Final Results

Synexus Clinical Research PLC 06 June 2006 SYNEXUS CLINICAL RESEARCH PLC Preliminary Results for the year ended 31 March 2006 Synexus Clinical Research plc ("Synexus" or "the Company"), which provides clinical trials services for the global pharmaceutical industry, today announces its preliminary results for the year ended 31 March 2006. HIGHLIGHTS • Profit before tax, and goodwill was £1.45 million - in line with market expectations. (2005: Loss of £ 0.85 million) • Successful flotation on AIM in November 2005 raised £3.5 million of new funds for the Company. • Significant progress made in line with our strategy to replicate our well established UK model in Eastern Europe and Asia • Establishment of strategic alliance in Mumbai, India. This business has already won its first trials with a major international pharmaceutical company • Acquisition of Polish clinical trials business, Skandynawskie Centrum Medyczne Sp. Zo.o., in January 2006 established our first site in Continental Europe. • Office opened in Sofia, Bulgaria. • Acquisition of Diagnostic Units Hungary announced today • The total number of patient visits for the year was over 30,000 - an increase of almost 50% over 2004/5 • Current investment in our UK infrastructure will improve operational efficiency and increase capacity by 50% • Net cash at year end was £1.7 million (2005: Debt of £5.7 million) • The Board is confident of meeting expectations for the current financial year. Commenting on the results, Executive Chairman, Mike Redmond said, "We are seeing increasing acceptance by our larger pharmaceutical clients of our model which provides large numbers of high quality patients for the lowest industry cost. We continue to seek acquisitions to enhance our network and to enable us to offer an international solution for our major pharmaceutical clients. With a significant proportion of this year's budgeted income already contracted, we are confident of achieving market expectations for the current year." Press enquiries Synexus Clinical Research plc Tel: +44 (0)1257 230723 Michael Redmond, Chairman Michael Fort, Chief Executive Biddicks - Financial Public Relations Tel: +44 (0)20 7448 1000 Zoe Biddick Brewin Dolphin Securities Tel: +44 (0)845 270 8600 Mark Brady/Sarah Kent Chairman's Statement This is the first Annual Report and Accounts since the successful flotation of the Company on AIM in November 2005. I am pleased to report that the results for the financial year ended 31 March 2006 have met expectations at the time of the float. Financial Results Turnover in the year was £9.54 million against £9.77 million in the previous year. Although total sales were down by £0.23 million, total investigator fees of £8.1 million were ahead by 9% over the 2005 result of £7.4 million, partially explaining the increase in margins. Profit before tax, excluding the amortisation of goodwill, for the year was £1.45 million, compared to a loss in the previous year of £0.85 million. Profit before tax was £1.23 million (2005: loss of £1.06 million)This significant turnaround reflects both improved operating performance, and the restructuring of the balance sheet immediately prior to float, resulting in the elimination of debt. Net cash at year-end amounted to £1.7 million compared with net debt of £5.7 million at 31 March 2005. Dividend The Board is not proposing payment of a dividend. Shareholder value at this point will be better served by retaining cash in the business to help drive the acquisition and expansion programme. Strategy In our prospectus, we stated that the strategy of the Group was to build a multi-country operation replicating our UK capability of recruiting large numbers of patients into later stage clinical trials for the pharmaceutical industry. Concentrating initially on Eastern European countries and India, we planned to have a number of clinical research hub sites, all operating to the same standards as our UK research sites. We made our first acquisition of an established profitable business in Poland in January 2006 and, subsequent to the year-end closing, we have acquired a second similar business in Hungary. In addition, we have established a new site in Mumbai, India, which has already won its first clinical research contracts with a major international pharmaceutical company. April saw the opening of our office in Sofia, Bulgaria, to capitalise on the increasing amount of business from that area of Eastern Europe. In short order, therefore, we have commenced the multi-country build-up envisaged in our strategy. This has resulted in increased and higher-level exposure within pharmaceutical clients. Established methods of recruiting patients into clinical trials evolve over time; in recent months we have seen increased interest by pharmaceutical clients in the Synexus concept of a group of research hub sites with large patient throughput. This contrasts with traditional, and hugely inefficient, methods of using many part-time clinical investigators, each recruiting a few patients. Your Board is confident, therefore, that the strategy we are pursuing will deliver strong business growth and