REG - Novacyt S.A. - 2023 Interim Results
28/09/2023 07:00
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RNS Number : 9027N Novacyt S.A. 28 September 2023
Novacyt S.A.
("Novacyt", the "Company" or the "Group")
2023 Interim Results
Company positioned for long-term sustainable growth following the acquisition
of Yourgene Health
Paris, France and Eastleigh, UK - 28 September 2023 - Novacyt (EURONEXT
GROWTH: ALNOV; AIM: NCYT), an international specialist in clinical
diagnostics, announces its unaudited interim results for the six months ended
30 June 2023.
Operational highlights (including post-period end)
· Completed the strategic acquisition of Yourgene Health plc
("Yourgene"), significantly enhancing Novacyt's global diagnostics business,
adding scale and diversification to accelerate long-term growth.
· Successfully developed nine multiplex RUO (research use only) assays
in key infectious disease areas.
· IVD certification process: initiated verification and validation
activities for two of the Company's developed multiplex products, with the aim
of certifying them as in vitro diagnostics (IVD) under the UKCA mark, expected
to complete during Q4 2023.
· Instrument sales recovery: Following the market saturation during the
COVID-19 pandemic, the Group's instrument sales are returning to normal levels
with Q2 2023 sales up by 66% vs Q1 2023.
· Recently launched Co-prep™ extraction system for research use and
CE marked both q16 and q32 instruments.
· On track to complete IVDR clinical trial for winter respiratory
panel, genesig™ Real-time PCR SARS-CoV-2 Winterplex, in early 2024.
· Exclusive development agreement with Eluceda Ltd to develop novel
biosensor technology in the fields of human and animal in vitro diagnostics,
life science research and animal speciation.
Financial highlights
· Group revenue for H1 2023 of £3.3m of which £0.5m relates to
COVID-19 (H1 2022: £16.5m of which £13.0m was related to COVID-19).
o Revenue for the non-COVID-19 portfolio totalled £2.8m representing 85% of
total revenue (H1 2022: £3.5m). As previously signalled, H1 2022 is a high
comparator particularly in instrumentation, where sales were linked to
COVID-19.
o Non-COVID-19 revenue continues to build with Q2 2023 showing 3% growth
over Q1 2023 and 10% growth vs Q4 2022.
· Group gross margin increased to 50% (£1.7m) in H1 2023 (H1 2022: 24%
(£4.0m)), due to lower stock write offs, but is still impacted by further
stock provisions as a result of lower than anticipated COVID-19 sales.
· Group operating costs fell by £4.1m to £7.0m in H1 2023 compared
with £11.1m in H1 2022.
· Group EBITDA loss before exceptionals reduced to £5.4m in H1 2023
(H1 2022: £7.1m loss).
· Loss after tax reduced to £8.3m in H1 2023 (H1 2022: £8.7m).
· Cash position at 30 June 2023 was £81.7m (FY 2022: £87.0m) and the
Company remains debt free.
· Acquired the entire share capital of Yourgene on 8 September 2023 for
£16.7m, settled in cash.
James McCarthy, Acting Group CEO of Novacyt, commented: "The Company remains
focused on building on the strength of its core business to deliver long-term
sustainable growth and create a leading global clinical diagnostics company.
The acquisition of Yourgene was an important strategic milestone adding scale
and diversifying our product portfolio, to create a stronger global
diagnostics business and will be a key driver to accelerate sustainable growth
of the business going forwards."
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) 596/2014.
Contacts
Novacyt SA +44 (0)23 8074 8830
James Wakefield, Non-Executive Chairman
James McCarthy, Acting Chief Executive Officer
SP Angel Corporate Finance LLP (Nominated Adviser and Broker) +44 (0)20 3470 0470
Matthew Johnson / Charlie Bouverat (Corporate Finance)
Vadim Alexandre / Rob Rees (Corporate Broking)
Numis (Joint Broker) +44 (0)20 7260 1000
Freddie Barnfield / Duncan Monteith / Jack McLaren
Allegra Finance (French Listing Sponsor) +33 (1) 42 22 10 10
r.durgetto@allegrafinance.com (mailto:r.durgetto@allegrafinance.com) /
Rémi Durgetto / Yannick Petit y.petit@allegrafinance.com (mailto:y.petit@allegrafinance.com)
Walbrook PR (Financial PR & IR) +44 (0)20 7933 8780
Stephanie Cuthbert / Anna Dunphy / Phillip Marriage novacyt@walbrookpr.com (mailto:novacyt@walbrookpr.com)
About Novacyt Group
Novacyt is an international diagnostics business delivering a broad portfolio
of in vitro and molecular diagnostic tests for a wide range of infectious
diseases, enabling faster, more accurate, accessible testing to improve
healthcare outcomes. The Company provides customers with a seamless
sample-to-result workflow using its integrated and scalable
instrumentation/solutions. The Company specialises in the design, manufacture,
and supply of real-time PCR kits, reagents and a full range of laboratory and
qPCR instrumentation for molecular biology research and clinical use. Novacyt
offers one of the world's most varied and comprehensive range of qPCR assays,
covering human, veterinary, biodefence, environmental, agriculture and food
testing.
The acquisition of Yourgene in September 2023 added a complementary
international genomics technology and services business, focussed on
delivering accurate molecular diagnostic and screening solutions, across
reproductive health and precision medicine. Yourgene's portfolio of in vitro
diagnostic products includes non-invasive prenatal tests (NIPT) for Down's
Syndrome and other genetic disorders, Cystic Fibrosis screening tests,
invasive rapid aneuploidy tests and DPYD genotyping assays. Yourgene also
works in partnership with global leaders in DNA technology to allow its
Ranger® Technology to deliver dynamic target enrichment.
Novacyt is headquartered in Vélizy in France with offices in the UK in
Stokesley, Eastleigh and Manchester. The Company also has offices in Taipei
(divestment pending), Singapore, the US and Canada and is listed on the London
Stock Exchange's AIM market ("NCYT") and on the Paris Stock Exchange Euronext
Growth ("ALNOV").
For more information, please refer to the website: www.novacyt.com
(http://www.novacyt.com)
Chief Executive's review
During the first six months of 2023 we have continued to make good progress
expanding our instrumentation and RUO product portfolio and enhancing our
workflow to diversify the business away from COVID-19. The recent acquisition
of Yourgene was a significant strategic milestone that has significantly
enhanced our global diagnostics business. This acquisition not only adds scale
but also diversifies our portfolio, reinforcing our position for long-term
growth.
Portfolio development
The increase in the incidence of infectious diseases is driving a growing
global demand for multiplex diagnostic products that can rapidly and
simultaneously detect multiple pathogens in a single test. During the period,
the Company successfully developed nine new multiplex RUO assays in key
infectious disease areas of respiratory virus, atypical pneumonia, viral and
bacterial meningitis, eye infection, joint infection, gastrointestinal viruses
and insect-borne viruses.
This expanded portfolio strengthens our diagnostic capabilities, particularly
in the gastrointestinal, respiratory, and meningitis markets, as well as other
high-growth disease areas. These assays have been specifically designed to
seamlessly integrate with our existing instrumentation, including the recently
launched Co-prep™ extraction system and our q16 and q32 instruments. The
Company expects these products to begin seeing commercial traction in Q4
2023.
As previously announced, the Company is prioritising UK Conformity Assessed
(UKCA) marking for its clinical tests, which is replacing the CE mark for all
in vitro diagnostic (IVD) products sold in the UK. Under UKCA, IVD
manufacturers can continue to self-certify their products, which typically
takes six to nine months compared to the 18-24 months to achieve a CE mark
under the new European In Vitro Diagnostic Regulation (IVDR). We have
initiated verification and validation activities for two of our developed
multiplex products, with the aim of certifying them as in vitro diagnostics
(IVD) under the UKCA mark:
a. genesig™PLEX Respiratory Virus Real-Time PCR Multiplex Kit II, which
complements our existing respiratory portfolio, such as the SARS-CoV-2
Winterplex, and meets the growing demand for decentralised diagnostic
solutions within the UK's expanding network of Acute Respiratory Infection
Hubs and Community Diagnostic Centres. The validation process for this product
is expected to conclude in Q4 2023.
b. genesig™PLEX Insect-Borne Real-Time PCR Multiplex Kit: We have
experienced strong customer demand for our existing RUO product, which targets
Dengue, Chikungunya, and Zika viruses. The rise in climate change has led to
an increase in the incidence of insect-borne infections and as a result there
is a growing market demand for an expanded version of this product, which can
detect multiple diseases. Our new multiplex product has additional target
detection profiles, including West Nile, Tick-Borne Encephalitis, and Yellow
Fever viruses. Validation for this product is also expected to be completed in
Q4 2023.
