single patient rooms in many critical care units in
hospitals around the world - represent a substantial and immediate
opportunity for our new Healthcare sales teams to focus on. Our
Defence business is well positioned with a significant order book
already covering most of our planned 2015 defence-related
shipments.
Risks and uncertainties
The Group faces a number of risks and uncertainties associated
with its activities. It has put in place formal risk-review
structures and mechanisms to help assess and monitor such risks and
uncertainties; and, as appropriate, has taken steps to mitigate the
identified risks and/or uncertainties to the extent practicable.
However, it is not possible to identify or anticipate all risks and
uncertainties; nor is it possible to mitigate all such identified
risks and uncertainties.
Set out below is a summary of the principal risks and
uncertainties which the Board believes the Group faces, over and
above those which are inherent with carrying out commercial
activities. The description of these principal risks and
uncertainties should be read in conjunction with, and considered
taking into account of, the description of the activities of the
Group set out elsewhere in this document and on the Group's
websites.
A summary of how the Group seeks to mitigate some or all of
these principal risks and uncertainties is also set out in the
table below. Given the nature of these risks and uncertainties - as
well as the general nature of risk implicit in any commercial
activities - investors should be aware that there can be no
assurances that the mitigation of the risks summarised below will
be effective, in whole or in part.
Risk and/or uncertainty Mitigation
Commercial. Ultimately in order The Group is spending more time
to prosper the Group needs to talking with actual and prospective
sell its products and services customers to try and anticipate
to sufficient customers at an market trends - and is working
appropriate margin. This requires with customers to develop new
good marketing and effective selling products and services attractive
of attractive products & services to such customers. It is also
into large and increasingly international constantly looking at ways in
markets. Some of these markets which it can exploit new lower
are at different stages of maturity cost digital marketing techniques
- or have different requirements to access new customers in a cost
due to, among other things, different effective manner. Further, it
levels of wealth or funding available is also examining ways to reduce
to the market participants or the prime costs of its equipment
differing regulatory requirements. and services to increase margins
In addition, some of the market and benefit from inherent price
requirements can change rapidly. elasticity in the market. Where
Taken together it is non-trivial possible the Group is seeking
- and can be expensive - to have to simplify its operations and
attractive products & services product offerings.
designed at the right price point
for the different markets into
which the Group sells.
-------------------------------------------
Competition. Some of the Group's The Group monitors the activities
competitors are substantially of existing, new and potential
larger than the Group and have, competitors closely and is constantly
among other things, greater financial, reviewing and, as appropriate,
selling and political lobbying refining its strategies, business
resources. Accordingly there is models, sales and marketing activities,
a risk that the Group's business execution plans and new product
could be adversely affected by development depending on, among
actions undertaken by these large other things, competitor activities.
competitors. Further, although The Group seeks to educate the
Bioquell has a number of granted relevant regulatory bodies or
or pending patents internationally, other governmental organisations
which should help to protect the responsible for the drafting or
key components of its intellectual enforcement of regulations.
property from copying, there is The Group has a significant portfolio
a risk that competitors operating of pending and granted patents
from territories with poorly enforced and other intellectual property
patent law/patent protection could which is available to it to invoke,
copy, in part or in whole, Bioquell's as appropriate.
products or services. In addition, The Group has developed specialist
in certain markets in which the manufacturing skills which should
Group operates there is the risk help protect its market share
that 'doing nothing' or finding and prospects.
something 'good enough' is the The Group has detailed sales and
preferred course of action taken marketing initiatives which are
by prospective customers for a designed to, among other things,
number of reasons including apathy, increase awareness of the Group's
management challenges, budget products and services - and make
allocations, or a disinclination it harder for prospective clients
to acknowledge the severity of to decide to 'do nothing'; or
specific issues. Accordingly 'doing opt for 'good enough' or 'do a
nothing' or 'doing a little' represents little'.
a form of competitive risk for
some of the Group's products or
services.
