Final Results

Fulcrum Pharma PLC 09 November 2006 FULCRUM PHARMA PLC ('the Group' or 'the Company') Preliminary Results for the Year Ended 31 August 2006 Fulcrum Pharma plc (AIM: FUL), the drug development and strategic outsourcing services company, today announces its preliminary results for the year ended 31 August 2006. Highlights â€¢ Profit before tax of Â£154,000 (2005: loss of Â£76,000, Â£315,000 before exceptional) â€¢ Fee sales improved by 34% to Â£8.3m (2005: Â£6.2m) â€¢ Successful acquisition and integration of Quadramed Ltd, a regulatory services business â€¢ Headcount increased by circa 50% and management team strengthened â€¢ Strong sales performance in Europe â€¢ Disappointing sales performance in US. New General Manager appointed â€¢ Good contribution to sales by Japan Commenting on the results, Chairman Prof. Sir Charles George said: 'We continue to focus on building Fulcrum to a sufficient scale to deliver sustainable profits. We remain committed to growing our services business, in particular in pharmaceutical regulatory affairs, both organically and by acquisition. Finally, I would like to thank the management and staff for all their efforts in bringing the company back into profit this year.' For further information, please contact: Fulcrum Pharma PLC Jon Court, Chief Executive Tel: 0870 710 7152 Fulcrum Pharma PLC Preliminary Results for the Year Ended 31 August 2006 Chairman's Report Business Review I am pleased to report the Group returned to profitability in this year and has maintained a strong balance sheet with net funds at 31 August 2006 of Â£1.9m (2005 Â£1.5m). Fulcrum's results show a profit before tax for the full year of Â£154,000 compared to last year's loss before tax of Â£76,000 (Â£315,000 loss before exceptional credit). Since last year's results the Group has successfully evolved to the next stage of its development. Group fee sales have grown by 34%, the management team has been strengthened and staff numbers have increased by nearly 50% through organic growth and company acquisition. Pharmaceutical services remain a growth sector in which changes in the regulatory environment have increased the demand for regulatory services and know-how. Fulcrum has capitalised on this market opportunity through the successful acquisition of Quadramed Limited ('Quadramed'), a regulatory services company based in the UK. The enhanced performance of this company since acquisition has confirmed the strategic fit of these services with Fulcrum's evolving business model. Financial Results The Group made a profit before tax of Â£154,000 (2005: loss of Â£76,000). Amortisation relating to the acquisition of Quadramed was Â£51,000. The retained profit for the year was Â£142,000 (2005: loss Â£89,000) and the basic earnings per share was 0.12p (2005: loss per share 0.07p). Fee sales increased by 34% to Â£8.3m (2005: Â£6.2m). Net operating costs, excluding exceptional credits, were Â£3.9m compared to Â£3.0m last year. The exceptional credit in the prior year of Â£239,000 represented income from the surrender of the lease on the UK office less the cost associated with relocation to new premises. The balance sheet remains strong with net funds at 31 August 2006 of Â£1.9m (2005: Â£1.5m). Operating Review Commercial, Sales and Business Development Over the past year Fulcrum has grown in size and increased the range of services it offers the pharmaceutical industry. Fee sales have increased in the full year by 34% and in the second half sales were Â£4.6m compared to Â£3.7m in the first half year. The Group has concentrated on strengthening the Fulcrum brand and has sponsored and presented at major biotechnology and partnering conferences in the US, Europe and Japan such as BIO 2006, BECIF, ASCO, DIA and Bio Business. Net operating costs have increased, reflecting investment in the scale up of the business, recruitment of staff and associated infrastructure. The Group is increasing sales and marketing resource to capitalise on its expanded operational capacity. Establishing long term business relationships Fulcrum has developed frameworks to manage long term strategic outsourcing relationships with clients. This enables Fulcrum to grow client accounts, improve productivity and mitigate risk. Fulcrum continues to provide expertise and support to Medicines for Malaria Venture ('MMV'), including for the development of the pyronaridine artesunate combination for treating acute uncomplicated malaria. The latter project was nominated as MMV Project of the Year 2005. In April 2006, long term business relationships were announced with Celtic Pharma Development Services Bermuda Limited ('Celtic Pharma') and NanoCarrier Co. Limited ('NanoCarrier'). Celtic Pharma is a leading global private equity firm focused on pharmaceutical and biotechnology products. NanoCarrier is a Japanese biotechnology company. Both relationships are expected to deliver