RNS Number:6790M
Goldshield Group PLC
24 June 2003
For Immediate Release: 07:00, Tuesday, 24 June 2003
GOLDSHIELD GROUP PLC
Preliminary Results for the year ended 31 March 2003
Goldshield Group plc, the profitable, marketing-led, emerging British
pharmaceutical company, today has pleasure in reporting its preliminary results
for the year ended 31 March 2003.
HIGHLIGHTS
* Turnover up 5% to #104.9 m (2002: #100.4 m)
* Profit before tax and exceptional items down 38% to #10.1 m (2002:
#15.9 m)
* Diluted earnings per share of nil (2002: 28.1 p)
* Final dividend per share 1.45 p (2002: 2.90 p per share)
* 24-hour Vitality home-shopping channel launched in January 2003,
progressing well
* The sales in Retail Brands Europe have shown growth over the past year
and have increased by 10% to #31.6 m (2002: #28.8 m)
* Own label business has grown by 178% over the year from #0.7 m to
#2.9 m
* 12 Marketing Authorisations have been granted
* Board changes:
- Mike Reardon replaces Andy Oades with immediate effect
- Non-Executive Chairman identified - discussion on-going
For further information, please contact:
Goldshield Group plc Tel on 24.06.03: +44 (0) 20 7466 5000
Ajit Patel, Executive Chairman Thereafter: +44 (0) 20 8649 8500
Rakesh Patel, Finance Director
Buchanan Communications Tel: +44 (0) 20 7466 5000
Nicola How / Louise Bolton +44 (0) 7956 597 099
GOLDSHIELD GROUP PLC
Preliminary Results for the year ended 31 March 2003
Chairman's Statement
The year to 31 March 2003 has been challenging for Goldshield, but despite
unpredictable market conditions, we continue to grow our overall business and
sales increased 4.5% to #104.9 million (2002: #100.4 million). However the Group
has suffered significant setbacks during the year resulting in a negative impact
on our profits. The overall profit before exceptional costs dropped to #9.3
million (2002: #15.9 million), the reduction being largely attributable to
increasing investment in key areas of the business (marketing and set up costs)
as well as higher than expected operational costs. Despite these disappointing
results the Board is pleased to recommend a final dividend of 1.45 pence (2002:
2.90 pence) per share, bringing the total for the year to 2.9 pence (2002: 4.35
pence) and have taken steps to address some of the difficulties encountered last
year.
Most of you will already be aware of the Company's current unforeseen legal
issues in the UK, as a consequence of the investigation launched by the Serious
Fraud Office and the subsequent claim filed by the Department of Health. This
together with certain smaller legal disputes in Ireland connected with the
acquisition of the Antigen business and our decision to impair the carrying
value of goodwill, have meant that the Group has suffered exceptional cost of
#5.8 million (2002: nil).
In Western Europe, the Direct to Consumer sales of our healthcare products have
declined. This decline is mainly attributable to the increased competition and
serious adverse publicity in the media regarding the use of vitamins. Whilst we
expect to see a continuation in the decline, the recently launched 24 - hour
Vitality home shopping channel continues to make good progress and we expect
that this, coupled with a number of strategic changes within our business, will
help to correct the recent trend.
The Pharmaceutical businesses in Europe have shown overall growth albeit largely
attributable to acquisitions. The Generics business in the UK has become very
competitive and we will continue to closely monitor its performance over the
coming months. The Brands business has been fairly stable with the newly
established Hospitals Division showing good signs of potential growth in the
coming months.
The North American business worsened during the last quarter with higher than
anticipated losses. The continuing lack of confidence and the break out of war
in Iraq meant that committed marketing campaigns performed poorly resulting in
higher than anticipated losses.
Quite clearly this has been an extraordinary year, which has required a great
deal of management time. Unexpected events, coupled with the after effects of
previous years' ambitious growth have not helped the results. A number of
changes have been made in order to restore immediate stability whilst we
manoeuvre the business back onto a realistic and sustainable growth path. The US
businesses have been drastically rationalised since the end of the year
resulting in over 100 redundancies. Our priorities for the next 12 months are to
implement more robust operational controls, reduce debt, and regain the
confidence of our employees, shareholders and business partners.
As part of our drive to initiate change, the Board is pleased to announce that a
very suitable and experienced candidate has been identified to join our Board as
Non Executive Chairman. His extensive experience will assist us a great deal in
handling the various issues we face. We hope to make an announcement shortly
once the formalities have been completed. This change will mean that I will take
on sole responsibility as Chief Executive Officer of the Group and Kirti Patel,
formerly our Chief Operating Officer, will take charge of the Pharmaceutical
Sciences and Product development units.
I am also pleased to announce that Mike Reardon, who has worked at Goldshield
since 2000 and previously worked with SmithKline Beecham and Gruenenthal, will
replace Andy Oades on the Main Board with immediate effect. Mike's previous
experience will be invaluable in driving the future growth of the division.
For the last three years Mike has been in charge of sales in territories outside
the UK, Western Europe, the USA and Canada. In his capacity as Executive
Director, Mike will be responsible for retail pharmacy and hospital businesses
in Western Europe in addition to his current responsibilities.
OPERATING REVIEW
Overview
As part of our ongoing efforts to integrate various businesses and provide them
with focus, we are reorganising them into smaller distribution channel - led
marketing and sales units. These business units will each focus on any one of
the four areas of distribution expertise. These are Direct to Consumer, Retail,
Hospital and Country Distributors. We have also created a global support unit
structure that will provide the operational support to each one of the Business
Units. Each Support Unit will in turn become a profit centre. We believe that
this approach will create a more accountable environment and will lead to better
efficiencies once the current difficulties have been overcome.
