BIOHIT OYJ STOCK EXCHANGE RELEASE 16 FEB 2007 10:00 AM
FINANCIAL STATEMENT REPORT OF BIOHIT GROUP 1 JANUARY TO 31
DECEMBER 2006
The Biohit Group had total net sales of EUR 31.4 million during
the financial year (EUR 28.7 million in 1Q-4Q/2005). The operating
loss for the financial year was EUR 0.1 million (operating loss
EUR 0.0 million). The loss for the financial year was EUR 0.8
million (loss EUR 0.2 million). Increased fixed costs, financing
expenses and taxes weakened earnings compared to 2005.
NET SALES
The Biohit Groups net sales totalled EUR 31.4 million (EUR 28.7
million). Although this represented an increase of 10% on 2005,
net sales growth still fell short of the targets set for 2006.
Sales of liquid handling products in Asian market areas and global
sales of diagnostics products did not develop as expected during
the financial year.
Sales and maintenance of liquid handling products still accounted
for 94% of net sales. The net sales of the liquid handling
business amounted to EUR 29.5 million (EUR 27.1 million) and the
net sales of the diagnostics business to EUR 1.9 million (EUR 1.5
million).
RESULT
The operating loss was EUR 0.1 million (operating loss EUR 0.0
million). The loss for the financial year was EUR 0.8 million
(loss EUR 0.2 million).
The operating profit of the liquid handling business was EUR 2.2
million (operating profit EUR 2.3 million), the operating loss of
the diagnostics business being EUR 2.4 million (operating loss EUR
2.3 million).
In spite of a rise in net sales, earnings for the financial year
were down on 2005. Earnings for 2006 were burdened by increased
fixed costs, of which a substantial share was associated with
starting up the production facility in China and restructuring the
organisation in Japan. Financing costs also increased on the
previous year due to the issue of a EUR 4.05 million convertible
bond in November 2005. The increased profitability of certain
Biohit Group subsidiaries also raised income tax by EUR 0.2
million compared to the previous year.
BALANCE SHEET
The balance sheet total was EUR 27.3 million (EUR 27.9 million)
and the equity ratio was 49 % (52 %) on 31 December 2006. In
accordance with a decision made at the Annual General Meeting on
20 April 2006, the share premium fund has been used to cover the
parent company's EUR 0.6 million losses for 2005. Additionally,
EUR 12.2 million have been transferred from the share premium fund
to a fund for investments of non-restricted equity.
LIQUIDITY
During the reporting period, the operating activities had a net
cash flow of EUR 0.2 million (EUR 0.7 million). At the end of the
reporting period, the liquid assets of the Group totalled EUR 0.9
million (EUR 1.7 million).
RESEARCH AND DEVELOPMENT
Research and development expenditures amounted to EUR 1.7 million
in 2006 (EUR 1.6 million), representing 5 per cent of net sales (6
per cent). EUR 306 thousand in development expenditure was
capitalised during the financial year (EUR 112 thousand).
INVESTMENTS
Gross investments in the reporting period totalled EUR 1.9 million
(EUR 2.0 million). Investments were mainly earmarked for the
Chinese production facility and equipment to increase the
automation level of liquid handling manufacture in the Kajaani and
Helsinki production facilities.
PERSONNEL
The average number of personnel in the reporting period was 310
(295 in 2005 and 291 in 2004), with 162 (162 in 2005 and 164 in
2004) persons being employed by the parent company and 148 (133 in
2005 and 127 in 2004) by the subsidiaries.
MAIN EVENTS OF THE REPORTING PERIOD
Liquid handling business area
Biohits liquid handling business includes mechanical and
electronic liquid dispensers as well as disposable tips. In
addition, the company offers services related to the maintenance
and calibration of liquid handling products as well as training
services on these products. The companys liquid handling products
are combined with diagnostic products, instruments and related
software, forming comprehensive analysis systems for research and
clinical diagnostics.
