REG - OptiBiotix Health - Final Results
28/06/2024 07:00
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RNS Number : 2397U OptiBiotix Health PLC 28 June 2024
28 June 2024
OptiBiotix Health plc
("OptiBiotix" or the "Company" or the "Group")
Final results
Notice of Annual General Meeting
OptiBiotix Health plc (AIM: OPTI), a life sciences business developing
compounds to tackle obesity, high cholesterol, diabetes and skin care
announces its audited results for the 12 months ended 31 December 2023.
Highlights
· Revenue for the year of £644,000, a 41% increase over 2022
(£457,000). There were a further circa £62k of sales orders received in
December 2023 which were delivered in 2024 and carried forward into 2024
accounts.
· A circa 30% reduction in administrative expenses (excluding non-cash
items such as share-based payments and amortisation) to £1.78m (2022:
£2.50m), reflecting cost saving measures, the removal of ProBiotix Health plc
(PBX)'s costs after March 2022 and recovery of some of the doubtful debt
provided in the 2022 accounts.
· An increase in sales of LeanBiome® to The Hut Group and sales of
SlimBiome® to Holland & Barrett, albeit from a very low base in 2022.
· An increase in sales of SlimBiome® to Paradise Fruits, a German
company producing gummies for Walmart and for sale online in China.
· Increased sales of our OptiBiome® prebiotic fibre (an alternative
trademark to SlimBiome®) to Optipharm in Australia following the launch
online of their Optislim and Optiman ready meal ranges incorporating a ready
meal OptiBiome sprinkle and a significant new investment in marketing.
· A reduction in stock: there was 13.9 metric tonnes of SlimBiome(®)
taken from stock held by two partners (Maxum and Cambridge Commodities) in
2023 compared to 2022 (up 39%) representing a value of approximately £417K
based on retail price of £30 per kg. Once this stock overhang is depleted,
the Company should see sales of SlimBiome to these partners contributing to
future revenues.
· Recruiting four new partners for SlimBiome® in Asia through our
partnership with Nutraconnect Pte, all of whom placed initial orders before
the end of 2023 and which we expect to contribute revenues of £125,000 to
£150,000 in 2024.
· Securing a license agreement with Tata Chemicals - part of the $300bn
turnover Tata Group - to incorporate its proprietary Fossence® into our
SlimBiome® and WellBiome® products for the Indian market. This brings the
assurance and familiarity of a branded ingredient from a well-known and
trusted local source to the attention of Indian consumers.
· Reaching a new distribution agreement for SlimBiome® in Australia and
New Zealand with Ravenswood Ingredients, part of the Brenntag group which is a
global leader in specialised food ingredients.
· One of our partners, Optipharm, securing an international listing for
products containing SlimBiome® with CostCo, the fifth largest retailer in the
world.
· Ongoing discussions with a leading US corporate on a global launch of
SlimBiome® in 2025 in multiple territories.
Post period end
· The recovery in sales in 2023 has carried forward into 2024 with
sales order in H1 approaching FY 2023.
· Launch of LeanBiome® in MuscleTech®, a leading sports nutrition
brand.
· Partnership agreement with Morepen for SlimBiome® containing
finished products.
· Manufacturing agreement with KAG Industries in India.
· Roehampton University submitting the results of a third human study
on SlimBiome® for publication, which demonstrated statistically significant
benefits to appetite and hunger regulation with no safety, compliance or
tolerance issues reported by the participating volunteers. This study
underlined the effectiveness of a single dose of SlimBiome® in delivering
hunger-free weight loss by non-invasive means, and was timely in view of the
growing consumer, media and pharmaceutical interest in this field.
· Successful placing to raise £1,350,500 through the issue of
6,752,500 new ordinary shares of 2 pence each in the Company in March 2024.
The Report & Accounts which will be shortly posted to shareholders
contains a Notice of Annual General Meeting ("AGM") which will be held at 12
noon on 8 August 2024 at the offices of Peterhouse Capital Limited, 3(rd)
Floor, 80 Cheapside, London EC2V 6EE.
Stephen O'Hara, CEO of OptiBiotix Health plc said: "2023 was a year where we
restructured the senior management team and focused on restoring sales growth
through more active management of existing accounts, broadening our partner
base by securing a number of new corporate partners in key strategic markets
like the USA and Asia, and investing in ecommerce channels, while reducing
operating costs. We continue to see sales momentum building in 2024 with our
highest ever single order of over £200,000 and sales orders in H1 approaching
FY 2023.
With appetite suppression, gut health, sugar alternatives, and modulation of
the human microbiome attracting ever-increasing interest, we look to the
future with a high degree of confidence. With the Company's first generation
products having multiple clinical studies and health claims we are now gaining
commercial traction with large partners in key markets plus the excitement of
bringing our industry changing second-generation products to market.
We have achieved this with minimal shareholder dilution, no debt, a strong
balance sheet (circa £9.4m as at 31 December 2023) and significant exposure
to the considerable growth potential of the microbiome through our
shareholdings in PBX and SkinBioTherapeutics PLC (SBTX).
On behalf of the Board, I would like to thank our valued shareholders for
their patience and ongoing support, and we look forward to continuing on an
upward trajectory for the remainder of 2024 and beyond."
This announcement contains information which, prior to its disclosure, was
considered inside information for the purposes of the UK Market Abuse
Regulation and the Directors of the Company are responsible for the release of
this announcement.
Forward-Looking Statements
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
For further information, please contact:
OptiBiotix Health plc www.optibiotix.com (http://www.optibiotix.com/)
Neil Davidson, Chairman Contact via Walbrook below
Stephen O'Hara, Chief Executive
Cairn Financial Advisers LLP (NOMAD) Tel: 020 7213 0880
Liam Murray / Jo Turner / Ludovico Lazzaretti
Peterhouse Capital Limited (Broker) Tel: 020 7220 9797
Duncan Vasey / Lucy Williams
Walbrook PR Ltd Mob: 07876 741 001
Anna Dunphy
About OptiBiotix - www.optibiotix.com (http://www.optibiotix.com/)
OptiBiotix Health plc (AIM: OPTI), which was formed in March 2012, brings
science to the development of compounds which modify the human microbiome -
the collective genome of the microbes in the body - in order to prevent and
manage human disease and promote wellness.
OptiBiotix has an extensive R&D programme working with leading academics
in the development of microbial strains, compounds, and formulations which are
used as active ingredients and supplements. More than twenty international
food and healthcare supplement companies have signed agreements with
OptiBiotix to incorporate their human microbiome modulators into a wide range
of food products and drinks.
OptiBiotix is also developing its own range of consumer supplements and health
products. The Company's current areas of focus include obesity, cardiovascular
health, and diabetes.
Chairman's Report
This year has seen the Group successfully returned to sales growth under the
renewed leadership of its founder Stephen O'Hara, who returned to the role of
CEO of OptiBiotix Limited in March 2023. In that time we have secured a
number of new corporate partners to help develop sales of our first-generation
products in key strategic markets like the USA and Asia, increased direct to
consumers sales through ecommerce channels and reduced operating costs. Our
second-generation products are now approaching commercialisation, offering
potential additional future growth for the Company. The positive trajectory
re-established during the year has continued into 2024. With new corporate
partners in new territories, strong ecommerce growth, reduced SlimBiome®
ingredient stock levels held by Maxum and Cambridge Commodities, a strong
balance sheet (circa £9.4m at 31 December 2023) and a successful fundraise in
2024, the financial strength of the Group provides shareholders with a robust
platform for growth going forward.
Strategy and business development
From the outset, the business has had a clear strategic focus on developing
unique products with functional benefits in high growth markets around the
world, and balancing risk and reward by building sales of first-generation
products while developing more innovative second-generation products with
greater potential.
The CEO reports in detail below on the actions we have taken during the year
to restore the Group to sales growth through more active management of
existing key accounts, increasing the number of partners in key strategic
markets, and investing to increase direct sales to customers through ecommerce
channels in the UK and subsequently internationally.
Results
The results show that after a very poor start to 2023 management changes in
spring led to a 41% increase in sales and a 30% decrease in costs in 2023,
despite one off termination costs of £153k. With improved sales and tighter
financial control operating losses for 2023 reduced by 33% from £2.4m to
£1.6m.
The Board
As noted in the last annual report Rene Kamminga, who was appointed CEO of
OptiBiotix Ltd in March 2021, and joined the Board of the Group in July 2022,
left the business in February 2023 when Stephen O'Hara resumed the role of CEO
at OptiBiotix Ltd. As outlined in the CEO report the Company took the
opportunity to streamline its board and reduce advisor costs to move the
business towards profitability. To support the management team Graham Myers
joined the Board on 1 December 2023 as Finance Director, a part-time role in
which he works closely with the OptiBiotix team to focus on driving each
business unit to profitability.
Outlook
The recovery of sales established in 2023 have continued into the current year
with the agreement with Morepen in India, encouraging discussion with a number
of US corporates, and strong e-commerce growth, any of which having the
potential to transform the business in 2024 and beyond. As the Chief Executive
reports in more detail below, we have secured additional agreements to grow
sales of our first-generation products in a number of key strategic markets
(e.g. USA, Asia), successfully broadened our product portfolio, and reached an
exciting stage in the commercialisation of our second-generation sugar
replacement SweetBiotix® and MicroBiome Modulators.
The actions we took during 2023 have put the Group back on a firm growth path
and the Company looks forward to reporting further progress in the year ahead.
We also look forward to realising the substantial potential value of our
second-generation SweetBiotix® family of products and microbiome modulators
as these achieve commercialisation.
N Davidson
Chairman
28 June 2024
Chief Executive's Report
Since the restructuring of our senior management team in Spring 2023, the
Group has focused on restoring sales growth and working towards profitability
through the more active management of existing accounts, broadening its
partner base, and investing in ecommerce channels, while reducing costs. This
is all part of a plan to take multiple products in the microbiome space to a
global marketplace. Our first-generation products now enjoy widespread
acceptance in international markets, helping us to reach new agreements with a
number of well-known corporate partners and to launch new products in more
territories expanding our customer base. Our online sales are growing
strongly, particularly in China and we are looking to replicate this approach
in other high growth territories such as India in 2024. We have also reached
an exciting stage in the commercialisation of our second-generation products
SweetBiotix® as a bulk sugar replacement and in finished products and seeing
growing interest in our microbiome modulators. The Group remains financially
robust with a strong balance sheet (circa £9.4m at 31 December 2023) and no
debt. We believe that the Group is now at a strategic inflection point having
made strong progress in 2023 and early 2024 on its stated aims of establishing
sales in major international markets like the USA, China, and India. As
partner and ecommerce sales in these territories grow, we launch new products
like WellBiome® with existing partners, add new partners in the USA and
India, and bring our second generation products to market, we have a number of
opportunities, any one of which would be transformational for the Company and
shareholders alike, and collectively change the future of the business.
Strategic overview
OptiBiotix Health PLC (OPTI) is a life sciences business founded on the
development of prebiotic and probiotic compounds to tackle obesity,
cardiovascular disease, diabetes and skincare: all markets offering strong
growth potential in every part of the world. The Company has built an
extensive portfolio of microbiome assets in this field including prebiotic
products like SlimBiome®, WellBiome®, SweetBiotix® and Microbiome
modulators within its core business, skincare through SkinBioTherapeutics PLC
(SBTX) and probiotics through ProBiotix Health plc (PBX). These are both
separately listed companies in which OptiBiotix has a shareholding. These
create a diverse portfolio of opportunities in an emerging area of healthcare
which is of growing interest to consumer markets around the world.
Our strategic approach has been to target global markets with highly
differentiated, clinically proven and patented products. Whilst ambitious,
more costly and time consuming than commercialising in local markets it
recognises the potential scale of the opportunity. The strategy has been
designed to reduce risk and maximise opportunities for investors by
recognising the challenges inherent in bringing new technologies and products
to a naturally conservative global food market, where consistency and risk
avoidance are key, and the acceptance of new products is notoriously slow.
In addition to founding and developing three distinct companies, we have
layered our development portfolio by creating both first-generation products
(SlimBiome® and WellBiome® in prebiotics and LP(LDL)® in probiotics) and
second-generation products (SweetBiotix® and Microbiome modulators). This has
allowed us initially to build sales and awareness of the Company and its
functional ingredients through its first-generation products while developing
the riskier and more innovative second-generation products that offer
potentially greater upside for investors.
The development of three distinct companies (OPTI, SBTX and PBX) with similar
fundamental science but different applications and markets provides investors
with multiple plays in the emerging microbiome market, both reducing their
risk and providing significant potential gains if one or more new products is
successfully brought to market.
Placing these companies separately on public markets creates tangible assets
which can potentially be disposed of to pay shareholders an ad hoc dividend,
as with the £10.25m dividend issue to OPTI shareholders on the listing of PBX
in March 2022, or the £5.4m of share sales in SBTX by OPTI since its listing
in 2017, which has reduced the need to fundraise for the continued development
of OPTI and avoided dilution for our own shareholders.
As a result, OPTI today has a strong balance sheet (circa £9.4m at 31
December 2023) with no debt, and multiple plays providing scope for profitable
development in different areas of the emerging microbiome space.
The annual accounts for 2020 and 2021 showed that each of OPTI's businesses
was profitable at the EBITDA level, with the Group as a whole attaining
profitability by virtue of the increased value of its SBTX asset. In 2022 we
faced a most challenging year in the wake of the COVID-19 pandemic and the
global economic uncertainty that followed the Russian invasion of Ukraine, and
increased costs and reduced sales following the appointment of a new CEO.
We took decisive action to address this through the departure of the CEO of
the prebiotic business under OptiBiotix Ltd in Spring 2023 and a series of
measures to reduce Board, management and advisory costs. Since implementing
these measures and under the renewed leadership of Stephen O'Hara as CEO, we
have enjoyed three quarters of increased sales. This growth has continued
into 2024.
Action has also been taken to reduce commercial risk in the business by
increasing the number of large partners in key strategic markets, particularly
the USA and Asia Pacific, with new relationships with Brenntag, Tata,
Iovate/Muscletech, and in 2024 an agreement with Morepen.
Equally importantly, we have made significant investments in our ecommerce
business to drive our direct-to-consumer sales, reducing reliance on retail
partners and increase our profit margins. While sales through retail partners
offer potential benefits in generating volume, and increase the awareness and
credibility of OPTI products, margins are lower and the uniqueness of our
formulations and their functional benefits are often lost to retail staff and
consumers among the many competing brands on offer.
With our first generation products gaining traction in the USA, China, and
India and the upcoming launch of our second-generation products, OPTI is well
placed to become a major player in the expanding microbiome market.
Commercial and scientific overview
During the year we have focused on driving sales growth through the more
active management of existing key accounts; increasing the number of partners
in key strategic markets, particularly the USA, China, and India; and
investing to increase direct sales to customers through ecommerce channels in
the UK and subsequently internationally.
Key developments during the financial year included:
Active management of existing key accounts:
· An increase in sales of LeanBiome® to The Hut Group for inclusion in
its Myprotein range.
· An increase in sales to Holland & Barrett health and wellbeing
retail and online business in the UK, albeit from a very low base in 2022.
· An increase in sales of SlimBiome® to Paradise Fruits, a German
company producing gummies for Walmart and for sale online in China.
· Increased sales of our OptiBiome® prebiotic fibre (an alternative
trademark to SlimBiome®) to Optipharm in Australia following the launch
online of their Optislim and Optiman ready meal ranges incorporating a ready
meal OptiBiome sprinkle and a significant new investment in marketing.
· An increase in the number of Apollo pharmacies in India and Nahdi
pharmacies in Saudi Arabia selling GoFigure(®) products.
· A reduction in SlimBiome(®) stock held by partners: there was 13.9
metric tonnes of SlimBiome(®) taken from stock held by two partners (Maxum
and Cambridge Commodities) in 2023 compared to 2022 (up 39%) representing a
value of approximately £417K based on retail price of £30 per kg. The
Company has commenced manufacture of replacement stock for Cambridge
Commodities as it anticipates most of this stock will be used for existing
orders planned for delivery in the first half of 2024.
Increasing the number of new partners, particularly in the USA and India:
· Recruiting four new partners for SlimBiome(®) in Asia through our
partnership with Nutraconnect Pte, all of which placed initial orders before
the end of 2023 and which we expect to contribute revenues of £125,000 to
£150,000 in 2024.
· Securing a license agreement with Tata Chemicals - part of the $300bn
turnover Tata Group - to incorporate its proprietary Fossence(®) into our
SlimBiome(®) and WellBiome(®) products for the Indian market. This brings
the assurance and familiarity of a branded ingredient from a well-known and
trusted local source to the attention of Indian consumers
· Reaching a new distribution agreement for SlimBiome(®) in Australia
and New Zealand with Ravenswood Ingredients, part of the Brenntag group which
is a global leader in specialised food ingredients.
· One of our partners, Optipharm, securing an international listing for
products containing SlimBiome(®) with CostCo, the fifth largest retailer in
the world.
· Ongoing discussions with a leading US corporate on a global launch of
SlimBiome(®) in 2025 in multiple territories.
Investing in ecommerce channels:
· The Company has made significant investments in new ecommerce
channels, including Amazon in the UK, Walmart in the USA, and Tmall.com in
China, to increase the proportion of our sales made direct to consumers. This
has generated strong growth in turnover, with total ecommerce sales up
approximately threefold in 2023 from 2022 and continued growth in Q1 2024
which we hope will continue as more channels come on line.
· Successfully launching new products including our reformulated gut
and digestive health WellBiome(®) functional fibre and mineral blend, which
has been selling strongly through both our own website and Amazon UK.
Other developments:
· A shift in our commercial focus to selling SlimBiome(®) Medical
sachets in Europe and SlimBiome(®) shots in India and the Gulf states. These
have been developed to help users manage their weight by reducing hunger and
food cravings. This is a highly differentiated product which leverages growing
market interest in anti-obesity GLP-agonist drugs like Semaglutide which work
by reducing appetite. SlimBiome(®) compares favourably with these drugs and
offers a healthy, natural and safe approach to weight management, with no
observed side effects in multiple human studies. GLP-agonists have a number of
reported common adverse effects and potentially serious side effects in some
groups. SlimBiome® can be used with any weight management or calorie
restriction plan and so complements rather than competes in a crowded
marketplace. The product enjoys high margins and became a top-selling line
within its market segment on Amazon UK in 2023.
· Roehampton University submitting the results of a third human study
on SlimBiome® for publication, which demonstrated statistically significant
benefits to appetite and hunger regulation with no safety, compliance or
tolerance issues reported by the participating volunteers. This study
underlined the effectiveness of a single dose of SlimBiome® in delivering
hunger-free weight loss by non-invasive means, and was timely in view of the
growing consumer, media and pharmaceutical interest in this field.
· Securing a grant from the Biotechnology and Biological Science
Research Council to fund a research project by the University of Leeds into
the impact of WellBiome(®) on the gut microbiome throughout the digestive
tract. This is expected to provide further substantiation of existing health
claims for WellBiome(®) in international markets.
· Hull University securing NHS Ethics approval as part of a large
programme grant (£2.7 million) amongst which is the proposal to explore
WellBiome® impact post-surgery. This is a project independent of OptiBiotix
in which Hull University have purchased WellBiome(®) to explore its impact on
post-surgical recovery times.
North America
We have a strong sales pipeline in North America and the USA made up of small,
medium size, and a number of large US corporates (including a £9bn
Multi-Level Marketing company -MLM) that offer opportunities for sales growth
in 2024 and beyond. The Company was pleased to receive a first order of
£116k from Muscletech in 2023, a leading weight management and sports
nutrition brand in the USA. This is a major sports nutrition brand who are
making a significant investment in LeanBiome® as a key differentiator in the
protein market and, if successful on launch could have a material impact on
future revenues.
The Company reported at the start of 2024 the launch of LeanBiome® in
MuscleTech's Nitro Tech Ripped range, a premium protein powder designed to
support athletes who want to lose fat and build lean muscle. LeanBiome(®) is
now included in two leading sports nutrition brands, Myprotein and MuscleTech,
across the world, a market worth $45.2bn in 2023, and expected to grow at a
CAGR of 7.5% pa to 2030, (Grand View Research, 2023). The Company sees the
sports nutrition market as an area of growing interest and opportunity for its
LeanBiome(®) brand with the scientific evidence increasingly showing that
optimising an athletes gut microbiome could improve an athletes' stamina,
lower inflammation, and support physical fitness (Frontiers | Editorial:
Nutrition to support gut health and the microbiome in athletes
(frontiersin.org)
(https://www.frontiersin.org/articles/10.3389/fnut.2023.1207543/full) . Having
two major global sports nutrition brands making a significant investment in
LeanBiome® highlighting it as a key science based differentiator should
provide investors a good indication to the potential opportunity developing
within the sports nutrition market. If successful, this could have a material
impact on future revenues and open up further opportunities in sports
nutrition around the world. The Company continued to advance projects and
expand the pipeline of opportunities with large North American companies and
exhibited its SlimBiome®, LeanBiome®, and Wellbiome® products at Supply
Side West, USA, in November 2023. Our focus is on companies committed to
science and strong storytelling, especially in weight management, wellness,
and sports nutrition with a special emphasis on e-commerce, direct selling,
and retail brands.
The Company is hopeful that further announcements with corporate partners in
the USA and Canada in 2024 will be made in due course.
OptiBiotix Health India
OptiBiotix Health India (OHI) was formed in November 2021 as a mid- to
long-term strategic investment in the world's most populous nation of 1.4bn
consumers, forecast to have a middle-class population of 475 million by 2030
and the world's largest cohort of medium to high level income customers by
2035. With obesity prevalence currently measured at 40.3%, India represents a
huge area of opportunity for weight management products.
The formation of OHI has helped OPTI to avoid high import taxes and to control
the purchase and sale of both ingredients (SlimBiome®) and finished product
(GoFigure®, Morepen) manufactured and sold in India.
After a slow start following the launch of products with Apollo Pharmacies in
September 2022, momentum built during the year resulting in GoFigure®
products being sold through approximately 1,000 stores by the year-end.
Apollo's own consumer survey showed an 87% customer return rate among
purchasers of GoFigure(®) products and 23% of new customers visiting their
pharmacies who just bought GoFigure(®) products. This feedback is consistent
with that from THG, who gained 40% new customers with the introduction of
LeanBiome(®) to their Myprotein range. Such results create a positive
platform for commercial discussions with potential new partners, demonstrating
the consumer appeal of our products and their ability to attract both new and
returning customers.
The licence agreement we secured with Tata Chemicals in October 2023 to
incorporate its proprietary Fossence(®) into our SlimBiome(®) and
WellBiome(®) products for the Indian market which is anticipated to increase
their appeal to Indian consumers. In Q1 2024 we announced a major new
partnership agreement to sell products containing SlimBiome(®) under the
well-known and trusted Dr Morepen brand. This is an established, well known,
and trusted brand in the Indian market and represents a material step forward
for our products in the Indian market. OptiBiotix will receive revenue for
both the ingredient and BTB product sales with first orders placed for launch
in Q3 2024. Based on Morepens current forecasts this agreement could
contribute in the region of £6-7 million revenue per annum to OptiBiotix in
the next four to five years (see announcement March 2024).
Thanks to the work of the Department of Business and Trade and our Business
Development Director, Dr Taru Jain, we have high industry awareness of
OptiBiotix and its products throughput India. This has created a strong
pipeline of opportunities with emerging and leading players in weight
management and sports nutrition in India, where we expect to build a
substantial business in the years ahead.
Consumer Health and Ecommerce
The Consumer Health division grew rapidly during the year, with our total
Ecommerce sales increasing threefold in 2023 compared to 2022. This was
driven by strong growth in the sale of gummies in China and large increases in
Amazon Prime subscriptions.
Gummy sales in China during the year varied widely per month, increasing
rapidly in October and November with the aid of local key opinion leader
influencers and new sales through the TikTok platform. Marketing on TikTok can
increase sales rapidly but at a high cost and tend to be impulse buys with
lower repeat purchases. Our TikTok account is managed by a Chinese agency with
sales reconciled against costs some time after revenue is received. They are
only then included in our accounts. We see TikTok as a means of increasing
product and brand awareness providing early sales growth with Tmall (Alibaba)
a more appropriate platform for sustainable growth.
In the UK we significantly increased our Amazon customer base by successfully
moving to the Fulfilment by Amazon (FBA) model that allowed customers to
receive faster deliveries through Prime accounts. SlimBiome® is consistently
among Amazon's top sellers for appetite suppressants, and achieved record
sales during Prime month in July 2023 and was awarded Amazon choice in Q1
2024.
We are extending our customer reach through new Amazon channels in Germany,
the UAE and the Kingdom of Saudia Arabia, with Amazon India to follow in H2
2024. We have also broadened our offer to consumers with the launch of new
products such as soups and indulgence bars, initially through our own website
with Amazon to follow. Such additions to our range help to increase our
average order value online and to compensate for the usual seasonal peaks and
troughs in the weight management cycle.
Competitor analysis of our WellBiome(®) range indicated a need to increase
awareness of the product through social channels. Competitors such as Symprove
have annual sales of around £20-£25m and are exploring a £250m sale later
this year (see Gut health supplement maker Symprove plots £250m sale |
Business News | Sky News
(https://news.sky.com/story/gut-health-supplement-maker-symprove-plots-250m-sale-13141152)
). They have a heavy reliance on promotion through influencers and social
media. In adopting a similar approach, we believe we can demonstrate
competitive advantage on both price and product efficacy, including on-pack
health claims, and build similar sales and value.
Competitor analysis of WellBiome(®) also indicated value in a change in
positioning from healthy ageing to boosting gut and digestive health which
should allow us to attract more customers through more easily understood
messaging and benefits for the consumer. We have targeted competitors with
keywords/ads and successfully listed with Amazon UK FBA.
The Consumer Health division has the advantage of receiving online sales
income immediately and allows more control of our brands and messaging, while
reducing our reliance on distributors to grow our brands.
Results
The Group's results for 2023 reflect its new structure following the listing
of ProBiotix Health (PBX) on the AQSE Growth Market on 31 March 2022. When
making comparisons with 2022, it should be noted that the prior year accounts
included revenues and costs for the combined Group (OPTI and PBX) up to the
end of March 2022.
Revenue for the year of £644,000 showed a pleasing 41% increase over 2022's
£457,000, with the move forward close to 50% once 2022's first quarter PBX
sales are adjusted for. The change of CEO in March 2023 resulted in a
significant improvement in revenue impetus following only £16K of sales in
the first two months of the year. Orders from our wholesale business customers
increased significantly year-on-year, although delays setting up logistics
with new partners meant that some deliveries were delayed into 2024 with sales
reportable in 2024. Our investment in online direct to consumer business began
to pay dividends as sales exceed £100,000 for the first time, a three fold
increase on 2022.
Administrative expenses (excluding non-cash items such as share-based payments
and amortisation) were reduced by almost 30% to £1,778K (2022: £2,498K),
reflecting cost saving measures, the removal of PBX's costs after March 2022
and recovery of some of the doubtful debt provided in the 2022
accounts. Actions to reduce 2023's costs included the removal of Cavendish as
joint broker, announced in December 2022, the departure of Rene Kamminga as
CEO in March 2023, a 20% reduction in all directors' remuneration from January
2023 and the retirement of two non-executive directors in July 2023. The
former CEO's termination agreement saw us incur a one-off cost of £153K.
With gross margins in percentage terms remaining steady year on year, the
combination of improved sales and good control of administrative expenses saw
operating losses reduce to £1,664K from £2,489K. Overall the Group recorded
a loss before tax for the year of £2.08m, compared with a profit of £2.59m
in 2022. The prior year benefitted from a significant gain on its investment
in PBX offset by a loss on revaluation of its shareholding in SBTX, whilst the
current year's results suffered from the inclusion of a very disappointing
£323K share of the total loss for the year of PBX. On the plus side we netted
a £487K accounting gain from the disposal of further shares in SBTX that
realised £1.1m in cash in 2023.
The Company retains a relatively healthy balance sheet with gross assets of
£9.4m (2022: £11.6m) and cash at the year-end of £0.6m (2022: £1.1m).
Since the year end a share placing and further sales of SBTX shares have
raised over £1.4m of additional funding to support the Group going forward.
The Board, senior management and advisers
We took decisive action in December 2022 and the first half of 2023 to reduce
Board, management and advisory costs in order to move the Group to operational
profitability as soon as possible.
As noted in the last annual report Rene Kamminga, who was appointed CEO of
OptiBiotix Ltd in March 2021, left the business on 28 February 2023 when
Stephen O'Hara resumed the role of CEO of OptiBiotix Health Limited. All
directors voluntarily accepted a 20% reduction in their salaries from 1
January 2023 and, with non-executive directors now outnumbering executive
directors by two to one, Stephen Hammond and Chris Brinsmead agreed to step
down as non-executive directors at our AGM in July 2023, with our thanks for
their contribution to the business.
Graham Myers joined the Board on 1 December 2023 as Finance Director, a
part-time role in which he will work closely with the OptiBiotix team to focus
on driving each business unit to profitability. Graham brings to us extensive
experience in optimising financial controls, managing budgets, building
profitable businesses and delivering mergers and acquisitions, all gained in a
career of almost 30 years with Croda International Plc; he remains Chair of
Croda Pension Trustees Limited.
On 28 December 2022 we served three months' notice to terminate the joint
brokership of Cavendish Securities plc, with Peterhouse Capital continuing as
the Company's sole broker. During the year we also secured a 50% reduction in
the fees charged by our corporate PR adviser.
Outlook
The Company set out a strategy of developing first generation products using
existing technology and highly innovative step change second generation
products in parallel and commercialising these in global markets. Whist
ambitious, costly and more time consuming, this strategy gave shareholders
exposure to multiple opportunities within the emerging global human microbiome
space and the potential for multiple upside. This strategy is now coming to
fruition.
Whilst this strategy has taken longer to deliver than anticipated the Company
is now at a tipping point with first generation products gaining widespread
international acceptance with growing sales in multiple territories and the
upcoming launch of our second generation products generating industry
interest. This creates a range of opportunities to support future sales
growth and value creation.
SlimBiome(®)/OptiBiome(®)/LeanBiome(®)
The Company has four human studies on SlimBiome which consistently demonstrate
it reduces hunger and cravings leading to changes in the amount of food and
type of food people eat and sustainable weight loss. The studies have
allowed the Company to gain on pack health claims in major markets (Europe,
Australia, USA, and Asia) leading to agreements with major international and
national companies like Iovate (Muscletech), TheHutGroup (Myprotein), Apollo,
and Morepen. The partnership with Morepen and first order of over £175K
plus ingredient sales of £27K in H1 2024 is the first step in an agreement in
a major market and based on Morepen's forecast could contribute in the region
of £6-7 million revenue per annum in the next four to five years. We
believe these agreements, plus other deals in the pipeline, and our focus on
selling finished products via e-commerce in multiple channels have the
potential to achieve sales of £30m+ in the future.
WellBiome(®)
WellBiome(®) is a patented food supplement, designed to support gut health
for wellbeing with health claims for improving gut health, brain and cognitive
health, and improve immune function. Research studies have shown that a
combination of fibres like WellBiome(®) can increase gut microbiome diversity
more than single fibres. The Company has a number of human studies ongoing
with WellBiome(®) including exploring its impact on post surgical recovery
times with Hull University and a study on the impact on stress, anxiety, and
sleep with Southampton University. Gut Health is a large and growing area in
consumer health with companies like Symprove with single products reporting
annual sales of around £20-£25m and a valuation of approximately £250m (see
Gut health supplement maker Symprove plots £250m sale | Business News | Sky
News
(https://news.sky.com/story/gut-health-supplement-maker-symprove-plots-250m-sale-13141152)
). We believe WellBiome(®) has a number of significant advantages over
Symprove including cost, shelf life, user convenience (sachet rather than
bottle), and health claims and see this as an area of high future growth with
the potential for similar sales and value.
Second generation products (SweetBiotix and MicroBiome Modulators/Synbiotics)
As with any step change innovation this has been a long and difficult path
with significant challenges, particularly on scale up, and during the two
years of COVID when development stopped. These challenges have now been
overcome and we have been pleased that the scale of the opportunity and
uniqueness of our patented approach has attracted the interest of major global
partners both in the manufacture (e.g DSM-Firmenich) and application of these
products (e.g Coca Cola, Nestle, Arla etc). These partners bring scale and
global networks albeit time consuming and with stringent confidentiality
conditions. We have been pleased with the progress made by DSM-Firmenich and
its preliminary forecast for SweetBiotix(®) of >100,000 metric tonne per
annum, demonstrating its intent and potential scale of the opportunity. If
this forecast materialises at an expected price of £30 per kg this would
represent substantial sales revenue. Experience tells us that partner
forecasts tend to be optimistic, increases in volume often take longer, and
over time the sales price is likely to be eroded to £18-£20 per kg, however
this gives an indication of the potential scale of the opportunity. We are
currently working with a manufacturer who supplies products to major
corporates and uses 10,000 metric tonnes of sugar per annum. We are
progressing incrementally and have included SweetBiotix(®) in a finished
product for a large global partner with a view for an upcoming launch. The
Company is also working on including SweetBiotix(®) in our own products and
launching a bulk sugar replacement product with the aim of seeing
SweetBiotix(®) in an increasing number of products in 2024 and beyond.
Whilst SweetBiotix(®) has captured investors interest, the Company has
another group of products which it believes create comparable opportunities
for revenue growth and value creation. OptiBiotix has developed a number of
unique, patented technologies, which allow it to create dietary ingredients
and/or therapeutic products to precision engineer the microbiome. This is
achieved by technologies which allow us to examine a microbe's genome to
identify its ability to utilise specific substrates. With this information
protein synthesis techniques can be used for large-scale production of unique
substrates specific for the optimum growth of that microbe. This allows the
creation of substrates which boost the growth of specific genera or species of
microbes that have been connected with cancer, improving drug treatments, the
development of chronic diseases, or even the ageing process Healthy longevity:
The role of the gut microbiome (medicalnewstoday.com)
(https://www.medicalnewstoday.com/articles/how-might-bacteria-eating-viruses-and-gut-bacteria-contribute-to-longevity)
. This ability to identify and create products which selectively enhance the
growth and activity of specific microbes is a new concept but has the
potential to revolutionise microbiome-based products and therapies.
Microbiome modulating approaches are a largely unexplored area of opportunity
for both the food and pharmaceutical industry but have the potential to
transform healthcare. If the microbiome is the future of healthcare, having an
approach to precision engineer the microbiome to enhance those microbes that
deliver health benefits is the pathway to achieving that aim.
As would be expected the Company has a high level of corporate interest in its
second-generation products. The Company is in discussion with a wide range of
industry partners over product application and launch timescales, some already
announced and some with new potential partners, across a wide range of areas
and will make announcements once these have been concluded. Given previous
experience with some investors contacting partners pretending to be employed
or representing OptiBiotix and damaging relationships, the Company wishes to
maintain confidentiality in this area to protect the best interests of
shareholders.
The focus for 2023 has been on recovering sales and moving the business to
profitability by a reduction in costs, a focus on existing partners returning
to forecast, bringing in new partners particularly in the USA and Asia, and
expanding ecommerce channels to increase margins and reduce partner
dependency. Good progress has been made in each of these areas which has led
to a recovery of growth in 2023 which has carried forward into 2024 with sales
orders in H1 approaching FY 2023. In the last year and into 2024 we have
been particularly pleased with the pipeline of high-quality partners like
Iovate, Dr Morepen, TheHutGroup, the high conversion rate of interest to new
accounts, and the progress we are making with online sales, particularly in
China. These all have the potential to bring in significant future revenues.
The fundamentals of our marketplace remain very exciting, with appetite
suppression, gut health, sugar alternatives, and modulation of the human
microbiome attracting ever-increasing interest as the potential solution to a
wide and growing range of lifestyle-related health challenges. OptiBiotix has
patented products with clinical studies in many of these areas. Our unique,
innovative products are based on strong science, proven in clinical studies,
comprehensively protected by our global portfolio of patents and trademarks,
and are achieving growing international recognition through both industry
awards and positive customer reviews and growing sales.
We look to the future with a high degree of confidence in our products, a
growing online presence in international markets and the excitement of
bringing our industry changing second-generation products to market.
We have achieved with minimal shareholder dilution, no debt, a strong balance
sheet, and significant exposure to the considerable growth potential of the
microbiome through our shareholdings in PBX and SBTX.
We would like to thank shareholders for their patience and support and look
forward to growing the business and shareholder value in the years ahead.
Stephen
O'Hara
Chief Executive
28 June 2024
Consolidated Statement of Comprehensive Income
Notes Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Revenue from contracts with customers 644 457
Cost of sales (324) (213)
─────── ───────
Gross profit 320 244
Share based payments (6) (11)
Depreciation and amortisation (205) (224)
Other administrative costs (1,804) (2,498)
Total administrative expenses 6 (2,015) (2,733)
─────── ───────
Operating loss (1,695) (2,489)
Finance cost 5 - -
Finance income 5 1 -
─────── ───────
1 -
Share of loss from associate 11 (323) (83)
(Loss)/Gain on investments 11 (513) (8,620)
Profit on disposal of investments 11 487 16
Profit on disposal of subsidiary 11 - 21,647
Provision against associate valuation 11 - (8,030)
─────── ───────
Profit/(Loss) before tax (2,043) 2,441
Taxation 7 4 146
─────── ───────
Total comprehensive income for the period (2,039) 2,587
═══════ ═══════
Total comprehensive income attributable to:
Owners of the company (2,039) 2,587
─────── ───────
(2,039) 2,587
═══════ ═══════
Earnings per share from continued operations
Basic profit/(loss) per share 8 (2.24)p 2.93p
Diluted profit/(loss) per share 8 (2.08)p 2.78p
═══════ ═══════
Consolidated Statement of Financial Position
Notes As at As at
31 December 31 December
2023 2022
ASSETS £'000 £'000
Non-current assets
Intangibles 9 1,331 1,540
Investments 11 3,887 5,022
Investment in associate 11 2,806 3,129
─────── ───────
8,024 9,691
─────── ───────
CURRENT ASSETS
Inventories 12 188 178
Trade and other receivables 13 460 521
Current tax asset 7 97 106
Cash and cash equivalents 14 635 1,052
─────── ───────
1,380 1,857
─────── ───────
TOTAL ASSETS 9,404 11,548
═══════ ═══════
EQUITY
Shareholders' Equity
Called up share capital 15 1,824 1,824
Share premium 16 2,958 2,958
Share based payment reserve 16 772 939
Merger relief reserve 16 1,500 1,500
Convertible debt - reserve 16 - -
Retained Earnings 16 1,818 3,684
─────── ───────
Total Equity 8,872 10,905
─────── ───────
LIABILITIES
Current liabilities
Trade and other payables 17 180 278
─────── ───────
180 278
─────── ───────
Non - current liabilities
Deferred tax liability 18 352 365
─────── ───────
352 365
─────── ───────
TOTAL LIABILITIES 532 643
─────── ───────
TOTAL EQUITY AND LIABILITIES 9,404 11,548
═══════ ═══════
Consolidated Statement of Changes in Equity
Share-based Non- Controlling Interest
Called up Payment reserve Convertible Merger Relief Reserve
Share capital Retained Earnings Share Debt Total
Premium Reserve equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 1,759 11,320 2,537 928 93 1,500 35 18,172
Profit for the year - 2,587 - - - - - 2,587
Dividends - (10,258)
(10,258) - - - - -
Transfer on loss of control - - - - (93) - - (93)
Transfer within reserves - 35 - - - - (35) -
Issue of shares during the year 65 - 445 - - - - 510
Fundraising commission - - (24) - - - - (24)
Share options and warrants - - - 11 - - - 11
────── ─────── ────── ────── ───── ────── ────── ───────
Balance at 31 December 2022 1,824 3,684 2,958 939 - 1,500 - 10,905
Loss for the year - (2,039) - - - - - (2,039)
Movement on reserves - 173 - (173) - - - -
Share options and warrants - - - 6 - - - 6
────── ─────── ────── ────── ───── ────── ────── ───────
Balance at 31 December 2023 1,824 1,818 2,958 772 - 1,500 - 8,872
══════ ═══════ ══════ ══════ ═════ ══════ ══════ ═══════
Notes to the Consolidated Statement of Cash Flows
Notes Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Opening Cash 1,052 2,007
Operating activities
Operating loss (1,695) (2,489)
Amortisation 205 224
Impairment of patents 5 -
Share based payments 6 11
Movement on inventory (10) (76)
Decrease/(increase) on receivables 61 1,116
(Decrease)/increase on payables (98) (19)
Tax received - 124
────── ──────
Net Proceeds for operating activities (1,527) (1,109)
Investing activities
Additions to intangibles - (168)
Cash disposed on loss of subsidiary - (188)
Proceeds on disposal of investments 1,110 25
────── ──────
Net 1,110 (331)
Financing activities
Net proceeds on Share issues - 485
────── ──────
Net cash inflow from financing activities - 485
────── ──────
Total movement (417) (955)
────── ──────
Cash and cash equivalents at end of period 1 635 1,052
══════ ══════
1. Cash and Cash Equivalents
Year ended
31 December Year ended
2023 31 December
2022
£'000 £'000
Cash and cash equivalents 635 1,052
═══════ ════════
Company Statement of Financial Position
Notes As at As at
31 December 31 December
2023 2022
ASSETS £'000 £'000
Non-current assets
Investments 11 5,858 7,008
Investment in associate 11 3,212 3,212
─────── ───────
9,070 10,220
─────── ───────
CURRENT ASSETS
Trade and other receivables 13 32 25
Cash and cash equivalents 14 434 865
─────── ───────
466 890
─────── ───────
TOTAL ASSETS 9,536 11,110
═══════ ═══════
EQUITY
Shareholders' Equity
Called up share capital 15 1,824 1,824
Share premium 16 2,958 2,958
Merger relief reserve 16 1,500 1,500
Share based payment reserve 16 772 939
Accumulated profit 16 2,400 3,806
─────── ───────
Total Equity 9,454 11,027
─────── ───────
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 17 82 83
─────── ───────
TOTAL LIABILITIES 82 83
─────── ───────
TOTAL EQUITY AND LIABILITIES 9,536 11,110
═══════ ═══════
Company Statement of Changes in Equity
Share-based
Called up Merger Relief Reserve Payment reserve
Share capital Share Retained Earnings Total
Premium equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 1,759 2,537 1,500 928 11,056 17,780
Profit for the year - - - - 3,008 3,008
Dividends - - - - (10,258) (10,258)
Share options and warrants - - - 11 - 11
Fundraising Commission - (24) - - - (24)
Issue of shares during the year 65 445 - - - 510
────── ─────── ────── ────── ─────── ───────
Balance at 31 December 2022 1,824 2,958 1,500 939 3,806 11,027
Loss for the year - - - - (1,579) (1,579)
Movement on reserves - - - (173) 173 -
Share options and warrants - - - 6 - 6
────── ─────── ────── ────── ─────── ───────
Balance at 31 December 2023 1,824 2,958 1,500 772 2,400 9,454
══════ ═══════ ══════ ══════ ═══════ ═══════
Company Statement of Cash Flows
Notes Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Opening Cash 865 1,705
Operating activities
Operating loss (1,535) (1,482)
Share based payments - 11
Loan conversion to management charge 14 -
Decrease/(increase) on receivables (7) 416
Impairment of investment in subsidiary - 50
(Decrease)/increase on payables - 42
Release of loan to subsidiary 901 756
────── ──────
Net Proceeds for operating activities (627) (207)
Investing activities
Net cash advances to subsidiary (915) (1,143)
Proceeds on disposal of investments 1,110 25
────── ──────
Net 195 (1,118)
Financing activities
Net proceeds on Share issues - 485
Interest income 1 -
────── ──────
Net cash inflow from financing activities 1 485
────── ──────
Total movement (431) (840)
────── ──────
Cash and cash equivalents at end of period 1 434 865
══════ ══════
Notes to the Company Statement of Cash Flows
1. Cash and Cash Equivalents
As at As at
31 December 31 December
2023 2022
£'000 £'000
Cash and cash equivalents 434 865
══════ ═══════
Notes on financial statements
1. General Information
OptiBiotix Health plc is a Public Limited Company limited by shares,
incorporated and domiciled in England and Wales. Details of the registered
office, the officers and advisers to the Company are presented on the company
information page at the start of this report. The Company's offices are at
Innovation Centre, Innovation Way, Heslington, York, YO10 5DG. The Company is
listed on the AIM market of the London Stock Exchange (ticker: OPTI).
The principal activity is that of identifying and developing microbial
strains, compounds, and formulations for use in food ingredients, supplements
and active compounds that can impact on human physiology, deriving potential
health benefits.
These financial statements present the results and balances of the Company and
its subsidiaries (together, the 'Group') for the year ended 31 December 2023.
2. Accounting Policies
Statement of compliance
The consolidated and parent company financial statements of Optibiotix
Health Plc have been prepared in accordance with UK adopted international
accounting standards (IFRSs), IFRIC interpretations and the Companies Act 2006
applicable to companies reporting under IFRS.
Basis of preparation
The financial statements have been prepared under the historical cost
convention. The functional currency is GBP.
The principal accounting policies are summarised below. They have all been
applied consistently throughout the period under review. The results are
rounded to the nearest thousand.
2. Accounting Policies (continued)
Going concern
The financial statements have been prepared on the assumption that
the Group is a going concern. When assessing the foreseeable future, the
Directors have looked at the budget for the next 12 months from the date of
this report, the cash at bank available as at the date of approval of these
financial statements and are satisfied that the group should be able to cover
its forecast maintenance costs, other administrative expenses and its ongoing
research and development expenditure.
As part of the Group going concern assessment the Directors have
also reviewed a range of scenarios including those reflecting conditions less
favourable than the base case scenario. In such scenarios the Directors have
had regard to cash generation and preservation options including further cost
mitigation, further sale of the Group's investment assets and share issues
where market conditions allow. Through one or a combination of these
measures, the Board are satisfied that the Group can continue as a going
concern in base case and downside
Management have considered its forecast of the group's cash requirements
reflecting contracted and anticipated future revenue and the resulting net
cash outflows. Management have not seen a material disruption to the business
as a result of the current political crises in Eastern Europe. Management
will keep events under constant review, and remedial action will be taken if
the situation demands it.
After making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt a going concern basis
in preparing the annual report and financial statements
2. Accounting Policies (continued)
Standards, amendments and interpretations effective and adopted in 2023
The accounting policies adopted are consistent with those of the previous
financial year. In addition, the Group has adopted the new, and amendments to,
standards listed below. These amendments were either not applicable or not
material to the Group or Parent Company.
International Accounting Standards (IAS/IFRS) Effective date
Initial Application of IFRS 17 and IFRS 9-Comparative Information 1 January 2023
(https://www.ifrs.org/content/dam/ifrs/publications/amendments/english/2021/initial-application-of-ifrs-17-and-ifrs-9-comparative-information.pdf)
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2)
Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (Amendments to IAS 12)
International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12) 1 January 2023
New standards and interpretations not yet adopted
The International Accounting Standards Board (IASB) has issued the following
standards, amendments and interpretations with an effective date after the
date of these consolidated financial statements. These are effective for
annual reporting periods beginning on or after the date indicated:
International Accounting Standards (IAS/IFRS) Effective date
Classification of liabilities as current or non-current and non-current 1 January 2024
liabilities with Covenants - Amendments to IAS 1
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 1 January 2024
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 1 January 2024
Lack of exchangeability - Amendments to IAS 21 1 January 2025
The Group is assessing the impact of these new standards and the Group's
financial reporting will be presented in accordance with these standards from
the effective date.
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Group.
The Directors anticipate that the adoption of these standards and the
interpretations in future period will have no material impact on the financial
statements of the company.
2.1 Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. The group controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over
the investee.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Changes in the Group's ownership interests in subsidiaries that do not result
in the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed
to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal
is calculated as the difference between (i) the aggregate of the fair value of
the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary and any non-controlling interests. Where certain
assets of the subsidiary are measured at revalued amounts or fair values and
the related cumulative gain or loss has been recognised in other comprehensive
income and accumulated in equity, the amounts previously recognised in other
comprehensive income and accumulated in equity are accounted for as if the
Company had directly disposed of the related assets (i.e. reclassified to
profit or loss or transferred directly to retained earnings).
The fair value of any investment retained in the former subsidiary at the date
when control is lost is regarded as the fair value on initial recognition for
subsequent accounting under IFRS 9 "Financial Instruments: Recognition and
Measurement" or, when applicable, the cost on initial recognition of an
investment in an associate or a jointly controlled entity.
2. Accounting Policies (continued)
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of the
assets transferred by the Group, liabilities incurred by the group to the
former owners of the acquiree and the equity interests issued by the group in
exchange for control of the acquiree. Acquisition-related costs are recognised
in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value at the acquisition date, except
that:
· deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised and measured in
accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
· liabilities or equity instruments related to share-based
payment transactions of the acquiree or the replacement of an acquiree's
share-based payment transactions with share-based payment transactions of the
group are measured in accordance with IFRS 2 Share-based Payment at the
acquisition date; and
· assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer's previously held equity interest
in the acquiree (if any) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after
assessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and
the fair value of the acquirer's previously held interest in the acquiree (if
any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
2. Accounting Policies (continued)
2.2 Revenue recognition
Revenue is measured at the fair value of sales of goods and services less
returns and sales taxes. The Group has analysed its business activities and
applied the five-step model prescribed by IFRS 15 to each material line of
business, as outlined below:
2.2.1 Sale of products
The contract to provide a product is established when the customer places a
purchase order. The performance obligation is to provide the product requested
by an agreed date, and the transaction price is the value of the product as
stated in our order acknowledgement. The performance obligation is typically
met when the product is dispatched and so revenue is primarily recognised for
each product when dispatching takes place. In some limited situations when the
product is complete but the customer is unable to take delivery the
performance obligation is met when the customer formally accepts transfer of
risk and control even though the product has not been dispatched.
2.2.2 License arrangements
Revenue is recognised when the customer obtains control of the rights to use
the IP. The performance obligations are considered to be distinct from any
ongoing distribution arrangements which are treated in line with sales of
products.
2.2.3 Milestone payments
Where the transaction price includes consideration that is contingent upon a
future event or circumstance, the contingent amount is allocated entirely to
that performance obligation if certain criteria are met. Revenue is recognised
at the point of time of the performance obligation being satisfied.
2.3 Investments in associates
Associates are those entities in which the Group has significant influence,
but not control or joint control over the financial and operating policies.
Significant influence is presumed to exist when the Group holds between 20 and
50 percent of the voting power of another entity. Investments in associates
are accounted for under the equity method and are recognised initially at
cost. The cost of the investment includes transaction costs.
The consolidated financial statements include the Group's share of profit or
loss and other comprehensive income of equity-accounted investees, after
adjustments to align the accounting policies with those of the Group, from the
date that significant influence commences until the date that significant
influence ceases.
When the Group's share of losses exceeds its interest in an equity-accounted
investee, the carrying amount of the investment, including any long-term
interests that form part thereof, is reduced to zero, and the recognition of
further losses is discontinued except to the extent that the Group has an
obligation or has made payments on behalf of the investee.