significant revenue over the next three years. Fulcrum also continues to support the delivery of the Addex Pharmaceuticals SA ('Addex') portfolio of products. Addex successfully achieved a further round of funding in August 2006. Regional Performance Pharmaceutical regulatory services are integral to all parts of Fulcrum's business in Europe, US and Japan. Following the acquisition of Quadramed, the Group has focused on growing regulatory services and products including late stage electronic submissions. In tandem the management team has been strengthened by new leadership appointments in Europe, US and Regulatory Services. Europe Fee sales in Europe have strengthened throughout the year, and, excluding the contribution from Quadramed, have increased by 38% over the previous year. To enable the company to execute the additional work, there has been investment, particularly in the second half of the year, in the recruitment of staff, expansion into new office premises in Strasbourg and the opening of a new office in Edinburgh. Under the leadership of the recently appointed General Manager for Europe, Sarah Arbe-Barnes, it is planned that the sales team will be further strengthened. The relocation of the UK office in Hemel Hempstead, which was planned to take place in mid December 2005, had to be postponed following the explosion at the Buncefield Oil Depot. The relocation is expected to take place in December 2006 and the original foreseen savings can then be achieved. US Fee sales in the US fell by 11% where the sales performance in the second half has been disappointing. Overall this position has been mitigated by the US providing key resources to support European contracts. A new General Manager, John Seman, was appointed in October 2006 to lead the US business. The Group remains committed to the strategy of delivering services globally and the objective of achieving a significant proportion of its income from the US. Japan Under the leadership of Teruyoshi Okuda and Kiyoshi Fujimaru, fee sales from Fulcrum's two Japanese companies have increased by 17%. The business model of a specialist oncology clinical research organisation and regulatory group has begun to develop into a sustainable, profitable business. During the period, several Government funded contracts with academia have been won. In addition, the continued investment in business development has generated Â£1.4m of fee sales from Japanese clients for Fulcrum in Europe and US and begun to create fee income for Fulcrum Regulatory Services. Fulcrum Regulatory Services ('FRS') FRS is based around the nucleus of Quadramed, acquired in February 2006. Phil Birch has been recruited to grow the existing regulatory services, as well as building a complementary regulatory compliance offering. Quadramed itself has had a successful initial seven months of trading within the group and its fee sales show a 39% increase over the same period last year. This improvement in sales demonstrates the strategic fit of these services with Fulcrum's evolving business model and the potential for synergy with the rest of the Group. The acquisition of Quadramed enables the Group to focus on growing regulatory services across the business, and to offer electronic submission capability for regulatory documents. As the regulatory agencies, such as FDA and EMEA, are moving to a position where they will only accept electronic submissions, this capability gives Fulcrum a strong position in this changing market. Management Incentives It is proposed to introduce a long term incentive plan to align senior management with future goals for profitability and growth. Full details will be provided to shareholders for approval. Board Changes As announced last year, it remains the intention of the Company to further strengthen the Board with more expertise within the service sector. Dr Angus Bell joined the board in March 2006 as a non-executive director and Dr David Clough, who had been a non-executive director since the company was listed on AIM in 2000, retired in May 2006. Future Strategy and Outlook Following the return to profitability, the Group has refined the strategy set out last year: 1. Grow the service business within the four business units and further develop the global service model. 2. Increase scale, particularly in pharmaceutical regulatory affairs, through acquisition and organic growth. 