Interim Results
Fulcrum Pharma PLC
09 May 2006
For immediate release 9 May 2006
FULCRUM PHARMA PLC
('the Group' or 'the Company')
Interim Results for the six months to 28 February 2006
Fulcrum Pharma plc (AIM: FUL), the drug development and strategic outsourcing
services company, today announces its interim results for the six months to 28
February 2006
Highlights
> Profit before tax of £88,000 (H12005: loss of £350,000)
> Group fee income increased by 28% to £3.7 million compared with the
same period last year
> Earnings enhancing acquisition of Quadramed Ltd, a regulatory
consultancy business, completed in February 2006
> Quadramed transaction underlines the Company's strategy of scaling up
of the business both organically and by acquisition
Commenting on the results, Chairman Prof. Sir Charles George, said:
'We are delighted that the Group is profitable and has begun executing its plans
to deepen expertise in areas of core competence. We expect the continued scaling
up of the business to result in improvements in efficiency and profitability.
Finally I would like to thank all of our staff for contributing to the progress
Fulcrum has made.'
FOR FURTHER INFORMATION, PLEASE CONTACT:
Fulcrum Pharma PLC Tel: 0870 710 7152
Jon Court, Chief Executive
Buchanan Communications Tel: 020 7466 5000
Mark Court, Mary-Jane Johnson
Fulcrum Pharma PLC
Preliminary Results for the Period Ended 28 February 2006
Report of the Chairman and Chief Executive
Introduction
Fulcrum returned to profitability in the second half of the last financial year
and this trend has continued through the first half of this financial year with
a profit before tax of £88,000 compared with a loss of £350,000 in the same
period last year. Group fee income has increased by 28% compared with the
corresponding period.
Fulcrum has been focussing on growing the scale of the business. An example of
this has been the earnings-enhancing acquisition of Quadramed Ltd ('Quadramed'),
announced on 9 February 2006, which has significantly strengthened Fulcrum's
existing regulatory services capability.
Financial Review
The results for the year ended 28 February 2006 show a profit before tax of
£88,000 (H12005: loss of £350,000). The basic earnings per share of 0.06p
compares with a loss per share of 0.29p per share in H12005.
The Group's balance sheet remains strong with net funds at 28 February 2006 of
£1.7 million (2005: £1.5m). Net cash includes £434,000 acquired with Quadramed.
The Directors do not propose an interim dividend (H12005: £nil)
Operating Review
The Group's future strategy was outlined in the 2005 Annual Report and comprised
(i) growing the service business in 3 regions and developing the global service
model, (ii) increasing scale in our areas of core competence and (iii) adding
further value through long term and or risk-sharing relationships. The following
sections report on progress made in the latest half year.
Business Development and Sales
First half Group fee income increased by 28% to £3.7 million compared with £2.9
million in the same period last year and with £3.3 million in the second half of
last 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 and BioBusiness. The latter has
resulted in increased customer awareness and client referrals.
Establishing long term business relationships
Long term business relationships with Celtic Pharma Development Services Bermuda
Ltd ('Celtic Pharma') and NanoCarrier Co Ltd ('NanoCarrier') were announced in
April 2006.
Celtic Pharma is a leading global private equity firm focussed on pharmaceutical
and biotechnology products. The three year agreement to provide drug
development services in Europe, the US and Japan to Celtic Pharma is of
sufficient significance that the Group will need to invest in further
infrastructure and resources in the second half of the financial year.
NanoCarrier is a Japanese R&D-driven biotechnology company. Under the terms of
the strategic partnership agreement Fulcrum will be responsible for the
provision of resources and expertise to support NanoCarrier to develop certain
of its products.
Regional Performance
Europe
The sales pipeline and order book which strengthened throughout last year
continues to improve. Fee income has increased by 50% compared with the same
period last year. The sales team has been successful in winning new clinical
contracts. In recognition of the increase in clinical work Dr Robert Miller has
been made Chief Medical Officer for the Group. To enable the company to execute
the additional work there has been investment in the recruitment of staff,
expansion into new office premises in Strasbourg and the opening of an office in
Edinburgh.
The results include one month's contribution from Quadramed which has performed
well since being acquired in February 2006. Integration of the new business
through client project work and joint selling is progressing. The broadened
capability has been well received by our clients.
The relocation of the UK office in Hemel Hempstead, which was planned to take
place in mid-December 2005, has had to be postponed following the fire at the
Buncefield Oil Depot but there has been no interruption to Fulcrum's business as
the Company remains at its original premises; however this has resulted in some
foreseen savings not yet being realised.
US
Although external fee income has decreased by 9% compared with the same period
last year, the US has provided key resources to support European contracts. The
close relationship with the European team is in keeping with our strategy to
deliver services globally.
Japan
Fee income in Japan has increased by 22% over the same period last year. Our
specialist oncology Clinical Research Organisation has developed into a
sustainable, profitable business providing CRO services for domestic Japanese
and international clients. In addition Japan has delivered significant
international sales to the Group.
