TIDMSBI
RNS Number : 6701Y
SourceBio International PLC
08 September 2022
SourceBio International plc
('SourceBio', the 'Company' or the 'Group')
Half Year Report
Solid first half results, with significant growth in core
business units
Transition away from non- core COVID-19 PCR business with the
expectation that demand disappears
More than fourfold growth in Cellular Pathology revenues
Strong balance sheet with no borrowings
SourceBio International plc (AIM: SBI), a leading international
provider of integrated state-of-the-art laboratory services ,
announces its unaudited half year results for the six months ended
30 June 2022, showing considerable growth in revenues from core
business lines year-on-year.
Financial highlights
-- Revenues from the three core business units of Healthcare
Diagnostics, Genomics and Stability Storage (excluding
Manufacturing) up 74% to GBP13.7 million (H1 2021: GBP7.9
million)
-- Cellular Pathology and Digital Pathology revenues up more
than fourfold to GBP6.8 million (H1 2021: GBP1.7 million) including
the contribution from LDPath since acquisition in March
-- Revenues above include organic Cellular Pathology revenues of
GBP4.6 million, up 179% on a like-for-like basis
-- Strong delivery from LDPath, with revenues of GBP2.2 million,
up 82% on a like-for-like basis and 14% ahead of plan
-- Total revenues of GBP20.5 million (H1 2021: GBP37.3 million),
including COVID-19 PCR revenues of GBP6.6 million (H1 2021: GBP28.4
million) which is no longer considered a core business line
-- Gross profit from the three core business units of Healthcare
Diagnostics, Genomics and Stability Storage (excluding
Manufacturing) up 58% to GBP5.9 million (H1 2021: GBP3.7 million)
with gross margin at 43.1% (2021: 47.3%)
-- Adjusted EBITDA (1) of GBP2.1 million (H1 2021: GBP11.2
million), largely reflecting the reduction in COVID-19 PCR volumes,
as expected
-- Cash at 30 June 2022 totalled GBP15.2 million (30 June 2021:
GBP17.2 million). The Group remains free of borrowings and this
amount is after having paid the initial net cash consideration of
GBP15.6 million in relation to the acquisition of LDPath in
March
1 Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation ('EBITDA') adjusted for exceptional items and
share based payments (see note 3)
Operational highlights
-- Successful integration of LDPath following acquisition in
March, with LDPath trading 14% above plan
-- Scale-up of Cellular Pathology and Digital Pathology
throughput to record levels achieved in June 2022
-- Ongoing planning to address the challenge to increase
capacity to meet market demand for Cellular Pathology and Digital
Pathology services
Post period end highlights
-- Premises fit-out underway of a larger Cambridge site to
support anticipated growth in the Genomics business unit. Larger
premises in London identified to support greater throughputs of
private Cellular Pathology and Digital Pathology work anticipated
in SourceLDPath. Both facilities are expected to be up and running
by Q4.
Jay LeCoque, Executive Chairman, commented: "We are encouraged
with progress and growth delivered in the three core business units
in the first half. Our operational focus remains the continued
further scale-up of Cellular Pathology and Digital Pathology
volumes through the rest of the year and beyond. We expect a very
busy second half and look forward to updating the market in due
course."
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as amended by The
Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the
publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the
public domain.
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
Richard Lindley / William Hall / Miquela
Bezuidenhoudt
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 with clients in the
pharmaceutical, healthcare, clinical, drug development and life
sciences research industries, with a focus on improving patient
diagnosis, management and care. Group revenues are derived from
four business units:
-- Healthcare Diagnostics - Histopathology cancer screening, including
Digital Pathology and clinical diagnostic services for the NHS and
private healthcare providers across the UK
-- Genomics - DNA sequencing services and Precision Medicine offering
for pharmaceutical and biotechnology industries, academia, contract
research organisations (CROs) and other research groups in the UK,
Europe and North America
----------------------------------------------------------------------
-- Stability Storage Controlled environmental storage services and
laboratory equipment validation services for pharmaceutical industry
in the UK, Ireland and North America
----------------------------------------------------------------------
-- Infectious Disease Testing - A range of COVID-19 testing services
for commercial enterprises, private healthcare groups and the NHS,
including PCR testing under ISO 15189 accreditation.
----------------------------------------------------------------------
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 the six months ended 30 June 2022
I am pleased to report a busy half year of significant
achievement in the business.
The key performance indicators ("KPIs") currently used by the
Group are revenue, gross profit, adjusted EBITDA and cash
resources. During 2022, the focus for revenue and gross profits as
KPIs have been on the core continuing business units as the Group
has materially reduced its Infectious Disease Testing business as
demand for COVID-19 PCR and associated services has significantly
reduced.
In this regard, core revenues for the first half increased to
GBP13.7 million, an increase of 74% on the prior first half
revenues of GBP7.9 million. The associated gross profit increased
to GBP5.9 million, an increase of 58% on the prior first half gross
profit of GBP3.7 million. Total revenues for the first half,
including COVID-19 PCR testing revenues, which declined fast in the
half year as demand reduced, decreased to GBP20.5 million, a
reduction of 45% on the prior first half revenues of GBP37.3
million. Total gross profit decreased to GBP7.0 million, a
reduction of 56% on the prior first half gross profit of GBP16.0
million. Adjusted EBITDA decreased to GBP2.1 million compared to
the prior first half adjusted EBITDA of GBP11.2 million, primarily
driven by the lower contribution from reduced COVID-19 PCR testing
volumes. Cash balances at 30 June totalled GBP15.2 million with no
bank and shareholder borrowings, compared to cash of GBP33.3
million at 31 December 2021. The reduction in cash was primarily
due to the acquisition of LDPath in March for an initial cash
consideration of GBP15.3 million. Further details of the financial
performance can be found in the Chief Financial Officer's Review
and within the financial information.
The Group completed its acquisition of LDPath in March 2022 to
further accelerate growth in Cellular Pathology and Digital
Pathology, and this has proved a very timely transaction, as the
demand for such services continues to increase significantly.
Recognising the material reduction in COVID-19 PCR testing
revenues as demand falls away, the Group has been through a
substantial re-organisation in the half year, with a significant
reduction in both COVID-19 PCR laboratory staff, thus reducing
variable costs, as well as sales, general and administrative roles,
thus reducing the cost base going forward. Resources have continued
to be added as required to fuel growth in the core business
units.
The Board is very grateful for the significant hard work and
dedication of the entire SourceBio team and for the many
achievements in what has been a period of change but continues to
be a period of significant opportunity.
