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RNS Number : 0400N Cambridge Nutritional Sciences PLC 21 November 2024
CAMBRIDGE NUTRITIONAL SCIENCES PLC
("CNS" or the "Company" or the "Group")
Interim Report
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2024
Improved gross margin and an increase in adjusted EBITDA. Company continues to
build on foundations and improve profitability
CNS (AIM: CNSL), the specialist medical diagnostics company focused on
promoting a personalised and functional approach to health and nutrition,
announces its unaudited interim results for the six months ended 30 September
2024 and remains on track to meet EBITDA expectations for the year.
H1 Financial Highlights:
· Adjusted EBITDA(1) increased to £0.2m (H1 2024: £0.0m)
· Revenue of £4.1m (H1 2024: £4.9m)
· Gross margin increased to 65.4% (H1 2024: 62.7%), largely due to
production efficiencies & product mix
· Loss before tax reduced to £0.2m (H1 2024: £0.7m)
· Cash and cash equivalents ahead of prior year at £4.5m (H1 2024:
£4.4m)
Operational Highlights:
· Strong performance in operations with FoodPrint® yields
continuing to improve
· CNSLab productivity has remained high with August and September
both hitting a record high number of tests
· Automation and restructuring in operations have helped drive
sustainable margin improvement
· Appointment of two full-time salespersons in the USA and Southern
Europe to further develop the markets
Current trading and Outlook:
· Company remains on track to meet adjusted EBITDA(1) expectation
· Sales team have been expanded with new Global Sales Director and
UK BDM to help drive long-term growth
· Well-funded to deliver on our strategic objectives to grow the
Company
· Developing new partnerships with USA Laboratories that are
expected to commercialise FoodPrint® in H2
· The Board remains confident that the Company has a compelling
case regarding the dispute with DHSC but there have been no material
developments
(1)Adjusted for exceptional items, amortisation of intangible assets and share
based payment charges.
Commenting on the results, James Cooper, Interim Chief Executive officer,
said:
"The results of H1 have shown that the operational improvements are now
hitting the bottom line, with an improved margin and an uplift in adjusted
EBITDA. This is particularly encouraging as we did not have the benefit of a
sizeable order backlog that boosted last year's H1 revenue. This puts us in a
strong position as we continue to invest in growing the sales team whilst
being confident in our ability to deliver on time and in full to all our
customers."
Investor presentation
Carolyn Rand, Chair, and James Cooper, Interim CEO, will provide a live
presentation relating to the Interim Results via the Investor Meet Company
platform today at 4:00pm GMT. The presentation is open to all existing and
potential shareholders.
Investors can sign up to Investor Meet Company for free and add to
meet Cambridge Nutritional Sciences plc via:
https://www.investormeetcompany.com/omega-diagnostics-group-plc/register-investor
(https://www.investormeetcompany.com/omega-diagnostics-group-plc/register-investor)
The investor presentation will later be made available on the Company website:
https://www.cnsplc.com/financials/presentations
(https://www.cnsplc.com/financials/presentations)
The information communicated in this announcement is inside information for
the purposes of Article 7 of EU Regulation 596/2014
Contacts:
Cambridge Nutritional Sciences plc www.cnsplc.com (http://www.cnsplc.com)
Carolyn Rand, Non-Executive Chair investors@cnsplc.com
James Cooper, Interim Chief Executive
Officer
Cavendish Capital Markets Limited Tel: 020 7220 0500
Geoff Nash / Edward Whiley (Corporate Finance)
Nigel Birks / Harriet Ward (ECM)
About Cambridge Nutritional Sciences plc
Cambridge Nutritional Sciences plc (AIM: CNSL) is a specialist medical
diagnostics company focused on industry-leading Health and Nutrition products.
Chair's Statement
Overview
I am pleased to see the operational efforts have continued to deliver results,
with a gross margin improvement to 65% due to productivity gains, despite
higher raw material costs. The continued operational improvements and
workforce rationalization also helped us reduce our overheads by 17%, allowing
adjusted EBITDA to improve to £0.2m, while maintaining stable cash balances
at £4.5m. Q1 sales were softer than expected as some customers are working on
one off reductions in their stock holdings to manage external forces, and in
addition now that they trust the product and our improved delivery service,
revenue has normalized following an abnormal backlog of orders in the previous
year, which decreased to £4.1m but is well ahead of H1 2023's £3.4m.
Following on from the success of improving operations and production capacity
our operational focus is now shifting towards sales and marketing; this
includes development and expansion for the UK and overseas markets to develop
the pipeline and expand our customer base. Although the sales cycles are long,
the focus has already greatly improved our qualified pipeline, and this gives
us confidence in our future delivery.
