TIDMATD
RNS Number : 2966N
Asterand PLC
31 August 2011
For Immediate Release 31 August 2011
Asterand plc
Interim Results for the Period Ended 30 June 2011
Asterand plc ("Asterand" or the "Group" - LSE: ATD), a leading
supplier of human tissue based solutions to pharmaceutical and
biotechnology companies engaged in drug discovery research, today
announces its unaudited financial results for the six months ended
30 June 2011.
Highlights:
-- Revenue of $11.9 million (H1 2010: $8.7 million)
An increase of 36%. Includes full six months of revenue
associated with BioSeek as compared to 4.5 months in H1 2010.
-- Operating expenses of $6.6 million (H1 2010: $6.0
million)
Includes full six months of operating expenditures associated
with BioSeek as compared to 4.5 months in H1 2010
-- Loss for the period of $2.3 million (H1 2010: $1.5 million
loss)
Includes $1.7 million exceptional interest expense relating to
the acquisition of BioSeek
-- EBITDA profit of $0.9 million (H1 2010: $1.4 million
loss)
Basic loss per 5p Ordinary Share of 1.9c (H1 2010: (1.3)c)
-- Gross Margin of 57% (H1 2010: 50%)
-- Cash resources at 30 June 2011 of $4.7 million (31 December
2010: $5.9 million)
-- Awarded key BioMAP(R) patents by the US Patent and Trademark
office, solidifying the Company's IP position for this important
platform
-- Attained ISO 9001:2008 certification for the Company's tissue
and biobanking operations in Detroit
-- Launched isletOrganDOT(TM) a novel 3D human cell based model
for diabetes research
-- Partnered with 5AM Solutions to create next generation
virtual biobanking software to expand access to geographically
distinct biospecimen resources
-- Volatile trading experienced post period end (excluding
BioSeek) has led to a reduced outlook for the year and the Group is
consequently looking to raise funds to bolster working capital
Jack Davis, Chairman and Interim CEO of Asterand plc said:
"We are pleased to report a 36% increase in Group revenues. This
reflects the successful integration of our BioSeek acquisition,
which has been a key growth driver within the Group. At the same
time we are seeing the benefits of our continuing drive to improve
gross margins through focused cost reductions. These efforts
coupled with the steps we are taking to reduce volatility in the
Tissues Solutions business position us well to attain a larger
share of the burgeoning tissue and tissue services market."
Chairman's Statement
H1 2011 Results
Excluding revenues from BioSeek, the rest of the Tissue Based
Solutions business has experienced volatile trading in the year to
date. Demand for these products and services remains high,
particularly for highly annotated materials, however meeting these
needs has been challenging, resulting in a retraction in the
non-BioSeek revenues, including the anticipated revenues under the
NCI contract. We are actively addressing these supply issues but in
the short term, after experiencing flat revenue year on year and
weakness at the start of the second half, we now expect that
revenue and earnings for the year, excluding BioSeek, will be
materially lower than current market expectations. At the same
time, I am pleased to say that the BioSeek business continues to
grow dramatically, driving total revenue for H1 to $11.9 million
(H1 2010: $8.7 million), an increase of 36% (includes full six
months of revenue associated with BioSeek as compared to 4.5 months
in H1 2010).
This revenue was achieved while making well placed investments
in science and innovation and keeping other expenditures in check.
Operating expenses for the period were $6.6 million (H1 2010: $6.0
million). The additional expenditures reflect a full six month's
expenditures for the BioSeek operations (2010: 4.5 months) and
expansion of our R&D activities following the appointment of Dr
Dalia Cohen as Chief Scientific Officer in September 2010. The
Biobank inventory was reduced to $9.0 million at 30 June 2011 (31
December 2010: $9.1 million) as the Group has improved its
efficiency on tissue spend. Gross margins for the first half of
2011 increased to 57% (H1 2010: 50%).
The Group realised a $2.3 million loss for the period, including
a $1.7 million exceptional interest expense relating to the
acquisition of BioSeek. Excluding this exceptional cost, the
Group's loss for the period was $0.6 million, an improvement from
the $1.5 million loss in H1 2010. When reviewed on an EBITDA basis,
the Group made a $0.9 million profit as compared to a $1.4 million
loss in H1 2010.
At 30 June 2011, cash resources were $4.7 million (31 December
2010: $5.9 million). The change in cash is attributable to working
capital movements, tax and interest payments, as well as the
investment in equipment and servicing the Group's debt. The Group
has a $2.7 million cash balance on a term loan with Silicon Valley
Bank. $2.5 million (plus accrued interest) of the $8.5 million
contingent BioSeek payment was paid subsequent to the period end
and the remaining $6 million contingent payment was converted into
loan notes that mature over the period to December 2013.
We continue to prudently manage cash flows through more
efficient spending on tissue acquisition and have taken measures to
trim our cost base going forward to better improve efficiency. As a
result, in July 2011, we've reduced costs by $150,000 per month.
These savings were achieved by reducing fixed production and
operating expenses and are expected to be in full effect by
September 2011. We expect to raise additional funds in the short
term to provide sufficient working capital for operations and to
fund improved tissue sourcing strategies.
