TIDMBQE
RNS Number : 8929G
Bioquell PLC
07 March 2018
Bioquell PLC - 2017 Preliminary Results
Bioquell PLC (LSE symbol:BQE), the specialist provider of
biodecontamination systems and services to the international Life
Sciences, Pharmaceutical and Healthcare markets, today announces
its preliminary results for the year ending 31(st) December
2017.
Financial highlights
-- Core biodecontamination business revenues up 13% to GBP28.5
million (2016: GBP25.2 million), up 9% at constant currency
rates*
-- Total revenues including the defence business were up 10% at
GBP29.2 million (2016: GBP26.5 million), up 6% at constant currency
rates*
-- Gross Profit Margins improved to 52% from 48% in 2016
-- Pre-exceptional EBITDA** increased 29% to GBP5.3 million (2016: GBP4.1 million)
-- Profit from operations before exceptional items was up 81% to
GBP2.9 million (2016: GBP1.6 million)
-- Exceptional item of GBP0.3 million relating to profit on
disposal of legacy Air Flow business (2016: exceptional items
totalled a charge of GBP1.5 million)
-- Profit before tax was GBP3.3 million (2016: GBP0.1 million)
-- Basic Earnings per share 11.6p (2016: 1.3p)
-- Diluted Earnings per share 10.8p (2016:1.2p)
-- Cash and cash equivalents was GBP14.6 million (2016: GBP8.8 million)
* expressing revenues in both the period under review and the
comparative period at constant exchange rates
** earnings before interest, tax, depreciation, amortisation and
exceptional items.
Key developments
-- Simplified and reduced complexity with the disposal of the
legacy Air Flow service business and, subsequent to the year end,
related spares business. The full benefit of increased focus on the
core biodecontamination business will be felt in the year ending 31
December 2018
-- Re-built US-based life sciences sales team which generated
record levels of revenue in the US in 2017
-- Encouraging sales growth of the Bioquell Qube aseptic workstation
-- Completed large Rapid Biodecontamination Service (RBDS)
contract with prestigious Middle East hospital
Ian Johnson, Executive Chairman of Bioquell PLC, said:
"I am pleased to report continued substantial improvements in
the financial performance of the Company for 2017. Management
continue to simplify the Group and focus on generating top line
growth from the core biodecontamination business, which reached
record levels for the year. The disposal of the legacy Air Flow
service activity will enhance our ability to deliver excellent
customer service to our core customers. We have invested in sales
and marketing resource to maximise our potential in the
international Life Sciences and Pharmaceutical market and on
further improving financial performance through generating
additional recurring revenues."
Chairman's Statement
INTRODUCTION
The Group achieved total revenues of GBP29.2 million (2016:
GBP26.5 million) and continues to generate the majority of its
revenues from its core Biodecontamination business. A relatively
small and historically unpredictable amount is derived from the
Defence sector.
For the 12 months ended 31 December 2017, the split of revenues
between these businesses was:
-- Biodecontamination: GBP28.5 million (2016: GBP25.2 million) -
a 13% increase year on year and accounting for 98% of Group
revenues (2016: 95%); and
-- Defence: GBP0.7 million (2016: GBP1.3 million) - a decline of
46% and accounting for 2% of Group revenues (2016: 5%).
The Group's strategy is to focus on generating growth from the
core biodecontamination business. As anticipated, defence revenues
declined as a proportion of total revenues.
FINANCIAL RESULTS
Revenue 2017 GBPm 2016 GBPm Growth Constant
% currency
growth
%
Biodecontamination 28.5 25.2 +13% 9%
Defence 0.7 1.3 -46% -46%
---------- ---------- ------- ----------
TOTAL 29.2 26.5 10% 6%
---------- ---------- ------- ----------
Set out below is a table which sub-analyses the revenues of the
Biodecontamination segment into the three principal product and
service categories. The Group's Qube product stands apart from its
other principal products and is presented separately. "Services"
comprises income from rental of the Group's POD product and income
from RBDS, the Group's Rapid Biodecontamination Service. "Systems"
includes all of the Group's other revenue streams.
2017 Recurring Non- 2017
revenues* recurring Total
revenues
GBPm GBPm GBPm
--------------------------- ---------- ---------- ------
Systems 8.8 8.4 17.2
Qube - 3.3 3.3
Services 3.1 4.9 8.0
--------------------------- ---------- ---------- ------
Biodecontamination segment 11.9 16.6 28.5
--------------------------- ---------- ---------- ------
2016 Recurring Non- 2016
revenues* recurring Total
revenues
GBPm GBPm GBPm
--------------------------- ---------- ---------- ------
Systems 7.7 8.9 16.6
Qube - 2.5 2.5
Services 2.9 3.2 6.1
--------------------------- ---------- ---------- ------
Biodecontamination segment 10.6 14.6 25.2
--------------------------- ---------- ---------- ------
*Recurring revenues comprise maintenance service & spare
parts, consumables, revenue from proactive RBDS engagements in
hospitals and revenue from POD rentals.
In the year, systems revenue increased by 4%, Qube revenue by
29% and services revenue by 32%.
Total recurring revenue increased by 12% and represented 42%
(2016: 42%) of total segment revenue.
Revenues from total non-UK sales in the period amounted to
GBP23.4 million (2016: GBP20.0 million), amounting to 80% (2016:
76%) of total revenues. The equivalent data for the
biodecontamination business shows that non-UK revenues were GBP22.8
million (2016: GBP18.7 million), representing approximately 80% of
this business' revenues. Virtually all defence revenues are non-UK
based.
Given the large percentage of total revenue earned in currencies
other than sterling, the Group monitors the level of constant
currency sales growth, calculated by expressing revenues in both
the period under review and the comparative period at constant
exchange rates as set out in the table below. For the year as a
whole biodecontamination sales grew by 9% in constant currency
terms.
