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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cobra Bio-Man. | LSE:CBF | London | Ordinary Share | GB0031704835 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Cobra Bio-Manufacturing PLC
18 January 2008
For Immediate Release 18 January 2008
Cobra Biomanufacturing Plc
Preliminary Results
for the year ended 30 September 2007
Cobra Biomanufacturing Plc, the international provider of biopharmaceutical
manufacturing services, today announces its preliminary results for the twelve
months ended 30 September 2007.
Operational Highlights Jan 2008
* Contracted forward order book up 57% to a record £9.4m (Jan 2007: £6.0m).
* Including a $9.5m two year virus contract providing greater revenue
predictability.
* Simon Saxby appointed today as Chief Operating Officer, bringing
international commercial, funding and technical expertise.
* David Thatcher to step down today as Chief Executive, whilst
continuing to provide guidance on scientific affairs and business
development as a non executive director and consultant.
Financial Summary 2007
* In line with current market expectations.
* Revenue £9.2m (2006: £10.1m).
* Loss before tax £1.9m (2006: £0.1m profit).
* Cash and short term investments £1.6m at year end (2006: £3.2m).
Commenting on the results, Peter Fothergill, Chairman said:
"Cobra today has a record £9.4m order book (Jan 2007: £6.0m). Worldwide
investment in biotechnology remains buoyant, although this may be tempered
somewhat by the emerging macroeconomic climate. Cobra's challenge is to win more
long term contracts which provide for a more consistent year on year performance
that in turn should see a return to profitability and a sound basis for further
expansion of its contract manufacturing services to the global marketplace. The
$9.5m virus contract, which will run for the next two financial years, is a big
step towards achieving this aim."
For further information, please contact:
Cobra Biomanufacturing Plc Tel: +44 (0) 1782 714 181
Peter Fothergill, Chairman
Peter Coleman, Finance Director & Company Secretary
Buchanan Communications Tel: +44 (0) 207 466 5000
Tim Anderson
Rebecca Skye Dietrich
Seymour Pierce (NOMAD & Broker) Tel: +44 (0) 20 107 8000
Stuart Lane
Chairman's Statement
Financial Summary 2007
The financial results for 2007 were in line with current market expectations,
but were still disappointing after six consecutive half year reporting periods
of consistent growth, which moved Cobra back into profit in 2006. Revenue fell
to £9.2m (2006: £10.1m), resulting in a pre tax loss of £1.9m (2006: £0.1m
profit), an operating cash outflow of £0.9m (2006: £1.1m inflow) and a closing
cash at bank and short term investments of £1.6m (2006: £3.2m).
Revenue and Contracted Order Book
Financial year 2007 was unusual for Cobra, with revenue in the second half of
the year falling away after a first half which was profitable and in line with
market expectations. Our aim has been to reduce the inherent 'lumpiness' of our
business by competing for more longer term contracts, including those for
commercial supply, particularly for the manufacture of virus based products.
However this is taking longer than anticipated and was exacerbated by overruns
on a number of short term contracts and the unanticipated loss at short notice
of the GSK/IAVI contract in May 2007. This left a revenue gap which we were
unable to close. Management actions to mitigate these events were implemented
involving operational efficiencies and cost base reductions. However there was
simply insufficient time or revenue to cover the remaining costs which are
necessary to stay competitive.
Notwithstanding, the overall shape of the business is improving. Revenue in 2007
from our North American customers was £6.0m (2006: £8.7m) 65% of the total
(2006: 85%). Revenue from our European based customers (excluding the UK)
increased fourfold to £2.8m (2006: £0.7m) 31% of the total (2006: 7%) as 2007
turned out to be the best ever year for funding for biotech in Europe*, beating
the $5.9bn** raised in 2006 (2005: $4.0bn).
Virus based revenue was £2.8m (2006: £1.9m) 30% of the total (2006: 19%), which
reflects Cobra's leading position in this highly specialised market. Protein
based revenue remained healthy at £4.3m (2006: £6.7m) 47% of the total (2006:
66%). These are encouraging signals as demand for our services continues to
expand.
The global biotech industry raised a total of $30.7bn* in 2007 (2006: $29.8bn),
the highest figure since 2000, which followed on from the $27.8bn** spent on the
research and development of biotech products in 2006 (2005: $21.0bn). The key to
Cobra's future is simply to win more of this business, more quickly in a growing
biomanufacturing service sector expected to be worth $2.8bn*** in 2008.
Since the end of the financial year Cobra has made considerable progress towards
achieving this aim. The contracted forward order book is now at a record £9.4m,
£6.0m of which is scheduled for the current financial year.