Expanding and Growing our Base Business
The BioSeek acquisition has been a true success story for
Asterand. As we have mentioned in previous reports, we have
established a blended sales model which has expanded the promotion
of BioSeek within our key accounts. This strategy has begun to gain
traction. H1 2011 revenues for BioSeek products grew by 111% when
compared to full six months H1 2010 revenues.
In addition, we expanded our service offerings with the launch
of isletOrganDOT, a 3-D human cell based technology. This IP
protected platform allows us to provide clients with relevant data
on the effects of their therapeutic compounds for treating
diabetes, a disease that afflicts more than 300 million people
worldwide.
I would also like to take this opportunity to acknowledge the
Detroit operations team for its achievement of ISO 9001:2008
certification. This important milestone recognises the consistent
quality exhibited throughout our tissue procurement, processing and
biobanking operations.
Board Changes and Corporate Governance
On 29 July 2011 we announced that Martyn Coombs, the Group's
Chief Executive Officer, had left the Company. On 31 August 2011,
and unrelated to Martyn's departure, we announced that John Stchur,
the Group's Chief Financial Officer, had also decided to step down
with immediate effect.
Martyn and John were responsible for guiding the Group through
an exciting period of its development, including the acquisition of
BioSeek in 2010 and their influence has added significantly to the
Group's positive growth prospects. I would like to take this
opportunity to thank both Martyn and John for their service over
the past years and wish them well in their future endeavors.
During the search for their replacements, I have taken on the
role of Interim CEO and Alan Fishman has been appointed as the
Interim CFO, bringing 30 years of financial experience to the
Company.
The board is also reviewing the cost of the Company's current
listing. Whilst the Company remains committed to being publicly
quoted, the costs of being on the Premium segment of the Official
List are quite significant for a Company of our size.
The principal risks and uncertainties faced by the Group remain
maintaining sufficient tissue supply, financial and liquidity risk
(in particular, in respect of the ability to raise sufficient
capital through fund-raising as discussed in the Outlook section
below), competition, potential for government regulation and
reliance on key personnel. A more detailed explanation of these
risks can be found on page 22 of the 2010 Annual Report and
Accounts.
Outlook
On July 29th, as part of a Board Changes announcement, we
indicated confidence in achieving market expectations for the year
as a whole. Since then, we have experienced lower than anticipated
sales in the Tissue Based Solutions business (excluding BioSeek)
causing us to lower our tissue sales outlook for the remainder of
the year. As a consequence, we now believe that revenue and
earnings for the year will be materially lower than current market
expectations. We expect to experience a slight retraction in the
Tissue Based Solutions business (excluding BioSeek) for the full
year as compared to 2010. We believe that the retraction is driven
by inefficiency in our ability to supply an increasing demand for
highly annotated materials (something that we are addressing).
Conversely, the BioSeek business continues to grow at a rate of
approximately 50% as compared to last year. Thus Group revenue for
2011, while materially lower than market expectations, is expected
to still be greater than 2010.
Operating costs continue to be managed carefully, although we
are anticipating exceptional costs in H2 surrounding Board changes.
In addition exceptional interest charges are anticipated in
relation to the BioSeek debt. Additionally, the Group has taken on
a total of $9.3 million in debt to finance the BioSeek acquisition
with corresponding debt service obligations.
The post period payment to the former BioSeek shareholders of
$2.5 million, plus accrued interest, has significantly decreased
our cash position. In addition, worse than expected trading post
period end will result in a breach of banking covenants in August
and the re-classification of the $2.7 million term loan as current
debt. Additional funds must be raised in the near future to see the
Group through this volatile trading period. Based on discussions
with potential investors, the Board believes that it has a
reasonable expectation that sufficient funds will be raised within
an appropriate timeframe to continue operating as a going concern
and provide enough working capital headroom to fund improved tissue
sourcing strategies, which are expected to improve supply and
thereby stabilise the non-BioSeek sales.
In addition to the inherent risk that funds cannot be raised
within the necessary timeframe, the following are considered to be
additional uncertainties related to raising these funds:
-- Shareholder approval - raising sufficient funds in a cost
efficient manner is predicated on shareholder approval. The Board
intends to convene a General Meeting at which the necessary
resolutions will be put to shareholders. While there is uncertainty
over the outcome of these votes, the Board has a reasonable
expectation that approval to proceed with this strategy will be
forthcoming.
-- Loan covenants - it will be necessary to re-negotiate the
conditions attached to the Group's banking facility. It is likely
that such re-negotiation will be linked to the raising of capital
as above. While there is a risk that the Group will not be able to
successfully renegotiate the covenants with its providers of
finance, the Board has a reasonable expectation based on
discussions with the Group's lenders that facilities will continue
to be made available.
-- Trading results - management have prepared revised budgets
and projections which they believe are prudent and achievable,
taking into account the volatility in sales (excluding BioSeek)
currently being experienced. However, the achievement of these
trading results is uncertain.
