Omega Diagnostics Gp - Final Results
03/08/2023 07:00
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RNS Number : 1414I Omega Diagnostics Group PLC 03 August 2023
OMEGA DIAGNOSTICS GROUP PLC
("Omega" or the "Company" or the "Group")
Final Results
Omega (AIM: ODX), the specialist medical diagnostics company focused on
industry-leading Health and Nutrition products, announces its audited results
for the year ended 31 March 2023, a year which has overseen the final steps of
restructuring a business now focused on promoting a personalised and
functional approach to health.
Operational highlights
· Completion of the disposal of the CD4 business effective 31 July
2022
· CD4 sale proceeds (excluding royalties) of £5.3 million received
in full
· Placing and open offer raised £2.2 million in May/June 2022
· Lower than expected production yields adversely impacted customer
deliveries in the final quarter
· Successful yield recovery plan implemented post-year end
· FoodPrint® yields reach a three-year high post-year end
· Major Chinese partner re-commences deliveries
· Launch of MyHealthTracker digital app
Financial highlights
· Despite sales growing by c.80% in the UK, overall revenues
decreased by 12% to £7.5m (2022: £8.5m)
· Order intake was up by 71% to £2.4m (2022: £1.4m) over the prior
year due to new installations and an increase in educating consumers and
driving awareness
· Gross margin decreased to 47.0% (2022: 59.7%)
· Operating loss* (continuing operations) were £3.2m (2022:
£0.9m)
· Loss from discontinued Global Health operations of £0.7m (2022:
£9.9 million)
· Adjusted EBITDA (continuing operations)** £2.0m (2022: £0.2m)
· Placing and open offer raised £2.2m in May/June 2022
· Cash balance of £5.0m, as at 31 March 2023 (2022: £2.8m, including a
cash balance of £1.6m and additionally had an overdraft facility of £2.0m,
which was undrawn)
* Stated after aborted relocation costs of £0.5 million
** Adjusted for exceptional items and share-based payment charges, see
Financial Review section
Post-period highlights
· FoodPrint® yields reached a three-year high post-year end
Commenting, Simon Douglas, Chairman, Omega Diagnostics said: "This year has
seen the final steps in the withdrawal from the Global Heath business through
the divestment of the loss making CD4 business and the full relocation to our
Health and Nutrition manufacturing site in Ely, Cambridgeshire. We have
started our journey into the U.S. market and entered into two agreements with
established testing laboratories which will be installing and validating our
core food sensitivity testing product, FoodPrint®.
The year ahead will be our first full year with the focus on our Health and
Nutrition business, where we can finalise our strategic objectives and start
to gain momentum and create value for our shareholders. Such a change does
bring its challenges, but one that is exciting and will be taken up with
renewed vigour by the whole team. A new culture needs to be established, one
that will allow us to focus on this core business and make it a success. Part
of this change will be a new name, Cambridge Nutritional; Sciences PLC
(LON:CNSL) and a resolution to change the name is proposed for the upcoming
Annual General Meeting. This new name builds on our existing CNSLab brand and
aligns with our goal to improve patient care through a more personalised
approach to health and wellbeing."
Contacts:
Omega Diagnostics Group PLC www.omegadx.com (http://www.omegadx.com)
Jag Grewal, Chief Executive via Walbrook PR
Officer
Chris Lea, Chief Financial Officer
finnCap Tel: 020 7220 0500
Ltd
Geoff Nash/Edward Whiley/George Dollemore (Corporate Finance)
Alice Lane/ Harriet Ward (ECM)
Walbrook PR Limited Tel: 020 7933 8780 or omega@walbrookpr.com (mailto:omega@walbrookpr.com)
Paul McManus / Lianne Applegarth Mob: 07980 541 893 / 07584 391 303
Sam Allen Mob: 07502 558 258
About Omega Diagnostics Group PLC
Omega manufactures and distributes high quality in-vitro diagnostic products
for use in hospitals, clinics, laboratories and healthcare practitioners in
over 70 countries and is now focused on the health and nutrition sector.
www.omegadx.com (http://www.omegadx.com)
Chairman's Statement
Focused on our future
Simon Douglas
Chairman
This has been a positive year where we implemented the final parts of the
turnaround strategy outlined last year. A turnaround year where we established
a new focus, with new and fresh objectives. It has seen a significant shift in
the business which is now a business promoting a personalised and functional
approach to health and nutrition. With the COVID-19 business now well behind
us and following the divestment of the Alva site last year, we have continued
to reshape and restructure the Company as we implement our new strategy. This
year has seen the final steps in the withdrawal from the Global Heath business
through the divestment of the loss-making CD4 business and the full relocation
to our Health and Nutrition manufacturing site in Ely, Cambridgeshire. We have
started our journey into the US market and entered into two agreements with
established testing laboratories which will be installing and validating our
core food sensitivity testing product, FoodPrint®. In addition to the
proceeds from the CD4 divestment we also raised further money from a placing
and open offer and are well financed to implement the Company's vision of
delivering personalised nutrition for better health and to create a valuable
Company for our shareholders. The Board will now focus Omega's efforts on its
Health and Nutrition business, maintaining its leadership position and
targeting significant organic growth over the coming years, through menu
expansion, related marketing activities and embracing digital technologies.
Business performance
The year showed a slight downturn in sales at £7.5 million from continuing
operations (2022: £8.5 million).
Whilst we had a very strong order book, one of our leading products, the
FoodPrint® test, had some production challenges towards the end of the year
which resulted in a drop in production yields and, as a consequence, a backlog
in the fulfilment of some orders. The Company took swift action to improve
operational efficiency and appointed Chartwell Consulting, a global specialist
in delivering operational performance improvements in healthcare
manufacturing, to work with us to deliver improvements in our production
processes and establishing new preventative procedures. We have already seen a
very material increase in yield and the improvements will help meet the demand
for our food sensitivity tests, which continues to be strong.
The combination of reduced yields and thus increased scrap meant the adjusted
EBITDA loss for continuing operations was £2.0 million (2022: adjusted EBITDA
profit of £0.2 million). This is not what we had anticipated at the beginning
of the year and is hugely disappointing. However the year-end cash position of
£5.1 million (2022: £1.6 million) will allow us to deliver against our
growth strategy from existing funds.
Some of this growth will come from investment in an expansion into new
territories, the most important of which is the USA, a health-conscious,
mature personal health and wellbeing market and the largest market for food
sensitivity testing globally. This year has seen us gain our first two orders
from new testing laboratories in the USA who are now implementing and
validating the test in readiness for launch.
Another part of our expansion plan is a new facility, with specialised
production and service laboratories. As previously announced, our new,
purpose-built facility in Ely, Cambridgeshire, has yet to be delivered by the
landlord. The quality of build is not up to the standard that we originally
specified so we have not been able to take possession. We have rejected the
terms of the landlord's current proposal and we are considering alternative
options. Whilst it is admittedly a frustrating position to be in, we have
extended the lease for our current building in Littleport to June 2025, which
will provide sufficient capacity and allow us time to consider alternative
plans.
New products
The Company is now focused on promoting a personalised and functional approach
to improving the health and nutrition of our customers. We have two key
products, FoodPrint®, a microarray technology used by over 160 laboratories
worldwide, and the Food Detective® product, the world's only established
point-of-care food specific IgG test which can be used by healthcare
practitioners within a clinic setting. These tests are also available through
our own testing laboratory, CNSLab which serves healthcare professionals and
the consumer directly.
As part of this personalised approach we are extending our menu to support our
core food sensitivity testing. This year saw the first steps in this expansion
of our current menu of tests as planned and we have been working closely with
two strategic partners to develop bespoke microbiome and nutrigenomic test
reports. These are planned for launch in the UK shortly and we will roll-out
these tests in other key markets in line with our stated strategic targets, as
we build a wider menu of complementary gut health tests to sell through our
established channels.
By better understanding the relationship between food sensitivity, the gut
microbiome, diet and gene expression, healthcare professionals will be able to
make specific dietary and lifestyle recommendations that help achieve better
health outcomes for patients.
As a Company we are passionate about improving lives around the world by
accurately informing health decisions and an important and exciting event
towards this goal was the recent successful launch of our new digital "app",
MyHealthTracker, strengthening our connection with our customers. This is a
health and wellbeing tool designed to be used alongside a trained healthcare
professional, allowing the patient to receive test results direct to their
smartphone which will help them to make changes to their diet for optimal
health. Fully tested and validated during the year it was initially available
in the UK in April and will be rolled out to more territories over the next
twelve months. This is another step towards our goal of improved patient care
through a more personalised approach to health and wellbeing. It will empower
people to become more proactive about managing their health straight from
their phone.
Strong balance sheet
In June 2022, we were pleased to announce that we raised of £2.2 million
(gross) through a placing and open offer of 55,002,776 new ordinary shares of
4.0 pence each and also issued share warrants to subscribe for 90 million
ordinary shares to institutional investors at an issue price of 4.0 pence per
new ordinary share. These warrants expire on 9 November 2023. Additionally, as
the final step to exiting from the Global Health business, the Company
disposed of the CD4 business, comprising of the VISITECT® CD4 and VISITECT®
CD4 Advanced Disease tests, to Accubio Limited, a wholly owned subsidiary of
Zhejiang Orient Gene Biotech Co. Ltd, for a total of £5.3 million. Omega will
also receive a royalty of 4% on Accubio's future CD4 revenues for the period
to 31 December 2026, capped at £1.0 million in aggregate.
This disposal, together with the capital raise leaves the Group well-funded,
with £5.1 million in the bank on 31 March 2023 and solely focused on its
Health and Nutrition business.
Board and employees
The Board has continued to be proactive and have now strategically re-aligned
the Company to focus on the Health and Nutrition business. We are well
financed and will endeavour to maintain our leadership position and to deliver
growth in the coming years. Whilst it is disappointing that we have faced some
recent production challenges, resulting in a poorer financial performance, the
team reacted swiftly in appointing external assistance and are well on our way
to solving the issues. Furthermore, in order to align the Executives'
interests with our various stakeholders and to incentivise the Executive
Directors and certain senior managers to deliver long-term value for
shareholders we have introduced a new long-term incentive plan (LTIP).
Finally I would like to thank all of our staff for their commitment and
dedication for continuing to deliver both products and services throughout the
year. And to our shareholders, both new and old, for their commitment and
patience as we re-focus and turnaround the Company.
