15 April 2015
Cyprotex PLC
(“Cyprotex” or the “Company” or the “Group”)
Final results for the year ended 31 December 2014
Substantial investment made to secure future growth
Cyprotex PLC (AIM: CRX), the preclinical ADME-Tox services company, today reports its final results for the year ended 31 December 2014.
Financial Highlights
- Strong revenue growth up 18.4% to £11.57 million (2013: £9.77 million)
- CeeTox acquisition contributed £1.12 millionof total revenue
- Excluding CeeTox revenue grew 7.0% (2013: 17.3%)
- Gross margins decreased to 75.0% (2013: 80.0%) predominantly as a result of greater outsourcing in the period
- Operating lossof £0.71 million, excluding goodwill impairment, (2013: Operating profit of £0.61 million)
- Goodwill impairment relating to US Operations of £3.04 million (2013: £nil)
- Underlying EBITDA^ of £0.61 million (2013: £1.54 million)
- Loss per share at 18.59 pence (2013: loss per share 3.56pence^^)
- Cash of £2.9 million as at 31 December 2014 (2013: £7.1 million)
^ excluding share-based payment charge and impairment of intangibles
^^rebased following a ten for one share consolidation
Operational Highlights
- Acquisition and integration of CeeTox business completed
- Expanded into the BioHub at the former Astra Zeneca Alderley Park site, and transferred a number of assays and staff to accommodate further growth in revenues
- Significant investment in several major new products and services. These include a new High Throughput Facility in Watertown, a new suite of drug transporter assays, a new high resolution QTof mass spectrometer for improved metabolite identification services and new toxicology analysis equipment in Macclesfield
- Dependence on one large customer and one large Government agency has been reduced at Kalamazoo
- 171 new customers in 2014 (2013:136 customers)
- 407 total customers served in 2014 (2013: 325 customers)
- Largest customer contributed 8.1% of revenues (2013:9.8%)
- Commenced and completed two large contracts for the US Environmental Protection Agency (EPA)
Ian Johnson, Chairman of Cyprotex PLC, said:
“2014 was a year of considerable investment for the Company. In addition to the CeeTox acquisition which brought access to a range of new assays and customers, particularly in the Cosmetic and Personal Care space, we have invested heavily in several significant new technical projects which considerably widens the Company’s potential service offerings to its current and to new customers. However, the CeeTox acquisition experienced operational issues before it ran effectively and the new technical projects took longer to validate than we anticipated. As a result, whilst revenues grew by 18% we recorded our first operating loss in 7 years, which was in line with guidance given at the time of our trading update in November. The acquisitions and investments are, however, critical for our future growth and we have every expectation that these will contribute to significant revenue growth and a return to profitability in 2015.”
For further information:
Cyprotex PLC / Tel: +44 (0) 1625 505 100Dr Anthony Baxter, Chief Executive Officer
John Dootson, Chief Financial Officer
Mark Warburton, Chief Operating Officer and Legal Counsel /
N+1 Singer (Nomad and broker to Cyprotex) / Tel: +44 (0)20 7496 3000
Shaun Dobson
Jen Boorer /
Notes to Editors:
Cyprotex PLC
Cyprotex is listed on the AIM market of the London Stock Exchange (CRX). It has sites in Macclesfield, near Manchester in the UK, Watertown, MA and Kalamazoo MI in the US. The Company was established in 1999 and works with more than 1,000 partners within the pharmaceutical and biotech industry, cosmetics and personal care industry and the chemical industry. Cyprotex acquired Apredica and the assets of Cellumen Inc. in August 2010 and the combined business provides support for a wide range of experimental and computational ADME-Tox and PK services, extending from early drug discovery through to IND submission. The acquisition of the assets and business of CeeTox in January 2014 has enabled Cyprotex to expand its range of services to target the personal care, cosmetics and chemical industries. The Company’s core capabilities include high quality in vitro ADME screening services, mechanistic toxicology and high content toxicology screening services, including our proprietary CellCiphr® toxicity prediction technology, predictive modelling using PBPK and QSAR techniques, including Cloe® PK for in vivo PK prediction, and a range of skin, ocular and endocrine disruption services. For more information, see
Chairman and Chief Executive Officer’s Report
Cyprotex announced the acquisition of certain assets, trade and business of CeeTox in January 2014. This acquisition was a key step in enabling the Group to widen its customer base into the Cosmetic, Personal Care and Household Chemicals markets where we believe ADME-Tox screening requirements are growing, providing opportunities for an expanded offering. The base in Kalamazoo, MI, USA was an additional positive feature resulting in the strengthening of our geographical base in the US, the largest market for our services. Lastly, the Kalamazoo facility can operate many of its assays to GLP (Good Laboratory Practice) an important consideration for screening data required for regulatory approvals. The acquisition has now been fully integrated into the Group and contributed £1.12 million of revenues in 2014. During the yearwe restructured the business, reduced costs, invested in improving several of the key assays to current standards and improved the marketing of these assets to a wider customer base. As a result revenues and numbers of clients increased in the second half of 2014 and we reduced the heavy reliance on two major customers at the Kalamazoo site.