We expect both tests to be available for clinical use in the UK during the
first half of 2024.
Novacyt is also progressing the clinical trial for its winter respiratory
panel, genesig™ Real-time PCR SARS-CoV-2 Winterplex, towards IVDR submission
in early 2024.
Commercial progress
During H1 the Company has been focused on reestablishing its RUO and
instrumentation businesses to drive growth in the non-COVID portfolio.
Although overall growth has been modest, we have started to gain traction in
building customer solutions in specific areas, which we believe will drive
future growth. Successes in this area include our continuing development of
aqua testing to enable more efficient management of fish stocks for both North
America and more recently the UK, livestock testing in Latin America and
progress with Dengue tenders for emerging markets.
We are currently live with a Winterplex promotional campaign with some
promising early opportunities for product validation UK clinical settings.
Instrumentation & workflow
We have seen good growth in instrument sales, with Q2 2023 increasing 66% vs
Q1 2023 as the market returns to normal following the saturation that was seen
during the COVID-19 pandemic.
During the period we launched our new Co-prep™ extraction system for RUO,
which is already gaining traction with a number of customers. This is now
available alongside our Co-prep™ automated liquid handling system as part of
our integrated sample-to-result molecular workflow solution, which provides an
end-to-end, fast scalable solution capable of processing over 1,000 tests per
day.
Business Development
Acquisition of Yourgene
On 8 September 2023, we completed the acquisition of Yourgene, creating a
stronger global diagnostics company with an expanded geographic commercial
footprint, a broader product portfolio and deeper expertise. Yourgene brings a
complementary international genomics technology and services business,
focussed on delivering accurate molecular diagnostic and screening solutions,
across reproductive health and precision medicine. Its portfolio of in vitro
diagnostic products includes non-invasive prenatal tests (NIPT) for Down's
Syndrome and other genetic disorders, Cystic Fibrosis screening tests,
invasive rapid aneuploidy tests and DPYD test to predict patients' toxicity
reactions to some chemotherapies. Yourgene's Ranger® Technology offers next
generation size selection with a range of sample preparation platforms for
dynamic target enrichment and can be utilised to improve workflows and
performance in multiple applications including NIPT, oncology, infectious
disease testing and gene synthesis.
As part of the acquisition, Yourgene's former Chair, Dr John Brown CBE, and
Lyn Rees, Yourgene's former CEO, will join the Novacyt Board, as non-executive
and executive director respectively, first as non-voting members, then as full
members, subject to shareholder ratification at the next AGM.
Partnerships
In January 2023, Novacyt entered into an exclusive development agreement with
Eluceda Ltd, a specialist developer of electrochemical sensors, to develop
novel biosensor technology in the fields of human and animal in vitro
diagnostics, life science research and animal speciation. Development of two
products has started and the first product is expected to launch early in
2024.
Current trading and outlook
Yourgene's financial year runs from 1 April to 31 March, which is different to
the calendar year approach followed by Novacyt. It is our intention to align
the accounting periods for the current fiscal year, which would result in a
nine-month trading period for Yourgene consolidated with a full 12 months of
Novacyt.
Unaudited revenue for Yourgene for the period 1 January to 30 June 2023
totalled £9.1m (including £0.5m of COVID-19 sales), which would give the
Group a proforma revenue for H1 of £12.4m (including £1.0m of COVID-19
sales).
Revenue guidance for Novacyt for the full year is in the range of £10m to
£13m (including £0.6m of COVID-19 sales), and covers 12 months trading for
Novacyt and approximately four months trading for Yourgene
post-acquisition. At this early stage we need to do further work on the
combined businesses to determine financial/EBITDA expectations for FY 2023.
The disposal of the Taiwan laboratory announced by Yourgene on 13 June 2023 is
still progressing subject to regulatory approval from the Taiwanese Government
and is now expected to complete by the end of the financial year.
The Company remains focused on building on the strength of its core business
to deliver long-term sustainable growth and create a leading global clinical
diagnostics company focused on unmet needs in infectious diseases. Over the
next six months the Company will be focussed on the integration of Yourgene
and will be evaluating the best ways to leverage our combined capabilities to
accelerate growth and drive efficiencies and synergies where appropriate. We
intend to provide an update to the market on the integration progress at the
next trading update in January 2024.
James McCarthy
Acting Chief Executive Officer
28 September 2023
FINANCIAL REVIEW
Overview
Novacyt's H1 2023 performance delivered sales of £3.3m, an EBITDA loss of
£5.4m and a loss after tax of £8.3m. Novacyt continued to execute on right
sizing its cost base by reducing its opex spend by over £1.0m compared with
H2 2022, and will continue to make cost savings where necessary.
Cash at 30 June 2023 was £81.7m, providing the Group with a solid foundation
on which to build and execute its future strategy. This allowed the Group to
acquire Yourgene on 8 September 2023 for £16.7m, settled in full in cash.
Income statement
Continuing operations * H1 2023 H1 2022
£'000 £'000
Revenue 3,339 16,508
Gross profit 1,665 4,010
Gross profit % 50% 24%
OPEX (7,040) (11,148)
EBITDA (5,375) (7,138)
EBITDA % n.m. n.m.
Recurring operating loss** (6,534) (8,179)
Operating loss (8,396) (8,712)
Other financial income and expenses 83 1,628
Income tax 174 2,041
Loss after tax from continuing operations (8,139) (5,043)
Loss from discontinued operations (209) (3,656)
Loss after tax attributable to the owners (8,348) (8,699)
* Following the 28 April 2022 announcement where Novacyt notified its
intention to close Microgen Bioproducts and Lab21 Healthcare, the net results
of the Lab21 Products segment have been reported on a separate line 'Loss from
discontinued operations' in accordance with IFRS 5, "Non-current Assets Held
for Sale and Discontinued Operations".
** H1 2023 recurring operating loss is stated before £1.9m of non-recurring
charges as follows:
1. £0.8m acquisition related expenses.
2. £0.6m costs in relation to the ongoing DHSC contract dispute.
3. £0.5m restructuring expenses.
Revenue
Revenue for H1 2023 fell to £3.3m compared with £16.5m in H1 2022,
predominantly driven by reduced demand for COVID-19 testing as we emerge from
the pandemic. Primer Design delivered sales totalling £2.8m, whilst IT-IS
International delivered sales of £0.5m for H1 2023.
Gross profit
The business delivered a gross profit of £1.7m (50%), compared with £4.0m
(24%) in H1 2022. The margin has improved significantly due to lower stock
write offs but is still impacted by further stock provisions as a result of
lower than anticipated COVID-19 sales.
Operating expenditure
Group operating costs fell by £4.1m to £7.0m in H1 2023 compared with
£11.1m in H1 2022. Savings are mainly due to lower staff costs, as headcount
for continuing operations fell from circa 210 in June 2022 to approximately
120 in June 2023 as a result of the Group-wide restructuring programme. In
addition, non-labour savings have been made in commercial insurance,
advertising and marketing, recruitment and facilities.
The business continued to invest heavily in research and development, spending
over £1.2m in H1 2023, around 17% of opex costs, to support bringing a number
of new products to the market.
EBITDA
The Group reported an EBITDA loss of £5.4m for H1 2023 compared with a loss
of £7.1m in H1 2022. The loss has decreased by £1.8m in the first half of
2023 driven by a reduced gross profit contribution of £2.3m as a result of
lower sales, offset by a £4.1m fall in operating expenditure.
Operating loss
The Group reduced its operating loss to £8.4m compared with a H1 2022 loss of
£8.7m. Year-on-year, depreciation and amortisation charges have increased by
£0.2m to £1.2m due to accelerating depreciation on a number of fixed assets.