Business review
The business comprises three core business units - Healthcare
Diagnostics, Genomics and Stability Storage.
From acquisition in March 2022, LDPath's Cellular and Digital
Pathology business joined the Healthcare Diagnostics business
unit.
The Group established a dedicated Precision Medicine business
line in response to attractive growth opportunities which, with
effect from January 2022, became a discrete offering within the
Genomics business unit. Comparative 2021 revenue and gross margin
analyses have been adjusted to reflect this change.
A brief review of each business unit is detailed below.
Healthcare Diagnostics
Healthcare Diagnostics provides a complete histopathology
service for the sectioning, processing, staining and analysing of
tissue samples on self-prepared and pre-prepared slides, and
reporting of results. 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 revenue streams within Healthcare Diagnostics comprise
Cellular Pathology and Digital Pathology testing and reporting,
which involves the examination of patient tissue pre- and
post-operative. This business had grown revenues in recent years at
approximately 40% per annum prior to COVID-19, largely driven by a
long-term shortage of pathology consultants in the UK. The
sustained impact of the COVID-19 pandemic through 2020 and 2021 had
a material effect on the quantity of elective surgeries in the UK
and thus the value of Cellular Pathology revenues in 2020 and 2021.
The growing size of the national elective surgery waiting lists, or
backlog, has been very well publicised in the media and the Group
has delivered a material scale-up in volumes and revenues since the
second half of 2021. It is very welcome to see the levels of
activity continue to increase in the half year as elective
surgeries return at greater scale. Cellular Pathology activity
generated GBP6.8 million of revenue in the first half of 2022 (H1
2021: GBP1.7 million), a more than fourfold increase and a gross
profit of GBP2.7 million in the first half of 2022 (H1 2021: GBP0.4
million), a near sevenfold increase, with a gross margin of 40.2%
in the first half of 2022 (H1 2021: 23.8%), the improvement driven
by the increased scale.
Included in the above was LDPath, which contributed GBP2.2
million of revenue since acquisition in March. Excluding the LDPath
acquisition, the existing organic business contributed GBP4.6
million of revenue in the first half of 2022 (H1 2021: GBP1.7
million), an increase of 179%. Both the organic Cellular Pathology
and LDPath businesses traded above plan in the half year.
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 and complexity but fewer in number. There has been
a strategic decision to seek a greater proportion of NGS work. As
mentioned above, the Genomics business unit now includes a
dedicated Precision Medicine business line.
The mix of the business unit's revenues comprised Sanger
Sequencing 42% (2021: 50%), NGS 35% (2021: 28%) and Precision
Medicine 23% (2021: 22%).
In aggregate, these services generated revenues totalling GBP3.7
million in the first half of 2022 (H1 2021: GBP3.3 million), an
increase of 11%, and a gross profit of GBP1.1 million (H1 2021:
GBP1.4 million), equating to a gross margin of 29.3% in the first
half of 2022 (H1 2021: 41.1%). The reduction in gross margin was
caused by the greater proportion of NGS and Precision Medicine,
where internal focus is on improving gross margins.
Stability Storage
The Stability Storage business unit comprises two principal
offerings: Stability Storage Services and Service and Validation.
In-house manufacture of temperature and humidity-controlled
equipment ceased in the half year as it was uneconomic to continue
at modest volumes and the Group's core skills are focused on
delivering a high quality service, rather than low volume
manufacture.
The larger of these offerings is Stability Storage Services,
which generated GBP2.0 million of revenue in the first half of 2022
(H1 2021: GBP1.8 million), an increase of 13%. SourceBio delivers
outsourced temperature and humidity-controlled environment storage
services for stability trials at all ICH (International Council for
Harmonisation 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 as well as
in Tramore, Ireland and San Diego, USA. Business is secured on
recurring contracts which are typically of three-year duration. By
its nature, this business line therefore provides highly visible
recurring revenue at gross margin levels typically exceeding
80%.
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 GBP1.2 million of revenue in the first half of
2022 (H1 2021: GBP1.1 million).
In total, these activities generated revenues totalling GBP3.2
million in the first half of 2022 (H1 2021: GBP2.9 million) and a
gross profit of GBP2.1 million (H1 2021: GBP2.0 million) equating
to a gross margin of 65.2% in the first half of 2022 (H1 2021:
67.4%).
Manufacturing generated GBP0.2 million (2021: GBP0.6 million) of
revenue prior to ceasing operations.
Non-core Infectious Disease Testing
These services generated revenues totalling GBP6.6 million in
the first half of 2022 (H1 2021: GBP28.4 million) and a gross
profit of GBP1.2 million in the first half of 2022 (H1 2021:
GBP12.4 million), equating to a gross margin of 18.2% in the first
half of 2022 (H1 2021: 43.6%). The decline in gross margin was
driven by reduced volumes. Revenue included GBP1.1 million of
revenue deferred from 2021 and now recognised (2021: GBPnil
deferred from 2020).
Summary and Outlook
The Group delivered a solid first half of 2022, with attractive
revenue growth in all three core business units. The highlight was
the particularly strong growth in Cellular Pathology and Digital
Pathology volumes and revenues as the continued shortfall in
pathologists and return of elective surgeries drove increased
demand for SourceLDPath services. The acquisition and successful
integration of LDPath added to already buoyant growth.
The Board believes that the Group's three core business units,
Healthcare Diagnostics, Genomics and Stability Storage all offer
both near-term and longer-term sustained growth potential. In
particular, the demand for our Cellular Pathology and Digital
Pathology surgeries has grown very substantially in the half year
and this demand appears to be increasing into the second half. The
Healthcare Diagnostics business unit is operating at
record-breaking levels and continues to focus on increasing its
capacity and throughput further in the second half to meet
unprecedented demand.
In response to declining demand to what now amount to only
nominal levels, the Group continues to scale down its COVID-19 PCR
testing operations as its focus is to drive growth from the three
core business units.
Given the current market environment, the Board believes that
SourceBio is well positioned to deliver further attractive growth
in revenue and margin from these core business units in the second
half of 2022. The Group is pleased to have strengthened its
position in Cellular Pathology with the LDPath acquisition and will
continue to seek further strategically attractive acquisition
opportunities.
We look forward to updating shareholders further during the rest
of the year.
Chief Financial Officer's Review
Revenue
Revenue from core operations for the half year 2022 was GBP13.7
million (H1 2021: GBP7.9 million), an increase of 74%. Including
revenue from Infectious Disease Testing, which is no longer
considered core, and Manufacturing which has now ceased, total
revenue for the half year 2022 was GBP20.5 million (H1 2021:
GBP37.3 million).
