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Asterand Plc (ATD)

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Monday 30 April, 2012

Asterand Plc

Final Results Statement

RNS Number : 2952C
Asterand PLC
30 April 2012
 



 

                                       

 

 

For Immediate Release                                                                                          30 April 2012

 

Asterand plc

FINAL RESULTS STATEMENT

for the year ended 31 December 2011

 

 

Asterand plc (LSE: ATD), a leading global supplier of human tissue and human tissue-based research services to pharmaceutical and biotechnology companies engaged in drug discovery research, announces its audited final  financial results for the year ended 31 December 2011.

The full 2011 Annual Report and Accounts can be found on our website at

http://www.asterand.com/Asterand/investors/financialreports/2012/Asterand_Annual_Report_Accounts_2011.pdf

 

Notes to Editors

Asterand plc is a leading supplier of high quality human tissue and tissue-based services. Our comprehensive approach to human tissue and research services offers pharmaceutical, biotech and diagnostic companies the unique opportunity to have one company meet all of their human biomaterial needs along the continuum of drug discovery and development. Our mission is to accelerate target discovery and drug compound validation and enable our clients to take safer and more effective drugs into the market.

For more information about Asterand please visit http://www.asterand.com

 

For further information contact:

Contacts:

Asterand plc

Jack Davis, Chairman,

Interim Chief Executive Officer and

Company Secretary

Tel:

Tel:

+ 44 (0) 1763 211 600 /

+ 1 (313) 263-0960

Alan Fishman, Interim Chief Financial Officer


As above




Daniel Stewart & Company plc

Antony Legge                            

Tel:

+44 (0) 20 7776 6550

 

 

                                                                                            

                                                                                 

                                                                                  

                                                    

 

                                                                   

 



CHAIRMAN'S STATEMENT

Results for the year ended 31 December 2011

During 2011 the Group achieved revenue of $24.09 million (2010: $21.31 million), an increase of 13%. These results were due to strong annual performance by the BioSeek business and benefited as well from the inclusion of a full twelve months of BioSeek in 2011 (2010: ten months) and an improved 4th quarter performance by the non-BioSeek related Tissue Based Solutions business. 

The Group's cost of sales was $11.23 million (2010: $9.33 million), leading to a gross profit for the year of $12.86 million (2010: $11.98 million profit). As a result, gross margins were 53% (2010: 56%).

This revenue growth was achieved while prudently managing costs and keeping expenditures on normal operations in check. Research and Development (R&D) expenses were $1.43 million (2010: $1.33 million). All 2011 R&D expenses were related to improvements to new product offerings to support the Group's focus on the business of human tissue supply and human tissue based solutions.

Selling and distribution costs were $3.41 million (2010: $3.82 million). These costs relate to sales staff salaries, commissions and marketing expenses. The modest decrease is attributable to a reduction in sales staff salaries expense due to attrition and a renegotiation of our consultant agreement with our Japanese sales and marketing representative. 

Total general and administrative expenses were $12.55 million (2010: $8.92 million). General and administrative expenses are analysed between those relating to exceptional costs and those to normal operations. Costs relating to normal operations were reduced to $7.82 million (2010: $8.00 million). 

On 24 October 2011 the commencement of a formal sales process for the Group was announced. During this process the Group has held discussions with several interested parties. The Company has not been able to secure an offer for the whole Group, instead it has signed letters of intent for each of the two businesses in the Tissue Based Solutions segment: BioSeek and the non-BioSeek Tissue Based Solutions.  As a consequence, the formal sale process has now ended and the Company is no longer in an Offer Period.

This decision, after the year end, to sell certain elements of the business separately has resulted in reductions in the carrying value of certain assets, primarily intangible assets and inventory, as explained further below.  These impairment charges reflect that these financial statements are not prepared on a going concern basis since all parts of the business are being actively marketed and thus the asset values have been adjusted to reflect their estimated realisable value.

Exceptional general and administrative costs rose to $4.73 million (2010: $0.92 million) due to these impairment charges, totalling $3.40 million.  Remaining exceptional costs related to severance, acquisition, litigation and sale costs.

The Group realised a $8.23 million loss for the year (2010: $2.07 million loss), including a $1.59 million (2010: $nil) exceptional interest expense relating to the financing arrangements in place to acquire BioSeek.  Loan notes were the agreed form of payment for the contingent consideration of BioSeek; the interest expense arising on these are deemed to be exceptional interest.

Although it is a non-IFRS measure, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and excluding exceptional items and share option related charges is monitored closely by the Directors and management as a metric to measure progress of business operations towards profitability and positive cash flow. The adjusted EBITDA for 2011 was $1.51 million profit, a $1.53 million improvement over 2010 (2010: $0.02 million loss). An explanation of this calculation can be found on page 6 of this document.