- The total market for liquid handling products grew by an average
of five per cent in 2006. Although growth declined in Western
countries, growth in emerging markets has been faster than
average. During 2006, Biohit succeeded in gaining market share
from its competitors and outpacing market growth in both pipettors
and pipettor tips. In spite of heightened competition, the
greatest increase was seen in mechanical pipettors. Sales of
disposable tips have also risen noticeably on the previous year.
During the financial year, Biohit has been particularly successful
as a supplier of both mechanical and electronic pipettors to the
pharmaceutical industry and global biotechnology companies.
- Western markets have exhibited a trend towards computer-
controlled analysis systems and robotic pipetting equipment. In
2006, Biohit engaged in even closer co-operation with partners
that use robotic pipettors in their analysis equipment and
systems. This business is, however, characterised by lengthy
product development and customisation periods, meaning that
notable sales growth will only occur 1-2 years after the launch of
co-operation projects.
- There is increasing demand in the market for pipettor
calibration and maintenance services, and their significance is
being underlined as quality standards rise and the current
generation of equipment in use begins to age. Biohit continued the
launch of its service concept at subsidiaries and throughout its
distribution network during 2006. The new concept has had a
favourable effect of the companys net sales and earnings. As part
of the service concept, Biohit has designed a new style of
management software for pipettor calibration and maintenance.
Distribution of the new software was begun in main market areas
during the fourth quarter.
In addition to OEM products and other pipetting equipment, the
company also focused its 2006 product development on further
enhancing its pipettor and pipettor tip product families. Products
launched during the financial year include a mechanical mLINE
pipettor for handling small volumes (0.1-3 microlitres) and an
eLINE Dispenser that is suitable for automated repetitive liquid
handling.
- Biohits quality systems must meet the standards set by both
customers and authorities. Det Norske Veritas granted the
companys liquid handling business the international ISO 13485
certificate in 2006. (ISO 13485:2003: Medical devices and
equipment. Quality systems. Standards required to meet regulatory
provisions.) Biohits diagnostics business received the ISO 13485
certificate back in 2003. Since then, the company has in principle
adhered to the same quality system in the manufacture of its
liquid handling products. The ISO 13485 quality certificate will
also bolster Biohits position in the Original Equipment
Manufacture (OEM) market, as the majority of the customer base
uses Biohits liquid handling products to complement its
diagnostics equipment and analysis systems.
Diagnostics
In the diagnostics business, Biohit focuses on products for the
screening, prevention and diagnosis of diseases of the
gastrointestinal tract. These products include the GastroPanel
examination performed on a blood sample for the diagnosis of upper
abdominal complaints (dyspepsia), H. pylori infection, atrophic
gastritis and the associated risks (gastric cancer and peptic
ulcer disease, as well as calcium, iron and vitamin B12
deficiencies). In addition, GastroPanel reveals the risk of
complications of the gastroesophageal reflux disease. The company
also provides biopsy specimen quick tests for the diagnosis of
lactose intolerance and H. pylori infection.
- Biohit has set out to build a strong network of local
distributors specialised in diagnostics. During the financial
year, Biohit made a number of agreements concerning the sales and
marketing of GastroPanel and other diagnostics products in several
countries, including Spain, Greece and Iceland.
- In order for business to grow, Biohit needs to receive approvals
from the relevant authorities in a number of countries. In the
USA, the FDA (Food and Drug Administration) is still handling
Biohits approval application for GastroPanels Pepsinogen I and
II tests, and the requisite additional studies on American patient
populations are underway. All GastroPanel tests (Pepsinogen I and
II, Gastrin-17 and Helicobacter pylori IgA and IgG antibodies)
have currently been granted marketing authorisations for clinical
diagnostics throughout the EU and also in countries such as India,
Canada, China, Ukraine and Russia.
- Biohit has a wide scientific co-operation network. In recent
years, the advantages of GastroPanel have been studied in about
40,000 patients across the world.
In the fourth quarter of 2006, the Chinese medical journal Wei
Chang Bing Xue (Chinese Journal of Gastroenterology; Vol. 11, No.
