REG - hVIVO PLC - Final results
09/04/2024 07:15
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RNS Number : 7507J hVIVO PLC 09 April 2024
hVIVO plc
("hVIVO", the "Company" or the "Group")
Final results
A record year across all financial and operational metrics
On track to deliver future growth targets
Initiating annual dividend policy
hVIVO plc (AIM & Euronext: HVO), a rapidly growing specialist contract
research organisation (CRO) and world leader in testing infectious and
respiratory disease products using human challenge clinical trials, announces
its audited results for the year ended 31 December 2023.
Financial highlights
• Revenue up 16% to £56.0 million (2022: £48.5 million)
• EBITDA up 44% to £13.0 million (2022: £9.1 million)
• EBITDA margins of 23.3% (2022: 18.7%)
• Cash and cash equivalents of £37.0 million as at 31 December 2023 (31
December 2022: £28.4 million)
• Adjusted basic EPS increased 32% to 1.27p per share (2022: 0.96p)
• Weighted contracted orderbook of £80 million as at 31 December 2023 (31
December 2022: £76 million)
• Dividend for the year of c.£1.4 million (0.20p per Ordinary Share) as the
Company commences an annual dividend policy
Operational highlights
• Multiple standalone and full-service end-to-end human challenge contracts
signed
• First human challenge trial contract signed with an Asia-Pacific (APAC) client
in over a decade
• Commencement of the development of challenge agents including Human
Metapneumovirus (hMPV) and additional supply of Respiratory Syncytial Virus
(RSV)
• Completed manufacturing of Flu B challenge agent
• Inoculated a record number of volunteers across nine challenge trials
• Increased operational efficiencies yielding record margins and cash generation
• Upcoming move to the new state-of-the-art facility, which is largely funded by
key clients, will increase revenue potential and position the Company for
further margin improvements
• Value proposition for human challenge trials has been reinforced by recent
positive outcomes:
• Pfizer's ABRYSVO™ became one of the first RSV vaccines to receive FDA
approval in May 2023 having received Breakthrough Designation, following an
PII HCT conducted by hVIVO
• At least two biotech clients received FDA Fast Track and/or Breakthrough
Designation
Post-period end highlights
• Master Services Agreement signed with mid-sized pharma client for human
challenge trial services
• Fit out of new facility at Canary Wharf ahead of schedule HSE Level 2 approval
has been received and the unit is ready to commence its first quarantine in
April 2024
• Q1 2024 trading in line with expectations and the Company remains confident
that 2024 will be another year of significant growth
Annual dividend
The Company paid a one-off special dividend of £3.1m in 2023. As part of the
Company's annual dividend policy, a dividend of c.£1.4 million, being 0.20p
per Ordinary Share will be payable on 20 May 2024 to shareholders on the
register on 19 April 2024. The corresponding ex-dividend date is 18 April
2024.
Outlook
• Revenue guidance of £62 million for 2024, H1 2024 weighted, with sustainable
EBITDA margins
• 90% of 2024 revenue guidance already contracted with good visibility into 2025
• hMPV virus manufacturing process on track to complete in 2024 but
characterisation trial cancelled, hVIVO has received the cancellation fee and
will be able to market the agent for future characterisation and challenge
studies
• The Canary Wharf expansion will add a cutting-edge containment level three
(CL-3) laboratory and will increase quarantine capacity to 50 beds,
establishing this facility as the world's largest commercial human challenge
trial unit
• New medium-term target of growing Group revenue to £100 million by 2028
achievable through strong organic growth complemented by small bolt-on
acquisitions that meet the Company's strategic and financial criteria
• Strong cash position underpins the Group's M&A strategy
Dr. Yamin 'Mo' Khan, Chief Executive Officer of hVIVO, said: "In 2023, we
experienced yet another year of growth in the human challenge trial sector,
driven by increased recognition among Big Pharma and biotech firms of the
compelling evidence supporting the efficacy of hVIVO's human challenge trials
in expediting the development of novel vaccines and antivirals. Our
exceptional financial performance, marked by record revenues, margins and
profitability, coupled with the significant number of volunteers inoculated,
underscores not only the expansion of the market but also our ability and
capacity to meet the increasing demand.
"Looking ahead, I am confident that our robust orderbook, revenue visibility,
and increased capabilities puts the Company is a strong position to deliver
our revenue target of £62 million for 2024, as well as our medium-term
objective of reaching £100 million in revenue by 2028. The hard work and
dedication of our team have been instrumental in achieving these results and I
extend my thanks to each of them."
Investor presentation
Yamin 'Mo' Khan, Chief Executive Officer, and Stephen Pinkerton, Chief
Financial Officer, will provide a live presentation relating to the full year
results via the Investor Meet Company platform on Tuesday 9 April
2024 at 6.00 pm BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up
until 9am the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet
hVIVO here
(https://www.investormeetcompany.com/hvivo-plc-1/register-investor) .
Investors who already follow hVIVO on the Investor Meet Company platform
will automatically be invited.
For further information please contact:
hVIVO plc +44 (0) 20 7756 1300
Yamin 'Mo' Khan, Chief Executive Officer
Stephen Pinkerton, Chief Financial Officer
Cavendish Capital Markets Limited (Nominated Adviser and Joint Broker) +44 (0) 20 7220 0500
Geoff Nash, Charlie Beeson, Nigel Birks, Harriet Ward
Peel Hunt LLP (Joint Broker) +44 (0)20 7418 8900
James Steel, Dr Christopher Golden
Davy (Euronext Growth Adviser and Joint Broker) +353 (0) 1 679 6363
Anthony Farrell, Niall Gilchrist
Walbrook PR (Financial PR & IR) +44 (0) 20 7933 8780 or hvivo@walbrookpr.com
Stephanie Cuthbert / Phillip Marriage / +44 (0) 7796 794 663 / +44 (0) 7867 984 082 /
Louis Ashe-Jepson
+44 (0) 7747 515 393
Notes to Editors
About hVIVO
hVIVO plc (http://www.hvivo.com) (ticker: HVO) (formerly Open Orphan plc) is
a rapidly growing specialist contract research organisation (CRO) and the
world leader in testing infectious and respiratory disease vaccines and
therapeutics using human challenge clinical trials. The Group provides
end-to-end early clinical development services to its large, established and
growing repeat client base, which includes four of the top 10 largest global
biopharma companies.
The Group's fast-growing services business includes a unique portfolio of 11
human challenge models, with a number of new models under development, to test
a broad range of infectious and respiratory disease products. The Group has
world class challenge agent manufacturing capabilities, specialist drug
development and clinical consultancy services via its Venn Life Sciences
brand, and a lab offering via its hLAB brand, which includes virology,
immunology biomarker and molecular testing. The Group offers additional
clinical field trial services such as patient recruitment and clinical trial
site services.
hVIVO runs challenge trials in London with a new 50 quarantine bedroom,
state-of-the-art facilities opening in Canary Wharf in 2024, with highly
specialised on-site virology and immunology laboratories, and an outpatient
unit. To recruit volunteers / patients for its studies, the Group leverages
its unique clinical trial recruitment capability via its FluCamp
(http://www.flucamp.com/) volunteer screening facilities in London and
Manchester.
Chair Statement
For the year ended 31 December 2023
2023 - A record year across all metrics
Another record year across all financial and operational metrics. hVIVO had
nine active challenge studies in the quarantine clinic and inoculated our
highest number of healthy volunteers during the year. Revenue continued its
upward momentum delivering strong double-digit growth, with further efficiency
gains resulting in record profit margins. The weighted contracted orderbook of
£80 million as at 31 December 2023 provides good visibility into 2024 and
beyond. The business also continues to efficiently generate cash,
demonstrating the strength of our highly cash-generative business model. Venn
Life Sciences ("Venn"), hVIVO's early drug development consultancy, also
continued its impressive trajectory delivering more than 30% revenue growth,
underlining the strong momentum visible across the entire Group.
We are also pleased to confirm the start of an annual dividend policy, a sign
of the significant progress made to date and our confidence in the current
health and future of the business. The upcoming move to our new
state-of-the-art facility in Canary Wharf, largely funded by our clients, will
increase our revenue capacity from current levels and further improve
operational efficiencies, ultimately enhancing our profit margins.
