Final Results
Avacta Group plc
Preliminary Results for the 15 month period to 31 July 2007
Avacta Group plc ("Avacta", "Avacta Group" or the "Company"), the advanced
biophysics technology company, announces its preliminary results for the 15
month period to 31 July 2007. These are Avacta's maiden results following the
successful admission to AIM on 8 August 2006.
Highlights:
* Successful fund raising and admission to AIM
*
+ Initial placing to raise £1.0m (before expenses) and admission to AIM
in August 2006
+ Secondary placing to raise £2.7m (before expenses) in April 2007
* Delivery on all targets since flotation
*
+ Two broad technology platforms to proof of principle stage
+ Confirmed multiple applications in biopharmaceuticals, defence,
biosecurity and clinical diagnostics
+ Laboratory prototype device to detect hazardous materials delivered to
the MOD
+ Company soundly placed to move to first technology revenues
* Key partnerships and grant support in place: MOD, DTI, OSI, HPA, CSL,
Cancer Research UK and Leeds University
* Three year agreement with UCB Celltech
*
+ Co-development of a new technology to assist with biopharmaceutical
drug development
* Expanded range of analytical services launched with immediate take up
*
+ New service product provides viral vaccine manufacturers with detailed
characterisation of their pharmaceutical products
* Strong analytical services order pipeline following marketing investment
*
+ 13 new client wins
+ Master Service Agreement with UCB Celltech
* Pre exceptional loss per share 0.19p (2006: 0.04p). Basic and diluted loss
per share 0.20p (2006: 0.04p)
* Net cash at period end of £2.5 million
Professor Alastair Smith, CEO commented:
"We are pleased to have met, and in many cases exceeded, the targets set out at
the time of our admission to AIM. In the coming year we are committed to
growing our analytical services revenues to provide quality, sustainable
earnings and cash flow in conjunction with the production of a number of
technology product prototypes in collaboration with partners such as UCB
Celltech and the MOD."
25 September 2007
Enquiries:
Avacta 0870 835 4367
Professor Alastair Smith, Chief
Executive Officer Tim Sykes, Chief
Financial Officer
Nexus Financial Limited 0207 451 7050
Nicholas Nelson / Kathy Boate
WH Ireland Limited 0161 832 2174
David Youngman / Robin Gwyn
BankOra Limited 0207 099 1940
Henry Turcan / Michael Brennan
Chairman's and Chief Executive Officer's Report
Business overview
We are delighted to report accelerated progress across the Avacta Group since
our admission to AIM via the reverse takeover of Readybuy plc in August 2006.
As part of the admission, £1.0m was raised by way of a placing of new ordinary
shares at 2.25 pence per share to enable us to develop our core technology
platforms to the proof of principle stage. Having successfully demonstrated the
value of the technology in a number of partnership programmes, a further
placing of new ordinary shares raised £2.7m at 2.5 pence per share in April
2007 allowing the Company to recruit more staff at the operational level,
resource the costs of product development and recruit a Commercial Director who
reports directly to the board. We believe that Avacta is now soundly placed to
take its developing portfolio of products through the commercialisation process
to first revenues. We have also invested in a targeted marketing programme for
our analytical services business ("Avacta Analytical") and we have seen a
strong development in the order pipeline since this programme began.
Strategy
At the time of the admission to AIM, Avacta's strategy was to use its expertise
in the field of biophysics to develop its core technological platforms to
provide solutions to clearly identified problems in high value markets. In this
regard, we identified three high value target markets for our products and
services; biopharmaceuticals, homeland defence and security and clinical
diagnostics. We have seen significant technical and commercial progress in each
of these three markets.
The Directors believe that the ability of Avacta to provide multiple products
with applications in diverse high value markets by leveraging its core
biophysical technology platforms is a key strength and de-risks the Company's
business plan.
Product development and pipeline
Biopharmaceutical
Our primary objective is to deliver new analytical technology which enables
biopharmaceutical companies to reduce the failure rate of candidate drugs in
the drug development pipeline. We have progressed this and have a
collaborative, co-funded product development programme with UCB Celltech with
financial support also being provided by the DTI. Our development team is on
schedule to deliver the prototype device as planned in the near future.
We have existing strong links with a number of key players in the
biopharmaceutical sector, created by Avacta Analytical, and these links give us
a clear opportunity for rapid market acceptance of the first product.
