RNS Number:6775V
Provalis PLC
23 February 2004
Meeting today:
There will be a 10.00 am briefing for analysts at Buchanan Communications, 107
Cheapside London. Running simultaneously to the briefing at 10.00 am there will
be a live web cast of the Interim Results briefing. This will be followed by a
11.30 am briefing for the press.
To connect to the web cast facility please go to the following internet address
approximately 10 minutes before the start of the briefing: http://
radio.buchanan.uk.com.
This presentation will also be available on the Provalis website later today at:
www.provalis.com.
Provalis will be holding a lunch at 12.45 pm also at Buchanan Communications. If
you would like to attend any of the meetings please contact Charlie Forsyth on
020 7466 5000.
For Immediate Release
23rd February 2004
Provalis plc
Interim Results for the period ended 31st December 2003
Provalis plc (LSE: PRO; NASDAQ: PVLS), the Medical Diagnostics and
Pharmaceuticals Group, is pleased to announce its interim results for the period
ended 31st December 2003.
Highlights
Group
* Group sales #6.4m (1H2003: #7.1m) with gross profit #3.6m (1H2003: #4.0m)
* Group operating loss increased to #1.8m (1H2003: #1.1m)
* Dimethaid arbitration ruling in Provalis' favour
* Closing cash of #3.2m subsequently augmented by the scheduled receipt of
#1.5m from Dr Falk Pharma in January 2004
* #3.0m, three year, Barclays Bank facility arranged in December 2003
Medical Diagnostics
* Sales lower at #0.6m (1H2003: #1.6m), having been significantly affected by
sub-distributors reducing stocks of Glycosal(R) test cartridges
* Placement rate of Glycosal(R) instruments maintained with over 9,000
instruments now shipped
* Development of G5, the fully automated diagnostic platform, continues to
make excellent progress with the HbA1c professional version still on track for
US regulatory submission in the second quarter of 2004 with launch in the
autumn of 2004
* R&D team being expanded to support the development of additional assays for
G5
Pharmaceuticals
* Sales advance to a record level of #5.8m (1H2003: #5.5m)
* Diclomax(R) sales stable at #3.2m (1H2003: #3.3m; 2H2003: #3.1m)
* Operating profit of #1.0m (1H2003: #1.3m) reflecting increased sales and
marketing activity
* New products launched onto UK and Ireland markets
Commenting on these results, Provalis Chairman Frank Harding said, "The
Pharmaceuticals business has performed in line with our expectations in the
first half of the current financial year, with a strong second quarter
performance. The first half saw new products launched and innovative marketing
initiatives undertaken, and we expect to see further sales growth in the second
half.
Although the placement of Glycosal(R) instruments to end users continues to be
encouraging, with over 9,000 instruments shipped to date, sales of the test
cartridge have been below our expectations. The stock readjustments in the
distribution chain that contributed towards this have now filtered through the
system, so, aided by a flow of launches in further markets, sales by Medical
Diagnostics should now build in the second half of the year."
Phil Gould, CEO of Provalis, added "The continuing placement of Glycosal(R)
instruments demonstrates the market need for point of care HbA1c testing,
particularly in the USA. G5, our next generation product, will be well placed to
fully exploit this market as, in addition to the technical attributes of
Glycosal(R), it has the benefit of being fully automated. We remain extremely
excited about the progress, and potential, of G5, which we believe will quickly
become our leading point of care diagnostics platform. G5 development remains on
track, with FDA submission scheduled for the second quarter of this year and
product launch still targeted for the autumn."
