SUFFOLK, U.K., Nov. 7, 2002 (PRIMEZONE) -- Celsis International plc ("Celsis") (Other OTC:CEITF) (LSE:CEL), a leading supplier of rapid microbial testing products and analytical laboratory services. Its diagnostic systems detect and measure contamination for leading companies in the pharmaceutical, personal care, dairy and beverage industries. The Company today announces its Interim Results for the 6 months to September 30, 2002.
- Significant earnings growth in the period:
-- Profit before tax at 1.16 million pounds (2001 profit on continued
operations: 40,000 pounds)
-- EPS 1.09p (2001 eps on continued operations: 0.05p)
-- Total revenues at constant rate of exchange increase 5% to 8.95
million pounds (2001: 8.52 million pounds)
-- Gross margin up to 61% (2001: 60%)
-- Financial and operational benefits from recent restructuring
being realised and helping deliver strong recovery of
profitability
-- Strong improvement in Operating Cash Flow with 2.38 million pounds
cash in hand at the end of the period (2001: 840,000 pounds). No
debt.
-- New proprietary enzyme technology: Adenylate Kinase, will provide
competitive edge and currently being adopted by global customer
base.
-- Newly developed dairy product assays offer enhanced sensitivity
with lower cost to manufacture
Jay LeCoque, Chief Executive of Celsis, commented: "The financial and operational benefits from our recent restructuring are now being realized. This year's first half marked the beginning of a new era for Celsis. With our restructuring now completed, we have transformed our Products Group into not just the leading rapid microbial testing company in our respective industries, but also one that is determined to delivering our customers the highest quality products combined with superior customer service."
"Our business fundamentals have remained strong even in this current difficult economic environment. Our Laboratories services business continues to grow and provide profits according to plan and our Products business is now delivering profitable growth. We are confident in our ability to achieve this year's profit forecast and remain focused on delivering sustained earnings growth."
CHAIRMAN'S & CHIEF EXECUTIVE'S STATEMENT
On March 26 of this year, we announced the completion of our management review and the significant restructuring of our Products business. The announcement marked the end of over 18 months of hard work and focused energy from our employees resulting in a truly global Products business, with the size, scope and as importantly, the "sense of urgency" to continuously meet the needs of our growing global customers.
More importantly, this announcement marked the beginning of a new era for our company. With our restructuring now completed, we have transformed Celsis into not just the leading rapid microbial testing company in our respective industries, but also one that is determined to deliver the highest quality products, combined with superior customer service at a competitive cost compared to any alternative testing method while maintaining or even improving our margins.
We have effectively rationalised our cost structure to allow lower cost manufacturing of rapid microbial assays and testing systems. We have consolidated and optimized our product lines across regions to benefit from these economies of scale in manufacturing but also to manage more effectively our global service and logistical functions. We intend to further increase the quality vs cost ratio with our customers to enhance the value of Celsis rapid microbial testing systems versus traditional agar plates or alternative testing systems.
Our R&D group newly based in Nettetal, Germany has engineered a new assay kit with enhanced sensitivity for our dairy customers. This kit was developed in record time and at less cost to manufacture, allowing both savings to our customers while at the same time improving our future operating margins. We have also continued to invest in both the R&D and manufacturing capacity of new proprietary testing technologies, such as Adenylate Kinase (AK) where Celsis holds an exclusive license in our respective industries from the Defence and Scientific Testing Laboratories (Dstl) division of the British Government. We have strategically invested in R&D partnerships with our key customers across industries to insure that we remain the supplier of choice.
In addition to completing the restructuring, we also had an impressive first six months operationally. Despite the weak economic environment, Profits after Tax have increased significantly on growing revenues in both our Products and Laboratory services businesses. In addition, we have greatly improved our cash position, which underscores the success of our revenue recognition policy implemented 18 months ago.
Financial Review
Group Turnover for the 6 months to September 30, 2002 at constant rate of exchange, (after elimination of the impact of the U.S. dollar weakening against sterling) was up 5% to 8.95 million pounds (2001: 8.52 million pounds continued operations). Sterling has strenghtened against the U.S. dollar from $1.43/1 pounds at the start of the period to $1.57/1 pounds at the end of the period, and turnover reflected in the financial statements for the 6 months is 8.56 million pounds.