An established business delivering consistent growth
hVIVO is the world leader in human challenge trials (HCTs) and an established
early clinical development services business. The Group continues to execute
its strategy, expanding its portfolio and diversifying client services, to
deliver long-term sustainable growth and profitability. To that end, post
period end we announced a new medium-term target to grow Group revenue to
£100 million by 2028, which the Board is confident is achievable through
continued strong organic growth complemented by small bolt-on acquisitions
that meet our disciplined strategic and financial criteria.
Organic growth in the period was driven by the steady expansion of the HCT
market, with our influenza and respiratory syncytial virus (RSV) challenge
models being key growth drivers. In particular, there has been renewed
interest in RSV vaccine and drug development from the global biopharma
industry following the approval of the world's first RSV vaccines last year.
hVIVO conducted the successful Phase 2 challenge trial for Pfizer's ABRYSVO™
vaccine, the data from which supported the FDA Breakthrough Designation and an
accelerated approval. We anticipate RSV continuing to be a key growth driver
going forward.
We have continued to win larger, full-service or bespoke human challenge
contracts that include client-funded development of new challenge models,
adding new indications to our world leading portfolio. Coupled with our new
state-of-the-art facilities, we have built robust foundations to further scale
the business and drive continued long-term organic growth. It is also worth
contextualising the Group's excellent progress against the tight biopharma
funding environment that has persisted for a couple of years. That said, we
are starting to see positive green shoots across the market, with January 2024
the strongest month of biotech funding since November 2021, and we are
confident hVIVO is well placed to benefit should this trend continue.
Whilst our existing HCT and Venn businesses are both delivering strong organic
growth, we will seek to enhance this via our inorganic growth strategy, and we
are actively assessing synergistic opportunities for small bolt-on
acquisitions in the areas of drug development consulting, patient recruitment
and clinical trial site services that will support our growth strategy whilst
also diversifying the Group's revenue streams. With a growing cash position of
£37 million at 31 December 2023 and strong sector and M&A expertise on
the Board, we are in a strong position to execute this strategy.
Annual dividend
In 2023, the Company paid its first cash dividend, a one-off special dividend
of £3.1 million. From 2024, as part of the Company's annual dividend policy,
we will pay an annual dividend in light of the cash generative qualities of
the business and the substantial cash balances on hand. A dividend of c.£1.4
million, being 0.20p per Ordinary Share will be payable on 20 May 2024 to
shareholders on the register on 19 April 2024, subject to shareholder approval
at the AGM. The corresponding ex-dividend date is 18 April 2024.
Outlook
hVIVO has had a strong start to 2024, conducting multiple concurrent challenge
trials and has 90% of this year's revenue guidance already contracted, with
record revenue visibility into 2025. The Board is confident that the Group's
consistent year-on-year growth of revenue, orderbook, sales pipeline, and
contract values are a strong indicator of the long-term health and growth
potential of the HCT market. The Group continues to evaluate opportunities to
optimise its business model and diversify its revenue streams via organic and
inorganic means to take advantage of this significant opportunity, helping
both grow the HCT market and further cement hVIVO's position as the global
leader.
Having received HSE approval in April 2024, the Group is on schedule to open
its new state-of-the-art facility in Canary Wharf in H1 2024, enabling hVIVO
to meet the growing demand for HCTs. The new facility will allow the Group to
further scale and drive revenue and margin improvements across its business
and will underpin the new medium-term target of growing Group revenues to
£100 million by 2028. As a result of the current strong outlook and
performance of the business, the Board remains confident in achieving revenues
of £62 million in 2024.
Cathal Friel
Chair
8 April 2024
CEO Statement
For the year ended 31 December 2023
An established long term sustainable growth model
Another record year has underlined hVIVO's ability to further build and expand
the human challenge trial market, with a growing number of evidence-based use
cases having showcased the tangible benefits these trials can bring to the
development of new vaccines and antivirals. Consequently, an increasing number
of drug developers have incorporated HCTs into their clinical development
plans resulting in an increase in both repeat and new business from our
growing roster of biopharma clients. Notably, four of the top ten global
biopharma firms are among our clients with contracts generally increasing in
both size and scope. The heightened demand for our services is evidenced in
the growing portfolio of our challenge models and the imminent move to our new
state-of-the-art quarantine facility. The fact that the majority of our new
challenge models are funded by our clients, and that our key clients have
largely financed the new facility, underpins our confidence in the future of
the HCT market. These investments also demonstrate the industry's recognition
of the value that hVIVO's HCTs can provide, and their ability to transform the
development pathway for new medicines.
The record revenue and profitability achieved during the year are testament to
our ongoing efforts to continually optimise the business to ensure we can
service this growing market over the long term as part of an established long
term sustainable growth model.
Another set of record results
hVIVO delivered record full year revenue of £56.0 million (2022: £48.5
million), a 16% increase on the previous year. The Group also recorded a
substantial 44% increase in EBITDA to £13.0 million (2022: £9.1 million),
with EBITDA margin increasing to 23.3% (2022: 18.7%). This growth was
primarily driven by the simultaneous conduct of multiple clinical trials
leading to improvements in the efficiency of volunteer recruitment, and
enhanced facility and staff utilisation. The client funding towards our new
Canary Wharf facility has also contributed to an improvement in EBITDA which
benefited margins in 2023 and is expected to also benefit 2024.
The considerable growth in cash to £37.0 million as at 31 December 2023 (31
December 2022: £28.4 million) is a result of an increase in the receipt of
upfront non-refundable fees, including client receipts for the new facility as
well as increased profitability in the conduct of HCTs. This offset the effect
of MHRA delays which impacted all clinical trials across the UK in 2023, and
also includes the £3 million one-off dividend paid in June 2023. Looking
ahead, our weighted orderbook grew to £80 million as at 31 December 2023 (31
December 2022: £76 million) having delivered £56.0 million of revenues in
2023. This substantial orderbook ensured that we entered the year in a very
strong position with 90% of 2024 revenue guidance already contracted. It is
important to emphasise that our orderbook is comprised of clients who have
signed a contractual agreement and paid the up-front non-refundable fee.
Exceptional operational execution
In 2023, hVIVO delivered nine active HCTs and inoculated a record number of
volunteers, with more than 17,000 potential volunteers undergoing in-house
screening. By leveraging our strong orderbook, we have strategically managed
and planned the utilisation of our quarantine clinic to optimise staff and
facility usage. The team has consistently demonstrated our ability to convert
the orderbook into revenue at excellent margins. In addition, our contracts
include milestone payments such that we maintain a positive cashflow
throughout the project lifecycle. We have also seen greater integration across
the Group, between hVIVO and Venn, especially across Medical Writing, Data
Management and Biostatistical service units. This synergy has created a
seamless end-to-end offering of early clinical development services. Volunteer
and patient recruitment continues to be the main challenge for the clinical
trial industry, with over 80% of clinical trials failing to meet enrolment
timelines in the US alone. FluCamp, the Group's technology-enabled volunteer
recruitment arm, provides industry leading volunteer recruitment for hVIVO's
trials. With an unparalleled database exceeding 300,000 potential volunteers
and around 1,500 volunteers screened each month, FluCamp has a very high
success rate in meeting healthy volunteer recruitment deadlines. In 2023, we
introduced a new volunteer management system which has improved engagement and
retention of potential volunteers as well as improving efficiencies.
The exceptional operational delivery across the business is a testament to the
outstanding team we have in place across the Group and is reflected by the
year-on-year repeat business from Big Pharma and biotech clients.
Delivering on our growth strategy: Optimise, scale and diversify
Optimising our operations
A large and diverse orderbook allows us to schedule our work in an efficient
manner. The main efficiency gains in the period were driven by the concurrent
conduct of challenge trials across multiple challenge agents. This has an
impact on a number of facets including volunteer recruitment, staff and site
utilisation. The screening of volunteers against multiple challenge trials
increases the likelihood of a volunteer entering a trial. This leads to an
increased throughput in the quarantine clinic, and greater utilisation of our
operational resources, both staff and facilities. Going forward, we expect the
new facility to be the main driver of further efficiency improvements, as it
will allow the Company to conduct even more challenge trials concurrently.