The directors have concluded that the combination of these
circumstances represents a material uncertainty that casts
significant doubt upon the Group's ability to continue as a going
concern and that, therefore, the Group may be unable to realise its
assets and discharge its liabilities in the normal course of
business. Nevertheless, after considering the uncertainties
described above and making appropriate enquiries, the directors
have a reasonable expectation that the company will obtain adequate
resources to continue in operational existence for the foreseeable
future. For these reasons, they continue to adopt the going concern
basis of accounting in preparing the interim financial
statements.
Jack Davis
Chairman, Asterand plc
Consolidated Income Statement
for the six months ended 30 June 2011
Six months Six months
ended ended
30 June 2011 30 June 2010
Unaudited Unaudited
Note $'000 $'000
---------------------------------- ----- -------------- --------------
Revenue 5 11,850 8,684
Cost of sales (5,088) (4,340)
---------------------------------- ---- -------------- ---------------
Gross profit 6,762 4,344
Research and development
costs (672) (503)
Selling and distribution
costs (1,721) (1,826)
- Normal operations (4,188) (3,811)
- Exceptional items (severance,
acquisition and litigation
costs) 6 - (438)
- Exceptional gain 6 - 564
---------------------------------- ---- -------------- ---------------
Total general and administrative
expenses (4,188) (3,685)
Total operating expenses (6,581) (6,014)
---------------------------------- ---- -------------- ---------------
Operating profit/(loss) 181 (1,670)
Interest income - normal
operations 29 -
---------------------------------- ---- -------------- ---------------
Interest expense - normal
operations (129) (13)
Interest expense - exceptional
costs (1,688) -
---------------------------------- ---- -------------- ---------------
Total interest expense (1,817) (13)
Foreign exchange (charge)/credit (16) 112
---------------------------------- ---- -------------- ---------------
Finance (expense)/income (1,804) 99
---------------------------------- ---- -------------- ---------------
Loss before taxation (1,623) (1,571)
Taxation (charge)/credit (668) 61
---------------------------------- ---- -------------- ---------------
Loss for the financial
period (2,291) (1,510)
---------------------------------- ---- -------------- ---------------
Loss per 5p ordinary share
Basic 8 (1.9)c (1.3)c
---------------------------------- ---- -------------- ---------------
Diluted 8 (1.9)c (1.3)c
---------------------------------- ---- -------------- ---------------
The notes on pages 10 to 19 form an integral part of this
condensed interim financial information
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2011
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
$'000 $'000
---------------------------------- ----------- -----------
Loss for the financial period (2,291) (1,510)
---------------------------------- ----------- -----------
Other comprehensive income:
Exchange translation differences
on consolidation recognised
directly in equity (68) (80)
---------------------------------- ----------- -----------
Other comprehensive expense
for the period net of tax (2,359) (1,590)
---------------------------------- ----------- -----------
Total comprehensive expense
for the period (2,359) (1,590)
---------------------------------- ----------- -----------
The notes on pages 10 to 19 form an integral part of this
condensed interim financial information.
Non-IFRS Measure
Earnings before interest, taxes, depreciation and amortisation
("EBITDA") - and excluding exceptional items and share option
related charges/(credits) for the six months ended 30 June 2011.
Although it is a non-IFRS measure, the Directors and management
monitor EBITDA closely as a metric to measure progress of business
operations towards profitability and positive cash flow.
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
$'000 $'000
-------------------------------------- ----------- -----------
Operating profit/(loss) 181 (1,670)
Exceptional items (severance,
acquisition and litigation costs) - 438
Exceptional gain - (564)
Share option related charge/(credit) 128 (4)
Depreciation and amortisation 541 448
-------------------------------------- ----------- -----------
EBITDA 850 (1,352)
-------------------------------------- ----------- -----------
The notes on pages 10 to 19 form an integral part of this
condensed interim financial information
Consolidated Balance Sheet
As at 30 June 2011
30 June
2011 31 Dec 2010
Unaudited Audited
$'000 $'000
----------------------------------------------- ---------- ------------
Assets
Non-current assets
Intangible assets 4,712 4,778
Property, plant and equipment 3,351 3,386
Deferred tax asset 4,777 4,843
Trade and other receivables 94 94
12,934 13,101
Current assets
Biobank inventory 9,037 9,136
Trade and other receivables 5,588 6,216
Cash and cash equivalents 4,659 5,918
------------------------------------------ --- ----------- ---------
19,284 21,270
------------------------------------------ --- ----------- ---------
Liabilities
Current liabilities
Trade and other payables (4,070) (5,250)
Income tax payable (1,036) (797)
Other financial liabilities
- Finance leases (8) (12)
- Current debt (600) (703)
- Amounts due to former shareholders of
BioSeek (4,607) (7,624)
- Warrants (57) -
------------------------------------------ --- ----------- ---------
(10,378) (14,386)
--------------------------------------------- ----------- ---------
Net current assets 8,906 6,884
Non-current liabilities
Deferred tax liability (221) (282)
Other financial liabilities
- Finance leases (2) (5)
- Long term debt (1,987) (2,348)
- Amounts due to former shareholders of
BioSeek (4,705) -
Other payables (1,988) (2,191)
---------------------------------------------- ----------- ---------
(8,903) (4,826)
--------------------------------------------- ----------- ---------
Net assets 12,937 15,159
---------------------------------------------- ----------- ---------
Shareholders' equity
Ordinary shares 9,474 9,262
Shares to be issued - 535
Share premium 84,676 84,298
Reverse acquisition reserve (66,757) (66,757)
Merger reserve 510 510
Other reserves 4,910 4,910
Profit and loss reserve (24,358) (22,149)
Currency translation reserve 4,482 4,550
---------------------------------------------- ----------- ---------
Total equity 12,937 15,159
---------------------------------------------- ----------- ---------
The notes on pages 10 to 19 form an integral part of this
condensed interim financial information.