Post-year end
The Group remains in an ongoing dispute with the Department of Health and
Social Care (DHSC) regarding the potential repayment of a pre-production
payment of £2.5 million under a contract to manufacture COVID-19 lateral flow
tests and has intimated a substantial counterclaim made in favour of the
Company. A formal mediation meeting took place in late April 2023, and both
parties are now reflecting on their respective positions. The Board remain
confident that the Company is in a strong position and that the pre-production
payment will not need to be repaid.
Corporate governance
The long-term success of the business and delivery on strategy depends on good
governance. The Company complies with the Quoted Companies Alliance Corporate
Governance Code 2018 as explained more fully in the Corporate Governance
Report.
Outlook and name change
This year has been the first year of turning the Company around, divesting the
last part of our previous Global Health business and started the journey as a
Health and Nutrition business and on promoting a personalised and functional
approach to health and nutrition. The year ahead will be our first full year
with this focus and a year where we can finalise our strategic objectives and
start to gain momentum and create value for our shareholders. Such a change
does bring its challenges, but one that is exciting and will be taken up with
renewed vigour by the whole team. A new culture needs to be established, one
that will allow us to focus on this core business and make it a success. Part
of this change will be a new name, Cambridge Nutritional Sciences PLC
(LON:CNSL) and a resolution to change the name is proposed for the upcoming
Annual General Meeting. This new name builds on our existing CNSLab brand and
aligns with our goal to improve patient care through a more personalised
approach to health and wellbeing.
We will be seeing our first sales from the USA and continue to find and engage
new testing laboratories to use the FoodPrint® test. We are confident that
our manufacturing yields of the FoodPrint® test will be restored, delivering
improved margins and lower costs with new preventive processes in place. The
current plans for the extension in our menu will be completed and both the new
microbiome and nutrigenomic tests will be launched and result in our first
sales from these new tests. This will start in the UK and then later in the
year be rolled out to other territories in a step wise fashion. Likewise, this
year has seen the launch of our new digital "app" the MyHealthTracker, our
unique health and wellbeing tool designed to be used alongside a trained
healthcare professional. This allows the patient to receive test results
direct to their smartphone which will help them to make changes to their diet
for optimal health. All these new products launched this year are another step
towards our goal of improved patient care through a more personalised approach
to health and wellbeing. With £5.1 million of cash at the end of the year we
can invest fully in these plans and deliver them on time and build an exciting
profitable business for everyone.
Simon Douglas
Chairman
2 August 2023
Chief Executive's Review
Laying a foundation
Jag Grewal
Chief Executive
Highlights
· Completion of the disposal of the CD4 business
· Launch of the MyHealthTracker digital app
· Ongoing development of new microbiome and nutrigenomics products
· FoodPrint® production yields much improved post-year end
· Our leading Chinese customer re-commenced purchasing
Introduction
The past year has overseen the final steps of restructuring a business now
focused: with a very clear vision and mission, on promoting a personalised and
functional approach to health. Divesting the CD4 business now allows us to put
all our efforts into delivering personalised nutrition diagnostics going
forward, maintaining our leadership position and targeting organic growth
through geographical expansion, a broadening of our product offering and
embracing digital technologies.
Whilst it was disappointing to have fallen short of our revenue and profit
expectations in the last quarter of the year due to operational issues, we
acted swiftly to improve our performance with the help of external
consultants. Nevertheless, we had a strong and growing order book
demonstrating our commercial success in an exciting market. We successfully
launched the MyHealthTracker digital platform in the UK and plan to roll it
out to key international markets, further cementing our leadership position
while better engaging our customers.
We operate in the consumer healthcare segment of gut health. It is
increasingly being recognised how important gut health is to overall health
and wellbeing and not a day goes by without some mention of the link which
poor nutrition has to chronic inflammatory disease. Targeted diagnostics are
essential in assisting health care professionals to identify the causes of
poor gut health and planning therapeutic protocols for their patients.
Core business review
Health and Nutrition
The Group offers products to test for food sensitivity, a condition where
there is a delayed adverse physiological response to particular foods, as
opposed to an allergic reaction to food. The Food Detective® product is
designed for use by healthcare practitioners and is believed to be the world's
only established point-of-care food specific IgG test.
FoodPrint® is a microarray technology used by over 160 laboratories worldwide
and offering significant benefits over traditional plate-based ELISA tests.
The Group also provides a laboratory testing service from its UK base near
Cambridge under the CNSLab brand, serving healthcare professionals and
consumers directly. The division's products have a widespread coverage and
brand reach in over 85 countries.
In the year ended 31 March 2023, Health and Nutrition revenues were £7.5
million (2022: £8.5 million) in line with the expected revenue range provided
in the 18 January 2023 trading update. However, with lower-than-expected
production yields and higher raw material costs, the adjusted EBITDA loss from
continuing operations increased to £2.0 million (2022: adjusted EBITDA profit
of £0.2 million). The year-end cash position was £5.1 million (2022: £1.6
million), in-line with expectations, and more than adequate to allow Omega to
deliver against its growth strategy from existing funds.
Demand for Omega's food sensitivity tests moving into the new financial year
remains strong with an opening order book of £2.4 million (2022: £1.4
million) on 1 April 2023, and the Company is taking action to improve
operational efficiency and manufacturing capability in the near term.
Chartwell Consulting, a global specialist in delivering operational
performance improvements in healthcare manufacturing, was appointed in
February and has been working with the team to deliver additional production
yield improvements whilst reducing the FoodPrint® slide manufacturing cycle
time. This has had a positive impact already in terms of the aforementioned
improvements. We are currently weaning ourselves off this additional support
by embedding core skills and learning into our manufacturing teams. High
performing organisations invariably develop greater resilience and performance
through adversity, and we are confident that this learning opportunity has
given us the ability to do just that.
It was pleasing to see Omega's largest partner in China return to ordering
Food Detective® kits in the year, reflecting the underlying recovery in the
market as well as increasing demand in what is a large potential market after
an initial lag, which is natural for novel products in virgin markets. In
fact, China became Omega's single largest market in 2023. Another market that
grew substantially was our home market in the UK which is serviced by our own
testing laboratory CNSLab. Sales grew by 95% driven by both practitioner-based
business as well as consumer demand serviced by our white-label partners. Our
core strategy is based on marketing to and educating health care
professionals. We recognise, however that we operate in a consumer healthcare
environment. White label partners are often better equipped to address and
support these markets.
Despite the operational difficulties, order intake was up over prior year due
to new installations and Omega's scientific marketing team continuing to work
incredibly hard to educate consumers and drive awareness of nutritional
therapy through our Health and Nutrition Academy webinars. These webinars have
also focused on naturopathic practice, functional medicine and sports
nutrition.
Part of laying a new foundation is the requirement for a new, purpose-built
facility. The current project has yet to be delivered by the landlord and the
Company has rejected the terms of the landlord's recent proposal for delivery
of the site. We are now considering alternative options. As previously
confirmed, an agreement has been reached to extend the current Littleport
lease to June 2025, thus providing sufficient time to resolve the outstanding
issues and facilitate an orderly relocation in due course.
Global Health (now discontinued)
The past financial year oversaw the final act of discontinuing the Global
Health division which was largely focused on VISITECT® CD4 products. These
products are disposable, lateral flow point-of-care tests for determining CD4
levels in people living with HIV. Believed to be the only instrument-free
point-of-care established test in the market, its strengths include the fact
there is no requirement for refrigerated storage and relative to other CD4
tests that require an accompanying desktop instrument, it is affordable and
easy to use.
However, this division and more importantly the products marketed had little
strategic fit with the core Health and Nutrition business. In addition, we
believed that the CD4 business would be more successful under new ownership,
with an owner that had a greater capacity to invest in production capabilities
and future product development. On 31 July 2022, we completed the sale to
Accubio Limited, a wholly owned subsidiary of Zhejiang Orient Gene Biotech Co.
Ltd, for an aggregate cash consideration of up to £6.3 million, before costs.
Under the terms of the sale, Omega received an immediate cash payment of £1.3
million for fixed assets and inventory, an additional £4.0 million for the
intellectual property and a 4% royalty on the sale of CD4 tests to 31 December
2026, capped at £1.0 million.
At the time of writing, Omega remains in an ongoing dispute with the
Department of Health and Social Care regarding the potential repayment of a
pre-production payment of £2.5 million under a contract to manufacture
COVID-19 lateral flow tests and a substantial counterclaim has been intimated
in favour of the Company. Discussions with the DHSC are ongoing, the nature of
which are not publicly disclosable due to confidentiality arrangements.
Strategy
Going forward, the Board will now focus Omega's efforts solely on its core
Health and Nutrition business, maintaining its leadership position and
targeting significant organic growth through embracing digital technologies
and related marketing activities. The Group's growth strategy in this segment
will also focus on geographic expansion in the USA, a health-conscious and
mature personal health and wellbeing market, as well as expansion of the
Group's current menu of tests available to healthcare professionals, with the
introduction of complementary tests, allowing customers to manage their
patients more comprehensively and thus enabling the Board's vision of
delivering personalised nutrition for better health.
In March 2023, Omega successfully launched MyHealthTracker, a health and
wellbeing tool designed to be used alongside a trained healthcare
professional, allowing the patient to receive laboratory test results direct
to their smartphone, thereby helping the patient make personalised changes to
their diet for optimal health. Access is by invitation only from an approved
healthcare professional with its main goal to elevate patient care by way of a
more personalised approach to health and wellbeing. This digital platform will
serve as a spine that not only improves consumer/patient and health care
professional engagement but will help us better understand our end-user market
around the world. This will further drive awareness and better health outcomes
that will lead to organic growth from an existing customer base.
The US Food Sensitivity testing market is estimated to be the largest and most
established market in the world. It is the leading market for functional
medicine laboratory testing with an increasing demand for personalised
medicine. The total US market size is estimated by the Directors to be
$50-$100 million and the Board believes that Omega's US revenues could
potentially be between £3 million and £6 million over the next three to five
years.
Having initially considered that the best route to market would be to
replicate Omega's CNSLab service direct to healthcare professionals and
ultimately direct to consumer we subsequently adjusted our strategy to
initially enter the market via partnerships with existing testing
laboratories. Differentiating ourselves from established players by taking our
tried and tested approach with education and support, coupled with its digital
strategy, to engage and empower patients and healthcare professionals we will
learn more about the US market as well as allowing the market time to become
familiar with our brand prior to any further investment decisions. At the time
of writing, we have already two new installations planned in the US with
discussions with a third laboratory at advanced stages.