FluCamp has also benefitted from greater automation as it transitions from
paper-based processes to fully integrated cloud-based systems. Likewise, the
implementation of a lab information management system (LIMS) in 2024 will help
to streamline lab processes and improve efficiency.
Scaling the business
The trend towards larger HCTs continues, reflecting the expanding utility of
HCTs. While the use of the two-arm study design comparing placebo versus
active remains prevalent, there's an evolution towards multi-arm studies,
comparing different doses and/or technologies. It is important to note that
the size of the trial cohort remains the primary determinant of contract
value. In addition, there's an increase in data collection to provide deeper
insights into the drug, including dosing strategies and endpoint selection,
which informs later-stage field trials.
With the collaboration of our key clients, the Company is laying the
groundwork to meet the growing market demands. The Canary Wharf facility will
house 50 quarantine beds with dedicated HEPA air handling systems, meaning we
can conduct more concurrent trials than are currently possible. Furthermore,
we can also add up to 20 more beds if the demand for challenge trials
continues unabated. It will also house a much larger laboratory including a
CL-3 capability allowing us to conduct HCTs in CL-3 pathogens such as
SAR-CoV-2. The new facility is projected to open, and be fully operational,
by the end of H1 2024, and is set to be the world's largest commercial human
challenge trial unit. hLAB, the Group's highly specialised virology and
immunology laboratory service offering, saw a 100% increase in completed lab
assays during the year.
Venn, our drug development consulting subsidiary, also achieved remarkable
success, with over 30% year-on-year revenue growth. Venn saw a 24% increase in
employee headcount as it successfully delivered larger contracts for its 75%
repeat fast-growing biotech and Big Pharma clients. We anticipate further
growth opportunities for Venn and have increased strategic investment in the
key growth areas of advanced therapy medicinal products (ATMP) and drug device
consulting.
Diversifying our orderbook and services
hVIVO signed multiple bespoke, full-service human challenge contracts to
develop new challenge models, further expanding our world-leading portfolio of
challenge models. These contracts are unique to hVIVO and provide a source of
potential long-term revenue. We also achieved a significant milestone by
signing our first HCT contract with a client based in the Asia-Pacific (APAC)
region in over a decade, effectively diversifying our order book across
clients, challenge models and geographies. Our current £80 million weighted
orderbook is highly diversified, with work contracted across 7 challenge
agents and 11 HCT clients, substantially reducing the impact to hVIVO of
potential postponements or cancellations.
Our new facility will further expand our service offerings, featuring an
enhanced laboratory and an on-site outpatient unit, enabling the facilitation
of Phase II and Phase III field trials. Furthermore, we aim to strengthen our
service portfolio through strategic small bolt-on acquisitions in existing
synergistic areas of expertise. We are particularly interested in acquiring
drug development consulting businesses that complement Venn, patient
recruitment companies synergistic with FluCamp, and Phase I units that can
utilise volunteers from our extensive database who are ineligible for HCTs. We
are actively evaluating potential opportunities aligned with our growth
strategy, leveraging our team's deep sector knowledge and operational
expertise to ensure successful acquisitions that enhance our position as a
global CRO service provider. Aligned with our M&A strategy, it is
important to note that we will wait for the right opportunity rather than rush
into a quick acquisition. Our growth strategy includes both organic and
inorganic growth, but we will re-align our targets depending on the
opportunities available.
In a recent development, we have received notice that the biopharmaceutical
company funding the development of the hMPV model is now intending to proceed
directly to a Phase III clinical study and no longer plans to conduct a
challenge study. As a result, hVIVO will recognise a cancellation fee for the
cancelled characterisation study in the current financial year. The hMPV
vaccine challenge study has never been included in the Company's weighted
orderbook and there is no change to 2024 financial guidance. The manufacture
of the hMPV challenge agent has been completed and is the Group's IP, we will
be marketing the agent for characterisation and challenge studies moving
forwards.
An evidence-based sales strategy
Our ability to expand the HCT market is driven by the continued notable
successes that our HCTs have delivered on behalf of our clients. hVIVO is the
world leader in HCTs, conducting on average 5-10 trials a year across multiple
challenge agents, substantially more than the 1-2 conducted each year by our
next closest competitor. This is a significant differentiator for the Group,
as we optimise our models after every trial, ensuring they deliver robust and
reliable results for our clients.
The following client case studies provide strong examples of what has been
achieved following a HCT with hVIVO:
• Pfizer's ABRYSVO™ became one of the first RSV vaccines to receive FDA
approval in May 2023 having received FDA Breakthrough designation
• At least two biotechs received FDA Fast Track and/or Breakthrough Designation
These case studies provide the vital evidence-based foundations for our
ongoing sales efforts, highlighting how hVIVO's HCTs can generate rapid
efficacy data that is recognised and valued by the FDA, leading to potentially
expedited pathways to market via FDA Breakthrough or Fast Track designation.
Pfizer's RSV vaccine ABRYSVO™ provides a strong example of what is
achievable through HCTs - its pathway to market was significantly accelerated
following a HCT conducted by hVIVO, saving potentially up to two years of
clinical development time that would have been required as part of a
traditional field trial. For biotech's with fewer resources and smaller
pipelines, the tight funding environment has also increased the attractiveness
of HCTs. HCTs can deliver quick efficacy data at a lower cost than field
trials, substantially increasing the value of their vaccines or antivirals,
which can strengthen their case for further funding and increase their
attractiveness to Pharma partners as a potential acquisition/licensing
candidate. This potential is evidenced by ReViral, who were acquired by Pfizer
for up to $525 million following an RSV HCT conducted by hVIVO.
We are confident that our evidence-based sales strategy will continue to grow
our market given the strong market dynamics related to the development of new
vaccines and antivirals. There are an increasing number of vaccines and
antivirals in development every year, yet for antivirals, there remains just
one approved treatment for every 20 viruses known to infect humans.
Well placed to deliver future growth targets
In 2023, we witnessed another year of strong growth in the HCT market, as both
Big Pharma and biotech companies increasingly recognised the evidence
supporting the ability of HCTs to expedite the development of new vaccines and
antivirals. Our record revenues, profitability and the number of volunteers
inoculated not only reflect the growing market but also highlight our
expertise and capability to meet this demand, establishing a long-term
sustainable growth model. It is testament to the hVIVO team that in the
current financially challenging life sciences market we have been able to
continue our strong growth trajectory. I am confident that once the funding
environment in the biotech industry improves, we will see a further increase
in demand for HCTs and in the meantime we remain well placed with a
significant orderbook stretching into 2025. Furthermore, we anticipate that
new challenge agents being developed, as well the development of next
generation of vaccines including mucosal and multi-valent vaccines will help
drive further growth going forward.
We have a well-defined growth strategy comprising both organic and inorganic
avenues. Our primary focus remains on expanding our core HCT business,
including the enhancement of the portfolio of challenge models. Additionally,
we aim to grow in complementary areas such as laboratory services, patient
recruitment, and clinical site services. This strategy is underpinned by the
move to the new facility with a larger quarantine and laboratory capabilities.
We also plan to explore opportunities for small bolt-on acquisitions in
existing synergistic areas to diversify our offerings.
In the short-term, I am confident our record orderbook, visibility, and strong
outlook for the business will enable us to achieve our guidance of £62
million in revenue for 2024. Looking ahead, we are committed to building the
Company to achieve our medium-term target of growing Group revenues to £100
million by 2028.