11, 2006) published a consensus report from Chinese scientists
recommending the use of GastroPanel tests (Gastrin 17, Pepsinogen
1 and Pepsinogen II, H. Pylori antibodies) for diagnosing
dyspepsia, H. pylori infection and atrophic gastritis in Chinese
healthcare. This recommendation has its origins in the Gastritis
Consensus Workshop, which was held in Shanghai on 1516 September
2006. Professor Shu-Dong Xiao, whose positions include one at the
Chinese Ministry of Health, chaired the workshop. GastroPanels
blood tests had already been granted an import licence in China.
- Alongside GastroPanel, Biohit has been developing the user-
friendly and cost-effective GastroView examination, for which a
patent application has been filed.
GastroView is primarily intended for use by general practitioners
and in healthcare centres and occupational healthcare. Blood
samples taken from the fingertip can be sent to Biohits service
laboratory for analysis by, for example, pharmacies, health spas,
sheltered accommodation and nursing homes for war veterans and the
elderly, and nutritional therapists. GastroView is currently only
in the launch phase and therefore did not generate net sales
during the 2006 financial year.
- To supplement current analysis systems, the company is
developing a user-friendly automatic analyser for private clinics,
health centres, emergency rooms, and special analyses. This
analyser would support decentralised laboratory diagnostics, and
therefore promote both more rapid diagnoses during doctors
appointments and the likelihood of correct treatment (evidence-
based medicine).
Tekes (Finnish Funding Agency for Technology and Innovation) has
awarded a grant to the GastroMate analyser development project,
which was begun in 2004. GastroMate performs the GastroView and
GastroPanel test on blood samples. GastroSoft software then
evaluates and creates a report on the test results, as well as
saving them for later use.
- During the financial year, Biohit completed a prototype for
XyliCyst chewing gum, which eliminates the carcinogenic
acetaldehyde that dissolves in saliva during smoking. The company
is currently searching for a manufacturer and distributors.
Biohit is offering licences to the food industry for both XyliCyst
and the BioFood method. The BioFood method eliminates the
carcinogenic acetaldehyde contained in many food substances, such
as yogurt and beer.
Still under development are Biohits BioCyst nutritional
supplements (capsules, for example), which rid anacidic stomachs
of the carcinogenic acetaldehyde produced by oral bacteria from
sugar and carbohydrates. Atrophic gastritis and the resulting
anacidic stomach can be diagnosed using Biohits GastroPanel and
GastroView examinations. About 300500 million people in the world
are estimated to have low-acid stomachs in which oral bacteria can
live and produce carcinogenic acetaldehyde.
Production
As production volumes increased in 2006, Biohit invested in the
automation of liquid handling product manufacture and logistics.
The company also focused on enhancing efficiency and dividing the
workload between the facilities in Helsinki and Kajaani and the
new factory in China.
In September, Biohit opened a production facility in Suzhou, near
Shanghai. The facility, which focuses on pipettor assembly, and
the administrative and marketing centre in Shanghai, will
primarily serve the growing Asian markets. The facility produces
mechanical pipettors. Pipettors sold in Finland,
Europe and the USA will still be produced at the companys Kajaani
facility. As production in China has only recently started up,
notable net sales were not generated during the financial year.
Administration
During 2006, Biohit honed its strategic management by, for
example, appointing separate management teams for the liquid
handling and diagnostics businesses. The division will enable each
business to be developed more effectively.
The Annual General Meeting held on 20 April 2006 decided that the
number of the members of the Board of Directors is six. The AGM
appointed Professor Reijo Luostarinen, Professor Osmo Suovaniemi,
M.Sc. (Econ.) and LLM Peter Tchernych, Academy Professor Mårten
Wikström, PhD Tero J. Kauppinen and PhD Peter B. Coggins as
members of the Board.
The AGM appointed authorized public accountant
PricewaterhouseCoopers Oy as the auditor.
Annual General Meeting in 2007
The date of Biohit Oyjs Annual General Meeting, to be held at
Restaurant Pörssi, has been changed to Monday 23 April 2007. A
separate invitation will be sent later.
