TIDMSBI
RNS Number : 1204N
SourceBio International PLC
28 September 2021
SourceBio International plc
("SourceBio", the "Company" or "the Group")
Half Year Report
For the six months ended 30 June 2021
Strong revenue and earnings growth versus prior year H1, fuelled
by COVID-19 testing
Return of the Group's core business units to more normalised
pre-pandemic operating levels
SourceBio International plc (AIM: SBI), a leading international
provider of integrated state-of-the-art laboratory services and
products , announces its unaudited half year results for the six
months ended 30 June 2021, showing considerable growth in revenues,
earnings and cash generation year-on-year.
Financial highlights
-- Revenue increased by 252% to GBP37.3 million (H1 2020: GBP10.6 million)
-- Gross profit increased by 252% to GBP16.0 million (H1 2020: GBP4.6 million)
-- Adjusted EBITDA(1) increased by 570% to GBP11.2 million (H1 2020: GBP1.7 million)
-- Adjusted EPS(2) increased substantially to 10.7 pence per
share (H1 2020: loss of 0.2 pence per share), basic and diluted EPS
increased more substantially to 10.7 pence per share (H1 2020: loss
of 8.0 pence per share)
-- Cash generated from operations increased by 747% to GBP11.4
million (H1 2020: GBP1.3 million) with strong cash conversion,
exceeding adjusted EBITDA
-- Cash balance of GBP17.2 million (31 December 2020: GBP8.4
million and 30 June 2020: GBP1.5 million) with no debt (30 June
2020: GBP101.3 million)
1 Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation ('EBITDA') adjusted for exceptional items (see
note 5)
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 8)
Operational highlights
-- A total of 613,987 RT-PCR tests completed in the first half
of 2021 making a cumulative 1,372,203 completed since the
commencement of COVID-19 testing services in May 2020.
-- Cellular Pathology services returned to pre COVID-19 levels
of business in the second quarter of 2021, bringing all core
business units back to normal levels of activity and showing growth
in the second quarter versus the first quarter.
Post-period end highlights
-- The ramp-up in RT-PCR COVID-19 testing has continued since
the half year-end as the demand had increased following the opening
up of travel and relaxation of restrictions. So far in September,
PCR testing throughput has been approximately 14,000 tests per day,
compared to August PCR testing which averaged 10,824 tests per day
and July PCR testing which averaged 6,868 tests per day. This
compares to June PCR testing throughput which averaged 3,673 tests
per day and H1 2021 PCR testing which averaged 3,392 tests per day.
Peak testing volumes have hit approximately 19,300 tests per day.
However, the changes in the travel guidelines announced on 17
September are expected to materially reduce the throughput and
revenues generated from PCR testing.
-- Appointment of Nick Bills, formerly the National Pathology
Manager for Nuffield Health, as Director of Healthcare, to lead the
Healthcare Diagnostics and Infectious Disease Testing business
units.
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.
Jay LeCoque, Executive Chairman, commented : "We are very
pleased with progress in the first half of 2021. As we reported in
July, the Group has looked forward to capitalising on further
opportunities in the second half, in particular driven by travel
related COVID-19 testing and we have been delighted to see
increased PCR testing throughput materialising in the third quarter
of 2021. However, as recently reported, the recent news relating to
changes in the travel testing requirements will materially impact
our estimated level of PCR testing post October with a
consequential impact on revenues for the year. However, we are well
positioned to accelerate the rollout of lateral flow technology
following the signing of two commercial deals, with Excalibur
Healthcare and Everything Genetic, which is expected to mitigate
some of the reduction in PCR testing. We are also particularly
pleased to see the continued momentum in our Healthcare Diagnostics
business unit as demand for Cellular Pathology services accelerates
and the recovery of elective surgeries gathers pace. Our search for
complementary M&A targets to drive further growth in revenues
and earnings is progressing well. We anticipate a very busy fourth
quarter of 2021 and financial year 2022."
Contacts:
SourceBio International plc www.sourcebiointernational.com
Jay LeCoque, Executive Chairman Via Walbrook PR
Tony Ratcliffe, Chief Financial
Officer
Liberum (Nominated Adviser 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, SourceBio offers
screening, gold standard RT-PCR and whole genome sequencing
COVID-19 testing solutions and operates under ISO 15189
accreditation required by the DHSC. SourceBio also provides
employee testing solutions to industry, and direct to consumer home
test kits (including "Fit to Fly", "Test to Release" and "Day 2
& Day 8 International Travel" approved tests).
-- Healthcare Diagnostics - histopathology cancer screening 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 the six months ended 30 June 2021
I am pleased to report a busy half year of significant
achievement in the business.
