TIDMHZD
RNS Number : 3630M
Horizon Discovery Group plc
16 September 2019
RNS
Horizon Discovery Group plc
Results for the Six Months Ended 30 June 2019
Cambridge, UK, 16 September 2019: Horizon Discovery Group plc
(LSE: HZD) ("Horizon", "the Group" or "the Company"), a global
leader in the application of gene editing and gene modulation
technologies, today announces its results for the six months ended
30 June 2019.
Group Financial highlights
-- Reported revenue of GBP28.6m an increase of 13.9% on the
prior year (HY18: GBP25.1m) or growth of 8.8% on a constant
currency basis(1)
-- Gross margin increased by 5.3 percentage points to 68.5% (HY18: 63.2%)
-- Adjusted EBITDA(1) loss of GBP0.9m(2) (HY18: GBP2.2m loss),
including a positive impact of GBP1.3m from the implementation of
IFRS 16 Leases
-- Loss after taxation(2) of GBP5.3m for the half year (HY18: GBP7.6m)
-- Cash position at 30 June 2019 of GBP24.8m (HY18: GBP24.9m)
Business Unit performance*
-- Research Reagents: Reported revenue of GBP16.5m up 11.5% on
the prior half year period (HY18: GBP14.8m) or growth of 6.8% on a
constant currency basis(1)
-- Screening: Reported revenue of GBP4.3m up 38.7% on the prior
half year period (HY18: GBP3.1m) or growth of 32.3% on a constant
currency basis(1)
-- Bioproduction: Reported revenue of GBP2.8m up 154.5% on the
prior half year period (HY18: GBP1.1m) or growth of 145.5% on a
constant currency basis(1)
-- Diagnostics: Reported revenue of GBP2.5m down 28.6% on the
prior half year period (HY18: GBP3.5m) or a decline of 31.4% on a
constant currency basis(1)
-- In Vivo: Reported revenue of GBP2.5m down 3.8% on the prior
half year period (HY18: GBP2.6m) or a decline of 11.5% on a
constant currency basis(1)
Other
-- Post period end, licensing partner Celyad received FDA
acceptance of an IND filing for CYAD-02 its CAR-T cell therapy
based on Horizon's optimized SMARTvector(TM) shRNA technology,
triggering the first milestone payment to the Group
-- Product revenue increased 14.6% to GBP22.8m (HY18: GBP19.9m);
Service revenue increased 11.5% to GBP5.8m (HY18: GBP5.2m)
Financial Outlook
-- Strong start to trading in H2 2019
-- Revenues for FY19 are expected to be second half weighted
(consistent with previous years) and in line with current market
expectations
-- The Group is trading in line with expectations for FY 2019
(1) Refer to the financial review for the definition and
reconciliation of alternate performance measures
(2) The HY19 results incorporate the impact of adopting IFRS16
Leases. Refer to the financial review for the reconciliation
*New market aligned business unit structure introduced in
January 2019. Prior year equivalents provided for comparison. A
detailed explanation of the performance of each Business Unit is
provided in the CEO Review.
Terry Pizzie, Chief Executive Officer of Horizon Discovery,
commented:
"Horizon has enjoyed a solid performance in the first half of
the year with the business as a whole performing in line with
expectations."
"I am pleased to report Group revenues of GBP28.6m, an increase
of 13.9% on the prior year (HY18: GBP25.1m) or a growth of 8.8% on
a constant currency basis. This growth has largely been driven by
strong performance in the Group's Bioproduction and Screening
business units, which increased revenues by 154.5% and 38.7%
respectively. The Group's Research Reagent business unit, which
encompasses more than half of Group revenues, also had a good start
to the year and we expect strong growth in the second half as this
Business Unit benefits from the increased capacity in Cell Line
engineering that we have implemented in the first half. We have
experienced some organisational challenges with our Diagnostics
business unit, but the corrective action that we have put in place
should lead to an improved performance in the second half."
"I am pleased to report that the business is on track to
complete the delivery of the productivity and eCommerce initiatives
that we are implementing as part of our Investing for Growth
strategy. We expect these investments to generate significant
payback in the short and long-term, by reducing costs, increasing
capacity and operating leverage, whilst also opening up new avenues
of growth."
"With our traditional second-half weighting and strong order
book for the remainder of 2019, we are well positioned to deliver
on our strategy, as we continue to transform Horizon from a
scientifically-led business, into a fully commercial tools and
services company with industrialised processes and
customer-directed R&D."
Analyst briefing
An analyst briefing will be held at 12:00pm BST on Monday 16
September 2019 at the offices of Numis, 10 Paternoster Sq., London,
EC4M 7LT. There will be a simultaneous live conference call.
Conference call details:
-- Participant UK dial--in: 0800 376 7922
-- Participant US dial--in: 1 866 966 1396
-- International dial--in: +44 (0) 2071 928000
-- Participant code: 6674702
A live webcast of the meeting and presentation slides, will be
available on the Group's website:
https://www.horizondiscoveryplc.com/category/presentations-recordings/
For further information from Horizon Discovery Group plc, please
contact:
Horizon Discovery Group plc
Terry Pizzie, Chief Executive Officer
Jayesh Pankhania, Chief Financial Officer
Jon Davies, Head of Investor Relations
Tel: +44 (0) 1223 655 580
Numis Securities Limited (Broker and NOMAD)
Freddie Barnfield / Tom Ballard / Duncan Monteith
Tel: +44 (0) 207 260 1000
Consilium Strategic Communications (UK Financial Media and
Investor Relations)
Mary-Jane Elliott / Matthew Neal / Melissa Gardiner
Tel: +44 (0) 20 3709 5700
Email: horizon@consilium-comms.com
Westwicke, an ICR Company (US Investor Relations)
Stephanie Carrington
Tel. 646-277-1282
Email: horizondisovery@icrinc.com
About Horizon Discovery Group plc www.horizondiscovery.com
Horizon Discovery Group plc (LSE: HZD) ("Horizon") drives the
application of gene editing and gene modulation within the global
life science market - supporting scientists on the path from
research to therapy.
