Genetix Group plc Interim Results for the six months ended 30 June 2008

--Delivering strong organic sales growth with continued investment -

New Milton, UK, 7 August 2008 - Genetix Group plc (AIM:GTX) ("Genetix" or the "Company"), the cancer diagnostic and biopharmaceutical technologies group, today announces its unaudited interim financial results for the six months ended 30 June 2008. 

* See note 1.

Mark Reid, Chief Executive of Genetix, commented:

"Genetix has enjoyed a good first half, delivering strong organic revenue growth and cash generation whilst also investing significantly in our sales infrastructure, building an enlarged network to capitalise on growth in our major markets. The successful launch of the GSL-120 Slide Loader has further confirmed Genetix at the forefront of introducing leading edge science technology whether to improve patient care or the drug development process.

The business continues to trade in line with management expectations and the Board is confident for the full year as a whole. The Board is also pleased to declare the payment of an interim dividend following on from the payment of the maiden dividend earlier in the year."

-- Ends --

An analyst meeting will be held at 9.30 a.m. today in London at the offices of Piper Jaffray Ltd at One South Place, London EC2M 2RB.

Enquiries:

The release will be available on the Company's website: www.genetix.com.

Notes to Editors:

About Genetix Group plc

Based in New Milton, UK, and quoted on the AIM (AIM: GTX), Genetix delivers the competitive edge in cell identification and selection from discovery to diagnosis. Genetix technologies are bringing new efficiencies to the cancer diagnostics and biopharmaceutical markets from target discovery through to clinical diagnosis. We continually deliver technological breakthroughs to increase our customers' productivity and success.

Genetix' customer base includes many of the world's leading cancer pathology, cytogenetic and biopharmaceutical groups. The Company's achievements helped revolutionise cell biology, proteomics and genomics. Genetix made a significant contribution to the Human Genome Project by supplying high-throughput equipment to seven of the leading eight laboratories of the consortium. Today, through its R&D expertise and scientific resource, Genetix is committed to the continual development of innovative solutions to accelerate the rate of cell based research.

For more information please visit www.genetix.com.

Chairman's Statement

Introduction

In my first report as Chairman I am pleased to announce another strong set of results for Genetix with accelerated sales momentum for our products, growth in our earnings and continued investment in our business to drive future organic growth.

Revenue for the first six months of the year was £12.4 million, 19% higher than the same period last year.  Adjusted profit before tax was £1.32 million, 4% higher than in the six months to June 2007. Our adjusted earnings per share improved 7% to 1.51 pence.  While delivering these results, we increased investment in our sales infrastructure by £0.9 million and maintained our research and development (R&D) expenditure at £0.9 million.

We have made good progress against objectives we set ourselves for 2008:

Interim Dividend

The Board has declared an interim dividend of 0.2 pence per share, which will be paid on 12 September 2008 to shareholders on the register on 15 August 2008.  The Board's policy is to grow the dividend steadily and progressively in line with the Group's earnings growth, after taking into account the financing requirements of future initiatives and opportunities which offer attractive shareholder returns.

Board Changes

As announced recently, I have assumed the role of Chairman from John Morgan, who has stood down after eight years of dedicated service.  We wish John well for the future.

I am very pleased to be welcoming Charles de Rohan to the Board as Chief Executive Officer with effect from 15 September 2008. Charles has broad international business and marketing experience within our sector and he currently holds the position of Divisional Vice President, Scientific Leadership and Global Accounts EMEA with Abbott Laboratories Diagnostic Division.  Charles' appointment strengthens our senior management structure to reflect our increasing presence in the cancer and clinical diagnostic markets.

Mark Reid, our current Chief Executive Officer, will continue to be firmly committed to the Company and from 15 September 2008 will be assuming a Non-executive Director role and will also have a specific brief to advise the Board on strategic direction. Mark has led Genetix with distinction over the past seventeen years, growing it to a business with an extensive range of products serving dynamic international markets. 

Strategy

Our strategy remains unchanged. We are focused on the growing markets of cancer diagnostics and biopharmaceutical drug discovery, which display attractive growth prospects and provide opportunities where Genetix' core strengths can help to drive change and deliver a sustainable, competitive advantage to its customers.  We will achieve this by investing organically and through high quality acquisitions that deliver enhanced access in our key markets or provide complementary products, skills and technology.

