RNS Number:7648K
Fulcrum Pharma PLC
07 May 2003
For Immediate Release Wednesday, 7 May 2003
Fulcrum Pharma plc
Interim Results for the six months to 28 February 2003
Fulcrum Pharma PLC (LSE: FUL), the independent drug development company, today
announces its interim audited results for the six months ended 28 February 2003.
Following the recent rise in the Group's share price and, in order to ensure
that the Market remains informed, Fulcrum has decided, on the advice of its
brokers, to bring forward the announcement of its interim results from 15 May to
today, Wednesday, 7 May 2003.
Highlights:
* EU sales remain flat
* US office fully established and operational
* Japanese businesses on track:
o new contracts won
o specialist oncology contract research organisation set up
* Group loss after exceptionals #313,000 (2002: #422,000 profit)
* Strong cash position : #4.7 million
* Dividend maintained at 0.2 pence per share
* Management Strengthened: Dr Michael Carter to join the Board as Non
Executive Director
Commenting on the results Chairman, Prof. Sir Charles George said:
"With the global economy remaining volatile, the importance of Fulcrum's
balanced global strategy is clear. While our sales in the EU have been lower
than expected, our US and Japanese businesses have performed in line with
internal expectations and remain well placed to provide revenue streams in
coming years.
"Your Board is confident that Fulcrum is positioned to grow in the future
outsourcing market as clients and investors recognise the value of strategic
outsourcing rather than burning cash on building their own development
infrastructure."
For further information, please contact :
Fulcrum Pharma PLC Tel: 0870 710 7152
Jon Court, Chief Executive
Buchanan Communications Tel: 07956 597 099
Nicola How / Louise Bolton Tel: 0207 466 5000
FULCRUM PHARMA PLC
Interim Results for the six months ended 28 February 2003
REPORT OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INTRODUCTION
I am pleased to announce the Interim results for the six months to 28 February
2003. The period under review continues to see the global pharmaceutical market
operating under increasingly difficult economic conditions. In Europe, Fulcrum's
customers have been slower to commit to new contracts for outsourced work.
Furthermore, the difficult financing environment in the biotech sector has
forced some companies to conserve cash and reduce the quantity of work
outsourced. These conditions have impacted our sales, particularly in the EU,
where changes in client strategy have resulted in the termination of two
significant contracts. As a result Fulcrum has experienced its first loss.
However, in light of the change in market conditions, the Management team has
been realigning its EU selling strategy with the consequence that a high number
of new clients have been won recently.
The Company continues to roll out its plans for the US and Japan. In both areas
we are experiencing better trading conditions for Fulcrum's services and this is
creating new selling opportunities through marketing Preferred Supplier
Arrangements ("PSA"). Progress in these areas is described in the operational
report below.
FINANCIAL REVIEW
The results for the six months ended 28 February 2003 show a loss before tax and
exceptional items of #313,000 (2002: profit of #422,000). During the period
Fulcrum has established its US subsidiary and completed the restructuring of the
Japanese business into subsidiaries. These activities have incurred anticipated
exceptional costs of #390,000.
The US and Japanese results were in line with expectations. It has been the
lower than expected sales in the EU, combined with the costs of Fulcrum's growth
plans, which have resulted in the loss before tax and exceptional items of
#313,000. The loss is stated after an exchange loss of #42,000 (2002: exchange
gain of #50,000) and non-recurring costs of #275,000 have been incurred. The
latter costs are related to recruitment, business development and office
relocation.
Fulcrum's cash position remains strong at #4.7 million.
DIVIDEND
The dividend has been maintained at 0.2 pence per share reflecting your
Directors' confidence in Group's future.
OPERATIONAL REVIEW
Last year I described our plan for expansion across Europe, US and Japan. These
plans were designed to put in place the capabilities and resources critical to
the long-term prospects of the Company. I am pleased to report that Fulcrum has
made good progress in all three areas in the implementation of this plan. The
solid building blocks now in place will be key to addressing the sales
performance in the first half of the year and building for the future.
A summary of this plan and how we have progressed since our preliminary
statement is outlined below:
* Scale up of the UK/European operation: Fulcrum has been successful in
attracting talented and experienced drug developers to the Company.
Therapeutic area expertise, project management resources and capabilities
in the management of outsourcing have all been strengthened. These skill
sets are critical to selling the business model to our clients. Despite the
difficult trading conditions there has been a good conversion on small
bids and new customers have been won. We are working to extend these new
relationships into longer term contracts.