Consolidated Statement of Changes in Equity
As at 30 June 2011
Profit
Shares Reverse Investment and Currency
Share to be Share acquisition Merger Other in own loss translation Total
capital issued premium reserve reserve reserves shares reserve reserve equity
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2010 9,043 5 84,282 (66,757) - 4,910 (1,062) (18,434) 4,616 16,603
Comprehensive
income
Loss for
the period - - - - - - - (1,510) - 1,510
Other
comprehensive
income
Exchange
translation - - - - - - - - (80) (80)
Total
comprehensive
income - - - - - - - (1,510) (80) (1,590)
Transactions
with owners
Employee
share option
schemes
Value of
employees
services - - - - - - - (4) - (4)
Proceeds
from shares
issued 5 (5) 14 - - - - - - 14
Acquisition
of BioSeek 213 - - - 510 - - - - 723
--------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ------------ ----------
Transactions
with owners 218 (5) 14 - 510 - - (4) - 733
--------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ------------ ----------
At 30 June
2010 9,261 - 84,296 (66,757) 510 4,910 (1,062) (19,948) 4,536 15,746
At 1 January
2011 9,262 535 84,298 (66,757) 510 4,910 (1,587) (20,562) 4,550 15,159
Comprehensive
income
Loss for
the period - - - - - - - (2,291) - (2,291)
Other
comprehensive
income
Exchange
translation - - - - - - - - (68) (68)
Total
comprehensive
income - - - - - - - (2,291) (68) (2,359)
Transactions
with owners
Employee
share option
schemes
Value of
employees
services - - - - - - - 128 - 128
Proceeds
from shares
issued 212 (535) 378 - - - (46) - - 9
--------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ------------ ----------
Transactions
with owners 212 (535) 378 - - - (46) 128 - 13 7
--------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ------------ ----------
At 30 June
2011 9,474 - 84,676 (66,757) 510 4,910 (1,633) (22,725) 4,482 12,937
--------------- ---------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ------------ ----------
The notes on pages 10 to 19 form an integral part of this
condensed interim financial information.
Consolidated Cash Flow Statement
for the six months ended 30 June 2011
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
$'000 $'000
------------------------------------------- ----------- -----------
Cash flows from operating activities
------------------------------------------- ----------- -----------
Loss for the year (2,291) (1,510)
Adjustments for:
Exceptional gain - (564)
Finance expense/(income) 1,804 (99)
Tax charge/(credit) 668 (61)
Depreciation of property plant
and equipment 429 368
Amortisation of intangible
assets 112 80
Share option compensation charge/(credit) 128 (4)
Operating cash flows before
movement in working capital 850 (1,790)
------------------------------------------- ----------- -----------
Decrease in trade and other
receivables 628 251
Decrease/(increase) in biobank
inventory 99 (1,079)
Decrease in trade and other
payables (1,754) (1,384)
Cash used in operations (177) (4,002)
Interest received 2 2
Interest paid (126) (14)
Interest element of finance
lease rental payments (1) (1)
Income taxes paid (422) -
Receipt of research and development
tax credit 87 -
Net cash used in operating
activities (637) (4,015)
------------------------------------------- ----------- -----------
Cash flows from investing activities
Acquisition of BioSeek, net
of cash acquired - 1,573
Purchase of property, plant
and equipment (254) (156)
Purchase of intangible assets - (33)
------------------------------------------- ----------- -----------
Net cash (used in)/generated
from investing activities (254) 1,384
------------------------------------------- ----------- -----------
Cash flows from financing activities
Proceeds from issue of ordinary
share capital 14 14
Debt and finance lease principal
payments (394) (62)
------------------------------------------- ----------- -----------
Net cash used in financing
activities (380) (48)
------------------------------------------- ----------- -----------
Net decrease in cash and cash
equivalents (1,271) (2,679)
------------------------------------------- ----------- -----------
Exchange gain/(loss) on cash
and cash equivalents 12 (41)
------------------------------------------- ----------- -----------
Cash and cash equivalents at
beginning of period 5,918 6,644
------------------------------------------- ----------- -----------
Cash and cash equivalents at
end of period 4,659 3,924
------------------------------------------- ----------- -----------
The notes on pages 10 to 19 form an integral part of this
condensed interim financial information.