The Company also invested in several large and some smaller R & D projects. These investments were made after a detailed analysis of the necessary technical direction in order to capture a larger quantum of service revenues in the ADME-Tox screening space. The investment in a High Throughput Facility in our Watertown site to replicate the highly efficient and cash generative system employed in Macclesfield involved capital expenditure of £0.62 million and the hiring of four additional staff. The validation of this complex facility took longer than expected which resulted in planned revenues for 2014 not being realised. This facility has now been validated and we expect to generate additional revenues from this system.
The Company also invested heavily in developing an enhanced drug transporter screening capability. Drug transporter screening is becoming a very important area to generate data to support submission documents needed by regulatory bodies such as the FDA. After a lengthy validation phase we have now commercialised the 8 main transporter types required for regulatory submissions. Sales from this new asset class commenced in the last quarter of 2014 and we expect this to be a key feature of our revenue growth in 2015. We have also invested in two new technologies to further our screening offerings in toxicology. We are now able to offer 3D microtissues and mitochondrial toxicity assays which are at the cutting edge of toxicological testing methods. Lastly, we invested in a Waters Quadrupole Time-of-flight (‘QTof’) high resolution mass spectrometer costing £0.28 million. This instrument has enabled us to enhance our Metabolite Identification offerings and almost immediately showed pleasing sales traction in the market.
In summary, the Company invested very heavily in new instrumentation and capabilities to strengthen our technical capabilities in a competitive market for ADME-Tox screening. All these technologies are now validated, and we expect revenue growth from these assays in 2015.
During the year wemade positive changes to our website, making it easier for customers to navigate and request screening services. The former CeeTox screens have been incorporated into the Cyprotex group website and we have increased our marketing spendin 2014 to showcase the new services.
As a result of our sales and marketing efforts we saw new customer numbers in 2014 rise to 171 from 136 in 2013. The company served a total of 407 customers in 2014 compared to 325 in 2013 (48 came from the Kalamazoo site). Our largest customer now accounts for 8.1% of revenues in 2014 compared to 9.8% in 2013.
Financial Performance
Overall Group revenues grew by 18.4% in 2014(2013:17.3%) to £11.57 million(2013: £9.77 million) in line with updated guidance given in November. Our new Kalamazoo site, which commenced trading as a branch of Cyprotex US, LLC on 1 January 2014, contributed £1.12 million of the increase, the remaining business growing by 7.0% in revenue terms.
As previously announced, this sales growth was lower (c13%) than had been anticipated at the start of the financial year and given that we are a highly operationally geared business, this revenue shortfall had a significant impact on the outturn for 2014 with the Group posting its first operating loss, excluding goodwill impairment,in 2014 for seven years at £0.71 million (2013: operating profit of£0.61 million).
The principal project we undertook and which commenced late in 2013 was the creation of a US High Throughput (‘HT’) facility at our Watertown site, based on a similar platformto that operating successfully at our UK site. This HT project, based on a new analytical platform for the US, was technically challenging on a number of fronts including ensuring our standardturnaround times, and consistency and reproducibility of data are achieved and maintained. We had anticipated that the validation of this new HT facility would be completed early in 2014; however our final validation runs were only completed at the end of 2014.Consequently,we will commence commercialisation of these services to clients in 2015.Investments in tangible fixed assets to support this project totalled £0.6 million in the year. Project relatedsalaries and consumables used in validation runs of £0.3 million have been expensed to the income statement in2014.
Goodwill relates to the Group’s US operations and is subject to a yearly impairment test. The results of this year’s calculation performed by the Board indicate a shortfall in valuation equivalent to the carrying value of goodwill and a provision for impairment of £3.04 million has been recognised.
Our work on developing a suite of transporter assays was more time consuming than originally anticipated with their launch delayed until October 2014. Pleasingly, we saw immediate uptake of this service offering and this continues into 2015. The other new assayslaunched on the new QTof and 3D toxicology equipment were successfully launched on time and saw immediate customer take up.
