MDY Healthcare - Interim Results
RNS Number:1749Y
MDY Healthcare PLC
12 June 2007
MDY Healthcare plc
Interim results
Completed transformation of MDY Healthcare into strategic investor
Three new strategic investments and establishment of senior advisory panel
12 June 2007: MDY Healthcare plc, ('MDY Healthcare', the 'Group' or the '
Company') the strategic investor in healthcare companies, today announces its
interim results for the six months ended 31 March 2007.
Operating Highlights
* Completed transformation of MDY Healthcare into strategic investor
* Three new strategic investments in Medivance Inc., Allergy
Therapeutics plc and Minster Pharmaceuticals and additional investment
in Cozart plc
* AOI Medical, MDY Healthcare's first unlisted investment, announced
planned AIM IPO (post period end)
* £2 million invested in portfolio of other listed healthcare companies
* Further strengthened management team with appointment of Dr. Robert
Watson
* Established advisory panel of senior executives including Brian Steer,
Jonathan Milner, Lawrence Kinet and June Scott
Financial Highlights
* 47% reduction in loss for the period to £1 million (30 September 2006:
£1.9 million)
* Net assets per share of £1.13 (30 September 2006: £1.20)
* Investments of £6.3 million (30 September 2006: £1.3 million)
* Cash of £9.4 million (30 September 2006: £17.2 million)
* £575,000 raised in placing announced today (see separate press
release)
Charles Spicer, CEO, said:
'We have made good progress throughout the first half of this year successfully
completing the transformation of the company into a strategic investor in
healthcare, investing in a further three high-growth potential healthcare
companies and announcing the formation of our highly experienced advisory panel.
'We were extremely pleased to announce the planned IPO for AOI Medical. This
should be a significant value creating event for us and positive validation of
our business model. We look forward to the next six months as our portfolio
progresses and we make further strategic investments to create long-term value
for shareholders.'
For further information, please contact:
MDY Healthcare plc
Charles Spicer, CEO
+44 (0) 207 647 1800
charles.spicer@MDYHealthcare.com
Financial Dynamics
Ben Atwell/John Gilbert
+44 (0) 207 831 3113
About MDY Healthcare
MDY Healthcare plc is a sector specialised strategic investing company quoted on
AIM (ticker symbol: MDY). The company seeks to achieve superior returns for
shareholders by investing globally in companies, both public and private, across
the healthcare sector. The directors, executives and senior advisors have
significant operational and investment experience in the sector and therefore
the ability to identify and review a wide range of potential investments.
Further information can be found on the website www.mdyhealthcare.com
Chairman and Chief Executive's Review
Overview
During the six months ended 31 March 2007 we completed the transformation of MDY
Healthcare into a strategic investor focussed on the healthcare sector. During
the period, we made three new strategic investments in Medivance Inc, Allergy
Therapeutics plc and Minster Pharmaceuticals plc as well as additional
investments in Cozart plc. We also invested just over £2 million in a portfolio
of investments in healthcare companies listed on the Main Market of the London
Stock Exchange or quoted on AIM.
In total, we now have investments valued at £6.2 million as at 31 March 2007
(compared with £1.3 million as at 30 September 2006) and cash reserves of £9.4
million as at 31 March 2007. Each of the companies in which we have made
strategic investments has made positive progress since we invested. Further
details on each investee company are detailed in the Strategic portfolio review
below.
During the period we further strengthened our executive team with the
appointment of Dr. Robert Watson (previously of Sofinnova Partners) as Associate
Director. We also established an advisory panel of senior executives from the
healthcare sector, namely Brian Steer, Chairman of Gyrus Group plc, Jonathan
Milner, CEO of Abcam plc and Lawrence Kinet, previously of Smiths Group plc.
More recently we also announced that June Scott, former Senior Portfolio Manager
and Head of Healthcare at Close Investments, has joined as a senior adviser.
Investment strategy
We aim to achieve superior returns for shareholders by investing globally in
companies, both public and private, across the healthcare sector. MDY
Healthcare's directors, executives and senior advisors have significant
operational and investment experience in the sector and therefore the ability to
identify and review a wide range of potential investments. Given the
management's experience and contact base within the sector, we are also able to
provide our investee companies with strategic business support and advice over
and above finance. We identify investment opportunities in companies in the
following sub sectors: medical technology, diagnostics, biopharmaceuticals and
other specialty pharmaceuticals, consumer health and providers of other
healthcare products and services.
