RNS No 772n
BESPAK PLC
8th July 1997
Preliminary Results Announcement
for the 52 weeks ended 2 May 1997
Financial Highlights
1997 1996
Turnover #77.7m #76.2m Up 2%
Profit before tax (before exceptional items) #11.0m #8.7m Up 26%
Exceptional items - #8.2m
Profit before tax #11.0m #16.9m
Earnings per share (before exceptional items) 29.5p 22.9p Up 29%
Net cash #6.3m #0.2m
Dividends per share 12.3p 11.0p Up 12%
Operating Performance
* Year of substantial progress
* Strong financial performance resulting from growth of drug delivery
business and improved operations
* Record sales and profits achieved in the UK
* Operating margins improved from 11.8% to 14.0%
* Improved quality and depth of operating management
* Strong cash generation
Dividend
* Final dividend increased by 12.9% to 7.68 pence per share (1996 6.8
pence), giving a total increase of 11.8% to 12.3 pence (1996 11.0 pence)
Building for the Future
* Strengthened outlook for growth
* Major programme of investment in drug delivery
* Focus on opportunities arising from serving growing markets in healthcare
Bespak plc Chairman, Sir David Cooksey, commented today:
"This last year has been successful for Bespak in that improved results have
been accompanied by a stronger outlook for growth derived from the Group's
pipeline of development programmes. Bespak is strongly positioned in
segments of the global healthcare markets which are likely to experience
significant growth in the future and the Board is confident that the Group is
taking advantage of the opportunities that this growth presents."
Enquiries:
Peter Chambre, Chief Executive
Robert Preece, Finance Director
Bespak plc
0171 638 9571
Issued by:
Sue Pemberton
Dewe Rogerson
0171 638 9571
Bespak plc
1996/97 Preliminary Results
OVERVIEW
This past year has been successful for Bespak plc, with profit before tax
(prior to the 1996 exceptional item) increasing by 26% to #11.0 million, on
turnover which grew by 2% to #77.7 million. Record sales and profits were
achieved in the UK and a base for further growth in profits was established
in the USA. Underlying this performance, sales of drug delivery products to
pharmaceutical customers rose by 14%, resulting from the launch of new
generic respiratory drugs in the USA and the growth of the drug delivery
devices segment of the Group's business. Further improvements in operating
effectiveness have been achieved in each of the Group's operations and the
continued emphasis on the management of cash has increased the Group's net
cash position at the year end to #6.3 million (1996 #0.2 million).
Earnings per share increased by 29% to 29.5 pence before exceptional items
(1996 #10.2 million exceptional credit, 1997 nil). The Board is recommending
that the final dividend be increased by 12.9% to 7.68 pence per share (1996
6.8 pence), a total increase for the year of 11.8% to 12.3 pence (1996 11.0
pence).
During this year, the Group's opportunities for growth in the drug delivery
market have improved from existing products, as well as from the pipeline of
products in development. As a result, a major programme of investment will
commence during the forthcoming year to support these opportunities and
build on the Group's position in this key market.
REVIEW OF OPERATIONS
UK
At Bespak UK record sales and profits were achieved, with turnover growing by
9% to #47.2 million and profits increasing by 27% to #9.6 million. The
company's primary focus is on the drug delivery product sector where sales
grew by 18% to #39.2 million. Sales of Bespak's range of metered dose valves
for delivering respiratory drugs and critical care valves for use with
catheters increased by 2% to reach #23.3 million. In addition, sales of
drug delivery devices increased by #5.6 million to #15.9 million, driven by
the growth of Accuhaler, Glaxo Welcome's dry powder inhaler product.
Sales of Bespak's personal care products declined by 20% to #8.0 million,
resulting mainly from weak market demand. The actions to focus on developing
the major customers in this sector have also contributed to the decline in
sales. This focus, combined with an investment programme which started
during 1996 to consolidate personal care manufacturing operations, will
create a stronger business in the forthcoming year.
USA
In the USA, turnover for the year declined by 6% to #30.5 million, although
in dollar terms this decline was 4%, and operating profit was maintained at
#1.2 million. This reflects a satisfactory year at Bespak Inc. and the
completion of the recent restructuring programme at Tenax Corporation.
Bespak Inc. serves the US pharmaceutical industry by developing and
manufacturing drug delivery devices, as well as distributing and providing
technical support to customers of Bespak's range of metered dose valves
manufactured in the UK. Bespak Inc. produced a strong performance, with
improved margins on sales similar to last year at #16.3 million. Sales of
distributed valve products increased by 4% following the launch in 1996 of
generic albuterol products (salbutamol) in the USA. A significant feature of
the results of Bespak Inc. in the first half of the year was the sales
increase caused by the filling of the distribution pipeline prior to the
launch of these products. In the second half year this pipeline filling
ended and sales of valves for the full year reflect the rise in the
underlying market, which is expected to continue in the forthcoming year.
