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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Goldshield Grp | LSE:GSD | London | Ordinary Share | GB0002893823 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 486.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:0481X
Goldshield Group PLC
11 June 2002
For Immediate Release: 07.00, Tuesday, 11 June 2002
GOLDSHIELD GROUP PLC
Preliminary Results for the year ended 31 March 2002
Eleventh year of positive growth for the profitable British pharmaceutical
company
Goldshield Group plc today has pleasure in reporting its preliminary results for
the year ended 31 March 2002.
HIGHLIGHTS
• For 11th consecutive year - turnover up - risen by 42.4% to £100.4 m
(2001: £70.5 m)
• Profit before tax increased by 26.3% to £15.9 m (2001: £12.6 m)
• Diluted earnings per share up 32.5% to 28.1 p (2001: 21.2p)
• Final dividend 2.9 p per share giving an increase in total dividend
for the year of 26.1% to 4.35 p per share (2001: 3.45 p per share)
• Resumption of US marketing activities post September 11 - outlook
highly promising
• Substantial rise in sales across all divisions and in all global
regions:
• Pharmaceutical products increased by 32.2% to £43.8 m (2001: £33.2 m)
• Healthcare products increased by 51.3% to £56.6 m (2001: £37.3 m) -
reflecting increased turnover in North America
• Group consolidation continues on track
• Successful completion of five acquisitions:
• Changes and PR Nutrition - considerably strengthened healthcare
prospects
• Antigen and Wyeth products - contributed to growth in
pharmaceutical division
Commenting on the results, Ajit Patel, Executive Chairman of Goldshield Group,
said:
"We have had another excellent year of progress and looking ahead your Board
expects continued growth in both the healthcare and the pharmaceutical product
areas. We now have a stable platform in the US from which we aim to build our
US business, while in Europe, we will focus on growing through a combination of
acquisitions and further exploiting niche-marketing opportunities. The Antigen
acquisition, in particular, provides us with growth prospects within the
injectibles and the oncology markets throughout Europe, the Rest of the World
and in due course, the US.
"I believe that the Group's growth should continue along the lines seen to date
and look forward to updating you on the progress we make as we move forward
during 2002/3."
For further information, please contact:
Goldshield Group plc Tel on 11.06.02: +44 (0) 20 7466 5000
Ajit Patel, Executive Chairman Thereafter: +44 (0) 20 8649 8500
Rakesh Patel, Finance Director
Buchanan Communications Tel: +44 (0) 20 7466 5000
Nicola How / Louise Bolton
Chairman's Statement
Overview
I am delighted to report on yet another successful year for the Group. The Group
has continued to grow organically and through acquisitions and the results are
in line with expectations.
Group turnover for the year has increased by 42.4% to £100.4 million with profit
before tax growing to £15.9 million - an increase of 26.3%. Diluted earnings per
share have increased by 32.5% to 28.1 pence (2001: 21.2 pence). In view of this
increase, the Directors are proposing a final dividend of 2.9 pence per share
making a total for the year of 4.35 pence per share which represents an increase
in the total dividend for the year of 26.1% (2001: 3.45 pence).
Sales in the United Kingdom and Western Europe have increased by 17.1% to £68.5
million (2001: £58.5 million) represented by organic growth of 11.5% with the
balance being attributable to the Antigen and Diamox acquisitions. Sales in
North America have increased to £26.3 million (2001: £7.5 million). Sales in the
Rest of the World have increased by 25.2% to £5.7 million (2001: £4.5 million).
Sales of pharmaceutical products have increased by 32.2% to £43.8 million (2001:
£33.2 million) and sales of healthcare products have increased by 51.3% to £56.6
million (2001: £37.3 million). The increased sales of healthcare products
largely reflect the increased turnover in North America.
The final dividend will be subject to approval at the Annual General Meeting, to
be held on 22 July 2002, and is expected to be paid on 19 August 2002 to
Ordinary Shareholders on the register at the close of business on 21 June 2002.
The UK based businesses have continued to perform successfully with the sales of
pharmaceutical products being augmented by the acquisition of the rights to
market Diamox in Western Europe and South Africa.
Following the events of September 11, the North American businesses suffered
from reduced confidence both in terms of the economy and the postal systems. I
am pleased to report that the consumer confidence is returning and we remain
positive about our growth prospects in this substantial healthcare market.
On 18 March 2002 Andy Oades was appointed to the main Board of the Group. Andy
joined Goldshield in February 1998 and is responsible for marketing
pharmaceutical products in Western Europe. Since joining the Group in 1998, he
has successfully managed the rapid growth of our pharmaceutical product sales.
The one disappointment for the Group was that on 10 April 2002, our business
premises and my residence were visited by the Serious Fraud Office ("SFO") and
certain documentation taken away. A press statement issued by the SFO stated
that its operations formed part of an investigation into a suspected conspiracy
to defraud the National Health Service ("NHS") concerning the pricing, supply
and distribution of penicillin based antibiotics and warfarin between 1 January
1996 and 31 December 2000. The Group has provided its full support and
co-operation to the SFO and its investigators and does not believe that it has
acted in an unlawful or improper manner.
The Group does not believe that the aspect of the SFO investigation which
relates to penicillin based products applies to the Group. This is because the
Group did not sell any penicillin based products during the period under
investigation.
So far as concerns that aspect of the SFO investigation which relates to
warfarin, the Group believes that this has only very limited application to the
Group. The Group had total sales of £6.9 million derived from warfarin during
the period under investigation. This equates to 3.7% of the Group's turnover
during this period. However, of this £6.9 million, £4.8 million was generated
from sales of Marevan, Goldshield's branded version of warfarin. Throughout the
period to which the investigation relates, Marevan was sold at prices determined
with the Department of Health ("DOH") under the Prescription Pricing
Regulation Scheme ("PPRS"). The effect of the PPRS is to prevent the NHS from
buying at prices above the PPRS specified levels. Whilst suppliers are free to
discount PPRS prices, the Group cannot see that selling at PPRS prices can be
considered fraudulent behaviour.
The remaining £2.1 million of warfarin sales were derived by the Group during
the period April 2000 to 31 December 2000 from the Group's generic warfarin
product. Sales of this generic warfarin product during the period under
investigation were made, on average, at prices 50% below the applicable Drug
Tariff published every month by the DOH.
The Directors believe that they have at all times conducted the affairs of the
Group in accordance with the highest standards of business probity and will
continue to do so.
As of June 10, 2002 we have had no further communications from the SFO since
their visit.
Operating Review
As announced in our statement last year, this year has been one of operational
consolidation, with a significant amount of resources having been invested in
management and infrastructure changes in order to prepare a platform for future
growth. I am pleased to report that the reorganisation is progressing as
planned. We expect to complete most of the changes by December 2002.