-------------------------------------------
Regulatory. The Group operates The Group endeavours to work closely
in a number of countries and sectors and establish a dialogue, either
which are highly regulated. There directly or through its third
is a risk that the relevant regulations, party distribution partners and/or
or their interpretation, could clients, with the relevant regulators
be changed and such changes could in the territories in which it
significantly adversely affect operates. In addition the Group
the Group's business in that country may, from time to time, engage
or sector. Further, given the consultants or legal advisers
specialist nature of its activities to help with its discussions with,
there is a risk of jurisdictional or strategic approach to, the
dispute by the different regulators regulators.
in a territory, as it may not
always be clear which regulator
has, or should have, jurisdiction
over the Group's activities.
-------------------------------------------
Political. The regulatory risks Generally the Group adopts a cautious,
and uncertainties summarised above low profile and conservative approach
can be closely linked to prevailing with its activities, particularly
policies or strategies being pursued with those where there may be
by politicians or civil servants. a political dimension. When considered
These policies or strategies can necessary, the Group may seek
be affected by effective lobbying, to to develop relationships, either
including lobbying by the Group's directly or indirectly, with politicians
competitors or customers, which and civil servants to assist with
could adversely affect the Group. its dialogue with governments
and counter the risk posed by
competitor lobbying.
-------------------------------------------
Growth from international operations. In many overseas territories the
The Group is experiencing significant Group uses third party distributors
growth in a number of the overseas to sell and support its products
territories in which it sells which helps reduce its direct
its products and services. There exposure to the territory - and
are a number of specific risks hence helps reduce certain risks.
and management challenges associated The financial standing and credit
with growth in overseas territories, limits of these distributors are,
including the preservation of to the extent practicable, closely
high levels of customer service monitored. In overseas territories
and support, margins and cash where the Group has a wholly owned
collection and repatriation. subsidiary and/or employees, the
Group uses a standardised approach
to establish and monitor the trading
activities, cash balances and
delegated management authorities
of these overseas subsidiaries.
-------------------------------------------
Technological. The Group is dependent The Group provides focussed products
on its technology - and products and services within its markets
and services - continuing to be and accordingly is able to monitor
efficacious, cost effective and relevant technological developments
attractive to the marketplace. carefully - whether by competitors
There is the risk that new technologies, or third party research organisations,
products or services are developed including universities. The Group
by competitors which perform better, takes into account such technological
are easier to use or are more developments when reviewing and
cost effective than those of the adjusting its strategy. It also
Group. Further, there is a risk uses a structured approach to
that it takes longer, or costs new, different but complementary
more, than anticipated to complete technologies to de-risk the Group's
the development of new technologies exposure to specific technologies.
and/or new products.
-------------------------------------------
Uncertain adoption rates of new The Group undertakes 'Voice of
products or services. The Group the Customer' market research
is constantly developing new products and seeks to develop new products
and services around which there and services closely with existing
is inherent risk. Moreover, in or potential customers. The close
both its principal divisions (Bio involvement of customers helps
& TRaC) it is changing elements increase the Group's confidence
of its business model - and there that such new products will be
is uncertainty as to how successful well received by the market and
these new business models will also provides a good basis for
be. Further, the associated product forecast adoption rates (and revenues).
development and business model However, in reality actual adoption
migration is expensive, requires rates can only ever be established
resources and contains inherent after a product launch.
uncertainty. For example, there The Group helps mitigate, in part,
is uncertainty as to how quickly the financial uncertainty associated
new products or services will with new product launches by ensuring
be adopted by the market - and that it retains large cash balances
hence concomitant uncertainty and access to debt finance so
with revenue, profit and cash that it is able to mitigate the
generation. Note that this uncertainty effect of unexpected high or low
and risk relates to both slow adoption rates.
and rapid adoption rates. Accordingly
the Group needs to balance carefully
the amount it invests in new product
development and its manufacturing
capabilities whilst ensuring it
retains appropriate profitability
and cash balances (or access to
other sources of finance) in order
to fund high levels of growth.