Other operating expenses have increased from £0.5m to £1.9m in H1 2023. The
main items making up the H1 2023 charge are i) £0.8m acquisition related
expenses, ii) £0.6m costs in relation to the ongoing DHSC contract dispute
and iii) £0.5m restructuring expenses as we continue to lower our cost base.
Loss after tax from continuing operations
The Group reported a loss after tax from continuing operations of £8.1m,
compared with a loss of £5.0m in H1 2022. Other financial income and expenses
netted to a £0.1m income compared with a £1.6m income in H1 2022. The two
key items making up the balance are i) a £1.2m net financial foreign exchange
loss, mainly resulting from revaluations of bank and intercompany accounts
held in foreign currencies (H1 2022: £1.4m net gain) and ii) offset by £1.5m
interest received on deposits held in bank accounts (H1 2022: £0.1m),
reflecting rising interest rates. The £0.2m taxation credit is made up of the
movement in the current and deferred tax position.
Loss from discontinued operations
In accordance with IFRS 5, the net result of the Lab21 Products business has
been reported on a separate line "Loss from discontinued operations" in the
consolidated income statements for H1 2023 and H1 2022.
Lab21 Products reported a loss after tax of £0.2m in H1 2023 versus a loss of
£3.7m in H1 2022. The H1 2023 result relates to clearing balance sheet items
and interest on intercompany balances.
The H1 2022 loss includes closure costs totalling circa £1.8m made up of i) a
£1.0m impairment charge on right-of-use assets (Camberley facility lease),
ii) £0.6m impairment charge on remaining property, plant and equipment and
iii) £0.2m redundancy costs. These costs are not repeated in 2023 as the
operations of the business were closed during 2022.
Earnings per share
The H1 2023 loss per share was £0.12 (H1 2022: £0.12 loss).
Statement of financial position
Jun-23 Dec-22 Jun-23 Dec-22
£'000 £'000 £'000 £'000
Goodwill 6,482 6,646 Share capital and premium 54,601 54,633
Right-of-use assets 361 521 Retained earnings and reserves 52,709 60,583
Property, plant and equipment 2,242 2,751 Total equity 107,310 115,216
Deferred tax assets 527 624
Other non-current assets 2,679 3,121 Deferred tax liabilities 893 1,041
Total non-current assets 12,291 13,663 Lease liabilities long-term 219 263
Other provisions and long-term liabilities 175 145
Inventories 2,459 3,027 Total non-current liabilities 1,287 1,449
Trade and other receivables 33,272 33,662
Tax receivables 608 1,149 Lease liabilities short-term 170 609
Other current assets 1,784 2,427 Trade and other liabilities 2,959 2,787
Cash and cash equivalents 81,734 86,973 Other provisions and short-term liabilities 20,422 20,840
Total current assets 119,857 127,238 Total current liabilities 23,551 24,236
TOTAL ASSETS 132,148 140,901 TOTAL EQUITY AND LIABILITIES 132,148 140,901
Non-current assets
Property, plant and equipment has fallen by £0.6m from £2.8m at 31 December
2022 to £2.2m at 30 June 2023, driven by two main factors, i) £0.8m
depreciation costs, and ii) offset by capital purchases of £0.2m.
Other non-current assets have fallen by £0.4m to £2.7m at 30 June 2023,
driven by the amortisation of intangible assets.
Current assets
Inventories and work in progress has fallen from £3.0m at 31 December 2022 to
£2.5m at 30 June 2023, as stock built up during the COVID-19 pandemic is
wound down to reflect a more normalised expected run-rate.
Trade and other receivables has fallen by £0.4m to £33.3m at 30 June 2023 in
line with a decline in sales. The trade receivables balance includes a £24.0m
unpaid DHSC invoice raised in December 2020, in respect of products delivered
during 2020 that remains unpaid at the date of publishing the accounts.
Recovery of the invoice is dependent on the outcome of the contract dispute.
Also included in trade and other receivables is a £8.2m VAT receivable
balance (December 2022: £8.3m), that mainly relates to UK VAT paid on sales
invoices in dispute with the DHSC. As these sales have not been recognised in
accordance with IFRS 15, the revenue, trade receivable and VAT element of the
transactions have been reversed, resulting in a VAT debtor balance.
Tax receivables has fallen by £0.5m to £0.6m at 30 June 2023, predominantly
due to the Group receiving cash from HMRC covering the carry back of tax
losses and research and development tax claims. The current balance relates to
2021 losses that can be carried back for relief against 2020 taxable profits
totalling £0.1m and research and development tax claim accruals covering 2022
and 2023 totalling £0.5m.
Other current assets have fallen by £0.6m to £1.8m at 30 June 2023, due to a
£0.5m fall in prepayments, predominantly driven by unwinding the annual
commercial insurance charge, and a £0.1m reduction in short-term deposits
driven by the repayment of a rent deposit in connection with settling the
Watchmoor facility lease. Prepayments at 30 June 2023 include Group commercial
insurance, rent, rates, prepaid support costs and stock that had been paid for
but not delivered at the reporting date.
Current liabilities
Short-term provisions fell slightly from £20.3m to £20.0m at 30 June 2023,
as a result of unwinding the dilapidations provision associated with the now
closed Watchmoor facility. A £19.8m product warranty provision booked in 2020
to cover Management's view of the maximum cost of replacing products in
relation to the ongoing commercial dispute with the DHSC remains unchanged at
30 June 2023.
Trade and other liabilities increased from £2.8m to £3.0m at 30 June 2023,
largely due to the impact of accruing acquisition costs in late June.
Non-current liabilities
Non-current liabilities fell by £0.1m to £1.3m at 30 June 2023, mainly due
to a reduction in the deferred tax liability.
Cash flow
Cash held at 30 June 2023 totalled £81.7m compared with £87.0m at 31
December 2022. Net cash used in operating activities was £5.7m for H1 2023,
made up of a working capital outflow of £0.3m and an EBITDA loss of £5.4m,
compared with a cash outflow of £1.7m in H1 2022.
Net cash from investing activities has swung from a £0.2m outflow for H1 2022
to a £1.0m inflow in H1 2023, with the Group benefiting from continued
interest rate rises, generating £1.1m interest from its cash balances.
Capital expenditure remained broadly flat year-on-year with H1 2023 totalling
£0.2m compared with £0.3m in H1 2022.
Net cash used in financing activities in H1 2023 totalled £0.5m compared with
£0.3m in H1 2022, with the main cash outflow continuing to be lease payments.
The Group remains debt free at 30 June 2023.
Consolidated income statement as at 30 June 2023
Amounts in £'000 Notes (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Continuing Operations
Revenue 4 3,339 16,508
Cost of sales 6 -1,674 -12,498
Gross profit 1,665 4,010
Sales, marketing and distribution expenses -1,506 -2,887
Research and development expenses -1,239 -3,271
General and administrative expenses -5,579 -6,211
Governmental subsidies 125 180
Operating loss before exceptional items -6,534 -8,179
Other operating income 7 - 2
Other operating expenses 7 -1,862 -535
Operating loss after exceptional items -8,396 -8,712
Financial income 8 1,994 2,351
Financial expense 8 -1,911 -723
Loss before tax -8,313 -7,084
Tax income 9 174 2,041
Loss after tax from continuing operations -8,139 -5,043
Loss from discontinued operations 16 -209 -3,656
Loss after tax attributable to owners of the Company -8,348 -8,699
Loss per share (£) 10 -0.12 -0.12
Diluted loss per share (£) 10 -0.12 -0.12
Loss per share from continuing operations (£) 10 -0.12 -0.07
Diluted loss per share from continuing operations (£) 10 -0.12 -0.07
Loss per share from discontinued operations (£) 10 -0.00 -0.05
Diluted loss per share from discontinued operations (£) 10 -0.00 -0.05
Consolidated statement of comprehensive income as at 30 June 2023
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Loss for the period recognised in the income statement -8,348 -8,699
Items that may be reclassified subsequently to profit or loss:
Translation reserves 474 -434
Total comprehensive loss -7,874 -9,133
Comprehensive loss attributable to:
Owners of the Company (*) -7,874 -9,133
(*) There are no non-controlling interests.
