SOURCE: BioProgress PLC

September 27, 2005 03:15 ET

BioProgress PLC - Interim Results

Cambridgeshire -- (MARKET WIRE) -- September 27, 2005 --27 September 2005

BioProgress plc

("BioProgress" or "the Company") (AIM: BPRG; NASDAQ: BPRG)

Interim Results for the six months to 30 June 2005

I would like to start this interim report by welcoming our new non executive Chairman Peter Ibbetson who joined the Board on the 29 July 2005. Peter has a wealth of experience across a number of sectors and his depth of banking and financial relationships will be of great future value to BioProgress. We are delighted that Peter has joined the team and look forward to working closely with him.

As previously reported, 2005 has been a turbulent year with a number of significant challenges for BioProgress. On 13 April 2005 the Board reported that trading levels from BioTec Films would be below expectations. The Board also embarked upon a strategic review of the business due to unexpected and excessive increases in overheads and other cost structures. Although remedial action has been taken, both during and since the conclusion of the review, the benefits of these initiatives will take effect after the period to which this statement relates. The management and structural changes took place in May and June 2005 and consequently have limited impact upon the interim performance.

Financial performance

The first six months trading resulted in an operating half year loss of GBP6.23 million compared with a loss of GBP3.97 million for the same period in 2004. This substantial increase was due to a number of factors including:

 
* Significant monthly trading losses from the Company's trading
  subsidiary BioTec Films Inc.; 

* Increased costs associated with inappropriate capital expenditure
  commitments entered into by the Company; and 

* Growth in non-productive overheads across the Company's operations.

A proportion of these increased costs also related to implementation of the LOCUM strategy and non-trading related investment activity carried out by the Company. Both these activities have now been stopped.

Other non-trading costs have also impacted the Company's financial performance. These include:

 
* Legal and other professional costs principally associated with the
  continuation of various litigation proceedings undertaken by the
  Company; and 

* Consultancy arrangements.  

In both these cases substantial reductions have been implemented which will impact during the second half of the current financial year. The new management team has taken steps to settle legal proceedings where possible but not in situations where the asset base of the Company has been impinged upon.

Cash burn for the period under review increased significantly, a function of the above factors, as well as an increase in general expenses. The implied monthly burn rate peaked at approximately GBP1 million per month during this period. With the new financial controls and restructuring initiatives in place this figure currently runs at an operational rate of approximately GBP200,000 per month and is expected to continue falling. This, despite the historic excessive spending levels, left the Company with a relatively strong current cash position at the half year of approximately GBP9 million.

Operational performance

Progress during the period under review was slower than anticipated. The Company's new management team continues to review the commercial viability of previous arrangements and expects to conclude this process within the next trading year.

Worthy of note, however, was the delivery of the first NROBE machine for powder encapsulation to our strategic partner FMC Biopolymer, a business unit of the FMC Corporation.

The development of the Company's first TABWRAP machine is proceeding on course for demonstration at the Madrid cPHI conference despite issues relating to its development earlier in the year. Integration of BioTec's development team with the technical team within Cambridgeshire, carried out post the period under review has yielded positive results within a more project management style structure. We expect this to impact positively upon the Company's performance towards the end of the financial year and the next trading year onwards.

The Company has continued to develop new relationships with prospective commercial partners; a drive which was increased after the period under review. Most of these developments relate to sensitive commercial developments and consequently the Company has committed to strict confidentiality undertakings in respect of such developments. Nevertheless, these developments present significant opportunities for the Company and continued validation of the strength and robustness of its intellectual property asset base.

Post results events

As stated at our Annual General Meeting ("AGM"), despite the turbulence of the period under review the quick actions taken and remedial measures implemented by management have enabled a rapid restructuring with the result that the Company remains in a relatively strong position both commercially and financially. Some of the steps taken have included:

 
* Restructuring of the operations of the Company to a matrix project
  management approach with fully costed resource centres applied in a
  structured way for the creation of a solutions led approach to
  partner and own generated projects; 

* Implementation of strict and effective financial and operational
  controls; 

* Separation of developmental projects with full project analysis
  plans; 

* Head count reduction of approximately 50% in the UK and 30% in the
  US; 

* Replacement of a number of our professional advisors and
  consultants, which the Board continue to monitor on a 'value added'
  basis; and 

* Strengthening of the technical, scientific and developmental
  resources within the Company and realignment of resources from non
  value generating to value generating areas.  

These measures have created new dynamism within the Company and provided a more transparent infrastructure in which the Company's operations can be managed effectively.