3. Grow the business and its profitability with - â€¢ Expanded sales effort and business development. â€¢ Developing long term client relationships. â€¢ Focusing on growing the most profitable, highest demand elements of Fulcrum's services The historic factors of capital efficiency and improved productivity continue to drive drug developers towards outsourcing. Conclusion Fulcrum continues to focus on building the business to a sufficient scale to deliver sustainable profits and remains committed to growing services, particularly in pharmaceutical regulatory affairs, both organically and by acquisition. Consolidated Profit & Loss Account for the year ended 31 August 2006 Year Ended Year Ended Year Year 31 August 31 August Ended Ended 31 August 31 August 31 August 31 August 2006 2006 2006 2005 Unaudited Unaudited Unaudited Audited --------------------- ----- --------- -------- --------- -------- Continuing Acquisitions Total --------------------- ----- operations -------- --------- -------- --------- Note Â£'000 Â£'000 Â£'000 Â£'000 --------------------- ----- --------- -------- --------- -------- Turnover 2 14,360 1,091 15,451 12,626 Cost of sales (10,818) (620) (11,438) (10,014) --------------------- ----- --------- -------- --------- -------- Gross profit 3,542 471 4,013 2,612 Selling expenses (540) (23) (563) (654) --------------------- ----- --------- -------- --------- -------- Administrative (3,084) (294) (3,378) (2,320) expenses Exceptional administrative credit 3 - - - 239 --------------------- ----- --------- -------- --------- -------- Total administrative expenses (3,084) (294) (3,378) (2,081) --------------------- ----- --------- -------- --------- -------- Other operating 65 - 65 - income ----- --------- -------- --------- -------- --------------------- Operating profit/ (17) 154 137 (123) (loss) Interest receivable and 59 56 similar income Interest payable and similar charges (42) (9) --------------------- ----- --------- -------- --------- -------- Profit/(loss) on ordinary activities before 154 (76) taxation Tax on profit/(loss) on 4 (12) (13) ordinary activities ----- --------- -------- --------- -------- --------------------- Profit/(loss)for the financial year 142 (89) --------------------- ----- --------- -------- --------- -------- Earnings per share (pence) 5 Basic 0.12p (0.07p) Diluted 0.10p (0.07p) Adjusted basic 0.12p (0.23p) Statement of Total Group Recognised Gains and Losses for the year ended 31 August 2006 2006 2005 Â£'000 Â£'000 Unaudited Audited -------- --------- Profit/(loss) on ordinary activities after taxation 142 (89) Exchange adjustments offset in reserves (27) (8) ------------------------------- -------- --------- Total recognised gains and losses since last annual report 115 (97) ------------------------------- -------- --------- Consolidated Balance Sheet as at 31 August 2006 -------- ------- 2006 2005 Unaudited Audited Â£'000 Â£'000 -------- ------- Fixed assets Intangible assets 1,216 - Tangible assets 552 460 Investments 469 172 ------------------------------ -------- ------- 2,237 632 -------- ------- Current assets Debtors 3,657 3,335 Short term investments 524 1,193 Cash at bank and in hand 1,571 678 ------------------------------ -------- ------- 5,752 5,206 Creditors: amounts falling due within one year (3,997) (2,481) ------------------------------ -------- ------- Net current assets 1,755 2,725 ------------------------------ -------- ------- Total assets less current liabilities 3,992 3,357 Creditors: amounts falling due after more than one (422) (31) year -------- ------- ------------------------------ Net assets 3,570 3,326 ------------------------------ -------- ------- Capital and reserves Called up share capital 6 1,285 1,219 Share premium account 6 4,547 4,370 Merger reserve 6 (454) (454) Profit and loss account 6 (1,808) (1,809) ------------------------------ -------- -------- ------- Equity shareholders' funds 3,570 3,326 ------------------------------ -------- -------- ------- Consolidated Cash Flow Statement for the year ended 31 August 2006 -------- -------- -------- Note 2006 2005 -------- -------- -------- Â£'000 Â£'000 Unaudited Audited -------- -------- -------- Net cash inflow/(outflow) from operating 7 795 (493) activities -------- -------- -------- ------------------------------ Returns on investment and servicing of finance Interest received 59 56 Interest paid (42) (9) ------------------------------ -------- -------- -------- Net cash inflow from returns on investments and servicing of finance 17 47 ------------------------------ -------- -------- -------- Taxation Corporation tax paid (72) (3) ------------------------------ -------- -------- -------- Capital expenditure and financial investment Purchase of own shares for employee share options and (114) (29) awards Purchase of equity investments (297) (87) Purchase of tangible fixed assets (310) (69) ------------------------------ -------- -------- -------- Net cash outflow from capital expenditure and financial investment (721) (185) ------------------------------ -------- -------- -------- Acquisitions & disposals Purchase of subsidiary undertakings (including (123) - costs) Cash acquired with subsidiary 445 - ------------------------------ -------- -------- -------- Net cash inflow from acquisitions and disposals 322 ------------------------------ -------- -------- -------- Net cash inflow/(outflow) before management of liquid 341 (634) resources and financing -------- -------- -------- ------------------------------ Management of liquid resources Decrease in short term investments 669 230 ------------------------------ -------- -------- -------- Financing Increase in borrowings - 100 Capital element of finance lease payments (30) (37) Bank loan repayments (87) (26) ------------------------------ -------- -------- -------- Net cash (outflow)/inflow from financing (117) 37 ------------------------------ -------- -------- -------- Increase/(decrease) in cash 7 893 (367) ------------------------------ -------- -------- -------- Reconciliation of net cash flow to movement in net funds -------- -------- -------- Note 2006 2005 Â£'000 Â£'000 Unaudited Audited -------- -------- -------- Increase/(decrease) in cash 893 (367) Decrease/(increase) in bank loans 87 (74) Bank loan acquired with subsidiary (11) - Decrease in short term investments (669) (230) Decrease in finance leases 30 37 Other non-cash movements - (7) ------------------------------ -------- -------- -------- Change in net funds from cash flows 330 (641) Net funds at 1 September 1,538 2,179 ------------------------------ -------- -------- -------- Net funds at 31 August 7 1,868 1,538 ------------------------------ -------- -------- -------- 1 Financial Information The results for the year ended 31 August 2006 are unaudited and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. They have been drawn up using accounting policies and principles consistent with those applied in the preparation of the audited accounts for the year ended 31 August 2005. The comparative information contained in the report for the year ended 31 August 2005 does not constitute the statutory accounts for the financial period. Those accounts have been reported on by the Company's Auditors, PricewaterhouseCoopers LLP, and delivered to the Registrar of Companies. The report of the Auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act. 2 Turnover Turnover represents sales to third parties including fee income and pass through costs. Geographical analysis by origin 2006 2005 Â£'000 Â£'000 Unaudited Audited -------- -------- Europe 5,162 3,082 USA 1,349 1,524 Japan 1,831 1,571 ------------------------------------ -------- -------- Total fee sales 8,342 6,177 Pass through costs 7,109 6,449 ------------------------------------ -------- -------- Turnover 15,451 12,626 ------------------------------------ -------- -------- Geographical analysis by destination 2006 2005 Â£'000 Â£'000 Unaudited Audited -------- -------- United Kingdom 2,184 3,245 Rest of Europe 4,669 3,290 North America 4,136 3,380 Japan 4,044 2,698 Rest of the World 418 13 ------------------------------------ -------- -------- Turnover 15,451 12,626 ------------------------------------ -------- -------- 3 Exceptional item The exceptional item in 2005 represents the income from the surrender of the lease on the UK office less the costs associated with the relocation to new premises. 2006 2005 Â£'000 Â£'000 -------- -------- Profit/(loss) on ordinary activities before taxation 154 (76) Exceptional administrative credit - (239) ------------------------------------ -------- -------- Profit/(loss) on ordinary activities before taxation and exceptional items 154 (315) ------------------------------------ -------- -------- 4 Tax on profit/(loss) on ordinary activities 2006 2005 Â£'000 Â£'000 Unaudited Audited -------- -------- UK taxation UK corporation tax at 30% 10 - ------------------------------------ -------- -------- Overseas taxation 2 13 Corporation taxes ------------------------------------ -------- -------- Total current taxation 12 13 ------------------------------------ -------- -------- Tax on profit/(loss) on ordinary activities 12 13 ------------------------------------ -------- -------- 5 Earnings/(loss) per share 2006 2005 Unaudited Audited -------- -------- Basic earnings/(loss) per share 0.12p (0.07)p Adjustment for exceptional credit - (0.16)p ------------------------------------ -------- -------- Adjusted earnings/(loss) per share 0.12p (0.23)p Diluted earnings/(loss) per share 0.10p (0.07)p ------------------------------------ -------- -------- 2006 2005 -------------------- ------------------- Profit Profit before before exceptional Exceptional exceptional Exceptional items items Total items items Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Unaudited Unaudited Unaudited Audited Audited Audited ----------- -------- -------- -------- -------- -------- ------- Profit/ (loss) before 154 - 154 (315) 239 (76) taxation Tax on profit/ (12) - (12) 35 (48) (13) (loss) -------- -------- -------- -------- -------- ------- ----------- Profit/ (loss) 142 - 142 (280) 191 (89) after -------- -------- -------- -------- -------- ------- taxation ----------- 5 Earnings/(loss) per share continued 2006 2005 Number Number Unaudited Audited --------- --------- Weighted average