SOURCE: Source BioScience PLC

March 22, 2016 08:42 ET

Source BioScience plc: Final Results

NOTTINGHAM, UNITED KINGDOM--(Marketwired - Mar 22, 2016) -  Source BioScience plc (LSE: SBS)

22 March 2016

Source BioScience plc

("Source BioScience" or "the Group")


Another year of record-breaking financial performance

Source BioScience plc (LSE: SBS), the international Laboratory Services and Products business announces its unaudited preliminary results for the year ended 31 December 2015.

Financial highlights

  • Revenue increased to £26.3 million (2014: £25.2 million)
  • Adjusted* EBITDA increased by 13% to £5.8 million (2014: £5.1 million)
  • Adjusted* profit before tax increased by 15% to £3.3 million (2014: £2.8 million)
  • Profit before tax up 40% to £2.0 million (2014: £1.4 million)
  • EPS increased by 50% to 0.45p basic (2014: 0.30p basic)
  • Cash generated from operations of £4.6 million (2014: £2.8 million)
  • Cash balance of £4.4 million (2014: £2.6 million) and net debt of £3.7 million (2014: £4.3 million)

*Adjusted results are stated after eliminating non-recurring acquisition and restructuring costs of £644,000 (2014: £808,000) and amortisation of intangibles arising from acquisitions of £636,000 (2014: £614,000). The adjusted results have been included to present a fair comparison of the progress in the underlying business.

Operational highlights 

  • Acquisition of Select Pharma Laboratories Ltd ('Select') in August 2015 for up to £7.3 million in cash
  • Over 1 million DNA sequencing reads delivered in the year, an increase of more than 15%; supported by the roll out of ultra-fast, 10-hour sequencing from the Group's Atlanta facility
  • Commissioned high throughput, high capacity serology production capability and serology laboratories at the Group's Rochdale site including "Class A" GMP clean room facilities
  • Launch of enhanced Just Between Us™ online sexual health service including access to at-home sampling for HIV, syphilis, hepatitis B and C in addition to an online prescription service
  • Award of first contract with the European Centre for Disease Control ('ECDC') for next generation DNA sequencing, worth up to EUR 1.2 million over three years

Post-period events

  • Launch of the world's first environmentally controlled -70°C walk-in chamber, the flagship Polar 50™; first Polar50™ installed in the Group's Rochdale facility with applications in research and drug manufacturing
  • Analytical chemistry laboratory commissioned in Rochdale initiating the roll-out programme for analytical testing across the Group's stability storage sites

Laurie Turnbull, Chairman of Source BioScience, said:
"I am delighted to be reporting to shareholders another year of record-breaking financial performance for Source BioScience.

"During 2015 we completed the acquisitions of Select and BritainsDNA and invested in a number of infrastructure projects to improve operational efficiencies, enhance capacity to meet demand and address new markets for our expanded portfolio of Laboratory Services and Products.

"The successful integration of the acquired businesses, both operationally and commercially, in conjunction with the ongoing delivery of a more efficient business, can be seen from the increase in gross margin to 50% (2014: 48%). This highlights the ability of Source BioScience to leverage our laboratory infrastructure and expertise across the entire Group.

"Source BioScience now offers a broad portfolio of Laboratory Services and Products to customers, extending its reach into new geographical markets, providing not only a more diversified and balanced business but also outstanding opportunities for increased sales and expansion of our business in the UK and internationally."

- Ends -

For further information, please contact:
Source BioScience plc
Nick Ash
 Chief Executive Officer
 Tel: +44 (0)115 973 9010

For investor enquiries:
N+1 Singer (Financial Advisor, Sponsor and Broker)
Nic Hellyer
 Tel: +44 (0)207 496 3000

About Source BioScience

Source BioScience plc (LSE: SBS) is a trusted provider of state of the art Laboratory Services and Products to the healthcare and clinical, life and applied sciences and biopharma industries. It is an international business operating ten state of the art facilities in five countries and with customers in over 90 countries worldwide. The Group offers a complementary portfolio of Laboratory Services and Products that share common technologies, laboratory processes, infrastructure and expertise. These include Diagnostics, DNA Sequencing and Genomics, Analytical and Regulated Services, Clinical Products, Life Science Research Reagents and Controlled Environment Storage for a diverse range of markets. These Laboratory Services and Products are provided to a large and diverse customer base including the top 50 pharmaceutical companies, leading universities and research institutes worldwide, the UK NHS and other healthcare providers. The Group is listed on the Premium Main Market of the London Stock Exchange.

Cautionary statement
This preliminary announcement contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Source BioScience plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Nothing in these Preliminary Results should be construed as a profit forecast.

