TIDMCRX
RNS Number : 2876W
Cyprotex PLC
18 August 2015
Cyprotex PLC
("Cyprotex" or "the Company")
Interim Results 2015
Revenues up significantly and return to operational
profitability
Cyprotex PLC (AIM: CRX), a specialist ADME-Tox Contract Research
Organisation (CRO), today reports its interim results for the half
year to 30 June 2015.
Financial Highlights
-- Revenues up 28% to GBP6.93 million (H1 2014: GBP5.41 million).
-- Gross margins were 76.7% (H1 2014: 78.7%, FY 2014: 75.0%).
-- Operating profit of GBP0.36 million (H1 2014: Operating loss GBP0.58 million).
-- Underlying EBITDA^ of GBP1.10 million (H1 2014: GBP0.04 million).
-- Cash of GBP4.13 million (H1 2014: GBP4.56 million, FY 2014: GBP2.93 million).
^ excluding share based payment charge
Operational Highlights
-- The investment plan for all 4 sites which commenced in early
2014 and completed in early 2015 is now bearing fruit and has
contributed significantly to the revenue growth seen in H1.
-- Investment in a new drug transporter facility for the support
of full drug-drug interaction studies for regulatory submission,
QTof based metabolite identification and 3D tissue-based toxicology
assays at our UK sites has been highly successful in revenue
generation. Successful translocation of our existing toxicology
facility to a second UK site at the BioHub, Alderley Park.
-- Validation of a replica High Throughput (HT) ADME screening
platform at our Watertown site has also been completed and the
platform is now supporting large scale screening contracts for the
US Government.
-- Investment in upgrading our toxicology assays at our
Kalamazoo site (formerly CeeTox) to bring them fully into OECD
compliance has been completed and these assays, along with our
proprietary SenCeeTox(R) skin sensitization assays have been well
received by existing and new customers.
-- Website upgrades including a new blog page have contributed
to a noticeable improvement in the global recognition of the
Cyprotex brand.
-- 103 new customers in H1 2015 (111 in H1 2014).
-- Successful completion and continued expansion of two large US
Environmental Protection Agency (EPA) contracts.
-- Largest customer is 12.3% (FY 2014: 7.8%) of revenues and
represents a continuing large strategic deal with a major
pharmaceutical company.
Post Period-End Highlights
-- Expansion of Research & Development into regulatory
genotoxicity services and the creation of a new Biosciences
Division across all four global sites.
Ian Johnson, Chairman of Cyprotex PLC, said:
"I am pleased to report a significant increase in first half
revenues, which in large part is the result of the significant
investment made in 2014 in widening and deepening our ADME and
Toxicity testing services on all four of our global sites. The
investment programme resulted in the generation of an operational
loss for 2014, however, as anticipated the Company has rapidly
returned to operational profitability in the first half of the year
and the Board remain confident that trading for the year is in line
with expectations and that this improvement in financial
performance will be sustained in the second half of 2015 as we
consolidate our new and improved service offerings."
For further information:
Cyprotex PLC Tel: +44 (0) 1625
505 100
Dr Anthony Baxter, Chief Executive ir@cyprotex.com
Officer www.cyprotex.com
John Dootson, Chief Financial
Officer
Mark Warburton, Chief Operating
Officer and Legal Counsel
N+1 Singer (Nomad and broker to Tel: +44 (0)20
Cyprotex) 7496 3000
Shaun Dobson shaun.dobson@n1singer.com
Jen Boorer jennifer.boorer@n1singer.com
www.n1singer.com
About Cyprotex PLC
Cyprotex is listed on the AIM market of the London Stock
Exchange (CRX). It has sites in Macclesfield and Alderley Park,
near Manchester in the UK, Watertown, MA and Kalamazoo, MI in the
US. The Company was established in 1999 and works with more than
1100 partners within the pharmaceutical and biotech industry,
cosmetics and personal care industry and the chemical industry.
Cyprotex acquired Apredica and the assets of Cellumen Inc. in
August 2010 and the combined business provides support for a wide
range of experimental and computational ADME-Tox and PK services,
extending from early drug discovery through to IND submission. The
acquisition of the assets and business of CeeTox in January 2014
has enabled Cyprotex to expand its range of services to target the
personal care, cosmetics and chemical industries. The Company's
core capabilities include high quality in vitro ADME screening
services, mechanistic toxicology and high content toxicology
screening services, including our proprietary CellCiphr(R) toxicity
prediction technology, predictive modelling using PBPK and QSAR
techniques, including Cloe(R) PK for in vivo PK prediction, and a
range of skin, ocular and endocrine disruption services. For more
information, see www.cyprotex.com
Chairman and Chief Executive Officer's Statement
The Company has made a very promising start to the year
reporting a 28% increase in sales over the corresponding period
last year. More importantly, the Company has returned to
operational profitability.
The increase in sales is predominantly due to the investments
made as part of a wide ranging strategic investment review which
commenced in early 2014. Whilst last year we experienced delays in
validating some of these assays and incurred the corresponding
overhead costs which had a resultant impact on profitability, the
decision to make the investments, financed by the cash injection of
GBP6.88 million in September 2013 led by Harwood Capital, was the
right one for the business.
The ADME-Tox services market remains fragmented and highly
competitive and our planned expansion into high value and
technically challenging new service offerings is a continuing part
of our drive to make Cyprotex the acknowledged world leader in the
provision of such services and to positively differentiate
ourselves in the eyes of our customers.
Since the beginning of 2014 the Company has made significant
investments with close to GBP2 million of capital expenditure
including GBP0.34 million in H1 2015. At our Macclesfield site, and
at the new BioHub facility at Alderley Park we have now validated
the full panel of drug transporter assays, the data from which is
required by both the US FDA (Food and Drug Administration) and EMA
(European Medicines Agency) for regulatory submissions. We have
also invested in a new Quadrupole Time of Flight Mass Spectrometer.