Results

In the first half of 2008 we built on the momentum for our cell biology products, with revenues up 26% to £3.3 million (June 2007: £2.6 million). Our clinical instrument business performed exceptionally well in the first six months, with revenues increasing by 34% to £4.3 million (June 2007: £3.2 million). This performance was supported by the successful launch of the GSL-120 Slide Loader, with the growth rate seen in the first half of the current year enhanced by customers' purchasing cycles.  In addition, we saw a healthy growth in our recurring revenue stream of consumables and services, up 16% to £3.0 million (2007: £2.6 million).  We also saw a stabilisation in the decline in our traditional genomics-based instruments compared to the same period last year.

The United States (US) continues to be our largest market representing 44% of Group sales. Sales in the US in the first half rose 4% as our investments there begin to bear fruit. Sales in Europe (including UK), representing 39% of Group sales, were 22% higher and sales in the rest of the world, representing 17% of Group sales, were 69% higher. 

The Group's gross margin improved to 61.0% (June 2007: 58.5%) driven by improved product mix and operational efficiencies. 

Net interest income at £0.3 million was 33% higher than the prior year due to higher cash balances.  

The Group's effective tax rate before adjustments to acquired intangibles and goodwill was unchanged at 18%. 

Sales and Marketing

Our sales and marketing spend increased by £0.9 million in the first half to ensure we have an enlarged sales infrastructure capable of delivering the full potential of our products in our chosen markets.  We are achieving this by:

Developing our Business

We continue to develop the business with a balanced portfolio of revenue sources from instruments targeted at cancer and genetic testing, cell biology, traditional genomics-based instruments, and consumables and services.

The Board believes that the opportunities have never been greater for the markets that Genetix serves.  As pharmaceutical companies grapple with the issue of delivering the next generation of medicines, they are focusing their efforts increasingly on biological drugs and on becoming more 'agile and lean'.  They want to speed the drug development process up and discontinue potential new drugs as early in the process as possible to minimise costs.  Our products fulfil both these critical needs - by focusing on productivity and early detection, they provide a compelling investment decision.

The healthcare world is moving from a focus on therapies that cure disease and relieve pain to one based on early diagnosis and prevention, assisted by the expanded use of targeted drugs.  In addition, pharmaceutical companies are searching for new therapies that target only those people that are most likely to respond.  Our systems can analyse both tissue and fluid samples and assess disease progression, thereby giving physicians more accuracy and time to take preventative action.

Research and Development

Over 40 of our employees are engaged in R&D dedicated to developing new products and science applications that ultimately will improve patient health, from speeding up the discovery of new drugs to more quickly and accurately diagnosing a medical condition.

The GSL-120 Slide Loader is one example - an automated solution for scanning and imaging cytogenetic slides, thereby providing significant productivity gains.  As it is also the first slide loader to incorporate an oiling and high quality image capture system, it gives clinicians more accurate and consistent images and, with digital data capture, examination need not be constrained by geographical boundaries.  The GSL-120 Slide Loader therefore helps clinicians by improving the speed and accuracy of genetic test results.

Gross R&D expenditure (before capitalised development costs) was £1.1 million (June 2007: £1.2 million). After capitalising £0.4 million (June 2007: £0.5 million), and amortising £0.2 million (June 2007: £0.2 million), net R&D spend was £0.9 million (June 2007: £0.9 million). 

Outlook

Genetix has a strong portfolio of products and is well positioned in the fast-growing markets of biopharmaceutical drug discovery and cancer diagnostics.  We will continue to invest in broadening our product offerings by playing to our core strengths in cell image analysis and selection.

Whilst continuing to build our business in established markets, we will also continue to develop the Company's presence in emerging markets, which offer excellent potential for future growth.

The business has a clear strategic vision, a growing global infrastructure in major markets worldwide and a strong balance sheet.  We remain focused in our determination to execute our plans to deliver strong growth and sustainable shareholder value.

Dr James Hill

Chairman

7 August 2008

Unaudited consolidated income statement (IFRS)

for the six months ended 30 June 2008

Unaudited consolidated statement of recognised income and expense (IFRS)

for the six months ended 30 June 2008

Unaudited consolidated reconciliation of movements in equity (IFRS)

for the six months ended 30 June 2008

Unaudited consolidated balance sheet (IFRS)

at 30 June 2008

Unaudited consolidated cash flow statement (IFRS)

for the six months ended 30 June 2008

Notes to the unaudited interim results

1.   Adjusted earnings measures
       A reconciliation of adjusted operating profit, profit before tax and earnings per share measures to IFRS measures is set out below. 
       The directors consider that the adjusted measures better reflect the underlying performance and trends of the Group.