Board Changes
The company announced its intention at the year end to strengthen the Board with
more expertise from the service sector. Dr Angus Bell, who previously held
senior management positions at Quintiles, the global leader in pharmaceutical
services, joined the Board in March 2006. Dr David Clough, who has been a
Non-executive Director since the company was listed on AIM in 2000, retires on 9
May 2006 and the Board would like to thank him for his contribution to Fulcrum's
growth.
Future Strategy and Outlook
The Group is focussed on building the business to a sufficient scale to achieve
sustainable profits. The investment in further growth could impact profitability
in the short term. Growth of our regulatory business is planned in Europe and
the US both organically and by making acquisitions where suitable opportunities
arise. Fulcrum is continuing to recruit staff to strengthen its services in
areas of core competence in drug development. The acquisition of Quadramed and
the signing of strategic agreements with Celtic and NanoCarrier are key elements
in the execution of the Group's ongoing strategy and will underpin the scale up
of the business.
Consolidated Profit and Loss Account
for the period ended 28 February 2006
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Turnover 2 7,699 6,330 12,626
Cost of sales (5,836) (5,090) (10,014)
Gross profit 1,863 1,240 2,612
Selling expenses (299) (381) (654)
Administrative expenses (1,493) (1,229) (2,320)
Exceptional administrative credit/(expenses) 3 - - 239
Total administrative expenses (1,493) (1,229) (2,081)
Operating profit/(loss) 71 (370) (123)
Interest receivable and similar income 25 27 56
Interest payable and similar charges (8) (7) (9)
Profit/(loss) on ordinary activities before
taxation 88 (350) (76)
Tax on profit/(loss) on ordinary activities 4 (10) - (13)
Profit/(loss) attributable to shareholders 78 (350) (89)
Proposed dividend 5 - - -
Retained profit/(loss) for the period 78 (350) (89)
Earnings/(loss) per share (pence)
Basic 6 0.06p (0.29)p (0.07)p
Adjusted basic 6 0.06p (0.29)p (0.23)p
Diluted 6 0.06p (0.29)p (0.07)p
Adjusted earnings per share excludes the effect of the exceptional items.
All items included in the profit and loss accounts relate to continuing
operations.
Statement of Total Group Recognised Gains and Losses
for the period ended 28 February 2006
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit/(loss) on ordinary activities after taxation 78 (350) (89)
Exchange adjustments offset in reserves 1 (22) (8)
Total recognised gains and losses since last annual report 79 (372) (97)
Consolidated Balance Sheet
as at 28 February 2006
28 February 28 February 31 August
2006 2005 2005
Unaudited Unaudited Audited
£'000 £'000 £'000
Fixed assets
Intangible assets 859 - -
Tangible assets 471 526 460
Investments 172 85 172
1,502 611 632
Current assets
Debtors 4,133 3,536 3,335
Short term investments 624 1,298 1,193
Cash at bank and in hand 1,357 678 678
6,114 5,512 5,206
Creditors: amounts falling due within one year (3,840) (3,012) (2,481)
Net current assets 2,274 2,500 2,725
Total assets less current liabilities 3,776 3,111 3,357
Creditors: amounts falling due after more than one year (149) (52) (31)
Net assets 3,627 3,059 3,326
Capital and reserves
Called up share capital 1,285 1,219 1,219
Share premium 4,547 4,370 4,370
Merger reserve (454) (454) (454)
Profit and loss account (1,751) (2,076) (1,809)
Equity shareholders' funds 3,627 3,059 3,326
Consolidated Cash Flow Statement
for the period ended 28 February 2006
Period Period Year
ended ended ended
28 February 28 February 31 August
2006 2005 2005
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Net cash inflow/(outflow) from operating 7 (9) (533) (493)
activities
Returns on investments and servicing of finance
Interest received 25 27 56
Interest paid (8) (7) (9)
Net cash inflow from returns on investments and 17 20 47
servicing of finance
Taxation
Corporation tax received/(paid) 51 (1) (3)
Capital expenditure and financial investment
Purchase of tangible fixed assets (95) (43) (69)
Purchase of own shares for employee share options
and awards (20 __ (29)
Purchase of equity investments - - (87)
Net cash outflow from capital expenditure and
financial investment (115) (43) (185)
Acquisitions and disposals
Purchase of subsidiary undertakings (including
costs) (1,165) - -
Net cash acquired with subsidiary 445 - -
Net cash outflow from acquisitions and disposals (720) - -
Net cash outflow before management of liquid (776) (557) (634)
resources and financing
Management of liquid resources
Decrease in short term investments 569 125 230
Financing
Increase in bank borrowings - 98 100
Capital element of finance lease payments (21) (19) (37)
Bank loan repayments (36) (14) (26)
Proceeds of issue of loan notes 700 - -
Proceeds of ordinary shares issued less costs 243 - -
Net cash inflow from financing 886 65 37
Increase/(decrease) in cash 7 679 (367) (367)
