TIDMNCYT
RNS Number : 2380Z
Novacyt S.A.
17 September 2020
Novacyt S.A.
("Novacyt", the "Company" or the "Group")
Half year 2020 results
Transformational performance set to continue
Paris, France and Camberley, UK - 17 September 2020 - Novacyt
(ALTERNEXT: ALNOV; AIM: NCYT), an international specialist in
clinical diagnostics, announces its unaudited results for the six
months ended 30 June 2020 and provides an update on its growth
strategy.
Summary highlights
-- H1 2020 sales of EUR72.4 million and EBITDA of EUR49.4
million, resulting from the sale of the Company's market leading
PCR COVID-19 test, has transformed Novacyt
-- Performance provides period end cash of EUR19.7m, following
repayment of all debt and significant investment in inventory
-- New strategy implemented to continue growth trajectory and
consolidate performance through broadening focus on respiratory and
transplant clinical diagnostics
-- Visibility of orders for the Company's COVID-19 product
portfolio suggests H2 2020 performance on track to exceed that of
H1 2020
Graham Mullis, Group CEO of Novacyt, commented:
" The first half of 2020 has been transformational for Novacyt,
delivering sales growth of more than 900%. The significantly
strengthened cashflow has enabled us to also settle all outstanding
debt. The Company's market leading position in COVID-19 PCR testing
has resulted in an increased customer base and a reputation for
innovation and high performance of our products , enabling us to
forge a number of strategic partnerships.
"From t his solid foundation , Novacyt has reviewed and
accelerate d its strategy for delivering long-term value to
shareholders , which it expects will be supported by the continued
strengthen ing of its financial position from operational cashflows
over at least the next 12-18 months. We have identified specific
high value opportunities for growth in the diagnostics market where
Novacyt can leverage its innovative position for developing new in
vitro diagnostic products. In addition, with new opportunities
created by an increased demand for diagnostics and investment in
the industry , we expect to further boost revenues and
profitability through selective and accretive acquisitions. We
believe the Company is well placed to deliver on our vision of
becoming a market leader in respiratory and transplant clinical
diagnostics."
Financial highlights
-- Group consolidated unaudited revenue increased over 900% to EUR72.4m ( H1 2019: EUR7.2m)
-- Primerdesign revenue increased over 2,000% to EUR70.6m (H1
2019: EUR3.3m) due to the success of the COVID-19 product
portfolio
-- Group gross margin strengthened to 83%, delivering a gross
profit of EUR60.3m, an increase of 20% from H1 2019 (63%)
-- Primerdesign maintained its strong gross margin, delivering
85% in H1 2020 (H1 2019: 86%), demonstrating strong control of
margins as the business is scaled
-- Group EBITDA of EUR49.4m (H1 2019: EUR0.2m)
-- Operating profit of EUR48.3m compared to a loss of EUR0.7m in
H1 2019, driven by the growth in sales in molecular products
business
-- Profit after tax of EUR40.2m compared to a loss of EUR1.2m in H1 2019
-- Cash at 30 June 2020 of EUR19.7m after paying down all
long-term debt and significant working capital investment made into
stock to ensure the continuity of supply to meet the demand for
COVID-19 tests
EUR'000 H1 2020 H1 2019
Consol Consol
Revenue 72,374 7,223
Gross profit 60,265 4,580
Gross margin % 83% 63%
EBITDA 49,365 153
Recurring operating profit / (loss) 48,672 (598)
Operating profit / (loss) 48,324 (664)
----------------------------------------- ------------------ ---------------
Profit / (loss) after tax 40,195 (1,208)
Loss from discontinued operations - (786)
----------------------------------------- ------------------ ---------------
Profit / (loss) after tax atrributable
to the owners 40,195 (1,994)
----------------------------------------- ------------------ ---------------
Operational highlights
-- Rapid development of new products to support laboratories and
clinicians in the fight against the spread of COVID-19
o Developed one of the first molecular tests for COVID-19,
subsequently received CE Mark accreditation and Emergency Use
Authorisation from most major regulatory authorities, including the
US Food and Drug Adminstration and the World Health
Organization
o Launch of three new innovative products (Exsig(TM) Direct,
Exsig(TM) Mag and COVID-HT) to support laboratories through
improving workflow efficiency and helping to address the reported
shortfall in global manufacturing and supply of extraction
reagents
o Launch of a saliva sampling type to support ease of patient
sampling, lower levels of discomfort and demonstrate more
reproducible data than other sampling types
o Developing, together with a partner, a serology (antibody)
test to detect past infection of COVID-19, with launch expected in
Q4 2020
-- Significant scale-up of the organisation, including
increasing manufacturing and supply chain capacity and commercial
support with the addition of a number of new hires
-- Collaboration with AstraZeneca, GSK and University of
Cambridge to support the UK COVID-19 testing effort
-- Secured a supply contract with the UK Department of Health
and Social Care for the Company's COVID-19 test
-- Signed a number of new and significant strategic
partnerships, including a distribution agreement in the US
-- Surveillence programme of the Company's COVID-19 test to
assess different SARS-CoV-2 viral sequences continues to
demonstrate 100% detection of more than 64,000 sequences
Post-period highlights
-- Initiation of a 2,000-patient clinical trial by Queen Mary
University of London using the Group's innovative near-patient
testing system
-- Launch of respiratory test panel (Winterplex(TM)) to diagnose
and distinguish between influenza A&B, RSV and COVID-19
-- Launch of a two-gene target test for COVID-19 to address
markets employing this testing approach
Strategy update highlights
-- New strategy to focus on organic, R&D and acquisitive
growth in the respiratory and transplant bacterial and viral
diagnostic markets
-- Investment in R&D and commercial infrastructure to
deliver new products and establish a direct sales force in key
markets in the US and across Europe
-- Selective product/technology and company acquisitions to
generate additional revenues and profits to offset potential future
reductions in COVID-19 revenues and enhance the Group's trajectory
towards becoming a market leader in respiratory and transplant
clinical diagnostics
-- Acquisition of specific assets to enable Novacyt to expand
its core capabilities whilst maintaining attractive margins
-- Investment in developing new IP portfolio to enhance and secure future value
Outlook
Novacyt's near-term f ocus is to deliver strong organic revenue
growth in the core business, where the Directors believe demand for
its products will continue to grow into at least H1 2021 as
COVID-19 testing continues. In the medium-term, Novacyt expects to
leverage its reputation, market intelligence and relationships
developed during the COVID-19 response to commercialise new
products, as well as expand its presence in respiratory and
transplant clinical diagnostics, to meet significant unmet market
needs. The Directors expect to supplement the Company's product
portfolio and expand its core capabilities through executing
selective and accretive M&A at the right time.