A strategic marketing priority includes expanding market outreach and is
evidenced by a full rollout of the MyHealthTracker App in the UK and a focus
on new markets and customers now helped by our recent sales hires. We have
also started enhancing business support systems and improving production
efficiency. A new eQMS (Quality Management System) and wireless temperature
monitoring system are also expected to drive productivity gains.
Financial Performance
Revenue decreased 16% to £4.1m (H1 2024: £4.9m), as some customers reduced
their stock holdings, however the Board expect revenues to be stronger in the
second half of the year.
Revenue by product group:
§ Sales of FoodPrint® £2.6m (H1 2024: £3.3m)
§ Sales of Food Detective® £0.7m revenue in line with the prior year
§ CNS Lab revenue in line with prior year at £0.8m
Gross profit from operations was £2.7m (H1 2024: £3.1m) whilst gross margin
improved by 4% to 65.4% (H1 2024: 62.7%). The increase in margin is due to a
reduction in production costs which has been driven by yield and productivity
increases. This is despite increases in raw material costs which were more
than offset by these improvements.
Overheads decreased by 17% to £2.9m (H1 2024: £3.5m), mainly due to our
operational project improvements and business process realignments.
The Group continues to consider EBITDA and adjusted EBITDA (adjusted for
exceptional items and share-based payments) as being the appropriate measures
of profitability being aligned with the cash generating activities of the
business. The adjusted EBITDA was £0.2m (H1 2024: £0.0m). The £0.1m
adjustment for exceptional items relates to the continued legal costs in
relation to the DHSC contract and Board changes.
The cash balance (including short term deposits) on 30 September 2024 was
£4.5m (H1 2024: £4.4m, 31 March 2024: £5.4m).
Operational Update
Following a successful yield improvement project in FY24, the business has
widened its focus on operational improvements to other areas, enabled by the
continuous improvement function. This has helped deliver new yield
improvements as well as productivity gains that have helped drive the change
in the gross margin. The team continue to look for further ways to improve the
operational efficiency in a cost-effective manner and we view this as an
important element of the business strategy going forward.
The business support systems have also been reviewed, and the team are in the
final stages of transitioning to a new eQMS. This will improve the
productivity of both the production and quality assurance teams whilst opening
up further productivity gains in the future, due to the increased
functionality that the new system contains. The team are now benefiting from
the new wireless Temperature Monitoring System which has eliminated the need
for hourly manual data collection and demonstrates how we can successfully use
technology to deliver valuable gains.
Strategic Priorities
The Company is now focussed on growing sales in both existing and new markets.
To enable this, we are expanding the sales team both in the UK and overseas.
The team are investigating multiple routes to market within their territories
and are receiving a positive response from those that we are engaging with.
The interest in our field is only growing and we frequently find people
unaware of the product and clinical utility that it can offer. This highlights
the need to continuously educate and increase our outreach to new potential
customers. In recognition of this we are expanding the marketing team which
will allow for a greater focus on both the education and direct marketing
capability of the company.
The MyHealthTracker App is fully rolled out in the UK and the team are now
analysing feedback from users and working with our partner to determine the
next generation of improvements and functionality. This includes the ability
to release the app in foreign languages for overseas markets.
The USA continues to be a focus market for the sales team and the recent
addition of a full-time sales member based in the US is expected to help
accelerate our progress in this market. They will be responsible for working
with our existing partners to help grow their business and in identifying new
opportunities in this exciting market.
DHSC dispute update
There is no further progress to report in our dispute with the Department of
Health and Social Care ('DHSC'). The Board continues to vigorously pursue its
substantial counterclaim for losses incurred towards the DHSC, as a direct
result of its 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. The Board remains confident that the
Company has a compelling case.
Current trading and Outlook
Whilst revenues in H1 were lower than expected, we remain confident in meeting
EBITDA expectations for the year. We expect that the de-stocking we
experienced in H1 will be alleviated in H2 as customers return to a more
regular order pattern. In addition, the impact of the expanded sales team
should be felt in the later stages of H2 and deliver a strong end to the
financial year. The business has been able to react accordingly and maintains
a strong margin which demonstrates the underlying strength of the business.
The Board's expectations are that the market conditions remain good - we are
well capitalised and in a strong position to grow as a standalone business.
Carolyn Rand
Non-Executive Chair
Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2024
6 months ended. 6 months ended. 12 months ended.