Notes to the interim results for the six months ended 30 June
2011
1. General information
The Company is a public limited company incorporated and
domiciled in the UK. The address of its registered office is: 2
Orchard Road, Royston, Herts, SG8 5HD. The Company is listed on the
London Stock Exchange.
This condensed consolidated interim financial information was
approved for issue on 30 August 2011.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2010 were approved by the Board on 28 April 2011 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under section
498 of the Companies Act 2006.
This condensed consolidated interim financial information has
been reviewed, not audited.
2. Basis of preparation
This condensed consolidated interim financial information for
the six months ended 30 June 2011 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial
Services Authority and with IAS 34, 'Interim financial reporting',
as adopted by the European Union. The condensed consolidated
interim financial information should be read in conjunction with
the annual financial statements for the year ended 31 December
2010, which have been prepared in accordance with IFRSs as adopted
by the European Union.
2.1 Going concern basis
As discussed in the Outlook section of the interim report, the
post period payment to the former BioSeek shareholders of $2.5
million, plus accrued interest, has significantly decreased our
cash position. In addition, worse than expected trading post period
end will result in a breach of banking covenants in August and the
re-classification of the $2.7 million term loan as current debt.
Additional funds must be raised in the near future to see the Group
through this volatile trading period. Based on discussions with
potential investors, the Board believes that it has a reasonable
expectation that sufficient funds will be raised within an
appropriate timeframe to continue operating as a going concern and
provide enough working capital headroom to fund improved tissue
sourcing strategies, which are expected to improve supply and
thereby stabilise the non-BioSeek sales.
In addition to the inherent risk that funds cannot be raised
within the necessary timeframe, the following are considered to be
additional uncertainties related to raising these funds:
-- Shareholder approval - raising sufficient funds in a cost
efficient manner is predicated on shareholder approval. The Board
intends to convene a General Meeting at which the necessary
resolutions will be put to shareholders. While there is uncertainty
over the outcome of these votes, the Board has a reasonable
expectation that approval to proceed with this strategy will be
forthcoming.
-- Loan covenants - it will be necessary to re-negotiate the
conditions attached to the Group's banking facility. It is likely
that such re-negotiation will be linked to the raising of capital
as above. While there is a risk that the Group will not be able to
successfully renegotiate the covenants with its providers of
finance, the Board has a reasonable expectation based on
discussions with the Group's lenders that facilities will continue
to be made available.
-- Trading results - management have prepared revised budgets
and projections which they believe are prudent and achievable,
taking into account the volatility in sales (excluding BioSeek)
currently being experienced. However, the achievement of these
trading results is uncertain.
The directors have concluded that the combination of these
circumstances represents a material uncertainty that casts
significant doubt upon the Group's ability to continue as a going
concern and that, therefore, the Group may be unable to realise its
assets and discharge its liabilities in the normal course of
business. Nevertheless, after considering the uncertainties
described above and making appropriate enquiries, the directors
have a reasonable expectation that the company will obtain adequate
resources to continue in operational existence for the foreseeable
future. For these reasons, they continue to adopt the going concern
basis of accounting in preparing the interim financial
statements.
3. Accounting policies
The accounting policies adopted are consistent with those of the
previous financial year, except as described below.
Exceptional items are disclosed and described separately in the
financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group.
They are material items of income or expense that have been shown
separately due to the significance of their nature or amount.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
During the period, the Group recognised for the first time
financial liabilities at fair value through profit or loss (see
note 13) in accordance with the following accounting policy:
The Group classifies its financial liabilities as either
financial liabilities at fair value through profit or loss or as
other financial liabilities. The category of financial liabilities
at fair value through profit or loss also has two sub-categories:
liabilities held for trading and those designated to the category
at inception. An entity has the right to designate any financial
liability at fair value through profit or loss on initial
recognition provided such a designation results in more relevant
information either:
-- because it eliminates or significantly reduces a measurement
or recognition inconsistency; or
-- because it is part of a group of financial liabilities that
is managed, and its performance evaluated on a fair value basis in
accordance with a documented risk management or investment
management strategy, and information about this group is provided
internally on that basis to the entity's key management
personnel.
Gains or losses arising from changes in the fair value of the
'financial liabilities at fair value through profit or loss' are
presented in the income statement as an exceptional item within
finance income/expense in the period in which they arise.
Warrants with an exercise price denominated in a currency
different to that of the company's functional currency are recorded
at their fair value within financial liabilities and re-measured to
their fair value at each balance sheet date. Gains or losses
arising from changes in their fair value are presented in the
income statement as an exceptional item within finance
income/expense in the period in which they arise.
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning 1
January 2011:
-- Amendment to IAS 24, 'Related party disclosures'. The revised
standard clarifies and simplifies the definition of a related party
but is not expected to have a significant impact on the disclosures
of the Group.
-- Amendment to IAS 32, 'Financial instruments: Presentation on
classification of rights issue'. This addresses the accounting for
rights issues which are denominated in a currency other than the
functional currency of the issuer.