Built upon more than a decade of experience in the engineering
of cell lines, Horizon offers an unmatched portfolio of tools and
services to help scientists gain a greater understanding of gene
function, identify genetic drivers behind human disease, deliver
biotherapeutics, cellular and gene therapies for precision medicine
as well as develop and validate diagnostic workflows.
Horizon's solutions enable almost any gene to be altered, or its
function modulated, in human and other mammalian cell lines.
The Company's customers include many of the world's foremost
academic institutes, global biopharmaceutical and biotechnology
companies as well as clinical diagnostic laboratories. Insight into
the challenges faced by these organizations enables Horizon to
focus efforts on development of innovative solutions that not only
differentiate the Company's offering, but also fuel development of
the next wave of precision medicines.
Horizon is headquartered in Cambridge, UK with offices in USA
and Japan. The Group is listed on the London Stock Exchange's AIM
market under the ticker HZD.
CEO REVIEW
I am pleased to report a solid performance in the first half of
the financial year with the Group as a whole performing in line
with expectations. Reported revenues of GBP28.6m increased 13.9% on
the prior year (HY18: GBP25.1m) representing growth of 8.8% on a
constant currency basis(1) . Gross Margins increased by 5.3
percentage points to 68.5% (HY18: 63.2%) largely driven by a strong
performance in our Bioproduction business unit. Our adjusted
EBITDA(1) loss of GBP0.9m(2) (HY18: GBP2.2m) is in line with our
expectations as we continue to invest in our business with a focus
on achieving growth and market share. We report a loss after tax(2)
of GBP5.3m for the period, representing an improvement over the
prior period (HY18: GBP7.6m loss).
As we indicated in our FY18 results statement, from the start of
this year we implemented a new Business Unit structure to allow the
Group to better develop and target the product and service
offerings increasingly required by our evolving markets. As a
result, we replaced the former reporting structure of Research
Products, Applied Products and Services (reported as Products and
Services at a Group level), with five market-aligned Business
Units: Research Reagents, Screening, Bioproduction, Diagnostics and
In Vivo. Each of these business units comprise a mix of products
and services that are tailored to the specific needs of their
respective customer segments.
The implementation of this new structure has resulted in some
organisational changes within the business, some of which are still
bedding down. However, I am pleased to report that the increased
focus that it has delivered, through having dedicated Business Unit
Managers and Product Managers, has largely delivered the expected
results, with the exception of Diagnostics, where some
organisational challenges led to a disappointing first half
performance (see Performance by Business Unit)
This set of results is the first in which the Group has reported
according to this new structure. Further details of the composition
of these Business Units and their performance in the half year are
set out below. In summary, revenue growth for the first six months
was driven by a notably strong performance in Bioproduction (up
154.5% on the prior year equivalent) and Screening (up 38.7% on the
prior year equivalent).
Research Reagents, which encompassed 58% (HY18: 59%) of Group
revenues, grew by 11.5% in the period. We expect continued strong
growth in the second half of the year, as this business unit
benefits from the substantially increased capacity in Cell Line
engineering achieved in the first half.
In Vivo's performance was down 3.8% on the prior year reflecting
the continuing challenges the business is facing in its market.
Diagnostics was down 28.6% on the prior year due to
organisational issues in this business unit. These have been
identified and the corrective action that we have put in place
should lead to an improved performance in the second half.
Whilst we will henceforth report according to this new
structure, for this period we have also provided commentary on the
way we formerly reported, in order to help investors track
performance in the first half of the financial year. Accordingly,
Group Product revenue increased 14.6% to GBP22.8m (HY18: GBP19.9m);
whilst Group Services revenue increased 11.5% to GBP5.8m (HY18:
GBP5.2m).
Investing for Growth
This time last year, the Group announced its new "Investing for
Growth" strategy to support our goal to become the 'go-to' provider
of IP-rich cell engineering solutions and to establish leadership
positions in key target markets. This has led us to prioritise the
highest value, highest growth areas of our core markets, in
particular CRISPR screening and reagents, cell engineering,
bioproduction and diagnostic reference standards.
To support this growth, we have committed GBP5m over an 18 month
period to an investment program which is focussed on supporting
growth across the Group and includes investments in automation to
increase production capacity, in Laboratory Information Management
Systems (LIMS) to improve data handling, in Business Intelligence
to add customer and business insight, and in digitisation to
enhance customer experience through our eCommerce channel.
Alongside this, we are continuing to invest in commercially led,
scientific innovation in order to stay at the forefront of emerging
technologies and maintain our market-leading position.
We are now nine months into this programme and the work is still
ongoing, but I am pleased to report that the goals we set ourselves
in the first half of the year have all been achieved. As planned,
by re-engineering our existing process we have successfully
delivered the expected tripling of capacity in Cell Line
Engineering with no additional headcount. We expect to increase
this further through the addition of automation by the end of the
first quarter of 2020, which will result in a five-fold increase in
capacity compared to the start of 2019. The redevelopment of the
Group's web and e-commerce project is also progressing to plan and
is on track for completion in October 2019. This will consolidate
what are currently two separate web sites (former Horizon and
Dharmacon) into a single platform that will provide an enhanced
customer experience and opportunities for cross-selling across the
Group's entire portfolio.
We expect these investments to generate significant payback in
the short and long-term, by reducing costs, increasing capacity and
operating leverage, whilst also opening up new avenues of
growth.