As well as our disclosed strategic investments reviewed below, we have built up
a trading portfolio of smaller stakes in UK public healthcare companies. These
investments increase our exposure to, and knowledge of, the public markets and
allow us to get to know potential strategic investee companies over time. The
portfolio also gives us the flexibility to participate in secondary equity
placings.
We maintain a flexible and dynamic company structure which we believe
differentiates us from other sector-specialised investors and allows us to
invest in high-growth companies utilising a range of investment strategies. As
a quoted company we are able to hold investments indefinitely (whether public or
private) albeit for all investments we will have an exit strategy. We target
smaller capitalised public companies with value and growth potential which are
often not typically the target of the larger institutional investors. We are
also investing in later-stage private companies that have a lower risk profile
than typical venture capital investments. We invest alongside a wide range of
other reputable investors and are willing to lead investment syndicates where
appropriate.
We have built a wide-ranging network of contacts within the sector that
generates a broad range of interesting investment opportunities. We have
therefore developed a rigorous and disciplined investment review process. As
such, we expect to continue to invest in approximately 1-3% of the opportunities
reviewed.
The key investment criteria we look for are companies with strong management
teams supported by reputable shareholders, advisers and non-executives. We
prefer later stage development or early commercialisation products with
differentiated competitive positioning or a strong market niche. We aim to
minimise the financial risk profile by looking for near-term liquidity potential
and a clear exit strategy. We aim to build a quality portfolio of investments
that we expect will generate strong newsflow from the date of investment thereby
maximising value creation over the medium term.
Strategic portfolio review
We now have five strategic investments: two of which are private US medtech
businesses and three AIM-quoted UK companies:
Cozart plc
In July 2006, we subscribed £336,000 for ordinary shares in Cozart plc as part
of a vendor placing to finance the acquisition of HL Scandinavia AB. Cozart is
an AIM-quoted medical diagnostics company which develops, manufactures and sells
immunodiagnostic tests, predominantly those used for the detection of drugs of
abuse. HL, based in Stockholm, supplies drugs of abuse point of care urine
testing products and services to customers in the criminal justice, workplace
and medical markets in Sweden. In March 2007 we invested a further £250,600 in
a vendor placing to finance the acquisition of Nemesis Scientific Limited, a UK
provider of workplace drug and alcohol testing services and products. Following
these and other purchases of shares, we now hold a total of approximately 2.2
million shares, representing 2.1% of the company.
Since our first investment, Cozart has announced a strong set of interim results
for the six months ended 30 November 2006 with key highlights including a
doubling of turnover and continued good progress in its joint development with
Philips Electronics. Since our second investment to fund the acquisition of
workplace testing provider Nemesis Scientific, Cozart has announced a major
workplace contract with Emirates Airlines for the provision of workplace testing
over a three year period. More recently, Cozart announced a new four-year
contract with the UK Home Office for laboratory oral fluid drug confirmation
testing.
AOI Medical Inc.
In September 2006, we subscribed $1.5 million for ordinary shares in AOI
Medical, Inc. as part of a private placing arranged and underwritten by Numis
Securities, with MDY Healthcare acting as lead investor. Based in Florida, USA,
AOI Medical is developing, and intends to commercialise, innovative orthopaedic
medical devices for the spine and trauma markets. The private placing raised a
total of $3.0 million to fund the continued product development as well as
clinical and product marketing. We have an interest of approximately 7.5% of
the issued share capital of AOI Medical. We also provide paid for strategic
consulting services to AOI Medical.
Since our investment, AOI Medical has made good progress in developing its
product portfolio and plans to submit its first product to the US FDA for
marketing approval in 2007 with commercial launch planned in Q4 2007. On 11
June, AOI Medical announced its intention to seek admission to AIM with an
institutional placing to raise approximately £8 million, with a pre-new money
valuation of approximately £21 million. MDY Healthcare currently owns
approximately 7.5% of the issued share capital of AOI Medical which would be
valued at approximately £1.6 million at the indicative pre-new money valuation.
MDY Healthcare has agreed to invest a further £1 million in the IPO. Following
admission to trading, MDY Healthcare would therefore hold approximately 8.6% of
AOI Medical's issued share capital.