A change in Biohit Oyjs shareholding
On 21 June 2006, Pentti Sipponen gave notification that he had
acquired 900,000 Biohit Oyj Series A shares from Erja-Yhtymä Oy.
After the flagging notification, the holding in Biohit Oyjs share
capital and voting rights of the shareholder (Pentti Sipponen),
and the holder of shares falling under his shareholding (Patolab
Oy), was as follows:
No of shares Votes % Share capital %
Series A shares 900,000 20.79 6.95
Series B shares 26,600 0.03 0.21
Distribution of holdings:
Pentti Sipponen: 900,000 Series A shares and 14,300 Series B
shares.
Patolab Oy: 12,300 Series B shares.
The date of change in holdings was 21 June 2006.
Equity Turnover and Price Development
During the reporting period, the total turnover of Biohits series
B shares on the Helsinki Exchanges Small Cap list (BIOBV) amounted
to EUR 3,465,874 and the number of shares traded was 1,530,490.
The highest share price was EUR 2.61 and the lowest EUR 1.99, the
average price being EUR 2.26. The closing price at the end of the
reporting period was EUR 2.03. On 31 December 2006, the market
capitalisation value for the series B shares totalled EUR
18,396,118.
Dissolution of the share premium fund
The Annual General Meeting (AGM) of Biohit held on 20 April 2006
decided upon a decrease of the share premium fund with a total of
EUR 12,842,314.81. EUR 612,688.29 will be used for the direct
covering of a loss shown on an adopted balance sheet (for FY
2005), and EUR 12,229,626.52 will be transferred to a fund
included in the company's non-restricted equity. The National
Board of Patents and Registration of Finland granted permission
for the dissolution of the share premium fund on 20 September
2006.
RISKS
In accordance with the principles of good corporate governance,
Biohit has assessed the risks associated with the companys
business operations. The most significant risks stem from the
international nature of the companys business and the market and
financial risks this brings, such as those associated with
currency exchange rates. The main responsibility for risk
management is held by the parent companys Board of Directors and
the Management Team.
Market growth for liquid handling products has levelled out in
Western countries and price competition has heightened in emerging
markets in particular. Falling prices place cost pressures on
production and logistics. Biohit is meeting this challenge in
various ways, such as by developing the most cost-effective Group-
wide production processes possible and by establishing the Chinese
production facility, which primarily serves China and its
neighbouring markets.
Entry into the diagnostics market is slow. The lengthy periods
required before approvals are received from the relevant
authorities affects the companys growth potential in certain
market areas. Taking full advantage of market potential also
requires proactive publishing for both the scientific community
and the customer base, training healthcare personnel, as well as
outlays on sales, marketing and a competent distributor network.
Changes in exchange rates and in particular a strengthening euro
currently pose notable financial risks that are inherent in the
global nature of the companys business. The nature of our
business, international operations and the structure of our
organisation also place pressure on cost structure and
profitability, thereby creating challenges for financing as well.
The growth of Biohits operations and the diversity of its
business environment mean the company must focus on continually
improving the expertise of its personnel. Recruiting the expert
personnel required to achieve growth expectations also sets its
own challenges.
OUTLOOK FOR 2006
The company expects the favourable trends in net sales of liquid
handling products to continue in 2007. The diagnostics business is
forecast to develop well in new market areas such as China, where
a consensus report by scientists is expected to increase
GastroPanel sales. An FDA approval is also awaited in the USA. The
company therefore estimates that the Groups net sales will exceed
those of the previous year.
Increased costs from business growth due to outlays on marketing
will continue to burden earnings in 2007. The operating result
is highly dependent on growth in the diagnostics business.
EVENTS AFTER THE CLOSE OF THE FINANCIAL YEAR
Plans to separate the diagnostics business.
After the close of the financial year, the company announced its
plans to hive off the diagnostics business into a separate limited
company with its own equity. At a meeting held on 26 January 2007,
the Board of Directors decided to investigate the possibility of
incorporation. The move would boost international marketing and
distribution and rapidly and effectively leverage the significant
potential of existing and forthcoming products.