Bio Div Group
GBPm GBPm
--------------------------------------------------- ------- -----
Revenue 28.5 29.2
Impact of foreign exchange movements (1.0) (1.1)
--------------------------------------------------- ------- -----
Constant currency revenue (at 2016 exchange rates) 27.5 28.1
--------------------------------------------------- ------- -----
Gross margin in the year was up 4% to 52% (2016: 48%). This
meaningful increase in gross margin reflects a number of additional
factors besides exchange rates including both the results of
targeted cost-reduction programmes associated with our products and
price increases for certain products.
Research & development and engineering costs
As is set out in the table below, the accounting charge for
Research & Development ("R&D") costs in the period
increased by 12% to GBP1.9 million (2016: GBP1.7 million). Cash
R&D costs were GBP1.2 million in the year (2016: GBP1.3
million), representing a 8% decrease.
2017 2016
GBPm GBPm
-------------------------------------- ------ ------
R&D and engineering costs per income
statement 2.2 1.8
Less engineering costs (0.3) (0.1)
--------------------------------------- ------ ------
R&D costs per income statement 1.9 1.7
Less amortisation expense (0.9) (0.9)
Plus capitalised costs 0.2 0.5
--------------------------------------- ------ ------
Total cash R&D expense 1.2 1.3
--------------------------------------- ------ ------
In the short to medium term we anticipate that R&D costs
will continue at a roughly similar level. We continue to work on
extensions to our product portfolio rather than on major new
product development initiatives.
Engineering costs increased from GBP0.1 million in 2016 to
GBP0.3 million; this increase was attributable principally to the
hiring of additional headcount in the Quality department during the
year.
Other Operating Expenses
Aside from research & development and engineering costs,
other operating expenses increased by 10% to GBP12.3 million (2016:
GBP11.2 million). Sales and marketing overheads increased by 10%,
reflecting the investment during the year in strengthening the
group's sales and marketing resources, particularly in North
America.
As is set out in the table below, pre exceptional EBITDA
(earnings before interest, tax, depreciation, amortisation and
adjusting items) increased by 29% in the year to GBP5.3 million
(2016: GBP4.1 million).
2017 2016
GBPm GBPm
------------------------------- ------ ------
Profit from operations("EBIT") 3.2 0.1
Exceptional Items (0.3) 1.5
Depreciation 1.4 1.5
Amortisation 1.0 1.0
EBITDA 5.3 4.1
------------------------------- ------ ------
Profit before tax and exceptional items was GBP2.9 million
(2016: GBP1.6 million). Profit before tax was GBP3.3 million (2016:
GBP0.1 million).
The exceptional item recognised in 2017 was the gain on the
disposal of the Airflow service business of GBP0.32 million. In
2016 there were exceptional items totalling a charge of GBP1.52
million, being one-off costs associated with the restructuring of
the board of GBP0.86 million and impairments of intangible assets
of GBP0.66 million.
Basic earnings per share were 11.6 pence (2016: 1.3 pence).
Capital expenditure continues to run significantly below the
depreciation charge, reflecting the Board's belief that the
substantial investments needed to support the growth of the
business in the short to medium term have, in general, been made
over recent years. A refurbishment programme for the Group's RBDS
equipment will increase capital expenditure in 2018 above levels
seen in recent years: overall capital expenditure in 2018 is
expected to be approximately GBP2 million.
In the year, purchases of tangible fixed assets totalled GBP0.8
million (2016: GBP0.7 million). Depreciation in the period was
GBP1.4 million (2016: GBP1.5 million).
Balance sheet
Intangible fixed assets decreased to GBP6.8 million (2016:
GBP7.6 million) as a result of the level of capitalised R&D
expenditure during the year (GBP0.2m) being less than the
amortisation charge of GBP0.9 million
Tangible fixed assets decreased to GBP3.9 million (2016: GBP4.6
million) as a result of depreciation (GBP1.4 million) exceeding
capital expenditure (GBP0.8 million) during the year.
Inventory increased by some GBP0.4 million to GBP3.2 million,
principally as a result of higher levels of raw materials inventory
in our UK factory. These higher levels were largely the result of a
strategic decision to hold higher levels of certain long lead time
items in order to reduce quoted lead times for certain manufactured
products.
Receivables fell by GBP1.0 million to GBP5.8 million,
principally as a result of the phasing of revenue in the last
months of 2017 compared to the last months of 2016.
Cash and cash equivalents increased by GBP5.8 million to GBP14.6
million, reflecting the profitability of the group in the year, the
relatively low level of capital expenditure and capitalisation of
development costs compared to the aggregate of depreciation and
amortisation (as discussed above) and a slightly lower level of
working capital at the end of 2017 compared to the end of 2016. The
Group spent GBP0.3 million on share buybacks during 2017, and
received a similar amount in proceeds from shares issued pursuant
to the exercise of share options.
Current liabilities totalled GBP6.9 million (2016: GBP5.9
million). This increase was partly down to higher current tax
liabilities, the result of improved group profitability, and partly
down to a higher level of provisions at the year end as a need was
identified to upgrade the in-field population of two unit types
within the product range to optimise their performance, and satisfy
the Group's obligations to the relevant customers.
The Group is considering returning further cash to shareholders
by way of share buybacks during the course of 2018 in lieu of
paying a dividend.
BUSINESS ACTIVITIES
Biodecontamination
The biodecontamination business provides products and services
to Life science research laboratories, pharmaceutical manufacturers
and healthcare organisations including hospitals. We serve
customers globally via direct sales offices and a network of
distributors. The Company provides Services, which includes RBDS
and POD; Systems, which includes hydrogen peroxide vapour (HPV)
equipment, consumables and service packages; and Isolators, which
includes the Qube aseptic workstation.