As part of our operational cost reduction drive we have created a back office
operation in India with a new 30,000 sq ft facility. The first phase of this
facility housing a global call centre was completed at the end of April, which
coincided with a shut-down of our loss-making call centre in North America. The
second phase of the back office operation, due to complete in August, will house
our Pharmaceutical Sciences, Product Development, Purchasing, Project
Management, IT/MIS and Finance personnel.
MARKETING AND SALES REVIEW
Direct to Consumer - Europe
The UK healthcare market continues to mature and operate in a difficult
environment of increasing regulatory control and persistent unfounded negative
media coverage. Overall sales in this area of our business have declined by
25.3% to #22.1 million (2002: #29.6 million).
The Direct to Consumer Europe (DCE) business has expanded its channels into
internet trading, tele-shopping and tele-marketing. Internet strategies are
positively contributing to the business whilst up - selling strategies are
building customer order value through high margin product sales. The DCE
business has completed a test programme and successfully launched a marketing
operation in France with encouraging results. New product innovations have
continued, establishing unique niche market areas for Goldshield and improving
gross margins in key product categories and loyalty clubs have further enhanced
brand loyalty. The Division continues to investigate new streams of income, for
the first time including the rental of its database assets to non - competitive
third parties.
Goldshield Vitality TV shopping channel was launched in record time at the end
of January 2003. With approximately 6.8 million homes having satellite TV, this
channel is a 24-hour, seven days a week television shopping channel transmitted
on digital satellite channel 667. Steady progress has been made towards
achieving break - even daily sales and establishing regular buying audiences.
Vitality provides access to stronger and growing niche markets within slimming
and beauty, as well as opportunity to recruit new customers in the vitamins
minerals supplements (VMS) market. Significant numbers of slimming customers
whose age profile is younger than our traditional mail order customers have been
recruited through this channel and we are currently looking at ways of targeting
this audience for our other products.
Direct to Consumer - North America
The overall sales in North America were similar to the same period last year at
#26.8 million (2002: #26.3 million). However the losses suffered in the last
quarter were significant and hence the Group has taken proactive measures to
adapt to the US economic conditions by streamlining its operations, capitalising
on cost - savings in India, exploring new markets, and maximising all customers
and leads through an integrated marketing strategy. Consumer confidence in the
US continues to have a considerable effect on overall sales. The US economic
forecast for the next six months is positive with a gradual recovery
anticipated.
The reduced operation will continue to explore new programs to generate business
within new markets. The recent development into the US electronic retailing
market has generated great potential for special offerings by the Group. The
release of new products across all business units will continue, as will the
further development and focus on the core products being Premium Health
Benefits, Essential 3, and Flexezy PRS. The Group is continuing to develop
additional product lines to extend the product range currently marketed by PR
Nutrition.
Through an automated online environment, the Group will further lower costs per
order and effectively influence the customer's buying habits, while expanding
its Auto-Ship program. The release of this system will improve customer
retention, buying frequency and value; while developing both Company and brand
loyalty. The recently launched Goldshield Elite marketing initiative will
provide opportunities for new levels of customer recruitment and retention
through successful network marketing channels.
Retail - Europe
The sales in Retail Brands Europe have shown growth over the past year and have
increased by 9.6% to #31.6 million (2002: #28.8 million). Sales in the UK
increased to #22.2million (2002: #21.1 million), whilst sales in Europe
increased to #9.4 million (2002: #7.7million). Much time and effort has been
spent throughout the year ensuring the successful integration of the products
acquired from Wyeth, which contributed to growth this year.
There have been a number of product launches throughout the year, including
Codipar, a patented novel formulation of Paracetamol 500mg/Codeine Phosphate
15mg; a range of branded generics: Soloc, Komil and Trintek (a GTN patch) which
takes advantage of modern patch technology.
Own label business has grown by 178% over the year from #0.7 million to #1.97
million.
Our Generics business has achieved sales during the year of #7. 9million (2002:
#7.3 million), which reflects a growth of 9.4% over the previous year. This has
been achieved despite very difficult conditions within the marketplace. Selling
prices have been low throughout the course of the year and competition has
increased. The result of this is that margins have been compromised.
Generic sales volumes have increased, which is encouraging for future growth
opportunities. Focus will continue on the further penetration of our customer
base, the launch of new products, reduction of overheads and further improvement
of customer service levels.
Hospital - Europe
The Antigen Hospital injectable business in the UK and Republic of Ireland (ROI)
achieved sales of #11.1 million (2002: #3.5 million), thus showing a 6.4% growth
on annualised sales.
The primary focus in the year has been the re - establishment of the Antigen
franchise in the UK and Republic of Ireland. Since acquisition the Antigen
business has been successful in winning new business with recent awards in
Yorkshire, North London, Eastern Counties, Wales, North East Division and
Scotland. Trading in this sector however is becoming increasingly competitive
with margins being eroded. Goldshield has also had to address a number of
integration and legal issues following the liquidation of Miza Ireland which was
the principal manufacturer for the Antigen business.
Hospital brands and specialised products continue to perform strongly and form
the focus of future developments. Notably the Company continues to see growth in
sales of Remodulin, prescribed for pulmonary arterial hypertension on a "named
patient" basis ahead of licensing approval by the MHRA, which is expected in
November 2003.
In the coming year the Division is expected to make good progress with the
introduction of a comprehensive range of oncology products (with the first UK
registration received already) together with selected niche and novel injectable
products. In anticipation of this the Group is in the process of restructuring
to focus increased activity on the oncology range - including new registrations,
products acquired from Wyeth and existing Goldshield brands as well as expansion
into European markets. Concerted activity will be centred on developing the
business into Europe over the next five years.