THE BOARD OF DIRECTORS PROPOSAL FOR THE DISPOSAL OF EARNINGS AND
DISTRIBUTION OF OTHER NON-RESTRICTED EQUITY
The Board of Directors proposes that no dividend be paid and that
the loss for the financial year be transferred to retained
earnings.
ACCOUNTING PRINCIPLES FOR THE INTERIM REPORT
This financial statement report has been prepared in accordance
with IFRS (International Financial Reporting Standards), using
IFRS recognition and measurement principles.
All the figures in the financial statement report have been
rounded up or down, due to which the sums of figures may deviate
from the sum total presented.
CONSOLIDATED FINANCIAL STATEMENT
Financial Year
1-12 1-12
2006 2005 Change Change
MEUR MEUR MEUR %
Net sales 31.4 28.7 2.7 10
Other operating income 0.0 0.1 0.0 -47
Change in inventories of
finished goods and work in
progress 0.9 0.6 0.3 57
Raw materials and consumables -6.0 -5.3 0.7 13
External services -1.4 -1.0 0.4 39
Employee benefit expenses -12.7 -11.6 1.2 10
Depreciation -1.8 -1.7 0.1 6
Other operating expenses -10.6 -9.8 0.8 8
Operating profit / loss -0.1 0.0 -0.1 -327
Financial expenses (net) -0.5 -0.2 0.2 108
Profit / loss before tax -0.6 -0.3 -0.4 -137
Income taxes -0.2 0.0 0.2 670
Profit / loss for the period -0.8 -0.2 -0.6 -271
Last quarter
10-12 10-12
2006 2005 Change Change
MEUR MEUR MEUR %
Net sales 8.7 8.3 0.4 5
Other operating income 0.0 0.0 0.0 -69
Change in inventories of
finished goods and work in
progress 0.0 0.1 -0.1 -95
Raw materials and consumables -1.6 -1.7 -0.1 -6
External services -0.3 -0.3 0.0 6
Employee benefit expenses -3.5 -3.1 0.4 12
Depreciation -0.4 -0.4 0.0 8
Other operating expenses -3.0 -2.7 0.3 12
Operating profit / loss -0.1 0.3 -0.4 -139
Financial expenses (net) -0.1 -0.1 0.0 -5
Profit / loss before tax -0.2 0.2 -0.4 -252
Direct taxes 0.1 0.1 0.0 17
Profit / loss for the period -0.1 0.2 -0.4 -161
BY BUSINESS SEGMENT
Group net sales by business segment
1-12 1-12
2006 2005 Change Change
MEUR MEUR MEUR %
Liquid handling 29.5 27.1 2.4 9
Diagnostics 1.9 1.5 0.3 22
Group operating result by business segment
1-12 1-12
2006 2005 Change Change
MEUR MEUR MEUR %
Liquid handling 2.2 2.3 0.0 -2
Diagnostics -2.4 -2.3 -0.1 -3
CONSOLIDATED BALANCE SHEET
31.12.2006 31.12.2005
MEUR % MEUR %
Assets
Non-current assets
Tangible assets 6.9 25 6.9 25
Goodwill 2.6 10 2.6 9
Other intangible
assets 1.6 6 1.4 5
Deferred tax assets 2.1 8 2.1 7
Total non-current
assets 13.2 48 13.0 47
Current assets
Inventories 5.8 21 4.6 16
Trade and other
receivables 7.5 28 8.5 31
Cash and cash
equivalents 0.9 3 1.7 6
Total current
assets 14.2 52 14.9 53
Total assets 27.3 100 27.9 100
Equity and
liabilities
Share capital 2.2 8 2.2 8
Share premium fund 0.2 1 13.0 47
Fund for
investments of non-
restricted equity 12.2 45 0.0 0
Retained earnings -1.2 -4 -1.0 -3
Total equity 13.4 49 14.3 51
Non-current
liabilities
Interest-bearing
liabilities 6.7 24 7.3 26
Deferred tax
liabilities 0.1 0 0.1 0
Pension obligations 0.0 0 0.1 0
Other liabilities 1.1 4 1.1 4
Total non-current
liabilities 7.9 29 8.5 31
Current liabilities
