RNS Number : 6215A
Biocare Solutions PLC
05 August 2008
Biocare Solutions Plc
5 August 2008
Biocare Solutions Plc
("Biocare" or the 'Company')
Final results for the year ended 31st December 2007
The Company's shares were suspended from trading on 27 June 2008 pending an announcement that it has obtained additional funding and
also pending publication of its annual audited accounts for the year ended 31 December 2007.
Set out below are the final results for Biocare Solutions Plc for the year ended 31 December 2007. The full audited Annual Report &
Accounts for the year ended 31 December 2007 have been posted to shareholders and are available from the Company's website:
www.biocaresolutions.co.uk. The report of the auditors on the accounts of Biocare for the year ended 31 December 2007 is qualified as they
have been unable to form a view of the appropriateness of the preparation of the financial statements on a going concern basis. Details of
the going concern situation of the Group are provided by the Directors in Note 1a of this announcement, below.
Also posted to shareholders is a notice of the Annual General Meeting to be held on Friday 29 August 2008 at 11AM at the office of
Capita Registrars, Phoenix House, 18 King William Street, London EC4N 7HE.
CHAIRMAN'S STATEMENT
We are pleased to report on the results of Biocare Solutions Plc and its subsidiaries for the year ended 31 December 2007 and comment on
the board's view of your group's prospects for the following financial year.
The consolidated loss before taxation of �3,349,850 for 2007 was less than that of �3,878,835 in 2006.
Despite this result the Group has made considerable progress in 2007 on a number of fronts:
* The new highly-automated production facility in Italy is fully operational and requires fewer manufacturing personnel despite
production capacity being at least 4 times that of the original plant in Northern Italy.
* With the transfer of production from the North of Italy, the management structure has been stream-lined and total overheads reduced.
* Work has continued on product development and product improvement. From September 2008 onwards at least 50% of the sales in Italy will
be in new / modified products with higher margins.
* From 2008 onwards the Italian subsidiary will start benefiting from employee, social security, VAT and tax concessions that have been
negotiated.
Some of the above activities proved highly disruptive for the small management team which had to contend with not only the complexities
of installing state of the art equipment but also substantial delays by local utilities in meeting previously agreed deadlines. These delays
resulted in duplicate personnel and running costs for a longer period than originally anticipated. Furthermore management had to deal with
the resulting redundancy situations in both Italy and the UK.
RAB Special Situations Fund has continued to support the Company with additional convertible loan funding during its development phase.
The Group's new Nomad has started procedures to raise fresh equity capital up to an amount of EUR1,500,000 which will be underwritten by one
of the current shareholders, by 15 September 2008.
The 2007 results were also affected by the losses made by its Malaysian subsidiary (�167,571). In February 2008, the Malaysian
operations were therefore sold to the local management who have signed an arms length distribution agreement. They are in the process of
obtaining local funding to enable them to open up the markets of Singapore and Thailand. But, from January 2008 onwards, Biocare Solutions
Plc has no further liabilities for any losses incurred in developing South East Asia other than a small loss on disposal of �25k.
With the Group's current activities being principally in Italy the decision has been taken to appoint Mazars LLP as the Group's
auditors. Mazars have strong operations in Italy and audit complexities will reduce accordingly.
KBC Peel Hunt have been the Company's nomad and broker since its flotation in September 2006 and the Board would like to thank them for
their support since that date. With the amicable agreement of all parties Libertas Capital has taken over the nomad/broker function with
effect from July 18th 2008.
With the new low-cost production capacity at its disposal and new products and improved packaging formats ready for launch, the Company
is confident of the future potential for its products. The Company is now ready to make presentations to selected retailers in other
European markets as well as expanding its distribution within the Italian marketplace.
Financial
Turnover of �2,353,623 was 2% below the prior year (2006: �2,397,794).
The gross profit margin over the year of 41% (2006: 45%), was impacted during the latter half of the year partially due to product mix
and the disruptions due to the restructuring of the company's manufacturing processes and the move to Ferrandina. This key performance
indicator is expected to recover now that the production in Ferrandina is fully operational.
