REG - SkinBioTherapeutics - Acquisition and Financial Update

SkinbiotherapeuticsAnnouncement

11/10/2024 07:00

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RNS Number : 8548H  SkinBioTherapeutics PLC  11 October 2024

 

SkinBioTherapeutics plc

("SkinBioTherapeutics" or "the Group")

 

Acquisition of Bio-Tech Solutions Ltd

and Financial Update

·    Second acquisition in M&A strategy adding manufacture and packaging of health, hygiene and personal care products, and future development platform for topical products
·    Cash and debt free acquisition, EBITDA profitable business
·    Strategically beneficial to Dermatonics, the current business model and future targets adding further value
·    Post acquisition, SkinBioTherapeutics has sufficient cash runway to support operations through to Summer 2026

11 October 2024, SkinBioTherapeutics plc (AIM: SBTX), a life science company
focused on skin health, announces the acquisition of the entire share capital
of Bio-Tech Solutions Ltd ("BTS") for a total enterprise consideration of
£1.25m payable in cash on closing. BTS is the second acquisition of the
Group's M&A strategy and brings the capabilities of manufacturing and
packaging of health, hygiene and personal care products, and a future
development platform for advanced topical creams.

The acquisition is being funded by a loan of £950,000 with an existing
shareholder and a subscription for 2,349,624 new Ordinary Shares at 10.64p
raising £250,000, as well as utilisation of Group cash reserves.  The terms
of the loan are set out in the financing section below.

The Group has also provided an overall financial update for the period to the
end of September 2024.

Acquisition of Bio-Tech Solutions Ltd

BTS is a well-established manufacturer and supplier of health, hygiene and
personal care products based in Driffield, Yorkshire, founded by Ian Moulds.

The business has capacity to produce liquids, topical creams and lotions as
well as tablets and capsules, manufactures to GMP standards, and the company
is ISO certified - 9001-2015 and ISO 13485 - 2016 (Medical Devices) with
quality control facilities. The company has 23 employees involved in
manufacturing, packaging, formulation, regulatory affairs and back office.

BTS delivered £2.1m of revenue and £0.5m of EBITDA for the year ending 30
June 2024.  Based on latest management accounts, it is forecasted to deliver
£3.0m of proforma revenue and £0.9m of proforma EBITDA in the 2024/25
financial year. Management anticipates that it will provide cost synergies to
the Group, initially through the manufacture of Dermatonics products which has
been established as part of the due diligence process.  This acquisition also
provides the potential for a future development platform for advanced topical
creams and capsules.  Further details of BTS are set out in the Appendix
below.

 

Financing of the acquisition through debt, equity and cash

The consideration for the acquisition is being funded through debt and equity
provided by long term shareholder, David Brierwood, as well as Group cash
reserves. The use of the loan and equity element preserves the Group's cash
runway, and allows time for integration and realisation of synergies.

The terms of the loan are as follows:

 

 Amount     £950,000
 Term       3 years
 Repayment  First 2 years quarterly interest payments, 3(rd) year quarterly interest and
            capital payments
 Interest   13%
 Fees       2%
 Warrants*  3,289,474 warrants exercisable at 10.64 pence per share.

 

In addition, the Company has entered into a subscription agreement with the
same investor to subscribe for 2,349,624 new Ordinary Shares at 10.64p raising
£250,000.

*The funds from the warrants on exercise will be used to reduce the debt from
£950,000 to £600,000.

 

Financial Update

Following the fundraising in August 2024 the cash position of the Group at end
September 2024 was £1.9m. Having acquired BTS, the Group now has sufficient
cash runway to support its operations through to Summer 2026 without any
additional income from Croda or other joint development agreements.

Following the successful completion of the clinical studies by Sederma (Croda
plc) and the commencement of full commercialisation, the Group has not altered
its view on forecasts and revenue expectations. Please note that any forecasts
are in the control of Sederma and management cannot forward forecast, so must
await the outcome of commercial discussions in October/ November.

 

Stuart Ashman, CEO of SkinBioTherapeutics plc, said:

"This is the second acquisition we have made as part of our buy and build
strategy to generate immediate and longer-term benefits to the
SkinBioTherapeutics Group.