In line with our intentions, we expect to make further changes to the Main Board
over the next 12 months. In particular, I expect to resign my position as
Chairman of the Board and instead concentrate more on the business as Chief
Executive Officer. The Board will simultaneously appoint a Non Executive
Chairman taking the total number of Non Executive Directors to three. Over the
coming months we will continue to review the make up of the Main Board.
A further area of change in the way we manage the business has been in the
creation of an Operating Board of Divisional and Functional Directors. The
Operating Board was formed to support the Main Board in the running of the day
to day business. The Operating Board which currently stands at 11 is supported
by an international senior management team consisting of over 40 key managers.
In addition to the management reorganisation a number of other operational
changes have also been implemented during the year. Management information and
accounting systems have been unified, new processes and software developments to
increase inventory efficiencies have been implemented. We have continued to
further outsource and streamline many more internal functions, both at home and
in the US, in order to provide better efficiencies.
Despite the fact that we have continued with intense operational changes in
preparing a platform for the future, we have maintained our growth, invested a
lot in strategic product development and made several acquisitions. I am
confident that the operational changes undertaken will make a significant
contribution to our growth during the next several years.
Acquisitions
Changes and PR
On 17 April 2001 the Group acquired Changes International ("Changes") and PR
Nutrition ("PR") from Twinlab Corporation. The acquisition was for the assets,
know-how, trademarks and inventory for a total consideration of US$5.0 million
payable upon completion. The consideration included inventories valued at US$1.5
million.
Changes develops, markets and sells vitamins, herbs and nutritional supplements
under the Changes brand through a network of independent distributors. The
Changes products are specially formulated and packaged for distribution and are
not intended for sale to retail outlets. Changes' product line addresses
specific needs in the areas of weight management, nutritional defence, advanced
daily nutrition, cardio-care and focused nutritional solutions.
PR develops, markets and sells nutritionally enhanced food bars, diet programmes
and other nutritional products under the PR Bar and PR Nutrition brand names for
sale direct to consumers through direct and speciality mailings and through
direct response sales.
Antigen
On 28 November 2001 the Group acquired the sales, marketing and distribution
rights worldwide for the Antigen brand from Antigen Holdings Limited. The Group
acquired Antigen International Limited, Antigen Overseas Limited and Anpharm
Limited (all companies registered in the Republic of Ireland) together with all
of the know-how, trade marks, trading styles, sales, marketing and distribution
rights to the products of Antigen Holdings Limited and its subsidiary companies.
The products acquired consist of a range of sterile injectible therapeutic
pharmaceuticals used throughout the world to treat a wide range of conditions
including Anaesthesia and Rheumatology.
This acquisition will provide a strong platform to enhance sales of sterile
injectible products throughout the UK and Ireland. Furthermore since November
the Group has started to develop sales in selected international markets. This
is a new product area for the Group and will open up new marketing
opportunities.
Diamox
On 24 December 2001 the Group acquired the sales, marketing and distribution
rights and associated intellectual property to Diamox from the Wyeth Division of
American Home Products Inc. for a total consideration of £4.9 million.
Diamox was originally introduced as an orally active diuretic and subsequently
has been found to be effective in the non-surgical treatment of glaucoma, a
major cause of loss of sight, and in treating epilepsy. The Group believes this
to be a sound acquisition strategically. This is a niche product capable of
further development and will strengthen our presence in some key markets.
The Group acquired Diamox tablets, Diamox SR capsules and Diamox Injection.
Initial markets for which the rights have been acquired are Western Europe
(excluding Italy, Spain and Portugal) plus South Africa. The Group also has the
option to obtain certain additional markets in Eastern Europe and the Middle
East at no extra cost.
Wyeth
On 26 March 2002 the Group acquired the sales, marketing and distribution rights
to ten pharmaceutical products for the UK and Ireland from John Wyeth & Brother
for a total consideration of £4.8 million.
The rights cover a range of products that will complement those of the Antigen
business and also include a number of products used in the treatment of various
types of cancer that will complement the range of oncology products under
registration with the Medicines Control Agency and in development. Two further
products will extend the Group's rheumatology portfolio.
Marketing and Sales Review
The Pharmaceutical product group has seen strong organic growth over the past
year due to a combination of internal management initiatives, an increase in our
International network of distributors and new product introductions. Overall the
sales have grown this financial year by 32.2% to £43.8 million. Contributions
from two acquisitions, Antigen and Wyeth, have contributed to this overall
growth and the acquisition of the Antigen portfolio provided Goldshield with a
significant presence in the Secondary Care sector within the UK and Eire. These
products are a foundation from which to add value within the current markets and
to enter new markets across selected European and International territories.
Overall sales of the healthcare products have increased by 51.3% to £56.6
million (2001: £37.3 million). This increase in sales is largely a reflection of
the increased turnover in North America. As anticipated there has been increased
competition in the UK mail order sector, which we dominate. The increased
competition is mainly due to the high growth of this business area and the low
costs of entry. We have therefore consolidated our UK business through brand
extension and niche product marketing and instead our efforts have been
concentrated on further developing the lucrative US$15 billion North American
market.
Europe
The launch of Forley Generics in April 2000 has been successful in exploiting
the growing trend within the Pharma Industry towards generic substitution of
branded products. This financial year we achieved net sales of £7.2 million. Our
portfolio of products has continued to grow during this period and now stands at
90. A further pipeline of new products is planned for next financial year to
complement the existing range and provide further offerings to the pharmacy
sector.
The new niche marketing initiative within dispensing doctors has continued to be
successful with annualised sales of £3.1 million at the financial year end.
These GPs control 16% of the total prescription market. A significant new
product pipeline is now planned for next financial year, which will coincide
with full UK coverage of this niche sector. Our distribution of brands across
other European countries continues to display growth. Export sales into European
countries have also grown in line with expectations.
The UK Healthcare market continues to mature. However, Goldshield has maintained
its estimated 10% share of this market, selling exclusively through mail order.
Our share in this sector is estimated to be over 70% and competition has failed
to make any significant impact on the business. During the year we have
continued to develop new ways of stimulating growth including the establishment
of a strong internet trading presence and up selling strategies to build
existing customer order values, as well as continuing our established strategies
of product advertising and education based promotions. A programme of
introducing improved or higher strength variants of existing key formulations
focussing closely on the needs of our customers has continued. In addition we
have selectively introduced third party products which have direct relevance to
our customers specific needs and expand our product range.
North America
As stated in last year's Group accounts, the US, being one of the largest
healthcare markets, was selected as a key region for developing sales outside
Europe. The North American market for healthcare products is over US$15.0
billion a year and growing. Our entry into this market place has been achieved
through various acquisitions including the assets of Changes and PR Nutrition
which were completed during last year. These acquisitions met our two initial
goals of establishing a management team in the US and to acquire an expertise in
direct sales through self employed agents.