A range of equipment is available to meet customer requirements
including portable and fixed systems. The customer may choose to
carry out the biodecontamination of facilities by purchasing
systems or utilise Bioquell's Rapid Biodecontamination Service
(RBDS).
Defence
MDH Defence is a 50 year-old legacy business within the Group.
Revenues have historically been difficult to forecast with the vast
majority of business derived from large overseas defence
contracts.
In recent years revenues have declined and in 2017 were GBP0.7
million, accounting for just 2% of Group revenues. The Board has
decided to conduct a review of strategic options for this non-core
activity.
EMPLOYEES
On behalf of the Board I would like to thank all employees
within the Group for their hard work and commitment during
2017.
BOARD CHANGES
In April 2017, Tony Bourne, a non-Executive Director, resigned
from the Board after 8 years of service. On behalf of the Board I
would like to thank Tony for his contribution to the Company.
OUTLOOK AND PROSPECTS
The Board believes that by continuing to simplify and reduce the
complexity of the Group we will realise our objective to build a
world class biodecontamination business. As we exited 2017 the
financial performance of our core biodecontamination business was
much improved as can be seen in the financial information set out
above. There are a number of different drivers of growth which are
positively affecting our business, including the need for customers
to achieve and maintain regulatory compliance, the increasing
threat posed by antibiotic resistance and continuing growth in
research and small scale production associated with cell-based
healthcare products.
We remain focussed on improving the financial performance of the
Company through further efficiency measures and generating top line
growth.
The business has started 2018 in line with expectations and the
board remains confident in delivering further growth in revenue and
profits.
Prior to publication, the information contained within this
announcement was deemed to constitute inside information under the
Market Abuse Regulations (EU) No. 596/2104 ("MAR").
Ian Johnson
Chairman
Bioquell PLC
7(th) March, 2018
Strategic report
This report should be read in conjunction with the Chairman's
statement which provides information on the financial performance
of the Group in 2017.
The Group has two operating segments for accounting purposes.
The principal segment is the biodecontamination business. The
business model of this segment incorporates the sale of equipment
and related consumables and equipment servicing and the provision
of biodecontamination services to the international Life Sciences,
Pharmaceutical & Healthcare sectors. The second segment is the
defence business, MDH Defence, which sells CBRN filtration
equipment to a number of major overseas defence contractors.
The Group has developed a world-class range of technologies for
the markets it serves. The primary strategic objective is to
increase the Group's revenues and profits from its core
biodecontamination business via improved and more effective selling
of its market-leading range of products & services.
The Board currently considers it appropriate to monitor progress
on its strategy by reference to three key performance indicators
("KPIs"): revenues (including constant currency revenues), earnings
before interest, tax, depreciation and amortisation ("EBITDA") and
pre-tax profit. These are adjusted for exceptional costs where such
costs or credits are identified in order to improve comparability
of underlying performance across periods. As the business develops
the Board will consider adding, as appropriate, further KPIs to
monitor progress against a broader range of objectives. KPIs are
monitored monthly and also reviewed on a year to date and trailing
twelve months basis. In other sections of this report we comment on
results and trends on certain metrics which are not considered to
be KPIs but remain ways in which we measure performance. For
example our Corporate Social Responsibility statement includes
consideration of Health and Safety performance and certain employee
metrics.
Key strategic drivers
Microorganisms - bacteria, viruses and fungi - are ubiquitous
and can be the cause of significant problems for individuals,
companies and organisations around the world. Bioquell's strategy
is to generate revenues from the provision of cost-effective
technology-based solutions for microbiological contamination
control and eradication.
Historically our product offerings for Life Sciences,
Pharmaceuticals and Healthcare were based solely around the Group's
specialist hydrogen peroxide vapour decontamination technology;
however, over recent years we have added a number of complementary
products and services which enable us to offer a broader range of
solutions to our customers, most of whom operate in highly and
increasingly regulated environments. Examples of such products
include the Qube, a novel modular aseptic work station
incorporating Hydrogen Peroxide Vapour technology and the Pod, an
Infection Control Enclosure sold or leased to hospitals.
The QUBE is used to provide an aseptic environment for a range
of applications including: sterility testing; the production of
toxic, intravenous oncology drugs; and the production of
small-scale cell-based healthcare products. Over time we expect the
range of specialist applications for the QUBE to increase.
Life Sciences and Pharmaceuticals sector
The principal drivers of growth for Bioquell's
biodecontamination business in this market sector include:
-- an increasingly complex, onerous and rapidly expanding
international regulatory environment relating to the safe
production of biologically-sensitive therapeutic products;
-- demand for cost effective, fast-to-deploy aseptic environments;
-- improved methods and technology for the swift and aseptic
transfer of heat-sensitive materials into clean-rooms;
-- interest by customers in the use of technology to achieve
cost reductions - specifically by replacing manual cleaning with
no-touch automated cleaning;
-- growth in research activities and small-scale production
associated with cell-based healthcare products; and
-- demand for the mitigation of risks and liabilities associated with complex, and often biologically-sensitive, therapies historically prepared in hospital pharmacies.
Bioquell is proactively positioning itself to take advantage of
the opportunities arising as a result of the drivers noted above
and intends to grow revenues by expanding its global life science
sales and marketing team with particular focus in the USA. In the
medium term, Bioquell's target is to generate similar levels of
revenues from EMEA, Asia Pacific and the Americas, reflecting the
relative sizes of the available market in these geographical
areas.
