RNS Number:6812E
Biocare Solutions PLC
28 September 2007
BIOCARE SOLUTIONS PLC
("Biocare" or the "Group" or the "Company")
Interim results for the six months ended 30 June 2007
The Board of Biocare Solutions plc (BSN.L) is pleased to announce its results
for the first half of the year 2007.
Financial highlights
* Revenues held steady at #1.1 million (H1 2006 #1.2 million)
* Gross margins increase to 54 per cent. (H1 2006 49 per cent.; H2 2006 41per cent.)
* Attributable loss reduced to #1.04 million (H1 2006 loss of #1.12 million)
* Results presented on IFRS basis
Operational Highlights
* Production commencing at new Ferrandina facility
* New highly-automated production equipment now installed
* Output and sales in first half held back despite double shift working
* New hypoallergenic laundry products launched,
* Higher product specifications introduced in partnership with major Italian client
* Two products trialed with Morrisons Supermarkets in the UK
Post-period events
* New loan financing agreed with RAB Special Situations to finance Ferrandina
* Board significantly strengthened by new Finance Director and non-executive director appointment
* New all-natural Lime descaler and Heavy Duty dirt and grime buster launched
* Italian government confirms regional investment incentive tax regime including Ferrandina
Commenting on the results Chairman, Stuart Anderson, said:
"Considerable progress has been made in bringing the new plant at Ferrandina to
the point of production. The delays have been frustrating for shareholders and
management alike but we look forward to bedding in Ferrandina during the coming
weeks, transferring all production from Meda at the end of October, and building
sales significantly from 2008 onwards."
For further information:
Biocare Solutions plc 020 7448 5211
Stuart Anderson, Chairman
Tony Higson, Managing Director
Martin Graham Shelley, Finance Director
KBC Peel Hunt Ltd 020 7418 8900
Richard Kauffer
Deon Veldtman
SPA Way
James Poole 020 7354 0356
Chairman's Statement
Overview
I'm pleased to report a satisfactory first half to trading in 2007 particularly in light of the distraction of
commencing production in Ferrandina. The momentum created a year ago from our listing in September in 2006 has been
visibly built upon providing further validation of the Group's commercial strategy and development approach which the
board are focussed on delivering.
Commissioning of our new freehold production facility in Ferrandina, Southern Italy, proved to be more drawn out than
we expected. It is gratifying therefore that we can report that production is now commencing and we expect acceptance
by our customers in the next few weeks and thereafter a significant build up in sales.
Against this background it is gratifying to be able to report maintained progress in the results of the Company for the
first half of the year 2007. Operating margin was improved to a very creditable 54 per cent., from the dip in the
second half of 2006.
In an important development it has been confirmed that investment tax credits will be available to the Company for the
investment in the new plant at Ferrandina. After initial challenge by the EU competition commission the investment
incentive regime for the Basilicata region, in which our new plant is situated, has been announced by the Italian
government, backdated to 1st January 2007. It is envisaged that tax credits of between 45 and 50 per cent. of the
capital invested will be available against corporate, VAT, local and social taxes and this is expected to make a
positive contribution to cash flow in 2008.
In addition to the considerable efforts directed towards the new production plant at Ferrandina, the Company has
continued to develop and test new products and to bring them to market. In Italy two exciting new products have just
been launched after testing. These include a new safe lime descaler and a heavy duty dirt and grime remover. Both of
these have considerable potential in the market.
Revenues have held up despite the diversion of management and staff by the build up in Ferrandina. This was achieved
through double shift working at the existing plant at Meda which operated throughout the period to new higher quality
and production specifications introduced since the beginning of the year.
Losses attributable to shareholders were held within tight limits, notwithstanding the additional expenses involved in
setting up a new production location.
On 30 July Martin Shelley joined the board as Finance Director and William van Klaveren became our new Non-Executive
Director, both of whom are fluent Italian speakers and each has already made a substantial contribution to the Company.