Balance Sheet

At 31 December 2011, the carrying value of the intangible assets was reduced to $3.31 million due to an impairment charge of $1.29 million to write down the carrying value of the assets of the non-BioSeek related Tissue Based Solutions business to a level of the expected net proceeds from the business disposal.

On 31 December 2011, the carrying value of the biobank inventory was reduced to $6.55 million due to an impairment charge of $2.11 million to write down the carrying value of inventory to the amount implied by the expected recoverable amounts in the sale of the non-BioSeek Tissue Based Solutions business. 

Cash flows

The Directors monitor the cash flow and cash resources closely. At 31 December 2011, there had been a $2.94 million reduction in the cash balance as compared to the previous year (2011: $2.98 million; 2010: $5.92 million). Primary uses of cash throughout the year included $3.24 million debt and finance lease repayments and $0.72 million of loan interest paid.

Financing and liquidity

At 31 December 2011 the Group had cash and cash equivalents of $2.98 million (2010: $5.92 million). The Group has a $2.30 million term loan with Silicon Valley Bank and a $6.59 million balance on the loan note with the former BioSeek shareholders.  In October 2011, the Group received notification that these loans were in default. As announced in October 2011, the Company is currently undergoing a formal sale of all or part of the business. Our creditors have remained supportive throughout and we believe the default status will be resolved at the conclusion of the sales process. 

Board changes and corporate governance

During 2011 we announced the departures of Martyn Coombs, the Group's Chief Executive Officer, John Stchur, the Group's Chief Financial Officer and Jonathan Fleming, a Non-Executive Director.

I'd like to take this opportunity to thank Martyn, John and Jonathan for their service over the past years and wish them well in their future endeavours.

The Board and management continue to have a policy of transparency with regards to our strategy and related activities. An important component of this involves communicating and listening to our shareholders to understand their ideas and points of view.

Aligning objectives between employees and shareholders

During 2011, we granted a total of 0.92 million share options to our employees through our Long Term Incentive Programme. We believe this programme enables us to retain key employees, while aligning the goals of our shareholders with those of our employees. Every Asterand employee receives shares under this programme.

Outlook

As previously mentioned, the Group commenced a formal sale process for the issued capital of the Group in October 2011. The Company has instead signed letters of intent to sell each of the two businesses: BioSeek and the non-BioSeek Tissue Based Solutions business, separately, and the formal sale process has ended with the Company now no longer in an Offer Period. 

Assuming that definitive agreements are executed the Board is expecting to issue a circular to shareholders in the coming weeks with details of the proposed transactions.  Then the likely process will be disposal of the assets of each of the two businesses and a solvent liquidation of the Group to return cash to shareholders.  Whilst the level of a liquidation dividend, if any, cannot definitely be determined at this time, the Board's current estimation, based on the letters of interest from the buyers and the current share price, is that the maximum payout to shareholders is unlikely to show a significant premium to the share price as of the close of business on 26 April 2012.

Revenue for the non-BioSeek portions of the Tissue Based Solutions business, which had been volatile for most of the year, stabilised in the last quarter of 2011, providing an increased cash flowover the original estimates.  Given these factors, the Directors have a reasonable expectation that the Company will maintain adequate resources to continue in operational existence until completion of disposals. The completion of the disposals is not guaranteed and there is inherent risk that the sale cannot be completed within the necessary timeframe. In addition, the following are considered to be further uncertainties related to the disposals:

·  Shareholder approval - raising funds through the disposals of all or part of the Company's assets is predicated on shareholder approval. The Board intends to convene an Extraordinary 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 - we are currently in default of our Silicon Valley Bank and former shareholders of BioSeek loans. We have been in communication with our lenders and they are in support of resolving the default status at the conclusion of this process. However, their continued support cannot be guaranteed.

·  Trading results - management have prepared budgets and projections which they believe are prudent and achievable. However, the achievement of these trading results is uncertain.

Given that the Directors have resolved to sell the two business units separately, a 'going concern' presumption in IAS 1 is not appropriate; therefore the accounts have been drawn up on a basis which reflects the Directors' intention to sell the two business units. The management team continues to tightly control operating expenses to maintain sufficient working capital. In addition, based on discussions with potential purchasers, the Board believes that it has a reasonable expectation that the disposals will be completed within an appropriate timeframe. 

