TIDMSBI
RNS Number : 7533F
SourceBio International PLC
09 November 2022
SourceBio International plc
('SourceBio', the 'Company' or the 'Group')
Trading Update,
Preparation for the proposed cancellation of admission of
ordinary shares to trading on AIM
and a proposed tender offer by the Company
SourceBio International plc (AIM: SBI), a leading international
provider of integrated state-of-the-art laboratory services ,
provides a trading update in relation to the period ending 31
December 2022.
In addition, the Board is considering the cancellation of the
admission of the Company's ordinary shares ("Ordinary Shares") to
trading on the AIM market of the London Stock Exchange (the
"Cancellation") and a proposed tender offer by the Company (the
"Tender Offer") for a proportion of the Ordinary Shares, subject
to, amongst other things, shareholder approval and securing the
necessary financing, as set out in further detail below.
Trading update - core business units
Revenues from the three core business units of Healthcare
Diagnostics, Genomics and Stability Storage continue to perform
well, as they did in the first half of the year, with all business
units showing growth on prior year. In particular, Cellular
Pathology and Digital Pathology services have continued the trend
of incremental growth as demonstrated in the first half. Healthcare
revenues in the ten months to 31 October 2022 were approximately
260% higher than the comparable prior year period. The Group
continues to focus on aggressively growing these three business
units.
Trading update - non-core COVID-19 PCR testing
As expected, the market for COVID-19 PCR testing services is now
very modest and this business is non-core to the Group. As noted in
the Company's interim results announcement on 8 September 2022,
included within contract liabilities was certain revenue in
relation to PCR test kits sold to a high street pharmacy chain in
late 2021 which was treated as deferred revenue as the tests had
not yet been returned to the Group's laboratory for processing. Due
to errors in the high street pharmacy chain's tracking of its
website testing volumes, the customer advised that although the
Group acted in accordance with the agreed commercial contract, they
believed that they had been incorrectly invoiced by a total of
approximately GBP2.67 million by the Group.
Whilst discussions with the customer continue, the Group
believes that it is prudent to recognise that GBP2.67 million of
deferred revenue in relation to this is now unlikely to be
recognised in the income statement. The Group has reached no
agreement in relation to any cash repayment to the customer.
Market expectations for 2022 incorporated the assumption that
all such COVID-19 deferred revenue would be recognised during the
year. Whilst it is very encouraging that the core business units
are performing well and that this over-performance is forecasted to
make up a part of the expected revenue and earnings shortfall
caused by this non-core PCR related issue, management believes that
2022 revenue and adjusted EBITDA(1) will be approximately GBP2.0
million less than previously expected.
(1) Adjusted EBITDA is earnings before interest, tax,
depreciation and amortisation ("EBITDA") adjusted for exceptional
items and share based payments
Potential Cancellation and Tender Offer
The Board has conducted a review of the benefits and drawbacks
to the Company retaining its listing on AIM and maintaining its
existing corporate structure. Subject to shareholder approval, as
noted below, the Board believes that the Cancellation would be in
the best interests of the Company and its shareholders as a whole,
for the following reasons:
-- although one of the main benefits of a company being on AIM
is the potential to issue new shares to raise additional funds for
investment or to issue new shares as consideration for
acquisitions, the Company is unable to raise money at what the
Directors believe to be a fair valuation and, due to the low
liquidity, the shares do not represent an attractive currency;
-- the Board believes that the Company's current share price
does not accurately reflect the future potential of the business,
especially given the significant growth opportunities in Cellular
and Digital Pathology;
-- the Group is focused on aggressively growing the three core
business units: Healthcare Diagnostics (Cellular and Digital
Pathology), Genomics and Stability Storage. There may be corporate
development and restructuring that is needed to drive and develop
such growth which may potentially be executed faster and more
nimbly if the Company were a private business;
-- the Board believes that, as a private company, the ability of
the Company to command a much higher valuation for the business on
eventual exit would serve in the best interest of Shareholders;
-- there is limited trading of the Ordinary Shares; and
-- the Company estimates that it could save annualised costs of
circa GBP600,000 per annum, being incremental costs resulting from
the Company being a public limited company with a listing on
AIM.
In conjunction with the Cancellation, t he Company is planning
the Tender Offer at a price of 115 pence per Ordinary Share. Whilst
yet to be finalised, it is intended that the Tender Offer would be
for a proportion of the Ordinary Shares and would be open to
certain shareholders, to the extent that shareholders do not wish
to retain their Ordinary Shares post Cancellation . It is expected
that holders of a substantial proportion (at least 48%) of the
Ordinary Shares will not tender shares under the Tender Offer and
therefore the Company expects to be able to purchase a large
proportion of the remaining shares.
The Group is in advanced discussions in relation to securing the
necessary financing for the Tender Offer.
In compliance with applicable law, regulations and the AIM
Rules, the Cancellation, the Tender Offer, the proposed
re-registration of the Company as a private limited company and the
adoption of new articles of association will, amongst other things,
require the final approval of the Board and the approval of
Shareholders at a general meeting of the Company. The Tender Offer
and Cancellation will be inter-conditional. The Tender Offer will
require the consent of the Panel on Takeovers and Mergers and will
need to comply with the Takeover Code (the "Code"), including
seeking waivers under Rule 9 and Rule 37 of the Code, and will
require shareholder approval.
The Company expects to provide fuller details of these
arrangements in due course.
Jay LeCoque, Executive Chairman, commented: "We continue to be
encouraged with progress and growth delivered across our three core
business units. Our operational focus remains the continued
expansion and scale-up of Cellular Pathology and Digital Pathology
volumes through the rest of the year and beyond. The PCR-related
deferred revenue situation is highly disappointing nonetheless
immaterial to the success and accelerating growth of our core
business units. Ultimately, we expect to secure a satisfactory
resolution to the issue raised by the COVID-19 PCR customer and
will update further as the situation develops. We are confident
that we can potentially grow the business faster as a private
company and look forward to providing fuller details 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
primarily from three core 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
----------------------------------------------------------------------
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.
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END
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