Final Results
Avacta Group plc
Unaudited Preliminary Results for the year to 31 July 2008
Avacta Group plc ("Avacta", the "Group" or the "Company") which develops
detection and analysis technology and services aimed at the pharmaceutical,
healthcare, security and industrial sectors, announces its unaudited
preliminary results for the year to 31 July 2008.
Highlights:
* All development milestones of the Company's first products met
* Optim and MIDAS on schedule for launch 2009
* Revenue growth within the contract services business of 120% to £0.47m
(2007: £0.21m)
* Operating loss was £1.65m (2007: loss £1.27m)
* Cash at bank of £1.10m (2007: £2.53m)
* Loss before tax of £1.57m (2007 : loss £1.22m)
* Loss per share flat at 0.18p (2007: loss 0.18p)
Alastair Smith, CEO commented:
"We have met our product development milestones and are poised to launch
several products during 2009, both directly ourselves and through commercial
partners. We are anticipating the forthcoming year as one in which Avacta
continues to deliver to plan and demonstrates good growth in commercial and
shareholder value."
The Company's Unaudited Preliminary Results are available on its website
www.avacta.com
4 November 2008
Enquiries:
Avacta Group plc 087 0835 4367
Alastair Smith, Chief Executive Officer
Tim Sykes, Chief Financial Officer
Daniel Stewart & Company plc 020 7776 6550
Lindsay Mair / Chloe Ponsonby
Novum Securities Limited 020 7562 4700
Henry Turcan/Michael Brennan
Haggie Financial LLP 020 7417 8989
Nicholas Nelson / Kathy Boate
Avacta Group Plc
Chairman's and Chief Executive Officer's Report
Business overview
The Company has made considerable progress during the past year having
continued to meet the commercial and developmental targets set at the time of
the admission to AIM in August 2006. The Company's overall objective is to
bring technology products to market and deliver high value services, based on
unique in-house technologies and expertise, which enable the very early stage
identification and analysis of drug compounds, chemicals or organisms. Such
technologies have commercial relevance in a range of high value sectors,
notably drug development, point of care medical diagnosis and defence &
security.
The Company's lead product, Optim, is expected to launch in early 2009 and the
Company's first diagnostics product, MIDAS, into the veterinary market shortly
afterwards, ahead of schedule. With these product launches and a pipeline of
future product developments over the coming few years, Avacta is making strong
progress towards its target to become a leading provider of high value
technology products and services to the broad Life Sciences sector.
Technology products
Biopharmaceutical development tools
Avacta's flagship technology product under development, Optim, has proceeded on
schedule and a system is now ready to demonstrate to lead customers over the
coming months. Optim provides drug developers with a solution to their urgent
need to know, at the very earliest stages, the likelihood of a compound
developing successfully into a viable biological drug product. This ability to
measure or predict in advance a host of potential biophysical problems that
could occur down-stream, is highly valuable to drug development companies.
Indeed it is estimated that of all the compounds they identify for onward
development, 80% fail at a later stage due to unforeseen problems at the
outset, some of which could be identified by Optim.
The unique selling point of Optim is that it can provide detailed analysis and
characterisation of critical properties of biological drug compounds using tiny
amounts of material, thus making such crucial analysis possible at an early
stage and reducing product development risk. Once launched, the Company
anticipates strong demand based on interest shown during pre-launch marketing
in what is essentially a virgin market without any known direct competition.
The Company has plans to expand the Optim product range to address further
customer needs which have been identified through the Company's regular
communication and interaction with biopharmaceutical developers and
manufacturers via its contract services business, Avacta Analytical.
Point of care diagnostics
Avacta's core technologies of laser analysis and fluid handling are being
applied to the growing market in point of care diagnostics for human and animal
healthcare. Avacta regards the diagnostics market and particularly the point of
care market, as an area of immense potential value for the Company and it has
several products and pipeline opportunities for this market. The Company has
developed a prototype of a rapid immunodiagnostic device ("MIDAS") which can
detect markers of disease in biological fluids such as blood and urine. The
Company's immediate focus is on short term revenues from the veterinary
diagnostics application of MIDAS and it expects to launch the product with a
veterinary diagnostics partner in the first half of 2009. A pipeline of animal
health tests will be developed to run on MIDAS and will be distributed
commercially through the same channels. Whilst MIDAS is proven in the
veterinary field, Avacta will be developing and clinically validating human
diagnostic applications and it is already in early stage discussions with
several companies with human diagnostic tests which could be delivered at point
of care by MIDAS.
Avacta's strong belief in the value of point of care and non-invasive
technologies was a key driver in its decision to acquire Oxford Medical
Diagnostics Limited ("OMD") in late 2007. OMD has an exclusive licence from
Oxford University to commercialise proprietary methods for breath analysis
using infra-red spectroscopy. OMD has agreed a collaboration agreement with V&F
Medical Development in Austria with whom clinical gas analysis systems to
rapidly identify bacterial infections will be researched and developed. OMD is
expecting to generate near term revenues from industrial applications of gas
analysis and recently signed a commercialisation deal with a leader in toxic
gas detection for a system to be sold into the petrochemical sector.
Homeland defence and security
The Company is working in collaboration with the UK Ministry of Defence ("MOD")
in developing detection and analysis technology for hazardous materials. The
underlying technology using laser based analysis, is an application of the core
optics expertise which the Company has developed. Excellent progress has been
made in this area and on 11 July 2008, the Company announced that a mobile
device aimed at the detection of hazardous chemicals, had reached the prototype
stage which was delivered to the MOD laboratories at Porton Down for onward
testing before completion of development into a ruggedised field device.
There are further opportunities for Avacta's technologies within the broader
field of homeland defence and security and Avacta intends to exploit these
opportunities further with appropriate partners through licensing deals.
Avacta Analytical
Avacta Analytical has further established its presence and expertise in the
provision of protein characterisation services to the biopharmaceutical
industry. This progress is usefully illustrated through the growth in revenues
of 120% to £0.47m (2007: £0.21m) as result of an increasing client base. Indeed
the recognition of expertise, particularly in the speciality analysis of higher
order structure and aggregation, is resulting in the Company being regularly
invited to speak at major scientific conferences and industry workshops.
The range of service offering has been enlarged by the internal development of
new services utilising biophysical techniques such as a high throughput
formulation screening service, QPCR, for the detection of host cell, viral and
other potential contaminants and further expansion of the protein chemistry
services offered to GMP regulatory standards. Avacta Analytical is rapidly
moving the business toward "full circle protein characterisation" by providing
all of the elements required by clients for their product development from
early stage to final product quality control.
Further strategic alliances, the continuing development of the service range
and high value Master Service Agreements from international clients for
formulation development services have given the business increasing exposure to
the market on which the Group, as a whole, intends to capitalise.
Group financial overview
The continued investment in our technological progress has increased the
reported operating loss of the Group to £1.65m (2007: loss £1.27m) which is in
line with the Board's expectations.
Revenues grew by approximately 120% to £0.47m (2007: £0.21m), demonstrating the
attractiveness of the Group's offering. The increased revenues enabled the
Avacta Analytical business to breakeven in its second full year of operation
and, with continued investment in marketing and operations, positions the
business well for further growth.
Operating cash outflow was £0.30m better than the operating loss due to
non-cash charges for share-based payments and through strong working capital
management.
The Group has recognised £0.11m in respect of R&D tax credits, including £0.08m
received since the year end.
Loss per share has remained flat at 0.18p (2007: 0.18p).
The Group has reported under IFRS for the first time. The impact on the
reported numbers has not been significant.
Staff
Avacta's headcount has increased from 10 in August 2006 to the current level of
30 having recruited some outstanding individuals in the fields of both science
and commerce. The Board thanks all staff for their dedication, commitment and
innovation over the past year.
Outlook
We have met our product development milestones and are poised to launch several
products during 2009, both directly ourselves and through commercial partners.
We are anticipating the forthcoming year as one in which Avacta continues to
deliver to plan and demonstrates good growth in commercial and shareholder
value.
Gwyn Humphreys Alastair Smith
Chairman Chief Executive Officer
4 November 2008
Consolidated Income Statement for the year ended 31 July 2008
2008 2007
Notes £000 £000
Revenue 466 212
Operating costs (2,118) (1,482)
------------- ------------
Operating loss before non-recurring expenses
and share-based payment charges (1,529) (1,137)
Non-recurring administrative expenses 3 - 83
Share-based payment charges 123 50
------------- ------------
Operating loss (1,652) (1,270)
Finance income 83 53
Finance expenses (4) (2)
------------- ------------
Loss before taxation (1,573) (1,219)
Taxation 105 -
------------- ------------
Loss for the year attributable to equity (1,468) (1,219)
holders of the company
------------- ------------
Loss per ordinary share :
- Basic / diluted 4 (0.18p) (0.18p)
------------- ------------
Consolidated Balance Sheet as at 31 July 2008
2008 2007
£000 £000
Non-current assets
Property, plant & equipment 290 148
Intangible assets 7,144 3,563
------------- ------------
7,434 3,711
------------- ------------
Current assets
Trade and other receivables 92 170
Income taxes 84 -
Cash and cash equivalents 1,097 2,527
------------- ------------
1,273 2,697
------------- ------------
Total assets 8,707 6,408
------------- ------------
Current liabilities
Trade and other payables (234) (164)
Finance lease obligations (11) (11)
------------- ------------
(245) (175)
------------- ------------
Non-current liabilities
Finance lease obligations (30) (41)
------------- ------------
(30) (41)
------------- ------------
Total liabilities (275) (216)
------------- ------------
Net assets 8,432 6,192
------------- ------------
Equity attributable to equity holders of the
Company
Called up share capital 900 856
Share premium account 6,524 4,882
Other reserve 1,834 1,834
Capital reserve 1,899 -
Retained earnings (2,725) (1,380)
------------- ------------
Total equity 8,432 6,192
------------- ------------
Consolidated statement of changes in equity for the year ended 31 July 2008
Share Share Other Capital Retained
capital premium reserve reserve earnings
£000 £000 £000 £000 £000
At 1 August 2006 702 1,549 (1,869) - (211)
Shares issued 154 3,604 - - -
Costs of issuing - (271) - - -
shares
Arising on the - - 3,703 - -
reverse takeover
Result for the period - - - - (1,219)
Share based payment - - - - 50
charges
------------- ------------- ------------- ------------- -------------
At 31 July 2007 856 4,882 1,834 - (1,380)
Shares issued during 44 1,642 - - -
the year as
consideration for
business combinations
and in settlement of
operating expenses
Shares to be issued - - - 1,899 -
as consideration for
business combinations
Result for the period - - - - (1,468)
Share based payment - - - - 123
charges
------------- ------------- ------------- ------------- -------------
At 31 July 2008 900 6,524 1,834 1,899 (2,725)
------------- ------------- ------------- ------------- -------------
Consolidated Cash Flow Statement for the year ended 31 July 2008
2008 2007
£000 £000
Operating activities
Loss before tax (1,573) (1,219)
Depreciation 57 20
Share based payment charges 123 50
Net finance income (79) (51)
------------- ------------
Operating cash outflow before changes in (1,472) (1,200)
working capital
Movement in trade and other receivables 78 (124)
Movement in trade and other payables 42 76
------------- ------------
Operating cash outflow from operations (1,352) (1,248)
Finance income received 83 53
Finance expense paid (4) (2)
Income tax received 21 -
------------- ------------
Net cash flow from operating activities (1,252) (1,197)
------------- ------------
Investing activities
Purchase of plant and equipment (138) (130)
Acquisition of subsidiaries 5 (69) 192
------------- ------------
Net cash flow from investing activities (207) 62
------------- ------------
Financing activities
Proceeds from issue of shares 40 3,435
Inception of new finance leases - 58
Capital repayment on finance leases (11) (6)
------------- ------------
Net cash flow from financing activities 29 3,487
------------- ------------
Net (decrease) / increase in cash and cash (1,430) 2,352
equivalents
Cash and cash equivalents at the beginning of 2,527 175
the year
------------- ------------
Cash and cash equivalents at the end of the 1,097 2,527
year
------------- ------------
Notes
1. The financial information set out herein does not constitute the Group's
statutory accounts for the year ended 31 July 2008 or the year ended 31
July 2007 but is derived from those accounts. The 2008 statutory accounts
have not been finalised but this preliminary announcement has been prepared
by the Directors based on the results and position which they expect will
be reflected in the statutory accounts. The comparative information in
respect of the year ended 31 July 2007 has been derived from the audited
statutory accounts for the year ended on that date upon which an
unqualified audit opinion was expressed and which did not contain a
statement under section 237 (2) or (3) of the Companies Act 1985. The
audited accounts will be posted to all shareholders in due course and will
be available on request by contacting the Company Secretary at the
Company's Registered Office.
2. Basis of preparation
The Group financial statements have been prepared and approved by the directors
in accordance with International Financial Reporting Standards as adopted by
the European Union (IFRS).
In the current year, the Group has adopted IFRS 7 "Financial Instruments:
Disclosures" for the first time. As IFRS 7 is a disclosure standard, there is
no impact of that change in accounting policy on the financial results
presented for the year ended 31 July 2007. Full details of the change will be
disclosed in the statutory accounts for the year ended 31 July 2008.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
3. Non-recurring administrative expenses
2008 2007
£000 £000
Professional and other charges related to the
Admission to AIM and to the Placing - 83
------------- -------------
4. Basic and diluted loss per ordinary share
The calculation of earnings per ordinary share is based on the profit or loss
for the period and the weighted average number of equity voting shares in issue
as follows. The number of shares in issue in the comparative period has been
restated to reflect the reverse acquisition of the Company and therefore the
number of shares in the comparative period is the aggregate of the weighted
average of the actual number of shares in issue and the shares issued by the
Company to acquire Avacta Limited.
2008 2007
Loss for the year (£000) (1,468) (1,219)
Non-recurring administrative expenses (£000) - 83
------------- -------------
Loss before non-recurring administrative (1,468) (1,136)
expenses (£000)
------------- -------------
Weighted average number of shares (number 801,261 692,426
`000)
------------- -------------
Basic and diluted loss per ordinary share (0.18)p (0.18)p
(pence)
------------- -------------
Loss before exceptional items per ordinary (0.18)p (0.16)p
share (pence)
------------- -------------
5. Acquisitions
Oxford Medical Diagnostics Limited
On 14 December 2007, the Company acquired the entire issued Ordinary share
capital of Oxford Medical Diagnostics Limited by way of a share for share
exchange. The Company allotted and issued 43,908,070 new ordinary shares of
0.1p fully paid to the holders of the Ordinary shares of Oxford Medical
Diagnostics Limited as consideration. Oxford Medical Diagnostics Limited has
50,000 Preference shares which hold equivalent rights as the Ordinary shares.
These Preference shares are the subject of a put option at the option of the
current preference shareholders, to convert to 12,054,696 new ordinary shares
of 0.1p fully paid.
£000
Tangible fixed assets 61
Cash in hand and at bank 41
Debtors 72
Creditors (63)
-------------
Net assets acquired 111
Purchase consideration
Fair value of shares issued and to be issued 3,546
Costs 110
-------------
Goodwill 3,545
-------------
Cash outflow on acquisition (69)
-------------
The fair values of the assets and liabilities acquired, as detailed above, were
equal to their book values.
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