Medivance, Inc
In December 2006, we subscribed $2.5 million for convertible loan notes in
Medivance, Inc in a private placing arranged by Piper Jaffray with MDY
Healthcare acting as lead investor. Based in Boulder, Colorado, Medivance is a
leading company in the emerging field of therapeutic temperature management.
Medivance's non-invasive technology, Arctic Sun(R) is patented and FDA approved
to rapidly cool patients ('therapeutic hypothermia') and precisely control their
temperatures as a therapeutic tool. Therapeutic cooling has been shown to
reduce brain damage after traumatic events such as cardiac arrest and brain
injury. It also has potential applications in the treatment of stroke and fever.
Introduced in 2004, Arctic Sun(R) has been adopted by prestigious hospitals
throughout the US, Europe and Asia. The private placing raised a total of $4.54
million to fund the continued marketing of the Arctic Sun(R) system around the
world.
Since we invested, Medivance has continued to roll out the Arctic Sun(R) product
internationally. Sales for the first four months of 2007 were ahead of
management's expectations with strong growth over 2006.
Minster Pharmaceuticals plc
In March 2007, we subscribed £471,750 for new shares and warrants in Minster
Pharmaceuticals plc in their fundraising which raised a total of £17.0 million
before expenses. The fundraising was arranged by Nomura Code Securities with
cornerstone investments from Care Capital and Rho Capital.
Minster is a drug development company that acquired from GlaxoSmithKline the
worldwide development rights of two compounds, tonabersat and sabcomeline, which
have already benefited from substantial investment by GSK. Minster's lead
product, tonabersat, belongs to an exciting new class of drugs called gap
junction blockers, and is being developed as a prophylactic treatment for
migraine. Minster has recently reported positive data for tonabersat from its
Phase IIa study.
Since we invested, Minster has continued to progress development of its
compounds. On 9 June 2007, Professor Peter Goadsby, the principal investigator
in their recent clinical trial of tonabersat in the prevention of migraine,
delivered a presentation of the positive trial data at the 49th Annual
Scientific Meeting of the American Headache Society.
Allergy Therapeutics PLC
In March 2007, we announced that we had acquired 500,000 ordinary shares in
Allergy Therapeutics PLC. Allergy Therapeutics is a Europe-based speciality
pharmaceutical company focused upon the treatment and prevention of allergy. It
has an existing sales base, an MHRA-approved manufacturing capability and an
established sales and marketing infrastructure in several major European
markets. In addition, Allergy Therapeutics has a number of novel vaccines which
have already undergone initial clinical evaluation and once registered, could
potentially revolutionise the treatment of allergy.
Since we invested, Allergy Therapeutics has announced conclusive results of
their oral allergy vaccine study and the commencement of dosing in their
Pollinex(R) phase III ragweed trial. They also announced that they have entered
into a Euro40 million debt facility with RBS. The funds will be used to finance
the final stages of development of Pollinex(R) Quattro Grass and Pollinex(R)
Quattro Ragweed, their ultra-short course vaccines to treat hayfever.
Financial review
In the six months ended 31 March 2007, our loss after tax nearly halved to £1
million from a loss of £1.9 million in the corresponding period in 2006. Of
this £1 million, £0.6 million was an exchange rate loss related to cash balances
held in US dollars resulting from the significant weakening of the dollar over
the period (as the cash proceeds from the sale of our operating business were
paid in US dollars). We do not look to speculate on currency movements and
believe the cost of hedging to be currently unattractive. Going forward we are
likely to continue to invest in US dollar based assets and will convert US
dollars into other currencies as and when needed.
Additionally, approximately £183,000 of our operating expenses related to costs
resulting from matters relating to the sale and / or closure of our previous
businesses.
Revenue for the period was £18,000 and interest income was £393,000. Losses per
share for the period were 7.26p as against 17.54p for the corresponding period
in 2006.
As at 31 March 2007, investments increased to £6.3 million (30 September 2006:
£1.3 million) resulting from the strategic and other investments made during the
period. The market value of our public investments at the period end was
affected by the global stockmarket correction that occurred in late February and
early March but has improved since the balance sheet date.
Cash and cash equivalents were £9.4 million (30 September 2006: £17.2 million).
Total liabilities were £0.3 million (30 September 2006: £2.2 million). Net
asset value per share was £1.13 (30 September 2006: £1.20).