Performance by Business Unit
The metrics included below are all reported measures unless
otherwise stated.
Research Reagents
-- Revenue of GBP16.5m up 11.5% on the prior year (HY18: GBP14.8m)
-- On a constant currency basis Revenue of GBP15.8m up 6.8%
The Research Reagents business unit comprises the tools (both
products and services) that allow scientists in both academia and
drug discovery to better understand disease mechanisms, and to
identify the drivers behind disease via both permanent and
transient changes in gene expression. It includes Horizon's
extensive catalogue of off-the-shelf (OTS) cell models (formerly
classified under Research Products) and bespoke cell engineering
services (formerly classified under Services) and Dharmacon's
custom-made and OTS gene modification (RNAi) and gene editing
(CRISPR) reagents (formerly categorised under Research Products)
which are delivered from the Group's manufacturing and global
logistics centre in Boulder, Colorado.
Horizon's main customers for this revenue stream are academic
research labs and early-stage biopharmaceutical companies, which
are leveraging Dharmacon's leadership position in RNAi/siRNA and
CRISPR reagents to perform gene modulation and editing. Sales are
typically high volume and transactional in nature, captured
primarily through the Group's website, with some sold via field
sales.
Horizon's OTS cell models are sold from the Group's website.
Off-the shelf models are available for immediate delivery, with an
express service that delivers cell models selected from a
predefined menu. Horizon's bespoke cell line engineering service is
available to those customers with highly specific requirements and
is predominantly sold to biotech and biopharmaceutical companies
through the Group's field sales and Key Accounts sales
organisation.
Research Reagents delivered sales of GBP16.5m in HY19, up 11.5%
on the prior year, with the Group benefiting from increased
cross-selling and continuing recovery in the former Dharmacon
business. This accounted for 58% of the Group's revenues and
delivered solid growth during the period.
We expect the overall growth rate of Research Reagents to
increase in the second half, as the business unit benefits from the
three-fold increase in cell line engineering capacity delivered in
H1 (through re-engineering existing processes) with automation
bringing this up to a five-fold increase by the end of the first
quarter of 2020.
Since the Group's inception, cell line engineering has been a
core capability of Horizon and is also an enabler for other
business units (e.g. Diagnostics and Screening). The market is
currently fragmented with no dominant players and our ambition is
to significantly grow revenues over the next 18-24 months. The
increase in capacity is key to this, as it will enable us to
decrease our manufacturing costs and extend our offering, with more
compelling solutions on both price and turnaround times.
This will have two main effects. Firstly, it will significantly
increase our addressable market, as we will now have a more
competitive offering and secondly, the increased project volumes
will allow us to increase operational leverage across other
business units, for example Diagnostics.
Screening (including leveraged R&D)
-- Revenue of GBP4.3m up 38.7% on the prior year (HY18: GBP3.1m)
-- On a constant currency basis Revenue of GBP4.1m up 32.3%
The Screening business unit comprises tools and services that
address major challenges in drug development, including Horizon's
CRISPR Screening and high throughput compound screening (both
formerly categorised under Services) and Dharmacon's CRISPR and
RNAi libraries (formerly categorised under Research Products).
Customers for this revenue stream are mid-to-large biotech and
biopharmaceutical companies, which are targeted by the Group's
field sales and Key Accounts team and have the choice of buying
either a fully outsourced service or just the tools they need
(CRISPR libraries) to do their own screening in-house.
Horizon has a market-leading position in this arena with more
than 500 CRISPR screens completed and ongoing, including with 8 out
of the top 20 global biopharmaceutical companies. In the early part
of 2019, we announced the launch of the world's first primary human
T-Cell CRISPR screening service, underlining our leading position
in this important developing market.
In addition to this extensive know-how and track record,
Horizon's ability to leverage Dharmacon's manufacturing expertise
is a major differentiator, as it means that we do not need to
source CRISPR reagents from other suppliers. The ability to package
CRISPR reagents into libraries for sale to organisations seeking to
do their own CRISPR screening is also a major factor in helping us
to engage with biopharmaceutical companies on both a tool supply
and outsourcing basis.
Screening delivered revenues of GBP4.3m for the period (HY18:
GBP3.1m), an increase of 38.7% on the prior year. Much of this
growth has been driven by an increase in the number of highly
complex large-scale screens for major biopharmaceutical companies.
Demand continues to be very strong in the second half. We have
received an order for GBP850k - the largest single order to date
and we will begin to see revenue from this contract in H2 2019.
Given the complexity and timescales of some of these major
projects, there can be a long time period between initiation of a
project and full revenue recognition. We are therefore evaluating
the development of simpler, standardised screens that can provide
run-rate business alongside these major projects, in order to
iron-out some of the lumpiness in the revenues.
Bioproduction
-- Reported revenue of GBP2.8m up 154.5% on the prior year (HY18: GBP1.1m)
-- On a constant currency basis Revenue of GBP2.7m up 145.5%
The Bioproduction business unit was formerly categorised under
Applied Products. The business unit's offering is a Chinese Hamster
Ovary (CHO) cell line which has been modified by gene editing to
improve the speed and efficacy of production of biologic drugs. The
cell line is available off-the-shelf as a product, which is sold
under license, with bespoke CHO cell line development also
available. The customers for this cell line are biotech,
biopharmaceutical and contract manufacture organisations globally,
which are served by Horizon's Key Account Partner sales team.
Biologics have revolutionised the treatment of many diseases and
now account for six out of the top 10 'blockbuster' drugs. CHO
cells are the predominant system used in the biologics
manufacturing processes due to their ability to produce complex
biologics at scale and their track record of regulatory
approval.
There is strong demand from companies pursuing biologic drugs
and looking for cost-effective ways to commence biomanufacturing.