Statement of financial position as at 30 June 2023
Amounts in £'000 Notes (Unaudited) (Audited)
Six month
Year ended
30 June
31 December
2023
2022
Goodwill 6,482 6,646
Other intangible assets 2,679 3,121
Property, plant and equipment 2,242 2,751
Right-of-use assets 361 521
Deferred tax assets 527 624
Total non-current assets 12,291 13,663
Inventories and work in progress 11 2,459 3,027
Trade and other receivables 12 33,272 33,662
Tax receivables 608 1,149
Prepayments and short-term deposits 1,775 2,418
Investments short-term 9 9
Cash and cash equivalents 81,734 86,973
Total current assets 119,857 127,238
Total assets 132,148 140,901
Lease liabilities short-term 170 609
Provisions short-term 13 20,015 20,300
Trade and other liabilities 14 2,959 2,787
Other current liabilities 407 540
Total current liabilities 23,551 24,236
Net current assets 96,306 103,002
Lease liabilities long-term 219 263
Provisions long-term 13 98 95
Deferred tax liabilities 893 1,041
Other long-term liabilities 77 50
Total non-current liabilities 1,287 1,449
Total liabilities 24,838 25,685
Net assets 107,310 115,216
Statement of financial position as at 30 June 2023 (continued)
Amounts in £'000 Notes (Unaudited) (Audited)
Six month
Year ended
30 June
31 December
2023
2022
Share capital 15 4,053 4,053
Share premium account 50,671 50,671
Own shares -123 -91
Other reserves -1,543 -2,017
Equity reserves 1,155 1,155
Retained earnings 53,097 61,445
Total equity - owners of the Company 107,310 115,216
Total equity 107,310 115,216
Statement of changes in equity as at 30 June 2023
Amounts in £'000 Other Group reserves
Share capital Share premium Own shares Equity reserves Acquisition of the shares of Primer Design Translation reserve OCI on retirement benefits Total Retained earnings Total equity
Balance at 1 January 2022 4,053 50,671 -78 1,155 -2,407 1,241 -8 -1,174 87,188 141,815
Translation differences - - - - - -843 - -843 - -843
Loss for the period - - - - - - - - -25,730 -25,730
Total comprehensive loss for the period - - - - - -843 - -843 -25,730 -26,573
Own shares acquired/sold in the period - - -13 - - - - - - -13
Other - - - - - - - - -13 -13
Balance at 31 December 2022 4,053 50,671 -91 1,155 -2,407 398 -8 -2,017 61,445 115,216
Translation differences - - - - - 474 - 474 - 474
Loss for the period - - - - - - - - -8,348 -8,348
Total comprehensive loss for the period - - - - - 474 - 474 -8,348 -7,874
Own shares acquired/sold in the period - - -32 - - - - - - -32
Balance at 30 June 2023 4,053 50,671 -123 1,155 -2,407 872 -8 -1,543 53,097 107,310
Statement of cash flows as at 30 June 2023
Amounts in £'000 Notes (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Net cash used in operating activities 17 -5,691 -1,662
Operating cash flows from discontinued operations -1,287 -1,589
Operating cash flows from continuing operations -4,404 -73
Investing activities
Proceeds from sale of property, plant and equipment 13 -
Purchases of patents and trademarks -35 -119
Purchases of property, plant and equipment -138 -182
Variation of deposits 120 -36
Acquisition of subsidiaries net of cash acquired -2 16
Interest received 1,052 122
Net cash from/(used in) investing activities 1,010 -199
Investing cash flows from discontinued operations 88 7
Investing cash flows from continuing operations 922 -206
Financing activities
Repayment of lease liabilities -483 -200
Purchase of own shares - net -32 -14
Interest paid -19 -67
Net cash used in financing activities -534 -281
Financing cash flows from discontinued operations -320 -84
Financing cash flows from continuing operations -214 -197
Net decrease in cash and cash equivalents -5,215 -2,142
Cash and cash equivalents at beginning of year 86,973 101,746
Effect of foreign exchange rate changes -24 37
Cash and cash equivalents at end of period 81,734 99,641
Notes to the interim financial statements for the six month period to 30 June
2023
1. General Information and basis of preparation
Novacyt is an international diagnostics business delivering a broad portfolio
of in vitro and molecular diagnostic tests for a wide range of infectious
diseases, enabling faster, more accurate, accessible testing to improve
healthcare outcomes. The Company provides customers with a seamless
sample-to-result workflow using its integrated and scalable
instrumentation/solutions. The Company specialises in the design, manufacture
and supply of real-time PCR kits, reagents and a full range of laboratory and
qPCR instrumentation for molecular biology research and clinical use. Novacyt
offers one of the world's most varied and comprehensive range of qPCR assays,
covering human, veterinary, biodefence, environmental, agriculture and food
testing. Its registered office is located at 13 Avenue Morane Saulnier, 78140
Vélizy Villacoublay.
The financial information contained in this report comprises the consolidated
financial statements of the Group and its subsidiaries (hereinafter referred
to collectively as the "Group"). They are prepared and presented in Great
British Pounds ("GBP"), rounded to the nearest thousand ("£'000s").
This condensed consolidated interim financial information does not constitute
full statutory accounts. It does not include all of the information required
for full annual financial statements and should be read in conjunction with
the consolidated financial statements for the twelve months ended 31 December
2022. Statutory accounts for the year ended 31 December 2022 were approved by
the Board of Directors and have been delivered to the Registrar of Companies.
The auditor's report on those accounts was unqualified. The financial
information for the half years 30 June 2023 and 30 June 2022 is unaudited and
the twelve months to 31 December 2022 is audited.
2. Summary of accounting policies applied by the Group
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRSs"). The financial statements have also
been prepared in accordance with IFRSs adopted by the European Union.
The financial information has been prepared on the historical cost basis
except in respect of those financial instruments that have been measured at
fair value. Historical cost is generally based on the fair value of the
consideration given in exchange for the goods and services.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable
or estimated using another valuation technique. In estimating the fair value
of an asset or a liability, the Group takes into account the characteristics
of the asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at the
measurement date.
Fair value for measurement and/or disclosure purposes in the financial
information is determined on such a basis, except for leasing transactions
that are within the scope of IFRS 16, and measurements that have some
similarities to fair value but are not fair value, such as net realisable
value in IAS 2 or value in use in IAS 36.
The areas where assumptions and estimates are material in relation to the
financial information are the measurement of goodwill (see note 16 of the 2022
Statutory Accounts for further details), the carrying amounts and useful lives
of the other intangible assets (see note 17 of the 2022 Statutory Accounts for
further details), deferred taxes (see note 20 of the 2022 Statutory Accounts
for further details), trade receivables (see note 22 of the 2022 Statutory
Accounts and note 12 of the 2023 Interim Accounts for further details) and
provisions for risks and other provisions related to the operating activities
(see note 29 of the 2022 Statutory Accounts and note 13 of the 2023 Interim
Accounts for further details).
The accounting policies set out below have been applied consistently to all
periods presented in the financial information.
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are substantially the same as those applied by
the Group in its financial statements for the year ended 31 December 2022 and
which form the basis of the 2023 financial statements. The methodology for
selecting assumptions underpinning the fair value calculations has not changed
since 31 December 2022.
Basis of consolidation
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between the members of the Group are eliminated on
consolidation. The Group's scope of consolidation included the following
companies, all fully consolidated when included in the scope.
At 30 June 2023 At 30 June 2022
Companies Interest percentage Consolidation method Interest percentage Consolidation method
Biotec Laboratories Ltd 100% FC 100% FC
IT-IS International Ltd 100% FC 100% FC
Lab21 Healthcare Ltd 100% DO 100% DO
Novacyt US Inc 100% FC 100% FC
Novacyt Inc 100% FC 100% FC
Microgen Bioproducts Ltd 100% DO 100% DO
Novacyt SA 100% FC 100% FC
Novacyt Asia Ltd 100% FC 100% FC
Novacyt China Ltd 100% FC 100% FC
Novacyt UK Holdings Ltd 100% FC 100% FC
Primer Design Ltd 100% FC 100% FC
Legend: FC: Full
consolidation
DO:
Discontinued operation
Discontinued operations and assets held for sale
A discontinued operation is a component that either has been disposed of, or
is classified as held for sale, and
(a) represents a separate major line of business or geographical
area of operations,
(b) is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of operations, or
(c) is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are presented in the consolidated income statement as
a single amount comprising the total of:
- The post-tax profit or loss of the discontinued operation,
- The post-tax gain or loss recognised on the measurement to fair
value less costs to sell, and
- The post-tax gain or loss recognised on the disposal of assets or
the disposal group making up the discontinued operation.
