Interim Results

Provexis PLC 23 November 2005 Provexis plc ('Provexis' or 'the Group') Interim Results for the half year ended 30 September 2005 Provexis plc, the nutraceutical company that develops scientifically-proven functional and medical foods, today announces its interim results for the six months ended 30 September 2005. Key Highlights • Successful integration of the businesses following the reverse takeover of Nutrinnovator Holdings plc by Provexis • Costs of maintaining business (£821,000) in-line with Directors' expectations, before one-off share option and re-organisation costs (£575,000) • Disposal of the Altu food-bar business completed 4 October 2005 in-line with strategy; results include non-recurring losses of £173,000 • SircoTM product approved by HEART UK in run-up to launch in January 2006 • On-going licensing talks with regard to the FruitflowTM technology remain positive • Collaboration agreement signed with global clinical nutrition company for the development and marketing of a medical food for the dietary management of Crohn's disease Commenting on the results Stephen Franklin, CEO of Provexis, said: 'The Group has made considerable progress in the last six months following the successful reverse takeover of Nutrinnovator and integration of the two businesses. The enlarged group is firmly focussed on the core business of developing scientifically-proven functional foods that provide health benefits associated with major areas of consumer concern, including cardiovascular disease and cancer. We have secured approval from the heart health charity, HEART UK, for our SircoTM product which remains on track for a UK launch in January 2006. Good progress is also being made in discussions to license our unique FruitflowTM technology and we have secured a collaboration agreement with a global nutrition company for our Crohn's disease technology. The Group is well positioned to maximise the opportunities offered by the functional food market. We have the product pipeline, technology and marketing capability to fully commercialise patented food-based technologies via a combination of new brands and licensing activity.' For further information, please contact:- Provexis plc Tel: 020 8392 6631 Stephen Franklin, Chief Executive Officer Mob: 07710 348774 Arbuthnot Securities Limited Tel: 020 7012 2000 Tom Griffiths Bell Pottinger Corporate and Financial Tel: 020 7861 3932 Ann-Marie Wilkinson/ Victoria Geoghegan Chairman's statement The Group has achieved considerable progress in the six months to 30 September 2005. We completed the reverse takeover of Nutrinnovator Holdings plc by Provexis Limited and this has been followed by a successful integration of the businesses. The new Provexis plc combines excellent scientific, marketing and sales talent thereby enabling us to rapidly develop and commercialise new functional food technologies via a combination of licensing and new brands. The Group has completed the development of its first functional food product, the fruit juice SircoTM, containing the patented FruitflowTM technology, and we are now fully prepared for the launch of SircoTM in the UK in January 2006. SircoTM is the culmination of seven years of research and development and the Directors believe it is one of the most significant developments in the functional food industry. Existing heart-health products focus on cholesterol management with benefits that are only derived after long-term consumption patterns. The SircoTM product is unique in that its health benefit is associated with 'blood thinning' and it is effective from the first drink. SircoTM has been designed to help consumers reduce the risk of thrombosis which can in-turn cause heart attack and stroke. Cardiovascular disease and cancer, together, kill the significant majority of people in the western world and to have two functional food developments with associated benefits in both of these areas is extremely exciting for the business. With regard to the latter, Provexis continues to work closely with Plant Bioscience Limited (PBL), the intellectual property management arm of The Institute of Food Research in Norwich, to develop a functional food product containing a glucosinolate-enriched broccoli extract. We believe this development programme will yield a new generation of food-based products with benefits associated with reducing the risks of specific cancers. This new product goes into human trials next year with a view to launching a new product in early 2007. In conjunction with the University of Liverpool and Professor Jon Rhodes, the Company continues to develop a medical food, based on a patented extract from the plantain banana, for the dietary management of Crohn's disease, a condition for which there is currently no cure. During the reporting period we entered into a collaboration with a global clinical nutrition