 

Jack Davis

Chairman, Asterand plc



 

Consolidated Income Statement


for the year ended 31 December 2011


 

 

Note

 

 2011

$'000

 

2010

$'000

Revenue

2

24,091

21,310

Cost of sales


(11,233)

(9,332)

Gross profit


12,858

11,978

Research and development costs


(1,432)

(1,326)

Selling and distribution costs


(3,412)

(3,824)

-Normal operations


(7,819)

(8,003)

-Exceptional items (impairment, severance, acquisition, litigation and sale costs)

3

(4,733)

(920)

Total general and administrative expenses


(12,552)

(8,923)

Total operating expenses


(17,396)

(14,073)

Operating loss


(4,538)

(2,095)

Interest income - normal operations


78

4

Interest expense - normal operations


(716)

(57)

Interest expense - exceptional costs


(1,591)

-

Foreign exchange credit


166

107

Finance (expense)/income


(2,063)

54

Loss before taxation


(6,601)

(2,041)

Taxation


(1,627)

(32)

Loss for the financial year attributable to owners of the parent


(8,228)

(2,073)

Loss per 5p ordinary share




Basic

4

(7.0)c

(1.8)c

Diluted

4

(7.0)c

(1.8)c

 

 

 

 

 

 

 

 

 



Consolidated Statement of Comprehensive Income

for the year ended 31 December 2011


 

Group

2011

$'000

 

Group

2010

$'000

Loss for the financial year

(8,228)

(2,073)

Other comprehensive income:



Exchange translation difference on consolidation recognised directly in equity

(183)

(66)

Other comprehensive expense for the year net of tax

(183)

(66)

Total comprehensive expense for the year

(8,411)

(2,139)

There is no tax arising on the exchange translation difference on consolidation recognised directly in equity.

 

Non-IFRS Measure

Earnings before interest, taxes, depreciation and amortisation ("EBITDA") - and excluding exceptional items and share option related charge for the year ended 31 December 2011:

 



 

2011

$'000

 

2010

$'000

Operating loss


(4,538)

(2,095)

Exceptional items (impairment, severance, acquisition, litigation and sale costs)


4,733

920

Share option related charge


230

132

Depreciation and amortisation


1,084

1,022

Adjusted EBITDA


1,509

(21)

 

 


Consolidated Balance Sheet

as at 31 December 2011


 

 

Note

 

2011

$'000

 

2010

$'000

Assets





Non-current assets





Intangible assets


5

3,305

4,778

Property, plant and equipment



2,959

3,386

Deferred tax asset



4,360

4,843

Trade and other receivables



90

94




10,714

13,101

Current assets





Biobank inventory


7

6,549

9,136

Trade and other receivables



6,130

6,216

Cash and cash equivalents



2,978

5,918




15,657

21,270

Liabilities





Current liabilities





Trade and other payables



(6,857)

(5,250)

Income tax payable



(1,307)

(797)

Other financial liabilities ─Finance leases


8

(5)

(12)

                         ─Current debt


8

(2,428)

(703)

                         ─Amounts due to former shareholders of BioSeek


8

(6,591)

(7,624)

                                     ─Warrants


8

(12)

-




(17,200)

(14,386)

Net current (liabilities)/assets



       (1,543)

6,884

Non-current liabilities





Deferred tax liability



(179)

(282)

Other financial liabilities ─Finance leases


8

-

(5)

                         ─Long term debt


8

-

(2,348)

Other payables



(1,778)

(2,191)




(1,957)

(4,826)

Net assets



7,214

15,159

Equity attributable to owners of the parent





Ordinary shares



9,428

9,262

Shares to be issued



8

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



(29,928)

(22,149)

Currency translation reserve



4,367

4,550

Total equity



7,214

15,159

 

 

 

 

 



Company Balance Sheet

as at 31 December 2011



Note

 2011

$'000

2010

$'000

Assets





Non-current assets





Investment in subsidiaries


6

21,617

24,574

Amounts receivable from Group companies


9

-

3,001




21,617

27,575

Current assets





Trade and other receivables



227

161

Cash and cash equivalents



10

10




237

171

Liabilities





Current liabilities





Trade and other payables



 (207)

 (22)

Amounts due to former shareholders of BioSeek


10

(6,591)

(7,624)

Amounts payable to Group companies


9

(2,329)

-




(9,127)

(7,646)

Net current liabilities



(8,890)

(7,475)

Net assets



12,727

20,100

Equity attributable to owners of the parent

 





Ordinary shares



 9,428

 9,262

Shares to be issued



 8

 535

Share premium



 84,676

 84,298

Merger reserve



 510

 510

Retained losses



(92,548)

(85,165)

Currency translation reserve



 10,653

 10,660

Total equity



 12,727

 20,100

 



 

Consolidated Statement of Changes in Equity

as at 31 December 2011

Group

Ordinary shares

$'000

 

Shares to be issued

$'000

Share premium $'000

Reverse acquisition reserve  $'000

Merger

 reserve

$'000

Other reserves $'000

Investment in own shares $'000

Profit and  loss

reserve $'000

Currency translation reserve

$'000

Total equity $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 year

-

-

-

-

-

-

-

(2,073)

-

(2,073)

 

Other comprehensive income











 

Exchange translation

-

-

-

-

-

-

-

-

(66)

(66)

 

Total Comprehensive Income

-

-

-

-

-

-

-

(2,073)

(66)

(2,139)

 

Employee share option schemes











 

Value of employee services

-

-

-

-

-

-

-

132

-

132

 

Proceeds from shares issued

6

-

16

-

-

-

-

-

-

22

 

