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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Healthcare Ent. | LSE:HCEG | London | Ordinary Share | GB00B6030H73 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 20.50 | 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:4231L
Healthcare Enterprise Group PLC
02 November 2006
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, JAPAN, AUSTRALIA OR SOUTH AFRICA
2 November 2006
Healthcare Enterprise Group plc
Interim results, proposed #2.0m cash placing and board change
Healthcare Enterprise Group plc (AIM: HCEG, "HCEG", the "Group", the "Company"),
the international healthcare products group, today reports results for the six
months ended 31 August 2006, a proposed #2.0m cash placing and a Board change.
The Group is also amending its warrant terms and is granting options to members
of the management team.
Interim highlights
* Turnover from continuing operations down 12% to #7.6m (2005: #8.6m)
* Net operating expenses reduced 30% to #4.0m (2005: #5.7m)
* Operating loss before exceptional items reduced by 57% to #0.95m (2005:
Loss #2.1m)
* Net loss for the period was #0.1m (2005: Loss #2.3m)
* Loss per share 0.05p (2005: Loss 1.5p)
Placing
* #2.0 million cash placing to provide additional working capital
* Three Directors have subscribed for 3.3 million shares in the Placing
Directorate change
* Gordon Wood has resigned from the Board and left the Group
Mark Tompkins, Group Chairman, said:
"We have cut #1.7m in costs, slimmed down inventory and receivables by #4.9m,
restructured all operations and cut back unnecessary capital expenditure. We
have reduced losses significantly at HSS, our UK operating business. In our
Brands business, sales of Ebiox have improved and we have made significant
progress in our efforts to monetise Optiscope. We are in a better position to
deliver profitable growth in the next financial year.
"Whilst there is a lot more work required in terms of cost reduction and
exploiting the Group's assets and businesses, the Group should now be
stabilised. However, to strengthen our balance sheet for ongoing restructuring
and to maintain our current investments, the Group has conditionally raised
#2.0m from institutional investors.
"Overall we are more confident about the prospects for the Group with continued
recovery at HSS, further progress being made on Ebiox sales and the initial
responses to Optiscope prototypes continuing to be encouraging."
Enquiries:
Healthcare Enterprise Group PLC 020 7351 7500
Mark Tompkins, Chairman
Lyndon Gaborit, Executive Deputy Chairman
Numis 020 7776 1500
Bruce Garrow
College Hill 020 7457 2020
Adrian Duffield / Corinna Dorward
Interim Results
The Group has shown progress in terms of a recovery in the six months ended 31
August 2006. Turnover for the period was #7.6m (2005: #8.6m) with increased
contributions from Ebiox, although the loss of the Metropolitan Police contracts
at Healthcare Sales & Service Limited ("HSS") reduced the headline figure.
The Group reported a loss before tax and exceptional items of #0.95m (2005: loss
#2.1m). This was achieved following significant cuts in overheads as costs were
reduced to #4.0m (2005: #5.7m).
The net loss for the period was #0.1m (2005: loss #2.3m).
The Group's loss per share was 0.05p (2005: loss per share 1.5p). Net debt
decreased in the period by #1.14m to #1.85m.
Healthcare Sales & Service
HSS distributes products primarily to the occupational health, first aid and
medical markets from a warehouse facility in Warrington. HSS had sales during
the period of #7.17m (2005: #8.3m). As expected, despite delivering month on
month profitability earlier in the period, a seasonal slowdown in July and
August combined with the loss of two low margin Metropolitan Police contracts,
resulted in a minimal operating loss of #0.07m (2005: loss #0.6m) for the six
months.
As stated in August, the annual revenue of the Metropolitan Police contracts was
#2.6m but they were extremely complex and barely profitable outsourcing
agreements, which provided few synergistic opportunities within HSS's Warrington
operation. Furthermore, the additional #1.3m and final consideration for the
acquisition of Crest Medical, acquired in November 2004, was no longer required
to be satisfied by the Company.
HSS management has made significant reductions in overheads, capital expenditure
and reduced working capital requirements. "On time and in full" delivery
figures have seen a significant improvement and the HSS management team has
recently been strengthened with the appointment of Adrian Hughes as sales and
marketing director, with excellent experience in the sector. In addition, sales
of the Ebiox products are being handled through the Warrington operation.
During the period HSS also secured supplier arrangements in the Far East,
although the funding required to finance overseas orders has resulted in a
requirement for additional working capital.