This particularly sensitive instrument is being used to identify
potential metabolites produced when a drug substance is
administered, which is another critical requirement by the
regulatory authorities before a drug can enter clinical trials. We
have also invested in developing novel 3-dimensional tissue models
for use in toxicology testing. These models are more representative
of tissues in the body than existing 2-dimensional models and
provide advantages such as enhanced longevity and improved
functionality. In Watertown, we have replicated our highly
successful High Throughput (HT) ADME screening facility. This was a
very challenging project but we are now running samples on this new
platform including high volume contracts. We anticipate that the HT
platform will be a driver of significant growth for this US site in
the future based on our customers' requirements for fast turnaround
and high quality data. In Kalamazoo, we have upgraded many of the
existing assays to comply with OECD (Organisation for Economic
Co-operation and Development) guidelines under GLP (Good Laboratory
Practice) conditions.
The results of these investments have benefitted all four sites
in terms of revenue growth with much of the increase seen in the
first half coming from these new services. Growth has also come
from larger contracts from existing customers, which is a pleasing
trend. In part this is due to increasing client inter-dependency
between the sites. Customers, who might perhaps have only chosen to
run ADME assays with us in the past, are now expanding their
contracts to include toxicology services. In addition, large
Government contracts, part of which was outsourced to third parties
in the past are now able to be run entirely within the Company at
our various sites.
US operations in 2014 were loss making and we are pleased to
report that while there remain challenges these losses are
diminishing. The performance of the UK sites, in terms of revenue
generation and profitability, has been outstanding and has largely
driven the 1(st) half results.
Customer Relationships
We have also invested in sales and marketing. The upgraded
website now incorporates all the assays we offer across all the
sites. Our new blog was launched on the Cyprotex website in April
2015, and this, along with a focus on social media, has driven a
significant increase in customer enquiries. We are now focussing on
making the Cyprotex name the brand of choice for ADME -Tox
screening services given that we now have over 1100 customers
including many of the major and medium sized pharmaceutical
companies as well as clients in many other industry segments
including cosmetics, agrochemicals, industrial chemicals, medical
devices and aviation.
Several of our larger customers have signed up to longer term
exclusive service contracts with Cyprotex which has benefitted us
on several levels and is a reflection of the growing confidence our
customers have in our ability to deliver a quality service.
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We have spent considerable marketing efforts on relaunching and
promoting our skin, ocular and endocrine disruption testing
services offered from our Kalamazoo site. These efforts appear to
be paying off with the growth of revenues for services being very
encouraging.
We have completed several projects from customers in Japan
following our increased marketing in the Far East. Furthermore, we
have secured several other Asian clients indicating the expansion
of our brand reach.
Post period end on 16 July 2015 the Company announced the launch
of a new Biosciences division to complement its existing ADME-Tox
business. The new Biosciences division enables customers to access
expertise in 2D and 3D cell -based efficacy screening to
investigate the therapeutic or biological effect of new
molecules.
Financial Performance
Turnover is 28% higher than the comparable period last year
driven by our investment strategy yielding benefits and growth from
existing customers particularly in higher value contracts. Our UK
site revenues, which contribute some three quarters of the total
reported, are significantly enhanced compared to those reported in
the comparative period, up 49%. Our revenues from the Watertown
site are slightly down on the comparative period, due to less
Government contract work being placed at this site over the
period.
Gross margins have grown to 76.7%, up from 75.0% for FY 2014
with decreased outsourcing in H1 2015 to partners as several new
services have been brought in-house.
We have invested in R&D projects to be able to launch new,
competitive assays to the ADME-Tox market. In terms of capital
expenditure, which is undertaken to support R&D programmes and
drive new efficiencies, total additions in H1 2015 were GBP0.34
million with total investments in laboratory equipment in the last
18 months approaching GBP2.0 million. Upgrading our equipment and
investment in new capabilities brings additional depreciation
charges to the income statement and as a consequence the
depreciation charge is 16% higher at GBP0.57 million (H1 2014:
GBP0.50 million).
We have invested substantially in our internal expertise, skills
and knowledge base increasing staff numbers from 112 at 30 June
2014 to 116 at 30 June 2015.
With the improved trading the Company reports a reversal of an
operating loss of GBP0.58 million in H1 2014 to an operating profit
in H1 2015 of GBP0.36 million, an increase of GBP0.94 million.
Similarly, underlying EBITDA has increased to GBP1.10 million, up
GBP1.05 million from H1 2014.
In September 2013, the Company issued Loan Notes to the value of
GBP7.0 million. One of the conditions attached to the issue of
these Loan Notes is that the value of an associated embedded
derivative is linked to changes in the Company's share price via
conversion or notional conversion rights into ordinary shares. The
Loan Note holders will then ultimately effectively share with
ordinary shareholders any increase in value of the Company above 60
pence per share. The value of the embedded derivative associated
with both Loan Note liabilities is linked to the average share
price in the 30 days preceding the reporting date. At 30 June 2015,
this was 54.0 pence (v 43.8 pence at 31 December 2014). It has been
calculated that this relative increase in share price leads to an
upward revision in the fair value of the embedded derivative
associated with the Loan Notes by GBP0.525 million in H1 2015 to
GBP1.875 million. This increase is recorded as a finance charge in
the income statement in H1 2015.
The Company's cash balances remain robust and stood at GBP4.13
million at period end, up from GBP2.93 million at the start of the
year. Principal movements are GBP1.69 million generated from
operations, GBP0.34 million spent on tangible fixed assets and
GBP0.15 million in servicing debt and contingent consideration
obligations.