However, high entry costs and restrictive licensing conditions can
make it difficult to gain access to CHO cells suitable for
manufacturing biologics. Horizon is differentiated in this market
by offering a high-quality gene edited, proprietary cell line, with
a clear IP position, freedom to operate and a disruptive,
predictable pricing model.
Our cell lines have now been validated by five successful
Investigational New Drug (IND) filings by customers (three in the
USA and two in China) which means the Group's market access and
credentials are now well established. The growing acceptance in the
market has meant that during H1, an increasing number of customers
have proceeded directly to full commercial licenses without going
through an initial evaluation period, significantly shortening the
sales cycle.
We remain optimistic for revenue growth during the second half,
but mindful of the fact that the sales of these high value
contracts tend to be lumpy in nature and that the strong
performance reported at the end of FY18, in which two new
commercial licences in excess of GBP1m were signed, has set a high
bar for a year-on-year comparison.
Diagnostics
-- Revenue of GBP2.5m down 28.6% on the prior year (HY18: GBP3.5m)
-- On a constant currency basis Revenue of GBP2.4m down 31.4%
The Diagnostics business unit comprises gene-edited cell lines
that have been developed to mimic human genetic diseases
(especially cancer). These standards are used to check the
performance of diagnostic tests and to validate new diagnostic
tests. The business unit was formerly categorised as Molecular
Diagnostics under Applied Products.
Horizon is a leading innovator of cell line-derived reference
standards and provides a source of genetically defined,
quantitative, sustainable and independent third-party reference
material, critical to the validation and routine performance
monitoring of assays.
The business unit's offering includes off-the-shelf cell-based
reference standards, which are typically sold through the Group's
eCommerce platform, and both tailored and bespoke reference
standards that are developed to customers' specific requirements
and predominantly sold via the Group's field sales team. The
customers for these reference standards include academic
laboratories, drug discovery companies and clinical laboratories
(including clinical R&D).
The key drivers for these tools are the need for fast, minimally
invasive, methods for detection of disease (as opposed to patient
derived biopsies) against a regulatory backdrop for increased
standardisation to remove subjectivity.
Performance in the first half of the year has been
disappointing, the root cause of which was internal organisational
issues rather than external market factors. We have now implemented
a number of changes in this business unit and are confident that
these will lead to an improved performance in the second half.
In Vivo
-- Revenue of GBP2.5m down 3.8% on the prior year (HY18: GBP2.6m)
-- On a constant currency basis Revenue of GBP2.3m down 11.5%
The In Vivo Business Unit provides genetically engineered rat
and mice models from its premises in Boyertown, Pennsylvania and St
Louis, Missouri, USA. In Vivo's animal models feature specific gene
deletions, insertions, repressions and modifications, and are used
as pre-clinical models for human genetic disease for drug
discovery. They are available as both OTS models and bespoke models
developed to customers' specific requirements. Customers include
academic researchers and drug discovery and development companies,
who are served by a dedicated specialist In Vivo sales team.
In our FY2018 results statement issued in April 2019, we
highlighted that In Vivo was facing some challenging market
headwinds and that we had reset our expectations for the growth of
the business. Against this backdrop, it is pleasing that revenues
in the period were broadly in line with the previous year.
There are a number of contributing factors for these market
challenges, including a decreasing demand for custom animal models
and pricing pressure. Additionally, In Vivo's market is dominated
by a handful of very large dedicated incumbents and gene editing is
not a disruptive force in this market, which means it will be
challenging for the Group to establish a market leading position in
this segment. We are therefore continuing to monitor the situation
carefully to determine the best course of action for this
business.
Maintaining market leadership
Horizon is committed to investing in partnerships and high-value
technologies that maintain the Group's market leadership
positions.
In October 2018, we announced a partnership with Celyad
(Euronext Brussels and Paris, and Nasdaq: CYAD) a clinical-stage
biopharmaceutical company focused on the development of CAR-T
cell-based therapies, which had licensed the Horizon's novel shRNA
technology to generate its second non-gene-edited allogeneic
platform.
Post period end, in early July 2019, Celyad secured FDA
Acceptance of an Investigational New Drug (IND) application for
CYAD-02, the autologous NKG2D based CAR-T cell therapy that deploys
Horizon's optimised SMARTvector(TM) shRNA technology. The Phase 1
trial with initiation planned for early 2020, will be the first
CAR-T cell therapy to employ the SMARTvector(TM) platform. Horizon
will receive a milestone payment for the successful IND filing.
In January 2019, Horizon signed a strategic partnership with
Rutgers, The State University of New Jersey (US), to develop and
commercialise base editing, a novel technology platform that has
the potential to provide more accurate gene editing and fewer
unintended genomic changes than currently available gene editing
methodologies.
As part of the agreement, Horizon has an option to exclusively
license the base editing technology for use in all therapeutic
applications. During the first half of the year, Horizon has been
working through the one-year evaluation phase of the technology
prior to taking the full licence. Data collated so far is
consistent with expectations and we expect to complete our
evaluation in the second half of 2019.
Also, in January, we announced the launch of the world's first
primary human T-Cell CRISPR screening service to meet the
requirements of immunology-based research in drug discovery.
In the past, the use of CRISPR screens in primary T lymphocytes
has proved to be challenging, owing to complex issues around the
introduction of the screening components and Cas9 in particular.
Horizon has adapted its established CRISPRko (knockout) platform to
address these issues enabling us to deliver a robust screening
platform, which allows customers working in the immuno-oncology
space to find gene targets and potential therapeutic avenues in
primary cells (T lymphocytes freshly isolated from the body) rather
than having to work through surrogate cell lines.
This is significant because we believe that the therapeutic
development pipeline for all diseases will move away from screening
in immortalised (cancer) cell lines and move towards screens in
primary cells, as they more closely represent real patients.