The key performance indicators currently used by the Group are
revenue, gross profit, adjusted EBITDA and cash resources. In this
regard, revenues for the first half increased to GBP37.3 million,
an increase of 252% on the prior first half revenues of GBP10.6
million, gross profit increased to GBP16.0 million, an increase of
252% on the prior first half gross profit of GBP4.6 million, and
adjusted EBITDA increased to GBP11.2 million, a level almost
seven-fold that of the prior first half adjusted EBITDA of GBP1.7
million. Cash balances at 30 June totalled GBP17.2 million with no
bank and shareholder borrowings, compared to cash of GBP8.4 million
at 31 December 2020. The Company's IPO in October 2020 transformed
the Group's balance sheet and this has been further bolstered by
strong cash conversion driven by a strong focus on working capital
management. Further details of the financial performance can be
found in the Chief Financial Officer's Review and within the
financial statements.
The Group continues to respond to a very fast-moving COVID-19
testing marketplace and has continued to offer PCR testing services
in the first half, at scale. The Group has successfully diversified
its customer base to reduce the reliance on the Department of
Health and Social Care (DHSC), who underpinned testing in 2020. The
Board pivoted to build additional capacity and secure the
anticipated increased demand for PCR testing over the summer as
travel restrictions were lifted. The second quarter therefore drove
an expansion programme to build further PCR testing capacity ahead
of this expected increase in demand, which pleasingly has
materialised during the third quarter of the year, creating record
PCR volumes and revenues.
The arrival and sustained impact of the COVID-19 pandemic has
clearly provided many and ongoing challenges across the globe. The
momentum of increased Cellular Pathology work in the second quarter
of 2021 as elective surgeries started to resume with much greater
pace now completes the return of all of the Group's long standing
business units to more normalised pre COVID-19 operating levels.
All business units have been challenged to accelerate and deliver
additional growth going forward. A more detailed review of the
first half of 2021, by business unit, is presented in the business
review below.
The Board is very grateful for the significant hard work and
dedication of the entire SourceBio team and for the many
achievements in what continues to be a uniquely challenging
backdrop but also a period of significant opportunity.
Business review
The business comprises four business units - Healthcare
Diagnostics, Genomics, Stability Storage and the newest 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
The Group's Infectious Disease Testing business provides UKAS
accredited COVID-19 Antigen RT-PCR laboratory-based testing and
whole genome sequencing services for COVID-19 testing. The testing
capacity in the Group's Nottingham facility was grown in modular
steps to approximately 10,500 tests per day capacity by the end of
2020 with further increases to approximately 20,000 tests per day
capacity by September 2021. The further capacity scale-up in
mid-2021 has been specifically in contemplation of an expected
increase in demand for COVID-19 PCR tests driven by the opening up
of travel, which has materialised in the third quarter. The Group
performed over 0.7 million tests by the end of 2020 and reached
approaching 1.4 million tests by the end of the first half of 2021
and exceeded 2.0 million tests by early September.
High volume COVID-19 Antigen RT-PCR laboratory-based tests
formed the entire revenues for this business unit in 2020 but, as
highlighted at the time of Admission in October 2020, the Board
anticipates that whilst PCR based testing will remain the gold
standard test, particularly for clinical purposes, the Group has
evaluated numerous technologies and offerings to enhance its
testing portfolio during 2021, most particularly in lateral flow
testing.
As announced on 20 September, the Group has secured two
commercial distribution agreements for the supply of lateral flow
tests. The first agreement is with Excalibur Healthcare Services
Limited for the supply of their new Lateral Flow Test, which has
been approved for professional use in Europe and the UK. This test
kit may also be combined with a "Test to go" scanning app and
Travel Pack that has been proven to provide a more accurate reading
of results than the human eye. The second agreement is with
Everything Genetic Limited which also uses a home use option for
lateral flow antigen testing.
These services generated revenues totalling GBP28.4 million in
the first half of 2021 (H1 2020: GBP2.2 million, 2020: GBP34.5
million) and a gross profit of GBP12.4 million in the first half of
2021 (H1 2020: GBP1.0 million, 2020: GBP13.7 million), equating to
a gross margin percentage of 43.6% in the first half of 2021 (H1
2020: 46.5%, 2020: 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 grown
rapidly 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
through to the second quarter of 2021 had a material effect on the
quantity of elective surgeries in the UK which reduced the levels
of business throughput. 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. It is very welcome to see the progressive
return of increasing levels of activity in the second quarter of
2021 as elective surgeries return at scale, with second quarter
revenues of GBP1.1 million being 77% higher than the first
quarter's revenues of GBP0.6 million. Cellular Pathology activity
generated GBP1.7 million of revenue in the first half of 2021 (H1
2020: GBP1.9 million) or 69% of this business unit's revenue (H1
2020: 70%).
SourceBio also offers enhanced molecular diagnostic tests
through its Reference Laboratory 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. Reference Laboratory
activity generated GBP0.7 million of revenue in the first half of
2021 (H1 2020: GBP0.8 million) or 31% of this business unit's
revenue (H1 2020: 30%).
In aggregate, these services generated revenues totalling GBP2.4
million in the first half of 2021 (H1 2020: GBP2.7 million, 2020:
GBP4.4 million) and a gross profit of GBP0.6 million in the first
half of 2021 (H1 2020: GBP0.8 million, 2020: GBP1.0 million),
equating to a gross margin percentage of 26.7% in the first half of
2021 (H1 2020: 28.2%, 2020: 23.6%).