The Directors reiterate guidance announced on 13 July 2020; g
iven the visibility of orders, extended contracts and the launch of
new COVID-19 related products, revenue for the second half of the
year is expected to be greater than the first half of the year and
margins to be at least at a similar level. Full year revenues are
expected to exceed EUR150 million and EBITDA profitability to
exceed EUR100 million. The Company expects this rate of financial
performance to extend into the first half of 2021. The Directors
remain confident in and excited by the prospects of the business,
not only for the short-term, but also for the longer-term.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
Contacts
Novacyt SA
Graham Mullis, Chief Executive Officer
Anthony Dyer, Chief Financial Officer
+44 (0)1276 600081
SP Angel Corporate Finance LLP (Nominated Adviser and Joint
Broker)
Matthew Johnson / Charlie Bouverat (Corporate Finance)
Vadim Alexandre / Rob Rees (Corporate Broking)
+44 (0)20 3470 0470
Numis Securities Limited (Joint Broker)
Freddie Barnfield / James Black (Corporate Broking)
+44 (0)20 7260 1000
Allegra Finance (French Listing Sponsor)
Rémi Durgetto / Yannick Petit
+33 (1) 42 22 10 10
r.durgetto@allegrafinance.com ; y.petit@allegrafinance.com
FTI Consulting (International)
Victoria Foster Mitchell / Mary Whittow
+44 (0)20 3727 1000
victoria.fostermitchell@fticonsulting.com / Mary.whittow@fticonsulting.com
FTI Consulting (France)
Arnaud de Cheffontaines
+33 (0)147 03 69 48
arnaud.decheffontaines@fticonsulting.com
About Novacyt Group
The Novacyt Group is an international diagnostics business
generating an increasing portfolio of in vitro and molecular
diagnostic tests. Its core strengths lie in diagnostics product
development, commercialisation, contract design and manufacturing.
The Company's lead business units comprise of Primerdesign and
Lab21 Products, supplying an extensive range of high-quality assays
and reagents worldwide. The Group directly serves oncology,
microbiology, haematology and serology markets as do its global
partners, which include major corporates.
For more information please refer to the website:
www.novacyt.com
Chief Executive Officer's Review
Operational review
The COVID-19 pandemic has highlighted Novacyt's intrinsic
ability to design, develop and rapidly scale-up market leading
molecular in vitro diagnostic (IVD) tests which enable it to
compete successfully at a global level. The Company has
significantly increased its customer base, has built a recognised
reputation for the performance of its products, formed multiple new
and significant strategic partnerships and established an
influential position in UK diagnostic testing . This solid
foundation, combined with a transformational financial performance
during H1 2020 as a direct result of the continuing success of the
Company's COVID-19 product portfolio, has enabled Novacyt to
eliminate all long-term debt and greatly enhance and accelerate its
strategy for delivering long-term value to shareholders, further
detail of which is provided in this report.
Molecular diagnostics
During H1 2020, Novacyt's molecular diagnostics division,
Primerdesign, delivered revenue growth of over 2,000% to EUR70.6m
compared to H1 2019 revenue of EUR3.3m. This growth reflects the
successful launch of a number of diagnostics products for COVID-19,
including one of the first polymerase chain reaction (PCR) tests to
combat the outbreak.
Market leading PCR test for COVID-19
In response to the emerging COVID-19 emergency, Novacyt made the
strategic decision to develop a diagnostic test for SARS-CoV-2 in
early January 2020. The Company launched the test in late January
2020 and subsequently received clinical use approval from a number
of leading global regulatory authorities, including CE Mark
accreditation and Emergency Use Authorisation (EUA) from the US
Food and Drug Adminstration (FDA) and the World Health Organization
(WHO). This rapid development of a test for COVID-19 positioned
Novacyt at the forefront of the global response to the spread of
the virus.
Significant demand and capacity expansion
To meet the unprecedented demand for the test following its
launch, Novacyt initiated a programme to significantly scale-up the
organisation. The Company engaged Chartwell Consulting, a
specialist in rapid process improvement, in early April 2020 to
manage and support the planning, procurement and logistics for the
capacity increase. This included increasing the Company's own
production capacity at the Primerdesign site in Southampton, UK, as
well as entering into contract manufacturing partnerships. The
Company also needed to manage suppy chain capacity, which included
expanding its key raw material supplier base to develop a long-term
and sustainable high volume supply of its tests.
Established an influential position in UK diagnostic testing
The COVID-19 pandemic has highlighted the importance of
diagnostics as part of the treatment regime across the globe. In
the UK, the government has a goal of supporting and creating a
national diagnostics industry that can compete on the global stage.
During H1 2020, Novacyt has been actively engaged with the UK
Department of Health and Social Care (DHSC) in supporting this
goal. This was demonstrated in April 2020 through a contract with
the DHSC for the supply of its COVID-19 test and separately a
collaboration with AstraZeneca, GSK and the University of Cambridge
for high-throughput COVID-19 testing. The Company has also
partnered with multiple private testing laboratories who support
various industries as they try to manage and maintain their
businesses.
Having established an influential position in UK diagnostic
testing during the pandemic, Novacyt continues to be actively
engaged with the DHSC and remains well positioned to support future
national testing initiatives.
Product portfolio expansion in COVID-19 and respiratory
diseases
Using Primerdesign's in-house expertise and specialisation in
rapid development of molecular solutions, Novacyt continued to
evolve its offering during H1 2020 with a range of new products to
support the application of the Company's COVID-19 testing solution
in a number of scenarios. This included various formats of the
Company's first generation test to support traditional and
high-throughput laboratory settings (exsig(TM) Mag and COVID-HT),
direct-to-PCR products (exsig(TM) Direct) which significantly
reduce the time-to-result by reducing the cumbersome pre-analytical
extraction phase of testing, a two-gene test to support testing in
markets that mandate a two-gene testing approach, near-patient
testing solutions, and a respiratory test panel aimed at supporting
testing during the winter season (Winterplex(TM)).
In July 2020, Queen Mary University of London announced the
initiation of a 2,000-patient clinical trial using Novacyt's
innovative near-patient testing system, which can deliver a result
within an hour. The study is investigating whether daily COVID-19
testing reduces the infection rate, morbidity and mortality in the
high-risk care home population. Novacyt believes daily testing has
the potential to reduce the transmission of SARS-CoV-2 in the
high-risk care home population and in a wider community
setting.
The Company has also been investing in its rapid testing
instrumentation platforms, q16 and q32, which allow for efficient
and high-performance testing in near-patient environments. By the
end of the year, Novacyt expects to manufacture and install an
increasing number of instruments and will have capacity for
significantly more as demand builds. As part of its investment, the
Company is further improving the operational workflow of its
reagents with these instrument platforms, reducing cycle times
significantly below 60 minutes and reducing the level of operator
involvement.
Continued high-performance of products
The success of the Company's COVID-19 test has been built around
robust design principles and the selection of a gene target that
has so far demonstrated exceedingly low levels of genetic mutation
and variation. To date, the gene target has been analysed against
over 64,000 individual COVID-19 viral sequences and demonstrated
100% detection. The Company's recently launched two-gene target
test for COVID-19 has also been added to this weekly surveillance
monitoring programme to demonstrate continued efficacy of the test
to diagnose SARS-CoV-2.
Expansion of product portfolio in respiratory and transplant
bacterial and viral diseases
As part of its renewed strategy, Novacyt plans to build its
international presence with an increased portfolio of IVD products
for clinical use in respiratory and transplantation markets. A new
R&D pipeline of products is being developed to enable Novacyt
to build upon its reputation established in COVID-19 testing. The
Company will continue to seek immediate approval for IVD
classification of new products, as well as developing current,
specific products from Primerdesign's extensive research-use-only
range to establish a portfolio of high value, clinically approved
diagnostics.
Protein diagnostics
During H1 2020, the Company's protein diagnostics business,
comprising of Lab21 Healthcare and Microgen Bioproducts, was
significantly influenced by the COVID-19 pandemic and saw a
reduction in global demand for its products. As a result, Novacyt
engaged Chartwell during the period to focus on operational
efficiencies in manufacturing to improve future outputs and lower
the cost of goods.
