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Abcam (ABC)

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Preliminary Results

RNS Number : 9963C
ABCAM Plc
09 September 2008
 
For immediate release                                                                                         9 September 2008
 
 
ABCAM PLC
("Abcam" or "the Company")
Preliminary results for the year ended 30 June 2008
Cambridge, UK: Abcam plc (AIM: ABC), the rapidly growing bioscience company that markets antibodies via its own online catalogue, is pleased to announce its preliminary results for the year ended 30 June 2008.
 
HIGHLIGHTS
·      Sales increased 49.7% to £36.7m (2007: £24.5m)
·      Pre-tax profits increased 48.2% to £8.2m pre potential offer related costs of £250k
·      Product range grew 29.8% to 44,000 antibodies and related products (2007: 33,900) 
·      Transfer of all polyclonal production to high-throughput- production (HTP) facility successfully completed, further development of monoclonal production programme and significant increase in levels of product characterisation undertaken in-house
·      US subsidiary continued to trade well, and our Japanese subsidiary grew sales by 67.4% in the second half of the year
·      Net cash and short term investments at 30 June 2008 of £14.5m (2007: £10.7m)
·      EPS increased by 43.8% to 16.88p per share (2007: 11.74p)
·      Final dividend increased by 42.9% to 4.56p per share (2007: 3.19p) making a total dividend for the year of 5.60p (2007: 3.99p)
 
David Cleevely, Chairman of Abcam, said: “The year to June 2008 was another year of impressive growth at Abcam, reflected in our strong sales, profits and cash generation, and in the 42.9% increase in our total dividend. The growing international demand for research antibodies, combined with the strength of our brand, product range and strategy, means that the Board looks forward to the future with confidence.”
 
For further information please contact:
Abcam                                                                  + 44 (0) 1223 696000
Jonathan Milner, Chief Executive Officer
Jeff Iliffe, Chief Financial Officer
www.abcam.com 
 
Numis Securities                                                  + 44 (0) 20 7260 1000
Nominated Adviser Michael Meade / Nick Westlake
Corporate Broking James Black
Buchanan Communications                                 + 44 (0) 20 7466 5000
Mark Court / Mary-Jane Johnson / Susanna Gale 
 
Notes for editors
About Abcam plc
Abcam is a producer and distributor of research-grade antibodies headquartered in Cambridge, United Kingdom, with offices in Cambridge, Massachusetts, USA and Tokyo, Japan. Abcam was admitted to AIM in November 2005 and trades under the ticker symbol ABC. The Company produces and distributes its own and third party produced antibodies to academic and commercial users throughout the world. Product ordering is available through the Company’s website www.abcam.com, where customers are also able to access up-to-date and detailed technical product data sheets. All the antibodies are sold under the Abcam brand name and the Company's vision is to build the world’s largest online resource of high quality and commercially viable antibodies. Abcam now has an online catalogue of over 44,000 products, most of which are antibodies, from over 250 suppliers and employs 184 staff in its three operating companies.
About antibodies
Antibodies are proteins produced by white blood cells in response to the introduction of a foreign body known as an antigen. Antibodies, which have a wide variety of uses in research, diagnostics and therapeutics, are used by bioscientists in research into disease and into the human genome, where they are used to mark and identify specific cells and other living matter. The number of human antibodies of use in research is potentially greater than one million.


 

 
Chairman’s Review
Abcam has recently celebrated its tenth anniversary and I am delighted to report on another outstanding year as the Group continues to go from strength to strength. Demand for research antibodies has never been higher, nor has our reputation. Our highly developed e-commerce platform, offering targeted information and easy access to products, has become the destination of choice for increasing numbers of researchers across the world.
Our intention is to consistently deliver robust growth whilst at the same time investing in the future of the business, thus ensuring that we have a solid and sustainable foundation for long-term development. This has been achieved this year and the business is well set for continued success.
We have achieved strong growth in all the regions in which we operate: sales in the year increased by 49.7% to £36.7m (49.1% on a constant currency basis), whilst gross margins increased from 59.1% to 60.8%. This outstanding performance is a testimony to the quality of the products and support we offer, the scalability of our operation and Abcam’s growing reputation as a quality supplier to the world scientific community.
A key driver of our success is our wealth of product data. This set of data is a tremendous asset and includes technical information, application specific information, user-generated reviews and how our products have been used in published experiments. Using this relevant, easily accessible information, research scientists can identify and purchase the products best suited for their requirements. During the year, our catalogue increased by more than 10,000 products, from 33,900 at the end of the last financial year to over 44,000 at the end of June 2008. Sales of individual products tend to increase the longer they are listed and as more data is gathered. New products contributed £3.2m to sales in the year and we expect sales from these new launches to increase in future years.
Our investments in the year included the continued development of the high-throughput production (HTP) facility. The HTP facility has taken on the production of new and existing polyclonal antibodies and been very successful in adding characterisation data, which is an important driver of growth, to our existing catalogue. A priority for this year has been increasing production efficiencies and managing costs. We have also continued development work on our automated monoclonal development programme. The initial level of sales of the monoclonal antibodies added to the catalogue during the year has been well ahead of expectations and we will continue to prudently manage monoclonal production levels in line with the development of our production process.
Our offices in the USA and Japan have both grown significantly in the year and our commitment to optimising the user experience has driven further investment in our website infrastructure, and the establishment of a dedicated e-commerce team. We are also continuing to build our distributor network in order to improve our geographic reach in parts of the world where an e-commerce model has yet to be fully embraced.
We have continued to attract staff of the highest calibre to ensure that our growth is targeted and well managed. A high proportion of our staff have PhDs and we aim to blend a depth of technical knowledge with strong commercial acumen. In November 2007 we appointed Jeff Iliffe as Chief Financial Officer and, with the extremely valuable contributions from the non-executive directors, we have a strong and effective Board.
Our aim is to continue delivering value to both our customers and our shareholders and I would like to thank them for their continued support. I would also like to extend thanks to our growing number of suppliers and finally to our dedicated and talented staff, who make these achievements possible.
Dividends
The Board’s policy is to distribute 33% of profit after tax as dividends. This was increased from 25% last year, in line with the strong cashflow and growing success of the Group. An interim dividend of 1.04p per share was paid in April 2008 and the Directors are therefore recommending a final dividend of 4.56p per share, making a total for the year of 5.60p. Subject to shareholder approval at the Annual General Meeting in November, this dividend will be paid on 28 November 2008 to shareholders on the register on 7 November 2008.
Outlook
Our track record demonstrates the strength of the combination of our highly developed e-commerce platform, wealth of product data, extensive range of antibodies and high-calibre staff. We have built an attractive position in an exciting market and the Board looks to the future with confidence.
David Cleevely FREng
Chairman
8 September 2008


 

CEO’s Review
We have built a truly international reputation in the research community for the reliability of our products and the support we offer. The development of our systems and the power of the internet enable us to focus our marketing effectively and to provide a targeted, high-value service at the individual researcher level. At the same time, our product range has expanded to more than 44,000 products and sales have increased by 49.7% to £36.7m.
We continue to strike a balance between current year growth and investment for the future. Even so, profit before taxation increased by 48.2% from £5.5m to £8.2m before charging £250k in costs associated with the potential offer process last summer.
What is also very exciting is the 29.8% growth achieved in the number of products in the catalogue and the breadth covered by the new products. One of the strengths of the team that sources externally manufactured antibodies from original equipment manufacturers (OEMs) is the diversity of deals that they can cover in building the catalogue. This year, deals range from one adding almost 3,000 antibodies immediately to those on individual products from niche researchers. It is encouraging also that we have built a sufficient market share such that the desirability of pursuing exclusive product line acquisition (PLA) deals has reduced. We do not rule out doing more PLA deals in the future, if the deals are lucrative; however as a source of growth and capturing market share their role and importance has diminished. Overall, we are now managing relationships with more than 250 suppliers and see growth both from new products that our established suppliers bring to us and from the continued addition of new suppliers. We are also expanding the breadth of antibody-related reagents that we can cover, giving us access to new markets; for example, this year we have almost doubled our proteins range.
Our HTP facility is now well established in its new building. The production levels of polyclonal antibodies now exceed the levels achieved in our old facility, with the capacity to increase this in line with market demand. We are also seeing the monoclonal antibodies coming out of the developmental stages of the facility, and showing good initial sales.
A further, particularly satisfying achievement is the introduction of high-throughput screening assays into the HTP facility, leading to increased levels and quality of characterisation which we can now provide with all our products. This is a key driver of our growth and we are delighted with the amount of characterisation data that is being generated.
Both our OEM product sourcing strategies and HTP product development are driven by our approach to the segmentation of the research market into Core Focus Areas (CFAs). This year we have continued to build our CFA strategy through the development and integration of product, marketing, events and support teams within each CFA. We have found that the CFA approach is very effective in capturing market share and continue to add further CFAs in order to maintain this momentum. We started the year with six CFAs and we added two further to take our total number to eight fully established CFAs.. 
A key area of development based around the CFAs is in the activities of the scientific events team, which organises and runs conferences and seminars. To help across all our CFAs we have also been developing an expert system – the Target Selection Database (TSDB) – to help in the quality of candidate targets that we can select. The TSDB is a powerful data-mining tool that integrates both internal and external scientific data sources to provide a comprehensive profile of the commercial potential of a target in half the time taken previously.
We have a highly efficient business, with end-to-end systems linking the public website directly through to product ordering, inventory management, logistics and accounting. The resulting real-time data gives us strong operational and financial control and enables us to adopt an agile and responsive approach to the management of the business.
Since the creation of the company ten years ago our strong focus has been on serving the researcher and our business philosophy and processes are all based around their needs and the achievement of their objectives. During that time our products have been used in ground-breaking research and referenced in thousands of publications, thus enhancing our international reputation. This commitment is also core to our future as through the development of our systems we build on our relationships, offering an ever more relevant service to each individual as our product range and geographic reach expand.
Jonathan Milner
CEO
8 September 2008


 

Managing Director’s Review
Our new HTP manufacturing facility in Cambridge UK has been open for just over a year and the move from our existing facility has gone well. The production processes for polyclonal antibodies are now established and the development programme for our own monoclonal manufacturing is well underway. During the year we have been commissioning the major pieces of automation equipment from Beckman Coulter needed for scaled-up production of monoclonals. The last of these – the freeze-down workstation for long-term storage of the clones – is scheduled to be commissioned before the end of this calendar year.
This year has marked an important transition for our Tokyo office, which since 1 January 2008 has moved from transacting the majority of our business through our original distributor, to dealing directly with our major sub-dealers in the Japanese market. This enables us both to provide better support to our customers by shortening the communication chain to them and to improve the margin we can realise from selling our products. This transition was always part of the strategy for developing the Tokyo office but I am delighted to report that we have achieved this whilst still delivering 67.4% growth in sales from ¥159.8m (£0.7m) to ¥267.5m (£1.3m), comparing the second half of this financial year with the same period last year.
This year has also seen us continuing our strategy of developing our European sales through our ‘virtual offices’ based out of our Cambridge UK office, enabling European customers to contact us directly in their own language. The results have been very pleasing, particularly in Germany and France. A combination of targeted marketing campaigns and amendments to our discount structure in Europe has meant we have increased sales by 65.5% from €8.9m to €14.7m. As well as contributing to our overall sales, the strength in growth of our European sales has contributed to the margin improvements we have seen this year.
Our North American sales based out of our office in Cambridge MA have also continued to grow from $24.7m to $33.8m, an increase of 36.9%. We have been fortunate to be able to take on an additional 4,500 square feet of adjoining space that has become vacant at our One Kendall Square address. This will enable us to implement smoothly the planned expansion of our operations in North America without the inconvenience of relocating and should provide sufficient space to accommodate up to three years of projected growth.
An area which is fast maturing into an important cornerstone of our business is our scientific events team. We organise and run conferences and seminars in our CFAs , both as part of our core marketing strategy and to build brand awareness and keep us in touch with our customers and the scientific community. We have gradually built up our capability and reputation in the biological events arena, from running two major events in 2006–07 (around Chromatin and Stem Cells) to four in 2007–08. In addition, we have run twenty smaller, one-day events and seminars this year and will expand these further in 2008-09.
Our strong performance this year is again a tribute to the enthusiasm and commitment of our staff. We aim to provide a rewarding and progressive environment for our employees and we are always seeking ways to improve our overall benefits package for all our staff. For example, this year in the UK, despite still being a relatively small company, we are offering a class-leading self-service flexible benefits system where staff can choose from a variety of benefits, ranging from health care and pensions to cycle-to-work schemes, and take best advantage of the tax concessions available via salary sacrifice. We believe that continuing to develop the creative and innovative individuals who have grown up through a young entrepreneurial culture will enable us to grow successfully over the coming years. This is achieved by being open to both interdepartmental transfers and the career aspirations of staff, together with active training and development programmes utilising local initiatives and other opportunities open to staff.
Jim Warwick
Managing Director
8 September 2008


 

FINANCIAL REVIEW
Sales
Sales increased in the year by 49.7% to £36.7m or 49.1% on a constant currency basis i.e. if foreign currency exchange rates had remained unchanged from 2007. (Average exchange rate applied to sales: 2008 £1:$1.997: €1.374: ¥220.051; 2007 £1:$1.925: €1.481: ¥229.699.)
Gross margin
Gross margins reported for the period under review are 60.8% compared with 59.1% for the previous year. The increase of 1.7% is attributable to improved pricing which more than compensated for price increases from suppliers (0.7%); higher sales of products acquired under the exclusive product line acquisitions (0.4%); and from the benefit of the stronger Euro during the period, since a relatively small proportion of our product costs are denominated in Euros (0.6%).
During the year our Business Development and Marketing teams combined to actively manage the margin achieved on sales and introduced a number of strategies aimed at working with suppliers to improve sales and manage cost increases.
Administrative expenses
Administrative expenses rose from £7.7m to £12.5m. This increase reflects the 37.2% growth in the average headcount to 166; the first full year of operation of the HTP facility; and the Japanese office. During the year a net impairment charge of £442k was taken to the income statement relating to the reduction in the carrying value of one of the exclusive product line acquisition deals, following an assessment of future prospects under the deal.
The bad debt provision increased from £224k to £591k during the year, largely as a result of an overseas distributor having financial difficulties after becoming involved in a local court action, meaning that recovery of the balance due is now considered doubtful.
Research and Development expenditure
Research and Development expenditure increased by 39.8%, reflecting an increase in investment in the development of the monoclonal production process and new polyclonal production development. The level of expenditure is expected to continue to increase in future as the level of new product polyclonal production grows and the monoclonal development programme scales-up.
Profit
Operating profits increased by 51.3% from £5.0m in the year ended June 2007 to £7.6m after adding back costs of £250k relating to a potential offer for the Group as announced to the market in July 2007. This represents an increase in operating profit as a percentage of sales from 20.5% to 20.8% despite the impact of the additional costs outlined above.
Interest income rose as the Company benefited from strong cash generation during the year.
Tax
The consolidated tax charge for the year was £2.1m or 25.9% of profit before tax reflecting the tax credits arising from the increased amount of research and development undertaken. A credit of £114k was also received for research and development activities undertaken in prior years. The effective tax charge for the year was 25.9% (2007 :26.6%).
The tax charge for 2007 was £1.5m having been restated from £1.6m following the adoption of International Financial Reporting Standards (IFRS). The consolidated tax charge will benefit in future from a full year’s impact of the reduction in corporation tax in the UK from 30% to 28% and an increased level of research and development.
Inventories
The Group manages stock levels closely by monitoring the expectations of future sales for every product in the catalogue, and the time taken to restock either from our own production or from OEM suppliers. As a result, stock levels have increased less than the growth in sales during the course of the year. Over time the Group expects the levels of stock to increase relative to sales since Abcam products developed in-house, involve batch sizes larger than required for immediate sale.
Debtors
A main focus for the year has been on debtor control and debtor days at the year end were 34.4 (2007: 44.3). The majority of sales continue to be on credit and we would expect some increase in debtor days over time in line with practice in local markets as the geographic spread of sales widens.
Creditors
Current liabilities rose from £3.4m to £4.8m primarily resulting from a 33.8% increase in trade and other payables, which is slightly less than the increase in sales. Non-current liabilities fell from £0.6m to £0.2m, being the net effect of a decrease in deferred tax balances due to the level of expenditure during the year on capital equipment relating to the HTP facility and a reduction in the estimated amount due as deferred settlement on a product line acquisition concluded in 2006.
Cashflow
The Group’s cashflow continues to be strong, with £7.1m (2007: £3.4m) generated from trading in the period. Consequently, despite spending £2.4m on facilities and equipment and £0.3m on acquiring distribution rights, the Group’s cash and short term investment balances increased by £3.8m.
Accounting standards
These are the first full year’s results of the Group to be stated under IFRS and consequently there are a number of changes to both presentation and content of these financial information. The effects of the adjustments are explained in note 30, the material changes being the inclusion of derivative instruments at fair value, giving rise to a charge to profit and loss of £197k (2007: charge of £168k) and the recognition of a deferred tax asset relating to unexercised share options of £224k (2007: liability of £46k).
EPS
The number of shares issued during the year for the exercise of share options was relatively small at 443,397 (2007: 158,800), meaning that as post tax profit grew by 43.7% (2007: 15.5%) the growth in basic EPS was 43.8% (2007: 5.7%) and diluted EPS was 44.9%.(2007: 6.5%)
Currency exposure
The Group continues to generate significant amounts of dollars and euros in excess of payments in these currencies, and has hedging arrangements in place to reduce the exposure. During the year to 30 June 2008 the Group had forward exchange contracts in place to sell $12.4m and €11.9m at average rates of £1 to $1.9356 and £1 to €1.4054 respectively. Of these, contracts for $4.2m and €4.5m were still outstanding at the year end.
For the year ending 30 June 2009 the Group has forward exchange contracts in place to sell $9.0m and €8.1m at average rates of £1 to $1.924 and €1.294.
Jeff Iliffe
Chief Financial Officer
8 September 2008

