REG - Novacyt S.A. - Final Results
27/04/2023 07:00
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RNS Number : 6197X Novacyt S.A. 27 April 2023
Novacyt S.A.
("Novacyt", the "Company" or the "Group")
Full year 2022 results
Full year revenue and EBITDA in line with guidance
Accelerating product development post-COVID-19 to become a leading global
clinical diagnostic company in infectious diseases
Paris, France and Eastleigh, UK 27 April 2023 - Novacyt (EURONEXT GROWTH:
ALNOV; AIM: NCYT), an international specialist in clinical diagnostics,
announces its audited results for the year ended 31 December 2022.
Operational highlights
Non-COVID-19 assay development
· Completed the development of genesig™PLEX, a multiplex
gastrointestinal bacterial assay, available as a research-use-only test (RUO)
· Developed and relaunched two single analyte transplant viral
assay panels for the Epstein-Barr virus and BK virus for use on open
instrument platforms
· Augmented product portfolio with the addition of over 40 CE
marked in vitro diagnostic (IVD) assays, through a third-party distribution
agreement with Clonit srl
· International launch and UK Coronavirus Test Device Approvals
(CTDA) approval of genesig™ Real-time PCR SARS-CoV-2 genesig™ Winterplex
panel covering RSV, Flu A&B and COVID-19
· Relaunched RUO portfolio globally and developed Monkeypox and
Adenovirus F41 RUO assays to support infectious disease monitoring
COVID-19 assay development
· Six UK CTDA approvals in the year (including genesig™
Winterplex multiplex panel), taking the total number of Novacyt products
approved by the CTDA to seven, the most of any UK-based company
· CE marked two lyophilised PROmate™ products, enabling
deployment of near-patient COVID-19 diagnostic solution without the need for
cold-chain shipping
· CE marked PathFlow™ COVID-19 Rapid Antigen Self-Test received,
one of the first saliva-based COVID-19 assays to be launched in the EEA and
providing diagnosis of symptomatic and asymptomatic individuals in
approximately 15 minutes
Workflow and instrumentation development
· Launched and CE marked CO-Prep™ Automated Liquid Handling
System and completed validation of a nucleic acid extraction system to enhance
post-COVID-19 integrated sample-to-result molecular workflow solution
· Launched two new lateral flow test (LFT) readers for use in
conjunction with a broad range of assays within Novacyt's Pathflow™ product
portfolio, consisting of 18 non-COVID-19 products across sexually transmitted,
gastrointestinal, respiratory and insect-borne infections
Commercialisation
· Partnered with a global fisheries company to develop solutions for
testing infectious salmon anaemia virus and bacterial kidney disease
· Signed a contract with a leading global non-governmental
organisation (NGO) to support the detection of arboviruses, including dengue,
Zika and Chikungunya
· Partnered with leading healthcare company in India to develop and
supply both reagents and instrumentation
Post-period highlights
· CE marked both q16 and q32 instruments
· Validation of third-party Respiratory Infection Assays largely
completed in Q1 as planned
· 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
· Completed the development of several RUO multiplex assays across
gastrointestinal, respiratory and insect borne viruses
· Sales to leading global NGO continues to gain momentum covering
West Nile Fever, Hepatitis A & E, haemorrhagic fever and arboviruses
(CHIK/DENG/ZIKA) with orders in excess of £150k
Financial highlights
· Group revenue for FY2022 was £21.0m, in line with guidance,
(FY2021: £92.6m), due to the expected decline in COVID-19 related sales
· Revenue from COVID-19 products in 2022 totalled £14.7m (FY2021:
£84.0m)
· Revenue for the non-COVID-19 portfolio in 2022 totalled £6.3m
(FY2021: £8.6m). This decline was predominantly driven by lower instrument
sales compared to FY2021 which benefited from COVID-19 demand
· Group gross profit totalled £5.7m (27%) in FY2022 (FY2021:
£28.2m (30%)). The FY2022 gross profit was reduced as a result of significant
stock provisions based on lower forecasted COVID-19 sales in addition to
writing-off stock that had not been provided for previously. Excluding the
impact of these items, the margin would be in excess of 60%
· Group EBITDA loss in FY2022 is £13.5m before exceptional items
(FY2021: £3.1m profit) as a result of the expected decline in revenue and in
line with guidance
· Discontinued operations loss of £3.5m in FY2022 (FY2021: £3.7m
loss)
· Loss after tax increased to £25.7m in FY2022 (FY2021: £9.7m
loss)
· Cash position at 31 December 2022 was £87.0m (2021: £101.7m)
and the Company remains debt free
Continuing operations * 2022 2021
£'000 £'000
Revenue 21,040 92,603
Gross profit ** 5,746 28,226
Gross profit % 27% 30%
OPEX (19,286) (25,131)
EBITDA (13,540) 3,095
EBITDA % n.m. 3%
Adjusted EBITDA ** (13,540) 38,865
Recurring operating (loss) / profit *** (15,655) 1,305
Operating loss (23,393) (3,916)
Other financial income and expenses 3,340 (1,744)
Income tax (2,148) (349)
Loss after tax from continuing operations (22,201) (6,009)
Loss from discontinued operations (3,529) (3,719)
Loss after tax attributable to the owners (25,730) (9,728)
* 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 for FY2021 and FY2022 has been reported on a
separate line 'Loss from discontinued operations' in accordance with IFRS 5,
"Non-current Assets Held for Sale and Discontinued Operations".
** Due to the ongoing commercial dispute with the DHSC, £35.8m exceptional
cost of sales were incurred in FY2021 (FY2022: £nil) that were one-off in
nature. The two largest items were a £26.1m stock provision, as a result of
the Group buying stock to fulfil expected future DHSC orders that did not
materialise; and the expensing of £6.9m of stock delivered to the DHSC which
has not been paid for as it is now part of the ongoing contract dispute.
*** FY2022 recurring operating loss is stated before £7.7m of non-recurring
charges as follows:
1. A £5.2m impairment charge in relation to the goodwill and intangible
assets associated with the IT-IS International acquisition.
2. £1.3m restructuring expenses.
3. £0.9m costs in relation to the ongoing DHSC contract dispute.
4. £0.3m of other expenses.
James McCarthy, Acting Group CEO of Novacyt, commented:
"The focus during 2022 has been on expanding our infectious disease product
portfolio beyond COVID-19 to sustain the long-term growth of the Company. The
distribution agreement with Clonit srl, was an important strategic step,
adding over 40 assays focused on our high growth target therapeutic areas of
respiratory, gastrointestinal infections, transplant and insect-borne
pathogens and also provided access to an additional diagnostic area in
sexually transmitted infection (STI). We successfully relaunched our core RUO
business, developing important new assays to support infectious disease
monitoring and we also strengthened our instrumentation business, which in
partnership with our assay development provides customers with a seamless
sample-to-result workflow.
"Following a rightsizing of our cost base, Novacyt is well positioned for
future growth and value creation as we move past the pandemic and continue our
journey to become a leading global clinical diagnostics company focused on
both existing and unmet needs in infectious diseases."