The Company has also developed a plan to expand its Pathflow(R)
brand of products and expects to launch a number of additional
tests over the next few months to expand its rapid testing
portfolio for infectious diseases.
The Company continues to make good progress in the development
and launch of a central lab-based serology test for the detection
of the IgG antibody to COVID-19. To date, the product has
demonstrated significant levels of sensitivity and specificity for
detection of IgG in patients 14 days after testing positive for
COVID-19 by a PCR test. Novacyt now expects to launch a CE Mark
approved product by the end of September 2020.
Strategy update
Next stage of growth
The Directors have identified specific growth opportunities in
the large, fast-growing diagnostics market. Supported by its core
clinical diagnostics capabilities of IVD product development,
manufacturing, regulatory and commercialisation, the Company
remains committed to creating shareholder value through its
three-pillar strategy of organic, R&D and acquisitive growth,
which will be focused within the respiratory and transplant
bacterial and viral diagnostic markets.
Respiratory and transplant are both high-margin, fast-growing
IVD markets where the Company already has expertise, including
COVID-19 and EBV and BKV products launched last year. Novacyt
intends to leverage the new customers and brand position it has
established during the COVID-19 pandemic to further penetrate these
markets through 2021 and beyond. Importantly, Novacyt will use the
skills, infrastructure and experience of both its business
divisions (Primerdesign and Lab21) to deliver solutions that
utilise the Group's protein and molecular diagnostic
capabilities.
The growth strategy aims to enable Novacyt to continue to grow
the size of the core business but also to accelerate this through
strategic acquisitions. The Directors believe the strong demand for
COVID-19 diagnostic testing will continue through the next few
months and well into next year, which will underpin the ongoing
financial transformation of the Group and its trajectory towards
becoming a market leader in respiratory and transplant clinical
diagnostics.
The Company intends to invest both organically and through
M&A in establishing a direct sales force in certain markets.
Novacyt plans to establish a strong commercial infrastructure in
the UK, where a significant investment in the diagnostics market is
taking place. In addition, it is in the process of evaluating the
best model to operate in the US, the world's largest IVD market. It
is also considering certain key mainland European markets. In the
rest of the world, Novacyt will continue to develop its successful
distributor and partnership sales model.
Novacyt has demonstrated during the last six months the
financial value and profitability it can generate in the right
clinical IVD markets with a low-cost base. To achieve additional
revenue, the Company will continue to invest in R&D to drive
new product development. Novacyt also plans to accelerate revenues
and additional profitability through selective and accretive
acquisitions. These actions are expected to replace any potential
lost revenues from a future decline in COVID-19 testing.
Market dynamics to support strategy
The focus on the importance of diagnostics, as a result of the
COVID-19 pandemic, is leading to increased opportunities and
anticipated significant new investment in the sector.
IVD market
With an estimated global market size of $69.5 billion(1) in
2020, the IVD industry is set to experience steady growth and
continued consolidation. Growing at a 5-year CAGR of 5%, some
analysts expect IVD to top $110 billion(1) by 2030. The industry is
expected to see growth in profits as consolidation and
technological advancements lead to greater economies of scale.
Growth drivers include an aging world population, increased
technological innovation leading to increased personalisation of
medicine and care, involvement in healthcare by technology
companies, rising living standards in developing nations, industry
consolidation and an increase in the incidence of chronic and
infectious diseases.
(1) BIS Research; Global In Vitro Diagnostic Market, July
2020
Centralised and decentralised testing markets
COVID-19 continues to present Novacyt with a significant
opportunity to place rapid mobile instruments where the shortage of
testing capacity and limitations of laboratory-based testing is
driving healthcare away from large centralised platforms into
decentralised more flexible platforms. Beyond COVID-19, Novacyt
believes there is the potential for a long-term shift in testing
policy towards decentralisation. With the launch of Novacyt's
near-patient testing system in July 2020, the Company is well
positioned to address this drive towards rapid, decentralised
testing.
The pandemic has also highlighted the limitations of closed
testing systems (platforms which are only compatible with tests
supplied by the instrument manufacturerer) in centralised
laboratories where availability of tests and related consumables
has been limited and has, therefore, impacted utilisation of
testing capacity. The Company believes healthcare providers will
identify a need to have more open systems (platforms which are
compatible with tests from a variety of suppliers) along with a
decentralised testing policy. Both shifts in policy would play to
core strengths of Novacyt.
Financial review
Revenue
Unaudited revenues for the first half of 2020 were EUR72.4m
compared to revenues for 2019 of EUR7.2m, representing a growth
rate of over 900% predominantly driven by the strong growth from
Primerdesign. This follows the successful development and launch of
one of the world's first molecular tests for COVID-19 in January
2020.
Gross margin
Gross profit has shown continued positive momentum, increasing
to EUR60.3m (83%) compared to EUR4.6m (63%) in the first half of
last year. This margin (83%) is in line with Primerdesign's
historic margin and, therefore, as Primerdesign has increased its
overall share of Group revenue, it has driven up the overall Group
percentage margin.
Primerdesign maintained its strong gross margin delivering 85%
in H1 2020, demonstrating that gross margin can be maintained as
the business is scaled.
The Lab21 Products business unit has been significantly impacted
by COVID-19 as many of its customers focused their attention on
COVID-19 testing resulting in a significant year-on-year revenue
and margin decline. However, the business entered H2 with a strong
order book and expects to see sales and margin improve towards the
end of 2020.
EBITDA
The Group continued its profitability trend delivering an EBITDA
of EUR49.4m in the first half of 2020. The underlying Primerdesign
EBITDA margin has increased to over 80% from 40% in H1 2019 when
management charges are excluded, demonstrating that the division
can be scaled without significant additional overheads. With
Primerdesign delivering approximately 98% of Group revenue in H1
2020 at 85% gross margin, its continued success contributes
substantially to the Group's positive EBITDA as the effect of
increasing Primerdesign revenues as a percentage of overall Group
revenues has been to enhance the overall profitability of the
Group.
To support the substantial growth seen by the Group in 2020,
investment has been made in overheads including the hiring of new
staff and additional facilities spend to maximise manufacturing
output. As a percentage of revenue these incremnental costs are
negligible, which is reflected in the Group delivering an EBITDA
margin of 68% in H1 2020.
Operating Profit
The Group delivered an operating profit of EUR48.3m compared
with a H1 2019 loss of EUR0.7m. Year-on-year exceptional charges
and depreciation/amortisation costs are only EUR0.2m higher in
2020, driven by the impairment of Omega ID acquisition intangible
assets. The key driver for the movement from a loss in 2019 to a
profit in 2020 is driven by the EBITDA profitability of
EUR49.4m.
Net Profit After Tax
Net proft after tax increased to EUR40.2m in H1 2020 from a loss
of EUR2m in H1 2019. Due to the settlement of all outstanding Group
debt in June 2020, borrowing costs increased year-on-year by
EUR1.7m to EUR2.3m. As a result of the profits delivered by the
Group in H1 2020, a UK corporation tax provision of EUR5.9m has
been made at 30 June 2020, which was subsequently paid in July
2020.