Country Distributors (Rest Of World)
International business reported a good second half of the year but failed to
totally recover the shortfall reported in the Interim results and finished 2.2%
down on last year.
As anticipated, the major growth area was the Antigen product range, up
threefold on last year from #0.3 million to #1.1 million, with significant sales
coming from the Middle East and Turkey. The re - introduction of the aseptic
product Dopamine, after being out of stock since pre - acquisition, was well
received and other aseptic products will follow in the coming year.
Sales of the Goldshield healthcare range have increased with several regulatory
approvals coming through. The launch of 'Ostex' (Glucosamine and Omega 3 fish
oil) has been successful in early launch markets and will roll out into further
markets during 2003.
2002/3 has been a difficult year with management constantly occupied with supply
issues, legal discussions (the Diamox acquisition from Wyeth for Middle East and
Central Europe has just been finalised 12 months later than expected), and by
the uncertainty of markets hit by the war in Iraq and the SARS epidemic in the
Far East. Despite 2002/3 being a difficult year, the International business has
maintained much of the growth it reported last year and established a strong
regional presence using the India base. The 2003/4 confirmed order book at 31
March 2003 (#2.5 million) was the highest it has been since the International
business was set up post the product acquisitions in 1999.
Product Development
Of the reported 15 Marketing Authorisations scheduled for approval by March
2003, 12 have been granted. A total of 4 product development projects have been
initiated since the 2002 Interim Statement. The level of activity for new
product development has been limited due to the allocation of resources to
important and urgent areas, most notably the technology transfer to alternative
suppliers of over 80 sterile injection products. This has also meant that Mutual
Recognition Procedures (MRP) for some products have been placed on hold and will
be initiated in the next financial year.
Of the 15 Marketing Authorisations under technical development reported in the
Interim Statement 2002, five applications have now been submitted, two have been
suspended and the remainder will be submitted in the next financial year. We
expect 16 new Marketing Authorisations to be granted in the next financial year.
Current Trading and Future Prospects
There is no doubt that the last year has been a difficult one and has halted our
10 year record of outstanding growth. Whilst I would like to see an immediate
turnaround in our business we realise that this is unrealistic and therefore we
want to ensure that the future expectations of all parties concerned, whether it
be shareholders, employees or business partners, are more realistically managed.
The current trading, on the back of some harsh decisions already made and the
possibility of more to come will mean that it would not be realistic to expect
performance to be significantly different from that experienced in the last half
of the financial year. It is also possible that they may be slightly worse as
the cost of some of the decisions made to rationalise our business will impact
short term earnings, both on the top and bottom lines.
Although some changes in our Direct to Consumer businesses are required to
attain a turnaround, the fundamentals of our Pharmaceutical Hospital and Retail
businesses are still sound. Therefore, whilst keeping an eye on rationalisations
and operational cost, I am mindful of the short term pain we will suffer if we
are going to maintain the investments made in people and infrastructure for the
future. Whilst my priorities are to increase our earnings, I would be hesitant
in making any further cuts during this difficult period in order to deliver
short term gains.
In summary, there is a lot to be done in the short term and our focus will be to
get our Direct to Consumer business in Europe back on track; to reorganise our
North American business in the uncertain economic environment; to get on top of
our operational issues surrounding supplies and stock control; reduce debt and
improve our balance sheet. In addition, changes to the Board coupled with
improved internal controls and reporting should help in getting the business
back on track in the medium term and we will update the market on how these
developments are progressing as soon as possible.
Ajit Patel
Executive Chairman
23 June 2003
Consolidated Profit and Loss Account
for the year ended 31 March 2003
Before goodwill
impairment
and exceptional Exceptional
items items Goodwill Total Total
(Note 3) impairment 2003 2002
Notes #000 #000 #000 #000 #000
Turnover 2 104,920 - - 104,920 100,433
Cost of sales (30,838) - - (30,838) (29,413)
Gross profit 74,082 - - 74,082 71,020
Distribution costs (11,092) - - (11,092) (14,760)
Impairment losses - - (4,864) (4,864) -
Exceptional legal and
professional costs - (951) - (951) -
Other administrative
expenses (52,903) - - (52,903) (40,032)
Administrative expenses (52,903) (951) (4,864) (58,718) (40,032)
Operating profit 10,087 (951) (4,864) 4,272 16,228
Net interest 4 (744) - - (744) (372)
Profit on ordinary activities
before taxation 3 9,343 (951) (4,864) 3,528 15,856
Tax on profit on ordinary
activities 6 (5,289) 285 - (5,004) (5,357)
(Loss)/profit on ordinary
activities after taxation 4,054 (666) (4,864) (1,476) 10,499
Equity minority interests 24 - - 24 (9)
(Loss)/profit for the
financial year 4,078 (666) (4,864) (1,452) 10,490
Equity dividends 8 (1,069) - - (1,069) (1,613)
(Loss)/profit retained
for the year transferred
(from)/to reserves 19 3,009 (666) (4,864) (2,521) 8,877
Earnings per share
Basic (pence) 9 (3.9) 28.6
Diluted (pence) 9 - 28.1
Dividend per share
(pence) 8 2.90 4.35
A statement of movements on reserves is given in note 19.