In light of the changing nature of the Company and increased activity within Ghaliston, Anthony Fabrizi has decided to resign from the Board. We wish him well and every success for the future. The Board expects to announce an additional non-executive director appointment shortly to compliment our skills and needs as a business.

I would like to thank my fellow directors and colleagues for their support during this period and for the enthusiasm shown by the team in their determination to remove the obstacles to growth and working with me and the new management team in redirecting and positioning the Company for growth.

The Board remains committed to the Company's strategy, outlined at the AGM and optimistic as to the future of the Company. We believe that the restructuring measures implemented have created a more solid platform to efficiently realise the Company's growth plans.

Richard Trevillion

Chief Executive Officer


Enquiries:
                                                                   
BioProgress plc                              01354 655674 

Richard Trevillion, Chief Executive Officer                   

Dan Farrow, Finance Director                                  
                                                                   
College Hill                                 020 7457 2020 

Adrian Duffield/Corinna Dorward                               

Forward-Looking Information.

The Ordinary Shares of BioProgress plc are registered under the US Securities and Exchange Act of 1934. To the extent that this announcement contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, this paragraph applies. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements in this release include statements addressing future financial and operating results and the timing and benefits of the reorganisation. Detailed information about factors pertinent to the business of the company that could cause actual results to differ is set forth in the Company's filings with the Securities and Exchange Commission. The Company is under no obligation to (and expressly disclaim any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. This announcement is for information only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice. The distribution of the announcement and/or issue of securities in certain jurisdictions may be restricted by law. Persons into whose possession this announcement comes are required to inform themselves about and to observe such restrictions.


Consolidated Profit And Loss Account 
For the period ended 30th June 2005 

                                                                      
                        Six Months         Six Months       Year Ended
                        to 30 June         to 30 June               31
                             2005               2004          December
                                                                 2004 
                      (Unaudited)        (Unaudited)        (Audited) 
                       GBP 000's            GBP 000's          GBP 000's 
                                                                      
                                                                      
  Turnover                 1,313                992            2,508  
                                                                      
  Cost of Sales             (688)              (562)          (1,706) 
                                                                      
  Gross profit               625                430              802  
                                                                      
  Administrative          (7,343)            (4,403)          (8,390) 
  Expenses                                                            
                                                                      
  Other Income               490                  -                -  
                                                                      
                                                                      
  Operating               (6,228)            (3,973)          (7,588) 
  Loss                                                                
                                                                      
                                                                      
  Net interest                67                124              457  
                                                                      
  Loss on                 (6,161)            (3,849)          (7,131) 
  Ordinary                                                            
  Activities                                                          
  before                                                              
  Taxation                                                            
                                                                      
  Tax on loss                  -                  -                -  
  on ordinary                                                         
  Activities                                                          
                                                                      
  Loss for                (6,161)            (3,849)          (7,131) 
  Period                                                              
                                                                      
  Basic and                (5.2p)             (3.4p)           (6.3p) 
  Diluted Loss                                                        
  per Ordinary                                                        
  Share                                                               
                                                                      
 
Consolidated Balance Sheet 
For the period ended 30th June 2005 

                                                                      
                        Six Months         Six Months       Year Ended
                        to 30 June         to 30 June               31
                             2005               2004          December
                                                                 2004 
                      (Unaudited)        (Unaudited)        (Audited) 
                       GBP 000's            GBP 000's          GBP 000's 
  Fixed Assets                                                        
  Intangible              13,809             15,608           13,953  
  Fixed Assets                                                        
  Tangible                 1,998              1,281            1,975  
  Fixed Assets                                                        
                          15,807             16,889           15,928  
                                                                      
  Current                                                             
  Assets                                                              
  Stocks                     509                459            1,761  
  Debtors                  1,882              2,114            1,972  
  Cash At Bank             8,789             13,260           14,447  
                          11,180             15,833           18,180  
                                                                      
                                                                      
  Creditors :             (2,149)            (1,455)          (1,522) 
  Amounts                                                             
  Falling Due                                                         
  within one                                                          
  Year                                                                
                                                                      
  Net Current              9,031             14,378           16,658  
  Assets                                                              
                                                                      
                                                                      
  Total Assets            24,838             31,267           32,586  
  less Current                                                        
  Liabilities                                                         
  Creditors :                  -                  -           (4,717)
  Amounts                                                             
  Falling Due                                                         
  after more                                                          
  than One                                                            
  Year                                                                
  Provisions              (3,003)            (4,144)          (2,861) 
  for                                                                 
  liabilities                                                         
  and Charges                                                         
                                                                      