Operating loss for the year was �3,153,510 (2006: �2,454,800). This was affected by the increase in overheads that arose in connection
with the restructuring of the company and the transfer of production to the new facility in the South of Italy. Salary costs were hit by
duplications in the latter part of the year and by redundancy costs. The actual move of machinery and other ancillary equipment and
machinery also increased transport costs and other overheads.
An exceptional finance charge of �51,500 arose on the raising of loans. This charge is shown as part of interest payable in the income
statement.
The Italian subsidiary is entitled to a tax credit equal to 50% of the investments in plant and machinery carried out in the region of
Basilicata where the new factory is based. �65,629 (2006: nil) of the tax credit received was recognised in the income statement as other
operating income.
Attributable losses for shareholders for the year of �3,349,850 (2006: �3,878,835) resulted in a loss per share of 3.7p (2006: 7.2p).
There is no tax charge for the year (2006: nil). The group has tax losses carried forward as result of which the group expects no tax
liability in either 2008 or 2009.
The board is not recommending a dividend (2006: nil).
Ferrandina facility
The premises purchased in Ferrandina in December 2006 have been improved during the year by investing a further �258,333 in order to
have a world class production facility.
The group has also invested an additional �1.4 million on plant and ancillary equipment in order to complete the new high-speed
production line and mechanised warehousing facility.
S.A.K. Anderson
Chairman
Consolidated income statement
For the year ended 31 December 2007
Notes 2007 2006
� �
Revenue 2,353,623 2,397,794
Cost of sales (1,391,892) (1,320,461)
Gross profit 961,731 1,077,333
Administrative expenses (4,180,870) (3,532,133)
Other operating income 65,629 -
Operating loss (3,153,510) (2,454,800)
Investment revenues 24,201 16,475
Loan interest payable (167,407) (230,890)
Bank interest payable (1,634) -
Other finance charges (51,500) (1,209,620)
Finance costs (220,541) (1,440,510)
Loss before taxation (3,349,850) (3,878,835)
Tax - -
Loss for the financial year (3,349,850) (3,878,835)
Loss per share 2
Loss per share - Basic and diluted (3.7)p (7.2)p
All amounts derive wholly from continuing activities.
Consolidated balance sheet
as at 31 December 2007
2007 2006
� �
Non-current assets
Intangible assets 450,487 438,890
Property, plant and equipment 4,687,302 3,290,688
Trade and other receivables 1,233,014 329,922
6,370,803 4,059,500
Current assets
Inventories 583,518 817,656
Trade and other receivables 2,193,319 1,959,972
Cash and cash equivalents 196,941 1,230,661
2,973,778 4,008,289
Total assets 9,344,581 8,067,789
Current liabilities
Trade and other payables (1,980,223) (1,260,288)
Obligations under finance leases (163,506) (38,794)
Other borrowings (1,890,500) -
Other taxes and social security (212,992) (33,460)
Accruals and deferred income (1,183,452) (379,862)
Total current liabilities (5,430,673) (1,712,404)
Net current (liabilities)/assets (2,456,895) 2,295,885
Non-current liabilities
Obligations under finance leases (591,855) (159,894)
Total non-current liabilities (591,855) (159,894)
Total liabilities (6,022,528) (1,872,298)
Net assets 3,322,053 6,195,491
Equity
Share capital 3 916,548 916,548
Share premium 3 7,608,407 7,608,407
Revaluation reserve 3 1,245,173 1,137,677
Merger reserve 3 5,010,633 5,010,633
Share option reserve 3 68,070 63,520
Translation reserve 3 372,701 8,335
Retained losses 3 (11,899,479) (8,549,629)
Total equity 3 3,322,053 6,195,491
Consolidated statement of recognised income and expense
for the year ended 31 December 2007
2007 2006
� �
Loss for the financial year (3,349,850) (3,878,835)
Exchange differences on translation of foreign operations 364,366 8,335
Exchange gains on translation of revaluation of property 107,496 -
Gain on revaluation of property - 1,137,677
Total recognised income and expense related to the year (2,877,988) (2,732,823)
Consolidated statement of cash
flows
for the year ended 31 December
2007
2007 2006
Notes � �
