TIDMSBI
RNS Number : 2134V
SourceBio International PLC
13 April 2021
SourceBio International plc
("SourceBio", the "Company" or the "Group")
Final Results
SourceBio International plc (AIM: SBI), a leading international
provider of integrated state-of-the-art laboratory services and
products , announces its final results for the year ended 31
December 2020.
Corporate highlights
-- Company's successful Admission to AIM completed in October 2020
Financial highlights
-- Revenue increased by 139% to GBP50.7 million (2019: GBP21.2 million)
-- Gross profit increased by 135% to GBP20.5 million (2019: GBP8.7
million)
-- Adjusted EBITDA1 increased by 369% to GBP14.2 million (2019: GBP3.0
million)
-- Adjusted EPS2 increased nearly twelve-fold on a like-for-like basis
to 19.8 pence per share (2019: 1.7 pence per share)
-- Cash generated from operations increased by 120% to GBP6.4 million
(2019: GBP2.9 million)
-- Cash balance of GBP8.4 million (2019: GBP1.2 million) with bank
and shareholder borrowings eliminated (2019: GBP95.9 million)
(1) Adjusted EBITDA is earnings before interest, tax,
depreciation and amortisation (EBITDA) adjusted for exceptional
items (see note 6)
(2) Adjusted EPS is earnings per share ("EPS") adjusted for
shareholder loan and PIK loan note interest payable, exceptional
items and the tax effects of these items (see note 9)
Operational highlights
2020
-- In May 2020, SourceBio established a new business unit, Infectious
Disease Testing, with the launch of COVID-19 Antigen RT-PCR testing
services, through high volume laboratory based testing
-- SourceBio progressively expanded its laboratory capacity at its
facility in Nottingham to 10,500 tests per day by the year-end date
-- In November 2020, the Group announced that it had been accepted
into the Increasing Capacity Framework Agreement for cancer test
services to NHS England, an initiative to reduce the significant
backlog of procedures built up during 2020
-- In December 2020, SourceBio signed a strategic partnership agreement
with Oxford Nanopore to offer a new generation of rapid COVID-19
test, LamPORE, for use in both traditional laboratory and more localised
settings
Post period end
-- In January 2021, the Group signed a supply agreement with a leading
UK high street retail and pharmacy group, to provide COVID-19 testing
services to support roll-out in their stores
-- In February 2021, the Group signed an agreement with Mitie Security
Limited to manage the delivery of community based COVID-19 testing
services through Department of Health and Social Care ("DHSC") mobile
testing trailers
-- In March 2021, the Group announced its laboratory expansion in San
Diego, USA, to include COVID-19 PCR testing services
-- In March 2021, the Group announced it had entered into an agreement
with the Rugby Football Union and Premiership Rugby Limited to provide
COVID-19 screening testing services for elite rugby in England
-- Trading in the early months of 2021 has been solid. It is expected
that the Group's COVID-19 testing focus in 2021 will transition
from exclusively RT-PCR testing to a wide portfolio of offerings
Jay LeCoque, Executive Chairman, commented: "I am very pleased
to report to shareholders significant revenue growth and
dramatically increased underlying profitability in an extremely
busy year for SourceBio, that included a successful AIM listing in
October. The results have been dominated by the provision of
COVID-19 testing services and, accepting the ongoing impact of the
COVID-19 pandemic, the Board remains pleased with performance
across all areas of the business. The Group remains strongly
capitalised with no borrowings, which positions us well to deliver
further aggressive growth in 2021. In particular for 2021, we see
Infectious Disease Testing revenues coming from a number of
technologies, platforms and locations, fixed and mobile. The Board
is appreciative of the strong support from both long standing and
new shareholders and we look forward to providing further updates
in due course."
Contacts:
SourceBio International plc www.sourcebiointernational.com
Jay LeCoque, Executive Chairman Via Walbrook PR
Tony Ratcliffe, Chief Financial Officer
Liberum (Nominated Advisor and Broker) Tel: 020 3100 2000
Bidhi Bhoma
Richard Lindley
Euan Brown
Walbrook PR Limited Tel: 020 7933 8780 or sourcebio@walbrookpr.com
Paul McManus / Sam Allen Mob: 07980 541 893 / 07502
558 258
About SourceBio International plc
www.sourcebiointernational.com
SourceBio is a leading international provider of integrated
state-of-the-art laboratory services and products with clients in
the healthcare, clinical, life science research and biopharma
industries, with a focus on improving patient diagnosis, management
and care. Group revenues are derived from four core businesses
areas:
-- Infectious Disease Testing - a range of COVID-19 testing services
for commercial enterprises, private healthcare groups, NHS and the
DHSC. Utilising multiple technologies (PCR, LamPORE, LAMP, Lateral
Flow, Quantitative Antibody tests and whole genome sequencing for
positive results), SourceBio offers both screening and gold standard
COVID-19 testing and operates under ISO 15189 accreditation required
by the DHSC. SourceBio also provides employee testing solutions
to industry, direct to consumer home test kits (including 'Fit to
Fly', 'Test to Release' and '2 & 8 Day International Travel' approved
tests) whilst also being the lead operator on mobile testing unit
services to support outbreak testing for the DHSC, event and venue
testing.
-- Healthcare Diagnostics - histopathology and clinical diagnostic
services for the NHS and private healthcare across the UK and Ireland.
-- Genomics - DNA sequencing services for pharmaceutical and biotechnology
companies, academia, contract research organisations (CROs) and
other research groups in the UK, Europe and North America.
-- Stability Storage - shelf-life testing services and equipment for
pharmaceutical and biotechnology companies, contract manufacturers
and analytical testing companies from around the world but primarily
in the UK, Ireland and the USA.
More details on Group operations can be found here:
www.sourcebioscience.com
SourceBio International plc (SBI) is listed on the AIM market of
the London Stock Exchange.
Executive Chairman's Review
Summary of 2020
I am pleased to report a year of significant growth and
achievement in the business, indeed a transformational year which
also included the Company's Admission to AIM in October 2020.
It is with pleasure that I welcome new shareholders and
sincerely thank existing shareholders for their continued strong
support. I am encouraged to report that the Group has delivered
substantial progress and has reported strong financial results for
2020. It continues to perform well, with excellent growth in
revenues, earnings and cash generation.
The key performance indicators currently used by the Group are
revenue, gross profit, adjusted EBITDA and cash resources. In this
regard, revenues for the year increased to GBP50.7 million, an
increase of 139% on the prior year revenues of GBP21.2 million,
gross profit has increased to GBP20.5 million, an increase of 135%
on the prior year gross profit of GBP8.7 million, and adjusted
EBITDA has increased to GBP14.2 million, a level almost five-fold
that of the prior year adjusted EBITDA of GBP3.0 million. Cash
balances at the year-end date totalled GBP8.4 million with no bank
and shareholder borrowings, compared to cash of GBP1.2 million and
bank and shareholder borrowings of GBP95.9 million at the prior
year-end date. Further details of the financial performance can be
found in the Chief Financial Officer's Review and within the
financial statements.
The arrival and sustained impact of the COVID-19 pandemic has
clearly provided ongoing challenges across the globe. SourceBio was
early to see significant opportunities to help mitigate these
challenges and indeed has been able to more than make up for any
adverse impacts to the Group's long standing business units by
introducing large scale laboratory based COVID-19 testing services
from its Nottingham facility. A more detailed review of the year,
by business unit, is presented below.
The Board is very grateful for the significant hard work and
dedication of the entire SourceBio team in 2020 and for the many
achievements in what has certainly been a uniquely challenging
backdrop.
Business review
The business comprises four business units - Healthcare
Diagnostics, Genomics, Stability Storage and a fourth business
unit, Infectious Disease Testing, which was created in May 2020 as
the Group launched its COVID-19 testing service. Starting with
Infectious Disease Testing, a brief review of each business unit is
detailed below.
Infectious Disease Testing
In a swift response to the global COVID-19 pandemic, SourceBio
quickly leveraged its scientific capabilities, existing
accreditations with the NHS for pathology services, reconfigured
laboratory space and capitalised on its staff expertise to set up a
COVID-19 Antigen RT-PCR testing capability which launched in May
2020. The testing capacity was grown in modular steps through the
year to a targeted 10,500 tests per day capacity ahead of the
year-end date. The Group performed over 758,000 tests by the end of
2020 (and exceeded one million tests in the first quarter of
2021).