Strategy
Our stated strategy for future growth remains dependent on three
factors. The first is growing our existing service revenues by
better marketing our services and by outperforming our competitors
in what is still a fragmented market. The second is growing
revenues by investing in targeted Research & Development to
provide new services to address customer needs which will provide
superior quality revenues. And finally, to grow the business by
acquisition of selective assets or companies which are technically
and philosophically aligned with the Cyprotex vision.
The investments made in 2014/15 which are now being actively
sold to customers have significantly strengthened the second arm of
this strategy as evidenced by the results in H1 2015. We intend to
prioritise this internal investment strategy for the foreseeable
future.
Outlook
Our 2014/15 investment plan in new Research & Development to
provide state-of-the-art equipment and valuable assays is now
complete and these new services have been launched and well
received by existing and new customers alike. Revenues from these
services have contributed significantly to the excellent growth we
have seen in the first half. Growth from existing customers
particularly in higher value contracts to assist with regulatory
filings of new drug substances has also been noted. We expect these
growth trends to continue into the 2(nd) half of the year and we
should also benefit from the usual and historical increase in
general trading in the second part of the year.
We will continue to focus on improving operational efficiency,
particularly in the US as well as making selective investments in
new services, albeit on a smaller scale for the remainder of 2015
and 2016.
The Board would like to thank all of our employees for an
excellent 1(st) half performance and looks forward to being able to
report further improvements in financial performance in the second
half, in line with management expectations.
Ian Johnson Anthony D Baxter
Chairman Chief Executive
Officer
18 August 2015
Consolidated interim income statement
six months to 30 June 2015
Unaudited Unaudited Audited
6 months 6 months year to
to to
30 June 30 June 31 December
Note 2015 2014 2014
GBP GBP GBP
Continuing operations
Revenue 4 6,928,080 5,411,699 11,570,719
Cost of sales (1,610,458) (1,154,123) (2,887,704)
------------ ------------ -------------
Gross profit 5,317,622 4,257,576 8,683,015
Administrative costs
- Goodwill impairment - - (3,040,047)
Administrative costs
- Other (4,956,724) (4,841,617) (9,392,254)
------------ ------------ -------------
Administrative costs
- Total (4,956,724) (4,841,617) (12,432,301)
------------ ------------ -------------
Operating profit/(loss) 360,898 (584,041) (3,749,286)
Finance income 5 8,934 391,689 266,904
Finance cost 5 (757,118) (235,985) (469,261)
------------ ------------ -------------
Loss before tax (387,286) (428,337) (3,951,643)
Income tax 23,393 23,613 (219,783)
------------ ------------ -------------
Loss for the period (363,893) (404,724) (4,171,426)
------------ ------------ -------------
Attributable to
the equity holders
of the parent (363,893) (404,724) (4,171,426)
------------ ------------ -------------
Loss per share
Basic loss per share 6 (1.62)p (1.80)p (18.59)p
Diluted loss per
share 6 (1.62)p (1.80)p (18.59)p
Consolidated interim statement of comprehensive income
six months to 30 June 2015
Unaudited Unaudited Audited
6 months 6 months year to
to to
30 June 30 June 31 December
2015 2014 2014
GBP GBP GBP
Continuing operations
Loss for the period (363,893) (404,724) (4,171,426)
Other comprehensive income/(loss)
Exchange differences on translation
of overseas operations 24,377 (126,596) 161,087
---------- ---------- ------------
Total comprehensive loss for
the period (339,516) (531,320) (4,010,339)
---------- ---------- ------------
Attributable to
the equity holders of the
parent (339,516) (531,320) (4,010,339)
---------- ---------- ------------
Consolidated interim statement of financial position
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at 30 June 2015
Unaudited Unaudited Audited
6 months ended 6 months ended year
ended
30 June 30 June 31 December
2015 2014 2014
Note GBP GBP GBP
ASSETS
Non current assets
Property, plant and equipment 9 4,215,111 4,821,159 4,417,391
Intangible fixed assets 10 597,492 3,424,636 668,486
Deferred taxation 541,052 842,010 539,804
---------------- ---------------- -------------
5,353,655 9,087,805 5,625,681
---------------- ---------------- -------------
Current assets
Inventories 777,413 613,561 734,684
Trade receivables 2,172,362 1,512,764 2,048,070
Other receivables 955,016 1,360,117 1,614,745
Income tax 95,444 - 95,444
Cash and cash equivalents 4,128,486 4,558,549 2,925,029
---------------- ---------------- -------------
8,128,721 8,044,991 7,417,972
---------------- ---------------- -------------
Total assets 13,482,376 17,132,796 13,043,653
---------------- ---------------- -------------
LIABILITIES
Current liabilities
Trade payables 452,303 1,298,485 397,587
Other payables 824,531 785,568 770,431
Income tax - 1,364 -
Obligations under finance leases 204,881 267,908 238,862
Provisions 11 - 25,681 -
1,481,715 2,379,006 1,406,880
---------------- ---------------- -------------
Non current liabilities
Obligations under finance leases 294,565 524,695 398,278
Other borrowings 5 9,336,911 8,234,273 8,593,959
Provisions 11 39,231 18,300 38,232
Deferred tax liabilities 143,115 132,342 157,634
9,813,822 8,909,610 9,188,103
---------------- ---------------- -------------
Total liabilities 11,295,537 11,288,616 10,594,983
---------------- ---------------- -------------
Net assets 2,186,839 5,844,180 2,448,670
---------------- ---------------- -------------
EQUITY- attributable to equity holders of the parent