Post balance sheet events
On 29 March 2007, we posted a circular to shareholders setting out various
resolutions which were subsequently passed at our Annual General Meeting held on
4 May 2007. The resolutions included, inter alia, a share capital
reorganisation, leading to the consolidation of our shares equating to 1 new
ordinary share for every 50 existing shares held. The 13,984,223 new ordinary
shares of 1p each were admitted to trading on AIM on 8 May 2007 under ISIN code
GB00B1VJNC59. The per share calculations included in the financial review above
are all based on the number of new ordinary shares outstanding i.e. on a
post-consolidation basis.
We also announced a free share dealing facility to allow shareholders with
uneconomic shareholdings to sell their shares for a limited period in a cost
efficient manner. We believe the share consolidation should improve the trading
performance of our shares and their attractiveness to a wider range of potential
investors.
Conclusion and outlook
We have now established MDY Healthcare as a credible and respected investor in
the sector with a promising portfolio of investments. Our first private
investment, AOI Medical, is progressing well towards completion of its IPO on
AIM, a significant value creating event for us and positive validation of our
business model. It is still relatively early in the development of the
repositioned company and the portfolio and we still have significant cash
reserves. Therefore we look forward to announcing further investments as well
as updating shareholders with further news from our strategic portfolio
companies as they continue to develop. We believe MDY Healthcare will
increasingly offer investors diversified exposure to public and private
investments in the smaller cap healthcare sector internationally benefiting from
the management team's sector expertise and investment selection skills.
MDY Healthcare plc
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six months ended 31 March 2007
2007 2006
Notes Continuing Continuing Discontinued
Operations Operations Operations Total
£'000 £'000 £'000 £'000
_____ _____ _____ _____
Revenue 2 18 2 15,078 15,080
Cost of Sales - - (10,388) (10,388)
_____ _____ _____ _____
18 2 4,690 4,692
Gross profit
Selling and distribution - - (1,690) (1,690)
costs
_____ _____ _____ _____
Administration expenses (688) (630) - (630)
Foreign exchange loss (589) - - -
Costs related to operations (183) - (2,954) (2,954)
discontinued in 2006
_____ _____ _____ _____
Administration expenses 4 (1,460) (630) (2,954) (3,584)
Research and development - - (733) (733)
expenditure in the year
Loss from operations (1,442) (628) (687) (1,315)
Fair value gains on 31 - - -
investments
Realised gains on sale of 3 - - -
investments
Interest receivable 393 2 13 15
Financing costs - (166) (331) (497)
_____ _____ _____ _____
Loss before tax (1,015) (792) (1,005) (1,797)
Income tax expense - - (92) (92)
_____ _____ _____ _____
Net loss for the period (1,015) (792) (1,097) (1,889)
_____ _____ _____ _____
Basic and diluted loss per 3 (7.26)p (7.35)p (10.19)p (17.54)p
share
_____ _____ _____ _____
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months ended 31 March 2007
2007 2006
Total Total
£'000 £'000
_____ _____
Loss for the financial period (1,015) (1,889)
Fair value losses on investments (19) -
Gain (loss) on foreign currency translation - 224
Actual return less expected return on pension scheme assets - 159
Experience gains and losses arising on pension scheme liabilities - (3)
_____ _____
Total recognised income and expense for the period (1,034) (1,509)
Adjustment for impact of first time adoption of IAS 32 and IAS 39 - (69)
_____ _____
Total recognised income and expenses for the period including (1,034) (1,578)
transition adjustments _____ _____
MDY Healthcare plc
UNAUDITED CONSOLIDATED BALANCE SHEET
For the six months ended 31 March 2007
31 March 31 March 30 September
2007 2006 2006
£'000 £'000 £'000
Notes
_____ _____ _____
Non-current assets
Property, plant and equipment 113 - 68
Financial asset investments 5 6,187 - 1,274
_____ _____ _____
6,300 - 1,342
_____ _____ _____
Current assets
Assets classified as held for sale 7 - 27,378 -
Trade and other receivables 452 132 545
Cash and cash equivalents 9,425 6 17,159
_____ _____ _____
9,877 27,516 17,704
_____ _____ _____
Total assets 16,177 27,516 19,046
_____ _____ _____
Liabilities
Current liabilities
Borrowings and other debt - (7,929) -