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 made a strategic investment in state-of-the-art equipment
in late 2019 to facilitate the delivery of more significant NGS
contracts. Whilst both revenue streams were impacted by COVID-19
during 2020, both bounced back within approximately three months.
NGS activity generated GBP0.9 million of revenue in the first half
of 2021 (H1 2020: GBP0.5 million) or 36% of this business unit's
revenue (H1 2020: 30%). The Board is very pleased with the absolute
increase and the continuing skew toward NGS versus Sanger
revenues.
In aggregate, these services generated revenues totalling GBP2.6
million in the first half of 2021 (H1 2020: GBP1.8 million, 2020:
GBP4.2 million) and a gross profit of GBP1.1 million (H1 2020:
GBP0.7 million, 2020: GBP1.7 million), equating to a gross margin
percentage of 43.3% in the first half of 2021 (H1 2020: 39.8%,
2020: 41.1%).
Stability Storage
The Stability Storage business unit comprises three principal
offerings: Stability Storage Services, Manufacturing, Service and
Validation with ancillary Analytical Testing Services primarily for
the purpose of shelf-life testing.
The largest of these offerings is Stability Storage Services,
which generated GBP1.8 million of revenue in the first half of 2021
(H1 2020: GBP1.9 million), or 51% of this business unit's revenue
(H1 2020: 55%). 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. In 2020 the
Group 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 long-term growth. Business is secured
on recurring contracts which are typically of three-year duration,
so whilst there has been a reduction in revenue of GBP0.1 million
versus the first half of 2020, this has been caused by the
predicted natural expiry of contracts and some lost work in the
move from Los Angeles to San Diego in the USA. By its nature, this
business line therefore provides highly visible recurring revenue
at high gross margin levels, now exceeding 80%. This business line
has been relatively robust as regards COVID-19 and is poised for
further growth as the increased capacity is sold.
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
GBP0.6 million of revenue in the first half of 2021 (H1 2020:
GBP0.4 million) or 18% of this business unit's revenue (H1 2020:
12%). Sales of capital equipment are naturally variable and subject
to economic confidence and the Board was pleased to secure solid
new business in the period 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 GBP1.1 million of revenue in the first half of
2021 (H1 2020: GBP1.1 million), or 31% (H1 2020: 32%) of this
business unit's revenue. Growth had been hampered to a degree by
the travel restrictions imposed by the ongoing COVID-19
pandemic.
In aggregate, these activities generated revenues totalling
GBP3.6 million in the first half of 2021 (H1 2020: GBP3.5 million,
2020: GBP6.9 million) and a gross profit of GBP1.8 million in the
first half of 2021 (H1 2020: GBP1.8 million, 2020: GBP3.9 million),
equating to a gross margin percentage of 50.4% in the first half of
2021 (H1 2020: 53.2%, 2020: 56.1%).
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
GBP0.4 million in the first half of 2021 (H1 2020: GBP0.4 million,
2020: GBP0.8 million) and a gross profit of GBP0.1 million in the
first half of 2021 (H1 2020: GBP0.2 million, 2020: GBP0.2
million).
Senior management
I was delighted to appoint Nick Bills as Director of Healthcare
in July 2021, with responsibility for the Healthcare Diagnostics
and Infectious Disease Testing business units. The Executive
Management team was further enhanced in August 2021 with the
addition of Richard Stevens following his promotion to Director of
Genomics and of Michael Whatmough, as General Manager of the
Stability Storage business unit. The Board sees substantial future
growth opportunities in the core business units and believes that
it is critical to have a strengthened team in place in order to
maximise these opportunities.
Russell Wheatcroft, formerly Chief Operating Officer, left the
business in August 2021.
Outlook
The Group had a transformational year in 2020 and delivered a
robust first half of 2021 with attractive revenues, earnings and
cash generation. Trading in the third quarter has been strong
driven by peak levels of PCR testing, contributing to further
growth in revenues, earnings and cash generation. The Board
recognises that the COVID-19 testing marketplace has been highly
fluid and clearly the changes in the travel guidelines announced on
17 September are expected to materially reduce the throughput and
revenues generated from PCR testing as Day 2 and Day 8 testing will
be removed under the new travel guidelines from the end of October
for fully vaccinated individuals and lower-risk countries. The
Group expects to continue to see interest in PCR testing services,
particularly for clinical purposes, to address positive results
from lateral flow testing, and for out-bound travel, the "Fit to
Fly scheme" and for Day 2 and Day 8 tests for arrivals from red
list countries. Following the implementation of these new rules in
October, PCR testing throughput is expected to reduce by
approximately 70% on the levels achieved in the third quarter of
the year.
The Group does expect a modest level of mitigation through the
expected revenues generated from the introduction of lateral flow
testing and from the scheduled launch in the fourth quarter of PCR
testing from its San Diego facility.
