RNS Number:2002U
Healthcare Enterprise Group PLC
16 November 2005
Healthcare Enterprise Group PLC
Trading Update, Interim results for the six months ended 31 August 2005 and
Board Changes
Healthcare Enterprise Group PLC ("HCEG", the "Group" or the "Company"), the
international healthcare products group, today reports results for the six
months ended 31 August 2005
* Turnover up 58% to #8.8 million (2004: #5.6 million)
* Operating loss, before exceptional items, #2.1 million (2004: #0.32
million profit)
* Loss per share 1.50p (2004: profit per share 0.32p)
Post period
* Board changes
* Disposal of assets to Ridgecrest
* Acquisition of ATA and Link
16 November 2005
Enquiries:
Healthcare Enterprise Group PLC 020 7351 7500
Mark Tompkins, Chairman
Gordon Wood, Chief Executive
College Hill 020 7457 2020
Adrian Duffield / Corinna Dorward
Trading Update
During the period the Crest Medical business, acquired by the Group in November
2004, was integrated into the Healthcare Sales & Service Ltd ("HSS") site in
Warrington. The integration of that business has proved more difficult and is
taking longer than anticipated, and the Group has recorded losses as a result.
Measures have already been implemented which are designed to return the business
to profit and cash generation by the early part of next year.
Since the end of the period changes have occurred in the senior management of
HSS with Gordon Wood, Group CEO, overseeing the business whilst the search for a
new Managing Director is undertaken.
As announced previously, the Group now expects to get the US Environmental
Protection Agency ("EPA") regulatory approval for Ebiox in the first half of the
next financial year and separate State approvals later in that year.
Significant costs have been involved in obtaining EPA approval, in order to
secure a number of distribution agreements in the US which are expected to
generate revenue in the second half of the next financial year. The Group
continues to progress a number of new product initiatives in this range.
The Group's new High Level Disinfectant ("HLD") product has successfully
undergone in situ trials and commercial discussions are underway with potential
global partners. The Group remains confident in this innovative range of
products, as interest is continuing to be expressed by potential distributors in
markets worldwide. The Group is in the process of appointing a Managing
Director to develop the Ebiox business.
Progress on development of Optiscope continues to be good and the Board
anticipates having prototype products in spring 2006. As previously announced
the product has met the technical milestone of outperforming the optics train in
the "gold-standard" market-leading re-useable endoscope. The Board is looking
to maximise the value of Optiscope in the near term.
Interim Results
The Group reported a loss after interest, tax and exceptional items of #2.3
million (2004: profit #0.4 million) on turnover of #8.8 million (2004: #5.6
million) for the six month period ended 31 August 2005. The loss has been
caused by difficulties experienced in integrating certain acquisitions, the
delays in achieving contracts for the sale of Ebiox (as previously announced)
and the cost of obtaining regulatory approvals.
The Group's loss per share for the period ended 31 August 2005 was 1.50p (2004:
profit 0.32p).
The Group's net debt increased in the period by #1.7 million to #3.1 million,
cash decreasing by #1.6 million and debt increasing by #0.1 million.
Healthcare Sales & Service ("HSS")
HSS is the Group's business trading in the occupational health and first aid
market, with the main company located at a 60,000 sq ft site in Warrington. It
has been formed by the consolidation of four companies over the last 18 months,
Safa Limited, IPS Limited, First Aid UK Limited and Crest Medical Limited.
In June 2005 the Group acquired CICS (Holdings) Limited and its wholly owned
subsidiary, Cross Infection Control Services Limited (together "CICS") for up to
#3 million in HCEG shares. CICS sells sterile kits and other disposables to
dental practice customers. CICS has been successfully integrated into the
Warrington site and is selling the Group's products into its customer base.
The operation had sales of #8.3 million (2004: #5.3 million) in the six month
period ended 31 August 2005 and recorded an operating loss of #0.6 million
(2004: profit #0.9 million). The integration of the Crest Medical business has
proved more difficult and is taking longer than anticipated which has resulted
in losses. A number of areas have already been identified where significant and
immediate improvements can be made. Since the integration of the Safa-IPS/First
Aid UK/Crest Medical businesses into the single Warrington facility, headcount
has reduced from 179 to 149, and general operating expenses reduced by #70,000
per month with further overhead reductions anticipated as part of the review
process.