-- Amendment to IFRS 1, 'First time adoption' on 'Financial
instrument disclosures'. This amendment provides first-time
adopters with the same transition provisions as included in the
amendment to IFRS 7 regarding comparative information for the new
three level disclosures. This is not relevant to the Group or
Company as consolidated and parent Company accounts are already
prepared under IFRS.
-- Annual improvements 2010. This set of amendments includes
changes to six standards and one IFRIC. These are minor amendments
and are not expected to have a significant impact on the Group.
-- Amendment to IFRIC 14, 'Prepayments of minimum funding
requirement'. This relates to companies that are required to make
minimum funding contributions to a defined benefit pension plan.
The Group does not have such schemes and therefore it is not
relevant.
-- IFRIC 19, 'Extinguishing financial liabilities with equity
instruments'. This clarifies the accounting when an entity
re-negotiates the terms of its debt with the result that the
liability is extinguished through the debtor issuing its own equity
instruments to the creditor.
There is not expected to be a significant impact resulting from
the future adoption of accounting standards that have been issued
but do not yet need to be applied by the Group.
4. Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amount of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the
consolidated financial statements for the year ended 31 December
2010, with the exception of changes in estimates that are required
in determining the provision for income taxes and the fair value of
liabilities associated with the acquisition of BioSeek (see note
13).
5. Segmental reporting
The Directors are of the opinion that under IFRS 8, 'Operating
segments', the Group has two business segments: Tissue Based
Solutions and Licensing. All revenue and costs are recorded in the
income statement under these two segments. BioSeek is classified
under the Tissue Based Solutions business segment.
Revenue by segment is split as follows:
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
$'000 $'000
------------------------ ----------- -----------
Tissue Based Solutions 11,850 8,665
Licensing - 19
------------------------ ----------- -----------
11,850 8,684
------------------------ ----------- -----------
EBITDA by segment is split as follows:
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
$'000 $'000
------------------------ ----------- -----------
Tissue Based Solutions 898 (1,227)
Licensing (48) (125)
------------------------ ----------- -----------
850 (1,352)
------------------------ ----------- -----------
A reconciliation of EBITDA for the operating profit/(loss) for
the periods presented is given on page 6.
Gross margin by segment is split as follows:
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
% %
------------------------ ----------- -----------
Tissue Based Solutions 57% 51%
Licensing - -
------------------------ ----------- -----------
All assets of the Group relate to Tissue Based Solutions.
The Group operates across four geographical segments. The UK is
the home country of the legal parent.
Revenue (by destination) Revenue (by origin)
Six months Six months Six months Six months
ended ended ended ended
30 June 30 June 30 June 30 June
2011 2010 2011 2010
Unaudited Unaudited Unaudited Unaudited
$'000 $'000 $'000 $'000
U.K. 627 488 1,827 1,562
Rest of
Europe 1,511 2,156 - -
North America 7,373 5,136 10,023 7,122
Japan 2,339 904 - -
11,850 8,684 11,850 8,684
=========== =========== =========== ===========
Net assets Capital expenditure
Six months Six months
ended ended
30 June 30 June 30 June 30 June
2011 2010 2011 2010
Unaudited Unaudited Unaudited Unaudited
$'000 $'000 $'000 $'000
U.K. (3,675) (7,675) 54 38
North America 16,612 23,421 369 181
12,937 15,746 423 219
=========== =========== ============= ============
During the period, the Group paid $137,000 for a Robotics
upgrade and a further $169,000 is committed to be spent post period
end (2010: $nil).
6. Exceptional items
Unusual and/or one time general and administrative expenses
incurred outside the normal course of business are classified as
exceptional items in the income statement.
General and administrative exceptional items comprised the
following:
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
$'000 $'000
--------------------------------------------- ------------ -----------
Professional fees in relation to severance,
acquisition, and litigation costs - 438
Exceptional gain on initial acquisition
consideration - (564)
--------------------------------------------- ------------ -----------
Net exceptional gain - (126)
--------------------------------------------- ------------ -----------
Exceptional severance, legal and professional fees were incurred
in the six months to 30 June 2010. These related to the acquisition
of BioSeek Inc, the litigation to secure access to new procurement
sites in Asia, Group transfer pricing tax advisory fees and
severance costs relating to the restructuring of the Detroit
operations.
The exceptional gain of $564,000 recognised in the six months
ended 30 June 2010 relates to the re-measurement of the contingent
consideration recognised on the acquisition of BioSeek Inc.
Interest expense-exceptional costs
The change in the settlement of debt to the former shareholders
of BioSeek has been treated as an extinguishment of the original
financial liability on the balance sheet (see note 13). The
movement in fair value between these financial liabilities and
their subsequent re-measurement at the balance sheet date has been
recorded as exceptional interest expense of $1,688,000 during the
period (2010: $nil).
7. Financial risk management
The Group's activities expose it to a variety of financial
risks: foreign currency risk, interest rate risk, liquidity risk
and credit risk. See note 13 for changes in the contractual cash
outflows resulting from the renegotiation of the amounts due to the
former shareholders of BioSeek.