Share capital 7 224,427 224,341 224,427
Share premium account 12,222,842 12,217,742 12,222,842
Other reserve 292,566 292,566 292,566
Share based payment reserve 982,691 826,683 905,006
Profit and loss account (11,535,687) (7,717,152) (11,196,171)
---------------- ---------------- -------------
Total equity 2,186,839 5,844,180 2,448,670
---------------- ---------------- -------------
Consolidated interim statement of changes in equity
six months to 30 June 2015
Share Share Other Share Profit Total
capital premium reserve based and loss equity
account payment account
reserve
GBP GBP GBP GBP GBP GBP
Balance at 1 January
2015 224,427 12,222,842 292,566 905,006 (11,196,171) 2,448,670
--------- ----------- --------- --------- ------------- ----------
Loss for the period - - - - (363,893) (363,893)
Other comprehensive
income
Exchange differences
on retranslation
of overseas operations - - - - 24,377 24,377
Total comprehensive
profit for the
period - - - - (339,516) (339,516)
--------- ----------- --------- --------- ------------- ----------
Share based payment
charge - - - 77,685 - 77,685
--------- ----------- --------- --------- ------------- ----------
Balance at 30 June
2015 224,427 12,222,842 292,566 982,691 (11,535,687) 2,186,839
--------- ----------- --------- --------- ------------- ----------
GBP GBP GBP GBP GBP GBP
Balance at 1 January
2014 224,341 12,217,742 292,566 765,383 (7,185,832) 6,314,200
-------- ----------- -------- -------- ------------ ----------
Loss for the period - - - - (404,724) (404,724)
Other comprehensive
loss
Exchange differences
on retranslation
of overseas operations - - - - (126,596) (126,596)
Total comprehensive
loss for the period - - - - (531,320) (531,320)
-------- ----------- -------- -------- ------------ ----------
Share based payment
charge - - - 61,300 - 61,300
-------- ----------- -------- -------- ------------ ----------
Balance at 30 June
2014 224,341 12,217,742 292,566 826,683 (7,717,152) 5,844,180
-------- ----------- -------- -------- ------------ ----------
GBP GBP GBP GBP GBP GBP
Balance at 1 January
2014 224,341 12,217,742 292,566 765,383 (7,185,832) 6,314,200
-------- ----------- -------- -------- ------------- ------------
Loss for the year - - - - (4,171,426) (4,171,426)
Other comprehensive
income
Exchange differences
on retranslation
of overseas operations - - - - 161,087 161,087
Total comprehensive
loss for the year - - - - (4,010,339) (4,010,339)
-------- ----------- -------- -------- ------------- ------------
Issue of share
capital
- conversion of
Loan Notes 86 5,100 - - - 5,186
Share based payments
transactions - - - 139,623 - 139,623
-------- ----------- -------- -------- ------------- ------------
Balance at 31 December
2014 224,427 12,222,842 292,566 905,006 (11,196,171) 2,448,670
-------- ----------- -------- -------- ------------- ------------
Consolidated interim statement of cash flows
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six months to 30 June 2015
Note Unaudited Unaudited Audited
6 months 6 months Year to
to to
30 June 30 June 31 December
2015 2014 2014
Cash flows from operating GBP GBP GBP
activities
Loss after taxation (363,893) (404,724) (4,171,426)
Adjustments for:
Depreciation of property,
plant and equipment 9 573,170 495,308 1,039,084
Amortisation of intangible
assets 10 83,509 68,171 140,352
Impairment of intangible assets - - 3,040,047
Share based payment charge 8 77,685 61,300 139,623
Loss/(gain) on disposals of
property, plant and equipment 77 531 (1,669)
Finance income (8,934) (391,689) (266,904)
Finance cost 757,118 235,985 469,261
Taxation recognised in the
income statement (23,393) (23,613) 219,783
Decrease/(increase) in trade
and other receivables 577,299 (108,205) (805,184)
Increase in inventories (36,264) (103,334) (209,370)
Increase/(decrease) in trade
and other payables 49,985 (364,558) (859,361)
Movement in provisions 11 - (42,169) (49,764)
Cash generated from/(used
in) operations 1,686,359 (576,997) (1,315,528)
Taxation paid - - (6,387)
Net cash generated from/(used
in) operating activities 1,686,359 (576,997) (1,321,915)
---------- ------------ ------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (342,234) (860,193) (1,486,913)
Proceeds from disposal of
property, plant and equipment - 343 2,543
Expenditure on intangible
assets - (66,311) (191,107)
Acquisition of business - (837,107) (837,107)
Interest received 8,934 6,696 24,585
---------- ------------ ------------
Net cash used in investing
activities (333,300) (1,756,572) (2,487,999)
---------- ------------ ------------
Cash flows from financing
activities
Interest paid (14,166) (25,941) (37,020)
Payment of finance lease liabilities (138,027) (160,576) (317,200)
Payment of contingent consideration - (12,408) (8,903)
Net cash used in financing
activities (152,193) (198,925) (363,123)
---------- ------------ ------------
Net increase/(decrease) in
cash and cash equivalents 1,200,866 (2,532,494) (4,173,037)
Exchange differences on cash
and cash equivalents 2,591 (3,565) 3,458
Cash and cash equivalents
at beginning of period 2,925,029 7,094,608 7,094,608
---------- ------------ ------------
Cash and cash equivalents
at end of period 4,128,486 4,558,549 2,925,029
---------- ------------ ------------
Notes to the interim condensed consolidated financial
statements
six months to 30 June 2015
1. Nature of operations and general information
Cyprotex PLC ('Cyprotex') and subsidiaries' (together 'the
Group') principal activity is the provision of in vitro and in
silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion,
Toxicity, and Pharmacokinetic) information to a number of different
industries including the Pharmaceutical, Biotechnology, Cosmetic,
Personal Care, Agrochemical, Chemical Industries and Academia.
