TIDMNCYT
RNS Number : 9027N
Novacyt S.A.
28 September 2023
Novacyt S.A.
("Novacyt", the "Company" or the "Group")
2023 Interim Results
Company positioned for long-term sustainable growth following
the acquisition of Yourgene Health
Paris, France and Eastleigh, UK - 28 September 2023 - Novacyt
(EURONEXT GROWTH: ALNOV; AIM: NCYT), an international specialist in
clinical diagnostics, announces its unaudited interim results for
the six months ended 30 June 2023.
Operational highlights (including post-period end)
-- Completed the strategic acquisition of Yourgene Health plc
("Yourgene"), significantly enhancing Novacyt's global diagnostics
business, adding scale and diversification to accelerate long-term
growth .
-- Successfully developed nine multiplex RUO (research use only)
assays in key infectious disease areas.
-- IVD certification process: initiated verification and
validation activities for two of the Company's developed multiplex
products, with the aim of certifying them as in vitro diagnostics
(IVD) under the UKCA mark, expected to complete during Q4 2023.
-- Instrument sales recovery: Following the market saturation
during the COVID-19 pandemic, the Group's instrument sales are
returning to normal levels with Q2 2023 sales up by 66% vs Q1
2023.
-- Recently launched Co-prep(TM) extraction system for research
use and CE marked both q16 and q32 instruments.
-- On track to complete IVDR clinical trial for winter
respiratory panel, genesig(TM) Real-time PCR SARS-CoV-2 Winterplex,
in early 2024.
-- Exclusive development agreement with Eluceda Ltd to develop
novel biosensor technology in the fields of human and animal in
vitro diagnostics, life science research and animal speciation.
Financial highlights
-- Group revenue for H1 2023 of GBP3.3m of which GBP0.5m relates
to COVID-19 (H1 2022: GBP16.5m of which GBP13.0m was related to
COVID-19).
o Revenue for the non-COVID-19 portfolio totalled GBP2.8m
representing 85% of total revenue (H1 2022: GBP3.5m). As previously
signalled, H1 2022 is a high comparator particularly in
instrumentation, where sales were linked to COVID-19.
o Non-COVID-19 revenue continues to build with Q2 2023 showing
3% growth over Q1 2023 and 10% growth vs Q4 2022.
-- Group gross margin increased to 50% (GBP1.7m) in H1 2023 (H1
2022: 24% (GBP4.0m)), due to lower stock write offs, but is still
impacted by further stock provisions as a result of lower than
anticipated COVID-19 sales.
-- Group operating costs fell by GBP4.1m to GBP7.0m in H1 2023
compared with GBP11.1m in H1 2022.
-- Group EBITDA loss before exceptionals reduced to GBP5.4m in H1 2023 (H1 2022: GBP7.1m loss).
-- Loss after tax reduced to GBP8.3m in H1 2023 (H1 2022: GBP8.7m).
-- Cash position at 30 June 2023 was GBP81.7m (FY 2022:
GBP87.0m) and the Company remains debt free.
-- Acquired the entire share capital of Yourgene on 8 September
2023 for GBP16.7m, settled in cash.
James McCarthy, Acting Group CEO of Novacyt, commented : "The
Company remains focused on building on the strength of its core
business to deliver long-term sustainable growth and create a
leading global clinical diagnostics company. The acquisition of
Yourgene was an important strategic milestone adding scale and
diversifying our product portfolio, to create a stronger global
diagnostics business and will be a key driver to accelerate
sustainable growth of the business going forwards."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
Contacts
Novacyt SA +44 (0)23 8074 8830
James Wakefield, Non-Executive
Chairman
James McCarthy, Acting Chief Executive
Officer
SP Angel Corporate Finance LLP (Nominated
Adviser and Broker) +44 (0)20 3470 0470
Matthew Johnson / Charlie Bouverat (Corporate
Finance)
Vadim Alexandre / Rob Rees (Corporate Broking)
Numis (Joint Broker) +44 (0)20 7260 1000
Freddie Barnfield / Duncan Monteith / Jack
McLaren
Allegra Finance (French Listing Sponsor) +33 (1) 42 22 10 10
Rémi Durgetto / Yannick Petit r.durgetto@allegrafinance.com
/ y.petit@allegrafinance.com
Walbrook PR (Financial PR & IR) +44 (0)20 7933 8780
Stephanie Cuthbert / Anna Dunphy novacyt@walbrookpr.com
/ Phillip Marriage
About Novacyt Group
Novacyt is an international diagnostics business delivering a
broad portfolio of in vitro and molecular diagnostic tests for a
wide range of infectious diseases, enabling faster, more accurate,
accessible testing to improve healthcare outcomes. The Company
provides customers with a seamless sample-to-result workflow using
its integrated and scalable instrumentation/solutions. The Company
specialises in the design, manufacture, and supply of real-time PCR
kits, reagents and a full range of laboratory and qPCR
instrumentation for molecular biology research and clinical use.
Novacyt offers one of the world's most varied and comprehensive
range of qPCR assays, covering human, veterinary, biodefence,
environmental, agriculture and food testing.
The acquisition of Yourgene in September 2023 added a
complementary international genomics technology and services
business, focussed on delivering accurate molecular diagnostic and
screening solutions, across reproductive health and precision
medicine. Yourgene's portfolio of in vitro diagnostic products
includes non-invasive prenatal tests (NIPT) for Down's Syndrome and
other genetic disorders, Cystic Fibrosis screening tests, invasive
rapid aneuploidy tests and DPYD genotyping assays. Yourgene also
works in partnership with global leaders in DNA technology to allow
its Ranger(R) Technology to deliver dynamic target enrichment.
Novacyt is headquartered in Vélizy in France with offices in the
UK in Stokesley, Eastleigh and Manchester. The Company also has
offices in Taipei (divestment pending), Singapore, the US and
Canada and is listed on the London Stock Exchange's AIM market
("NCYT") and on the Paris Stock Exchange Euronext Growth
("ALNOV").
For more information, please refer to the website:
www.novacyt.com
Chief Executive's review
During the first six months of 2023 we have continued to make
good progress expanding our instrumentation and RUO product
portfolio and enhancing our workflow to diversify the business away
from COVID-19. The recent acquisition of Yourgene was a significant
strategic milestone that has significantly enhanced our global
diagnostics business. This acquisition not only adds scale but also
diversifies our portfolio, reinforcing our position for long-term
growth.
Portfolio development
The increase in the incidence of infectious diseases is driving
a growing global demand for multiplex diagnostic products that can
rapidly and simultaneously detect multiple pathogens in a single
test. During the period, the Company s uccessfully developed nine
new multiplex RUO assays in key infectious disease areas of
respiratory virus, atypical pneumonia, viral and bacterial
meningitis, eye infection, joint infection, gastrointestinal
viruses and insect-borne viruses.
This expanded portfolio strengthens our diagnostic capabilities,
particularly in the gastrointestinal, respiratory, and meningitis
markets, as well as other high-growth disease areas. These assays
have been specifically designed to seamlessly integrate with our
existing instrumentation, including the recently launched
Co-prep(TM) extraction system and our q16 and q32 instruments. The
Company expects these products to begin seeing commercial traction
in Q4 2023.
As previously announced, the Company is prioritising UK
Conformity Assessed (UKCA) marking for its clinical tests, which is
replacing the CE mark for all in vitro diagnostic (IVD) products
sold in the UK. Under UKCA, IVD manufacturers can continue to
self-certify their products, which typically takes six to nine
months compared to the 18-24 months to achieve a CE mark under the
new European In Vitro Diagnostic Regulation (IVDR). We have
initiated verification and validation activities for two of our
developed multiplex products, with the aim of certifying them as in
vitro diagnostics (IVD) under the UKCA mark:
a. genesig(TM)PLEX Respiratory Virus Real-Time PCR Multiplex Kit
II, which complements our existing respiratory portfolio, such as
the SARS-CoV-2 Winterplex, and meets the growing demand for
decentralised diagnostic solutions within the UK's expanding
network of Acute Respiratory Infection Hubs and Community
Diagnostic Centres. The validation process for this product is
expected to conclude in Q4 2023.
b. genesig(TM)PLEX Insect-Borne Real-Time PCR Multiplex Kit: We
have experienced strong customer demand for our existing RUO
product, which targets Dengue, Chikungunya, and Zika viruses. The
rise in climate change has led to an increase in the incidence of
insect-borne infections and as a result there is a growing market
demand for an expanded version of this product, which can detect
multiple diseases. Our new multiplex product has additional target
detection profiles, including West Nile, Tick-Borne Encephalitis,
and Yellow Fever viruses. Validation for this product is also
expected to be completed in Q4 2023.