Much of the year's activity has been focused on consolidating and integrating
these acquisitions into the central management in the UK and stemming the
inherited decline in sales and agent numbers. We are pleased to report that we
have stopped these declines and have seen sales stability during the 1st and 2nd
quarters of this calendar year.
Following the sad events of September 11 and the subsequent anthrax scares, US
consumer confidence was very low. In particular the confidence in the postal
system affected sales and marketing efforts of direct marketing businesses
throughout the United States. This led us to suspend all new marketing
initiatives in October of last year. I am pleased to report that the consumer
confidence in the postal systems has bounced back and as a result we have
resumed some marketing activities during May and will continue to increase our
efforts in order to bring the business back on track.
Sales in the US were £26.3 million in the year compared to £7.5 million in 2001
when we only traded for 9 months. The US businesses produced an operating profit
before amortisation and depreciation of just over £1.1 million.
International (Rest of World)
International sales increased by 25.2% to £5.7 million (2001: £4.5 million) with
sales arising in 47 countries through distributors and direct exports. Although
the year has seen completion of Goldshield Distribution agreements in all but a
handful of countries (formalising a network which now covers 30 markets and has
been extended through the Antigen acquisition to almost 50), it is management's
intention to focus on selected markets. It is thus worth noting that 68% of 2002
sales came from just six markets and 82% from the top twelve.
The pharmaceutical business increased by 36% contributing £5.1 million (2001:
£3.9 million) some 88% of the International sales. For the first time the
acquisitions made in 1999 (the SmithKline Beecham product range and Kamillosan/
Camoderm from Norgine) all outperformed pre-acquisition sales levels. The former
SB products with sales of £4.0 million (2001: £3.2 million) have done
particularly well in the Middle East and South Africa. Growth in sales of
Kamillosan/Camoderm, a product widely used by nursing mothers, has been achieved
through successful first time launches by our marketing partners in Australia
and South Africa, as well as a re-launch in New Zealand.
With strong interest from the Distributor network we have in place it is
envisaged that the recently acquired Antigen injectible product range will
provide a significant contribution to International's business in the coming
year.
The Regina and Goldshield Healthcare business has seen limited growth by
comparison, up 17% to £0.7 million. The Regina brand which depends heavily on
the Duty Free business in the Far East was severely impacted at the start of the
year by a sharp reduction in business travel due to the economic downturn in the
region which was further hit by events of September 11. As reported last year
first introductions of Goldshield Healthcare products had been achieved in
several smaller markets and towards the end of this year we have added to this
range launches in South Africa and the Czech Republic.
Product Development
During this financial year considerable activity has occurred with initiating
new Pharmaceutical product developments, license submissions and approvals
within Europe and selected International markets.
In the year ended 31 March 2001 we reported that 36 new product development
projects were initiated within the injectible and oncology markets. Currently
four products are awaiting approval from the UK regulatory authority and 16 have
completed the pre-formulation phase of which six are ready for commercial scale
up and preparation of regulatory dossiers. Eight of these projects were put on
hold since they were similar to the basket of products acquired from Antigen.
The rest have been put on hold due to changes in market conditions making these
projects commercially unprofitable.
We have also initiated a further 12 new injectible formulation developments for
the European and International markets.
Outside the injectibles and oncology markets, we are currently developing a
further 16 products. These products which are mainly oral and topical, cover
several different niche markets. These projects are at different stages of
development and we expect to see at least 4 marketing authorisations during the
current financial year.
Overall, during the year under review, we submitted 60 product licences covering
24 active substances and achieved 40 different product approvals in Europe, the
majority of which were in the UK
Future Prospects
Looking forward the Goldshield Board expects continued progress in both the
healthcare and the pharmaceutical product areas. Much of the integration and
consolidation has been completed in the US. We will use this stable platform
together with renewed confidence in the postal systems as the basis to build our
business there. The ongoing consolidation within the US healthcare market
continues to provide tremendous opportunities and we fully expect to capitalise
on these over the next few years.
In Europe we will focus on growing our business through a combination of
acquisitions and further exploiting niche-marketing opportunities. The Antigen
acquisition together with the ongoing product development will provide us with
growth prospects within the injectibles and the oncology markets throughout
Europe, International and the US in time. Furthermore, the generics business,
which will benefit from several product approvals and lower manufacturing costs
is set to grow in Europe and International markets. The growing number of
country partners and the prospect of selling existing group products through
these channels adds to the prospects for future growth.
2001/2 has been another remarkable year for the Group and I would like to take
this opportunity to thank every member of the Goldshield Group throughout the
world, without whom this success would not have been possible. As I am now
personally spending an increasing amount of time in helping to establish the US
business, I would also like to thank Kirti Patel, Chief Operating Officer, for
his hard work and dedication in continuing to run a well managed and efficient
organisation at home.
The fundamentals of the Group's business including its clear direction,
strengthened management team and operational infrastructure, broadening
geographic base, significantly better opportunities for growth in both Europe
and US, broader product development portfolio, strong balance sheet and cash
flow mean that the Group is better placed than at any time in the Group's
history.
I believe that the Group's growth should continue along the lines seen to date
and look forward to updating you on the progress we make as we move forward
during 2002/3.
Ajit Patel
Executive Chairman
10 June 2002
Finance Director's Review
Turnover
Once again the Group has benefited from strong organic and acquisitive growth.
Group turnover for the year has increased by 42.4% to £100.4 million (2001:
£70.5 million). Business and product acquisitions during the year have
contributed sales of £21.2 million during the year.
Sales in the UK and Western Europe have increased by 17.1% to £68.5 million
(2001: £58.5 million) represented by organic growth of 11.5% with the balance
being attributable to the Antigen and Diamox acquisitions.
Sales in North America have increased to £26.3 million (2001: £7.5 million),
this being largely attributable to the acquisition of Changes International Inc
("Changes") and PR Nutrition Inc in April last year and a full year's sales for
Golden Pride and Achievers.
We continue to develop successful trading relationships with our distributors
and marketing partners, and this has resulted in sales in the rest of the world
increasing by 25.2% to £5.7 million (2001: £4.5 million) of which 5.5% is
represented by organic growth.
Sales of pharmaceutical products have increased by 32.2% to £43.8 million (2001:
£33.2 million) and sales of healthcare products have increased by 51.3% to £56.6
million (2001: £37.3 million). The increased sales of healthcare products
largely reflects the increased turnover in North America.
Gross profit
The Group's gross profit for the year was £71.0 million (2001: £53.1 million),
after charging product manufacturing and packaging costs. The gross margin
achieved was 70.7% (2001: 75.3%). This reduction from last year is largely due
to lower margins earned on recent pharmaceutical acquisitions and lower margins
on generic pharmaceutical products.