Cyprotex's vision is to provide, in partnership with our customers
in drug discovery and development, the highest quality, fastest
turnaround and most cost effective ADMET and pharmacokinetic data
to those customers.
Cyprotex PLC is the Group's ultimate parent company. It is
incorporated and domiciled in England and Wales. The address of
Cyprotex PLC's registered office is 100 Barbirolli Square,
Manchester M2 3AB. The addresses of its principal places of
business are 15 Beech Lane, Macclesfield, Cheshire, United Kingdom,
SK10 2DR, BioHub at Alderley Park, Alderley Edge, Cheshire, SK10
4TG, 313 Pleasant Street, Watertown, Massachusetts, MA02472 USA and
4717 Campus Drive, Kalamazoo, Michigan MI49008 USA. It trades
through its wholly owned subsidiaries, Cyprotex Discovery Limited
based in Macclesfield and Alderley Park in the UK and Cyprotex US,
LLC in Watertown and Kalamazoo in the USA. Cyprotex PLC's shares
are listed on the Alternative Investment Market of the London Stock
Exchange.
Cyprotex's interim condensed consolidated financial statements
('the interim financial statements') are presented in Pounds
Sterling (GBP), which is also the functional currency of the parent
company. These interim financial statements have been approved for
issue by the Board of Directors on 18 August 2015.
The financial information for the year ended 31 December 2014
set out in these interim financial statements does not constitute
statutory accounts as defined in section 435 of the Companies Act
2006. The Group's statutory financial statements for the year ended
31 December 2014 have been filed with the Registrar of Companies.
The auditor's report on those financial statements was unqualified
and did not contain statements under section 498(2) or section
498(3) of the Companies Act 2006.
2. Basis of preparation, going concern and accounting policies
Basis of preparation
These interim financial statements are for the six months to 30
June 2015. They have been prepared in accordance with IAS 34,
Interim Financial Reporting. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the annual consolidated
financial statements of the Group for the year ended 31 December
2014.
Going concern
The Directors have reviewed the budget, financial forecast
including cash flow forecasts and other relevant information. They
believe that the Group has adequate resources to continue in
operation for the foreseeable future.
Accounting policies -
New standards, interpretations and amendments adopted by the
Group
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual consolidated financial
statements for the year ended 31 December 2014, except for the
adoption of new standards and interpretations effective as of 1
January 2015.
Effective
dates
IAS 19 Employee Benefits- Defined 1 July 2014
Benefit Plans: Employee Contributions
(Amendments)
Annual Improvements to IFRS 2010 1 July 2014
- 2012 Cycle
Annual Improvements to IFRS 2011 1 July 2014
- 2013 Cycle
The Directors do not consider that the adoption of these
standards and interpretations would have a material impact on the
consolidated or company financial statements in the period of
initial application.
3. Seasonal fluctuations
Historically revenues are strongest in the second half of the
year. Revenues slow following the Christmas and New Year holidays,
and again during the summer holidays, particularly from European
clients.
Year ended Year ended Year ended
31 December 31 December 31 December
2014 2013 2012
Revenue % % %
First half year 46.8 46.6 44.7
Second half year 53.2 53.4 55.3
The provision of ADMET services is subject to seasonal
fluctuations, historically with peak demand in the second half of
each year. For the six months ended 30 June 2015, revenues
represented 59.9% of the annual level of revenues in the year ended
31 December 2014.
4. Segmental information
The Group has a single operating and reporting segment, that of
providing in vitro and in silico ADMET/PK (Absorption,
Distribution, Metabolism, Excretion, Toxicity, and Pharmacokinetic)
information to a number of different industries including the
Pharmaceutical, Biotechnology, Cosmetic, Personal Care,
Agrochemical, Chemical Industries and Academia. The revenue and
operating profit or loss for the periods are derived from the
Group's single operating and reportable segment. This has been
determined by reference to the information that the Chief Operating
Decision Maker receives about the Group.
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The Group gives a geographic analysis of revenue by destination.
Key markets for the Group are identified as North America, Mainland
Europe and the United Kingdom.
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
Geographical analysis of GBP GBP GBP
revenue by destination:
United Kingdom 1,928,632 956,114 1,887,601
Rest of Europe 1,713,830 1,497,538 3,261,360
North America 3,145,962 2,906,789 6,201,518
Rest of the World 139,656 51,258 220,240
---------- ---------- ------------
6,928,080 5,411,699 11,570,719
---------- ---------- ------------
5. Finance income and finance cost
Finance income comprises the following:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP GBP GBP
Income from deposits 8,934 6,696 24,585
Movement in Loan Notes derivative
value - 384,993 242,319
---------- ---------- ------------
8,934 391,689 266,904
---------- ---------- ------------
Finance cost comprises the following:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP GBP GBP
Interest element of finance
leases and hire purchase
contracts 14,166 22,568 32,778
Bank loans - - -
Interest component of contingent
consideration - 3,373 4,242
PIK Loan Note interest 217,952 210,044 432,241
Movement in Loan Notes derivative 525,000 - -
value
---------- ---------- ------------
757,118 235,985 469,261
---------- ---------- ------------
The Group entered into a Subscription Agreement on 21 August
2013 with Trident Private Equity Fund III LP, the ultimate outcome
of which was the issue of GBP3 million of unsecured Redeemable Loan
Notes ("Redeemables") and GBP4 million of unsecured Convertible
Loan Notes ("Convertibles") in September 2013. By way of an Open
Offer the Company issued GBP4 million nominal value of Convertible
Loan Notes at par. Additionally it also, by way of subscription,
issued GBP3 million nominal value of Redeemable Loan Notes at par.