* Globalisation to meet the needs of our clients: We have used our global
resources to develop new business and serve existing clients in EU, US and
Japan.
US: I am pleased to report that our US office under the leadership of Dr Bruce
McCreedy now has a high quality team of drug developers in place and has won
contracts from new clients within its first half year of operation. The first US
office has been established in North Carolina where Fulcrum can access new
clients, the suppliers required to execute its business model and an excellent
pool of talent for future recruitment. Since the US market represents more than
half of the global R&D spend this is an important development for Fulcrum.
Japan: We are delighted that we have been able to recruit Mr Fujimaru (formerly
a senior executive and Board member of EPS, one of Japan's leading service
providers) to lead Niphix KK. Niphix is Fulcrum's newly created, specialist
oncology Contract Research Organisation ("CRO"). It is our aim that Niphix will
provide oncology services to the Pharma community which, in Japan, is an area
still poorly served. Fulcrum's CRO has already gained its first contract and
with Mr Fujimaru's recent experience of setting up and running a successful
service company in Japan we have every confidence in this being the first of
many client wins. Niphix is an important piece of Fulcrum's mid to long term
strategy to create shareholder value.
Our first Japanese company, Fulcrum Pharma KK continues to provide project
design and management services to Japanese and European clients and retains its
reputation as a supplier of specialist oncology drug development services.
* Development of Partnership or Preferred Supplier Arrangements ("PSA"):
Fulcrum continues to use the PSA concept as an effective selling tool for
its core development services. The PSA concept is where Fulcrum makes an
equity or other capital investment into a client company in return for
preferred supplier status to manage the development of a number of client
products. As reported last year, while this has been useful to access
clients it has been difficult to implement due to the volatility in the
Biotech and Pharma industries. Management has therefore taken steps to
optimise the conditions for success and are incubating a PSA venture within
Fulcrum and this could ultimately provide a portfolio of contracts for
Fulcrum's core business. It is intended to spin out this venture within 12
months and a team of senior executives has been recruited. Some of the
#3,250,000 funds raised last year are being invested to develop this PSA.
This is another example of Fulcrum diversifying within its market to create
value downstream for our investors.
* Strategic Services: These have been further developed in order to provide
new products in Chemistry Manufacturing & Controls (CMC) and preclinical
development. These products have been used to increase access to new and
existing clients and facilitate cross-selling. For example, contracts are
being won in Japan, which utilise our technical and CMC expertise and
resources in our EU and US Offices.
STRENGTHENING THE BOARD
I am delighted that Dr Michael Carter has agreed to join our Board. Dr Carter
brings important industry and City experience. He has gained these skill sets
from a range of directorship roles in start up Pharma companies in Europe and
the US, a venture partner role with Schroder Ventures Life Sciences and through
commercial roles in big Pharma.
PROSPECTS
The current trading conditions, which have impacted sales in the first half,
will have a knock on effect in the second half of the year. We expect sales to
improve in the future and I look forward to reporting a positive outcome for the
full year - however this will be significantly below current market
expectations.
With the global economy remaining volatile, the importance of Fulcrum's balanced
global strategy is clear. While our sales in the EU have been lower than
expected, our US and Japanese businesses are performing in line with internal
expectations and remain well placed to provide revenue streams in coming years.
Your Board is confident that Fulcrum remains well positioned to grow in the
future outsourcing market as clients and investors recognise the value of
strategic outsourcing rather than burning cash on building their own development
infrastructure. Further, the incubation of a Preferred Supplier Arrangement
within Fulcrum has the potential to provide upside to our sales and further
mitigate the risks associated with the current market.
FULCRUM PHARMA PLC
Consolidated profit and loss account
for the period ended 28 February 2003
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
Unaudited Unaudited Audited
Notes #'000 #'000 #'000
Turnover 2,498 2,983 5,742
Cost of sales (1,988) (2,064) (3,808)
Exceptional cost of sales related to
new subsidiaries 2a (225) - -
Exceptional credit 2b - - 554
Total cost of sales (2,213) (2,064) (3,254)
__________ ______ ________
Gross Profit 285 919 2,488
Selling expenses (228) (127) (275)
Exceptional selling expenses - - 185
Total selling expenses (228) (127) (90)
Administrative expenses (658) (398) (817)
Exceptional administrative expenses
related to new subsidiaries 2a (165) - (181)
Exceptional credit 2b - - 196
Total administrative expenses (823) (398) (802)
__________ ______ ________
Operating (loss)/profit (766) 394 1,596
Interest receivable & similar income 63 28 75
__________ ______ ________
(Loss)/profit on ordinary activities
before taxation (703) 422 1,671
Tax on (loss)/profit on ordinary activities 3 168 (139) (231)
__________ ______ ________
(Loss)/profit attributable to shareholders (535) 283 1,440
Proposed dividend 4 (244) (123) (123)
__________ ______ ________
Retained (loss)/profit for the period (779) 160 1,317
__________ ______ ________
Earnings per share (pence)
Basic 5 (0.44p) 0.46p 1.44p
Adjusted basic 5 (0.19p) - 0.63p
Adjusted earnings per share exclude the effect of the exceptional items.