Structure
I am pleased to announce today the appointment of Simon Saxby as Chief Operating
Officer and main Board Director. At the same time, David Thatcher will step down
as Chief Executive, whilst continuing to provide guidance on scientific affairs
and business development as a non executive director.
Simon Saxby has 25 years experience in the biotechnology industry, latterly as
CEO of Alpha Biologics Sdn Bhd, a Malaysian contract manufacturing organisation
(CMO) with an office and laboratories in Cambridge UK. Simon was a founder
director of Murex Diagnostics which was sold to Abbott Laboratories for $350m, a
co-founder and operations director of Quantum Biosystems Ltd, he led the
development of a CMO business for Unisyn Technologies in Massachusetts, USA for
4 years and has held appointments with KS Biomedix Plc, Xenova Plc and Synexis
Ltd. Simon's well rounded international experience in business development and
manufacturing is ideally suited to the challenges of the service business.
David Thatcher started Cobra's manufacturing activities 15 years ago and became
CEO in 2002, when the Group listed on AIM as a specialist provider of
biomanufacturing services. His 5 years in the post have seen a dramatic change
in the operating environment, with Cobra's original DNA business virtually
disappearing in 2004. He re-orientated the business to focus on virus and
protein manufacturing, coupled with a strong business development capability in
North America. At the same time he has applied his scientific expertise to the
development of novel technologies which can be applied to the Group's
manufacturing processes and from which we now have potentially valuable product
development and licensing opportunities. David will continue to support this
initiative as a consultant (see Oral Vaccines section).
Oral Vaccines
During the year we have advanced our potentially exciting oral vaccine
technology with a series of collaborations to prove the principle in both human
and animal health applications. At the same time our successful application for
a DTI grant, to develop formulations and undertake preclinical testing for human
flu, will allow the work on this project to commence in early 2008. The Group
has now formed a separate subsidiary called Cobra Oral Technology Limited (COT)
to focus our efforts on this opportunity.
Outlook
Cobra today has a record £9.4m order book (Jan 2007: £6.0m). Worldwide
investment in biotechnology remains buoyant, although this may be tempered
somewhat by the emerging macroeconomic climate. Cobra's challenge is to win more
long term contracts which provide for a more consistent year on year performance
that in turn should see a return to profitability and a sound basis for further
expansion of its contract manufacturing services to the global marketplace. The
$9.5m virus contract which will run for the next two financial years is a big
step towards achieving this aim.
Peter Fothergill
Chairman
18 January 2008
* BioCentury 07/01/2008
** Ernst and Young's Beyond Borders Global Biotechnology Report 2007
***Hi Tech Business Decisions 2007
Financial Review
Basis of Preparation
These are the first results of the Group to be stated under International
Financial Reporting Standards (IFRS) and the comparatives have been restated on
this basis. The principal impact of IFRS and the effect of these on the Group's
2006 income statement and profit for the year and the balance sheets and equity
for 1 October 2005 and 30 September 2006 are set out in note 13.
Income Statement
Revenue and gross margin: for the year fell by 9% to £9.2m (2006: £10.1m), due
to cancellation of an existing contract and longer lead times for new contracts
in the second half of the year, resulting in the Group not being able to
maximise the coverage of its direct manufacturing costs, a high proportion of
which are fixed and essential to maintain our cGMP and quality standards. These
factors in addition to overruns on a number of our service contracts primarily
for our European customers reduced gross margin to 42% (2006: 53%).
Research and development: expenditure increased in the year by 51% to £0.6m
(2006: £0.4m), to continue the process science work required to maintain the
Group's competitive position in the existing manufacturing service business and
to continue the development of our oral vaccine platform technology, ORT-VAC.
Other operating expenses: sales, marketing and distribution costs at £1.1m
(2006: £1.1m) and administrative expenses at £3.9m (2006: £3.9m) remained flat
as we controlled our costs in the second half of the year.
Reorganisation costs: the Group incurred £0.1m of reorganisation costs in the
latter part of the year as we reduced our headcount, to reduce the cost base and
enhance our competitive position.
(Loss)/profit before/after tax: as a result of the above the Group incurred a
loss before tax of £1.9m (2006: £0.1m profit) and with a R&D tax credit claim of
£0.1m in the year (2006: £0.1m) a loss after tax of £1.8m (2006: £0.1m profit).
Balance Sheet
Capital investment: Cobra invested a further £1.1m in plant and equipment in the
year (2006: £1.5m), lower than the previous year as we controlled expenditure in
the second half. However this investment is essential as we maintain our
facilities to cGMP.
Deferred income: ended the year at £0.5m (2006: £1.2m), reflecting the fall off
in the business in the second half. There was a corresponding fall in
inventories to £0.4m (2006: £0.6m).