Revenue across the business units is summarised below:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
Business unit GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ -------------
Healthcare Diagnostics 6,823 1,658 4,866
Genomics 3,656 3,290 6,505
Stability Storage 3,190 2,927 6,059
--------------------------------- ------------ ------------ -------------
Core operations 13,669 7,875 17,430
Infectious Disease Testing 6,639 28,376 73,567
Manufacturing, now wound down 166 638 978
Non-core operations, now wound
down - 371 472
--------------------------------- ------------ ------------ -------------
Total 20,474 37,260 92,397
--------------------------------- ------------ ------------ -------------
Note the comparable data for 2021 above has been adjusted to
reflect the move of Precision Medicine from Healthcare Diagnostics
to Genomics as if that move had occurred on 1 January 2021 and
Manufacturing revenues have all been excluded from Stability
Storage and shown as non-core.
The Group comprises three core business units, Healthcare
Diagnostics, Genomics and Stability Storage. A fourth business
unit, Infectious Disease Testing, was established to commercialise
COVID-19 PCR testing services which peaked during 2021 and is no
longer considered core.
-- The Healthcare Diagnostics business unit, consisting of
Cellular Pathology and Digital Pathology under the integrated
SourceLDPath umbrella, delivered revenues of GBP6.8 million in the
first half of 2022 (H1 2021: GBP1.7 million and 2021: GBP4.9
million), representing growth of 312%. The organic Cellular
Pathology business delivered revenues of GBP4.6 million in the
first half of 2022 (H1 2021: GBP1.7 million and 2021: GBP4.9
million), representing a growth of 179%. LDPath delivered revenues
of GBP2.2 million from 8 March to 30 June and traded 14% ahead of
plan.
-- Genomics comprises traditional Sanger Sequencing, which
delivered revenues of GBP1.5 million in the first half of 2022 (H1
2021: GBP1.6 million, 2021: GBP2.9 million), representing a
reduction of 7%, NGS, which delivered revenues of GBP1.3 million in
the first half of 2022 (H1 2021: GBP0.9 million, 2021: GBP2.0
million), representing growth of 38%, and Precision Medicine which
delivered revenues of GBP0.9 million in the first half of 2022 (H1
2021: GBP0.7 million, 2021: GBP1.5 million), representing growth of
17%. Strategically the Company is consciously targeting a greater
proportion of higher value NGS project work over the more routine
Sanger Sequencing work, and the mix continues to trend in that
direction.
-- Stability Storage comprises Stability Storage Services which
delivered revenues of GBP2.0 million in the first half of 2022 (H1
2021: GBP1.8 million, 2021: GBP3.8 million), representing growth of
13% and Service and Validation which delivered revenues of GBP1.1
million in the first half of 2022 (H1 2021: GBP1.1 million, 2021:
GBP2.3 million), representing growth of 3%. Stability Storage
Services are sold via long-term contracts on a recurring revenue
model, providing strong forward visibility. The Group's
unprofitable manufactured products offering was closed in the
second quarter after delivering revenues of GBP0.2 million in the
first half of 2022 (H1 2021: GBP0.6 million, 2021: GBP0.9 million)
and is now shown as non-core.
Gross profit
Gross profit for the three core business units, Healthcare
Diagnostics, Genomics and Stability Storage was GBP5.9 million in
the first half of 2022 (H1 2021: GBP3.7 million, 2021: GBP8.0
million), representing a gross margin of 43.1% in the first half of
2022 (H1 2021: 47.3%, 2021: 46.1%). Of note is the improved
Healthcare Diagnostics gross margin of 40.2% in the first half of
2022 (H1 2021: 23.8%, 2021: 34.6%), which was driven by scale. The
Genomics gross margin decreased to 29.2% in the first half of 2022
(H1 2021: 41.1%, 2021: 36.4%), which was driven by the change in
mix towards more NGS business. This decrease is expected to be
countered with price increases, initiated in the latter end of the
first half, higher equipment utilisation and better project
selection.
Including non-core revenues, overall gross profit was GBP7.0
million in the first half of 2022 (H1 2021: GBP16.0 million, 2021:
GBP36.2 million), representing a gross margin of 34.1% in the first
half of 2022 (H1 2021: 43.0%, 2021: 39.2%).
Expenses
Excluding exceptional costs and non-cash depreciation,
amortisation and share based payments, expenses in the first half
of 2022 were GBP5.5 million (H1 2021: GBP4.8 million, 2021: GBP12.2
million). Expenses in the first half of 2022 reduced 26% from
GBP7.4 million in the second half of 2021. The Group's expense base
was subject to significant scrutiny during the half year as the
COVID-19 PCR revenues declined fast and the Group had less need or
justification for the same level of cost base. The full financial
benefits of a slimmed down sales, general and administrative team
cost base will benefit the second half of 2022 and beyond.
Depreciation of tangible fixed assets increased to GBP1.5
million in the first half of 2022 (H1 2021: GBP1.2 million, 2021:
GBP2.8 million), consistent with the charge incurred in the second
half of 2021.
Amortisation of intangible fixed assets increased to GBP0.3
million in the first half of 2022 (H1 2021: GBP0.1 million, 2021:
GBP0.1 million) due to the inclusion of the amortisation of the
assets acquired with LDPath.
Total expenses in the first half of 2022 were GBP9.9 million (H1
2021: GBP6.0 million, 2021: GBP15.2 million). Excluding exceptional
costs, expenses in the first half of 2022 were GBP7.4 million (H1
2021: GBP6.0 million, 2021: GBP15.2 million). Such total expenses
less exceptional costs in the first half of 2022 reduced 19% from
GBP9.2 million in the second half of 2021.
Adjusted EBITDA
The Board's key measure of underlying business profitability and
assessing trends across periods is adjusted earnings before
interest, tax, depreciation and amortisation, share based payments
and exceptional items (adjusted EBITDA). The Group achieved an
adjusted EBITDA of GBP2.1 million in the first half of 2022 (H1
2021: GBP11.2 million, 2021: GBP24.1 million). This translated to
an adjusted EBITDA percentage in the first half of 2022 of 10.2%
(H1 2021: 30.1%, 2021: 26.1%), in line with plan and an expected
consequence as the Group transitions from its reliance on the
results of COVID-19 PCR testing in 2021.
Exceptional costs
Total exceptional costs were GBP2.5 million in the first half of
2022 (H1 2021 and 2021: nil).
Professional fees relating to the acquisition of LDPath amounted
to GBP650,000.