Test volumes were initially dominated by demand from the DHSC
but, as their requirements have become more variable, the customer
mix has become less polarised. The customer base in the year
comprised the DHSC, certain NHS trusts and other NHS constituents,
as well as private healthcare groups and commercial clients.
High volume COVID-19 Antigen RT-PCR laboratory-based tests
formed the entire revenues for 2020 but, as highlighted at the time
of Admission, the Board anticipates that whilst PCR based testing
will remain the gold standard test, the Group will offer additional
testing capabilities during 2021. The Group has already reviewed a
number of complementary applications, technologies and routes to
market. This is evidenced by the announcement of the collaboration
with Oxford Nanopore in December 2020, which increases the Group's
offering to include LamPORE rapid testing both in a traditional
laboratory setting and in more localised environments.
These services generated revenues totalling GBP34.5 million
(2019: GBPnil) and a gross profit of GBP13.7 million (2019:
GBPnil), equating to a gross margin percentage of 39.6%.
Healthcare Diagnostics
Healthcare Diagnostics provides a complete histopathology and
clinical diagnostics service for the sectioning, processing,
staining and analysis of tissue samples on self-prepared and
pre-prepared slides. SourceBio operates ISO 15189 accredited
medical laboratories and has built a significant network of
specialist consultant pathologists, all registered with the Royal
College of Pathologists and the General Medical Council. SourceBio
maintains service level agreements with over 130 NHS departments,
private healthcare providers and pharma and biotech customers.
The principal revenue stream within Healthcare Diagnostics is
Cellular Pathology testing, which involves the examination of
patient tissue pre- and post-operative. This business had rapidly
grown in the previous two years at approximately 40% per annum and
indeed grew at approaching 80% in the first quarter of 2020
compared to the first quarter in 2019. The arrival of the COVID-19
pandemic in the first quarter of 2020 and its continued impact had
a material effect on the quantity of elective surgeries in the UK
which reduced the levels of business throughput. This meant that
average monthly revenues in the latter nine months of the year
averaged approximately 21% of the average monthly revenues in the
first quarter, although there was a noticeable, but modest, uplift
in activity in the latter months of the year. The growing size of
elective surgery waiting lists has been well publicised in the
media and the Group has devoted time in the year to plan and
prepare for a material scale-up in activity that it believes will
be required when this very large amount of anticipated demand is
released.
SourceBio also offers through its Reference Laboratory enhanced
molecular diagnostic tests to further investigate the more complex
cases. This revenue stream was also impacted by COVID-19 but, by
the second half of 2020, was able to return to almost similar
levels of activity as pre-COVID-19.
In aggregate, these services generated revenues totalling GBP4.4
million (2019: GBP7.3 million) and a gross profit of GBP1.0 million
(2019: GBP2.9 million), equating to a gross margin percentage of
23.6% (2019: 40.0%), the reduction caused by the reduced volumes of
business.
Genomics
Genomics is the study of genes to help progress research and
clinical discovery for the pharmaceutical and healthcare
industries. SourceBio offers both traditional Sanger Sequencing,
which for many years has been the industry accepted standard for
sequencing single strands of DNA at a time, and Next Generation
Sequencing ("NGS"), which allows the sequencing of millions of
strands of DNA at once. NGS sequencing projects are typically
larger in scale, complexity and profitability but fewer in number.
The Group was disappointed with its revenue mix in 2019, with 75%
of Genomics business being Sanger Sequencing and only 25% being
NGS. Following the strategic investment in state-of-the-art
equipment in late 2019, the 2020 results have positively increased
the NGS component to 33% of total Genomics revenues. Whilst both
revenue streams were impacted by COVID-19, both bounced back within
approximately three months, with Sanger Sequencing in the second
half of the year operating at almost similar levels of activity as
pre-COVID-19, and NGS in the second half of the year operating at
levels approximately 30% higher than pre-COVID.
In aggregate, these services generated revenues totalling GBP4.2
million (2019: GBP4.5 million) and a gross profit of GBP1.7 million
(2019: GBP1.8 million), equating to a gross margin percentage of
41.1% (2019: 39.3%).
Stability Storage
The Stability Storage business unit comprises four offerings:
Stability Storage Services, Manufacturing, Service and Validation
and Analytical Testing Services primarily for the purpose of
shelf-life testing.
The largest of these offerings is Stability Storage Services,
which generated 52% (2019: 49%) of this business unit's revenues.
SourceBio delivers outsourced temperature and humidity-controlled
environment storage services for stability trials at all ICH
(International Council for Harmonization of Technical Requirements
for Pharmaceuticals for Human Use) specified conditions as well as
at bespoke conditions as required. Environmentally controlled
stability storage is the gateway for a number of products to be
released and to stay on the market. These products range from drug
products, medical devices, consumer products and packaging. The
Group is well established in this market with accredited facilities
in Rochdale, UK. The Group has invested in additional capacity in
the Tramore, Ireland facility and completed its fit-out and
relocation to a larger site in San Diego, USA, to support growth.
Business is secured on recurring contracts which are typically of
three year duration, so whilst there has been a reduction in
revenue of GBP0.3 million versus prior year, this has been caused
by the predicted natural expiry of contracts. By its nature, this
business line therefore provides highly visible recurring revenue
at gross margin levels of approximately 80% - indeed this business
line has been relatively robust as regards COVID-19.
For those clients wishing to perform shelf-life testing
in-house, the Group manufactures temperature and humidity
controlled equipment such as cabinets (low volume storage),
reach-in rooms and walk-in rooms (high volume storage) for
installation at customers' premises. This activity generated 16% of
this business unit's revenue (2019: 21%). Sales of capital
equipment are naturally variable and subject to economic
confidence, but the Board was pleased to secure solid new business
in the year and to have an attractive pipeline of further
opportunities.
SourceBio also provides Service and Validation services to
established clients which have previously purchased and installed
SourceBio equipment. These services comprise regular and periodic
servicing and testing of installed storage equipment at customer
premises to ensure adherence to relevant regulatory standards. This
activity generated 32% (2019: 30%) of this business unit's revenue,
although there was a modest reduction in revenue of GBP0.1 million
versus prior year, caused by the travel restrictions imposed by the
ongoing COVID-19 pandemic.
The Group established its new Analytical Testing service in
2020, allowing SourceBio to undertake the required periodic
withdrawal and testing of customers' product samples held within
the Group's temperature and humidity controlled storage facilities.
This activity generated initial token revenues in 2020.
In aggregate, these activities generated revenues totalling
GBP6.9 million (2019: GBP7.9 million) and a gross profit of GBP3.9
million (2019: GBP4.3 million), equating to a gross margin
percentage of 56.1% (2019: 54.8%).
Other non-core services
The Group also offers additional legacy products that it sees as
non-core. These products comprised the supply of a set of library
clones for research purposes, the market for which is generally
declining, and the manufacture and supply of blood and tissue
serological products to a limited customer base.
In aggregate, these activities generated revenues totalling
GBP0.8 million (2019: GBP0.9 million) and a gross profit of GBP0.2
million (2019: GBP0.4 million), equating to a gross margin
percentage of 20.4% (2019: 43.3%).
Board and Governance
The Board was enhanced in contemplation of Admission to AIM in
October 2020. We were delighted to welcome Simon Constantine to the
Board as Independent Non-Executive Director and Chair of the Audit
Committee. Having worked with Tony Ratcliffe for some months, we
were also pleased to formally invite him to join the Board as Chief
Financial Officer.
The Board extends its thanks to both James Agnew and Carlo
Sgarbi for their efforts and support over a number of years prior
to their retirement as Non-Executive Directors this year.
The Board continues to believe that the current make-up of the
Board is appropriate to the Group's needs and to meet its
governance commitments. The Board is committed to high standards of
governance and has adopted the QCA (Quoted Companies Alliance)
Code. Further details of compliance can be found in the Corporate
Governance Statement within the Annual Report and Accounts and on
the Company's website.