Bioquell is also able to deliver technologies other than
Hydrogen Peroxide Vapour decontamination systems and services. For
example, the Bioquell QUBE comprises a novel, modular aseptic
work-station incorporating Hydrogen Peroxide Vapour technology.
The current level of recurring revenues in the group is 42%
(2016: 42%). We are working to increase this level by proactively
selling service packages to customers at the time they purchase new
equipment, and by converting longstanding customers onto upgraded
equipment which uses only Bioquell's own consumables.
Changes to regulations
There are an increasing number of regulations affecting the
markets into which we sell. Such regulations can cover both
decontamination equipment and/or the associated consumables.
Typically we find more onerous regulation tends to help increase
demand for Bioquell's high quality decontamination technology as
our clients remain focussed on attaining - and retaining -
regulatory compliance.
Healthcare sector
Bioquell's healthcare strategy is to provide technology-based
solutions which help hospitals reduce their hospital acquired
infection ("HAI") rates and combat the significant issues
associated with antibiotic resistance. For example, the Bioquell
POD enables hospitals to convert multi-bed, open-plan units at high
risk of the spread of HAIs into single-occupancy rooms. PODs can be
decontaminated using Bioquell's Hydrogen Peroxide Vapour
technology.
Defence sector
We manufacture specialist chemical, biological, radiological and
nuclear ("CBRN") filtration systems and environmental control
equipment for military vehicles and fixed facilities. Interest in
our CBRN products has been helped over the last few years by
increased levels of conflict in the Middle East as well as
instability in Eastern Europe.
Principal challenges
We are seeking to grow the Group's revenues by promoting the use
of Bioquell's technology to solve microorganism-related problems
for highly regulated customers in the Life Sciences and
Pharmaceutical sectors. Microorganism-related problems are becoming
more challenging, largely due to increasing drug resistance. Many
new, on-patent biotech drugs are highly susceptible to bioburden
contamination and are governed by increasingly complex
regulations.
In implementing our strategy we encounter a number of
challenges, including the international nature of our markets,
highly conservative customers (who may be reluctant to adopt new
technology), large competitors (with better established sales
footprints and customer relationships), an increasingly fragmented
and heterogeneous Life Sciences sector as well as hospitals which
are often reluctant to discuss - and therefore act on - the costs
and clinical impact of HAIs.
Brexit
The Bioquell Group derives some 30% of its revenue from trading
with other EU countries, roughly half of which is derived from the
cross-border shipment of capital equipment from the UK to the EU.
At the time of writing, there appears to be no imminent threat to
this trade given the suggestion of a transition period of some 21
months after the date of the UK's departure from the EU in March
2019. No issues have been identified specific to Bioquell's
business which would lead to its being affected any differently
from other UK based exporters to the EU after this transition
period expires.
Conclusion: the Bioquell Group
The Group has a robust strategy in place to generate high margin
revenues from customers in three large, growing and highly
regulated sectors: Life Sciences, Pharmaceuticals &
Healthcare.
Sales into the Life Sciences and Pharmaceuticals sectors
currently remain key to the profitability of the Group - and we
have taken clear and robust steps to re-focus the sales and
marketing efforts of the Group onto what are by far the Group's
largest markets.
On behalf of the Board
Ian Johnson
Executive Chairman
7 March 2018
Risks and uncertainties
The Group faces a number of risks and uncertainties associated
with its activities. It has put in place formal risk-review
structures and mechanisms to help assess and monitor such risks and
uncertainties; and, as appropriate, has taken steps to mitigate the
identified risks and/or uncertainties to the extent practicable.
However, it is not possible to identify or anticipate all risks and
uncertainties; nor is it possible to mitigate all such identified
risks and uncertainties.
Set out below is a summary of the principal risks and
uncertainties which the Board believes the Group faces, over and
above those which are inherent with carrying out commercial
activities. The description of these principal risks and
uncertainties should be read in conjunction with, and considered
taking into account of, the description of the activities of the
Group set out elsewhere in this document and on the Group's
websites.
The Board has undertaken a robust assessment of the principal
risks facing the Group including those that would threaten its
business model, future performance, solvency or liquidity.
A summary of how the Group seeks to mitigate some or all of
these principal risks and uncertainties is also set out in the
table below.
Risk and/or uncertainty Mitigation
---------------------------------------------- ----------------------------------------------
Commercial. In order to prosper the The Group is spending more time talking
Group needs to sell its products with actual and prospective customers
and services to sufficient customers to try and anticipate market trends
at an appropriate margin. This requires - and is working with customers to
good marketing and effective selling develop new products and services
of attractive products & services attractive to such customers. Management
into the Group's markets. noted in 2016 that the Group's sales
resources in both the Americas and
Asia needed strengthening and has
been taking steps to address this.
---------------------------------------------- ----------------------------------------------
Competition. Some of the Group's The Group monitors the activities
competitors are substantially larger of existing, new and potential competitors
than the Group and have, among other closely and is constantly reviewing
things, greater financial, selling and, as appropriate, refining its
and political lobbying resources. strategies, business models, sales
Accordingly there is a risk that and marketing activities, execution
the Group's business could be adversely plans and new product development
affected by actions undertaken by depending on, among other things,
these large competitors. competitor activities.
---------------------------------------------- ----------------------------------------------
Regulatory. The Group operates in The Group endeavours to work closely
a number of countries and sectors and establish a dialogue, either
which are highly regulated. These directly or through its third party
regulations affect both the group's distribution partners and/or clients,
customers and the group's products. with the relevant regulators in the
There is a risk that the relevant territories in which it operates.
regulations, could be changed and
such changes could significantly
adversely affect the Group's business
in a specific country or sector.