Financial review
Gross profit for the period was unchanged at #0.6 million (H1 2006: #0.6
million). Sales at #1.1 million for the first six months of the year were
marginally lower than the equivalent period a year ago (#1.2 million).
During the first six months cost of sales were held down, declining 17 per
cent., leading to a recovery in gross margin to 54 per cent. compared to 49 per
cent. in the first half of 2006 and 41 per cent. in the second half of that
year.
Overheads were held to #1.6 million, despite higher expenses from double shift
working and new systems of production at Meda; leading to an attributable loss
for shareholders of #1.0 million a marginal improvement on the equivalent loss
of #1.1 million in 2006. This was equivalent to a loss per share of 1.13p which
compared to a restated 2.93 p loss per share in the first half of 2006.
These interim results are presented on the IFRS basis of accounting for the
first time. Prior period comparatives have been restated to the new basis as
from January 1 2006. Changes in accounting do not alter the cash flows of the
Company. A restated opening balance sheet is shown below. The result of these
restatements has only a marginal impact on numbers previously reported. The
principal effect has been the writing back to profit and loss account of sums
previously amortised for goodwill..
Dividend
No interim dividend is being recommended.
Operating Review
As previously reported Sales from Meda in the first six months of the year were limited by the existing plant's double
shift capacity. Equipment delays and deferred operating permits from local government agencies at Ferrandina held back
the Company's ability to meet demand for its products in all markets, but especially in Italy, where a number of new
customers are awaiting the increased production capacity.
After further delays during the summer holiday period waiting for infrastructure completion the Board is pleased to
confirm that commissioning has started at Ferrandina, and the Board is confident that significant new business is
expected over the next few weeks to reflect the investment the Group has made. Transfer from Meda of the existing
production and establishment of distribution facilities in Northern Italy has been scheduled for the end of October.
The commencement of production in Ferrandina and the transfer of existing functions from Meda, which is expected to be
completed during the coming two months, have been accompanied by a planned restructuring of the Company. Taking
advantage of the transition, the Company plans to streamline management and introduce greater operating efficiencies.
Overhead savings are anticipated to be in the region of #0.3 million in 2008.
In addition to the two products for heavy duty degreasing and descaling announced above, the Company received
certification during the first half of 2007 for two new laundry products that meet exacting hypoallergenic standards
and test negative for skin irritation. Deliveries have commenced and customer acceptance is enthusiastic. These
products are expected to be an important source of future revenue and competitive advantage.
Shortage of production capacity has limited the planned expansion in the UK market. We continue to test product
specification with the major supermarkets and to trial sales in selected stores. The Company recruited a senior sales
executive to develop the UK market and in May we received confirmation of acceptance of two products to be carried by
Morrison's, in addition to existing listings with Sainsbury's and Coop UK.
Post-period events
The balance sheet at June 30 2007 shows no borrowings following the cash raised
at the time of listing. During the past year investment in building production
in Italy has been substantial. The Company therefore decided to raise
supplementary financing in June and agreed a short-term loan facility for up to
#1.03 million with RAB Special Situations Master Fund. To date approx. #0.5
million of this facility has been drawn down. The Company plans to replace this
facility with longer term asset financing in Italy at an appropriate time.