Operating results
The Group operating profit was £16.2 million (2001: £12.4 million), representing
an operating margin of 16.2% (2001: 17.6%). The lower operating margin is due to
lower returns achieved in North America as anticipated, coupled with increased
investment in marketing initiatives and increased competition in the UK for
healthcare products.
The operating profit is stated after charging amortisation on goodwill and other
intangible assets of £8.0 million (2001: £6.6 million). The increase in the
amortisation charge is as a result of the acquisitions made during the year and
the full year's charge on acquisitions made in the year ended 31 March 2001.
The North American subsidiaries showed a small operating loss for the year of
£0.6 million (2001: £0.3 million) after amortisation of £1.7 million (2001: £1.3
million). This is in line with our expectations.
Development expenditure
Development expenditure incurred and written off direct to the profit and loss
account was £0.9million (2001: £1.0 million). As at 31 March 2002 the Group does
not have any capitalised development expenditure (2001: nil).
Taxation
The taxation charge of £5.4 million (2001: £4.6 million) represents an effective
tax rate of 33.8% (2001: 36.4%). The decrease is largely as a result of tax
losses in the United States reducing the overall effective rate. Deferred tax
included in the tax charge was nil (2001: £1.5 million).
Earnings and dividend
Diluted earnings per share have increased by 32.5% to 28.1 pence (2001: 21.2
pence).
Basic earnings per share have increased by 29.4% to 28.6 pence (2001: 22.1
pence).
In view of the Group's significant progress during the year the Directors
propose a final dividend of 2.9 pence per share representing an increase in the
total dividend for the year of 26.1% (2001: 3.45 pence).The final dividend will
be subject to approval at the Annual General Meeting, to be held on 22 July
2002,and is expected to be paid on 19 August 2002 to Ordinary Shareholders on
the register at the close of business on 21 June 2002.
Cash flow and liquidity
At the year-end the Group had cash balances of £9.3 million (2001: £6.7
million).
Bank loans of £13.7 million have been taken out during the year (2001: £3.5
million). At 31 March 2002 £15.3 million remained outstanding (2001: £3.3
million), of which £4.6 million (2001: £0.7 million) is due within one year. Of
the outstanding loans, £2.8 million is repayable by quarterly installments
through to 31 December 2002 and £2.2 million repayable by quarterly installments
through to 30 July 2003.The balance of £10.3 million has been financed through a
revolving loan facility of £11.5 million, with no repayments required, expiring
on 5 December 2006.
At 31 March 2002 the Group had liabilities in respect of deferred consideration
payments due on acquisitions of £14.6 million (2001: £16.2 million). Of this
£8.4 million is due within one year (2001: £6.7 million).
During the year the Group fulfilled its commitments to GlaxoSmithKline plc with
the third and final installment of consideration relating to the acquisition of
product licenses and trademarks in 1999. The payment of approximately £4.0
million reflected a reimbursement from GlaxoSmithKline plc of approximately £1.5
million as referred to in the Report and Accounts for the year ended 31 March
2001.
The Directors are confident that all current and future liabilities can be met
when they fall due out of the Group's operating cash flow. In addition the
Group's bankers have indicated that funds will be made available in appropriate
circumstances.
Amended Earn-out Agreement
Under the terms of the Agreement between the Group's wholly owned subsidiary
Goldshield USA Inc. ("Company") and Golden Pride International Inc and WT
Rawleigh Inc (together "GPI") dated 1 July 2000, up to US$21.0 million was
payable. US$8.5 million was paid on completion, with the balance payable subject
to the performance of GPI in the twenty-one months from completion.
Having made the Changes and PR Nutrition acquisition in April 2001, it was
essential to
rationalise and integrate our North American businesses to take advantage of
possible efficiencies in operations and management and to enhance development of
the business.
On 6 July 2001, the Company amended the Earn-out Agreement, whereby the balance
due to GPI was crystallised at US$ 9.5 million without any performance criteria.
Of this deferred balance, US$ 3.2 million was paid on 1 April 2002, and the
balance is payable in equal installments every six months.
The circumstances surrounding the amendment were reviewed by the Company's
auditors, Grant Thornton and were considered fair and reasonable as far as the
shareholders of the Goldshield Group were concerned.
Under the terms of the Agreement between the Company and Achievers Unlimited
dated 1 September 2000, a deferred consideration of up to US$ 9.3 million was
payable subject to performance twenty-seven months from completion. The
Directors also amended this Agreement on 19 July 2001, whereby, US$ 4.0 million
was payable without any performance criteria. US$ 2.0 million was paid on 29
July 2001 and the balance is due on 31 August 2002. The Company's auditors were
not required to review this amendment since this transaction was outside the
related party's requirements of the Listing Rules of the London Stock Exchange.
Rakesh Patel
Finance Director
10 June 2002
Consolidated Profit and Loss Account
for the year ended 31 March 2002
2002 2002 2002 2001
Continuing Acquisitions Total Total
Notes Operations
£000 £000 £000 £000
Turnover 2 80,555 19,878 100,433 70,513
Cost of sales (24,370) (5,043) (29,413) (17,404)
Gross profit 56,185 14,835 71,020 53,109
Distribution costs (7,751) (7,009) (14,760) (5,991)
Administrative expenses (33,042) (6,990) (40,032) (34,697)
Operating profit
15,392 836 16,228 12,421
Net interest 4 (372) 137
Profit on ordinary activities
before taxation 3 15,856 12,558
Tax on profit on ordinary
activities 6 (5,357) (4,572)
Profit on ordinary activities after taxation 10,499 7,986
Equity minority interests (9) -
Profit for the financial year 10,490 7,986
Equity dividends 8 (1,613) (1,249)
Profit retained for the year
transferred to reserves 19 8,877 6,737
Earnings per share
Basic (pence) 9 28.6 22.1
Diluted (pence) 9 28.1 21.2
Dividend per share (pence) 4.35 3.45
A statement of movements on reserves is given in note 19.
