Trading Update
23 August 2007 – ClinPhone plc, a leading specialist supplier of technology solutions to the clinical trials industry, today provides a further update on trading following the announcement issued on 31 July. The Company reported at that time that its business was being adversely affected on three fronts: operational difficulties which included telephone outages, an increase in the sale of EDC software service rather than licence and the weak US$.
The Company experienced operational difficulties in June and July which impacted its Randomisation and Trial Supply Management services to some customers. The causes of those issues have been rectified and should not reoccur but the quality of service provided to some customers during that period was affected.
There was further evidence in June and July that customers were currently choosing to buy ClinPhone EDC products as a software service rather than licence the products. Revenue for these services will be recognised over the duration of the service provision.
Management has revised internal forecasts to allow for the variation in the USD:GBP exchange rate. Using an estimated average rate for the full year of $2.02 to the £1, earnings before interest and tax are reduced by approximately £978k.
The consequences of these issues during June and July 2007 and on the financial year to date are:
• An exceptionally high level of cancellations of contracted orders in the order book over June and July amounting to 7.7% of the opening order book for the quarter of £52.4m, as announced in the interim management statement on 13 June 2007. As previously stated the issues are resolved and management anticipate cancellations to return to historic levels.
• The total order book (including Business Authorisations) grew to £50.4m as at 31 July 2007 compared to the total order book as at 31 July 2006 of £49.2m. At constant exchange rates this represents a growth of 8.9% year on year. As at 31 July 2007 the Company had 536 live trials compared to 441 at the same time last year and 527 at the end of the last quarter 31 May 2007.
• The revenue expectations for EDC during the current financial year have been significantly reduced. In addition, further investment is being made in service provision in the business to ensure that the capacity exists to meet the demand in this growing market. Management now believes that it is unlikely that EDC will be earnings enhancing in its first year post acquisition; however, it continues to believe that the strategic imperative and growth opportunity that this market represents when this technology is combined with other ClinPhone technologies is a significant and important one to the future of ClinPhone.
• Management are addressing the issues presented by these factors by restructuring parts of the business, continuing the retraining of its sales teams and putting in place the necessary measures to improve the efficiency of operations and quality systems. These plans are designed to return the company to historic levels of profitability while maintaining the necessary capacity and development activity to deliver the strategic plan.
• As a result of the above and of the impact of currency, ClinPhone now estimates that the revenue for the year ending 28th February 2008 will be approximately £10m lower than initial management expectations and that gross profit margins will be approximately 5% lower than initial management expectations.
Steve Kent, Chief Executive of ClinPhone, said:
"We very much regret the damage done to shareholder value by the various difficulties faced by the Company over the past three months, some of which have been caused by issues outside our control but others have arisen as a result of our own internal issues. Management has taken and will continue to take urgent action to correct these issues and put the Company back on track. Despite the recent challenges, we continue to believe that the market for technology in clinical trials is a highly attractive opportunity and we remain confident in ClinPhone's potential to deliver future profitable growth for shareholders."
Enquiries:-
ClinPhone plc
Steve Kent – Chief Executive Officer
Scott Brown – Chief Financial Officer
Phone: 0115 955 7333
Fax: 0115 840 6302
Financial Dynamics
David Yates
Ben Brewerton
Phone: 0207 831 3113