The Group has responded to a material and swift reduction in
market demand for COVID-19 related testing, reducing its
laboratory-based team by approximately 150 roles in the period.
Recognising the need for lesser infrastructure post COVID-19,
material reductions in sales, general and administration headcount
have also been made to right-size the Group's expense base. These
cost savings were largely achieved towards the end of the half year
and are expected to materially benefit the second half year and
beyond. Reorganisation costs totalled GBP0.7 million.
The COVID-19 inventory provision of GBP0.9 million relates to
the rapid reduction in demand for COVID-19 PCR and travel related
lateral flow tests. The Manufacturing inventory provision of GBP0.2
million relates to provisions against inventory relating to the
discontinued but immaterial business line of Manufacturing and
supply of Storage equipment.
Finance costs
Total finance costs were GBP0.3 million in the first half of
2022 (H1 2021: GBP0.2 million, 2021: GBP0.4 million). The Group
inherited GBP0.6 million of Coronavirus Business Interruption Loan
Scheme (CBILS) loans through its acquisition of LDPath, all of
which were repaid by the half year date.
The bulk of the finance costs relate to finance leases charges.
At the end of the first half the Group had no borrowings other than
leases.
Tax
An income tax credit of GBP0.5 million arose in the first half
of 2022 (H1 2021: charge of GBP1.9m, 2021: charge of GBP4.0
million). The vast majority of the taxable profits were generated
in the UK, where the Group is liable to corporation tax.
Loss/earnings per share
The basic and diluted earnings per share in the first half of
2022 amounted to a loss of 2.8 pence per share (H1 2021: earnings
10.7 pence per share, 2021: earnings 22.5 pence per share).
Adjusted earnings per share is an Alternative Performance
Measure and is calculated by dividing the result for the period
attributable to ordinary shareholders, excluding expenses related
to exceptional items and share based payments, as well as the tax
effect of these items, by the weighted average number of ordinary
shares in issue during the period. The adjusted earnings per share
in the first half of 2022 amounted to 0.1 pence per share (H1 2021:
10.7 earnings pence per share, 2021: 22.6 earnings pence per
share).
Intangible assets
Goodwill at the half year increased to GBP25.8 million (H1 2021:
GBP10.0 million, 2021: GBP10.0 million), with no impairment charged
in the half year and other intangible assets had a net book value
of GBP8.4 million (H1 2021: GBP0.2 million, 2021: GBP0.2 million).
The increases were driven by the intangible assets acquired through
the LDPath acquisition. Further analysis of the assets acquired,
including intangible assets, are detailed in note 13.
Property, plant and equipment
Net book value of property, plant and equipment at the half year
amounted to GBP8.8 million (H1 2021: GBP8.0 million, 2021: GBP8.2
million), an overall increase of GBP0.8 million. Additions in the
first half of 2022 totalled GBP1.2 million, comprising assets
acquired through LDPath of GBP0.4 million and other additions of
GBP0.8 million.
Right-of-use assets
As a result of the implementation of IFRS 16 Leases, the Group
recorded at the half year GBP13.3 million of right-of-use assets
(H1 2021: GBP10.5 million, 2021: GBP10.3 million). The increase in
the half year was due to the inclusion of a new property in
Cambridge to support the expected growth in the Genomics business
unit, as well as newly leased laboratory equipment.
Inventories
Inventories at the half year amounted to GBP1.6 million (H1
2021: GBP5.1 million, 2021: GBP5.0 million), with the decrease
caused primarily by the reduced stockholding requirements to
support materially lower levels of forecasted COVID-19 PCR testing.
No new COVID-19 PCR consumables were acquired in the period. In
addition, the ceasing of in-house manufacture of Storage equipment
caused a GBP0.2 million reduction in inventory.
Trade and other receivables
Trade and other receivables at the half year amounted to GBP6.6
million (H1 2021: GBP11.5 million, 2021: GBP7.2 million), the
decrease driven by the reduced levels of COVID-19 PCR testing.
Overall, debtor days outstanding at the half year were 52 days (H1
2021: 40 days, 2021: 34 days) and during the half year averaged 48
days (H1 2021: 43 days, 2021: 43 days).
Trade and other payables
Current trade and other payables at the half year amounted to
GBP11.6 million (H1 2021: GBP8.5 million, 2021: GBP13.4 million),
the increase in the year being driven largely by the inclusion of
GBP1.8 million of deferred consideration in relation to the LDPath
acquisition completed in March 2022 and the increase in contract
liabilities, being revenue in relation to PCR tests sold but not
yet returned to the laboratory for analysis, thus deferred from
revenue. As set out in note 12, there is an element of uncertainty
as to the precise quantum and timing of the potential recognition
of this deferred revenue into revenue.
Non-current trade and other payables at the half year amounted
to GBP4.7 million (H1 2021: GBP0.3 million, 2021: GBP0.3 million),
the increase being the inclusion of GBP4.4 million of deferred
consideration in relation to the LDPath acquisition completed in
March 2022.
Lease liabilities
Total lease liabilities at the half year amounted to GBP16.1
million (H1 2021: GBP13.4 million, 2021: GBP13.0 million). The
increase in the half year was primarily driven by the new Cambridge
facility.
Cash and working capital
Net cash generation from operations in the half year was GBP0.3
million (H1 2021: GBP10.2 million, 2021: GBP28.8 million). Whilst
significantly reduced from 2021 levels, largely due to the
reduction in COVID-19 PCR testing services, this also included
exceptional costs in the half year.
Cash and cash equivalents at the half year amounted to GBP15.2
million (H1 2021: GBP17.2 million, 2021: GBP33.3 million).
Borrowings (excluding leases) at the half year 2022 remained GBPnil
(H1 2021: GBPnil) as the Group repaid the debt acquired though the
LDPath acquisition. The Group currently has no bank borrowing or
debt facilities.
Net assets
Net assets at the half year amounted to GBP45.9 million (H1
2021: GBP39.6 million, 2021: GBP48.3 million).