In order to capitalise on this market shift, Horizon has
leveraged its proprietary manufacturing expertise to make guide
RNAs as a long single strand, rather than as two separate
components (CRISPR RNA (crRNA) and tracrRNA) which is how they are
usually supplied.
There is a growing body of research that indicates that such
synthetic single guide RNA strands are able to edit genes in
primary cells without any detectable changes elsewhere in the
genome. The research also indicates that synthetic single guide
RNAs are more effective in primary cells, suggesting that screens
might work better in primary cells with a synthetic single guide
library.
Horizon's work during the first half of the year should lead to
the launch of its first pooled synthetic single guide library in Q4
2019, which will include subset libraries of our well established
druggable genome library. The whole genome library will be complete
later in 2020.
Summary and outlook 2019
The market opportunity for gene editing and gene modulation is
substantial and growing rapidly. Horizon is at the forefront of
this innovation wave and our products and services are powering
three key areas in the therapeutics ecosystem:
-- Research: the demand for life science tools designed to
understand the genetic basis of disease;
-- Development: the need to improve the speed and reduce the
costs of drug development and associated companion diagnostics;
and
-- Therapy: providing the tools to enable new therapeutic
approaches, including personalised medicines (cell and gene
therapies) and immuno-oncology
Scientific interest in these fields continues to accelerate as
gene editing and gene modulation become embedded in basic research
and drug discovery programmes. The Group's core competence in
cell-line engineering (which underpins all of our business units)
enables us to create a unique and high value portfolio of tools and
services, which combined with our commercial reach, provides the
basis for sustainable competitive advantage and strong prospects
for growth.
In line with previous years, we anticipate a strong second half
weighting to our performance. With an already strong order book for
the second half of 2019, the Board expects FY19 revenues to be
in-line with market expectations and to maintain a positive
adjusted EBITDA.
On 23 June 2016, the UK held a referendum on continuing
membership of the EU, the outcome of which was a decision for the
UK to leave the EU (Brexit). Unless and until the Brexit
negotiation and parliamentary-ratification processes are complete,
it is difficult to anticipate the potential impact on the Group's
performance.
The Group has responded by engaging proactively with key
external stakeholders and establishing a cross-functional team to
understand, assess, plan and implement operational actions that may
be required. The Group has adopted a base case planning assumption
of a hard Brexit/no deal. The Board reviews the potential impact of
Brexit regularly.
Terry Pizzie
Chief Executive Officer
16 September 2019
FINANCIAL REVIEW
A solid revenue performance during HY19 of GBP28.6m (HY18:
GBP25.1m), represents growth of 13.9% against the equivalent prior
period, being in line with market expectations. Revenue growth is
8.8% on a constant currency basis(1) and consistent with prior
years we expect revenues to be second half weighted.
Reported gross margins for HY19 were 68.5% (HY18: 63.2%), which
benefitted from an increasing proportion of Bioproduction and
screening revenues.
Our reported adjusted EBITDA(1) loss improved to GBP0.9m(2)
(HY18: GBP2.2m loss). This included the benefit of GBP1.3m due to
the implementation of IFRS 16 Leases. On a like for like basis, the
adjusted EBITDA(1) loss was GBP2.2m.
Exceptional items for the period totalled GBP0.1m (HY18:
GBP1.6m) relating to the departure of Richard Vellacott as Chief
Financial Officer.
We report a loss after tax(2) of GBP5.3m for the period,
representing an improvement over the prior period (HY18: GBP7.6m
loss) substantially due to the implementation of IFRS 16 Leases and
an increase in the tax credit.
Management consider the following as additional alternative
performance measures to supplement statutory measures of
performance as they provide additional insight. Constant currency
is the measured current year revenues based on the prevailing
foreign exchange rates from the prior year.
HY HY
2019 2018
Adjusted EBITDA GBPm GBPm
Operating loss (5.7) (7.8)
------------------------------- ------ ------
Amortisation and depreciation 4.7 4.0
------------------------------- ------ ------
EBITDA (1.0) (3.8)
------------------------------- ------ ------
Exceptional items (note
3) 0.1 1.6
Adjusted EBITDA (0.9) (2.2)
------------------------------- ------ ------
Exceptional items
Exceptional items, due to their size, nature or the expected
infrequency of the events giving rise to them, are presented
separately on the face of the income statement.
The reported income statement for HY19 incorporates the modified
retrospective adoption of IFRS 16 (refer to Notes 1 and 10 to the
Financial Statements). The impact on the HY2019 alternative
performance measure is depicted below:
Adjusted EBITDA Prior to IFRS 16 As Reported
Impact of adopting IFRS16 Impact HY2019
IFRS 16 GBPm GBPm GBPm
HY2019
Operating loss (6.0) 0.3 (5.7)
------------------------------- ---------- -------- ------------
Amortisation and depreciation 3.7 1.0 4.7
------------------------------- ---------- -------- ------------
EBITDA (2.3) 1.3 (1.0)
------------------------------- ---------- -------- ------------
Exceptional items (note
3) 0.1 0.1
Adjusted EBITDA (2.2) 1.3 (0.9)
------------------------------- ---------- -------- ------------
Balance Sheet Prior impact IFRS 16 As Reported
Impact of adopting IFRS16 Impact HY2019
IFRS 16 GBPm GBPm GBPm
HY2019
Right of use assets - 11.2 11.2
------------------------------- -------------- -------- ------------
Trade and other payables (10.1) 0.6 (9.5)
Current lease liabilities - (3.0) (3.0)
Non-current lease liabilities - (11.3) (11.3)
------------------------------- -------------- -------- ------------
Operating costs
Total operating expenses (excluding exceptional items) for the
period are GBP25.2m (HY18: GBP22.1m). This is in line with
expectations as we invest in our people and infrastructure in order
to deliver our ambitious strategic objectives.