Sales of drug delivery devices manufactured by Bespak Inc. declined during
the year by 10%. However, profits from these products were increased as a
result of significantly improved operating effectiveness at the company's two
plants in North Carolina.
At Tenax Corporation, which supplies specialist assemblies and components to
the medical device industry, sales declined by 9% to #14.2 million. Although
Tenax made a small loss during the year, the company was operating profitably
in the second half year following the successful completion of the
restructuring programme which commenced in 1995. The objective of this
programme has been to create a fully competitive supplier to the major
medical device customers in the USA, by focusing on a small number of key
customers where Tenax could provide very high levels of service and quality
and by restructuring the manufacturing operations to reduce cost
significantly.
The new management team at Tenax appointed during this past year has now
established a sound base for the operation, with prospects of growth in the
future.
BUILDING FOR THE FUTURE
Bespak is the world's leading supplier of delivery devices to the
respiratory drug industry and the Group has some significant opportunities
for growth in this market. During the next year a substantial investment
programme will commence, which it is anticipated will be completed over three
years, to install the capacity required for the developments currently
underway in valves and devices for drug delivery.
Bespak has been working for a number of years with its major valve customers
on programmes to change the propellants for metered dose asthma inhalers
from the current CFC (chlorofluorocarbon) to new HFA (hydrofluoroalkane)
propellants. The product development phase of this major change programme
is nearing its conclusion, with the initial submissions to the regulatory
authorities having been made by our customers during the past period. While
the Group continues to anticipate that the phasing of the transition will
cause some temporary loss of market share, in the medium term this conversion
is expected to result in an increase in Bespak's share of this key market
through the winning of some new products and customers. During the
forthcoming year Bespak will commence the installation of new clean room
manufacturing facilities to support the launch requirements of our customers
for the new range of valves.
In addition to its position in the market for valves for aerosol-based
inhalers, Bespak has excellent prospects for growth in the development of dry
powder inhalers for the treatment of respiratory disease. Bespak is
currently the exclusive supplier of Glaxo Wellcome's dry powder inhaler,
Accuhaler, and has already completed the second phase of capacity
installation for this device. A third stage expansion of capacity will come
on stream during 1998, for which significant investment is required at the
King's Lynn facility.
Work is continuing to support other dry powder inhaler programmes. Bespak
will be the manufacturer of the Medeva dry powder inhaler which is planned to
be launched later in 1997. At that time it is anticipated that Bespak will
commence the manufacturing investment programme, providing for the
introduction of high volume automated manufacturing in 1999. During the past
year significant progress has also been made, in conjunction with Rhne-
Poulenc Rorer, on the development of the Ultrahaler dry powder inhaler, in
preparation for the regulatory filing, anticipated in 1999.
The Group's pharmaceutical customers are increasingly viewing the use of drug
delivery devices as having the potential to enhance the performance of
specific drugs and to protect their franchise against generic competition.
These factors will drive the growth of the drug delivery device market and
Bespak is uniquely positioned to meet our customers' requirements, offering
both device development and manufacturing capabilities in the UK and USA.
There are already a number of significant development programmes underway in
the USA, which provide the potential for long term growth at Bespak Inc.
In addition, we are planning to enhance the Group's capability to develop new
drug delivery technologies for our customers by increasing investment over
the next two years in the Group's device development organisation and in new
product innovation.
Following the completion of the restructuring programme at Tenax, the Group
can now seek to benefit from the changes underway in the medical device
sector to achieve satisfactory growth and margins. While the medical device
industry is likely to continue its trend of long term growth, the
consolidation currently taking place among the major medical device companies
will inevitably lead to a reduction in the number of suppliers to these
companies. The Group believes that it can take advantage of opportunities
that these trends will bring for high quality, competitive suppliers to the
industry.
OUTLOOK
During the forthcoming year, our expectations are that continued growth of
drug delivery products will be supported by further efforts to achieve
improved operating effectiveness in each of the Group's businesses. At the
same time, Bespak will commence a three year programme of investment to
support the major product launches in drug delivery and to strengthen the
Group's product development capability and pipeline. Bespak is serving
growing sectors of the global healthcare market and is continuing to enhance
its opportunities for long term growth in its key markets of medical devices
and drug delivery.