Where material, the analysis of the single amount is presented in the relevant
note (see note 16).
In the statement of cash flows, the net cash flow attributable to the
investing and financing activities of discontinued operations have been
disclosed separately.
No adjustments have been made in the statement of financial position.
Going concern
The directors have, at the time of approving the financial statements, a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Thus, they adopt the going
concern basis of accounting in preparing the financial statements.
The going concern model covers the period up to and including September
2024. In making this assessment, the directors have considered the following
elements:
- The working capital requirements of the business;
- A positive cash balance at 30 June 2023 of £81,734,000;
- The costs associated with the acquisition of Yourgene Health plc;
and
- The DHSC commercial dispute having a trial date set for June 2024.
If, however, Novacyt had to pay the full value of the DHSC claim in the period
up to and including September 2024, which is not the scenario that management
considers to be likely, then the Group would not have sufficient funds to
settle the liability without agreeing a payment plan or raising additional
cash.
Measurement of goodwill
Goodwill is broken down by cash-generating unit ("CGU") or group of CGUs,
depending on the level at which goodwill is monitored for management purposes.
In accordance with IAS 36, none of the CGUs or groups of CGUs defined by the
Group are greater in size than an operating segment.
Impairment testing
Goodwill is not amortised, but is subject to impairment testing when there is
an indication of loss of value, and at least once a year at the reporting
date.
Such testing consists of comparing the carrying amount of an asset to its
recoverable amount. The recoverable amount of an asset, a CGU or a group of
CGUs is the greater of its fair value less costs to sell and its value in use.
Fair value less costs to sell is the amount obtainable from the sale of an
asset, a CGU or a group of CGUs in an arm's length transaction between
well-informed, willing parties, less the costs of disposal. Value in use is
the present value of future cash flows expected to arise from an asset, a CGU
or a group of CGUs.
It is not always necessary to determine both the fair value of an asset less
costs to sell and its value in use. If either of these amounts exceeds the
carrying amount of the asset, the asset is not impaired and it is not
necessary to estimate the other amount.
Inventories
Inventories are carried at the lower of cost and net realisable value. Cost
includes materials and supplies, and, where applicable, direct labour costs
incurred in transforming them into their current state. It is calculated using
the weighted average cost method. The recoverable amount represents the
estimated selling price less any marketing, sales and distribution expenses.
The gross value of goods and supplies includes the purchase price and
incidental expenses.
A provision for impairment, equal to the difference between the gross value
determined in accordance with the above terms and the current market price or
the realisable value less any proportional selling costs, is recognised when
the gross value is greater than the other stated item.
Trade receivables
The Group has an established credit policy under which the credit status of
each new customer is reviewed before credit is advanced, including external
credit evaluations where possible. Credit limits are established for all
significant or high-risk customers, which represent the maximum amount
permitted to be outstanding without requiring additional approval from the
appropriate level of senior management. Outstanding debts are continually
monitored by each division. Credit limits are reviewed on a regular basis, and
at least annually. Customers that fail to meet the Group's benchmark
creditworthiness may only transact with the Group on a prepayment basis.
Trade receivables are recorded initially at fair value and subsequently
measured at amortised cost. This generally results in their recognition at
nominal value less an allowance for any doubtful debts. Trade receivables in
foreign currency are transacted in their local currency and subsequently
revalued at the end of each reporting period, with any foreign exchange
differences being recognised in the income statement as an income/expense.
The allowance for doubtful debts is recognised based on Management's
expectation of losses without regard to whether an impairment trigger happened
or not (an "expected credit loss" model). Through implementation of IFRS 9,
the Group concluded that no real historical default rate could be determined
due to a low level of historical write offs across the business. The Group
therefore recognises an allowance for doubtful debts on the basis of invoice
ageing. Once an invoice is overdue from its due date, based on agreed credit
terms, by more than 90 days, this invoice is then more likely to default than
those invoices operating within 90 days of their due date. As such, these
invoices will be provided for in full as part of an expected credit loss
model, except where Management have reviewed and judged otherwise.
Trade receivables are written off when there is no reasonable expectation of
recovery. Indicators that there may be no reasonable expectation of recovery
may include the failure of the debtor to engage in a payment plan, and failure
to make contractual payments within 365 days of the original due date.
Cash and cash equivalents
Cash equivalents are held to meet short-term cash commitments rather than for
investment or other purposes. For an investment to qualify as a cash
equivalent, it must be readily convertible into a known amount of cash and be
subject to an insignificant risk of change in value. Cash and cash equivalents
comprise cash funds, current bank accounts and marketable securities (cash
Undertakings for Collective Investment in Transferable Securities ("UCITS"),
negotiable debt securities, etc.) that can be liquidated or sold within a very
short time (generally with original maturities of three months or less) and
which have a negligible risk of change in value. All such items are measured
at fair value, with any adjustments recognised in the income statement.
Trade payables
Trade payables are obligations to provide cash or other financial assets. They
are recognised in the statement of financial position when the Group becomes a
party to a transaction generating liabilities of this nature. Trade and other
payables are recognised in the statement of financial position at fair value
on initial recognition, except if settlement is to occur more than 12 months
after recognition. In such cases, they are measured using the amortised cost
method. The use of the effective interest rate method will result in the
recognition of a financial expense in the income statement. Trade and other
payables are eliminated from the statement of financial position when the
corresponding obligation is discharged.
Trade payables have not been discounted, because the effect of doing so would
be immaterial.
Provisions
In accordance with IAS 37 "Provisions, Contingent Liabilities and Contingent
Assets", a provision is recognised when the Group has a current obligation as
of the reporting date in respect of a third party and it is probable or
certain that there will be an outflow of resources to this third party,
without at least equivalent consideration from the said third party.
Provisions for risks and charges cover the amount corresponding to the best
estimate of the future outflow of resources required to settle the obligation.
The provisions are for the restoration of leased premises, risks related to
litigations and product warranties.
Long-Term Incentive Plan (LTIP)
Novacyt granted shares to certain employees under a LTIP adopted on 1 November
2017. The final tranches were settled in 2022 and the scheme has now been
fully settled.
In December 2021, Novacyt implemented a cash LTIP to qualifying employees,
based on achieving certain annual EBITDA targets over a three-year qualifying
period. The plan will vest on the third anniversary of the grant date and will
be settled in cash.
In February 2022, a Performance Share Awards programme for executive
management was created as part of its new LTIP. This LTIP replaced the
previous phantom share award scheme which ended in November 2020.
The 2022 Performance Share Awards programme is structured as nil-cost options,
giving a right to acquire a specified number of shares at a nil exercise price
per share (i.e. for no payment) in accordance with the rules, governed by
sections L-225-197-1 and seq. of the French Commercial Code ("actions
gratuities").
The awards will vest over a three-year performance period, starting 1 January
2022 and ending on 31 December 2024, subject to the Company achieving certain
total shareholder return growth conditions. The baseline for total shareholder
return is based on the average closing price of the Company's shares in
December 2021 which was £3.54. This will be compared to the equivalent figure
in December 2024.
Consolidated revenue
IFRS 15 "Revenue from Contracts with Customers" establishes a principles-based
approach to recognising revenue only when performance obligations are
satisfied, and control of the related goods or services is transferred. It
addresses items such as the nature, amount, timing and uncertainty of revenue,
and cash flows arising from contracts with customers. IFRS 15 applies a
five-step approach to the timing of revenue recognition and applies to all
contracts with customers except those in the scope of other standards:
· Step 1 - Identify the contract(s) with a customer
· Step 2 - Identify the performance obligations in the contract
· Step 3 - Determine the transaction price
· Step 4 - Allocate the transaction price to the performance
obligations in the contract
· Step 5 - Recognise revenue when (or as) the entity satisfies a
performance obligation
The Group principally satisfies its performance obligations at a point in time
and revenue recognised relating to performance obligations satisfied over time
is not significant. As such, revenue is generally recognised at the point of
sale, with little judgement required in determining the timing of transfer of
control.