---------------------------------------------- ----------------------------------------------
Political. As an entity which has There are no circumstances specific
a highly international business, to the Group or its end user markets
the Group is exposed to uncertainties which renders it particularly susceptible
arising from political events such to such political uncertainties.
as the Brexit vote, specifically The Group seeks to analyse as quickly
in so far as these impact cross border as it possible can the implications
trading arrangements. for its business of any new political
or trade-related changes arising
from events such as Brexit.
---------------------------------------------- ----------------------------------------------
Technological. The Group is dependent The Group provides focussed products
on its technology - and products and services within
and services - continuing to be efficacious, its markets and accordingly is able
cost effective and attractive to to monitor relevant technological
the marketplace. There is the risk developments carefully - whether
that new technologies, products or by competitors or third party research
services are developed by competitors organisations, including universities.
which perform better, are easier The Group takes into account such
to use or are more cost effective technological developments when reviewing
than those of the Group. and adjusting its commercial strategy
and its product development roadmap.
---------------------------------------------- ----------------------------------------------
Financial. The Group has a number The Group has standardised, detailed
of international subsidiaries and monthly management reporting packs
trades with companies located throughout which all of its subsidiaries are
the world. The international nature required to complete. These submissions
of many of its business activities are reviewed centrally and the key
results in elevated financial risk, points discussed at regular subsidiary
including, but not limited to: foreign or divisional management meetings.
exchange exposure, credit risk and As appropriate, foreign exchange
cash collection/retention/ management hedging is undertaken centrally.
(together "Key Financial Risks"). In addition, there are detailed delegated
management authority levels which
cover, among other things, Key Financial
Risks.
---------------------------------------------- ----------------------------------------------
Reliance on suppliers. Due to the The Group seeks to work closely and
complexity of many of its manufactured in partnership with its key suppliers.
products, the Group is dependent It also has a key supplier review/audit
on a number of key suppliers. These programme which helps the Group make
suppliers could supply components strategic decisions about working
late, supply poor quality components, more closely with a given supplier
refuse to supply or cease trading. or, if appropriate, take the decision
Such disruptions to the Group's supply to identify an alternative supplier.
chain could cause major issues to
the trading activities of the Group.
---------------------------------------------- ----------------------------------------------
Reliance on customers within a given The Group monitors carefully the
sector. Although the Group is not revenue it generates from any single
significantly dependent upon one customer (or customer group) and
single customer, changes within a if appropriate takes proactive steps
sector or sub-sector could adversely to reduce the proportion of such
affect the trading performance of revenues within the subsidiary or
the Group division - or seeks to sell other
product lines to such customers in
order to diversify this risk.
---------------------------------------------- ----------------------------------------------
Retention of and Dependence on key The Group has in place a number of
employees. As with any group of its measures which are designed to optimise
size, the Group is dependent on certain key employee retention including,
key employees. Their sudden or unexpected but not limited to ensuring that
departure from the Group can have their work is stimulating and interesting;
a disruptive effect upon the Group's their remuneration is competitive;
activities. and the work place environment and
culture is attractive.
The Group actively seeks ways in
which the Group can reduce its dependence
upon key employees by developing
other employees' skills or, where
necessary, hiring in supplementary
employees with the necessary skill
sets. Additionally, the Group's remuneration
structure is designed so as to foster
employee loyalty.
---------------------------------------------- ----------------------------------------------
Cybersecurity. Cybersecurity threats The Group has had a third party carry
come from a wide variety of sources out an assessment of the Group's
and may target a wide range of different principal systems and their vulnerability
systems for diverse purposes. This to attack; key findings of this review
makes such risks notably difficult have been actioned and this review
to mitigate. Besides business disruption will be performed at regular intervals
risk, there is also a threat to the on an ongoing basis.
Group's own and third party sensitive The Group actively considers the
data which may, in the ordinary course IT security connotations associated
of business, be held on the Group's with any new systems developments
systems. and/or business operations.
---------------------------------------------- ----------------------------------------------
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report and the risks and uncertainties
which affect the business are summarised above. The Group has
sufficient financial resources to cover budgeted future cash-flows,
together with contracts with its customers and suppliers across
different geographic areas and industries.
In accordance with the Corporate Governance requirements the
Directors confirm that they have a reasonable expectation that the
Group has adequate financial resources to continue to trade for the
foreseeable future. Thus, they continue to adopt the going concern
basis in preparing the financial statements.
Responsibility statement
This responsibility statement has been prepared in connection
with the Group's full Annual Report and Accounts for the year ended
31 December 2017, certain parts therefore are not included within
this Preliminary Announcement.
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole;
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
This responsibility statement was approved by the Board of
Directors on 7 March 2018 and is signed on its behalf by:
Ian Johnson Michael Roller
Executive Chairman Group Finance Director
Consolidated income statement
for the year ended 31 December 2017
2017 2016
Continuing operations Notes GBP'000 GBP'000
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Revenue 2 29,190 26,485
Cost of sales (13,986) (13,740)
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Gross profit 15,204 12,745
Gross profit margin 52% 48%
Operating expenses:
Sales & marketing costs (5,654) (5,154)
Administration costs (4,459) (4,191)
R&D and engineering costs (2,168) (1,826)
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Operating profit before exceptional items 2,923 1,574
Profit on sale of Airflow business 315 -
Impairment of intangible assets - (662)
Costs associated with Board restructuring - (858)
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Operating profit 4 3,238 54
Investment revenues 53 132
Finance costs (8) (110)
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Profit before tax 3,283 76
Tax 5 (591) 321
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Profit for the period attributable to equity holders
of the parent 9 2,692 397
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Earnings per share attributable to the
owners of the parent - basic 11.6p 1.3p
- diluted 10.8p 1.2p
------------------------------------------------------------------------------------------------------------- ----- -------- --------
Consolidated statement of comprehensive income
for the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Net profit for the year 2,692 397
Exchange differences on translation of foreign operations* (68) 510
----------------------------------------------------------- -------- --------
Total recognised income 2,624 907
----------------------------------------------------------- -------- --------
* May be reclassified subsequently to profit and loss in accordance with IFRS.