In order to realise our vision of becoming a leader in delivering diagnostics
that provide a complete gut health assessment, it has been our intention to
build a wider menu of complementary gut health tests and to sell these through
our already well-established channels in over 85 countries. The gut microbiome
is the new frontier to understanding chronic inflammatory conditions arising
from poor gut health. Over recent years the gut microbiome in particular has
been linked to a plethora of diseases and conditions, from diabetes and
anxiety to obesity and the Group has recently seen a growing demand from its
existing customer base in this segment.
In addition to the microbiome, it is also important to understand the
relationship between nutrients, diet, and gene expression. Nutrigenomics
allows the healthcare professional to understand genetic strengths and
weaknesses making specific improvements that help achieve better health.
Combining microbiome and nutrigenomics with our existing IgG tests provides a
compelling value proposition that will offer true personalised nutritional
assessment and the Board believes that menu expansion has the potential to
generate material revenue growth over the medium term. The Directors believe
that menu expansion from microbiome and nutrigenomics combined has the
potential to increase revenues by £2 million to £5 million over the next
five years.
Having signed heads of term agreements with two separate digital technology
partners to develop bespoke microbiome and nutrigenomic test reports, we have
prioritised the microbiome test as having greater potential demand and volume
of sales. We aim to commercialise the test in the UK shortly under our own
CNSLab laboratory service to healthcare professionals.
Summary and Outlook
As an international diagnostic testing business that is passionate about
improving lives around the world by accurately informing health decisions, the
recent launch of our MyHealthTracker app helps our reach and connects us to
our customers globally, while giving us a better understanding of gut health
data and trends in terms of predictive analysis. It also empowers people, via
a healthcare practitioner, to become more proactive about managing their
health straight from their phone, which we believe is an important step
forward.
Whilst it's disappointing to have challenges regarding the lower-than-expected
production yields, we have taken swift action to bring in consultants to
oversee a number of process improvements and are confident the actions being
taken will deliver a material improvement in yield in the near term. Embedding
key lessons learned from this is part of laying a brand-new foundation for a
business that is emerging from a group structure and learning to stand on its
own two feet. Now based in Ely, Cambridgeshire, we have had to build new
finance, HR and regulatory teams that were previously located in Alva,
Scotland. We have a new senior management team and need to get through the
"storming and norming" stages to gel teams together, change culture and step
out of some of the legacy shadows to drive the business forward.
The demand for our food sensitivity tests continues to be strong and the order
book is holding up well. We remain excited and confident for our prospects in
the US as we continue to build a wider menu of complementary gut health tests
to sell via our established channels.
We operate in an exciting market where it is increasingly being recognised
that improving gut health and avoiding food-driven inflammation are key to
achieving a healthy weight and maximising energy. As healthcare systems creak
under the burden of chronic disease and an ageing population, society is
increasingly turning to prevention through wellness. Gut health is at the very
frontier of this change and we in turn sit at the heart of this movement.
On a personal level, I remain honoured to lead the organisation, a company I
love, in a healthcare market I am passionate about. I work with an
extraordinary group of talented individuals whose knowledge and know how form
a key cornerstone of our strategy within personalised nutrition. We have had
some setbacks in the latter part of the year but the team have adopted a
growth mindset with a willingness to learn and improve. This will help in
developing a new foundation and culture that drives performance and success in
the future.
Jag Grewal
Chief Executive Officer
2 August 2023
Financial Review
Improving operational efficiency
Chris Lea
Chief Financial Officer
The year was one in which the Group completed the disposal of the remainder of
the Global Health division, culminating with the disposal of the CD4 business
on 31 July 2022. The disposal of the loss-making division and receipt of the
initial cash proceeds of £5.3 million have significantly strengthened the
Group balance sheet and allowed the Board to focus exclusively on the
remaining Health and Nutrition business, where there are a number of growth
opportunities.
Essential changes to the formulation of the Group's key FoodPrint® product in
May 2022 led to a second half weighted sales forecast which placed additional
pressures on the Group's manufacturing operations. Whilst production yields
have been declining steadily from a high in April 2020, there was a further
and unexpected sharp decline from November 2022 which, when coupled with
delays in the quality control approval process brought about by personnel
changes, inefficient working practices and COVID-19 related absences, did not
allow the Group to keep up with demand for its FoodPrint® product.
Whilst the order book at 31 March 2023 was £2.4 million - £1.0 million
higher than the prior year - the low yield led to a substantially higher than
expected raw material cost and a consequent reduction in gross margin towards
the end of the financial year. In February 2023, the Board appointed Chartwell
Consulting to undertake a review of micro-array production and to recommend
and help implement an improvement plan, with the aim of returning yields to
the 2020 high or better and to significantly reduce manufacturing and quality
control lead times. These objectives have largely been achieved, with a number
of all-time high yields achieved in recent weeks, although there is further
work required to ensure performance is sustainable at these levels.
Furthermore, the Omega team have developed new KPIs and troubleshooting skills
and are now better positioned to respond earlier and more effectively to any
future production challenges. In response to the lower-than-expected
operational performance, several personnel changes have been enacted, with Jag
Grewal currently acting as Interim Operations Director whilst the recruitment
of a full-time replacement is underway.
Dispute with the DHSC
As announced on 10 December 2021, the Group is in dispute with the DHSC
regarding the potential repayment of a pre-production payment of £2.5 million
(net of VAT). The Board, having taken legal advice, does not believe that the
Group is required to repay the pre-production payment and considers that it is
entitled to recover additional losses in connection with the contract. The
legal costs associated with the dispute have been expensed and, with no
production volume over which the pre-production payment can be recovered as
envisaged in the contract, the Group still retains a deferred income balance
of £2.5 million pending resolution of the dispute.
Whilst the Company sought to develop a COVID-19 test for commercial,
non-governmental purposes, this was entirely separate from the operation of
the contract with DHSC, which was for the manufacture - and not development -
of tests and required DHSC to confirm which test was to be manufactured
through the licensing of rights. There is no reference to the development of
the Group's own test anywhere in the contract, whereas the contract
specifically deals with the licensing of intellectual property rights by the
DHSC once an appropriate agreement has been entered into between the DHSC and
a third-party test developer. Despite repeated requests over the last 18
months, the DHSC have yet to provide any information regarding the licencing
of rights.
Following a protracted series of correspondence throughout 2022, on 26 April
2023 the Group met with a mediator and representatives of DHSC to attempt to
resolve the dispute. Following mediation, the Board are increasingly confident
that the Company is in a strong position and that the pre-production payment
will not need to be repaid. Furthermore, the Company intends to pursue its
counterclaim to seek to recover additional losses incurred in connection with
the contract.
The mediation was paused to allow DHSC to re-assess their position in the
light of the evidence provided by the Group. As a consequence, the Board is
increasingly confident that the DHSC's claim has no merit and will not
succeed. The Board now intends to vigorously pursue its substantial
counterclaim for losses incurred as a result of the DHSC's failure to licence
the necessary intellectual property to permit the contract to move forward and
their failure to notify the Group of their inability to do so in a timely
manner.
Placing and an open offer/direct subscription
Requiring additional funding to finance the CD4 business through to an
eventual sale, the Company undertook a placing in May 2022 and an open
offer/direct subscription in June 2022 which raised £2.0 million and £0.2
million respectively, at a price of 4.0 pence, with the placees requiring
warrants over a further 90 million shares at an exercise price of 4.0 pence.
To date, none of these warrants have been exercised and they expire on 9
November 2023.
Disposal/sale of CD4 business
Following the decision to divest the CD4 business, the Group completed the
disposal to Accubio on 31 July 2022. Under the terms of this agreement, the
Group received an immediate cash payment of £1.3 million for fixed assets and
inventory on hand at completion. Furthermore, the Group received an additional
£4.0 million of deferred consideration in November 2022, following the
successful outcome of a final clinical study. The Group will continue to
receive a royalty of 4% of Accubio's future CD4 revenues for the period to 31
December 2026, capped at £1.0 million in aggregate.
Following the sale, the Group were left with surplus plant and equipment with
a net book value of £0.7 million, the majority of which relate to the
COVID-19 business and which were purchased as part of the site expansion for
the DHSC contract. These assets were offered to potential purchasers of the
CD4 business and as such have been classified as assets held for sale at 31
March 2022. These non-CD4 assets were written down to an estimated recoverable
amount of £0.1 million as at 31 March 2022 and were fully impaired as at 30
September 2022. Finance lease liabilities of £0.4 million remain outstanding
in relation to lateral flow equipment which was purchased for the manufacture
of COVID-19 lateral flow tests for the DHSC and the commercial market.
Financial results summary - continuing operations
For the year ended 31 March 2023, the Group reported revenue of £7.5 million
(2022: £8.5 million), an EBITDA loss of £2.6 million (2022: EBITDA loss of
£0.4 million), an adjusted EBITDA loss of £2.0 million (2022: EBITDA profit
of £0.2 million), and a statutory loss before tax of £3.3 million (2022:
£1.0 million).
Health and Nutrition Corporate Total
2023 £'000 £'000 £'000
Sales 7,546 - 7,546
Operating loss after exceptional costs (2,132) (1,107) (3,239)
Add back:
Depreciation and amortisation 591 - 591
EBITDA (1,541) (1,107) (2,648)
Share-based payment charge 1 77 78
Exceptional aborted relocation costs 524 - 524
Adjusted EBITDA (1,016) (1,030) (2,046)
Statutory loss before taxation (2,145) (1,107) (3,252)
Health and Corporate Total
Nutrition
2022 £'000 £'000 £'000
Sales 8,539 - 8,539
Operating profit/(loss) after exceptional costs 965 (1,894) (929)
Add back:
Depreciation and amortisation 547 - 547
EBITDA 1,512 (1,894) (382)
Share-based payment charge 58 158 216
Compensation for loss of office - 287 287
Exceptional aborted placing costs - 50 50
Adjusted EBITDA 1,570 (1,399) 171
Statutory profit/(loss) before taxation 944 (1,894) (950)
Health and Nutrition revenue of £7.5 million (2022: £8.5 million) was 12%
below prior year, with the order backlog caused by lower than anticipated
production yields accounting for all of this shortfall. The order book at 1
April 2023 was £2.4 million (2022: £1.4 million). Encouragingly, the Group's
primary trading partner in China re-commenced ordering after a two-year
hiatus.
A summary of Health and Nutrition revenue is in the table below:
2023 2022 inc/(dec)
£'000 £'000 %
FoodPrint® 4,123 6,102 (32)%
Food Detective® 2,291 1,614 (41)%
CNS laboratory service 948 484 95%
Food ELISA/other 184 339 (45)%
7,546 8,539 (12)%
The gross profit margin percentage has decreased to 47.0% (2022: 59.7%),
impacted by lower FoodPrint® production yields and substantially increased
scrap costs.