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Statement of Total Recognised Gains
and Losses for the year ended 31 March 2002
Group
2002 2001
£000 £000
Profit for the financial year 10,490 7,986
Currency differences on foreign currency net investments (337) 389
Total recognised gains and losses for the year and total gains
and losses recognised since the last financial statements 10,153 8,375
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Balance Sheet at 31 March 2002
2002 2001
Notes £000 £000
Fixed assets
Goodwill 10 33,051 27,328
Other intangible assets 10 38,589 32,704
Intangible assets 10 71,640 60,032
Tangible assets 11 1,327 1,674
72,967 61,706
Current assets
Stocks 13 12,281 8,201
Debtors: due after more than one year - deferred tax 14 783 -
Debtors: due within one year 14 14,007 7,209
Cash at bank and in hand 24 9,320 6,707
36,391 22,117
Creditors: amounts falling due within one year 15 (35,610) (26,576)
Net current assets/(liabilities) 781 (4,459)
Total assets less current liabilities 73,748 57,247
Creditors: amounts falling due after more than one
year 16 (19,237) (12,207)
Provisions for liabilities and charges 17 (3,187) (2,487)
51,324 42,553
Capital and reserves
Called up share capital 18 1,842 1,811
Share premium account 19 21,049 20,858
Profit and loss account 19 28,283 19,743
Shareholders' funds 20 51,174 42,412
Equity minority interests 21 150 141
Total Capital employed 51,324 42,553
The financial statements were approved by the Board of Directors on 10 June
2002,and signed on their behalf by:
A R Patel, Chairman
R V Patel, Finance Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Company Balance Sheet at 31 March 2002
2002 2001
Notes £000 £000
Fixed assets
Investments 12 5,221 4,573
Current assets
Debtors: due after more than one year 14 17,313 15,079
Debtors: due within one year 14 14,467 4,183
Cash at bank and in hand 1,388 986
33,168 20,248
Creditors: amounts falling due within one year 15 (2,856) (914)
Net current assets 30,312 19,334
Total assets less current liabilities 35,533 23,907
Creditors: amount falling due after one year 16 (10,697) -
24,836 23,907
Capital and reserves
Called up share capital 18 1,842 1,811
Share premium account 19 21,049 20,858
Profit and loss account 19 1,945 1,238
Shareholders' funds 24,836 23,907
The financial statements were approved by the Board of Directors on 10 June
2002,and signed on their behalf by:
A R Patel, Chairman
R V Patel, Finance Director
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Cash Flow Statement
for the year ended 31 March 2002
2002 2001
Notes £000 £000
Net cash inflow from operating activities 22 18,093 17,955
Returns on investments and servicing of finance
Interest received 164 229
Interest paid (536) (92)
Net cash (outflow)/inflow from returns on
investments and servicing of financing (372) 137
Taxation
Corporation tax paid (5,942) (2,052)
Capital expenditure and financial investment
Purchase of tangible fixed assets (26) (248)
Purchase of intangible fixed assets (9,513) (14,329)
Proceeds on disposal of tangible fixed assets 804 4
Proceeds on disposal of intangible fixed assets 229 -
Net cash outflow from capital expenditure and financial
investment (8,506) (14,573)
Acquisitions and disposals
Purchase of businesses (11,437) (8,592)
Equity dividends paid (1,394) (1,050)
Proceeds of investment by minority interest - 141
Net cash outflow before financing (9,558) (8,034)
Financing
New bank loan 13,737 3,500
Bank loan payment (1,788) (165)
Issue of shares 222 53
Increase/(Decrease) in cash 24 2,613 (4,646)
The accompanying accounting policies and notes form an integral part of these
financial statements.
Notes to the Financial Statements
1. Principal Accounting Policies
Basis of preparation
The financial statements have been prepared in accordance with applicable United
Kingdom accounting standards and under the historic cost convention. The Group
has adopted FRS 18,Accounting Policies in the year. The Directors have reviewed
the principal accounting policies and consider they remain the most appropriate
for the Group. The principal accounting policies of the Group have remained
unchanged from the previous year, apart from the adoption of FRS 19,Deferred
Tax.
Basis of consolidation
The Group financial statements consolidate those of the Company and of its
subsidiary undertakings (see note 12) drawn up to 31 March 2002.Profits or
losses on intra-group transactions are eliminated in full. The results of the
subsidiary undertaking acquired during the year have been included from the date
of acquisition. On acquisition of a subsidiary, all of the subsidiary's assets
and liabilities which exist at the date of acquisition are recorded at the fair
values reflecting their condition at that date. Goodwill arising on
consolidation, representing the excess of the fair value of the consideration
given over the fair values of the identifiable net assets acquired, is
capitalised net of any provision for impairment and is amortised on a straight
line basis over its estimated useful economic life.
Investments
Investments in subsidiary undertakings in the balance sheet of the Company are
included at the cost of the shares held less amounts written off.
Turnover
Turnover is the total amount receivable by the Group for goods supplied and
services provided, excluding value added tax and trade discounts.
Intangible fixed assets
Brand names, know-how, licences, trademarks and similar intangible items are
capitalised at historical cost net of any provision for impairment and amortised
on a straight line basis over their estimated useful economic lives, which range
between 7 and 10 years.
Depreciation
Depreciation is calculated to write down the cost, less estimated residual
value, of all tangible fixed assets over their expected useful economic lives.
The rates generally applicable are:
Freehold land and buildings 4% p.a. straight line
Office equipment 20% p.a. straight line
Plant and equipment 15% p.a. straight line
Motor vehicles 20% p.a. straight line
Laboratory 20% p.a. straight line
Amortisation commences in the month of purchase and is calculated on a pro rata
basis in the year of acquisition.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or
events that give the group an obligation to pay more tax in the future, or a
right to pay less tax in the future have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is measured using rates of tax that have been
enacted or substantially enacted by the balance sheet date.
Pensions
The Group operates a defined contribution pension scheme whereby contributions
are made to individual employee pension plans of certain employees. These costs
are charged against profits in respect of the accounting period in which they
are paid.
Leased assets
Payments made under operating leases are charged to the profit and loss account
on a straight line basis over the period of the lease.
Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. The financial statements of foreign subsidiaries are translated at the
rate of exchange ruling at the balance sheet date. The exchange differences
arising from the re-translation of the opening net investment in subsidiaries
are taken directly to reserves. Where exchange differences result from the
translation of foreign currency borrowings raised to acquire foreign assets
(including equity investments) they are taken to reserves and offset against the
differences arising from the translation of those assets. All other exchange
differences are dealt with through the profit and loss account.
This accounting policy is as prescribed by Statement of Standard Accounting
Practice 20. It may involve reporting exchange gains on unsettled long term
monetary items as part of the profit or loss for the period. This policy
represents a departure from statutory accounting principles, which only allow
profits which are realised at the balance sheet date to be included in the
profit and loss account. The directors consider that this policy is necessary in
order that the financial statements may give a true and fair view. Deferral of
exchange gains whilst recognising exchange losses would inhibit the fair
measurement of the performance of the group in the year.
Research and development expenditure
All research and development expenditure is written off to the profit and loss
account in the period in which it is incurred.
Financial instruments
Financial assets are recognised in the balance sheet at the lower of cost or net
realisable value. Provision is made for diminution in value where appropriate.
Interest receivable is accrued and credited to the profit and loss account in
the period to which it relates.
Share Options
The estimated cost of share options granted are accrued over the period to which
the benefit relates.
2. Segmental Reporting
Turnover and profit on ordinary activities before taxation are attributable to
the principal activity of the Group.