Modification to equity settled share option scheme

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(187)

 

-

 

(187)

 

Proceeds from shares issued

-

530

-

-

-

-

(525)

-

-

5

 

Acquisition of BioSeek

213

-

-

-

510

-

-

-

-

723

 

Transactions with owners

219

530

16

-

510

-

(525)

(55)

-

695

 

At 31 December 2010

9,262

535

84,298

(66,757)

510

4,910

(1,587)

(20,562)

4,550

15,159

 

Comprehensive Income











 

Loss for the year

-

-

-

-

-

-

-

(8,228)

-

(8,228)

 

Other comprehensive income











 

Exchange translation

-

-

-

-

-

-

-

-

(183)

(183)

 

Total Comprehensive Income

-

-

-

-

-

-

-

(8,228)

(183)

(8,411)

 

Employee share option schemes











 

Value of employee services

-

-

-

-

-

-

-

403

-

403

 

Proceeds from shares issued

166

(527)

378

-

-

-

46

-

-

63

 

Transactions with owners

166

(527)

378

-

-

-

46

403

-

466

 

At 31 December 2011

9,428

8

84,676

(66,757)

510

4,910

(1,541)

(28,387)

4,367

7,214

 

 

Included within the investment in own shares reserve are 304,037 (2010: 419,231) shares of 5p each held by the 2007 Employee Ownership Plan Trust ('2007 EOPT') for the satisfaction of share obligations under all option plans. The costs of funding and administering the 2007 EOPT are charged to the income statement of the Group in the period to which they relate. At 31 December 2011, the shares owned by the 2007 EOPT had a market value of $11,159 (2010: $176,981).

Other reserves represent the merger reserve arising on consolidation, being the share capital and share premium account balances of Pharmagene Laboratories Limited (renamed Asterand UK Limited) less the nominal value of the shares issued by the Company to acquire these shares, before the merger with Pharmagene plc (renamed Asterand plc) prior to the initial public offering of the Company in 2000.

The merger reserve represents the premium to the nominal value of the shares issued on the acquisition of BioSeek during 2010.

In 2010, a modification was made to an equity settled share option scheme (2007 LTIP options) to settle this partly in cash to allow US employees to settle their US tax liability on US vested options. This resulted in a charge of $187,000 being recorded through reserves (2011: $nil).

 

 

 

 

 

 

 

 



Company Statement of Changes in Equity

as at 31 December 2011


Ordinary

shares

$'000

Shares to

be issued

$'000

Share

premium

$'000

Merger

reserve

$'000

Profit and

loss

reserve

$'000

Currency

translation

reserve

$'000

Total

equity

$'000

At 1 January 2010

9,043

5

84,282

-

(83,140)

10,810

21,000

Comprehensive income








 Loss for the year

-

-

-

-

(1,970)

-

 (1,970)

Other comprehensive income








 Exchange translation

-

-

-

-

-

(150)

(150)

Total comprehensive income

-

-

-

-

(1,970)

(150)

 (2,120)

Employee share option schemes








 Value of employee services

-

-

-

-

67

-

 67

 Capital contribution

-

-

-

-

65

-

65

 Proceeds from shares issued

6

-

16

-

-

-

 22

 Modification to equity settled share option scheme

-

-

-

-

(187)

-

 (187)

 Shares to be issued

-

530

-

-

-

-

 530

Acquisition of BioSeek

213

-

-

510

-

-

 723

Transactions with owners

219

530

16

510

(55)

-

1,220

At 1 January 2011

9,262

535

84,298

510

(85,165)

10,660

20,100

Comprehensive income








 Loss for the year

-

-

-

-

(7,786)

-

 (7,786)

Other comprehensive income








 Exchange translation

-

-

-

-

-

(7)

(7)

Total comprehensive income

-

-

-

-

(7,786)

(7)

 (7,793)

Employee share option schemes








 Value of employee services

-

-

-

-

289

-

 289

 Capital contribution

-

-

-

-

114

-

114

 Proceeds from shares issued

166

(527)

378

-

-

-

 17

Transactions with owners

166

(527)

378

-

403

-

420

At 31 December 2011

9,428

8

84,676

510

(92,548)

10,653

12,727

 

See Consolidated Statement of Changes in Equity for explanation of changes in equity.