Excluding exceptional costs, administrative overheads for continuing
operations increased by £0.4 million to £4.8 million (2022: £4.4 million).
Sales and marketing costs increased by £0.2 million to £1.5 million (2022:
£1.3 million).
Exceptional items
2023 2022
Continuing Continuing
operations operations
£'000 £'000
Aborted relocation costs (524) -
Compensation for loss of office - (287)
Aborted placing costs - (50)
Total (524) (337)
During the year, the Group incurred exceptional costs on continuing operations
of £0.5 million (2022: £0.3 million). These costs represent the cumulative
expenditure on the planned new manufacturing facility in Ely. To date, the
landlord has yet to deliver the property to the agreed specification and has
advised that they are unable to fund the remaining works required to complete
the building. Whilst the Group is contractually obliged to enter into a lease
for the property once it has been completed to the agreed specification, this
is now considered to be highly improbable. As a consequence, the Group have
extended the lease for the current Littleport site to June 2025 and is
currently evaluating a number of new and existing properties in the Ely area.
Financial results summary - discontinued operations
As a consequence of the decision taken in March 2022 to dispose of the CD4
business, the Global Health division, which also included the COVID-19
business, has been treated as a discontinued operation, with the COVID-19
assets, CD4 assets and any associated research and development assets being
written down to their recoverable amount and reclassified as assets held for
sale as at 31 March 2022.
2023 2022
£'000 £'000
Sales 640 3,789
Operating loss after exceptional costs (810) (7,476)
Impairment on the remeasurement of asset values (176) (1,915)
Depreciation and amortisation - 742
EBITDA (986) (8,649)
Share-based payment charge - 66
Exceptional (income)/costs (150) 1,028
Impairment on the remeasurement of asset values 176 1,915
Adjusted EBITDA loss (960) (5,640)
Loss before taxation (988) (9,550)
In the four months to the date of disposal of the CD4 business, revenue from
Global Health was £0.6 million (twelve months ended 31 March 2022: £3.8
million).
2023 2022 inc/(dec)
£'000 £'000 %
VISITECT® CD4 448 968 (54)%
COVID-19 - 2,596 (100)%
Allergy/autoimmune 131 87 51%
Other 61 138 (56)%
640 3,789 (83)%
The exceptional costs associated with the discontinued Global Health division
are as follows:
2023 2022
£'000 £'000
Loss on disposal of the Alva site (after costs) - (399)
Gain on disposal of Alva lease - 158
Impairment of Global Health inventory - (723)
Bad debt income/(expense) 150 (190)
Reduction in Omega Diagnostics GmbH settlement* - 126
150 (1,028)
* relates to the German business which was discontinued in the year
ended 31 March 2019.
The loss on disposal of the Alva site includes the sale of tangible fixed
assets at a loss of £0.2 million, transaction costs of £0.1 million and
other costs of £0.1 million. In addition, the Group made a net gain of £0.2
million when disposing of the Alva property lease.
All COVID-19 inventory was fully impaired at 31 March 2022 and CD4 inventory
was written down to net realisable value in line with the terms of the CD4
sale and purchase agreement, resulting in an aggregate impairment charge of
£0.7 million.
The bad debt expense of £0.2 million in 2022 includes a provision for the
potential repayment which may have arisen if Abingdon Health were unsuccessful
in resolving their ongoing dispute with the DHSC. This provision was released
in 2023 following the settlement of the related dispute.
The insolvency claim relating to Omega Diagnostics GmbH was settled during the
2022 for £0.3 million, £0.1 million lower than had been provided for in
prior periods.
Assets held for sale
At 31 March 2022, the Global Health assets of £5.0 million and liabilities of
£0.5 million were reclassified as held for sale. These assets and liabilities
included CD4 assets and liabilities and non-CD4 assets and liabilities.
Following the withdrawal from the COVID-19 market and disposals of the Alva
manufacturing site and the CD4 business, the Group also has a number of
surplus assets which are no longer required to support its operations. These
non-CD4 assets were primarily plant and equipment purchased in anticipation of
COVID-19 lateral flow test production.
In 2022, the Group recognised an impairment loss of £1.9 million on the
remeasurement of the CD4 and non-CD4 assets to their fair value, less costs to
sell. This amount included assumptions on the fair value of deferred
consideration and future royalty income to be received by the Group following
the sale of the CD4 business. In 2023, the Group recognised a further
impairment of £0.2 million, fully impairing these assets.
Adjusted EBITDA
Alongside the key performance indicators of revenue and gross margin
percentage, the Group continues to consider EBITDA and adjusted EBITDA as
being more appropriate performance measures which are better aligned with the
cash-generating activities of the business. Whilst the Group made an EBITDA
loss of £3.6 million (2022: £9.0 million), the continuing Group generated an
EBITDA loss of £2.6 million (2022: £0.4 million). The adjusted EBITDA loss
(before exceptional costs, share-based payment charges and the impairment loss
recognised on the remeasurement to fair value of assets held for sale, less
costs to sell) for continuing operations is £2.0 million (2022: EBITDA profit
of £0.2 million).
2023 2022
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
£'000 £'000 £'000 £'000 £'000 £'000
Operating loss after exceptional costs (3,239) (810) (4,049) (929) (7,476) (8,405)
Impairment on the remeasurement of asset values - (176) (176) - (1,915) (1,915)
Depreciation and amortisation 591 - 591 547 742 1,289
EBITDA (2,648) (986) (3,634) (382) (8,649) (9,031)
Exceptional costs 524 (150) 374 337 1,028 1,365
Impairment on the remeasurement of asset values - 176 176 - 1,915 1,915
Share-based payment charge 78 - 78 216 66 282
Adjusted EBITDA (2,046) (960) (3,006) 171 (5,640) (5,469)
After the loss arising from discontinued activities of £0.7 million (2022:
£9.9 million), the Group has recorded a loss after tax of £3.9 million
(2022: £11.3 million).
Taxation
The current year tax credit of £0.4 million arises predominantly from the
cash receipt of £0.5 million of research and development tax credits relating
to the year ended 31 March 2021. Other than to offset any deferred tax
liabilities which may crystallise in the future, based on the Group's trading
assumptions the deferred tax asset in respect of trading losses will begin
being realised from 2025 onwards, when the Group starts to generate taxable
profits. The deferred tax asset has been valued based upon a future UK
Corporation tax of 25%.
Loss per share
The loss per share was 1.7 pence (2022: 6.2 pence) based on a statutory loss
after tax of £3.9 million (2022: loss of £11.3 million). The basic loss per
share for continuing operations was 1.4 pence (2022: 0.9 pence). The adjusted
loss per share was 1.4 pence (2022: 4.2 pence). The adjusted loss after tax
was £3.1 million (2022: loss of £7.7 million) and the loss per share is
calculated on the basic average of 231.3 million shares (2022: 182.6 million
shares) in issue. The adjusted loss per share on continuing operations was 1.1
pence (2022: 0.4 pence).
Research and development
During the year, the Group invested a total of £0.4 million in all
development activities associated with continuing operations, in line with the
prior year (2022: £0.4 million), representing 4.7% (2022: 5.1%) of revenue.
Of the total expenditure, £0.1 million (2022: £0.1 million) has been
capitalised in accordance with IAS 38 - Development Costs, whilst earlier
stage expenditure and expenditure not qualifying in accordance with IAS 38
criteria of £0.3 million (2022: £0.3 million) has been expensed through the
income statement. The capitalised expenditure incurred all related to the
development of the digital platform.
Research and development expenditure on the now discontinued Global Health
division totalled £0.1 million during the first four months of the year
(2022: £0.8 million).
Property, plant and equipment
Total expenditure on property, plant and equipment in the year was £0.03
million (2022: £1.0 million).
As at 31 March 2023, the outstanding liabilities in connection with leases
recognised under IFRS 16 includes short-term liabilities of £0.02 million
(2022: £0.1 million) and long-term liabilities of £NIL million (2022: £0.02
million).
Financing and going concern
Following the disposal of the operations in Scotland, the Group has appointed
NatWest to replace Bank of Scotland as its bankers, with support to be
provided by the East of England corporate team, more local to the Littleport
site. In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Company and
Group can continue in operational existence through a period of at least
twelve months from the date of approving the financial statements (the going
concern period). The Directors have determined that the going concern period
for purposes of these financial statements is the period through to 31 August
2024. The Group realised a loss of £3.9million for the year ended 31 March
2023 (2022: loss of £11.3 million). As at 31 March 2023, the Group had net
current assets of £6.7 million, including a cash balance of £5.1 million.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Strategic Report. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Financial
Review.
The Directors have prepared trading and cash flow base case forecasts to 31
August 2024 and have applied reverse stress tests to the base case forecasts.
The stress tests have been applied to take account of the impact of potential
uncertain outcomes that are, to an extent, outside of management's control, as
well as reduced trading forecasts, taking into account current macro-economic
conditions. These scenarios include:
• The reverse stress test indicates revenue could fall by a further 45%
and a gross margin could deteriorate by an additional 2% before forecast cash
resources are exhausted.
• After taking legal advice and making an assessment of the terms and
conditions contained within the contract with the DHSC, the Directors do not
believe the Group will be required to repay the pre-production payment of
£2.5 million. In addition, the Directors consider there to be grounds to
claim for damages for additional losses incurred under the contract. As such,
the Directors believe that there will be no cash outflow in the form of a
repayment to the DHSC in the going concern period and repayment is not
included in the base case or as a sensitivity. However, the Directors
acknowledge that there is a risk that a repayment of some or all of this
amount may be required, the timing and quantum of which is uncertain.
The Board has a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the period to 31
August 2024. On this basis, the Directors continue to adopt the going concern
basis of preparation. Accordingly, these financial statements do not include
the adjustments that would be required if the Company and Group was unable to
continue as a going concern.