We expect both tests to be available for clinical use in the UK
during the first half of 2024.
Novacyt is also progressing the clinical trial for its winter
respiratory panel, genesig(TM) Real-time PCR SARS-CoV-2 Winterplex,
towards IVDR submission in early 2024.
Commercial progress
During H1 the Company has been focused on reestablishing its RUO
and instrumentation businesses to drive growth in the non-COVID
portfolio. Although overall growth has been modest, we have started
to gain traction in building customer solutions in specific areas,
which we believe will drive future growth. Successes in this area
include our continuing development of aqua testing to enable more
efficient management of fish stocks for both North America and more
recently the UK, livestock testing in Latin America and progress
with Dengue tenders for emerging markets.
We are currently live with a Winterplex promotional campaign
with some promising early opportunities for product validation UK
clinical settings.
Instrumentation & workflow
We have seen good growth in instrument sales, with Q2 2023
increasing 66% vs Q1 2023 as the market returns to normal following
the saturation that was seen during the COVID-19 pandemic.
During the period we launched our new Co-prep (TM) extraction
system for RUO, which is already gaining traction with a number of
customers. This is now available alongside our Co-prep(TM)
automated liquid handling system as part of our integrated
sample-to-result molecular workflow solution, which provides an
end-to-end, fast scalable solution capable of processing over 1,000
tests per day.
Business Development
Acquisition of Yourgene
On 8 September 2023, we completed the acquisition of Yourgene,
creating a stronger global diagnostics company with an expanded
geographic commercial footprint, a broader product portfolio and
deeper expertise. Yourgene brings a complementary international
genomics technology and services business, focussed on delivering
accurate molecular diagnostic and screening solutions, across
reproductive health and precision medicine. Its portfolio of in
vitro diagnostic products includes non-invasive prenatal tests
(NIPT) for Down's Syndrome and other genetic disorders, Cystic
Fibrosis screening tests, invasive rapid aneuploidy tests and DPYD
test to predict patients' toxicity reactions to some
chemotherapies. Yourgene's Ranger(R) Technology offers next
generation size selection with a range of sample preparation
platforms for dynamic target enrichment and can be utilised to
improve workflows and performance in multiple applications
including NIPT, oncology, infectious disease testing and gene
synthesis.
As part of the acquisition, Yourgene's former Chair, Dr John
Brown CBE, and Lyn Rees, Yourgene's former CEO, will join the
Novacyt Board, as non-executive and executive director
respectively, first as non-voting members, then as full members,
subject to shareholder ratification at the next AGM.
Partnerships
In January 2023, Novacyt entered into an exclusive development
agreement with Eluceda Ltd, a specialist developer of
electrochemical sensors, to develop novel biosensor technology in
the fields of human and animal in vitro diagnostics, life science
research and animal speciation. Development of two products has
started and the first product is expected to launch early in
2024.
Current trading and outlook
Yourgene's financial year runs from 1 April to 31 March, which
is different to the calendar year approach followed by Novacyt. It
is our intention to align the accounting periods for the current
fiscal year, which would result in a nine-month trading period for
Yourgene consolidated with a full 12 months of Novacyt.
Unaudited revenue for Yourgene for the period 1 January to 30
June 2023 totalled GBP9.1m (including GBP0.5m of COVID-19 sales),
which would give the Group a proforma revenue for H1 of GBP12.4m
(including GBP1.0m of COVID-19 sales).
Revenue guidance for Novacyt for the full year is in the range
of GBP10m to GBP13m (including GBP0.6m of COVID-19 sales), and
covers 12 months trading for Novacyt and approximately four months
trading for Yourgene post-acquisition. At this early stage we need
to do further work on the combined businesses to determine
financial/EBITDA expectations for FY 2023.
The disposal of the Taiwan laboratory announced by Yourgene on
13 June 2023 is still progressing subject to regulatory approval
from the Taiwanese Government and is now expected to complete by
the end of the financial year.
The Company remains focused on building on the strength of its
core business to deliver long-term sustainable growth and create a
leading global clinical diagnostics company focused on unmet needs
in infectious diseases. Over the next six months the Company will
be focussed on the integration of Yourgene and will be evaluating
the best ways to leverage our combined capabilities to accelerate
growth and drive efficiencies and synergies where appropriate. We
intend to provide an update to the market on the integration
progress at the next trading update in January 2024.
James McCarthy
Acting Chief Executive Officer
28 September 2023
FINANCIAL REVIEW
Overview
Novacyt's H1 2023 performance delivered sales of GBP3.3m, an
EBITDA loss of GBP5.4m and a loss after tax of GBP8.3m. Novacyt
continued to execute on right sizing its cost base by reducing its
opex spend by over GBP1.0m compared with H2 2022, and will continue
to make cost savings where necessary.
Cash at 30 June 2023 was GBP81.7m, providing the Group with a
solid foundation on which to build and execute its future strategy.
This allowed the Group to acquire Yourgene on 8 September 2023 for
GBP16.7m, settled in full in cash.
Income statement
Continuing operations
* H1 2023 H1 2022
GBP'000 GBP'000
Revenue 3,339 16,508
Gross profit 1,665 4,010
--------- ----------
Gross profit % 50% 24%
--------- ----------
OPEX (7,040) (11,148)
--------- ----------
EBITDA (5,375) (7,138)
--------- ----------
EBITDA % n.m. n.m.
--------- ----------
Recurring operating loss** (6,534) (8,179)
--------- ----------
Operating loss (8,396) (8,712)
--------- ----------
Other financial income and expenses 83 1,628
--------- ----------
Income tax 174 2,041
--------- ----------
Loss after tax from continuing operations (8,139) (5,043)
--------- ----------
Loss from discontinued operations (209) (3,656)
--------- ----------
Loss after tax attributable to the
owners (8,348) (8,699)
--------- ----------
* Following the 28 April 2022 announcement where Novacyt
notified its intention to close Microgen Bioproducts and Lab21
Healthcare, the net results of the Lab21 Products segment have been
reported on a separate line 'Loss from discontinued operations' in
accordance with IFRS 5, "Non-current Assets Held for Sale and
Discontinued Operations".
** H1 2023 recurring operating loss is stated before GBP1.9m of
non-recurring charges as follows:
1. GBP0.8m acquisition related expenses.
2. GBP0.6m costs in relation to the ongoing DHSC contract dispute.
3. GBP0.5m restructuring expenses.
Revenue
Revenue for H1 2023 fell to GBP3.3m compared with GBP16.5m in H1
2022, predominantly driven by reduced demand for COVID-19 testing
as we emerge from the pandemic. Primer Design delivered sales
totalling GBP2.8m, whilst IT-IS International delivered sales of
GBP0.5m for H1 2023.
Gross profit
The business delivered a gross profit of GBP1.7m (50%), compared
with GBP4.0m (24%) in H1 2022. The margin has improved
significantly due to lower stock write offs but is still impacted
by further stock provisions as a result of lower than anticipated
COVID-19 sales.
Operating expenditure
Group operating costs fell by GBP4.1m to GBP7.0m in H1 2023
compared with GBP11.1m in H1 2022. Savings are mainly due to lower
staff costs, as headcount for continuing operations fell from circa
210 in June 2022 to approximately 120 in June 2023 as a result of
the Group-wide restructuring programme. In addition, non-labour
savings have been made in commercial insurance, advertising and
marketing, recruitment and facilities.
The business continued to invest heavily in research and
development, spending over GBP1.2m in H1 2023, around 17% of opex
costs, to support bringing a number of new products to the
market.
EBITDA
The Group reported an EBITDA loss of GBP5.4m for H1 2023
compared with a loss of GBP7.1m in H1 2022. The loss has decreased
by GBP1.8m in the first half of 2023 driven by a reduced gross
profit contribution of GBP2.3m as a result of lower sales, offset
by a GBP4.1m fall in operating expenditure.
Operating loss
The Group reduced its operating loss to GBP8.4m compared with a
H1 2022 loss of GBP8.7m. Year-on-year, depreciation and
amortisation charges have increased by GBP0.2m to GBP1.2m due to
accelerating depreciation on a number of fixed assets.
Other operating expenses have increased from GBP0.5m to GBP1.9m
in H1 2023. The main items making up the H1 2023 charge are i)
GBP0.8m acquisition related expenses, ii) GBP0.6m costs in relation
to the ongoing DHSC contract dispute and iii) GBP0.5m restructuring
expenses as we continue to lower our cost base.