Ebiox
Ebiox is the Group's proprietary range of cleansing and decontamination products
for use in healthcare and other industries. The range includes a handrub,
handwash, detergents for cleaning hard surfaces and floors, cleaning wipes, an
instrument cleaning range and the newly developed High Level Disinfectant for
the sterilisation of surgical instruments.
Ebiox sales in the period ended 31 August 2005 totalled #0.1 million (2004:
#Nil) and operating losses were #0.24 million (2004: #0.01 million). A further
#0.25 million (2004: #Nil) was spent on product development.
The Ebiox instrument and surface cleaning range of products has been
successfully registered in Germany and sales are commencing. Registration
activities have continued with the relevant authorities in many other countries
worldwide.
In the US the Group's regulatory consultants have indicated that the
Environmental Protection Agency ("EPA") approvals will be received in the first
half of the next financial year - the products have now passed all requested
testing to date and the registration process has commenced. US EPA approval
will be followed by individual State approvals and the Board would anticipate
being able to sell the Ebiox range in the US from late summer 2006.
The Group is also progressing the negotiation of distribution agreements with
partners worldwide.
Optiscope
Optiscope is HCEG's fully disposable rigid endoscope. Progress on development
of Optiscope continues to be good and the Group anticipates having prototype
products in spring 2006. As previously announced the product has met the
technical milestone of outperforming the optics train in the "gold-standard"
market-leading re-useable endoscope. During the period HCEG has invested a
further #0.08 million to increase its stake to 68.1%. Optiscope recorded no
revenues in the period (2004: #Nil) and reported an operating loss of #0.03
million (2004: #Nil).
Women's Reproductive Health
The Group has two investments in this area and has agreed terms to acquire a
third.
Medilator
In May 2005 the Group acquired 2.5% of the share capital of Medilator Limited ("
Medilator") with a series of options to acquire up to 65% of the ordinary share
capital. Medilator has developed a platform for single-use, disposable cervical
dilatation devices.
Fertiligent
In June 2005 the Group acquired 2.5% of the share capital of Fertiligent Limited
("Fertiligent") with a series of options to acquire up to 100% of the ordinary
share capital. A further investment of $125,000 was made in September 2005
bringing the Group's investment to 13.08%. Fertiligent develops innovative
reproductive health products capable of significantly enhancing the success
rates of existing infertility treatments.
Fertiloscopy
The Group has agreed terms to acquire Fertiloscopy for up to Euro354,000 in cash.
Fertiloscopy is a device to assist in the diagnosis of infertility in women.
Disposal of certain non core assets to Ridgecrest
In November 2005 the Group completed the sale of certain non-core assets with a
book value of $2.5m to Ridgecrest Healthcare Group, Inc. ("Ridgecrest") for
$5.0m in Ridgecrest ordinary and convertible preferred shares.
Acquisition of ATA and Link
In November 2005 the Group completed the acquisition of its distributors in
South East Asia for #40,000 in cash and 350,877 HCEG ordinary shares.
Board Changes
Stuart Bruck is stepping down as Executive Chairman of the Board with immediate
effect to relocate to the US and pursue other interests. Mr Bruck was the
founder of the Group and the Board acknowledges the valuable contribution he has
made to the Group's evolution to date. Mr Bruck remains a significant
shareholder and will serve as a non executive director.
Mark Tompkins, a non-executive director of HCEG since formation, is to take over
as Chairman. Mr Tompkins has extensive experience at board level in listed
healthcare companies in both the US and Europe. This is supplemented by his
working experience in senior executive management, management consulting and
investment.
John Bradshaw has decided to step down as Group Finance Director and will be
assisting the Group with the recruitment of his replacement. He will also be
continuing to assist the Group in the commercialisation of Optiscope.
As previously announced, in November 2005, Michael Low, Group Development
Director, and Kenneth Denos, non-executive Director, left the Board, as part of
the disposal to Ridgecrest.
Summary
In spite of the difficulties and disappointing figures, the Board remains of the
view that HSS, which is the market leader in its sub-sector, is a strong
business capable of producing significant revenues and profits in the future. It
is pleased with the progress and growing market acceptance of Ebiox and is
encouraged by the product development trials of Optiscope.