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
For the six months ended 30 June 2022
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Continuing operations : Note GBP'000 GBP'000 GBP'000
---------------------------------------- ---- ----------- ----------- ------------
Revenue 3, 4 20,474 37,260 92,397
Cost of sales (13,488) (21,236) (56,184)
---------------------------------------- ---- ----------- ----------- ------------
Gross profit 3 6,986 16,024 36,213
Distribution costs (1,535) (1,602) (3,651)
Administrative expenses (8,351) (4,421) (11,573)
Other operating income 5 576 - 118
Adjusted EBITDA 3 2,097 11,218 24,115
Depreciation (1,497) (1,158) (2,843)
Amortisation 9 (305) (59) (88)
Share based payments (153) - (77)
Exceptional costs 6 (2,466) - -
Operating (loss)/profit (2,324) 10,001 21,107
Finance income - - 21
Finance costs (258) (209) (442)
(Loss)/profit before tax (2,582) 9,792 20,686
(3,971)
Taxation 7 491 (1,860) 971)
---------------------------------------- ---- ----------- ----------- ------------
(Loss)/profit attributable to
equity shareholders of the Company (2,091) 7,932 16,715
---------------------------------------- ---- ----------- ----------- ------------
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss:
- Exchange differences on translation
of foreign operations (446) (119) (318)
---------------------------------------------- ----------- ----------- ------------
Total comprehensive income attributable
to equity shareholders of the Company (2,537) 7,813 16,397
---------------------------------------- ---- ----------- ----------- ------------
(Loss)/earnings per share:
Basic and diluted (loss)/earnings
per ordinary share 8 (2.8)p 10.7p 22.5p
---------------------------------------- ---- ----------- ----------- ------------
Consolidated Statement of Financial Position
As at 30 June 2022
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2022 2021 2021
Note GBP'000 GBP'000 GBP'000
------------------------------------------- ---- --------- --------- ------------
Assets
Non-current assets
Intangible assets - goodwill 9 25,820 9,993 9,993
Intangible assets - other 9 8,369 203 192
Property, plant and equipment 8,766 7,973 8,226
Right-of-use assets 13,337 10,516 10,347
Deferred tax asset - 395 79
Total non-current assets 56,292 29,080 28,837
------------------------------------------- ---- --------- --------- ------------
Current assets
Inventories 10 1,601 5,089 4,999
Trade and other receivables 6,609 11,453 7,242
Corporation tax receivable 934 - 777
Cash and cash equivalents 15,209 17,186 33,304
------------------------------------------- ---- --------- --------- ------------
Total current assets 24,353 33,728 46,322
------------------------------------------- ---- --------- --------- ------------
Total assets 80,645 62,808 75,159
------------------------------------------- ---- --------- --------- ------------
Equity attributable to equity shareholders
of the Company
Share capital 11 111 111 111
Share premium account 33,189 33,189 33,189
Foreign exchange reserve (593) 52 (147)
Share option reserve 230 - 77
Retained earnings 12,987 6,295 15,078
Total equity 45,924 39,647 48,308
------------------------------------------- ---- --------- --------- ------------
Liabilities
Non-current liabilities
Trade and other payables 12 4,749 317 339
Lease liabilities 14,921 12,193 11,946
Deferred tax 2,140 - -
Provisions 137 138 137
------------------------------------------- ---- --------- --------- ------------
Total non-current liabilities 21,947 12,648 12,422
------------------------------------------- ---- --------- --------- ------------
Current liabilities
Trade and other payables 12 11,560 8,492 13,362
Corporation tax payable - 791 -
Lease liabilities 1,196 1,212 1,049
Provisions 18 18 18
------------------------------------------- ---- --------- --------- ------------
Total current liabilities 12,774 10,513 14,429
------------------------------------------- ---- --------- --------- ------------
Total liabilities 34,721 23,161 26,851
------------------------------------------- ---- --------- --------- ------------
Total equity and liabilities 80,645 62,808 75,159
------------------------------------------- ---- --------- --------- ------------
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2022
Share Foreign Share
Share premium exchange option Retained Total
capital account reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Balance at 1 January 2021 111 33,189 171 - (1,637) 31,834
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Profit for the period - - - - 7,932 7,932
Other comprehensive income - - (119) - - (119)
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Total comprehensive income
for the period - - (119) - 7,932 7,813
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Unaudited balance at 30
June 2021 111 33,189 52 - 6,295 39,647
Profit for the period - - - - 8,783 8,783
Other comprehensive income - - (199) - - (199)
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Total comprehensive income
for the period - - (119) 7,932 7,813
---------------------------- --- --- ------ ------ ------ - - (199) - 8,783 8,584
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Transactions with owners
recorded directly in equity:
- Employee share options - - - 77 - 77
----------------------------------------------------------------- --------
Total transactions with owners - - - 77 - 77
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Audited balance at 31 December
2021 111 33,189 (147) 77 15,078 48,308
Loss for the period - - - - 7,932 7,932 - - - - (2,091) (2,091)
Other comprehensive income - - (446) - - (446)
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Total comprehensive income
for the period - - (446) - (2,091) (2,537)
----------------------------------------------------------------- -------- -------- --------- -------- --------- --------
Transactions with owners
recorded directly in equity:
- Employee share options
-------------------------------
Total transactions with owners
-------------------------------
Unaudited balance at 30
June 2022
------------------------------- - - - 153 - 153
-------- -------- --------- -------- --------- --------
- - - 153 - 153
-------- -------- --------- -------- --------- --------
111 33,189 (593) 230 12,987 45,924
-------- -------- --------- -------- --------- --------
Consolidated Statement of Cash Flows
For the six months ended 30 June 2022
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ---- ----------- ----------- ------------
Cash flows from operating activities
(Loss)/profit for the period (2,091) 7,932 16,715
Adjustments for:
Depreciation of property, plant and equipment
and right-of-use assets 1,497 1,158 2,843
Amortisation 305 59 88
Profit on disposal of fixed assets (3) (134) (147)
Finance costs 258 209 442
Finance income - - (21)
Taxation (491) 1,860 3,971
Other operating income (50) - (118)
Share based payment charges 153 - 77
Working capital adjustments:
Decrease/(increase) in inventories 3,439 (1,491) (1,401)
(Decrease) in provisions - (1) (2)
(Increase)/decrease in trade and other
receivables 1,993 (1,021) 3,228
(Decrease)/increase in trade and other
payables (5,750) 2,813 7,618
Cash (outflow from)/inflow from operations (750) 11,384 33,293
Income tax received/(paid) 712 (1,197) (4,509)
Net cash (outflow from)/inflow from
operating activities (28) 10,187 28,784
--------------------------------------------- ---- ----------- ----------- ------------
Cash flows from investing activities
Purchase of subsidiary, net of cash acquired 13 (15,636) - -
Purchase of property, plant and equipment (795) (1,515) (2,975)
Purchase of intangible assets (218) (20) (40)
Proceeds on disposal of property, plant
and equipment 8 645 647
Net cash (outflow from) investing activities (16,641) (890) (2,368)
--------------------------------------------- ---- ----------- ----------- ------------
Cash flows from financing activities
Repayment of CBILs borrowings acquired
with LDPath (675) - -
Interest paid (34) (17) (56)
Payment of lease liabilities (779) (507) (1,445)
--------------------------------------------- ---- ----------- ----------- ------------
Net cash (outflow from) financing activities (1,488) (524) (1,501)
--------------------------------------------- ---- ----------- ----------- ------------
Net (decrease)/increase in cash and
cash equivalents (18,157) 8,773 24,915
--------------------------------------------- ---- ----------- ----------- ------------
Net foreign exchange difference on cash
and cash equivalents 62 (22) (46)
Cash and cash equivalents at the beginning
of the period 33,304 8,435 8,435
--------------------------------------------- ---- ----------- ----------- ------------
Cash and cash equivalents at the end
of the period 15,209 17,186 33,304
--------------------------------------------- ---- ----------- ----------- ------------
Notes to the Unaudited Consolidated Financial Statements
For the six months ended 30 June 2022
1. General information
SourceBio International plc (the "Company" or "SourceBio") is a
public limited 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 to the
healthcare and clinical, life and applied sciences and biopharma
industries.