The information contained within this Announcement is deemed by the Company to
constitute inside information as stipulated under Article 7 of the Market
Abuse Regulation (EU) No. 596/2014 (as amended) as it forms part of the
domestic law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018 (as amended). Upon the publication of this Announcement
via the Regulatory Information Service, this inside information is now
considered to be in the public domain.
Contacts
Novacyt SA
James Wakefield, Non-Executive Chairman
James McCarthy, Acting Chief Executive Officer
+44 (0)1276 600081
SP Angel Corporate Finance LLP (Nominated Adviser and Broker)
Matthew Johnson / Charlie Bouverat (Corporate Finance)
Vadim Alexandre / Rob Rees (Corporate Broking)
+44 (0)20 3470 0470
Numis (Joint Broker)
Freddie Barnfield / Duncan Monteith / Jack McLaren
+44 (0)20 7260 1000
Allegra Finance (French Listing Sponsor)
Rémi Durgetto / Yannick Petit
+33 (1) 42 22 10 10
r.durgetto@allegrafinance.com (mailto:r.durgetto@allegrafinance.com) ;
y.petit@allegrafinance.com (mailto:y.petit@allegrafinance.com)
Walbrook PR
Paul McManus/ Stephanie Cuthbert/ Anna Dunphy
+44 (0)20 7933 8780
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.
Novacyt is headquartered in Vélizy in France with offices in Stokesley and
Eastleigh, UK, and is listed on the London Stock Exchange's AIM market
("NCYT") and on the Paris Stock Exchange Euronext Growth ("ALNOV").
Chief Executive's review
In early 2022 the business set out a new strategy to transition to a
post-COVID-19 market; this strategy remains in place today and I am pleased to
see its successful early execution over the course of last year and Q1 2023.
This strategy focussed on the twin objectives of portfolio development and
geographic expansion underpinned by our credentials as an agile, world leading
provider of integrated RUO and clinical diagnostics. In parallel we continue
to evaluate strategic opportunities, which would accelerate the growth of the
Company, including potential licensing deals, partnerships and acquisitions.
As part of the transition beyond COVID-19, the Company conducted a
foundational piece of market research early in 2022, which directed the
organic development of the post-COVID-19 diagnostics portfolio towards high
growth infectious disease areas, including respiratory, gastro-intestinal
infections, transplant, and insect-borne pathogens.
Whilst our core strategy has not changed, the 2022 trading environment was
much more volatile than expected and the Company saw a sharp reduction in
COVID-19 sales, falling from £10.6m in Q1 2022 to £4.1m for the total Q2-Q4
period. This decline was much faster than previously expected, prompting
management to accelerate our post-COVID-19 product development efforts, both
internally and externally. Following a strategic review, we also executed a
significant cost rightsizing including the discontinuation of the Microgen
Bioproducts and Lab21 Healthcare businesses whilst protecting investment in
R&D and commercial activities. As we accelerate our product development it
is also worth noting that the application of the In Vitro Diagnostic
Regulation (IVDR) from May 2022 means that product development cycles for
clinical products from design to launch are now likely to be c.24 months, vs 6
months under the previous IVD process.
Portfolio development
Product development
In July 2022 the Company relaunched its extensive and established research use
only (RUO) portfolio, ensuring our primers and probes were best-in-class to
reliably target current pathogens. By year-end, the team had optimised and
verified the redesigns of 25 RUO products, and also developed new RUO assays
for Monkeypox and Adenovirus F41.
As the product development pathway for clinical products has been
significantly extended under IVDR, the Company will now develop RUO versions
for its target therapeutic areas as a first step. This activity is well
underway targeting the development of up to ten new multiplex products in 2023
in the areas of gastrointestinal, respiratory and insect-borne infections.
Through a combination of internal R&D and third-party sourcing, the
Company has already launched a portfolio of CE marked clinical assays in the
following areas:
· A winter respiratory panel with the internally developed
genesig™ Real-time PCR SARS-CoV- 2 Winterplex launched in Europe and CTDA
approved for UK launch in October 2022
· Sexually transmitted infections (STI) (e.g., Chlamydia
trachomatis, Neisseria gonorrhoeae, Trichomonas vaginalis)
· Gastrointestinal infections (e.g., Clostridium difficile,
Enterovirus)
· Respiratory (RI) (e.g., Mycoplasma pneumoniae)
· Two single analyte transplant viral assay panels for the
Epstein-Barr virus and BK virus for use on open instrument platforms during
the period.
These products and our enhanced workflow solution will be targeted to
indications where there is a need for cost-effective, rapid, accurate and
highly precise diagnostic testing. Based on market research, we believe the
key market for this offering is in routine testing in mid-to-low volume spoke
laboratories and non-routine services in hub laboratories. As identified in
April 2022 at the strategy update, we will target these markets due to our
differentiated customer offering.
For Europe, which is our initial target geography with CE marked products, the
Company estimates a market size of circa £470m growing at a CAGR of 10%. The
mid-term goal is to expand our offering to customers worldwide.
Our molecular portfolio is complemented by an extensive range of lateral flow
diagnostic tests (LFTs) for clinical use. The range aligns with the target
disease areas covered by our molecular portfolio and has been further enhanced
with the launch of two new LFT readers for use in conjunction with a number of
key assays within Novacyt's Pathflow™ product portfolio. The readers are
designed to provide digital test results based on optical imaging technology,
thereby removing the ambiguity of manually interpreting a reading. The result
is available in a matter of seconds (~10-12 secs) in a digital form that can
be exported to other systems.
Instrumentation & workflow
Novacyt has made considerable progress enhancing its post-COVID-19 integrated
sample-to-result molecular workflow solution. We have validated a nucleic acid
extraction system and have launched an automated liquid handling system
(CO-Prep™) for assay setup that complements our proprietary q16 and q32
instruments and user friendly direct-to-PCR assays to deliver an end-to-end,
fast scalable workflow solution capable of processing over 1,000 tests per
day. The new workflow reduces hands-on time and risk of contamination whilst
providing robust sample stewardship to reduce the chance of human error. The
complete workflow platform can be used where current decentralised
sample-to-result solutions are not easily scalable, slow, and costly.
COVID-19 portfolio
To ensure Novacyt remains well positioned for any future COVID-19 outbreaks in
both developed and developing markets, the Company has consolidated its
portfolio. To this end, Novacyt secured CE mark accreditation for its
saliva-based PathFlow™ COVID-19 Rapid Antigen Self-Test and an ambient
version of its PROmate™ COVID-19 2G assay designed for international
shipping. Both tests complement the Company's established genesig™ COVID-19
Real-Time PCR portfolio and PROmate™ COVID-19 direct to PCR 1G and 2G
assays.
Commercialisation
During the period, Novacyt has focused on deploying talent in key geographies
and optimising its global distributor network to ensure optimal commercial
coverage for its recently relaunched RUO portfolio and its growing clinical
offering. Through this work, coverage has been increased across EMEA and the
Company has begun conducting distributor training on its full portfolio,
including its expanded clinical portfolio and workflow.