For further information:-
Dr Phil Gould, Chief Executive Officer, Provalis plc, Tel: 01244 833463
Mr Peter Bream, Finance Director, Provalis plc, Tel: 01244 833552
Mr Lee Greenbury, Company Secretary, Provalis plc, Tel: 01244 833402
Lisa Baderoon, Buchanan Communications, Tel: 020 7466 5000
Provalis' Internet Website ; http://www.provalis.com
"Safe Harbor" Statement under the US Private Securities Litigation Reform Act of
1995: Statements in this announcement that relate to future plans, expectations,
events, performances and the like are forward-looking statements as defined in
the US Private Securities Litigation Reform Act of 1995. Actual results of
events could differ materially from those described in the forward-looking
statements due to a variety of factors. Such factors include, among others: the
viability of the Group's products, which are at various stages of development;
the generation of sufficient operating cash flow by the Group's pharmaceutical
and medical diagnostic businesses to finance the ongoing development of these
businesses as well as the Group's research and development activities; the
success of the Group's research and development strategy and activities;
uncertainties related to future clinical trial results and the associated
regulatory process; the execution and success of collaborative agreements with
third parties; availability and level of reimbursement for the Group's products
from government health administration authorities or other third-party payors;
the rate of net cash utilisation within the Group and, hence, the Group's
possible need for additional capital in the short, medium and/or long term; the
Group's intellectual property position and the success of patent applications
for its products and technologies; the Group's dependence on key personnel;
general business and economic conditions; the impact of future laws, regulations
and policies; stock market trends in the Group's sector; and other factors
beyond the Group's control that may cause the Group's available capital
resources to be used more quickly than expected. These and other factors that
could affect the Company's future results are more fully described in its
filings with the US Securities and Exchange Commission, inparticular the latest
20-F filing, copies of which are available from the Company Secretary at the
Company's registered address.
Notes to Editors
Provalis plc (LSE:PRO and NASDAQ:PVLS) is a diversified healthcare company with
two operating businesses:-
* Medical Diagnostics - develops and sells to world markets
medical diagnostic products for chronic disease management. The division's
principle products are Glycosal(R) and Osteosal(R) in the areas of diabetes
and osteoporosis respectively.
* Pharmaceuticals - sells and markets its own, and third party, branded,
prescription medicines in the UK and Ireland to GPs and hospitals through its
own regionally managed sales force. The division's principle product is
Diclomax(R), a medicine for use in the treatment of musculo-skeletal
disorders, and it also sells products in the areas of gastroenterology,
osteoporosis, migraine and dermatology.
Chairman's & Chief Executive's Statement
Group
The Group had mixed success in the first half of the financial year, with our
Pharmaceuticals business achieving record half yearly sales, but our Medical
Diagnostics business performing below expectations. The Group's unaudited half
year sales were #6.4m which, as anticipated at the Annual General Meeting, were
lower than in the same period last year (1H2003: #7.1m). It should be remembered
that first half sales last year benefited from the one-off order for Glycosal(R)
instruments and test cartridges from Abbott Laboratories (#0.4m), but, after
taking this into account, the first half of this year still saw lower than
anticipated sales of Glycosal(R) test cartridges.
The Group recorded an operating loss of #1.8m (1H2003: #1.1m) reflecting the
costs of establishing the Irish business as well as the effect of the reduced
sales by Medical Diagnostics and lower gross profit.
The Group ended the period with #3.2m in cash, which was achieved as a result of
tight cash management which still allowed targeted spending on key R&D projects,
capital spending on equipment for the manufacture of G5 and focussed promotion
and market development by our Pharmaceuticals business, particularly in Ireland.
In December 2003,the Group entered into a #3.0m Barclays Bank facility
committed for three years and, since the end of the half year, has received the
second #1.5m payment due from Dr Falk Pharma and #0.24m of the #0.95m grant
awarded earlier in the year by the Welsh Assembly. It should also be remembered
that future cash flows will be enhanced when the monthly payments of #380,000 to
Pfizer for Diclomax(R) cease in November 2004, and that the final payment of up to
#2.0m is due from Dr Falk Pharma in January 2005.
The arbitration proceedings brought by the Group against Dimethaid International
Inc following the early termination of the Pennsaid distribution agreement were
decided in Provalis' favour in December 2003, with Provalis being awarded
damagesof #1.2m, plus interest and costs of a further #0.4m. Dimethaid paid
Provalis #0.2m of this in February 2004, with the balance being payable by
instalments until April 2005. The Group has recognised this income of #0.2m in
the period which has been offset by the #0.2m of legal costs incurred in the
period.
Medical Diagnostics
As anticipated, Glycosal(R) sales of #0.6m in the period were down on the same
period last year (1H2003: #1.6m). Sales in the first half of last year were
boosted bythe one-off order from Abbott Laboratories (#0.4m), with the
remainder of this comparative shortfall being due to lower than anticipated
sales of test cartridges. These lower sales resulted from a combination of
de-stocking in the lengthy US sub-distributor network, and short delays to our
distributors entering new markets, due to factors such as import administration,
which has then held up the routine re-supply of test cartridges.