The financial information in these interim results is that of
the parent Company and all of its subsidiaries. It has been
prepared in accordance with UK adopted International Accounting
Standards (IFRS). The accounting policies applied by the Group in
this financial information are the same as those applied by the
Group in its financial statements for the year ended 31 December
2021 and which will form the basis of the 2022 financial statements
except for a number of new and amended standards which have become
effective since the beginning of the previous financial year. These
new and amended standards are not expected to materially affect the
Group.
The financial information presented herein does not constitute
full statutory accounts under Section 434 of the Companies Act 2006
and was not subject to a formal review by the auditors. The
financial information in respect of the year ended 31 December 2021
has been extracted from the statutory accounts which have been
delivered to the Registrar of Companies. The Group's Independent
Auditor's report on those accounts was unqualified, did not include
references to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and did not contain
a statement under section 498(2) or 498(3) of the Companies Act
2006. The financial information for the half years ended 30 June
2022 and 30 June 2021 is unaudited.
2. Summary of significant accounting policies
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 periods
presented, unless otherwise indicated.
Basis of preparation
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.
Going concern
The Directors have prepared detailed budgets and rolling
forecasts covering the period to 31 December 2024. These plans take
into account all reasonably foreseeable circumstances and include
consideration of trading results and cash flows on a month-by-month
basis.
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 current
level of cash balances 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
Brands 10 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 number of defined contribution money
purchase pension schemes 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 period and contributions actually paid are shown as
either accruals or prepayments.
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.
Leases
The Group leases various office and laboratory facilities 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.
In addition, the carrying amount of lease liabilities and
right-of-use asset is measured if there is a modification, a change
in the lease term or a change in the fixed lease payments. The
remeasured lease liability (and corresponding right-of-use asset)
is calculated using a revised discount rate, based upon a revised
incremental borrowing rate at the time of the change.
The Group leases properties in Nottingham and Cambridge in the
UK, San Diego in the USA, as well as Tramore 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.
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:
Laboratory testing services
Revenues received or receivable for services, typically provided
under contract pathology, Sanger Sequencing services and COVID-19
PCR testing are recognised when the services are provided, which is
when a test result is delivered.
Products
During the year the Group ceased its final product offering, the
manufacture of storage equipment. Up to this point, revenue from
sales of certain products was 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.
Contracts recognised over time and with multiple elements
The Group enters into certain contracts that are performed over
time. These include Genomics and Validation Services.
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 has historically entered into contracts for the
supply and installation of Storage equipment, revenue has been
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.
Where there is a delay in returning a testing kit to the
laboratory for the testing service to be performed, the revenue is
deferred until the likelihood of it not being returned is highly
probable or if the testing kit reaches the end of its period of
shelf-life.
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.
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 period, so as to
facilitate comparison with prior periods.
Equity instruments
Equity instruments issued by the Group are recorded as the value
of the proceeds received net of direct issue costs.
Share based payments
The cost of equity settled transactions with employees is
measured by reference to the fair value on the date they are
granted. Where there are no market conditions attaching to the
exercise of the options, the fair value is determined using a range
of inputs into a Black-Scholes pricing model. Where there are
market conditions attaching to the exercise of the options a Monte
Carlo model is used to determine fair value based on a range of
inputs. The value of equity-settled transactions is charged to the
Statement of Comprehensive Income over the period in which the
service conditions are fulfilled with a corresponding credit to the
share option reserve in equity.
On the exercise of share options, an amount equal to the fair
value of the option at the date it was granted is transferred from
the share option reserve into retained earnings.
3. 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 of which Healthcare
Diagnostics, Genomics and Stability Storage are considered core.
Since the reduction in COVID-19 PCR testing, Infectious Disease
Teasing is now considered non-core .
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.
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
---------------------- ------------------- ---------------------------------
Gross Gross Gross
Revenue profit Revenue profit Revenue profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- --------- -------- --------------- ----------------
Healthcare Diagnostics 6,823 2,743 1,658 395 4,866 1,685
Genomics 3,656 1,067 3,290 1,352 6,505 2,367
Stability Storage 3,190 2,079 2,927 1,974 6,059 3,979
Core business units 13,669 5,889 7,875 3,721 17,430 8,031
Infectious Disease Testing,
non core 6,639 1,205 28,376 12,378 73,567 28,509
Manufacturing, now
wound down 166 (108) 638 (178) 978 (419)
Other, now wound down - - 371 103 422 92
---------------------------- ------------ -------- --------- -------- --------------- ----------------
Total 20,474 6,986 37,260 16,024 92,397 36,213
---------------------------- ------------ -------- --------- -------- --------------- ----------------
Comparative revenue and gross margin analyses for 2021 have been
restated to reflect (1) the transfer of the Reference Laboratory
from the Healthcare Diagnostics business unit to the Precision
Medicine business line within the Genomics business unit and (2)
the exclusion of Manufacturing from Stability Storage and transfer
to non-core.
Due to the shared nature of many assets, assets and liabilities
for both 2021 and 2022, are not able to be separately allocated
across the business segments but are reported to the CODM on an
aggregate basis.
The Infectious Disease Testing revenue included GBP1,111,000
from the recognition of revenue in relation to COVID-19 PCR tests
that was carried forward and deferred from 2021.
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, share based payments and exceptional items (EBITDA
before share based payments and exceptional items, 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 of the Consolidated
Statement of Profit and Loss. Exceptional items are summarised in
note 6.