Net cash outflow from 4 (2,116,253) (3,486,578)
operating activities
Cash flows from investing
activities
Interest received 24,201 16,475
Purchase of property, plant (1,003,747) (1,328,352)
and equipment
Net cash outflow from (979,546) (1,311,877)
investing activities
Cash flows from financing
activities
Interest paid (2,704) (304,795)
Proceeds from issues of equity - 9,946,980
shares
New loans raised 1,890,500 -
Capital element of finance (108,540) -
lease rental payments
Expenses paid in connection - (1,538,412)
with share issue
Expenses paid in connection (51,500) -
with raising new loans
Repayments of borrowings - (2,303,655)
Interest element of finance (30,043) (12,473)
lease rental payments
Net cash inflow from financing 1,697,713 5,787,645
activities
Net (decrease)/increase in cash and cash (1,398,086) 989,190
equivalents
Cash and cash equivalents at the beginning of the period 1,230,661 233,136
Effect of foreign exchange 364,366 8,335
rates
Cash and cash equivalents at the end of the period 196,941 1,230,661
Notes to the final results
1. Accounting policies
The board approved the final results on 31 July 2008. The financial information set out in this statement does not constitute the
Group's statutory accounts for the period ended 31 December 2007, within the meaning of section 240 of the Companies Act 1985. Whilst the
financial information included in these final results has been prepared under the historical cost convention and in accordance with the
recognition and measurement criteria of International Financial Reporting Standards (IFRSs), these final results do not itself contain
sufficient information to comply with IFRSs and further information will be included in the Group's statutory accounts to ensure
compliance.
The report of the auditors on the accounts of Biocare Solutions plc for the year ended 31 December 2007 are qualified. In forming their
opinion, the auditors considered the adequacy of the disclosure made in the financial statements concerning the going concern basis of
preparation set out in note 1a. Their report states "Because of the potential significance to the financial statements of the effect of
preparing them on a basis other than as a going concern, we are unable to form an opinion." The report of the auditors on the accounts for
Biocare Solutions plc for the year ended 31 December 2006 was unqualified and there was no statement under either section 237(2) or section
237(3), however there was an emphasis of matter relating to going concern. Full accounts for Biocare Solutions plc for the year ended 31
December 2006 have been filed at Companies House.
a) Going concern
At 31 December 2007, the Group had net current liabilities of �2,456,895 and a loss for the year of �3,349,850. During the year and
subsequent to 31 December 2007, the Group has secured funding from RAB Special Situations (Master) Fund Limited now in the form of a secured
convertible loan of up to �3,457,390, to provide working capital for the Group.
With the new highly automated production facility in Italy only recently becoming fully operational, the Group's business is still at
the early stages of developing its product and customer base and as such there can be considerable unpredictable variation in the amount of
revenue and timing and amounts of cash flows.
The directors have produced cash flow forecasts to 31 December 2009. On the basis of this cash flow information, the directors are of
the opinion that both the ongoing support of RAB and additional funds will be required.
The directors are working towards bringing the Group to a level of profitable trading. In doing so, they are assessing on a regular
basis, sales activities and cost levels. The Group has a number of new and improved products to be announced shortly. In addition, the
Group's new nomad has started procedures to raise fresh equity capital up to an amount of EUR1,500,000 which will be underwritten by one of
the current shareholders, by 15 September 2008.
The directors have also received written confirmation from RAB that they will not call for repayment of the loan notes until the earlier
of the Group's ability to repay or July 2009.