  Net Assets              21,835             27,123           25,008  
                                                                      
                                                                      
  Capital and                                                         
  Reserves                                                            
  Called up                1,220              1,157            1,178  
  Share                                                               
  Capital                                                             
  Share                   33,911             31,439           32,304  
  Premium                                                             
  Account                                                             
  Other                    1,655                  -              239  
  Reserves                                                            
  Profit and             (14,951)            (5,473)          (8,713) 
  Loss Account                                                        
                                                                      
  Shareholders'           21,835             27,123           25,008  
  Funds                                                               
                                                                      
                                                                      
 
Consolidated Cash Flow Statement 
For the period ended 30th June 2005 

                                                                      
                           Six Months       Six Months            Year
                           to 30 June       to 30 June        Ended 31
                                2005             2004         December
                                                                 2004 
                          (Unaudited)      (Unaudited)      (Audited) 
                                                                      
                          GBP 000's          GBP 000's         GBP 000's 
                                                                      
  Net Cash Outflow           (4,083)          (4,323)         (7,806) 
  from Operating                                                      
  Activities                                                          
                                                                      
  Returns on                                                          
  Investments and                                                     
  Servicing of                                                        
  Finance                                                             
  Interest received             273              125             506  
  Interest Paid                  (1)              (1)             (2) 
                                                                      
  Net Cash inflow               272              124             504  
  from Returns on                                                     
  Investments and                                                     
  Servicing of                                                        
  Finance                                                             
                                                                      
  Taxation                        -                -             (12) 
                                                                      
  Capital                                                             
  Expenditure                                                         
  Purchase of                  (197)          (1,156)           (848) 
  Tangible Fixed                                                      
  Assets                                                              
  Purchase of                     -             (615)              -  
  Intangible Fixed                                                    
  Assets                                                              
                                                                      
  Net Cash Outflow             (197)          (1,771)           (848) 
  from Capital                                                        
  Expenditure                                                         
                                                                      
                                                                      
  Acquisitions and                                                    
  Disposals                                                           
  Purchase of                     -                -          (1,901) 
  Unincorporated                                                      
  Business                                                            
                                                                      
  Net Cash Outflow                -                -          (1,901) 
  from Acquisitions                                                   
  and Disposals                                                       
                                                                      
                                                                      
  Financing                                                           
  Issue of Shares                 -           18,052          18,621  
  Redemption of                   -             (252)           (484) 
  preference shares                                                   
  Issue costs                     -             (455)           (455) 
  Receipts from                   -                -           5,000  
  Convertible Bond                                                    
  Issue Costs for                 -                -             (44) 
  Convertible Bond                                                    
  Redemption of              (1,650)               -               -  
  Convertible Bond                                                    
                                                                      
  Net Cash                   (1,650)          17,345          22,638  
  (Outflow)/Inflow                                                    
  from Financing                                                      
                                                                      
  (Decrease)/Increase        (5,658)          11,375          12,575  
  in Cash                                                           
                                                                      
 
 
Consolidated Statement of Total Recognised Gains and Losses 
For the period ended 30th June 2005 

                                                                      
                        Six Months         Six Months       Year Ended
                        to 30 June         to 30 June               31
                             2005               2004          December
                                                                 2004 
                      (Unaudited)        (Unaudited)        (Audited) 
                       GBP 000's            GBP 000's          GBP 000's 
                                                                      
  Loss for the            (6,161)            (3,849)          (7,131) 
  Period                                                              
                                                                      
  Currency                   (77)                22               64  
  Differences                                                         
  on Foreign                                                          
  Currency Net                                                        
  Investments                                                         
                                                                      
                                                                      
  Total                   (6,238)            (3,827)          (7,067) 
  Recognised                                                          
  Gains and                                                           
  Losses for                                                          
  the Period                                                          
                                                                      
 
 
NOTES TO THE INTERIM REPORT 2005 
 
 
1.     ACCOUNTING POLICIES AND BASIS OF PREPARATION

 
The principal accounting policies of the Company are set out in the
Company's annual report and Financial Statements as reported in
December 2004. The policies have remained unchanged from the previous
annual report except for the implementation of FRS 25. This standard
requires the Company's Convertible Bond to be split between Debt and
Equity components and resulted in a transfer of GBP1,078,000 from Debt
to Equity on the 1 of January 2005. 
 
 
2.     LOSS PER SHARE

  
The Calculation of the Loss per share is based on the loss for the
period of GBP6,160,592 divided by the weighted average number of shares
in issue during the same period, being 118,342,200 Ordinary Shares of
GBP0.01 each. 
 