company. This gives the business further options with regard to route to market. In addition, as announced on 7 November 2005, Provexis was awarded a research grant of £180,000 from the North West Development Agency for the Crohn's disease technology. The functional food sector continues to grow strongly in all major markets worldwide and I believe that Provexis, with its evidence-based approach, is uniquely positioned to be a significant source of innovation for the industry. With the depth of the science-based functional food pipeline, the forthcoming launch of SircoTM in the UK, and the licensing interest in the FruitflowTM technology, we look forward to making yet further progress during the second half of the year. Dawson Buck Chairman Management review The enlarged business has a management team which combines experienced marketing and sales talent with strong scientific credentials and capability. This mix of talent is core to our competitive advantage in a market where few companies are able to both develop, and successfully market, scientifically-proven functional foods. SircoTM heart health juice The Group has successfully developed and is preparing to launch SircoTM, the first heart health drink to contain the patented FruitflowTM technology. FruitflowTM was developed by Provexis in order to help regular 'healthy' consumers reduce the risk of heart attack and stroke. The natural bioactive works by reducing blood platelet aggregation, a significant contributing factor to a thrombosis (internal blood clot). SircoTM, which will initially be available in two flavours, will be launched in the UK in January 2006. Confirmation of the specific retailers for the launch date, and the number of initial distribution points, have still to be confirmed. We expect to be in a position prior to Christmas to confirm the number of distribution points at launch. The product will carry the claim 'Helps to Maintain a Healthy Heart and Benefits Circulation' and this is supported by 5 years of human trials carried out by Provexis. The science supporting the claim has been approved by independent scientists at HEART UK. Licensing of FruitflowTM technology The FruitflowTM intellectual property rights are broad and well protected, and the core patent has now been granted in the United States, Europe and Australia, with forthcoming grants anticipated in Japan, Canada and Mexico. The recent grant in the United States was an important development for our licensing ambitions, and gives us access to the principal market for heart-healthy foods. Licensing discussions have been initiated with all the major food and beverage corporations and it is through this route that the technology will be globalised. Altu food bar On 4 October 2005 we completed the disposal of the Altu food-bar business in order to focus on the core business of developing and commercialising functional foods. New product development The Group entered into a collaboration agreement with a global clinical nutrition company in order to facilitate the development of a novel medical food, based on a patented extract from plantain, for the dietary management of Crohn's disease and has secured significant government funding to expand the scope of the clinical trial which commences next year. Crohn's disease is a chronic, relapsing disease of the intestine which affects 1 in a 1000 people in the UK. Management of the condition is currently restricted to various drug regimes and surgery. We continue to work closely with the technology transfer organisation of The Institute of Food Research to develop a functional beverage containing a natural bioactive ingredient associated with a reduced risk of developing certain types of cancer. This enters human trials next year at the Rowett Research Institute and, subject to success, is anticipated to be ready for launch in the UK in early 2007. The Group is one year into a three year technology acquisition agreement with Plant Bioscience Limited who continue to access their global network of 35 research institutes to find further functional food opportunities. Financial performance Costs of maintaining the business in the period of £821,000 were in line with Directors' expectation. Also recognised in the period were £455,000 of one-off share option costs, which are not a cash item, and £120,000 of one-off re-organisation costs, relating to personnel changes effected in integrating the two businesses. Losses relating to the Altu food-bar business, which was disposed of shortly after the period end, have been presented separately in the profit and loss account as a discontinued operation. These losses, which are non-recurring, total £173,000 for the period and include an exceptional provision of £34,000 for disposal costs. The group balance sheet at the period-end reflects the successful completion on 23 June 2005 of the proposals in connection