number of shares 125,478,759 121,185,914 Weighted average number of shares held by the Employee Share Ownership Trust (2,013,839) (676,406) --------------------------------- --------- --------- Weighted average number of shares for basic earnings per share 123,464,920 120,509,508 Number of share options 23,110,875 - --------------------------------- --------- --------- Weighted average number of shares for diluted EPS 146,575,795 120,509,508 --------------------------------- --------- --------- The basic earnings per ordinary share is based on the Group's profit for the year of Â£142,000 (2005: loss of Â£89,000) divided by the weighted average number of ordinary shares in issue, excluding those shares held by the Employee Share Ownership Trust ('ESOT'). Exceptional costs or credits charged or credited against operating profit and exceptional tax charges or credits do not relate to the profitability of the Group on an ongoing basis. Therefore an adjusted basic earnings/(loss) per ordinary share is also presented. 6 Reconciliation of movements on reserves and shareholders'funds Called up Share Profit share premium Merger and loss capital account reserve account Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ----------------- ------- -------- -------- -------- -------- At 1 September 2005 1,219 4,370 (454) (1,809) 3,326 Retained profit for year - - - 142 142 Issue of ordinary share 66 177 - - 243 Purchase of own shares for ESOT - - - (114) (114) Unrealised exchange loss on consolidation - - - (27) (27) ----------------- ------- -------- -------- -------- -------- At 31 August 2006 1,285 4,547 (454) (1,808) 3,570 ----------------- ------- -------- -------- -------- -------- 7 Notes to the consolidated cash flow statement Reconciliation of the operating profit/(loss) to net cash inflow/(outflow) from operating activities: 2006 2005 Â£'000 Â£'000 Unaudited Audited -------- -------- Operating profit/(loss) 137 (123) Amortisation 51 - Depreciation 197 197 Shares compensation charge - 21 Loss on disposal of fixed assets 15 - Exchange loss (13) (8) (Increase)/decrease in debtors (216) 17 Increase/(decrease) in creditors 624 (597) ------------------------------------ -------- -------- Net cash inflow/(outflow) from operating activities 795 (493) ------------------------------------ -------- -------- Analysis of net funds As at As at 1 September 31 August 2005 Cash flow Acquisitions 2006 Â£'000 Â£'000 Â£'000 Â£'000 Audited Unaudited Unaudited Unaudited --------- --------- -------- -------- Cash at bank and in hand 678 448 445 1,571 Bank loan (270) 87 (11) (194) Short term investment 1,193 (669) - 524 Finance lease (63) 30 - (33) --------------------- --------- --------- -------- -------- 1,538 (104) 434 1,868 --------- --------- -------- -------- Major non -cash transactions The only major non-cash transaction that occurred during the period was the issue of 6,666,667 ordinary shares to satisfy part of the consideration on the acquisition of Quadramed Limited. The details are set out in note 8. 8 Acquisition On 8 February 2006, the Company acquired the entire issued share capital of Quadramed Limited for an initial consideration of Â£1,090,000, of which Â£50,000 was paid in cash and Â£690,000 was paid by the issue of loan notes, Â£500,000 of which are guaranteed, Â£250,000 was paid by the issue of 6,666,667 ordinary shares of 1 pence each and Â£100,000 was paid in other consideration. Further deferred consideration, based on the turnover of Quadramed Limited during the first twelve months following completion of the acquisition, and estimated to be Â£400,000, will be payable in convertible loan notes. ----------------------------------------------- Book value and fair value of net assets acquired in Quadramed Limited Â£'000 ----------------------------------------------- Fixed assets 8 Debtors 165 Cash 445 Creditors - amounts falling due within one year (329) ------------------------------------ --------- Net assets 289 ------------------------------------ --------- Consideration ------------------------------------ --------- Cash consideration 50 Consideration in shares 250 Consideration in loan notes 690 Other consideration 100 Deferred consideration in convertible loan notes 400 Acquisition costs 66 ------------------------------------ --------- Total Consideration 1,556 ------------------------------------ --------- Capitalised goodwill 1,267 ------------------------------------ ------- --------- 9 Copies of Annual Report Copies of the Annual Report are being sent to the shareholders and will be available to the public at the registered office of Fulcrum Pharma plc, 5th Floor, Kodak House, Station Road, Hemel Hempstead, Hertfordshire, HP1 1JY. This information is provided by RNS The company news service from the London Stock Exchange

Companies

The Fulham Shore (FUL)

Full Archive

UK 100

Latest directors dealings

All directors dealings today