Cash and short term investments: due to the operating losses incurred and
capital investment required, offset by net financing of £0.3m (2006: £0.6m
inflow). Cash and short term investments closed at £1.6m (2006: £3.2m).
Non current liabilities: remained at £2.8m (2006: £2.8m). The composition of non
current liabilities is split between a bank loan with National Westminster Bank
Plc, secured against freehold buildings of £1.9m (2006: £1.8m) repayable over a
13 year period commencing November 2007 and finance lease obligations of £0.9m
(2006: £1.0m) repayable between 2 and 5 years.
Cash Flow
Operating cash outflow for the period was £0.9m (2006: £1.1m inflow). We also
spent £1.1m on plant and equipment in the year (2006: £1.5m). This expenditure
was partially financed during the year, through a mixture of additional mortgage
loans of £0.2m net (2006: £0.6m net) and finance leases of £0.6m (2006: £0.5m),
offset by existing finance lease repayments of £0.5m (2006: £0.4m). The result
is cash and short term investments of £1.6m (2006: £3.2m).
Taxation
At 30 September 2007, the Group had trading tax losses carried forward of £16.0m
ensuring that the Group should not be obliged to pay UK corporation tax for the
foreseeable future on any trading profits. The Group is also entitled to claim
research and development tax relief, available under Schedule 20 of the Finance
Act 2000, in respect of financial year 2007, which resulted in a credit to the
Group Income Statement of £0.1m (2006: £0.1m).
Treasury Policies and Financial Risk
Surplus funds are intended to support the Group's short term working capital
requirements. These funds are invested through the use of short term deposits
and the policy is to maximise returns as well as to provide the flexibility
required to fund on-going operations. It is not the Group's policy to enter into
financial derivatives for speculative or trading purposes.
Interest Rate, Liquidity, Credit and Foreign Currency Risk
Interest rate risk: at 30 September 2007 the Group had a mortgage with the
National Westminster Bank Plc of £2.0m (2006: £1.8m). The Group pays a fixed
rate of 1.65% over the National Westminster Bank Plc's sterling base rate on the
outstanding mortgage balance.
Liquidity risk: surplus funds are invested on a short term basis at money market
rates and therefore such funds are available at very short notice.
Credit risk: the Group's credit risk relates to trade receivables, short term
investments and cash and cash equivalents. The credit risk on liquid funds is
limited because the counterparties are banks with high credit ratings assigned
by international credit rating agencies. The Group has no significant
concentration of credit risk related to receivables, as the exposure is spread
over a number of customers.
Foreign currency risk: the Group generated overseas revenue during the year,
primarily from North America and Continental Europe. The position regarding
currency risk is regularly reviewed and currency hedging activity is initiated
where appropriate. In the year the Group realised an exchange rate gain of £38k
(2006: £127k gain), through the provision of forward currency contracts against
the Group's contracted US dollar and Euro order book. Currency risk is also
partially offset by overseas expenditure.
Peter Coleman
Finance Director
18 January 2008
Group Income Statement
For the year ended 30 September 2007
Notes 2007 2006
£000's £000's
Revenue 4&5 9,194 10,145
Cost of sales (5,329) (4,808)
Gross profit 5 3,865 5,337
Sales, marketing and distribution costs (1,058) (1,079)
Research and development (606) (401)
Administrative expenses (excluding share based payments) (3,914) (3,733)
Share based payments (32) (122)
Total administrative expenses (3,946) (3,855)
Reorganisation costs (90) -
Operating (loss)/profit (1,835) 2
Finance income 6 101 192
Finance costs 7 (151) (123)
(Loss)/profit before tax (1,885) 71
Taxation 8 110 55
(Loss)/profit for the year (1,775) 126
Basic (loss)/earnings per share 9 (9.1)p 0.6p
The results for the year and preceding year are derived from continuing
activities.
There was no recognised income or expenditure other than the (loss)/profit for
the year and the preceding year, accordingly no Statement of Recognised Income
and Expense has been prepared.