· Commercialised Winterplex panel with sales to hospitals in both
the UK and Europe.
· Partnered with a global fisheries company in the development of
tests and workflow for more efficient management of fish stocks; initial sales
have been focused on their North American subsidiary and we are now engaging
with other global sites to identify their testing needs
· As the APAC region begins to open up post-COVID, we are
re-engaging with new and existing distributors across the region with the RUO
reagent and instrument products
· Signed a contract with a leading global non-governmental
organisation (NGO) to support the detection of arboviruses, including dengue,
Zika and Chikungunya. This has now been extended to include West Nile fever,
hepatitis A & E and haemorrhagic fever, with further orders received. We
also anticipate sales of our RSV test to come in the near term and they are
currently evaluating our Winterplex product for deployment across Africa
· Partnered with a leading healthcare company in India to supply
both reagents and instrumentation
The Company expects to launch an updated customer website in Q3, that will
replace and consolidate former legacy sites. All commerce activity will be
conducted from this single site, which will include webshop functionality, as
well as a customer portal offering instrument registration and software
upgrades.
Business development
In addition to the internal development of the new portfolio, the Company
continues to assess strategic M&A, partnership and licensing opportunities
as a priority to add scale and diversification to support the long-term growth
of the business.
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.
DHSC dispute
On 25 April 2022, the Company was notified that the Department of Health and
Social Care (DHSC) had issued a claim against Primer Design Ltd and Novacyt
S.A. for £134.6m in relation to the contract dispute announced by the Company
on 9 April 2021 regarding its second supply contract with the DHSC, announced
on 29 September 2020. 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 £81.5m against the DHSC. On 30 January 2023 the UK High Court
notified Novacyt that the hearing of the case between Primer Design Ltd /
Novacyt 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.
The Company is unable to provide additional comment at this time but will
provide further updates as appropriate and to the extent it is permitted to do
so.
Current trading and outlook
Group revenue for Q1 2023 is expected to be circa £1.7m of which £0.3m
relates to COVID-19 sales. This has been a slower than expected start to the
year particularly in instrumentation where we are seeing an over-hang of
inventories that customers built up during the pandemic. Looking forward we
expect the run-rate for both RUO and instrument sales to increase and we
should also observe sales from our clinical portfolio coming through towards
the latter part of the year.
Last year we implemented a number of strategic changes to transition the
business beyond COVID-19 and position Novacyt for long-term sustainable
growth. We are evaluating a number of opportunities that would accelerate
this growth and believe we are well placed to build on the strength of our
core business as we continue to deliver our strategy, expanding both our
product portfolio and geographic footprint, to build a leading global clinical
diagnostics company focused on unmet needs in infectious diseases.
FINANCIAL REVIEW
Overview
Novacyt's 2022 performance was impacted by a faster than anticipated decline
in COVID-19 related sales, and as such is reporting a loss for the year.
During the second half of 2022 the Group made good progress on i)
transitioning from its reliance on COVID-19 revenue and ii) right sizing its
cost base. During the year the Group carried out a large restructuring
exercise to reduce its opex cost base, which saw over 100 employees leave the
Group.
Novacyt generated sales of £21.0m, an EBITDA loss of £13.5m and a loss after
tax of £25.7m.
Cash at the end of 2022 was £87.0m, which provides the Group with a solid
foundation on which to build and execute on its future strategy.
Discontinued operations
In early 2022, Novacyt carried out a strategic review of the Lab21 Healthcare
and Microgen Bioproducts 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. Novacyt announced its intention to discontinue both businesses
in April 2022, and they had ceased day to day trading as at the end of June
2022.
In accordance with IFRS 5, the net results of Lab21 Healthcare and Microgen
Bioproducts have been reported on a separate line "Loss from discontinued
operations" in the consolidated income statement for FY 2022 and 2021.
Revenue
Revenue for 2022 fell to £21.0m compared with £92.6m in 2021, driven by
reduced demand for COVID-19 testing as we emerge from the pandemic. Primer
Design delivered sales totalling £19.6m whilst IT-IS International delivered
sales of £1.4m for 2022.
Gross profit
The business delivered a gross profit of £5.7m (27%), compared with £28.2m
(30%) in 2021. The margin, at 27%, is significantly below the Group's historic
margin (60%+) predominantly due to the impact of stock in the form of i)
booking a higher stock provision than normal as a result of lower forecast
COVID-19 sales and ii) writing-off stock that had not been provided for
previously. Excluding the impact of these items, the margin would be in excess
of 60%. The 2021 gross profit was impacted by the £35.8m one-time cost of
sales exceptional charge relating to the DHSC dispute.
Operating expenditure
Group operating costs fell by £5.8m to £19.3m in 2022 compared with £25.1m
in 2021. Savings are mainly due to lower staff costs, as headcount for the
continuing operations has fallen from circa 239 in December 2021 to circa 137
in December 2022 as a result of the Group-wide restructuring programme.
Further savings have been made in legal and professional fees, commercial
insurance, as the business contracts, and facilities.
The business continued to invest in research and development, which saw a
year-on-year increase in expenditure that supported bringing a number of new
products to the market.
EBITDA
The Group reported an EBITDA loss of £13.5m for 2022 compared with a profit
of £3.1m in 2021. The £16.6m swing from EBITDA profitability in 2021 to an
EBITDA loss in 2022 is driven by a reduced gross profit contribution of
£22.5m as a result of lower sales, partially offset by a £5.8m fall in
operating expenditure.
Operating loss
The Group reported an operating loss of £23.4m compared with a 2021 loss of
£3.9m, predominantly driven by lower sales. Year-on-year, depreciation and
amortisation charges have increased by £0.3m to £2.1m due to the annualised
effect of reporting twelve months of depreciation on a number of material
asset additions during late 2021.
Other operating expenses have increased from £5.2m to £7.7m. The main
items making up the 2022 charge are i) a £5.2m impairment charge in relation
to the goodwill and intangible assets associated with the IT-IS International
acquisition due to reduced future expected cash flow generation, ii) £1.3m
restructuring expenses predominantly covering redundancy payments, iii) £0.9m
costs in relation to the ongoing DHSC contract dispute and iv) £0.3m of other
expenses.
Loss after tax from continuing operations
The Group reported a loss after tax from continuing operations of £22.2m,
compared with a loss of £6.0m in 2021. Other financial income and expenses
netted to a £3.3m income compared with a £1.7m charge in 2021. The two key
items making up the balance are i) a £2.4m net financial foreign exchange
gain mainly resulting from revaluations of the 2017 to 2020 LTIP scheme
liability and bank and intercompany accounts held in foreign currencies and
ii) with interest rates rising the Group received £0.6m interest on deposits
held in bank accounts. Taxation at £2.1m is predominantly as a result of the
movement in deferred tax.
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 statement for 2022 and 2021.
Lab21 Products reported a loss after tax of £3.5m in 2022 versus a loss of
£3.7m in 2021. The 2022 loss includes closure costs totalling circa £1.8m
made up of i) a £1.0m impairment charge of right-of-use assets (Camberley
facility lease), ii) £0.6m impairment charge of remaining property, plant and
equipment and iii) £0.2m redundancy costs. The 2022 tax expense of £0.4m
is primarily due to the release of all deferred tax balances, as unused tax
losses cannot be utilised by the Group post closure.
Earnings Per Share
2022 saw a loss per share of £0.36 compared to a loss per share of £0.14 in
2021, as a result of the loss widening.
Statement of financial position
Dec-22 Dec-21 Dec-22 Dec-21
£'000 £'000 £'000 £'000
Goodwill 6,646 11,471 Share capital and premium 54,633 54,646
Right-of-use assets 521 1,788 Retained earnings and reserves 60,583 87,169
Property, plant and equipment 2,751 4,594 Total equity 115,216 141,815
Deferred tax assets 624 3,143
Other non-current assets 3,121 3,918 Deferred tax liabilities 1,041 1,224
Total non-current assets 13,663 24,914 Lease liabilities long-term 263 1,446
Other provisions and long-term liabilities 145 308
Inventories 3,027 11,461 Total non-current liabilities 1,449 2,978
Trade and other receivables 33,662 38,499
Tax receivables 1,149 5,034 Lease liabilities short-term 609 424
Other current assets 2,427 2,043 Trade and other liabilities 2,787 17,190
Cash and cash equivalents 86,973 101,746 Other provisions and short-term liabilities 20,840 21,290
Total current assets 127,238 158,783 Total current liabilities 24,236 38,904
TOTAL ASSETS 140,901 183,697 TOTAL EQUITY AND LIABILITIES 140,901 183,697
Non-current assets
Goodwill has fallen from £11.5m in 2021 to £6.6m in 2022. Following the 2022
impairment review, goodwill associated with the acquisition of IT-IS
International Ltd has been impaired by £5.2m as a result of reduced future
expected cash flow. The remaining £0.3m is due to exchange revaluations on
the acquisition of Primer Design goodwill balance, which is held in Euros.
Right-of-use assets have decreased from £1.8m at 31 December 2021 to £0.5m
at 31 December 2022, largely as a result of fully impairing the right-of-use
asset associated with the Camberley facility following the closure of the
Lab21 Products business that operated from that site.
Property, plant and equipment has decreased by £1.8m from 31 December 2021 to
£2.8m at 31 December 2022, driven by four main factors, i) £1.0m
depreciation costs, ii) £0.6m impairment costs for fixed assets associated
with the Lab21 Products business, iii) £0.4m impairment costs for lab
equipment that will not be of use to the Novacyt Group and iv) offset by
capital purchases of £0.2m.
Deferred tax assets have decreased from £3.1m at 31 December 2021 to £0.6m
at 31 December 2022. The 2022 balance relates to Primer Design, where a
£0.6m deferred tax asset, relating to carried forward tax losses, has been
recognised to offset its £0.6m deferred tax liability on accelerated capital
allowances. The remaining deferred tax assets have not been recognised at
31 December 2022 on the basis that they may not be recoverable in the
near-term. At 31 December 2022, the Group has unused tax losses of over
£70.9m (covering France & the UK) available for offset against future
relevant profits and their period of use is unlimited.
Other non-current assets have reduced by £0.8m to £3.1m as at 31 December
2022 largely driven by the amortisation of intangible assets.
Current assets
Inventories and work in progress has fallen significantly from £11.5m at 31
December 2021 to £3.0m at 31 December 2022, this is mainly due to i)
providing for stock that is at risk of not being sold due to the fall in
expected future demand for COVID-19 related products and ii) writing off stock
that has expired in 2022 that was not previously provided for.
Trade and other receivables has fallen by £4.8m to £33.7m at 31 December
2022 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 £8.3m VAT
receivable balance (December 2021: £8.2m), 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 £3.9m to £1.1m at 31 December 2022, as the
Group received a refund for the overpayment of 2020 corporation tax from HMRC
in March 2022. The current balance relates to 2021 losses that can be carried
back for relief against 2020 taxable profits totalling £0.5m and a Research
and Development Expenditure Credit (RDEC) accrual covering 2021 and 2022
totalling £0.6m.
Other current assets have increased to £2.4m from £2.0m in 2021, driven by a
£0.2m increase in prepayments and a £0.2m increase in short-term deposits,
which includes rent deposits due back to the Group. Prepayments at 31 December
2022 include the annual Group commercial insurance, rent, rates, prepaid
support costs and stock that had not been delivered at the reporting date.
Current liabilities
Contingent consideration fell from £0.8m to £nil in 2022 as a result of
settling the final earnout milestones associated with the IT-IS International
acquisition, concluding the payments for the acquisition.
Short-term provisions remained flat year-on-year at £20.3m (2021: £20.0m). A
product warranty provision for £19.8m 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 remained unchanged in 2022.
Trade and other liabilities fell to £2.8m at 31 December 2022 from £17.2m at
31 December 2021, predominantly as a result of payments made during the year
in relation to the 2017 to 2020 LTIP scheme, together with a £2.6m decrease
in trade payables and accrued invoices in line with reduced sales.
Non-Current Liabilities
Non-current liabilities has fallen by £1.5m to £1.4m at 31 December 2022.
The main driver for this is the reduction in the long-term lease liability as
a result of Microgen Bioproducts negotiating the surrender of its Watchmoor
Point leased facility based in Camberley, which was agreed in 2022 and settled
in early 2023.
Cash flow
Cash held at the end of 2022 totalled £87.0m compared with £101.7m at 31
December 2021. Net cash used in operating activities was £13.7m for 2022 made
up of a working capital outflow of £0.2m and an EBITDA loss of £13.5m,
compared to a cash inflow of £15.7m in 2021.
Net cash used in investing activities fell to £0.6m from £5.0m in 2021.
Capital expenditure in 2022 fell to £0.4m compared with £4.1m in 2021, when
the Group heavily invested in insourcing manufacturing. Acquisition related
cash outflows reduced by £0.1m year-on-year as a result of the final earnout
milestone associated with the IT-IS acquisition being lower than the previous
year's payment. In addition, the Group has benefited from interest rate
rises throughout 2022, generating £0.6m interest income from its cash
balances.
Net cash used in financing activities in 2022 totalled £0.5m compared with
£0.6m in 2021, with the main cash outflow continuing to be lease payments.
The Group remains debt free at 31 December 2022.
Patent Box
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
(FY2022) UK corporation tax rate of 19%.
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.
Announcement Note
The information included in this announcement is extracted from the audited
Group Consolidated Accounts. Defined terms used in the announcement refer to
terms as defined in the Group Consolidated Accounts unless the context
otherwise requires. This announcement should be read in conjunction with, and
is not a substitute for, the full Group Consolidated Accounts.
Chief Financial Officer
Novacyt S.A.
Consolidated income statement for the years ended 31 December 2022 and 31
December 2021
Amounts in £'000 Notes Year ended Year ended
31 December
31 December
2022
2021 (*)
Continuing Operations
Revenue 21,040 92,603
Cost of sales 4 -15,294 -28,607
Cost of sales - exceptional 5 - -35,770
Total cost of sales -15,294 -64,377
Gross profit 5,746 28,226
Sales, marketing and distribution expenses -4,826 -6,225
Research and development expenses -5,047 -4,645
General and administrative expenses 6 -12,090 -16,359
Governmental subsidies 562 308
Operating (loss) / profit before exceptional items -15,655 1,305
Other operating income 7 - 65
Other operating expenses 7 -7,738 -5,286
Operating loss after exceptional items -23,393 -3,916
Financial income 8 3,969 787
Financial expense 8 -629 -2,531
Loss before tax -20,053 -5,660
Tax expense 9 -2,148 -349
Loss after tax from continuing operations -22,201 -6,009
Loss from discontinued operations 17 -3,529 -3,719
Loss after tax attributable to owners of the Company (**) -25,730 -9,728
Loss per share (£) 10 -0.36 -0.14
Diluted loss per share (£) 10 -0.36 -0.14
Loss per share from continuing operations (£) 10 -0.31 -0.09
Diluted loss per share from continuing operations (£) 10 -0.31 -0.09
Loss per share from discontinued operations (£) 10 -0.05 -0.05
Diluted loss per share from discontinued operations (£) 10 -0.05 -0.05
* The 2021 consolidated income statement is presented to reflect the impact of
the application of IFRS 5 relative to discontinued operations, by stating the
Lab21 Products activity on a single line 'Loss from discontinued operations'.
** There are no non-controlling interests.
Consolidated statement of comprehensive income for the years ended 31 December
2022 and 31 December 2021
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021 (*)
Loss for the period recognised in the income statement -25,730 -9,728
Items that may be subsequently reclassified to profit or loss:
Translation reserves -843 862
Total comprehensive loss -26,573 -8,866
Comprehensive loss attributable to:
Owners of the Company (**) -26,573 -8,866
* The 2021 consolidated income statement is presented to reflect the impact of
the application of IFRS 5 relative to discontinued operations, by stating the
Lab21 Products activity on a single line 'Loss from discontinued operations'.
**There are no non-controlling interests.
Statement of financial position for the years ended 31 December 2022 and 31
December 2021
Amounts in £'000 Notes Year ended Year ended
31 December
31 December
2022
2021
Goodwill 11 6,646 11,471
Other intangible assets 3,121 3,710
Property, plant and equipment 2,751 4,594
Right-of-use assets 521 1,788
Non-current financial assets - 144
Deferred tax assets 624 3,143
Other long-term assets - 64
Total non-current assets 13,663 24,914
Inventories and work in progress 12 3,027 11,461
Trade and other receivables 13 33,662 38,499
Tax receivables 1,149 5,034
Prepayments and short-term deposits 2,418 2,034
Investments short-term 9 9
Cash and cash equivalents 86,973 101,746
Total current assets 127,238 158,783
Total assets 140,901 183,697
Lease liabilities short-term 609 424
Contingent consideration short-term - 836
Provisions short-term 14 20,300 19,956
Trade and other liabilities 15 2,787 17,190
Other current liabilities 540 498
Total current liabilities 24,236 38,904
Net current assets 103,002 119,879
Lease liabilities long-term 263 1,446
Provisions long-term 14 95 308
Deferred tax liabilities 1,041 1,224
Other long-term liabilities 50 -
Total non-current liabilities 1,449 2,978
Total liabilities 25,685 41,882
Net assets 115,216 141,815
Statement of financial position for the years ended 31 December 2022 and 31
December 2021 (continued)
Amounts in £'000 Notes Year ended Year ended
31 December
31 December
2022
2021
Share capital 16 4,053 4,053
Share premium account 50,671 50,671
Own shares -91 -78
Other reserves 16 -2,017 -1,174
Equity reserve 1,155 1,155
Retained earnings 16 61,445 87,188
Total equity - owners of the Company 115,216 141,815
Total equity 115,216 141,815
Statement of changes in equity for the years ended 31 December 2022 and 31
December 2021
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 2021 4,053 50,671 -49 1,155 -2,407 379 -8 -2,036 96,916 150,710
Translation differences - - - - - 862 - 862 - 862
Loss for the period - - - - - - - - -9,728 -9,728
Total comprehensive income / (loss) for the period - - - - - 862 - 862 -9,728 -8,866
Own shares acquired / sold in the period - - -29 - - - - - - -29
Balance at 31 December 2021 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
Statement of cash flows for the years ended 31 December 2022 and 31 December
2021
Amounts in £'000 Notes Year ended Year ended
31 December
31 December
2022
2021
Net cash (used in) / from operating activities 18 -13,729 15,689
Operating cash flows from discontinued operations -1,955 2,180
Operating cash flows from continuing operations -11,774 13,509
Investing activities
Purchases of patents and trademarks -260 -330
Purchases of property, plant and equipment -156 -3,770
Variation of deposits -12 16
Acquisition of subsidiary net of cash acquired -787 -943
Interest received 638 40
Net cash used in investing activities -577 -4,987
Investing cash flows from discontinued operations 28 -247
Investing cash flows from continuing operations -605 -4,740
Financing activities
Repayment of lease liabilities -503 -610
Purchase of own shares - net -13 -29
Net cash used in financing activities -516 -639
Financing cash flows from discontinued operations -142 -261
Financing cash flows from continuing operations -374 -378
Net (decrease) / increase in cash and cash equivalents -14,822 10,063
Cash and cash equivalents at beginning of year 101,746 91,765
Effect of foreign exchange rate changes 49 -82
Cash and cash equivalents at end of year 86,973 101,746
Notes
1. CORPORATE INFORMATION
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. Its registered office is located at 13 Avenue Morane
Saulnier, 78140 Vélizy Villacoublay.
2. BASIS OF ANNOUNCEMENT
2.1 Basis of Preparation
The consolidated financial statements for the fiscal year ended 31 December
2022 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. They are prepared and
presented in Great British Pounds ("GBP"), rounded to the nearest thousand
("£'000s").
2.2 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 17).
In the statement of cash flows the net cash flow attributable to the
operating, investing and financing activities of discontinued operations have
been disclosed separately.
No adjustments have been made in the statement of financial position.
Comparatives for discontinued operations are restated.
2.3 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 April 2024. In
making this assessment, the Directors have considered the following elements:
- The working capital requirements of the business;
- A positive cash balance at 31 December 2022 of £86,973,000;
- Payment of the Long-Term cash Incentive Plan ("LTIP") that commenced
in 2021 and vests at the end of 2023; and
- The DHSC commercial dispute having a trial date set for June 2024.
The forecast prepared by the Group shows that it is able to cover its cash
needs during the financial year 2023 up until April 2024.
2.4 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.
2.4.1 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 DHSC
dispute, further details are disclosed in note 20.
· 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 the year end, the Group had trade receivables of £25,485,000 against which
a credit loss provision of £214,000 has been applied. At the date of signing
the financial statements, £23,957,000 of the 31 December 2022 receivables,
relating to products delivered during 2020, were overdue due to the contract
dispute with the Department of Health and Social Care "DHSC" (see notes 20 and
21). Management considers it to be more likely than not that the 31 December
2022 balances are recoverable; this is a significant judgement.
· Provisions
The carrying value of provisions at 31 December 2022 and 2021 are as per the
table below:
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Provisions for restoration of premises 425 308
Provision for litigation 157 157
Provisions for product warranty 19,813 19,799
Total provisions 20,395 20,264
o Provisions for restoration of premises
The value of provision required is determined by Management on the basis of
available information, experience and, in some cases, expert estimates. When
these obligations are settled, the amount of the costs or penalties that are
ultimately incurred or paid may differ significantly from the amounts
initially provisioned. Therefore, these provisions are regularly reviewed and
may have an effect on the Group's future results.
To the Group's knowledge, there is no indication to date that the parameters
adopted as a whole are not appropriate, and there are no known developments
that could significantly affect the amount of provision.
o 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 notes 20
and 21.
2.4.2 Key sources of estimation uncertainty
The Group has a number of key sources of estimation uncertainty. Of these
items, only the measurement of goodwill (see note 11) 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.
The carrying amount of goodwill in the statement of financial position and
related impairment loss over the period is shown below:
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Goodwill Primer Design 6,384 6,053
Cumulative impairment of goodwill - -
Net value 6,384 6,053
Goodwill IT-IS International 9,437 9,437
Cumulative impairment of goodwill -9,175 -4,019
Net value 262 5,418
Total goodwill 6,646 11,471
Sensitivity analysis has been performed on the goodwill balance. There is
significant headroom associated with the Primer Design balance, but there is
limited headroom on the IT-IS International goodwill balance, which could
result in future impairments. The goodwill sensitivity analysis is presented
in note 11.
3. 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 announcement to
discontinue the Microgen Bioproducts and Lab21 Healthcare businesses earlier
this year, the Lab21 Products segment, which is made up of these businesses,
is being 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 is being 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 represents intercompany transactions across the Group that have not been
allocated to an individual operating segment. It is not a discreet segment.
The Chief Operating Decision Maker is the Chief Executive Officer.
Headcount
The average headcount by segment is presented in the table below:
Segment 2022 2021
Primer Design 141 169
Lab21 Products 21 45
IT-IS International 31 38
Corporate 29 24
Total headcount 222 276
Breakdown of revenue by operating segment and geographic area
o Year ended 31 December 2022
Amounts in £'000 Primer Design IT-IS International Total
Geographical area
United Kingdom 10,051 72 10,123
Europe (excluding UK) 3,372 477 3,849
America 4,134 347 4,481
Asia-Pacific 1,373 479 1,852
Middle East 347 30 377
Africa 357 1 358
Total revenue 19,634 1,406 21,040
o Year ended 31 December 2021
Amounts in £'000 Primer Design IT-IS International Total
Geographical area
United Kingdom 41,944 164 42,108
Europe (excluding UK) 31,045 355 31,400
America 8,047 782 8,829
Asia-Pacific 7,262 1,376 8,638
Middle East 501 17 518
Africa 1,053 57 1,110
Total revenue 89,852 2,751 92,603
Breakdown of result by operating segment
o Year ended 31 December 2022
Amounts in £'000 Primer Design Lab21 Products IT-IS International Corporate Intercompany Total
eliminations
Revenue 19,634 - 1,417 - -11 21,040
Cost of sales -14,710 - -2,026 - 1,442 -15,294
Sales and marketing costs -4,231 - -321 -274 - -4,826
Research and development -4,458 - -589 - - -5,047
General and administrative -7,668 - -1,046 -1,261 - -9,975
Governmental subsidies 490 - 72 - - 562
Earnings before interest, tax, depreciation and amortisation as per management -10,943 - -2,493 -1,535 1,431 -13,540
reporting
Depreciation and amortisation -1,699 - -405 -44 33 -2,115
Operating (loss) / profit before exceptional items -12,642 - -2,898 -1,579 1,464 -15,655
o Year ended 31 December 2021
Amounts in £'000 Primer Design Lab21 Products IT-IS International Corporate Intercompany Total
eliminations
Revenue 89,856 - 9,270 - -6,523 92,603
Cost of sales -27,582 - -5,131 - 4,106 -28,607
Cost of sales - exceptional -37,192 - -3,984 - 5,406 -35,770
Sales and marketing costs -5,659 - -228 -338 - -6,225
Research and development -4,148 - -497 - - -4,645
General and administrative -12,439 - -1,493 -637 - -14,569
Governmental subsidies 254 - 54 - - 308
ADJUSTED Earnings before interest, tax, depreciation, amortisation and cost of
sales - exceptional, as per management reporting
40,282 - 1,975 -975 -2,417 38,865
Earnings before interest, tax, depreciation and amortisation as per management 3,090 - -2,009 -975 2,989 3,095
reporting
Depreciation and amortisation -1,372 - -404 -24 10 -1,790
Operating profit / (loss) before exceptional items 1,718 - -2,413 -999 2,999 1,305
Assets and liabilities are not reported to the Chief Operating Decision Maker
on a segmental basis and are therefore not disclosed.
Please note that in accordance with IFRS 5 the results of the Lab21 Products
segment for 2022 and 2021 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.
4. Cost of sales
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Cost of inventories recognised as an expense 17,509 20,373
Change in stock provision -6,473 -10,404
Freight costs 73 405
Direct labour 4,141 17,624
Product warranty 14 11
Other 30 598
Total cost of sales 15,294 28,607
Total cost of sales has fallen year on year reflecting the reduction in sales.
In 2022 the stock provision relating to continuing operations decreased by a
net £6,473,000 (2021: £10,404,000). A large amount of stock, which had
previously been provided for, was written off and disposed of during 2022,
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.
A large amount of stock, which had previously been provided for, was written
off and disposed of during 2021, with the cost being charged to 'Cost of
inventories recognised as an expense' and a corresponding release of the stock
provision being made.
5. Cost of sales - exceptional
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Cost of inventories recognised as an expense - 4,802
Change in stock provision - 26,098
Direct labour - 4,133
Other - 737
Total cost of sales - exceptional - 35,770
During 2022 no costs were classified as cost of sales - exceptional relating
to the DHSC dispute.
Due to the DHSC dispute mentioned in note 20, Management booked a number of
one-off, non-recurring cost of sales charges in 2021. Two of the key items
were a £26,098,000 stock provision, as a result of the Group buying stock to
fulfil expected future DHSC orders that did not materialise, and the expensing
of £6,884,000 of stock delivered to the DHSC which has not been paid for as
it is now included in the ongoing contract dispute.
6. General and administrative expenses
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Purchases of non-stored raw materials and supplies 323 376
Lease and similar payments 477 397
Maintenance and repairs 370 499
Insurance premiums 1,024 1,451
Legal and professional fees 1,622 2,404
Banking services 55 88
Employee compensation and social security contributions 5,144 7,890
Depreciation and amortisation of property, plant and equipment and intangible 2,115 1,790
assets
Other general and administrative expenses 960 1,464
Total general and administrative expenses 12,090 16,359
Legal and professional fees include advisors' fees, audit fees and legal fees.
Labour costs have reduced year on year predominantly as a result of the
restructuring programming undertaken by the Group in 2022 to reduce its cost
base.
Depreciation and amortisation of property, plant and equipment and intangible
assets increased in 2022 due to the annualised effect of reporting twelve
months of depreciation on a number of material asset additions during late
2021.
Other general and administrative expenses include costs such as building
rates, regulatory fees and IT expenses. 2021 included approximately £500,000
charitable donations.
7. Other operating income and expenses
Amounts in £'000 Year ended Year ended
31 December 2022
31 December 2021
Other operating income - 65
Total other operating income - 65
Impairment of IT-IS International goodwill -5,156 -4,019
DHSC contract dispute costs -927 -802
Restructuring expenses -1,255 -422
Acquisition related expenses -325 -
Other expenses -75 -43
Total other operating expenses -7,738 -5,286
Operating income
Other operating income in 2021 predominantly relates to the settlement of a
legal claim against a third party.
Operating expenses
Goodwill associated with the IT-IS International Ltd acquisition was impaired
in 2022 and 2021 due to reduced future expected cash flow generation.
DHSC contract dispute costs relate to legal and professional fees and product
storage costs incurred in the ongoing commercial dispute.
Restructuring expenses have increased in 2022 driven by the Group
restructuring programme.
Acquisition related expenses primarily include costs associated with potential
merger and acquisition targets.
8. Financial income and expense
Amounts in £'000 Year ended Year ended
31 December
31 December
2022 2021
Financial foreign exchange gains 2,506 337
Discount of financial instruments 3 33
Interest received from discontinued operations 779 363
Other financial income 681 54
Total financial income 3,969 787
Interest on IFRS 16 liabilities -45 -66
Financial foreign exchange losses -139 -2,214
Discount of financial instruments -31 -54
Interest paid to discontinued operations -413 -150
Other financial expense -1 -47
Total financial expense -629 -2,531
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. Income tax
The standard rate of corporation tax applied to reported profit is 19%, which
is the tax rate applicable to the companies in the United Kingdom for the
financial year 2022 (due to rise to 25% on 1 April 2023). It was 19% for the
year 2021.
Taxation for other jurisdictions (mainly France) is calculated at the rates
prevailing in the respective jurisdictions.
The Group's tax charge is the sum of the total current and deferred tax.
Amounts in £'000 Year ended Year ended
31 December
31 December
2022 2021
Current tax expense
Current year (expense) / income -224 411
Deferred tax expense
Deferred tax expense -1,924 -760
Total taxation expense in the income statement -2,148 -349
The expense for the period can be reconciled to the loss before tax as
follows:
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Loss before taxation -20,053 -5,660
Tax at the UK corporation tax rate (2022 and 2021: 19%) 3,810 1,075
Effect of different tax rates of subsidiaries operating in other jurisdictions 95 115
Change of the tax rate for the calculation of the deferred tax 3,571 -
Effect of non-deductible expenses and non-taxable income -1,224 -822
Derecognition of deferred tax assets -8,047 -
Change in unrecognised deferred tax assets -287 -712
Other adjustments -66 -5
Total taxation expense for the year -2,148 -349
At 31 December 2022, the Group has unused tax losses of £70,909,000 (2021:
£9,432,000) available for offset against future relevant profits and their
period of use is unlimited.
The key item making up the non-deductible expenses in 2022 and 2021 is the
impairment of goodwill.
Matters affecting the tax charge
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 19%.
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.
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 31 December 2022 there are no outstanding dilutive
instruments.
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Net loss attributable to owners of the Company -25,730 -9,728
Impact of dilutive instruments - -
Net diluted loss attributable to owners of the Company -25,730 -9,728
Weighted average number of shares 70,626,248 70,626,248
Impact of dilutive instruments - -
Weighted average number of diluted shares 70,626,248 70,626,248
Loss per share (£) -0.36 -0.14
Diluted loss per share (£) -0.36 -0.14
Loss per share from continuing operations (£) -0.31 -0.09
Diluted loss per share from continuing operations (£) -0.31 -0.09
Loss per share from discontinued operations (£) -0.05 -0.05
Diluted loss per share from discontinued operations (£) -0.05 -0.05
11. Goodwill
Goodwill is the difference recognised, upon consolidation of a company,
between the fair value of the purchase price of its shares and the net assets
acquired and liabilities assumed, measured in accordance with IFRS 3.
Cost £'000
At 1 January 2021 31,982
Exchange differences -1,624
At 31 December 2021 30,358
Exchange differences 1,144
At 31 December 2022 31,502
Accumulated impairment losses
At 1 January 2021 14,105
Impairment of the IT-IS International goodwill 4,019
Impairment of the Lab21 Products goodwill 1,822
Exchange differences -1,059
At 31 December 2021 18,887
Impairment of the IT-IS International goodwill 5,156
Exchange differences 813
At 31 December 2022 24,856
Carrying value at 31 December 2020 17,877
Carrying value at 31 December 2021 11,471
Carrying value at 31 December 2022 6,646
Primer Design
The impairment testing of the CGU as at 31 December 2022 was carried out using
the DCF method, with the key assumptions as follows:
o Five-year business plan;
o Extrapolation of cash flows beyond five years based on a growth rate of
1.5%; and
o Discount rate corresponding to the expected rate of return on the market for
a similar investment, regardless of funding sources, equal to 12.1%.
The implementation of this approach demonstrated that the value in use
amounted to £36,112,000, which is greater than the carrying amount of this
asset. As such, no impairment was recognised in the year ended 31 December
2022.
IT-IS International
The impairment testing of the CGU as at 31 December 2022 was carried out using
the DCF method, with the key assumptions as follows:
o Five-year business plan;
o Extrapolation of cash flows beyond five years based on a growth rate of
1.5%; and
o Discount rate corresponding to the expected rate of return on the market for
a similar investment, regardless of funding sources, equal to 12.1%.
The implementation of this approach demonstrated that the value in use
amounted to £1,992,000, which is lower than the carrying amount of this
asset. As such an impairment charge has been recognised in the year ended 31
December 2022 due to reduced future expected revenue generation.
12. Inventories and work in progress
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Raw materials 8,562 19,382
Work in progress 2,854 3,350
Finished goods 3,404 7,831
Stock provisions -11,793 -19,102
Total inventories and work in progress 3,027 11,461
Total inventories and work in progress has reduced significantly since
December 2021, predominantly as a result of providing for, writing off and
disposing of stock that had either expired or is deemed excess stock as a
result of lower future forecasted COVID-19 sales.
Stock provisions have fallen as a result of provided for stock being written
off and disposed of during 2022.