Balance Sheet
Dec
EUR'000 Jun-20 -19 EUR'000 Jun-20 Dec -19
Goodwill 15,911 15,918 Share capital and premium 66,721 61,711
Other non-current
assets 7,225 8,245 Retained earnings (7,959) (47,117)
Total non-current
assets 23,136 24,163 Total equity 58,762 14,594
Inventories 15,558 2,439 Borrowings (> 1 yr) - 6,137
Trade and other Lease liabilities -
receivables 28,470 2,168 long-term 2,043 2,356
Other current Other provisions and
assets 1,091 420 long-term liabilities 293 289
Cash and cash
equivalents 19,720 1,805 Total non-current liabilities 2,336 8,782
Total current
assets 64,839 6,832
Borrowings (< 1 yr) - 2,189
Lease Liabilities -
short-term 225 268
Trade and other liabilities 16,296 4,591
Other provisions and
short-term liabilities 10,356 641
Total current liabilities 26,877 7,689
Assets classified Liabilities classified
as held for sale - 70 as held for sale - -
TOTAL ASSETS 87,975 31,065 TOTAL EQUITY AND LIABILITIES 87,975 31,065
------------------ -------------- -------------- ------------------------------ -------------- --------------
The Group held EUR19.7m of cash on the balance sheet at 30 June
2020 compared to EUR1.8m at 31 December 2019. This large increase
in cash is predominantly driven by the significant upturn in
trading that has delivered substantial profits to the Group,
resulting in an operating cash inflow of EUR24.6m. Cash outflows
from financing activities totalled EUR5.6m, made up of a EUR2.9m
cash inflow from the conversion of warrants and an outflow of
EUR8.5m on settling all Group debts/borrowings. Capital expenditure
in H1 2020 was minimal at EUR0.2m as infrastructure investment had
been made in prior periords.
Inventory has increased by EUR13.2m to EUR15.6m from EUR2.4m at
31 December 2019. The majority of the inventory balance relates to
building stock to meet the needs of the COVID-19 pandemic and allow
Novacyt to fulfil customer demand immediately. The lead time for
obtaining some raw materials is significant, so bulk orders have
been placed to ensure there are no supply chain issues, which
resulted in the higher raw materials balance at 30 June 2020.
Trade receivables have increased since the year end by EUR26.3m
to EUR28.5m driven by the ramp-up in sales as the Group responded
to the COVID-19 pandemic with the launch of its tests.
Approximately 90% of the debtor book as at 30 June 2020 was current
and related to sales in June 2020. Prepayments have increased since
31 December 2019 by EUR0.7m driven by upfront payments for stock
(consumables and instruments) that were not received in H1
2020.
At 30 June 2020, the Company is debt free after settling all
outstanding amounts, such that net debt decreased from EUR8.3m at
31 December 2019 to nil.
Short-term provisions have increased by EUR4.1m since 31
December 2019 to EUR4.2m at 30 June 2020, driven by an increase in
the long-term incentive plan liability, as a result of the
Company's share price increasing since the start of the year.
Trade and other liabilities has increased from EUR4.6m since 31
December 2019 to EUR16.3m at 30 June 2020 in line with the growth
in the business. Trade payables has increased to EUR3.6m and
accrued invoices covering predominantly third-party manufacturing
costs has increased to EUR7.6m, from EUR2.1m and EUR0.9m,
respectively. In order to meet market demand for the COVID-19 test,
the Group took the early decision to outsource elements of
manufacturing to allow the business to be scaled up quickly. Tax
liabilities in the form of Value Added Tax (VAT) payable in the UK
has increased by EUR4.6m to EUR4.7m from EUR0.1m at 31 December
2019.
For the first time, the Group has been able to benefit from the
UK Patent Box regime, which provides a special reduced corporation
tax rate to incentivise research and development by taxing patent
revenues differently from other commercial revenues. Subject to a
number of adjustments, the effective rate of tax on profits derived
from the sale of products subject to patents is close to 10% rather
than the normal UK tax rate of 19%. The Patent Box rate is normally
claimed once a patent has been granted, but it is expected that the
Group's products will fall within a specific exemption allowing the
reduced rate to be claimed immediately. Due to the uncertainty over
the details of the full calculation, for current reporting purposes
a reduced corporation tax rate of 12% on profits from patented
products has been assumed. As a result of the profit delivered in
H1 2020, the Group booked a UK corporation tax provision of
EUR5.9m.
Consolidated income statement as at 30 June 2020
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR Notes 2020 2019
Continuing Operations
============ ============
Revenue 4, 5 72,374 7,223
Cost of sales 6 - 12,109 - 2,643
============================================================== ============ ============
Gross profit 60,265 4,580
Sales, marketing and distribution expenses - 1,966 - 1,317
Research and development expenses - 593 - 229
General and administrative expenses - 9,035 - 3,639
Governmental subsidies - 7
Operating profit/loss before exceptional items 48,672 - 598
Other operating income 7 5 57
Other operating expenses 7 - 353 - 123
Operating profit/loss after exceptional items 48,324 -664
============================================================== ============ ============
Financial income 8 87 36
Financial expense 8 - 2,292 - 579
Profit/loss before tax 46,120 - 1,208
============================================================== ============ ============
Tax (expense)/income 9 - 5,924 -
Profit/loss after tax from continuing operations 40,195 - 1,208
============================================================== ============ ============
Loss from discontinued operations - - 786
Profit/loss after tax attributable to owners of the company 40,195 - 1,994
============================================================== ============ ============
Profit/loss per share (EUR) 10 0.61 -0.05
Profit/diluted loss per share (EUR) 10 0.61 -0.05
Profit/loss per share from the continuing operations (EUR) 0.61 -0.03
Profit/diluted loss per share from the continuing operations (EUR) 0.61 -0.03
Loss per share from the discontinued operations (EUR) 0.00 -0.02
Diluted loss per share from the discontinued operations (EUR) 0.00 -0.02
The June 2019 consolidated income statement is presented to
reflect the impacts of the application of IFRS 5 relative to
discontinued operations, by stating the NOVAprep activity on a
single line "Loss from discontinued operations".
Consolidated statement of comprehensive income as at 30 June
2020
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR Notes 2020 2019
Profit/loss after tax 40,195 - 1,994
========================================================================== ============ ============
Items that may be reclassified subsequently to profit or loss:
Translation reserves - 1,959 - 2
============ ============
Total comprehensive profit/loss 38,236 - 1,996
========================================================================== ============ ============
Comprehensive profit/loss attributable to:
Owners of the company (*) 38,236 - 1,996
(*) There are no non-controlling interests.