Gross Profit increased to 5.24 million pounds (2001: 5.13 million pounds continued operations) and the Gross Margin increased from 60.2% to 61.1 % in spite of increased price pressure in our European Dairy Sector. This increase was the result of the successful focus on higher margin business opportunities in both our Product and Lab businesses.
Operating, Administration and R&D costs were reduced to 4.07 million pounds versus 5.08 million pounds last year that included a refocus of R&D priorities on projects with the highest returns to the business. Operating Profit rose significantly to 1.16 million pounds (2001: 56,000 pounds on continued operations) and the Profit Before Tax increased strongly to 1.16 million pounds (2001: 40,000 pounds on continued operations). Earnings per share are 1.09p (2001: 0.05p)
Net Operating Cash inflow has increased five fold at 1.04 million pounds (2001: 182,000 pounds) and the Balance Sheet has continued to be strengthened notably with lower trade debtors of 3.46 million pounds (2001: 7.30 million pounds).
We have greatly improved our cash position at 2.39 million pounds (2001: 843,000 pounds) whilst Creditors have been reduced to 1.98 million pounds (2001: 3.7 million pounds). The Creditors/Cash ratio (acid test ratio) has improved dramatically to 0.73 (2001: 4.0).
The main loan between group companies is a U.S. dollar denominated balance and the group has previously experienced exchange gains and losses which have been shown in the profit and loss account. This loan has now been formalised into a long-term agreement and it is appropriate to show exchange gains and losses as a reserve movement.
With no debt and an increasingly strong cash position the Company is making substantial progress and as mentioned in the Financial Review of the 2002 Annual Report the initial benefits of our restructuring last year are being seen in the current period with a return to profitability, and no exceptional write offs.
Products Group
Our Products business delivered a healthy sales increase of 5.3% using constant rate of exchange and 2.3% after accounting for the 8% decline in the dollar versus the pound. The revenue growth mix within the Products Group varies by industry and by region with more growth coming from our more profitable business segments. Our Products Group sales force is being deployed accordingly to maximize these business opportunities.
Revenues in our Personal Care and Pharmaceutical Products business was up 23% with much growth coming from the continued expansion of Celsis systems implementation by our global customers. Testing volumes increased in all regions but were especially strong in our Asian markets where testing volumes increased a combined 45%.
Our proprietary next generation testing system utilizing AK technology is being adopted by our large global customers. Colgate-Palmolive, is now implementing AK in their global manufacturing sites, and we are working closely with Unilever on a joint development effort utilizing AK technology to dramatically reduce testing times even further. Other global customers are in the process of implementing AK and we will continue to support these implementations with dedicated validation support from our Laboratory Group. The migration to AK reinforces our long-term strategy to remain the leading supplier of rapid methods technologies to these important market segments.
Revenues in our Dairy Products business registered some decline primarily due to European pricing pressure. We remain very confident that with the implementation of our new cost structure, we can now offer our customers new and competitively higher value products while maintaining or even improving our operating margins.
Our Beverage business has expanded to also include an AK product offering. While Beverage is still a relatively small part of our overall Products business, Pepsi-Cola is one recent convert to AK technology. We are also working with several other large global beverage customers who are currently in the final stages of evaluating our AK or other beverage testing products.
We have recently employed our highly successful Global Corporate Account Management (GCAM) strategy with global beverage companies. This strategy provides the most efficient management of global customer needs, as evidenced by our successes in our global personal care and pharmaceutical accounts.
Laboratory Group
Our Laboratory services business in the United States saw sales increase 5.5% in U.S. dollars. As with the Products business, the revenue mix of services varies by market segment and we are allocating our resources to maximize the business potential of our services offering.
Services to medium and small pharmaceutical companies that have been well funded during this economic downturn increased 55% while sales to large generic pharmaceutical customers declined somewhat due to the intense cost pressure exerted from Health Maintenance Organizations (HMOs) and other heath insurance managers.
We have recently developed a workload financial model to better communicate the financial benefits of contracting laboratory services to a targeted group of lab services customers. We have co-developed this model with two of our established customers and expect this new "value sell" approach to strengthen our sales position moving forward.