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 March 2003
Group
2003 2002
#000 #000
(Loss)/profit for the financial year (1,452) 10,490
Currency differences on foreign currency net investments (1,118) (337)
Total recognised gains and losses for the year and total gains
and losses recognised since the last financial statements (2,570) 10,153
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Balance Sheet
at 31 March 2003
2003 2002
Notes #000 #000
Fixed assets
Goodwill 10 24,647 33,051
Other intangible assets 10 34,128 38,589
Intangible assets 10 58,775 71,640
Tangible assets 11 1,847 1,327
60,622 72,967
Current assets
Stocks 13 15,444 12,281
Debtors: due after more than one year - deferred tax 14 240 783
Debtors: due within one year 14 16,648 14,007
Cash at bank and in hand 24 2,433 9,320
34,765 36,391
Creditors: amounts falling due within one year 15 (36,770) (35,610)
Net current (liabilities)/assets (2,005) 781
Total assets less current liabilities 58,617 73,748
Creditors: amounts falling due after more than one year 16 (7,500) (19,237)
Provisions for liabilities and charges 17 (3,426) (3,187)
47,691 51,324
Capital and reserves
Called up share capital 18 1,846 1,842
Share premium account 19 21,075 21,049
Profit and loss account 19 24,644 28,283
Shareholders' funds 20 47,565 51,174
Equity minority interests 21 126 150
Total capital employed 47,691 51,324
The financial statements were approved by the Board of Directors on 23 June
2003, and signed on their behalf by:
A R Patel, Chairman
R V Patel, Finance Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Company Balance Sheet
at 31 March 2003
2003 2002
Notes #000 #000
Fixed assets
Investments 12 5,642 5,221
Current assets
Debtors: due after more than one year 14 11,444 17,313
Debtors: due within one year 14 21,591 14,467
Cash at bank and in hand - 1,388
33,035 33,168
Creditors: amounts falling due within one year 15 (5,183) (2,856)
Net current assets 27,852 30,312
Total assets less current liabilities 33,494 35,533
Creditors: amounts falling due after
more than one year 16 (7,500) (10,697)
25,994 24,836
Capital and reserves
Called up share capital 18 1,846 1,842
Share premium account 19 21,075 21,049
Profit and loss account 19 3,073 1,945
Shareholders' funds 25,994 24,836
The financial statements were approved by the Board of Directors on 23 June
2003, and signed on their behalf by:
A R Patel, Chairman
R V Patel, Finance Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Cash Flow Statement
for the year ended 31 March 2003
2003 2002
Notes #000 #000
Net cash inflow from operating activities 22 11,232 18,093
Returns on investments and servicing of finance
Interest received 81 164
Interest paid (825) (536)
Net cash outflow from returns on
investments and servicing of finance (744) (372)
Taxation
Corporation tax paid (4,582) (5,942)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,177) (26)
Purchase of intangible fixed assets (2,626) (9,513)
Proceeds on disposal of tangible fixed assets 106 804
Proceeds on disposal of intangible fixed assets - 229
Net cash outflow from capital expenditure and
financial investment (3,697) (8,506)
Acquisitions and disposals
Purchase of businesses and deferred consideration (5,917) (11,437)
Equity dividends paid (1,605) (1,394)
Net cash outflow before financing (5,313) (9,558)
Financing
New bank loan 1,234 13,737
Bank loan payment (2,838) (1,788)
Issue of shares 30 222
Cash (outflow)/inflow from financing (1,574) 12,171
(Decrease)/increase in cash 23 (6,887) 2,613
The accompanying accounting policies and notes form an integral part of these
financial statements.
Notes to the Financial Statements
1. PRINCIPAL ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared in accordance with applicable United
Kingdom accounting standards and under the historic cost convention. The
Directors have reviewed the principal accounting policies and consider they
remain the most appropriate for the Group. The principal accounting policies of
the Group have remained unchanged from the previous year and are set out below.
Basis of consolidation
The Group financial statements consolidate those of the Company and of its
subsidiary undertakings drawn up to 31 March 2003. Profits or losses on intra-
group transactions are eliminated in full. The results of the subsidiary
undertakings acquired during the year have been included from the date of
acquisition. On acquisition of a subsidiary, all of the subsidiary's assets and
liabilities which exist at the date of acquisition are recorded at the fair
values reflecting their condition at that date.
Goodwill arising on consolidation, representing the excess of the fair value of
the consideration given over the fair values of the identifiable net assets
acquired, is capitalised net of any provision for impairment and is amortised on
a straight line basis over its estimated useful economic life.
Investments
Investments in subsidiary undertakings in the balance sheet of the Company are
included at the cost of the shares held less amounts written off.
Turnover
Turnover is the total amount receivable by the Group for goods supplied and
services provided, excluding value added tax and trade discounts.
Intangible fixed assets
Brand names, know-how, licences, trademarks and similar intangible items are
capitalised at historical cost net of any provision for impairment and amortised
on a straight line basis over their estimated useful economic lives, which range
between seven and 10 years.
Depreciation
Depreciation is calculated to write down the cost, less estimated residual
value, of all tangible fixed assets over their expected useful economic lives.
The rates generally applicable are:
Freehold buildings 4% p.a. straight line
Office equipment 20% p.a. straight line
Plant and equipment 15% p.a. straight line
Motor vehicles 20% p.a. straight line
Laboratory 20% p.a. straight line
Amortisation commences in the month of purchase and is calculated on a pro rata
basis in the year of acquisition.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or
events that give the group an obligation to pay more tax in the future, or a
right to pay less tax in the future have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is measured using rates of tax that have been
enacted or substantially enacted by the balance sheet date.
Pensions
The Group operates a defined contribution pension scheme whereby contributions
are made to individual employee pension plans of certain employees. These costs
are charged against profits in respect of the accounting period in which they
are paid.
Leased assets
Payments made under operating leases are charged to the profit and loss account
on a straight line basis over the period of the lease.
Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. The financial statements of foreign subsidiaries are translated at the
rate of exchange ruling at the balance sheet date. The exchange differences
arising from the re-translation of the opening net investment in subsidiaries
are taken directly to reserves. Where exchange differences result from the
translation of foreign currency borrowings raised to acquire foreign assets
(including equity investments) they are taken to reserves and offset against the
differences arising from the translation of those assets. All other exchange
differences are dealt with through the profit and loss account.
This accounting policy is as prescribed by Statement of Standard Accounting
Practice 20. It may involve reporting exchange gains on unsettled long term
monetary items as part of the profit or loss for the period. This policy
represents a departure from statutory accounting principles, which only allow
profits which are realised at the balance sheet date to be included in the
profit and loss account. The directors consider that this policy is necessary in
order that the financial statements may give a true and fair view. Deferral of
exchange gains whilst recognising exchange losses would inhibit the fair
measurement of the performance of the group in the year.
Research and development expenditure
All research and development expenditure is written off to the profit and loss
account in the period in which it is incurred.
Financial instruments
Financial assets are recognised in the balance sheet at the lower of cost or net
realisable value. Provision is made for diminution in value where appropriate.
Interest receivable is accrued and credited to the profit and loss account in
the period to which it relates.
Share options
The estimated cost of share options granted are accrued over the period to which
the benefit relates.
2. SEGMENTAL REPORTING
Turnover and profit on ordinary activities before taxation are attributable to
the principal activity of the Group.
2003 2002
#000 #000
Turnover by destination:
United Kingdom 61,440 58,710
Western Europe Excluding the United Kingdom 11,108 9,766
North America 26,845 26,288
Rest of the World 5,527 5,669
104,920 100,433
Turnover by origin:
United Kingdom 65,802 70,859
North America 26,844 26,288
Ireland 12,274 3,286
104,920 100,433
2003 2002
#000 #000
Operating profit:
United Kingdom 7,513 16,735
North America (6,123) (602)
Ireland 2,882 95
4,272 16,228
Net assets:
United Kingdom 59,216 65,685
North America (1,022) 915
Ireland 3,177 8
Unallocated (13,680) (15,284)
47,691 51,324
3. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
The profit on ordinary activities is stated after charging/(crediting):
2003 2002
#000 #000
Auditors' remuneration:
-Audit services 147 175
-Non audit services (see below) 74 104
Depreciation and amortisation:
-Intangible fixed assets 9,828 8,006
-Tangible fixed assets 477 455
Hire of plant and machinery 60 50
(Profit)/loss on disposal of assets:
-Intangible fixed assets - 107
-Tangible fixed assets 40 (199)
Impairment losses 4,864 -
Exceptional legal and professional costs 951 -
Other operating lease rentals 894 905
Foreign exchange (gains)/losses (61) 195
Research and development:
-current year expenditure 969 900
Auditors remuneration for non audit services principally consists of the review
and reporting on the Group's interim results, compliance work for corporation
taxes and sales taxes in jurisdictions in which the Group has a presence and
limited due dilligence services on proposed acquisitions.
Exceptional legal and professional costs relate to fees in connection with the
Serious Fraud Office investigation, Department of Health claim and issues
arising out of the Irish operations.
4. NET INTEREST
2003 2002
#000 #000
Interest payable on bank loans and overdrafts (825) (536)
Interest receivable and similar income 81 164
(744) (372)
5. DIRECTORS AND EMPLOYEES
Employees
Staff costs during the year were as follows:
2003 2002
#000 #000
Wages and salaries 11,060 6,854
Social security costs 1,056 555
Other pension costs 340 453
12,456 7,862
The average number of employees is analysed below:
2003 2002
Administration 121 84
Marketing and Selling 227 159
Management 24 21
Warehouse 35 71
407 335
Directors' Remuneration
The emoluments of the Directors were as follows:
2003 2002
#000 #000
Emoluments 1,107 941
Payments to third parties for consultancy services 28 27
Gain on exercise of share options - 57
Pension contributions to money purchase pension schemes 95 82
1,230 1,107
During the year five Directors (2002: five Directors) participated in money
purchase pension schemes.
The amounts set out above include remuneration in respect of the highest paid
Director as follows:
2003 2002
#000 #000
Emoluments 347 340
Pension contributions to money purchase pension schemes 31 31
378 371
6. TAX ON PROFIT ON ORDINARY ACTIVITIES
2003 2002
#000 #000
United Kingdom corporation tax at 30% (2002: 30%) 3,624 5,432
Adjustment in respect of prior periods (393) (152)
Overseas taxation 1,098 160
Total current tax 4,329 5,440
Origination and reversal of timing differences 239 (799)
Adjustment to estimated recoverable amount of deferred tax assets 436 716
Total deferred tax 675 (83)
Tax on profit on ordinary activities 5,004 5,357
The tax assessed for the year is higher than the standard rate of corporation
tax in the United Kingdom at 30% (2002: 30%). The differences are explained as
follows:
2003 2002
#000 #000
Profit on ordinary activities before tax 3,528 15,856
Profit on ordinary activities multiplied by the standard rate of
corporation tax in the United Kingdom of 30% (2002: 30%) 1,058 4,757
Effect of
Expenses not deductible for tax purposes 1,175 859
Impairment provision not qualifying for tax relief 1,459 -
Capital allowances for the year in excess of depreciation (209) 72
Utilisation of tax losses (3) (65)
Tax losses carried forward 1,242 -
Differential tax rates on overseas earnings - (31)
Adjustments to tax charge in respect of prior periods (393) (152)
Total current tax 4,329 5,440
7. PROFIT FOR THE FINANCIAL YEAR
The Parent Company has taken advantage of section 230 of the Companies Act 1985
and has not included its own profit and loss account in these financial
statements. The profit after tax for the year of the company was #1,128,000
(2002: #741,000) which is dealt with in the financial statements of the Company.