Trade and other payables (339) (1,509) (2,174)
Liabilities classified as held for sale 7 - (6,410) -
_____ _____ _____
Total current liabilities (339) (15,848) (2,174)
_____ _____ _____
Non-current liabilities
Deferred tax liability (29) - (29)
Total non-current liabilities (29) - (29)
_____ _____ _____
Total liabilities (368) (15,848) (2,203)
Net assets 15,809 11,668 16,843
_____ _____ _____
Equity
Issued capital 7,013 5,441 7,013
Share premium account 100,851 97,707 100,851
Shares issuable 63 63 63
Capital redemption reserve fund 20 20 20
Other reserves 22,854 22,854 22,854
Share option reserve - 161 -
Translation reserve 119 (474) 119
Retained earnings (115,111) (114,104) (114,077)
_____ _____ _____
Total equity 8 15,809 11,668 16,843
_____ _____ _____
MDY Healthcare plc
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2007
2007 2006
Notes £'000 £'000
_____ _____
Cash flows from operating activities
Loss from operations (1,442) (1,797)
Adjustments for:
Depreciation 7 509
Loss on sale of property, plant - 3
Realised gains on investments 3 -
Impairment of assets held for sale 7 - 1,331
Impairment of intangibles - 17
Impairment of property, plant and equipment - 7
Foreign exchange loss 589 -
Interest receivables - (15)
Financing costs - 497
_____ _____
Operating loss before changes in working (843) 552
capital and provisions
Increase in inventory - (418)
Decrease in trade and other receivables 93 267
(Decrease)/increase in trade and other payables (1,835) 304
_____ _____
Cash (absorbed by) generated from operations (2,585) 705
Current tax paid - (92)
Interest paid - (361)
_____ _____
Net cash inflow/(outflow) from operating activities (2,585) 252
Cash flow from investing activities
Interest received 393 13
Purchase of investments (5,238) -
Sale of investments 315
Purchase on intangibles - (5)
Purchase of property, plant and equipment (51) (87)
Proceeds from the sale of tangible property, plant and equipment - -
_____ _____
Net cash outflow from investing activities (4,581) (79)
_____ _____
Cash flows from financing activities
Proceeds from issue of share capital - 236
Bank loan repayment - (737)
_____ _____
Net Cash outflow from financing activities - (501)
_____ _____
Decrease in cash and cash equivalents 6 (7,166) (328)
Cash and cash equivalents at 1 October 17,159 (1,401)
Effect of exchange rate fluctuations on cash held (568) 15
_____ _____
Cash and cash equivalents at end of period 9,425 (1,714)
_____ _____
MDY Healthcare plc
Notes to the Interim Financial Statement (unaudited) for six months ended 31
March 2007
1. Accounting policies
Basis of preparation
The interim accounts of MDY Healthcare plc ('the Group') are for the six months
ended 31 March 2007. The financial statements are presented on a historical
basis in pounds sterling, rounded to the nearest thousand. Functional
currencies within the Group consist primarily of U.S. dollar and pounds
sterling. The financial statements have been prepared on a going concern basis
notwithstanding the losses for the period. The Directors are satisfied that
this basis of preparation is appropriate, having regard to the cash position of
the Group.
The interim results have been prepared on the basis of the recognition and
requirements of IFRS in issue that have been endorsed by the EU for the year
ending 30 September 2007. The respective standards that will be applicable for
the year ending 30 September 2007, including those that will be available on an
optional basis, are not known with certainty at the time of preparing these
interim results. Accordingly the accounting policies for that period will be
determined finally only when the annual financial statements for the year ending
30 September 2007 are prepared.
The preparation of financial information in accordance with the measurement and
recognition of IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form
the basis of making judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
from these estimates.
The consolidated financial statements have been prepared under the historical
cost convention, as modified by the revaluation of certain financial assets at
fair value, as required by IAS 39 'Financial Instruments: Recognition and
Measurement'. The basis of consolidation is set out below.
Basis of Consolidation
The consolidated financial statements include the financial statements of MDY
Healthcare plc and its subsidiary undertakings prepared up to 31 March 2007.