All items included in the Profit and Loss accounts relate to continuing
operations. There were no recognised gains or losses other than the profit for
the period.
FULCRUM PHARMA PLC
Consolidated Balance Sheet
As at 28 February 2003
28 February 28 February 31 August
2003 2002 2002
Unaudited Unaudited Audited
#'000 #'000 #'000
Fixed assets
Tangible assets 405 35 24
Investments 53 - 53
______ ______ ______
458 35 77
Current assets
Debtors 1,766 1,732 1,982
Short term investments 3,781 - 4,520
Cash at bank and in hand 948 2,624 582
_____ _____ _____
6,495 4,356 7,084
Creditors: amounts falling due within one year (1,810) (1,796) (1,249)
_____ _____ _____
Net current assets 4,685 2,560 5,835
_____ _____ _____
Total assets less current liabilities 5,143 2,595 5,912
Provision for liabilities and charges (15) (10) (5)
_____ _____ _____
5,128 2,585 5,907
_____ _____ _____
Capital and reserves
Called up share capital 1,219 615 1,219
Share premium 4,370 1,543 4,370
Merger reserve (454) (133) (454)
Profit and loss account (7) 560 772
_____ _____ ______
Equity shareholders' funds 5,128 2,585 5,907
_____ _____ _____
Jon Court
Geoffrey Smith
Directors
May 2003
FULCRUM PHARMA PLC
Consolidated cash flow statement
for the period ended 28 February 2003
Six months Six months Period
ended ended ended
28 February 28 February 31 August
2003 2002 2002
Unaudited Unaudited Audited
Notes #'000 #'000 #'000
Net cash (outflow/inflow) from
operating activities 6 (24) 629 228
Returns on investments and servicing of finance
Interest received 63 28 75
Taxation paid - - (145)
Capital expenditure and financial investment
Purchase of tangible fixed assets (412) (13) (23)
Equity dividends paid to shareholders 4 - - (123)
________ _________ _________
Net cash outflow before management of
liquid resources and financing (373) 644 12
Management of liquid resources
Decrease/(increase) in short term investment 739 - (4,520)
Financing
Issue of ordinary share capital - - 3,250
Share issue costs - - (140)
_______ _________ _________
- - 3,110
_______ _________ _________
Increase/(decrease) in cash 6 366 644 (1,398)
_______ _________ ______
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash 6 366 644 (1,398)
Cash flow from (decrease)/increase in
short term investment 6 (739) - 4,520
_______ _______ ______
Change in net funds from cash flows (373) 644 3,122
Net funds at start of period 6 5,102 1,980 1,980
_______ _______ ______
Net funds at end of period 6 4,729 2,624 5,102
________ _______ ______
FULCRUM PHARMA PLC
For the period ended 28 February 2003
1. FINANCIAL INFORMATION
The interim results for the six months ended 28 February 2003 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 2002. The comparative
information contained in the report for the year ended 31 August 2002 does
not constitute the statutory accounts for the financial period. Those
accounts have been reported on by the Company's Auditors,
PricewaterhouseCoopers, 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. EXCEPTIONAL ITEMS
Six months to Six months to Year ended
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Loss/(profit) on ordinary activities before tax (703) 422 1,671
Exceptional expenses related to subsidiaries 390 - 181
Exceptional credit - - (935)
________ _______ _______
(Loss)/profit on ordinary activities before
taxation and exceptional items (313) 422 917
________ _______ _______
The Group has reported a loss before tax and exceptional items of #313,000. As
set out in the paragraphs below, the Company has recorded an exceptional charge
of #390,000 in the current period, and an exceptional charge of #181,000 and
exceptional credit of #935,000 in the year to 31 August 2002.
a. Exceptional expenses related to new subsidiaries #390,000 (31.08.2002,
#181,000)
The exceptional charge to cost of sales of #225,000 and administration
expenses of #165,000 (31 August 2002, #181,000) represents the initial set
up and related costs for the Group's new subsidiaries in the USA and Japan.