  

Abcam plc




Consolidated Income Statement




For the year ended 30 June 2008










Year ended

Year ended


Notes

30 June 2008

30 June 2007




Restated*



£000

£000

Revenue

5

36,694 

24,519 

Cost of sales


(14,389)

(10,020)



 

 

Gross profit


22,305 

14,499 





Administration and management expenses


(12,344)

(7,590)

 excluding share based compensation charge


 

 

Share based compensation charge


(173)

(142)

Total management and administration expenses


(12,517)

(7,732)





Research and development expenses


(2,398)

(1,709)

 excluding share based compensation charge


 

 

Share based compensation charge


(19)

(20)

Total research and development expenses


(2,417)

(1,729)



 

 

OPERATING PROFIT


7,371 

5,038 





Investment revenue

5

581 

495 



 

 

PROFIT BEFORE TAXATION 


7,952 

5,533 





Tax 

11

(2,062)

(1,472)



 

 

PROFIT FOR THE PERIOD FROM CONTINUING 

6,29

5,890 

4,061 

 OPERATIONS








Earnings per share




 from continuing operations - pence




Basic

13

16.88

11.74

Diluted 

13

16.56

11.43





*Restated to reflect the adoption of IFRS as per note 30.







All profit is attributable to equity holders of the parent.




  

Abcam plc








Consolidated statement of recognised income and expense



For the year ended 30 June 2008











Year ended

Year ended







30 June 2008

30 June 2007







£000

£000


(Losses)/gains on cash flow hedges



(168)

168


Exchange differences on translation of foreign operations

3 

(28)


Deferred tax on outstanding share options


502 

(30)


Net income recognised directly in equity


337 

110 










Profit for the year




5,890

4,061










Total recognised income and expense for the year

6,227

4,171










  

Abcam plc





Consolidated Balance Sheet




At 30 June 2008







Notes

30 June 2008

30 June

2007





Restated*




£000

£000

Non-current assets





Intangible assets


14

994 

1,691 

Property, plant and equipment

15

4,204 

2,832 




5,198 

4,523 

Current assets





Inventories


17

4,506 

3,102 

Trade and other receivables

18

4,860 

4,327 

Cash and cash equivalents 

18

13,473 

10,709 

Short term deposits


18

1,020 

  - 

Derivative financial instruments

19

  - 

168 




23,859 

18,306 






Total Assets



29,057 

22,829 






Current Liabilities





Trade and other payables


21

(4,073)

(3,045)

Current tax liabilities


21

(382)

(248)

Provisions


22

(96)

(75)

Derivative financial instruments

19

(197)

  - 




(4,748)

(3,368)






Net current assets



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