2. Accounting Policies (continued)
2.4 Investments at fair value
Equity investments are held at fair value at the balance sheet date with any
profit or loss for the year being taken to the Income statement. The value of
listed investments being calculated at the closing price on the balance sheet
date.
2.5 Employee Benefits
The Group operates a defined contribution pension scheme. Contributions
payable by the Group's pension scheme are charged to the income statement in
the period in which they relate.
2.6 Taxation
Income tax expense represents the sum of the tax currently payable
and deferred tax.
(i) Current tax
Current taxes are based on the results shown in the
financial statements and are calculated according to local tax rules using tax
rates enacted or substantially enacted by the statement of financial position
date.
Income tax is recognised in the income statement or in
equity if it relates to items that are recognised in the same or a different
period, directly in equity.
Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered from or paid
to the taxation authorities.
(ii) Deferred tax
Deferred tax is provided, using the liability method,
on temporary differences at the statement of financial position date between
the tax base of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary
differences.
Deferred tax assets are recognised for all deductible
temporary differences, carry forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differenced and the carrying
forward or unused tax assets and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part
of the deferred tax assets to be utilised. Conversely, previously unrecognised
deferred tax assets are recognised to the extent that it is probable that
sufficient taxable profit that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on the tax rates and tax laws that have been
enacted or substantively enacted at the balance sheet date.
2. Accounting Policies (continued)
2.7 Financial instruments
Financial assets and financial liabilities are recognised when the
group becomes a party to the contractual provisions of the instrument.
2.8 Loans and receivables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate
method.
2.9 Equity investments comprise investments which do have a fixed maturity and
are classified as non current assets if they are intended to be held for the
medium to long term. They are measured at fair value through profit or
loss.
2.10 Trade receivables are initially measured at fair value and are
subsequently measured at amortised cost less appropriate provisions for credit
losses. Such provisions are recognised in the income statement.
2.11 Cash and cash equivalents comprise cash in hand and demand deposits and
other short-term highly liquid investments with maturities of three months or
less at inception that are readily convertible to a known amount of cash and
are subject to an insignificant risk of changes in value.
2.12 Trade payables are not interest-bearing and are initially valued at their
fair value and are subsequently measured at amortised cost.
2.13 Equity instruments are recorded at fair value, being the proceeds
received, net of direct issue costs.
2.14 Share Capital - Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of taxation, from the proceeds.
2.15 Financial instruments require classification of fair value as determined
by reference to the source of inputs used to derive the fair value. This
classification uses the following three-level hierarchy:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices);
Level 3 - inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
2.16 Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the first-in, first-out (FIFO) method. Net realisable value
is the estimated selling price in the ordinary course of business, less
applicable variable selling expenses.
2. Accounting Policies (continued)
2.17 Impairment of non-financial assets
At each statement of financial position date, the Group reviews the carrying
amounts of its investments to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for impairment
annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately, unless the relevant asset is
carried at a re-valued amount, in which case the impairment loss is treated as
a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (cash-generating unit) in prior years. A
reversal of an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
2.18 Capital management
Capital is made up of stated capital, premium, other reserves and
retained earnings. The objective of the Group's capital management is to
ensure that it maintains strong credit ratings and capital ratios. This will
ensure that the business is correctly supported and shareholder value is
maximised.
The Group manages its capital structure through adjustments that
are dependent on economic conditions. In order to maintain or adjust the
capital structure, the Company may choose to change or amend dividend payments
to shareholders or issue new share capital to shareholders. There were no
changes to the objectives, policies or processes during the period ended 31
December 2023.
2. Accounting Policies (continued)
2.19 Share-based compensation
The fair value of the employee and suppliers services received in exchange for
the grant of the options is recognised as an expense. The total amount to be
expensed over the vesting year is determined by reference to the fair value of
the options granted, excluding the impact of any non-market vesting conditions
(for example, profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of options that are
expected to vest. At each statement of financial position date, the entity
revises its estimates of the number of options that are expected to vest. It
recognises the impact of the revision to original estimates, if any, in the
income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the options
are exercised.
The fair value of share-based payments recognised in the income statement is
measured by use of the Black Scholes model, which takes into account
conditions attached to the vesting and exercise of the equity instruments. The
expected life used in the model is adjusted; based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future share
price behaviour and is selected based on past experience, future expectations
and benchmarked against peer companies in the industry.
2.20 Property, plant and equipment
Property, plant and equipment are stated at historical cost less subsequent
accumulated depreciation and accumulated impairment losses, if any. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance are
charged to profit or loss during the financial period in which they are
incurred.
Depreciation on property, plant and equipment is calculated using the
straight-line method to write off their cost over their estimated useful
lives at the following annual rates:
Computer
equipment
30%
Useful lives and depreciation method are reviewed and adjusted if appropriate,
at the end of each reporting period.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the difference between the
sales proceeds and the carrying amount of the relevant asset and is recognised
in profit or loss in the year in which the asset is derecognised.
2. Accounting Policies (continued)
2.21 Intangibles - Patents and trademarks
Patents acquired by way of the fair value uplift by way of the reverse merger
in 2014 have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight line method to
allocate the cost of the these acquired patents over their estimated useful
life of twenty years once the patents have been granted.
Development costs for new patents and trademarks since 2014 that have
been capitalized in line with the recognition criteria of IAS38 have been
estimated to have a useful economic life of 10 years
2.22 Research and Development
Research expenditure is written off to the statement of comprehensive income
in the year in which it is incurred. Development expenditure is written off in
the same way unless the Directors are satisfied as to the technical,
commercial and financial viability of individual projects. In this situation,
the expenditure is deferred and amortised over the 10 years during which the
Company is expected to benefit.
2.23 Merger relief reserve
The merger relief reserve arises from the 100% acquisition of OptiBiotix
Limited whereby the excess of the fair value of the issued ordinary share
capital issued over the nominal value of these shares is transferred to this
reserve in accordance with section 612 of the Companies Act 2006.
2.24 Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements requires management to make
estimates and assumptions concerning the future that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts
of revenues and expenses during the reporting periods.
2. Accounting Policies (continued)
The resulting accounting estimates will, by definition, differ from the
related actual results.
· Share based payments
The fair value of share based payments recognised in the income statement is
measured by use of the Black Scholes model, which takes into account
conditions attached to the vesting and exercise of the equity instruments. The
expected life used in the model is adjusted; based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future share
price behaviour and is selected based on past experience, future expectations
and benchmarked against peer companies in the industry.
· Useful life of intangible assets
Management have estimated that the useful life of the fair value uplift of
the patents acquired by way of the reverse merger in 2014 to be 20 years.
Development costs of patents and trademarks since 2014 that have been
capitalized in line with the recognition criteria of IAS38 have been estimated
to have a useful economic life of 10 years. These estimates will be reviewed
annually and revised if the useful life is deemed to be lower based on the
trading business or any changes to patent law. The net book value of
intangible assets at the year- end was £1.331m (£1.540m)
· Impairment reviews
IFRS requires management to undertake an annual test for impairment of
indefinite lived assets and, for finite lived assets to test for impairment if
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Impairment testing is an area involving
management judgement, requiring assessment as to whether the carrying value of
assets can be supported by the net present value of future cash flows derived
from such assets using cash flow projections which have been discounted at an
appropriate rate. In calculating the net present value of the future cash
flows, certain assumptions are required to be made in respect of highly
uncertain matters. The board looked at the current order book going forward,
the ongoing discussions with current customers and the recent new customers
and concluded that an impairment of the intangible assets was not applicable
for the year to 31 December 2023.
2. Accounting Policies (continued)
· Recognition and measurement of the investment in Probiotix Health
plc
Management have reviewed the nature of the relationship with Probiotix Health
plc in line of the Group's interest moving from 100% to 44% by 31 March
2022. Management have had regard to the requirements of IFRS 10 to consider
the facts and circumstances of the relationship between Optibiotix and
Probiotix and not just the shareholding interest. In taking account of a
range of factors, including Optibiotix's minority representation on the
Probiotix board and the terms of a relationship agreement entered into between
the parties, management have concluded that Optibiotix have significant
influence over Probiotix but not control. This remains under continuing
review as facts and circumstances change.
As a result of the recognition of the Group's remaining 44% interest at 31
March
2022 at fair value the Group and Company balance sheet report material
investment holdings in Probiotix Health plc.
The Directors have had regard to potential impairment of this asset. The
Directors believe there are no indicators which point to a potential adverse
impact on the asset.
3. Segmental Reporting
In the opinion of the directors, the Group has one class of business, in four
geographical areas being that of identifying and developing microbial strains,
compounds and formulations for use in the nutraceutical industry. The Group
sells into to four highly interconnected markets, all costs assets and
liabilities are derived from the UK location.
Revenue analysed by geographical market
Year ended Year ended
31 December 31 December 2022
2023
£'000 £'000
UK 221 136
US 202 100
India - 61
China 75 -
Rest of world 146 160
────── ──────
644 457
══════ ══════
During the reporting period one customer represented £104k (14.9%) of Group
revenues. (2022: one customer generated £100k representing 21.9% of Group
revenues)
4. Employees and Directors
Year ended Year ended
31 December 31 December 2022
2023
£'000 £'000
Wages and salaries 375 522
Directors' remuneration 272 354
Social security costs 54 66
Pension costs 19 35
────── ──────
720 977
══════ ══════
Within salaries and wages there is a charge of £153k (2022:NIL) for
termination payments made to R Kamminga.
In addition to the costs disclosed above a further £177k of employee costs
have been recharged to Probiotix Health Plc under a shared services agreement.
Year ended Year ended
31 December 31 December 2022
2023
No. No.
The average monthly number of employees during the period was as follows:
Group
Directors 5 6
Selling, General and Administration 5 5
────── ──────
10 11
══════ ══════
Company
Directors 5 6
───── ──────
5 6
══════ ══════
4. Employees and Directors (Continued…)
Directors' remuneration was as follows:
Year ended Year ended
31 December 31 December 2022
2023
£'000 £'000
Directors' remuneration 272 354
Directors' share based payments - 12
Benefits in kind 5 5
Bonus - -
Pension 7 10
────── ──────
Total emoluments 284 381
══════ ══════
Emoluments paid to the highest paid director
Remuneration for qualifying services 138 143
Company pension contributions to defined 5 4
────── ──────
143 147
══════ ══════
4. Employees and Directors (continued)
Directors' remuneration
Details of emoluments received by Directors and key management of the Company
for the year ended 31 December 2023 are as follows:
Directors
Remuneration Share based Pension Costs Benefits in Kind Total Total
and fees payments 2022
£'000 £'000 £'000 £'000 £'000 £'000
S P O'Hara 138 - 5 4 147 151
S Christie 20 - - - 20 25
R Davidson 44 - - - 44 55
S Kolyda 44 - 2 1 47 88
C Brinsmead 11 - - - 11 31
S Hammond 11 - - - 11 31
G Myers 4 - - - 4 -
Total 272 - 7 5 284 381
Benefits in kind relate to medical insurance. The number of directors to
whom retirement benefits were accruing was 2 (2022: 2).
5. Net Finance Income / (Costs)
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Finance Income:
Bank Interest 1 -
────── ──────
Net Finance Income / (Costs) 1 -
══════ ══════
6. Expenses - analysis by nature
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
Research and development 40 68
Directors' fees & remuneration (Note 4) 272 354
Salaries, pension and social security 447 623
Auditor remuneration - Group and Company audit fees 58 25
Auditor remuneration-Audit of subsidiaries - 15
Auditor remuneration - non audit fees:tax compliance - 8
Auditor remuneration - non audit fees: other assurance - 2
Brokers & Advisors 94 122
Advertising & marketing 114 84
Share based payments charge 6 12
Bad debt provision (104) 458
Amortisation of patents and development costs 205 224
Patent and IP costs 183 88
Consultancy fees 314 378
Legal and professional fees 9 12
Public Relations costs 55 80
Travel costs 93 102
Other expenses 229 78
────── ──────
Total administrative expenses 2,015 2,733
══════ ══════
7. Corporation Tax
Corporation Tax
Year ended Year ended
31 December 31 December 2022
2023
£'000 £'000
Corporation tax credit 17 (38)
Deferred tax movement (13) (108)
────── ──────
Total taxation 4 (146)
══════ ══════
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for
the year ended 31 December 2023 nor for the year ended 31 December 2022.
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Profit (Loss) on ordinary activities before income tax (2,043) 2,442
═══════ ═══════
Loss on ordinary activities multiplied by the standard rate of corporation tax (480) 466
in UK of 23.5% (2023 - 19%)
Effects of:
Disallowables 171 166
Income not taxable (63) (1,068)
Accelerated depreciation - -
R&D tax credit claimed - (38)
Amortisation 31 28
Revenue items capitalised - -
Other timing differences -
Unused tax losses carried forward 358 408
────── ──────
Tax credit 17 (38)
══════ ══════
The group has estimated losses of £7.6m (2022: £6.1m) in respect of which a
deferred tax asset of £1.9m (2022: £1.5m) has not been recognised due to the
uncertainty of future taxable profits. The unrecognised deferred tax asset
has been assessed by reference to a rate of 25% which is the UK headline
corporation tax rate from 1 April 2023.
7. Corporation Tax (continued)
The Group submits claims for R&D tax credits in respect of its research
and development activities in respect of microbiome modulators and similar
products relating to the exploitation of its patent portfolio and potential
new patents arising from scientific research performed by group employees and
its partners. Whilst the Board are confident of recovery of the estimated
R&D tax credit, there is no certainty that the receivable will be
recoverable until HMRC have approved the claim and the enquiry window is
closed. However, based on the group's history of successful claims over a
number of years, the Board are satisfied that the tax receivable is
recoverable and appropriately recorded.
2023 2022
Current tax asset - Group £ £
Balance brought forward 191,249
Received during the year (123,663)
Prior year adjustment -
Research & development tax credit claimed 37,500
────── ──────
105,086
8. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable shareholders by the weighted average number of ordinary shares
outstanding during the period.
Reconciliations are set out below:
2023
Weighted average
Basic and diluted EPS Earnings Number of shares Profit per-share
£'000 No. Pence
Basic EPS (2,038) 90,190,661 (2.24)p
Diluted EPS (2,038) 98,273,568 (2.08)p
══════ ════════ ══════
2022
Weighted average
Earnings Number of shares Profit per-share
£'000 £ Pence
Basic EPS 2,587 88,279,952 2.93
Diluted EPS 2,587 93,213,179 2.78
══════ ════════ ══════
As at 31 December 2023 there were 7,082,907 (2022: 7,182,907)
outstanding share options and NIL (2022: NIL) outstanding share warrants.
9. Intangible assets
Group Development Costs and Patents
£'000
Cost
At 31 December 2021 3,865
Additions 46
Disposals (1,370)
───────
At 31 December 2022 2,541
Additions -
Disposals -
Impairment (4)
───────
At 31 December 2023 2,537
═══════
Amortisation
At 31 December 2021 1,225
Amortisation charge for the year 224
Disposals (448)
───────
At 31 December 2022 1,001
Amortisation charge for the year 206
Disposals -
Amortisation eliminated on impairment (1)
───────
At 31 December 2023 1,206
═══════
Carrying amount
At 31 December 2023 1,331
At 31 December 2022 1,540
═══════
The company had no intangible assets during the reporting period.
Development costs and patents represent cost capitalised in respect of the
Group's intellectual property portfolio and includes the costs of registering
and maintaining patents as well as capitalised development costs. All
intangible assets relate to the Group's principal activities.
Disposals in the year 31 December 2022 relate to two patent families relating
to probiotic patents owned by Probiotix Limited and therefore which were
derecognised upon the group's loss of control of Probiotix Health plc. This
disposal has formed part of the gain on loss on disposal reported in the
income statement.
10. Property, plant and equipment
Group
£'000
Cost
At 31 December 2021 8
Additions -
Disposals -
───────
At 31 December 2022 8
Additions -
Disposals -
───────
At 31 December 2023 8
═══════
Depreciation
At 31 December 2021 8
Charge for the year -
───────
At 31 December 2022 8
Charge for the year -
───────
At 31 December 2023 8
═══════
Carrying amount
At 31 December 2023 -
At 31 December 2022 -
═══════
The company had no fixed assets during the reporting period.
11. Investments
Group
Set out below is the investment in Skinbiotherapeutics PLC. The investment
was treated as an associate of the group until 2 November 2020, after which
time the shareholding dropped to 24.65% and recalculated as an equity
investment. The Group records its investment in Skinbiotherapeutics plc at
fair value and is remeasured by reference to its closing price on AIM at each
reporting date. The share price at 31 December 2023 was 15.25p.
During the year, 6,911,567 were disposed to generate gross proceeds of
£1.1m with original cost of £622k. At 31 December 2023 the holding stood
at 13.39%
2023 2022
£'000 £'000
Investments
At the beginning of the period 5,022 13,651
Revaluations - (8,620)
(Loss)/Gain on investments (513) -
Disposal of shares during year (622) (9)
At 31 December 3,887 5,022
Investment in Associate
On 31 March 2022, ProBiotix Health Plc ( "PBX") the parent company of
ProBiotix Limited listed on the AQSE Growth Market. The listing of PBX on
AQSE, together with the issue of a dividend in specie and issue of new shares,
means that PBX is now considered an associate for accounting purposes with its
revenues and costs removed post listing and only OptiBiotix's (44%) proportion
of its profit and loss included in the Group's accounts under the equity
method of accounting. The step-down from being a subsidiary to an associate
resulted in the revaluation of the remaining interest held in PBX at the
listing price and a gain on disposal of a subsidiary recognised in the income
statement. A gain of £21.647m was recorded in the income statement.
An assessment was undertaken to assess whether the Company had defacto
control over PBX during the period considering Board representation, financing
arrangements , the Relationship agreement and the other shareholdings in PBX.
Based on the assessment it was concluded that the Company only had significant
influence and that PBX was an associate in the period. The Relationship
agreement sets out costs that are being incurred by the Group that are being
recharged to PBX.
At 31 March 2022 the Group held 53,533,333 shares in Probiotix Health plc,
valued at the IPO price of 21p resulting in a deemed cost of investment in
associate of £11.24m. As an associate, the Group's investment is equity
accounted and the Group's 44% share of loss was deducted from this carrying
value.
11. Investments (continued…)
Investment in Associate
2023 2022
£'000 £'000
Investments
At the beginning of the period 3,129 -
Additions
Deemed cost on reclassification from subsidiary - 11,242
Impairment in the period - (8,030)
Share of result for the period (see below) (323) (83)
At 31 December 2,806 3,129
PBX is registered in United Kingdom and is in the Health food sector.
Set out below is financial information on PBX set out in its IFRS financial
statements for the year to 31 December 2023.
2023 2022
£'000 £'000
Revenue 1,673 1,308
Loss from continuing operations (729) (237)
Total comprehensive loss (735) (189)
Current assets 1,871 2,311
Current Liabilities (566) (307)
Non-current liabilities (97) (89)
44% share of total comprehensive loss (323) (83)
11. Investments (continued)
Company Investments
2023 2022
£'000 £'000
Listed Investments
At the beginning of the period 5,022 13,651
Additions -
Revaluations (513) (8,620)
Disposal of shares during year (622) (9)
───── ─────
3,887 5,022
Investment in subsidiaries
At the beginning of the period 1,986 2,081
Additions - 16
Impairment (15) (50)
Disposals - (61)
───── ─────
1,970 1,986
At 31 December 5,858 7,008
Company Investment in Associate
2023 2022
£'000 £'000
At the beginning of the period 3,212 60
Reclassification to associate - 11,182
Provision against value of associate - (8,030)
At 31 December 3,212 3,212
The Company holds listed investments at fair value, and investments in
subsidiaries and associates at cost less impairment. The fair value of the
Company's investment in Probiotix Health plc upon losing control was set as
deemed cost.
11. Investments (continued)
The Directors have had regard to potential impairment of this group's
investment in Probiotix. The Directors believe there are no indicators which
point to a potential adverse impact on the asset.
During the year to 31 December 2022 an impairment charge of £8.03m was
recorded in the income statement as a separate line item. The impairment
assessment was made by reference to fair values using Level 1 inputs on the
Fair Value Hierarchy, being observable traded prices on the AQSE Growth
exchange.
During the year to 31 December 2022 an impairment of £50,000 was raised
against the Company's investment in The Healthy Weight Loss Company Limited as
the board intend to wind up this company which has minimal assets and no
trading activity.
The entities listed below have share capital consisting solely of ordinary
shares, which are held by the Group. The country of incorporation is also the
principal place of business and the proportion of ownership interest is the
same as the proportion of voting rights held.
As at 31 December 2023 the Company directly held the following subsidiaries:
Name and Nature of Active / Dormant Country of incorporation Proportion of
Registered office address of company Business and place of business equity interest
OptiBiotix Limited Research & Development Active United Kingdom 100% of ordinary shares
Innovation Centre Innovation Way, Heslington, York, YO10 5DG
Optibiotix Health India Private Limited Health foods Active India 100% of ordinary shares
House NO.243, Mcd Colony, Vivekanand Puri Sarai
Rohilla City, Delhi CITY, DELHI, North Delhi, Delhi, India, 110007
The Healthy Weight Loss Company Limited was dissolved on 19 December 2023.
12. Inventories
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Finished goods 188 178 - -
══════ ══════ ══════ ══════
During the period £334k (2022: £213k) has been expensed to the
income statement.
13. Trade and other Receivables
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current
Accounts receivable 345 379 18 -
Other receivables 97 131 12 17
Prepayments and accrued income 18 11 2 8
───── ───── ───── ─────
460 521 32 25
During the year Optibiotix Health PLC recharged Probiotix Health PLC £15,000
for Directors' fees which was repaid after the year end.
During the year Optibiotix Health PLC loaned Optibiotix Limited £1,223,340 to
finance working capital costs. Optibiotix Limited recharged Optibiotix
Health PLC £327,979 , (2022: £373,426) for salary costs. The balance at the
year end of £895,381 (2022: £846,574) was cancelled. There was no interest
charged during the year. This does not impact on the consolidated Group
accounts.
During the year Optibiotix Limited recharged Probiotix Health PLC
£44,799(2022: £23,139) for directors' fees. The balance at the yearend was
£NIL. There was no interest charged during the year.
During the year Optibiotix Limited transactions with Probiotix Limited were as
follows: -
· £490,786 (2022:£440,663) for salaries
and administration costs;
· £67,700 (2022: £60,676 income
received on behalf of Probiotix limited; and
· £425,639 repayments received.
There was no interest charged during the year. The remaining balance of
£27,617 was received after the year end.
14. Cash and Cash Equivalents
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Cash and bank balances 635 1,052 434 865
══════ ══════ ══════ ══════
All cash is held in demand deposits with large UK banks.
15. Called Up Share Capital
2023 2022
Issued share capital comprises: £'000 £'000
Ordinary shares of 2p each -91,190,661 (2022: 91,190,661) 1,824 1,824
────── ──────
1,824 1,824
────── ──────
No new shares were issued during the year.
16. Reserves
Share capital is the amount subscribed for shares at nominal value. Share
premium represents amounts subscribed for share capital in excess of nominal
value, net of expenses.
Merger relief reserve arises from the 100% acquisition of OptiBiotix Limited
on 5 August 2014 whereby the excess of the fair value of the issued ordinary
share capital issued over the nominal value of these shares is transferred to
this reserve in accordance with section 612 of the Companies Act 2006.
Retained earnings represents the cumulative profits and losses of the group
attributable to the owners of the company net of distributions paid.
Share based payment reserve represents the cumulative amounts charged in
respect of unsettled warrants and options issued.
17. Trade and other payables
Current:
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Accounts Payable 56 191 7 34
· Accrued expenses 75 70 67 39
· Other payables 49 17 8 10
· ─────── ─────── ─────── ───────
Total trade and other payables 180 278 82 83
─────── ─────── ─────── ───────
18. Deferred Tax
Deferred tax is provided, using the liability method, on temporary differences
at the statement of financial position date between the tax base of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 25% (2022: 25%).
The movement on the deferred tax account is as shown below:
2023 2022
£'000 £'000
At 31 December 365 552
Movement in the period (13) (187)
────── ──────
At 31 December 352 365
══════ ══════
Deferred tax assets have not been recognised in respect of tax losses and
other temporary differences giving rise to deferred tax assets as the
directors believe there is uncertainty over the timing of future taxable
profits. Further details of available losses are set out in note 7.
19. Related Party Disclosures
Transactions and balances with Probiotix Health Plc are set out in note 13.
Key Management Personel (KMP) disclosures have been made under note 4.
20. Ultimate Controlling Party
The Board consider that there is no overall controlling party.
21. Share Based payment Transactions
(i) Share options
The Company had introduced a share option programme to
grant share options as an incentive for employees of the subsidiaries.
Each share option converts into one ordinary share of the Company on
exercise. No amounts are paid or payable by the recipient on receipt of the
option and the Company has no legal obligation to repurchase or settle the
options in cash. The options carry neither rights to dividends nor voting
rights prior to the date on which the options are exercised. Options may be
exercised at any time from the date of vesting to the date of expiry.
Movements in the number of share options outstanding and their related
weighted average exercise prices are as follows:
Number of options Average exercise price
2023 2022 2023 2022
No. No. £ £
Outstanding at the beginning of the period 7,182,907 7,632,907 0.092 0.18
· Granted during the period - 500,000 - 0.02
· Forfeited/cancelled during the year (325,000) (950,000) 0.52 0.70
· Exercised during the period - - - -
· ─────── ─────── ────── ──────
Outstanding at the end of the period 6,857,907 7,182,907 0.08 0.092
─────── ─────── ────── ──────
For the share options issued in 2014 vesting conditions dictate that half will
vest if the middle market quotation of an existing Ordinary share is 16p or
more on each day during any period of at least 30 consecutive Dealing days and
half will vest when a commercial contract is signed. The two conditions are
not dependent on each other and will vest separately.
For the share options issued in 2015 vesting conditions dictate that some of
the options will vest if the middle market quotation of an existing Ordinary
share is 40p or more on each day during any period of at least 30 consecutive
Dealing days and some will vest if certain revenue targets are met or if
certain scientific studies are completed. The conditions are not dependent on
each other and will vest separately.
For the share options issues in 2017 vesting conditions dictate that the
options will vest if certain revenue conditions are met.
For the share options issues in 2020 vesting conditions dictate that the
options will vest if certain revenue conditions are met.
For share options issued in 2022 The Company agreed with a number of option
holders to surrender their existing options in return for Nominal Value
Options over half the number of shares of their existing options, which are
subject to a combination of performance and time-based vesting criteria. This
ensures a continued focus on commercial revenues and shareholder value
creation. New options will be granted on a similar basis going forward.
Options granted to non-executive directors will be subject to time-based
vesting.
21. Share Based payment Transactions (continued)
The share options outstanding at the period end had a weighted average
remaining contractual life of 475 days (2022: 830 days) and the maximum term
is 10 years.
The share price per share at 31/12/23 was £0.27 (31/12/2022: £0.13)
Where share options were cancelled and replaced with share options with
revised terms, the Board have considered this set of transactions as a
modification of share based payment arrangements and have therefore considered
whether any incremental value arises as a result of the grant of modified
awards. Having performed an assessment the Board have concluded that no
incremental value fair is required and therefore no charge has been
recognised. In respect of replacement options which include market based
vesting conditions in respect of revenue targets, the Board have determined
that the value of this proportion of shares have immaterial value in light of
the Group's results for the 2022 accounting period in which they were
granted.
(i) Warrants
On 20 February 2014, an open offer was made to the potential investors to
subscribe for 203,380,942 new ordinary shares of £0.0001 each at £0.0001
each. On a 1:1 basis, warrants attach to any shares issued under the open
offer convertible at any time to 30 November 2018 at £0.0004 per shares.
On 4 August 2014, the warrants in issue were consolidated in the ratio of
200:1 as part of the share reorganisation.
At a meeting of warrant holders on 24 January 2017 it was agreed to extend the
exercise period for all remaining warrants to 28 January 2022 and 19 February
2022
Movements in the number of share warrants outstanding and their related
weighted average exercise prices are as follows:
Number of warrants Average exercise price
2023 2022 2023 2022
No. No. £ £
Outstanding at the beginning of the period - 329,336 - 0.08
· Exercised - (125,060) - 0.08
· Cancelled - (204,276) - -
· ─────── ─────── ─────── ───────
Outstanding at the end of the period - - - 0.08
─────── ─────── ─────── ───────
There were no warrants in issue at 31 December 2023.
A charge of £NIL (2022: £Nil) has been recognised during the year for the
share based payments over the vesting period.
22. Financial Risk Management Objectives and Policies (Continued..)
The Group's financial instruments comprise cash balances and
receivables and payables that arise directly from its operations.
The main risks the Group faces in respect of its financial
statements are liquidity risk and credit risk.
The Board regularly reviews and agrees policies for managing each
of these risks. The Group's policies for managing these risks are summarised
below and have been applied throughout the period.
Interest risk
The Group is not exposed to significant interest rate risk as it
has limited interest bearing liabilities at the year end.
The group's financial assets do not bear interest.
Credit Risk
The Group try to limit the credit risk by dealing with larger
companies and also asking new smaller customers to provide a deposit
with the purchase order.
Management have regard to credit exposures when entering into new
contracts and seek to agree settlement terms on all contracts. Credit
exposure is regularly monitored by management and any overdue debts are
followed up as part of the group's credit control procedures. Where a debt
becomes significantly overdue, management have regard to credit loss
provisions to reflect the existence of expected credit losses, taking account
of forward looking information as well as the pattern of cash collections for
that category of customer.
The Board consider a default to have occurred when a receivable
passes 60 days beyond agreed credit terms, at which point regard is had to the
specific characteristics of the debtor in assessing exposure to material
credit risk and therefore the requirement to create a loss provision.
Liquidity risk
Liquidity risk is the risk that Group will encounter difficulty in
meeting these obligations associated with financial liabilities.
The responsibility for liquidity risks management rest with the
Board of Directors, which has established appropriate liquidity risk
management framework for the management of the Group's short term and
long-term funding risks management requirements.
During the period under review, the Group has not utilised any
borrowing facilities.
The Group manages liquidity risks by maintaining adequate reserves
by continuously monitoring forecast and actual cash flows, and by matching the
maturity profiles of financial assets and liabilities.
Capital risk
The Group's objectives when managing capital are to safeguard the ability to
continue as a going concern in order to provide returns for shareholders and
benefits to other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
23. Post Balance Sheet Events
On 25 March 2024 the company issued and allotted 6,627,500 shares
of 2 pence per share exercised at a price of 20 pence per share in the capital
of the company.
On 25 March 2024 Mr Graham Myers, recently appointed Director of
the company acquired 125,000 shares in the company representing 0.13% of the
Company's issued share capital at a price of 20 pence per share
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