Consolidated Cash Flow Statement

for the year ended 31 December 2011

 

 

 

Note

 

2011

$'000

 

2010

$'000

Cash flows from operating activities




Loss for the year


(8,228)

(2,073)

Adjustments for:




Contingent consideration remeasurement


-

356

Finance expense/(income)


2,063

(54)

Tax charge


1,627

32

Depreciation of property, plant and equipment


865

827

Amortisation of intangible assets

5

219

195

Share option compensation charge


403

132

Impairment charge

3

3,400

-

Operating cash flows before movement in working capital


349

(585)

Decrease/(increase) in trade and other receivables


75

(2,242)

Decrease/(increase) in biobank inventories

7

480

(318)

Increase/(decrease) in trade and other payables


1,194

(1,570)

Cash used in operations


2,098

(4,715)

Interest received


78

4

Interest paid


(716)

(53)

Interest element of finance lease rental payments


(2)

(4)

Income taxes paid


(763)

(120)

Receipt of research and development tax credit


87

-

Net cash used in operating activities


782

(4,888)

Cash flows from investing activities




Cash acquired on acquisition of BioSeek

10

-

1,573

Purchase of property, plant and equipment


(457)

(311)

Purchase of intangible assets

5

(35)

(64)

Net cash (used in)/generated from investing activities


(492)

1,198

Cash flows from financing activities




Proceeds from issue of ordinary share capital


14

22

Proceeds from ordinary share capital to be issued


-

5

Loan received


-

2,948

Debt and finance lease principal payments


(3,244)

(11)

Net cash (used in)/generated from financing activities


(3,230)

2,964

Net decrease in cash and cash equivalents


(2,940)

(726)

Cash and cash equivalents at beginning of year


5,918

6,644

Cash and cash equivalents at end of year


2,978

5,918



 

Company Cash Flow Statement

for the year ended 31 December 2011


Note

 Company

2011

$'000

Company

2010

$'000

Cash flows from operating activities




Loss for the year


(7,786)

(1,970)

Adjustments for:




 Finance expense


 1,591

 -

 Share option compensation charge


 289

 67

 Impairment charge

6

3,071

-

Operating cash flows before movement in working capital


(2,835)

(1,903)

(Decrease)/increase in trade and other payables


 (185)

 78

Cash used in operating activities


(3,020)

(1,825)

Cash flows from investing activities




Increase in loans to subsidiary undertakings


3,006

1,799

Net cash generated from investing activities


3,006

1,799

Cash flows from financing activities




Proceeds from issue of ordinary share capital


14

22

Proceeds from ordinary share capital to be issued


-

5

Net cash generated from financing activities


14

27

Net increase/(decrease) in cash and cash equivalents


-

1

Cash and cash equivalents at beginning of year


10

9

Cash and cash equivalents at end of year


10

10



NOTES TO THE FINANCIAL STATEMENTS

1.       Accounting policies and basis of preparation

The final results announcement for the year ended 31 December 2011 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), International Accounting Standards (IAS) and IFRS Interpretations Committee (IFRIC) interpretations and the listing rules of the Financial Services Authority. The details of the significant accounting policies of the Group are set out in the 2011 Annual Report, copies of which are available from the Company or on the Company's website. Based on audited accounts, the financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 31 December 2011 as defined in Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered after the Company's Annual General meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of Companies Act 2006.  However included in their report is an emphasis of matter in relation to the basis of preparation in relation to matters as disclosed below.

Going concern

In view of the notices of default having been received from both the holders of the BioSeek notes and Silicon Valley Bank and the lack of interest from parties to acquire the entire share capital of the Company, the Directors have, since the year end, resolved that both the non-BioSeek Tissue Based Solutions and BioSeek businesses should be sold and in due course Asterand plc should be liquidated. Accordingly, the going concern presumption in IAS 1 is not appropriate and the accounts have been drawn up on a basis which reflects the Directors' intention to sell both the non-BioSeek Tissue Based Solutions and BioSeek businesses in an orderly manner in due course, with letters of intent having been signed for the disposal of both businesses. In drawing up the accounts on this basis, the assets of the two businesses are carried at depreciated cost, or if lower, written down to the estimated realisable value based on the offers received for each business.  An orderly realisation of the Group's assets is dependent on the continued financial support of Silicon Valley Bank and the BioSeek note holders. No liabilities are required to be recorded in relation to the costs to close down the businesses, as the operating businesses themselves are not being closed but sold.

Impairment of non-current and current assets 

Non-current and current assets are tested for impairment when a triggering event occurs by comparing the carrying value of the asset being tested with its recoverable amount.  The recoverable amount is the higher of the net selling price and value in use.  Value in use is calculated on the basis of estimated future cash flows, using a discount rate appropriate to the Group.  If the recoverable amount is less than the carrying amount, an impairment loss is recognised in the income statement. In view of the Directors' decision, post year end, to sell the two businesses in the Tissue Based Solutions segment, impairment charges reflect the net selling price expected to be achieved in these transactions, as value in use is considered to approximate this fair value.

 

2.       Segmental reporting

The Directors are of the opinion that under IFRS 8 'Operating Segments', the Group has two operating segments: Tissue Based Solutions and Licensing. All revenue and costs are recorded in the income statement under these two segments.