8. EQUITY DIVIDENDS
2003 2002
#000 #000
Ordinary shares - interim dividend of 1.45p per share paid
20 January 2003 (2002: 1.45p paid 21 January 2002) 534 543
Ordinary shares - proposed final dividend of 1.45p per share payable on
17 October 2003 (2002: 2.9p paid 19 August 2002) 535 1,070
1,069 1,613
9. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings per
share, adjusted to allow for the issue of shares and the post tax effect of
dividends, on the assumed conversion of all dilutive options. There is no
diluted earnings per share as share options would not have a dilutive effect on
the loss for the year.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below.
2003 2002
Weighted Weighted
average average
number Per share number Per share
Earnings of shares amount Earnings of shares amount
#000 000 pence #000 000 pence
(Loss)/profit attributable
to shareholders (1,452) 36,879 10,490 36,621
Basic earnings per share (3.9) 28.6
Dilutive effect of securities
Options - - - 693
Share save options - - - 68
Adjusted earnings - - 10,490 37,382
Diluted earnings per share - 28.1
10. INTANGIBLE FIXED ASSETS
Group Brand names
know - how
licences and
trade marks Goodwill Total
#000 #000 #000
Cost
At 1 April 2002 49,324 42,370 91,694
Exchange differences 57 (647) (590)
Additions 918 1,336 2,254
At 31 March 2003 50,299 43,059 93,358
Amortisation
At 1 April 2002 10,735 9,319 20,054
Exchange differences (1) (162) (163)
Provided in the year 5,437 4,391 9,828
Impairment losses - 4,864 4,864
At 31 March 2003 16,171 18,412 34,583
Net book amount
At 31 March 2003 34,128 24,647 58,775
Net book amount
At 31 March 2002 38,589 33,051 71,640
The Board has reviewed the value of all of the intangible assets and has
provided for impairment losses against goodwill relating to certain
underperforming businesses and products.
The Board has considered the useful economic life for significant acquisitions
and concluded in each case that the useful economic life is 10 years.
11. TANGIBLE FIXED ASSETS
Group Freehold land Office Plant & Motor
& buildings Laboratory equipment equipment vehicles Total
#000 #000 #000 #000 #000 #000
Cost
At 1 April 2002 37 187 1,217 515 102 2,058
Exchange differences (5) - (34) (31) 12 (58)
Additions - - 1,164 1 12 1,177
Disposals - - (26) (77) (63) (166)
At 31 March 2003 32 187 2,321 408 63 3,011
Depreciation
At 1 April 2002 - 173 454 100 4 731
Exchange differences - - (19) (5) - (24)
Charge for the year - 14 390 49 24 477
Disposals - - (20) - - (20)
At 31 March 2003 - 187 805 144 28 1,164
Net book amount
At 31 March 2003 32 - 1,516 264 35 1,847
Net book amount
At 31 March 2002 37 14 763 415 98 1,327
12. FIXED ASSET INVESTMENTS
See Company Website.
13. STOCKS
Group
2003 2002
#000 #000
Finished goods and goods for resale 15,444 12,281
14. DEBTORS
Debtors due after more than one year
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
Deferred tax 240 783 - -
Amounts owing by subsidiary undertaking - - 11,444 17,313
240 783 11,444 17,313
Debtors due within one year
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
Trade debtors 14,499 11,806 - -
Current taxation - 595 - 42
Amounts owing by subsidiary undertaking - - 21,538 14,083
Prepayments and accrued income 2,149 1,606 53 342
16,648 14,007 21,591 14,467
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
Bank overdraft - - 600 -
Bank loan 6,180 4,587 4,000 1,747
Trade creditors 7,642 7,563 - -
Deferred purchase consideration 7,898 8,364 - -
Current taxation 2,618 2,820 - -
Social security and other taxes 1,383 969 - -
Other creditors 1,429 1,091 - -
Accruals 9,085 9,146 48 39
Dividends payable 535 1,070 535 1,070
36,770 35,610 5,183 2,856
16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
Deferred purchase consideration - 6,193 - -
Bank Loan 7,500 10,697 7,500 10,697
Other creditors - 2,347 - -
7,500 19,237 7,500 10,697
Since the year end the Group and its bankers have renegotiated the Group's
facilities. The financial statements reflect the change in the repayment terms.
Bank borrowings are secured by a fixed and floating charge over current and
future assets of the Group. Interest is charged at up to 2.4% above the National
Westminster Bank plc base rate on bank loans and overdraft borrowings.
A loan of #2,180,000 was repaid to the bank on 1 April 2003.
17. PROVISIONS FOR LIABILITIES AND CHARGES
Group
2003 2002
#000 #000
Deferred taxation 3,426 3,187
Deferred taxation provided for in the financial statements is set out below.
Group
Amount provided
2003 2002
#000 #000
Accelerated capital allowances 3,426 3,187
Group
2003 2002
#000 #000
At 1 April 2002 3,187 2,487
Movement in the year 239 700
At 31 March 2003 3,426 3,187
Also included in debtors are deferred tax assets of #240,000 (2002: #783,000).
This reduction follows a re - assessment of their recoverable amount and the
difference has been charged to the profit and loss account (see note 6).
The group has not recognised deferred tax assets amounting to #2,286,000 (2002:
#500,000) in respect of tax losses available to offset against future profits.
18. Called Up Share Capital
Group
2003 2002
#000 #000
Authorised
100,000,000 ordinary shares of 5 pence each (2002: 100,000,000) 5,000 5,000
Group
2003 2002
#000 #000
Allotted, called up and fully paid
36,921,989 ordinary shares of 5 pence each (2002: 36,836,715) 1,846 1,842
During the year 85,274 shares were issued under the unapproved employee share
option scheme and the employee share save scheme. The difference between the
total consideration of #30,000 and the nominal value of #4,000 has been credited
to the share premium account.