COVID-19 testing market backdrop
A very large proportion of the Group's business in 2020 was
derived from high volume laboratory based COVID-19 Antigen RT-PCR
testing, the Group's only COVID-19 offering. The Board is mindful
that the COVID-19 landscape is rapidly evolving and that this
brings both uncertainty and opportunity. The Group believes that,
whilst PCR based testing will likely remain the gold standard, it
will be essential for the Group to offer additional testing
services during 2021 and beyond. There has already been a shift in
focus from many customers towards screening initiatives using rapid
lateral flow testing, as one example - the need for testing is
clearly evolving and expanding. The Group has reviewed and
validated a number of complementary testing applications,
technologies and routes to market and will be launching these
progressively, as evidenced by the announcement of the Group's
collaboration with Oxford Nanopore in December 2020, which
increases the Group's offering to include LamPORE rapid testing
both in a traditional laboratory setting and in mobile trailers to
provide for more localised community focused testing. It is
therefore expected that the Group's COVID-19 testing focus in 2021
will transition from exclusively RT-PCR testing to a wide portfolio
of offerings, including rapid testing. Indeed, the Group has
already seen multiple COVID-19 revenue streams in the first quarter
of 2021, including revenues generated from mobile based testing
units operated on behalf of the DHSC and Mitie.
The Group has established a number of new COVID-19 testing
initiatives, some of which are in anticipation of the expected
lifting of travel restrictions, where significant business is
expected to be secured as travel related testing gains momentum.
The Group also recently announced the configuring of its San Diego
facility to provide COVID-19 testing services to the USA market.
This is expected to launch mid-year which, together with the
seasonal nature of travel, means that the Group anticipates a
significant proportion of 2021 revenues and earnings to be
generated from the third quarter of the year onwards, giving a
second half bias to the expected results for 2021.
SourceBio is actively planning for demand for COVID-19 testing
services to continue potentially longer than was initially
anticipated at the start of the pandemic and before the multiple
waves of infections and emergence of new virus variants. Whilst the
vaccination roll-out to date has been very successful, the Group
believes that this will not negate the ongoing need for testing.
Indeed, a recent analysis in the US and a number of European
countries completed by the Boston Consulting Group concluded " . .
. with peak demand occurring in the seasonally affected first
quarters of 2021 and 2022. Although we expect testing volumes to
decline after 2021, we expect a continued need for testing in 2023
and 2024 as the disease enters a more endemic phase". Airports,
airlines, cruise lines and hotels are already looking to establish
testing services for passengers and guests. Similarly, the sports
and entertainment industries are also building on-site testing
capabilities and tests are expected to continue to be sold in
leading high street pharmacy outlets.
Outlook
The Group has been through a transformational year in 2020 and
starts the new year with a strong cash balance, no borrowings, and
a business that is rapidly growing whilst generating substantial
earnings and cash. Trading in the early months of 2021 has been
solid and in line with the Board's expectation.
The Group is working hard in all the COVID-19 testing
initiatives described above and the Board believes the Group is
well placed to capture attractive new business opportunities.
The Board also believes that its long-standing three business
units, Healthcare Diagnostics, Genomics and Stability Storage offer
both near-term and longer-term sustained growth potential. Whilst
elective surgeries continue to be significantly and quite publicly
delayed, the backlog of potential work for our Cellular Pathology
teams appears to be growing very substantially. Whilst the timing
of a return to substantial volumes of work cannot be accurately
predicted, the Board believes that the volumes will be very high
when they do return, and the teams have prepared plans to cope with
the significant volume growth expected in due course.
Given the current macro environment, the Board believes that
SourceBio is well positioned to deliver further substantial growth
in revenue, earnings and cash generation in 2021. It will also
continue to consider potential acquisition opportunities. We look
forward to updating shareholders further during the year.
Chief Financial Officer's Review
Revenue
Revenue for 2020 was GBP50.7 million (2019: GBP21.2 million), an
increase of 139%.
Revenue across the four core business units is summarised
below:
2020 2019
Business unit GBP'000 GBP'000
---------------------------- --------- ----------------
Infectious Disease Testing 34,463 -
Healthcare Diagnostics 4,424 7,293
Genomics 4,219 4,523
Stability Storage 6,880 7,934
Core operations 49,986 19,750
Non-core operations 751 916
----------------------------- --------- ----------------
Sub total 50,737 20,666
Wound down operations - 568
----------------------------- --------- ----------------
Total 50,737 21,234
----------------------------- --------- ----------------
The Group established a new business unit in 2020, Infectious
Disease Testing, following its launch of COVID-19 Antigen RT-PCR
testing services in May. During 2020 the Group rapidly built
capacity at its Nottingham facility and secured total revenues of
GBP34.5 million (2019: GBPnil).
The three established business units, Healthcare Diagnostics,
Genomics and Stability Storage, were all to a degree impacted by
COVID-19 during 2020.
-- The Healthcare Diagnostics business unit delivered revenues of GBP2.7
million (2019: GBP5.6 million) from Cellular Pathology testing,
where volumes were heavily impacted by well publicised delays in
elective surgeries. These delays continued through 2020 whilst the
backlog of potential work has reportedly dramatically increased.
The Reference Laboratory delivered revenues of GBP1.7 million (2019:
GBP1.7 million), with work in this area quickly recovering from
an initial impact from COVID-19;
-- Genomics comprises traditional Sanger Sequencing, which delivered
revenues of GBP2.8 million (2019: GBP3.4 million) and NGS (Next
Generation Sequencing), which delivered revenues of GBP1.4 million
(2019: GBP1.1 million). The Company invested in state-of-the-art
equipment in 2019 as part of the strategic objective of skewing
business towards a greater proportion of generally higher value
and high margin NGS work, which proved successful in 2020. Both
revenue streams within Genomics recovered quickly following a modest
impact from COVID-19; and
-- Stability Storage comprises Stability Storage Services which delivered
revenues of GBP3.6 million (2019: GBP3.9 million), Service and Validation
which delivered revenues of GBP2.2 million (2019: GBP2.3 million)
and Manufacturing which delivered revenues of GBP1.1 million (2019:
GBP1.7 million). Stability Storage Services, which are sold on a
recurring revenue model, were relatively robust. Service and Validation
work was impacted by the restrictions to travel, whilst equipment
sales, being capital purchase items, were naturally affected by
general economic uncertainties.
Gross profit
Gross profit for the year was GBP20.5 million (2019: GBP8.7
million), representing a gross margin percentage of 40.3% (2019:
40.9%). Although the quantum and mix of revenue dramatically
changed in 2020, gross margin percentage levels were maintained
overall.
Expenses
Total expenses for the year were GBP9.8 million (2019: GBP7.7
million), an increase of GBP2.1 million. The biggest cause of the
increase was GBP1.5 million of exceptional expenses in relation to
the Company's Admission to AIM in October. The remaining GBP0.6
million of increase occurred across a number of areas but reflected
a general containment of expenditures in spite of the dramatic
increase in business throughput and revenues generated. Management
was largely able to utilise existing infrastructure to establish
and build COVID-19 testing capacity.
The total charge for depreciation of tangible fixed assets and
amortisation of intangible fixed assets increased to GBP2.0 million
(2019: GBP1.8 million) due primarily to increased laboratory
equipment depreciation.
EBITDA
The Board's key measure of underlying business profitability and
addressing trends across periods is adjusted earnings before
interest, tax, depreciation and amortisation, share based payments
and exceptional items (adjusted EBITDA). In 2020, the Group
achieved an adjusted EBITDA of GBP14.2 million (2019: GBP3.0
million), an increase of 369%. This translated to an adjusted
EBITDA percentage in the year of 27.9% (2019: 14.2%), an almost
doubling in adjusted EBITDA margin. There were no share based
payments in the year or in the comparative period and exceptional
items in the year amounted to GBP1.5 million (2019: GBP0.2
million). The principal driver for the huge growth in adjusted
EBITDA was the level of COVID-19 test revenues and gross profit
secured in the year, which did not necessitate corresponding
increases in expenses.