"As with our acquisition of Dermatonics earlier this year, this deal brings in
revenues, positive EBITDA and cash, as well as providing the Group with cost
synergies. We gain access to an important and varied customer base in the
healthcare space with an excellent team which we intend to retain. The main
rationale for the deal is obtaining regulatory approved manufacturing
facilities which will underpin the expansion of our product portfolio. BTS
brings us the capability to manufacture products ourselves and supports our
other pillars for the longer term.

"In December 2023, I talked about "transforming the Group". It may have taken
slightly longer than we had intended to deliver the second acquisition,
however with a projected annualised Group turnover in excess of £6.3m before
any revenue from the Croda partnership these two acquisitions provide us with
a strong product portfolio and integrated manufacturing. I believe we can
claim that the "transformation" has well and truly begun. This is another
building block to the solid scientific and financial foundations of the Group
and, with the successful completion of the Croda clinical studies, we are
moving rapidly towards Group profitability.

"I'd like to thank David Brierwood for his help in completing this deal. He
has been a long-term supporter of both SkinBioTherapeutics and our strategy to
transform the Group through acquisitions of complementary businesses."

 

Long-term shareholder, David Brierwood, said:

"I have long admired SkinBioTherapeutics' ambitions to transform the skin
healthcare market, and have watched with increasing conviction as the business
model has evolved over the past few years. I am delighted to have been able to
support the Group to achieve this next milestone acquisition and enabling the
transformation of SkinBioTherapeutics from an R&D company to a
revenue-generating, profitable commercial Group."

 

Commenting on the deal, Ian Moulds, Founder of Bio-Tech Solutions said:

"Building up BTS has been a life's work. As I reach retirement, I'm very happy
to be handing it over to the SkinBioTherapeutics team, where it can be become
a fundamental part of a bigger entity. Stuart and his team have done extensive
due diligence and during this process we have got to know each other very
well. I fully support SkinBioTherapeutics' growth plans in the skin and
personal healthcare sectors; BTS and its team are passing into good hands."

-Ends-

The information communicated in this announcement contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) No.
596/2014.

 

Reminder of Shareholder presentation and Q&A

CEO, Stuart Ashman, and CFO, Manprit Randhawa, will provide a live
presentation about the terms and rationale of the acquisition of Bio-Tech
Solutions and the financing details via the Investor Meet platform at 10am
Friday 11 October 2024.

The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard at any
time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet
SkinBioTherapeutics at the link HERE
(https://www.investormeetcompany.com/skinbiotherapeutics-plc/register-investor)
.

Investors who already follow SkinBioTherapeutics on the Investor Meet Company
platform will automatically be invited.

A recording of the presentation will be available shortly afterwards on the
SkinBioTherapeutics investor relations section of the website HERE
(https://www.skinbiotherapeutics.com/?s=investor+meet) .

 

For more information please contact:

 SkinBioTherapeutics plc                            +44 (0) 191 495 7325

 Stuart J. Ashman, CEO

 Manprit Randhawa, CFO

 Cavendish Capital Markets Limited                  +44 (0) 20 7397 8900

(Nominated Adviser & Broker)

 Giles Balleny, Dan Hodkinson (Corporate Finance)

 Charlie Combe (Broking)

 Dale Bellis, Tamar Cranford-Smith (Sales)

 Vigo Consulting (financial press)                  +44 (0) 20 7390 0231

 Rozi Morris                                                               +44 (0) 7740 859 962

                                                    Skinbio@vigoconsulting.com (mailto:Skinbio@vigoconsulting.com)

 

Notes to Editors

About SkinBioTherapeutics plc

SkinBioTherapeutics is a life science company focused on skin health. The
Company's proprietary platform technology, SkinBiotix®, is based upon
discoveries made by the translational dermatology team at the University of
Manchester.

The Company is targeting a number of skin healthcare sectors, the most
advanced of which are cosmetic skincare and food supplements to modulate the
immune system by harnessing the gut-skin axis. In each area
SkinBioTherapeutics plans to exemplify its technology through human studies.
The Company's first product, AxisBiotix-Ps™, a food supplement to address
the symptoms of mild to moderate psoriasis.

The Company listed on AIM in April 2017 and is based in Newcastle, UK. For
more information, visit: www.skinbiotherapeutics.com
(http://www.skinbiotherapeutics.com/) .

