Interim Results

NMT Group PLC 23 September 2004 23 September 2004 NMT GROUP PLC Interim Results for the six months ended 30 June 2004 NMT Group PLC, the provider of drug delivery solutions to prevent needlestick injury, announces its interim results for the six months ended 30 June 2004. Key points • Reorganisation into the development and licensing business close to completion and benefits being experienced. • Good progress made in negotiating the development of exclusive pre-fill needle product variants with several pharmaceutical companies. • Discussions with potential licensing partners, for the manufacture of 2nd Generation safety syringes in the Far East, continue but remain uncertain. Future progress conditional on securing acceptable commercial terms and assurances on the financial standing and technical capabilities of potential partners. • Law suit with Retractable Technologies Inc settled for US$ 1million. • Group's financial position remains strong. Net cash of £9.8 million (£12.8 million at 31 December 2003). Net 'free' cash after re-organisation provision is £7.3 million. Commenting on the results, Tony Fletcher, Chairman, said: 'I am pleased to report demonstrable progress over the last six months. With the major reorganisation largely completed, the Group is now able to concentrate on the growth of its development and licensing business. However success in the coming months, with regard to the pre-fill needle unit and our prospective pharmaceutical partners, will be critical to the Group's long-term future. I continue to believe that the prospects for the Group are good.' Enquiries: NMT Group PLC Tony Fletcher - Chairman Tel: 01506 445000 07836 725246 CHAIRMAN'S STATEMENT I am pleased to report that the Group has made demonstrable progress over the last six months. The beneficial impact of the re-organisation which was started in December 2003, is now being experienced with a pre-exceptional operating loss for the first six months of 2004 reduced to £0.7 million from £2.2 million in the same period of 2003. After several months of discussion with a number of pharmaceutical companies, the Group has now received specific requests to initiate the detailed design process for exclusive product variants of the pre-fill needle unit, which may lead, in due course, to contracts for their development and licensed manufacture. There are three distinct phases prior to pharmaceutical companies entering into a formal collaboration contract - design, prototyping and the conclusion of a successful marketing trial. In this regard, I can report that the Group is achieving measurable progress with some potential customers. The Group has received from one pharmaceutical company a detailed specification, for which design work is in progress; an initial prototype has been modelled to meet the unique specification of a second pharmaceutical company; and the Group is currently building several thousand units for a marketing trial to be run by a third company. Dependent on the success of these activities, and the agreement of satisfactory commercial terms, it is possible that first commercial sales of the pre-fill needle unit could take place in late 2005 / early 2006. In addition, a number of suitable European manufacturers have been identified for these products and discussions with them are well advanced. Securing the first customer for the NMT safety pre-fill needle unit is of fundamental importance to the future of the Group, as it will provide a solid foundation in gaining further business for this product range going forward. Several visits have been made by members of the Group's development and licensing team to the Far East in order to hold commercial and technical discussions with several parties who have expressed interest in commencing manufacture of 2nd Generation safety syringes. However progress in this area has been slow and the Group is not prepared to commit significant resources and expenditure to this project, until acceptable commercial terms can be agreed and satisfactory assurances on both the technical capabilities and financial standing of any nominated licensee are obtained. Re-organisation The re-organisation of the Group into a development and licensing business has now largely been completed. The manufacturing facility at Oakbank Park was vacated in July and our team of 10 people now operates from smaller offices at Fairways Business Park, Livingston. Break up and sale of the remaining plant and machinery is presently in progress, with planned completion before the end of the year. Overall re-organisation costs to date remain in line with the provision made in 2003 Annual Accounts. The outstanding provision at 30 June 2004 of £2.5 million is mainly related to the termination of manufacturing facility leases. It is expected that this provision will be fully utilised in the second half of 2004. Litigation As previously announced, the law suit for alleged patent infringement, filed by Retractable Technologies Inc ('RTI'), was settled for US$ 1 million, which the Board believes to represent an acceptable cost for a commercially expedient solution in respect of the Group's 1st Generation safety syringe product range no longer sold or manufactured. An exceptional charge of £0.8 million