Finance costs
Total finance costs for the year were GBP7.9 million (2019:
GBP9.1 million), a decrease of GBP1.2 million. The largest
component was GBP7.5 million (2019: GBP8.8 million) in relation to
the compounding (non-cash) interest charges in relation to the PIK
loan notes and loans provided by shareholders. Prior to Admission,
the PIK loan notes were redeemed and converted into equity. Shortly
after Admission, the Group settled the shareholder loans
outstanding, which then amounted to GBP26.0 million, from the
proceeds of the share placing. In addition, the Company incurred
interest charges of GBP0.2 million (2019: GBP0.2 million) in
relation to bank borrowings. Shortly after Admission, the Group
settled the bank borrowings outstanding, which then amounted to
GBP5.1 million, from the proceeds of the share placing and sale and
leaseback transaction. The remaining finance costs of GBP0.3
million (2019: GBP0.1 million) related to finance leases charges.
At the year-end date the Group had no borrowings other than
leases.
Tax
An income tax credit arose amounting to GBP0.2 million (2019:
charge of GBP0.1 million). The vast majority of the earnings were
generated in the UK, where the Group was able to utilise brought
forward tax losses to reduce its overall income tax charge. The
Group has trading losses of GBP1,115,000 in its USA subsidiary
available for carry forward beyond the year-end date.
Earnings per share
The Board believes that adjusted earnings per share provides the
clearest measure of underlying earnings performance. Adjusted
earnings per share is an Alternative Performance Measure and is
calculated by dividing the result for the year attributable to
ordinary shareholders, excluding interest expense attributable to
the shareholder loans and PIK loan notes and expenses related to
exceptional items, as well as the tax effect of these items, by the
weighted average number of ordinary shares in issue during the
year. The adjusted earnings per share in the year amounted to 19.8
pence per share (2019: 1.7 pence per share), a more than ten-fold
growth.
The Group had no share options in issue thus its basic and
diluted earnings per share were the same. The basic and diluted
earnings per share in the year amounted to 5.3 pence per share
(2019: 16.4 loss pence per share).
Intangible assets
Goodwill at the year-end date remained at GBP10.0 million, with
no impairment charged in the year and other intangible assets
remained at a net book value of GBP0.3 million.
Property, plant and equipment
Net book value of property, plant and equipment at the year-end
date amounted to GBP7.0 million (2019: GBP6.5 million), an overall
increase of GBP0.5 million. Additions in the year totalled GBP3.9
million, comprising mainly laboratory equipment of GBP1.8 million,
fixtures and fittings of GBP1.4 million and leasehold improvements
of GBP0.7 million, which were primarily required to support the
creation and capacity build-up of COVID-19 testing services. During
the year, the freehold facility at Nottingham was sold and leased
back, thus there was a disposal from property, plant and equipment
and an addition to right-of-use assets. At the time of disposal,
the property had a net book value of GBP2.2 million and it was sold
for GBP5.0 million. Under IFRS 16, the profit realised of GBP2.8
million was offset against the right-of-use asset value
created.
Right-of-use assets
As a result of the implementation of IFRS 16 "Leases", the Group
recorded at the balance sheet date GBP9.5 million of right-of-use
assets (2019: GBP4.3 million), an overall increase of GBP5.2
million which represented the creation of a right-of-use asset as a
consequence of the new lease on the Nottingham property.
Inventories
Inventories at the year-end date amounted to GBP3.6 million
(2019: GBP0.8 million), the increase due to the stockholding
requirements of COVID-19 testing following the establishment of the
Infectious Disease Testing business unit.
Trade and other receivables
Trade and other receivables at the year-end date amounted to
GBP10.5 million (2019: GBP5.2 million), the increase driven by the
receivables within the Infectious Disease Testing business unit.
The credit losses provision at the year-end date amounted to
GBP34,000 (2019: GBP282,000), the reduction driven by the increased
proportion of government work undertaken. Overall, debtor days
outstanding at the year-end date were 42 days (2019: 47 days) and
during the year averaged 37 days (2019: 53 days).
Lease liabilities
Total lease liabilities at the year-end date amounted to GBP12.1
million (2019: GBP4.1 million), an increase of GBP8.0 million. This
increase was primarily driven by the inclusion of the right-of-use
liability of GBP8.6 million in relation to the Nottingham property,
following the sale and leaseback transaction in October 2020.
Cash and working capital
Cash generation from operations was strong at GBP6.4 million
(2019: GBP2.9 million). Cash and cash equivalents at the year-end
date amounted to GBP8.4 million (2019: GBP1.2 million). Borrowings
(excluding leases) at the year-end date were GBPnil (2019: GBP95.9
million) as the Group redeemed and converted its outstanding PIK
loan notes into equity and repaid all of its bank and shareholder
borrowings. The improved funding position of the Group was driven
principally by the increased cash generation of the business,
fuelled by the growth in COVID-19 testing services, by the funds
raised from the placing on the Company's Admission to AIM which
amounted to gross proceeds of GBP35.0 million, and from the
proceeds of the sale and leaseback transaction of the Nottingham
facility, which amounted to GBP5.0 million.
The Group currently has no bank borrowing facilities.
Net assets
Net assets at the year-end date amounted to GBP31.8 million
(2019: net liabilities GBP77.2 million), the improved position
arising from the settlement of borrowings made possible by the
GBP35.0 million of funds raised on Admission to AIM and also as a
consequence of the reorganisation ahead of the AIM Admission where
the shareholder PIK loan notes of GBP72.7 million were redeemed and
converted into equity.
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
For the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Continuing operations: GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Revenue 50,737 21,234
Cost of sales (30,284) (12,548)
----------------------------------------------------- ------------ ------------
Gross profit 20,453 8,686
Distribution costs (1,573) (1,465)
Administrative expenses (8,181) (6,193)
----------------------------------------------------- ------------ ------------
Adjusted EBITDA 14,155 3,016
Depreciation (1,890) (1,556)
Amortisation (102) (255)
Exceptional costs (1,464) (177)
----------------------------------------------------- ------------ ------------
Operating profit 10,699 1,028
Finance costs (7,908) (9,057)
----------------------------------------------------- ------------ ------------
Profit / (loss) before tax 2,791 (8,029)
Taxation 201 (116)
----------------------------------------------------- ------------ ------------
Profit / (loss) attributable to equity shareholders
of the Company 2,992 (8,145)
----------------------------------------------------- ------------ ------------
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss:
- Exchange differences on translation of
foreign operations 208 (37)
----------------------------------------------------- ------------ ------------
Total comprehensive income attributable to
equity shareholders of the Company 3,200 (8,182)
----------------------------------------------------- ------------ ------------
Earnings per share
Adjusted profit per ordinary share 19.8p 1.7p
Basic and diluted earnings / (loss) per ordinary
share 5.3p (16.4)p
----------------------------------------------------- ------------ ------------
Consolidated Statement of Financial Position
As at 31 December 2020
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- --------------- -----------
Assets
Non-current assets
Intangible assets - goodwill 9,993 9,993
Intangible assets - other 349 311
Property, plant and equipment 6,959 6,480
Right-of-use assets 9,478 4,257
Deferred tax asset 395 -
Total non-current assets 27,174 21,041
-------------------------------------------- --------------- -----------
Current assets
Inventories 3,598 816
Trade and other receivables 10,472 5,227
Cash and cash equivalents 8,435 1,235
-------------------------------------------- --------------- -----------
22,505 7,278
Assets classified as held
for resale 475 475
-------------------------------------------- --------------- -----------
Total current assets 22,980 7,753
-------------------------------------------- --------------- -----------
Total assets 50,154 28,794
-------------------------------------------- --------------- -----------
Equity attributable to equity shareholders of the Company
Share capital 111 2,906
Share premium account 33,189 -
Foreign exchange reserve 171 (37)
Retained earnings (1,637) (80,117)
-------------------------------------------- --------------- -----------
Total equity 31,834 (77,248)
-------------------------------------------- --------------- -----------
Liabilities
Non-current liabilities
Trade and other payables 394 365
Borrowings - 71,537
Lease liabilities 11,602 3,449
Deferred tax liabilities - 30
Provisions 141 160
-------------------------------------------- --------------- -----------
Total non-current liabilities 12,137 75,541
-------------------------------------------- --------------- -----------
Current liabilities
Trade and other payables 5,494 5,389
Borrowings - 24,403
Corporation tax payable 126 38
Lease liabilities 547 656
Provisions 16 15
-----------
Total current liabilities 6,183 30,501
-------------------------------------------- --------------- -----------
Total liabilities 18,320 106,042
-------------------------------------------- --------------- -----------
Total equity and liabilities 50,154 28,794
-------------------------------------------- --------------- -----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Share Foreign