2002 2001
£000 £000
Turnover by destination:
United Kingdom 58,710 53,098
Western Europe Excluding the United Kingdom 9,766 5,413
North America 26,288 7,473
Rest of the World 5,669 4,529
100,433 70,513
Turnover by origin:
United Kingdom 70,859 63,040
North America 26,288 7,473
Ireland 3,286 -
100,433 70,513
Operating profit:
United Kingdom 16,735 12,692
North America (602) (271)
Ireland 95 -
16,228 12,421
Net assets:
United Kingdom 65,685 44,071
North America 915 1,817
Ireland 8 -
Unallocated (15,284) (3,335)
51,324 42,553
3. Profit On Ordinary Activities Before Taxation
The profit on ordinary activities is stated after charging/(crediting):
2002 2001
£000 £000
Auditors' remuneration:
-Audit services 175 86
-Non audit services (see below) 104 63
Depreciation and amortisation:
-Intangible fixed assets 8,006 6,644
-Tangible fixed assets 455 319
Hire of plant and machinery 50 42
(Profit)/loss on disposal of assets
-Intangible fixed assets 107 (233)
-Tangible fixed assets (199) (4)
Other operating lease rentals 905 635
Foreign exchange losses 195 398
Research and development:
-current year expenditure 900 1,004
Auditors remuneration for non audit services principally consists of the review
and reporting on the Group 's interim results, compliance for corporation taxes
and sales taxes in jurisdictions in which the Group has a presence and limited
due diligence services on proposed acquisitions.
4. Net Interest
2002 2001
£000 £000
Interest payable on bank loans and overdrafts (536) (92)
Interest receivable and similar income 164 229
(372) 137
5. Directors And Employees
Employees
Staff costs during the year were as follows:
2002 2001
£000 £000
Wages and salaries 6,854 6,546
Social security costs 555 567
Other pension costs 453 315
7,862 7,428
The average number of employees is analysed below:
2002 2001
Administration 84 97
Marketing and Selling 159 116
Management 21 20
Warehouse 71 71
335 304
Directors' Remuneration
The emoluments of the Directors were as follows:
2002 2001
£000 £000
Emoluments 941 811
Payments to third parties for consultancy services 27 22
Gain on exercise of share options 57 -
Pension contributions to money purchase pension schemes 82 70
1,107 903
During the year five Directors (2001: four Directors) participated in money
purchase pension schemes.
During the year four Directors,(2001: four Directors) ,including the highest
paid Director, became entitled to receive additional shares under long term
incentive schemes.
The amounts set out above include remuneration in respect of the highest paid
Director as follows:
2002 2001
£000 £000
Emoluments 340 297
Pension contributions to money purchase pension schemes 31 27
371 324
6. Tax On Profit On Ordinary Activities
2002 2001
£000 £000
United Kingdom corporation tax at 30% (2001: 30%) 5,432 3,728
Adjustment in respect of prior periods (152) (217)
Overseas taxation 160 172
Total current tax 5,440 3,683
Origination and reversal of timing differences- (799) (23)
Adjustment to estimated recoverable amount of deferred
tax assets 716 912
Total deferred tax (credit)/charge (83) 889
Tax on profit on ordinary activities 5,357 4,572
The tax assessed for the year is higher than the standard rate of corporation
tax in the United Kingdom at 30% (2001: 30%).
The differences are explained as follows:
2002 2001
£000 £000
Profit on ordinary activities before tax 15,856 12,558
Profit on ordinary activities multiplied by the standard rate
of corporation tax in the United Kingdom of 30%
(2001: 30%) 4,757 3,767
Effect of
Expenses not deductible for tax purposes 859 1,081
Capital allowances for the year in excess of depreciation 72 (889)
Utilisation of tax losses (65) (95)
Differential tax rates on overseas earnings (31) 36
Adjustments to tax charge in respect of prior periods (152) (217)
5,440 3,683
7. Profit For The Financial Year
The Parent Company has taken advantage of section 230 of the Companies Act 1985
and has not included its own profit and loss account in these financial
statements. The profit after tax for the year of the company was £741,000 (2001:
£1,646,000) which is dealt with in the financial statements of the Company.
8. Equity Dividends
2002 2001
£000 £000
Ordinary shares - interim dividend of 1.45p per share paid
21 January 2002 (2001: 1.10p paid 22 January 2001) 543 398
Ordinary shares - proposed final dividend of 2.90p per
share payable on 19 August 2002
(2001: 2.35p paid 17 August 2001) 1,070 851
1,613 1,249
9. Earnings Per Share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings per
share, adjusted to allow for the issue of shares and the post tax effect of
dividends, on the assumed conversion of all dilutive options.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below.
2002 2001
Weighted Weighted
average average
number Per share number Per share
Earnings of shares amount Earnings of shares amount
£000 000 pence £000 000 pence
Profit attributable
to shareholders 10,490 36,621 7,986 36,208
Basic earnings
per share 28.6 22.1
Dilutive effect of securities
Options - 693 - 1,352
Share save options - 68 - 89
Adjusted earnings 10,490 37,382 7,986 37,649
Diluted earnings
per share 28.1 21.2
10. Intangible Fixed Assets
Group
Brand names
know-how
licences and
trade marks Goodwill Total
£000 £000 £000
Cost
At 1 April 2001 39,163 32,968 72,131
Exchange differences - (39) (39)
Additions 10,261 9,762 20,023
Disposals (100) (321) (421)
At 31 March 2002 49,324 42,370 91,694
Amortisation
At 1 April 2001 6,459 5,640 12,099
Exchange differences - 34 34
Provided in the year 4,303 3,703 8,006
Disposals (27) (58) (85)
At 31 March 2002 10,735 9,319 20,054
Net book amount
At 31 March 2002 38,589 33,051 71,640
Net book amount
At 31 March 2001 32,704 27,328 60,032
The Board has considered the useful economic life for significant acquisitions
and concluded in each case that the useful economic life is 10 years.
11. Tangible Fixed Assets
Group
Freehold land Office Plant & Motor
& buildings Laboratory equipment equipment vehicles Total
£000 £000 £000 £000 £000 £000
Cost
At 1 April 2001 786 187 901 257 66 2,197
Additions - - 562 34 117 713
Transfers (224) - - 224 - -
Disposals (525) - (246) - (81) (852)
At 31 March 2002 37 187 1,217 515 102 2,058
Depreciation
At 1 April 2001 94 135 201 35 58 523
Charge for the year - 38 331 65 21 455
Disposals (94) - (78) - (75) (247)
At 31 March 2002 - 173 454 100 4 731
Net book amount
At 31 March 2002 37 14 763 415 98 1,327
Net book amount
At 31 March 2001 692 52 700 222 8 1,674
12. Fixed Asset Investments
See Company Website.