with the acquisition of Provexis Limited and the associated capital re-organisation, debt conversion and placing which were effected with the Company's re-admission to AIM on that date. Under these proposals each existing Ordinary share of 2 pence in the Company was sub-divided into two new Ordinary shares of 1 pence each. The whole of the issued share capital of Provexis Limited was acquired for a consideration of £6,253,000 new Ordinary shares at 5.6 pence per share, and goodwill on acquisition recognised of £7,265,000. Existing and new loans for a total of £2,090,000 were converted into new equity, and £3,776,000 before expenses was raised via a placing, both at 5.6 pence per share. Resulting net funds at the period-end were £3,798,000 compared to £705,000 at the start of the period. Outlook The next 12 months will be a defining period for the business. Retail success of SircoTM in the UK and securing the first license to the FruitflowTM technology remain critical milestones for the success of the business. However, the technology pipeline following FruitflowTM is strong, and with the marketing capability and licensing opportunities available, we believe that the company is well positioned to take advantage of the increasing global demand for functional foods. Stephen Franklin Chief Executive Officer Consolidated profit and loss account for the six months ended 30 September 2005 Six months Note ended 30 September 2005 (unaudited) Continuing Discontinued Total £ £ £ Turnover - 127,688 127,688 Cost of Sales - (100,091) (100,091) --------- ---------- ----------- Gross Profit - 27,596 27,596 Distribution Costs - (14,299) (14,299) Administrative Expenses Share option costs (455,446) - (455,446) Re-organisation costs (119,850) - (119,850) Other administrative expenses (821,085) (152,545) (973,630) (1,396,381) (152,545) (1,548,926) --------- ---------- ----------- Operating Loss (1,396,381) (139,248) (1,535,629) Interest receivable 52,020 - 52,020 Interest payable and similar charges (6,500) - (6,500) --------- ---------- ----------- Loss on ordinary activities before and after taxation 3 (1,350,861) (139,248) (1,490,109) Exceptional items Provision for loss on disposal 1 - (33,676) (33,676) --------- ---------- ----------- Loss transferred from reserves (1,350,861) (172,924) (1,523,785) --------- ---------- ----------- Loss per ordinary share Basic and diluted, p 5 (0.9) (0.1) (1.0) Discontinued activities relate to the Altu food-bar business (see Note 1) All recognised gains and losses in the current and prior periods are included in the profit and loss account. Consolidated profit and loss account for the six months ended 30 September 2005 Note Six months ended 30 September 2004 (unaudited) Continuing Discontinued Total £ £ £ Turnover - 138,143 138,143 Cost of Sales - (96,013) (96,013) --------- ---------- ----------- Gross Profit - 42,130 42,130 Distribution Costs - (14,819) (14,819) Administrative Expenses Share option costs (487,358) - (487,358) Re-organisation costs - - - Other administrative expenses (316,004) (554,114) (870,118) (803,362) (554,114) (1,357,476) --------- ---------- ----------- Operating Loss (803,362) (526,803) (1,330,165) Interest receivable 14,195 - 14,195 Interest payable and similar charges (6,680) - (6,680) --------- ---------- ----------- Loss on ordinary activities before and after taxation 3 (795,847) (526,803) (1,322,650) Exceptional items Provision for loss on disposal 1 - - - --------- ---------- ----------- Loss transferred from reserves (795,847) (526,803) (1,322,650) --------- ---------- ----------- Loss per ordinary share Basic and diluted, p 5 (2.6) (1.7) (4.3) Discontinued activities relate to the Altu food-bar business (see Note 1) All recognised gains and losses in the current and prior periods are included in the profit and loss account. Consolidated profit and loss account for the six months ended 30 September 2005 Note Year ended 31 March 2005 (unaudited) (unaudited) (audited) Continuing Discontinued Total £ £ £ Turnover 310,000 298,667 608,667 Cost of Sales (246,709) (222,985) (469,694) --------- ---------- --------- Gross Profit 63,291 75,682 138,973 Distribution Costs - (30,821) (30,821) Administrative Expenses Share option costs (505,636) - (505,636) Re-organisation costs - - - Other administrative expenses (664,370) (776,788) (1,441,158) (1,170,006) (776,788) (1,946,794) --------- ---------- --------- Operating Loss (1,106,715) (731,927) (1,838,642) Interest receivable 34,286 - 34,286 Interest payable and similar charges (19,738) - (19,738) --------- ---------- --------- Loss on ordinary activities before and after taxation 3 (1,092,167) (731,927) (1,824,094) Exceptional items Provision for loss on disposal 1 - - - --------- ---------- --------- Loss transferred from reserves (1,092,167) (731,927) (1,824,094) --------- ---------- --------- Loss per ordinary share