Dr Yamin 'Mo' Khan
CEO
8 April 2024
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
£'000 £'000
Operations
Revenue from contracts with customers 56,043 48,477
Other operating income 2,623 2,220
Direct project and administrative costs (45,629) (41,625)
EBITDA before exceptional items 13,037 9,072
Depreciation & amortisation (2,716) (2,930)
Exceptional items (219) (119)
Operating profit 10,102 6,023
Net finance income 1,055 617
Impairment of investment in associate - (6,957)
Share of loss of associate using equity method (10) (48)
Profit/(loss) before income tax 11,147 (365)
Income tax credit/(charge) 4,968 (411)
Profit/(loss) for the year 16,115 (776)
Profit/(loss) for the year is attributable to:
Shareholders 16,115 (776)
Other comprehensive income
Items that will not be subsequently reclassified to income statement:
Currency translation differences (49) 27
Total comprehensive income/(loss) for the year 16,066 (749)
Earnings per share attributable to shareholders during the year:
Basic earnings per share 2.38p (0.12)p
Diluted earnings per share 2.35p (0.12)p
Adjusted earnings per share attributable to shareholders during the year:
Basic adjusted earnings per share 1.27p 0.96p
Diluted adjusted earnings per share 1.25p 0.96p
The notes following the financial statements are an integral part of these
financial statements.
All activities relate to continuing operations.
Consolidated and Company Statements of Financial Position
As at 31 December 2023
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Assets
Non‐current assets
Intangible assets 5,667 6,023 - -
Property, plant and equipment 6,203 1,513 - -
Investments in subsidiaries - - 22,377 22,377
Right of use assets 13,835 1,610 - -
Deferred tax asset 5,519 - - -
Total non‐current assets 31,224 9,146 22,377 22,377
Current assets
Inventories 426 499 - -
Trade and other receivables 14,605 13,291 1,527 11,651
Cash and cash equivalents 36,973 28,444 2,281 2,799
Total current assets 52,004 42,234 3,808 14,450
Total assets 83,228 51,380 26,185 36,827
Equity attributable to owners
Share capital 680 671 680 671
Share premium account 516 4 516 4
Merger reserves (6,856) (6,856) (2,241) (2,241)
Foreign currency reserves 1,309 1,358 2,014 2,014
Retained earnings 38,677 25,041 21,970 36,016
Total equity 34,326 20,218 22,939 36,464
Liabilities
Non‐current liabilities
Lease liabilities 12,163 737 - -
Leasehold provision 1,559 660 - -
Total non‐current liabilities 13,722 1,397 - -
Current liabilities
Trade and other payables 34,228 28,869 3,246 363
Lease liabilities 367 826 - -
Leasehold provision 585 70 - -
Total current liabilities 35,180 29,765 3,246 363
Total liabilities 48,902 31,162 3,246 363
Total equity and liabilities 83,228 51,380 26,185 36,827
The notes following the financial statements are an integral part of these
financial statements.
The financial statements were approved and authorised for issue by the Board
on 8 April 2024.
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the parent Company's Statement of
Comprehensive Income. The loss for the parent Company for the year was
£11,567,000 (2022: loss of £1,362,000).
Consolidated and Company's Statement of Changes in Shareholders' Equity
For the year ended 31 December 2023
Share capital Share premium Merger reserve Foreign currency reserve Retained earnings Total
Group £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 671 1 (6,856) 1,331 25,533 20,680
Changes in equity for the year ended 31 December 2022
Loss for the year - - - - (776) (776)
Currency differences - - - 27 - 27
Total comprehensive (loss) for the year - - - 27 (776) (749)
Transactions with the owners
Share based payments - - - - 284 284
Shares issued - 3 - - - 3
Total contributions by and distributions to owners - 3 - - 284 287
At 31 December 2022 671 4 (6,856) 1,358 25,041 20,218
Changes in equity for the year ended 31 December 2023
Profit for the year - - - - 16,115 16,115
Currency differences - - - (49) - (49)
Total comprehensive income for the year - - - (49) 16,115 16,066
Transactions with the owners
Share based payments - - - - 575 575
Shares issued 9 512 - - - 521
Dividends paid - - - - (3,054) (3,054)
Total contributions by and distributions to owners 9 512 - - (2,479) (1,958)
At 31 December 2023 680 516 (6,856) 1,309 38,677 34,326
Share capital Share premium Merger reserve Foreign currency reserve Retained earnings Total
Company £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 671 1 (2,241) 2,014 37,094 37,539
Changes in equity for the year ended 31 December 2022
Loss for the year - - - - (1,362) (1,362)
Share based payments - - - - 284 284
Shares issued - 3 - - - 3
Total contributions by and distributions to owners - 3 - - (1,078) (1,075)
At 31 December 2022 671 4 (2,241) 2,014 36,016 36,464
Changes in equity for the year ended 31 December 2023
Loss for the year - - - - (11,567) (11,567)
Share based payments - - - - 575 575
Shares issued 9 512 - - - 521
Dividends paid - - - - (3,054) (3,054)
Total contributions by and distributions to owners 9 512 - - (14,046) (13,525)
At 31 December 2023 680 516 (2,241) 2,014 21,970 22,939
Consolidated and Company's Statement of Cash Flows
For the year ended 31 December 2023
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Cash generated from/(used in) operations
Profit/(loss) before income tax 11,147 (365) (11,565) (1,311)
Adjustments for:
- Depreciation & amortisation 2,716 2,930 - -
- Impairment of intangible assets 254 - - -
- Exceptional items 219 119 - -
- Impairment of associate - 6,957 - -
- Net gain on disposals of PPE - (12) - -
- Net finance income (1,055) (617) (182) (834)
- Share based payment charge 575 284 - -
- R&D tax credit Included in other income (2,432) (1,851) - -
- Share of associate loss 10 48 - -
- Impairment of intercompany balances - - 10,428 282
- Movement in provisions through P&L 155 - - -
Changes in working capital:
- (Increase)/decrease in trade and other receivables (1,158) (4,309) 3,325 (1,135)
- Decrease in inventories 73 172 - -
- Increase/(decrease) in trade and other payables 5,187 11,152 15 (2,890)
Net cash generated from/(used in) operations 15,691 14,508 2,021 (5,888)
Income tax (R&D tax credit) received/(paid) 1,548 1,473 (24) -
Net cash generated from/(used in) operating activities 17,239 15,981 1,997 (5,888)
Cash flow from investing activities
Purchase of property, plant and equipment (5,177) (1,275) - -
Purchase of intangible assets - (87) - -
Net cash used in investing activities (5,177) (1,362) - -
Cash flow from financing activities
Lease payments (2,044) (2,178) - -
Dividends paid (3,054) - (3,054) -
Proceeds from issue of shares 521 3 521 3
Interest & FX gains received 1,054 635 21 19
Repayment of convertible debenture security - (294) - -
Net cash (used in)/generated from financing activities (3,523) (1,834) (2,512) 22
Net increase in cash and cash equivalents 8,539 12,785 (515) (5,866)
Cash and cash equivalents at beginning of year 28,444 15,694 2,799 8,663
FX translation (10) (35) (3) 2
Cash and cash equivalents at end of year 36,973 28,444 2,281 2,799
Notes to the financial statements
For the year ended 31 December 2023
1. Presentation of the financial statements
Description of business
The hVIVO plc Group is a rapidly growing specialist CRO pharmaceutical
services group which is the world leader in the testing of vaccines and
antivirals using human challenge clinical trials.
hVIVO plc (the "Company") is a company incorporated in England and Wales. The
Company is a public limited company, limited by shares, listed on the AIM
market of the London Stock Exchange and on Euronext Growth in Dublin.
Basis of preparation
The financial statements have been prepared in accordance with the Group's
accounting policies approved by the Board and described in Note 2, 'Summary of
significant accounting policies'. The preparation of the financial statements
in conformity with generally accepted accounting principles requires
management to make estimates that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The financial statements have been prepared in accordance with UK adopted
international accounting standards (IFRS), and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. Figures are
presented in thousands of pounds sterling (£'000), unless otherwise
indicated.
These financial statements comprise the accounts of hVIVO plc and its
subsidiaries (the "Group") for the year ended 31 December 2023. A list of
subsidiaries is set out in note 14.
Parent company financial statement
The financial statements of the parent company, hVIVO plc, have been prepared
in accordance with UK adopted international accounting standards (IFRS), and
with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS.