The Group's three other business units are very well positioned
in their respective markets and have benefited from investment and
are poised for delivering attractive growth going forward, in the
current year and beyond.
Notwithstanding the anticipated reduced levels of PCR testing in
the latter months of the year, the Group does anticipate the
delivery of very strong revenue, earnings and cash generation. The
Board expects revenues for 2021 to grow by approximately 70% on
2020 revenues of GBP50.7 million.
As was contemplated at IPO, the cash generated from COVID-19
testing to date, of approximately GBP20 million, plus the further
cash generation anticipated, as well the COVID-19 related working
capital that will ultimately unwind into cash, all provide the
Group with an exceptionally strong balance sheet and the
wherewithal to rapidly accelerate the growth of the core business
through acquisition. The Group has continued to evaluate potential
acquisition opportunities, with a number of encouraging discussions
underway. We expect the focus of acquisitions to be similar or
complementary businesses most likely relevant to the Healthcare
Diagnostics (with cellular pathology and precision medicine targets
being of particular interest) and Genomics business units.
Geographically, the initial focus is on targets located in the UK,
Europe and the USA. We look forward to updating shareholders
further in due course.
Chief Financial Officer's Review
Revenue
Revenue for the half year 2021 was GBP37.3 million (H1 2020:
GBP10.6 million), an increase of 252%.
Revenue across the four core business units is summarised
below:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
Business unit GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -------------
Infectious Disease Testing 28,376 2,189 34,463
Healthcare Diagnostics 2,384 2,729 4,424
Genomics 2,564 1,805 4,219
Stability Storage 3,565 3,463 6,880
Core operations 36,889 10,186 49,986
Non-core operations 371 406 751
----------------------------- ------------ ------------ -------------
Total 37,260 10,592 50,737
The Group continued to maximise throughput in its newest
business unit, Infectious Disease Testing, following its launch of
COVID-19 Antigen RT-PCR testing services in May 2020. During the
first half of 2021 the Group secured total revenues of GBP28.4
million (H1 2020: GBP2.2 million and 2020: GBP34.5 million).
The three established business units, Healthcare Diagnostics,
Genomics and Stability Storage, were all to a degree impacted by
COVID-19 during 2020 but have now all returned to pre COVID-19
levels of trading:
-- The Healthcare Diagnostics business unit delivered revenues
of GBP2.4 million in the first half of 2021 (H1 2020: GBP2.7
million and 2020: GBP4.4 million). Cellular Pathology testing
volumes continued to be modest in the early months of 2021 as
volumes remained heavily impacted by well publicised delays in
elective surgeries whilst the backlog of potential work has
reportedly dramatically increased. However, these volumes started
to recover in the second quarter as momentum in elective surgeries
increased. Cellular Pathology delivered revenues of GBP1.7 million
in the first half of 2021 (H1 2020: GBP1.9 million and 2020:
GBP2.7million). The Reference Laboratory delivered revenues of
GBP0.7 million in the first half of 2021 (H1 2020: GBP0.8 million
and 2020: GBP1.7million) largely consistent with prior trading as
work in this area quickly recovered from the initial impact from
COVID-19.
-- Genomics comprises traditional Sanger Sequencing, which
delivered revenues of GBP1.6 million in the first half of 2021 (H1
2020: GBP1.3 million, 2020: GBP2.8 million) and NGS (Next
Generation Sequencing), which delivered revenues of GBP0.9 million
in the first half of 2021 (H1 2020: GBP0.5 million, 2020: GBP1.4
million). Both business lines have showed a strong recovery and
good growth following the modest impact from COVID-19. 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 continued to prove successful as the proportion of NGS work
continues to trend up. NGS revenues in the first half of 2021 were
36% of the Genomics total (H1 2020: 30%, 2020: 33%).
-- Stability Storage comprises Stability Storage Services which
delivered revenues of GBP1.8 million in the first half of 2021 (H1
2020: GBP1.9 million, 2020: GBP3.5 million), Service and Validation
which delivered revenues of GBP1.1 million in the first half of
2021 (H1 2020: GBP1.1 million, 2020: GBP2.2 million) and
Manufacturing which delivered revenues of GBP0.6 million in the
first half of 2021 (H1 2020: GBP0.4 million, 2020: GBP1.1 million).
Stability Storage Services, which are sold on a recurring revenue
model, have been relatively robust although some business was lost
as the business moved its North American facility in early 2020.
Service and Validation work has remained relatively flat, with
growth opportunities impacted by the restrictions to travel, whilst
the timing of equipment sales, being capital purchase items, is
naturally fluid.
Gross profit
Overall gross profit was GBP16.0 million in the first half of
2021 (H1 2020: GBP4.6 million, 2020: GBP20.5 million), representing
a gross margin percentage of 43.0% in the first half of 2021 (H1
2020: 43.0%, 2020: 40.3%). Although the quantum and mix of revenue
dramatically changed in 2020, gross margin percentage levels were
maintained overall. It is notable that, in spite of increasing
pricing pressure, the Infectious Disease Testing gross margin
percentage increased to 43.6% in the first half from 39.6% in 2020,
largely driven by procurement efficiencies and cost savings.