 

 

Additional details about the acquisition of Bio-Tech Solutions

Overview

As stated in the FY results on 30 November 2023, SkinBioTherapeutics announced
a dual growth strategy which comprised organic growth of its own portfolio and
inorganic growth through the acquisition of companies that either manufacture
or sell a variety of branded topical products for common dermatological
conditions to NHS hospitals, dispensing practices and national pharmacy
chains.

The criteria for acquisition included the following features:

·    Accretive from a revenue and earnings perspective from day one in
order to reduce the operating cash burn

·    Providing synergies operationally and strategically

The overall goal of the Group is to become a cash generating entity as swiftly
as possible.

Dermatonics was the first acquisition completed in early 2024 which provided a
full range of healthcare products with access to a number of commercial
routes, including a partnership with the Umesh Modi Group across Asia, the
Middle East, and Africa.

Today's announcement about the acquisition of Bio-Tech Solutions (BTS)
provides the manufacturing element of the growth strategy. The Directors
believe that the BTS business and financial performance fulfils the criteria
set by SkinBioTherapeutics and provides a significant growth opportunity for
the Company.

 

Introduction to Bio-Tech Solutions

BTS specialises in the manufacture of health, hygiene and personal care
products. This acquisition provides the platform for SkinBioTherapeutics to
further develop the products on offer as well as gaining a good level of
market penetration through its established links with hospitals and care
homes.

BTS was founded in 2002 and is a family business located in Driffield in
Yorkshire, owned by Mr and Mrs Moulds (the Vendors). The Company's aim and
purpose is to provide contract manufacturing for infection control, cosmetics,
hygiene and dental care. The type of products range from liquids, creams,
lotions, etc. The manufacturing facilities are to GMP standards and ISO
certified, and the Company has quality control (QC) facilities, including HPLC
(high-performance liquid chromatography) analysis service and can also deal
with flammables.

The business employs 23 staff, split between office and factory. Mr Moulds has
been working part time and is looking to retire. To date, he has still been
involved in the running of the business and he will stay on in a part-time
consultant role post-acquisition.

 

Financial performance*

For the financial year ended 30 June 2024, BTS reported unaudited revenues
of £2.1 million and EBITDA of £0.5 million. Over the last four financial
years, BTS has grown both revenue and EBITDA. Post year end, the business has
performed well, and financially, it is expected to reach £3.0m in proforma
revenues and £0.9m in proforma EBITDA pre-synergies.

* Based on unaudited management accounts

 

Manufacturing operation

The factory is run under the supervision of the Operations Manager, who has
been in the post for four years.

The facility is to GMP standards and BTS are ISO 9001 & ISO 13485
certified. Within the building there are quality control facilities, including
HPLC analysis service, and it is authorised to deal with flammables.

The operation currently works one 8 hour shift in a 4.5 day week, but has the
capacity to significantly increase this.

 

Rationale for acquisition

SkinBioTherapeutics aims to develop and market systems of products which aim
to heal skin from within (Gut-Skin Axis) and heal from outside (using a range
of topicals).  Within the R&D pipeline are a range of programmes and cost
centres which aim to develop topicals using the SkinBioTherapeutics
technologies over the coming years as new products/applications are launched.

BTS is a profitable company and this acquisition would ultimately increase
SkinBioTherapeutics' revenue and EBITDA. The business manufactures many
products such as skin creams and lotions and as a result, there is a
synergistic opportunity for the Group to manufacture its own products in the
future.

BTS also produces products for hygiene and infection control which could
create potential synergies with the Group's CleanBiotix pillar.

At the senior level, the operations manager, Andrew Tindall, will report into
Stuart Ashman, CEO of SkinBioTherapeutics. He is responsible for day-to-day
management of overall operations.

In summary, management believes that the BTS acquisition has solid rationale
and meets all the Group's criteria as a synergistic transaction and to be
additive.

 

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are not
based on historical facts but rather on the Directors' current expectations
and assumptions regarding the Group's future growth, results of operations,
performance, future capital and other expenditures (including the amount,
nature and sources of funding thereof), competitive advantages, business
prospects and opportunities. Such forward looking statements reflect the
Directors' current beliefs and assumptions and are based on information
currently available to the Directors.

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