Chairman's Statement

Source BioScience has delivered another year of strong financial performance with profit before tax and cash generation greater than in any previous year.

The acquisition of Select in August 2015 was the most recent step in the Board's strategy to enhance the Group's Laboratory Services capability and roll out its highly respected and accredited outsourced laboratory service offering into new and adjacent markets.

The acquisition provides the Group with the expertise and capability to provide stability testing and Quality Control product and batch release testing services that are highly complementary with the Group's stability storage services. The integration is progressing well and to plan.

The enhanced range of services and products enables the Group to offer a "one stop shop" for a number of customer requirements, in particular those requiring a regulated clinical trial, stability storage and analytical testing service. The cohesion and commonality of the operational infrastructure, expertise and extended geographic reach is critical to driving the growth of the business. This represents a "joined up" business built on common technology platforms and infrastructure, laboratory processes and intellectual capital which now extends across ten facilities internationally.

As a result of the rapid integration of the acquired businesses, and the subsequent leveraging of the expanded portfolio and geographic reach, the Board is again pleased to report that all key financial metrics are ahead of the previous year:

Summary results

Revenue   26,302   25,175   +4 %
Gross profit   13,275   12,244   +8 %
Adjusted* EBITDA   5,759   5,089   +13 %
Adjusted* profit before tax   3,263   2,837   +15 %
Reported profit before tax   1,983   1,415   +40 %
EPS (basic)   0.45p   0.30p   +50 %
Cash generated from operations   4,623   2,822   +64 %

*Adjusted results are stated after eliminating non-recurring acquisition and restructuring costs of £644,000 (2014: £808,000) and amortisation of intangibles arising from acquisitions of £636,000 (2014: £614,000). The adjusted results have been included to present a fair comparison of the progress in the underlying business.

Divisional performance
A summary of the activities and performance of the Laboratory Services and Products divisions is presented below. More detail is provided in the Business Review. 

Laboratory Services
Laboratory Services comprises the laboratory and analytical services activities of the Group including diagnostic testing for cancer and infectious disease; DNA sequencing and contract research activities; stability storage and downstream analytical testing.

Revenue increased by 17% to £15.6 million (2014: £13.3 million) and divisional operating profit increased by 16% to £5.5 million (2014: £4.7 million).

The main drivers of the revenue growth were the expansion of the Analytical and Regulated Services offering, including the acquisition of Select, and continued growth of the DNA Sequencing and Genomic Services business both in the UK and internationally.

The Diagnostics business provides expert histopathology (tissue analysis), molecular diagnostics (gene-based analysis) and companion diagnostic testing services to public and private healthcare providers, including the UK National Health Service ('NHS'). There are a number of applications for this combination of capability, including cancer diagnostics and sexually transmitted infection ('STI') testing. The Company has expanded the Just Between Us™ STI service during the year to provide home-sampling for HIV, syphilis, hepatitis B and C testing in addition to an online prescription service.

DNA Sequencing and Genomic Services
The DNA Sequencing and Genomic Services business provides ultra-fast DNA sequencing delivered across the Group's international network of laboratories to academic research groups, biotechnology and pharmaceutical customers.

During 2015 the Group processed over 1 million customer samples for DNA sequencing, 15% up on 2014. The momentum is being sustained by the introduction of new services and the expansion of Source BioScience's laboratory network. The DNA sequencing service was launched from the Group's facilities in Atlanta during the year, providing customers in the south east of the USA with access to sequencing data within ten hours of submitting their samples.

Analytical and Regulated Services
The Analytical and Regulated Services business provides support for drug discovery and drug manufacture, from biomarker discovery and clinical trial services through stability storage and analytical testing to sample archiving under environmentally controlled conditions.

Revenue from stability storage and analytical testing was up by more than 50% compared with the prior year. This includes incremental revenue following the acquisition of Select in addition to like for like revenue growth of 17%, driven by an increase in the number of stability storage trials.

The stability storage activities are delivered from five sites in Rochdale, Stirling, Tramore (Ireland), Atlanta and Los Angeles. At these sites, customers from biopharma and life science research can access stability storage, -80°C and ultra-low temperature (liquid nitrogen) storage. In the majority of cases, stability storage contracts with customers are multi-year arrangements, typically for a period of three years.

The acquisition of Select greatly expands the range of analyses that the Group can offer. The ability to perform gene-based analysis and downstream analytical testing for stability and cryo-storage customers at a single, accredited site can significantly de-risk sample handling and specimen transport. This is attractive to pharmaceutical and biotech companies who may only have a very limited number of extremely valuable samples and specimens. The enhanced offering of sample storage in conjunction with analytical laboratory expertise has already led to new opportunities being crystallised with biopharma customers.