-------------------------------------------
Financial. The Group has a number The Group has standardised, detailed
of international subsidiaries monthly management reporting packs
and trades with companies located which all of its subsidiaries
throughout the world. The international are required to complete. These
nature of many of its business submissions are reviewed centrally
activities results in elevated and the key points discussed at
financial risk, including, but regular subsidiary or divisional
not limited to: foreign exchange management meetings. As appropriate,
exposure, credit risk and cash foreign exchange hedging is undertaken
collection/retention/management centrally. In addition, there
(together "Key Financial Risks"). are detailed delegated management
authority levels which cover,
among other things, Key Financial
Risks.
-------------------------------------------
Legal liabilities. Given its international Generally the Group adopts a cautious,
activities, the Group could be low-profile and conservative approach
subject to litigation in a number with its activities. It has put
of different jurisdictions. By in place a number of policies
its very nature, such litigation which employees are required to
could be related to a broad number follow in order to reduce to the
of issues, including alleged patent extent practicable these risks.
infringement, problems relating Further the Group actively seeks
to the Group's technology, contravention to build a close relationship
of anti-bribery legislation or with its customers in order to
alleged incorrect completion of resolve, as appropriate, any issues
documentation associated with that may arise without the need
its service activities. for litigation
-------------------------------------------
Reliance on suppliers. Due to The Group seeks to work closely
the complexity of many of its and in partnership with its key
manufactured products, the Group suppliers. It also has a key supplier
is dependent on a number of key review / audit programme which
suppliers. These suppliers could helps the Group make strategic
supply components late, supply decisions about working more closely
poor quality components, refuse with a given supplier or, if appropriate,
to supply or cease trading. Such take the decision to identify
disruptions to the Group's supply an alternative supplier.
chain could cause major issues
to the trading activities of the
Group.
-------------------------------------------
Reliance on customers within a The Group monitors carefully the
given sector. Although the Group revenue it generates from any
is not significantly dependent single customer (or customer group)
upon one single customer, changes and if appropriate takes proactive
within a sector or sub-sector steps to reduce the proportion
could adversely affect the trading of such revenues within the subsidiary
performance of the Group. For or division - or seeks to sell
example, the pharmaceutical industry other product lines to such customers
is currently facing significant in order to diversify this risk.
challenges as a number of drugs
lose patent protection or from
the trend towards the marketing
of disposable, single-use drug
delivery systems, and accordingly
there is a risk that such changes
could affect the revenues that
the Group generates from companies
within this sector.
-------------------------------------------
Retention of key employees. The The Group has in place a number
Group has a number of key employees of measures which are designed
working for it. The loss of certain to optimise key employee retention
of these employees could be problematic including, but not limited to
for the Group. ensuring that their work is stimulating
and interesting; their remuneration
is competitive; and the work place
environment and culture is attractive.
Additionally, employees have the
opportunity, as appropriate, to
participate in equity upside from
employee share option schemes.
Dependence on key employees. As The Group actively seeks to highlight
with any Group of its size, the key employees and to consider
Group is dependent on certain ways in which the Group can reduce
key employees. Their sudden or its dependence upon them by developing
unexpected departure from the other employees' skills or, where
Group can have a disruptive effect necessary, hiring in supplementary
upon the Group's activities employees with the necessary skill
sets. Additionally, the Group's
remuneration structure is designed
so as to foster employee loyalty.
-----------------------------------------
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report and the risks and uncertainties
which affect the business are summarised above. The Group has
sufficient financial resources to cover budgeted future cash-flows,
together with contracts with its customers and suppliers across
different geographic areas and industries. The Directors, having
taken due account of the proposed disposal of the TRaC business
referred to in note 11 to the accounts, believe that the Group is
well placed to manage its business successfully despite the current
uncertain economic outlook.
In accordance with the Corporate Governance requirements the
Directors confirm that they have a reasonable expectation that the
Group has adequate financial resources to continue to trade for the
foreseeable future. Thus, they continue to adopt the going concern
basis in preparing the financial statements.
Responsibility statement
This responsibility statement has been prepared in connection
with the Group's full Annual Report and Accounts for the year ended
31 December 2014, certain parts thereof are not included within
this Preliminary Announcement.