Details of this fundraising were sent to all shareholders by way of
a circular. Both instruments pay interest in the form of 'payment
in kind' ('PIK') notes at the rate of 5% per annum on a compound
basis, payable on each anniversary of issue for a period of five
years.
Convertible Loan Notes were offered and issued such that each
shareholder would be entitled to 0.01783003 of nominal value
GBP1.00 Convertible Loan Notes. Convertible Loan Notes are
convertible at 6 pence per share, now 60 pence following a ten for
one share consolidation in July 2014. Redeemable Loan Notes were
issued subject to a notional conversion price of 6 pence per
ordinary share, now 60 pence following a ten for one share
consolidation in July 2014. Issue costs associated with this
fundraising amounted to GBP122,000. Net proceeds from the issue of
Loan Notes amounted to GBP6,878,000.
The Convertible Loan Notes and associated PIK notes can be
converted at the election of the holders of Convertible Loan Notes
into ordinary shares of the Company on 30 September 2014 and/or on
each anniversary of that date. Subject to conversion rights being
exercised by the Noteholder, Loan Notes are repayable by the
Company on the earlier of:
-- the Offer Date where there is a change in control of the
Company or a scheme of arrangement put in place.
-- the Maturity Date (30 September 2018). The Maturity Date in
respect of the Convertible Loan Notes and Redeemable Loan Notes may
also be extended by up to two years at the option of a 50% majority
of the holders of Convertible Loan Notes and Redeemable Loan Notes
respectively.
The amount to be paid by the Company in respect of the
redemption of the Loan Notes will be the greater of:
i) the nominal amount of the Loan Notes and the PIK Notes:
and
ii) where a change in control of the Company or a scheme of
arrangement is put in place, the amount calculated by applying the
Offer Price per ordinary share applicable to the Offer to the
number of Ordinary Shares represented by the Notes on the
assumption that the nominal value of the Loan Notes then in issue
(including any PIK notes issued or to be issued on or immediately
prior to the Offer Date) had been converted in to Ordinary Shares
at the Conversion Price (60 pence) or Notional Conversion Price (60
pence), as the case may be, on the Offer Date: and
iii) where the Loan Notes are redeemed on the Maturity Date the
amount calculated by applying the average mid-market closing price
of the Ordinary Shares in the 30 Business days prior to the
Maturity Date to the number of Ordinary shares represented by the
Loan Notes on the assumption that the nominal value of the Loan
Notes then in issue (including any PIK notes issued or to be issued
on or immediately prior to the Maturity Date) had been converted
into Ordinary shares at the Conversion Price (60 pence) or Notional
Conversion price (60 pence) on the Maturity date (30 September
2018).
The Convertible Loan Notes and Redeemable Loan Notes are subject
to a multiplier based upon the increase in share price from the
Conversion or Nominal Conversion price of 60 pence. In both cases
any increase in the average mid-market closing price of Cyprotex
shares from a nominal base of 60 pence in the 30 prior market
dealing days leads to a broadly proportionate increase in the
amount of potential Loan Note related debt repayable on maturity.
This increase in debt, relating to share price movements of the
Company, is accounted for under International Financial Reporting
Standards ("IFRS") as an additional finance cost in the income
statement. Any decrease in debt, relating to share price movements
of the Company, is accounted for under International Financial
Reporting Standards ("IFRS") as an additional finance income in the
income statement.
The Convertible Loan Notes have three separate economic
components as follows:
-- a liability component being a discounted fixed rate debt;
-- an equity component due to the holders right to convert into Ordinary shares; and
-- an embedded derivative due to conversion rights being linked to the Company's share price.
Each of these components is measured to fair value at the issue
date.
This results in recognition of GBP164,496 (net of associated
issue costs) as an equity component and the initial recognition of
the debt component.
The Redeemable Loan Notes have two separate economic components
as follows:
-- a liability component being a discounted fixed rate debt; and
-- an embedded derivative due to conversion rights being linked
to the Company's share price via a notional issue price.
Each of these components is measured to fair value at the issue
date and a gain of GBP122,734 is deferred in respect of differences
in market and coupon rates at the date of issue.
Subsequently, the liability components of both the Convertible
and Redeemable Loan Notes are recorded at amortised cost using the
effective interest method, with interest-related charges recognised
as an expense in finance cost in the income statement. The embedded
derivatives associated with the Convertible and Redeemable Loan
Notes are subsequently measured at fair value at each balance sheet
date, and the gain or loss on re-measurement to fair value is
recognised as finance cost/income in the income statement.
The carrying value attributed to the Loan Notes are as
follows:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP GBP GBP
Loan Notes - Convertible 4,190,467 3,944,928 4,066,762
Loan Notes - Redeemable 3,271,444 3,082,019 3,177,197
Embedded derivative 1,875,000 1,207,326 1,350,000
---------- ---------- ------------
9,336,911 8,234,273 8,593,959
---------- ---------- ------------
(MORE TO FOLLOW) Dow Jones Newswires
August 18, 2015 02:00 ET (06:00 GMT)
A summary of the components of the finance costs/(income)
associated with the issue of Redeemable and Convertible Loan Notes
is as follows:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP GBP GBP
PIK Loan Note interest measured
at fair value 217,952 210,044 432,241
Loan Note valuation of embedded
derivatives movement 525,000 (384,993) (242,319)
---------- ---------- ------------
Net finance charge/(income)
relating to Loan Notes 742,952 (174,949) 189,922
---------- ---------- ------------
The number of Redeemable Loan Notes in issue is as follows:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
number number number
Loan Notes issued 3,160,684 3,000,000 3,000,000
PIK Loan Notes issued on first
anniversary - - 160,684
---------- ---------- ------------
Redeemable Loan Notes in issue 3,160,684 3,000,000 3,160,684
---------- ---------- ------------
The number of Convertible Loan Notes in issue is as follows:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
number number number
Loan Notes issued 4,194,764 4,000,000 4,000,000
PIK Loan Notes issued on first
anniversary - - 199,950
Converted into Ordinary shares
of the Company - - (5,186)
---------- ---------- ------------
Convertible Loan Notes in
issue 4,194,764 4,000,000 4,194,764
---------- ---------- ------------
In the case of the embedded derivatives in calculating their
values, principal assumptions used were a share price volatility of
38%, a credit spread of 20% and a risk free rate of 1.1%.