Ebiox
Ebiox sales in the period were #0.44m (2005 #0.1m) and with an almost breakeven
performance at the operating level with losses of #0.09m (2005: loss #0.24m).
The ongoing assessment of the full range of Ebiox products has resulted in the
Group focusing on specific product areas where it has the most immediate and
commercial advantages, such as the instrument cleaning range.
Our consultants continue to work towards gaining EPA approval in the United
States for Ebiox surface cleaning product by the end of the year, although the
timing cannot be guaranteed.
Optiscope
The Group continues to receive positive feedback from the industrial and
commercial evaluation of the 10mm laparoscope prototype disposable rigid
endoscope.
The Group has engaged Burnham Securities, Inc, an US investment bank to assist
in monetising its investment in Optiscope and an information memorandum is being
sent to interested parties.
Since Optiscope is in a pre commercialisation phase of development no revenues
were recorded and a loss of #0.06m reported.
Women's Reproductive Health
The Group has restricted its focus to just two product groups in women's health
namely Fertiligent, a high quality, low cost intrauterine sperm pump to help
assist infertile couples conceive and Medilator, which has developed a platform
for single-use, disposable cervical dilatation devices.
Initial trial results for Fertiligent have been positive but were not as good as
anticipated. There are indications that the results may be of limited value due
to the small size of the sample. Market tests for Medilator continue.
Current trading and outlook
Whilst HSS's operations have in the view of the Board been stabilised and
structured to facilitate potential growth, the second half of the year started
slowly following the non renewal of the Metropolitan Police contracts announced
in August 2006. The Group expects second half revenues to be lower than those
recorded in the first half of the year as the full effect of these non renewed
contracts are felt. Time will also be required for the strengthened HSS
management team to achieve results.
The Board expects to continue to record a loss for the second half of the year
at the operating level, although it is anticipated that this will be lower than
the first half loss as the benefits of cost reductions and improved margins are
experienced.
The Company has now brought to a conclusion outstanding post-completion issues
in relation to the 2004 Crest Medical acquisition without any impact upon the
Company's financial position.
With new management in place at HSS and trading at a near breakeven position,
the Board remains optimistic about the prospects for the Group. It is focused,
not only on achieving a resumption of profitability, but in exploring all
alternatives to realise value for shareholders.
Board Change
Gordon Wood has resigned as an executive director with immediate effect, to
pursue other opportunities. He will remain as a consultant to the Group for a
short period to assist in the commercialisation of the Optiscope business. The
Board wishes to thank Dr Wood for his contribution over the three years that he
has been with the Group, and wishes him well in pursuing endeavours in the
United States.
The Placing
The Company has conditionally raised approximately #2.0 million (before
expenses) subject to, inter alia, shareholders' approval (the "Placing"). The
Directors have agreed to subscribe in aggregate, #100,000 in the Placing, to
demonstrate their commitment to the Company going forward.
The Placing, principally with institutional shareholders and the Directors,
comprises 6,666,667 ordinary shares of the Company ("Ordinary Shares") placed
firm with investors ("Firm Placing Shares") and 60,000,000 Ordinary Shares
conditionally placed with investors subject to obtaining shareholder approval at
the EGM ("Conditional Placing Shares"), all at 3p per share ("Placing Price").
It is proposed that each subscription for 4 Firm Placing Shares or Conditional
Placing Shares ("Placing Shares") shall include the issue of 1 new warrant ("New
Warrants"). If the necessary resolutions proposed at the EGM and warrantholders'
meeting are not passed, no New Warrants will be issued.
In consideration for arranging the Placing, Numis Securities Limited ("Numis")
will be entitled to a commission of 4 per cent. of the value of those Ordinary
Shares placed by Numis on behalf of the Company (excluding the Ordinary Shares
subscribed for by the Directors), amounting to #76,000, which will be applied in
subscribing for Ordinary Shares at the Placing Price (together with New
Warrants). Numis has secured a commitment from Ludgate Investments Limited to
subscribe for, or procure placees for, 23,400,000 Placing Shares in return for a
commission of 1.5 per cent. of the value of such Placing Shares at the Placing
Price, equal to #10,530. Along with other placees, Ludgate Investments Limited
will, assuming the necessary authorities to issue the New Warrants are granted,
also receive 5,850,000 New Warrants, exercisable in accordance with the terms of
the New Warrants.