Trade and other
payables 5.0 18 4.2 15
Current interest-
bearing liabilities 1.0 4 0.9 3
Total current
liabilities 6.0 22 5.1 18
Total liabilities 13.9 51 13.6 49
Total equity and
liabilities 27.3 100 27.9 100
CONSOLIDATED CASH FLOW STATEMENT
1-12/2006 1-12/2005
MEUR MEUR
Cash flow from operating
activities:
Profit / loss before tax -0.6 -0.3
Adjustments 2.2 2.1
Change in working capital -0.9 -0.8
Interest and other financial
items paid -0.4 -0.3
Interest received 0.1 0.1
Income taxes paid -0.2 -0.1
Net cash flow from operating
activities 0.2 0.7
Cash flow from investment
activities:
Investments in tangible and
intangible assets -1.8 -1.7
Investments in funds and
deposits 0.0 -3.4
Capital gain from
investments in funds and
deposits 2.5 0.0
Net cash flow from
investment activities 0.8 -5.1
Cash flow from financing
activities:
Proceeds from loans 0.1 4.7
Repayment of loans -1.0 -1.0
Net cash flow from financing
activities -0.9 3,7
Translation difference
adjustment 0,0 0,2
Increase (+) / decrease (-)
in cash and cash equivalents 0.1 -0.6
Cash and cash equivalents at
beginning of period 0.7 1.3
Cash and cash equivalents at
end of period 0.9 0.7
STATEMENT OF CHANGES IN EQUITY
Consolidated statement of changes in equity on 31 December 2006
MEUR Share Share Trans- Fund for Earnings Equity
capital premium lation investme
fund diff. nts of
non-
restrict
ed
equity
Equity on 1
Jan 2006 2.2 13.0 0.1 0.0 -1.1 14.3
Transfer from
share premium
fund -12.8 12.2 0.6 0.0
Translation
differences 0.0 0.0
Profit/loss
for the period -0.8 -0.8
Equity on 31
Dec 2006 2.2 0.2 0.1 12.2 -1.3 13.4
Consolidated statement of changes in equity on 31 December 2005
MEUR Share Share Trans- Earnings Equity
capital premium lation
fund diff.
Equity on 1 Jan 2005 2.2 13.1 0.0 -1.1 14.1
Transfer from share
premium fund -0.3 0.3 0.0
Translation differences 0.2 0.2
Profit/loss for the
period -0.2 -0.2
Equity share of
convertible capital
notes 0.2 0.2
Equity on 31 Dec 2005 2.2 13.0 0.1 -1.1 14.3
INVESTMENTS AND PERSONNEL
1-12/06 1-12/05 Change Change
%
Investments, gross, MEUR 1.9 2.0 -0.1 -3
% of net sales 6.1 7.0
Average number of employees 310 295 15 5
COLLATERAL, CONTINGENT LIABILITIES AND OTHER COMMITMENTS
31.12.2006 31.12.2005
MEUR MEUR
Mortgages and pledged assets
Loans from financial
institutions 1.7 2.3
Corporate mortgages 1.8 1.6
Mortgages on real estate 1.4 1.4
Other long-term liabilities 0.4 0.5
Mortgages on real estate 0.8 0.8
Leasing commitments 5.3 3.8
KEY RATIOS
31.12.2006 31.12.2005
Equity ratio % 49.4 51.5
Earnings per share, EUR -0.06 -0.02
Shareholders equity per
share 1.04 1.10
Average number of shares 12,937,627 12,937,627
Number of shares at the end
of period 12,937,627 12,937,627
The figures in the Financial Statement Report are not audited.
Helsinki on 16 February 2007
Board of Directors of Biohit Oyj
Distribution:
Helsinki Exchanges
Financial Supervisory Authority
Press
http://www.biohit.com
Further information:
Osmo Suovaniemi, M.D., Ph.D., Professor
President & CEO
Tel: +358-9-773 861
Mobile: +358-40-745 5605
Email: osmo.suovaniemi@biohit.com