Share premium exchange Retained Total
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- ---------- ---------- ---------
Balance at 1 January 2019 2,905 - - (71,972) (69,067)
Loss for the year - - - (8,145) (8,145)
Other comprehensive expense - - (37) - (37)
------------------------------------ --------- --------- ---------- ---------- ---------
Total comprehensive expense for
the year - - (37) (8,145) (8,182)
------------------------------------ --------- --------- ---------- ---------- ---------
Transactions with owners, recorded directly
in equity
- Proceeds from shares issued 1 - - - 1
Total transactions with owners 1 - - - 1
------------------------------------ --------- --------- ---------- ---------- ---------
Balance at 31 December 2019 2,906 - (37) (80,117) (77,248)
------------------------------------ --------- --------- ---------- ---------- ---------
Profit for the year - - - 2,992 2,992
Other comprehensive income - - 208 - 208
------------------------------------ --------- --------- ---------- ---------- ---------
Total comprehensive income for
the year - - 208 2,992 3,200
------------------------------------ --------- --------- ---------- ---------- ---------
Transactions with owners recorded directly
in equity
- Redemption of PIK loan notes
in consideration for issuance
of shares 72,658 - - - 72,658
- Reduction in share capital (75,488) - - 75,488 -
- Proceeds from shares issued 3 - - - 3
- Proceeds from shares issued
on Admission to AIM 32 34,968 - - 35,000
- Costs of share issue - (1,779) - - (1,779)
------------------------------------ --------- --------- ---------- ---------- ---------
Total transactions with owners (2,795) 33,189 - 75,488 105,882
------------------------------------ --------- --------- ---------- ---------- ---------
Balance at 31 December 2020 111 33,189 171 (1,637) 31,834
------------------------------------ --------- --------- ---------- ---------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------------------ ------------ ------------
Cash flows from operating activities
Profit / (loss) for the year 2,992 (8,145)
Adjustments for:
Depreciation of property, plant and equipment
and right-of-use assets 1,890 1,556
Amortisation 102 255
Reversal of past impairment - (36)
Foreign exchange 253 (142)
Profit on disposal of property, plant and
equipment - (106)
Finance costs 7,908 9,057
Taxation (201) 116
Issue costs of new shares 1,464 -
Working capital adjustments:
(Increase) / decrease in inventories (2,782) 582
(Decrease) in provisions (18) (465)
(Increase) / decrease in trade and other receivables (5,245) 1,306
Increase / (decrease) in trade and other payables 25 (1,068)
------------------------------------------------------ ------------ ------------
Cash generated from operations 6,388 2,910
Income tax paid (48) (57)
------------------------------------------------------ ------------ ------------
Net cash inflows from operating activities 6,340 2,853
------------------------------------------------------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (3,870) (907)
Purchase of intangible assets (140) (80)
Proceeds on disposal of property, plant and
equipment 5,000 406
Net cash generated by / (used in) investing
activities 990 (581)
------------------------------------------------------ ------------ ------------
Cash flows from financing activities
Gross proceeds from issue of shares 35,003 -
Costs of Admission to AIM and new share issuance (3,243) -
New borrowings secured 2,000 -
Repayment of borrowings (30,253) (1,000)
Interest paid (2,750) (303)
Payment of lease liabilities (894) (763)
------------------------------------------------------ ------------ ------------
Net cash (used in) financing activities (137) (2,066)
Net increase in cash and cash equivalents 7,193 206
Net foreign exchange difference on cash and
cash equivalents 7 (9)
Cash and cash equivalents at the beginning
of year 1,235 1,038
Cash and cash equivalents at the end of year 8,435 1,235
------------------------------------------------------ ------------ ------------
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
1. General Information
SourceBio International plc (the "Company" or "SourceBio") was
incorporated on 8 July 2016 as Sherwood Holdings Limited and
changed its name, and re-registered as a public limited company,
SourceBio International plc, on 21 October 2020. SourceBio is a
company incorporated in England and Wales and domiciled in the UK.
The ordinary shares of the Company are traded on the AIM Market of
the London Stock Exchange. The address of the registered office is
1 Orchard Place, Nottingham Business Park, Nottingham, NG8 6PX.
SourceBio is the ultimate parent Company of a number of
subsidiaries whose principal activity is as an international
provider of integrated state-of-the-art laboratory services and
products to the healthcare and clinical, life and applied sciences
and biopharma industries.
Two significant changes have occurred in this financial
reporting period:
-- Firstly, the COVID-19 global pandemic materially impacted on the
trading results of the long established core business, most notably
the Cellular Pathology services within the Healthcare Diagnostics
business unit. The Group more than made up the revenue and profit
shortfall through the establishment of a new Infectious Disease
Testing business unit, which generated significant revenues and
earnings from the provision of large scale laboratory RT-PCR based
COVID-19 testing services; and
-- Secondly, the Company listed on AIM on 29 October 2020 and raised
GBP35 million gross funds. Shortly before this transaction the Company
completed a capital reorganisation. The net result was that the
Group settled its PIK loan notes and repaid all of its shareholder
loans and bank borrowings during the year.
2. Summary of Significant Accounting Policies
Accounting policies for the year ended 31 December 2020
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. These
policies have been applied consistently to all the years presented,
unless otherwise stated.
Basis of preparation
The consolidated accounts of SourceBio International plc have
been prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006
(IFRS).
The consolidated financial statements have been prepared under
the historical cost convention. The consolidated financial
statements are presented in Sterling which is the functional and
presentational currency of the Group and are rounded to the nearest
thousand, GBP'000, except where otherwise indicated.
The results shown do not constitute statutory financial
statements for the year ended 31 December 2020 within the meaning
of section 435 of the Companies Act 2006 but are extracted from
those financial statements. Statutory accounts for the year ended
31 December 2020 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting in June.
The auditors have reported on those accounts; their reports were
(i) unqualified, (ii) did not include references to any matters to
which the auditors drew attention by way of emphasis without
qualifying their reports and (iii) did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2020 and not
early adopted
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory for the
Group's accounting periods beginning on or after 1 January 2021 or
later periods and which the Group has decided not to adopt early.
The Group has considered the impact of these new standards and
interpretations in future periods on profit, earnings per share and
net assets. None of these new standards or interpretations is
expected to have a material impact.
Going concern
The Directors have prepared detailed budgets and forecasts
covering the period to 31 December 2022 which are based on the
medium-term strategic business plan prepared for the period to 31
December 2023. These plans take into account all reasonably
foreseeable circumstances and include consideration of trading
results and cash flows on a month-by-month basis. This forecasting
has been undertaken following the impact of COVID-19 and has
considered both the negative impact on the core business and the
positive impact derived from the recently established Infectious
Disease Testing business unit which is expected to continue to
materially contribute to the financial results going forward.
The Group is expected to generate cash and operating profits
sufficient to meet its day-to-day operating needs and to support
its planned capital expenditure. Taking into account the proceeds
from the recent IPO and based on their enquiries and the
information available to them in respect of the other risks and
uncertainties set out herein, the Directors have a reasonable
expectation that the Group has adequate resources to continue
operating for the foreseeable future. Thus, they have adopted the
going concern basis of accounting in preparing these financial
statements.
Basis of consolidation
The Group's consolidated financial statements include the
results of the Company and all its subsidiaries. Subsidiaries are
all entities over which the Group has control. The Group controls
an entity where the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated
from the date that control ceases.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Intangible assets
Goodwill
Goodwill is initially measured at fair value, being the excess
of the aggregate of the consideration transferred over the fair
value of the net assets acquired, and any previous interest held
over the net identifiable assets acquired and liabilities assumed.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. The goodwill is tested annually for
impairment irrespective of whether there is an indication of
impairment.
For the purposes of impairment testing, goodwill is allocated to
the cash generating units ("CGUs") expected to benefit from the
acquisition. CGUs to which goodwill has been allocated are tested
for impairment at least annually, or more frequently when there is
an indication that the unit may be impaired. If the recoverable
amount of the CGU is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of
the unit pro-rata on the basis of the carrying amount of each asset
in the unit.