Our reported operating cash outflow for the year at £1.32 million (2013: £1.53 cash inflow) has been adversely impacted by frustrating delays in fully novating a significant contract with the US Environmental Protection Agency (‘EPA’), which has led to delays in invoicing work performed in the US in 2014 of £0.9 million. Post period end the novationwas finally completed in March 2015. Otherwise cash outflows correlate in proportion to our trading loss.
In the previous year, the Company raised £6.88 million (net of expenses) by way of issuing unsecured Redeemable and Convertible Loan Notes (‘Loan Notes’). The values of these Loan Notesare linked to the share price of the Company. Accordingly, as their balance sheet value changes, thischangeis also reported within finance costs or finance income and these reported amounts can fluctuate significantly with share price movements until their ultimate redemption value is reached on maturity. The earliest date of maturity is 30 September 2018. In 2014 changes to Loan Notes valuations saw the Company record finance income of £242,319 (2013: finance charge of £1,592,319).
Outlook and Summary
Whilst 2014 hasbeen a challenging year for the Group, we believe our investments and improved marketing strategies will provide an enhanced platform for future growth. We have made a positive start to 2015 and anticipate a return to profitability in the current year.
Ian Johnson / Dr Anthony D BaxterNon-Executive Chairman / Chief Executive Officer
15April2015
Consolidated income statement
year to 31 December 2014
Continuing operations / Note / 2014 / 2013 / 2012£ / £ / £
Revenue
/ 4 / 11,570,719 / 9,768,027 / 8,327,274Cost of sales / (2,887,704) / (1,953,071) / (1,508,826)
Gross profit
/ 8,683,015 / 7,814,956 / 6,818,448Administrative costs
-Goodwill impairment / (3,040,047) / - / -
-Other / (9,392,254) / (7,201,810) / (6,492,379)
Total administrative costs / (12,432,301) / (7,201,810) / (6,492,379)
Operating (loss)/profit / (3,749,286) / 613,146 / 326,069
Finance income
-Finance income relating to loan notes issued including embedded derivatives / 5/12 / 242,319 / - / -
-Other finance income / 24,585 / 12,107 / 7,218
Total finance income / 5 / 266,904 / 12,107 / 7,218
Finance costs
-Finance cost relating to loan notes issued including embedded derivatives / 5/12 / (432,241) / (1,695,719) / -
-Other finance costs / (37,020) / (86,580) / (84,072)
Total finance cost / 5 / (469,261) / (1,782,299) / (84,072)
(Loss)/profitbefore tax
/ (3,951,643) / (1,157,046) / 249,215Income tax / (219,783) / 360,098 / (46,713)
(Loss)/profitfor the year
/ (4,171,426) / (796,948) / 202,502Attributable to the owners of the parent
/ (4,171,426) / (796,948) / 202,502(Loss)/earningsper share
Basic (loss)/earnings per share / 6 / (18.59)p / (3.56)p / 0.91p
Diluted(loss)/earnings per share / 6 / (18.59)p / (3.56)p / 0.90p
Consolidated statement of comprehensive income
year to 31 December 2014
2014 / 2013 / 2012£ / £ / £
Continuing operations
(Loss)/profit for the year / (4,171,426) / (796,948) / 202,502
Other comprehensive income/(loss)– Items that may be reclassified subsequently to profit or loss:
Exchange differences on retranslation of overseas operations / 161,087 / (18,338) / (124,202)
Total comprehensive (loss)/income for the year
/ (4,010,339) / (815,286) / 78,300Attributable to the owners of the parent
/ (4,010,339) / (815,286) / 78,300Consolidated statement of financial position
at 31 December 2014
Note / 2014 / 2013 / 2012£ / £ / £
ASSETS
Non current assets
Property, plant and equipment
/ 9 / 4,417,391 / 3,788,714 / 2,692,786Intangible fixed assets
/ 11 / 668,486 / 3,097,862 / 3,395,753Deferred tax assets / 539,804 / 855,005 / 540,900
5,625,681 / 7,741,581 / 6,629,439
Current assets
Inventories / 734,684 / 425,638 / 367,967Trade receivables / 2,048,070 / 1,500,527 / 1,199,999