Loss after tax from continuing operations
The Group reported a loss after tax from continuing operations
of GBP8.1m, compared with a loss of GBP5.0m in H1 2022. Other
financial income and expenses netted to a GBP0.1m income compared
with a GBP1.6m income in H1 2022. The two key items making up the
balance are i) a GBP1.2m net financial foreign exchange loss,
mainly resulting from revaluations of bank and intercompany
accounts held in foreign currencies (H1 2022: GBP1.4m net gain) and
ii) offset by GBP1.5m interest received on deposits held in bank
accounts (H1 2022: GBP0.1m), reflecting rising interest rates. The
GBP0.2m taxation credit is made up of the movement in the current
and deferred tax position.
Loss from discontinued operations
In accordance with IFRS 5, the net result of the Lab21 Products
business has been reported on a separate line "Loss from
discontinued operations" in the consolidated income statements for
H1 2023 and H1 2022.
Lab21 Products reported a loss after tax of GBP0.2m in H1 2023
versus a loss of GBP3.7m in H1 2022. The H1 2023 result relates to
clearing balance sheet items and interest on intercompany
balances.
The H1 2022 loss includes closure costs totalling circa GBP1.8m
made up of i) a GBP1.0m impairment charge on right-of-use assets
(Camberley facility lease), ii) GBP0.6m impairment charge on
remaining property, plant and equipment and iii) GBP0.2m redundancy
costs. These costs are not repeated in 2023 as the operations of
the business were closed during 2022.
Earnings per share
The H1 2023 loss per share was GBP0.12 (H1 2022: GBP0.12
loss).
Statement of financial position
Jun-23 Dec-22 Jun-23 Dec-22
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- ------------------------------ --------
Goodwill 6,482 6,646 Share capital and premium 54,601 54,633
Retained earnings and
Right-of-use assets 361 521 reserves 52,709 60,583
Property, plant and
equipment 2,242 2,751 Total equity 107,310 115,216
Deferred tax assets 527 624
Other non-current
assets 2,679 3,121 Deferred tax liabilities 893 1,041
Total non-current
assets 12,291 13,663 Lease liabilities long-term 219 263
Other provisions and
long-term liabilities 175 145
Inventories 2,459 3,027 Total non-current liabilities 1,287 1,449
Trade and other receivables 33,272 33,662
Tax receivables 608 1,149 Lease liabilities short-term 170 609
Other current assets 1,784 2,427 Trade and other liabilities 2,959 2,787
Other provisions and
Cash and cash equivalents 81,734 86,973 short-term liabilities 20,422 20,840
Total current assets 119,857 127,238 Total current liabilities 23,551 24,236
TOTAL ASSETS 132,148 140,901 TOTAL EQUITY AND LIABILITIES 132,148 140,901
----------------------------- -------- ------------------------------ --------
Non-current assets
Property, plant and equipment has fallen by GBP0.6m from GBP2.8m
at 31 December 2022 to GBP2.2m at 30 June 2023, driven by two main
factors, i) GBP0.8m depreciation costs, and ii) offset by capital
purchases of GBP0.2m.
Other non-current assets have fallen by GBP0.4m to GBP2.7m at 30
June 2023, driven by the amortisation of intangible assets.
Current assets
Inventories and work in progress has fallen from GBP3.0m at 31
December 2022 to GBP2.5m at 30 June 2023, as stock built up during
the COVID-19 pandemic is wound down to reflect a more normalised
expected run-rate.
Trade and other receivables has fallen by GBP0.4m to GBP33.3m at
30 June 2023 in line with a decline in sales. The trade receivables
balance includes a GBP24.0m unpaid DHSC invoice raised in December
2020, in respect of products delivered during 2020 that remains
unpaid at the date of publishing the accounts. Recovery of the
invoice is dependent on the outcome of the contract dispute. Also
included in trade and other receivables is a GBP8.2m VAT receivable
balance (December 2022: GBP8.3m), that mainly relates to UK VAT
paid on sales invoices in dispute with the DHSC. As these sales
have not been recognised in accordance with IFRS 15, the revenue,
trade receivable and VAT element of the transactions have been
reversed, resulting in a VAT debtor balance.
Tax receivables has fallen by GBP0.5m to GBP0.6m at 30 June
2023, predominantly due to the Group receiving cash from HMRC
covering the carry back of tax losses and research and development
tax claims. The current balance relates to 2021 losses that can be
carried back for relief against 2020 taxable profits totalling
GBP0.1m and research and development tax claim accruals covering
2022 and 2023 totalling GBP0.5m.
Other current assets have fallen by GBP0.6m to GBP1.8m at 30
June 2023, due to a GBP0.5m fall in prepayments, predominantly
driven by unwinding the annual commercial insurance charge, and a
GBP0.1m reduction in short-term deposits driven by the repayment of
a rent deposit in connection with settling the Watchmoor facility
lease. Prepayments at 30 June 2023 include Group commercial
insurance, rent, rates, prepaid support costs and stock that had
been paid for but not delivered at the reporting date.
Current liabilities
Short-term provisions fell slightly from GBP20.3m to GBP20.0m at
30 June 2023, as a result of unwinding the dilapidations provision
associated with the now closed Watchmoor facility. A GBP19.8m
product warranty provision booked in 2020 to cover Management's
view of the maximum cost of replacing products in relation to the
ongoing commercial dispute with the DHSC remains unchanged at 30
June 2023.
Trade and other liabilities increased from GBP2.8m to GBP3.0m at
30 June 2023, largely due to the impact of accruing acquisition
costs in late June.
Non-current liabilities
Non-current liabilities fell by GBP0.1m to GBP1.3m at 30 June
2023, mainly due to a reduction in the deferred tax liability.
Cash flow
Cash held at 30 June 2023 totalled GBP81.7m compared with
GBP87.0m at 31 December 2022. Net cash used in operating activities
was GBP5.7m for H1 2023, made up of a working capital outflow of
GBP0.3m and an EBITDA loss of GBP5.4m, compared with a cash outflow
of GBP1.7m in H1 2022.
Net cash from investing activities has swung from a GBP0.2m
outflow for H1 2022 to a GBP1.0m inflow in H1 2023, with the Group
benefiting from continued interest rate rises, generating GBP1.1m
interest from its cash balances. Capital expenditure remained
broadly flat year-on-year with H1 2023 totalling GBP0.2m compared
with GBP0.3m in H1 2022.
Net cash used in financing activities in H1 2023 totalled
GBP0.5m compared with GBP0.3m in H1 2022, with the main cash
outflow continuing to be lease payments.
The Group remains debt free at 30 June 2023.
Consolidated income statement as at 30 June 2023
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 Notes 2023 2022
Continuing Operations
Revenue 4 3,339 16,508
Cost of sales 6 -1,674 -12,498
=========================================================== ============ ============
Gross profit 1,665 4,010
Sales, marketing and distribution expenses -1,506 -2,887
Research and development expenses -1,239 -3,271
General and administrative expenses -5,579 -6,211
Governmental subsidies 125 180
Operating loss before exceptional items -6,534 -8,179
=========================================================== ============ ============
Other operating income 7 - 2
Other operating expenses 7 -1,862 -535
Operating loss after exceptional items -8,396 -8,712
=========================================================== ============ ============
Financial income 8 1,994 2,351
Financial expense 8 -1,911 -723
Loss before tax -8,313 -7,084
=========================================================== ============ ============
Tax income 9 174 2,041
Loss after tax from continuing operations -8,139 -5,043
----------------------------------------------------------- ------------ ============
Loss from discontinued operations 16 -209 -3,656
Loss after tax attributable to owners of the Company -8,348 -8,699
=========================================================== ============ ============
Loss per share (GBP) 10 -0.12 -0.12
Diluted loss per share (GBP) 10 -0.12 -0.12
Loss per share from continuing operations (GBP) 10 -0.12 -0.07
Diluted loss per share from continuing operations (GBP) 10 -0.12 -0.07
Loss per share from discontinued operations (GBP) 10 -0.00 -0.05
Diluted loss per share from discontinued operations (GBP) 10 -0.00 -0.05
Consolidated statement of comprehensive income as at 30 June
2023
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Loss for the period recognised in the income statement -8,348 -8,699
================================================================== ============ ============
Items that may be reclassified subsequently to profit or loss:
Translation reserves 474 -434
Total comprehensive loss -7,874 -9,133
================================================================== ============ ============
Comprehensive loss attributable to:
Owners of the Company (*) -7,874 -9,133
(*) There are no non-controlling interests.