Intangible assets (other than goodwill)
Intangible assets acquired separately from a business are
recognised at cost and are subsequently measured at cost less
accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised
separately from goodwill at the acquisition date if the fair value
can be measured reliably.
Amortisation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives on the following bases:
Software - 5 years
Development costs - 4 years
Customer relationships - 4 to 6 years
Research and development expenditure
Research expenditure is written off against profits in the year
in which it is incurred. Identifiable development expenditure is
capitalised to the extent that the technical, commercial and
financial feasibility can be demonstrated. Development costs relate
to a laboratory information management system that was developed
internally by the Group.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of
accumulated depreciation and accumulated impairment losses. Cost
comprises purchase cost together with any incidental cost of
acquisition.
Depreciation is provided to write down the cost less estimated
residual value of all tangible fixed assets by equal instalments
over their expected useful economic lives on a straight-line basis.
The following useful lives are applied:
-- Freehold buildings: 50 years
-- Leasehold improvements: remaining lease term
-- Plant, fixtures, fittings and equipment: 3 to 15 years
-- Motor vehicles: 4 years
Right-of-use assets (included within property, plant and
equipment) relate to leasehold buildings and office equipment and
are depreciated over the lease term.
Impairment of non-current assets
At each reporting period end date, the Group reviews the
carrying amounts of its non-current assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the CGU to which the asset
belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount. An impairment loss is
recognised immediately in the Statement of Comprehensive
Income.
Recognised impairment losses are reversed if, and only if, the
reasons for the impairment loss have ceased to apply. Where an
impairment loss subsequently reverses, the carrying amount of the
asset or CGU is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset or CGU in prior
years. A reversal of an impairment loss is recognised immediately
in profit or loss.
Inventories
Inventory is stated at the lower of cost and net realisable
value. Cost is based on the cost of purchase on a first in, first
out basis and includes costs associated with bringing the items to
their present location and condition. Net realisable value is the
estimated selling price less costs to complete and sell.
Financial instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised on the date the Group becomes a party to the contractual
provisions of the instrument. Financial instruments are recognised
initially at fair value plus, in the case of a financial instrument
not a fair value through profit and loss, transaction costs that
are directly attributable to the acquisition or issue of the
financial instrument. Financial instruments are derecognised on the
trade date when the Group is no longer a party to the contractual
provisions of the instrument.
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, loans and borrowings, lease
liabilities and trade and other payables.
Trade and other receivables and trade and other payables
Trade and other receivables are initially recognised at fair
value and subsequently at amortised cost using the effective
interest method less any allowance for expected credit losses.
Trade receivables are generally due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected
credit losses, which uses a lifetime expected loss allowance. To
measure the expected credit losses, trade receivables have been
grouped based on days overdue.
Trade and other payables are recognised initially at transaction
price plus attributable transaction costs. Subsequent to initial
recognition they are measured at amortised cost using the effective
interest method, less any expected credit losses in the case of
trade receivables. If the arrangement constitutes a financing
transaction, for example if payment is deferred beyond normal
business terms, then it is measured at the present value of future
payments discounted at a market rate of interest for a similar debt
instrument.
Contract assets
Contract assets are recognised when revenue is recognised but
payment is conditional on a basis other than the passage of time.
Contract assets are included in trade and other receivables.
Contract liabilities
Contract liabilities are recognised when payment from a customer
is received in advance of performance obligations being satisfied.
Contract liabilities are recognised in trade and other
payables.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at the
present value of future payments discounted at a market rate of
interest. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised costs using the effective
interest method, less any impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents for the purpose only on the
cash flow statement.
Provisions
A provision is recognised in the Statement of Financial Position
when the Group has a present legal or constructive obligation as a
result of a past event, that can be reliably measured and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects risks
specific to the liability. Where the effect of the time value of
money is material, the amount expected to be required to settle the
obligation is recognised at present value. When a provision is
measured at present value, the unwinding of the discount is
recognised as a finance cost in profit or loss in the period in
which it arises.
Employee benefits
T he Group operates a defined contribution money purchase
pension scheme under which it pays contributions based upon a
percentage of the members' basic salary. Contributions to defined
contribution pension schemes are charged to the Statement of
Comprehensive Income and differences between contributions payable
in the year and contributions actually paid are shown as either
accruals or prepayments.
Leases
The Group leases various office and laboratory facilities,
warehousing, as well as certain laboratory, IT and office equipment
and a number of vehicles. Rental contracts are typically made for
fixed periods of variable lengths. 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, less any lease incentives receivable;
-- variable lease payments based on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable by the Group under residual
value guarantees;
-- the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The
lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined, which is
generally the case for leases held by the Group, the Group uses an
estimated incremental borrowing rate, being the rate that the
individual lessee is estimated to have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions.
The Group is exposed to potential future increases in variable
lease payments based on an index or rate, which are not included in
the lease liability until they take effect. When adjustments to
lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use
asset.
Lease payments are allocated between principal 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.
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
-- any potential restoration costs.
The Group leases properties in Nottingham and Cambridge in the
UK, San Diego in the USA, as well as Tramore and Dublin in Ireland.
All such leases are accounted for by recognising a right-of-use
asset and a lease liability.
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Payments associated with short-term leases of equipment and
vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less without a
purchase option. Low-value assets comprise IT equipment and small
items of office equipment.
Finance income and expenses
Finance expenses comprise interest payable (including lease
liability interest) and is recognised in the profit or loss using
the effective interest method.
Finance income is recognised in the profit or loss as it
accrues.
Revenue recognition
Revenue is recognised when control of a service or product
provided by the Group is transferred to the customer, in line with
the Group's performance obligations in the contract, and at an
amount reflecting the consideration the Group expects to receive in
exchange for the provision of services.
The Group recognised revenue from the following activities:
Services
Revenues received or receivable for services, typically provided
under contract pathology, COVID testing, Sanger Sequencing
services, Stability Storage and Analytical Testing services, are
recognised when the services are provided, which may be when a test
result is delivered or (for an extended service contract) on a
pro-rata basis in line with the committed period to provide that
service.
Products
Revenue from sales of products, typically provided under
processed human tissue, genomic reagents and antibodies and
serology is recognised when goods are delivered to and accepted by
the customer.
Service agreements
Revenue relating to service contracts invoiced at the inception
of the agreements is deferred such that the income is recognised
over the contract life. The revenue is recognised in line with the
provision of the services or, where the quantum and timing of the
services cannot be reliably predicted, evenly over the period of
the agreement.
Contracts recognised over time and with multiple elements
The Group enters into certain contracts that are performed over
time. These include Genomics, Validation Services and
Manufacturing.
Under these contracts revenue is recognised based on the stage
of completion. The assets created do not have an alternative use
and the Group has an enforceable right to payment for performance
completed to date on such contracts.
Where the Group enters into contracts for the supply and
installation of products, revenue is recognised based on the
specific terms of each contract. In some instances, this requires
the allocation of the transaction price between the supply of the
product and the installation and commissioning. Where contracts
require separation, the revenue is allocated based on the fair
values attributable to the separate elements and the performance
obligations being met.
Testing kits
The price charged for the testing kits is specified in
agreements negotiated with each customer. The price for the testing
kits comprises an amount for laboratory consumables and reagents
required to perform the tests and, where the systems are supplied
on a rental basis, an equipment premium, which is equivalent to a
rental charge, and an amount for maintenance of the systems during
the term of the agreement. All contracts are for a fixed price and
do not include variable consideration.
Revenue associated with the laboratory consumables and reagents
is recognised when the testing kits are delivered and accepted by
the customer. Revenue from the equipment premium and maintenance
element is recognised over the period in which the customer is
expected to benefit from the provision of these elements of the
supply.
Pre-paid vouchers
Vouchers are sold to customers in advance in return for the
right to receive certain sequencing services in the future. These
are not cash refundable. The revenue associated with these voucher
sales is recognised when the services are performed and obligations
met with an estimate made for a proportion of vouchers that are not
expected to be redeemed, based on prior period redemption
rates.
Taxes
Corporation tax, where payable, is provided on taxable profits
at the current rate.
Deferred tax is provided on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences,
and the carry-forward of unused tax assets and unused tax losses
can be utilised. The carrying amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities, and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority
on either the taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
balance sheet date.