Outlook
Considerable progress has been made in bringing the new plant at Ferrandina to
the point of production. The delays have been frustrating for shareholders and
management alike but we look forward to bedding in Ferrandina during the coming
weeks, transferring all production from Meda at the end of October, and building
sales significantly from 2008 onwards
Stuart Anderson
Chairman
28 September 2007
Consolidated income statement
for the period from 1 January 2007 to 30 June 2007
30 June 30 June 31
2007 2006 December
2006
Unaudited Unaudited Audited
#'000 #'000 #'000
Continuing operations
Revenue 1,103 1,213 2,398
Cost of sales (512) (620) (1,321)
Gross profit 591 593 1,077
Administrative expenses (1,646) (1,614) (3,531)
Operating loss (1,055) (1,021) (2,454)
Interest receivable 18 2 17
Loan interest payable (4) (99) (231)
Exceptional finance charges - - (1,210)
Interest payable and similar (4) (99) (1,441)
charges
Loss on ordinary activities before (1,041) (1,118) (3,878)
taxation
Tax on loss on ordinary - - -
activities
Loss for the period attributable to (1,041) (1,118) (3,878)
shareholders
Earnings per share As restated
Loss per share - basic and diluted (1.13)p (2.93)p (7.19)p
Consolidated statement of changes in shareholders' equity
for the period from 1 January 2006 to 30 June 2007
Share Share Revaluation Other Share Retained Total
capital premium reserve Reserves option earnings Equity
reserve
Balance at 1 January 681 3,236 - - - (4,671) (754)
2006
Issue of shares 128 1,370 1,498
Profit for the 6 months (1,118) (1,118)
ended 30 June 2006
Exchange differences on -
translation
Balance at 30 June 2006 809 4,606 - - - (5,789) (374)
Profit for the 6 months (2,760) (2,760)
to 31 December 2006
Issue of shares 108 3,002 3,110
Revaluation of freehold 1,138 1,138
properties
Reserve arising from 5,011 5,011
Reverse acquisition
Share based payments 64 64
Exchange differences on 8 8
translation
Balance at 31 December 917 7,608 1,138 5,011 64 (8,541) 6,197
2006
Profit for the 6 months (1,041) (1,041)
to 30 June 2007
Issue of shares -
Revaluation of freehold -
properties
Reserve arising from -
Reverse acquisition
Share based payments -
Exchange differences on 6 6
translation
Balance at 30 June 2007 917 7,608 1,138 5,011 64 (9,576) 5,162
Consolidated balance sheet
as at 30 June 2007
30 June 30 June 31 December
2007 2006 2006
Unaudited Unaudited Audited
# 000 # 000 # 000
on-current Assets
Intangible assets 429 456 439
Property, plant and 3,419 1,054 3,290
equipment
Total non-current 3,848 1,510 3,729
assets
Current assets
Inventories 799 717 818
Trade and other 2,389 2,558 2,290
receivables
Cash and cash 466 640 1,231
equivalents
Total current assets 3,654 3,915 4,339
Total assets 7,502 5,425 8,068
Current liabilities
Trade and other 2,219 5,799 1,711
payables
Total current 2,219 5,799 1,711
liabilities
Non-current liabilities
Other non-current 121 - 160
liabilities
Total non-current 121 - 160
liabilities
Total liabilities 2,340 5,799 1,871
Net assets 5,162 (374) 6,197
Equity
Called up share capital 917 809 917
Share premium 7,608 4,606 7,608
Revaluation reserve 1,138 - 1,138
Merger reserve 5,011 - 5,011
Share option reserve 64 64
Retained earnings (9,576) (5,789) (8,541)
Total equity 5,162 (374) 6,197
Consolidated cash flow statement
for the period from 1 January 2007 to 30 June 2007
30 June 2007 30 June 2006 31 December
2006
Unaudited Unaudited Audited
# # #
Cash flows from operating activities
Operating loss (1,055) (1,021) (2,455)
Depreciation
charges 103 114 210
Amortisation of
Intangibles 9 9 18
Exchange
differences
arising on
consolidation 45 - 18
Share option
charges - 64
-------- -------- --------
(898) (898) (2,145)
Movements in working capital
Decrease/(Increas
e) in inventories 19 (97) (197)
(Increase)
intrade debtors
and other
receivables (99) (1,171) (909)
Increase
/(Decrease) in
trade creditors
and other
payables 508 839 (227)
-------- -------- --------
Net cash outflow
used in operating
activities (470) (1,327) (3,478)
-------- -------- --------
Cash flows from investing activities
Interest received 18 2 16
Purchase of
property, plant
and equipment (270) (343) (1,328)
-------- -------- --------
Net cash outflow
used in investing