Consolidated balance sheet
as at 31 December 2017
2017 2016
Notes GBP'000 GBP'000
----------------------------------------------------- ----- -------- --------
Non-current assets:
Other intangible assets 6,817 7,568
Property, plant & equipment 3,910 4,572
Deferred tax assets 422 90
----------------------------------------------------- ----- -------- --------
11,149 12,230
----------------------------------------------------- ----- -------- --------
Current assets:
Inventories 3,204 2,773
Trade and other receivables 5,822 6,847
Derivative financial instruments 88 44
Cash and cash equivalents 7 14,586 8,756
----------------------------------------------------- ----- -------- --------
23,700 18,420
----------------------------------------------------- ----- -------- --------
Total assets 34,849 30,650
----------------------------------------------------- ----- -------- --------
Current liabilities:
Trade and other payables (5,508) (5,404)
Derivative financial instruments (30) (72)
Current tax liabilities (768) (210)
Provisions (594) (240)
----------------------------------------------------- ----- -------- --------
Net current assets 16,800 12,494
----------------------------------------------------- ----- -------- --------
Non-current liabilities:
Cash settled share based payments (49) -
Deferred tax liabilities (1,140) (890)
----------------------------------------------------- ----- -------- --------
Total liabilities (8,089) (6,816)
----------------------------------------------------- ----- -------- --------
Net assets 26,760 23,834
----------------------------------------------------- ----- -------- --------
Equity:
Share capital 8 2,327 2,294
Share premium account 1,733 1,496
Equity reserve 2,069 1,780
Capital reserve 255 255
Translation reserve 205 273
Retained earnings 9 20,171 17,736
----------------------------------------------------- ----- -------- --------
Equity attributable to equity holders of the Company 26,760 23,834
----------------------------------------------------- ----- -------- --------
The financial statements of Bioquell PLC, registered number
00206372, were approved by the Board of Directors and authorised
for issue on 7 March 2018.
They were signed on its behalf by:
Ian Johnson Michael Roller
Director Director
7 March 2018 7 March 2018
Consolidated statement of changes in equity
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
---------------------------------------------------------- ------ -------- --------
Profit for the year 2,692 397
Exchange differences on translation of foreign operations (68) 510
---------------------------------------------------------- ------ -------- --------
Total comprehensive income in the year 2,624 907
Other movements in the year:
Issued share capital 8 33 68
Issued share premium 237 577
Acquisition of own shares for cancellation - (41,396)
Acquisition of own shares to be held in Treasury (304) (1,269)
Credit to equity reserve for share-based payments 223 35
Charge to equity on exercise of share options under
the SARS scheme (2) (6)
Charge to equity for deferred tax 115 -
Net increase/(decrease) in equity shareholders' funds 2,926 (41,084)
---------------------------------------------------------- ------ -------- --------
Equity shareholders' funds at beginning of year 23,834 64,918
Equity shareholders' funds at end of year 26,760 23,834
---------------------------------------------------------- ------ -------- --------
Consolidated cash flow statement
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
----------------------------------------------------- ---- -------- --------
Net cash from operating activities 10 6,949 4,133
----------------------------------------------------- ---- -------- --------
Investing activities
Purchases of property, plant and equipment (757) (723)
Expenditure on capitalised product development (132) (409)
Purchase of intangible asset (52) (58)
Net cash generated used in investing activities (941) (1,190)
----------------------------------------------------- ---- -------- --------
Financing activities
Proceeds on issue of ordinary shares 270 645
Acquisition of own shares for cancellation - (41,396)
Acquisition of own shares to be held in Treasury (304) (1,269)
----------------------------------------------------- ---- -------- --------
Net cash used in financing activities (34) (42,020)
----------------------------------------------------- ---- -------- --------
Net increase/(decrease) in cash and cash equivalents 5,974 (39,077)
----------------------------------------------------- ---- -------- --------
Cash and cash equivalents at beginning of year 8,756 47,573
Effect of foreign exchange rate changes (144) 260
Cash and cash equivalents at end of year 14,586 8,756
----------------------------------------------------- ---- -------- --------
1. Basis of preparation
The financial information for the year ended 31 December 2017
contained in this New Release was approved by the Board on 7 March
2018. This announcement does not constitute statutory financial
statements of the Company within the meaning of section 435 of the
Companies Act 2006, but is derived from those financial statements,
which have been prepared in accordance with International Financial
Reporting Standards (IFRS) as endorsed and adopted for use by the
European Union.
The following new and revised Standards and Interpretations have
been adopted in the current year. Their adoption has not had any
significant impact on the amounts reported in these financial
statements but may impact the accounting for future transactions
and arrangements:
IAS 7 (amendments) Statement of Cash Flows - disclosure initiative
Recognition of Deferred Tax Asset for Unrealised
IAS 12 (amendments) Losses
Annual improvements 2014 - 2016 Cycle
to IFRSs
Otherwise the principal Group accounting policies are the same
as set out in detail in the Annual Report and Accounts 2016 and
have been applied consistently throughout the years ended 31
December 2016 and 2017.
Statutory accounts for 2016 have been delivered to the Registrar
of companies and those for 2017 will be delivered following the
Company's Annual General Meeting on 23 April 2018. The auditors
have reported on those financial statements. Their reports were not
qualified, did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report, and did not contain a statement under Section 498 (2) or
(3) of the Companies Act 2006.