Statement of financial position as at 30 June 2023
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in GBP'000 Notes 2023 2022
Goodwill 6,482 6,646
Other intangible assets 2,679 3,121
Property, plant and equipment 2,242 2,751
Right-of-use assets 361 521
Deferred tax assets 527 624
===================================== ============ =============
Total non-current assets 12,291 13,663
Inventories and work in progress 11 2,459 3,027
Trade and other receivables 12 33,272 33,662
Tax receivables 608 1,149
Prepayments and short-term deposits 1,775 2,418
Investments short-term 9 9
Cash and cash equivalents 81,734 86,973
===================================== ============ =============
Total current assets 119,857 127,238
Total assets 132,148 140,901
===================================== ============ =============
Lease liabilities short-term 170 609
Provisions short-term 13 20,015 20,300
Trade and other liabilities 14 2,959 2,787
Other current liabilities 407 540
===================================== ============ =============
Total current liabilities 23,551 24,236
Net current assets 96,306 103,002
===================================== ============ =============
Lease liabilities long-term 219 263
Provisions long-term 13 98 95
Deferred tax liabilities 893 1,041
Other long-term liabilities 77 50
===================================== ============
Total non-current liabilities 1,287 1,449
Total liabilities 24,838 25,685
===================================== ============ =============
Net assets 107,310 115,216
===================================== ============ =============
Statement of financial position as at 30 June 2023
(continued)
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in GBP'000 Notes 2023 2022
Share capital 15 4,053 4,053
Share premium account 50,671 50,671
Own shares -123 -91
Other reserves -1,543 -2,017
Equity reserves 1,155 1,155
Retained earnings 53,097 61,445
====================================== ============ =============
Total equity - owners of the Company 107,310 115,216
Total equity 107,310 115,216
====================================== ============ =============
Statement of changes in equity as at 30 June 2023
Amounts in
GBP'000 Other Group reserves
------------------------------------------------
Acquisition
of the
shares of OCI on
Share Share Own Equity Primer Translation retirement Retained Total
capital premium shares reserves Design reserve benefits Total earnings equity
======== ======== ======= ========= ============ ============ =========== ======= ========== ========
Balance at 1
January 2022 4,053 50,671 -78 1,155 -2,407 1,241 -8 -1,174 87,188 141,815
=============== ======== ======== ======= ========= ============ ============ =========== ======= ========== ========
Translation
differences - - - - - -843 - -843 - -843
Loss for the
period - - - - - - - - -25,730 -25,730
Total
comprehensive
loss for the
period - - - - - -843 - -843 -25,730 -26,573
Own shares
acquired/sold
in the period - - -13 - - - - - - -13
Other - - - - - - - - -13 -13
Balance at 31
December 2022 4,053 50,671 -91 1,155 -2,407 398 -8 -2,017 61,445 115,216
=============== ======== ======== ======= ========= ============ ============ =========== ======= ========== ========
Translation
differences - - - - - 474 - 474 - 474
Loss for the
period - - - - - - - - -8,348 -8,348
Total
comprehensive
loss for the
period - - - - - 474 - 474 -8,348 -7,874
Own shares
acquired/sold
in the period - - -32 - - - - - - -32
Balance at 30
June 2023 4,053 50,671 -123 1,155 -2,407 872 -8 -1,543 53,097 107,310
=============== ======== ======== ======= ========= ============ ============ =========== ======= ========== ========
Statement of cash flows as at 30 June 2023
Amounts in GBP'000 Notes (Unaudited) (Unaudited)
Six month Six month
30 June 30 June
2023 2022
Net cash used in operating activities 17 -5,691 -1,662
============================================== ============ ============
Operating cash flows from discontinued
operations -1,287 -1,589
Operating cash flows from continuing
operations -4,404 -73
Investing activities
Proceeds from sale of property, plant 13 -
and equipment
Purchases of patents and trademarks -35 -119
Purchases of property, plant and equipment -138 -182
Variation of deposits 120 -36
Acquisition of subsidiaries net of cash
acquired -2 16
Interest received 1,052 122
============================================== ============ ============
Net cash from/(used in) investing activities 1,010 -199
============================================== ============ ============
Investing cash flows from discontinued
operations 88 7
Investing cash flows from continuing
operations 922 -206
Financing activities
Repayment of lease liabilities -483 -200
Purchase of own shares - net -32 -14
Interest paid -19 -67
============================================== ============ ============
Net cash used in financing activities -534 -281
============================================== ============ ============
Financing cash flows from discontinued
operations -320 -84
Financing cash flows from continuing
operations -214 -197
Net decrease in cash and cash equivalents -5,215 -2,142
============================================== ============ ============
Cash and cash equivalents at beginning
of year 86,973 101,746
Effect of foreign exchange rate changes -24 37
Cash and cash equivalents at end of
period 81,734 99,641
============================================== ============ ============
Notes to the interim financial statements for the six month
period to 30 June 2023
1. General Information and basis of preparation
Novacyt is an international diagnostics business delivering a
broad portfolio of in vitro and molecular diagnostic tests for a
wide range of infectious diseases, enabling faster, more accurate,
accessible testing to improve healthcare outcomes. The Company
provides customers with a seamless sample-to-result workflow using
its integrated and scalable instrumentation/solutions. The Company
specialises in the design, manufacture and supply of real-time PCR
kits, reagents and a full range of laboratory and qPCR
instrumentation for molecular biology research and clinical use.
Novacyt offers one of the world's most varied and comprehensive
range of qPCR assays, covering human, veterinary, biodefence,
environmental, agriculture and food testing. Its registered office
is located at 13 Avenue Morane Saulnier, 78140 Vélizy
Villacoublay.
The financial information contained in this report comprises the
consolidated financial statements of the Group and its subsidiaries
(hereinafter referred to collectively as the "Group"). They are
prepared and presented in Great British Pounds ("GBP"), rounded to
the nearest thousand ("GBP'000s").
This condensed consolidated interim financial information does
not constitute full statutory accounts. It does not include all of
the information required for full annual financial statements and
should be read in conjunction with the consolidated financial
statements for the twelve months ended 31 December 2022. Statutory
accounts for the year ended 31 December 2022 were approved by the
Board of Directors and have been delivered to the Registrar of
Companies. The auditor's report on those accounts was unqualified.
The financial information for the half years 30 June 2023 and 30
June 2022 is unaudited and the twelve months to 31 December 2022 is
audited.
2. Summary of accounting policies applied by the Group
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs"). The
financial statements have also been prepared in accordance with
IFRSs adopted by the European Union.
The financial information has been prepared on the historical
cost basis except in respect of those financial instruments that
have been measured at fair value. Historical cost is generally
based on the fair value of the consideration given in exchange for
the goods and services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at
the measurement date.
Fair value for measurement and/or disclosure purposes in the
financial information is determined on such a basis, except for
leasing transactions that are within the scope of IFRS 16, and
measurements that have some similarities to fair value but are not
fair value, such as net realisable value in IAS 2 or value in use
in IAS 36.
The areas where assumptions and estimates are material in
relation to the financial information are the measurement of
goodwill (see note 16 of the 2022 Statutory Accounts for further
details), the carrying amounts and useful lives of the other
intangible assets (see note 17 of the 2022 Statutory Accounts for
further details), deferred taxes (see note 20 of the 2022 Statutory
Accounts for further details), trade receivables (see note 22 of
the 2022 Statutory Accounts and note 12 of the 2023 Interim
Accounts for further details) and provisions for risks and other
provisions related to the operating activities (see note 29 of the
2022 Statutory Accounts and note 13 of the 2023 Interim Accounts
for further details).
The accounting policies set out below have been applied
consistently to all periods presented in the financial
information.
The accounting policies applied by the Group in these condensed
consolidated interim financial statements are substantially the
same as those applied by the Group in its financial statements for
the year ended 31 December 2022 and which form the basis of the
2023 financial statements. The methodology for selecting
assumptions underpinning the fair value calculations has not
changed since 31 December 2022.
Basis of consolidation
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between the members of the
Group are eliminated on consolidation. The Group's scope of
consolidation included the following companies, all fully
consolidated when included in the scope.