Summary
We are very pleased with the progress of our newly restructured company. The marketplace available to Celsis is significant and we are now acutely focused on developing solid business expansion while delivering sustained earnings growth.
Our results to date have been ahead of plan and we look forward to reporting our continued progress throughout the year. We are very grateful to all of our employees for their individual contributions toward making our restructured company a success, and we thank you, our shareholders for your continued support of the new Celsis.
Jack Rowell, Non-Executive Chairman Jay LeCoque, Chief Executive
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Total Continuing Discontinuing Total Total
operations operations
Unaudited Unaudited Audited
Six Six Six Six Year
Pounds
'000 months months months months to 31 March
to 30 Sept to 30 Sept to 30 Sept to 30 Sept
Notes 2002 2001 2001 2001 2002
Turnover 8,562 8,515 150 8,665 17,703
Cost of
sales (3,327) (3,383) (100) (3,483) (6,812)
Gross
profit 5,235 5,132 50 5,182 10,891
Overheads
Sales &
marketing
expenses (2,784) (3,725) (314) (4,039) (7,411)
Admini-
strative
expenses (985) (983) -- (983) (3,739)
Research &
development
expenditure (303) (368) (44) (412) (778)
Operating
profit/
(loss) 1,163 56 (308) (252) (1,037)
Excep-
tional
items -- (1,543) (1,543) (2,918)
Profit/
(loss)
before
interest 1,163 56 (1,851) (1,795) (3,955)
Interest
receivable
& similar
income 65 58 -- 58 58
Interest
payable (71) (74) -- (74) (83)
Profit/
(loss)
before
taxation 1,157 40 (1,851) (1,811) (3,980)
Taxation (5) 88
Retained
profit/
(loss)
for the
period 1,152 40 (1,851) (1,811) (3,892)
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Total Continuing Discontinuing Total Total
operations operations
Unaudited Unaduited Audited
Six Six
Pounds
'000 months Six months Six months months Year
to 30 to 30 to 31
Sept to 30 Sept to 30 Sept Sept March
Notes 2002 2001 2001 2001 2002
Earnings
per
Ordinary
Share
Before
exceptional
costs 1.09p 0.05p (0.29p) (0.24p) (0.91)p
Exceptional
costs -- -- (1.50p) (1.50p) (2.73p)
Earnings
per
Ordinary
Share(1) 1.09p 0.05p (1.79p) (1.74p) (3.64)p
IIMR
earnings
per
Ordinary
Share 1.09p 0.05p (1.79p) (1.74p) (3.64)p
Diluted
earnings
per share(1) 1.09p 0.05p (1.79p) (1.74p) (3.64)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Profit /
(Loss) for
the finan-
cial
period 1,152 (1,811) (3,892)
Currency
translation
differences
on foreign
currency net
investments (687) (273) (169)
Prior year
adjustment -- -- --
Total
(losses)/
profit
recognised
since
last annual
report 465 (2,084) (4,061)
UNAUDITED CONSOLIDATED BALANCE SHEET
AT 30 SEPTEMBER 2002
Pounds'000 At 30 Sept At 30 Sept At 31 March
2002 2001 2002
Notes Unaudited Audited
Fixed Assets
Intangible assets 1,015 1,312 1,048
Tangible assets 2,557 3,298 2,964
Investments 4 5 4
3,576 4,615 4,016
Current Assets
Stocks 2,271 2,021 2,505
Debtors : amounts falling due
after one year 155 530 162
Debtors : amounts falling due
within one year 3,307 6,766 4,211
Cash at bank and in hand 2,386 843 1,790
8,119 10,160 8,668
Creditors - due within one
year (1,741) (3,382) (2,505)
Net Current Assets 6,378 6,778 6,163
Total Assets less Current
Liabilities 9,954 11,393 10,179
Creditors - due after more than
one year (237) (299) (315)
Provision for liabilities
and charges (135) -- (747)
Net Assets 9,582 11,094 9,117
Capital and Reserves:
Called up share capital 1,071 1,071 1,071
Share premium account 14,564 14,564 14,564
Profit and loss account(5) (7,094) (5,582) (7,559)
Reserve arising on
consolidation 1,041 1,041 1,041
Equity shareholders' funds 9,582 11,094 9,117
UNAUDITED CASHFLOW STATEMENT
Pounds'000 Six months Six months Year
to 30 Sept to 30 Sept to 31 March