Foreign currency translation
Transactions in currencies other than the functional currency
(foreign currency) are initially recorded at the exchange rate
prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the
reporting date. Non-monetary assets and liabilities denominated in
foreign currencies are translated at the rate ruling at the date of
the transaction, or, if the asset or liability is measured at fair
value, the rate when that fair value was determined.
All translation differences are taken to profit or loss, except
to the extent that they relate to gains or losses on non-monetary
items recognised in other comprehensive income, when the related
translation gain or loss is also recognised in other comprehensive
income.
The functional currency of the Group is Sterling. Exchange
differences arising from the translation of foreign operations are
recognised in other comprehensive income and accumulated in a
foreign currency translation reserve within equity.
Equity instruments
Equity instruments issued by the Group are recorded as the value
of the proceeds received net of direct issue costs.
Exceptional costs
The Group presents as exceptional items on the face of the
Statement of Comprehensive Income those material items of income
and expense which, because of the nature, expected infrequency and
materiality of the events giving rise to them, merit separate
presentation to allow shareholders to better understand the
elements of financial performance in the year, so as to facilitate
comparison with prior years.
3. First time adoption of IFRS
These extracts from the financial statements, for the year ended
31 December 2020, are the first the Group has prepared in
accordance with IFRS. For periods up to and including the year
ended 31 December 2019, the Group prepared its financial statements
in accordance with generally accepted accounting principles (UK
GAAP). Accordingly, the Group has prepared financial statements
that comply with IFRS applicable as at 31 December 2020, together
with the comparative period data for the year ended 31 December
2019, as described in the summary of significant accounting
policies. Fuller details are provided in the Company's Annual
Report and Accounts.
4. Operating segments
Operating segments description
IFRS 8 requires that operating segments be identified on the
basis of internal reporting and decision-making. Management has
determined the Group's operating segments based on the monthly
management reports presented to the Chief Operating Decision Maker
("CODM"). The CODM is the Executive Chairman and the monthly
management reports are used by the Group to make strategic
decisions and allocate resources. For the purposes of management
reporting to the CODM, the commercial activities of the Group are
organised into four business segments :
- Infectious Disease Testing;
- Healthcare Diagnostics;
- Genomics; and
- Stability Storage.
The Infectious Disease Testing business unit was formed in May
2020 when the Group launched COVID-19 testing services in response
to the unfolding global pandemic. In addition to these four
business segments, the Group has modest continuing non-core
operations, which are presented separately and modest wound down
operations (in 2019 only) which are also presented separately.
Revenue and gross profit by business segment
Revenues and gross profits are presented for each business
segment but, due to the shared nature of many expenses, expenses
are not separately allocated across the business segments.
T here have been immaterial sales between business segments, and
where these do occur they are at arm's length pricing.
Unallocated costs represent common costs.
2020 2019
Revenue Gross profit Revenue Gross profit
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ------------- ---------------- -----------------
Infectious Disease Testing 34,463 13,663 - -
Healthcare Diagnostics 4,424 1,046 7,293 2,919
Genomics 4,219 1,734 4,523 1,779
Stability Storage 6,880 3,857 7,934 4,349
Unallocated - - - (547)
----------------------------- --------- ------------- ---------------- -----------------
Core operations 49,986 20,300 19,750 8,500
Non-core operations 751 153 916 397
----------------------------- --------- ------------- ---------------- -----------------
Sub total 50,737 20,453 20,666 8,897
Wound down operations - - 568 (211)
----------------------------- --------- ------------- ---------------- -----------------
Total 50,737 20,453 21,234 8,686
----------------------------- --------- ------------- ---------------- -----------------
Due to the shared nature of many assets, assets and liabilities
are not able to be separately allocated across the business
segments, but are reported to the CODM on an aggregate basis.
Adjusted EBITDA (Alternative Performance Measure)
The CODM, Board and Executive Management team primarily use a
measure of adjusted earnings before interest, tax, depreciation and
amortisation and exceptional items (EBITDA before exceptional
costs, or adjusted EBITDA) to assess the performance of the overall
business. This is an Alternative Performance Measure. The
reconciliation of adjusted EBITDA to operating profit is shown on
the face on the Consolidated Statement of Profit and Loss.
Exceptional items are summarised in note 6.
5. Revenue
Geographical segments
The Group manages its business segments on a global basis. The
operations are based primarily in the UK, with additional
facilities in Europe and the USA.
The revenue analysis in the table below is based on the location
of the customer.
2020 2019
GBP'000 GBP'000
--------------- -------- --------
United Kingdom 46,657 15,438
Europe 2,349 3,631
USA 1,731 2,165
Total 50,737 21,234
--------------- -------- --------
The Group details below significant customers who have
contributed to more than 10% of Group revenue:
2020 2019
GBP'000 GBP'000
------------------------------------- -------- --------
Department of Health and Social Care 17,200 -
Spire Healthcare Limited 10,700 -
------------------------------------- -------- --------
6. Exceptional items
2020 2019
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Costs in relation to the Company's Admission to AIM 1,464 -
Restructuring and other costs - 161
Goodwill and asset impairment - (36)
Legal claim accrual - 206
Release of employment matters provision - (154)
----------------------------------------------------- -------- --------
Total 1,464 177
----------------------------------------------------- -------- --------
The Company was admitted to AIM on 29 October 2020 and incurred
total professional fees and transaction costs (including
unrecoverable VAT) of GBP3,243,000, of which GBP1,779,000 was
charged to the share premium account and GBP1,464,000 was recorded
as exceptional costs in the profit and loss.
7. Finance costs
2020 2019
GBP'000 GBP'000
------------------------ -------- --------
On bank and other loans (7,677) (8,961)
On lease liabilities (231) (96)
Total (7,908) (9,057)
------------------------ -------- --------
8. Taxation
2020 2019
Current tax GBP'000 GBP'000
----------------------------------------- -------- --------
UK corporation tax on losses for the 232 -
current year
Adjustment in respect of previous years (62) 16
Foreign taxation 54 90
Foreign taxation adjustment in respect
of previous years - (10)
----------------------------------------- -------- --------
Total 224 96
----------------------------------------- -------- --------
Deferred tax
Origination and reversal of timing differences (431) 10
Adjustments in respect of prior periods - 10
Effect of tax rate change on opening 6 -
balance
------------------------------------------------ ------ ---
Total (425) 20
------------------------------------------------ ------ ---
Total (credit) / charge (201) 116
-------------------------- ------ ----
Reconciliation of tax expense
The tax assessed on the profit / (loss) on ordinary activities
for the year is lower than the standard rate of corporation tax in
the UK of 19% (2019: 19%):
2020 2019
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Profit / (loss) on ordinary activities
before taxation 2,791 (8,029)
Profit / (loss) on ordinary activities
by rate of tax 530 (1,526)
Expenses not deductible for tax purposes 422 173
Ineligible depreciation 23 181
Movement in deferred tax not recognised (1,402) (292)
Adjustment in respect of prior periods (62) 16
Leases including sale and leaseback (559) -
Interest not deductible under thin capitalisation
rules 898 1,578
Effect of change in corporation tax rate 6 (27)
Losses eliminated - 83
Other (57) (70)
--------------------------------------------------- -------- --------
Tax (credit) / charge on profit or loss (201) 116
--------------------------------------------------- -------- --------
The Group has GBP274,000 of deferred tax assets, arising from
tax losses within Source BioScience Inc. and other short-term
timing differences which based on the anticipated future
profitability of the entity, have not been recognised.
9. Earnings / (loss) per share
Basic earnings per share is calculated by dividing the result
for the year attributable to ordinary shareholders of the Company
by the weighted average number of shares in issue during the year.
For 2019 and 2020, the share numbers used have been calculated
consistently to take into account the 2020 share reorganisation,
i.e. by assuming the various steps of the share reorganisation had
been in effect through 2019 and 2020.
Diluted earnings per share is calculated by dividing the result
for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year adjusted
for the effects of dilutive options. As there are no options in
issue, diluted earnings per share is the same as basic earnings per
share.