resultant shareholder value. People The last twelve months have been an exciting time for all employees in the Group, whose efforts have resulted in a financially strong business. The Board is appreciative of the collective efforts of all our staff. Since the year end we are delighted to welcome Malcolm Hughes who has joined the Board as senior non-executive director Since flotation, we have moved also to strengthen the management team with external recruitment to provide the capability to deliver on our expansion plans. Current Trading and Prospects Existing signed contracts give the Board confidence that its expectations for the current financial year will be met. Longer term, the increasing acceptance of the Synexus model by pharmaceutical clients, gives support for continued growth. Mike Redmond, Chairman, 6 June 2006 Chief Executive's Statement I am delighted to report on your Company's first results as a public company since flotation on AIM in November last year. The capital restructuring of the business and the subsequent fund raising has allowed significant progress to be made across a number of areas of the operation. Business Development and the Market The Group's offering, particularly to our larger pharmaceutical clients, continues to enjoy increasing levels of acceptance and we are seeing wider demand for the Group's model which provides large numbers of high quality patients for the lowest industry cost. The pharmaceutical industry is itself now recognising the need to change the way patients are recruited into clinical trials. As demand increases for longer term safety and screening studies, so the industry is accepting the need to modernise a process that has until now, been carried out as a cottage industry using literally thousands of GP and consultant sites across the world. In a market for outsourced investigator fees that is worth over US$2 billion per annum (source: CenterWatch) it is imperative that the pharmaceutical companies partner with operators of sites that can deliver high quality and high volumes. Our industry is extremely conservative and change takes time, however, Synexus is at the forefront of this change and is leading the move to streamline patient recruitment in the clinical trials market. We continue to achieve new milestones. During the last nine months we have recruited almost 2000 patients for a single study. This follows on from the volume successes of previous years in Impaired Glucose Tolerance, Prostate Cancer Prevention, Obesity and Osteoporosis among many others bringing the total number of patients recruited by Synexus to 15,000 in the last four years. This brings the total patients currently on trials with the Group to almost 5,000 reflecting the increasingly longer-term nature of our revenue streams. Similarly, the total number of patient visits for the year exceeded 30,000, an increase of almost 50% over the previous year. The Group's expansion into Eastern Europe and India has given Synexus a serious edge in a global market where large numbers of previously untreated patients can be accessed. This significantly improves the feasibility and deliverability of clinical trials, the result being not only a quicker achievement of study end points for clients, but also significant cost savings due to large economies of scale, particularly in study monitoring. To build further on this success, we are now extending our business development reach into North America. We are increasingly in regular contact with the major decision makers within the pharmaceutical industry with very encouraging results. A larger number of enquiries and requests for proposals for bigger patient group studies across a wider range of therapeutic areas has been the direct result of this strategy. These should have a direct influence on revenue towards the end of the current financial year. I am also particularly pleased to report we are currently successfully recruiting patients for a 'flu vaccine study; vaccines being an area previously not majored on by the Company. The very unfortunate Northwick Park Hospital incident earlier in the year has heightened the profile of clinical trials not only in the home market but internationally as well. Synexus does not carry out Phase I "first in man" trials, concentrating instead on later Phase II and Phase III trials into efficacy and safety. As a result of increased contact with patients currently on clinical trials, this has had a minimal impact on the business Centre Expansion and Development Mainland Europe I am very pleased to be able to report the completion of the purchase of Diagnostic Units Hungary (DUH), which is a high quality clinic and the major recruiter of patients in Hungary. DUH is in a very exciting position both geographically and strategically and will dovetail well into the company's European group, which has seen the purchase of SCM in Wroclaw, Poland and the opening of an office in Sofia, Bulgaria. The prospects from these centres alone are excellent as they allow the company to offer a wider European solution to our clients. Additionally, the centres have varying specialities in their domestic