2. Revenue
An analysis of the Group's revenue follows. Revenue from
continuing operations is generated from two segments, being
Bio-decontamination (sale of goods and services) and Defence (sale
of goods). Within the Biodecontamination segment management tracks
revenue in three distinct categories; the sale of Systems
(including associated service, consumables and validation), the
sale of Qube (Bioquell's Aseptic Workstation solution) and the sale
of Services (Biodecontamination service and Pod).
2017 2016
GBP'000 GBP'000
--------------------------- -------- --------
Sales of Systems 17,227 16,586
Sales of Qube 3,233 2,502
Services 8,006 6,082
--------------------------- -------- --------
Biodecontamination segment 28,466 25,170
Sales of Defence 724 1,315
--------------------------- -------- --------
29,190 26,485
--------------------------- -------- --------
Revenue from continuing operations is generated from two
segments, being Bio-decontamination (sale of goods and services)
and Defence (sale of goods):
2017 2016
GBP'000 GBP'000
--------------------------------------- -------- --------
Sales of goods (including consumables) 15,684 15,806
Revenue from the rendering of services 13,506 10,679
--------------------------------------- -------- --------
29,190 26,485
--------------------------------------- -------- --------
Geographical analysis
The Group's Biodecontamination equipment is manufactured within
the UK and sold into the UK, Europe and Rest of World markets. The
following table provides an analysis of the Group's sales by
geographical market, irrespective of the origin of the goods or
services:
Year ended Year ended
31 December 31 December
2017 2016
Sales revenue by geographical market GBP'000 GBP'000
------------------------------------- ------------ ------------
UK 5,780 6,454
Rest of Europe 8,800 7,676
Rest of World 14,610 12,355
------------------------------------- ------------ ------------
29,190 26,485
------------------------------------- ------------ ------------
3. Business and geographical segments
For management purposes, the Group is currently organised into
two divisions - Biodecontamination ("BIO") and Defence. These
divisions are consistent with the internal reporting as reviewed by
the Executive Chairman. Segment information is available only
within the Income Statement, the Group does not split out the
balance sheet for the Defence business. Segment information about
these businesses is presented below:
BIO Defence Consolidated
Year ended 31 December 2017 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- ------------
Revenue
Total revenue 28,466 724 29,190
Result
Segment result before adjusted item 4,036 (35) 4,001
Sale of Airflow business 315 - 315
------------------------------------- -------- -------- ------------
Segment result 4,351 (35) 4,316
Unallocated head office costs (1,078)
------------------------------------- -------- -------- ------------
Profit from operations 3,238
------------------------------------- -------- -------- ------------
Finance costs and investment revenue 45
------------------------------------- -------- -------- ------------
Profit before tax 3,283
------------------------------------- -------- -------- ------------
Tax (591)
------------------------------------- -------- -------- ------------
Profit for the year 2,692
------------------------------------- -------- -------- ------------
The profit from the sale of the Airflow business (GBP315,000)
has been recognised as a chargeable gain for tax purposes resulting
in a tax charge of GBP61,000.
BIO Defence Consolidated
Year ended 31 December 2016 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- -------- ------------
Revenue
Total revenue 25,170 1,315 26,485
Result
Segment result before exceptional item 2,603 202 2,805
Impairment of intangibles (458) (204) (662)
-------------------------------------------- -------- -------- ------------
Segment result 2,145 (2) 2,143
Costs associated with Board restructuring (858)
-------------------------------------------- -------- -------- ------------
Consolidated result after exceptional items 1,285
-------------------------------------------- -------- -------- ------------
Unallocated head office costs (1,231)
-------------------------------------------- -------- -------- ------------
Profit from operations 54
-------------------------------------------- -------- -------- ------------
Finance costs and investment revenue 22
-------------------------------------------- -------- -------- ------------
Profit before tax 76
-------------------------------------------- -------- -------- ------------
Tax 321
-------------------------------------------- -------- -------- ------------
Profit for the year 397
-------------------------------------------- -------- -------- ------------
The impairment of intangibles had no cash impact on the business
but it did create a release of the deferred tax liability adding
GBP126,000 to the recognised tax credit on the Income Statement.
The costs associated with Board restructuring had a cash impact
totalling GBP858,000 and were recognised as an allowable deduction
for tax purposes.
4. Profit from operations
Profit from operations has been arrived at after
charging/(crediting):
2017 2016
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Research & development costs 982 832
Impairment of intangible assets - 662
Depreciation of property, plant and equipment 1,393 1,544
Amortisation of development costs 849 864
Amortisation of trademarks, patents and licence fees 87 162
Cost of inventories recognised as an expense 7,202 6,433
Cost of inventory written off in the year 22 102
Staff costs 10,823 10,169
Loss on disposal of property, plant and equipment - 8
Net foreign exchange (gain)/loss (62) 276
----------------------------------------------------- -------- --------
An analysis of auditors' remuneration is provided below:
2017 2016
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Fees payable to the Company's auditors for the audit of the
Company's annual accounts 45 43
Fees payable to the Company's auditors for the audit of the
subsidiaries pursuant to legislation 74 63
Fees payable for the audit of subsidiaries by other Deloitte
firms (France) 15 15
------------------------------------------------------------- -------- --------
Total audit fees 134 121
------------------------------------------------------------- -------- --------
Audit related assurance services 4 9
------------------------------------------------------------- -------- --------
Total non-audit fees 4 9
------------------------------------------------------------- -------- --------
5. Tax
2017 2016
GBP'000 GBP'000
----------------------------------- -------- --------
UK corporation tax current year (558) (42)
UK corporation tax prior year - (16)
Deferred tax credit current year 112 418
Deferred tax adjustment prior year (145) (39)
----------------------------------- -------- --------
(591) 321
----------------------------------- -------- --------
Corporation tax is calculated at 19.25% (2016: 20%) of the
estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. Reductions in the corporate tax rates
have been announced in the USA and France both of which have
converged more closely to the UK rate. There has been no
significant immediate impact to the Group as a consequence of these
changes.