13. Stocks
Group
2002 2001
£000 £000
Finished goods and goods for resale 12,281 8,201
14. Debtors
Debtors due after more than one year
Group Company
2002 2001 2002 2001
£000 £000 £000 £000
Deferred tax 783 - - -
Amounts owing by subsidiary undertaking - - 17,313 15,079
783 - 17,313 15,079
Debtors due within one year
Group Company
2002 2001 2002 2001
£000 £000 £000 £000
Trade debtors 11,806 6,663 - -
Current taxation 595 - 42 -
Amounts owing by subsidiary undertaking - - 14,083 4,159
Prepayments and accrued income 1,606 546 342 24
14,007 7,209 14,467 4,183
15. Creditors: Amounts Falling Due Within One Year
Group Company
2002 2001 2002 2001
£000 £000 £000 £000
Bank loan 4,587 660 1,747 -
Trade creditors 7,563 8,819 - -
Deferred purchase consideration 8,364 6,663 - -
Current taxation 2,820 2,810 - 63
Social security and other taxes 969 1,087 - -
Other creditors 1,091 472 - -
Accruals 9,146 5,214 39 -
Dividends payable 1,070 851 1,070 851
35,610 26,576 2,856 914
16. Creditors: Amounts Falling Due After More Than One Year
Group Company
2002 2001 2002 2001
£000 £000 £000 £000
Deferred purchase consideration 6,193 9,532 - -
Bank Loan 10,697 2,675 10,697 -
Other creditors 2,347 - - -
19,237 12,207 10,697 -
Bank borrowings are secured by a fixed and floating charge over current and
future assets of the Group. Interest is charged at 1.3%above the National
Westminster Bank Plc base rate on bank loans and 1.5%above base rate on
overdraft borrowings.
17. Provisions For Liabilities And Charges
Group
2002 2001
£000 £000
Deferred taxation 3,187 2,487
Deferred taxation provided for in the financial statements is set out below.
Group
Amount provided
2002 2001
£000 £000
Accelerated capital allowances 3,187 2,487
Group
2002 2001
£000 £000
At 1 April 2001 2,487 1,598
Movement in the year 700 889
At 31 March 2002 3,187 2,487
18. Called Up Share Capital
Group
2002 2001
£000 £000
Authorised
100,000,000 ordinary shares of 5 pence each
(2001:100,000,000) 5,000 5,000
Group
2002 2001
£000 £000
Allotted,called up and fully paid
36,836,715 ordinary shares of 5 pence each
(2001:36,215,096) 1,842 1,811
During the year 621,619 shares were issued under the unapproved employee share
option scheme and the employee share save scheme. The difference between the
total consideration of £222,000 and the nominal value of £31,000 has been
credited to the share premium account.
Share options
See Company Website.
19. Share Premium Account And Reserves
Group &
Group Company Company
Profit Profit Share
& loss & loss premium
account account account
£000 £000 £000
At 1 April 2001 19,743 1,238 20,858
Profit for the year 8,877 741 -
Premium on allotment during the year - - 191
Currency difference on foreign currency
net investments (337) (34) -
At 31 March 2002 28,283 1,945 21,049
20. Reconciliation Of Movements In Equity Shareholders'funds
Group
2002 2001
£000 £000
Profit for the financial year after taxation 10,490 7,986
Dividends (1,613) (1,249)
Issue of shares 222 53
Share option accrued cost - 124
Currency difference on foreign currency net investments (337) 389
Net increase in shareholders' funds 8,762 7,303
Shareholders' funds at 1 April 2001 42,412 35,109
Shareholders' funds at 31 March 2002 51,174 42,412
21. Equity Minority Interests
Equity minority interests represent a holding of 30%in Health and Beauty Direct
Limited (see note 12) and the holders of these shares have no other rights
against any other Group undertaking.
22. Net Cash Inflow From Operating Activities
Group
2002 2001
£000 £000
Operating profit 16,228 12,421
Depreciation 455 319
Amortisation 8,006 6,644
Currency differences on foreign currency net investments - 398
Increase in stocks (2,238) (1,633)
(Profit)/loss on disposal of fixed assets:
-Intangible fixed assets 107 (233)
-Tangible fixed assets (199) (4)
Increase in debtors (4,143) (800)
(Decrease)/increase in creditors (123) 719
Share option accrued cost - 124
Net cash inflow from operating activities 18,093 17,955
23. Reconciliation Of Net Cash Flow To Movement In Net Debt
Group
2002 2001
£000 £000
Increase/(Decrease)in cash for the year 2,613 (4,646)
Cash inflow from financing (11,949) (3,335)
Change in net debt arising from cashflows (9,336) (7,981)
Net funds at 1 April 2001 3,372 11,353
Net debt at 31 March 2002 (5,964) 3,372
24. Analysis Of Changes In Net Debt
Group
2002 Cash flow 2001
£000 £000 £000
Cash in hand and at bank 9,320 2,613 6,707
Bank loan (15,284) (11,949) (3,335)
(5,964) (9,336) 3,372
25. Acquisitions
Acquisition of Changes and PR Nutrition
On 17 April 2001 the Group acquired Changes International ("Changes") and PR
Nutrition ("PR") from Twinlab Corporation. The acquisition was for the assets,
know-how, trademarks and inventory for a total consideration of £3,536,000
payable upon completion.
The assets and liabilities acquired were:-
Book and
Estimated
Fair Value
£000
Fixed assets
Brand names, know-how, licenses and trade marks 35
Tangible assets 547
Current assets
Stocks 1,104
1,686
Purchased goodwill capitalised 1,850
3,536
Satisfied by
Cash 3,536
Acquisition of Antigen
On 28 November 2001 the Group acquired the sales, marketing and distribution
rights worldwide for the Antigen brand from Antigen Holdings Limited. The Group
acquired Antigen International Limited, Antigen Overseas Limited and Anpharm
Limited (all companies registered in the Republic of Ireland) together with all
of the know-how, trade marks, trading styles, sales, marketing and distribution
rights to the products of Antigen Holdings Limited and its subsidiary companies.
The companies and assets are being acquired at an estimated cost of £9.4
million. The estimated consideration is to be satisfied in two parts, firstly by
a payment of £5.2 million and secondly by an obligation to discharge the
obligations of the subsidiaries up to an estimated £4.2 million acquired under
the wider scheme of arrangement covering all Antigen companies (including those
not acquired by the Group) over the period to May 2004. The total known
creditors covered by the wider scheme of arrangement are estimated at £18.8
million.