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken as
a whole;
-- the strategic report, which is incorporated into the
directors' report, includes a fair review of the development and
performance of the business and the position of the Group and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties they face; and
-- the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Group's performance,
business model and strategy.
This responsibility statement was approved by the Board of
Directors on 18 March 2015 and is signed on its behalf by:
Nick Adams Michael Roller
Group Chief Executive Group Finance Director
Consolidated income statement
for the year ended 31 December 2014
2014 2013
Notes GBP'000 GBP'000
------------------------------------------------ ----- -------- --------
Revenue 2 45,268 44,637
Cost of sales (25,005) (24,034)
------------------------------------------------ ----- -------- --------
Gross profit 20,263 20,603
Gross profit margin 45% 46%
Operating expenses:
Sales & marketing costs (8,483) (8,329)
Administration costs (5,306) (6,344)
R&D and engineering costs (7,702) (3,027)
------------------------------------------------ ----- -------- --------
Profit from operations before exceptional Items 2,638 2,903
Impairment of intangible assets (3,866) -
------------------------------------------------ ----- -------- --------
Operating (loss)/profit 4 (1,228) 2,903
Investment revenues - 302
Finance costs (131) (124)
(Loss)/profit before tax (1,359) 3,081
Tax 5 342 (30)
------------------------------------------------ ----- -------- --------
(Loss)/profit for the year 9 (1,017) 3,051
------------------------------------------------ ----- -------- --------
Earnings per share - basic 6 (2.4)p 7.3p
- diluted (2.4)p 7.2p
------------------------------------------------ ----- -------- --------
Pre-exceptional earnings per share 4.9p -
------------------------------------------------ ----- -------- --------
Movements in reserves are set out in note 9.
All amounts are derived from continuing operations.
Consolidated statement of comprehensive income
for the year ended 31 December 2014
2014 2013
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Net (loss)/profit for the year (1,017) 3,051
Exchange differences on translation of foreign operations* (4) (37)
----------------------------------------------------------- -------- --------
Total recognised (loss)/income (1,021) 3,014
----------------------------------------------------------- -------- --------
*May be reclassified subsequently to profit and loss in
accordance with IFRS.
Consolidated balance sheet
as at 31 December 2014
2014 2013
Notes GBP'000 GBP'000
----------------------------------------------------- ----- -------- --------
Non-current assets:
Goodwill 691 691
Other intangible assets 9,023 13,318
Property, plant & equipment 14,257 14,788
Deferred tax assets 175 175
----------------------------------------------------- ----- -------- --------
24,146 28,972
----------------------------------------------------- ----- -------- --------
Current assets:
Inventories 3,358 2,512
Trade and other receivables 11,790 9,832
Derivative financial instruments - 293
Cash and cash equivalents 7 2,840 3,550
----------------------------------------------------- ----- -------- --------
17,988 16,187
----------------------------------------------------- ----- -------- --------
Total assets 42,134 45,159
----------------------------------------------------- ----- -------- --------
Current liabilities:
Trade and other payables (6,648) (7,370)
Derivative financial instruments (2) -
Current tax liabilities (581) (75)
Obligations under finance leases (104) -
Borrowings (224) (224)
Provisions (88) (77)
----------------------------------------------------- ----- -------- --------
Net current assets 10,341 8,441
----------------------------------------------------- ----- -------- --------
Non-current liabilities:
Deferred tax liabilities (1,997) (2,845)
Other non-current liabilities (1,433) (1,309)
Total liabilities (11,077) (11,900)
----------------------------------------------------- ----- -------- --------
Net assets 31,057 33,259
----------------------------------------------------- ----- -------- --------
Equity:
Share capital 8 4,254 4,243
Share premium account 801 712
Equity reserve 1,995 1,892
Capital reserve 255 255
Translation reserve (117) (113)
Retained earnings 9 23,869 26,270
----------------------------------------------------- ----- -------- --------
Equity attributable to equity holders of the Company 31,057 33,259
----------------------------------------------------- ----- -------- --------
The financial statements of Bioquell PLC, registered number
00206372, were approved by the Board of Directors and authorised
for issue on 18 March 2015.
