31 August, 2011

Bioquell PLC - 2011 interim results

Bioquell PLC (LSE: BQE) - Bioquell PLC (LSE: BQE) - provider of patented, low temperature, environmentally-friendly bio-decontamination technologies to the Healthcare, Life Sciences and Defence sectors; as well as specialist testing and compliance services in the UK via TRaC - announces its interim results for the six months period ended 30 June, 2011.

Group financial highlights:

§  14% increase in orders in the period to £23.9 million (2010: £21.0 million)

§  11% increase in revenues to £20.0 million (2010: £18.0 million)

§  Substantial (4x) increase in pre-tax profit to £2.0 million (2010: £0.5 million)

§  Basic earnings per share of 3.5p (2010: 1.0p)

§  Significant net cash position combined with a strong balance sheet: net cash of £4.6 million (2010: £3.4 million) and net assets of £25.3 million (2010: £22.6 million)

Bio-decontamination (Healthcare, Life Sciences, Defence) division:

§  Orders increased by 17% to £16.7 million (2010: £14.3 million)

§  Revenues increased by 13% to £13.4 million (2010: £11.9 million)

§  Seeing good opportunities for further international, organic growth across all three sectors - assisted by the continuing development of new products

TRaC (Testing, Regulatory and Compliance) division:

§  Orders increased by 7% to £7.2 million (2010: £6.7 million)

§  Revenues increased by 8% to £6.6 million (2010: £6.1 million)

§  Plans for further expansion of TRaC in the UK - in part driven by its new consulting business (ESQ)

Commenting on the 2011 interim results, Nigel Keen, Chairman of Bioquell PLC, said:

"The Group performed well in the first half achieving improved levels of orders, revenues and profitability."

"We see interesting opportunities for growth - across our core Life Sciences, Healthcare and Defence sectors - in Asia and other developing markets."

"We continue to invest in the expansion of our international sales networks, the development of our product range and TRaC's facilities."

"The Group continues to be conservatively financed with significant net cash resources and is well positioned to fund substantial levels of organic growth."

Enquiries:

Nigel Keen            Chairman                        Bioquell PLC           01264 835900

Nick Adams          Group Chief Executive

Mark Bodeker        Chief Operating Officer and Finance Director

Notes to editors:

§ Bioquell is a UK-headquartered, international technology company with two divisions:

o Bio-decon which sells specialist bio-decontamination products and services into the Healthcare, Life Sciences and Defence sectors, with most of its revenues generated from overseas customers; and

o TRaC which provides specialist Testing, Regulatory and Compliance services principally to UK corporates.

§ Bioquell's bio-decontamination technology is principally based around hydrogen peroxide vapour - which is highly efficacious at eradicating micro-organisms such as bacteria and viruses at room temperature - and is subsequently broken down using specialist catalysts to water vapour and oxygen at the end of the bio-decontamination process.

§ Bioquell's bio-decontamination technology:

o is used by bio-pharmaceutical, biotechnology and research institutions to provide sterile equipment and/or sterile working environments;

o is used to eradicate "superbugs" from hospitals; independent scientific research has demonstrated that 'bioquelling' hospital equipment and facilities reduces significantly the rates of hospital acquired infection;

o has been incorporated in a wound-care product - BioxyQuell - which has received conditional regulatory approval;

o was selected by the United States Department of Defense for the JSSED programme to decontaminate sensitive equipment against biological and chemical warfare agents; and

o is also used in other sectors where bioburden can create significant problems including, for example, the food industry

§ Bioquell currently has overseas operations in the USA, France, Ireland, Singapore and China.

§ TRaC sells its specialist services to the product development departments of a broad range of companies, principally based in the UK, with a particular focus on aerospace, military and telecoms clients.

GROUP FINANCIAL RESULTS

Order intake in the first six months of the year was good, with Group orders up 14% in the period to £23.9 million (2010: £21.0 million). Orders in the Bio-decontamination division increased by 17% to £16.7 million (2010: £14.3 million) and by 7% in the TRaC division to £7.2 million (2010: £6.7 million).

Group revenues were up 11% in the period to £20.0 million (2010: £18.0 million). The Bio-decontamination division achieved a 13% increase in revenues to £13.4 million (2010: £11.9 million) and TRaC posted revenues up 8% to £6.6 million (2010: £6.1 million).

Pre-tax profit increased substantially in the period to £2.0 million (2010: £0.5 million) reflecting the effect of increased revenues combined with a 2% increase in gross margin to 45% (2010: 43%) and a 5% reduction in overheads to £6.9 million (2010: £7.3 million). The reduction in overheads includes the positive effect of foreign exchange movements of £0.4 million (2010: £0.1 million) in the period.

The Group's balance sheet remains strong with gross cash of £5.8 million (2010: £4.9 million), net cash of £4.6 million (2010: £3.4 million) and net assets of £25.3 million (2010: £22.6 million).

BIO-DECONTAMINATION DIVISION

Life Sciences

Bioquell's Life Sciences business continues to be the largest contributor to revenues and profits within the Group's Bio-decontamination division. Sales of bio-decontamination equipment and services into the Life Sciences sector increased both in the UK and overseas. For example, in June 2011 we announced the award of a US $1 million contract for the supply of bio-decontamination equipment to be used in the Chinese Ministry of Agriculture's research laboratories. This contract award coincided with the approval by the Chinese authorities of the establishment of Bioquell China - with its first office now set up in Shenzhen.