has been made in the profit and loss account, which was principally in respect of this settlement and includes £0.1 million of legal costs which were in excess of the Group's insurance cover. No provision was made for any costs in respect of the RTI litigation at 31 December 2003. Results Turnover of £nil compared with £5.4 million in the same period last year and reflected no trading income to date in the new licensing and development business. An operating loss on continuing activities before exceptional items of £0.7 million (2003: £0.8 million) resulted from on-going operating costs of the business. Exceptional charges of £0.8 million, were offset by interest receivable of £0.2 million (2003: £0.2 million), to result in a loss before tax £1.3 million (2003: £2.0 million). Net cash outflow from operating activities in the half-year to 30 June 2004 was £3.3 million (2003:£1.8 million), of which £2.0 million was attributable to reorganisation costs and £0.8 million to the RTI litigation. Cash balances at 30 June 2004 stood at £9.8 million prior to the outstanding reorganisation provision of £2.5 million. Adjustment in respect of this amount would leave a residual cash balance of £7.3 million. Board Roy Smith, Chief Executive and Gerard Cassels, Group Finance Director left the Group during the period and I would wish to express my thanks again for their contribution to the business over recent years. Given that the Group's Board has been reduced to only two directors, Gerard Cassels has agreed to continue to act as Company Secretary for the immediate future. Share Capital Consolidation The Board believes that it is now appropriate to consolidate the Group's share capital in order to allow its share price to realistically reflect the commercial status of the business. Shareholder approval will be sought to consolidate the Group's ordinary share capital with the issue of 1 new ordinary share (of £4) for every 100 existing ordinary shares (of 4 pence) in issue. It is planned to hold an Extraordinary General Meeting on 3 November 2004 to vote on the appropriate resolution. A separate circular on this issue is being sent to shareholders with these Interim Accounts. Outlook The Group's financial position remains strong. The coming months are of critical importance. The immediate priority of the development and licensing team, under the leadership of Graham Crowther, is to ensure the successful completion of the present development activities in respect of the pre-fill needle unit with our potential pharmaceutical partners; and thereafter to secure commercially acceptable contracts for the development and licensed manufacture of specific product variants. This product range is likely to offer the most significant benefit to the Group in the short term. The Group will continue to pursue partners for 2nd Generation syringe products, but in accordance with a policy of securing agreement of satisfactory commercial terms, prior to allocating significant cost and resources. I remain optimistic on the future of the business. Tony Fletcher Chairman 23 September 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the six months ended 30 June 2004 6 months to 6 months to 30 June 2003 30 June 2004 Unaudited Interim £'000 Continuing Discontinuing Unaudited £'000 £'000 Interim £'000 Turnover - - 5,433 5,433 Operating loss before exceptional items (799) (1,422) (2,221) Exceptional items (795) - - - Group operating loss (1,491) (799) (1,422) (2,221) Interest receivable 223 148 95 243 Interest payable - - (36) (36) Loss on ordinary activities before taxation (1,268) (651) (1,363) (2,014) Taxation 38 37 - 37 Loss for the financial period (1,230) (614) (1,363) (1,977) Loss per ordinary share basic and diluted (0.1)p (0.1)p (0.2)p (0.2)p Loss per share before exception items (0.0)p (0.1)p (0.2)p (0.2)p 12 months to 31 December 2003 Continuing Discontinued Audited £'000 £'000 Full Year £'000 Turnover - 12,285 12,285 Operating loss before exceptional items (1,599) (873) (2,472) Exceptional items - (14,476) (14,476) Group operating loss (1,599) (15,349) (16,948) Interest receivable 301 170 471 Interest payable - (72) (72) Loss on ordinary activities before taxation (1,298) (15,251) (16,549) Taxation 87 - 87 Loss for the financial period (1,211) (15,251) (16,462) Loss per ordinary share basic and diluted (0.1)p (1.8)p (1.9)p Loss per share before exceptional items (0.1)p (0.1)p (0.2)p NOTES 1. Basis of preparation The financial information in this report does not comprise statutory accounts for the purposes of Section 240 of the Companies Act 1985. The interim accounts for the six months ended 30 June 2004 and six months ended 30 June 2003, which are unaudited, have been prepared on the basis of accounting policies consistent with those set out in the Company's full accounts for the year ended 31 December 2003. The accounts for the year ended 31 December 2003 presented in this report are an abridged version of the full accounts which carried an unqualified auditors' report, did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985 and have been filed with the Registrar of Companies. There is no difference between the loss on ordinary activities before taxation and the retained loss for the period stated above and their historical cost equivalents. 