The (charge)/credit for the year can be reconciled to the profit
per the Income Statement as follows:
2017 2016
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Profit before tax 3,283 76
Tax at the UK corporation rate of 19.25% (2016: 20%) (632) (17)
Adjusted for:
Tax effect of expenses not deductible in determining taxable
profit (26) (33)
Effect on deferred tax asset of movement in share price (29) 71
Effect of research and development relief 155 204
Tax effect of different tax rate of subsidiaries operating
in other jurisdictions (105) (33)
Prior year adjustment (145) (55)
Utilisation of tax losses not recognised 227 54
Effective change in tax rate (36) 130
------------------------------------------------------------- -------- --------
(591) 321
------------------------------------------------------------- -------- --------
In 2017, the anticipated tax deduction on unexercised share
options exceeded the cumulative related remuneration expenses and
GBP115k has therefore been charged directly to equity (2016:
GBPnil).
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended Year ended
31 December 31 December
2017 2016
Earnings GBP'000 GBP'000
----------------------------------------------------------- ------------ ------------
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to equity holders
of the parent 2,692 397
----------------------------------------------------------- ------------ ------------
Year ended Year ended
31 December 31 December
Number of shares 2017 2016
------------------------------------------------------------ ------------ ------------
Weighted average number of ordinary shares for the purposes
of basic earnings per share 23,144,421 31,174,461
Effect of dilutive potential ordinary shares:
- share options 1,874,233 1,019,473
------------------------------------------------------------ ------------ ------------
Weighted average number of ordinary shares for the purposes
of diluted earnings per share 25,018,654 32,193,934
------------------------------------------------------------ ------------ ------------
7. Analysis of net cash
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
-------------------------- ------------ ------------
Cash and cash equivalents 14,586 8,756
-------------------------- ------------ ------------
8. Share capital
2017 2016
--------------------------------------------- ------------------- -------------------
Number GBP'000 Number GBP'000
--------------------------------------------- ---------- ------- ---------- -------
Authorised
Ordinary shares of 10p each 55,947,780 5,595 55,947,780 5,595
Redeemable deferred ordinary shares of GBP1
each 255,222 255 255,222 255
--------------------------------------------- ---------- ------- ---------- -------
5,850 5,850
--------------------------------------------- ---------- ------- ---------- -------
Called up, allotted and fully paid
Ordinary shares of 10p each 22,471,816 2,247 22,004,780 2,200
Ordinary shares of 10p each held in Treasury 797,000 80 940,000 94
--------------------------------------------- ---------- ------- ---------- -------
2,327 2,294
--------------------------------------------- ---------- ------- ---------- -------
In March 2017 333,000 shares were transferred from Treasury to
be held by the Company in relation to the LTIP scheme.
During the year the Company acquired 190,000 shares in the
market for GBP304,000. These shares are now held in Treasury.
The Company issued a total of 324,036 ordinary shares of 10p
each for GBP270,000 on the conversion of options under the
Executive Share Option schemes and the Save-as-you-earn scheme.
9. Retained earnings
GBP'000
--------------------------------------------------- --------
Balance at 1 January 2016 57,636
Net profit for the year from continuing operations 397
Acquisition of own shares for cancellation (39,296)
Acquisition of own shares to be held in Treasury (1,269)
Exercised share options 268
--------------------------------------------------- --------
Balance at 1 January 2017 17,736
Net profit for the year from continuing operations 2,692
Acquisition of own shares to be held in Treasury (304)
Exercised share options 47
--------------------------------------------------- --------
Balance at 31 December 2017 20,171
--------------------------------------------------- --------
10. Notes to the cash flow statement
2017 2016
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Profit before tax 3,283 76
Adjustments for:
Finance costs 8 110
Investment revenues (53) (132)
Depreciation of property, plant and equipment 1,393 1,544
Amortisation and impairment losses of intangible assets 936 1,026
Impairment of intangible assets - 662
Accelerated IFRS2 charge - 60
Share-based payments 272 35
Loss on disposal of property, plant and equipment - 8
Increase in provisions 354 156
--------------------------------------------------------- -------- --------
Operating cash flows before movements in working capital 6,193 3,545
(Increase)/decrease in inventories (515) 976
Decrease/(increase) in receivables 717 (359)
Increase/(decrease) in payables 509 (51)
--------------------------------------------------------- -------- --------
Cash generated by operations 6,904 4,111
Investment revenues 53 132
Interest paid (8) (110)
--------------------------------------------------------- -------- --------
Net cash from operating activities 6,949 4,133
--------------------------------------------------------- -------- --------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
The cash impact of the sale of the Airflow business was a cash
inflow of GBP254,000.
11. Post balance sheet event
On 8th January 2018, the Group disposed of its airflow spare
parts business to Crowthorne Hi Tec Services Limited. The gain
arising on this disposal will be accounted for in the Group's 2018
accounts.
12. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are
therefore not disclosed.
Remuneration of key management personnel
The total remuneration for all of the Directors of Bioquell PLC,
who are the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24 Related
Party Disclosures.
2017 2016
GBP'000 GBP'000
----------------------------- -------- --------
Short-term employee benefits 446 724
Post-employment benefits 16 60
Share-based payments 148 33
----------------------------- -------- --------
610 817
----------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DQLFBVXFBBBE
(END) Dow Jones Newswires
March 07, 2018 02:00 ET (07:00 GMT)
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