RNS Number:3212F
Healthcare Enterprise Group PLC
17 November 2004
Healthcare Enterprise Group PLC
Interim Results for the six months ended 31 August 2004
Acquisition of Crest Medical From Unichem Ltd - A Division of Alliance
Unichem plc
Interim results for the international healthcare company focused on specialised,
high-value products, supply and services in the UK, Europe and the US.
Key points
* Maiden profit of #0.3 million profit after interest, tax and
exceptionals, on turnover of #5.6 million following the company's expansion
into UK occupational health and first aid sub-sector where it now has a
leadership position
* 51% stake in Ebiox and focus on marketing distribution channels
* 62% stake in Optiscope Technologies, developer of disposable rigid
endoscopes using proprietary technology
* Acquisition of First Aid UK Ltd in June this year
* Focus on UK, US and EU growth sectors in healthcare
Post Period
* Announced today: Transaction valued up to #7.5 million acquisition of
Crest Medical from Unichem Ltd, a division of Alliance Unichem plc
* $10 million contract for use of Ebiox in USA - distribution agreement
with Midwest Medical Supply Company LLC
* Optiscope Technologies development/manufacturing agreement with Wahl
Optoparts GmbH, a division of Jenoptik AG
* Acquisition of Distrimatch GmbH - opens Germany and US markets
* 1 for 25 share consolidation
Stuart Bruck, Chairman, commented:
"Healthcare Enterprise Group has come a long way in a short time. It has
achieved leadership in several niches in a large and diverse industry and will
move forward decisively with its proprietary technologies: Ebiox and Optiscope.
These will be followed by other technologies under development.
"The next six months will see the company integrating the four occupational
healthcare companies which form Safa-IPS Healthcare Ltd and enhanced momentum
behind the Ebiox commercialisation plan. In addition the ball is now rolling
with regard to Optiscope which, in the directors' belief, could equal the
commercial opportunities available to Ebiox."
Enquiries:
17 November 2004
Healthcare Enterprise Group PLC 020 7351 7500
Stuart Bruck, Chairman
Lyndon Gaborit, Finance Director
College Hill 020 7457 2020
Nicholas Nelson
Corinna Dorward
CHAIRMAN'S STATEMENT
Results
The first half of the year has been successful in achieving major new milestones
including an acquisition to further ensure the Group's position as the dominant
operator in the occupational healthcare marketplace. It has also seen
significant development of proprietary products from the SafaTec portfolio.
Despite absorbing significant integration costs in relation to the occupational
healthcare business, plus start up costs in relation to Ebiox and its now
established presence on the market, HCEG has for the first time moved into
profitability. The Group reported profit after interest, tax and exceptional
items of #0.3 on turnover of #5.6m at the interim period.
Occupational Healthcare and First Aid Products
Safa-IPS Healthcare Ltd
The focus in the first half has been on the consolidation of the businesses
acquired in late 2003 in the first aid and occupational healthcare sectors.
Consolidating these on one site in Warrington, accomplished in October of this
year, has further reduced overheads and helped achieve further synergies.
During the period, cross selling opportunities were assessed and incorporated
into the marketing effort such as the Group's catalogue which now includes over
4,000 product lines - making it the most comprehensive in UK occupational health
and first aid.
In June 2004 HCEG acquired First Aid UK Limited, a supplier of first aid kits to
customers including the NHS, local authority customers and high street
retailers, contributing revenues of approximately #2 million per annum. The
acquisition further strengthened the Group's market leading position in the
niche occupational healthcare sector. Also in Summer, the Group announced its
first steps into the German marketplace by appointing Distrimatch GmbH as the
distribution partner to Safa-IPS Healthcare Ltd. The agreement, which covers
German speaking countries and certain US markets, was kicked off with a supply
agreement to Asklepios Kliniken GmbH, one of Germany's largest private hospital
chains.
Today, the Group has announced the conditional acquisition of Crest Medical
Limited a subsidiary of Unichem Ltd., a division of Alliance Unichem plc.