Statement of financial position as at 30 June 2020
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in '000 EUR Notes 2020 2019
Goodwill 15,911 15,918
Other intangible assets 3,514 4,313
Property, plant and equipment 3,221 3,478
Non-current financial assets 112 240
Other long-term assets 377 214
===================================== ============ =============
Non-current assets 23,136 24,163
Inventories and work in progress 11 15,558 2,439
Trade and other receivables 12 28,470 2,168
Tax receivables - 4
Prepayments 1,081 406
Short-term investments 10 10
Cash & cash equivalents 13 19,720 1,805
===================================== ============ =============
Current assets 64,839 6,832
Assets classified as held for
sale - 70
Total assets 87,975 31,065
===================================== ============ =============
Bank overdrafts and current portion
of long-term borrowings 14 - 2,189
Lease liabilities - short-term 225 268
Provisions - short-term 15 4,237 50
Trade and other liabilities 16 16,296 4,591
Tax liabilities 5,650 -
Other current liabilities 469 591
===================================== ============ =============
Total current liabilities 26,877 7,689
Net current assets / (liabilities) 37,962 -857
===================================== ============ =============
Borrowings and convertible bond
notes 14 - 6,137
Lease liabilities - long-term 2,043 2,356
Provisions - long-term 15 215 240
Deferred tax liabilities 78 49
===================================== ============ =============
Total non-current liabilities 2,336 8,782
Total liabilities 29,213 16,471
===================================== ============ =============
Net assets 58,762 14,594
===================================== ============ =============
Statement of financial position as at 30 June 2020
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in '000 EUR Notes 2020 2019
Share capital 17 4,708 3,873
Share premium account 62,151 58,012
Own shares - 138 - 174
Other reserves - 5,265 - 3,306
Equity reserve 1,323 401
Retained losses - 4,017 - 44,212
====================================== ============ =============
Total equity - owners of the company 58,762 14,594
Total equity 58,762 14,594
====================================== ============ =============
Statement of changes in equity as at 30 June 2020
Amounts in
'000 EUR Other group reserves
-----------------------------------------------------
Other
Acquisition comprehensive
of the income on
Share Share Own Equity shares of Translation retirement Retained Total
capital premium shares reserves Primerdesign reserve benefits Total loss equity
======== ======== ======= ========= ============= ============ ============== ======== ========== ========
Balance at 1
January 2019 2,511 58,249 - 178 422 - 2,948 139 - 11 - 2,820 - 38,046 20,138
=============== ======== ======== ======= ========= ============= ============ ============== ======== ========== ========
Translation
differences - - - - - - 486 - - 486 - - 486
Loss for the
period - - - - - - - - - 6,558 - 6,558
Total
comprehensive
loss for the
period - - - - - - 486 - - 486 - 6,558 - 7,044
Issue of share
capital - - 180 - - - - - - - - 180
Own shares
acquired/sold
in the period - - 4 - - - - - - 4
Other changes 1,362 -57 - -21 - - - - 392 1,676
Balance at 31
December 2019 3,873 58,012 - 174 401 - 2,948 - 347 - 11 - 3,306 - 44,212 14,594
=============== ======== ======== ======= ========= ============= ============ ============== ======== ========== ========
Translation
differences - - - - - - 1,959 - - 1,959 - - 1,959
Profit for the
period - - - - - - - - 40,195 40,195
Total
comprehensive
income /
(loss) for
the period - - - - - - 1,959 - - 1,959 40,195 38 236
Issue of share
capital 835 4,139 - - - - - - - 4,974
Own shares
acquired/sold
in the period - - 36 - - - - - - 36
Other changes - - - 922 - - - - - 922
Balance at 30
June 2020 4,708 62,151 - 138 1,323 - 2,948 - 2,306 -11 -5,265 -4,017 58,762
=============== ======== ======== ======= ========= ============= ============ ============== ======== ========== ========
Statement of cash flows as at 30 June 2020
Amounts in '000 EUR Notes (Unaudited) (Unaudited)
Six month Six month
30 June 30 June
2020 2019
Net cash from operating activities 18 24,603 - 577
========================================================== ============ ============
Investing activities
Proceeds on disposal of property, plant and equipment 3 -
Purchases of patents and trademarks - 43 - 158
Purchases of property, plant and equipment - 268 - 200
Purchases of trading investments 78 6
Acquisition / sale of subsidiaries net of cash 7 - 278
Net cash generated from investing activities - 223 - 630
========================================================== ============ ============
Investing cash flows from discontinued activities - - 25
Investing cash flows from continuing operations - 223 - 605
Repayments of borrowings and other financial liabilities 14 - 5,991 - 993
Proceeds on issue of borrowings and bond notes - 2,036
Proceeds on issue of shares 2,908 - 69
Disposal (purchase) of own shares - Net 36 - 2
Variation of other short-term financing facilities - 775 -
Paid interest expenses - 1,808 - 290
Net cash generated from financing activities - 5,630 682
========================================================== ============ ============
Financing cash flows from discontinued activities - -
Financing cash flows from continuing operations - 5,630 682
Net increase/(decrease) in cash and cash equivalents 18,750 - 525
========================================================== ============ ============
Cash and cash equivalents at beginning of year 1,805 1,132
Effect of foreign exchange rate changes - 835 - 9
Cash and cash equivalents at end of period 19,720 598
========================================================== ============ ============
Notes to the interim financial statements for the six month
period to 30 june 2020
1. General Information and basis of preparation
The Novacyt Group is an international diagnostics business
generating an increasing portfolio of invitro and molecular
diagnostic tests. Its core strengths lie in diagnostics product
development, commercialisation, contract design and manufacturing.
The Company's lead business units comprise of Primerdesign and
Lab21 Products, supplying an extensive range of high-quality assays
and reagents worldwide. The Group directly serves microbiology,
haematology and serology markets as do its global partners, which
include major corporates. 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 Company and its
subsidiaries (hereinafter referred to collectively as "the Group").
They are prepared and presented in '000s of euros.
The financial information includes all companies under exclusive
control. The Company does not exercise joint control or have
significant influence over other companies. Subsidiaries are
consolidated from the date on which the Group obtains effective
control. It has been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting
Standards as adopted for use in the EU (IFRSs).
This condensed consolidated interim financial information does
not constitute full statutory accounts. They do 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 2019. Statutory
accounts for the year ended 31 December 2019 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 2020 and 30
June 2019 is unaudited and the twelve months to 31 December 2019 is
audited.
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 Company's scope of
consolidation included the following companies:
At 30 June 2020
and 31 December 2019 At 30 June 2019
=============================================== ===============================================
Companies Interest Control Consolidation Interest Control Consolidation
percentage percentage method percentage percentage method
=============== ============== =============== ============== ============== =============== ==============
Biotec
Laboratories
Ltd 100.00 % 100.00 % FC 100.00 % 100.00 % FC
Lab21
Healthcare Ltd 100.00 % 100.00 % FC 100.00 % 100.00 % FC
Lab21 Ltd 0.00 % 0.00 % - 100.00 % 100.00 % FC
Microgen
Bioproducts
Ltd 100.00 % 100.00 % FC 100.00 % 100.00 % FC
Novacyt SA 100.00 % 100.00 % FC 100.00 % 100.00 % FC
Novacyt Asia
Ltd 100.00 % 100.00 % FC 100.00 % 100.00 % FC
Novacyt China
Ltd 100.00 % 100.00 % FC 100.00 % 100.00 % FC
Novacyt UK
Holdings Ltd 100.00 % 100.00 % FC 0.00 % 0.00 % -
Primerdesign
Ltd 100.00 % 100.00 % FC 100.00 % 100.00 % FC
2. Summary of accounting policies applied by the Group
The financial statements have been prepared in accordance with
International Financials Reporting Standards (IFRSs). The financial
statements have also been prepared in accordance with IFRSs adopted
by the European Union and therefore the Goup financial statements
comply with Article 4 of the EU IAS Regulation.
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 2019 Statutory Accounts for further
details ), the carrying amounts and useful lives of intangible
assets (see Note 17 of the 2019 Statutory Accounts for further
details ), deferred taxes (see Note 21 of the 2019 Statutory
Accounts for further details ), trade receivables (see Note 23 of
the 2019 Statutory Accounts for further details ) and provisions
for risks and other provisions related to the operating activities
(see Note 28 of the 2019 Statutory 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 2019 and which form the basis of the
2020 financial statements. The methodology for selecting
assumptions underpinning the fair value calculations has not
changed since 31 December 2019.
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 continue to adopt the going concern basis of
accounting in preparing the financial statements.
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 2020 of EUR19,720,000;
- the payment of the LTIP that commenced in November 2017 to be paid in November 2020;
- increased operating cash inflows generated by the COVID-19 pandemic.
