Gropep exceeds profit forecast

GroPep (ASX: GRO) has exceeded its half-year profit forecast by AUD$0.5 million and is on track to post a $3 million profit at the end of the 2004-2005 financial year.

The profit reflects a 34 per cent increase in sales revenue for its cell culture products to $6.1 million and a 23 per cent increase in total revenue to $8 million, and was helped by the receipt of a $3.4 million R&D Start grant from the Federal government in support of the company's psoriasis project, and the recent restructuring of its CSL/JRH agreement due to the sale of JRH by CSL, which has seen CSL commit to paying $1 million per annum to GroPep for the next six years.

CEO Bob Finder said the results demonstrated the company's significant progress over the last two years. Last year the full year profit was $3 million, marking a return to profitability after its 2002 acquisition of Biotech Australia.

"We continue to see excellent growth in sales of our Cell Culture Products," Finder said.

"The biopharmaceuticals that utilise our Cell Culture Products are experiencing strong growth and as a result we have increased our sales revenue forecast for 2004-05 to growth of 40-45 per cent."

The company also reported a positive operating cash flow of $0.8 million, with a net cash outflow of $0.7 million, leaving the company with just over $10 million in the bank. The expenditure included $2 million on upgrades to the company's Thebarton manufacturing facility.

"Significant progress has been made on the facility upgrade project during the last six months and we expect the first stage of the project to be completed during the current half year period," Finder said.

"Cash reserves remain above $10 million and with the majority of the facility upgrade expenditure having been incurred, we expect operating and net cash flow to be positive in the second half."

GroPep still expects that its R&D expenditure this financial year will be within 15-20 per cent of total revenue.

Shares in GroPep were up 7 per cent to $1.30.