Group Balance Sheet
As at 30 September 2007
Notes 2007 2006
£000's £000's
Non current assets
Property, plant and equipment 8,504 8,355
Intangible assets 143 160
8,647 8,515
Current assets
Inventories 382 595
Trade and other receivables 10 1,456 2,273
Short term investments 275 275
Cash and cash equivalents 1,338 2,940
3,451 6,083
Total assets 12,098 14,598
Current liabilities
Bank loans and overdraft (194) (37)
Obligations under finance leases (639) (470)
Trade and other payables 11 (2,190) (3,302)
(3,023) (3,809)
Net current assets 428 2,274
Non current liabilities
Bank loans (1,916) (1,773)
Obligations under finance leases (890) (1,004)
(2,806) (2,777)
Total liabilities (5,829) (6,586)
Net assets 6,269 8,012
Equity
Called up share capital 1,959 1,959
Share premium 9,634 9,634
Merger reserve 29,729 29,729
Other reserves 453 421
Income statement (35,506) (33,731)
Total equity 6,269 8,012
Group Cash Flow Statement
For the year ended 30 September 2007
Notes 2007 2006
£000's £000's
Net cash (outflow)/inflow from operating activities 12 (871) 1,141
Investing activities
Payments to acquire property, plant and equipment (1,069) (1,484)
Payments to acquire intangible assets (4) (157)
Net cash outflow from investing activities (1,073) (1,641)
Financing activities
New borrowings 487 1,650
Repayment of borrowings (253) (1,100)
Lease finance acquired via sale and leaseback 558 504
Repayment of capital elements of finance leases (502) (372)
Increase in bank overdraft 80 -
Issue of ordinary shares - 8
Purchase of treasury shares - (8)
Finance income 63 65
Interest on bank loans (45) (33)
Interest element of finance leases (106) (94)
Net cash inflow from financing activities 282 620
(Decrease)/increase in cash and cash equivalents (1,662) 120
Opening cash and cash equivalents 2,940 2,760
Effect of foreign exchange rates 60 60
Closing cash and cash equivalents 1,338 2,940
Group Statement of Changes in Equity
As at 30 September 2007
Share Share Merger Other Income
capital premium reserve reserves statement Total
£000's £000's £000's £000's £000's £000's
At 1 October 2005 1,951 9,634 29,729 307 (33,857) 7,764
Increase in share capital 8 - - - - 8
Shares purchased - - - (8) - (8)
Share based payments - - - 122 - 122
Profit for the year - - - - 126 126
At 30 September 2006 1,959 9,634 29,729 421 (33,731) 8,012
Share based payments - - - 32 - 32
Loss for the year - - - - (1,775) (1,775)
At 30 September 2007 1,959 9,634 29,729 453 (35,506) 6,269
Notes to the Financial Statements
1.General information
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs), this announcement does not
itself contain sufficient information to comply with IFRSs. The Group will
publish full financial statements that comply with IFRSs on 18 January 2008.
Cobra Biomanufacturing Plc is a company incorporated in the UK under the
Companies Act 1985. The address of the registered office is The Stephenson
Building, Keele Science Park, Keele, Staffordshire, ST5 5SP. The nature of the
Group's operations and its principal activities are set out in note 5 and in the
Financial Review.
This financial information is presented in pounds sterling because that is the
currency of the primary economic environment in which the Group operates.
At the date of signing this financial information, the following standards and
interpretations which have not been applied in these financial statements were
in issue but not effective:
IFRS 7 Financial Instruments: Disclosures; and the Related
Amendments to IAS 1 on Capital Disclosures
IFRS 8 Operating Segments
IFRIC 10 Interim Financial Reporting and Impairment
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes
IFRIC 14/IAS 19 The Limit on a Defined Benefit Asset and Minimum Funding
Requirements and their Interactions
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the Group, other than additional disclosures in relation to the
adoption of IFRS 7.
2. Significant accounting policies
Basis of preparation: The Group's previous financial statements have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP). However for
the financial year ended 30 September 2007, the Group has decided to prepare its
annual consolidated financial statements in accordance with IFRS as adopted by
the European Union (EU) and implemented in the UK.
The presentation of financial information under IFRS is governed by IFRS 1. In
some cases this will require the presentation of an item in a different
position, or the use of a different description in the IFRS income statement or
balance sheet to that adopted in the UK GAAP profit and loss account or balance
sheet. These reclassifications have been described in the explanatory notes.
An explanation of how the transition from UK GAAP to IFRS has affected the
Group's results and income statement for the year ended 30 September 2006, and
the equity and balance sheets as at 1 October 2005 and 30 September 2006 is set
out in note 13.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 30 September 2007 or 2006, but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under s237(2) or
(3) Companies Act 1985.
Basis of consolidation: The Company has taken the exemption available under
Section 230 of the Companies Act 1985 from presenting an income statement for
the Company, Cobra Biomanufacturing Plc only. The consolidated financial
statements comprise the accounts of Cobra Biomanufacturing Plc and its
subsidiary undertakings (the Group), Cobra Biologics Limited, Cobra Oral
Technology Limited, Cobra Biomanufacturing EBT Limited and Cobra
Biomanufacturing LLC up to 30 September 2007.