Expenses
Total expenses in the first half of 2021 were GBP6.0 million (H1
2020: GBP3.8 million, 2020: GBP9.8 million). The 2020 expenses
included GBP1.5 million of exceptional expenses in relation to the
Company's Admission to AIM in October. The Group has generally
incurred additional expenses across all areas of the business in
order to successfully secure, deliver and maintain the sustained
increased level of business throughput and in order to prepare for
the further anticipated increase in business throughput expected in
the second half of 2021. Management was largely able to utilise
much of the 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 GBP1.2 million
in the first half of 2021 (H1 2020: GBP0.9 million, 2020: GBP2.0
million) due primarily to increased laboratory equipment
depreciation.
Adjusted 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). The Group achieved an
adjusted EBITDA of GBP11.2 million in the first half of 2021 (H1
2020: GBP1.7 million, 2020: GBP14.2 million). This translated to an
adjusted EBITDA percentage in the first half of 2021 of 30.1% (H1
2020: 15.8%, 2020: 27.9%), an almost doubling in adjusted EBITDA
margin from H1 2020 and an increase of 2.2% on 2020. There were no
share-based payments in the period and there were no exceptional
items in the first half of 2021 (H1 2020: GBP0.1 million credit,
2020: GBP1.5 million). The principal driver for the huge growth in
adjusted EBITDA versus H1 2020 was the level of COVID-19 test
revenues and gross profit secured, which did not necessitate
corresponding increases in expenses. The Group has focussed hard on
maximising adjusted EBITDA and this is reflected in the further
improvement over 2020.
Finance costs
Total finance costs were GBP0.2 million in the first half of
2021 (H1 2020: GBP5.0 million, 2020: GBP7.9 million). A substantial
reduction in ongoing finance costs was achieved when the Company's
PIK loan notes were redeemed in consideration for the issuance of
new shares in contemplation of the Company's Admission to AIM in
October 2020 and all the Group's shareholder and bank borrowings
were repaid shortly after Admission.
The remaining modest finance costs relate to finance leases
charges. At the period end date the Group had no borrowings other
than leases.
Tax
An income tax charge of GBP1.9 million arose in the first half
of 2021 (H1 2020: GBPnil, 2020: GBP0.2 million credit). The vast
majority of the earnings in the first half of 2021 were generated
in the UK, where the Group exhausted its accumulated tax losses in
2020 which reduced the prior year's overall income tax charge, thus
has accrued tax due on all its income. The Group had trading losses
of GBP1.1 million in its USA subsidiary available for carry forward
at 1 January 2021.
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 period 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
period. The adjusted earnings per share in the first half of 2021
amounted to 10.7 pence per share (H1 2020: loss of 0.2 pence per
share, 2020: 19.8 pence per share).
The Group had no share options in issue thus its basic and
diluted earnings per share were the same. The Group also had no
adjusting interest or exceptional items in the first half of 2021
so basic and diluted earnings per share in the first half of 2021
amounted to 10.7 pence per share (H1 2020: loss of 8.0 pence per
share, 2020: 5.3 pence per share).
Intangible assets
Goodwill at the half year remained at GBP10.0 million, with no
impairment charged in the half year and other intangible assets had
a net book value of GBP0.2 million (H1 2020: GBP0.2 million, 2020:
GBP0.3 million).
Property, plant and equipment
Net book value of property, plant and equipment at the half year
amounted to GBP8.0 million (H1 2020: GBP8.2 million, 2020: GBP7.0
million), an overall increase of GBP0.5 million. Additions in the
first half of 2021 totalled GBP1.5 million, comprising mainly
laboratory equipment of GBP0.6 million, fixtures and fittings of
GBP0.7 million and leasehold improvements of GBP0.2 million, which
were primarily required to support the capacity build-up of
COVID-19 testing services.
Right-of-use assets
As a result of the implementation of IFRS 16 "Leases", the Group
recorded at the half year GBP10.5 million of right-of-use assets
(H1 2020: GBP2.9 million, 2020: GBP9.5 million). The principal
increase in the second half of 2020 arose from the addition of
GBP5.2 million which represented the creation of a right-of-use
asset as a consequence of the sale and leaseback of the Nottingham
property. Additions in the half year of 2021 totalled GBP1.5
million and related to mainly newly leased laboratory equipment of
GBP1.3 million and newly leased property of GBP0.2 million.
Inventories
Inventories at the half year amounted to GBP5.1 million (H1
2020: GBP1.2 million, 2020: GBP3.6 million), the increase due to
the increased stockholding requirements to support forecasted
COVID-19 testing.
Trade and other receivables
Trade and other receivables at the half year amounted to GBP11.5
million (H1 2020: GBP5.4 million, 2020: GBP10.5 million), the
increase driven by the receivables within the Infectious Disease
Testing business unit. The credit losses provision at the half year
amounted to GBP200,000, an increase on the GBP34,000 at the start
of the year.