Share options
Details of Directors' share options are set out in the Report on Remuneration on
pages 20 to 24.
The market price at 31 March 2003 was 139 pence and the range during the year
ended 31 March 2003 was 115 pence to 535 pence.
See Company Website.
19. SHARE PREMIUM ACCOUNT AND RESERVES
Group &
Group Company Company
Profit Profit Share
& loss & loss premium
account account account
#000 #000 #000
At 1 April 2002 28,283 1,945 21,049
Retained (loss)/profit for the year (2,521) 1,128 -
Premium on allotment during the year - - 26
Currency difference on foreign currency net investments (1,118) - -
At 31 March 2003 24,644 3,073 21,075
20. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
Group
2003 2002
#000 #000
(Loss)/Profit for the financial year after taxation (1,452) 10,490
Dividends (1,069) (1,613)
Issue of shares 30 222
Currency difference on foreign currency net investments (1,118) (337)
Net (decrease)/increase in Shareholders' funds (3,609) 8,762
Shareholders' funds at 1 April 2002 51,174 42,412
Shareholders' funds at 31 March 2003 47,565 51,174
21. EQUITY MINORITY INTERESTS
Equity minority interests represent a holding of 30% in Health and Beauty Direct
Limited and the holders of these shares have no other rights against any other
Group undertaking.
22. NET CASH INFLOW FROM OPERATING ACTIVITIES
Group
2003 2002
#000 #000
Operating profit 4,272 16,228
Depreciation 477 455
Amortisation 9,828 8,006
Impairment losses 4,864 -
Increase in stocks (3,214) (2,238)
(Profit)/loss on disposal of fixed assets:
- Intangible fixed assets - 107
- Tangible fixed assets 40 (199)
Increase in debtors (2,794) (4,143)
Decrease in creditors (2,241) (123)
Net cash inflow from operating activities 11,232 18,093
23. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Group
2003 2002
#000 #000
(Decrease)/Increase in cash for the year (6,887) 2,613
Cash inflow/(outflow) from debt financing 1,604 (11,949)
Change in net debt arising from cashflows (5,283) (9,336)
Net debt at 1 April 2002 (5,964) 3,372
Net debt at 31 March 2003 (11,247) (5,964)
24. ANALYSIS OF CHANGES IN NET DEBT
Group
2003 Cash flow 2002
#000 #000 #000
Cash in hand and at bank 2,433 (6,887) 9,320
Bank loan (13,680) 1,604 (15,284)
(11,247) (5,283) (5,964)
25. ACQUISITION OF THE ASSETS AND CERTAIN LIABILITIES OF VITAQUEST
INTERNATIONAL, INC
On 2 May 2002 Goldshield Call Center Services Inc. purchased all the assets and
assumed some liabilities of Vitaquest International Inc. in order to provide a
call centre to enhance the North American business.
The consideration for the purchase was #1,716,000 of which #686,000 was paid in
cash and the balance is a promissory note of #1,030,000 payable in 10 monthly
installments of #103,000 commencing on June 30, 2002.
In addition Goldshield assumed #876,000 in current liabilities and #715,000 in
current assets of which #416,000 were accounts receivables.
The assets and liabilities acquired were as follows:-
Book and
Estimated
Fair Value
#000
Goodwill 1,136
Tangible assets 741
Current assets 715
Total Assets acquired 2,592
Current liabilities assumed (876)
Net assets acquired 1,716
Paid in cash 686
promissory note 1,030
1,716
Goodwill has been capitalised and the purchase accounted for by the acquisition
method of accounting. Following the full integration into the North American
operations it is not possible to determine the contribution towards Group cash
flow.
26. LEASING COMMITMENTS
Operating lease payments amounting to #1,186,000 (2002: #631,000) are due within
one year. The leases to which these amounts relate expire as follows:
Group Group
2003 2002
Land & Land &
buildings Other buildings Other
#000 #000 #000 #000
In one year or less 252 38 37 34
Between one and five years 712 126 428 74
In five years or more 58 - 58 -
1,022 164 523 108
The Company did not have any operating leases at 31 March 2003 (31 March 2002:
nil).
27. CONTINGENT LIABILITIES
Indemnities and guarantees
At 31 March 2003, the company had undertaken to provide support to certain
subsidiary undertakings.
There is a contingent liability in respect of bank borrowings of all companies
within the Group which are secured by an inter company cross guarantee. The
aggregate Group liability at 31 March 2003 amounted to #13,680,000 (2002:
#15,284,000).
The group has given indemnities in respect of advance payments, deferred
purchase consideration and import duty guarantees issued on its behalf in the
normal course of business. The indemnities given at 31 March 2003 were #535,156
(2002: #21,952).
Irish Operations
On 28 November 2001 the group acquired the sales, marketing an distribution
rights for the Antigen brand from Antigen Holdings Limited. The companies and
assets were acquired at an estimated cost of #9.4 million. The estimated
consideration was to be settled in two parts, firstly by the payment of #5.2
million and secondly by an obligation to discharge the wider scheme of
arrangement covering all Antigen companies (including those not acquired by the
group). The total known creditors covered by the scheme of arrangements are
estimated at #5.4 million as at 31 March 2003 (2002: #18.8 million).
On 29 October 2002, Miza Ireland Limited and each of its Irish subsidiaries,
parties to the wider scheme of arrangement were placed into examinership. The
directors have obtained legal opinion that the group's exposure to the debts
covered by the scheme of arrangement is restricted to the debts borne by the
companies it acquired. Accordingly, no adjustments have been made for
outstanding creditors of Miza Ireland and its subsidiaries under the scheme of
arrangement in these financial statements.