Leases - After adoption of IFRS 16
IFRS 16 Leases was issued in January 2016 and is effective for
an entity's financial statements for annual reporting periods
beginning on or after 1 January 2019. IFRS 16 sets out the
principles for the recognition, measurement, presentation and
disclosure of leases. IFRS 16 introduces significant changes to
lessee accounting: it removes the distinction between operating and
finance leases under IAS 17 and requires a lessee to recognise a
right-of-use asset and a lease liability at lease commencement for
all leases, except for short-term leases and leases of low value
assets.
-- The right-of-use asset is initially measured at cost and
subsequently measured at cost less accumulated depreciation and
impairment losses, adjusted for any remeasurement of the lease
liability
-- The lease liability is initially measured at the present
value of the future lease payments discounted using the discount
rate implicit in the lease (or if that rate cannot be readily
determined, the lessee's incremental borrowing rate). Subsequently,
the lease liability is adjusted for interest and lease payments, as
well as the impact of lease modifications, amongst others.
IFRS 16's transition provisions permit lessees to use either a
full retrospective or a modified retrospective approach for leases
existing at the date of initial application of the standard, with
options to use certain transition reliefs.
The Group has elected to apply the standard using the modified
retrospective approach from 1 January 2019, utilising certain of
the practical expedients provided within the standard. The Group
recognised right-of-use assets and lease liabilities in the
consolidated statement of financial position, initially measured at
the present value of the future lease payments, with the
right-of-use asset adjusted by the amount of any prepaid or accrued
lease payments.
Inventories
Inventories are carried at the lesser of their acquisition cost
and their recoverable amount. The acquisition cost of inventories
includes materials and supplies, and, where applicable, personnel
expenses incurred in transforming inventories 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 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 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 upon credit terms by more than 90 days, that 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.
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 past due.
Cash and cash equivalents
Cash equivalents are held in order 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 profit or loss.
Trade payables
Trade payables are obligations to provide cash or other
financial assets. They are recognised in the balance sheet when the
Group becomes a party to a transaction generating liabilities of
this nature. Trade and other payables are recognised in the balance
sheet 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 balance sheet when the corresponding
obligation is extinguished.
Trade payables have not been discounted, because the effect of
doing so would be immaterial.
Provisions
-- Long Term Incentive Plan
Novacyt granted to certain employees shares under a long-term
management incentive plan adopted on 1 November 2017. The exercise
price is set at the share price on the grant date and the options
will be settled in cash. The options will fully vest on the third
anniversary of the grant date. The payment expenses are calculated
under IFRS 2 "Share-based payments". The accounting charge is
spread across the vesting period to reflect the services received
and a liability recognised on the statement of financial
position.
Taxation
The income tax expense represents the sum of the tax currently
payable 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 profit
or loss 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 based on the judgement of
external tax professionals supported by the Group and 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 and they are expected to reverse in the
foreseeable future.
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.
Profit/loss per share
The Group reports basic and diluted profit/loss per common
share. Basic profit/loss per share is calculated by dividing the
profit attributable to common shareholders of the Company by the
weighted average number of common shares outstanding during the
period.
Diluted profit/loss per share is determined by adjusting the
profit attributable to common shareholders by the weighted average
number of common shares outstanding, taking into account the
effects of all potential dilutive common shares, including options.
These options are taken into account for the calculation of the
profit/loss per share only if their exercise price is higher than
the market price and if they have a dilutive effect on the result
per share.
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/credited in arriving at
operating profit on the face of the consolidated income
statement.
Loss from discontinued operations
On the 11(th) December 2018, Novacyt announced its intention to
sell the NOVAprep business and thus presents its financial results
in accordance with the IFRS 5 accounting rule on discontinued
operations. As a result, all revenues and charges generated by this
activity are presented on a single line, below the net result. This
business was disposed of on the 24(th) December 2019.
3. Critical accounting judgements and key sources of estimatE
uncertainty
The preparation of the financial information in accordance with
IFRS requires management to exercise judgement on the application
of accounting policies, and to make estimates and assumptions that
affect the amounts of assets and liabilities, and income and
expenses. The underlying estimates and assumptions, made in
accordance with the going concern principle, are based on past
experience and other factors deemed reasonable in the
circumstances. They serve as the basis for the exercise of
judgement required in determining the carrying amounts of assets
and liabilities that cannot be obtained directly from other
sources. Actual amounts may differ from these estimates. The
underlying estimates and assumptions are reviewed continuously. The
impact of changes in accounting estimates is recognised in the
period of the change if it affects only that period, or in the
period of the change and subsequent periods if such periods are
also affected.
Key sources of estimation uncertainty
The Group has a number of key sources of estimation uncertainty.
Of these items only the measurement of goodwill, the measurement of
useful lives of intangible assets, the measurement of fair value of
assets and liabilities in business combinations, the recognition of
deferred taxes, the value of trade and other receivables and the
provisions for risks and other provisions related to the operating
activities are considered likely to give material adjustment. Other
areas of estimates are deemed not material.
Taxation provisions:
The Group's current tax provision of EUR5,924,000 relates to
management's assessment of the amount of tax payable on open tax
positions where the liabilities remain to be agreed with HMRC.
Uncertain tax items included in the provision of EUR5,924,000
relate principally to the interpretation of tax legislation
regarding arrangements entered into by the Group in the UK. Due to
the uncertainty associated with such tax items, there is a
possibility that, on conclusion of open tax matters at a future
date, the final outcome may differ significantly.
Whilst a range of outcomes is reasonably possible, the extent of
the reasonably possible range is from additional liabilities of up
to EUR3,683,000 to a reduction in liabilities of up to
EUR1,052,000.
4. Revenue
The table below shows revenue from ordinary operations:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR 2020 2019
Manufactured goods 72,210 6,676
Services - 306
Traded goods 26 58
Other 138 183
Total Revenue 72,374 7,223
======================= ============ ============
The majority of the Group's revenue is generated in British
Pounds. The Group has not hedged against the associated currency
risk.
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 and the managers of the various entities to make
decisions regarding the allocation of resources to the segment and
to assess its performance;
- for which discrete financial information is available.
The Group has identified three operating segments, whose
performances and resources are monitored separately:
o Corporate and Cytology
Previously, this segment represented the NOVAprep and French
Group central costs. Following the disposal of NOVAprep in December
2019, this segment now shows the French Group central costs, the
results of Novacyt UK Holdings Limited and the results of NOVAprep
are shown in a single line - Discontinued Operations.
o Lab21 Products (formerly Corporate and Diagnostics)
This segment represents Lab21 Products which is a developer,
manufacturer and distributor of a large range of protein-based
infectious disease IVD products with both Microgen Bioproducts Ltd
and Lab21 Healthcare Ltd now based in Camberley, UK.
o Primerdesign (formerly Molecular Products)
This segment represents the activities of Primerdesign, which is
a designer, manufacturer and marketer of molecular 'real time' qPCR
testing devices and reagents in the areas of infectious diseases
based in Southampton, UK.
The Chief Operating Decision Maker is the Chief Executive
Officer.
o Reliance on major customers
Primerdesign's revenue includes approximately EUR21,000,000
(2019: EUR nil) from sales to the Group's largest customer. One
other customer contributed 10% or more to the Group's revenue in
2020.