However, our distributors continued to place Glycosal(R) instruments at the target
rate, with over 1,300 new units sold by them in the period, and as they have
also reported to us that sales are now being made to potentially significant
markets such as India, Japan and Spain, we expect sales by the Medical
Diagnostics business to build.
We now have over three years' experience of commercialising Glycosal(R) and have
supplied over 9,000 instruments and two million test cartridges. Our market
analysis indicates that the monthly usage rate of test cartridges among
established customers varies from around 40 in diabetology clinics to around 12
in the smaller general practitioner-run clinics.
This experience has given us a much greater understanding of the market for
point of care diagnostic products. This is particularly so in the key US market,
where the success in placing Glycosal(R) instruments has demonstrated the market
demand for a rapid, accurate, technically accredited and low cost point of care
test for glycated haemoglobin, particularly in the smaller general
practitioner-run clinics. However, market feedback indicates that this demand
will best be served by a fully automated test which fits smoothly into
physicians' and nurses' work flows.
Glycosal(R) has highlighted the potential of this market but, being a
semi-automated system, cannot fully exploit it; market research has indicated
that it is this semi-automation that has resulted in the higher than anticipated
retirement rate of Glycosal(R), particularly in the more busy clinics. G5 however,
whilst sharing all of the technical, cost and time advantages of Glycosal(R), is
fully automated and so will be ideally positioned to exploit this valuable
market. As such, we have the opportunity with G5 to make a significant
penetration of the lucrative and key US point of care market.
Pharmaceuticals
Sales by the Pharmaceuticals business showed good progress in the half year,
buoyed by maintained sales of Diclomax(R) our arthritis therapy, launches of new
products in the UK and the emergence of our business in Ireland. Sales advanced
strongly, particularly in the second quarter, to #5.8m for the half year. This
is 5% ahead of the first half, and 7% ahead of the second half of the last
financial year. Theoperating profit was #1.0m, reduced from the same period
last year (1H2003: #1.3m) due to the increased costs of supporting new product
launches and the building of the business in Ireland.
Diclomax(R) sales were maintained at #3.2m (1H2003: #3.3m: 2H2003: #3.1m), despite
the continuing challenge from the new COX2 inhibitors.
The sales business in Ireland made good progress in its first full half year of
trading, with sales of #0.3m. With Diclomax(R) and other Provalis products now
launched in Ireland, and an exploratory collaboration with Pfizer now underway,
we expect to see further growth by this business in the second half of the year.
The Pharmaceuticals business is a dynamic and flexible business able to respond
quickly to market opportunities. As an example of this, the recent NICE decision
to withdraw support for the use of hormone replacement therapy in the treatment
of osteoporosis has presented Provalis with the chance to increase the market
share of Calceos(R), which is used as an adjunctive therapy for osteoporosis. In
order to capitalise on this unexpected opportunity, Provalis has immediately
focussed its promotion and marketing efforts over the next marketing cycle on
Calceos(R), has reduced the price to allow more competitive tendering against
other products, and has contracted in a third party sales-force to intensify the
detailing of Calceos(R) to doctors in the UK; we expect to see significant sales
growth of this product.
Provalis is committed to growing the range of products sold by the
Pharmaceuticals business and we are in late stage discussions to license-in a
new generation product with the potential to replace the revenue from the sales
of the Dr Falk Pharma range, which will be returned at the end of 2004, within
three years.
New product development - G5 now in manufacture and progressing towards US
regulatory submission in USA
Development of G5, the fully automated diagnostic platform, has progressed well
in the first half of the year and is now essentially complete. Third party
manufacturing facilities for both the instrument and test cartridge components
are in place, and further expansion of Provalis' cartridge assembly facility in
Deeside is underway. Instruments and cartridge components have already been
delivered to us for use in the definitive clinical trials to be carried out to
support the US regulatory submission due in the second quarter of 2004, and in
large scale trials with interested parties. We will be holding a number of
research and investor events in the coming months to demonstrate G5 and to
highlight its market potential and world leading features.
Third party interest in G5 has been significant, reflecting the exciting product
proposition of a fully automated yet low cost, reliable, rapid and versatile
doctor's office diagnostic platform. This level of interest reinforces the
market opportunities for G5 that are available to Provalis. With assistance from
an experienced US based consultancy firm, we are using our understanding of the
marketplace and the lessons we have learned from the use of third party
distributors on a global basis, to finalise our commercialisation strategy for
G5 in order to best realise these opportunities.