Going concern
The financial statements have been prepared using the historical cost
convention modified by the revaluation of certain items, as stated in the
accounting policies, and on a going concern basis. The Directors consider the
use of the going concern basis to be appropriate given the significant cash
reserves at year end and strong contracted order book. The Directors have
prepared working capital projections which show that the Group and Company
will be able to continue as a going concern for the foreseeable future.
2. Summary of significant accounting policies
Consolidation
Entities over which the Group has the power to direct the relevant activities
so as to affect the returns to the Group, generally through control over the
financial and operating policies, are accounted for as subsidiaries. Where the
Group has the ability to exercise significant influence over entities, they
are accounted for as associates. Interests acquired in entities are
consolidated from the date the Group acquires control and interests sold are
de‐consolidated from the date control ceases.
Transactions and balances between subsidiaries are eliminated and no profit
before tax is taken on sales between subsidiaries until the products are sold
to customers outside the Group. The relevant proportion of profits on
transactions with associates is also deferred until the products are sold to
third parties.
Associates
Investments in associates are accounted for using the equity method of
accounting, after initially being recognised at cost less any fair value
adjustment.
When the Group's share of losses in an equity‐accounted investment equals or
exceeds its interest in the entity, including any other unsecured long‐term
receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group's interest in these entities. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
New accounting requirements
Amendments to accounting standards issued by the IASB and adopted in the year
ended 31 December 2023 did not have a material impact on the results or
financial position of the Group. Certain new accounting standards, amendments
to accounting standards and interpretations have been published that are not
mandatory for 31 December 2023 reporting periods and have not been adopted
early by the Group. These standards, amendments and interpretations are not
expected to have a material impact on the results or financial position of the
Group in future reporting periods.
Foreign currency translation
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the functional currency). The consolidated financial
statements are presented in pounds sterling, which is the functional and
presentation currency of the main operating entities.
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions where
items are re‐measured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year‐end
exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the Statement of Comprehensive Income within
'direct project and administrative expenses', except when deferred in other
comprehensive income as qualifying cash flow hedges and qualifying net
investment hedges.
The results and financial position of all the Group entities (none of which
has the currency of a hyper‐inflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentational currency as follows:
· assets and liabilities presented are translated at the closing rate
at the date of that reporting period;
· income and expenses are translated at average exchange rates; and
· all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the translation of the net
investment in foreign operations are taken to other comprehensive income. When
a foreign operation is partially disposed of or sold, exchange differences
that were recorded in equity are recognised in the Statement of Comprehensive
Income as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
monthly management reporting provided to the chief operating decision‐makers
(CODM). The CODM have been identified as the Executive Directors and
Non‐Executive Chair.
Internal management reporting provided to the CODM is on a consolidated basis.
Management therefore considers the Group to be one business unit and therefore
one reporting segment for disclosure in these financial statements.
Revenue from contracts with customers
The Group enters into fixed‐price and multi‐service contracts with
customers. Revenue is recognised at an amount that reflects the consideration
to which the Group expects to be entitled in exchange for the goods or
services and is shown net of Value Added Tax. Revenue is recognised based on
the actual service provided to the end of the reporting period as a proportion
of the total services to be provided because the customer receives and uses
the benefits simultaneously.
Payment terms tend to vary between 30 and 90 days.
Provisions for losses to be incurred on contracts are recognised in full in
the period in which it is determined that a loss will result from the
performance of the contractual arrangement.
The difference between the amount of revenue from contracts with customers
recognised and the amount invoiced on a particular contract is included in the
Statement of Financial Position as either deferred income or accrued income.
Amounts become billable in advance upon the achievement of certain milestones,
in accordance with pre‐agreed invoicing schedules included in the contract
or on submission of appropriate detail. Any cash payments received as a result
of this advance billing are not representative of revenue earned on the
contract as revenues are recognised over the period during which the specified
contractual obligations are fulfilled. Amounts included in deferred income are
expected to be recognised within one year and are included within current
liabilities.
In the event of contract termination, if the value of work performed and
recognised as revenue from contracts with customers is greater than aggregate
milestone billings at the date of termination, cancellation clauses provide
for the Group to be paid for all work performed to the termination date.
Other operating income (mainly research & development tax credits)
R&D tax credits are multi‐government backed tax incentives that allows
companies to claim back some of the costs they have incurred on research,
development and innovation. These are non taxable and involve a high level of
management judgement.
Interest income
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Exceptional items
These are items of an unusual or non‐recurring nature incurred by the Group
and include transactional costs and one‐off items relating to business
combinations, such as acquisition expenses, restructuring and redundancy
costs.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation and any provision for impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the asset and
bringing the asset to its working condition for its intended use.
All other repairs and maintenance are charged to the Statement of
Comprehensive Income during the financial period in which they are incurred.
Depreciation on assets is calculated using the straight‐line method to
allocate asset cost to its residual value over its estimated economic useful
life, as follows:
· Leasehold improvements the expected life of the lease, three to ten
years
· Plant & machinery four years
· Fixtures & fittings three to ten years
The assets' residual values and useful economic lives are reviewed annually,
and adjusted if appropriate, at the end of each reporting period.
An asset's carrying value is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the
sale proceeds with the carrying amount and are recognised in direct project
and administrative costs in the Statement of Comprehensive Income.
Intangible assets
Goodwill
Goodwill is stated at cost less impairments. Goodwill is deemed to have an
indefinite useful life and is tested for impairment annually.
Other intangible assets
Intangible assets are stated at cost less provisions for amortisation and
impairments.
Development costs are capitalised when the related products meet the
recognition criteria of an internally generated intangible asset, the key
criteria being as follows:
· technical feasibility of the completed
intangible asset has been established;
· it can be demonstrated that the intangible
asset will generate probable future economic benefits;
· adequate technical, financial and other
resources are available to complete the development;
· the expenditure attributable to the intangible
asset can be reliably measured; and
· management has the ability and intention to use
or sell the intangible asset.
Development costs recognised as assets are amortised over their expected
useful life.
Impairment of non‐financial assets
Assets that have an indefinite life such as Goodwill are not subject to
amortisation and are tested annually for impairment. Assets that are subject
to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the carrying amount
exceeds its recoverable amount.
The recoverable amount is the higher of an asset's 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.
Impairment of goodwill is not reversed. For other intangible assets, where
an impairment loss subsequently reverses, the carrying amount of the asset 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.
Leases
The Group recognises right of use assets under lease arrangements in which it
is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets, which are charged
to the Statement of Comprehensive Income as incurred. Right of use assets
owned by third parties under lease agreements are capitalised at the inception
of the lease and recognised in the Statement of Financial Position. The
corresponding liability to the lessor is recognised as a lease liability. The
carrying amount is subsequently increased to reflect interest on the lease
liability and reduced by lease payments made.
In calculating the present value of lease payments, the Group uses the
incremental borrowing rate at the lease commencement date if the interest rate
implicit in the lease is not readily determinable.
Finance costs are charged to the Statement of Comprehensive Income so as to
produce a constant periodic rate of charge on the remaining balance of the
lease liabilities for each accounting period.
If modifications or reassessments of lease obligations occur, the lease
liability and right of use asset are remeasured.
Inventories
Inventories are reported at the lower of cost (purchase price and/or
production cost) and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less estimated
costs of completion and applicable variable selling expenses.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is recognised in the
Statement of Comprehensive Income, except to the extent that it relates to
items recognised in other comprehensive income where the associated tax is
also recognised in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws
enacted at the reporting period date in the countries where the Company and
its subsidiaries operate and generate taxable income. Management evaluates
positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation and establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred tax assets are recognised for all deductible temporary differences,
carry‐forward of unused tax assets and tax losses, to the extent that they
are regarded as recoverable. They are regarded as recoverable where, on the
basis of available evidence, there will be sufficient taxable profits against
which the future reversal of the underlying temporary differences can be
deducted.
The carrying value of the amount of deferred tax assets is reviewed at each
reporting period 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
tax asset to be utilised.
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 the tax rates (and tax laws) that have been substantively
enacted at the reporting period date.
Share capital
Ordinary Shares and Deferred Shares are classified as equity. Proceeds in
excess of the nominal value of shares issued are allocated to the share
premium account and are also classified as equity. Incremental costs directly
attributable to the issue of new Ordinary Shares or options are deducted from
the share premium account.