 
3.     SHARES ISSUED AND REDEEMED

 
On 7 June, 2005 the Company issued 4,285,714 Ordinary Shares of GBP0.01
at an issue price of GBP0.385 per Share in part settlement of the
repayment of the 2009 Convertible Loan Notes. 
The shares issued in the period have resulted in total proceeds to
the company of GBP1,650,000. The difference between proceeds received
and the nominal value of shares issued amounting to GBP1,607,143 has
been credited to the share premium account. 
 
 
4.     RESERVES

                                                                      
                               Share       Profit and            Other
                             Premium             Loss        Reserves 
                            Account          Account                  
                         GBP 000's          GBP 000's          GBP 000's 
                                                                      
  At 1 January 2005          32,304          (8,713)              239 
  Loss for the                    -          (6,161)                - 
  Period                                                              
  Reclassification                -               -             1,078 
  of Equity                                                           
  Component of                                                        
  convertible Bond                                                    
  Premium on                  1,607               -                 - 
  Allotment during                                                    
  the period                                                          
  Gain on                         -               -               338 
  Redemption of the                                                   
  Equity Component                                                    
  of the                                                              
  Convertible Bond                                                    
  Exchange                        -             (77)                - 
  differences                                                         
                                                                      
  At 30th June 2005          33,911         (14,951)            1,655 
 
 
 
5.     NET CASH OUTFLOW FROM OPERATING ACTIVITIES

 
                                                                      
                        Six Months         Six Months       Year Ended
                      to 30 June           to 30 June               31
                             2005               2004          December
                                                                 2004 
                      (Unaudited)        (Unaudited)        (Audited) 
                       GBP 000's            GBP 000's          GBP 000's 
 
  Operating               (6,228)            (3,973)          (7,588) 
  Loss                                                                
  Gain on Debt              (490)                 -                -  
  Component of                                                        
  Convertible                                                         
  Bond                                                                
  Depreciation               587                491            1,074  
  and                                                                 
  Amortisation                                                        
  Gain on                    (30)                 -                -  
  Disposal of                                                         
  Fixed Assets                                                        
  Write off                  283                  -                -  
  Finance                                                             
  costs                                                               
  Decrease in              1,252               (459)          (1,512) 
  Stocks                                                              
  Decrease in                 90             (1,092)            (688) 
  Debtors                                                             
  Increase in                627                604              648  
  Creditors                                                           
  Exchange                  (174)               106              260  
  difference                                                          
  Net Cash                (4,083)            (4,323)          (7,806) 
  outflow from                                                        
  operating                                                           
  activities                                                          
                                                                      

6.     RECONCILIATION OF NET CASH OUTFLOW TO MOVEMENT IN NET FUNDS

 
 

                                                                      
               Six Months       Six Months            Year
               to 30 June       to 30 June        Ended 31
                    2005             2004         December            
                                                     2004             
              (Unaudited)      (Unaudited)      (Audited)             
                                                                      
              GBP 000's          GBP 000's         GBP 000's             
                                                                      
  Increase       (5,658)          11,375          12,575              
  in Cash                                                             
  in Period                                                           
  and                                                                 
  Movement                                                            
  in Net                                                              
  Funds                                                               

  Cash flow       1,650                -          (4,956)             
  from                                                                
  financing                                                           

  Non cash        3,067                -             239              
  items                                                               

  Net Funds       9,730            1,872           1,872              
  Brought                                                             
  forward                                                             
                                                                      
  Net Funds       8,789           13,247           9,730              
  Carried                                                             
  Forward                                                             
                                                                      
                     At 1      Cash flows         Non Cash          At
                  January                           items         30th
                    2005                                        June  
                                                                 2005 
               GBP 000's          GBP 000's        GBP 000's  GBP 000's 

  Cash at        14,447           (5,658)              -        8,789 
  Bank and                                                            
  in hand                                                             
  Convertibl     (4,717)           1,650           3,067            - 
  e Bonds                                                             
                                                                      
                  9,730           (4,008)          3,067        8,789 
 
 
7.     PUBLICATION OF NON-STATUTORY ACCOUNTS

 
The financial information set out in this interim report does not
constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The figures for the year ended 31st December 2004
have been extracted from the Statutory Financial Statements, which
have been filed with the Registrar of Companies. The Auditor's report
on those financial statements is unqualified. The financial
information for the six months to 30th June 2005 and for the period
to 30th June 2004 is un-audited. 
 
These results were announced to the AIM on 27 September 2005 and have
been posted to all shareholders. Copies of the interim report will be
available from the Company's registered office at 14, Hostmoor
Avenue, March Trading Estate, March, Cambridgeshire, PE15 0AX. 

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