Balance sheet
Overall net assets of the Group were GBP136.8m at the end of the
period (31 December 2018: GBP143.3m). Group working capital (net
current assets less cash) is GBP6.9m (31 December 2018: GBP10.8m),
after allowing for the GBP2.4m impact of IFRS 16 to current
liabilities.
The Group remains well funded with cash resources of GBP24.8m
(31 December 2018: GBP26.7m). This funding provides a robust
position to support our investment in key strategic projects such
as the new eCommerce platform which will be launched later this
year.
Current trading and outlook
We anticipate a stronger second half performance in line with
prior years, underpinned by a robust order book, the launch of our
eCommerce platform and the three-fold increase in capacity in Cell
Line engineering.
Independent review report to Horizon Discovery Group plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2019 which comprises the consolidated
income statement, the consolidated balance sheet, the consolidated
statement of changes in equity, the consolidated cash flow
statement and related notes 1 to 10. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with the accounting policies the Group intends to use in
preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2019 is not prepared, in all material respects, in accordance
with accounting policies the Group intends to use in preparing its
next annual financial statements and the AIM Rules of the London
Stock Exchange.
Deloitte LLP
Statutory Auditor
Cambridge, UK
13 September 2019
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP`000 GBP`000 GBP`000
Note
REVENUE 2 28,554 25,112 58,733
Cost of sales (9,002) (9,241) (19,205)
Gross profit 19,552 15,871 39,528
Other operating income 2 1,014 269 2,204
Sales, marketing and distribution
costs (7,065) (5,724) (13,003)
Research and development costs (7,864) (7,363) (15,241)
Corporate and administrative expenses (10,892) (9,159) (20,737)
Share of results of joint ventures (313) (137) (299)
Exceptional items 3 (143) (1,583) (33,185)
OPERATING LOSS (5,711) (7,826) (40,733)
Investment income 2 40 61 90
Finance costs (463) (3) (11)
LOSS BEFORE TAX (6,134) (7,768) (40,654)
Taxation 884 149 4,833
LOSS FOR THE PERIOD (5,250) (7,619) (35,821)
LOSS PER SHARE
Basic and diluted (pence) 4 (3.5p) (5.1p) (23.9p)
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
Six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP`000 GBP`000 GBP`000
LOSS FOR THE PERIOD (5,250) (7,619) (35,821)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation
of foreign operations 482 2,911 6,936
Tax on items that may be reclassified
subsequently to profit or loss - - 314
Other comprehensive income for the
period net of tax 482 2,911 7,250
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD (4,768) (4,708) (28,571)
Total comprehensive income attributable
to:
Owners of the Company (4,768) (4,708) (28,571)
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEET
Six months ended 30 June 2019
Unaudited Unaudited Audited
As at 30 As at 30 As at 31
June 2019 June 2018 December
GBP`000 GBP`000 2018
Note GBP`000
Non current assets
Goodwill 5 51,940 75,263 51,750
Other intangible assets 44,558 51,426 45,644
Property, plant and equipment 10,905 12,482 11,680
Right of use assets 11,161 - -
Investments 2,647 1,723 2,960
Other receivables 433 433 433
121,644 141,327 112,467
Current assets
Inventories 2,272 2,533 2,541
Trade and other receivables 15,280 18,441 19,071
Corporation tax receivable 1,820 - 3,053
Cash and cash equivalents 24,831 24,867 26,740
44,203 45,841 51,405
Total assets 165,847 187,168 163,872
Current liabilities
Trade and other payables (9,481) (10,662) (13,912)
Lease liabilities 10 (2,990) - -
Net current assets 31,732 35,179 37,493
Non-current liabilities
Deferred tax (5,043) (9,057) (5,955)
Long term provisions (201) (191) (197)
Other payables - (338) (495)
Lease liabilities 10 (11,349) - -
Total liabilities (29,064) (20,248) (20,559)
Net assets 136,783 166,920 143,313
Equity
Share capital 6 3,135 3,125 3,134
Share premium account 139,195 137,975 139,102
Share option reserve 3,418 2,651 3,100
Merger reserve 67,457 67,457 67,457
Retained earnings (76,422) (44,288) (69,480)
Total equity 136,783 166,920 143,313
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2019
Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share premium Share option Merger Retained
capital account reserve reserve earnings Total
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 January
2019 3,134 139,102 3,100 67,457 (69,480) 143,313
Restatement of opening
retained earnings for
IFRS16 - - - - (2,174) (2,174)
Loss for the period - - - - (5,250) (5,250)
Other comprehensive
income for the period - - - - 482 482
Shares issued 1 93 - - - 94
Credit to equity for
equity settled share
based payment transactions - - 318 - - 318
Balance at 30 June
2019 3,135 139,195 3,418 67,457 (76,422) 136,783
Unaudited Unaudited Unaudited Unaudited Unaudited
Share Share premium Share option Merger Retained
capital account reserve reserve earnings Total
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 January
2018 3,121 137,681 2,478 67,457 (39,580) 171,157
Loss for the period - - - - (7,619) (7,619)
Other comprehensive
income for the period - - - - 2,911 2,911
Shares issued 4 294 - - - 298
Credit to equity for
equity settled share
based payment transactions - - 173 - - 173
Balance at 30 June
2018 3,125 137,975 2,651 67,457 (44,288) 166,920
HORIZON DISCOVERY GROUP PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31
June 2019 June 2018 December
GBP`000 GBP`000 2018
Note GBP`000
Net cash inflow/(outflow) from
operating activities 7 1,309 (2,243) 1,519
Investing activities
Interest and bank charges paid (602) (123) (11)
Interest received 38 60 90
Acquisition of investment in joint
venture - - (1,400)
Purchases of property, plant and
equipment (607) (718) (2,708)
Purchase of intangible assets (1,182) (512) (851)
Net cash outflow from investing
activities (2,353) (1,293) (4,880)
Financing activities
Proceeds on issue of shares net
of expenses 93 298 1,433
Principal elements of lease payments
(2018 - principal elements of
finance lease payments) (982) - -
Net cash (outflow)/inflow from
financing activities (889) 298 1,433
Net decrease in cash and cash
equivalents (1,933) (3,238) (1,928)
Cash and cash equivalents at beginning
of period 26,740 28,084 28,084
Effect of exchange rate changes 24 21 584
Cash and cash equivalents at end
of period 24,831 24,867 26,740
1. ACCOUNTING POLICIES
General information
This condensed consolidated interim financial information does
not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2018 were approved by the Board of Directors and have been
delivered to the Registrar of Companies. The audit report on those
accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not contain any statement under section
498(2) or (3) of the Companies Act 2006.