Merger reserve
The reserve represents a premium on the issue of the Ordinary Shares for the
acquisition of subsidiary undertakings. Merger reserve is non-distributable.
Employee benefits
Pension obligations
Group companies operate a pension scheme with defined contribution plans,
under which the Group pays fixed contributions into a separate entity with the
pension cost charged to the Statement of Comprehensive Income as incurred.
The Group has no further obligations once the contributions have been paid.
Share‐based payment
Where equity settled share options and warrants are awarded to Directors and
employees, the fair value of the options and warrants at the date of grant is
charged to the Statement of Comprehensive Income over the vesting period and
the corresponding entry recorded in the share‐based payment reserve.
Non‐market vesting conditions are reflected by adjusting the number of
equity instruments expected to vest at each reporting date so that, the
cumulative amount recognised over the vesting period is based on the number of
options that eventually vest.
3. Segmental analysis
The Directors are responsible for resource allocation and the assessment of
performance. In the performance of this role, the Directors review the Group's
activities, in the aggregate. The Group has therefore determined that it has
only one reportable segment under IFRS 8 Operating Segments, which is 'medical
and scientific research services'.
During the year ended 31 December 2023, the Group had two customers who each
generated revenue greater than 10% of total revenue (2022: three customers)
across multiple projects. These customers generated 34% and 21% of revenue
(2022: 12%, 12% and 11% of revenue).
4. Other operating income
Other operating income mainly represents research and development tax credits
(R&D tax credits) received to fund research and development activities
around the Group.
2023 2022
£'000 £'000
hVIVO Gross RDEC Credits 2,267 1,851
Venn R&D Related Credits 165 213
hVIVO Recharge of staff to third parties 191 156
2,623 2,220
hVIVO Services Limited, can claim UK R&D incentives under both the RDEC
scheme (noted above) and the SME scheme (when the Company is loss making).
Venn Life Sciences Biometry Services S.A.S. can claim Credit Tax Research
('CIR') payments in France and Venn Life Sciences ED B.V. can claim R&D
credits against payroll taxes in the Netherlands.
5. Expenses - analysis by nature
The following items have been included in operating profit:
2023 2022
£'000 £'000
Employment Benefit expense 20,884 18,081
Share based payments 575 284
Other expenses 24,170 23,260
Total direct project and administrative costs 45,629 41,625
Also included within operating profit are the below depreciation and
amortisation charges:
PPE depreciation and amortisation 827 999
Depreciation related to right of use assets 1,889 1,931
Also included within operating profit are exceptional items as shown below:
2023 2022
£'000 £'000
Exceptional items include:
- Transaction costs relating to business combinations, acquisitions & - 119
re‐organisations
- Write off of receivables from associates 219 -
Total exceptional items 219 119
Services provided by the Company's auditor and its associates. During the year
the Group (including its overseas subsidiaries) obtained the following
services from the Company's auditor and its associates:
2023 2022
£'000 £'000
Fees payable to Company's auditor for the audit of the parent Company and 53 52
consolidated financial statements
Fees payable to Company's auditor for the audit of subsidiaries and their 42 37
consolidated financial statements
Total paid to the Company auditor 95 89
Fees payable to the auditors of subsidiaries for services:
- The audit of Company's subsidiaries pursuant to legislation paid to other 55 55
auditors
- Other services paid to other auditors - 1
- Tax services paid to other auditors 2 2
Total paid to other auditors 57 58
Total auditor's' remuneration 152 147
6. Directors' emoluments
Group Group
2023 2022
£'000 £'000
Aggregate emoluments 1,189 995
Social security costs 154 119
Contribution to defined contribution pension scheme 57 42
Total directors' remuneration 1,400 1,156
See further disclosures within the Report of the Remuneration Committee.
Group Group
2023 2022
Highest paid director £'000 £'000
Total emoluments received 587 518
Defined contribution pension scheme 34 27
621 545
7. Staff costs
Group Group
2023 2022
£'000 £'000
Wages and salaries 17,447 15,077
Social security costs 2,520 2,100
Pension costs 917 904
Employee Benefit expense 20,884 18,081
Share based payments 575 284
21,459 18,365
Group Group
2023 2022
£'000 £'000
Average number of people (including Executive Directors) employed was:
Administration 48 43
Clinical operations 218 161
Sales and marketing 8 6
Total average number of people employed 274 210
8. Pensions
The Group operates a number of defined contribution pension schemes whose
assets are independently administered. The charge for the year in respect of
these defined contribution schemes was £917,000 (2022: £904,000).
Contributions of £100,000 were payable to the funds at the year end and are
included within trade and other payables (2022: £98,000).
9. Finance income and costs
2023 2022
£'000 £'000
Interest expense:
Interest on lease liabilities (155) (133)
Other finance costs (21) 1
Finance costs (176) (132)
Finance income:
FX gain on sales & expenses 50 613
Interest income on cash and short‐term deposits 1,181 136
Finance income 1,231 749
Net finance income 1,055 617
10. Taxation
Group 2023 2022
£'000 £'000
Current tax:
Research and development tax charge 537 352
Tax in foreign jurisdictions 14 9
Other - 50
Current tax charge 551 411
Deferred tax:
Current year 2,588 -
Adjustment in respect of prior years (8,107) -
Deferred tax credit (5,519) -
Income tax (credit)/charge (4,968) 411
The income tax charge on the Group's results before tax differs from the
theoretical amount that would arise using the standard tax rate applicable to
the profits of the consolidated entities as follows:
Group 2023 2022
£'000 £'000
Profit/(Loss) before tax 11,147 (365)
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 2,620 (69)
23.5% (2022: 19%)
Tax effects of:
- Expenses not deductible for tax purposes 236 1,488
- VLS Germany tax risk on liquidation - 51
- Current Year R & D Tax (credit) (190) (194)
- Temporary timing differences 565 (153)
- Adjustments in respect of prior year (8,107) 33
- Additional allowances deductible for tax purposes - 125
- Losses carried forward (92) (870)
Income tax (credit)/charge (4,968) 411
The Group has recognised a deferred tax asset for losses carried forward for
the first time relating to losses in hVIVO Services Limited. Management only
recognises a deferred tax asset when there is evidence that recoverability of
the asset is probable, taking into account business forecasts and tax
regulations. The Group, and entity in which losses are recognised, has seen
underlying profitability for both the current and prior year, and expects to
continue to be profit making. Therefore, management considers it appropriate
to recognise a deferred tax asset.
Deferred tax assets and liabilities are only offset where there is a legally
enforceable right of offset and there is an intention to settle the balan ces
on a net basis.
The reconciliation of the deferred tax asset is shown below:
Group Tax losses Right of use assets Lease liabilities and provisions Accelerated capital allowances Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2022 - - - - -
Statement of Comprehensive Income movement - - - - -
At 31 December 2022 - - - - -
Adjustment in respect of prior years 8,251 - - (144) 8,107
Statement of Comprehensive Income movement (2,213) (2,944) 2,944 (375) (2,588)
At 31 December 2023 6,038 (2,944) 2,944 (519) 5,519
The current portion of the deferred tax asset cannot be reliably estimated.
11. Earnings per share
Basic earnings per share has been calculated by dividing the profit
attributable to shareholders by the weighted average number of shares in issue
during the year.
2023 2022
Basic earnings/(loss) per share (p) 2.38p (0.12)p
Basic adjusted earnings per share (p) 1.27p 0.96p
Diluted earnings/(loss) per share (p) 2.35p (0.12)p
Diluted adjusted earnings per share (p) 1.25p 0.96p
Diluted earnings per share has been calculated after adjusting the weighted
average number of shares used in the basic calculation to assume the
conversion of all potentially dilutive shares. A potentially dilutive share is
a warrant or option where its exercise price is below the average market price
of hVIVO shares during the year and any performance conditions attaching to
the scheme have been met at the Statement of Financial Position date. The
adjusted profit is used in the calculation of adjusted earnings per share as
reconciled below:
2023 2022
£'000 £'000
Profit/(loss) for the year 16,115 (776)
Initial recognition of deferred tax assets (8,107) -
Share based payments 575 284
Impairment of investment in associate - 6,957
Adjusted profit for the year 8,583 6,465
The numbers of shares used in calculating basic and diluted earnings per share
are reconciled below. Where there is a loss in the year, the share options are
deemed to be antidilutive and therefore not included in the calculation.
