HUNTINGDON LIFE SCIENCES GROUP PLC AND SUBSIDIARIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 1-10173
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HUNTINGDON LIFE SCIENCES GROUP plc
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENGLAND AND WALES
(JURISDICTION OF INCORPORATION OR ORGANIZATION)
WOOLLEY ROAD, ALCONBURY, HUNTINGDON, PE28 4HS, CAMBRIDGESHIRE, ENGLAND
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
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At March 31, 2000, 291,010,094 Ordinary Shares of 5 pence each were outstanding.
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TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION Page
Item 1 Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets at
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income
for the three months ended March 31,2000
and March 31, 1999 4
Condensed Consolidated Statement of Changes
in Shareholders' Equity 4
Condensed Consolidated Statements of Cash
Flows for the three months ended March 31, 2000
and March 31, 1999 5
Notes to Condensed Consolidated Financial 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosures
about Market Risk 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security
Holders 13
Item 5 Other Information 13
Item 6 Exhibits and reports on Forms 6-K and 8-K 13
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
(pound)'000 (pound)'000
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents 3,575 5,258
Account receivable net of allowance for
(pound)34,000 (1999:(pound)115,000)
Unbilled receivables 6,053 5,689
Inventories 839 803
Prepaid expenses and other 1,388 1,233
Deferred income taxes 727 825
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Total current assets 21,562 23,403
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Property and equipment: net 68,283 68,969
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Investments 150 79
Unamortised costs of raising long term debt 665 692
Deferred income taxes 5,679 5,492
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Total Assets 96,339 98,635
------------- --------------
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 4,543 3,982
Accrued payroll and other benefits 839 760
Accrued expenses and other liabilities 3,341 4,593
Fees invoiced in advance 8,858 9,317
Short term debt 22,586 22,656
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Total current liabilities 40,167 41,308
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Long term debt 31,342 31,023
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Other long term liabilities 2,541 2,977
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Deferred income taxes 14,064 14,111
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Shareholders' Equity: 5p Ordinary Shares
Authorised-at March 31, 2000 400,000,000
(1999, 400,000,000)
Issued and outstanding-at March 31, 2000
291,010,294 (1999, 291,010,294)
Paid in capital 25,100 25,100
Retained earnings (31,425) (30,434)
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Total shareholders' equity 8,225 9,216
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Total liabilities and shareholders' equity 96,339 98,635
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<PAGE>
HUNTINGDON LIFE SCIENCES GROUP PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
Three months ended March 31,
2000 1999
(pound)'000 (pound)'000
(except per (except per
share data) share data)
Revenues 15,463 13,383
Cost of sales (13,009) (12,669)
------------------ -----------------
Gross profit 2,454 714
Selling and administrative (2,367) (2,267)
expenses
------------------ -----------------
Operating profit/(loss) 87 (1,553)
Interest income 51 155
Interest expense (1,084) (1,099)
Other (loss)/income (181) (600)
------------------ -----------------
Loss before income taxes (1,127) (3,097)
Income taxes 136 1,171
------------------ -----------------
Net loss (991) (1,926)
------------------ -----------------
Loss per share
- - basic (pound)(0.003) (pound)(0.007)
- - diluted (pound)(0.003) (pound)(0.007)
'000 '000
Weighted average shares
- - basic 291,010 291,010
- - diluted 291,010 291,010
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Unaudited
Ordinary Paid in Retained
Shares Capital Earnings Total
(pound)'000(pound)'000(pound)'000(pound)'000
Balance, December 31, 1999 14,550 25,100 (30,434) 9,216
Net loss for period - - (991) (991)
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Balance, March 31, 2000 14,550 25,100 (31,425) 8,225
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<PAGE>
HUNTINGDON LIFE SCIENCES GROUP PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
March, 31 March, 31
2000 1999
(pound)'000 (pound)'000
Cash flows from operating activities:
Net loss (991) (1,926)
Adjustments to reconcile net loss to net
loss to net cash provided by operating
activities
Depreciation and amortisation 1,459 1,485
Amortisation of loan costs 27 58
Deferred income taxes (136) (1,171)
Changes in operating assets and liabilities:
Accounts receivable and prepaid expenses 96 (382)
Inventories (36) 14
Accounts payable, accrued expenses and
other liabilities and accrued payroll
and other benefits
Fees invoiced in advance (459) (242)
Other liabilities (436) (1,417)
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Net cash used by operating activities (1,087) (4,285)
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Cash flows from investing activities:
Purchase of property, plant and equipment (720) (1,017)
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Net cash used in investing activities (720) (1,017)
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Cash flows from financing activities:
Repayment of loan - (500)
Repayments of short term borrowings - (747)
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Net cash used by financing activities (1,247)
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Effect of exchange rate changes on cash and 124 486
cash equivalents
------------ -------------
Decrease in cash and cash equivalents (1,683) (6,063)
Cash and cash equivalents at beginning
of year 5,258 14,080
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Cash and cash equivalents at end of year 3,575 8,017
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<PAGE>
HUNTINGDON LIFE SCIENCES GROUP PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary for a fair statement of the results of operations for the
interim periods presented. The consolidated financial statements have been
compiled without audit and are subject to such year-end adjustments as may be
considered appropriate and should be read in conjunction with the historical
consolidated financial statements of Huntingdon Life Sciences plc. and
subsidiaries (Huntingdon) for the years ended December 31, 1999, 1998 and 1997
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 1999. Operating results for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
These financial statements have been prepared in accordance with US GAAP and
under the same accounting principles as the financial statements included in the
Annual Report on Form 10-K.
Certain reclassifications have been made to the 1999 amounts to conform to the
2000 presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Revenues represent the value of work done for clients, exclusive of VAT or sales
taxes. Billings in advance of work performed are recorded as fees invoiced in
advance and included in current liabilities, while billings in arrears of work
performed are included in current assets as amounts recoverable on contracts.
Contracts
Profit on contracts, irrespective of length, is taken as the work is carried
out. The profit is calculated to reflect the proportion of the work performed,
by recording turnover and related costs as contract activity progresses.
Turnover is calculated as that proportion of total contract value which costs
incurred to date bear to total expected costs for that contract. Full provision
is made for losses on contracts when they are first foreseen.
Depreciation
The cost of depreciable assets is written off in equal monthly instalments over
their expected useful lives as follows:
Freehold buildings and facilities 15 - 50 years
Plant and equipment 5 - 15 years
Vehicles 5 years
Computer software 5 years
Taxation
The current charge for income taxes is calculated in accordance with the
relevant tax regulations applicable to each entity in the Company. Deferred
income taxes are recognised for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis. The effect on
deferred tax assets and liabilities of a change in tax rates is recognised in
income in the period that includes the enactment date. Deferred tax assets are
recognised in full subject to a valuation allowance that reduces the amount
recognised to that which is more likely than not to be realised.
Loss per share
Loss per share is computed in accordance with FASB Statement No. 128, "Earnings
Per Share". Basic loss per share is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding during
the period. The computation of diluted loss per share is similar to the
computation of basic loss per share, except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares had been issued. The potential dilution
which could arise from outstanding share options and the Convertible Capital
Bonds is not disclosed as any adjustments would be anti-dilutive.
Loss per share/ADR is calculated using an exchange rate of $1.60 = (pound)1.00
(1999 $1.63 = (pound)1.00). Each ADR represents five Ordinary Shares.
Segment Analysis
The Company's operating locations have been aggregated into a single reportable
segment, as permitted under SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", since they have similar economic
characteristics, products, production processes, types of customers and
distribution methods.
Going Concern
Bank loans totalling (pound)22,586,000 are repayable on August 31, 2000.
Management are currently involved in negotiations to provide adequate financing
following the expiry of these loans. This financing could be asset backed or
supported by projected cash flows. The negotiations are at an early stage and
although Management are confident that they will be able to achieve the
financing prior to August 31, 2000 it is too early to predict the outcome as
there are uncertainties involved in either approach.
In the light of the above Management have formed a judgement that it is
appropriate to adopt the going concern basis in preparing the accounts. The
financial statements do not include any adjustments that would result from an
inability to secure adequate financing.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the results of operations during the reporting periods. Although these estimates
are based upon management's best knowledge of current events and actions, actual
results could differ from those estimates.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1. OVERVIEW
Huntingdon is a leading Contract Research Organisation offering world-wide
pre-clinical and non-clinical testing for biological safety and efficacy
assessment which is necessary for the development of pharmaceuticals and
chemicals. Huntingdon serves the rapidly evolving requirements to perform safety
evaluations on new pharmaceutical compounds and chemical compounds contained
within the products that people use, eat and are otherwise exposed to. In
addition it tests the effect of such compounds on the environment and also
performs work on assessing the safety and efficacy of veterinary products.
2. RESULTS OF OPERATIONS
Three months ended March 31, 2000 compared with three months ended March 31,
1999
Revenues for the three months ended March 31, 2000 were (pound)15.5 million, an
increase of 16% on revenues of (pound)13.4 million for the three months ended
March 31, 1999. The impact of increases in orders since the refinancing in
September 1998 continues to feed through to revenues.
Cost of sales for the three months ended March 31, 2000 were (pound)13.0
million, an increase of 4.3% on cost of sales of (pound)12.5 million for the
three months ended March 31, 1999. This increase was driven by the increase in
revenues, but was partially offset by a lower charge for pension costs this
year. Pension costs in the three months ended March 31, 2000 were (pound)0.3
million lower than in the corresponding period in 1999.
Selling and administration expenses rose by 4.4% to (pound)2.4 million for the
three months ended March 31, 2000 from (pound)2.3 million in the corresponding
period in 1999, driven by the increase in revenues.
Net interest expense for the three months ended March 31, 2000 was (pound)1.0
million, a 9.4% increase on net interest expense of (pound)0.9 million for the
three months ended March 31, 1999. The increase in expense was due to a
combination of higher net debt and higher interest rates on bank borrowings.
The unrealised loss on exchange of (pound)0.2 million arose on net liabilities
denominated in US dollars (primarily the Convertible Capital Bonds of $50
million) with the weakening of sterling against the dollar. In the first quarter
of 1999 sterling also weakened against the dollar resulting in a (pound)0.6m
loss on exchange.
Taxation relief on losses for the three months ended March 31, 2000 was
(pound)0.1 million representing relief at 12% compared to 38% in the
corresponding period in 1999. As Huntingdon operates in both the UK and the US
its effective tax rate is subject to variation from period to period due to
changes in the geographic distribution of its pre tax earnings and due to the
non taxation of exchange losses.
The overall net loss for the three months ended March 31, 2000 was (pound)1.0
million compared to a loss of (pound)1.9 million for the three months ended
March 31, 1999. Loss per share was 0.3 pence down from 0.7 pence last year on
shares in issue of 291,010,294 (1999, 291,010,294). Loss per ADR was 2.5 cents
down from 5.4 cents last year.
3. LIQUIDITY & CAPITAL RESOURCES
During the three months ended March 31, 2000 funds absorbed were (pound)1.7
million, which includes the impact of exchange rate movements, reducing cash in
hand and on short term deposit from (pound)5.3 million at December 31, 1999 to
(pound)3.6 million at March 31, 2000. The funds were utilised as follows:-
(pound)m
Operating loss excluding depreciation 1.5
Cost reduction programme (0.1)
Working capital movements (0.8)
Interest (1.6)
Capital expenditure (0.7)
---------
(1.7)
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During 1998 poor trading results put a heavy strain on cash resources, utilising
Huntingdon's available facilities. Given the medium to long term element of many
of Huntingdon's activities and the reluctance of clients to place new work until
Huntingdon's finances were stabilised, Huntingdon required a substantial
injection of finance to both initially restore confidence and then to fund
operations during the period until Huntingdon returned to profitability.
On September 2, 1998 a Group of new investors subscribed (pound)15 million for
120 million ordinary shares whilst existing shareholders and institutional
investors took up a further 57 million shares, contributing (pound)7.1 million.
After expenses of (pound)1.7 million, the issue of shares raised (pound)20.4
million. On the same date Huntingdon's bankers agreed to confirm and fix
Huntingdon's facilities at (pound)24.5 million until August 31, 2000 and this
amount was fully drawn down.
On September 1, 1999 the sale of the Wilmslow Research Centre was completed.
Part of the proceeds from this sale ((pound)1.9 million) were used to repay bank
debt and the facility was reduced accordingly. Interest is payable in quarterly
breaks at "LIBOR" plus 1.75% per annum in respect of drawings up to (pound)19.5
million and LIBOR plus 1% in respect of drawings over (pound)19.5 million. The
interest rate payable at March 31, 2000 is 8.0148% on (pound)19.5 million and
8.2648% on (pound)3.1 million.
As this facility is confirmed to August 31, 2000 the bank debt is now shown in
current liabilities. Management are currently involved in negotiations to
provide adequate financing following the expiry of these loans. This finance can
be asset backed or supported by projected cash flows. The negotiations are at an
early stage and although Management are confident that they will be able to
achieve the financing prior to August 31, 2000 it is too early to predict the
outcome as there are uncertainties involved in either approach. In the light of
the above Management have formed a judgement that it is appropriate to adopt the
going concern basis in preparing the accounts. The financial statements do not
include any adjustments that would result from an inability to secure adequate
financing.
The remainder of Huntingdon's long term finance is provided by Convertible
Capital Bonds repayable in 2006 (the "Bonds"). Bonds totalling $50 million were
issued in 1991 and remained outstanding as at March 31, 2000. The Bonds carry
interest at 7.5%, payable at six-monthly breaks in March and September. The
conversion rate, which is based upon a fixed rate of exchange of (pound)1.00=US
$1.6825 is 242.3 pence per Ordinary Share and is subject to adjustment in
certain circumstances.
The balance of the consideration payable for the purchase of the Wilmslow
Research Centre ((pound)3.3 million) was repaid in 1999.
4. EXCHANGE RATE FLUCTUATIONS AND EXCHANGE CONTROLS
In the three months to March 31, 2000 following the weakening of sterling
against the US dollar, net liabilities denominated in US dollars (mainly $50
million Bonds) have increased in value on consolidation to sterling. For the
period this does not affect the cash flow of Huntingdon but has increased the
reported loss before tax, accounting largely for the unrealised loss on exchange
of (pound)0.2 million reported in these results. This compares with an exchange
loss in the first quarter of 1999 of (pound)0.6 million.
Interest on the Bonds is payable half-yearly (in March and September) in US
dollars and the impact of fluctuations in the exchange rate between sterling and
US dollars is offset by US dollar denominated revenues receivable by Huntingdon.
Although reported results have been affected by conversion into sterling of the
Bonds on consolidation and there may be an impact in the future, Management have
decided not to hedge against this exposure. Such a hedge might impact upon
Huntingdon's cash flow compared with movements on the Bonds which do not affect
cash flow in the medium term. Huntingdon's current treasury policy does not
include any hedging or derivative activity.
Huntingdon operates on a world-wide basis and generally invoices its clients in
the currency of the country in which it operates. Thus, for the most part
exposure to exchange rate fluctuations is limited as sales are denominated in
the same currency as costs. Trading exposures to currency fluctuations do occur
as a result of certain sales contracts, performed in the UK for US clients,
which are denominated in US dollars and contribute approximately 14% of total
revenues. Huntingdon has not experienced difficulty in transferring funds to and
receiving funds remitted from those countries outside the US or UK in which it
operates and Management expects this situation to continue.
Whilst the UK has not at this time entered the European Monetary Union,
Huntingdon has ascertained that its financial systems are capable of dealing
with Euro denominated transactions. In addition these systems ensure that
Huntingdon, if ever required to do so, will be able to report in Euro's.
5. INTEREST RATES
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's debt obligations. The Company has a cash flow
exposure on its bank loans due to its variable LIBOR pricing. In the 3 months
ended March 31, 2000 a 1% change in LIBOR would have resulted in a fluctuation
in interest expense of approximately (pound)60,000.
6. COMPETITION
Competition in both the pharmaceutical and non-pharmaceutical market segments
ranges from in-house research and development divisions of large pharmaceutical,
agrochemical and industrial chemical companies, who perform their own safety
assessments to contract research organisations like Huntingdon, who provide a
full range of services to the industries and niche suppliers focussing on
specific services or industries.
This competition could have a material adverse effect on Huntingdon's net
revenues and net income, either through in-house research and development
divisions doing more work internally to utilise capacity or through the loss of
studies to other competitors on pricing. As Huntingdon operates on an
international basis, movements in exchange rates, particularly against sterling,
can have a significant impact on its price competitiveness.
7. INDUSTRY CONSOLIDATION
The process of consolidation within the pharmaceutical industry should
accelerate the move towards outsourcing work to contract research organisations
such as Huntingdon in the longer term as resources are increasingly invested on
in-house facilities for discovery and lead optimisation, rather than development
and regulatory safety evaluation. However, in the short term, there is a
negative impact with development pipelines being rationalised and a focus on
integration rather than development. This can have a material adverse impact on
Huntingdon's net revenues and net income.
8. INFLATION
While most of Huntingdon's net revenues are earned under fixed price contracts,
the effects of inflation do not generally have a material adverse effect on its
operations or financial condition as only a minority of the contracts have a
duration in excess of one year.
9. YEAR 2000
The Company completed its Year 2000 compliance program in December 1999. Where
necessary, items of computer hardware, software and other equipment relying on
computer related technologies were upgraded or replaced and the Company has
experienced no disruption to its operations as a result of equipment or computer
failures. Equally there has been no disruption caused by problems at the
Company's clients or suppliers.
The Company currently estimates that the amounts that have, or will be, expensed
as incurred over the three year period to December 31, 2000 will total between
(pound)1,900,000 and (pound)2,000,000. Of this amount a total of
(pound)1,818,000 has been incurred and expensed in the two years to December 31,
1999 ((pound)1,808,000 in 1999 and (pound)10,000 in 1998). The amounts that will
be capitalised have primarily been incurred in the two years to December 31,
1999 and are estimated at (pound)1,500,000 ((pound)1,203,000 in 1999 and
(pound)275,000 in 1998).
The Company is continuing to monitor for potential issues through 2000, but
believes that Year 2000 compliance will have no material adverse effect on the
results of its operations.
10. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
It requires that an entity recognise all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. As amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FAB
Statement No. 133", this statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000, although early adoption is
encouraged. The Company is in the process of analysing the impact of the
adoption of this statement on its consolidated financial statements.
11. FORWARD LOOKING STATEMENTS
Certain statements in this section and elsewhere in this Quarterly Report on
Form 10-Q (as well as information included in oral statements or other written
statements made or to be made by Huntingdon) constitute "forward-looking
statements" pursuant to the safe-harbor provisions of the United States Private
Litigation Reform Act of 1995. Such forward-looking statements include the
discussions of the business strategies of Huntingdon and expectations concerning
future operations, margins, profitability, liquidity and capital resources.
Although Huntingdon believes that such forward-looking statements are
reasonable, it can give no assurance that any forward-looking statements will
prove to be correct. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of Huntingdon to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These risks, uncertainties and other factors are
more fully described in the Huntingdon's Form 10-K for the year ended December
31, 1999 as filed with the SEC.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<PAGE>
HUNTINGDON LIFE SCIENCES GROUP PLC
OTHER INFORMATION
PART II OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At an Extraordinary General Meeting of the Company held on March 22,
2000, stockholders voted upon the approval and adoption of new
Articles of Association. Shares were voted on this matter as
follows:
For: 58,717,006
Against: 82,304
Abstain: 5,500
ITEM 6 EXHIBITS AND REPORTS ON FORMS 6-K AND 8-K
(A) Exhibits
Exhibit 99.1 - Press Release, dated May 10, 2000, announcing first
quarter earnings results.
(B) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUNTINGDON LIFE SCIENCES GROUP plc
(Registrant)
By: /s/ Julian T. Griffiths
Name: Julian T Griffiths
Title: Finance Director
Date: May 15, 2000
PRESS RELEASE Huntingdon Life Sciences Group plc
("Huntingdon") (NYSE/SEAQ:HTD)
Woolley Road, Alconbury, Huntingdon
Cambs PE28 4HS, England
For Further Information:
Richard A. Michaelson
Phone: UK: +44 (0) 1480 892194
US: (201) 525-1819
e-mail: [email protected]
IMMEDIATE RELEASE
May 10, 2000
HUNTINGDON ANNOUNCES FIRST QUARTER RESULTS
Huntingdon, England, May 10, 2000 - Huntingdon Life Sciences Group plc
("Huntingdon" or the "Company") (NYSE:HTD) announced today that net revenues for
the quarter ended March 31, 2000 were (pound)15.5 million ($24.7 million) an
increase of 16% from revenues for the equivalent period last year of (pound)13.4
million ($21.8 million). Under UK GAAP the Company reported an operating loss of
(pound)0.2 million ($0.4 million), down from (pound)1.2 million ($2.0 million)
last year. Net loss after taxation for the first quarter was (pound)1.4 million
($2.3 million) compared to (pound)2.8 million ($4.6 million) for the equivalent
period last year. Net loss per ordinary share was 0.5 pence compared to 1.0
pence last year. Net loss per ADR was 4.0 cents compared to 7.8 cents last year.
Under US GAAP the Company reported an operating profit of (pound)0.1 million
($0.1 million) compared to an operating loss of (pound)1.6 million ($2.5
million) for the equivalent period last year. Net loss after taxation for the
first quarter was (pound)1.0 million ($1.6 million) compared to (pound)1.9
million ($3.1 million) last year. Net loss per ordinary share was 0.3 pence
compared to 0.7 pence last year. Net loss per ADR was 3 cents compared to 5
cents last year. The principal differences between the UK and US reported
results are non-cash charges associated with pension accounting and deferred
taxation.
Andrew Baker, Huntingdon's Executive Chairman said:
"The strong year over year revenue growth and meaningful margin improvement is
testament to our increasing success in strengthening Huntingdon's position as
one of the world's leaders in non-clinical safety testing. Growth in backlog,
new clients, and returning clients builds our confidence that high standards of
scientific excellence and customer service are the right focus for us".
Brian Cass, Huntingdon's Managing Director added:
"New orders for the first quarter were 16% up on the first quarter of last year,
and 10% ahead of the fourth quarter, helping to build our backlog to its highest
level in almost three years. Revenues, showing some seasonal softness in some
areas, were still level with the fourth quarter. We are also encouraged by the
16% year over year growth and the (pound)1 million reduction in operating
losses, which represents an incremental margin of approximately 50%".
Huntingdon Life Sciences Group plc is one of the world's leading CROs providing
product development services to the pharmaceutical, agrochemical and
biotechnology industries. Huntingdon brings leading technology and capability to
support its clients in non-clinical safety testing of new compounds in early
stage development and assessment. Huntingdon operates research facilities in the
United Kingdom (Huntingdon and Eye, England) and the United States (The
Princeton Research Centre, New Jersey).
This announcement contains statements that may be forward-looking as defined by
the USA's Private Litigation Reform Act of 1995. These statements are based
largely on Huntingdon's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond Huntingdon's control, as more fully
described in Huntingdon's Form 10-K for the year ended December 31, 1999, as
filed with the US Securities and Exchange Commission.
* * * TABLES TO FOLLOW * * *
<PAGE>
HUNTINGDON LIFE SCIENCES GROUP plc
("HUNTINGDON")
(NYSE/SEAQ - HTD)
SUMMARY OF UNAUDITED CONSOLIDATED PROFIT & LOSS ACCOUNTS
3 Months ended March 31 2000 1999
- -----------------------
(pound)000's (pound)000's
As restated
Revenues 15,463 13,383
Cost of sales (13,331) (12,366)
--------- -----------
Gross profit 2,132 1,017
Selling and administration (2,367) (2,267)
--------- -----------
Loss on ordinary activities before interest (235) (1,250)
Interest receivable and similar income 207 372
Interest payable and similar charges (1,421) (1,915)
--------- -----------
Loss on ordinary activities before taxation (1,449) (2,793)
Taxation - -
--------- -----------
Loss after taxation (1,449) (2,793)
--------- -----------
Loss per share - - basic 0.5 1.0
(pence)
- diluted 0.5 1.0
--------- -----------
Loss per ADR - (cents) - basic 4.0 7.8
- diluted 4.2 8.2
--------- -----------
Consolidated Statement of Total Recognised Gains and Losses
For the 3 months ended March 31
2000 1999
(pound)000's (pound)000's
Loss for the period (1,449) (2,793)
--------- -----------
Total losses recognised since last
report and accounts (1,449) (2,793)
--------- -----------
<PAGE>
SUMMARY OF UNAUDITED CONSOLIDATED BALANCE SHEETS
As at March 31 2000 1999
- --------------
(pound)000's (pound)000's
As restated
Fixed Assets 68,433 75,266
--------- -----------
Stock 839 1,123
Debtors 16,422 14,074
Cash and short term investments 3,575 8,017
--------- -----------
Current assets 20,836 23,214
Bank loans and overdrafts (22,586) -
Creditors and taxation (17,210) (19,676)
--------- -----------
Net current (liabilities)/assets (18,960) 3,538
--------- -----------
Total assets less current liabilities 49,473 78,804
Convertible capital bonds (30,677) (30,064)
Long term loans - (24,500)
Provisions for liabilities and charges (2,642) (2,818)
--------- -----------
Shareholder funds - all equity 16,154 21,422
--------- -----------
<PAGE>
SUMMARY OF UNAUDITED CONSOLIDATED CASH FLOWS
3 Months ended March 31 2000 1999
(pound)000's (pound)000's
As restated
Operating loss (235) (1,250)
Depreciation 1,459 1,485
Movement in provisions (112) (1,234)
Movement in other working capital (474) (1,306)
--------- -----------
Net cash inflow/(outflow) from operating
activities 638 (2,305)
Net interest paid (1,601) (1,517)
Purchase of fixed assets (net of disposals) (720) (1,017)
--------- -----------
Net cash outflow before use of liquid
resources and financing (1,683) (4,839)
Management of liquid resources
Movement in short term investments 2,200 4,000
Financing:
Repayments of amounts borrowed - (500)
--------- -----------
Net cash outflow from financing - (500)
--------- -----------
Increase/(decrease) in cash and cash 517 (1,339)
equivalents
--------- -----------
<PAGE>
Notes:
(1)Bank loans totalling (pound)22,586,000 are repayable on August 31, 2000. The
directors are currently involved in negotiations to provide adequate
financing following the expiry of these loans. This finance could be asset
backed or supported by projected cash flows. The negotiations are at an early
stage and although the directors are confident that they will be able to
achieve the financing prior to August 31, 2000 it is as yet too early to
predict the outcome as there are uncertainties involved in either approach.
In the light of the above the directors have formed a judgement that it is
appropriate to adopt the going concern basis in preparing the accounts. The
financial statements do not include any adjustments that would result from an
inability to secure adequate finance.
(2)These results have been prepared in accordance with UK GAAP but do not
constitute Statutory Accounts as defined by the UK Companies Act 1985 and
have not been audited.
(3)Certain figures in the accounts for the three months ended March 31, 1999
have been reclassified so that their presentation mirrors that in the
accounts for the three months ended March 31, 2000. These are the provision
for pension costs, exchange differences on the Convertible Capital Bonds,
short term investments and IT costs.
(4)Loss per share is based on an average of 291,010,294 (1999, 291,010,294)
Ordinary Shares outstanding during the 3 month period ended March 31, 2000.
(5)Diluted loss per share is based on an average 273,747,301 (1999,
277,665,772) Ordinary shares outstanding during the 3 month period ended
March 31, 2000.
(6)Loss per ADR is calculated using an exchange rate of $1.60 = (pound)1.00
(1999, $1.63 = (pound)1.00). Each ADR represents five Ordinary Shares.
(7)For the purposes of consolidation an average exchange rate of $1.60 =
(pound)1.00 has been used in the 3 month period ended March 31, 2000 (1999,
$1.63 = (pound)1.00).
(8)A printed copy of this quarterly report is being posted to shareholders and
is available on request from the Registered Office at Woolley Road,
Alconbury, Huntingdon Cambs PE28 4HS.