The placing of the Firm Placing Shares together with other relevant allotments
renders existing shareholder authorities insufficient to allow the placing of
the Conditional Placing Shares (and the New Warrants) to proceed without further
shareholder approval. Accordingly, the issue of the Conditional Placing Shares
is conditional on the passing by shareholders of the resolution granting the
relevant authorities ("Issue Authority Resolution") at the EGM on 27 November
2006. The issue of the New Warrants is conditional (inter alia) on the passing
of both the shareholder resolutions and the warrantholder resolution.
The Company is, therefore, proposing the Issue Authority Resolution, which is a
special resolution, to grant further authority to the Directors to allot
relevant securities up to an agreed limit and to allot shares for cash without
the application of statutory pre-emption rights. This authority, if approved,
will enable the Company to issue the Conditional Placing Shares and the New
Warrants. This authority will also permit the Company to issue Ordinary Shares
for cash with an aggregate nominal value of up to #680,221, representing 10 per
cent. of the nominal value of the shares in issue following the allotment of the
Firm Placing Shares.
The reason for taking this new authority is to give the Directors flexibility to
raise cash by way of a private placement without having to implement a rights
issue or open offer which would be disproportionately expensive. The Company
will apply for Admission of the Placing Shares and the New Warrants to trading
on AIM
Use of proceeds of the Placing
The net proceeds of the Placing, after costs estimated to be approximately
#150,000, are expected to be approximately #1.85 million. This sum will be used
in connection with the Company's restructuring, to maintain its current
investments in a suitable state to maximise value, to provide additional working
capital and for other corporate purposes, including certain termination payments
to Gordon Wood in respect of his contractual entitlements, who, as described
under "Board Change" is leaving the Company with immediate effect.
Although the Placing represents a discount of 13.8 per cent. to the middle
market quotation of the Ordinary Shares as at 1 November 2006, the Directors
consider this discount is justified in order to raise the necessary funds to
achieve the objectives outlined above.
Directors' interests in the Placing
Each of Mark Tompkins, Lyndon Gaborit and Nigel Wray and/or their connected
persons has agreed to subscribe for Firm Placing Shares. In total, the Directors
will acquire 3,333,333 Firm Placing Shares at the Placing Price, together with
833,333 New Warrants. This represents 1.2 per cent. of the issued share capital
as enlarged by the Placing, assuming the Issue Authority Resolution is passed
and the Conditional Placing Shares and Ordinary Shares subscribed for by Numis
are allotted ("Enlarged Issued Share Capital"). Following completion of the
Placing, the Directors will collectively own or be interested in 21,109,349
Ordinary Shares representing approximately 7.8 per cent. of the Enlarged Issued
Share Capital, and 1,333,065 Amended Warrants representing approximately 4.7 per
cent. of the total Amended Warrants in issue.
Amendment to the terms of the Warrants
The Company currently has 277,171,690 unexercised Warrants in issue. Following
the consolidation of the Ordinary Shares effected in January 2005, a holder of
25 Warrants is currently entitled to subscribe in cash for 1 Ordinary Share at a
subscription price of 37.5 pence per Ordinary Share. These Warrants are
exercisable on 30 June (or if such day is not a business day, on the next
following business day) in 2007 and 2008 (inclusive) (or if later, on the
thirtieth day after the date on which copies of the audited accounts of the
Company for the immediately preceding financial year are despatched to
shareholders).
It is proposed that the exercise price be reduced from 37.5 pence to 6 pence per
Ordinary Share, and to aid simplicity and transparency, it is proposed that
every 25 Warrants are consolidated into 1 New Warrant, entitling the holder
thereof to subscribe for 1 Ordinary Share, with fractions of new warrants being
disregarded for this purpose.
The proposed amendments to the terms and conditions of the Warrants require the
sanction of the Warrantholders who must pass an extraordinary resolution. The
Company also proposes that the Shareholders sanction such changes at the EGM.
The issue of the Conditional Placing Shares is not conditional in any way on the
Warrantholder Resolution being passed. If the Warrantholder Resolution is not
passed, the terms of the Warrants will remain as they currently are and no New
Warrants will be issued to placees in connection with the Firm Placing Shares or
the Conditional Placing Shares.
The amendment to the terms of the Warrants is, however, conditional on the
sanction of shareholders.