Subsidiaries are those entities over which the Group has the power to control
the operating and financial policy so as to obtain economic benefit from its
activities. Subsidiaries are consolidated from the date on which control is
transferred to the Group and are no longer consolidated from the date that
control ceases. All intercompany profits, transactions and account balances
have been eliminated. The acquisition method of accounting is applied for
acquisitions with fair values being attributed to the identifiable net assets
acquired.
Equity investments and other financial assets
Financial assets within the scope of IAS 39 are classified as either financial
assets at fair value through profit or loss, loans or receivables, held to
maturity investments or available for sale financial assets. When financial
assets are recognised initially they are measured at fair value, plus, in the
case of investments not at fair value through profit or loss, directly
attributable transaction cost.
Financial assets at fair value through profit or loss
Following the conclusion of the Group's change in strategic direction and
operations, the Group now operates as a strategic investor in financial
investments. Following this change, the Group now classifies equity investments
as financial assets at fair value through profit or loss.
Realised and unrealised gains and losses on financial assets at fair value
through profit or loss are included in the income statement in the period in
which they arise.
Available for sale financial assets
The Group's investments in equity securities held previous to the change in
strategic direction are classified as available-for-sale financial assets. On
initial recognition they were measured at fair value plus incremental direct
costs. Subsequently they are measured at fair value and changes therein, other
than impairment losses and foreign exchange gains and losses on available-
for-sale monetary items, are recognised directly in equity. When the
investments are derecognised, the cumulative gain or loss previously recognised
directly in equity is recognised in the income statement.
Valuation of investments
The fair values of quoted investments are based on bid prices at the balance
sheet date.
The fair value of unlisted investments is established using International
Private Equity and Venture Capital Guidelines ('IPEVCG'). The valuation
methodology used most commonly by the Group is the 'price of recent investment'
contained in the IPEVCG valuation guidelines.
Recognition of financial assets
The purchase or sale of financial assets is recognised using trade date
accounting for all financial assets at fair value through profit or loss.
Assets held for sale
Immediately before classification as held for sale, measurement of the assets
(and all assets and liabilities in a disposal group) is brought up-to-date in
accordance with applicable IFRSs. Then, on initial classification as held for
sale, non-current assets and disposal groups are recognised at the lower of
carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale are included in
profit or loss, even when there is a revaluation. The same applied to gains and
losses on subsequent measurement.
A discontinued operation is a component of the Group's business that represents
a separate major line of business or geographical area of operation or is a
subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the
operation meets the criteria to be classified as held for sale, if earlier.
Revenue and Revenue Recognition
Revenue represents the fair value amounts (excluding value added tax) derived
from the provision of goods and services to third party customers during the
period together with royalties. Non-refundable royalty income and licence fees
are credited to the income statements when earned, in accordance with the terms
prescribed in each respective licence agreement, and when the Group has no
future obligations pursuant to that royalty or licence fee. Refundable
royalties and licence fees are treated as deferred income until such time as
they are no longer refundable and not subject to future obligations.
Employee Benefits
(a) Pensions
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statements as incurred.
(b) Share-based payment transactions
The share option programme allows Group employees to acquire shares of the
Company. The fair value of options granted under the programme is recognised as
an expense with a corresponding increase in equity. The fair value is measured
at grant date and spread over the period during which the value is measured at
grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted
is measured using the Black-Scholes formula, taking into account the terms and
conditions upon which the options were granted.
Tax
Taxation on the profit or loss for this year comprises current and deferred tax.
Taxation is recognised in the income statements except to the extent that it
relates to items recognised directly in equity, in which case the related tax is
recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates and laws that have been enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
Deferred taxation is provided using the balance sheet liability method,
providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes. If the deferred tax arises from initial recognition of asset or
liability in the transaction other than a business combination that at the time
of the transaction does not affect accounting or taxable profit or loss, it is
not recognised. Deferred tax is provided on temporary differences arising on
investments in subsidiaries except where the timing of the reversal of the
temporary difference will not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Earnings per ordinary share
Basic earnings per ordinary share is computed by dividing the net profit/(loss)
attributable to ordinary shareholders by the weighted average number or ordinary
shares in issue during the year.
Foreign Currencies
Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rates of exchange
prevailing at the date. Any gain or loss arising from a change in exchange
rates subsequent to the date of the transaction is included as an exchange gain
or loss in the profit and loss account.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to pounds sterling at
the foreign exchange rates prevailing at the balance sheet date. The revenues
and expenses of foreign operations are translated at the average rates of
exchange during the year. Exchange differences arising on translation of
opening net assets and results of foreign operations are recognised directly to
equity, in a translation reserve. Those arising after the transition date to
IFRS are released to the income statements upon disposal.