Overall, debtor days outstanding at the half year were 40 days
(H1 2020: 33 days, 2020: 42 days) and during the half year averaged
43 days (H1 2020: 42 days, 2020: 53 days).
Lease liabilities
Total lease liabilities at the half year amounted to GBP13.4
million (H1 2020: GBP3.9 million, 2020: GBP12.1 million). The
increase in the half year was primarily driven by new equipment
acquired on lease.
Cash and working capital
Cash generation from operations was strong and exceeded EBITDA
in the half year 2021 at GBP11.4 million (H1 2020: GBP1.3 million,
2020: GBP6.4 million). Cash and cash equivalents at the half year
amounted to GBP17.2 million (H1 2020: GBP1.5 million, 2020: GBP8.4
million). Borrowings (excluding leases) at the half year 2021
remained GBPnil (H1 2020: GBP101.3 million) as the Group redeemed
and converted its outstanding PIK loan notes into equity and repaid
all of its bank and shareholder borrowings in October 2020. The
improved funding position of the Group over the first half of 2021
was driven principally by the strong cash conversion of the
business. The Group currently has no bank borrowing facilities.
Net assets
Net assets at the half year 2021 amounted to GBP39.6 million (H1
2020: net liabilities GBP81.3 million, 2020: GBP31.8 million), the
improved position over the first half of 2021 was driven by strong
trading.
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
For the six months ended 30 June 2021
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Continuing operations : Note GBP'000 GBP'000 GBP'000
------------------------------------------- ---- ----------- ----------- ------------
Revenue 4 37,260 10,592 50,737
Cost of sales (21,236) (6,035) (30,284)
------------------------------------------- ---- ----------- ----------- ------------
Gross profit 3 16,024 4,557 20,453
Distribution costs (907) (668) (1,573)
Administrative expenses (5,116) (3,086) (8,181)
Adjusted EBITDA 3 11,218 1,673 14,155
Depreciation (1,158) (863) (1,890)
Amortisation (59) (61) (102)
Exceptional items 5 - 54 (1,464)
Operating profit 10,001 803 10,699
Finance costs 6 (209) (5,020) (7,908)
Profit / (loss) before tax 9,792 (4,217) 2,791
Taxation 7 (1,860) - 201
------------------------------------------- ---- ----------- ----------- ------------
Profit attributable to equity shareholders
of the Company 7,932 (4,217) 2,992
------------------------------------------- ---- ----------- ----------- ------------
Other comprehensive income
Items that may be reclassified
to profit or loss:
- Exchange differences on translation
of foreign operations (119) 101 208
------------------------------------------- ---- ----------- ----------- ------------
Total comprehensive income attributable
to equity shareholders of the Company 7,813 (4,116) 3,200
------------------------------------------- ---- ----------- ----------- ------------
Earnings per share:
Basic and diluted earnings / (loss)
per ordinary share 8 10.7p (8.0p) 5.3p
------------------------------------------- ---- ----------- ----------- ------------
Consolidated Statement of Financial Position
As at 30 June 2021
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2021 2020 2020
Notee GBP'000 GBP'000 GBP'000
------------------------------------------- ----- --------- --------- ------------
Assets
Non-current assets
Intangible assets - goodwill 9,993 9,993 9,993
Intangible assets - other 203 207 349
Property, plant and equipment 7,973 8,153 6,959
Right-of-use assets 10,516 2,858 9,478
Deferred tax asset 395 - 395
Total non-current assets 29,080 21,211 27,174
------------------------------------------- ----- --------- --------- ------------
Current assets
Inventories 5,089 1,211 3,598
Trade and other receivables 11,453 5,430 10,472
Cash and cash equivalents 17,186 1,478 8,435
------------------------------------------- ----- --------- --------- ------------
33,728 8,119 22,505
Assets classified held for resale - 475 475
------------------------------------------- ----- --------- --------- ------------
Total current assets 33,728 8,594 22,980
------------------------------------------- ----- --------- --------- ------------
Total assets 62,808 29,805 50,154
------------------------------------------- ----- --------- --------- ------------
Equity attributable to equity shareholders
of the Company
Share capital 9 111 2,906 111
Share premium account 33,189 - 33,189
Foreign exchange reserve 52 64 171
Retained earnings 6,295 (84,334) (1,637)
Total equity 39,647 (81,364) 31,834
------------------------------------------- ----- --------- --------- ------------
Liabilities
Non-current liabilities
Trade and other payables 317 314 394
Borrowings 10 - 71,071 -
Lease liabilities 12,193 3,446 11,602
Provisions 138 196 141
------------------------------------------- ----- --------- --------- ------------
Total non-current liabilities 12,648 75,027 12,137
------------------------------------------- ----- --------- --------- ------------
Current liabilities
Trade and other payables 8,492 5,398 5,494
Borrowings 10 - 30,204 -
Corporation tax payable 791 117 126
Lease liabilities 1,212 407 547
Provisions 18 16 16
------------------------------------------- ----- --------- --------- ------------
Total current liabilities 10,513 36,142 6,183
------------------------------------------- ----- --------- --------- ------------
Total liabilities 23,161 111,169 18,320
------------------------------------------- ----- --------- --------- ------------
Total equity and liabilities 62,808 29,805 50,154
------------------------------------------- ----- --------- --------- ------------
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2021