activities (252) (341) (1,312)
-------- -------- --------
Cash flows from financing activities
Interest paid (4) - (305)
Proceeds from
issues of equity
shares - 1,498 9,947
Proceeds from
issues of
convertible loan
notes - 577 -
Expenses paid in
connection with
share issue - - (1,538)
Repayments of
borrowings - - (2,304)
Capital element
of finance lease
rental payments (39) - (12)
-------- -------- --------
Net cash flows
(used
in)/generated
from financing
activities (43) 2,075 5,788
-------- -------- --------
Net
(decrease)/increa
se in cash and
cash equivalents (765) 407 998
Cash and cash
equivalents at
the beginning of
the period 1,231 233 233
-------- -------- --------
Cash and cash
equivalents at
the end of the
period 466 640 1,231
-------- -------- --------
Notes to the interim Report
For the six months ended 30 June 2007
1. Accounting policies
Basis of preparation
The condensed financial statements have been prepared in accordance with
International Financial Reporting standards ('IFRS') as adopted by the European
Union. The disclosures required by IFRS 1 - 'First-time Adoption of
International Financial Reporting Standards' concerning the transition from UK
GAAP to IFRS are given in note 5. The date of transition to IFRS is 1 January
2006. The impacts of IFRSs issued but not yet effective at the balance sheet
date would not have a significant impact on these financial statements.
A summary of the Company's and the Group's accounting policies is given below.
Accounting convention
The financial statements have been prepared on the historical cost basis, except
as disclosed in the accounting policies set out below.
First time adoption of International Financial Reporting Standards
IFRS 1 - 'First-time Adoption of International Financial Reporting Standards'
sets out the requirements for the first time adoption of IFRS. The standard
permits a number of optional exemptions to this general principle. The Group has
adopted the following approach to the key exemptions:
* The Company has elected not to apply IFRS 3 to all business combinations
that occurred before 1st January 2005. However after the transition date,
the adoption of IFRS 3 resulted in a change of accounting policy for
goodwill. Under UK GAAP goodwill on consolidation was capitalised and
subject to an annual impairment review and was otherwise written off over
five years from the year of acquisition. In accordance with the provision of
IFRS 3 the Group ceased the amortisation of the goodwill from the date of
transition, 1 January 2006 and as a consequence any amortisation of goodwill
charged after the transition date has been reversed to the profit and loss.
The shareholders of Biocare Solutions (UK) Limited (formerly Biocare Solutions
Limited) exchanged the entire shareholdings in Biocare Solutions (UK) Limited
for shares in Biocare Solutions Plc on 21 August 2006, as part of a share for
share exchange in consideration for the entire share capital of Biocare
Solutions (UK) Limited. On that day, Biocare Solutions (UK) Limited became a
wholly owned subsidiary of Biocare Solutions Plc.
Under UK GAAP the transaction qualified as a group reconstruction within the
meaning of FRS 6 "Acquisitions and Mergers", and had been accounted for using
the merger accounting method in the year ended 31 December 2006. However, the
introduction of the new holding company does not result in the addition of any
new businesses to the group, and as such the reconstruction falls outside of the
scope of IFRS 3. Therefore, merger accounting principles have continued to be
applied. As a result, although the group reconstruction did not become
effective until August 2006, the consolidated financial statements of Biocare
Solutions Plc are presented as if Biocare Solutions Plc and Biocare Solutions
(UK) Limited had always been part of the same group. Accordingly, the financial
statements for the current and prior period had been prepared as if Biocare
Solutions (UK) Limited had been owned by Biocare Solutions Plc throughout the
current and comparative accounting periods.
* share-based payments: the Group has not adopted the exemption to apply
IFRS 2 - 'Share-Based Payments' only to awards made after 7 November 2002.