4. 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.
Six months Six months
ended 30 June ended Year ended
2022 30 June 31 December
GBP'000 2021 2021
GBP'000 GBP'000
--------------- -------------- ---------- ------------
United Kingdom 18,768 35,244 88,727
Europe 1,186 1,047 2,285
USA 509 969 1,337
Rest of world 11 - 48
--------------- -------------- ---------- ------------
Total 20,474 37,260 92,397
--------------- -------------- ---------- ------------
The Group details below significant customers who have
contributed to more than 10% of Group revenue in any of the periods
shown:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
GBP'000 GBP'000 GBP'000
----------- ---------- ---------- ------------
Customer A 296 12,269 14,453
Customer B 2,808 2,122 12,750
Customer C 265 - 12,151
----------- ---------- ---------- ------------
5. Other income
Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------------ ---------- ---------- ------------
Settlement in relation to dispute with
former employee 526 - -
Research & development expenditure credit 50 - 118
576 - 118
------------------------------------------ ---------- ---------- ------------
6. Exceptional items
Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------------------- ---------- ---------- ------------
Professional fees in relation to the acquisition
of LDPath Limited 650 - -
Reorganisation costs 682 - -
Inventory provision on closure of Manufacturing
business line 246 - -
Inventory provision on ceasing to supply
COVID-19 travel related lateral flow tests 888 - -
------------------------------------------------- ---------- ---------- ------------
2,466 - -
------------------------------------------------- ---------- ---------- ------------
The reorganisation costs relate to reductions in headcount,
principally in relation to COVID-19 PCR testing as the throughput
declined significantly from its peak in 2021, as well as reductions
in sales, general and administration headcount as the business
right-sized its expense base as COVID-19 PCR testing declined.
The Manufacturing inventory provisions relate to provisions
against inventory relating to the discontinued but immaterial
business line of Manufacturing and supply of Storage equipment.
The COVID-19 inventory provision relates to the rapid reduction
in demand for COVID-19 PCR and travel related lateral flow
tests.
7. Taxation
The tax charge in the half years have been calculated based on
the estimated tax rate that is expected to apply to the full
year.
8. (Loss)/earnings per share
Basic earnings per share is calculated by dividing the result
for the period attributable to ordinary shareholders of the Company
by the weighted average number of shares in issue during the
period.
Diluted earnings per share is calculated by dividing the result
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period adjusted for the effects of dilutive options.
The weighted average number of shares and the loss for the
period for the purposes of calculating diluted loss per share for
the half year are the same as for the basic loss per share
calculation. This is because the outstanding share options would
have the effect of reducing the loss per share and would not,
therefore, be dilutive under the terms of IAS 33. There were no
share options in issue in during the six months ended 30 June
2021.
Adjusted earnings per share, an Alternative Performance Measure,
is calculated by dividing the result for the period attributable to
ordinary shareholders, which adds or deducts items that are
typically adjusted for by users of financial statements. These
items comprise expenses related to exceptional items and share
based payments as well as the tax effect of these items, by the
weighted average number of ordinary shares in issue during the
period.
The calculation of adjusted earnings, which includes any impact
of taxation is as below:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ---------- ------------
(Loss)/profit for the period (2,091) 7,932 16,715
Exceptional items 2,466 - -
Share based payments 153 - 77
Tax effect of the above (469) - -
------------------------------- ------------ ---------- ------------
Adjusted profit for the period 59 7,932 16,792
------------------------------- ------------ ---------- ------------
The reconciliation of the earnings and weighted average number
of shares used in the calculations for the six months ended 30 June
2022 and 30 June 2021 is set out below:
Six months ended Six months ended
30 June 2022 30 June 2021
------------------------------ ----------------------------
Weighted
Weighted average
average Per number Per
number of share of share
Earnings shares amount Earnings shares amount
GBP'000 000's (pence) GBP'000 000's (pence)
-------------------------------- -------- ---------- -------- -------- -------- --------
Basic and Diluted
EPS
(Loss) / earnings attributable
to ordinary shareholders
of the Company (2,091) 74,183 (2.8)p 7,932 74,183 10.7p
-------------------------------- -------- ---------- -------- -------- -------- --------
Adjusted EPS
Adjusted earnings attributable
to
ordinary shareholders
of the Company 59 74,183 0.1p 7,932 74,183 10.7p
-------------------------------- -------- ---------- -------- -------- -------- --------
The reconciliation of the earnings and weighted average number
of shares used in the calculations for the year ended 31 December
2021 is set out below:
Year ended 31 December
2021
----------------------------
Weighted
average
number Per
of share
Earnings shares amount
GBP'000 000's (pence)
-------------------------------------------------------- -------- -------- --------
Basic EPS
Earnings attributable to ordinary shareholders
of the Company 16,715 74,183 22.5p
-------------------------------------------------------- -------- -------- --------
Effect of diluted share options - 37
Diluted EPS
Diluted EPS
Earnings attributable to ordinary shareholders
of the Company 16,715 74,220 22.5p
-------------------------------------------------------- -------- -------- --------
Adjusted EPS
Adjusted earnings attributable to ordinary shareholders
of the Company 16,792 74,183 22.6p
-------------------------------------------------------- -------- -------- --------
9. Goodwill and other intangible assets
Total other
Development Customer intangible
Goodwill Software costs relationships Brands assets Total
Consolidated GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- --------- ------------ --------------- -------- ------------ --------
Cost
At 1 January
2021 61,331 34 1,303 185 - 1,522 62,853
Additions - - 20 - - 20 20
Disposals - - - - - - -
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 30 June 2021 61,331 34 1,323 185 - 1,542 62,873
Additions - - 20 - - 20 20
Disposals - - (512) - - (512) (512)
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 31 December
2021 61,331 34 831 185 - 1,050 62,381
Additions - 168 50 - - 218 218
Acquisition of
LDPath 15,827 3,511 - 1,290 3,481 8,282 24,109
Disposals - - (18) - - (18) (18)
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 30 June 2022 77,158 3,713 863 1,475 3,481 9,532 86,690
----------------- --------- --------- ------------ --------------- -------- ------------ --------
Amortisation
and impairment
At 1 January
2021 51,338 6 982 185 - 1,173 52,511
Amortisation
charge - 4 55 - - 59 59
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 30 June 2021 51,338 10 1,037 185 - 1,232 52,570
Amortisation
charge - 5 24 - - 29 29
Disposals - - (403) - - (403) (403)
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 31 December
2021 51,338 15 658 185 - 858 52,196
Amortisation
charge - 126 20 43 116 305 305
Disposals - - - - - - -
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 30 June 2022 51,338 141 678 228 116 1,163 52,501
----------------- --------- --------- ------------ --------------- -------- ------------ --------
Net book value
At 31 December
2020 9,993 28 321 - - 349 10,342
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 30 June 2021 9,993 24 286 - - 310 10,303
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 31 December
2021 9,993 19 173 - - 192 10,185
----------------- --------- --------- ------------ --------------- -------- ------------ --------
At 30 June 2022 25,820 3,572 185 1,247 3,365 8,369 34,189
----------------- --------- --------- ------------ --------------- -------- ------------ --------
Amortisation is charged within administrative expenses in the
Statement of Comprehensive Income.