As well as carrying out testing for glycated haemoglobin, G5 is able to perform
other diagnostic tests. We believe that having a range of tests on the same
instrument will be a key factor in G5's future success, and are expanding the R&
Dteam in order to support the development of these further tests. The first
additional test is planned for introduction in spring 2005.
We remain extremely excited about the prospects for G5. This product will become
our flagship product in the USAfollowing its launch onto the point of care,
glycated haemoglobin testing market in the autumn of 2004.
Outlook for the full year
The Pharmaceutical business has performed in line with our expectations in the
first half of the current financialyear, with a particularly strong second
quarter. With a number of new products launched, and new marketing initiatives
underway, we expect to grow sales further.
The placement of Glycosal(R) instruments to end users continues to be encouraging,
with over 9,000 instruments shipped to date. With the stock readjustment of
cartridges having taken place in the sub-distribution chain, and sales now being
made to potentially significant new markets, sales by the Medical Diagnostics
business should now build.
Although Glycosal(R) currently takes centre stage for our Medical Diagnostics
business, we remain very excited about the progress, and potential, of G5. We
set ourselves a demanding programme for its secure introduction, but this
remains on track with US regulatory submissions and product launch still
targeted for the second quarter and the autumn of 2004 respectively, following
which we believe G5 will quickly become our flagship point of care diagnostics
platform, particularly inthe USA.
Frank Harding Philip Gould
Chairman Chief Executive Officer
20 February 2004
Consolidated Profit and Loss Account
for the six months ended 31 December 2003
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
Notes #'m #'m #'m
-----------------------------------------------------------------------------
Turnover
- Continuing activities 1 6.4 7.1 14.0
-----------------------------------------------------------------------------
6.4 7.1 14.0
Cost of sales (2.8) (3.1) (6.3)
-----------------------------------------------------------------------------
Gross profit 3.6 4.0 7.7
Selling and distribution (1.9) (1.6) (3.1)
expenses
Administration expenses
-------- --------- ---------
Amortisation of intangible 6 (0.7) (0.7) (1.5)
assets
Administration costs 2 (1.8) (1.8) (3.2)
Research and development (1.0) (1.0) (2.0)
costs
-------- --------- ---------
(3.5) (3.5) (6.7)
-----------------------------------------------------------------------------
Operating loss
- Continuing activities (1.8) (0.7) (1.7)
- Discontinued activities 1 - (0.4) (0.4)
-----------------------------------------------------------------------------
(1.8) (1.1) (2.1)
Loss on termination of 1, 2 - (0.2) (0.2)
discontinued activities
Profit on variation of
distribution agreement
- Continuing activities 2 - - 3.4
-----------------------------------------------------------------------------
(Loss) profit on ordinary (1.8) (1.3) 1.1
activities before
interest
Interest receivable 0.1 0.1 0.2
-----------------------------------------------------------------------------
(Loss) profit on ordinary 1 (1.7) (1.2) 1.3
activities before
taxation
Taxation 3 (0.3) - -
-----------------------------------------------------------------------------
(Loss) profit for the (2.0) (1.2) 1.3
period
-----------------------------------------------------------------------------
(Loss) profit per ordinary 4 (0.6)p (0.4)p 0.4p
share - basic and diluted
-----------------------------------------------------------------------------
The accompanying notes are an integral part of this Consolidated Profit and Loss
Account.
Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 December 2003
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
#'m #'m #'m
-------------------------------------------------------------------------------
Shareholders' funds at the start of 17.1 15.9 15.9
the period
(Loss) profit for the period (2.0) (1.2) 1.3
Currency translation differences on
foreign currency net
investments - - (0.1)
-------------------------------------------------------------------------------
Shareholders' funds at the end of the 15.1 14.7 17.1
period
-------------------------------------------------------------------------------
The accompanying notes are anintegral part of this Reconciliation of Movements
in Shareholders' Funds.