6. Loss per ordinary share
The calculation of the basic loss per share is based on the loss
attributable to ordinary shareholders divided by the weighted
average number of shares in issue during the period.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post tax effect of dividends and/or interest, on the
assumed conversion of all dilutive options and other dilutive
potential ordinary shares.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below.
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
Continuing operations 2015 2014^ 2014
Loss after tax and earnings
attributable to ordinary shareholders
(GBP) (363,893) (404,724) (4,171,426)
----------- ----------- ------------
Weighted average number of ordinary
shares in issue
(number used for basic loss
per share) 22,436,258 22,434,056 22,436,258
Dilutive effect of options (number) - - -
----------- ----------- ------------
Weighted average number of ordinary
shares in issue
(number used for diluted loss
per share) 22,436,258 22,434,056 22,436,258
----------- ----------- ------------
Basic & diluted loss per share
(pence) (1.62)p (1.80)p (18.59)p
----------- ----------- ------------
^ rebased for ten for one share consolidation on 24 July
2014
Where a loss is reported for a period the weighted average
number of ordinary shares in issue, for the purpose of calculating
diluted loss/earnings per share, is the same as that used for the
basic loss/earnings per share calculation. This is because
outstanding share options would have the effect of reducing the
loss per ordinary share and would therefore not be dilutive.
On 24 July 2014, following approval by shareholders at General
Meeting the Company proceeded to effect a ten for one share
consolidation. The effect of this share consolidation was to reduce
the number of shares in issue by 90% from 224,340,569 to
22,434,056. Accordingly historic reported (loss)/earnings per share
after that date are rebased by multiplying by a factor of ten.
Under the Share Consolidation every ten existing ordinary shares
with nominal value GBP0.001 were consolidated into one new ordinary
share with nominal value GBP0.01. The rights attaching to the New
Ordinary Shares are identical in all respects to those of the
Existing Ordinary Shares. Application was made for 22,434,056 New
Ordinary Shares of GBP0.01 each to be admitted to trading on AIM
with dealing commencing on 28 July 2014, with any fractional
entitlements aggregated and sold in the market and the proceeds
given to charity.
Following the ten for one share consolidation the conversion or
notional conversion price for Loan Notes issued by the Company, and
the target and exercise price of any share option awards are all
adjusted upwards by a factor of ten.
7. Share issues
No shares were issued in the 6 month period to 30 June 2015 or 6
months to 30 June 2014.
During the year ended 31 December 2014, 8,643 ordinary shares
were issued pursuant to the conversion of Loan Notes at 60 pence
per share. The share issues in exchange for the cancellation of
Loan Notes yielded GBPnil in cash and increased equity by GBP5,186.
The share price at the date of conversion was 51 pence.
Shares issued and movements in share capital may be summarised
as follows:
Number GBP
6 months to 30 June 2015
At 1 January 2015 22,442,699 224,427
At 30 June 2015 22,442,699 224,427
-------------- --------
6 months to 30 June 2014
At 1 January 2014 224,340,569 224,341
At 30 June 2014 224,340,569 224,341
-------------- --------
Year to 31 December 2014
At 1 January 2014 224,340,569 224,341
Share consolidation - one (201,906,513) -
for ten
Issued - conversion of Loan
Notes 8,643 86
-------------- --------
At 31 December 2014 22,442,699 224,427
-------------- --------
The Company has only one class of shares.
8. Share based payment
The Company adopted a Long Term Incentive Plan ('LTIP') on 22
January 2014. The purpose was to allow participants, who are
executives in the Company, to potentially share in the creation of
value for shareholders. A total of 2,999,999 share options under
the LTIP have been awarded. The vesting of these executive options
is on grant, at an exercise price of 60 pence per share, and are
exercisable only upon change of control of the Company within a ten
year period, dependent upon the Company's share price performance
and subject to a minimum share price of 120 pence.