The interim financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements as at 31 December 2010.
The Group's liabilities measured at fair value consist of the
warrants issued to the former shareholders of BioSeek of $429,000
and the warrants associated with the term loan of $57,000 totalling
$486,000 (31 December 2010: $nil). The inputs for the valuations of
these financial liabilities are not based on observable market
data. During the period, there were no significant changes in the
business or economic circumstances that affected the fair value of
the Group's financial liabilities.
8. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of 5p Ordinary Shares issued during the period.
For diluted loss per share, the weighted average number of
Ordinary Shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary Shares. These represent share options
granted to employees where the exercise price is less than the
average market price of the Company's Ordinary Shares during the
period presented. In the periods presented, the Group had no
potentially dilutive Ordinary Shares in issue because it was loss
making.
Six months Six months
ended ended
30 June 30 June
2011 2010
Unaudited Unaudited
-------------------------------------------- ----------- -----------
Loss attributable to ordinary shareholders
($'000's) (2,291) (1,510)
Weighted average number of shares (000's) 118,504 114,890
-------------------------------------------- ----------- -----------
Basic and diluted loss per Ordinary Share (1.9)c (1.3)c
-------------------------------------------- ----------- -----------
9. Income taxes
Income tax expense is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year. The estimated annual tax rate used for the
year to 31 December 2011 is 40% (the estimated rate for the six
months ended 2010 was 34%). The increase in tax rates is due to
additional State taxes provided for. The tax provision of $668,000
for the period ended 30 June 2011 (30 June 2010: $61,000 credit)
results from taxable profits generated by BioSeek and although
there are significant tax losses available for off-set, these are
restricted following the change in ownership.
A number of changes to the UK corporation tax system were
announced in the March 2011 Budget Statement. The Finance (No 3)
Act 2011, which was substantively enacted on 5 July 2011, includes
legislation reducing the main rate of corporation tax from 26% to
25% from 1 April 2012. Further reductions to the main rate are
proposed to reduce the rate by 1% per annum to 23% by 1 April 2014.
The changes had not been substantively enacted at the balance sheet
date and, therefore, are not included in these interim financial
statements. The impact of the proposed changes to the UK
corporation tax rates are not material to the UK deferred tax
balances.
10. Dividends
No dividends have been paid or proposed for the period ended 30
June 2011 (30 June 2010: $nil).
11. Borrowings and loans
30 June 30 June
2011 31 Dec 2010 2010
Unaudited Audited Unaudited
$'000 $'000 $'000
-------------------------------------- ----------- ------------ -----------
Current
Other financial liabilities-finance
leases 8 12 -
Other financial liabilities-current
debt 600 703 -
Other financial liabilities-amounts
due to former shareholders of
BioSeek 4,177 - -
Non-Current
Other financial liabilities-finance
leases 2 5 10
Other financial liabilities-long
term debt 1,987 2,348 -
Other financial liabilities-amounts
due to former shareholders of
BioSeek 4,705 - -
-------------------------------------- ----------- ------------ -----------
Total Borrowings and loans 11,479 3,068 10
-------------------------------------- ----------- ------------ -----------
Current other financial liabilities - amounts due to former
shareholders of BioSeek excludes the fair value of warrants of
$430,000 (see note 13).
Movements in borrowings are analysed as follows:
Six Months ended 30 June 2010 $'000
----------------------------------------------------- -------
Opening amount as at 1 January 2010 57
Finance leases on acquisition of subsidiary 29
Repayment of borrowings (76)
----------------------------------------------------- -------
Closing amount as at 30 June 2010 10
----------------------------------------------------- -------
Six Months ended 30 June 2011 $'000
----------------------------------------------------- -------
Opening amount as at 1 January 2011 3,068
Reduction in value of term loan following issuance
of associated warrants (87)
Issuance of loan notes (see note 13) 6,417
Loan to ex-shareholders of BioSeek (see note 13) 2,551
Repayment of borrowings (394)
Movement in fair value (recognised in exceptional
interest) (86)
Accretion of loan arrangement fees 6
Accretion of warrants associated with the term loan 4
----------------------------------------------------- -------
Closing amount as at 30 June 2011 11,479
----------------------------------------------------- -------
As explained in note 2.1, there is expected to be a post period
end breach of banking covenants. Although correctly presented at
the time of signing these interim financial statements, a breach of
the loan covenants on 31 August 2011 would result in the
re-classification of the term loan as current debt.
12. Share capital
Shares to
Share be
Share Capital Premium issued Total
Unaudited Unaudited Unaudited Unaudited Unaudited
Number $'000 $'000 $'000 $'000
At 1 January 2010 116,343,860 9,262 84,298 535 94,095
Allocated under
share option
schemes 2,708,320 212 378 (535) 55
At 30 June 2011 119,052,180 9,474 84,676 - 94,150
============ ========== ========== ========== ============
Options exercised in the period to 30 June 2011 resulted in
567,650 shares being issued (30 June 2010: nil shares). Exercise
proceeds of $15,400 (30 June 2010: $nil) were received in respect
of 265,650 options, all others are zero cost options. In addition,
2,051,000 shares were issued as a result of options exercised in
the year to 31 December 2010 that had not been issued as at 31
December 2010. 89,670 shares were also issued under the Share
Incentive Plan (the "SIP").