Consolidated Profit and Loss Account (Unaudited)
For the 52 weeks ended 2 May 1997
Notes 1997 Before Exceptional 1996
Total exceptional items Total
items
#000 #000 #000 #000
Turnover 2 77,749 76,164 _ 76,164
Operating expenses (66,841) (67,186) _ (67,186)
Innovata Biomed contract _ _ 8,200 8,200
_______ _______ _______ _______
Net operating income 2 10,908 8,978 8,200 17,178
Net interest 124 (240) _ (240)
receivable/(payable) _______ _______ _______ _______
Profit on ordinary 11,032 8,738 8,200 16,938
activities before taxation
Taxation (3,584) (2,951) 1,978 (973)
_______ _______ _______ _______
Profit on ordinary 7,448 5,787 10,178 15,965
activities after taxation _______ _______
Dividends 3 (3,114) (2,778)
_______ _______
Retained profit for the year 4,334 13,187
_______ _______
Earnings per share 4 29.5p 22.9p 40.3p 63.2p
_______ _______ _______ _______
All amounts relate to continuing operations.
There is no difference between the profit on ordinary activities before
taxation and the retained profit for the year stated above, and their
historical cost equivalents.
Consolidated Balance Sheet (Unaudited)
At 2 May 1997
1997 1996
#000 #000
Fixed assets
Intangible assets 361 350
Tangible assets 31,088 30,638
Investments 784 784
_______ _______
32,233 31,772
_______ _______
Current assets
Stocks 5,798 8,244
Debtors 12,218 14,695
Short term deposits 12,500 9,535
Cash at bank and in hand 3,489 1,791
_______ _______
34,005 34,265
Creditors
- amounts falling due within one year (21,735) (21,419)
- Innovata Biomed contract - (2,500)
_______ _______
Net current assets 12,270 10,346
_______ _______
Total assets less current liabilities 44,503 42,118
Creditors
- amounts falling due after more than one year (4,317) (6,177)
Provisions for liabilities and charges
Deferred taxation (386) -
Innovata Biomed provision (4,607) (4,933)
_______ _______
Net assets 35,193 31,008
_______ _______
Capital and reserves
Called up share capital 2,526 2,525
Share premium account 14,342 14,320
Special reserve 308 308
Profit and loss account 18,017 13,855
_______ _______
Equity shareholders' funds 35,193 31,008
_______ _______
Consolidated Cash Flow Statement (Unaudited)
For the 52 weeks ended 2 May 1997
Notes 1997 1996
#000 #000
Cash inflow from operating activities
Net cash inflow from operating 5 20,719 16,476
activities
Outflow related to Innovata Biomed (2,826) (2,650)
contract ______ _______
Net cash inflow from operating 17,893 13,826
activities ______ _______
Returns on investment and servicing of finance
Interest received 714 897
Interest paid (655) (1,075)
______ _______
59 (178)
______ _______
Taxation
UK corporation tax paid (2,891) (2,555)
Overseas tax repaid 71 492
______ _______
(2,820) (2,063)
______ _______
Capital expenditure
Payments to acquire intangible fixed assets (125) (134)
Payments to acquire tangible fixed assets (6,782) (6,628)
Receipts from sales of tangible fixed assets 161 177
______ _______
(6,746) (6,585)
______ _______
Acquisitions and disposals
Proceeds from the sale of Medix Group Limited - 1,002
Equity dividends paid (2,884) (2,576)
______ _______
Net cash inflow before management of 5,502 3,426
liquid resources and financing ______ _______
Management of liquid resources
Movement in fixed deposits (2,965) 245
Financing
Issue of shares 23 -
Repayment of borrowings (1,550) (1,675)
______ _______
(1,527) (1,675)
______ _______
Increase in cash and cash equivalents 1,010 1,996
______ _______
Statement of Total Recognised Gains and Losses
for the 52 weeks ended 2 May 1997
1997 1996
#000 #000
Profit on ordinary activities after 7,448 15,965
taxation
Exchange movements on foreign currency net (172) 143
investments
_______ _______
Total recognised gains and losses for the 7,276 16,108
financial year _______ _______
Reconciliation of Movements in Equity Shareholders' Funds
for the 52 weeks ended 2 May 1997
1997 1996
#000 #000
Equity shareholders' funds brought forward 31,008 17,678
Profit on ordinary activities after 7,448 15,965
taxation
Dividends (3,114) (2,778)
Exchange movements on foreign currency net (172) 143
investments
Issue of ordinary share capital 23 -
_______ _______
Equity shareholders' funds carried forward 35,193 31,008
_______ _______
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Preparation of the Preliminary Announcement
(i) Basis of preparation
The profit and loss account covers the 52 weeks (1996 53 weeks) to 2 May
1997. The balance sheets have been drawn up at 2 May 1997 and 3 May 1996
respectively. The results of overseas subsidiarieshave been translated into
sterling at the average rates of exchange ruling during the financial year.
(ii) Abridged accounts
The foregoing financial information, which has been prepared on the basis of
the accounting policies set out in Bespak plc's accounts for the 53 weeks to
3 May 1996, does not amount to full accounts within the meaning of section
240 of the Companies Act 1985 (as amended).