They were signed on its behalf by:
Nicholas Adams Michael Roller
Director Director
18 March 2015 18 March 2015
Consolidated statement of changes in equity
for the year ended 31 December 2014
2014 2013
GBP'000 GBP'000
------------------------------------------------------ -------- --------
(Loss)/profit for the year (1,017) 3,051
Exchange differences (4) (37)
------------------------------------------------------ -------- --------
Total comprehensive (loss)/income in the year (1,021) 3,014
Other movements in the year:
Issued share capital 11 64
Issued share premium 89 502
Credit to equity reserve for share-based payments 123 231
Movement in deferred tax charged to equity - -
Final dividend for year ended 31 December 2013/2012 (1,404) (1,282)
------------------------------------------------------ -------- --------
Net (decrease)/increase in equity shareholders' funds (2,202) 2,529
------------------------------------------------------ -------- --------
Equity shareholders' funds at beginning of year 33,259 30,730
Equity shareholders' funds at end of year 31,057 33,259
------------------------------------------------------ -------- --------
Consolidated cash flow statement
for the year ended 31 December 2014
2014 2013
Note GBP'000 GBP'000
------------------------------------------------------ ---- -------- --------
Net cash from operating activities 10 3,750 7,506
------------------------------------------------------ ---- -------- --------
Investing activities
Proceeds on disposal of property, plant and equipment 53 24
Purchases of property, plant and equipment (2,418) (3,940)
Expenditure on product development (1,009) (2,270)
Purchase of intangible asset (6) (494)
------------------------------------------------------ ---- -------- --------
Net cash used in investing activities (3,380) (6,680)
------------------------------------------------------ ---- -------- --------
Financing activities
Proceeds on issue of ordinary shares 100 566
Dividends paid on ordinary shares (1,404) (1,282)
Repayment of borrowings (328) (135)
New finance lease obligations 556 -
New bank loans raised - 595
------------------------------------------------------ ---- -------- --------
Net cash used in financing activities (1,076) (256)
------------------------------------------------------ ---- -------- --------
Net (decrease)/increase in cash and cash equivalents (706) 570
------------------------------------------------------ ---- -------- --------
Cash & cash equivalents at beginning of year 3,550 3,010
Effect of foreign exchange rate changes (4) (30)
Cash & cash equivalents at end of year 2,840 3,550
------------------------------------------------------ ---- -------- --------
Notes to the results
for the year ended 31 December 2014
1. Basis of preparation
The financial information in this announcement has been
extracted from the financialstatements for the year ended 31
December 2014 which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and International Financial Reporting
Interpretations Committee (IFRIC) interpretations issued and
effective at the time of preparing these accounts.
During the year, the Group has applied IFRS10 'Consolidated
financial statements', IFRS12 'Disclosure of interest in other
entities', IFRS 11 'Joint arrangements', IAS 27 (revised) 'Separate
financial statements', IAS 28 (revised) 'Investments in associates
and joint ventures', IFRS 7 (amended) 'Financial instruments:
disclosures', IAS 32 (amended) 'Financial instruments:
presentation' and IAS 39 'Financial instruments: recognition and
measurement'. Their adoption has not had a material impact on the
disclosures and amounts reported. Otherwise the principal Group
accounting policies are the same as set out in detail in the Annual
Report and Accounts 2013 and have been applied consistently
throughout the years ended 31 December 2013 and 2014.
The financial information set out in the full year results
announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2014 or 2013 for the purpose of
section 435 of Companies Act 2006, but it is derived from those
accounts. Statutory accounts for 2013 have been delivered to the
Registrar of Companies and those for 2014 will be delivered
following the Company's Annual General Meeting on 18 May 2015. The
auditors' reports on both the 2013 and 2014 accounts were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) of the Companies Act 2006.