13. BioSeek acquisition
The Group acquired 100% of the share capital of BioSeek, Inc.
("BioSeek") on 18 February 2010.
The initial consideration paid by Asterand was a sum of $1.0
million satisfied by the issue of 2,695,856 New Asterand Shares at
$0.37 (22p) per share - calculated based on the per share closing
prices of Ordinary Shares on the London Stock Exchange during the
thirty (30) consecutive trading day period ended on 17 November
2009, converted into U.S. dollars at the exchange rate for
purchasing U.S. dollars with pound sterling as quoted in the
Financial Times on such date.
An additional sum of $8.5 million became payable in April 2011
based on a formula applied to 2010 BioSeek revenues.
As previously announced, the first US $3 million of this payment
was to be satisfied through the issue of 8.1 million Asterand
shares, and the remaining $5.5 million consideration was to be paid
in cash. All amounts recorded at the 31 December 2010 balance sheet
date (valued under IFRS 3 (revised), 'Business combinations') were
made under this assumption.
However, in April 2011 we subsequently agreed with the former
BioSeek shareholders that the entire $8.5 million of contingent
consideration would be satisfied with cash rather than cash and
shares; $2.5 million to be paid in single payment and the remaining
$6 million to be satisfied by the issue of loan notes ("Amounts due
to former shareholders of BioSeek") that mature over the period to
December 2013. The Company has entered into a warrant agreement
with the former BioSeek shareholders whereby they have the right to
subscribe for 5.2 million new Ordinary Shares at 14.12p per share.
This warrant agreement will expire on 22 July 2014.
The contingent consideration was classified as a financial
liability under IFRS 3 (revised). Under IAS 39, 'Financial
instruments: Recognition and measurement', the change in the
settlement of debt to the former shareholders of BioSeek has been
treated as an extinguishment of the original financial liability on
the balance sheet. As a result, the fair value of the re-negotiated
debt (i.e. cash and loan notes) is recorded as a liability on the
balance sheet, with the movement in fair value being recorded
through the income statement. The fair value of the cash and loan
notes at inception was $8,968,000. These financial liabilities have
been designated at inception at fair value through profit or loss
and therefore they will be recorded at their fair value each
reporting period, with subsequent changes in fair value also being
recorded through the income statement. The fair value of the cash
and loan notes at 30 June 2011 was $8,882,000.
Under IFRS, warrants with an exercise price denominated in a
currency (GBP) different to that of the company's functional
currency (USD) should be recorded at their fair value within
liabilities, with changes in their fair value recorded through the
income statement. The fair value of the warrants was initially
recorded at $716,000. The warrants will continue to be adjusted
through the income statement each reporting period until such time
as they are exercised or expire. The fair value of the warrants at
30 June 2011 was $430,000.
The movement in fair value between these financial liabilities
and their subsequent re-measurement at the balance sheet date has
been recorded as exceptional interest expense as follows:
Change in
Other financial liabilities-amounts due to fair
former shareholders of BioSeek value
-------------------------------------------------- ------------ ----------
30 June
2011 31 Dec 2010
$'000 $'000 $'000
---------------------------------------- -------- ------------ ----------
Fair value of contingent consideration - 7,624 7,624
Fair value of cash and loan notes
at inception 8,968 - (8,968)
Re-measurement of cash and loan
notes to fair value at period end (86) - 86
Initial fair value of warrants 716 - (716)
Re-measurement of warrants to fair
value at period end (286) - 286
---------------------------------------- -------- ------------ ----------
Interest expense-exceptional costs (1,688)
---------------------------------------- -------- ------------ ----------
The warrants have been classified within current financial
liabilities on the balance sheet as they can be exercised at any
time.
Statement of Directors' Responsibilities
The directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last Annual Report.
A list of directors is maintained on the Asterand plc website:
www.asterand.com.
By order of the Board
John Stchur
Chief Financial Officer
30 August 2011
Independent Review Report to Asterand plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2011, which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. This report, including the
conclusion, has been prepared for and only for the Company for the
purpose of the Disclosure and Transparency Rules of the Financial
Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2011 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Emphasis of matter - going concern
Without modifying our conclusion, we draw attention to note 2.1
to the interim financial statements concerning going concern. The
interim financial statements have been prepared on a going concern
basis and the validity of this depends on raising additional funds,
as described more fully in note 2.1 to the interim financial
statements. This indicates the existence of a material uncertainty
which may cast significant doubt about the Group's ability to
continue as a going concern. The interim financial statements do
not include any adjustments that would result from a failure to
raise additional funds.
PricewaterhouseCoopers LLP Chartered Accountants Cambridge
30 August 2011
Notes:
a. The maintenance and integrity of the Asterand plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the half-yearly financial statements
since they were initially presented on the website.
b. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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