Grant of options to employees and members of the management team
The Company's Remuneration Committee has granted options to acquire Ordinary
Shares to some of the Directors and senior members of the management team to
reflect their hard work in difficult circumstances, and to provide them with the
appropriate incentive going forward. The following grants of options have been
or are proposed to be made to Directors and management (or their connected
persons), each with an exercise price of 3 pence per Ordinary Share:
Name Option Option Grants following and Proposed Option Total
Grants on 2 conditional upon shareholder Grants on 7 November
November approvals of authorities at from expired
2006 EGM Option pool*
Mark Tompkins - 2,401,960 1,076,911 3,478,871
Lyndon Gaborit - 4,876,707 1,794,852 6,671,559
Other executives and 6,325,296 333,333 717,941 7,376,570
consultants
TOTAL 6,325,296 7,612,000 3,589,704 17,527,000
* future expired options will be re-allocated by the Remuneration Committee
The Company will ensure that all grants are within the 11 per cent. limit
imposed by the Company's option scheme.
Notice of EGM and Warrantholders' Meeting
A circular containing full details of the proposals set out in this announcement
has been posted to shareholders of the Company today. Included within the
circular is a proxy card and a notice convening an EGM of the Company at 11:00
a.m. on 27 November 2006. In addition, a proxy card and a notice convening a
Warrantholders' Meeting at 11:05 a.m. on 27 November 2006 has been posted to all
Warrantholders today.
Unaudited consolidated profit and loss account for the 6 months ended 31 August
2006
Six months ended 31 August
2006 2005
Note Before Exceptional Total Before Exceptional Total
exceptional items exceptional items
items items
#'000 #'000 #'000 #'000 #'000 #'000
Turnover
Acquisitions - - - - - -
Continuing
activities 7,614 - 7,614 8,666 - 8,666
Discontinued
activities - - - 136 - 136
7,614 - 7,614 8,802 - 8,802
Cost of sales (4,533) - (4,533) (5,140) - (5,140)
Gross profit 3,081 - 3,081 3,662 - 3,662
Net operating
expenses 3 (4,031) 927 (3,104) (5,737) (105) (5,842)
Group Operating
profit/(loss)
Acquisitions - - - 25 - 25
Continuing
activities (950) 927 (23) (2,100) - (2,100)
Discontinued - - - - - -
activities
Group Operating
Profit/(Loss) (950) 927 (23) (2,075) (105) (2,180)
Share of operating
results of
associates - - - - - -
Total Operating
Profit/(Loss) (950) 927 (23) (2,075) (105) (2,180)
Exceptional Income/
(costs) 3 - - - - - -
Profit/(Loss) on
ordinary activities before
interest (950) 927 (23) (2,075) (105) (2,180)
Net interest
payable and
similar charges (101) - (101) (98) - (98)
Profit/(loss) on
ordinary activities before
taxation (1,051) 927 (124) (2,173) (105) (2,278)
Taxation - - - - - -
Profit/(loss) on
ordinary activities after
taxation (1,051) 927 (124) (2,173) (105) (2,278)
Minority interests 27 - 27 9 - 9
Profit/(loss) for
the period (1,024) 927 (97) (2,164) (105) (2,269)
Basic and diluted
loss per share 4 (0.05)p (1.50)p
Audited consolidated profit and loss account for the year ended 28 February 2006
Year ended 28 February 2006
Note Continuing Exceptional Total
operations items
#'000 #'000 #'000
Turnover
Acquisitions 618 - 618
Continuing operations 15,171 - 15,171
Discontinued activities 612 - 612
16,401 - 16,401
Cost of sales (9,880) - (9,880)
Gross profit 6,521 - 6,521
Net operating expenses (10,962) (15,320) (26,282)
Group operating profit/(loss)
Acquisitions 180 - 180
Continuing operations (4,623) (15,320) (19,943)
Discontinued activities 2 - 2
Group Operating loss (4,441) (15,320) (19,761)
Share of operating results of
associates - - -
Total Operating loss (4,441) (15,320) (19,761)
Exceptional Income/(costs) 1,522 1,522
Loss on ordinary activities
before interest (4,441) (13,798) (18,239)
Net interest payable and
similar charges (334) - (334)
Loss on ordinary activities
before taxation (4,775) (13,798) (18,573)
Taxation - - -
Loss on ordinary activities
after taxation (4,775) (13,798) (18,573)
Minority interests 22 - 22
Loss for the financial year (4,753) (13,798) (18,551)
Basic and diluted loss per
share 4 (11.93)p
Consolidated Balance Sheet
Note Unaudited Unaudited Audited
31 August 31 August 28 February
2006 2005 2006
#'000 #'000 #'000
Fixed assets
Intangible assets 21,998 34,911 21,933
Tangible assets 496 618 545
Other Investments 1,592 145 1,538
24,086 35,674 24,016
Current assets
Stocks 1,866 3,141 2,096