Chris Lea
Chief Financial Officer
2 August 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2023
2023 2022
Note £'000 £'000
Continuing operations
Revenue 3,6 7,546 8,539
Cost of sales (4,001) (3,437)
Gross profit 3,545 5,102
Administration costs (4,755) (4,438)
Selling and marketing costs (1,530) (1,256)
Other income 6 25 -
Operating loss before exceptional items 6 (2,715) (592)
Exceptional items 6 (524) (337)
Operating loss after exceptional items (3,239) (929)
Finance costs 4 (13) (21)
Loss before taxation (3,252) (950)
Tax credit/(expense) 5 80 (459)
Loss for the year from continuing operations (3,172) (1,409)
Discontinued operations
Loss after tax for the year from discontinued operations 7 (688) (9,924)
Loss for the year (3,860) (11,333)
Other comprehensive (losses)/income to be reclassified to profit and loss in
subsequent periods
Exchange differences on translation of foreign operations (15) 10
Other comprehensive (losses)/income for the year (15) 10
Total comprehensive losses for the year (3,875) (11,323)
Earnings per share (EPS)
Basic and diluted EPS on loss for the year 8 (1.7)p (6.2)p
Earnings per share for continuing operations
Basic and diluted EPS on loss for the year from continuing operations 8 (1.4)p (0.9)p
Consolidated Balance Sheet
as at 31 March 2023
2023 2022
Note £'000 £'000
ASSETS
Non-current assets
Intangibles 9 4,525 4,745
Property, plant and equipment 10 567 1,138
Right of use assets 10 21 106
Deferred taxation 11 997 1,107
Total non-current assets 6,110 7,096
Current assets
Inventories 13 777 1,094
Trade and other receivables 14 2,403 3,045
Cash and cash equivalents 15 5,115 1,605
Total current assets 8,295 5,744
Assets held for sale 7 - 4,995
Total assets 14,405 17,835
EQUITY AND LIABILITIES
Equity
Share capital 16 10,244 8,044
Share premium 25,072 25,340
Retained deficit (25,319) (21,537)
Translation reserve (46) (31)
Total equity 9,951 11,816
Liabilities
Non-current liabilities
Long-term borrowings 17 19 51
Lease liabilities 10 - 23
Deferred income 18 2,500 2,500
Total non-current liabilities 2,519 2,574
Current liabilities
Short-term borrowings 17 32 204
Lease liabilities 10 23 92
Trade and other payables 19 1,525 2,674
Total current liabilities 1,580 2,970
Liabilities directly associated with assets held for sale 7 355 475
Total liabilities 4,454 6,019
Total equity and liabilities 14,405 17,835
Simon
Douglas
Chris Lea
Non-Executive Chairman Chief Financial Officer
2 August
2023
2 August 2023
Omega Diagnostics Group PLC
Registered number: 5017761
Consolidated Statement of Changes in Equity
for the year ended 31 March 2023
Share Share Retained Translation
capital premium deficit reserve Total
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2021 8,028 25,288 (9,891) (41) 23,384
Loss for year ended 31 March 2022 - - (11,333) - (11,333)
Other comprehensive income - net exchange adjustments - - - 10 10
Total comprehensive (losses)/income for the year - - (11,333) 10 (11,323)
Issue of share capital for cash consideration 16 52 - - 68
Share-based payments - - 282 - 282
Deferred tax charge related to share-based payments - - (595) - (595)
Balance at 31 March 2022 8,044 25,340 (21,537) (31) 11,816
Loss for year ended 31 March 2023 - - (3,860) - (3,860)
Other comprehensive loss - net exchange adjustments - - - (15) (15)
Total comprehensive losses for the year - - (3,860) (15) (3,875)
Issue of share capital for cash consideration 2,200 - - - 2,200
Expenses in connection with share issue - (268) - - (268)
Share-based payments - - 78 - 78
Balance at 31 March 2023 10,244 25,072 (25,319) (46) 9,951
Consolidated Cash Flow Statement
for the year ended 31 March 2023
2023 2022
Note £'000 £'000
Cash flows generated from operations
Loss for the year from continuing operations (3,172) (1,409)
Loss for the year from discontinued operations (688) (9,924)
Adjustments for:
- Gain on disposal of fixed assets - (7)
- Loss on disposal of Alva site fixed assets - 226
- Depreciation 10 219 671
- Amortisation of intangible assets 9 372 618
- Impairment and derecognition of intangible assets 9 15 47
- Impairment loss recognised on the remeasurement to fair value 7 176 1,915
- Impairment of assets relating to aborted Ely relocation 10 399 -
- Share-based payments 78 282
- Taxation (380) 833
- Omega Diagnostic GmbH liability settlement - (126)
- Finance costs 16 180
Cash outflow from operating activities before working capital movement (2,965) (6,694)
Decrease in trade and other receivables 812 1,130
Decrease in inventories 128 480
Decrease in trade and other payables (1,466) (137)
Movement in grants (139) (8)
Receipt of advance funding from the DHSC - 2,000
Taxation received 478 -
Cash outflow from operating activities (3,152) (3,229)
Investing activities
Finance income 19 -
Income from sale of property, plant and equipment - 985
Income from sale of the CD4 business 5,315 -
Purchase of property, plant and equipment 10 (25) (968)
Purchase of intangible assets (128) (510)
Net cash generated from/(used in) investing activities 5,181 (493)
Financing activities
Finance costs 4 (1) (2)
Proceeds from issue of share capital 2,200 68
Expenses in connection with share issue (268) -
Principal portion of asset finance payments (314) (198)
Interest portion of asset finance payments (25) (34)
Principal portion of lease liability payments (97) (192)
Interest portion of lease liability payments (9) (144)
Net cash generated from/(used in) financing activities 1,486 (502)
Net increase/(decrease) in cash and cash equivalents 3,515 (4,224)
Effects of exchange rate movements (5) 2
Cash and cash equivalents at beginning of year 1,605 5,827
Cash and cash equivalents at end of year 5,115 1,605
Company Balance Sheet
as at 31 March 2023
2023 2022
Note £'000 £'000
ASSETS
Non-current assets
Investments 12 3,101 3,100
Intercompany receivables 14 19,067 -
Total non-current assets 22,168 3,100
Current assets
Trade and other receivables 14 85 16,898
Cash and cash equivalents 15 717 1,045
Total current assets 802 17,943
Total assets 22,970 21,043
EQUITY AND LIABILITIES
Equity
Share capital 16 10,616 8,416
Share premium 25,689 25,957
Retained deficit (13,627) (13,727)
Total equity 22,678 20,646
Liabilities
Current liabilities
Trade and other payables 19 292 397
Total current liabilities 292 397
Total liabilities 292 397
Total equity and liabilities 22,970 21,043
As permitted by section 408 of the Companies Act 2006, no separate statement
of comprehensive income is presented for the Company.
The Company profit in the year was £22,000 (2022: loss of £2,832,000).
Simon
Douglas
Chris Lea
Non-Executive Chairman Chief Financial Officer
2 August
2023
2 August 2023
Omega Diagnostics Group PLC
Registered number: 5017761
Company Statement of Changes in Equity
for the year ended 31 March 2023
Share Share Retained
capital premium surplus/(deficit) Total
Note £'000 £'000 £'000 £'000
Balance at 31 March 2021 8,400 25,905 (10,785) 23,520
Loss for the year ended 31 March 2022 - - (2,832) (2,832)
Share options exercised 16 52 - 68
Share-based payments as restated 3 - - 282 282
Deferred tax charge related to share-based payments - - (392) (392)
Balance at 31 March 2022 8,416 25,957 (13,727) 20,646
Profit for the year ended 31 March 2023 - - 22 22
Issue of share capital for cash consideration 2,200 - - 2,200
Expenses in connection with share issue - (268) - (268)
Share-based payments - - 78 78
Balance at 31 March 2023 10,616 25,689 (13,627) 22,678
Company Cash Flow Statement
for the year ended 31 March 2023
2023 2022
£'000 £'000
Cash flows generated from operations
Profit/(loss) for the year 22 (2,832)
Adjustments for:
- Taxation - 678
- Impairment of subsidiaries - 1,685
- Share-based payments 78 158
- Finance costs - 31
Cash inflow/(outflow) before working capital movement 100 (280)
Increase in trade and other receivables excluding intercompany financing (14) (22)
Decrease in trade and other payables (104) (269)
Cash outflow from operating activities (18) (571)
Investing activities
Intercompany transfer of intangible assets - 31
Transfers of cash to subsidiary companies (6,482) (19,806)
Transfers of cash from subsidiary companies 4,240 15,811
Investment in subsidiaries - -
Net cash used in investing activities (2,242) (3,964)
Financing activities
Finance costs - (31)
Proceeds from issue of share capital 2,200 68
Expenses of share issue (268) -
Net cash inflow from financing activities 1,932 37
Net decrease in cash and cash equivalents (328) (4,498)
Cash and cash equivalents at beginning of year 1,045 5,543
Cash and cash equivalents at end of year 717 1,045
Notes to the Financial Statements
for the year ended 31 March 2023
1 Authorisation of financial statements
The financial statements of Omega Diagnostics Group PLC (registered number:
5017761; registered office address: One Fleet Place, London EC4M 7WS for the
year ended 31 March 2023 were authorised for issue by the Board of Directors
on 2 August 2023, and the balance sheets were signed on the Board's behalf by
Simon Douglas and Chris Lea. Omega Diagnostics Group PLC is a public limited
company incorporated in England. The Company's ordinary shares are traded on
AIM.
2 Accounting policies
Basis of preparation
The accounting policies which follow set out those policies which have been
applied consistently to all periods presented in these financial statements.
The consolidated financial statements, and the Company financial statements,
are presented in sterling and have been prepared in accordance with UK-adopted
international accounting standards and, as regards to the Company financial
statements, as applied in accordance with the provisions of the Companies Act
2006. The Company has taken advantage of section 408 of the Companies Act 2006
not to present the Company statement of comprehensive income.
In relation to IFRS 8 - Operating Segments, the Group has identified the
Executive Board as the chief operating decision maker with responsibility for
decisions over the allocation of resources to operating segments and for the
monitoring of their performance. Following the decision of the Executive Board
to discontinue trading in the Global Health segment, the Group now reports on
two segments as below:
· Health and Nutrition; and
· Corporate.
Discontinued operations
Assets and liabilities are classified as held for disposal if their
recoverable value is likely to be recovered via a sale or distribution as
opposed to continued use by the Group. In order to be classified as assets
held for sale, assets and liabilities must meet all of the following
conditions; the disposal is highly probable, it is available for immediate
disposal, it is being actively marketed and the disposal is likely to occur
within one year.
Assets that qualify as held for disposal and related liabilities are disclosed
separately from other assets and liabilities in the balance sheet
prospectively from the date of classification. Non-current assets determined
as held for disposal are measured at the lower of carrying value and fair
value less costs to sell. No depreciation or amortisation is charged in
respect of these assets after classification as held for disposal.