At 30 June 2023 At 30 June 2022
============================================ ============================================
Companies Interest percentage Consolidation method Interest percentage Consolidation method
===================== ===================== ===================== ===================== =====================
Biotec Laboratories
Ltd 100% FC 100% FC
IT-IS International
Ltd 100% FC 100% FC
Lab21 Healthcare Ltd 100% DO 100% DO
Novacyt US Inc 100% FC 100% FC
Novacyt Inc 100% FC 100% FC
Microgen Bioproducts
Ltd 100% DO 100% DO
Novacyt SA 100% FC 100% FC
Novacyt Asia Ltd 100% FC 100% FC
Novacyt China Ltd 100% FC 100% FC
Novacyt UK Holdings
Ltd 100% FC 100% FC
Primer Design Ltd 100% FC 100% FC
Legend: FC: Full consolidation
DO: Discontinued operation
Discontinued operations and assets held for sale
A discontinued operation is a component that either has been
disposed of, or is classified as held for sale, and
(a) represents a separate major line of business or geographical area of operations,
(b) is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of operations,
or
(c) is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are presented in the consolidated income
statement as a single amount comprising the total of:
- The post-tax profit or loss of the discontinued operation,
- The post-tax gain or loss recognised on the measurement to fair value less costs to sell, and
- The post-tax gain or loss recognised on the disposal of assets
or the disposal group making up the discontinued operation.
Where material, the analysis of the single amount is presented
in the relevant note (see note 16).
In the statement of cash flows, the net cash flow attributable
to the investing and financing activities of discontinued
operations have been disclosed separately.
No adjustments have been made in the statement of financial
position.
Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Thus, they adopt the going concern basis of accounting in
preparing the financial statements.
The going concern model covers the period up to and including
September 2024. In making this assessment, the directors have
considered the following elements:
- The working capital requirements of the business;
- A positive cash balance at 30 June 2023 of GBP81,734,000;
- The costs associated with the acquisition of Yourgene Health plc; and
- The DHSC commercial dispute having a trial date set for June 2024.
If, however, Novacyt had to pay the full value of the DHSC claim
in the period up to and including September 2024, which is not the
scenario that management considers to be likely, then the Group
would not have sufficient funds to settle the liability without
agreeing a payment plan or raising additional cash.
Measurement of goodwill
Goodwill is broken down by cash-generating unit ("CGU") or group
of CGUs, depending on the level at which goodwill is monitored for
management purposes. In accordance with IAS 36, none of the CGUs or
groups of CGUs defined by the Group are greater in size than an
operating segment.
Impairment testing
Goodwill is not amortised, but is subject to impairment testing
when there is an indication of loss of value, and at least once a
year at the reporting date.
Such testing consists of comparing the carrying amount of an
asset to its recoverable amount. The recoverable amount of an
asset, a CGU or a group of CGUs is the greater of its fair value
less costs to sell and its value in use. Fair value less costs to
sell is the amount obtainable from the sale of an asset, a CGU or a
group of CGUs in an arm's length transaction between well-informed,
willing parties, less the costs of disposal. Value in use is the
present value of future cash flows expected to arise from an asset,
a CGU or a group of CGUs.
It is not always necessary to determine both the fair value of
an asset less costs to sell and its value in use. If either of
these amounts exceeds the carrying amount of the asset, the asset
is not impaired and it is not necessary to estimate the other
amount.
Inventories
Inventories are carried at the lower of cost and net realisable
value. Cost includes materials and supplies, and, where applicable,
direct labour costs incurred in transforming them into their
current state. It is calculated using the weighted average cost
method. The recoverable amount represents the estimated selling
price less any marketing, sales and distribution expenses.
The gross value of goods and supplies includes the purchase
price and incidental expenses.
A provision for impairment, equal to the difference between the
gross value determined in accordance with the above terms and the
current market price or the realisable value less any proportional
selling costs, is recognised when the gross value is greater than
the other stated item.
Trade receivables
The Group has an established credit policy under which the
credit status of each new customer is reviewed before credit is
advanced, including external credit evaluations where possible.
Credit limits are established for all significant or high-risk
customers, which represent the maximum amount permitted to be
outstanding without requiring additional approval from the
appropriate level of senior management. Outstanding debts are
continually monitored by each division. Credit limits are reviewed
on a regular basis, and at least annually. Customers that fail to
meet the Group's benchmark creditworthiness may only transact with
the Group on a prepayment basis.
Trade receivables are recorded initially at fair value and
subsequently measured at amortised cost. This generally results in
their recognition at nominal value less an allowance for any
doubtful debts. Trade receivables in foreign currency are
transacted in their local currency and subsequently revalued at the
end of each reporting period, with any foreign exchange differences
being recognised in the income statement as an income/expense.
The allowance for doubtful debts is recognised based on
Management's expectation of losses without regard to whether an
impairment trigger happened or not (an "expected credit loss"
model). Through implementation of IFRS 9, the Group concluded that
no real historical default rate could be determined due to a low
level of historical write offs across the business. The Group
therefore recognises an allowance for doubtful debts on the basis
of invoice ageing. Once an invoice is overdue from its due date,
based on agreed credit terms, by more than 90 days, this invoice is
then more likely to default than those invoices operating within 90
days of their due date. As such, these invoices will be provided
for in full as part of an expected credit loss model, except where
Management have reviewed and judged otherwise.
Trade receivables are written off when there is no reasonable
expectation of recovery. Indicators that there may be no reasonable
expectation of recovery may include the failure of the debtor to
engage in a payment plan, and failure to make contractual payments
within 365 days of the original due date.
Cash and cash equivalents
Cash equivalents are held to meet short-term cash commitments
rather than for investment or other purposes. For an investment to
qualify as a cash equivalent, it must be readily convertible into a
known amount of cash and be subject to an insignificant risk of
change in value. Cash and cash equivalents comprise cash funds,
current bank accounts and marketable securities (cash Undertakings
for Collective Investment in Transferable Securities ("UCITS"),
negotiable debt securities, etc.) that can be liquidated or sold
within a very short time (generally with original maturities of
three months or less) and which have a negligible risk of change in
value. All such items are measured at fair value, with any
adjustments recognised in the income statement.
Trade payables
Trade payables are obligations to provide cash or other
financial assets. They are recognised in the statement of financial
position when the Group becomes a party to a transaction generating
liabilities of this nature. Trade and other payables are recognised
in the statement of financial position at fair value on initial
recognition, except if settlement is to occur more than 12 months
after recognition. In such cases, they are measured using the
amortised cost method. The use of the effective interest rate
method will result in the recognition of a financial expense in the
income statement. Trade and other payables are eliminated from the
statement of financial position when the corresponding obligation
is discharged.
Trade payables have not been discounted, because the effect of
doing so would be immaterial.
Provisions
In accordance with IAS 37 "Provisions, Contingent Liabilities
and Contingent Assets", a provision is recognised when the Group
has a current obligation as of the reporting date in respect of a
third party and it is probable or certain that there will be an
outflow of resources to this third party, without at least
equivalent consideration from the said third party. Provisions for
risks and charges cover the amount corresponding to the best
estimate of the future outflow of resources required to settle the
obligation.
The provisions are for the restoration of leased premises, risks
related to litigations and product warranties.
Long-Term Incentive Plan (LTIP)
Novacyt granted shares to certain employees under a LTIP adopted
on 1 November 2017. The final tranches were settled in 2022 and the
scheme has now been fully settled.
In December 2021, Novacyt implemented a cash LTIP to qualifying
employees, based on achieving certain annual EBITDA targets over a
three-year qualifying period. The plan will vest on the third
anniversary of the grant date and will be settled in cash.
In February 2022, a Performance Share Awards programme for
executive management was created as part of its new LTIP. This LTIP
replaced the previous phantom share award scheme which ended in
November 2020.
The 2022 Performance Share Awards programme is structured as
nil-cost options, giving a right to acquire a specified number of
shares at a nil exercise price per share (i.e. for no payment) in
accordance with the rules, governed by sections L-225-197-1 and
seq. of the French Commercial Code ("actions gratuities").
The awards will vest over a three-year performance period,
starting 1 January 2022 and ending on 31 December 2024, subject to
the Company achieving certain total shareholder return growth
conditions. The baseline for total shareholder return is based on
the average closing price of the Company's shares in December 2021
which was GBP3.54. This will be compared to the equivalent figure
in December 2024.
Consolidated revenue
IFRS 15 "Revenue from Contracts with Customers" establishes a
principles-based approach to recognising revenue only when
performance obligations are satisfied, and control of the related
goods or services is transferred. It addresses items such as the
nature, amount, timing and uncertainty of revenue, and cash flows
arising from contracts with customers. IFRS 15 applies a five-step
approach to the timing of revenue recognition and applies to all
contracts with customers except those in the scope of other
standards:
-- Step 1 - Identify the contract(s) with a customer
-- Step 2 - Identify the performance obligations in the contract
-- Step 3 - Determine the transaction price
-- Step 4 - Allocate the transaction price to the performance obligations in the contract
-- Step 5 - Recognise revenue when (or as) the entity satisfies a performance obligation
The Group principally satisfies its performance obligations at a
point in time and revenue recognised relating to performance
obligations satisfied over time is not significant. As such,
revenue is generally recognised at the point of sale, with little
judgement required in determining the timing of transfer of
control.