2. Revenue
An analysis of the Group's revenue is as follows:
2014 2013
GBP'000 GBP'000
--------------------------------------- -------- --------
Sales of goods 16,004 17,704
Revenue from the rendering of services 29,264 26,933
--------------------------------------- -------- --------
45,268 44,637
--------------------------------------- -------- --------
3. Business and geographical segments
For management purposes, the Group is currently organised into
two divisions - Bio-decontamination ("BIO") and Testing, Regulatory
and Compliance ("TRaC"). These divisions are consistent with the
internal reporting as reviewed by the Chief Executive. Segment
information about these businesses is presented below:
BIO TRaC Consolidated
Year ended 31 December 2014 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- ------------
Revenue
Total revenue 27,266 18,002 45,268
Result
Segment result before exceptional 949 3,450 4,399
Impairment of intangibles (3,866) - (3,866)
------------------------------------- -------- -------- ------------
Segment result (2,917) 3,450 533
------------------------------------- -------- -------- ------------
Unallocated head office costs (1,761)
------------------------------------- -------- -------- ------------
Profit from operations (1,228)
------------------------------------- -------- -------- ------------
Finance costs and investment revenue (131)
------------------------------------- -------- -------- ------------
Profit before tax (1,359)
------------------------------------- -------- -------- ------------
Tax 342
------------------------------------- -------- -------- ------------
Profit for the year (1,017)
------------------------------------- -------- -------- ------------
Other information
Capital additions 2,031 1,379 3,410
Unallocated corporate additions -
------------------------------------- -------- -------- ------------
Total capital additions 3,410
------------------------------------- -------- -------- ------------
Depreciation and amortisation 2,960 1,218 4,178
Unallocated corporate depreciation 44
------------------------------------- -------- -------- ------------
Total depreciation and amortisation 4,222
------------------------------------- -------- -------- ------------
Assets and liabilities are allocated to reportable segments.
BIO TRaC Consolidated
Balance sheet as at 31 December 2014 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- ------------
Assets
Segment assets 24,353 15,372 39,725
------------------------------------- -------- -------- ------------
Unallocated corporate assets 2,409
------------------------------------- -------- -------- ------------
Consolidated total assets 42,134
------------------------------------- -------- -------- ------------
Liabilities
Segment liabilities 6,787 3,071 9,858
------------------------------------- -------- -------- ------------
Unallocated corporate liabilities 1,219
------------------------------------- -------- -------- ------------
Consolidated total liabilities 11,077
------------------------------------- -------- -------- ------------
Unallocated corporate assets include cash held by the parent
company, derivative valuations and fixed assets, unallocated
corporate liabilities include a loan held by the parent
company.
BIO TRaC Consolidated
Year ended 31 December 2013 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- ------------
Revenue
Total revenue 27,866 16,771 44,637
Result
Segment result 1,045 3,363 4,408
------------------------------------- -------- -------- ------------
Unallocated head office costs (1,505)
------------------------------------- -------- -------- ------------
Profit from operations 2,903
------------------------------------- -------- -------- ------------
Finance costs and investment revenue 178
------------------------------------- -------- -------- ------------
Profit before tax 3,081
------------------------------------- -------- -------- ------------
Tax (30)
------------------------------------- -------- -------- ------------
Profit for the year 3,051
------------------------------------- -------- -------- ------------
Other information
Capital additions 3,815 2,894 6,709
Unallocated corporate additions -
------------------------------------- -------- -------- ------------
Total capital additions 6,709
------------------------------------- -------- -------- ------------
Depreciation and amortisation 3,009 1,204 4,213
Unallocated corporate depreciation 43
------------------------------------- -------- -------- ------------
Total depreciation and amortisation 4,256
------------------------------------- -------- -------- ------------
Segment profit represents the profit earned by each segment
without allocation of central administration costs including
Directors' salaries, investment revenue and finance costs and
income tax expense. This is the measure reported to the Group's
Chief Executive for the purpose of resource allocation and
assessment of segment performance.