Some contracts with customers contain a limited assurance warranty that is
accounted for under IAS 37 (see Provisions accounting policy). If a repair or
replacement is not possible under the assurance warranty, a full refund of the
product price may be given. The potential refund liability represents variable
consideration.
Under IFRS 15.53, the Group can use either:
· The expected value (sum of probability weighted amounts); or
· The most likely amount (generally used when the outcomes are binary).
The method used is not a policy choice. Management use the method that it
expects will best predict the amount of consideration based on the terms of
the contract. The method is applied consistently throughout the contract.
Variable revenue is constrained if appropriate. IFRS 15 requires that revenue
is only included to the extent that it is highly probable that there will not
be a significant reversal in future periods.
In making this assessment, Management have considered the following factors
(which are not exclusive):
· If the amount of consideration is highly susceptible to factors
outside the Group's influence;
· Whether the uncertainty about the amount of consideration is not
expected to be resolved for a long period of time;
· The Group's experience (or other evidence) with similar types of
contract;
· The Group has a practice of either offering a broad range of price
concessions or changing the payment terms and conditions of similar contracts
in similar circumstances; and
· The contract has a large number and broad range of possible
consideration amounts.
The decision as to whether revenue should be constrained is considered to be a
significant judgement as the term 'highly probable' is not defined in IFRS 15.
Management consider highly probable to be significantly more likely than
probable.
Taxation
Income tax on profit or loss for the period comprises current and deferred
tax.
· Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years, and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
A provision is recognised for those matters for which the tax determination is
uncertain but it is considered probable that there will be a future outflow of
funds to a tax authority. The provisions are measured at the best estimate of
the amount expected to become payable. The assessment is the result of the
Group's judgement based on the advice of external tax professionals and
supported by previous experience in respect of such activities.
· Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
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 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
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary
differences in the near-term.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised based on tax
laws and rates that have been enacted or substantively enacted at the
reporting date.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in the income statement, except when
they relate to items that are recognised in other comprehensive income or
directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting for the
business combination.
UK Patent Box regime
The UK Patent Box regime is a special low corporate tax rate used to
incentivise research and development by taxing revenues from patented
products differently from other revenues. On 30 March 2022 Novacyt
(specifically Primer Design Ltd) received confirmation that the UK
Intellectual Property Office had granted the key patent (ORF1a/b), with patent
number GB2593010. This means that the effective rate of tax on profits
(adjusted for certain rules) derived from the sale of products incorporating
this patent is close to 10% rather than the current UK corporation tax rate of
25%.
The effective tax rate is given via a tax deduction and, due to the
uncertainty over the precise timing of the tax relief available to the company
and the complexity involved in making a claim for the first time, a tax asset
has not been recognised. The asset will only be recognised when Management can
reliably measure and predict the outcome of a Patent Box claim in terms of
value and timing.
Research and development tax credits
Primer Design Ltd and IT-IS International Ltd benefit from tax credits in
respect of some of their research activities. The tax credit is calculated per
financial year and deducted from the tax payable by the company in respect of
the year during which research expenses were incurred. Tax credits that cannot
be deducted from the tax expense are surrendered for a repayable tax credit
and treated as a governmental subsidy in the income statement.
In 2022, Primer Design Ltd and IT-IS International Ltd instead benefitted from
an R&D expenditure credit in respect of some of their research activities.
The tax credit is calculated per financial year as 13% of the actual
expenditure and is shown in the income statement as a governmental subsidy.
The credit is taxable and therefore the tax charge on this credit is included
in the tax line of the income statement.
Profit/loss per share
The Group reports basic and diluted profit/loss per ordinary share. Basic
profit/loss per share is calculated by dividing the profit/loss attributable
to ordinary shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period.
Diluted profit/loss per share is determined by adjusting the profit/loss
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding, taking into account the effects of all potential
dilutive ordinary shares, including options.
Exceptional items
Exceptional items are those costs or incomes that, in the view of the Board of
Directors, require separate disclosure by virtue of their size or incidence,
and are charged or credited in arriving at operating profit on the face of the
consolidated income statement.
3. Critical accounting judgements and key sources of estimate
uncertainty
In the application of the Group's accounting policies, the directors are
required to make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The 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 if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Critical accounting judgements
· Constraint of revenue
Revenue is only constrained if it is highly probable there will not be a
significant reversal of revenue in the future. Highly probable is not defined
in IFRS 15 and so it is a significant judgement to be exercised by Management.
The value of revenue related to performance obligations fulfilled in 2020 to
which constraint has not been applied is £130,642,000 and relates to the
Department of Health and Social Care "DHSC" dispute, further details of which
are disclosed in note 18.
· Trade and other receivables
An estimate of the risks of non-receipt based on commercial information,
current economic trends and the solvency of individual customers is made to
determine the need for impairment on a customer-by-customer basis. Management
use significant judgement in determining whether a credit loss provision is
required.
At 30 June 2023, the Group had trade receivables of £25,209,000 against which
a credit loss provision of £248,000 has been applied. At the date of
publishing the interim financial statements, £23,957,000 of the 30 June 2023
receivables were overdue due to the contract dispute with the DHSC (see note
18). Management considers it to be more likely than not that the 30 June 2023
balances are recoverable; this is a significant judgement.
· Provisions for product warranty
The value of provision required is determined by Management based on available
information, experience and, in some cases, expert estimates. Product warranty
provisions are only included if it is considered to be probable that an
outflow of economic benefit will be required. Determination of probable is a
significant judgement especially in light of the dispute described in note 18.
Key sources of estimation uncertainty
The Group has a number of key sources of estimation uncertainty. Of these
items, only the measurement of goodwill is considered likely to result in a
material adjustment. Where there are other areas of estimates these have been
deemed not material.
· Measurement of goodwill
Goodwill is tested for impairment on an annual basis. The recoverable amount
of goodwill is determined mainly on the basis of forecasts of future cash
flows. The total amount of anticipated cash flows reflects Management's best
estimate of the future benefits and liabilities expected for the relevant CGU.
The assumptions used and the resulting estimates sometimes cover very long
periods, taking into account the technological, commercial and contractual
constraints associated with each CGU. These estimates are mainly subject to
assumptions in terms of volumes, selling prices and related production costs,
and the exchange rates of the currencies in which sales and purchases are
denominated. They are also subject to the discount rate used for each CGU.
The value of the goodwill is tested whenever there are indications of
impairment and reviewed at each annual closing date or more frequently should
this be justified by internal or external events.
4. Revenue
The table below shows revenue on a geographical basis:
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Geographical area
United Kingdom 814 8,447
France 196 122
Rest of Europe 584 2,851
America 764 3,514
Asia-Pacific 749 1,234
Africa 192 202
Middle East 40 138
Total revenue 3,339 16,508
Revenue has fallen due to a lower demand for COVID-19 tests.
The breakdown of revenue by operating segment and geographic area is presented
in note 5.
5. Operating segments
Segment reporting
Pursuant to IFRS 8, an operating segment is a component of an entity:
- that engages in business activities from which it may earn revenues
and incur expenses (including revenues and expenses relating to transactions
with other components of the same entity);
- whose operating results are regularly reviewed by the Group's Chief
Executive to make decisions regarding the allocation of resources to the
segment and to assess its performance; and
- for which discrete financial information is available.