Nevertheless, the exact timing of the commercialisation of both Ebiox and
Optiscope remains difficult to predict. Consequently, without licensing income
from either or both of these product ranges in the second half, the Board would
not expect the Group to be profitable in the current full financial year.
The Board is continuing to review all of the Group's assets to maximise
shareholder value and cash generation.
Unaudited consolidated profit and loss account
For the six months ended 31 August 2005
Six months ended 31 August
2005 2004
Continuing Exceptional Total Continuing Exceptional Total
operations items operations items
#'000 #'000 #'000 #'000 #'000 #'000
Turnover
Continuing operations 8,666 - 8,666 5,264 - 5,264
Acquisitions 136 - 136 303 - 303
8,802 - 8,802 5,567 - 5,567
Cost of sales (5,140) - (5,140) (2,916) - (2,916)
Gross profit 3,662 - 3,662 2,651 - 2,651
Net operating (5,737) (105) (5,842) (2,332) 116 (2,216)
expenses
Group operating
profit (loss)
Acquisitions 25 - 25 16 - 16
Continuing activities (2,100) (105) (2,205) 303 116 419
Group operating (2,075) (105) (2,180) 319 116 435
profit (loss)
Share of operating - - - (8) - (8)
results of associates
Total operating (2,075) (105) (2,180) 311 116 427
profit (loss)
Exceptional costs - - - - 1 1
Profit (loss) on (2,075) (105) (2,180) 311 117 428
ordinary activities
before interest
Net interest payable (98) - (98) (66) - (66)
and similar charges
Profit (loss) on (2,173) (105) (2,278) 245 117 362
ordinary activities
before taxation
Taxation on profit - - - - - -
(loss) on ordinary
activities
Profit (loss) on (2,173) (105) (2,278) 245 117 362
ordinary activities
after taxation
Minority interests 9 - 9 8 - 8
Profit (loss) for the (2,164) (105) (2,269) 253 117 370
six month period
Basic earnings per (1.50p) 0.32p
share
Audited consolidated profit and loss account
For the year ended 28 February 2005
Year ended 28 February 2005
Continuing Exceptional Total
operations items
#'000 #'000 #'000
Turnover
Continuing operations 3,687 - 3,687
Acquisitions 11,280 - 11,280
14,967 - 14,967
Cost of sales (7,275) - (7,275)
Gross profit 7,692 - 7,692
Net operating expenses (6,686) (125) (6,811)
Group operating profit (loss)
Acquisitions 364 - 364
Continuing activities 642 (125) 517
Group operating profit (loss) 1,006 (125) 881
Share of operating results of associates 6 - 6
Total operating profit (loss) 1,012 (125) 1,012
Exceptional costs - (1,135) (1,135)
Profit (loss) on ordinary activities before 1,012 (1,260) (248)
interest
Net interest payable and similar charges (74) - (74)
Profit (loss) on ordinary activities before 938 (1,260) (322)
taxation
Taxation on profit (loss) on ordinary (30) - (30)
activities
Profit (loss) on ordinary activities after 908 (1,260) (352)
taxation
Minority interests 18 - 18
Profit (loss) for the year 926 (1,260) (334)
Basic and diluted loss per share (0.27p)
Unaudited consolidated balance sheet
As at 31 August 2005
31 August 28 February
2005 2004 2005
#'000 #'000 #'000
Fixed assets
Intangible assets 34,911 16,539 33,759
Tangible assets 618 322 514
Investments in associated - 23 -
undertakings
Other investments 145 120 116
35,674 17,004 34,389
Current assets
Stocks 3,141 1,292 3,048
Debtors 6,107 3,073 6,008
Current asset investments - - 4
Cash at bank and in hand 710 1,112 2,341
9,958 5,478 11,401
Creditors: Amounts falling due (5,050) (3,501) (4,542)
within one year
Invoice discounting facility (1,850) (984) (1,331)
Debt due within one year (970) (450) (1,369)
Net current assets 2,088 543 4,159
Total assets less current 37,762 17,547 38,548
liabilities
Creditors: Amounts falling due (4,211) (1,250) (4,326)
after more than one year
Provisions for liabilities and (289) - (289)
charges
Net assets 33,262 16,297 34,023
Capital and reserves
Called up share capital 4,566 3,684 4,492
Shares to be allotted 1,997 629 2,348
Warrants issued 364 358 364
Share premium account 34,191 16,130 32,042