Basic and diluted, p 5 (3.4) (2.3) (5.7) Discontinued activities relate to the Altu food-bar business (see Note 1) All recognised gains and losses in the current and prior periods are included in the profit and loss account. Consolidated balance sheet as at 30 September 2005 Note As at As at As at 30 30 31 September September March 2005 2004 2005 (unaudited) (unaudited) (audited) £ £ £ Fixed Assets Intangible assets 2 7,144,189 - - Tangible assets 9,399 15,544 11,455 ----------- ----------- --------- 7,153,588 15,544 11,455 Current Assets Stocks 55,634 108,745 47,243 Debtors 300,958 138,878 288,984 Cash at bank and in hand 10 3,797,636 1,566,538 1,105,689 ----------- ----------- --------- 4,154,228 1,814,161 1,441,916 Creditors: amounts falling due within one year Convertible debt - - (400,000) Other (578,939) (441,652) (543,549) ----------- ----------- --------- (578,939) (441,652) (943,549) Net current assets 3,575,289 1,372,509 498,367 ----------- ----------- --------- Total assets less current liabilities 10,728,877 1,388,053 509,822 Creditors: amounts falling due after more than one year Convertible debt - (400,000) - ----------- ----------- --------- Net assets 10,728,877 988,053 509,822 ----------- ----------- --------- Capital and reserves Called up share capital 6 2,496,284 332,184 332,184 Share premium account 7 10,444,355 1,335,192 1,335,192 Merger reserve 7 1,137,616 1,137,616 1,137,616 Share option reserve 7 890,480 397,690 420,903 Profit and loss account 7 (4,239,858) (2,214,629) (2,716,073) ----------- ----------- --------- Shareholders'funds 10,728,877 988,053 509,822 ----------- ----------- --------- Consolidated cash flow statement for the six months ended 30 September 2005 Six months Six months Note ended ended Year ended 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £ £ £ Net cash outflow from operating activities 8 (1,010,298) (779,265) (1,247,519) Returns on investments and servicing of finance Interest received 58,083 584 25,566 Interest paid on convertible loan notes (6,500) - (16,900) Interest element of finance lease rental payments ----------- ---------- --------- - (180) (238) ----------- ---------- --------- 51,583 404 8,428 Capital expenditure Purchase of tangible fixed assets (2,977) (2,283) (2,282) ----------- ---------- --------- (2,977) (2,283) (2,282) Acquisitions and disposals Purchase of Provexis Limited 724,211 - - ----------- ---------- --------- Cash outflow before financing (237,481) (781,144) (1,241,373) Financing Issue of ordinary share capital 3,775,744 2,020,764 2,025,080 Exercise of share options - - 1,884 Costs of share issues (845,694) (258,871) (265,071) Capital element of finance lease rental payments (622) (1,149) (1,769) Issue of convertible loan notes - 400,000 400,000 ----------- ---------- --------- Cash inflow from financing 2,929,428 2,160,744 2,160,124 ----------- ---------- --------- Increase in cash in the period 9 2,691,947 1,379,600 918,751 ----------- ---------- --------- Notes to the consolidated accounts for the six months ended 30 September 2005 1. Financial information The interim financial information for the six months ended 30 September 2005 and the six months ended 30 September 2004 are unaudited and do not constitute statutory accounts within the meaning of section 240 of the Companies Act. This information has been drawn up using accounting policies and principles consistent with those applied in the preparation of the audited accounts of Provexis plc for the year ended 31 March 2005 and the new accounting policy for goodwill arising on acquisition. The comparative information in the report for the year ended 31 March 2005 constitutes the statutory accounts for that financial period. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified. Discontinued activities for all periods relate to the Altu food-bar business, the disposal of which was completed on 4 October 2005 for gross consideration of £75,000. An exceptional charge has been recognised in the six months ended 30 September 2005 to provide for costs relating to this disposal and to write down the carrying value of the relevant assets to realisable value. Copies of this interim financial information are being sent to shareholders. These interim results are also available on the internet at www.provexis.com 2. Goodwill arising on acquisition The consolidated financial statements include the accounts of Provexis plc and its subsidiary undertakings. On 23 June 2005 the Company acquired the entire issued share capital of Provexis Limited, a private nutraceutical company. Provexis Limited has been consolidated using the acquisition method and its results are incorporated from that date. The difference between the cost of acquisition and the fair value of the separable net assets acquired, 'goodwill', is amortised over 15 years as, in the opinion of the directors, this represents the period over which the goodwill is effective. 