Celsis International Plc: Interim Results for 6 Months to September 30, 2002


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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