2. Exceptional Items The following exceptional items have been reflected in the accounts for the six months ended 30 June 2004. The lawsuit filed by Retractable Technologies Inc was resolved in April 2004. The settlement comprised the payment of £0.6 million and admission of non-willful infringement of RTI patents. In addition, a further £0.1 million of uninsured legal costs were incurred. The closure of the 1st Generation syringe facility in Livingston was announced in December 2003 resulting in a charge of £14.5 million for the year. An additional charge of £0.1 million was made in the period. 3. Taxation As a result of losses brought forward there is anticipated to be no tax charge in the current year. The tax credit reflects a research and development tax credit for the period. 4. Loss per share The calculation of loss per share is based on the loss for the period attributable to ordinary shareholders and on the average number of ordinary shares in issue during the period, which totalled 871,132,000 shares (2003 interim - 871,131,294 : full year - 871,132,794). As a loss has been incurred during the six months ended 30 June 2004 there is no dilutive effect of unexercised share options. CONSOLIDATED BALANCE SHEET As at 30 June 2004 Unaudited Unaudited Audited Interim Interim Full year 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 --------- ---------- ----------- Fixed assets Tangible assets 338 8,867 386 --------- ---------- ----------- Current assets Stocks - 824 - Debtors 638 2,627 3,157 Cash at bank and in hand 9,753 13,351 12,842 ------------------------ --------- ---------- ----------- 10,391 16,802 15,999 --------- ---------- ----------- Creditors: amounts falling due within one year (452) (2,389) (1,018) --------- ---------- ----------- Net current assets 9,939 14,413 14,981 --------- ---------- ----------- Total assets less current liabilities 10,277 23,280 15,367 --------- ---------- ----------- Creditors: amounts falling due after more than one year - (232) (60) Provisions for liabilities and charges (2,510) - (6,310) --------- ---------- ----------- Net assets 7,767 23,048 8,997 --------- ---------- ----------- Capital and reserves Called up share capital 37,187 37,187 37,187 Share premium account 38,639 38,639 38,639 Profit and loss account (68,059) (52,778) (66,829) --------- ---------- ----------- Total equity shareholders' funds 7,767 23,048 8,997 --------- ---------- ----------- CONSOLIDATED CASH FLOW STATEMENT For the six months ended 30 June 2004 Unaudited Unaudited Audited Interim Interim Full year 2004 2003 2003 Note £'000 £'000 £'000 -------- ------- -------- Net cash outflow from operating activities Net cash outflow - continuing operation before exceptional items (537) (785) (1.577) Net cash outflow - discontinued operatinin 2003 (1,956) (995) (521) Net cash outflow - exceptional items 2 (795) - - -------- ------- -------- Net cash outflow from operating activities (3,288) (1,780) (2,098) -------- ------- -------- Returns on investments & servicing of finance Interest received (net) 231 292 467 Taxation 195 - 114 Capital expenditure - (261) (439) -------- ------- -------- Net cash outflow before management of liquid resources and financing (2,862) (1,749) (1,956) Management of liquid resources 2,251 2,743 2,714 -------- ------- -------- Net cash outflow from financing (227) (306) (608) -------- ------- -------- (Decrease) / increase in cash in the period (838) 688 150 -------- ------- -------- Reconciliation of net cashflow to movement in net funds (Decrease) / increase in cash in the period (838) 688 150 Cashflow from finance leases-repayments of principle 227 306 608 Cash inflow from management of liquid resources (2,251) (2,743) (2,714) -------- ------- -------- Decrease in net funds in period (2,862) (1,749) (1,956) Net funds at beginning of period 12,385 14,341 14,341 -------- ------- -------- Net funds at end of period 9,523 12,592 12,385 -------- ------- -------- STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the six months ended 30 June 2004 Unaudited Unaudited Audited Interim Interim Full year 2004 2003 2003 £'000 £'000 £'000 -------- -------- -------- Loss on ordinary activities after taxation (1,230) (1,977) (16,462) Exchange adjustment on translation of investment in subsidiary - 257 688 -------- -------- -------- Total recognised losses for the period (1,230) (1,720) (15,774) -------- -------- -------- RECONCILIATION OF SHAREHOLDERS' FUNDS For the six months ended 30 June 2004 Unaudited Unaudited Audited Interim Interim Full year 2004 2003 2003 £'000 £'000 £'000 -------- -------- -------- Loss for the period (1,230) (1,977) (16,462) Other recognised gains for the period - 257 688 -------- -------- -------- Total recognised losses for the period (1,230) (1,720) (15,774) Share options - notional cost of share options - 34 37 granted -------- -------- -------- Total movements during the period (1,230) (1,686) (15,737) Shareholders' funds at start of period 8,997 24,734 24,734 -------- -------- -------- Total shareholders' funds at end of period 7,767 23,048 8,997 -------- -------- -------- This information is provided by RNS The company news service from the London Stock Exchange

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