3. Taxation Based upon the results of the Group, there is no tax charge / (credit) for the period. 4. Dividend No interim dividend is proposed. 5. Loss per ordinary share The calculation of basic loss per ordinary share is based upon the losses after taxation for the period for continuing operations of £1,350,861; for discontinued operations of £172,924; and in total of £1,523,785 (2004 : losses for continuing operations £795,847; for discontinued operations £526,803; and in total of £1,322,650 ; year ended 31 March 2005 : losses for continuing operations £1,092,167; for discontinued operations £731,927; and in total of £1,824,094) and the weighted average number of ordinary shares, as adjusted for the 2 for 1 share split effected 23 June 2005, in issue during the period of 151,475,184 (2004 : 30,681,903 ; year ended 31 March 2005 : 32,064,060). There are no potentially dilutive shares in issue. 6. Share capital As at As at As at 30 30 September September 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) Ordinary Ordinary Ordinary shares shares of shares of 2p each 2p each Number £ Number £ Number £ In issue at start of period 16,609,194 332,184 13,279,150 265,583 13,279,150 265,583 Share split 2 for 1: Issue of new shares of 1p each 16,609,194 - - - - - Issued for acquisition of Provexis Limited 111,658,555 1,116,586 - - - - Issued for loan conversions 37,327,381 373,274 - - - - Issued via placing 67,424,000 674,240 3,235,849 64,717 3,235,849 64,717 Exercise of share options - - 94,195 1,884 94,195 1,884 --------- --------- -------- --------- -------- -------- In issue at end of period 249,628,324 2,496,284 16,609,194 332,184 16,609,194 332,184 --------- --------- -------- --------- -------- -------- On 23 June 2005 the following changes to the Company's share capital occurred: - a capital re-organisation was effected so that each existing 2p Ordinary share was split into two new 1p Ordinary shares. - 111,658,555 new Ordinary shares of 1p each were issued at 5.6p per share as consideration for the acquisition of the entire issued share capital of Provexis Limited. - 37,327,381 new Ordinary shares of 1p each were issued at 5.6p per share in satisfaction of outstanding loans in the Company and Provexis Limited - 67,424,000 new Ordinary shares of 1p each were issued at 5.6p per share for cash consideration under the placing effected with the Company's re-admission to AIM. 7. Reserves Share Merger Share Profit premium Reserve option and loss account reserve account £ £ £ £ At 1 April 2005 1,335,192 1,137,616 420,903 (2,716,073) Premium on share issue 9,954,857 - - - Share issue costs (845,694) - - - Loss for the period - - - (1,523,785) Share options granted - - 469,577 - --------- -------- -------- --------- At 30 September 2005 10,444,355 1,137,616 890,480 (4,239,858) --------- -------- -------- --------- 8. Reconciliation of operating loss to net cash outflow from operating activities Six months Six months ended ended Year ended 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £ £ £ Operating loss (1,535,629) (1,330,165) (1,838,642) Depreciation and amortisation 131,530 3,967 8,057 UITF 17 charge 469,577 441,020 464,233 (Increase)/ decrease in stocks (8,391) (46,854) 14,648 Decrease/ (increase) in debtors 48,847 (68,043) (223,040) (Decrease)/ increase in creditors (116,233) 220,810 327,225 Net cash outflow from ---------- ---------- ----------- operating activities (1,010,298) (779,265) (1,247,519) ---------- ---------- ----------- 9. Reconciliation of net cash flow to movement in net funds Six months Six months ended ended Year ended 30 30 31 September September March 2005 2004 2005 (unaudited) (unaudited) (audited) £ £ £ Increase in cash in the period 2,691,947 1,379,600 918,751 Cash outflow/ (inflow) from increase in debt and lease financing 400,622 (398,851) (398,231) --------- --------- --------- Change in net funds resulting from cash flows 3,092,569 980,749 520,520 Opening net funds 705,067 184,547 184,547 --------- --------- --------- Closing net funds 3,797,636 1,165,296 705,067 --------- --------- --------- 10. Analysis of net funds At Cash Other At 1 April 2005 flow non-cash 30 September changes 2005 £ £ £ £ Cash at bank and in hand 1,105,689 2,691,947 - 3,797,636 -------- 2,691,947 Obligations under finance leases (622) 622 - - Convertible loan notes (400,000) - 400,000 - --------- -------- --------- ---------- Total 705,067 2,692,569 400,000 3,797,636 --------- -------- --------- ---------- Further to the completion of the Company's acquisition of Provexis Limited, the loan notes were converted into new equity in the Company on 23 June 2005 at the placing price of 5.6 pence per new Ordinary share. This information is provided by RNS The company news service from the London Stock Exchange

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