This consolidated interim financial information has been
reviewed, not audited.
Basis of preparation
The annual financial statements of Horizon Discovery Group plc
are prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee (IFRIC)
interpretations as adopted by the European Union and the Companies
Act 2006 applicable to companies reporting under IFRS. The
condensed consolidated set of financial statements included in this
half-yearly financial report has not been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the European
Union.
The accounting policies adopted in the preparation of the
condensed consolidated interim information are consistent with
those followed in the preparation of the Group's financial
statements for the year ended 31 December 2018 except where
disclosed otherwise in this note.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group
was described on pages 36 and 37 of the Company's Annual Report and
Financial Statements for the year ended 31 December 2018. The
identified critical accounting estimates in the 2018 Annual Report
and Financial Statements were:
-- Revenue recognition; and
-- Deferred tax assets.
The critical accounting judgements identified and disclosed in
the 2018 Annual Report and Financial Statements were:
-- Goodwill, other intangible assets and other asset valuation; and
-- Forecasts and discount rates.
A further assessment was made at the half year and the
significant risks identified were unchanged from those in the
annual report. It is anticipated that the risk profile will not
significantly change for the remainder of the year. Risk is an
inherent part of doing business and the strong cash position of the
Group, along with the growth profile of the business, leads the
Directors to believe that the Group is well placed to manage
business risks successfully.
Going concern
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, support the
conclusion that there is a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future, a period of not less than
twelve months from the date of this report. Accordingly, the going
concern basis has been adopted in preparing the half-yearly
financial information.
Adoption of new and revised standards
In the current period the Group had to change its accounting
policies and make retrospective adjustments as a result of adopting
IFRS 16 Leases following the modified retrospective approach. The
impact of the adoption of the leasing standard and the new
accounting policies are disclosed in note 10 below.
On adoption of IFRS 16 the Group has recognised within the
balance sheet a right of use asset and lease liability on all
applicable leases. Within the income statement, rent expense has
been replaced by depreciation and interest expense.
There are no new standards that have been issued but are not yet
effective that are expected to have a material impact on the
Group.
2. REVENUE
An analysis of the Group's revenue is as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP`000 GBP`000 GBP`000
Revenue 28,554 25,112 58,733
Other operating income 1,014 269 2,204
Interest received 40 61 90
29,608 25,442 61,027
3. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP`000 GBP`000 GBP`000
Impairment charges - - (32,124)
CFO exit costs (143) - -
Acquisition and integration
costs - (297) -
Restructuring costs - (11) -
CEO exit costs - (445) (476)
Legal and advisory costs - (598) (585)
Rebranding costs - (232) -
(143) (1,583) (33,185)
The exceptional items in the current period are costs relating
to the departure of Richard Vellacott as Chief Financial
Officer.
4. LOSS PER SHARE
The calculations of basic and diluted loss per share are based
upon the following data:
Unaudited Unaudited Audited Year
Six months Six months ended 31
ended 30 June ended 30 June December
2019 2018 2018
GBP`000 GBP`000 GBP`000
Loss
Loss for the purposes of
basic and diluted loss per
share being net loss attributable
to owners of the Company (5,250) (7,619) (35,821)
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic and diluted loss
per share 150,421,755 149,188,169 149,597,584
Loss per share (3.5p) (5.1p) (23.9p)
Basic EPS is calculated by dividing the earnings attributable to
ordinary owners of the parent by the weighted average number of
shares outstanding during the period. Diluted EPS is calculated on
the same basis as basic EPS but with a further adjustment to the
weighted average shares in issue to reflect the effect of all
potentially dilutive share options. The number of potentially
dilutive share options is derived from the number of share options
and awards granted to employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the period.
IAS 33 - Earnings per Share, requires presentation of diluted
earnings per share where a company could be called upon to issue
shares that would decrease net profit or increase net loss per
share. No adjustment has been made to the basic loss per share as
at 30 June 2019, as the exercise of share options would have the
effect of reducing the loss per ordinary share, and therefore is
not dilutive.
5. GOODWILL
Unaudited
GBP000
Cost
At 30 June 2018 75,263
Effects of movements in foreign exchange 2,379
At 31 December 2018 77,642
Effects of movements in foreign exchange 314
At 30 June 2019 77,956
Accumulated impairment losses
At 30 June 2018 -
Impairment losses for the period (25,892)
At 31 December 2018 (25,892)
Effects of movements in foreign exchange (124)
At 30 June 2019 (26,016)
Net book value
At 30 June 2019 51,940
At 31 December 2018 51,750
At 30 June 2018 75,263
As part of the FY18 goodwill and intangibles impairment review
enhanced disclosures were presented in relation to the Genomic
Products CGU which management consider are still relevant. These
were described on page 74 of the annual report.