However no adjustment was necessary since the principles of IFRS2 -
'Share-based Payments' had already been applied by the Company in previous
years.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with generally accepted
accounting practice requires management to make estimates and judgements that
affect the reported amounts of current and contingent assets and liabilities and
the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually reviewed and are based on historical
experience and other factors, and expectations of future events that are
believed to be reasonable under the circumstances. The judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty are:
* Property, plant and equipment
These are stated at cost less accumulated depreciation and any recognised
impairment loss. Depreciation is provided at rates calculated to write off the
value of each asset over its estimated useful life. The value of the assets is
reviewed for impairment if events or circumstances indicate the carrying values
may not be recoverable.
* Impairment of Goodwill
Determining whether goodwill is impaired requires an estimation of the value in
use, which is calculated by estimating the future cash flow expected to arise
from the cash-generating unit and discounted by a suitable discount rate in
order to calculate the present value. No provision for impairment was made in
the period and the carrying value at the balance sheet date was #298,000.
* Share based payments
In determining the fair value of equity settled share based payments and the
related charge to the income statement, the Group makes assumptions about the
future events and market conditions. The fair value is determined using a
valuation model, which is dependent on future estimates including timing with
which the options will be exercised and the future volatility of the Group's
share price. These assumptions are based on publicly available information and
reflect market expectations and the advice of qualified experts. Different
assumptions about these factors could affect the reported value of share-based
payments.
Basis of consolidation
The financial information incorporates the results of the Company and entities controlled by the Company. Control is
achieved where the Company has the power to govern the financial and operating policies of an investee entity to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition, or from the date of disposal, as appropriate.
Where necessary, adjustments are made to the results of the subsidiaries to bring the accounting policies used into
line with those used by the Group.
All intra-Group transactions are eliminated on consolidation.
Goodwill
Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any
impairment is recognised immediately in profit or loss and is not subsequently reversed.
Other intangible assets
Acquired intangible assets values are held on the balance sheet at cost and
amortised on a straight-line basis over their estimated useful lives. Any
impairment in value is recognised immediately in the income statement.
Property plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and
impairment losses.
Properties are stated at revalued amount less accumulated depreciation and
impairment losses.
2. Segment reporting
Segment information is presented in the consolidated interim financial statements in respect of the Group's
geographical segment, which are the primary basis of segment reporting
----------- ------- ------- ------- ------- ------- ------- ------- -------
By Segment Italy UK Malaysia Total Italy UK Malaysia Total
30-Jun-07 30-Jun-07 30-Jun-07 30-Jun-07 30-Jun-06 30-Jun-06 30-Jun-06 30 June 2006
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
------- ------- ------- ------- ------- ------- ------- -------
Segment 1,027 65 11 1,103 1,099 77 37 1,213
Revenue ------- ------- ------- ------- ------- ------- ------- -------
Segment (604) (47) (57) (708) (348) (116) (84) (548)
Results
Unallocated
expenses (347) (473)
------- ------- ------- ------- ------- ------- ------- -------
Group
operating
Losses (1,055) (1,021)
Interest
Receivable 18 2
Interest
and
similar (4) (99)
charges ------- -------
Profit for
the (1,041) (1,118)
period ------- ------- ------- ------- ------- ------- ------- -------
-----------
3. Earnings per share
The calculation of the basic and diluted earnings per ordinary share is based on losses after tax of #1,039,143
(December 2006: #3,878,835 and June 2006: #1,118,532) and on 91,654,812 ordinary shares (December 2006: 53,942,698 and
June 2006: 38,226,557)
There were no dilutive potential ordinary shares at 30 June 2007.