Breakdown of revenue by operating segment and geographic
area
o At 30 June 2020
Amounts in '000
EUR Lab21 Products Primerdesign Total
Geographical
area
Africa 64 2,014 2,078
Europe 943 58,040 58,983
Asia-Pacific 518 2,764 3,282
America 195 3,685 3,880
Middle East 70 4,081 4,151
Revenue 1,790 70,584 72,374
=================== =============== ============== ========
o At 30 June 2019
Amounts in '000
EUR Lab21 Products Primerdesign Total
Geographical
area
Africa 358 161 518
Europe 1,555 1,352 2,906
Asia-Pacific 1,097 496 1,594
America 409 980 1,390
Middle East 551 264 815
Revenue 3,970 3,253 7,223
=================== =============== ============== =======
6. COST OF SALES
The table below shows the cost of sales:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR 2020 2019
Cost of inventories recognised
as an expense 4,811 1,592
Change in stock provision 145 152
Manufacturing sub-contracting 6,011 -
costs
Non-stock items and supplies 130 17
Freight costs 122 39
Direct labour 859 815
Other 31 28
Total Cost of sales 12,109 2,643
================================= ============ ============
Cost of inventories recognised as an expense, has increased
significantly due to higher sales in H1 2020. In order to respond
to market demands in 2020 some elements of manufacturing were
outsourced resulting in EUR6,011,000 of sub-contractor costs.
7. Other operating income and expenses
The table below shows other operating income and expenses:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR 2020 2019
Other income 5 57
Other operating income 5 57
=========================== ============ ============
Litigation with employees - -3
Restructuring expenses -126 -31
Business sale expenses - -21
Brand impairment - Omega -200 -
Other expenses -27 -68
Other operating expenses -353 -123
=========================== ============ ============
The restructuring expenses in 2020 relate to site closure costs
for the Bridport facility, following the transfer of manufacturing
of the Lab21 Healthcare portfolio of products to our Camberley
facility.
No further products will be sold under any brands/trademarks
acquired as part of the Omega Infectious Diseases acquisition in
2018, and as a result the remaining intangible asset has been fully
written down in 2020.
8. Financial income and expense
The table below shows financial income and expense:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR 2020 2019
Exchange gains 33 36
Actualisation of the long term 54 -
sale receivables
Financial income 87 36
=================================== ============ ============
Interest on loans -1,744 -430
Negma phantom warrant settlement -404 -
Exchange losses -115 -53
Other financial expense -29 -96
Financial expense -2,292 -579
=================================== ============ ============
Financial Expense:
Interest on loans
The interest charge is mainly related to the Vatel and Harbert
European Growth Capital bond notes. The June 2020 figure has
increased substantially due to the full repayment of the
EUR5,000,000 Harbert European Growth Capital bond and its
associated interest charges.
Negma phantom warrant settlement
In November 2019 Novacyt SA granted Negma 1,300,000 phantom
warrants, i.e. warrants that do not give access to the share
capital of the Company, in exchange for the cancellation of
1,300,000 warrants giving access to the share capital of Novacyt
SA. The phantom warrants guaranteed to pay Negma the profit from
the difference between the EUR0.20 exercise price and the share
price on the day before the exercise date. This instrument was
recognised as a derivative financial liability at December 2019 for
a value of EUR90,000. Negma exercised the phantom warrants in
February 2020, which resulted in a payment to Negma of EUR494,000.
The charge at June 2020 is the difference between these two
amounts.
9. income tax
The standard rate of corporation tax applied to reported profit
is 28 percent, which is the tax rate applicable to Novacyt SA in
France. It has not changed compared to June 2019.
Taxation for other jurisdictions (mainly the UK) is calculated
at the rates prevailing in the respective jurisdictions.
The charge for the period can be reconciled to the profit before
tax as follows:
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR 2020 2019
Profit before tax on continuing operations 46,120 -1,208
Tax at the French corporation tax rate (28
%) 12,914 -338
Tax effect of non-deductible expenses and
non-taxable income 101 -86
Tax effect of utilisation of tax losses not -244 -
previously recognised
Change in unrecognised deferred tax assets 1,610 534
Research tax expenditure enhancement -90 -63
Patent box relief -3,683 -
Effect of different tax rates of subsidiaries
operating in other jurisdictions -4,689 9
Other effects 5 -56
Tax expense for the period 5,924 -
=============================================== ============ ============
Matters affecting the tax charge
For the first time, the Group has been able to benefit from the
UK Patent Box regime, which is a special low corporate tax rate
used by several countries to incentivise research and development
by taxing patent revenues differently from other commercial
revenues. Subject to a number of adjustments, the effective rate of
tax on profits derived from the sale of products subject to patents
is close to 10% rather than the normal UK tax rate of 19%. The
Patent Box rate is normally claimed once a patent has been granted,
but it is likely that the Group's products will fall within a
specific exemption allowing the reduced rate to be claimed
immediately. Due to the uncertainty over the details of the full
calculation, for current reporting purposes a reduced corporation
tax rate of 12% on profits from patented products has been
assumed.
10. Profit/Loss per share
Profit/loss per share is calculated based on the weighted
average number of shares outstanding during the period. Diluted
profit/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 June
2020, there are no longer any outstanding dilutive instruments.
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in 000' EUR 2020 2019
Net loss attributable to owners of the company 40,195 - 1,994
Impact of dilutive instruments - -
Net loss attributable to owners of the company 40,195 - 1,994
================================================== ========================== ==========================
Weighted average number of shares 65,721,150 37,664,418
Impact of dilutive instruments - -
Weighted average number of diluted shares 65,721,150 37,664,418
================================================== ========================== ==========================
Earnings per share (EUR) 0.61 - 0.05
================================================== ========================== ==========================
Diluted earnings per share (EUR) 0.61 - 0.05
The table below presents the movements of the stock options
during the first 6 months of 2020. They were not taken into account
in the calculation of diluted earnings because they were
anti-dilutive for the period ending on 30 June 2019, and were all
exercised or elapsed at June 2020.
Beneficiary Kreos Primerdesign Yorkville Negma Harbert Total
================ =========== ============= ======================= =========== =========== =============
Grant 12 May 12 May 31 July 2015 to 25 April 5 November
date 2016 2016 18 July 2017 2019 2019
================ =========== ============= ======================= =========== =========== =============
Number
of warrants 353,536 1,000,000 1,501,427 2,979,544 6,017,192
================ =========== ============= ======================= =========== =========== =============
Exercise From EUR5.511 to
price EUR1.45 EUR1.16 EUR0.946 EUR0.20 EUR0.0698
================ =========== ============= ======================= =========== =========== =============
Exercise 1 November 12 May 3 years after issuance 25 April 5 November
deadline 2022 2021 2024 2026
================ =========== ============= ======================= =========== =========== =============
Accounting Equity Derivative Equity Derivative Derivative
financial financial financial
liability liability liability
================ =========== ============= ======================= =========== =========== =============
Number
of warrants
on 1 January
2020 353,536 1,000,000 853,216 1,679,544 6,017,192 9,903,488
================ =========== ============= ======================= =========== =========== =============
Warrants
exercised
in 2020 -353,536 -1,000,000 -528,541 -1,679,544 -6,017,192 -9,578,813
================ =========== ============= ======================= =========== =========== =============
Number
of additional
shares 353,536 1,000,000 528,541 1,679,544 6,017,192 9,578,813
================ =========== ============= ======================= =========== =========== =============
Share
capital
increase EUR512,627 EUR1,160,000 EUR500,000 EUR335,909 EUR420,000 EUR2,928,536
================ =========== ============= ======================= =========== =========== =============
Warrants
cancelled
in 2020 - - -324,675 - - -324,675
================ =========== ============= ======================= =========== =========== =============
Warrants - - - - - -
outstanding
on 30
June 2020
================ =========== ============= ======================= =========== =========== =============
11. Inventories and work in progress
The table below shows inventories and work in progress:
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in '000 EUR 2020 2019
Finished goods 9,084 780
Raw materials 5,133 1,399
Work in progress 1,480 282
Traded goods 69 82
Stock provisions -208 -104
Total 15,558 2,439
===================== ============ =============
Increased inventory levels are supporting the Group's revenue
growth, with significant finished goods being held in stock ready
for immediate dispatch to support the worldwide COVID-19 pandemic,
as demand remains high for the Primerdesign test kits.