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 2020 2,906 - (37) (80,117) (77,248)
Loss for the period - - - (4,217) (4,217)
Other comprehensive income - - 101 - 101
-------------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income
for the period - - 101 (4,217) (4,116)
-------------------------------- --------- --------- ---------- ---------- ---------
Unaudited balance at 30 June
2020 2,906 - 64 (84,334) (81,364)
-------------------------------- --------- --------- ---------- ---------- ---------
Profit for the period - - - 7,209 7,209
Other comprehensive income - - 107 - 107
-------------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income
for the period - - 107 7,209 7,316
-------------------------------- --------- --------- ---------- ---------- ---------
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
-------------------------------- --------- --------- ---------- ---------- ---------
Audited balance at 31 December
2020 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
-------------------------------- --------- --------- ---------- ---------- ---------
Consolidated Statement of Cash Flows
For the six months ended 30 June 2021
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ----------- ------------
Cash flows from operating activities
Profit / (loss) for the period 7,932 (4,217) 2,992
Adjustments for:
Depreciation of property, plant
and equipment and
right-of-use assets 1,158 863 1,890
Amortisation 59 61 102
Foreign exchange (86) 101 253
Profit on disposal of property,
plant and equipment (134) (1) -
Finance costs 209 5,020 7,908
Taxation 1,860 - (201)
Issue costs of new shares - - 1,464
Working capital adjustments:
(Increase) in inventories (1,491) (395) (2,782)
(Decrease) in provisions (1) (1) (18)
(Increase) in trade and other receivables (1,021) (65) (5,245)
Increase / (decrease) in trade and
other payables 2,899 (22) 25
Cash generated from operations 11,384 1,344 6,388
Income tax (paid) / received (1,197) 75 (48)
Net cash inflows from operating activities 10,187 1,419 6,340
-------------------------------------------- ----------- ----------- ------------
Cash flows from investing activities
Purchase of property, plant and equipment (1,515) (1,092) (3,870)
Purchase of intangible assets (20) (21) (140)
Proceeds on disposal of property,
plant and equipment 645 20 5,000
Net cash (outflow) / inflow from
investing activities (890) (1,093) 990
-------------------------------------------- ----------- ----------- ------------
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 - 1,000 2,000
Repayment of borrowings - (500) (30,253)
Interest paid (17) (100) (2,750)
Payment of lease liabilities (507) (483) (894)
-------------------------------------------- ----------- ----------- ------------
Net cash outflow from financing activities (524) (83) (137)
-------------------------------------------- ----------- ----------- ------------
Net increase in cash and cash equivalents 8,773 243 7,193
-------------------------------------------- ----------- ----------- ------------
Net foreign exchange difference on
cash and cash equivalents (22) - 7
Cash and cash equivalents at the
beginning of the period 8,435 1,235 1,235
-------------------------------------------- ----------- ----------- ------------
Cash and cash equivalents at the
end of the period 17,186 1,478 8,435
-------------------------------------------- ----------- ----------- ------------
Notes to the Unaudited Consolidated Financial Statements
For the six months ended 30 June 2021
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 and
products 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. 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 2020 and
which will form the basis of the 2021 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 2020
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
2021 and 30 June 2020 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 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 (now lesser) negative impact on the core
business plus the positive impact derived from the 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 existing
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
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 period 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 period, so as to
facilitate comparison with prior periods.
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 :
- 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 non-core operations which
are being wound down and which are presented separately as non-core
operations.
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 Year ended
30 June 2021 Six months ended 31 December
30 June 2020 2020
------------------- ------------------- ---------------------------------
Revenue
Gross Gross Gross
profit Revenue profit Revenue profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- --------- -------- --------------- ----------------
Infectious Disease
Testing 28,376 12,378 2,189 1,018 34,463 13,663
Healthcare Diagnostics 2,384 637 2,729 769 4,424 1,046
Genomics 2,564 1,110 1,805 719 4,219 1,734
Stability Storage 3,565 1,796 3,463 1,844 6,880 3,857
Core operations 36,889 15,921 10,186 4,350 49,986 20,300
Non-core operations 371 103 406 207 751 153
------------------------ --------- -------- --------- -------- --------------- ----------------
Total 37,260 16,024 10,592 4,557 50,737 20,453
------------------------ --------- -------- --------- -------- --------------- ----------------
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
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 on the Consolidated Statement of Profit and Loss.
Exceptional items are summarised in note 5.