The segment information for the year ended 31 December 2011 is as follows:

 

Group 2011

 

Tissue Based Solutions

$'000

 

Licensing

$'000

 

Total

$'000

Revenue from external customers

24,091

-

24,091

Adjusted EBITDA

1,599

(90)

1,509

Gross margin

54%

-

53%

Share option related charge

230

-

230

Depreciation and amortisation

1,084

-

1,084

Exceptional items

4,733

-

4,733

Interest income - normal operations

78

-

78

Interest expense - normal operations

716

-

716

Interest expense - exceptional costs

1,591

-

1,591

Income tax charge

1,627

-

1,627

Total allocated assets

22,011

-

22,011

Reduction to non-current assets (other than financial instruments and deferred tax assets)

 

1,904

 

-

 

1,904

 

The segment information for the year ended 31 December 2010 is as follows:

Group 2010

 

Tissue Based Solutions

$'000

 

Licensing

$'000

 

Total

$'000

Revenue from external customers

21,291

19

21,310

Adjusted EBITDA

202

(223)

(21)

Gross margin

57%

-

56%

Share option related charge

132

-

132

Depreciation and amortisation

1,022

-

1,022

Exceptional items

920

-

920

Interest income - normal operations

4

-

4

Interest expense - normal operations

57

-

57

Income tax charge

32

-

32

Total allocated assets

29,528

-

29,528

Additions to non-current assets (other than financial instruments and deferred tax assets)

 

7,164

 

-

 

7,164

 



A reconciliation of adjusted EBITDA to loss before tax is provided as follows:



2011

$'000

2010

$'000

Adjusted EBITDA for total segments


1,509

(21)

Share option related charge


(230)

(132)

Depreciation and amortisation


(1,084)

(1,022)

Exceptional items


(4,733)

(920)

Finance (expense)/income


(2,063)

54

Loss before tax


(6,601)

(2,041)

 

Reportable segments' assets are reconciled to total assets as follows:



2011

$'000

2010

$'000

Segment assets


22,011

29,528

Unallocated:




Deferred tax asset


4,360

4,843

Total assets


26,371

34,371

 

During the year the Tissue Based Solutions segment includes revenues derived from a single customer that contributed to 11.2% of total revenues (2010: no single customer exceeded 10% of total revenues).

The licensing revenue for the year ended 31 December 2011 is $nil (2010: $19,000). The Group continues to invest modestly to maintain certain intellectual property in this segment.

The Group operates across four geographical segments. The UK is the home country of the legal parent.

 


 Revenue

  (by destination)

Revenue

(by origin)

Net (liabilities)/assets

Capital expenditure


2011

$'000

2010

$'000

2011

$'000

2010

$'000

2011

$'000

2010

$'000

2011

$'000

2010

$'000

United Kingdom

2,345

1,356

3,606

3,743

(8,135)

(815)

52

70

Rest of Europe

3,643

4,906

-

-

-

-

-

-

North America

14,141

12,469

20,485

17,567

15,349

15,974

440

305

Japan

3,962

2,579

-

-

-

-

-

-


24,091

21,310

24,091

21,310

7,214

15,159

492

375

 

 

 

 

 

 

3.       Exceptional items

General and administrative items which are significant by virtue of their size or are incidental are classified as exceptional items in the income statement.

Exceptional items comprised the following:


 Group

 2011

 $'000

Group

2010

$'000

Professional fees in relation to acquisition, restructuring and litigation

 184

 466

Severance costs

 699

 98

Accelerated share option charge

173

-

Fair value movements on acquisition consideration

-

 356

Professional fees in relation to sale of businesses

277

-

Impairment charge in relation to sale of businesses

3,400

-


4,733

 920

Exceptional legal and professional expenses of $184,000 (2010: $466,000) were incurred during 2011 and are primarily in relation to the Group restructuring.  In 2010, these costs related to the acquisition of BioSeek, Inc, litigation to secure access to key procurement sites in Asia and transfer pricing advisory fees.

Severance costs of $699,000 were incurred during 2011; these are costs associated with the Group restructuring (2010: $98,000 relating to the Detroit operations restructuring).  In addition, an accelerated fair value share option adjustment of $173,000 is included in 2011 relating to the Growth Share Plan.

Professional fees in relation to the process of selling the Group of $277,000 were incurred during 2011 (2010: $nil), comprising of broker and lawyer fees. 

As discussed in the outlook section of the Chairman's Statement, letters of intent to sell both the non-BioSeek Tissue Based Solutions and BioSeek businesses have been signed. Whilst negotiations are on-going, the current expected sales price less costs to sell for the tissue business is such that an impairment charge has been required to write down the carrying value of the assets of the tissue business to the level of the expected net proceeds. The impairment has initially been allocated against goodwill and other intangible assets associated with the relevant cash generating units, with an impairment charge of $1,293,000 being recorded.  In addition, since the carrying value of other non-monetary asset classes is considered to materially approximate recoverable amounts, the Directors have re-assessed the carrying value of inventory, such that its value has been reduced by $2,107,000 to reflect the value implied by the expected proceeds for the tissue business as a whole.

For further details surrounding fair value movements on acquisition consideration in 2010, see Note 10.