There can be no certainty that the outcome of all the matters discussed above will be as forecast by the directors. The directors
believe that they will secure adequate funding from the issuance of additional equity, meet their sales forecasts and manage their cash
outflows as described above. On this basis the directors believe it appropriate to prepare the financial statements on the going concern
basis. The financial statements do not include any adjustment to the value of balance sheet assets (particularly the carrying value of
goodwill of �129,517, the carrying value of intellectual property of �320,970 and the carrying value of property, plant and equipment of
�4,687,302) or provision for further liabilities, which would result should the going concern concept not be valid"
b) Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with generally accepted accounting practice requires management to make estimates
and judgements that affect the reported amounts of current and contingent assets and liabilities and the reported amounts of revenues and
expenses during the reporting period.
Estimates and judgements are continually reviewed and are based on historical experience and other factors, and expectations of future
events that are believed to be reasonable under the circumstances. The critical judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty are:
* Property, plant and equipment
The company is keeping a spare production line which is not currently used. The line could be fully operational with some minor
maintenance work and it is the intention of the management to use this line to bottle new products in the future that are not compatible
with the current line. It will also be used to cope with situations of excessive load when the current line is saturated avoiding costly
double shifts. In view of the future benefits to the business, the line has not been impaired.
* Impairment of Goodwill
Determining whether goodwill is impaired requires an estimation of the value in use, which is calculated by estimating the future cash
flow expected to arise from the cash-generating unit and discounted by a suitable discount rate in order to calculate the present value.
The directors prepared projections that show a positive cash flow in 2009. The cash flow has been discounted at 40%. The net present
value calculated showed a positive value of �196,763 compared to a carrying value of �129,517.
On this basis the directors have taken the view that goodwill is fairly stated and that no impairment charge is required.
* Share based payments
In determining the fair value of equity settled share based payments and the related charge to the income statement, the Group makes
assumptions about the future events and market conditions. The fair value is determined using a valuation model, which is dependent on
future estimates including timing with which the options will be exercised and the future volatility of the Group's share price. These
assumptions are based on publicly available information and reflect market expectations and the advice of qualified experts. Different
assumptions about these factors could affect the reported value of share-based payments.
* Tax credits
The Italian subsidiary is entitled to a tax credit equal to 50% of the investments in plant and machinery in Basilicata less accumulated
depreciation. Although the group has not yet received confirmation that the application has been processed, local advisors state that this
is merely a formality, and are actively soliciting the appropriate paperwork from the government department in question. As such the group
has recognised a proportion of this credit within operating income in 2007.
* Conditions attached to the purchase of the building in Ferrandina
There were a number of conditions attached to the purchase of the building and the land in Ferrandina. All the conditions have been met
except for the hiring of 16 employees. Although this could jeopardise the term of the contract with the seller, the group expect to satisfy
this requirement when a second shift starts working later this year and the group has been led to believe by the seller (a government body),
that this condition will not be enforced.
* Impairment of intellectual property
Further to a review of its expected useful life the intellectual property is amortised over five years from 1 January 2007 (2006: 20
years from acquisition). The reason for this change in estimate is that new product formulations are expected to be introduced in five
years.
c) Basis of consolidation
The consolidated financial information incorporates the results of the Company and entities controlled by the Company. Control is
achieved where the Company has the power to govern the financial and operating policies of an investee entity to obtain benefits from its
activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective
date of acquisition, or from the date of disposal, as appropriate.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
2. Loss per share
2007 2006
Net loss attributable to ordinary shareholders �(3,349,850) �(3,878,835)
Weighted average number of ordinary shares in issue 91,654,817 53,942,699
Basic and diluted loss per share (3.7)p (7.2)p
Diluted loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period adjusted for the effects of all potentially dilutive shares.
The only potentially dilutive shares were the share options. These shares are anti-dilutive as they would decrease the loss per share.
There is therefore no difference between the basic loss per share and diluted loss per share for the period.