Following initial recognition, goodwill is subject to impairment
reviews, at least annually, and measured at cost less accumulated
impairment losses. Any impairment is recognised immediately in the
Consolidated Statement of Comprehensive Income and is not
subsequently reversed.
A business unit summary of the allocation of goodwill is shown
below:
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------ -------- -----------
Healthcare Diagnostics 15,292 1,458 1,458
Genomics 2,596 2,596 2,596
Stability Storage 5,939 5,939 5,939
-------------------------------- ------------------------- -------- -----------
Total 23,827 9,993 9,993
-------------------------------- ------------------------- -------- -----------
10. Inventories
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- ---------- -----------
Raw materials 1,601 5,089 4,616
Finished goods and goods for resale - - ?? 383
--------------------------------------------- -------- ------ -----------
Total 1,601 5,089 4,999
--------------------------------------------- -------- ---------- -----------
11. Share capital
There have been no share movements in 2021 or in the half year.
There are 74,183,038 ordinary shares of 0.15p each in issue, all
fully paid. No further share options have been issued in the half
year.
12. Trade and other payables
30 June 30 June 31 December
2022 2021 2021
Current GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -----------
Trade payables 4,084 4,606 4,740
Other tax and social security 548 421 483
Accruals 812 1,027 2,933
Contract liabilities 4,305 2,438 5,206
Deferred consideration in relation to LDPath
acquisition 1,811 - -
-------------------------------------------------- -------- -------- -----------
Total current 11,560 8,492 13,362
-------------------------------------------------- -------- -------- -----------
Non-current
-------------------------------------------------- -------- -------- -----------
Contract liabilities 389 317 339
Deferred and contingent consideration in relation
to LDPath acquisition 4,360 - -
-------------------------------------------------- -------- -------- -----------
Total non-current 4,749 317 339
-------------------------------------------------- -------- -------- -----------
Included within contract liabilities is certain revenue in
relation to PCR test kits sold to a high street pharmacy chain
during the height of the pandemic in late 2021 which was treated as
deferred revenue as the tests were not yet returned to the Group's
laboratory for processing. Due to errors in the high street
pharmacy chain's tracking of its website sales data, it advised the
Group in May 2022 that they believed that they had been
"overcharged" by the Group a total of GBP2,673,000. The Group acted
in accordance with the agreed commercial contract. The Group has
requested, and is awaiting, full details of the customer's relevant
data to review prior to continuing discussions with the customer to
resolve the matter. There is a risk, therefore, that some revenues
that are currently deferred may not ultimately be recognised as
(non core) revenue.
13. Business Combination
On 8 March 2022 the Group purchased the entire issued share
capital of LDPath Limited ("LDPath"), a London based leader in
Digital Pathology testing services.
The goodwill of GBP13,834,000 arising from the acquisition is
attributable to the expected future benefits arising from the
acquired business.
The following table summarises the provisional fair values of
the consideration paid for LDPath and the amounts of the assets
acquired and liabilities assumed recognised at the acquisition
date. Acquisition costs of GBP650,000 have been
written off against income and disclosed as an exceptional
item.
Provisional fair values
GBP'000
---------------------------------------------- ------------------------------
Consideration
Cash 16,167
Deferred cash consideration re warranty
retention 1,779
Deferred cash consideration re receivables
retention 460
Contingent consideration on revenue performance to 31 December
2024 (potential earn-out payments) 4,299
----------------------------------------------------------------- -----------
Total consideration 22,705
---------------------------------------------- ------------------------------
Recognised amounts of identifiable assets and liabilities acquired
assumed
Trade name - see note 9 3,481
Customer relationships - see note 9 1,290
Website and software - see note 9 3,511
Plant, property and equipment 1,105
Cash 899
Inventories 41
Trade and other receivables 1,358
CBILS loans (675)
Lease liabilities (579)
Trade and other payables (1,336)
Deferred tax (2,217)
---------------------------------------------- ------------------------------
Total identifiable net assets 6,878
---------------------------------------------- ------------------------------
Goodwill 15,827
---------------------------------------------- ------------------------------
The contingent consideration on revenue performance is based on
measures of LDPath revenue and any Digital Pathology revenue
generated in the periods to 31 December 2022, 31 December 2023 and
31 December 2024, compared to agreed targets. Any amounts payable
will be payable in the April following the relevant year-end date,
based on audited results. The amount of deferred and contingent
consideration has been discounted to take account of the time value
of money. The revenue included in the Consolidated Statement of
Comprehensive Income since 8 March 2022 contributed by LDPath was
GBP2,200,000. LDPath also contributed an adjusted EBITDA of
GBP228,000 over the same period.
30 June
2022
Outflow of cash to acquire subsidiary, net of cash acquired GBP'000
------------------------------------------------------------ --------
Cash consideration 16,167
Deferred cash consideration 368
Less: Balances acquired
Cash (899)
Net outflow of cash - investing activities 15,636
------------------------------------------------------------ --------
14. Contingent liabilities
HMRC
As previously reported, in December 2021, HMRC issued a letter
to the Group that challenged the Group's VAT treatment of COVID-19
PCR testing services provided. On professional advice, the Group
treated the accounting for COVID-19 PCR services as VAT exempt.
HMRC suggested that some of those services should have been treated
as standard rated for VAT purposes. The Group took advice, which
supported the accounting treatment adopted. Should all arguments
presented by HMRC be held and based on draft calculations, the
maximum potential cash liability payable by the Group would be
GBP5.0 million. HMRC have since reverted to its policy team and its
solicitors office and on 25 July, HMRC verbally informed the
Group's tax advisors that it did not intend to pursue its claim for
VAT to be chargeable on COVID-19 PCR services. The Group has been
told that this decision is expected to be put in writing in
September. The Board continues to conclude that no provision should
be made in its financial statements.
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END
IR FLFEEAVIDIIF
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