 

4.       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 in issue during the year.

For diluted earnings 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 year ended 31 December 2011.

Since 31 December 2011, 112,794 5p ordinary shares have been issued (2010: none).



 

2011

 

2010

Loss attributable to owners of the parent ($'000s)


(8,228)

(2,073)

Weighted average number of shares (000's)


118,053

115,792

Basic loss per Ordinary Share


(7.0)c

(1.8)c

Diluted loss per Ordinary Share


(7.0)c

(1.8)c

In the years ended 31 December 2011 and 31 December 2010, the Group had no potentially dilutive potential Ordinary Shares in issue because it made a loss for the year.

 

5.       Intangible assets

Group 2011

Developed

technology

$'000

Licences and

certification costs

$'000

Computer

software

$'000

Goodwill

$'000

Total

$'000

Cost






At 1 January 2011

 3,224

247

237

 1,348

5,056

Additions

-

 -

35

-

35

Exchange differences

-

-

4

 -

4

At 31 December 2011

3,224

247

276

1,348

5,095

Accumulated amortisation






At 1 January 2011

141

12

125

-

278

Charge for year

161

12

46

-

219

Impairment charge

-

 223

97

973

1,293

Exchange differences

-

-

-

-

-

At 31 December 2011

302

247

268

973

1,790

Net book value at 31 December 2011

2,922

-

8

375

3,305

 

Group 2010

Developed

technology

$'000

Licences and

certification costs

$'000

Computer

software

$'000

Goodwill

$'000

Total

$'000

Cost






At 1 January 2010

 -

231

190

 973

1,394

Additions

-

 23

41

-

64

Assets acquired on acquisition of BioSeek

3,224

-

 11

375

3,610

Exchange differences

-

(7)

(5)

 -

(12)

At 31 December 2010

3,224

247

237

1,348

5,056

Accumulated amortisation






At 1 January 2010

-

-

83

-

83

Charge for year

141

12

42

-

195

Exchange differences

-

-

-

-

-

At 31 December 2010

141

12

125

-

278

Net book value at 31 December 2010

3,083

235

112

1,348

4,778

Net book value at 1 January 2010

-

231

107

973

1,311

 

The amortisation charge arising on intangible assets other than goodwill for the year of $219,000 (2010: $195,000) has been charged to general and administrative expenses (normal operations).

The Company owns no intangible assets.

As discussed in the outlook section of the Chairman's Statement letters, of intent to sell both the non-BioSeek Tissue Based Solutions and BioSeek businesses have been signed. Whilst negotiations are on-going, the current expected sales price less costs to sell for the non BioSeek Tissue Based Solutions business is such that an impairment charge has been required to write down the carrying value of the assets of the non BioSeek Tissue Based Solutions business to the level of the expected net proceeds. The impairment has initially been allocated against goodwill and other intangible assets associated with the relevant cash generating units, with an impairment charge of $1,293,000 being recorded. 

The remaining goodwill of $375,000 arose on the acquisition of the BioSeek business in 2010.  The carrying value of goodwill has been assessed based on the higher of fair value less cost to sell and value in use.  Based on the offer received for the business, no impairment charge was necessary.

 

6.       Details of principal subsidiaries

Fixed asset investments


Company

2011

$'000

Company

2010

$'000

Shares in Group undertakings




As at 1 January


24,574

16,163

Capital contribution relating to share based payments


114

65

Acquisition of BioSeek


-

8,346

Impairment charge


(3,071)

-

As at 31 December


21,617

24,574

The capital contribution relates to the share option compensation charge in respect of share options granted by the Company to employees of Asterand UK Limited, Asterand, Inc. and BioSeek, LLC.

Given the intention of the Directors to sell both the non-BioSeek Tissue Based Solutions and BioSeek businesses, they have reviewed the carrying value of investments and recognised an impairment of $3,071,000.

For further details surrounding the acquisition of BioSeek, see Note 10.

Details of subsidiary undertakings are as follows:

Name of undertaking

Country of incorporation

Description of shares held

Proportion of nominal value of issued shares and voting rights held by the Group

Asterand UK Limited

England and Wales

ordinary shares

100%

Asterand, Inc.

US

1 cent class A common stock

100%

The principal business activity of Asterand UK Limited is the use of human biological information in drug discovery and development. Asterand, Inc.'s principal activity is the collection and supply of human tissue samples to pharmaceutical and biotechnology companies.

Asterand UK Limited owns 100% of the issued share capital of the following company:

Name of undertaking

Country of incorporation

Description of shares held

Principal activities

Pharmagene Laboratories Trustees Limited

England and Wales

£1 ordinary shares

Trustees of the employee share ownership plan

Asterand Inc owns 100% of the membership interests of the following company:

Name of undertaking

Country of incorporation

Description of shares held

Principal activities

BioSeek, LLC (acquired as BioSeek, Inc.)