These subsidiaries have commenced trading during the current period
b. Exceptional credit of #935,000
Fulcrum acquired the share capital of Fulcrum Pharma Developments Ltd (FPD
Ltd) in March 2000 by means of a share for share exchange. Due to
uncertainties regarding the valuation of FPD Ltd, it was agreed between the
Company and the vendors that additional shares would be issued by the
Company by way of deferred consideration, the number of such shares
depending on the profits of the Company in the year ending 31 August 2001.
Although the directors believed that the substance of this arrangement was
deferred consideration, they received advice that the appropriate
accounting treatment was to charge the profit and loss account in the year
ended 31 August 2001 with the fair value of the additional shares to be
issued (#950,000). This charge was reversed in the year to 31 August 2002.
Consequently, there is an exceptional credit in the year to 31 August 2002.
The credit has been allocated to the same cost centres to which the
exceptional charge was allocated in the previous year, as follows:-
2002
#'000
Cost of sales (554)
Selling expenses (185)
Administrative expenses (196)
(935)
As disclosed in the document dated 8 March 2000, produced by the Company in
connection with its admission to AIM and in the Company's annual accounts
for the year ended 31 August 2000, certain shareholders, including
directors, of the Company were entitled under a share exchange agreement
dated 7 March 2000 to be allotted up to a maximum of 56,666,666 additional
1p ordinary shares in the Company by reference to the consolidated profits
before tax of the Group for the twelve months ended 31 August 2001. Based
on the profit before tax for that year, of #546,000, the Company issued
31,666,667 additional ordinary shares for no cash consideration on 11 June
2002.
3. TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES
Six months to Six months to Year ended
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Current taxation
UK Corporation tax at 30%: (178) 139 241
Adjustment in respect of prior period - - (5)
_________ _______ ______
(178) - 236
Deferred taxation
Deferred taxation 10 - (5)
________ _______ _______
(168) 139 231
________ _______ _______
The tax charge for the year differs from the standard rate of corporation tax in
the UK of 30% (2002: 30%). The differences are explained below:-
Six months to Six months to Year ended
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Loss/(profit) on ordinary activities before tax (703) 422 1,671
Exceptional credit (see note 5b) - - (935)
_______ _______ ______
(Loss)/profit on ordinary activities before
tax and exceptional items (703) 422 736
_______ _______ ______
(Loss)/profit on ordinary activities before tax
and exceptional items multiplied by the standard
rate of corporation tax in the UK of 30%
(2002:30%)) (211) 127 221
Effects of:
Depreciation in excess of capital allowances - 5 10
Expenses not deductible for tax purposes 6 7 5
Tax losses for the period not relieved 27 - -
________ _______ _______
Current tax charge for period (178) 139 236
________ _______ _______
4. DIVIDENDS
An interim dividend of 0.2p per ordinary share (2002 0.2p) is proposed.
5. EARNINGS PER SHARE
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2003 2002 2002
(Loss)/profit on ordinary activities after
taxation for basic earnings per share (535) 283 1,440
Exceptional expenses related to new
subsidiaries 390 - 181
Exceptional credit - - (935)
Tax on exceptional items (90) - (55)
____________ ____________ __________
(Loss)/profit on ordinary activities after
taxation for adjusted earnings per share (235) 283 631
_____________ ___________ _____________
Weighted average number of ordinary shares
for earnings per share 121,401,451 61,500,000 99,846,929
_____________ ___________ ____________
The weighted average number of shares is calculated excluding those held by the
Employee Share Ownership Plan, which are treated as cancelled.
6. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of the operating profit to net cash (outflow)/inflow from
operating activities.
Six months to Six months to Year to
28 February 28 February 31 August
2003 2002 2002
#'000 #'000 #'000
Operating (loss)/profit (766) 394 1,596
Depreciation 31 20 41
Exchange gain - - (10)
Non cash exceptional item - - (935)
Decrease/(increase) in debtors 216 (747) (298)
Increase/(decrease) in creditors 495 962 (166)
_________ _________ _______
Net cash (outflow)/inflow from operating
activities (24) 629 228
_________ _________ _______
(b) Analysis of net funds
Cash at bank Short term Total
and in hand Investments
#'000 #'000 #'000
At 1 September 2002 582 4,520 5,102
Cashflow 366 (739) (373)
______ ______ ______
At 28 February 2003 948 3,781 4,729
______ ______ ______
7. 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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