Second only to HCEG, Crest Medical is the largest supplier of first aid and
medical product supplies to the UK occupational healthcare and first aid market
with 40 major customers making up 80% of their #7 million annual sales.
HCEG has achieved in a short space of time dominance in this marketplace with
the largest share of the UK occupational healthcare sub-sector. Its customer
base includes 67 FTSE 100 companies in the UK, and will be enlarged further
through the addition of Crest's customer base.
Proprietary Technology
Ebiox
In July 2004, HCEG acquired a further 2% in Ebiox Limited ("Ebiox") giving the
Group a majority holding of 51%. Ebiox is a range of proprietary cleansing and
decontamination products for use in healthcare and other industries. The Group
also holds an option to acquire the remaining share capital of Ebiox.
During the period the Ebiox Handrub passed clinical tests carried out by the NHS
Hospital Infection Research Laboratory City Hospital, Birmingham which show that
the Ebiox Handrub is compliant with EN1500, the EU standard for continental
Europe and the UK.
HCEG believes that the Ebiox Hand rub is the first non-alcohol based product
that is compliant with EU standards and has been developed to be better than
alcohol as a hand hygiene solution. The Ebiox non-alcohol Hand rub
decontaminates hands without drying or irritating the skin, and has been
specifically designed to be user-friendly to encourage more hand cleaning than
the existing washing protocol achieves.
During the period Ebiox achieved US Environment Protection Agency approval for a
range of five Ebiox decontamination products including Neozyme, Ultra P, Ultra
L, RDA and SSC. These products are directed at the surgical instrument cleaning
market.
Through its agreement with major UK distributor to the NHS, Vernon Carus,
initial sales have been secured and Ebiox products are being supplied to 50 NHS
hospitals in the UK. Distribution agreements have been secured with Fannins
Healthcare in Ireland, Norse Crown in Malaysia and Thai Gauze in Thailand during
the period.
Earlier this month. the Group announced an agreement with Midwest Medical Supply
Company, LLC of St. Louis Missouri ("MMS"), to supply its Ebiox range of
products into the $3 billion industrial clean room marketplace. The agreement
gives MMS the exclusive right to sell a variety of Ebiox products to the
industrial clean room market in the United States, provided that such sales
aggregate $10 million within the first year of the agreement. MMS, which
reported group sales in 2003 of $150 million, is a significant regional
distributor to the US healthcare industry.
Acquisition of Distrimatch
Concurrent with the execution of the MMS transaction, HCEG has agreed to acquire
the remaining shares of Distrimatch GmbH for a total maximum consideration of
approximately Euro1 million to be paid in a combination of conversion of a debt
facility and shares of HCEG, and linked to a performance related earn out.
Optiscope
In July 2004 HCEG announced that the Group had increased its stake in Optiscope
Technologies Ltd to 62%, giving it a controlling interest in this developer of
disposable rigid endoscopes using proprietary technology. HCEG believes that,
as the only disposable endoscope in the market, Optiscope has significant
advantages over endoscopes currently in use, which will underpin the adoption of
the product throughout hospitals and clinics worldwide.
HCEG is already securing Optiscope's production and distribution channels and
earlier this month announced an agreement with Wahl Optoparts GmbH, a division
of JENOPTIKS AG, for the development and manufacture of Optiscope. JENOPTIKS AG
is a world leader in photonics technologies operating out of twenty countries
with group sales of Euro3 billion.
It is thought that the partnership with Wahl Optoparts will accelerate time to
market for the finished product by nearly a year. HCEG now anticipates that a
commercial product will be available for FDA inspection in 2005.
Outlook
Healthcare Enterprise Group has come a long way in a short time. It has
achieved leadership in a niche but large and diverse industry and moved forward
decisively with its proprietary technologies: Ebiox and Optiscope. These will
be followed by other pipeline products from our Safatec portfolio, such as
Bio-Silk wound dressing and Elisha medical airway devices and other products
which HCEG is evaluating.
The next six months will see the company integrating the four occupational
healthcare companies which form Safa-IPS Healthcare Ltd and enhanced momentum
behind the Ebiox commercialisation plan. In addition, the ball is now rolling
with regard to Optiscope which, in the directors' belief, could equal the
commercial opportunities available to Ebiox.