In order to calculate the fair value of potential awards a Monte
Carlo simulation was used. The principal inputs to the valuation
model were as follows:
Total
Number of awards^ 2,166,666 833,333 2,999,999
Award and Grant date 25 Jan 1 April
2014 2014
Expected life (years) 4.6 4.4
Share price at date of grant^
(pence) 75.0 56.3
Share price target^ (pence) 120.0 120.0
Exercise price^ (pence) 60.0 60.0
Risk free rate 1.67% 1.71%
Dividend yield 0.00% 0.00%
Volatility 40.60% 44.60%
^ rebased following ten for one share consolidation on 24 July
2014
(MORE TO FOLLOW) Dow Jones Newswires
August 18, 2015 02:00 ET (06:00 GMT)
The amounts charged to the income statement in respect of these
awards, is as follows:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP GBP GBP
Awards made on 25 January
2014 62,621 53,871 117,007
Awards made on 1 April 2014 15,064 7,429 22,616
---------- ---------- ------------
Total share based payment
charge 77,685 61,300 139,623
---------- ---------- ------------
9. Additions and disposals of property, plant and equipment
The following tables show the significant additions and
disposals of property, plant and equipment:
6 months to Long leasehold Office Computer Laboratory Total
30 June 2015 and buildings equipment equipment equipment
GBP GBP GBP GBP GBP
Carrying amount
At 1 January
2015 907,645 44,228 216,198 3,249,320 4,417,391
Additions - 415 60,265 281,554 342,234
Disposals - - (67) (10) (77)
Exchange - 4 2,941 25,788 28,733
Depreciation (11,012) (3,504) (58,932) (499,722) (573,170)
--------------- ----------- ----------- ----------- ----------
At 30 June 2015 896,633 41,143 220,405 3,056,930 4,215,111
--------------- ----------- ----------- ----------- ----------
6 months to 30 Long leasehold Office Computer Laboratory Total
June 2014 and buildings equipment equipment equipment
GBP GBP GBP GBP GBP
Carrying amount
At 1 January
2014 925,499 49,152 207,467 2,606,596 3,788,714
Additions - 1,389 94,893 1,458,244 1,554,526
Disposals - (874) - - (874)
Exchange - (7) (3,259) (22,633) (25,899)
Depreciation (10,971) (3,438) (44,805) (436,094) (495,308)
--------------- ----------- ----------- ----------- ----------
At 30 June 2014 914,528 46,222 254,296 3,606,113 4,821,159
--------------- ----------- ----------- ----------- ----------
Year to 31 December Long leasehold Office Computer Laboratory Total
2014 and buildings equipment equipment equipment
GBP GBP GBP GBP GBP
Carrying amount
At 1 January
2014 925,499 49,152 207,467 2,606,596 3,788,714
Additions - business
acquired - 348 11,108 122,644 134,100
Additions - other 4,100 2,469 100,106 1,380,238 1,486,913
Disposals - (874) - - (874)
Exchange - 9 4,677 42,936 47,622
Depreciation (21,954) (6,876) (107,160) (903,094) (1,039,084)
--------------- ----------- ----------- ----------- ------------
At 31 December
2014 907,645 44,228 216,198 3,249,320 4,417,391
--------------- ----------- ----------- ----------- ------------
10. Intangible fixed assets
The following tables show the movement on intangible fixed
assets:
6 months to Goodwill Trade Customer Technology Technology Total
30 June 2015 names relationships & knowhow & knowhow
(internally
generated)
GBP GBP GBP GBP GBP GBP
Carrying amount
At 1 January
2015 - - 37,824 267,786 362,876 668,486
Additions - - - - - -
Exchange - - 967 6,985 4,563 12,515
Amortisation - - (33,246) (24,592) (25,671) (83,509)
---------- -------- --------------- ----------- ------------- ---------
At 30 June
2015 - - 5,545 250,179 341,768 597,492
---------- -------- --------------- ----------- ------------- ---------
6 months to Goodwill Trade Customer Technology Technology Total
30 June 2014 names relationships & knowhow & knowhow
(internally
generated)
GBP GBP GBP GBP GBP GBP
Carrying amount
At 1 January
2014 2,499,807 - 98,283 302,270 197,502 3,097,862
Additions 410,481 - - - 66,311 476,792
Exchange (68,420) - (1,975) (6,926) (4,526) (81,847)
Amortisation - - (30,663) (22,681) (14,827) (68,171)
---------- ------- --------------- ----------- ------------- ----------
At 30 June
2014 2,841,868 - 65,645 272,663 244,460 3,424,636
---------- ------- --------------- ----------- ------------- ----------
Year to Goodwill Trade Customer Technology Technology Total
31 December names relationships & knowhow & knowhow
2014 (internally
generated)
GBP GBP GBP GBP GBP GBP
Carrying amount
At 1 January
2014 2,499,807 - 98,283 302,270 197,502 3,097,862
Additions-
business acquired 410,481 - - - - 410,481
Additions-
other - - - - 191,107 191,107
Exchange 129,759 - 1,238 11,152 7,286 149,435
Impairment (3,040,047) - - - - (3,040,047)
Amortisation - - (61,697) (45,636) (33,019) (140,352)
------------ ------- --------------- ----------- ------------- ------------
At 31 December
2014 - - 37,824 267,786 362,876 668,486
------------ ------- --------------- ----------- ------------- ------------
Additions in the period to 30 June 2014 and year ended 31
December 2014 to technology & knowhow relate to development
work associated with Drug Transporter technology.
Additions in the period to 30 June 2014 to goodwill arose on the
acquisition of certain assets and trade of CeeTox, Inc.
11. Contingent consideration
On 4 August 2010 prior to the acquisition of Cyprotex US, LLC by
Cyprotex PLC; Cyprotex US, LLC acquired certain assets and the
trade of Cellumen, Inc under an asset purchase agreement. Under the
terms of that agreement Cyprotex US, LLC agreed to pay a contingent
payment based on future sales revenues using the CellCiphr(TM)
technology acquired for a period up to four years at a rate of
between 10% and 20%. These potential payments were classified as
contingent consideration and terminated in August 2014.
On 1 January 2014 the Group's US subsidiary, Cyprotex US, LLC,
under an asset purchase agreement ('APA'), purchased certain assets
and trade of CeeTox, Inc. (CeeTox) from North American Science
Associates, Inc ('NAMSA'). CeeTox is based in Kalamazoo, Michigan,
USA. The initial purchase price of GBP0.84 million was paid on
completion. There is potentially further consideration payable to
NAMSA at a rate of 5% of net sales until 31 December 2016 if sales
of certain identified assays exceed the level achieved in the year
to 30 September 2013 in subsequent 12 month periods to a maximum of
GBP3.1 million.
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