Prior to the acquisition by the Group, Antigen International Limited, Antigen
Overseas Limited and Anpharm Limited were part of a cross guarantee banking
arrangement covering Antigen Holdings Limited and Castleholding Investment
Company Limited and their subsidiaries. The Directors did not believe the cross
guarantee was enforceable and had received legal advice that there was a sound
basis for the Group to resist arguments that the guarantee was enforceable at
the year end. The amount of such borrowings at 31 March 2003 amounted to #nil
(2002: #5,800,000).
Serious Fraud Office (SFO) Investigation)
On 10 April 2002 the Group's premises and those of the Chairman were visited by
the SFO and certain documentation taken away. A press statement issued by the
SFO stated that its operations formed part of an investigation into suspected
conspiracy to defraud the National Health Service (NHS) concerning the prices
charged for penicillin based antibiotics and Warfarin between 1 January 1996 and
31 December 2000.
The Directors do not believe the Group has acted in an unlawful or improper
manner, nor has it at any time conspired to defraud the NHS and no provision has
been made accordingly. Until any formal charges are made against the Group, its
maximum potential exposure under relevant legislation for the alleged offences
cannot be quantified.
Department of Health (DoH) claim
On 20 December 2002, the DoH issued a legal claim against the Group and three
other companies (Norton Healthcare Limited, Norton Pharmaceuticals Limited and
Regent - GM Laboratories Limited) amounting to #28.6 million for alleged
anticompetitive practices involving the fixing of selling prices and controlling
the market and production of Warfarin between January 1997 and September 2000.
The Directors believe the Group is free from wrong - doing in respect of these
allegations and no provision has been made for amounts potentially due under
this claim.
Legal and professional costs on both these actions are expensed as incurred.
There were no other contingent liabilities at 31 March 2003 or 31 March 2002.
28. POST BALANCE SHEET EVENTS
Subsequent to the year end, the Directors decided to close the call centre in
Portland and discontinue its telemarketing business. The goodwill associated
with this business is therefore impaired and has been fully provided against.
On 23 June the Group and its bankers renegotiated its banking facilities.
Further details are provided in note 16.
29. FINANCIAL INSTRUMENTS
The Group uses financial instruments, comprising cash, short term borrowings,
trade debtors and trade creditors, which arise directly from its operations. The
main purpose of these financial instruments is to raise finance for the Group's
operations.
Short term debtors and creditors
Short term debtors and creditors have been excluded from the following
disclosures except those relating to currency risk.
Interest rate risk
The Group finances its operations through a mixture of retained profits and bank
facilities. Bank borrowings are made using variable interest rates.
Liquidity risk
The Group seeks to manage financial risk, to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably.
Short-term flexibility is achieved through overdraft facilities and short/medium
term borrowings.
Maturity of financial liabilities
The Group financial liabilities analysis at 31 March 2003 was as follows:
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
In less than one year or on demand
Bank and other borrowings payable by instalments 6,180 4,587 4,600 1,747
Deferred purchase consideration 7,898 8,364 - -
In more than one year but less than two years
Bank and other borrowings payable by instalments - 431 - 431
Deferred purchase consideration - 6,193 - -
In more than two years but less than five years
Bank and other borrowings 7,500 10,266 7,500 10,266
21,578 29,841 12,100 12,444
Borrowing facilities
The Group has undrawn facilities available of #500,000 expiring within one year
(2002: #1,766,000).
Currency risk
The Group is exposed to translation and transaction foreign exchange risk. In
relation to translation risk the proportion of assets held in the foreign
currency are matched to an appropriate level of borrowings in the same currency.
Transaction exposures are hedged when known, mainly using the forward exchange
hedge market.
The Group seeks to hedge its exposures using a variety of financial instruments,
with the objective of minimising the impact of fluctuations in exchange rates on
future transactions and cash flows.
The Group has overseas subsidiaries operating in Ireland where reserves and
expenses are denominated in Euros. The Group has funded the acquisition cost and
working capital by a Euro loan. As the Group receives net cash inflows in Euros
this loan is being reduced and replaced, as necessary, by funding denominated in
Sterling.
#16.6 million (2002: #15.4 million) of the sales of the Group's business is to
customers in continental Europe/foreign markets excluding North American
operations. The majority of these sales are invoiced in the currencies of the
customers involved. The Group policy is to minimise all currency exposures on
any balance not expected to mature within 30 days of its arising through the use
of forward currency contracts. All other sales of UK business are denominated in
sterling.
The tables below show the extent to which Group companies have monetary assets
and liabilities in currencies other than their local currency.
Functional currency of operation Net foreign currency monetary assets/(liabilities)
Other
US Dollar Euro currencies Total
#000 #000 #000 #000
2003
Sterling (227) (3,992) 692 (3,527)
Dollar 1,477 - 22 1,499
Euro 334 974 (132) 1,176
1,584 (3,018) 582 (852)
2002
Sterling (1,109) (4,626) 1,091 (4,644)
Dollar 152 - 145 297
Euro (175) 317 - 142
(1,132) (4,309) 1,236 (4,205)
Fair values
The fair values of the Group's financial instruments are considered equal to the
book value.
30. RELATED PARTY TRANSACTIONS
Golden Pride, Inc. occupy a building owned by Hersey Family Limited Partnership,
a Florida Limited Partnership, in which Harry Hersey Jr. a member of the group
senior management team is a partner. In the year ended 31 March 2003 net
payments of #127,000 (2002: #103,000) were paid to Hersey Family Limited
Partnership.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR USRAROARNURR