30 September 2024 30 September 2023 31 March 2024
Note £'000 £'000 £'000
Revenue 2 4,134 4,934 9,774
Cost of sales (1,432) (1,841) (3,728)
Gross profit 2,702 3,093 6,046
Administration costs (2,263) (2,746) (5,287)
Selling and marketing costs (617) (790) (1,378)
Other income 26 51 84
Operating loss before exceptional items (152) (392) (535)
Exceptional items (117) (294) (238)
Operating loss after exceptional items (269) (686) (773)
Finance income/(costs) 3 73 (12) 28
Loss before taxation (196) (698) (745)
Tax credit 4 - - 417
Loss for the period (196) (698) (328)
Other comprehensive losses to be reclassified to profit and loss in subsequent
periods
Exchange differences on translation of foreign operations (17) (3) (14)
Other comprehensive income for the period (17) (3) (14)
Total comprehensive losses for the period (213) (701)
(342)
Earnings per share (EPS)
Basic and diluted EPS on loss for the period 5 (0.1)p (0.3)p (0.1)p
Consolidated Balance Sheet
as at 30 September 2024
30 September 2024 30 September 2023 31 March 2024
Note £'000 £'000 £'000
ASSETS
Non-current assets
Intangibles 6 4,039 4,313 4,099
Property, plant, and equipment 7 485 515 388
Right of use assets 7 76 177 126
Deferred taxation 1,400 994 1,406
Total non-current assets 6,000 5,999 6,019
Current assets
Inventories 776 1,073 607
Trade and other receivables 2,208 2,290 1,824
Short-term deposits - - 2,501
Cash and cash equivalents 4,520 4,396 2,943
Total current assets 7,504 7,759 7,875
Total assets 13,504 13,758 13,894
EQUITY AND LIABILITIES
Equity
Share capital 10,255 10,244 10,255
Share premium 25,072 25,072 25,072
Retained deficit (25,710) (25,974) (25,585)
Translation reserve (77) (49) (60)
Total equity 9,540 9,293 9,682
Liabilities
Non-current liabilities
Long-term borrowings - 3 -
Lease liabilities - 77 25
Deferred income 2,500 2,500 2,500
Total non-current liabilities 2,500 2,580 2,525
Current liabilities
Short-term borrowings 3 33 22
Lease liabilities 76 101 101
Trade and other payables 1,203 1,452 1,323
Total current liabilities 1,282 1,586 1,446
Liabilities directly associated with assets held for sale 182 299 241
Total liabilities 3,964 4,465 4,212
Total equity and liabilities 13,504 13,758 13,894
Consolidated Statement of Changes in Equity
for the six months ended 30 September 2024
Share Share Retained Translation
capital premium deficit reserve Total
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2023 10,244 25,072 (25,319) (46) 9,951
Loss for the period to 30 September 2023 - - (698) - (698)
Other comprehensive losses - net exchange adjustments - - - (3) (3)
Total comprehensive losses for the period - - (698) (3) (701)
Share-based payments - - 43 - 43
Balance at 30 September 2023 10,244 25,072 (25,974) (49) 9,293
Profit for the period to 31 March 2024 - - 370 - 370
Other comprehensive losses - net exchange adjustments - - - (11) (11)
Total comprehensive income/(losses) for the period - - 370 (11) 359
Issue of share capital 11 - - - 11
Share-based payments - - 19 - 19
Balance at 31 March 2024 10,255 25,072 (25,585) (60) 9,682
Loss for the period to 30 September 2024 - - (196) - (196)
Other comprehensive income - net exchange adjustments - - - (17) (17)
Total comprehensive (losses)/income for the period - - (196) (17) (213)
Share-based payments - - 71 - 71
Balance at 30 September 2024 10,255 25,072 (25,710) (77) 9,540
Consolidated Cash Flow Statement
for the six months ended 30 September 2024
6 months ended 6 months ended 12 months ended
30 September 2024 30 September 2023 31 March 2024
£'000 £'000 £'000
Cash flows generated from operations
Loss for the period (196) (698) (328)
Adjustments for:
Depreciation 90 108 214
Amortisation of intangible assets 218 219 436
Impairment of property, plant and equipment - - 110
Share-based payments 71 43 73
Taxation - - (417)
Finance costs (73) 12 (28)
Cash inflow/(outflow) from operating activities before working capital 110 (316) 60
movement
(Increase)/decrease in trade and other receivables (384) 113 579
(Increase)/decrease in inventories (169) (296) 170
Decrease in trade and other payables (120) (73) (202)
Cash (outflow)/inflow from operating activities (563) (572) 607
Investing activities
Finance income 82 - 50
Transfer from/(to) short-term deposits 2,501 - (2,501)
Purchase of property, plant, and equipment (137) (10) (48)
Purchase of intangible assets (157) (7) (11)
Net cash inflow/(outflow) in investing activities 2,289 (17) 2,510
Financing activities
Finance costs - (1) (1)
Principal portion of asset finance payments (78) (71) (143)
Interest portion of asset finance payments (4) (7) (13)
Principal portion of lease liability payments (50) (47) (99)
Interest portion of lease liability payments (5) (4) (9)
Net cash outflow from financing activities (137) (130) (265)
Net increase/(decrease) in cash and cash equivalents 1,589 (719) (2,168)
Effects of exchange rate movements (12) - (4)
Cash and cash equivalents at beginning of period 2,943 5,115 5,115
Cash and cash equivalents at end of the period 4,520 4,396 2,943
Notes to the Interim Report
for the six months ended 30 September 2024
1. BASIS OF PREPARATION
For the purpose of preparing the 31 March 2024 annual financial statements the
Directors used IFRS as adopted by the EU and in accordance with the AIM Rules
issued by the London Stock Exchange. In preparing these interim financial
statements, the accounting policies used in the Group's Annual Report for the
year ended 31 March 2024 have been applied consistently. The Group has not
applied IAS 34 Interim Financial Reporting, which is not mandatory for AIM
companies, in the preparation of these interim financial statements.