Some contracts with customers contain a limited assurance
warranty that is accounted for under IAS 37 (see Provisions
accounting policy). If a repair or replacement is not possible
under the assurance warranty, a full refund of the product price
may be given. The potential refund liability represents variable
consideration.
Under IFRS 15.53, the Group can use either:
-- The expected value (sum of probability weighted amounts); or
-- The most likely amount (generally used when the outcomes are binary).
The method used is not a policy choice. Management use the
method that it expects will best predict the amount of
consideration based on the terms of the contract. The method is
applied consistently throughout the contract. Variable revenue is
constrained if appropriate. IFRS 15 requires that revenue is only
included to the extent that it is highly probable that there will
not be a significant reversal in future periods.
In making this assessment, Management have considered the
following factors (which are not exclusive):
-- If the amount of consideration is highly susceptible to
factors outside the Group's influence;
-- Whether the uncertainty about the amount of consideration is
not expected to be resolved for a long period of time;
-- The Group's experience (or other evidence) with similar types of contract;
-- The Group has a practice of either offering a broad range of
price concessions or changing the payment terms and conditions of
similar contracts in similar circumstances; and
-- The contract has a large number and broad range of possible consideration amounts.
The decision as to whether revenue should be constrained is
considered to be a significant judgement as the term 'highly
probable' is not defined in IFRS 15. Management consider highly
probable to be significantly more likely than probable.
Taxation
Income tax on profit or loss for the period comprises current
and deferred tax.
-- Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years, and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting
period.
A provision is recognised for those matters for which the tax
determination is uncertain but it is considered probable that there
will be a future outflow of funds to a tax authority. The
provisions are measured at the best estimate of the amount expected
to become payable. The assessment is the result of the Group's
judgement based on the advice of external tax professionals and
supported by previous experience in respect of such activities.
-- Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of
the temporary differences in the near-term.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the reporting date.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in the income statement,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the
business combination.
UK Patent Box regime
The UK Patent Box regime is a special low corporate tax rate
used to incentivise research and development by taxing revenues
from patented products differently from other revenues. On 30 March
2022 Novacyt (specifically Primer Design Ltd) received confirmation
that the UK Intellectual Property Office had granted the key patent
(ORF1a/b), with patent number GB2593010. This means that the
effective rate of tax on profits (adjusted for certain rules)
derived from the sale of products incorporating this patent is
close to 10% rather than the current UK corporation tax rate of
25%.
The effective tax rate is given via a tax deduction and, due to
the uncertainty over the precise timing of the tax relief available
to the company and the complexity involved in making a claim for
the first time, a tax asset has not been recognised. The asset will
only be recognised when Management can reliably measure and predict
the outcome of a Patent Box claim in terms of value and timing.
Research and development tax credits
Primer Design Ltd and IT-IS International Ltd benefit from tax
credits in respect of some of their research activities. The tax
credit is calculated per financial year and deducted from the tax
payable by the company in respect of the year during which research
expenses were incurred. Tax credits that cannot be deducted from
the tax expense are surrendered for a repayable tax credit and
treated as a governmental subsidy in the income statement.
In 2022, Primer Design Ltd and IT-IS International Ltd instead
benefitted from an R&D expenditure credit in respect of some of
their research activities. The tax credit is calculated per
financial year as 13% of the actual expenditure and is shown in the
income statement as a governmental subsidy. The credit is taxable
and therefore the tax charge on this credit is included in the tax
line of the income statement.
Profit/loss per share
The Group reports basic and diluted profit/loss per ordinary
share. Basic profit/loss per share is calculated by dividing the
profit/loss attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares outstanding during
the period.
Diluted profit/loss per share is determined by adjusting the
profit/loss attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding, taking into account
the effects of all potential dilutive ordinary shares, including
options.
Exceptional items
Exceptional items are those costs or incomes that, in the view
of the Board of Directors, require separate disclosure by virtue of
their size or incidence, and are charged or credited in arriving at
operating profit on the face of the consolidated income
statement.
3. Critical accounting judgements and key sources of estimate uncertainty
In the application of the Group's accounting policies, the
directors are required to make judgements (other than those
involving estimations) that have a significant impact on the
amounts recognised and to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical accounting judgements
-- Constraint of revenue
Revenue is only constrained if it is highly probable there will
not be a significant reversal of revenue in the future. Highly
probable is not defined in IFRS 15 and so it is a significant
judgement to be exercised by Management. The value of revenue
related to performance obligations fulfilled in 2020 to which
constraint has not been applied is GBP130,642,000 and relates to
the Department of Health and Social Care "DHSC" dispute, further
details of which are disclosed in note 18.
-- Trade and other receivables
An estimate of the risks of non-receipt based on commercial
information, current economic trends and the solvency of individual
customers is made to determine the need for impairment on a
customer-by-customer basis. Management use significant judgement in
determining whether a credit loss provision is required.
At 30 June 2023, the Group had trade receivables of
GBP25,209,000 against which a credit loss provision of GBP248,000
has been applied. At the date of publishing the interim financial
statements, GBP23,957,000 of the 30 June 2023 receivables were
overdue due to the contract dispute with the DHSC (see note 18).
Management considers it to be more likely than not that the 30 June
2023 balances are recoverable; this is a significant judgement.
-- Provisions for product warranty
The value of provision required is determined by Management
based on available information, experience and, in some cases,
expert estimates. Product warranty provisions are only included if
it is considered to be probable that an outflow of economic benefit
will be required. Determination of probable is a significant
judgement especially in light of the dispute described in note
18.
Key sources of estimation uncertainty
The Group has a number of key sources of estimation uncertainty.
Of these items, only the measurement of goodwill is considered
likely to result in a material adjustment. Where there are other
areas of estimates these have been deemed not material.
-- Measurement of goodwill
Goodwill is tested for impairment on an annual basis. The
recoverable amount of goodwill is determined mainly on the basis of
forecasts of future cash flows. The total amount of anticipated
cash flows reflects Management's best estimate of the future
benefits and liabilities expected for the relevant CGU. The
assumptions used and the resulting estimates sometimes cover very
long periods, taking into account the technological, commercial and
contractual constraints associated with each CGU. These estimates
are mainly subject to assumptions in terms of volumes, selling
prices and related production costs, and the exchange rates of the
currencies in which sales and purchases are denominated. They are
also subject to the discount rate used for each CGU.
The value of the goodwill is tested whenever there are
indications of impairment and reviewed at each annual closing date
or more frequently should this be justified by internal or external
events.
4. Revenue
The table below shows revenue on a geographical basis:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Geographical area
United Kingdom 814 8,447
France 196 122
Rest of Europe 584 2,851
America 764 3,514
Asia-Pacific 749 1,234
Africa 192 202
Middle East 40 138
Total revenue 3,339 16,508
=================== =========== ===========
Revenue has fallen due to a lower demand for COVID-19 tests.
The breakdown of revenue by operating segment and geographic
area is presented in note 5.
5. Operating segments
Segment reporting
Pursuant to IFRS 8, an operating segment is a component of an
entity:
- that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the same
entity);
- whose operating results are regularly reviewed by the Group's
Chief Executive to make decisions regarding the allocation of
resources to the segment and to assess its performance; and
- for which discrete financial information is available.
The Group has identified four operating segments whose
performance and resources are monitored separately. Following the
Group's decision to discontinue the Microgen Bioproducts and Lab21
Healthcare businesses in 2022, the Lab21 Products segment, which is
made up of these businesses, has been treated as a discontinued
operation:
o Primer Design
This segment represents the activities of Primer Design Ltd,
which is a designer, manufacturer and marketer of molecular
'real-time' qPCR testing devices and reagents in the area of
infectious diseases based in Eastleigh, UK.
o IT-IS International
This segment represents the activities of IT-IS International
Ltd, a diagnostic instrument development and manufacturing company
specialising in the development of PCR devices for the life
sciences and food testing industry based in Stokesley, UK.
o Lab21 Products
This segment represents the activities of Lab21 Products, which
was a developer, manufacturer and distributor of a large range of
protein-based infectious disease IVD products covering Microgen
Bioproducts Ltd and Lab21 Healthcare Ltd, both based in Camberley,
UK. As these businesses ceased trading in June 2022, this segment
has been treated as a discontinued operation.
o Corporate
This segment represents Group central/corporate costs. Where
appropriate, costs are recharged to individual business units via a
management recharge process.
o Intercompany eliminations
This column represents intercompany transactions across the
Group that have not been allocated to an individual operating
segment. It is not a discrete segment.