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 Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
--------------- ---------- ---------- ------------
United Kingdom 35,244 8,481 46,657
Europe 1,047 1,426 2,349
USA 969 678 1,731
--------------- ---------- ---------- ------------
Total 37,260 10,592 50,737
--------------- ---------- ---------- ------------
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 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- ------------
Department of Social Care 1,190 1,946 17,200
Spire Healthcare Limited
lthcare Limited 12,256 107 10,700
-------------------------- ---------- ---------- ------------
5. Exceptional items
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ---------- ------------
Release of employment matters provision - (54) -
Costs in relation to the Company's
Admission to AIM - - 1,464
---------------------------------------- ---------- ---------- ------------
Total - (54) 1,464
---------------------------------------- ---------- ---------- ------------
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.
6. Finance costs
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
--------------------- ---------- ---------- ------------
On bank loans - (83) (158)
On PIK notes - (3,313) (4,970)
On shareholder loans - (1,459) (2,549)
On lease liabilities (209) (165) (231)
--------------------- ---------- ---------- ------------
Total (209) (5,020) (7,908)
--------------------- ---------- ---------- ------------
7. Taxation
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ------------
Current tax
UK corporation tax on profit for
the current period 1,860 - 232
Adjustment in respect of previous
periods - - (62)
Foreign taxation - - 54
Total 1,860 - 224
------------------------------------- ---------- ---------- ------------
Deferred tax
Origination and reversal of timing
differences - - (431)
Effect of tax rate change on opening
balance - - 6
Total - - (425)
------------------------------------- ---------- ---------- ------------
Total charge / (credit) 1,860 - (201)
------------------------------------- ---------- ---------- ------------
The tax charge in the six month periods have been calculated
based on the estimated tax rate that is expected to apply to the
full year.
8. Earnings / (loss) 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. For 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 2020.
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. 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 six months
ended 30 June 2021 was based on the profit attributable to ordinary
shareholders of GBP7,932,000 (H1 2020: GBP4,217,000 loss and 2020:
GBP2,992,000 profit) and 74,183,038 ordinary shares (H1 2020:
52,578,100 ordinary shares and 2020: 56,307,171) 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 period 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
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 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ---------- ------------
Profit / (loss) for the period 7,932 (4,217) 2,992
Interest payable on shareholder loans
and PIK loan notes - 4,772 7,677
Exceptional items - (54) 1,464
Tax effect of the above - (599) (964)
-------------------------------------- ---------- ---------- ------------
Adjusted profit / (loss) for the
period 7,932 (98) 11,169
-------------------------------------- ---------- ---------- ------------
The reconciliation of the earnings and weighted average number
of shares used in the calculations for the six months ended 30 June
2021 and 30 June 2020 is set out below:
Six months ended Six months ended
30 June 2021 30 June 2020
------------------------------ ------------------------------
Weighted Weighted
average Per average Per
number of share number of share
Earnings shares amount Earnings shares amount
GBP'000 000's (pence) GBP'000 000's (pence)
------------------------------- -------- ---------- -------- -------- ---------- --------
Basic and Diluted EPS
Earnings / (loss) attributable
to ordinary shareholders
of the Company 7,932 74,183 10.7p (4,217) 52,578 (8.0p)
------------------------------- -------- ---------- -------- -------- ---------- --------
Adjusted basic EPS
Adjusted earnings /
(loss) attributable
to
ordinary shareholders
of the Company 7,932 74,183 10.7p (98) 52,578 (0.2p)
------------------------------- -------- ---------- -------- -------- ---------- --------
The reconciliation of the earnings and weighted average number
of shares used in the calculations for the year ended 31 December
2020 is set out below:
Year ended 31 December
2020
------------------------------
Weighted
average Per
number of share
Earnings shares amount
GBP'000 000's (pence)
----------------------------------------------- -------- ---------- --------
Basic and Diluted EPS
Earnings attributable to ordinary shareholders
of the Company 2,992 56,307 5.3p
----------------------------------------------- -------- ---------- --------
Adjusted basic EPS
Adjusted earnings attributable to ordinary
shareholders of the Company 11,169 56,307 19.8p
----------------------------------------------- -------- ---------- --------
9. Share capital
The share movements are detailed below:
1p and 0.001p 0.001p
ordinary A ordinary 0.15p ordinary
shares shares shares
Issued and fully paid Number Number Number GBP'000
--------------------------------------- --------------- ------------ -------------- --------
At 1 January 2020 and 30 June 2020 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
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 and at 30 June
2021 - - 74,183,038 111
--------------------------------------- --------------- ------------ -------------- --------
10. Borrowings
30 June 2021 31 December
GBP'000 30 June 2020 2020
Current GBP'000 GBP'000
--------------------------- ------------ ------------ ------------
Bank loans and overdrafts - 4,350 -
Other loans - 25,854 -
--------------------------- ------------ ------------ ------------
Total - 30,204 -
--------------------------- ------------ ------------ ------------
Non-current
Other loans - 71,071 -
Total - 101,275 -
---------------------------- ------------ ------------ ------------
The Bank and other loans were repaid on or shortly after
Admission to AIM in October 2020.
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END
IR FLFEEAIIDFIL
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September 28, 2021 01:59 ET (05:59 GMT)
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