Property, Plant and Equipment
Leasehold property is stated at cost, net of depreciation and any provision for
impairment.
Depreciation is provided by the Group to write off the cost less the estimated
residual value of tangible fixed assets by equal instalments over their
estimated useful economic lives as follows:
- Leasehold improvements: over the term of the relevant lease
- Plant, equipment, fixtures and fittings: 3 to 7 years
Leased assets
Leases where the lessor retains substantially all the risks and benefits of
ownership of the assets are classified by the lessee as operating leases.
Operating lease payments are recognised as an expense in the income statements
on a straight-line basis over the lease term.
Where the Group enters into a lease which entails taking substantially all the
risks and rewards of ownership of an asset, the lease is treated as a finance
lease. The asset is recoded in the balance sheet as a property, plant and
equipment and is depreciated over its useful life or the term of the lease,
whichever is shorter. Future instalments under such leases, net of finance
charges, are included within creditors. Lease payments are apportioned between
the interest element, which is charged to the profit and loss account, and the
capital element which reduces the outstanding obligation for future instalments.
Impairment reviews and testing
The carrying amounts of the Group's assets, other than certain financial assets
(which are carried at fair value) are reviewed to determine whether there is any
indication of impairment when an event or transaction indicates that there may
be. If such indication exists, an impairment test is carried out and the asset
is written down to its recoverable amount.
The recoverable amount of an asset is the greater of its net selling price and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-generating unit to
which the asset belongs.
Impairment losses are recognised in the income statements.
An impairment loss is reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation of amortisation, if no
impairment loss had been recognised.
Cash and cash equivalents
Cash and cash equivalents, comprise cash balances and call deposits, including
bank deposits of less than three months maturity. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash management are
included as a component of cash and cash equivalents for the purpose of the
statements of cash flows.
Trade and Other Receivables
Trade receivables, which generally have 30 day terms, are recognised originally
at fair value less an allowance for any impairment. An impairment allowance is
made when there is objective evidence that collection of the full amount is no
longer probable.
2 Revenue and Segment Information
Primary reporting segment -geographical segments
2007 2006
£'000 £'000
_____ _____
Revenue
United Kingdom 18 125
Rest of Europe - 943
United States - 13,480
Rest of World - 532
_____ _____
18 15,080
_____ _____
Loss on ordinary activities before taxation
United Kingdom (1,442) (1,832)
United States - 1,613
Rest of World - (152)
Central costs - (944)
_____ _____
(1,442) (1,315)
Financing costs (net) 427 (482)
_____ _____
(1,015) (1,797)
_____ _____
Assets by location of undertaking
United Kingdom 14,139 1,559
United States 2,038 25,486
Rest of world - 471
_____ _____
16,177 27,516
_____ _____
Liabilities by location of undertaking
United Kingdom (368) (3,057)
United States - (4,725)
Rest of World - (137)
_____ _____
(368) (7,919)
Borrowing and other debt - (7929)
_____ _____
(368) (15,848)
_____ _____
Geographical revenue is shown by location of customers. Geographic revenue by
location from which products and services are supplied is not materially
different.
The Group's secondary reporting format is its class of business. All income
statement and balance sheet items in the current year relate to the strategic
investing business.
3 Loss per share
2007 2006
£'000 £'000
_____ _____
Basic
Net loss for the financial period (£'000) (1,015) (1,889)
Weighted average number of shares outstanding ('000) 13,984 10,769
Basic loss per share (7.26)p (17.54)p
_____ _____
Basic loss per share is calculated by dividing the weighted average number of
ordinary shares in issue into the loss after taxation for the year attributable
to ordinary shareholders. The number of shares used to calculate loss per share
for both periods has been adjusted to take account of the share capital
reorganisation that took place on 4 May 2007. The effect of the share capital
reorganisation was to consolidate the then existing ordinary shares on the basis
of 1 consolidated share for every 50 existing ordinary shares, creating
consolidated shares of 50p each. Each consolidated share then in issue was then
immediately subdivided and converted into 1 new ordinary share of 1 pence each
and 1 deferred share of 49 pence each. The effect of the share capital
reorganisation was to reduce the number of ordinary shares in issue from
699,211,150 to 13,984,223. There is no difference for 2007 and 2006 between the
basic loss per share and the diluted loss per share as ordinary share
equivalents from share options have been excluded from the computation as their
effects are anti-dilutive.