The Group has identified four operating segments whose performance and
resources are monitored separately. Following the Group's decision to
discontinue the Microgen Bioproducts and Lab21 Healthcare businesses in 2022,
the Lab21 Products segment, which is made up of these businesses, has been
treated as a discontinued operation:
o Primer Design
This segment represents the activities of Primer Design Ltd, which is a
designer, manufacturer and marketer of molecular 'real-time' qPCR testing
devices and reagents in the area of infectious diseases based in Eastleigh,
UK.
o IT-IS International
This segment represents the activities of IT-IS International Ltd, a
diagnostic instrument development and manufacturing company specialising in
the development of PCR devices for the life sciences and food testing industry
based in Stokesley, UK.
o Lab21 Products
This segment represents the activities of Lab21 Products, which was a
developer, manufacturer and distributor of a large range of protein-based
infectious disease IVD products covering Microgen Bioproducts Ltd and Lab21
Healthcare Ltd, both based in Camberley, UK. As these businesses ceased
trading in June 2022, this segment has been treated as a discontinued
operation.
o Corporate
This segment represents Group central/corporate costs. Where appropriate,
costs are recharged to individual business units via a management recharge
process.
o Intercompany eliminations
This column represents intercompany transactions across the Group that have
not been allocated to an individual operating segment. It is not a discrete
segment.
The Chief Operating Decision Maker is the Chief Executive Officer.
Reliance on major customers and concentration risk
In H1 2023 and H1 2022 the Group was not dependent on one particular customer
and there were no customers generating sales accounting for over 10% of
revenue.
95.0% of receivables are with one counterparty, with whom there is a contract
dispute as disclosed in note 18. Management considers it to be more likely
than not that the 30 June 2023 balances are recoverable.
Breakdown of revenue by operating segment and geographic area
o At 30 June 2023
Amounts in £'000 Primer Design IT-IS International Total
Geographical area
United Kingdom 796 18 814
France 159 37 196
Rest of Europe 379 205 584
America 689 75 764
Asia-Pacific 555 194 749
Africa 172 20 192
Middle East 28 12 40
Total revenue 2,778 561 3,339
o At 30 June 2022
Amounts in £'000 Primer Design IT-IS International Total
Geographical area
United Kingdom 8,446 1 8,447
France 99 23 122
Rest of Europe 2,606 245 2,851
America 3,271 243 3,514
Asia-Pacific 853 381 1,234
Africa 201 1 202
Middle East 138 - 138
Total revenue 15,614 894 16,508
Breakdown of result by operating segment
o 6 month ended 30 June 2023
Amounts in £'000 Primer Design IT-IS International Corporate Intercompany Total
Eliminations
Revenue 2,778 561 - - 3,339
Cost of sales -1,309 -374 - 9 -1,674
Sales and marketing costs -1,281 -202 -23 - -1,506
Research and development -1,047 -192 - - -1,239
General and administrative -3,007 -729 -684 - -4,420
Governmental subsidies 154 -29 - - 125
Earnings before interest, tax, depreciation and amortisation as per management -3,712 -965 -707 9 -5,375
reporting
Depreciation and amortisation -935 -209 -33 18 -1,159
Operating (loss)/profit before exceptional items -4,647 -1,174 -740 27 -6,534
o 6 month ended 30 June 2022
Amounts in £'000 Primer Design IT-IS International Corporate Intercompany Total
Eliminations
Revenue 15,614 902 - -8 16,508
Cost of sales -11,125 -1,670 - 297 -12,498
Sales and marketing costs -2,493 -172 -222 - -2,887
Research and development -2,996 -275 - - -3,271
General and administrative -3,780 -520 -870 - -5,170
Governmental subsidies 163 17 - - 180
Earnings before interest, tax, depreciation and amortisation as per management -4,617 -1,718 -1,092 289 -7,138
reporting
Depreciation and amortisation -840 -202 -15 16 -1,041
Operating (loss)/profit before exceptional items -5,457 -1,920 -1,107 305 -8,179
Please note that in accordance with IFRS 5 the results of the Lab21 Products
segment for 2022 and 2023 have been reported on a separate line 'Loss from
discontinued operations' which is shown below EBITDA and thus all items above
EBITDA have a nil value.
6. Cost of sales
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Cost of inventories recognised as an expense 1,157 5,530
Change in stock provision -175 3,923
Freight costs 32 42
Direct labour 664 2,984
Product warranty - 6
Other -4 13
Total cost of sales 1,674 12,498
Total cost of sales has declined year on year reflecting the reduction in
sales.
In H1 2023 the stock provision relating to continuing operations has decreased
by a net £175,000 (H1 2022: increased by £3,923,000, predominantly due to
providing for excess stock associated with falling COVID-19 sales). Stock,
which had previously been provided for, has been written off and disposed of
during H1 2023, with the cost being charged to 'Cost of inventories recognised
as an expense' and a corresponding release of the stock provision being made.
Direct labour (including subcontractor costs) has decreased year on year as a
result of scaling back production to align to lower sales.
7. Other operating income and expenses
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Other operating income - 2
Total other operating income - 2
Acquisition related expenses -666 -
DHSC contract dispute costs -640 -462
Restructuring expenses -543 -
Other expenses -13 -73
Total other operating expenses -1,862 -535
2023 acquisition related expenses are associated with the acquisition of
Yourgene Health plc.
DHSC contract dispute costs relate to legal and professional fees and product
storage costs incurred in the ongoing commercial dispute.
Restructuring expenses in 2023 relate to Group-wide restructuring charges, as
the Group continues to reduce its cost base.
8. Financial income and expense
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Financial foreign exchange gains 519 2,001
Interest received from discontinued operations 415 216
Other financial income 1,060 134
Total financial income 1,994 2,351
Interest on IFRS 16 liabilities -19 -24
Financial foreign exchange losses -1,731 -594
Discount of financial instruments -3 -19
Interest paid to discontinued operations -158 -86
Total financial expense -1,911 -723
Financial foreign exchange gains and losses are driven by revaluations of the
LTIP liability and bank and intercompany accounts held in foreign currencies.
Interest received from or paid to discontinued operations relates to interest
on intercompany balances with Microgen Bioproducts Ltd and Lab21 Healthcare
Ltd.
Other financial income relates to interest received on cash balances.
9. Tax income
The main rate of corporation tax in the UK is 25% for the corporation tax year
beginning 1 April 2023 (2022: 19%). From 1 April 2023, a 19% small profits
corporation tax rate was introduced for companies whose profits do not exceed
£50,000.
The H1 2023 financials have been calculated using a corporation tax rate of
19%.
Taxation for other jurisdictions (mainly France) is calculated at the rates
prevailing in the respective jurisdictions.
The Group's tax is the sum of the total current and deferred tax.
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Current tax income/(expense)
Current year tax income/(expense) 123 -
Deferred tax income/(expense)
Deferred tax income/(expense) 51 2,041
Total tax income/(expense) in the income statement 174 2,041
The tax income for the period can be reconciled to the loss before tax as
follows:
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Loss before taxation -8,313 -7,084
Tax at the UK corporation tax rate (2023: 19%, 2022: 19%) 1,580 1,346
Effect of different tax rates of subsidiaries operating in other jurisdictions 159 61
Change of the tax rate for the calculation of deferred tax 272 888
Effect of non-deductible expenses and non-taxable income -40 -254
Change in unrecognised deferred tax assets -1,761 -
Other adjustments -36 -
Total tax income for the period 174 2,041
10. Loss per share
The loss per share is calculated based on the weighted average number of
shares outstanding during the period. The diluted loss per share is calculated
based on the weighted average number of shares outstanding and the number of
shares issuable as a result of the conversion of dilutive financial
instruments. At 30 June 2023, there are no outstanding dilutive instruments.
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Net loss attributable to owners of the Company -8,348 -8,699
Weighted average number of shares 70,626,248 70,626,248
Loss per share (£) -0.12 -0.12
Diluted loss per share (£) -0.12 -0.12
Loss per share from continuing operations (£) -0.12 -0.07
Diluted loss per share from continuing operations (£) -0.12 -0.07
Loss per share from discontinued operations (£) -0.00 -0.05
Diluted loss per share from discontinued operations (£) -0.00 -0.05
11. Inventories and work in progress
Amounts in £'000 (Unaudited) (Audited)
Six month
Year ended
30 June
2023 31 December
2022
Raw materials 8,977 8,562
Work in progress 1,947 2,854
Finished goods 3,153 3,404
Stock provisions -11,618 -11,793
Total inventories and work in progress 2,459 3,027
Inventories and work in progress has fallen since December 2022, as stock
built up during the COVID-19 pandemic is wound down to reflect a more
normalised expected run-rate.