Revenue: Excludes value added tax and represents amounts receivable in respect
of the sale of services during the year. Revenue on contracts is invoiced in
accordance with the terms of the agreement with the customer. Non refundable
capacity reservation fees, which are usually invoiced and paid upon contractual
signature, are recognised as revenue as the contract progresses. The remainder
of the contractual revenue is recognised upon the stage of completion when the
outcome of the contract can be foreseen with reasonable certainty and after
allowing for costs of completion.
Research and development expenditure: Expenditure on new manufacturing process
improvements or know how, which includes internal wage costs and external costs
incurred in patenting, external studies and consultancy which the Group is
satisfied that it is probable that future economic benefit will result, is
capitalised as an intangible asset and amortised through research and
development expenditure over its expected useful life. Capitalisation commences
from the point at which the technical feasibility and commercial viability can
be demonstrated.
Expenditure that does not meet the above criteria is written off in the period
in which it is incurred.
Intangible assets: Are stated at cost less provisions for amortisation and
impairments. Patents and know how are amortised over their estimated useful
economic lives from the time they are available for use. The estimated useful
lives for determining the amortisation charge are reviewed annually.
Property, plant and equipment: Depreciation is provided on all property, plant
and equipment, other than freehold land, at rates calculated to write off the
cost less residual value of each asset evenly over its expected useful life as
follows:
Freehold buildings between 15 and 50 years
Plant and laboratory equipment between 6.67 and 15 years
Short leasehold building improvements 6.67 years
Office equipment 4 years
Motor vehicles 3 years
The cost of property, plant and equipment includes directly attributable finance
costs, calculated on a day to day basis, on expenditure incurred during
construction and modification. The carrying values of property, plant and
equipment are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. Assets under construction
include the costs directly attributable to bringing the asset into working
condition for its intended use.
Taxation: The tax income represents the sum of the current tax receivable and
deferred tax. The tax currently receivable is based on the taxable (loss)/profit
for the year. Taxable losses differ from the net (loss)/profit as reported in
the income statement because it excludes items of income and expenses that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
(loss)/profit, and is accounted for using the balance sheet asset method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary differences arise from the initial recognition of
goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the tax
(loss)/profit nor the accounting (loss)/profit.
Deferred tax liabilities are recognised for taxable temporary differences arsing
from investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. The carrying value of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient profits will be available to allow all or part
of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, expect when it relates to items
charged or credited direct to equity, in which case the deferred tax is also
dealt with in equity. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
Government grants: In respect of capital expenditure are credited to a deferred
income account and are released to profit over the expected useful lives of the
relevant assets by equal instalments. Grants of a revenue nature are credited to
income so as to match them with the expenditure to which they relate.
Inventories: Are stated in the balance sheet at the lower of cost incurred in
bringing each element of inventory to its present location and condition, and
net realisable value. Cost is calculated on a first in first out basis.
Raw materials: purchase cost on a first in first out basis
Work in progress: cost of direct materials and labour plus attributable
overheads based on a normal level of activity.
Net realisable value is based on estimated selling price less any further costs
expected to be incurred on completion and disposal and provision is also made
for slow moving or obsolete items.
Leasing and hire purchase commitments: Assets held under finance leases and hire
purchase contracts, which are those where substantially all the risks and
rewards of ownership of the asset have passed to the Group, are capitalised in
the balance sheet and are depreciated over their useful lives.
The interest element of the rental obligations is charged to the income
statement over the period of the lease and represents a constant proportion of
the balance of capital repayments outstanding.
Rentals paid under operating leases are charged to income on a straight line
basis over the lease term.
Share based payments: The Group has applied the requirements of IFRS 2 'Share
Based Payments'. In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments after 7 November 2002, that were
unvested at 1 October 2005.
The Group makes equity settled share based payments to its employees and
directors. Equity settled share based payments are measured at fair value at
the date of grant and expensed on a straight line basis over the vesting period
of the award. At each balance sheet date, Cobra revises its estimate of the
number of options that are expected to become exercisable.
The value of any shares or options granted is charged to the income statement
over the period the shares vest, with a corresponding credit to reserves. When
share options are exercised, the proceeds received, net of any transaction
costs, are credited to share capital (nominal value) and share premium.
Short term investments: Assets in this category are held at amortised cost and
are short term deposits with original maturities of more than three months.
Cash and cash equivalents: Include cash in hand and at bank and short term
deposits with original maturities of three months or less.
Foreign currencies: Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange
ruling at the balance sheet date. All differences are taken to the income
statement.
Financial instruments: The Group uses financial instruments to reduce exposure
to foreign exchange risk and interest rate movements. The Group does not
currently hedge account, nor does it hold or issue derivative financial
instruments for speculative purposes. The criteria for forward foreign currency
contracts are:
* The instrument must be related to a firm foreign currency commitment;
* It must involve the same currency as the hedged item; and
* It must reduce the risk of foreign currency exchange rate movements on the
Group's operation.
Employee benefits: The Group operates a defined contribution pension scheme,
covering all eligible employees. Contributions to the defined contribution
pension scheme and all other employee benefit costs, most notably holiday pay
are charged to the income statement on an accruals basis.
3 Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group's accounting policies
In the process of applying the Group's accounting policies, which are described
in note 2, the Directors have made the following judgements that have the most
significant effect on the amounts recognised in the financial statements (apart
from those involving estimations, which are dealt with below).
Revenue recognition: In making its judgement with regard to revenue recognition
for its manufacturing services business, the Directors have considered the
detailed criteria for the recognition of revenue for the provision of services
set out in IAS 18 'Revenue' and in particular for each service contract whether
a stage deliverable had been achieved.
Key sources of estimation uncertainty
Impairment of assets: Determining whether the non current assets of the Group
and the Company's investment in subsidiaries are impaired requires an estimation
of the value in use of the cash generating units to which the assets have been
allocated. The value in use requires management to estimate the future cash
flows expected to arise from the cash generating unit and a suitable discount
rate in order to calculate the present value.
Additionally, estimates and assumptions have been made by management in respect
of the fair values of share options, the estimated useful life of tangible and
intangible assets, accruals and prepayments.
4. Revenue
All revenue is generated from continuing operations, the analysis of which is as
follows:
2007 2006
£000's £000's
The rendering of services 9,099 10,145
License revenue 95 -
9,194 10,145
Finance income is disclosed separately in the income statement and has been
excluded from this note.
The licensing revenue generated in the year was received from a North American
customer, whose product type was protein and the payment is associated with
contract manufacturing services.
5. Business and geographical segments
The Group provides contract manufacturing services for the biopharmaceutical
industry.
Management segments the Group's service contracts by revenue and gross profit
contribution into business segments, defined by the customer's product type
(i.e. protein, virus, DNA and Cell Line) and geographically, by the four key
territories in which its customers are located (North America, Europe excluding
UK, UK and Rest of the World) to provide some level of trend performance,
recognising that there will always be a degree of variability in segmental
performance due to the technical complexity and scientific uniqueness of each
service contract.
Management does not allocate sales, marketing and distribution costs, research
and development, administrative expenses, share based payments, finance income,
finance costs, taxation and net assets to individual service contract or
business or geographic segments, as they are regarded by the Group as central
overheads/assets.
Business segments: The business segmental results for 2007 and 2006 are as
follows:
2007 Protein Virus DNA Cell Line Total
£000's £000's £000's £000's £000's
Revenue by customer product type 4,288 2,802 1,817 287 9,194
Cost of sales (2,378) (1,318) (1,522) (111) (5,329)
Gross profit 1,910 1,484 295 176 3,865
Sales, marketing and distribution costs (1,058)
Research and development (606)
Admin exps (ex share based payments) (3,914)
Share based payments (32)
Total administrative expenses (3,946)
Reorganisation costs (90)
Operating loss (1,835)
Finance income 101
Finance costs (151)
Loss before tax (1,885)
Taxation 110
Loss for the year (1,775)
Net assets 6,269
2006 Protein Virus DNA Cell Line Total
£000's £000's £000's £000's £000's
Revenue by customer product type 6,742 1,946 1,013 444 10,145
Cost of sales (3,184) (824) (637) (163) (4,808)
Gross profit 3,558 1,122 376 281 5,337
Sales, marketing and distribution costs (1,079)
Research and development (401)
Admin exps (ex share based payments) (3,733)
Share based payments (122)
Total administrative expenses (3,855)
Operating profit 2
Finance income 192
Finance costs (123)
Profit before tax 71
Taxation 55
Profit for the year 126
Net assets 8,012
Geographic segments: the geographical segmental results for 2007 and 2006 are as
follows:
2007 North Europe (excl Rest of the Total
America UK) UK World
£000's £000's £000's £000's £000's
Revenue by customer location 5,985 2,834 212 163 9,194
Cost of sales (2,645) (2,515) (125) (44) (5,329)
Gross profit 3,340 319 87 119 3,865
Sales, marketing and distribution costs (1,058)
Research and development (606)
Admin exps (ex share based payments) (3,914)
Share based payments (32)
Total administrative expenses (3,946)
Reorganisation costs (90)
Operating loss (1,835)
Finance income 101
Finance costs (151)
Loss before tax (1,885)
Taxation 110
Loss for the year (1,775)
Net assets 6,269
2006 North Europe (excl Rest of the Total
America UK) UK World
£000's £000's £000's £000's £000's
Revenue by customer location 8,657 703 589 196 10,145
Cost of sales (3,990) (392) (361) (65) (4,808)
Gross profit 4,667 311 228 131 5,337
Sales, marketing and distribution costs (1,079)
Research and development (401)
Admin exps (ex share based payments) (3,733)
Share based payments (122)
Total administrative expenses (3,855)
Operating profit 2
Finance income 192
Finance costs (123)
Profit before tax 71
Taxation 55
Profit for the year 126
Net assets 8,012
6. Finance income
2007 2006
£000's £000's
Bank interest receivable 63 65
Exchange rate gains 38 127
101 192
7. Finance costs
2007 2006
£000's £000's
Interest payable on bank loans 45 33
Interest payable on finance leases 106 94
151 127
Less: interest capitalised - (4)
151 123
8. Taxation
The Group is entitled to Research and Development tax relief under Schedule 20
of the Finance Act 2000, in respect of the years ended 30 September 2006 and
2007.
2007 2006
£000's £000's
Taxation on (loss)/profit on ordinary activities
Tax credit in relation to R&D claim (100) (55)
Adjustments in respect of previous periods (10) -
Total tax (110) (55)
The trading losses carried forward available for set off against future profits
arising from the same trade amount to approximately £16.0m (2006: £14.2m)
9. (Loss)/earnings per ordinary share
2007 2006
£000's £000's
(Loss)/profit for the year (1,775) 126
(Loss)/earnings per share
Weighted average number of shares (000's) 19,591 19,504
(Loss)/earnings per share (pence) (9.1) 0.6
10. Trade and other receivables
2007 2006
£000's £000's
Trade receivables 790 1,445
Other receivables 292 319
Prepayments 374 509
1,456 2,273
11. Trade and other payables
2007 2006
£000's £000's
Trade payables 1,085 1,394
Taxation 125 121
Deferred income 516 1,195
Accruals and other provisions 464 592
2,190 3,302
12. Net cash (outflow)/inflow from operating activities
2007 2006
£000's £000's
Operating (loss)/profit (1,835) 2
Reorganisation costs 90 -
Depreciation of property, plant and equipment 850 737
Amortisation of intangible fixed assets 17 1
Share based payments 32 122
Decrease/(increase) in inventories 213 (364)
Decrease/(increase) in trade and other receivables 812 (203)
(Decrease)/increase in deferred income (679) 839
Decrease in trade and other payables (436) (42)
Net cash (outflow)/inflow from operations (936) 1,092
R&D tax credit 65 49
Net cash (outflow)/inflow from operating activities (871) 1,141
13. Explanation of the transition to IFRS
For all periods up to and including the year ended 30 September 2006, the Group
prepared its financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (UK GAAP).
In preparing this financial information, the Group has started from an opening
balance sheet as at 1 October 2005 the Group's date of transition to IFRS, and
made those changes in accounting policies and other restatements required by
IFRS 1, for the first time adoption of IFRS.
IFRS 1 allows first time adopters certain exemptions from the general
requirements to retrospectively apply IFRS as effective for the 30 September
2005 year end. The optional exemptions taken by the Group are as follows:
Business combinations: The Group has elected not to apply IFRS 3 Business
Combinations retrospectively to business combinations that took place prior to
the transition date. Consequently, goodwill arising on business combinations
before the transition date remains at its previous UK GAAP carrying value as at
the date of transition.
Share based payments: The Group has adopted the exemption in IFRS 1 such that
the application of IFRS 2 "Share Based Payments" applies only to awards made
after 7 November 2002, which have not vested by 1 January 2005.
The principal impact of IFRS on these interim financial statements has been in
relation to the following:
a. There is a provision for holiday pay shown under administrative
expenses.
b. In accordance with IFRS 2, share based payments are measured at a fair
value at the date of grant and expensed on a straight line basis over the
vesting period of the award.
c. Under IFRS Cobra has chosen to reclassify foreign exchange gains under
finance income, under UK GAAP they were previously shown under administrative
expenses.
d. Under UK GAAP short term bank deposits were included in cash at bank
including short term deposits, under IFRS, those with original maturities of
less than three months are included in cash and cash equivalents and those with
original maturities of three months or more are shown under short term
investments.