Debtors 2,391 6,107 3,181
Cash at bank and in hand 201 710 489
4,458 9,958 5,766
Creditors: amounts falling due within
one year (4,903) (7,870) (5,606)
Net Current assets/(liabilities) (445) 2,088 160
Total assets less current liabilities 23,641 37,762 24,176
Creditors: failing due after more
than one year (245) (4,211) (2,827)
Provisions for liabilities and
charges - (289) -
Deferred shares (746) - (746)
Warrants issued (364) - (357)
Net assets 22,286 33,262 20,246
Capital and reserves
Called up share capital 4,726 4,566 4,298
Shares to be allotted 620 1,997 620
Share premium account 40,814 34,191 39,078
Profit and loss account (22,346) (5,939) (22,249)
Merger reserve (2,293) (2,293) (2,293)
Other reserves 728 728 728
Shareholders funds 22,249 33,250 20,182
Minority interests 37 12 64
Capital employed 22,286 33,262 20,246
Group cash flow statement
Unaudited Unaudited Six Audited
Six months months ended Year ended
ended 31 August 28 February
31 August
2006 2005 2006
#'000 #'000 #'000
Net cash outflow from operating activities (751) (1,585) (4,868)
Return on investments and servicing of
financing
Interest received - 16 14
Interest paid (101) (115) (348)
Net cash outflow for returns on investments
and servicing of finance (101) (99) (334)
UK Corporation tax paid - (36) (73)
Capital expenditure and financial investment
Purchase of tangible fixed assets (35) (179) (221)
Development costs capitalised (100) (199) (441)
Purchase of fixed asset investments (54) (50) (114)
Net cash outflow from capital expenditure and
financial investment (189) (428) (776)
Acquisitions
Purchase of subsidiary undertakings - (78) (120)
Acquisition expenses - (169) (176)
Net cash acquired with subsidiaries - 250 297
Net cash disposed of with subsidiaries - - (73)
Net cash inflow/(outflow) from acquisitions - 3 (72)
Net cash outflow before financing (1,041) (2,145) (6,123)
Financing
Issue of share capital 2,172 182 4,769
Share issue costs - - (200)
Increase/(decrease) of long term borrowings (1,125) - 100
Increase/(decrease) of short term borrowings (272) 89 (377)
Repayment of principal under hire purchase
contracts (22) (7) (22)
Net cash inflow from financing 753 264 4,270
Decrease in cash in the period (288) (1,881) (1,853)
Reconciliation of operating loss to net cash outflow from
operating activities
Operating loss (23) (2,075) (19,761)
Amortisation 35 39 12,077
Depreciation 83 80 209
(Increase)/decrease in stocks 230 (40) 835
Decrease in debtors 790 2 1,868
Increase/(decrease) in creditors (1,866) 484 (1,291)
Movement in provision for share options - - (289)
Exceptional costs - (105) 1,522
Investments written off - 30 (10)
Exchange differences - - (28)
Net cash outflow from operating activities (751) (1,585) (4,868)
Analysis of net debt
Cash at bank and in hand 201 710 489
Invoice discounting facility (534) (1,850) -
Debt due within one year (1,500) (970) (2,306)
Debt due after one year - (1,025) (1,125)
Hire purchase contracts (18) (49) (46)
Net debt (1,851) (3,184) (2,988)
Notes to the interim financial statements
1. Form of statements
These statements do not constitute statutory accounts within the meaning of the
Companies Act 1985 and are unaudited. The figures for the year ended 28 February
2006 have been extracted from the statutory accounts for that year which have
been delivered to the Registrar of Companies and contain an unqualified opinion
with an added emphasis of matter paragraph.
2. Accounting policies
The accounting policies used are those expected to be applied for the year ended
28 February 2007 and consistent with those used for the year ended 28 February
2006
3. Exceptional items
Exceptional items comprise exceptional costs of #373,000 in connection with
reorganisation costs and an exceptional gain of #1,300,000 arising from a write
back of amortisation following an impairment review.
4. Loss per share
The basic loss per share has been calculated on the following basis:
Unaudited Unaudited Audited
Six months ended Six months Year ended
31 August 2006 ended 28 February
31 August 2006
2005
Loss for the period #'000 (97) (2,269) (18,551)
Weighted average number of shares 187,010,495 151,145,902 155,454,106
In the current period the average number of Ordinary Shares is the same on a
diluted basis.
5. Interim dividend
The directors are not recommending the payment of an interim dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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