Profit and loss account (5,939) (2,981) (3,670)
Merger reserve (2,293) (2,293) (2,293)
Other reserves 728 771 728
Shareholders' funds (including 33,250 16,299 34,011
non-equity interests)
Minority interests 12 (2) 12
Capital employed 33,262 16,297 34,023
Unaudited consolidated cash flow statement
For the six months ended 31 August 2005
Six months ended Year ended
31 August 28 February
2005 2004 2005
#'000 #'000 #'000
Net cash outflow from operating (1,585) (695) (2,634)
activities
Return on investments and servicing
of finance
Interest received 16 - 48
Interest paid (115) (66) (202)
Net cash outflow for returns on (99) (66) (154)
investments and servicing of finance
UK corporation tax paid (36) - (320)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (179) (129) (293)
Development costs capitalised (199) - (211)
Proceeds of sale of tangible fixed - 1,030 1,288
assets
Purchase of fixed asset investments (50) (72) (107)
Net cash inflow (outflow) from (428) 829 677
capital expenditure and financial
investment
Acquisitions
Purchase of subsidiary undertakings (78) (1,084) (2,032)
Acquisition expenses (169) - (719)
Net cash acquired with subsidiaries 250 87 195
Net cash outflow from acquisitions 3 (997) (2,556)
Net cash outflow before financing (2,145) (928) (4,987)
Financing
Issue of share capital 182 73 5,766
Share issue costs - - (456)
(Decrease)increase of long term - (372) (476)
borrowings
Repayment of short term borrowings (430) - (1,148)
Increase in short term borrowings 519 - -
Repayment of principal under hire (7) - (28)
purchase contracts
Net cash inflow from financing 264 (299) 3,658
(Decrease) increase in cash in the (1,881) (1,227) (1,329)
period
Unaudited consolidated cash flow statement
For the six months ended 31 August 2005
Reconciliation of operating loss to net cash outflow from operating activities
Six months ended Year ended
31 August 28 February
#'000 #'000
Operating profit (loss) (2,075) 881
Amortisation of intangible fixed 39 22
assets
Depreciation of tangible fixed assets 80 125
Decrease (increase) in stocks (40) (373)
Decrease (increase) in debtors 2 (2,137)
Increase (decrease) in creditors 484 304
Movement in provision for share - 125
options
Exceptional costs (105) (1,333)
Profit on sale of fixed assets - (248)
Investment write off 30 -
Net cash outflow from operating (1,585) (2,634)
activities
Analysis of net debt
31 August 2005 28 February 2005
#'000 #'000
Cash at bank and in hand 710 2,341
Invoice discounting facility (1,850) (1,331)
Debt due within one year (970) (1,351)
Debt due after one year (1,025) (1,025)
HP contracts (49) (56)
Net debt (3,184) (1,422)
Notes to the interim financial statements
1. Form of statements
These financial statements do not constitute statutory accounts within the
meaning of the Companies Act 1985 and are unaudited. The figures for the year
ended 28 February 2005 have been extracted from the statutory accounts for that
year which have been delivered to the Registrar of Companies and contain an
unqualified audit report.
2. Accounting policies
The interim report is prepared on the basis of the accounting policies set out
in the financial statements for the year ended 28 February 2005.
3. Earnings per share
Earnings per share are calculated by dividing the profit on ordinary activities
attributable to shareholders by the weighted average number of shares in issue
during the period. The weighted average number of shares used is 151,145,902
(Half year ended 31 August 2004: 115,600,000, Year ended 28 February 2005:
123,908,141).
4. Acquisitions
On 16 June 2005 the Group acquired 100% of the equity share capital of CICS
(Holdings) Limited for a consideration of #1,337,000, including costs. Goodwill
of #1,005,000 arose on the transaction.
5. Interim dividend
The directors do not recommend the payment of an interim dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DQLBFEFBZFBZ
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