The calculation of basic earnings per share for the year was
based on the profit attributable to ordinary shareholders of
GBP2,992,000 (2019: GBP8,145,000 loss) and 56,307,171 ordinary
shares (2019: 49,711,000 ordinary shares) being the weighted
average number of ordinary shares in issue.
Adjusted earnings per share, an Alternative Performance Measure,
is calculated by dividing the result for the year attributable to
ordinary shareholders, excluding interest expense attributable to
the shareholder loans and PIK notes and expenses related to
exceptional items, as well as the tax effect of these items, by the
weighted average number of ordinary shares in issue during the
year.
The calculation of adjusted earnings per share for the year was
based on the adjusted profit attributable to ordinary shareholders
of GBP11,169,000 (2019: GBP826,000) and 56,307,171 ordinary shares
(2019: 49,711,000 ordinary shares) being the weighted average
number of ordinary shares in issue.
The calculation of adjusted earnings, which includes any impact
of taxation is as below:
2020 2019
GBP'000 GBP'000
------------------------------------------- -------- --------
Profit / (loss) for the year 2,992 (8,145)
Interest payable on shareholder loans and
PIK loan notes 7,677 8,961
Exceptional items 1,464 177
Tax effect of the above (964) (167)
------------------------------------------- -------- --------
Adjusted profit for the year 11,169 826
------------------------------------------- -------- --------
The reconciliation of the earnings and weighted average number
of shares used in the calculations is set out below:
2020 2019
---------------------------- ----------------------------
Weighted Weighted
average average
number Per number Per
of share of share
Earnings shares amount Earnings shares amount
GBP'000 000's (pence) GBP'000 000's (pence)
--------------------------------- -------- -------- -------- -------- -------- --------
Basic and Diluted EPS
Earnings attributable
to ordinary shareholders
of the Company 2,992 56,307 5.3p (8,145) 49,711 (16.4)p
--------------------------------- -------- -------- -------- -------- -------- --------
Adjusted basic EPS
Adjusted earnings attributable
to
ordinary shareholders
of the Company 11,169 56,307 19.8p 826 49,711 1.7p
--------------------------------- -------- -------- -------- -------- -------- --------
10. Share capital
2020 2019
Issued and fully paid Number GBP'000 Number GBP'000
--------------------------------- ---------- ------- ----------- -------
Ordinary shares of 1p each - - 290,549,917 2,905
A ordinary shares of 0.001p each - - 32,283,324 1
ordinary shares of 0.15p each 74,183,038 111 - -
--------------------------------- ---------- ------- ----------- -------
At 31 December 74,183,038 111 322,833,241 2,906
--------------------------------- ---------- ------- ----------- -------
The share movements in 2019 and 2020 are detailed below:
1p and 0.001p 0.001p A
ordinary ordinary 0.15p ordinary
shares shares shares
Issued and fully paid Number Number Number GBP'000
------------------------------------ --------------- ------------ -------------- --------
At 1 January 2019 290,549,917 - 2,905
Issuance of ordinary shares of
0.001p each - 32,283,324 - 1
------------------------------------ --------------- ------------ -------------- --------
At 31 December 2019 290,549,917 32,283,324 - 2,906
Redemption of PIK loan notes,
issuance of 1p shares 7,265,790,769 - - 72,658
Capital reduction 1p to 0.001p
shares - - - (75,488)
Consolidation into 0.15p ordinary
shares (7,556,340,686) - 50,375,603 -
Consolidation into 0.15p A ordinary
shares and
subsequent conversion into 0.15p
ordinary shares - (32,283,324) 215,222 -
Allotment of 0.15p ordinary shares
to Jay LeCoque - - 1,987,275 3
------------------------------------ --------------- ------------ -------------- --------
Total prior to Admission to AIM - - 52,578,100 79
Allotment of shares on Admission
to AIM - - 21,604,938 32
------------------------------------ --------------- ------------ -------------- --------
At 31 December 2020 - - 74,183,038 111
------------------------------------ --------------- ------------ -------------- --------
In October 2020 the PIK loan notes issued by the Company were
redeemed and delisted from the Cayman Stock Exchange on the same
day. Such redemption was satisfied by the allotment of ordinary
shares of 1p each in the capital of the Company. This resulted in
an allotment of a total of 7,265,790,769 ordinary shares of 1p each
in the capital of the Company, issued and credited as fully
paid.
Following this, the Company undertook a capital reduction of the
nominal value of the ordinary shares of the Company, reducing the
nominal value of such ordinary shares from 1p to 0.001p. The amount
by which the Company's capital was reduced was treated as a
realised profit and therefore was used to increase the retained
earnings of the Company and therefore created distributable
reserves.
In October 2020, following the capital reduction by the Company
referred to above, the following consolidations of shares took
place:
(a) the ordinary shares of 0.001p each in the capital of the
Company were consolidated into ordinary shares of 0.15p each;
and
(b) the A ordinary shares of 0.001p each in the capital of the
Company were consolidated into A ordinary shares of 0.15p each.
In October 2020, following the consolidation of shares in the
Company referred to above, the A ordinary shares in the Company
were converted into ordinary shares of 0.15p each, thereby
resulting in the Company having only one class of share. Following
the above steps, an allotment of 1,987,275 ordinary shares of 0.15p
each was made to Jay LeCoque. Following the above allotment, the
entire issued share capital of the Company comprised 52,578,100
ordinary Shares.
On Admission to AIM in October 2020, a total of 21,604,938 new
ordinary shares were issued for cash consideration totalling GBP35
million. All 0.15p ordinary shares carry equal rights in all
respects including rights to vote, receive dividends and
participate in any distribution on a winding up.
11. Borrowings
2020 2019
Current GBP'000 GBP'000
-------------------------- -------- --------
Bank loans and overdrafts - 1,000
Other loans - 23,403
Total 24,403
-------------------------- -------- --------
Non-current
-------------------------- ------
Bank loans and overdrafts - 3,850
Other loans -67,687
Total 71,537
-------------------------- ------
Bank loans and overdrafts
As at 31 December 2020, the Group owed a total of GBPnil (2019:
GBP4,850,000) in respect of a term loan and revolving credit
facility with Barclays Bank plc.
As at 31 December 2020, GBPnil (2019: GBP1,250,000) was owed in
respect of the term loan. The term loan issued was for a value of
GBP5,000,000, repayable in quarterly instalments of capital and
interest commencing on 24 June 2016.
As of 31 December 2020, the revolving credit facility available
to the Group was GBP2,800,000 which has since lapsed. As at 31
December 2020 GBPnil (2019: GBP3,600,000) was drawn.
The rate of interest applicable to each loan/facility is the
aggregate of the applicable margin and LIBOR. The applicable margin
varies between 2.9% and 3.75%.
Bank loans and overdrafts of the Group, including the latterly
undrawn facility, were secured by fixed and floating charges over
certain assets of the Group.
Other loans
PIK loan notes
Prior to conversion into equity, the Company had unsecured PIK
loan notes of GBP49,400,000 issued to certain shareholders. These
were repayable on 31 December 2023, or earlier in the event of an
exit, and interest accrued at 10%, which was rolled up with the
principal sum and payable on the repayment date.
In October 2020 the PIK loan notes issued by the Company were
redeemed and delisted from the Cayman Stock Exchange on the same
day. Such redemption was satisfied by the allotment of ordinary
shares of 0.0001p each in the capital of the Company. This resulted
in an allotment of a total of 7,265,790,769 ordinary shares of
0.0001p each in the capital of the Company, issued and credited as
fully paid.
Unsecured loan notes
Prior to settlement during the year, other unsecured loan notes
include GBP16,600,000, which were all originally repayable on 31
December 2018. Interest accrued and was rolled-up with the
principal sum as follows:
-- 5% per annum up to 31 March 2017;
-- 8% per annum from 1 April 2017 to 31 May 2017;
-- 10% per annum from 1 June 2017 to 30 June 2017; and
-- 12.5% per annum thereafter.
In October 2018, the Company re-negotiated the repayment date of
the GBP16,600,000 unsecured loan notes so that there was no fixed
repayment date. During the year, the unsecured loan notes were
repaid, thus the balance at the year-end was GBPnil (2019:
GBP23,403,000).
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END
FR UUAWRASUSAAR
(END) Dow Jones Newswires
April 13, 2021 02:00 ET (06:00 GMT)
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