Underlying demand for Bioquell's sophisticated, patent-protected and highly effective bio-decontamination technology continues to grow in the Life Sciences sector driven by a number of factors. Bio-pharmaceutical and biotechnology organisations continue to require sterile equipment and facilities for research and/or production of new biologically-derived drugs. Biological containment laboratories also represent an important market for Bioquell's products and services. There is more pressure from regulators on organisations to stop using formaldehyde, a confirmed human carcinogen, to decontaminate facilities. Further, various regulatory bodies continue to focus on the risks to patients and products associated with biological contamination. This international regulatory focus helps to encourage adoption of Bioquell's technology worldwide.

We are also seeing increasing demand for our technology in the in-house and outsourced hospital pharmacy market as a result of the requirement for the preparation of intravenous drugs to be carried out in sterile conditions. Moreover, it is clear that 'personalised medicine' - including gene and stem cell therapy - will require sterile facilities close to the patient for the preparation of these next-generation therapeutic products.

Given the broad range of opportunities for growth which we see in the Life Sciences sector, we are continuing to invest in expanding our international sales networks as well as developing new products, many of which will incorporate patented technology and/or are being designed to generate consumable-based revenues. Some of these new products will reach the market next year and we anticipate they will be an important driver of future revenue growth in our Life Sciences business.

Healthcare

Eradication of pathogens causing hospital acquired infection

The problems for hospitals relating to hospital acquired infection (HAI) continue to increase. In particular multidrug-resistant Gram-negative bacteria and the new strain of Clostridium difficile are creating more issues for healthcare providers worldwide. It is notable that the Gram-negative bacteria often cause major clinical difficulties in intensive care units (ICUs) - particularly in the multi-bed units found in the United Kingdom and some developing economies. This can cause significant problems for large, acute care hospitals as properly functioning ICUs are essential for the provision of modern, complex surgery.

In the first half of the year we saw growing activity levels for bio-decontamination services in the UK healthcare market, although growth in the US healthcare market has been slower so far this year. In addition, we have begun to see interest in our bio-decontamination technology from hospitals in some developing economies. We are intending to grow our activities in these emerging healthcare markets where very often the scale and severity of the HAI-related problems are materially worse than those seen in North America or Europe.

Wound-care

The regulatory review of our wound care product, BioxyQuell, has been completed and an authorisation to market the product has been recommended by the relevant regulatory body. We anticipate final certification will be issued shortly.

Separately we understand from our external statistical adviser that the results from our current Randomised Controlled Trial (RCT) are unlikely to reach statistical significance even if the RCT were to be carried through to its previously planned completion. Accordingly we have decided to stop the RCT so that we can review the scientific data which have been generated so far by the trial. This will allow us to understand better the performance characteristics of the BioxyQuell technology with a view to optimising its application.

We continue to work on developing plans to commercialise this wound-care technology and, post final confirmation of European regulatory approval, we intend to start to use the technology in clinics close to our Andover headquarters in the UK to generate further information on its performance. We have also started work relating to obtaining US regulatory approval for the use of this equipment in the US healthcare market.

Defence

Decontamination of biological and chemical warfare agents

We are involved in further preliminary testing and research work which is being undertaken on the decontamination equipment we developed for the United States Department of Defense (DOD) in relation to the Joint Services Sensitive Equipment Decontamination (JSSED) system. We are also planning to submit proposals later this year in relation to the DOD's revised requirements for the decontamination of biological and chemical warfare agents pursuant to the DOD Joint Program Interior Decontamination (JPID) programme. The draft JPID requirements are similar in many respects to the JSSED system which already incorporates our technology. We continue to believe that there are good opportunities for Bioquell's bio-decontamination technology in the US defense market, although at the current time it is not possible to estimate the timing or quantum of any associated revenues.

CBRN filtration and environmental control

We made good progress in the first half in relation to the development of our chemical, biological, radiological and nuclear (CBRN) filtration and environmental control business, including the announcement in June of a £4 million CBRN filtration system contract for a Malaysian defence group. We have also developed a new product for this market which we are promoting into the USA and other international military vehicle markets. We believe that we are well positioned to win further contracts in this market in the short to medium term.

TRAC DIVISION

Testing, Regulatory and Compliance

Our TRaC division recorded a solid performance in the first half and continues to see opportunities for further organic growth in the United Kingdom. Earlier this year the business launched its new consultancy business - Early Stage Qualification (ESQ) - which, by drawing upon TRaC's existing and large team of highly experienced technical experts, provides advice to clients on how best to design their products taking into account regulatory and/or client-mandated standards. New European regulations also contribute to the growth of TRaC's electromagnetic compatibility (EMC) testing business with, for example, the requirement for Information Technology Equipment manufacturers selling equipment into the EU to test for emissions above 1 GHz from 1 October 2011.

The investment in TRaC's new North West facilities has been completed and good progress has been made on the development of TRaC's new Southern test facility. The majority of the Group's capital expenditure in the first half of £2.0 million (2010: £1.7 million) related to investment in TRaC - and in particular investment in these two new facilities.

OUTLOOK AND PROSPECTS

In our Bio-decontamination division we expect further growth in all three of our core sectors - Life Sciences, Healthcare and Defence - principally from our international client-base, especially in developing countries. In the UK our TRaC division also continues to perform strongly.

At the same time our primary business model continues to migrate from capital equipment sales to service- or consumable-based revenues; and this should develop further next year as a number of our new products reach the market.

The Group benefits from a strong balance sheet which enables us to continue to invest with confidence in the profitable development and expansion of both our Bio-decontamination and TRaC divisions.

Nigel Keen

Chairman

Bioquell PLC

31 August, 2011