Consolidated Balance Sheet
at 31 December 2003
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
Notes #'m #'m #'m
-------------------------------------------------------------------------------
Fixed assets
Intangible assets 6 11.8 13.3 12.5
Tangible assets 1.8 1.6 1.6
-------------------------------------------------------------------------------
13.6 14.9 14.1
-------------------------------------------------------------------------------
Current assets
Stocks 2.4 1.7 1.9
Debtors 4.1 2.2 4.0
Cash at bank and in hand 3.2 7.3 6.6
-------------------------------------------------------------------------------
9.7 11.2 12.5
Creditors: Amounts falling (8.2) (7.3) (7.7)
due within one year
-------------------------------------------------------------------------------
Net current assets 1.5 3.9 4.8
-------------------------------------------------------------------------------
Total assets less current 15.1 18.8 18.9
liabilities
-------------------------------------------------------------------------------
Creditors: Amounts falling due after - (4.1) (1.8)
more than one year
-------------------------------------------------------------------------------
Net assets 1 15.1 14.7 17.1
-------------------------------------------------------------------------------
Capital and reserves
Called-up share capital 7 3.3 3.3 3.3
Share premium account 7 24.1 24.1 24.1
Merger reserve 7 96.3 96.3 96.3
Profit and loss account 7 (108.6) (109.0) (106.6)
-------------------------------------------------------------------------------
Equity shareholders' 15.1 14.7 17.1
funds
-------------------------------------------------------------------------------
The accompanying notes are an integral part of this Consolidated Balance Sheet.
The interim financial statements were approved by the Board of Provalis plc on
20 February 2004.
Statement of Total Recognised Gains and Losses
for the six months ended 31 December 2003
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
#'m #'m #'m
-------------------------------------------------------------------------------
(Loss) profit for the period (2.0) (1.2) 1.3
Currency translation differences on
foreign currency net
investments - - (0.1)
-------------------------------------------------------------------------------
Total recognised gains and losses (2.0) (1.2) 1.2
relating to the period
-------------------------------------------------------------------------------
Consolidated Cash Flow Statement
for the six months ended 31 December 2003
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
Notes #'m #'m #'m
-------------------------------------------------------------------------------
Operating loss (1.8) (1.1) (2.1)
Depreciation of tangible 0.3 0.3 0.5
fixed assets
Amortisation of intangible 0.7 0.7 1.5
fixed assets
(Increase) in stocks (0.5) (0.3) (0.5)
Increase (decrease) in 0.6 (0.1) 0.2
creditors
(Increase) in debtors (0.1) (0.2) (0.3)
-------------------------------------------------------------------------------
Net cash outflow from (0.8) (0.7) (0.7)
operating activities
-------------------------------------------------------------------------------
Cash flow statement
Net cash outflow from (0.8) (0.7) (0.7)
operating activities
-------------------------------------------------------------------------------
Returns on investments and
servicing of finance
Interest received 0.1 0.1 0.2
-------------------------------------------------------------------------------
Net cash inflow from returns
on investments and
servicing of finance 0.1 0.1 0.2
-------------------------------------------------------------------------------
Taxation
R&D tax credit received 0.1 0.4 0.6
-------------------------------------------------------------------------------
Net cash inflow from 0.1 0.4 0.6
taxation
-------------------------------------------------------------------------------
Capital expenditure and
financial investment
Purchase of intangible fixed (2.3) (2.3) (4.6)
assets
Purchase of tangible fixed (0.5) (0.3) (0.5)
assets
Proceeds on variation of - - 1.5
distribution agreement
-------------------------------------------------------------------------------
Net cash outflow from capital
expenditure and
financial investment (2.8) (2.6) (3.6)
-------------------------------------------------------------------------------
Acquisitions and disposals
Termination of discontinued - (0.2) (0.2)
businesses
-------------------------------------------------------------------------------
Net cash outflow from - (0.2) (0.2)
acquisitions and disposals
-------------------------------------------------------------------------------
Net cash outflow before
management of liquid
resources and financing (3.4) (3.0) (3.7)
-------------------------------------------------------------------------------
Management of liquid
resources
Decrease in short term 4.8 2.2 3.5
deposits
-------------------------------------------------------------------------------
Net cash inflow from 4.8 2.2 3.5
management of liquid
resources
-------------------------------------------------------------------------------
Financing
Unsecured loan repayments - (0.1) (0.1)
-------------------------------------------------------------------------------
Net cash outflow from - (0.1) (0.1)
financing
-------------------------------------------------------------------------------
Increase (decrease) in cash 8 1.4 (0.9) (0.3)
-------------------------------------------------------------------------------
The accompanying notes are an integral part of this Consolidated Cash Flow
Statement.