Assets or groups of assets and related liabilities that qualify as held for
disposal are classified as discontinued operations when they represent a
separate major line of business or geographical area, are part of a single
plan to dispose of a separate major line of business or geographical area or
are acquired exclusively with a view to resale. Income and expenses relating
to these discontinued operations are disclosed in a single net amount after
taxes in the statement of comprehensive income, with comparative amounts
re-presented accordingly.
Additional disclosures are provided in Note 7. All other notes to the
financial statements include amounts for continuing operations, unless
indicated otherwise.
Basis of consolidation
The Group financial statements consolidate the financial statements of Omega
Diagnostics Group PLC and the entities it controls (its subsidiaries). Control
is achieved when the Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those returns
through its power over the investee. Subsidiaries are consolidated from the
date of acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control ceases. The
financial statements of the subsidiaries used in the preparation of the
consolidated financial statements are based on consistent accounting policies.
All intercompany balances and transactions, including unrealised profits
arising from them, are eliminated.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Strategic Report. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Financial
Review.
In determining the appropriate basis of preparation of the financial
statements, the Directors are required to consider whether the Company and
Group can continue in operational existence through a period of at least
twelve months from the date of approving the financial statements (the going
concern period). The Directors have determined that the going concern period
for purposes of these financial statements is the period through to 31 August
2024. The Group realised a loss of £3.9 million for the year ended 31 March
2023 (2022: loss of £11.3 million). As at 31 March 2023, the Group had net
current assets of £6.7 million, including a cash balance of £5.1 million.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Strategic Report. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Financial
Review.
The Directors have prepared trading and cash flow base case forecasts to 31
August 2024 and have applied reverse stress tests to the base case forecasts.
The stress tests have been applied to take account of the impact of potential
uncertain outcomes that are, to an extent, outside of management's control, as
well as reduced trading forecasts, taking into account current macro-economic
conditions. These scenarios include:
· After taking into account the above sensitivities and mitigating
actions, the reverse stress test indicates revenue could fall by a further 45%
and a gross margin could deteriorate by an additional 2% before forecast cash
resources are exhausted.
· After taking legal advice and making an assessment of the terms and
conditions contained within the contract with the DHSC, the Directors do not
believe the Group will be required to repay the pre-production payment of
£2.5 million. In addition, the Directors consider there to be grounds to
claim for damages for additional losses incurred under the contract. As such,
the Directors believe that there will be no cash outflow in the form of a
repayment to the DHSC in the going concern period and repayment is not
included in the base case or as a sensitivity. However, the Directors
acknowledge that there is a risk that a repayment of some or all of this
amount may be required, the timing and quantum of which is uncertain.
The Board has a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the period to 31
August 2024. On this basis, the Directors continue to adopt the going concern
basis of preparation. Accordingly, these financial statements do not include
the adjustments that would be required if the Company and Group was unable to
continue as a going concern.
Intangible assets
Goodwill
Business combinations are accounted for under IFRS 3 using the acquisition
method. Goodwill represents the excess of the cost of the business combination
over the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities. Goodwill is not amortised but is
subject to an annual impairment review and whenever events or changes in
circumstances indicate that the carrying value may be impaired a charge is
made to the income statement. After initial recognition, goodwill is stated at
cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to the related
cash-generating units monitored by management, usually at business segment
level where synergies lie. Where the recoverable amount of the cash-generating
unit is less than its carrying amount, including goodwill, an impairment loss
is recognised in the income statement.
Other intangible assets
Intangible assets acquired as part of a business combination are recognised
outside goodwill if the asset is separable or arises from contractual or other
legal rights and its fair value can be measured reliably. Following initial
recognition at fair value at the acquisition date, the historical cost model
is applied, with intangible assets being carried at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets with a
finite life have no residual value and are amortised on a straight-line basis
over the expected useful lives, with charges included in administration costs,
as follows:
Technology assets - 5 to 20 years
Software - 5 years
Licences - 17 to 20 years
Customer relationships - fully amortised
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable.
Research and development costs
Expenditure on research and initial feasibility work is written off through
the income statement as incurred. Thereafter, expenditure on product
development which meets certain criteria is capitalised and amortised over its
useful life. The stage at which it is probable that the product will generate
future economic benefits is when the following criteria have been met:
technical feasibility; intention and ability to sell the product; availability
of resources to complete the development of the product; and the ability to
measure the expenditure attributable to the product. The useful life of the
intangible asset is determined on a product-by-product basis, taking into
consideration a number of factors. Development costs previously recognised as
an expense are not recognised as an asset in a subsequent period. Research and
development intangible assets are amortised on a straight-line basis over the
expected useful lives, with charges included in administration costs, as
follows:
IAS38 Development costs - 5 to 20 years
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any accumulated impairment losses. Depreciation is charged so as to write
off the cost of assets to their estimated residual values over their estimated
useful lives on a straight-line basis as follows:
Leasehold improvements - ten years, straight line with no residual value or the remaining term of the
lease if shorter
Plant and machinery - three to ten years, straight line with no residual value
Right of use leased assets - over the lease term, straight line with no residual value
The carrying values of property, plant and equipment are reviewed for
impairment if events or changes in circumstances indicate the carrying value
may not be recoverable and are written down immediately to their recoverable
amount. Useful lives are reviewed annually and, where adjustments are
required, these are made prospectively.
Leases
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term with the discount rate
determined by reference to the Group's incremental borrowing rate at
commencement of the lease.
Right of use assets are recognised at the commencement date of the lease and
measured at an amount equal to the initial lease liability recognised and
initial direct costs incurred when entering into the lease. Right of use
assets comprise the premises and equipment with leases in excess of one year.
Low value leases
Rentals applicable to low value leases, where substantially all the benefits
and risks remain with the lessor, are charged against the statement of other
comprehensive income on a straight-line basis over the period of the lease.
Asset finance arrangements
The Group raises finance secured on new asset purchases. Amounts received in
relation to the financing of fixed asset acquisitions, where the lender has
security over the specified assets acquired, are recorded as liabilities in
the balance sheet and accounted for in accordance with IFRS 9. Interest
incurred on these arrangements is charged to the statement of comprehensive
income using the effective interest rate method.
Impairment of assets
The Group and Company assess at each reporting date whether there is an
indication that an asset may be impaired. If any such indication exists, the
Group and Company make an estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of an asset's or cash-generating
unit's fair value less costs to sell and its value in use and is determined
for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. Where
the carrying amount of an asset exceeds its recoverable amount, the asset is
considered to be impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to
their net present value, using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to that
asset. Impairment losses on continuing operations are recognised in the income
statement in those expense categories consistent with the function of the
impaired asset.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
defined as standard cost or purchase price and includes all direct costs
incurred in bringing each product to its present location and condition. Net
realisable value is based on estimated selling price less any further costs
expected to be incurred prior to completion and disposal.
Trade receivables
Trade receivables recognised by the Group and Company are carried at original
invoice amount less an allowance for any non-collectable or impaired amounts.
The Group uses the IFRS 9 expected credit loss model to measure loss
allowances at an amount equal to their lifetime expected credit loss. A
provision for doubtful amounts is made when there is objective evidence that
collection of the full amount is no longer probable.
Significant financial difficulty or significantly extended settlement periods
are considered to be indicators of impairment. Normal average payment terms
vary from payment in advance to 90 days. Balances are written off when the
probability of recovery is assessed as remote.
Provision for expected credit losses (ECLs) of receivables
The Group uses a provision matrix to calculate ECLs for trade receivables. The
provision rates are based on analysis of payment receipt days past due for
groupings of various customer segments (i.e. by geography, product type,
customer type and rating).
The provision matrix is initially based on the Group's historical observed
default rates. The Group will calibrate the matrix to adjust the historical
credit loss experience with forward-looking information. For instance, if
forecasted economic conditions are expected to deteriorate over the next year,
which could lead to an increased number of defaults in the medical diagnostics
sector, the historical rates are adjusted. At every reporting date, the
historical observed default rates are updated and changes in the
forward-looking estimates are analysed.
The assessment of the correlation between historical observed rates, forecast
economic conditions and ECLs is an estimate. The amount of ECLs is sensitive
to changes in circumstances and forecasted economic conditions. The Group's
historical credit loss experience and forecast of economic conditions may also
not be representative of the customer's actual default in the future. The
information about the ECLs on the Group's trade receivables is disclosed in
the Notes to the Financial Statements.
Expected credit loss on amounts due from subsidiaries are measured using the
general models for ECLs. When there has been a significant increase in credit
risk since initial recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of the timing
of the default. This is determined by applying the probability of default to
the receivables due from subsidiaries.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and in
hand and short-term deposits with an original maturity of three months or
less. Bank overdrafts or other short-term debt facilities 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 of the
statement of cash flows.
Financial instruments
Under IFRS 9, financial assets, liabilities and equity instruments are
classified according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities.
Financial assets held by the Group and Company are trade and other receivables
and cash.
Financial liabilities held by the Group and Company are trade and other
payables, deferred income and bank borrowings.
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them. Trade receivables are measured at the
transaction price determined under IFRS 15. The Group's financial assets at
amortised cost include trade receivables and loans to subsidiaries.
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised when the rights to
receive cash flows from the asset have expired.
For trade receivables and contract assets, the Group applies a simplified
approach in calculating ECLs. Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance based on lifetime ECLs at
each reporting date.
Customer credit risk is managed by the Group finance team and is subject to
the Group's established policy, procedures and controls relating to customer
credit risk management. All new customers are subject to formal take-on
procedures which include the first four orders being on a proforma basis.
Customers' credit is reviewed on a regular basis with existing trading
experiences taken into account when deciding on ongoing terms. The Group has
an excellent record in cash collections and consequently has had almost no bad
debt in recent years.
A financial asset is deemed to be impaired when internal or external
information indicates that the Group is unlikely to receive the outstanding
contractual amounts in full before taking into account any credit enhancements
held by the Group. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows.
Trade payables are not interest bearing and are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest
method.
Bank borrowings are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. For long-term
bank borrowings stated at amortised cost, transaction costs that are directly
attributable to the borrowing instrument are recognised as an interest expense
over the life of the instrument.
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires; when an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the consolidated statement of
comprehensive income.
Company's investments in subsidiaries
The Company recognises its investments in subsidiaries at cost. The carrying
value of investments is reviewed for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable.