Other receivables / 1,614,745 / 743,683 / 536,995
Income tax / 95,444 / - / -
Cash and cash equivalents
/ 2,925,029 / 7,094,608 / 858,5397,417,972 / 9,764,456 / 2,963,500
Total assets
/ 13,043,653 / 17,506,037 / 9,592,939LIABILITIES
Current liabilities
Trade payables
/ 397,587 / 515,083 / 289,114Other payables
/ 770,431 / 1,114,562 / 570,037Obligations under finance leases
/ 238,862 / 315,696 / 228,765Income tax
/ - / 1,364 / -Provisions
/ - / 59,025 / 108,100Current portion of long term borrowings
/ - / - / 72,3601,406,880 / 2,005,730 / 1,268,376
Non current liabilities
Long term borrowings
/ - / - / 538,493Obligations under finance leases
/ 398,278 / 638,235 / 567,916Other borrowings
/ 12 / 8,593,959 / 8,389,113 / -Provisions
/ 38,232 / - / 58,814Deferred tax liabilities
/ 157,634 / 158,759 / 202,6069,188,103 / 9,186,107 / 1,367,829
Total liabilities
/ 10,594,983 / 11,191,837 / 2,636,205Net assets
/ 2,448,670 / 6,314,200 / 6,956,734EQUITY
Equity attributable to equity holders of the parentShare capital
/ 7 / 224,427 / 224,341 / 223,687Share premium account
/ 12,222,842 / 12,217,742 / 12,210,140Other reserve
/ 292,566 / 292,566 / 128,070Share based payment reserve
/ 905,006 / 765,383 / 765,383Profit and loss account
/ (11,196,171) / (7,185,832) / (6,370,546)Total equity
/ 2,448,670 / 6,314,200 / 6,956,734Consolidated statement of changes in equity
year to 31 December 2014
Share capital / Share premium account / Other reserve / Share based payment reserve / Profit and loss account / Totalequity
£ / £ / £ / £ / £ / £
Balance at 1 January 2014 / 224,341 / 12,217,742 / 292,566 / 765,383 / (7,185,832) / 6,314,200
Loss for the year / - / - / - / - / (4,171,426) / (4,171,426)
Other comprehensive income
Exchange differences on retranslation of overseas operations / - / - / - / - / 161,087 / 161,087
Total comprehensive income for the year / - / - / - / - / (4,010,339) / (4,010,339)
Issue of share capital
– conversion of loan notes / 86 / 5,100 / - / - / - / 5,186
Share based payments transactions / - / - / - / 139,623 / - / 139,623
Balance at 31 December 2014 / 224,427 / 12,222,842 / 292,566 / 905,006 / (11,196,171) / 2,448,670
Share capital / Share premium account / Other reserve / Share based payment reserve / Profit and loss account / Total
equity
£ / £ / £ / £ / £ / £
Balance at 1 January 2013 / 223,687 / 12,210,140 / 128,070 / 765,383 / (6,370,546) / 6,956,734
Loss for the year / - / - / - / - / (796,948) / (796,948)
Other comprehensive loss
Exchange differences on retranslation of overseas operations / - / - / - / - / (18,338) / (18,338)
Total comprehensive loss for the year / - / - / - / - / (815,286) / (815,286)
Issue of share capital
– exercise of share options / 654 / 7,602 / - / - / - / 8,256
Equity element of convertible loan note / - / - / 164,496 / - / - / 164,496
Balance at 31 December 2013 / 224,341 / 12,217,742 / 292,566 / 765,383 / (7,185,832) / 6,314,200
Share capital / Share premium account / Other reserve / Share based payment reserve / Profit and loss account / Total
equity
£ / £ / £ / £ / £ / £
Balance at 1 January 2012 / 223,687 / 12,210,140 / 128,070 / 704,610 / (6,448,846) / 6,817,661
Profit for the year / - / - / - / - / 202,502 / 202,502
Other comprehensive loss
Exchange differences on retranslation of overseas operations / - / - / - / - / (124,202) / (124,202)
Total comprehensive income for the year / - / - / - / - / 78,300 / 78,300
Share based payments transactions / - / - / - / 60,773 / - / 60,773
Balance at 31 December 2012 / 223,687 / 12,210,140 / 128,070 / 765,383 / (6,370,546) / 6,956,734
The other reserve first arose on the acquisition of Cyprotex Discovery Limited by the Company in January 2002, which was accounted for as a merger. Additions in the prior year of £164,496 relate to the equity component of Convertible Loan Notes issued in the year ended 31 December 2013 (see note12).
Consolidated statement of cash flows
year to 31 December 2014
Note / 2014 / 2013 / 2012Cash flows from operating activities / £ / £ / £
(Loss)/profit after taxation / (4,171,426) / (796,948) / 202,502
Adjustments for:
Depreciation of property, plant and equipment / 1,039,084 / 646,983 / 453,777
Amortisation of intangible assets / 140,352 / 153,742 / 152,114
Impairment of intangibles / 3,040,047 / 135,801 / -
Share based payments charge / 139,623 / - / 60,773
Gain on disposals of property, plant and equipment / (1,669) / (10,997) / (24,226)
Finance income / (266,904) / (12,107) / (7,218)
Finance cost / 469,261 / 1,782,299 / 84,072
Taxation recognised in the income statement / 219,783 / (360,098) / 46,713
Increase in trade and other receivables / (805,184) / (508,891) / (256,361)
Increase in inventories / (209,370) / (58,457) / (20,414)
(Decrease)/increase in trade and other payables / (859,361) / 629,369 / 17,910
Movement on provisions / (49,764) / (60,990) / (102,532)
Cash (used in)/generated from operations / (1,315,528) / 1,539,706 / 607,110
Taxation paid / (6,387) / (6,527) / (4,246)
Net cash (used in)/generated from operating activities
/ (1,321,915) / 1,533,179 / 602,864Cash flows from investing activities
Purchase of property, plant and equipment / 10 / (1,486,913) / (1,169,165) / (291,090)Expenditure on intangibles / 11 / (191,107) / - / (93,034)
Proceeds from disposal of property, plant and equipment / 2,543 / 11,000 / 39,500
Acquisition of business / 15 / (837,107) / - / -
Interest received / 24,585 / 12,107 / 7,218
Net cash used in investing activities
/ (2,487,999) / (1,146,058) / (337,406)Cash flows from financing activities
Interest paid / (37,020) / (86,580) / (84,072)Proceeds from issue of share capital / - / 8,256 / -
Proceeds from loan notes / 12 / - / 7,000,000 / -
Loan note issue costs / 12 / - / (122,000) / -
Repayment of long-term borrowings / - / (610,853) / (70,647)
Payment of finance lease liabilities / (317,200) / (288,705) / (178,282)
Payment of contingent consideration / (8,903) / (50,259) / (44,156)
Payment of short term borrowings / - / - / (150,000)
Net cash(used in)/generated from financing activities
/ (363,123) / 5,849,859 / (527,157)Net (decrease)/increase in cash and cash equivalents
/(4,173,037)
/6,236,980
/(261,699)
Exchange differences on cash and cash equivalents / 3,458 / (911) / (7,442)Cash and cash equivalents at beginning of year / 7,094,608 / 858,539 / 1,127,680
Cash and cash equivalents at end of year / 2,925,029 / 7,094,608 / 858,539
Notes to the final results
year to 31 December 2014
1.Nature of operations and general information
Cyprotex PLC (‘Cyprotex’) and subsidiaries’ (together ‘the Group’) principal activity is the provision of in vitro and in silico ADMET and PK (Absorption, Distribution, Metabolism, Excretion, Toxicity and Pharmacokinetics) information to a number of different industries including the Pharmaceutical, Biotechnology, Cosmetic, Personal Care, Agrochemical, Chemical Industries and Academia.
Cyprotex’s vision is to accurately predict the human clinical outcome following exposure to a chemical or drug using high quality, robust in vitro methods combined with in silico technology. Rather than being a pure data provider, we add value and relevance to the ADME-Tox data supplied to our customers in the Pharmaceutical, Cosmetics, Personal Care, Chemical Industries and Academia.
Cyprotex PLC is the Group’s ultimate parent company. It is incorporated and domiciled in England and Wales. The address of Cyprotex PLC’s registered office is 100 Barbirolli Square, Manchester M2 3AB. The addresses of its principal places of business are 15 Beech Lane, Macclesfield, Cheshire, United Kingdom, SK10 2DR and 313 Pleasant Street, Watertown, Massachusetts MA 02472 USA and 4717 Campus Drive, Kalamazoo, Michigan MI49008 USA. It trades through its wholly owned subsidiaries: Cyprotex Discovery Limited based in Macclesfield in the UK and Cyprotex US, LLC in Watertown and Kalamazoo in the USA. Cyprotex PLC’s shares are listed on the Alternative Investment Market of the London Stock Exchange.
The consolidated financial information set out in this announcement is presented in Pounds Sterling (£), which is also the functional currency of the parent. The consolidated financial information has been approved for issue by the Board of Directors on 15 April2015.
The information in this preliminary announcement does not constitute statutory accounts within the meaning of sections 434 to 436 of the Companies Act 2006 and no statutory accounts have yet been filed with the Registrar of Companies for the year ended 31 December 2014. Statutory accounts for the year ended 31 December 2013 have been filed with the Registrar of Companies. The auditors report on these accounts was unqualified and did not contain an emphasis of matter, nor did it contain a statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2014 will be delivered to the registrar of Companies following the Company's Annual General Meeting.