Notes to Accounts
for the six months ended 31 December 2003
1. Segmental analysis by class of business
The analysis by class of business of the Group's turnover, profit (loss) on
ordinary activities before taxation and net assets is set out below:
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
#'m #'m #'m
-------------------------------------------------------------------------------
Turnover
Continuing activities
- Medical Diagnostics 0.6 1.6 3.1
- Pharmaceuticals 5.8 5.5 10.9
-------------------------------------------------------------------------------
6.4 7.1 14.0
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Profit (loss) on ordinary activities
before taxation
Continuing activities operating
profit (loss)
- Medical Diagnostics (1.7) (1.0) (2.3)
- Pharmaceuticals 1.0 1.3 2.5
- Common costs (1.1) (1.0) (1.9)
Net interest receivable 0.1 0.1 0.2
Profit on variation of distribution - - 3.4
agreement
-------------------------------------------------------------------------------
(1.7) (0.6) 1.9
Discontinued activities* operating - (0.4) (0.4)
(loss)
Loss on termination of discontinued - (0.2) (0.2)
activities*
-------------------------------------------------------------------------------
(1.7) (1.2) 1.3
-------------------------------------------------------------------------------
*Discontinued activities relate to certain programmes in the Vaccines Research
Business of Therapeutics R&D
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
#'m #'m #'m
-------------------------------------------------------------------------------
Net assets
- Medical Diagnostics 0.6 0.4 0.5
- Pharmaceuticals 9.7 5.1 7.2
-------------------------------------------------------------------------------
10.3 5.5 7.7
Unallocated common assets including 4.8 9.29.4
cash and deposits
-------------------------------------------------------------------------------
Net assets 15.1 14.7 17.1
-------------------------------------------------------------------------------
2. Exceptional items
In December 2003 the Group announced that the arbitration it commenced against
Dimethaid International Inc. following Dimethaid's termination of the Pennsaid(R)
distribution agreement had been decided in Provalis' favour, and that as a
result Provalis had been awarded the compensatory sum of #1.2m, together with
costs and interest of #0.4m. Subsequent to this announcement the Group has
negotiated a payment schedule with Dimethaid resulting in an initial receipt of
#0.2m in February 2004 and a series of monthly payments ending in April 2005.
Due to the continued uncertainty in the receipt of these monies the award will
only be recognised in the Group Accounts to the extent that its recovery is
considered to be sufficiently certain, and therefore #0.2m has been recognised
in the period. This offsets the #0.2m of costs incurred during this period in
connection with this arbitration.
The loss on discontinued activities of #0.2m in the six months ended December
2002 and the year ended 30 June 2003 relate to the redundancy and closure costs
of Therapeutic R&D's Vaccine programmes.
The profit on variation of distribution agreement of #3.4m in the year ended
June 2003 relates toprofit recognised on payments arising from the variation of
the distribution agreement with Dr Falk Pharma. #1.5m was received in both
February 2003 and January 2004 and a further #0.4m is due to be received in
January 2005. Up to a further #1.6m may be received in January 2005 contingent
on the levels of sales of Falk products in calendar year 2004.
3. Taxation
In December 2003 the Inland Revenue rejected a claim for R&D tax credits in the
Medical Diagnostics business for the year ended 30 June 2002. The Group is
strongly contesting the Inland Revenue's decision. Cumulatively, the Group had
recognised #0.4m in respect of the R&D tax credits for the Medical Diagnostics
business. However if the Group's appeals are unsuccessful, #0.3m of cash
received to date in respect of tax credits may have to be repaid, and a
provision for this has been included in the tax charge for the period.
The Inland Revenue accepted the claim for the R&D tax credits for the
Therapeutics business at an amount of #0.1m in excess of the credits previously
recognised in the accounts.
4. Loss per share
The loss per share is based on the loss for the period of #2.0m (6 months ended
31 December 2002: loss #1.2m; full year 2003: profit#1.3m) and the weighted
average number of ordinary shares in issue during the period of 330,603,722 (6
months ended 31 December 2002: 330,360,181; full year 2003: 330,360,181).