Foreign currency translation
The financial statements are presented in UK pounds sterling. Transactions in
currencies other than sterling are recorded at the prevailing rate of exchange
at the date of the transaction. At each balance sheet date, monetary assets
and liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing on the balance sheet date. Non-monetary assets and
liabilities that are denominated in foreign currencies are translated at the
rates prevailing at the date of the transaction.
Gains and losses arising on retranslation of monetary items are included in
the net profit or loss for the year. The trading results of the overseas
subsidiaries are translated at the average exchange rate ruling during the
year, with the exchange difference between the average rates and the rates
ruling at the balance sheet date being taken to other comprehensive income and
accumulated in the translation reserve. Any differences arising on the
translation of the opening net investment in the overseas subsidiaries and of
applicable foreign currency loans are recognised in other comprehensive income
and accumulated in the translation reserve.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and net of discounts and sales-related taxes. Sales of goods are
recognised when our performance obligations have been met. This will be when
goods have been despatched and the collection of the related receivable is
reasonably assured. Sale of goods relates to the sale of medical diagnostic
kits. Revenue relating to CNSLab laboratory services is recognised on
communication of test results.
Grants
Grants are recognised when it is reasonable to expect that the grants will be
received and that all related conditions will be met, usually on submission of
a valid claim for payment. Grants in respect of capital expenditure are
credited to a deferred income account and are released to the income statement
over the expected useful lives of the relevant assets by equal annual
instalments. Revenue grants are credited to the income statement as and when
the relevant expenditure is incurred.
Share-based payments
For equity-settled transactions, the Group measures the award by reference to
the fair value at the date at which they are granted and it is recognised as
an expense over the vesting period, which ends on the date on which the
relevant employees become fully entitled to the award. In certain
circumstances, such as death of an employee, the Directors can amend the
vesting period at their discretion. Fair value is determined using the
Black-Scholes model.
Any other conditions which are required to be met in order for an employee to
become fully entitled to an award are considered to be non-vesting conditions.
Like market performance conditions, non-vesting conditions are taken into
account in determining grant date fair value. No expense is recognised for
awards that do not ultimately vest, except for awards where vesting is
conditional upon a market or non-vesting condition, which are treated as
vesting irrespective of whether or not the market or non-vesting condition is
satisfied, provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is
calculated, representing the extent to which the vesting period has expired
and management's best estimate of the achievement or otherwise of vesting
conditions and of the number of equity instruments that will ultimately vest
or, in the case of an instrument subject to a market or non-vesting condition,
be treated as vesting as described above. This includes any award where
non-vesting conditions within the control of the Group or the employee are not
met. The movement in cumulative expense since the previous balance sheet date
is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on
the difference between the fair value of the original award and the fair value
of the modified award, both as measured on the date of the modification. No
reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any cost not yet recognised in the income
statement for the award is expensed immediately. Any compensation paid up to
the fair value of the award at the cancellation or settlement date is deducted
from equity, with any excess over fair value being treated as an expense in
the income statement.
Pensions
Contributions to personal pension plans of employees on a defined contribution
basis are charged to the income statement in the year in which they are
payable.
Income taxes
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates and
laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements, with the following exceptions:
· where the temporary difference arises from the initial
recognition of goodwill or of an asset or liability in a transaction that is
not a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss;
· in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures, where the timing
of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable
future; and
· deferred income tax assets are recognised only to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses
can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted
basis at the tax rates that are expected to apply when the related asset is
realised or the liability is settled, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Income tax and deferred tax are charged or credited in other comprehensive
income or directly to equity if they relate to items that are credited or
charged in other comprehensive income or directly to equity. Otherwise, income
tax and deferred tax are recognised in profit or loss.
Use of estimates and judgements
The preparation of these financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. It is not practical to separate estimates from judgements in
relation to future forecasts. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
The significant areas of estimation uncertainty and critical judgements in
applying the accounting policies that have the most significant effect on the
amounts recognised in the financial information are as follows:
Intangible assets - expected useful life
Management judgement is required to estimate the useful lives of intangible
assets, having reference to future economic benefits expected to be derived
from use of the asset. Economic benefits are based on the fair values of
estimated future cash flows. The Group seeks to develop relationships with key
external decision makers that can influence the global agenda for the markets
in which the Group operates. To the extent that future economic benefits are
dependent upon inputs and decisions to be taken by third parties, the Group
maintains regular dialogue with these parties to ensure it has the most
relevant and up-to-date data upon which to base its judgement. The Group
reviews its technology assets on a regular basis by undertaking competitor
reviews to ensure the relevance of these assets and to increase the likelihood
that future economic benefits will continue to ensue. The period selected for
amortisation in relation to the Health and Nutrition products is five years as
there is competitor activity in this space.
Carrying value of goodwill
Goodwill is tested annually for impairment. The test considers the recoverable
amount of cash-generating units (CGUs) that give rise to the goodwill. The
recoverable amount is determined to be the higher of the fair value less costs
to sell and the value in use of the CGU. If the carrying amount of the CGU
exceeds its recoverable amount, an impairment charge will be recognised
immediately in the income statement.
Value in use calculations require the estimation of future cash flows to be
derived from the respective CGU and the selection of an appropriate discount
rate in order to calculate their present value. The value in use methodology
is consistent with the approach taken by management to evaluate economic value
and is deemed to be the most appropriate for the respective CGU. The
methodology is based on the pre-tax cash flows arising from the specific CGU
and discounted using a pre-tax discount rate. The estimation of the timing and
value of underlying projected cash flows and the selection of appropriate
discount rates involves management judgement. Subsequent changes to these
estimates or judgements may impact the carrying value of the assets.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on the
difference between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that the taxable profits will be available against which
deductible temporary differences can be utilised within a reasonable period of
time. 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 profits will be available to allow the asset recognised to
be recovered within a reasonable period of time.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right of offset within the same tax authority and where the Group
intends to either settle them on a net basis, or to realise the asset and
settle the liability simultaneously. A deferred tax asset is recognised only
to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Investments
For investments subject to impairment testing, the investment carrying value
is compared to the investment recoverable amount. The recoverable amount is
determined to be the higher of the fair value less costs to sell and the value
in use of the investment. If the carrying amount of the investment exceeds its
recoverable amount, an impairment charge will be recognised immediately in the
income statement. Reversals of previous impairment charges are recognised if
the recoverable amount of the investment significantly exceeds the carrying
amount.
Value in use calculations require the estimation of future cash flows to be
derived from the respective subsidiary and the selection of an appropriate
discount rate in order to calculate their present value. The value in use
methodology is consistent with the approach taken by management to evaluate
economic value and is deemed to be the most appropriate for the respective
subsidiary. The methodology is based on the pre-tax cash flows arising from
the respective subsidiary and discounted using a pre-tax discount rate. The
estimation of the timing and value of underlying projected cash flows and the
selection of appropriate discount rates involves management judgement.
Subsequent changes to these estimates or judgements may impact the carrying
value of the subsidiary.
Deferred income
At inception, amounts advanced by DHSC were classified as deferred income
under IFRS 15 because they were to be recovered at an agreed amount per
lateral flow test produced. With no production volume over which the advance
payment can be recovered as envisaged in the contract, the Company still
retains the deferred income balance of £2.5 million pending resolution of the
dispute. Depending on the outcome of the settlement negotiations, the amount
of deferred income to be retained by the Company may be more or less than the
amount stated. Under IFRS 15 no amount would be recognised as revenue unless
it is highly probable that a significant reversal would not occur.
Notwithstanding legal advice obtained and the Directors intention to challenge
any attempt to reclaim the amount advanced under the contract, at the 31 March
2023, the Directors have determined the amount to be fully constrained.
Fair value of assets held for sale
The fair value less costs to sell of assets held for sale at 31 March 2022 was
£5.0 million (see Note 7), of which the majority relates to the CD4 business.
The fair value has been determined on the basis of negotiations with potential
buyers at the balance sheet date and, since there were no material changes to
the fair value of the CD4 business between 31 March 2022 and 31 July 2022, the
consideration agreed has been determined to be representative of the fair
value at the balance sheet date. Judgement has also been applied in
determining the appropriate fair value of the contingent elements of the
consideration agreed, which is based on a range of possible outcomes
including, the outcome of the ongoing clinical study in Kenya which is
expected to conclude in the final quarter of 2022 and revenues generated from
future CD4 revenues under Accubio ownership for the period to 31 December 2026
which the Group are entitled to royalty fees of 4%.
Standards adopted for the first time
There are no new or revised standards effective for annual periods beginning
on or after 1 April 2022 that are relevant to the Group.
Standards, amendments and interpretations to existing standards that are not
yet effective
There are no new standards, amendments to existing standards or
interpretations that are effective as at 31 March 2022 relevant to the Group.
3 Segmental information
Following the withdrawal from COVID-19 products and the decision taken in
March 2022 to dispose of the CD4 business, the sale of which was completed on
31 July 2022, the entire Global Health division was classified as held for
sale, the only remaining division is Health and Nutrition. The Global Health
division specialised in the research, development, production and marketing of
kits to aid the diagnosis of infectious diseases, including COVID-19.
The Health and Nutrition division specialises in the research, development and
production of kits to aid the detection of immune reactions to food. It also
provides clinical analysis to the general public, clinics and health
professionals as well as supplying the point-of-care Food Detective® test.
The Corporate segment consists of centralised corporate costs which are not
allocated to the trading activities of the Group.
Inter-segment transfers or transactions are entered into under the normal
commercial conditions that would be available to unrelated third parties.