3. Statement of changes in equity
Group Share capital Share premium Revaluation reserve Other reserves Share option reserve Translation
reserve Retained earnings Total Equity
Balance at 1 January 2006 681,161 3,236,239 - - - -
(4,670,794) (753,394)
Issue of shares 128,333 1,369,647 - - - -
1,497,980
Net profit for the year - - - - - -
(3,922,007) (3,922,007)
Issue of shares 107,054 3,002,521 - - - -
3,109,575
Revaluation of freehold - - 1,137,677 - - -
- 1,137,677
properties
Reserve arising from share for - - - 5,010,633 - -
- 5,010,633
share exchange
Share based payments - - - - 63,520 -
- 63,520
Exchange differences on - - - - - -
8,335 8,335
translation
Balance at 31 December 2006 as 916,548 7,608,407 1,137,677 5,010,633 63,520 -
(8,584,466) 6,152,319
previously reported
Effects of adopting IFRS 3 - - - - - -
43,172 43,172
Effects of adopting IAS 21 - - - - - 8,335
(8,335) -
Balance at 31 December 2006 as 916,548 7,608,407 1,137,677 5,010,633 63,520 8,335
(8,549,629) 6,195,491
restated
Net loss - - - - - -
(3,349,850) (3,349,850)
Exchange difference on - - 107,496 - - -
- 107,496
revaluation of freehold
properties
Reserve arising from share for - - - - - -
- -
share exchange
Share based payments - - - - 4,550 -
- 4,550
Exchange differences on - - - - - 364,366
- 364,366
translation
Balance at 31 December 2007 916,548 7,608,407 1,245,173 5,010,633 68,070 372,701
(11,899,479) 3,322,053
4. Note to the statement of cash flows
2007 2006
� �
Operating loss (3,153,510) (2,454,800)
Depreciation charges 559,091 209,631
Amortisation of Intangibles 21,498 18,198
Exchange differences arising on consolidation (212,344) 10,075
Share option charges 4,550 63,520
(2,780,715)
(2,153,376)
Movements in working capital
Decrease/(Increase) in inventories
234,138
(197,469)
Increase in receivable
(1,136,439)
(909,181)
Increase/(Decrease) in payables
1,566,763
(226,552)
Net cash outflow from operating activities
(2,116,253)
(3,486,578)
5. Post balance sheet events
On 18 February 2008 the group signed three deeds of variation that changed the terms of the loans. In particular the interest rate on
all the loans was reduced to 6% per annum for the period from (and including) 19 February 2008 up to (and including) 7 April 2008 or the
date of repayment.
On 31 March 2008, the Company entered into a new loan note agreement with RAB Special Situations (Master) Fund Limited for a loan of up
to �3,457,390. Interest at 2% per month was payable on the Aggregate Nominal Amount (defined as the aggregate principal amount of the Loan
Notes outstanding at that time and all capitalised interest thereon) from (and including) 1 April 2008 up to (and including) the date of
repayment or conversion in full of the aggregate nominal Amount. All Loan Notes not converted, prepaid or redeemed prior to the redemption
date (initially 30 June 2008 then postponed to 29 August 2008 further to a deed of variation signed on 16 July 2008) had to be redeemed at
par by the Company on the Redemption Date. If the Company failed to redeem the loan notes then in issue on the redemption date then, in
addition to the above interest rate, default interest at 0.50% per month accrued on the aggregate nominal Amount from the date on which
payment was due to be made by the Company.
On 23 May 2008 Biocare Solutions Plc and its UK subsidiaries, Biocare Solutions (UK) Limited and Biocare Solutions Trading limited,
executed a debenture in favour of RAB Special Situations (Master) Fund Limited. The Debenture created a security by the way of a fixed and
floating charge over each group company and over each group company's assets and undertakings whether in the UK or elsewhere.
In February 2008 the Company sold the shareholding in its Malaysian Subsidiary to its management who took over all future liabilities
for the business. The consideration agreed was �100,000. A consolidated loss on disposal of �25,000 arose from the transaction.
For further information visit www.biocaresolutions.co.uk or enquire to:
Stuart Anderson, Chairman Biocare Solutions plc +44 (0) 207 016 7795
Martin Shelley, Finance Director
Jakob Kinde Libertas Capital +44 (0) 207 569 9650
Sandy Jamieson
This information is provided by RNS
The company news service from the London Stock Exchange
END
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