The Chief Operating Decision Maker is the Chief Executive
Officer.
Reliance on major customers and concentration risk
In H1 2023 and H1 2022 the Group was not dependent on one
particular customer and there were no customers generating sales
accounting for over 10% of revenue.
95.0% of receivables are with one counterparty, with whom there
is a contract dispute as disclosed in note 18. Management considers
it to be more likely than not that the 30 June 2023 balances are
recoverable.
Breakdown of revenue by operating segment and geographic
area
o At 30 June 2023
Primer
Amounts in GBP'000 Design IT-IS International Total
Geographical
area
United Kingdom 796 18 814
France 159 37 196
Rest of Europe 379 205 584
America 689 75 764
Asia-Pacific 555 194 749
Africa 172 20 192
Middle East 28 12 40
Total revenue 2,778 561 3,339
====================== ========= ==================== =======
o At 30 June 2022
Primer
Amounts in GBP'000 Design IT-IS International Total
Geographical
area
United Kingdom 8,446 1 8,447
France 99 23 122
Rest of Europe 2,606 245 2,851
America 3,271 243 3,514
Asia-Pacific 853 381 1,234
Africa 201 1 202
Middle East 138 - 138
Total revenue 15,614 894 16,508
====================== ========= ==================== =======
Breakdown of result by operating segment
o 6 month ended 30 June 2023
Intercompany
Amounts in GBP'000 Primer Design IT-IS International Corporate Eliminations Total
Revenue 2,778 561 - - 3,339
Cost of sales -1,309 -374 - 9 -1,674
Sales and marketing costs -1,281 -202 -23 - -1,506
Research and development -1,047 -192 - - -1,239
General and administrative -3,007 -729 -684 - -4,420
Governmental subsidies 154 -29 - - 125
Earnings before interest, tax,
depreciation and amortisation as per
management reporting -3,712 -965 -707 9 -5,375
=========================================== ============== ==================== ========== ============== =======
Depreciation and amortisation -935 -209 -33 18 -1,159
Operating (loss)/profit before exceptional
items -4,647 -1,174 -740 27 -6,534
=========================================== ============== ==================== ========== ============== =======
o 6 month ended 30 June 2022
Intercompany
Amounts in GBP'000 Primer Design IT-IS International Corporate Eliminations Total
Revenue 15,614 902 - -8 16,508
Cost of sales -11,125 -1,670 - 297 -12,498
Sales and marketing costs -2,493 -172 -222 - -2,887
Research and development -2,996 -275 - - -3,271
General and administrative -3,780 -520 -870 - -5,170
Governmental subsidies 163 17 - - 180
Earnings before interest, tax,
depreciation and amortisation as per
management reporting -4,617 -1,718 -1,092 289 -7,138
========================================== ============== ==================== ========== ============== ========
Depreciation and amortisation -840 -202 -15 16 -1,041
Operating (loss)/profit before
exceptional items -5,457 -1,920 -1,107 305 -8,179
========================================== ============== ==================== ========== ============== ========
Please note that in accordance with IFRS 5 the results of the
Lab21 Products segment for 2022 and 2023 have been reported on a
separate line 'Loss from discontinued operations' which is shown
below EBITDA and thus all items above EBITDA have a nil value.
6. Cost of sales
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Cost of inventories recognised
as an expense 1,157 5,530
Change in stock provision -175 3,923
Freight costs 32 42
Direct labour 664 2,984
Product warranty - 6
Other -4 13
Total cost of sales 1,674 12,498
================================= ============ ============
Total cost of sales has declined year on year reflecting the
reduction in sales.
In H1 2023 the stock provision relating to continuing operations
has decreased by a net GBP175,000 (H1 2022: increased by
GBP3,923,000, predominantly due to providing for excess stock
associated with falling COVID-19 sales). Stock, which had
previously been provided for, has been written off and disposed of
during H1 2023, with the cost being charged to 'Cost of inventories
recognised as an expense' and a corresponding release of the stock
provision being made.
Direct labour (including subcontractor costs) has decreased year
on year as a result of scaling back production to align to lower
sales.
7. Other operating income and expenses
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Other operating income - 2
Total other operating income - 2
================================= ============ ============
Acquisition related expenses -666 -
DHSC contract dispute costs -640 -462
Restructuring expenses -543 -
Other expenses -13 -73
Total other operating expenses -1,862 -535
================================= ============ ============
2023 acquisition related expenses are associated with the
acquisition of Yourgene Health plc.
DHSC contract dispute costs relate to legal and professional
fees and product storage costs incurred in the ongoing commercial
dispute.
Restructuring expenses in 2023 relate to Group-wide
restructuring charges, as the Group continues to reduce its cost
base.
8. Financial income and expense
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Financial foreign exchange
gains 519 2,001
Interest received from discontinued
operations 415 216
Other financial income 1,060 134
Total financial income 1,994 2,351
====================================== ============ ============
Interest on IFRS 16 liabilities -19 -24
Financial foreign exchange
losses -1,731 -594
Discount of financial instruments -3 -19
Interest paid to discontinued
operations -158 -86
Total financial expense -1,911 -723
====================================== ============ ============
Financial foreign exchange gains and losses are driven by
revaluations of the LTIP liability and bank and intercompany
accounts held in foreign currencies.
Interest received from or paid to discontinued operations
relates to interest on intercompany balances with Microgen
Bioproducts Ltd and Lab21 Healthcare Ltd.
Other financial income relates to interest received on cash
balances.
9. Tax income
The main rate of corporation tax in the UK is 25% for the
corporation tax year beginning 1 April 2023 (2022: 19%). From 1
April 2023, a 19% small profits corporation tax rate was introduced
for companies whose profits do not exceed GBP50,000.
The H1 2023 financials have been calculated using a corporation
tax rate of 19%.
Taxation for other jurisdictions (mainly France) is calculated
at the rates prevailing in the respective jurisdictions.
The Group's tax is the sum of the total current and deferred
tax.
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Current tax income/(expense)
Current year tax income/(expense) 123 -
Deferred tax income/(expense)
Deferred tax income/(expense) 51 2,041
Total tax income/(expense) in the income statement 174 2,041
==================================================== ============ ============
The tax income for the period can be reconciled to the loss
before tax as follows:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Loss before taxation -8,313 -7,084
Tax at the UK corporation tax rate (2023: 19%, 2022: 19%) 1,580 1,346
Effect of different tax rates of subsidiaries operating in other jurisdictions 159 61
Change of the tax rate for the calculation of deferred tax 272 888
Effect of non-deductible expenses and non-taxable income -40 -254
Change in unrecognised deferred tax assets -1,761 -
Other adjustments -36 -
Total tax income for the period 174 2,041
================================================================================ ============ ============
10. Loss per share
The loss per share is calculated based on the weighted average
number of shares outstanding during the period. The diluted loss
per share is calculated based on the weighted average number of
shares outstanding and the number of shares issuable as a result of
the conversion of dilutive financial instruments. At 30 June 2023,
there are no outstanding dilutive instruments.
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Net loss attributable to owners of the Company -8,348 -8,699
===================================================== ============ ============
Weighted average number of shares 70,626,248 70,626,248
===================================================== ============ ============
Loss per share (GBP) -0.12 -0.12
===================================================== ============ ============
Diluted loss per share (GBP) -0.12 -0.12
Loss per share from continuing operations (GBP) -0.12 -0.07
Diluted loss per share from continuing operations
(GBP) -0.12 -0.07
Loss per share from discontinued operations
(GBP) -0.00 -0.05
Diluted loss per share from discontinued operations
(GBP) -0.00 -0.05
===================================================== ============ ============
11. Inventories and work in progress
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in GBP'000 2023 2022
Raw materials 8,977 8,562
Work in progress 1,947 2,854
Finished goods 3,153 3,404
Stock provisions -11,618 -11,793
Total inventories and work in progress 2,459 3,027
======================================== ============ =============
Inventories and work in progress has fallen since December 2022,
as stock built up during the COVID-19 pandemic is wound down to
reflect a more normalised expected run-rate.