markets allowing us to widen the therapeutic areas offered to our clients. We will continue to look for similar types of acquisition opportunities in a number of other European countries over the coming months, with the active encouragement of our larger pharmaceutical customers. UK The UK home market during 2005/6 has been the main contributor to revenues and remains a growth area for us. The financial resources introduced into the Company on flotation and generated through improved trading have enabled us to invest in the restructuring of our original network of 12 centres into 8 major "hub" sites in order to achieve significantly greater operational efficiencies and to achieve the operational milestones mentioned above. This streamlining, expected to be completed by the end of September 2006, will result in five significantly larger single unit "super hub" sites in Scotland (Glasgow), Lancashire (Bolton), Merseyside (Liverpool), West Midlands (Birmingham) and Thames Valley (Reading). Additionally there will remain three further hub sites in Manchester, Cardiff and Wolverhampton. The investment made into our sites will allow for an increase in throughput of up to 50%. This will enable us to continue to exploit our position as the only company to be able to carry out large-scale clinical trials on an international basis. India The company entered into a franchise agreement in December 2005 with its partners in Mumbai, India, IRL. Following very successful visits from our clients after the setting up of the centre, we have won our first trials from a major European pharmaceutical company. We are very pleased with the development of this site both in terms of the quality of its employees and the local infrastructure as demand for studies to be conducted in India remains high. The Group now has the foundations on which to build a successful business. People We are delighted to have been able to announce the strengthening of our operational board with the recruitment of a number of key individuals. Dominic Clavell joined the company from Novartis Pharmaceuticals in May 2006 as International Operations Director. Dominic takes key responsibility for all the sites, and having been a customer of ours for the last 5 years, will set extremely high standards. Chris Lee joins in August from Ajinomoto Pharmaceuticals as Business Development Director. Chris held the position of International Medical Director at Ajinomoto for 5 years prior to this and his appointment considerably strengthens our international offering as well as bringing significant experience to the operating board. Our additional financial capability has enabled us to review management throughout the organisation. As a result, both at the hub sites and centrally, we have strenghtened our mangement team to enable us to take the business to the next stage. Our staff at all levels have been a major stength during the last 12 months, a period of significant change, enabling the company to achieve its objectives in an effective manner. The Board offers its sincere thanks to all for their efforts. Financial The Group has generated a maiden operating profit as a listed company of £1.53 million (2005: loss of £0.52 million) as the benefits of negotiating contracts from a strengthening commercial position have flowed through in improved gross margins. The flotation was accompanied by a restructuring of the Group's debt which has resulted in a reduction of the interest charge for the year from £0.54 million to £0.30 million. The Group's profit before tax was £1.23 million compared with a loss of £1.06 million in 2005. Strong trading in the last quarter of the financial year led to an increase in trade debtors of £0.73 million and trade creditors have reduced by £0.20 million. Whilst we have seen an investment of nearly £1 million in working capital, the net funds from the flotation of £0.8 million and retained cash from trading have enabled the Group to increase cash to £1.98 million from £0.43 million last year. A key element of the Group's strategy is to acquire profitable patient recruitment companies in emerging economies. In January 2006 we announced the acquisition of Skandynawskie Centrum Medyczne Sp. Z o.o. (SCM) in Poland for an initial consideration of £0.85 million satisfied by the issue of 1.04 million shares at a price of 81.5 pence per share. SCM achieved a profit after tax of £100,000 in the year ended 31 December 2005 after three years of loss making since its incorporation. Further consideration is payable on an earn-out, based on profits after tax of £150,000 and above. As already mentioned, since the year end we have acquired the share capital of Diagnostic Units Hungary (DUH) for an initial consideration of 1.5 million euros which was satisfied by a payment of 1 million euros in cash and the balance by the issue of 362,976 shares in Synexus at 95 pence each. DUH is a successful business and made a profit after tax of £142,000 in the year ended 31 December 2005. On the first anniversary after completion 0.5 million euros of deferred consideration is payable in cash. A further 0.75 million euros is payable based on