The interim financial statements are unaudited. The information shown in the
consolidated balance sheet as at 30 September 2024 does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006 and the
information in respect of the year ended 31 March 2024 has been extracted from
the Group's 2024 Annual Report which has been filed with the Registrar of
Companies. The report of the auditors on the financial statements contained
within the Group's 2024 Annual Report was unqualified and did not contain a
statement under sections 498 (2) and 498 (3) of Chapter 3, Part 16 of the
Companies Act 2006. These interim financial statements were approved by the
Board of Directors on 20 November 2024.
2. SEGMENT INFORMATION
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.
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.
2. SEGMENT INFORMATION (CONTINUED)
Business segment information
Health and
Nutrition Corporate Total
6 months to 30 September 2024 £'000 £'000 £'000
Revenue 4,265 - 4,265
Inter-segment revenue (131) - (131)
Total revenue 4,134 - 4,134
Cost of sales (1,432) - (1,432)
Gross profit 2,702 - 2,702
Operating costs (2,153) (701) (2,854)
Operating profit/(loss) before exceptional items 549 (701) (152)
Exceptional items (49) (68) (117)
Operating profit/(loss) after exceptional items 500 (769) (269)
Depreciation 90 - 90
Amortisation 218 - 218
EBITDA 808 (769) 39
Exceptional items 49 68 117
Share-based payment charges - 71 71
Adjusted EBITDA 857 (630) 227
Share-based payment charges - (71) (71)
Depreciation (90) - (90)
Amortisation (218) - (218)
Net finance income 73 - 73
Exceptional costs (49) (68) (117)
Profit/(loss) before tax 573 (769) (196)
Exceptional items 49 68 117
Share-based payment charges - 71 71
Amortisation 60 - 60
Adjusted profit/(loss) before tax 682 (630) 52
2. SEGMENT INFORMATION (CONTINUED)
Health and
Nutrition Corporate Total
6 months to 30 September 2023 £'000 £'000 £'000
Revenue 5,062 - 5,062
Inter-segment revenue (128) - (128)
Total revenue 4,934 - 4,934
Cost of sales (1,841) - (1,841)
Gross profit 3,093 - 3,093
Operating costs (2,739) (746) (3,485)
Operating profit/(loss) before exceptional items 354 (746) (392)
Exceptional items (151) (143) (294)
Operating profit/(loss) after exceptional items 203 (889) (686)
Depreciation 108 - 108
Amortisation 219 - 219
EBITDA 530 (889) (359)
Exceptional items 151 143 294
Share-based payment charges - 17 17
Adjusted EBITDA 681 (729) (48)
Share-based payment charges - (17) (17)
Depreciation (108) - (108)
Amortisation (219) - (219)
Net finance costs (12) - (12)
Exceptional costs (151) (143) (294)
Profit/(loss) before tax 191 (889) (698)
Exceptional items 151 143 294
Share-based payment charges - 17 17
Amortisation 61 - 61
Adjusted profit/(loss) before tax 403 (729) (326)
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
2. SEGMENT INFORMATION (CONTINUED)
6 months to 6 months to
30 September 2024 30 September 2023
£'000 £'000
Revenues
UK 840 830
Rest of Europe 952 1,167
North America 628 1,031
South/Central America 178 243
India 302 282
Asia 826 874
Africa and the Middle East 408 507
4,134 4,934
6 months to 6 months to inc/(dec)
30 September 2024 30 September 2023
£'000 £'000 %
FoodPrint® 2,564 3,284 47%
Food Detective® 717 732 4%
CNS laboratory service 842 829 97%
Food ELISA/other 11 89 28%
4,134 4,934 44%
3. FINANCE INCOME/(COSTS)
6 months to 6 months to
30 September 2024 30 September 2023
Continuing operations £'000 £'000
Interest receivable 82 -
Interest payable on bank overdraft - (1)
Interest payable on lease liabilities (5) (4)
Interest on hire purchase and asset finance arrangements (4) (7)
73 (12)
4. TAXATION
6 months to 6 months to
30 September 2024 30 September 2023
Continuing operations £'000 £'000
Tax credited in the income statement