6. SHARE CAPITAL
Share capital as at 30 June 2019 amounted to GBP3,135,000.
During the period, the Group issued 81,606 GBP0.01 ordinary shares
through the exercise of employee share options.
7. NOTES TO THE CASH FLOW STATEMENT
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP`000 GBP`000 GBP`000
Loss for the period (5,250) (7,619) (35,821)
Adjustments for:
Investment revenues (40) (61) (90)
Finance costs 627 142 11
Depreciation of property, plant and equipment 1,354 1,709 2,876
Amortisation of intangible assets 2,363 2,318 5,354
Amortisation of right of use assets 1,000 - -
Goodwill, intangible asset and property,
plant and equipment impairment charges - - 32,124
Loss on disposal of property, plant and
equipment - - 7
Loss on disposal of intangible assets 71 - 145
RDEC tax credit in other operating income (125) - -
Tax credit (884) (149) (4,833)
Share option charge 318 150 622
Share of loss of joint venture 313 137 299
Operating cash flows before movements in
working capital (253) (3,373) 694
Decrease in inventories 271 63 33
Decrease/(increase) in receivables 4,429 2,116 (1,894)
(Decrease)/increase in payables (4,709) (1,602) 3,610
Cash generated by operations (262) (2,796) 2,443
Tax received/(paid) 1,571 553 (924)
Net cash from operating activities 1,309 (2,243) 1,519
8. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation. There has
been no material change in the type of related party transactions
described in the financial statements for the year ended 31
December 2018.
9. SUBSEQUENT EVENTS
On 6 August 2019 the Company invested a further GBP700k in
Avvinity Therapeutics Limited in return for 62,500 shares,
increasing the Company's share of Avvinity's equity from 43% to
47%. At the date of this announcement there had been no other
subsequent events to report.
10. ADOPTION OF IFRS16
This note explains the impact of the adoption of IFRS 16 Leases
on the group's financial statements and discloses the new
accounting policies that have been applied from 1 January 2019.
Until the 2018 financial year, leases of property, plant and
equipment were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased
asset is available for use by the group. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable
-- variable lease payment that are based on an index or a rate
-- amounts expected to be payable by the lessee under residual value guarantees
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability
-- any lease payments made at or before the commencement date
less any lease incentives received
-- any initial direct costs, and
-- restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss.
The group has adopted IFRS 16 retrospectively from 1 January
2019 but has not restated comparatives for the 2018 reporting
period, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019. Short-term leases are leases with
a lease term of 12 months or less.
In applying IFRS 16 for the first time, the group has used the
following practical expedients permitted by the standard:
-- reliance on previous assessments on whether leases are onerous
-- the exclusion of short-term leases
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
Adjustments on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was between 5.13% and 8.85%. The group did not have
any leases previously classified as finance leases prior to the
adoption of IFRS 16.
The incremental borrowing rates have been determined on a lease
by lease basis, using the reference rate and country risk premium,
plus the entity credit risk premium, plus asset specific risk
adjustments.
The reference rate has been derived from government bonds of the
country with the leased asset with a term corresponding to the
weighted average lease length and currency. No country risk premium
was required for any of the leases as the country of the leased
asset matched the country in whose currency the lease was
denominated in, so there is no foreign currency risk. The entity
credit risk premium was determined by reference to each entity
within the group holding finance leases financial performance to 31
December 2018 (the date of transition to IFRS 16) compared to
similar companies with external credit ratings. Using these credit
ratings, the credit risk premium for each lease and entity has been
estimated using corporate bond curves for companies in the
Healthcare sector with a matching credit rating and term.
For property leases, asset risk adjustments were made based on
operational risk of each asset, which includes whether security has
been provided for the lease by the Group. This only asset which
required an asset specific adjustment was the UK property, as it
had a remaining term of more than ten years on transition to IFRS
16.
GBP'000
Operating lease commitments disclosed as at 31 December
2018 19,043
Discounted using the lessee's incremental borrowing
rate of at the date of initial application 15,217
Add: Additional identified leases not included in 2018
operating lease disclosure, discounted at lessee's incremental
borrowing rate of at the date of initial application 75
Total right of use assets 15,292
Of which are:
Current lease liabilities 2,967
Non-current lease liabilities 12,325
Total right of use assets 15,292
The associated right-of-use assets for all leases were measured
on the modified retrospective basis as if the new rules had always
been applied but has not restated comparatives for the 2018
reporting period, as permitted under the specific transitional
provisions in the standard. There were no onerous lease contracts
that would have required an adjustment to the right-of-use assets
at the date of initial application.
An impairment of the In Vivo CGU was made at 31 December 2018 so
all assets valued at their recoverable amount. One lease identified
related to this unit, so value of the right of use asset has been
impaired to GBPnil at 1 January 2019. The effect of this additional
impairment above the expected amortisation over the useful life of
the asset was GBP687,000. This has been included as part of the
restatement of opening reserves on transition to IFRS 16.
The recognised right-of-use assets relate to the following types
of assets:
30 June 2019 1 January
GBP'000 2019
GBP'000
Properties 11,124 12,095
Equipment 42 50
Total right of use assets 11,166 12,145
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
-- Right of use assets - Increase by GBP12,145,000
-- Accruals - Decrease by GBP700,000
-- Lease liabilities - Increase by GBP15,292,000
-- Deferred taxation liabilities - Decrease by GBP97,000
The net impact on retained earnings at 1 January 2019 was a
decrease of GBP2,350,000
In determining the lease term, management considers all facts
and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated). The assessment is reviewed if a significant
event or a significant change in circumstances occurs which affects
this assessment and that is within the control of the lessee.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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