US

100% of membership interests

Drug discovery services

 

All of the above subsidiaries are included in the consolidated accounts and have a year end of 31 December.

 

7.       Biobank inventory



Group

2011

$'000

Group

2010

$'000

Raw materials


1,204

1,016

Finished goods


5,345

8,120



6,549

9,136

The cost of inventories recognised as an expense and included in cost of sales in 2011 amounted to $3,990,329 (2010:    $3,611,830).

During 2011, the value of inventories written down to residual value and subsequently included in cost of sales amounted to $1,962,000 (2010: $1,482,000).  There is also an obsolescence provision of $449,000 (2010: $449,000) against 'finished goods' to provide against a specific set of specimens that have become delinked from their clinical data.   

On 31 December 2011, the carrying value of the biobank inventory was reduced to $6,549,000 due to an impairment charge of $2,107,000 to write down the carrying value of inventory to the amounts implied by the expected recoverable amounts from the sale of the non-BioSeek Tissue Based Solutionsbusiness. 

8.       Other financial liabilities

Current



Group

2011

$'000

Group

2010

$'000

Current portion of debt


2,428

703

Finance leases


5

12

Amounts due to former shareholders of BioSeek (See Note 10)


6,591

7,624

Warrants


12

-



9,036

8,339

Non-current



Group

2011

$'000

Group

2010

$'000

Long term debt


-

2,348

Finance leases


-

5



-

2,353

A $3 million three year term loan with Silicon Valley Bank was in drawn down in 2010 and timely repayments have been made throughout 2011. The loan bears interest at 3.25% above the Prime Rate and 5.0% above Prime Rate when in default.  At 31 December 2011 the Group had breached covenants attaching to its Silicon Valley Bank loan and loan notes borrowings, such that these amounts became payable on demand.

The loan arrangement fees for the term loan have been deducted from the amounts borrowed and are being amortised over a three year period.

Finance lease liabilities



Group

2011

Group

2010

Gross finance lease liabilities - minimum lease payments


$'000

$'000

No later than one year


6

15

Later than one year and no later than five years


-

5



6

20

Future finance charges on finance leases


(1)

(3)

Present value of finance leases


5

17

The present value of finance lease liabilities is as follows:



Group

2011

$'000

Group

2010

$'000

No later than one year


5

12

Later than one year and no later than five years


-

5



5

17

9.       Related party transactions

The Group did not enter into any related party transactions during the year.

During 2010, the Group paid $117,000 on behalf of Martyn Coombs, former CEO, to cover the taxes payable on his Growth Share Ownership Plan implemented during the year. This amount was subsequently reimbursed and was fully repaid by 31 December 2010.

The Company entered into the following transactions in the year with subsidiaries of the Group:

Intercompany receivable/(payable)


 Company

 2011

 $'000

Company

2010

$'000

At 1 January


3,001

 4,767

Amounts received


(5,330)

(1,766)

At 31 December


(2,329)

 3,001

10.     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 the Group 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 was paid in July 2011 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 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 loan notes at 31 December 2011 was $6,537,000.

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 31 December 2011 was $54,000.

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:

                                                                                                                           Other financial liabilities

                                                                                                - amounts due to former shareholders of BioSeek



31 December

2011

 $'000

 

31 December

2010

$'000

Change in

Fair value

 $'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 loan notes to fair value


193

-

(193)

Initial fair value of warrants


716

-

(716)

Re-measurement of warrants to fair value


(662)

-

662

Interest expense - exceptional costs




(1,591)

 

The warrants have been classified within current financial liabilities.

 

11.     Post balance sheet events

The Directors have resolved that both the non-BioSeek Tissue Based Solutions and BioSeek businesses should be sold, with letters of intent having been signed for the disposal of both businesses. Both of these businesses form part of the Tissue Based Solutions segment. The disposal of each of these businesses is considered to be a class 1 disposal, and will therefore require shareholder approval, but the Directors expect the sale to complete by 30 June 2012.

 

Notice of Annual General Meeting

 

·        Asterand Plc will hold its Annual General Meeting at its registered office at 2 Orchard Road, Royston, Hertfordshire, SG8 5HD on Tuesday 26 June 2012 at 10:00 am.

 

The following documents have been sent to shareholders today:

·      Annual Report and Accounts 2011

·      Notice of 2012 Annual General Meeting ('AGM')

·      Form of Proxy

 

In accordance with Listing Rule 9.6.1 Asterand Plc has submitted two copies of each of the above documents to the UK Listing Authority ('UKLA') and these documents will shortly be available for inspection at the UKLA's Document Viewing Facility, which is situated at:

Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel: +44 (0) 20 7066 1000.

Copies of the Annual Report and Accounts 2011 and Notice of AGM, will be available on the Company's website at
www.asterand.com on 30 April 2012.


For further information contact:

                                                                     

Jack Davis, Chairman, Interim CEO and Company Secretary

Tel No: +44 (0) 1763 211600

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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