12. Trade and other receivables
Amounts in £'000 (Unaudited) (Audited)
Six month
Year ended
30 June
2023 31 December
2022
Trade and other receivables 25,209 25,485
Expected credit loss provision -248 -214
Tax receivables - Value Added Tax 8,233 8,312
Receivables on sale of businesses 69 69
Other receivables 9 10
Total trade and other receivables 33,272 33,662
The trade receivables balance includes a £23,957,000 unpaid DHSC invoice
raised in December 2020, in respect of products delivered during 2020, that
remains unpaid at the date of publishing the interim accounts. Recovery of the
invoice is dependent on the outcome of the contract dispute.
During 2021, £49,034,000 (including VAT) of products and services were
delivered and invoiced to the DHSC which has now been included as part of the
ongoing dispute. As these sales have not been recognised in accordance with
IFRS 15, the revenue, trade receivable and VAT element of the transactions
have been reversed. This accounting treatment does not change the Group's
legal position or rights in relation to the dispute with the DHSC.
The 'Tax receivables - Value Added Tax' balance of £8,233,000 mainly relates
to VAT paid in the UK on sales invoices in dispute with the DHSC. As these
sales have not been recognised in accordance with IFRS 15, the revenue, trade
receivable and VAT element of the transactions have been reversed, resulting
in a VAT debtor balance.
Trade receivables balances are due within one year. Once an invoice is more
than 90 days overdue, it is deemed more likely to default and as such, these
invoices have been provided for in full as part of an expected credit loss
model, except where Management have reviewed and judged otherwise.
13. Provisions
The table below shows the nature of and changes in provisions for risks and
charges for the period from 1 January 2023 to 30 June 2023:
Amounts in £'000 (Audited) Increase Reduction (Unaudited)
At 1 January At 30 June
2023
2023
-
Provisions for restoration of premises 95 3 - 98
Provisions long-term 95 3 - 98
Provisions for restoration of premises 330 - -285 45
Provision for litigation 157 - - 157
Provisions for product warranty 19,813 - - 19,813
Provisions short-term 20,300 - -285 20,015
The provision for product assurance warranties predominantly relates to the
notification of a product warranty claim with the DHSC (see note 18).
Management have assessed the DHSC product warranty provision held at 31
December 2022 and have deemed that it is still appropriate at 30 June 2023.
14. Trade and other liabilities
Amounts in £'000 (Unaudited) (Audited)
Six month
Year ended
30 June
2023 31 December
2022
Trade payables 354 278
Accrued invoices 2,154 2,035
Social security liabilities 436 455
Tax liabilities - Value Added Tax 4 6
Other liabilities 11 13
Total trade and other liabilities 2,959 2,787
15. Share capital
Amount of share capital in £'000 Amount of share capital in €'000 Unit value per share Number of shares issued
in €
(Audited) At 31 December 2022 4,053 4,708 0.07 70,626,248
(Unaudited) At 30 June 2023 4,053 4,708 0.07 70,626,248
As of 30 June 2023 and 31 December 2022, the Company's share capital of
€4,708,416.54 was divided into 70,626,248 shares with a par value of 1/15th
of a Euro each.
The Company's share capital consists of one class of share. All outstanding
shares have been subscribed, called and paid.
16. Discontinued operations
In early 2022, Novacyt commenced a strategic review of the business, which
included a review of the Microgen Bioproducts and Lab21 Healthcare businesses
to consider the merits of maintaining multiple company entities/names under
the Novacyt Group umbrella versus a simplified business model and brand, which
the directors believed could be more impactful.
In April 2022, Novacyt announced its intention to discontinue both businesses,
and as at the end of June 2022 they had ceased day to day trading operations.
In accordance with IFRS 5, the net result of the Lab21 Products business has
been reported in the line 'Loss from discontinued operations' on the
consolidated income statement.
The table below presents the detail of the loss generated by these two
businesses as of 30 June 2023 and 2022:
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Discontinued Operations
Revenue - 1,349
Cost of sales 2 -979
Gross profit 2 370
Sales, marketing and distribution expenses - -300
Research and development expenses - -17
General and administrative expenses 3 -2,839
Operating profit/(loss) before exceptional items 5 -2,786
Other operating expenses - -173
Operating profit/(loss) after exceptional items 5 -2,959
Financial income 15 86
Financial expense -229 -371
Loss before tax -209 -3,244
Taxation (expense)/income - -412
Loss after tax from discontinued operations -209 -3,656
2023 balances relate to clearing balance sheet items and interest on
intercompany balances.
17. Notes to the cash flow statement
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Loss for the period -8,348 -8,699
Loss from discontinued operations -209 -3,656
Loss from continuing operations -8,139 -5,043
Adjustments for:
Depreciation, amortisation, impairment loss and provisions 877 2,841
Losses on disposal of assets 89 60
Income tax credit -299 -1,809
Operating cash flows before movements of working capital -7,681 -7,607
Decrease in inventories (*) 568 7,264
Decrease in receivables 908 3,561
Increase/(decrease) in payables 758 -9,069
Cash used in operations -5,447 -5,851
Income taxes received 789 4,244
Finance income -1,033 -55
Net cash used in operating activities -5,691 -1,662
Operating cash flows from discontinued operations -1,287 -1,589
Operating cash flows from continuing operations -4,404 -73
(*) The variation of the inventories value results from the following
movements:
Amounts in £'000 (Unaudited) (Unaudited)
Six month
Six month
30 June
30 June
2023
2022
Decrease in the gross value of inventory 743 3,218
(Decrease)/increase in the stock provision -175 4,046
Total variation of the net value of inventories 568 7,264
The details for the change in the stock provision are covered in notes 6 and
11.
18. Contingent liabilities
During 2021, the Group received notification of a contract dispute between its
subsidiary, Primer Design Ltd, and the DHSC related to revenue totalling
£129,125,000 in respect of performance obligations satisfied during the
financial year to 31 December 2020.
During 2021, a further £49,034,000 (including VAT) of products and services
were delivered and invoiced to the DHSC which have subsequently been included
as part of the ongoing dispute. Management made the judgement that in
accordance with IFRS 15, Revenue from Contracts with Customers, it was not
appropriate at that stage in the dispute to recognise as revenue, any sales
invoices raised to the customer in 2021 that were in dispute. However,
Management remains committed to obtaining payment for these goods and
services.
Payment for £23,957,000 of invoices in respect of products delivered during
2020 remains outstanding at the date of publishing the interim accounts and
recovery of the debt is dependent on the outcome of the dispute.
On 25 April 2022, legal proceedings were issued against Novacyt and Primer
Design Ltd in respect of amounts paid to Primer Design Ltd totalling
£134,635,000 (including VAT) by the DHSC. This refers to £132,814,000
(including VAT) of reagent sales out of a total disputed amount of
£154,950,000 (£129,125,000 excluding VAT as previously reported) plus
£1,821,000 (£1,517,000 excluding VAT) of q16 instruments which have been
added to the dispute. This takes the total 2020 revenue in dispute to
£130,642,000.
On 15 June 2022, Novacyt and Primer Design Ltd filed a defence of the claim
received on 25 April 2022, and Primer Design Ltd made a counterclaim of circa
£81,500,000 including interest and VAT against the DHSC.
On 30 January 2023, Novacyt announced that the UK High Court had directed
Novacyt that the hearing of the case between Primer Design Ltd / Novacyt SA
and the DHSC has been listed to commence on 10 June 2024 and is expected to
last 16 days.
The Group remains committed to defending the case and asserting its
contractual rights, including recovering outstanding sums due from the DHSC.
Management have reviewed the position at 30 June 2023 and deem this to be an
appropriate reflection of the current commercial dispute.
Management and the Board of Directors have reviewed the product warranty
provision totalling £19,753,000 booked in 2020 in relation to the DHSC
dispute and have deemed that it remains appropriate at 30 June 2023.
19. Subsequent events
On 3 July 2023, Novacyt announced the proposed cash acquisition of Yourgene
Health plc, which subsequently completed on 8 September 2023.
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