Products comprises the portfolio of Clinical Products, including serology products for blood and tissue banking and cytology products for cervical cancer screening, and the portfolio of Life Science Research Reagents, including cDNA clones and other biomolecular tools.

In addition, the Group designs, manufactures and installs a range of high quality, standard and bespoke, controlled environment systems that provide climatic conditions specified to customer requirements. Typically, customers are pharmaceutical companies, healthcare products manufacturers and contract research laboratories looking to establish in-house stability and speciality storage capability.

Divisional operating profit increased to £2.7 million (2014: £2.4 million) on decreased revenue of £10.7 million (2014: £11.9 million). The reduction in revenue was due principally to the ongoing decline in the number of liquid based cytology tests being undertaken by the NHS Cervical Screening Programme, as reported previously. Despite decreased revenue, the divisional profit improved as a result of manufacturing efficiencies and enhanced margins across the Products portfolio, particularly Controlled Environment products.

Clinical Products
The serology operation provides diagnostic products and other clinical grade reagents, including phosphate buffered saline solutions, to laboratories undertaking blood typing, tissue analysis and organ transplant. Customers include NHS Blood and Transplant and the portfolio complements the Diagnostics services operations with cross-selling opportunities apparent.

The commissioning of the state of the art, high throughput serology manufacturing suite, including "Class A" GMP clean room capability, at the Rochdale facility supports the next stage in accelerating the growth of the serology business. The enhanced capability increases the flexibility, productivity and gross margin of the serology manufacturing process.

With regard to the Group's cervical screening cytology activities, the expectation that the NHS will migrate across to HPV primary testing has been reported previously and the downward trend in liquid based cytology volumes is anticipated to continue. The Company actively manages the Clinical Products portfolio to minimise the impact of the anticipated and ongoing change in the dynamics of the NHS Cervical Screening Programme and there are opportunities for growth across other components of the Clinical Products portfolio.

Life Science Research Reagents
GenomeCUBE®, the Group's proprietary search engine and bioinformatics tool for the Group's product portfolio, has undergone further development during the year. GenomeCUBE® is a key component of the international growth strategy over the medium to longer term and ultimately all of the Group's products will be available through this platform. In conjunction with the improvements made to the website, e-commerce platform and eShop, the enhancements to GenomeCUBE® will enable the accelerated globalisation of the services and products portfolio, providing distributors and customers with fast and easy access to the entire portfolio.

Controlled Environment
The design and manufacture of stability storage and controlled environment chambers is highly complementary with the Analytical and Regulated Services business, including stability storage and stability testing services.

Customers demand high quality, controlled environment systems that satisfy the regulatory requirements for stability storage of pharmaceutical and other healthcare products. The Group provides a range of standard and bespoke systems that can be validated to meet the requirements of the MHRA and US Food and Drug Administration ('FDA') which is critical to regulatory approval of therapeutics and other healthcare products.

Controlled Environment manufacturing has performed well during 2015 with major improvements made to installation and validation efficiencies along with the increased use of outsourced manufacturing for certain components of the chambers. This has enabled the Company to be more competitive in key geographies, particularly the US and European markets, and revenue has increased by 25% compared with last year.

A number of new products have been launched to meet the demands of biopharma customers. In February 2016, the Group launched the world's first environmentally controlled -70°C walk-in chamber, the flagship Polar50™. The first Polar50™ has been installed in the Rochdale facility, with applications in research and drug manufacturing.

Our people
Source BioScience's staff are critical to the success of the business and 2015 was another year of substantial improvement in Company performance. On behalf of the Board, I would like to thank everyone across the Group for their hard work and dedication and also welcome new employees who have joined the Source BioScience team over the past twelve months.

I would also like to reiterate my welcome to Tim Jackson-Smith who joined the Board as a Non-Executive Director during 2015. Tim has over 20 years' experience in legal practice in addition to significant, relevant experience in the listed-company environment, having served for more than eight years in both executive and non-executive director roles at a number of main market and AIM quoted companies. The Board is determined to recruit and retain the highest calibre individuals and Tim brings experience and an important, additional skill base as we continue with the implementation of the growth strategy.

We believe that the Group has a very strong business model and opportunities for further growth are apparent across the Laboratory Services and Products divisions. The Board's strategy is to expand the service and product offering, enabling greater market penetration, with the objective of delivering increasing value for shareholders. The aim is to achieve this through continued organic growth from the enlarged infrastructure in addition to further, carefully selected acquisitions when the opportunities arise, building on the strong foundations now established in the business.

Laurie Turnbull
22 March 2016
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