Homeland defence and security
During the latter part of 2006, we delivered a laboratory prototype rapid
chemical detection device to the UK Ministry of Defence ("MOD") for evaluation.
The ability to quickly detect the presence of dangerous substances using a
portable field device has obvious applications for the military, homeland
security and the disease control and emergency services. This prototype device
was successfully tested and on 3 September 2007 we announced a contract with
the MOD to deliver a full system for field trials.
We have also secured funding from the DTI Office of Science and Innovation to
work with the Government's Health Protection Agency ("HPA") and Central Science
Laboratories ("CSL") to deliver a handheld pathogen detection system with
potential applications in the detection of infectious bacteria and viruses such
as foot and mouth, anthrax, MRSA, H5N1 avian flu virus and SARS. This
partnership with HPA and CSL will provide Avacta with access to expertise in
pathogen detection, bio-assay reagents and sophisticated containment testing
facilities which could give Avacta some competitive advantage in this
application. We remain on target to deliver a prototype system to our partners
in Government laboratories in the current financial year.
Clinical diagnostics
We are making progress into this large, potentially lucrative market more
quickly than we anticipated. Our pathogen detection technology, when combined
with the right biomarkers, has the potential to provide early stage screening
for a number of diseases and we are exploring an opportunity for breast and
colorectal cancer screening applications.
We also recently announced a new partnership with Cancer Research UK and Leeds
NHS trust on 13 August 2007 to apply our technology to identify abnormalities
of cells and tissue that are indicative of cancer. The research will be based
at Avacta and the University of Leeds and will be carried out in conjunction
with the Leeds General Infirmary. The aim is to aid the detection of cancerous
material reliably and speedily during routine screenings and surgical
operations. This is an exciting opportunity for Avacta to leverage its existing
technology to provide a potentially valuable tool for pathologists and
surgeons.
Avacta Analytical
Avacta Analytical is now established as a leader in contract services
provision, specialising in biophysical analysis, to the biopharmaceutical
market. Pioneering work has been undertaken to develop new service offerings
and we are now fully operational and running to the GLP standards required in
this demanding sector. We have undertaken a targeted marketing programme,
exhibiting at several major international events and we have already seen
encouraging growth in pipeline with several major new client wins. Avacta
Analytical is managed by a team that has a track record in GLP/GMP contract
services provision and the high quality of service that Avacta Analytical
provides is reflected in the significant amount of repeat business that we
generate and in the establishment of a Master Service Agreement with UCB
Celltech, which we announced during late 2006. A new service was launched
during spring 2007 with immediate take up - the Vivax Toolkit. This service
joins the established Biophysical Toolkit and provides vaccine manufacturers
with services to provide detailed characterisation of their pharmaceutical
products. Further new service offerings form an essential part of our growth
plan for Avacta Analytical.
Financial overview
The accelerated level of investment in our technological progress has increased
the reported operating loss of the Group to £1.4m (2006: loss £0.2m) which is
in line with the board's expectations. This includes one time costs charged to
profit relating to the reverse takeover of Readybuy plc and the placing
completed in April 2007 of approximately £0.1m, and recurring costs associated
with our status as a public company of approximately £0.2m.
Revenues in Avacta Analytical grew and investment in marketing and operational
capability positions this business well for future growth. This investment led
to a small loss in this division of £0.1m (2006 : £Nil).
Operating cash outflow was £0.2m better than the operating loss due to non-cash
charges for the amortisation of goodwill arising on the reversal (£174,000) and
for share options (£50,000). The latter charge for share options is required by
FRS20, `Share based payment` for the first time this year.
There is no charge for taxation during the period. The cumulative tax losses of
the group to carry forward are approximately £1.3m gross. The potential
deferred tax asset has not been recognised.
Loss per share before exceptional items increased to 0.19p (2006: 0.04p). Basic
(and diluted) loss per share was 0.20p (2006: 0.04p).
The basis of preparation of these results, which adopt the principles of
reverse acquisition accounting, is set out within Note 2.
Fund raising during the period
The placing of approximately 45.0m new ordinary shares at 2.25p per share
raised £1.0m gross at the time of the admission to AIM. After £0.4m of
associated expenses, the net cash inflow was £0.6m. £0.2m of the fees was
written off against the share premium account, £0.1m has been capitalised as a
cost of investment and £0.1m has been charged within exceptional items.
The placing of 108.4m new ordinary shares at 2.5p per share raised £2.7m gross
during April 2007. After £0.1m of associated expenses, the net cash inflow was
£2.6m. These costs have been largely written off against the share premium
account.
The Group continues to manage the cash position to maximise interest income,
while at the same time minimising any risk to these funds. Surplus cash funds
are deposited with commercial banks that meet credit criteria approved by the
Board, for periods between one and six months. At 31 July 2007, the Group had £
2.4m on short term deposit (2006: £Nil).
People
Over the past year we have doubled our headcount to 20 staff to fully resource
the technological development of our existing portfolio of devices and support
the development of Avacta Analytical. We have also recently appointed a
Commercial Director who brings a track record of commercialisation of
technology products and this will allow us to build on the commercial
partnerships already in place and deliver significant further routes to market
for our technology and services. This appointment complements an already
outstanding group of highly committed and talented individuals.
Outlook
We are pleased to have met, and in many cases exceeded, the targets set out at
the time of our admission to AIM. In the coming year we are committed to
growing our analytical services revenues to provide quality, sustainable
earnings and cash flow in conjunction with the production of a number of
technology product prototypes in collaboration with partners such as UCB
Celltech and the MOD.
Dr Gwyn Humphreys, Chairman
Professor Alastair Smith, Chief Executive Officer
25 September 2007
Consolidated Profit and Loss Account for the year ended 31 July 2007
Note 2
Year ended Year ended
31 July 31 July
2007 2006
Note £000 £000
Turnover 212 197
Operating costs (1,656) (415)
-------------- --------------
Operating loss before (1,361) (218)
exceptional items
Exceptional items 3 (83) -
-------------- --------------
Operating loss (1,444) (218)
Interest receivable 53 9
Interest payable (2) -
-------------- --------------
Loss on ordinary (1,393) (209)
activities before
taxation
Taxation - 2
-------------- --------------
Loss for the financial (1,393) (207)
year
-------------- --------------
Loss per ordinary share
- Basic and diluted 4 (0.20)p (0.04)p
-------------- --------------
There is no material difference between the loss on ordinary activities before
taxation and the loss for the financial years stated above, and their
historical cost equivalents.
All of the above activities are continuing.
There were no recognised gains or losses other than the loss for the financial
year.
Group and Company Balance Sheets as at 31 July 2007
Group Company
Note 2
31 July 31 July 30 April
2007 2006 2007 2006
Note £000 £000 £000 £000
Fixed assets
Tangible assets 148 38 1 -
Intangible assets 3,389 - - -
Investments - - 617 -
------------- ------------- ------------- -------------
3,537 38 618 -
Current assets
Debtors 170 46 430 -
Cash at bank and in hand 2,527 175 2,449 32
------------- ------------- ------------- -------------
2,697 221 2,879 32
Creditors - amounts (175) (88) (120) (16)
falling due within one
year
------------- ------------- ------------- -------------
Net current assets 2,522 133 2,759 16
------------- ------------- ------------- -------------
Total assets less 6,059 171 3,377 16
current liabilities
Creditors - amounts
falling due after more
than one year (41) - - -
------------- ------------- ------------- -------------
Net assets 6,018 171 3,377 16
------------- ------------- ------------- -------------
Capital and reserves
Called up share capital 856 702 856 96
Share premium account 4,882 1,549 4,882 1,426
Other reserve 2 1,834 (1,869) - -
Profit and loss account 2 (1,554) (211) (2,361) (1,506)
------------- ------------- ------------- -------------
Shareholders' funds 5 6,018 171 3,377 16
------------- ------------- ------------- -------------
Consolidated Cash Flow Statement for the year ended 31 July 2007
Note 2
2007 2006
Year ended 31 July Year ended 31 July
Note £000 £000 £000 £000
Net cash outflow from operating 6 (1,248) (212)
activities
Returns on investments and
servicing of finance
Interest received 53 9
Interest paid (2) -
----------- -----------
Net cash inflow from returns on
investment and servicing of 51 9
finance
Taxation - 2
Capital expenditure and
financial investment
Purchase of tangible fixed (130) (38)
assets
Acquisitions
Net cash inflow from 192 -
acquisition
Management of liquid resources
Cash used to increase short (2,425) -
term deposits
----------- -----------
Cash flow before use of (3,560) (239)
financing
Financing
Net proceeds from issue of 3,435 381
shares
New finance lease agreements 58 -
Payments to acquire tangible fixed assets (6) -
under finance leases
----------- -----------
Net cash inflow from financing 3,487 381
----------- -----------
(Decrease) / increase in cash (73) 142
----------- -----------
Reconciliation of net cash flow to movement in net funds
2007 2006
£000 £000
(Decrease) / increase in cash (73) 142
Management of liquid resources 2,425 -
----------- -----------
Increase in net funds from cash
flows and 2,352 142
movement in net cash in the
year
New finance leases (52) -
Net cash at 1 August 175 33
----------- -----------
Net cash at 31 July 2,475 175
----------- -----------
Notes
1. The consolidated financial information for the period ended 31 July 2007
has been prepared on a basis consistent with the previous year, except for
the first time adoption of FRS 20 Share based payment, and in accordance
with applicable UK accounting standards. The preliminary announcement does
not constitute the Group's statutory financial statements within the
meaning of s240 of the Companies Act 1985. The financial information for
the year ended 31 July 2007 has been extracted from the un-audited
financial statements. The comparative information for the group has been
derived from the un-audited financial statements of Avacta Limited for the
year ended 31 July 2006.