2023 2022
Weighted average number of shares in issue No. No.
Basic 677,444,133 670,943,918
Dilution for share options and warrants 8,403,182 -
Diluted 685,847,315 670,943,918
12. Intangible assets
Goodwill Software Development Other Intangible Assets Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 7,228 2,199 685 10,112
Additions - 87 - 87
At 31 December 2022 7,228 2,286 685 10,199
Additions - - - -
At 31 December 2023 7,228 2,286 685 10,199
Amortisation
At 1 January 2022 1,628 2,173 92 3,893
Charge for the year - 19 264 283
At 31 December 2022 1,628 2,192 356 4,176
Charge for the year - 27 75 102
Impairment - - 254 254
At 31 December 2023 1,628 2,219 685 4,532
Net book value
At 1 January 2022 5,600 26 593 6,219
At 31 December 2022 5,600 94 329 6,023
At 31 December 2023 5,600 67 - 5,667
Goodwill was allocated to the Group's single cash‐generating unit (CGU)
identified according to a single operating segment.
2023 2022
£'000 £'000
hVIVO Group 5,600 5,600
Goodwill is tested for impairment at the Statement of Financial Position date.
The recoverable amount of goodwill at 31 December 2023 was assessed at
£5,600,000 (2022: £5,600,000) on the basis of value in use. An impairment
loss was not recognised as a result of this review.
The key assumptions in the calculation to assess value in use are the future
revenues and the ability to generate future cash flows. The most recent
financial results and forecast approved by management for the next two years
were used followed by an extrapolation of expected cash flows at a constant
growth rate for a further seven years. The projected results were discounted
at a rate which is a prudent evaluation of the pre‐tax rate that reflects
current market assessments of the time value of money and the risks specific
to the cash‐generating units.
The key assumptions used for value in use calculations in 2023 were as
follows:
Longer‐term growth rate (from 2024 onwards) 7.5%
Discount rate
15%
The impairment review is prepared on the Group basis rather than a single unit
basis.
The Directors have performed a sensitivity analysis to assess the impact of
downside risk of the key assumptions underpinning the projected results of the
Group. The projections and associated headroom used for the Group is sensitive
to the EBITDA growth assumptions that have been applied.
The Company had no intangible assets at 31 December 2023 (2022: nil).
13. Property plant and equipment
Leasehold improvements Plant & Machinery Fixtures & Fittings Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 842 2,507 1,111 4,460
Additions 450 540 286 1,276
Disposals - (90) - (90)
Exchange differences - - 44 44
At 31 December 2022 1,292 2,957 1,441 5,690
Additions 4,808 414 194 5,416
Disposals - - (58) (58)
Exchange differences - (1) (10) (11)
At 31 December 2023 6,100 3,370 1,567 11,037
Depreciation
At 1 January 2022 706 2,141 686 3,533
Charge for the year 333 166 217 716
Elimination on disposal - (90) - (90)
Exchange differences - - 18 18
At 31 December 2022 1,039 2,217 921 4,177
Charge for the year 189 292 244 725
Elimination on disposal - - (58) (58)
Exchange differences - - (10) (10)
At 31 December 2023 1,228 2,509 1,097 4,834
Net book value
At 1 January 2022 136 366 425 927
At 31 December 2022 253 740 520 1,513
At 31 December 2023 4,872 861 470 6,203
The Company had no property plant and equipment at 31 December 2023 (2022:
nil).
14. Investments in subsidiaries and associates
2023 2022
Company £'000 £'000
Shares in Group undertakings
At 1 January and 31 December 22,377 22,377
Investments in Group undertakings are recorded at cost, which is the fair
value of the consideration paid. Following review an impairment provision of
nil (2022: nil) has been made to the investment in subsidiaries.
The subsidiaries of hVIVO plc are as follows:
Name of Company Country of Registration Principal activities Proportion of ordinary shares and voting rights held (%)
hVIVO Holdings Limited*^ England & Wales Intermediate holding company 100
hVIVO Services Limited* England & Wales Viral challenge and related laboratory services 100
hVIVO Inc. USA Sales & marketing services 100
Venn Life Sciences ED B.V^ Netherlands Pre‐clinical & early clinical research services 100
Venn Life Science Biometry Services S.A.S^ France Data management & statistics services 100
Open Orphan DAC^ Ireland Group services company 100
Venn Life Sciences Limited^ Ireland Dormant 100
Venn Life Sciences (Germany) GmbH^ Germany In liquidation 100
Venn Life Sciences (France) S.A.S^ France Dormant 100
*Registered address Queen Mary Bioenterprises Innovation Centre, 42 New Road,
London, E1 2AX
^Directly owned by hVIVO plc
These consolidated financial statements incorporate the financial statements
of all entities controlled by the Company at 31 December 2023.
The Group, via its holding in hVIVO Holdings Limited, has investments in two
associated companies as follows:
Name of Company Country of Registration Principal activities Proportion of ordinary shares held/voting rights held (%)
Imutex Limited(1) England & Wales Clinical development 49/49
PrEP Biopharm Limited(2) England & Wales In liquidation 62.62/49.98
(1) Carrying value of nil at 31 December 2023 (2022: nil). The registered
office address is The Walbrook Building, 25 Walbrook, London, England, EC4N
8AF. The investment was fully impaired in the year ended 31 December 2022.
(2) Carrying value of nil at 31 December 2023 (2022: nil). The registered
office address is Unit 2 Spinnaker Court 1c Becketts Place, Hampton Wick,
Kingston Upon Thames, KT1 4EQ
15. Leases
Right of use assets Lease Liabilities
2023 2022 2023 2022
£'000 £'000 £'000 £'000
As at 1 January 1,610 2,788 1,563 2,854
New leases acquired 14,149 740 12,890 739
Leases exited (22) (8) (24) (20)
Depreciation expense (1,889) (1,931) - -
Interest expense - - 155 133
Payments - - (2,044) (2,178)
Exchange differences (13) 21 (10) 35
As at 31 December 13,835 1,610 12,530 1,563
Current 367 826
Non-current 12,163 737
Maturity of lease liabilities:
31 December 2023 31 December 2022
£'000 £'000
Current - Within one year 367 826
Non‐current - Between one to two years 2,457 271
Non‐current - Between two to five years 9,706 466
12,530 1,563
Short‐term lease payments expensed during the year ended 31 December 2023
were £19,000 (2022: £47,000).
16. Inventories
Group Group
2023 2022
£'000 £'000
Virus inventory 286 385
Consumables 140 114
Total inventories 426 499
Inventories expensed in the Consolidated Statement of Comprehensive Income are
£685,000 (2022: 697,000) and are shown within direct project and
administrative costs. No provision against inventories was required during
2023.
17. Trade and other receivables
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade receivables 9,117 8,276 - -
Prepayments 1,405 992 72 346
Accrued income 760 1,505 - -
Amounts owed by subsidiary undertakings - - 1,445 11,280
Other receivables (incl. R&D tax credits) 3,323 2,518 10 25
14,605 13,291 1,527 11,651
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
The majority of the Group's contracts are based on milestone payments and the
Group seeks to ensure that contract milestones are timed to result in
invoicing occurring in advance where at all possible, prior to the
satisfaction of performance obligations. Therefore, projects that are in
progress are typically in a deferred income position. However, some smaller
contracts are on a time and materials basis and consequently work is
undertaken initially and invoiced subsequently, and this gives rise to the
accrued income balance noted above. The costs incurred to obtain or fulfil a
contract which has been recognised as accrued income have been determined with
reference to labour hours incurred to the period end as a percentage of the
total estimated labour hours to complete specified performance obligations as
stipulated by the relevant contracts. Accrued income is not amortised as it is
of a short‐term nature.