2002 2001 2002
Unaudited Audited
Net cash inflow from operating
activities 1,035 182 1,543
Returns on investments and
servicing of finance
Interest received 65 59 9
Interest paid (71) (54) (83)
Net cash (outflow)/inflow from
returns on investments
and servicing of finance (6) 5 (74)
Taxation
Corporation tax paid (5) -- (2)
(5) -- (2)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (187) (415) (553)
Sale of tangible fixed assets -- --
Sales of Hygiene Monitoring
division -- -- 123
Purchase of intangible fixed assets -- --
Net cash (outflow)/inflow from
returns on investment
and capital expenditure (187) (415) (430)
Acquisitions
Purchase of subsidiary undertaking
(less cash acquired) -- -- --
Cash inflow/(outflow) before
financing 837 (228) 1,037
Financing
Issue of shares -- -- --
Proceeds from share options
exercised -- -- --
Repayment of principal under
finance leases (67) (5) (127)
Repayment of loan principal -- -- --
Net cash (outflow) from financing (67) (5) (127)
(Decrease)/increase in cash in the
period 770 (233) 910
NOTES
1. Basic & diluted (loss)/profit per Ordinary Share
Pounds '000 Six months Six months Year
to 30 Sept to 30 Sept to 31 March
2002 2001 2002
Unaudited Audited
Profit/(loss) on ordinary
activities after taxation 1,152 (1,811) (3,892)
Basic weighted average number
of Ordinary Shares in issue 106,985,918 103,226,366 106,985,918
Diluted weighted average
number of Ordinary Shre in
issue 106,985,918 103,972,363 106,985,918
2. Reconciliation of operating (loss)/profit to net cash (outflow)/
inflow from operating activities
Operating profit/(loss) before
exceptional costs 1,163 (252) (1,037)
Exchange gain/(loss) 31 --
Depreciation of tangible fixed
assets 376 400 845
Provision for reduction in
valuation of shares held by
ESOT -- 1
Amortisation of intangible
assets 32 23 87
Loss on disposal of tangible
fixed assets -- 286
Loss/(profit) on disposal of
tangible fixed assets 13 272
Decrease/(increase) in debtors 684 1,417 4,316
Decrease/(increase) in stocks 234 792 51
(Decrease)/increase in trade &
other creditors (842) (699) (984)
Costs of fundamental
reorganisation provided -
provision expended (612) (1,543) (2,294)
Net cash inflow/(outflow) from
continuing operating 1,035 182 1,543
activities
3. Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash in
the period 770 (233) 910
Repayment of finance lease and
loan obligations 67 5 127
Changes in net funds resulting
from cashflows 837 (228) 1,037
New finance leases (20) -- (156)
Exchange adjustment 37 20 --
Movement in net funds in the
period 854 (208) 881
Net funds at the beginning of
the period 1,224 343 343
Funds at the end of the period 2,078 135 1,224
4. Analysis of net funds
At start Non-cash Exchange At end
of period Cashflow changes differences of
Pounds'000 period
Six months ended 30
September 2002
Cash at bank and in
hand 1,790 596 2,386
Bank overdrafts (174) 174 --
Loans --
Finance leases (392) 67 (20) 37 (308)
1,224 837 (20) 37 2,078
Six months ended 30
September 2001
Cash at bank and in
hand 1,590 (755) -- 8 843
Bank overdrafts (884) 522 -- -- (362)
Loans -- -- -- -- --
(363)
Finance leases 5 -- 12 (346)
343 (228) -- 20 135
Year ended 31 March
2002
Cash at bank and in
hand 1,590 200 1,790
Bank overdrafts (884) 710 (174)
Loans --
Finance leases (363) 127 (156) (392)
343 1,037 -- (156) 1,224
5. Profit and loss account
Six months Six months Year
to 30 Sept to 30 Sept to 31 March
2002 2001 2002
Retained (loss)/profit brought (7,559) (3,498) (3,498)
forward
At 1 April (7,559) (3,498) (3,498)
Retained profit/(loss) for the 1,152 (1,811) (3,892)
period
Exchange difference (687) (273) (169)
Retained loss carried forward (7,094) (5,582) (7,559)
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