The acquisition was structured such that Miza Pharmaceuticals Inc., a Canadian
pharmaceutical contract manufacturer acquired 100% of the issued share capital
of Antigen Holdings Limited through its wholly owned Irish subsidiary company
Miza Ireland Limited (formerly Mytek Limited). The Group then acquired the
subsidiaries and assets referred to above from Mytek Limited through its wholly
owned, Irish registered subsidiary, Antigen Pharmaceuticals Limited (formerly
Startville Limited) at a cost of £5.2 million.
The assets and liabilities acquired were:-
Estimated Estimated
Book Fair Value Fair
Value adjustments Value
£000 £000 £000
Fixed assets
Brand names, know-how, licenses and trade marks 40 - 40
Tangible assets 236 - 236
Current assets
Stocks 1,098 (360) 738
Other current assets 2,060 - 2,060
Current liabilities (5,155) (41) (5,196)
(1,721) (401) (2,122)
Purchased goodwill capitalised 7,772
5,650
Satisfied by Cash:
Paid to Mytek Limited 5,200
Stamp duty and professional fees 450
5,650
Contribution to Group cash flow
The post acquisition contribution of subsidiary acquisitions to Group cash flow
was a net cash inflow from operating activities of £1,571,000.
26. Leasing Commitments
Operating lease payments amounting to £631,000 (2001:£570,000)are due within one
year. The leases to which these amounts relate expire as follows:
Group Group
2001 2002
Land & Land &
buildings Other buildings Other
£000 £000 £000 £000
In one year or less 37 34 - 89
Between one and five years 428 74 252 24
In five years or more 58 - 205 -
523 108 457 113
The Company did not have any operating leases at 31 March 2002 (31 March 2001:
nil)
27. Contingent Liabilities
At 31 March 2002 the Company had undertaken to provide support to certain
subsidiary undertakings. There is a contingent liability in respect of bank
borrowings of all Companies within the Group secured by an intercompany cross
guarantee. The aggregate Group liability at 31 March 2002 amounted to
£15,284,000 (2001:£3,335,000).
The Group has given indemnities in respect of advance payments, deferred
purchase consideration and import duty guarantees issued on its behalf in the
normal course of business. The indemnities given at 31 March 2002 were £21,952
(2001: £36,731).
Prior to their acquisition by the Group, Antigen International Limited, Antigen
Overseas Limited and Anpharm Limited were part of a cross guarantee banking
arrangement covering Antigen Holdings Limited, Castlehaven Investment Company
Limited and their subsidiaries. The amount of such borrowings at 31 March 2002
amounted to £5.8 million. The Directors do not believe the cross guarantee is
still enforceable and have received legal advice that there is a sound basis for
the Group to resist arguments that the guarantee is still enforceable at the
year end.
There were no other contingent liabilities at 31 March 2002 or 31 March 2001.
28. Post Balance Sheet Events
As set out in the Chairman's review, on 10 April 2002 the Group's premises and
those of the chairman were visited and certain documentation taken away. A press
statement issued by the Serious Fraud Office ("SFO") stated that its operations
formed part of an investigation into a suspected conspiracy to defraud the
National Health Service concerning the prices charged for penicillin based
antibiotics and warfarin between 1 January 1996 and 31 December 2000.
Since the visit on 10 April 2002, neither the Group nor its directors have
received any further information from the SFO.
The Group has provided its full support and co-operation to the SFO and its
investigators and the directors do not believe the Group has acted in an
unlawful or improper manner, nor has it at any time conspired to defraud the
National Health Service.
As a result, in the view of the directors, there was not an obligation at the
year end date for which a material provision was necessary under UK GAAP. Until
any formal charges are made against the Group, its maximum potential exposure
under relevant legislation for the alleged offences cannot be quantified.
29. Financial Instruments
The Group uses financial instruments, comprising cash, short term borrowings,
trade debtors and trade creditors, which arise directly from its operations. The
main purpose of these financial instruments is to raise finance for the Group 's
operations.
Short term debtors and creditors
Short term debtors and creditors have been excluded from the following
disclosures except those relating to currency risk.
Interest rate risk
The Group finances its operations through a mixture of retained profits and bank
facilities. Bank borrowings are made using variable interest rates.
Liquidity risk
The Group seeks to manage financial risk, to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably.
Short-term flexibility is achieved through overdraft facilities and short/medium
term borrowings.
Maturity of financial liabilities
The Group financial liabilities analysis at March 2002 was as follows:
Group Company
2002 2001 2002 2001
£000 £000 £000 £000
In less than one year or on demand
Bank and other borrowings payable by instalments 4,587 660 1,747 -
Deferred purchase consideration 8,364 6,663 - -
In more than one year but less than two years
Bank and other borrowings payable by instalments 431 2,675 431 -
Deferred purchase consideration 6,193 9,532 - -
In more than two years but less than five years
Bank and other borrowings 10,266 - 10,266 -
29,841 19,530 12,444 -
Borrowing facilities
The Group has undrawn facilities available of £1,766,000 expiring within one
year (2001:£500,000).
Currency risk
The Group is exposed to translation and transaction foreign exchange risk. In
relation to translation risk the proportion of assets held in the foreign
currency are matched to an appropriate level of borrowings in the same currency.
Transaction exposures are hedged when known, mainly using the forward exchange
hedge market.
The Group seeks to hedge its exposures using a variety of financial instruments,
with the objective of minimising the impact of fluctuations in exchange rates on
future transactions and cash flows.
The Group has overseas subsidiaries operating in North America where reserves
and expenses are denominated in US dollars. In order to protect the Group 's
sterling balance from movements in the US dollar, the Group finances its net
investment in its subsidiaries by means of its sterling bank balances.
£15.4 million of the sales of the Group 's business is to customers in
continental Europe/foreign markets excluding North American operations. The
majority of these sales are invoiced in the currencies of the customers
involved. The Group policy is to minimise all currency exposures on any balance
not expected to mature within 30 days of its arising through the use of forward
currency contracts. All other sales of UK business are denominated in sterling.
The tables below show the extent to which Group companies have monetary assets
and liabilities in currencies other than their local currency.
Functional currency of operation Net foreign currency monetary assets/(liabilities)
Other
US Dollar Euro currencies Total
£000 £000 £000 £000
2002
Sterling (1,109) (4,626) 1,091 (4,644)
Dollar 152 - 145 297
Euro (175) 317 - 142
(1,132) (4,309) 1,236 (4,205)
2001
Sterling 79 926 359 1,364
Dollar 949 - 122 1,071
Euro - - - -
1,028 926 481 2,435
Fair values
The fair values of the Group 's financial instruments are considered equal to
the book value.
30. Related Party Transactions
Golden Pride, Inc. occupy a building owned by Hersey Family Limited Partnership,
a Florida Limited Partnership, in which Harry Hersey Jr is a partner. In the
year ended 31 March 2002 net payments of £103,000 (2001:£77,000) were paid to
Hersey Family Limited Partnership.
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