4. Current assets - Trade debtors and other receivables
30 June 2007 30 June 2006 31 December
2006
# 000 # 000 # 000
Trade debtors 1,648 1,686 1,318
Other debtors 736 345 787
Prepayments
and accrued
income 5 527 185
--------- --------- ---------
2,389 2,558 2,290
--------- --------- ---------
5. Trade creditors and other payables
30 June 2007 30 June 2006 31 December
2006
# 000 # 000 # 000
Obligations
under finance
lease and hire
purchase
contracts 39 - 39
Trade creditors 1,565 2,207 1,098
Amounts owed
to related
parties (note
22) - 300 -
Other taxes
and social
security costs - - 33
Convertible
loans - 2,881 -
Other creditors 279 217 161
Accruals and
deferred
income 13 194 380
--------- --------- ---------
2,219 5,799 1,711
--------- --------- ---------
Effects of adoption of international financial reporting standards
Reconciliation of equity
At 1 January 2006 At 30 June 2006 At 31 December 2006
Date of transition comparable interim End of last period
period presented under UK
Gaap
UK GAAP Effect Opening UK Effect IFRS UK Effect IFRS
of IFRS GAAP of balance GAAP of balance
IFRS balance IFRS sheet IFRS sheet
sheet
# # # # # # # # #
Non-current assets
Intangible assets 464 464 434 22 456 396 43 439
Property plant and 826 826 1,054 1,054 3,291 3,291
equipment
Investments - - - - - -
Total non-current 1,290 1,290 1,488 1,510 3,687 3,730
assets
Current assets
Inventories 620 620 717 717 818 818
Trade and other 1,387 1,387 2,558 2,558 2,290 2,290
receivables
Cash and cash 233 233 640 640 1,231 1,231
equivalents
2,240 2,240 3,915 3,915 4,339 4,339
Total assets 3,530 3,530 5,403 5,425 8,026 8,069
Current liabilities
Trade and other 4,284 4,284 5,799 5,799 1,712 1,712
payables
Total current 4,284 4,284 5,799 5,799 1,712 1,712
liabilities
Non-current liabilities - - - - 160 160
Total Non-current - - - - 160 160
liabilities
Total liabilities 4,284 4,284 5,799 5,799 1,872 1,872
Net (liabilities)/ (754) (754) (396) (374) 6,154 6,197
assets
Equity
Called up share capital 681 681 809 809 917 917
Share premium 3,236 3,236 4,606 4,606 7,608 7,608
Revaluation reserve - - - - 1,138 1,138
Merger reserve - - - - 5,011 5,011
Share option reserve 64 64
Profit and loss account (4,671) (4,671) (5,811) 22 (5,789) (8,584) 43 (8,541)
Shareholders' funds (754) (754) (396) (374) 6,154 6,197
Reconciliation of Profit
At 30 June 2006 At 31 December 2006
comparable interim period End of last period presented
under UK Gaap
UK GAAP Effect Under UK GAAP Effect Under
of IFRS of IFRS
IFRS IFRS
# # # # # #
Turnover 1,213 1,213 2,398 2,398
Cost of sales (620) (620) (1,320) (1,320)
Gross profit 593 593 1,078 1,078
Administrative expenses (1,636) 22 (1,614) (3,575) 43 (3,532)
Operating loss (1,043) (1,021) (2,497) (2,454)
Interest 2 2 17 17
receivable
Loan interest payable (99) (99) (231) (231)
Exceptional finance charges - (1,210) (1,210)
Interest payable and (99) (99) (1,441) (1,441)
similar charges
Loss on ordinary activities (1,140) (1,118) (3,921) (3,878)
before taxation
Tax on loss on ordinary -
activities
Loss for the financial year (1,140) (1,118) (3,921) (3,878)
Effects of IFRS
a) IFRS 3 - Business combinations
The equity and retained earnings have been adjusted by adding back goodwill
previously amortised to the Income statement under UK GAAP (note 1).
b) Cash flow statement
The Group's consolidated cash flow statement was presented in accordance with IAS7. The statements present
substantially the same information as that required under UK GAAP, with the following exceptions:
*Under UK GAAP, cash flows are presented under nine standard headings,
whereas under IFRSs, cash flows are required to be classified under
operating, investing and financing activities.
+ *Under UK GAAP, cash and cash equivalents, which include cash and
short term deposits, were shown as cash in hand and deposits repayable
on demand.
6. Availability to public
Copies of these interim results will be available at the Company's
offices at 2 London Wall Buildings, London Wall, London, EC2M 5UU, and
at the Company's website at www.biocaresolutions.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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