The lead time for obtaining some raw materials was significant,
as such bulk orders have been placed to ensure there are no supply
chain issues, contributing to the higher raw materials balance in
2020.
12. Trade and other receivables
The table below shows trade and other receivables:
(Unaudited)
Six month (Audited) Year ended
30 June 31 December
Amounts in '000 EUR 2020 2019
Trade and other receivables 28,401 2,014
Estimated credit loss provision -552 -464
Accrued income 17 18
Tax receivables (excluding income tax) 428 392
Receivables on sale of businesses 176 178
Other receivables - 30
Total Trade and other receivables 28,470 2,168
========================================== ============ =====================
Trade receivables balances are due within one year. Once an
invoice is overdue from its due date by more than 90 days, this
invoice 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.
13. cash and cash equivalents
The table below shows cash and cash equivalents:
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in '000 EUR 2020 2019
Available cash 19,708 1,793
Money market deposits 12 12
Cash and cash equivalents 19,720 1,805
============================== ============ =============
14. Borrowings
The following tables show borrowings and financial liabilities
carried at amortised cost.
o Maturities as of 30 June 2020
Amount due for settlement within 12 Amount due for settlement after 12 Total
Amounts in '000 EUR months months
Bond notes - - -
Accrued interest on borrowings - - -
Short term financing facilities - - -
Total financial liabilities - - -
================================== ==================================== ==================================== ======
o Maturities as of 31 December 2019
Amount due for settlement within Amount due for settlement after 12 Total
Amounts in '000 EUR 12 months months
Bond notes 1,306 6,137 7,443
Accrued interest on borrowings 39 - 39
Short term financing facilities 844 - 844
Total financial liabilities 2,189 6,137 8,326
=================================== =================================== ==================================== ======
At 30 June 2020, the Group is debt free having repaid the
EUR5,000,000 bond subscribed by Harbert European Growth Capital and
converted the Vatel EUR4,000,000 bond into equity.
The short-term financing facility remains in place but no funds
have been drawn down as at 30 June 2020.
15. Provisions
The table below shows the nature of and change in provisions for
risks and charges for the period from 1 January 2020 to 30 June
2020:
At At
1 January 30 June
Amounts in '000 EUR 2020 Increase Reduction Reclass Change in exchange rates 2020
Provisions for restoration of
premises 226 3 - - -14 215
Long term management incentive
plan 14 - - -14 - -
Long-term provisions 240 3 - -14 -14 215
================================== =========== ========= ========== ======== ========================= =========
Long term management incentive
plan - 4,173 - 14 - 4,187
Provision for litigation 50 - - - - 50
Short-term provision 50 4,173 - 14 - 4,237
================================== =========== ========= ========== ======== ========================= =========
The table below shows the nature of and change in provisions for
risks and charges for the period from 1 January 2019 to 31 December
2019:
At At
1 January Change in exchange 31 December
Amounts in '000 EUR 2019 Increase Reduction Adoption of IFRS 16 rates 2019
Provisions for
restoration of
premises 147 7 - 25 87 10 226
Long term management
incentive plan 20 - - 6 - - 14
Long-term provisions 167 7 - 31 87 10 240
====================== =========== ========= ========== ==================== ===================== =============
Provision for
litigation 100 - - 50 - - 50
Short-term provision 100 - - 50 - - 50
====================== =========== ========= ========== ==================== ===================== =============
As a result of the share price increasing significantly since
December 2019, the provision for the long-term incentive plan for
management has increase substantially to EUR4,187,000 as at 30 June
2020.
16. Trade and other liabilities
(Unaudited) (Audited)
Six month Year ended
30 June 31 December
Amounts in '000 EUR 2020 2019
Trade payables 3,572 2,091
Accrued invoices 7,577 858
Social security liabilities 485 473
Tax liabilities 4,654 142
Other liabilities 8 37
Options classified as liabilities - 990
Total Trade and other liabilities 16,296 4,591
===================================== =========== ============
The options classified as liabilities at 31 December 2019
include the warrants and phantom warrants granted to Harbert
European Growth Capital, Negma and the former shareholders of
Primerdesign, that were exercised, in the first half of 2020.
Trade payables and accrued invoices have increased significantly
in line with increased revenue.
The EUR4,654,000 tax liability predominantly relates to Value
Added Tax (VAT) payable to HMRC in the UK.
17. Share capital
Amount Number
of share Unit value of shares
Amounts in '000 EUR capital per share issued
========================================= ========== =========== ===========
At 1 January 2019 2,511 0.07 37,664,341
Capital increase by conversion of
OCABSA 1,362 0.07 20,430,413
At 31 December 2019 3,873 0.07 58,094,754
Capital increase following the exercise
of warrants 639 0.07 9,578,813
Capital increase by conversion of
debt 197 0.07 2,952,681
At 30 June 2020 4,708 0.07 70,626,248
As of 31 December 2019, the Company's share capital of
EUR3,872,983.59 was divided into 58,094,754 shares with a par value
of 1/15th of a Euro each.
As of 30 June 2020, the Company's share capital of
EUR4,708,416.55 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.
18. Notes to the cash flow statement
(Unaudited) (Unaudited)
Six month Six month
30 June 30 June
Amounts in '000 EUR 2020 2019
Profit / Loss for the year / period 40,195 -1,994
Profit / Loss from the discontinued activities - -786
Profit / Loss from the continuing operations 40,195 -1,208
Adjustments for:
Depreciation, amortisation and impairment loss 897 863
Management long-term incentive plan 4,173 -
Undiscounting of the long-term sales receivable (NOVAprep & Lab21 Ltd) -54 -
(Increase) / decrease of fair value -90 -
Gains / (losses) on disposal of assets 166 6
======================================================================== =========== ===========
Operating cash flows before movements of working capital 45,287 -1,125
(Increase) / decrease in inventories -13,766 105
(Increase) / decrease in receivables -28,338 -224
Increase / (decrease) in payables 13,253 281
Cash from operations 16,436 -964
======================================================================== =========== ===========
Income taxes paid/(received) 5,928 -41
Finance costs 2,238 428
Net cash from operating activities 24,603 -577
======================================================================== =========== ===========
Operating cash flows from the discontinued activities - -633
Operating cash flows from the continuing operations 24,603 56
19. Impact of THE UK'S DEPARTURE FROM THE EUROPEAN UNION on Group activity
It is difficult to anticipate the impact of Brexit as trade
negotiations continue and the final trade agreements and regulatory
landscape is unknown. The tax consequences depend on the outcome of
negotiations between Europe and the United Kingdom, and to date are
undetermined.
Management is continually monitoring the situation and continues
to identify market, operational and legal risks and to take the
appropriate mitigation measures as deemed necessary.
20. Subsequent events
There are no subsequent events to report.
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END
IR FFFVFALIRLII
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