Reconciliation of net cash flow to movement in net funds
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Increase/(decrease) in cash 7 679 (367) (367)
Decrease/(increase) in bank loans 7 35 (84) (74)
Decrease in short term investments 7 (569) (125) (230)
Decrease in finance leases 7 21 19 37
Other non-cash movements - - (7)
Change in net funds resulting from cash flows 166 (557) (641)
Bank loan acquired with subsidiary 7 (11) - -
Net funds at start of period 7 1,538 2,179 2,179
Net funds at end of period 7 1,693 1,622 1,538
Notes to the Financial Statements
for the period ended 28 February 2006
1. Financial information
The interim results for the six months ended 28 February 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
Geographical analysis by origin
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
£'000 £'000 £'000
Europe 2,181 1,458 3,082
USA 683 747 1,524
Japan 815 667 1,571
Total fee income 3,679 2,872 6,177
Pass through costs 4,020 3,458 6,449
7,699 6,330 12,626
3. Exceptional items
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
£'000 £'000 £'000
Profit/(loss) on ordinary activities before tax 88 (350) (76)
Exceptional administrative credit - - (239)
Profit/(loss) on ordinary activities before taxation and 88 (350) (315)
exceptional items
The Group has reported a profit before tax and exceptional items of £88,000
(H12005: loss of £350,000). The exceptional credit in 2005 represented the
income from the surrender of the lease on the UK office less the costs
associated with relocation to new premises.
4. Tax on profit/(loss) on ordinary activities
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
£'000 £'000 £'000
Current taxation
UK corporation tax at 30% 10 - -
Adjustment in respect of prior period - - -
10 - -
Overseas taxation
Corporation taxes - - 13
Total current taxation 10 - 13
Deferred taxation
Origination and reversal of timing differences - - -
10 - 13
The tax charge for the period differs from the standard rate of corporation tax
in the UK of 30% (2005: 30%).
The differences are explained below:
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
£'000 £'000 £'000
Profit/(loss) on ordinary activities before tax 88 (350) (76)
Profit/(loss) on ordinary activities before tax and
exceptional items multiplied by the standard rate of
corporation tax in the UK of 30% (2005: 30%) 26 (105) (23)
Effects of:
Capital allowances in excess of depreciation (7) (2) 23
Expenses not deductible for tax purposes 8 4 11
Adjustment in respect of foreign taxes - - 5
Tax losses for the period not relieved 21 129 97
Research and development tax credits (38) (26) (77)
Exceptional credit in excess of capital gain - - (23)
Current tax charge for period 10 - 13
5. Dividends
The Directors do not propose to pay an interim dividend (H1 2005: £nil per
share).
6. Earnings/(loss) per share
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
£'000 £'000 £'000
Profit/(loss) on ordinary activities after taxation for basic 78 (350) (280)
earnings per share
Exceptional credit - - 191
Profit/(loss) on ordinary activities after taxation for adjusted 78 (350) (89)
earnings per share
Weighted average number of ordinary shares for earnings per share 121,095,840 120,901,541 121,185,914
The weighted average number of shares is calculated excluding those held by the
Employee Share Ownership Plan, which are treated as cancelled.
Diluted earnings per share is based on the profit for the period of £78,000 and
on 136,385,411 shares of 1p each being the weighted average number of shares in
issue during the period after allowing for the dilutive effect of the conversion
into ordinary shares of options outstanding during the period. For the period
ended 28 February 2005 and the year ended 31 August 2005 the basic and diluted
loss per share were the same as there are no potential ordinary shares that
would increase the loss per share in the periods.
7. Notes to the consolidated cash flow statement
(a) Reconciliation of the operating profit to net cash outflow from operating
activities
Period ended Period ended Year ended
28 February 28 February 31 August
2006 2005 2005
£'000 £'000 £'000
Operating profit/(loss) 71 (370) (123)
Depreciation and amortisation 99 93 197
Shares in ESOT written down - - 21
Exchange loss 1 (14) (8)
(Increase)/decrease in debtors (693) (184) 17
Increase/(decrease) in creditors 513 (58) (597)
Net cash outflow from operating activities (9) (533) (493)
(b) Analysis of net funds
As at As at
1 September 28 February
2005 Cash Flow Acquisition 2006
£'000 £'000 £'000
Cash at bank and in hand 678 234 445 1,357
Bank loans (270) 35 (11) (246)
Short term investment 1,193 (569) - 624
Finance leases (63) 21 - (42)
1,538 (279) 434 1,693
8. Copies of unaudited interim report
Copies of this report are being sent to shareholders and are also available at
the registered office of Fulcrum Pharma plc, Kodak House, Station Road, Hemel
Hempstead, Hertfordshire HP1 1JY.
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