12. Trade and other receivables
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in GBP'000 2023 2022
Trade and other receivables 25,209 25,485
Expected credit loss provision -248 -214
Tax receivables - Value Added Tax 8,233 8,312
Receivables on sale of businesses 69 69
Other receivables 9 10
Total trade and other receivables 33,272 33,662
=================================== ============ =============
The trade receivables balance includes a GBP23,957,000 unpaid
DHSC invoice raised in December 2020, in respect of products
delivered during 2020, that remains unpaid at the date of
publishing the interim accounts. Recovery of the invoice is
dependent on the outcome of the contract dispute.
During 2021, GBP49,034,000 (including VAT) of products and
services were delivered and invoiced to the DHSC which has now been
included as part of the ongoing dispute. As these sales have not
been recognised in accordance with IFRS 15, the revenue, trade
receivable and VAT element of the transactions have been reversed.
This accounting treatment does not change the Group's legal
position or rights in relation to the dispute with the DHSC.
The 'Tax receivables - Value Added Tax' balance of GBP8,233,000
mainly relates to VAT paid in the UK on sales invoices in dispute
with the DHSC. As these sales have not been recognised in
accordance with IFRS 15, the revenue, trade receivable and VAT
element of the transactions have been reversed, resulting in a VAT
debtor balance.
Trade receivables balances are due within one year. Once an
invoice is more than 90 days overdue, it is deemed more likely to
default and as such, these invoices have been provided for in full
as part of an expected credit loss model, except where Management
have reviewed and judged otherwise.
13. Provisions
The table below shows the nature of and changes in provisions
for risks and charges for the period from 1 January 2023 to 30 June
2023:
(Audited) (Unaudited)
At 1 January At 30 June
Amounts in GBP'000 2023 Increase Reduction 2023
-
======================================== ============== ========= ========== =============
Provisions for restoration of premises 95 3 - 98
Provisions long-term 95 3 - 98
======================================== ============== ========= ========== =============
Provisions for restoration of premises 330 - -285 45
Provision for litigation 157 - - 157
Provisions for product warranty 19,813 - - 19,813
Provisions short-term 20,300 - -285 20,015
======================================== ============== ========= ========== =============
The provision for product assurance warranties predominantly
relates to the notification of a product warranty claim with the
DHSC (see note 18). Management have assessed the DHSC product
warranty provision held at 31 December 2022 and have deemed that it
is still appropriate at 30 June 2023.
14. Trade and other liabilities
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in GBP'000 2023 2022
Trade payables 354 278
Accrued invoices 2,154 2,035
Social security liabilities 436 455
Tax liabilities - Value Added Tax 4 6
Other liabilities 11 13
Total trade and other liabilities 2,959 2,787
==================================== =========== ============
15. Share capital
Amount of Unit value Number
share capital Amount of share per share of shares
in GBP'000 capital in EUR'000 in EUR issued
============================= =============== ==================== =========== ===========
(Audited) At 31 December
2022 4,053 4,708 0.07 70,626,248
(Unaudited) At 30 June 2023 4,053 4,708 0.07 70,626,248
As of 30 June 2023 and 31 December 2022, the Company's share
capital of EUR4,708,416.54 was divided into 70,626,248 shares with
a par value of 1/15th of a Euro each.
The Company's share capital consists of one class of share. All
outstanding shares have been subscribed, called and paid.
16. Discontinued operations
In early 2022, Novacyt commenced a strategic review of the
business, which included a review of the Microgen Bioproducts and
Lab21 Healthcare businesses to consider the merits of maintaining
multiple company entities/names under the Novacyt Group umbrella
versus a simplified business model and brand, which the directors
believed could be more impactful.
In April 2022, Novacyt announced its intention to discontinue
both businesses, and as at the end of June 2022 they had ceased day
to day trading operations.
In accordance with IFRS 5, the net result of the Lab21 Products
business has been reported in the line 'Loss from discontinued
operations' on the consolidated income statement.
The table below presents the detail of the loss generated by
these two businesses as of 30 June 2023 and 2022:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Discontinued Operations
Revenue - 1,349
Cost of sales 2 -979
---------------------------------------------------- ------------ ------------
Gross profit 2 370
Sales, marketing and distribution expenses - -300
Research and development expenses - -17
General and administrative expenses 3 -2,839
Operating profit/(loss) before exceptional items 5 -2,786
---------------------------------------------------- ------------ ------------
Other operating expenses - -173
Operating profit/(loss) after exceptional items 5 -2,959
---------------------------------------------------- ------------ ------------
Financial income 15 86
Financial expense -229 -371
Loss before tax -209 -3,244
---------------------------------------------------- ------------ ------------
Taxation (expense)/income - -412
---------------------------------------------------- ------------ ------------
Loss after tax from discontinued operations -209 -3,656
---------------------------------------------------- ------------ ------------
2023 balances relate to clearing balance sheet items and
interest on intercompany balances.
17. Notes to the cash flow statement
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Loss for the period -8,348 -8,699
-------------------------------------------------- ----------- -----------
Loss from discontinued operations -209 -3,656
Loss from continuing operations -8,139 -5,043
Adjustments for:
Depreciation, amortisation, impairment loss and
provisions 877 2,841
Losses on disposal of assets 89 60
Income tax credit -299 -1,809
================================================== =========== ===========
Operating cash flows before movements of working
capital -7,681 -7,607
Decrease in inventories (*) 568 7,264
Decrease in receivables 908 3,561
Increase/(decrease) in payables 758 -9,069
Cash used in operations -5,447 -5,851
================================================== =========== ===========
Income taxes received 789 4,244
Finance income -1,033 -55
Net cash used in operating activities -5,691 -1,662
================================================== =========== ===========
Operating cash flows from discontinued operations -1,287 -1,589
Operating cash flows from continuing operations -4,404 -73
(*) The variation of the inventories value results from the
following movements:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in GBP'000 2023 2022
Decrease in the gross value of inventory 743 3,218
(Decrease)/increase in the stock provision -175 4,046
================================================ =========== ===========
Total variation of the net value of inventories 568 7,264
================================================ =========== ===========
The details for the change in the stock provision are covered in
notes 6 and 11.
18. Contingent liabilities
During 2021, the Group received notification of a contract
dispute between its subsidiary, Primer Design Ltd, and the DHSC
related to revenue totalling GBP129,125,000 in respect of
performance obligations satisfied during the financial year to 31
December 2020.
During 2021, a further GBP49,034,000 (including VAT) of products
and services were delivered and invoiced to the DHSC which have
subsequently been included as part of the ongoing dispute.
Management made the judgement that in accordance with IFRS 15,
Revenue from Contracts with Customers, it was not appropriate at
that stage in the dispute to recognise as revenue, any sales
invoices raised to the customer in 2021 that were in dispute.
However, Management remains committed to obtaining payment for
these goods and services.
Payment for GBP23,957,000 of invoices in respect of products
delivered during 2020 remains outstanding at the date of publishing
the interim accounts and recovery of the debt is dependent on the
outcome of the dispute.
On 25 April 2022, legal proceedings were issued against Novacyt
and Primer Design Ltd in respect of amounts paid to Primer Design
Ltd totalling GBP134,635,000 (including VAT) by the DHSC. This
refers to GBP132,814,000 (including VAT) of reagent sales out of a
total disputed amount of GBP154,950,000 (GBP129,125,000 excluding
VAT as previously reported) plus GBP1,821,000 (GBP1,517,000
excluding VAT) of q16 instruments which have been added to the
dispute. This takes the total 2020 revenue in dispute to
GBP130,642,000.
On 15 June 2022, Novacyt and Primer Design Ltd filed a defence
of the claim received on 25 April 2022, and Primer Design Ltd made
a counterclaim of circa GBP81,500,000 including interest and VAT
against the DHSC.
On 30 January 2023, Novacyt announced that the UK High Court had
directed Novacyt that the hearing of the case between Primer Design
Ltd / Novacyt SA and the DHSC has been listed to commence on 10
June 2024 and is expected to last 16 days.
The Group remains committed to defending the case and asserting
its contractual rights, including recovering outstanding sums due
from the DHSC.
Management have reviewed the position at 30 June 2023 and deem
this to be an appropriate reflection of the current commercial
dispute.
Management and the Board of Directors have reviewed the product
warranty provision totalling GBP19,753,000 booked in 2020 in
relation to the DHSC dispute and have deemed that it remains
appropriate at 30 June 2023.
19. Subsequent events
On 3 July 2023, Novacyt announced the proposed cash acquisition
of Yourgene Health plc, which subsequently completed on 8 September
2023.
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END
IR NKOBDOBKDPCB
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
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