The statutory accounts for the period ended 31 July 2007 will be sent to
shareholders by 31 October 2007. Copies will be available at the Company's
registered office: The Biocentre, York Science Park, Heslington, York, YO10 5NY
and on the Company's website at www.avacta.com. Readybuy plc's 2006 accounts,
which contain an unqualified audit report, have been filed with the Registrar
of Companies.
2. The Group has applied reverse acquisition accounting rules, the principle
guidance for which is within FRED36, Business Combinations. Avacta Limited
is therefore considered the parent undertaking that acquired Avacta Group
plc (formerly Readybuy plc). The overall affect of this is that the
financial statements are prepared from Avacta Limited's perspective, rather
than Avacta Group plc's. In effect, this means :
* the comparatives are those of the Avacta Limited group, rather than those
of Avacta Group plc (Readybuy plc);
* the results, comparative results and cumulative reserves are those of the
Avacta Limited group plus the post acquisition results of Avacta Group plc
for the year ended 31 July 2007 and the comparatives for the year ended 31
July 2006;
* goodwill, which is calculated by reference to the fair value of the
acquired assets of Avacta Group plc (Readybuy plc) of £3.6m has been
recognised and is being amortised over 20 years;
* a reverse acquisition reserve ("Other reserve") of £1.8m has been created;
however,
* the share capital and share premium is that of Avacta Group plc (Readybuy
plc).
3. Exceptional items represent the professional and other fees related to the
reversal of Avacta Limited into the Company, the subsequent re-admission to
AIM and the Placing.
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. The number of shares in issue has been restated to reflect the reverse
acquisition of the Company. 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.
Note 2
2007 2006
Loss (£000) (1,393) (207)
Exceptional items (£000) (83) -
------------- -------------
Loss before exceptional items (£000) (1,310) (207)
------------- -------------
Weighted average number of shares 692,426 544,083
(number `000)
------------- -------------
Basic and diluted loss per ordinary (0.20)p (0.04)p
share (pence)
------------- -------------
Loss before exceptional items per (0.19)p (0.04)p
ordinary share (pence)
------------- -------------
5. Reconciliation of movement in shareholders' funds
Note 2
2007 2006
£000 £000
Group :
Loss attributable to ordinary (1,393) (207)
shareholders
Other recognised gains :
- Share option charge 50 -
- Issue of share capital (net 3,487 381
of issue costs)
- Impact of reverse 3,703 -
acquisition
------------- -------------
Addition to shareholders' 5,847 174
funds
Opening shareholders' funds 171 (3)
------------- -------------
Closing shareholders' funds 6,018 171
------------- -------------
6. Net cash inflow from operating activities
Note 2
2007 2006
£000 £000
Group :
Operating loss (1,444) (218)
Depreciation of tangible 20 3
fixed assets
Amortisation of goodwill 174 -
arising on reversal
Share option charge 50 -
(Increase) / decrease in (124) 36
debtors
Increase / (decrease) in 76 (33)
creditors
------------- -------------
Net cash outflow from (1,248) (212)
operating activities
------------- -------------
7. International Financial Reporting Standards ("IFRS") conversion
Avacta must prepare its financial statements under IFRS for the year ending 31
July 2008. A company-wide project, with the objective of ensuring compliance
with International Accounting Standards (as adopted by the EU), is underway.
The three principal accounting areas that may require accounting treatments
that are different to that under UK GAAP are goodwill, research and development
expenditure and deferred taxation.
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