5. Earnings before interest, taxation, depreciation and amortisation (EBITDA)
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
#'m #'m #'m
-------------------------------------------------------------------------------
(Loss) profit on ordinary activities (1.7) (1.2) 1.3
before taxation
Interest (0.1) (0.1) (0.2)
Amortisation 0.7 0.7 1.5
Depreciation 0.3 0.3 0.5
-------------------------------------------------------------------------------
EBITDA (0.8) (0.3) 3.1
Profit on variation of distribution - - (3.4)
agreement
-------------------------------------------------------------------------------
EBITDA before exceptional items (0.8) (0.3) (0.3)
Operating loss from discontinued - 0.4 0.4
activities*
Loss on termination of discontinued - 0.2 0.2
activities*
-------------------------------------------------------------------------------
EBITDA before exceptional items and
excluding
discontinued activities (0.8) 0.3 0.3
------------------------- --------- -------- --------
*Discontinued activities relate to certain programmes in the Vaccines Research
Business of Therapeutics R&D
6. Intangible assets
The intangible assets represent the total cost of acquisition of Diclomax(R) from
Parke Davis, a subsidiary of Pfizer Inc., on 3 December 2001, for #14.9m. The
asset is being amortised over a period of ten years and the Consolidated Profit
and Loss Account for the six months ended 31 December 2003 contains amortisation
of #0.7m (six months ended 31 December 2002: #0.7m).
The cash outflow associated with the acquisition of Diclomax(R) was #2.3m in the
six months (six months ended 31 December 2002: #2.3m). The outstanding #4.1m of
acquisition cost is held within creditors and will be payable in weekly
instalments until November 2004. As security for the payment of the deferred
consideration Parke Davis has a fixed and floating charge over the assets
(excluding book debts) of Provalis Healthcare Limited. The security offered by
Provalis plc lapsed on 3 December 2002 but Provalis plc will continue to
guarantee the debt of Provalis Healthcare Limited to Parke Davis Limited.
7. Movements in equity shareholders' funds
Called-up Share Profit
share premium Merger and loss
capital account reserve account Total
#'m #'m #'m #'m #'m
-------------------------------------------------------------------------------
Balance at 1 July 3.3 24.1 96.3 (106.6) 17.1
2003
Loss for the period - - - (2.0) (2.0)
-------------------------------------------------------------------------------
Balance at 31 December 3.3 24.1 96.3 (108.6) 15.1
2003
-------------------------------------------------------------------------------
8. Cash flow information
(a) Reconciliation of net cash flow to movements in net funds
6 months 6 months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
(Unaudited) (Unaudited) (Audited)
#'m #'m #'m
-------------------------------------------------------------------------------
Increase (decrease) in cash in the 1.4 (0.9) (0.3)
period
Repayments of unsecured loan - 0.1 0.1
(Decrease) in short term deposits (4.8) (2.2) (3.5)
-------------------------------------------------------------------------------
Movement in net funds in the period (3.4) (3.0) (3.7)
Net funds at start of period 6.6 10.3 10.3
-------------------------------------------------------------------------------
Net fundsat end of period 3.2 7.3 6.6
-------------------------------------------------------------------------------
(b) Analysis of changes in net funds
Asat As at
1 July Cash 31 December
2003 flow 2003
#'m #'m #'m
-------------------------------------------------------------------------------
Cash 1.6 1.4 3.0
Short term deposits 5.0 (4.8) 0.2
-------------------------------------------------------------------------------
Net funds 6.6 (3.4) 3.2
-------------------------------------------------------------------------------
Short term deposits have a maturity of more than 24 hours but less than 12
months. They are repayable on demand subject, in some instances, to the
repayment of certain expenses. Cash includes cash in hand and deposits repayable
on demand.
9. Nature of financial information
The interim figures for the six months ended 31 December 2003 have been
independently reviewed by the auditors, but they, and those for the six months
ended 31 December 2002, are unaudited.
The financial information set out herein does not comprise full accounts within
the meaning of section 240 of the Companies Act 1985. The comparative figures
for the year ended 30 June 2003 are extracted from the audited accounts for that
year, which have been filed with the Registrar of Companies. The auditors'
report on those audited accounts was unqualified and did not contain any
statement under sections 237(2) or (3) of the Companies Act 1985.
The Interim Report has been prepared on the basis of the accounting policies set
out in the most recent set of annual financial statements.
Independent Review Report
by KPMG Audit Plc to Provalis Plc
Introduction
We have been engaged by the Company to review the financial information set out
on pages 7 to 12 and we have read the other information contained in the Interim
Report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company inaccordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower levelof assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2003.
KPMG Audit Plc
Chartered Accountants
8 Princes Parade
Liverpool
L3 1QH
20 February 2004
- END -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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