BIO TRaC Consolidated
Balance sheet as at 31 December 2013 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- ------------
Assets
Segment assets 27,792 12,887 40,679
------------------------------------- -------- -------- ------------
Unallocated corporate assets 4,480
------------------------------------- -------- -------- ------------
Consolidated total assets 45,159
------------------------------------- -------- -------- ------------
Liabilities
Segment liabilities 7,309 3,244 10,553
------------------------------------- -------- -------- ------------
Unallocated corporate liabilities 1,347
------------------------------------- -------- -------- ------------
Consolidated total liabilities 11,900
------------------------------------- -------- -------- ------------
Geographical segments
The Group's bio-decontamination equipment is manufactured within
the UK and sold into the UK, Europe and Rest of World markets. The
TRaC segment offers services from bases within the UK and the
majority of its revenue is generated within the UK.
The following table provides an analysis of the Group's sales by
geographical market, irrespective of the origin of the goods or
services:
Year ended Year ended
31 December 31 December
2014 2013
Sales revenue by geographical market GBP'000 GBP'000
------------------------------------- ------------ ------------
UK 21,995 20,165
Rest of Europe 8,593 8,816
Rest of World 14,680 15,656
------------------------------------- ------------ ------------
45,268 44,637
------------------------------------- ------------ ------------
The following is an analysis of the carrying amount of segment
assets, and additions to property, plant and equipment and
intangible assets, analysed by the geographical area in which the
assets are located:
Additions to
property,
plant and equipment
Carrying amount and intangible
of segment assets assets
-------------------------- --------------------------
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------ ------------ ------------ ------------
UK 21,601 26,259 3,183 6,313
Rest of Europe 2,100 2,249 81 65
Rest of World 445 464 146 331
--------------- ------------ ------------ ------------ ------------
24,146 28,972 3,410 6,709
--------------- ------------ ------------ ------------ ------------
4. Profit from operations
(Loss)/profit from operations has been arrived at after
charging/(crediting):
2014 2013
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Research & development costs 2,340 1,613
Impairment of intangible assets 3,866 -
Depreciation of property, plant and equipment 2,757 2,906
Amortisation of development costs 1,238 1,127
Amortisation of trademarks, patents and licence fees 251 223
Cost of inventories recognised as an expense 8,749 6,933
Cost of inventory written off in the year 50 -
Staff costs 19,577 19,988
Loss on disposal of property, plant and equipment 129 55
Net foreign exchange (gain)/loss (98) 107
----------------------------------------------------- -------- --------
A more detailed analysis of auditors' remuneration is provided
below:
2014 2013
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Fees payable to the Company's auditors for the audit
of the Company's annual accounts 30 30
Fees payable to the Company's auditors for the audit
of the subsidiaries pursuant to legislation 105 104
----------------------------------------------------- -------- --------
Total audit fees 135 134
----------------------------------------------------- -------- --------
Audit related assurance services 5 6
Taxation compliance services - 17
----------------------------------------------------- -------- --------
Total non-audit fees 5 23
----------------------------------------------------- -------- --------
5. Tax
2014 2013
GBP'000 GBP'000
----------------------------------- -------- --------
UK corporation tax current year (500) (184)
UK corporation tax prior year (6) 24
Deferred tax credit current year 844 227
Deferred tax adjustment prior year 4 (97)
----------------------------------- -------- --------
342 (30)
----------------------------------- -------- --------
Corporation tax is calculated at 21.5% (2013: 23.5%) of the
estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge for the year can be reconciled to the profit per the
income statement as follows:
2014 2013
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
(Loss)/profit before tax (1,359) 3,081
Tax at the UK corporation rate of 21.5% (2013: 23.5%) 292 (724)
Adjusted for:
Tax effect of expenses not deductible in determining
taxable profit (93) (108)
Effect on deferred tax asset of movement in share
price (121) (39)
Effect of research and development relief 338 671
Tax effect of different tax rate of subsidiaries operating
in other jurisdictions 35 10
Deferred tax not recognised on other timing differences - (159)
Prior year adjustment (2) (73)
Utilisation of tax losses not recognised (42) -
Effective change in tax rate (65) 392
----------------------------------------------------------- -------- --------
342 (30)
----------------------------------------------------------- -------- --------
Nothing was charged directly to equity (2013: charge to equity
of GBPnil).