13. Trade and other receivables
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Trade and other receivables 25,485 30,279
Expected credit loss provision -214 -89
Tax receivables - Value Added Tax 8,312 8,213
Receivables on sale of businesses 69 66
Other receivables 10 30
Total trade and other receivables 33,662 38,499
Trade receivables have decreased since 31 December 2021 in line with falling
monthly sales.
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 annual 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 £8,312,000 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.
The movement in the expected credit loss provision is shown below:
Year ended Year ended
31 December
31 December
2022
2021
Amounts in £'000
89 160
Balance at the beginning of the period
Impairment losses recognised 453 100
Amounts written off during the year as uncollectible -14 -44
Impairment losses derecognized -157 -
Amounts recovered during the year -157 -127
Balance at the end of the period 214 89
The split by maturity of the clients' receivables is presented below:
Year ended Year ended
31 December
31 December
2022
2021
Amounts in £'000
970 5,818
Less than one month
Between one and three months 143 217
Between three months and one year 121 24,200
More than one year 24,251 44
Balance at the end of the period 25,485 30,279
14. Provisions
The table below shows the nature of and changes in provisions for risks and
charges for the period from 1 January 2022 to 31 December 2022:
Amounts in £'000 At Increase Reduction Other movements Reclass At
1 January
2022 31 December
2022
Provisions for restoration of premises 308 - - 117 -330 95
Provisions long-term 308 - - 117 -330 95
Provisions for restoration of premises - - - - 330 330
Provision for litigation 157 - - - - 157
Provisions for product warranty 19,799 14 - - - 19,813
Provisions short-term 19,956 14 - - 330 20,300
The table below shows the nature of and changes in provisions for risks and
charges for the period from 1 January 2021 to 31 December 2021:
Amounts in £'000 At Increase Reduction Other movements Change in exchange rates At
1 January
2021 31 December
2021
Provisions for restoration of premises 242 117 -67 16 - 308
Provisions long-term 242 117 -67 16 - 308
Provision for litigation 68 157 -65 - -3 157
Provisions for product warranty 19,788 11 - - - 19,799
Provisions short-term 19,856 168 -65 - -3 19,956
Provisions chiefly cover:
- Risks related to litigations;
- The restoration expenses of the premises as per the lease
agreements; and
- Product assurance warranties.
The provisions for the restoration of the premises are an estimation of
amounts payable to cover dilapidations at the end of the rental periods, thus
at the following dates:
- Microgen Bioproducts Ltd: January 2023 (lease surrender date);
- Primer Design Ltd: May 2023 and November 2025 as there are two sites
that do not have co-terminus leases;
- IT-IS International Ltd: December 2023 and September 2025, as there
are two sites that do not have co-terminus leases.
The provision for product assurance warranties predominantly relates to the
notification of a product warranty claim with the DHSC (see notes 20 and 21).
Management have assessed the DHSC product warranty provision held at 31
December 2021 and have deemed that it is still appropriate at 31 December
2022.
15. Trade and other liabilities
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Trade payables 278 1,363
Accrued invoices 2,035 3,534
Social security liabilities 455 954
Tax liabilities - Value Added Tax 6 115
Other liabilities 13 11,224
Total trade and other liabilities 2,787 17,190
Trade payables and accrued invoices have decreased in line with reduced sales.
Other liabilities have fallen as a result of settling all outstanding
liabilities in relation to the 2017 to 2020 LTIP scheme during 2022.
16. ISSUED CAPITAL and reserves
16.1 Share capital
As of 31 December 2022 and 2021, 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.
Amount of share capital Amount of share capital €'000 Unit value per share Number of shares
£'000 € issued
Balance at 1 January 2021 4,053 4,708 0.07 70,626,248
Balance at 31 December 2021 4,053 4,708 0.07 70,626,248
Balance at 31 December 2022 4,053 4,708 0.07 70,626,248
16.2 Other reserves
Amounts in £'000
Balance at 1 January 2021 -2,036
Translation differences 862
Balance at 31 December 2021 -1,174
Translation differences -843
Balance at 31 December 2022 -2,017
16.3 Retained earnings/Losses
Amounts in £'000
Balance at 1 January 2021 96,916
Loss for the year -9,728
Balance at 31 December 2021 87,188
Loss for the year -25,730
Adjustment of the LTIP contribution -13
Balance at 31 December 2022 61,445
17. 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 segment 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 31 December 2022 and 2021:
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Revenue 1,448 3,177
Cost of sales -1,102 -1,725
Gross profit 346 1,452
Sales, marketing and distribution expenses -320 -800
Research and development expenses -22 -170
General and administrative expenses -3,059 -2,474
Operating loss before exceptional items -3,055 -1,992
Other operating expenses -290 -1,887
Operating loss after exceptional items -3,345 -3,879
Financial income 1,181 192
Financial expense -953 -482
Loss before tax -3,117 -4,169
Taxation (expense) / income -412 450
Loss after tax from discontinued operations -3,529 -3,719
18. Notes to the cash flow statement
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Loss for the year -25,730 -9,728
Loss from discontinued operations -3,529 -3,719
Loss from continuing operations -22,201 -6,009
Adjustments for:
Depreciation, amortisation, impairment loss and provisions 7,918 7,882
Unwinding of discount on contingent consideration 133 -17
Losses on disposal of assets 543 75
Surrendering the Watchmoor Point lease (non-cash impact) 281 -
Income tax charge / (credit) 1,998 -409
Operating cash flows before movements of working capital -14,857 -2,197
Decrease in inventories (*) 8,434 18,427
Decrease in receivables 4,625 42,754
Decrease in payables -15,624 -23,996
Cash (used in) / from operations -17,422 34,988
Income taxes received / (paid) 4,223 -19,437
Finance costs -530 138
Net cash (used in) / from operating activities -13,729 15,689
Operating cash flows from discontinued operations -1,955 2,180
Operating cash flows from continuing operations -11,774 13,509
(*) The variation of the inventories value results from the following
movements:
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Decrease in the gross value of inventories 15,743 2,392
Variation of the stock provision -7,309 16,035
Total variation of the net value of inventories 8,434 18,427
The details for the change in the stock provision are covered in notes 4, 5
and 12.
19. Related parties
Parties related to Novacyt SA are:
- the managers, whose compensation is disclosed below; and
- the Directors of Novacyt SA.
Remuneration of key management personnel
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Fixed compensation and company cars 1,605 2,176
Variable compensation 15 590
Social security contributions 224 412
Contributions to supplementary pension plans 26 48
Termination benefits - 371
Cash based payment benefits - LTIP 17 -
Total remuneration 1,887 3,597
Aggregate Directors' remuneration
Amounts in £'000 Year ended Year ended
31 December
31 December
2022
2021
Fixed compensation and company cars 988 897
Variable compensation - 350
Social security contributions 155 181
Contributions to supplementary pension plans - 11
Fees 38 32
Total remuneration 1,181 1,471
Related party transactions were made on terms equivalent to those that prevail
in arm's length transactions.
20. 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 annual 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.
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 31 December 2022 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 31 December 2022.
21. Subsequent events
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.
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