1 for 25 share consolidation
HCEG proposes to seek approval from shareholders to consolidate its share
capital on the basis of a 1 new ordinary share for every 25 ordinary shares
held. It is currently anticipated that the meeting to approve this will take
place before the end of the Group's financial year.
Group profit and loss account
for 6 months ended 31st August 2004
6 months 6 months to 6 months to 6 months 6 months 6 months to 6 months
to 31 31 August 31 August to 31 to 31 31 August to 31
August 2004 2004 August August 2003 Goodwill August
2004 Exceptional 2004 2003 Amortisation 2003
Continuing items Goodwill Total Continuing #'000 Total
operations Amortisation Operations operations Operations
#'000 #'000 #'000 #'000 #'000 #'000
Turnover
Continuing operations 5,264 - - 5,264 - - -
Acquisitions 303 - - 303 - - -
5,567 - - 5,567 - - -
Cost of sales (2,916) - - (2,916) - - -
Gross profit 2,651 - - 2,651 - - -
Administrative expenses (2,332) 116 - (2,216) (438) (849) (1,287)
Continuing operations 304 116 - 419 (438) (849) (1,287)
Acquisitions 16 - - 16 - - -
Group operating profit 319 116 - 435 (438) (849) (1,287)
Share of operating loss in
associated
undertakings (8) - - (8) - - -
Total operating profit: Group
and share
of associates 311 116 - 427 (438) (849) (1,287)
Profit on sale of fixed assets - 248 - 248 - - -
Reorganisation costs - (247) - (247) - - -
Net interest payable (66) - - (66) 3 - 3
Profit on ordinary activities 245 117 - 362 (435) (849) (1,284)
before taxation
Taxation on ordinary activities - - - - - - -
Profit on ordinary activities 245 117 - 362 (435) (849) (1,284)
after taxation
Equity minority interests 8 - - 8 - - -
Retained profit / (loss) for the 253 117 - 371 (435) (849) (1,284)
financial year
Earnings per ordinary share
Adjusted - Before goodwill 0.01p - - 0.01p (0.03)p - (0.03)p
amortisation
Basic - After goodwill - - - 0.01 - - (0.1)p
amortisation
Group profit and loss account
for 12 months ended 29th February 2004
12 months to 12 months to 12 months to 12 months to
29 February 29 February 29 February 29 February
2004 2004 2004 Goodwill 2004
Continuing Exceptional Amortisation Total
operations items Operations
#'000 #'000 #'000 #'000
Turnover
Continuing operations 2,999 - - 2,999
Acquisitions - - - -
2,999 - - 2,999
Cost of sales (1,635) - - (1,635)
Gross profit 1,364 - - 1,364
Administrative expenses (2,077) (891) (1,085) (4,053)
Continuing operations (713) (891) (1,085) (2,689)
Acquisitions - - - -
Group operating profit (713) (891) (1,085) (2,689)
Share of operating loss in associated
undertakings (5) - - (5)
Total operating profit: Group and share
of associates (718) (891) (1,085) (2,694)
Profit on sale of fixed assets - - - -
Reorganisation costs - (148) - (148)
Net interest payable (74) - - (74)
Profit on ordinary activities before taxation (792) (1,039) (1,085) (2,916)
Taxation on ordinary activities (92) 20 - (72)
Profit on ordinary activities after taxation (884) (1,019) (1,085) (2,988)
Equity minority interests 12 - - 12
Retained profit / (loss) for the financial year (872) (1,019) (1,085) (2,976)
Earnings per ordinary share
Adjusted - Before goodwill amortisation (0.05)p - - (0.05)p
Basic - After goodwill amortisation - - - (0.17)p
Group balance sheet
at 31st August 2004
31st August 31st August 29th February
2004 2003 2004
#'000 #'000 #'000
Fixed assets
Intangible assets 16,539 - 14,676
Tangible assets 322 10 960
Investment in associates 23 - 463
Other investments 120 40 52
17,004 50 16,151
Current assets
Stocks 1,292 - 866
Debtors: due within one year 3,073 437 2,194
Current asset investments - - 4
Cash at bank and in hand 1,112 191 2,339
5,478 628 5,403
Creditors: amounts falling due within one year (4,935) (433) (4,294)
Net current assets 543 195 1,109
Total assets less current liabilities 17,547 245 17,260
Creditors: amounts falling due after more than one year (1,250) - (1,516)
Provisions for liabilities and charges - - (29)