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended Year ended
31 December 31 December
2014 2013
Earnings GBP'000 GBP'000
--------------------------------------------------- ------------ ------------
(Loss)/earnings for the purposes of basic earnings
per share being net profit attributable to equity
holders of the parent (1,017) 3,051
--------------------------------------------------- ------------ ------------
Year ended Year ended
31 December 31 December
Number of shares 2014 2013
--------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for the
purposes of basic earnings per share 42,512,990 41,920,410
Effect of dilutive potential ordinary shares:
- share options - 576,681
--------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 42,512,990 42,497,091
--------------------------------------------------- ------------ ------------
7. Analysis of net cash
2014 2013
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Cash and cash equivalents 2,840 3,550
Bank loan - due within one year (224) (224)
- due after one year (1,085) (1,309)
Finance leases - due within one year (104) -
- due after one year (348) -
--------------------------------------------- --------- ---------
1,079 2,017
--------------------------------------------- --------- ---------
8. Share capital
2014 2013
------------------------------------------------- ------------------- -------------------
Number GBP'000 Number GBP'000
------------------------------------------------- ---------- ------- ---------- -------
Authorised
Ordinary shares of 10p each 55,947,780 5,595 55,947,780 5,595
Redeemable deferred ordinary shares of GBP1 each 255,222 255 255,222 255
------------------------------------------------- ---------- ------- ---------- -------
5,850 5,850
------------------------------------------------- ---------- ------- ---------- -------
Called up, allotted and fully paid
Ordinary shares of 10p each 42,535,363 4,254 42,432,427 4,243
------------------------------------------------- ---------- ------- ---------- -------
4,254 4,243
------------------------------------------------- ---------- ------- ---------- -------
During the year the Company issued a total of 102,936 ordinary
shares of 10p each for GBP99,000 on the conversion of options under
the executive share option schemes and the Save-as-you-earn
scheme.
9. Retained earnings
GBP'000
---------------------------- -------
Balance at 1 January 2013 24,426
Net profit for the year 3,051
Payment of dividend (1,282)
Exercised share options 75
---------------------------- -------
Balance at 1 January 2014 26,270
Net loss for the year (1,017)
Payment of dividend (1,404)
Exercised share options 20
---------------------------- -------
Balance at 31 December 2014 23,869
---------------------------- -------
10. Notes to the cash flow statement
2014 2013
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
(Loss)profit from operations (1,228) 2,903
Adjustments for:
Depreciation of property, plant and equipment 2,776 2,888
Amortisation and impairment losses of intangible assets 1,486 1,351
Impairment of intangible assets 3,824 -
Share-based payments 123 231
Loss on disposal of property, plant and equipment 129 55
Increase in provisions 11 1
--------------------------------------------------------- -------- --------
Operating cash flows before movements in working capital 7,121 7,429
(Increase)/decrease in inventories (828) 240
(Increase)/decrease in receivables (1,628) 99
Decrease in payables (784) (288)
--------------------------------------------------------- -------- --------
Cash generated by operations 3,881 7,480
Interest paid (131) (124)
Income taxes received - 150
--------------------------------------------------------- -------- --------
Net cash from operating activities 3,750 7,506
--------------------------------------------------------- -------- --------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
11. Post balance sheet event
On 12 March 2015, the Group announced the proposed disposal,
subject to shareholder approval, of the TRaC division for a cash
consideration of GBP44.5million.
12. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are
therefore not disclosed.
Remuneration of key management personnel
The total remuneration for all of the Directors of Bioquell PLC,
who are the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24 Related
Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the
Directors' Remuneration Report in the Annual Report and
Accounts.
2014 2013
GBP'000 GBP'000
----------------------------- -------- --------
Short-term employee benefits 719 816
Post-employment benefits 75 81
Share-based payments 17 79
----------------------------- -------- --------
811 976
----------------------------- -------- --------
This announcement has been posted on the Company's website at
www.bioquellplc.com. It is expected that the annual report and
accounts will be posted to shareholders on 15 April 2015 and a copy
will be posted on the Company's website at that time. Further
copies can be obtained after that date from the Company Secretary,
Bioquell plc, 52 Royce Close, West Portway, Andover, SP10 3TS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DDLFFEXFXBBE
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