The reconciliation between UK GAAP and IFRS for the Group's profit for the year
and income statements for the year ended 30 September 2006 and the total equity
and balance sheets as at 1 October 2005 (the date of transition) and 30
September 2006 are presented below:
Reconciliation of profit for the year ended 30 September 2006
2006
£000's
Profit after tax under UK GAAP 265
Holiday pay accrual a (18)
Share based payments b (121)
Profit after tax under IFRS 126
Reconciliation of income statement for the year ended 30 September 2006
UK GAAP IFRS effect IFRS
£000's £000's £000's
Revenue 10,145 - 10,145
Cost of sales (4,808) - (4,808)
Gross profit 5,337 - 5,337
Sales, marketing and distribution costs (1,079) - (1,079)
Research and development (401) - (401)
Admin expenses (ex share based payments) a & c (3,588) (145) (3,733)
Share based payments b (1) (121) (122)
Total administrative expenses (3,589) (266) (3,855)
Operating profit 268 (266) 2
Finance income c 65 127 192
Finance costs (123) - (123)
Profit before tax 210 (139) 71
Taxation 55 - 55
Profit after tax 265 (139) 126
Reconciliation of equity as at 1 October 2005 (date of transition to IFRS) and
30 September 2006
1 October 30 September
2005 2006
£000's £000's
Total equity under UK GAAP 7,813 8,079
Holiday pay accrual a (49) (67)
Total equity under IFRS 7,764 8,012
Reconciliation of balance sheet presentation at 1 October 2005 (date of
transition to IFRS)
UK GAAP IFRS effect IFRS
£000's £000's £000's
Non current assets
Property, plant and equipment 7,495 - 7,495
7,495 - 7,495
Current assets
Inventories 233 - 233
Trade and other receivables 2,013 - 2,013
Short term investments d - 275 275
Cash and cash equivalents d 3,036 (275) 2,761
5,282 - 5,282
Total assets 12,777 - 12,777
Current liabilities
Obligations under finance leases (306) - (306)
Trade and other payables a (2,475) (49) (2,524)
(2,781) (49) (2,830)
Net current assets 2,501 (49) 2,452
Non current liabilities
Bank loans (1,280) - (1,280)
Obligations under finance leases (903) - (903)
(2,183) - (2,183)
Total liabilities (4,964) (49) (5,013)
Net assets 7,813 (49) 7,764
Capital and reserves
Share capital 1,951 - 1,951
Share premium 9,634 - 9,634
Merger adjustment 29,729 - 29,729
Other reserves b - 307 307
Profit and loss account a & b (33,501) (356) (33,857)
Total equity 7,813 (49) 7,764
Reconciliation of balance sheet presentation at 30 September 2006
UK GAAP IFRS effect IFRS
£000's £000's £000's
Non current assets
Property, plant and equipment 8,355 - 8,355
Intangible assets 160 - 160
8,515 - 8,515
Current assets
Inventories 595 - 595
Trade and other receivables 2,273 - 2,273
Short term investments d - 275 275
Cash and cash equivalents d 3,215 (275) 2,940
6,083 - 6,083
Total assets 14,598 - 14,598
Current liabilities
Bank loans (37) - (37)
Obligations under finance leases (470) - (470)
Trade and other payables a (3,235) (67) (3,302)
(3,742) (67) (3,809)
Net current assets 2,341 (67) 2,274
Non current liabilities
Bank loans (1,773) - (1,773)
Obligations under finance leases (1,004) - (1,004)
(2,777) - (2,777)
Total liabilities (6,519) (67) (6,586)
Net assets 8,079 (67) 8,012
Capital and reserves
Share capital 1,959 - 1,959
Share premium 9,634 - 9,634
Merger adjustment b 29,729 - 29,729
Other reserves a & b (7) 428 421
Profit and loss account (33,236) (495) (33,731)
Total equity 8,079 (67) 8,012
Basis of preparation and further information
The Annual Report will be posted to shareholders on 29 February 2008. Further
copies will be available on request from the Company Secretary, Cobra
Biomanufacturing Plc, The Science Park, Keele, Staffordshire, ST5 5SP.
The Annual General Meeting will be held on 10 April 2008 at 11.00am at Buchanan
Communications Limited, 45 Moorfields, London, EC2Y 9AE.
The financial information for the year ended 30 September 2007 does not
constitute full accounts within the meaning of Section 240 of the Companies Act
1985. The figures for the year ended 30 September 2007 are audited. The
preliminary announcement is prepared on the same basis as set out in the
statutory accounts for the year ended 30 September 2007. Those accounts, upon
which the auditors issued an unqualified opinion, will be delivered to the
Registrar of Companies.
Statutory Accounts for 2007 will be delivered to the Registrar of Companies
following the Annual General Meeting.
The board of directors of Cobra Biomanufacturing Plc approved the Preliminary
Results on 18 January 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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