the trading performance of DUH in the year ending 31 March 2007 with the maximum payable if DUH generates profit after tax in the region of £259,000 in that period. Since the flotation the Group's financial position has been substantially strengthened with closing net assets at 31 March 2006 of £6.64 million and negligible gearing. This increase in net assets of over £9.0 million from the previous year gives a sound base on which to build the Group's finances moving forward. Current Trading and Prospects The value of the order book at the year end, including remaining revenues from existing contracts, is £16.3million (2005: £13million) and gives the board confidence in achieving the internal forecasts for the coming year. The opportunity to now leverage our position in bidding for studies internationally rather than on a single country basis offers our clients real economies of scale which we are confident will increase the size, quality and therapeutic spread of studies. Prospects at each of our sites are good and your Board is optimistic that the foundations laid down in 2005/6 have established a good platform for the further development and acceptance of the Synexus model internationally. Your Board will continue to look to grow not only as a result of the investment in infrastructure described above, but also via acquisition, in both mainland Europe and beyond where a number of interesting strategic opportunities remain which would enhance our offering to the global pharmaceutical industry. We continue to enjoy the support of our customers who are among the largest companies in the world and who are increasingly buying in to the Synexus model of patient recruitment and management on a volume basis. Michael Fort, Chief Executive Officer, 6 June 2006 Synexus Clinical Research plc Consolidated profit and loss account For the year ended 31 March 2006 2006 2005 Notes £'000 £'000 Turnover Continuing operations 9,448 9,771 Acquisitions 94 - ------ ------ 9,542 9,771 Cost of sales (4,719) (7,071) ------ ------ Gross profit 4,823 2,700 ------ ------ Operating expenses Amortisation of goodwill (213) (205) Other operating expenses (3,079) (3,018) ------ ------ Total operating expenses (3,292) (3,223) ------ ------ Operating profit /(loss) Continuing operations 1,510 (523) Acquisition 21 - ------ ------ Total operating profit 1,531 (523) Net Interest (299) (535) ------ ------ Profit/(loss) on ordinary activities before taxation 1,232 (1,058) Taxation 3 29 13 ------ ------ Retained profit / (loss) for the financial year 1,261 (1,045) ====== ====== Basic earnings per share 2 6.8p (10.4)p Consolidated statement of total recognised gains and losses For the year ended 31 March 2006 The Group has no recognised gains or losses for the year/period other than those stated above and therefore no separate statement of total recognised gains and losses has been presented. The results above also represent the historical cost profit/(loss) Synexus Clinical Research plc Consolidated balance sheets As at 31 March 2006 2006 2005 Notes £'000 £'000 Fixed assets Intangible assets 5 3,881 3,147 Tangible assets 514 378 ------ ------- 4,395 3,525 ------ ------- Current assets Debtors 2,428 1,607 Deferred tax 103 74 Cash at bank and in hand 1,982 428 ------ ------- 4,513 2,109 Creditors: amounts falling due within one year (2,020) (4,918) ------ ------- Net current assets/(liabilities) 2,493 (2,809) ------ ------- Total assets less current liabilities 6,888 716 Creditors: amounts falling due after more than one (251) (3,393) year ------ ------- Net assets/ (liabilities) 6,637 (2,677) ====== ======= Capital and reserves Called up share capital 2,279 1,000 Share premium account 2,491 296 Merger reserve 1,253 515 Capital redemption reserve 2,661 - Profit and loss account (2,047) (4,488) ------ ------- Equity shareholders' funds / (deficit) 6,637 (2,677) ====== ======= Synexus Clinical Research Plc Consolidated cash flow statement For the year ended 31 March 2006 Notes 2006 2005 £'000 £'000 Net cash inflow/(outflow) from operating activities 6 899 (528) ------ ------ Return on investments and servicing of finance Net Interest (28) (41) ------ ------ Capital expenditure and financial investment Purchase of tangible assets (71) (45) ------ ------ Acquisitions and disposals Purchase of subsidiary undertakings (60) - Net cash acquired with subsidiary 7 - ------ ------ Net cash outflow from acquisitions 4 (53) - ------ ------ Cash inflow/ (outflow) before financing 747 (614) ------ ------ Financing Issue of share capital (net of issue costs) 2,734 - Repayment of loans (1,927) - Capital element of finance lease payments - (2) ------ ------ Net cash inflow/ (outflow) from financing 807 (2) ------ ------ Increase / (decrease) in cash in the period 7 1,554 (616) ====== ====== Notes to the Financial Information 1. Basis of preparation and financial information The financial information in this preliminary announcement has been prepared in accordance with the accounting policies set out in the financial statements of Synexus Clinical Research Plc for the year ended 31 March 2005, which have remained unchanged for the financial year ended 31 March 2006. The financial information in this document does not constitute the Company's statutory accounts for the year ended 31 March 2006, but is derived from those accounts. Statutory accounts for 2006 will be delivered to the Registrar of Companies following the company's Annual General Meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under sections 237 (2) or (3) of the Companies Act 1985. 