Current tax - current year - -
Current tax - prior year adjustment - -
Deferred tax - current year - -
Deferred tax - prior year adjustment - -
- -
4. TAXATION (continued)
Reconciliation of total tax credit
Factors affecting the tax credit for the period: £'000 £'000
Loss taxable (196) (672)
Effective rate of taxation 25% 19%
Loss before tax multiplied by the effective rate of tax (49) (128)
Effects of:
Deferred tax asset not recognised 49 128
Tax credit for the period - -
5. EARNINGS PER SHARE
6 months to 6 months to
30 September 2024 30 September 2023
£'000 £'000
Loss attributable to equity holders of the Group (196) (698)
2024 2023
Number Number
Weighted average number of shares 237,950,660 237,685,180
Share options - -
Diluted weighted average number of shares 237,950,660 237,685,180
The number of shares in issue at the period end was 237,950,660. Basic
earnings per share are calculated by dividing profit 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.
Adjusted earnings per share on loss for the period
The Group presents adjusted earnings per share which is calculated by taking
adjusted loss before taxation and adding the tax credit 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 assess better
trends in financial performance.
6 months to 6 months to
30 September 2024 30 September 2023
£'000 £'000
Loss attributable to equity holders of the Group (196) (698)
Exceptional items 117 294
Amortisation of intangible assets 60 61
Share-based payment charges 71 17
Adjusted loss attributable to equity holders of the Group 52 (326)
Adjusted EPS on loss for the period 0.0p (0.8)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 loss before
taxation and adding back exceptional items, amortisation of intangible assets
(excluding development costs) and share-based payment charges.
6. INTANGIBLES
Licences/ Technology Customer Development
Goodwill software assets relationships costs Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 31 March 2023 3,017 1,726 1,975 100 9,259 15,907
Additions - 7 - - - 7
At 30 September 2023 3,017 1,733 1,975 100 9,259 16,084
Additions - 4 - - - 4
Currency translation - (1) - - - (1)
At 31 March 2024 3,017 1,736 1,975 100 9,259 16,087
Additions - 158 - - - 158
At 30 September 2024 3,017 1,894 1,975 100 9,259 16,245
Accumulated amortisation
At 31 March 2023 - 1,647 1,539 100 8,266 11,552
Amortisation charge in the period - 12 49 - 158 219
At 30 September 2023 - 1,659 1,588 100 8,424 11,771
Amortisation charge in the period - 10 50 - 157 217
At 31 March 2024 - 1,669 1,638 100 8,581 11,988
Amortisation charge in the period - 10 50 - 158 218
At 30 September 2024 - 1,679 1,688 100 8,739 12,206
Net book value
At 30 September 2024 3,017 215 287 - 520 4,039
At 31 March 2024 3,017 67 337 - 678 4,099
At 30 September 2023 3,017 74 387 - 835 4,313
7. FIXED ASSETS
Right of use Leasehold Plant and
assets improvements machinery Total
Consolidated £'000 £'000 £'000 £'000
Cost
At 31 March 2023 412 696 2,445 3,553
Additions 202 - 10 212
Disposals (412) - - (412)
At 30 September 2023 202 696 2,455 3,353
Additions - 4 34 38
Disposals - (299) (1,069) (1,368)
At 31 March 2024 202 401 1,420 2,023
Additions - - 137 137
At 30 September 2024 202 401 1,557 2,160
Accumulated depreciation
At 31 March 2023 391 694 1,880 2,965
Charge in the period 46 - 62 108
Disposals (412) - - (412)
At 30 September 2023 25 694 1,942 2,661
Charge in the period 51 2 53 106
Impairment - - 110 110
Disposals - (299) (1,069) (1,368)
At 31 March 2024 76 397 1,036 1,509
Charge in the period 50 1 39 90
At 30 September 2024 126 398 1,075 1,599
Net book value
At 30 September 2024 76 3 482 561
At 31 March 2024 126 4 384 514
At 30 September 2023 177 2 513 692
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