Contractual payment terms are typically 30 to 90 days from date of invoice.
The carrying amounts of the Group's trade and other receivables denominated in
all currencies were as follows:
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
GBP£ 13,167 9,944 90 647
Euro 1,438 2,066 1,437 11,004
USD$ - 1,281 - -
Total 14,605 13,291 1,527 11,651
18. Trade and other payables
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade payables 2,088 2,701 51 105
Amounts due to subsidiary undertakings - - 2,890 -
Social security and other taxes 814 738 28 50
Other payables 525 718 - -
Accrued expenses 5,857 3,946 277 208
Deferred income 24,944 20,766 - -
34,228 28,869 3,246 363
All balances are due within 1 year.
The Group seeks to ensure that study contract milestones are timed to result
in invoicing occurring in advance where at all possible, prior to the
satisfaction of performance obligations. Therefore, projects that are in
progress are typically in a contract liability position which gives rise to
the deferred income balance above. Performance obligations of contracts with
customers are satisfied on the delivery of study data to the customer along
with a final study report. Due to the nature of the business, there are no
warranties or refunds expected or provided for.
The Group is using the practical expedient not to adjust the amount of
consideration for the effects of any financing component as the period between
when the promised services are transferred and when the customer pays for the
service is less than twelve months.
19. Leasehold provision
2023 2022
£'000 £'000
As at 1 January 730 -
Additional provisions 1,484 730
Utilisation of provisions (70) -
As at 31 December 2,144 730
Current 585 70
Non-Current 1,559 660
2,144 730
Leasehold provisions relate to dilapidation provisions for the Group's various
property leases.
20. Capital commitments
Group
The Group has net capital commitments of £1,248,000 at 31 December 2023
relating to the new facility build in Canary Wharf (2022: nil).
Company
The Company has agreed to act as surety to a lease agreement for its
subsidiary, hVIVO Services Ltd, No liability has been recognised in the
Company Statement of Financial Position.
21. Share capital
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
680,371,877 (2022: 671,047,771) Ordinary Shares of £0.001 680 671 680 671
During the year the Company issued 9,324,106 @ £0.056/Share resulting in an
increase of £9,000 (2022: nil) to share capital and £512,000 (2022: £3,000)
to share premium as a result of share options and warrants being exercised.
22. Other reserves
Group and Company
Share premium
Share premium is the difference between the nominal value of shares issued and
the actual cash received for the issued shares.
Merger reserve
This includes reverse acquisition reserve which resulted from the reverse
takeover of Venn Life Sciences Holdings Plc by Open Orphan DAC on 28 June
2019. Also included is a Group re‐organisation reserve relating to previous
re‐organisation of the Venn Group.
Foreign currency reserve
The foreign currency reserve arises from a one off transition of the Group
from a presentational currency of euro to pounds sterling, and from the
translation of subsidiaries' results on consolidation which have a functional
currency other than pounds sterling.
23. Share options and warrants
Share options
The Group has various share option plans under which it has granted share
options to certain Directors and senior management of the Group under its
Long-Term Incentive Plan.
The number of outstanding share options remaining at 31 December 2023, along
with the comparative period are as follows:
2023:
Date of issue Exercise price Vesting date # of options at 01/01/2023 # of options exercised # of options granted # of options at 31/12/2023
2015 13p 2025 280,000 - - 280,000
2019 5.6p 2024 7,716,964 (7,716,964) - -
2017 2p 2024 277,792 - - 277,792
2022 0.1p 2025 7,227,273 - - 7,227,273
15,502,029 (7,716,964) - 7,785,065
2022:
Date of issue Exercise price Vesting date # of options at 01/01/2022 # of options exercised # of options granted # of options at 31/12/2022
2015 13p 2025 280,000 - - 280,000
2019 5.6p 2024 7,716,964 - - 7,716,964
2017 2p 2024 396,249 (118,457) - 277,792
2022 0.1p 2025 - - 7,227,273 7,227,273
8,393,213 (118,457) 7,227,273 15,502,029
The weighted‐average exercise price of all options outstanding at year end
is 0.63p (2022: 3.1p) and the weighted‐average remaining contractual life is
1.0 year (2022: 1.8 years).
Share based payment charge for the year was £575,000 included in direct
project and administration costs (2022: £284,000). There were no new share
options granted during the year. An estimated charge of £148,000, included
in the total charge, has been recognised for share options that were granted
post-year end where the obligation to issue them existed at the year end.
In the prior year, new share options granted during the year relate to the
implementation of a Long‐Term Incentive Plan (LTIP). The weighted average
fair value of the options at measurement date was 14.74p per option. The
Company used the Black Scholes model to value the options. The following key
assumptions were factored into the model when valuing these options at the
date of grant:
- expected volatility of 74%, based on observable market inputs
- option life of 3 years
- expected dividends yield of 0%
- risk‐free interest rate of 3.11%
- a 25% deduction was taken to the fair value to reflect market conditions in
the option agreement
Warrants
The number of outstanding warrants remaining at 31 December 2023, along with
the comparative period are as follows:
2023:
Date of issue Exercise price Expiry date # of warrants at 01/01/2023 # of warrants expired # of warrants exercised # of warrants at 31/12/2023
11/12/2018 0.1p 10/12/2023 232,696 (232,696) - -
11/12/2018 2.2p 10/12/2023 424,589 (424,589) - -
28/06/2019 0.1p 27/06/2024 1,607,142 - (1,607,142) -
2,264,427 (657,285) (1,607,142) -
2022:
Date of issue Exercise price Expiry date # of warrants at 01/01/2022 # of warrants expired # of warrants exercised # of warrants at 31/12/2022
11/12/2018 0.1p 10/12/2023 232,696 - - 232,696
11/12/2018 2.2p 10/12/2023 424,589 - - 424,589
28/06/2019 0.1p 27/06/2024 1,607,142 - - 1,607,142
2,264,427 - - 2,264,427
24. Dividends
2023 2022
Equity dividends £'000 £'000
Special dividend for 2022: 0.45p per ordinary share 3,054 -
A final dividend for the year ended 31 December 2023 of £1,361,000 (0.20p per
ordinary share) is recommended by the Directors and is to be paid to all
ordinary shareholders on the register at the close of business on 19 April
2024 with payment being made on 20 May 2024, subject to shareholder approval
at the Annual General Meeting.
25. Related party disclosures
Directors
Directors' emoluments are set out in the Report of the Remuneration Committee
Report.
Key management compensation for the year was as follows:
2023 2022
£'000 £'000
Aggregate emoluments 1,189 994
Employer contribution to pension scheme 57 42
1,246 1,036
Key management includes the Directors only.
Other transactions with Directors
In December 2018, Venn Life Sciences Holdings plc completed a £1 million
financing from private individuals, including Cathal Friel who participated
via his pension fund, the CMF Pension Fund. The financing was completed via
the issue of a two-year loan note and as part of their investment, the holders
of the loan notes received warrants to purchase shares in the Group with an
expiry date in December 2023. Cathal Friel was unable to exercise these
warrants prior to their expiry due to his knowledge of insider information for
extended periods of time. As such, the Board agreed that the Group would pay
19.95p per warrant share (being the closing price on 8 December 2023, the last
trading day prior to the Final Date of the Warrant Instrument) minus the
subscription price of £9,573.65 to the CMF Pension Fund for a total of
£121,554 in lieu of the unexercised warrants.
Group
Non‐Executive Group Chair, Cathal Friel, is a Director of Raglan
Professional Services Ltd which has provided office related services, charged
at cost, to Open Orphan DAC (2023 charge £4,000; 2022 charge £9,000). The
balance owed by Open Orphan DAC to Raglan Professional Services Ltd at year
end 2023 was £1,000 (2022: £2,000).
There were no other related party transactions during the year.
Company
During the year the Company absorbed net management charges of £344,000
(2022: £142,000) from its subsidiaries. At 31 December 2023 the Company was
owed £11,874,000 (2022: £11,280,000) by its subsidiaries, and the Company
owed £2,890,000 (2022: nil) to its subsidiaries. The Company holds a
provision of £10,428,000 against the receivable.
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