The abridged comparative figures for the 53 weeks to 3 May 1996 are from the
accounts of Bespak plc for the 53 weeks ended 3 May 1996. These accounts have
been reported on by the Company's auditors 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. Segment information
The geographical analysis of turnover, net operating income and net assets is
as follows:
Geographical area (turnover by destination)
1997 1996
#000 #000
United Kingdom 30,709 27,374
United States 30,564 33,277
Europe 12,604 11,097
Rest of the World 3,872 4,416
_______ _______
77,749 76,164
Average rate of exchange #1 Sterling: US $ 1.59 1.56
Turnover by origin United Kingdom United States of Total
America
1997 1996 1997 1996 1997 1996
#000 #000 #000 #000 #000 #000
Total sales 53,560 49,877 30,565 32,434 84,125 82,311
Inter-segment sales (6,369) (6,141) (7) (6) (6,376) (6,147)
_______ _______ _______ _______ _______ _______
External sales 47,191 43,736 30,558 32,428 77,749 76,164
_______ _______ _______ _______ _______ _______
Net operating income
Net operating income by 9,652 7,572 1,186 1,206 10,838 8,778
segment
Innovata Biomed _ 8,200 _ _ _ 8,200
contract _______ _______ _______ _______ _______ _______
Total 9,652 15,772 1,186 1,206 10,838 16,978
Income from associates _______ _______ _______ _______ 70 200
_______ _______
10,908 17,178
_______ _______
NOTES TO THE PRELIMINARY ANNOUNCEMENT
2. Segment information continued
Turnover by origin United Kingdom United States of Total
America
1997 1996 1997 1996 1997 1996
#000 #000 #000 #000 #000 #000
Operating assets by 26,359 28,189 10,870 13,019 37,229 41,208
segment _______ _______ _______ _______ _______ _______
Unallocated net
assets/(liabilities):
Investments 784 784
Deferred taxation (386) _
Innovata Biomed (4,607) (7,433)
liability & provision
Tax and dividends (4,083) (3,734)
Net funds 6,256 183
_______ _______
35,193 31,008
_______ _______
Closing rate of exchange 1.62 1.50
#1 Sterling: US $
3. Dividends 1997 1996
#000 #000
Interim dividend of 4.62p per share
paid on 21 February 1997 (1996 - 4.2p) 1,167 1,061
Proposed final dividend of 7.68p per share
payable on 6 October 1997 (1996 - 6.8p) 1,947 1,717
_______ _______
3,114 2,778
_______ _______
The record date for the proposed final dividend is close of business on
18 July 1997.
4. Earnings per share
The earnings per share as shown in the profit and loss account are calculated
by reference to the net profit after taxation and the weighted average number
of shares in issue during the year (1997 - 25,257,713; 1996 - 25,253,951).
Figures for fully diluted earnings per share based on outstanding share
options are not provided as the effect on earnings per share is not material.
The number of shares in issue at 2 May 1997 was 25,262,161 (1996 -
25,253,951).
NOTES TO THE PRELIMINARY ANNOUNCEMENT
5. Net cash inflow from operating activities
Reconciliation of net operating income to
net cash inflow from operating activities. 1997 1996
#000 #000
Net operating income before exceptional 10,908 8,978
items
Depreciation 5,161 5,160
Profit on sale of tangible fixed assets (34) (24)
Decrease in stocks 2,174 1,113
Decrease in debtors 2,649 16
(Decrease)/increase in creditors (111) 1,340
Income from interests in associated (70) (200)
undertakings
Dividends received from associated 42 29
undertakings
Loss on disposal of Medix Group Limited _ 64
_______ _______
Net cash inflow from operating activities 20,719 16,476
_______ _______
6. Reconciliation of net funds
The table below provides an analysis of net funds and a reconciliation of net
cashflow to movement in net funds.
At 4 May Cash Inception Exchange At 2 May
1996 flow of leasing movements 1997
contracts
#000 #000 #000 #000 #000
Cash at bank and in 1,791 1,698 _ _ 3,489
hand
Overdrafts (3,338) (688) _ 94 (3,932)
_______ _______ _______ _______ _______
Cash and cash (1,547) 1,010 _ 94 (443)
equivalents
Loans and leasing (7,805) 1,550 (74) 528 (5,801)
obligations
Short term deposits 9,535 2,965 _ _ 12,500
_______ _______ _______ _______ _______
Net funds 183 5,525 (74) 622 6,256
_______ _______ _______ _______
Financing items included
in cash flow movements
Issue of shares (23)
_______
Net cash inflow
before management of 5,502
liquid resources and financing _______
END
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