Business segment information
Health and
Nutrition Corporate Total
2023 £'000 £'000 £'000
Revenue 7,742 - 7,742
Inter-segment revenue (196) - (196)
Total revenue 7,546 - 7,546
Cost of sales (4,001) - (4,001)
Gross profit 3,545 - 3,545
Operating costs (5,153) (1,107) (6,260)
Operating loss before exceptional items (1,608) (1,107) (2,715)
Exceptional items (524) - (524)
Operating loss after exceptional items (2,132) (1,107) (3,239)
Depreciation 219 - 219
Amortisation 372 - 372
EBITDA (1,541) (1,107) (2,648)
Exceptional items 524 - 524
Share-based payment charges 1 77 78
Adjusted EBITDA (1,016) (1,030) (2,046)
Share-based payment charges (1) (77) (78)
Depreciation (219) - (219)
Amortisation (372) - (372)
Net finance costs (13) - (13)
Exceptional costs (524) - (524)
Loss before tax (2,145) (1,107) (3,252)
Exceptional items 524 - 524
Share-based payment charges 1 77 78
Amortisation 109 - 109
Adjusted loss before tax (1,511) (1,030) (2,541)
Health and
Nutrition Corporate Total
2022 £'000 £'000 £'000
Revenue 8,779 - 8,779
Inter-segment revenue (240) - (240)
Total revenue 8,539 - 8,539
Cost of sales (3,437) - (3,437)
Gross profit 5,102 - 5,102
Operating costs (4,137) (1,557) (5,694)
Operating profit/(loss) before exceptional items 965 (1,557) (592)
Exceptional items - (337) (337)
Operating profit/(loss) after exceptional items 965 (1,894) (929)
Depreciation 194 - 194
Amortisation 353 - 353
EBITDA 1,512 (1,894) (382)
Share-based payment charges 58 158 216
Exceptional items - 337 337
Adjusted EBITDA 1,570 (1,399) 171
Share-based payment charges (58) (158) (216)
Depreciation (194) - (194)
Amortisation (353) - (353)
Net finance costs (21) - (21)
Exceptional items - (337) (337)
Profit/(loss) before tax 944 (1,894) (950)
Exceptional items - 337 337
Share-based payment charges 58 158 216
Amortisation 99 - 99
Adjusted profit/(loss) before tax 1,101 (1,399) (298)
The adjusted profit/(loss) before taxation is a key measure of the Group's
trading performance used by the Directors. The reported numbers are non-GAAP
measures.
Corporate consists of centralised corporate costs which are not allocated
across the trading divisions.
The segment assets and liabilities are as follows:
Health and
Nutrition Corporate Total
2023 £'000 £'000 £'000
Segment assets 8,208 85 8,293
Unallocated assets - - 6,112
Total assets 8,208 85 14,405
Segment liabilities 1,307 292 1,599
Unallocated liabilities - - 2,500
Total liabilities 1,307 292 4,099
The assets and liabilities held for sale at 31 March 2022 are detailed in Note
7 - discontinued operations.
Health and
Nutrition Corporate Total
2022 £'000 £'000 £'000
Segment assets 10,055 73 10,128
Unallocated assets - - 2,712
Total assets 10,055 73 12,840
Segment liabilities 2,508 397 2,905
Unallocated liabilities - - 2,639
Total liabilities 2,508 397 5,544
Unallocated assets comprise cash and deferred taxation. Unallocated
liabilities primarily relate to deferred income balances.
Information about major customers
One customer within the Health and Nutrition segment accounts for £839,000,
11.0% (2022: £1,369,000, 16.0%) of continuing revenues.
Geographical information
The Group's geographical information is based on the location of its markets
and customers. Sales to external customers disclosed in the geographical
information are based on the geographical location of its customers. The
analysis of segment assets and capital expenditure is based on the
geographical location of the assets.
2023 2022
£'000 £'000
Revenues
UK 975 470
Rest of Europe 2,311 2,605
North America 1,143 1,742
South/Central America 301 500
India 529 513
Asia and the Far East 1,726 1,503
Africa and the Middle East 561 1,206
7,546 8,539
Property, Trade
plant and and other
Intangibles equipment Inventories receivables Total
2023 £'000 £'000 £'000 £'000 £'000
Assets
UK 4,524 586 724 2,312 8,146
India 1 2 53 91 147
Unallocated assets - - - - 6,112
Total assets 4,525 588 777 2,403 14,405
Property, Trade
plant and and other
Intangibles equipment Inventories receivables Total
2022 £'000 £'000 £'000 £'000 £'000
Assets
UK 4,743 1,241 1,084 2,938 10,006
India 2 3 10 107 122
Unallocated assets - - - - 2,712
Total assets 4,745 1,244 1,094 3,045 12,840
2023 2022
£'000 £'000
Liabilities
UK 1,531 2,829
India 68 76
Unallocated liabilities 2,500 2,639
Total liabilities 4,099 5,544
Capital expenditure
Health and Nutrition 25 275
Global Health and Other - 693
Total capital expenditure 25 968
Intangible expenditure
Health and Nutrition 128 92
Global Health and Other - 489
Total intangible expenditure 128 581
4 Discontinued operations
Following the withdrawal from COVID-19 products and the decision taken in
March 2022 to dispose of the CD4 business, the sale of which was completed on
31 July 2022, the entire Global Health division was classified as held for
sale as part of a single coordinated plan and has therefore been presented as
a discontinued operation.
The Alva manufacturing site was disposed of in March 2022 for £985,000
resulting in a loss on disposal of £226,000 before costs of £173,000. In
addition, the remaining 14 years of the Alva lease were assigned to the
acquiror, and 93 employees were transferred to Accubio Limited. The Group made
a gain of £158,000 when disposing of the Alva right of use asset and
associated lease liability.
The remaining Global Health assets, including the CD4 assets, were held for
sale as at 31 March 2022 and an impairment loss of £1,915,000 has been
recognised on the remeasurement to fair value, less costs to sell. The non-CD4
assets relate primarily to COVID-19 plant and equipment no longer used in the
business, the liabilities relate to the hire purchase on these assets.
The sale of the CD4 business was completed effective 31 July 2022 at which
time net assets, less cost of disposal were £5,486,000. Net cash proceeds of
£5,315,000 have been received and the Company is entitled to a royalty of 4%
of Accubio's test revenues to 31 December 2026, capped at £1.0 million in
aggregate. In calculating the loss on disposal an estimated £171,000 of
future royalty income was assumed based on CD4 sales for the year ended 31
March 2022.
2023 2022
£'000 £'000
Revenue 640 3,789
Cost of sales (184) (4,773)
Gross profit/(loss) 456 (984)
Administration costs (1,195) (4,832)
Selling and marketing costs (223) (640)
Other income 2 8
Operating loss before exceptional items (960) (6,448)
Exceptional items 150 (1,028)
Operating loss after exceptional items (810) (7,476)
Finance costs (2) (159)
Impairment loss recognised on the remeasurement to fair value less costs to (176) (1,915)
sell
Loss before taxation (988) (9,550)
Tax benefit/(expense):
Related to pre-tax loss from the ordinary activities for the period 267 (738)
Related to measurement to fair value less costs to sell 33 364
Loss for the year from discontinued activities (688) (9,924)
Adjusted loss before taxation
2023 2022
£'000 £'000
Loss for the year from discontinued activities (688) (9,924)
Exceptional (income)/expense (150) 1,028
Impairment loss recognised on the remeasurement to fair value less costs to 176 1,915
sell
Amortisation of intangible assets - 6
Share-based payment charges - 66
Adjusted loss for the year from discontinued activities (662) (6,909)
Earnings per share
2023 2022
Basic, loss for the year from discontinued operations (0.3)p (5.4)p
Diluted, loss for the year from discontinued operations (0.3)p (5.4)p
Adjusted, loss for the year from discontinued operations (0.3)p (3.8)p
Cash flows
The net cash flows relating to the Global Health business are, as follows:
2023 2022
£'000 £'000
Operating 200 (4,064)
Investing 5,335 (126)
Financing (129) (412)
Net cash inflow/(outflow) 5,406 (4,602)
The major classes of assets and liabilities of the Global Health business as
held for sale as at 31 March 2022 are, as follows:
Held for sale
£'000
CD4 assets
Intangible assets 3,784
Property, plant and equipment 395
Right of use assets 9
Inventories 664
CD4 assets held for sale 4,852
Non-CD4 assets
Intangible assets -
Property, plant and equipment 143
Non-CD4 assets held for sale 143
Total assets held for sale 4,995
CD4 liabilities
Lease liabilities (10)
Non-CD4 liabilities
Borrowings (465)
Total liabilities directly associated with the assets held for sale (475)
Net assets directly associated with the disposal group 4,520
The assets held for sale are stated net of the cost of disposal.
Total liabilities directly associated with the assets held for sale at 31
March 2023 were £355,000 (2022: £475,000).
Exceptional items summary
2023 2022
£'000 £'000
Loss on disposal of the Alva site - (399)
Gain on disposal of Alva lease - 158
Impairment of Global Health inventory - (723)
Bad debt provision 150 (190)
Reduction in Omega Diagnostics GmbH settlement* - 126
Total income/(expense) 150 (1,028)
* Relates to the German business which was discontinued in the year
ended 31 March 2019.
5 Earnings per share
Basic earnings per share are calculated by dividing the loss for the year
attributable to ordinary equity holders of the Group by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the loss attributable to
ordinary equity holders of the Group by the weighted average number of
ordinary shares outstanding during the year plus the weighted average number
of ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares. Diluting events are excluded
from the calculation when the average market price of ordinary shares is lower
than the exercise price.
2023 2022
£'000 £'000
Loss attributable to equity holders of the Group
Continuing operations (3,172) (1,409)
Discontinued operations (688) (9,924)
Loss attributable to equity holders of the Group for basic earnings (3,860) (11,333)
2023 2022
Number Number
Basic average number of shares 231,263,884 182,638,427
Share options 575,000 4,359,653
Diluted weighted average number of shares 231,838,884 186,998,080
Basic and diluted EPS on loss for the year (1.7)p (6.2)p
Basic and diluted EPS on loss for the year from continuing operations (1.4)p (0.9)p
Adjusted earnings per share on profit for the year
The Group presents adjusted earnings per share, which are calculated by taking
adjusted loss before taxation and adding the tax credit or deducting the tax
charge in order to allow shareholders to understand better the elements of
financial performance in the year, so as to facilitate comparison with prior
periods and to better assess trends in financial performance.
2023 2022
£'000 £'000
Loss attributable to equity holders of the Group (3,860) (11,333)
Exceptional items* 550 3,280
Amortisation of intangible assets 109 105
Share-based payment charges 78 282
Adjusted loss attributable to equity holders of the Group (3,123) (7,666)
* Being the sum of continuing exceptional items, discontinuing
exceptional items and impairment loss recognised on the remeasurement to fair
value less costs to sell.
Adjusted loss for the year - continuing operations
The reported numbers are non-GAAP measures.
2023 2022
£'000 £'000
Loss for the year from continuing operations (3,172) (1,409)
Exceptional items 524 337
Amortisation of intangible assets 109 99
Share-based payment charges 78 216
Adjusted loss for the year from continuing operations (2,461) (757)
Adjusted EPS on loss for the year (1.4)p (4.2)p
Adjusted EPS on loss for the year from continuing operations (1.1)p (0.4)p
Adjusted loss before taxation, which is a key measure of the Group's trading
performance used by the Directors, is derived by taking statutory profit
before taxation and adding back exceptional items, amortisation of intangible
assets (excluding development costs) and share-based payment charges.
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