Net assets 16,297 245 15,715
Capital and reserves
Called up share capital 3,684 2,121 3,558
Shares to be allotted 629 - 2,258
Warrants issued 358 - 364
Share premium account 16,130 1,967 14,219
Profit and loss account (2,981) (1,550) (3,291)
Merger reserve (2,293) (2,293) (2,293)
Other reserve 771 892
Shareholders' funds (including non-equity interests) 16,299 245 15,707
Equity minority interests (2) - 8
Capital employed 16,297 245 15,715
Group cash flow statement
at 31st August 2004
31st August 31st August 29th February
2004 2003 2004
#'000 #'000 #'000
Net cash outflow from operating activities (695) (735) (1,323)
Returns on investments and servicing of finance
Interest received - 3 17
Interest paid (66) - (326)
(66) 3 (309)
UK Corporation tax paid - - (1)
Capital expenditure and financial investment
Purchase of tangible fixed assets (129) (1) (47)
Sale of tangible fixed assets 1,030 - -
Loan to associated undertakings - (50)
Other loans - - (16)
Purchase of fixed asset investments (72) (9) (20)
829 (10) (133)
Acquisitions and disposals
Purchase of subsidiary undertakings (1,084) - (9,091)
Net cash acquired with subsidiaries 87 671 446
Purchase of interest in associated undertakings - - (21)
(997) 671 (8,666)
Cash outflow before management of liquid resources and financing (928) (71) (10,432)
Financing
Issue of ordinary shares 73 56 10,681
Increase / (decrease) in debt (372) (1) 1,883
(299) 55 12,564
Increase/(decrease) in cash in the period (1,227) (16) 2,132
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 to
29th February, 2004 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 accounts have been prepared on a basis which is consistent with the
accounting policies adopted for the year ended 29 February 2004 updated for new
accounting standards applicable to the year ended 28 February 2005 with the
exception of goodwill amortisation.
The group's previous practice was to capitalise goodwill arising on acquisitions
and amortise it over its estimated useful life, up to a maximum of 20 years.
The Board is required to consider annually the useful economic life of goodwill.
Having considered the goodwill arising on the previous acquisitions, the Board
believes that the remaining goodwill has an indefinite life. Accordingly,
goodwill is no longer subject to routine amortisation but will be reviewed
annually for impairment. In the annual statutory accounts this will be a
departure from paragraph 21 of Schedule 4 to the Companies Act, but is necessary
so that these statutory accounts give a true and fair view.
The Board has also considered the impact this change in approach would have had
on the results for the six months to 31 August 2004. Had goodwill been amortised
on the basis previously adopted the profit of #362,000 on ordinary activities
would have been reduced by #373,000. In the case of the year ended 29 February
2004, had the new treatment been adopted the loss on ordinary activities would
have been reduced by #245,000.
3. Earnings per share
Earnings per share for the six months has been calculated using the profit
attributable to ordinary shareholders before and after exceptional items and (in
2003 only) amortisation of #245,000 (2003: loss #435,000) and #362,000 (2003:
loss #1,284,000) respectively divided by the weighted average number of shares
in issue during that period of 2.890 bln (2003: 1.304 bil).
4. Acquisitions
First Aid UK: First Aid UK was acquired on 12th July 2004 for a total
consideration of #1.3m. Provisional goodwill of #1.1m was acquired.
Ebiox Limited: Further equity investment in this company on 23rd July 2004 has
increased total shareholding to 51%, reclassifying this business from an
associate company to a subsidiary. Total consideration for this subsidiary was
#0.4m resulting in provisional goodwill of #0.8m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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