2. Earnings per share Earnings per share is calculated on the basis of the profit for the year divided by the weighted average number of shares in issue for 2006 of 18,656,563 (2005: 10,000,000). An adjusted earnings per share , which excludes goodwill amortisation, has been calculated to allow shareholders to gain a greater understanding of the trading performance of the Group: Earnings Weighted Pence per share Earnings Weighted Pence per share attributable to average number attributable to average number ordinary of shares ordinary of shares shareholders shareholders £'000 £'000 Basic earnings 1,261 18,656,563 6.8 (1,045) 10,000,000 (10.4) per share Amortisation of goodwill 213 - - 205 - - Adjusted earnings per share 1,474 18,656,563 7.9 (840) 10,000,000 (8.4) 3. Taxation 2006 2005 £'000 £'000 UK Corporation tax Current tax - - Deferred tax (29) (13) ------- ------- Tax on profit on ordinary activities (29) (13) ======= ======= Taxable losses available for relief against future taxable profits in the UK amount to approximately £962,000 (2005: £3,512,000). Factors affecting the tax charge for the year The differences are explained below: 2006 2005 £'000 £'000 Profit/(loss) on ordinary activities before taxation 1,232 (1,058) Profit/(loss) on ordinary activities multiplied by the rate of corporation tax in the UK at 30% (2005: 19%) 370 (201) Effect of: Capital allowances in excess of depreciation (22) 21 Goodwill amortisation 61 39 Permanent timing differences 10 18 Losses (414) 123 Other (5) - ------- ------- Current tax charge for year - - ======= ======= 4. Acquisitions On 31 January 2006 the Company acquired the entire issued share capital of Skandynawskie Centrum Medyczne Sp. Z o.o.(SCM). The initial consideration of £850,000 was satisfied by the allotment of 1,042,945 ordinary shares at a price of 81.5 pence per share. A further £1,400,000 could become payable in cash and ordinary shares dependent on the level of the profit after tax of SCM for the year ending 31 March 2007. Based on current expectations of performance the directors do not expect to make a payment of deferred consideration. The certified accounts for SCM for the year ended 31 December 2005 show turnover of £0.47 million, profit before tax of £0.12 million and taxation of £0.02 million. The unaudited accounts for the month of January 2006 indicate that SCM's turnover was £0.07 million, a loss of £7,000 and there was no taxation. The acquisition has been accounted for using the acquisition method of accounting and goodwill arising on acquisition has been capitalised and will be amortised over a period of 20 years which is its expected life. The assets and liabilities acquired are set out below: Book value Adjustment Fair value £'000 £'000 £'000 Intangible assets 1 (1) - Fixed assets 176 - 176 Debtors 77 7 84 Cash 7 - 7 Trade creditors and taxes (37) (3) (40) Loans (264) - (264) -------- -------- ------- Net liabilities (40) 3 (37) -------- -------- Goodwill 947 --- --- ------- Total consideration and cost 910 --- --- ------- Satisfied by: Issue of shares 850 Costs 60 ------- 910 ======= 5. Intangible fixed assets Goodwill £'000 Cost At 1 April 2005 4,100 Additions 947 -------- At 31 March 2006 5.047 ======== Amortisation At 1 April 2005 953 Charge for year 213 -------- At 31 March 2006 1,166 ======== At 31 March 2006 3,881 ======== At 1 April 2005 3,147 ======== 6. Reconciliation of operating profit/(loss) to operating cash flows 2006 2005 £'000 £'000 Operating profit/(loss) 1,531 (523) Depreciation and amortisation charges 324 323 (Increase) in debtors (737) (60) (Decrease) in creditors (219) (268) ------- ------- Net cash inflow/(outflow) from operating activities 899 (528) ======= ======= 7. Reconciliation of net cash flow to movement in net debt 2006 2005 £'000 £'000 Increase/(decrease) in cash during the period 1,554 (616) Cash outflow from decrease in debt and lease financing 1,927 2 ------- ------- Change in net debt resulting from cash flows 3,481 (614) Debt acquired with subsidiary (264) - Debt capitalised into share capital 3,297 - Interest accrued (271) (493) Interest waived 1,172 ------- ------- Movement in net debt in the period 7,415 (1,107) Net debt at 1 April 2005 (5,684) (4,577) ------- ------- Net cash/(debt) at 31 March 2006 1,731 (5,684) ======= ======= 8. Copies of the preliminary announcement are available from the company's Registered Office at Sandringham House, Ackhurst Park, Chorley, Lancashire, PR7 1NY. The Annual Report and Accounts for the year ended 31 March 2006 will be posted to shareholders on or before 30 June 2006 This information is provided by RNS The company news service from the London Stock Exchange

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