4 Administration expenses
Included in administration costs for the period ended 31 March 2007 is an
exchange rate loss of £589,000 relating mainly to cash balances held in US
dollars and costs related to businesses discontinued in previous periods of
£183,000.
Included in administration expenses for the period ended 31 March 2006 is an
impairment loss of £1,331,000 with respect to assets and liabilities classified
as held for sale in relation to Hypoguard Limited and a provision of £120,000
has been recognised in the income statement for the costs expected to be
incurred as a result of the closure of the Group's plant in India.
5 Financial asset investments
£'000
_____
At 30 September 2006 1,274
Additions at fair value 5,238
Disposals (315)
Fair value gain through profit and loss 31
Fair value loss through equity (19)
Foreign exchange loss (22)
_____
At 31 March 2007 6,187
_____
6 Analysis of changes in net funds
At 30 Cash Exchange At 31
September flow rate March
2006 movements 2007
£'000 £'000 £'000 £'000
_____ _____ _____ _____
Cash at bank 17,159 (7,166) (568) 9,425
Overdraft - - - -
_____ _____ _____ _____
Bank loans - - - -
_____ _____ _____ _____
Total 17,159 (7,166) (568) 9,425
_____ _____ _____ _____
7 Assets classified as held for sale assets/liabilities
In the prior period, on 7 March 2006 the Board of the Company and Medisys USA,
Inc. signed a Term Sheet with Arkray, Inc of Japan under the terms of which
ARKRAY was to purchase the entire issued share capital of Hypoguard Limited and
Hypoguard USA, Inc. (together with its wholly owned subsidiary Hypoguard Medical
Products, Inc,) for a cash consideration (including amounts to be applied
towards repayment of all intra-Group loans) of $42.8million (£24.7m). Included
in administration expenses for the period ended 31 March 2006 above is an
impairment loss of £1,331,000 with respect to assets and liabilities classified
at 31 March 2006 as held for sale in relation to Hypoguard Limited. The
transaction closed on 11 May 2006.
8 Reconciliation of movements in equity
2007 2006
£'000 £'000
_____ _____
Total recognised income and expense for the period (1,015) (1,578)
Movement on share option reserve - (11)
Adjustment to issued capital/share premium for impact of first time
Adoption of IAS 32 and IAS 39 - 153
Issued share capital including premium, less expenses (net) - 109
Fair value losses on investments (19)
_____ _____
Net decrease in equity (1,034) (1,327)
Total equity at 1 October 16,843 12,995
Closing equity 15,809 11,668
_____ _____
9 Transactions with key management personnel
During the six months ended 31 March 2007 £150,000 (year ended 30 September
2006: £300,000) was paid to Pacific Corporate Consultants Limited of which Dr
David Wong is a retained consultant.
10 Contingent liabilities
Hypoguard USA Inc. ('Hypoguard') and Medisys USA, Inc. ('Medisys') (a subsidiary
of MDY Healthcare plc) filed a complaint against their insurer St Paul Fire and
Marine Insurance Company in Hennepin County, Minnesota District Court for St.
Paul's failure to defend or meet the costs that were incurred in defending an
action brought against Hypoguard and Medisys by M Miller and WC Cole on behalf
of themselves and all others similarly situated in the Circuit Court of Madison
County State of Illinois. In relation to the Miller/Cole action, Hypoguard and
Medisys received summary judgement in their favour in November 2006.
Hypoguard and Medisys have received summary judgement in their favour that St
Paul was obligated to defend the Miller/Cole action. St Paul has appealed the
judgement. No specific provision or asset has been included in these financial
statements in respect of this matter.
11 Approval by the directors
The interim report for the six months ended 31 March 2007 has been prepared by
the Company and was approved by the Directors on 11 June 2007.
12 Availability of announcement
Copies of this announcement are available to members of the public from the
Company's head office, 11 Stanhope Gate, London W1K 1AN. A copy will also be
posted on the Group's website: www.mdyhealthcare.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAAKFFFSXEAE
