REG - Yourgene Health PLC - Final Results
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Yourgene Health plc
("Yourgene", the "Company" or the "Group")
Final Results
Manchester, UK - 28 July 2020: Yourgene Health plc (AIM: YGEN), the international molecular diagnostics group which commercialises genetic products and services, announces its results for the year ended 31 March 2020.
The results reflect strong organic growth as well as a first contribution from Elucigene Diagnostics ("Elucigene"), acquired in April 2019, with the Group's first profits at an adjusted EBITDA* level demonstrating significant progress towards profitability. The Board remains confident that the Company's growth trajectory will continue and remain on track to hit ambitious growth targets for 2021 in line with consensus expectations.
Financial highlights
· Revenues up 87% to £16.6m from £8.9m, of which 36% is organic growth
· Gross profits up 122% to £10.2m from £4.6m
· £4.7m improvement in adjusted EBITDA* to £1.3m from (2019: loss of £3.4m)
· Operating loss reduced to £3.2m from £4.8m, with half of 2020 figure due to non-cash share-based payments charge
· Total comprehensive loss of £2.3m, compared to a prior year equivalent loss of £4.8m, excluding significant net finance gain from Thermo Fisher debt cancellation (£3.4m profit inclusive of the debt cancellation).
· Cash used by operations halved to £2.1m (2019: £4.0m) due to growth working capital
· Cash and cash equivalents at 31 March 2020 of £2.8m (31 March 2019: £1.3m)
- Post period end receipts of £0.8m for warrants / options exercise and £0.5m for R&D tax credit
· Net cash (cash less borrowings) improved to £2.4m (31 March 2019: net cash of £1.0m)
* Adjusted EBITDA is the operating profit/(loss) before interest, tax, depreciation, amortisation, share-based payments and acquisition-related expenses shown separately disclosed on the face of the Income Statement
Operational highlights
· Acquisition of Elucigene and associated £11.8m (gross) equity fundraise in April 2019
- +12% like-for-like growth achieved through the realisation of commercial synergies
- Operational synergies include enhanced capabilities, facilities and manufacturing capacity
· Acquisition of French distributor's NIPT business for up to £3.5m in March 2020
- Relationship management and back office support transition well advanced
- Business is on track to achieve first growth incentive milestone
· Launch of first oncology product, the Elucigene DPYD assay, a new chemotoxicity diagnostic assay, which continues to gain traction in global market
· First US revenues and opening of Yourgene Health Inc in the US
· Development of the Illumina-based IONA® test progressing well and CE mark obtained post period end
· Non-Executive Appointments Dr John Brown, CBE and Jonathan Seaton
· Product launches of Yourgene Flex™ Analysis Software to support product diversification
Lyn Rees, Chief Executive Officer of Yourgene, commented:
"I am delighted to announce our first EBITDA* profit as a demonstration of the transformation that is underway at Yourgene and resultant organic growth, supported by the contribution from Elucigene and the smooth integration process that is almost complete. The AGX-DPNI acquisition of our French NIPT customers in March 2020 is also on track to achieve the ambitious growth incentive targets significantly supported by the commercial roll out of our new IONA Nx product.
"The reorientation of the business to focus on our key four strategic growth drivers is starting to bear fruit, and I remain convinced we have a very significant opportunity ahead of us. We are confident in our outlook for the year ahead, even before potential COVID-related product and service revenues, and we are very excited about the prospects for further growth in the coming years."
A presentation on the financial results and business outlook will be delivered by Lyn Rees, CEO, and Barry Hextall, CFO and will be available to view on the Company's website later today, here: https://www.yourgene-health.com/investors/company-information/investor-videos
For more information, please contact:
Yourgene Health plc
Lyn Rees, Chief Executive Officer
Barry Hextall, Chief Financial Officer
Joanne Cross, Director of Marketing
Tel: +44 (0)161 669 8122
investors@yourgene-health.com
Cairn Financial Advisers LLP (NOMAD)
Liam Murray / James Caithie / Ludovico Lazzaretti
Tel: +44 (0)20 7213 0880
Stifel Nicolaus Europe Limited (Sole Corporate Broker)
Nicholas Moore / Matthew Blawat / Ben Maddison
Tel: +44 (0)20 7710 7600
Walbrook PR Ltd (Media and Investor Relations)
Paul McManus / Lianne Cawthorne
Tel: +44 (0)20 7933 8780 or yourgene@walbrookpr.com
Mob: 07980 541 893 Mob: 07584 391 303
About Yourgene Health
Yourgene Health is an international molecular diagnostics group which develops and commercialises genetic products and services. The group works in partnership with global leaders in DNA technology to advance diagnostic science.
Yourgene develops and commercialises simple and accurate molecular diagnostic solutions, for reproductive health and molecular genetics. The Group's products include non-invasive prenatal tests (NIPT) for Down's Syndrome and other genetic disorders, Cystic Fibrosis screening tests, invasive rapid aneuploidy tests, male infertility tests and genetic disease tests. Yourgene's commercial footprint is already established in the UK, Europe, the Middle East, Africa and Asia.
Our product development, research service and commercial capabilities extend across the lifecycle of genetic test development including regulatory submissions. Through our technical expertise and partnerships, Yourgene Health is also extending its genetic testing offering into oncology.
Yourgene Health is headquartered in Manchester, UK with offices in Taipei, Singapore and Miami, and is listed on the London Stock Exchange's AIM market under the ticker "YGEN". For more information, visit www.yourgene-health.com and follow us on twitter @Yourgene_Health.
CHAIRMAN'S STATEMENT
Yourgene Health Plc has gone from strength-to-strength, and during the financial year 2019/20 we have reported our first year of positive EBITDA*. The Group now has three clear areas of product focus:
· Non-Invasive Prenatal Testing (NIPT)
· Reproductive Health
· Molecular Genetics, including oncology, research services and infectious disease (COVID-19 testing)
Excluding Infectious Disease, which was a new focus post-period end, each of these areas grew throughout the last financial year, however it will be their contribution throughout 2020 and beyond that will define the Group.
During the 2019/20 financial year we acquired and integrated Elucigene Diagnostics and in March 2020 we acquired AGX-DPNI S.A.S, both of these acquisitions have been earnings enhancing during the current financial year and will continue to be so.
Distribution channels expanded during the period and we now currently distribute to over 60 countries, to over 300 customers, either directly or via distributors. To accommodate this expansion we have invested in new facilities and staff, which will provide additional capacity for the anticipated future growth of the Group and to support the roll out of the IONA® Nx product.
The Board during this period has been strengthened by the appointment of Dr John Brown CBE and Jonathan Seaton, who both have extensive experience within the life science industry and have made a very valuable contribution. Jonathan in particular has a lot of expertise in mergers and acquisitions and is based in the US - this supports our strategic growth plans.
I would like to take this opportunity to thank all of our team at Yourgene for their effort, dedication and loyalty to the Group during this period and the COVID-19 pandemic. We have a business that has a balanced portfolio with substantial opportunities, which we are determined to deliver upon.
Adam Reynolds
Chairman
27 July 2020
CEO'S REVIEW
I am absolutely delighted with the positive progress that we've made in the last 12 months, and I am equally excited about the opportunities we have ahead of us in the new financial year which will allow us to continue our strong commercial momentum despite the challenges caused by the global pandemic. I am also very proud of the way the team has pulled together to support the global COVID-19 effort with the launch of our Clarigene™ SARS-CoV-2 Test and also to progress the IONA® Nx NIPT Workflow product ("IONA Nx") through CE marking and towards commercial launch under difficult market conditions.
Certainly, from a financial perspective, the year ending 31 March 2020 proved to be another year of delivering significant growth in line with expectations. Revenues were up 87% to £16.6m compared to the previous year and we achieved a key milestone of recording a positive adjusted EBITDA* for the first time, with adjusted EBITDA of £1.3m compared to an adjusted EBITDA loss of £3.4m last year. Also, with over £2.7m of cash in the bank at year end we are well funded to continue to execute against our four key strategic priorities for growth, and which over the last year we made significant progress against.
Key strategic priorities for growth
Product penetration
- selling more into existing channels
Geographic expansion
- selling more into new territories
Product expansion
- new product lines and content
Acquisitive growth
- both earnings enhancement opportunities and technology consolidation
Product penetration
During the year we recorded like for like organic growth from existing products of approximately 36%. The majority of this organic growth is derived from the increased use of our flagship non-invasive prenatal tests (NIPT) for Down's syndrome and other genetic disorders. Sales from NIPT products and services were up 29% over the year to just over £10m (up from £7.9m), although this does include three weeks' contribution from our French NIPT distribution business which was acquired in March. Whilst we are delighted with the continued performance of the NIPT business this growth was held back due to anticipation by our UK and European customers for the new Illumina-based IONA Nx format, which we expect to be a major driver of NIPT sales growth in these markets once launched.
It was also pleasing to see a very strong performance over the year from our research services activities operated from Taipei, which made a strong contribution to the performance of our Molecular Genetics Division (previously referred to as Oncology & Research services).
Our strong focus on the development of key relationships has been essential to ensuring continued growth from our existing sales channels. We have cultivated and reinforced our direct relationships with customers in key regions and we have a well-established channel of distribution partners who bring the experience of local market knowledge, culture and language, networks and provide on the ground regulatory and logistic support. We continue to maintain and develop relationships with key instrumentation manufacturers such as Illumina and Thermo Fisher. We have established collaborations with key opinion leaders, clinicians, and scientists, to promote the need for high-quality and highly accurate prenatal screening.
Having already established a strong NIPT footprint in India, the Middle East and Asia we have benefited from continued growth in these areas. As NIPT use continues to grow in these areas, our distribution partners have successfully increased adoption of our products within their regions.
Geographic expansion
We continue to make excellent progress in expanding our commercial footprint into new territories. A key achievement during the year was the establishment of a direct sales presence in the US for the first time, through the establishment of Yourgene Health Inc, and most importantly the generation of our first US revenues. We expect to see good growth from the US market when borders open up again.
The Elucigene acquisition has been a big driver of our increased geographic coverage and we now sell products into over 60 countries worldwide, compared to 30 countries last year.
During the year we have entered new markets with contract wins for NIPT in South East Asia, Eastern Europe and the Middle East, we have appointed new distributors to cover additional countries, previously not served by our distribution network. We continue to look for long term opportunities in China across our expanded product range and we continue to evaluate potential partners.
The result of our geographic expansion can be seen below:
Revenue analysed by geographical market
Regional segments
Year ended
30 March 2020
£m
% of total
Year ended
30 March 2019
£m
% of total
Growth
UK
2.0
12%
1.2
14%
+62%
Europe
4.1
25%
1.8
20%
+133%
International
10.5
63%
5.9
66%
+78%
Total
16.6
100%
8.9
100%
+87%
Product expansion
During the year we have successfully executed our plan to broaden our product lines and content beyond NIPT and to establish a wider range of additional reproductive health products within the Group, covering many elements of the reproductive lifecycle.
During the year we launched our first oncology product, the Elucigene DPYD assay, a new chemotoxicity diagnostic assay, a simple-to-use genotyping test that can identify cancer patients with Dihydropyrimidine Dehydrogenase (DPD) deficiency. DPD can cause severe and sometimes lethal side effects in patients being treated with chemotherapeutic drug 5-Fluorouracil (5-FU), commonly used in the treatment of colon, oesophageal, stomach, pancreatic, breast and cervical cancers. UK sales are growing with several public sector key customers routinely using the test to pre-screen cancer patients ahead of being prescribed a treatment therapy.
This year we also launched Yourgene Flex™ Analysis Software which allows us to work in close collaboration with product development partners to customise our analysis platform for their NGS applications beyond NIPT. We believe that this will open up opportunities to develop products in other fields such as reproductive health, oncology or other clinical diagnostic fields and across new regions too.
Following the successful development and CE marking of our IONA Nx product our talented R&D team are now able to deploy on developing additional new products and services, not only for us but also for any contract development partners. This is particularly significant given our expedited development of products and services focused on infections disease, namely COVID-19, and I will address this opportunity in my Outlook statement. Our product range is more diverse, utilises broader technologies and we have become platform agnostic. We are the only NIPT provider to offer the test for both NGS platforms.
The increased spread of our revenue base outside of NIPT can be seen in the table below:
Revenue analysed by product segments
Product segments
Year ended
31 March 2020
£m
% of total
Year ended
31 March 2019
£m
% of total
Growth
NIPT
10.1
61%
7.9
89%
+29%
Reproductive Health
3.7
22%
0.0
0%
n/a
Molecular Genetics
2.8
17%
1.0
11%
+174%
Total
16.6
100%
8.9
100%
+87%
Acquisitive growth
During the year we completed two strategic and earnings enhancing acquisitions that have been a major contributor to the successful growth of the Company and has set us up with a much stronger platform to deliver further growth in 2020 and beyond.
In April 2019, we acquired Elucigene Diagnostics, a highly complementary business which was immediately accretive to earnings. Integration has gone incredibly well with the team now united under one management structure operating out of our Citylabs 1.0 facilities in Manchester. Manufacturing is now concentrated on this one site and the expected synergies from integration have been fully realized. Yourgene now has a wider portfolio of complementary products that can be sold to customers as part of a range and a broader global sales network. Following integration we have achieved over 12% like-for-like growth in the Elucigene business through the realisation of commercial synergies.
In March 2020 we announced the acquisition of our French NIPT distribution channel, AGX-DPNI, providing us with direct access into a key growth market given that the French Government agreed NIPT reimbursement in early 2019 and we experience 75% growth in our NIPT volume sales in France during 2019.
We will continue to consider additional selective synergistic M&A opportunities that offer significant shareholder value, whether these might be earnings enhancement opportunities or the chance to acquire complementary molecular diagnostic technologies.
Continued expansion of people talent
Outside of the Board, we've been keen to invest in the future growth of our business by acquiring talented individuals to the organization, strengthening our team and developing staff's expertise. Key hires this year include our first US commercial recruit to support US operations, a new Research & Development Director, and a new HR Director. We have added new talent and skills to our service laboratory offering and have strengthened our quality and regulatory team. In anticipation of further commercial growth and the launch of new products we have also strengthened our marketing, sales, business development and customer service teams. In addition, we have grown our European sales team with key appointments in UK, France, Germany to support the commercial roll-out of the IONA Nx NIPT Workflow.
Conscious of the fact that it is our entire team that delivers value to shareholders, we are in the process of identifying suitable ways to ensure that everyone involved in this business will be rewarded for success. This will align the interests of all staff with our investors, and with staff themselves as shareholders we will ensure that we all work together to deliver shareholder value.
Impact of COVID-19 on the business
I am exceptionally proud of how the entire Yourgene team have adapted to the new working conditions imposed by the Coronavirus pandemic. Early on in the crisis we put in place robust systems to continue to operate efficiently and to continue to provide customers with world-leading molecular diagnostic solutions and services. Keeping customer supplied was key during this period and I am pleased to say that this has been maintained throughout. I would certainly like to record my thanks to everyone for their hard work and dedication and I'm sure shareholders will join me in congratulating the team for continuing to supply customer and develop new products for commercial launch under such testing circumstances.
Outlook
Without doubt, the most exciting part of our business is not just what we have proudly achieved in 2019, but the platform that we've built to deliver future growth in 2020 and beyond. Critical to this is the opportunity for growth that we have through the launch of IONA Nx, following successful CE-IVD marking, and also the launch of our Clarigene™ SARS-CoV-2 test.
IONA Nx
In June we were delighted to announce the CE-IVD mark for our Illumina-based IONA® test, which will be launched as the IONA® Nx NIPT Workflow. This test has been developed to run on the Illumina NextSeq 550Dx Next Generation Sequencing ("NGS") instrument, and this is major advancement of our flagship NIPT given that Illumina's NGS technology accounts for around 75% of the global NGS market. Not only does it allow us for the first time to proactively market in our existing markets (mainly Europe) but it will also allow us to target new markets, previously excluded to us for NIPT, such as Asia Pacific and North America.
In anticipation of full commercial launch, we are soon to be installing the test to run as part of our own laboratory service run from our facilities in Manchester. This will allow us to imbed best practice in readiness for the transition to our customer labs. Planning and scheduling are underway with existing IONA customers across Europe to transition to the IONA Nx and market development plans are in place for the introduction of IONA Nx in new territories and discussions are progressing with customers in new territories for the IONA Nx. We expect to announce further details of our commercial launch and roll-out activities over the summer and will be working through a schedule of regulatory submissions to allow launch into new regions over the coming months.
Our IONA test has a strong reputation for reliability and accuracy and was the first CE marked NIPT product for the European market. The new IONA Nx combines this gold standard for reliability and accuracy with a market leading sequencer and we believe this will be a strong driver of growth in the future.
Clarigene™ SARS-CoV-2 test
The launch of our Clarigene™ SARS-CoV-2 test for research use last month is a significant step towards the launch of our CE marked product.
We remain on track to achieve CE marking for our test before the end of this month. Initial data has shown that the test shows competitive performance against other market leading products (i.e. 100% specificity) and has a quick turnaround time and low false negative results, given that the test only detects RNA and not amplified patient DNA. The CE-IVD version will have two viral targets and assay controls, making it more desirable from the reimbursement perspective across several European regions.
There is no doubt that there is a significant opportunity to drive sales of the Clarigene™ SARS-CoV-2 test and CE IVD kits, once approved. Recent collaborations with partners are in place to provide corporate partners and healthcare settings such as care homes and private GP practice with a fast and reliable COVID-19 lab testing service.
The next key news for shareholders on our progress in this area will be confirmation of CE Marking. We understand that the COVID-19 testing market is dynamic and, to a certain extent, unpredictable as a result. With this in mind, we will commit to updating shareholders on a quarterly basis on the commercial take-up of this product, and not based on unsupported speculation of what the future potential uptake might be.
Market forecasts for 2021 and beyond see our growth trajectory continuing and heralds a move towards full profitability in the near term. We remain confident that we can deliver against these forecasts and that both IONA Nx and our Clarigene products will be major contributors to this growth. There has never been a better time to be in this high growth molecular diagnostics market and I am really excited about the opportunities ahead for the Group.
Lyn Rees
Chief Executive Officer
27 July 2020
Financial Review
Income statement
In the trading year revenues grew 87% to £16.6m (2019: £8.9m) due to organic growth, the April 2019 acquisition of Elucigene Diagnostics in the UK and the March 2020 acquisition of AGX-DPNI in France as described elsewhere in this report.
Gross profits grew 122% to £10.2m (2019: £4.6m) with gross margins increasing to 62% (2019: 52%). Gross margins benefited from the higher margin Elucigene product mix as well as an increasing proportion of revenues in our International geographic market. General administrative expenses increased to £9.0m (2019: £8.1m) in particular due to the enlarged operational capabilities acquired in the Elucigene business. We maintained research and development expenditure as we focused on the development of the new version of the IONA® test for the Illumina NGS platform.
We recorded our first adjusted EBITDA profit of £1.3m (2019: £3.4m loss). Adjusted EBITDA is measured as the operating loss before depreciation, amortisation, separately disclosed items. Operating lease commitments are now classified as right of use assets and financial liabilities under IFRS16, which we have adopted for the first time (see note 2).
Separately disclosed items
Significant items within administrative expenses are shown separately in the Consolidated Statement of Comprehensive Income, with further details in note 5. These separately disclosed items include non-cash accounting charges for share-based payments which reflect the improved business performance (ie the likelihood of achieving performance targets) and the increases in the Company's share price in the second half of the reporting period. The costs of acquisitions and the associated integration expenses are also shown separately as non-trading expenses and for greater transparency. Note that the integration expenses are largely related to the acquisition of Elucigene Diagnostics in April 2019, and are largely offset in cash terms by renegotiated property leases and operational synergies realised which will flow through the Income Statement in future years.
Operating loss
There is a resultant much-reduced operating loss after total administrative expenses of £3.2m (2018: £4.8m loss) driven by rising revenues and gross profits, whilst controlling administrative expenses and despite the significant non-cash separately disclosed items.
Finance income/(expenses)
During the period the Group incurred net finance expenses of £0.1m (2019: net finance income of £8.2m). The 2019 figure was principally due to a one-off restructured relationship with Life Technologies which involved a significant debt cancellation in February 2019 (see note 30).
Taxation and foreign exchange
The resulting loss on ordinary activities of £2.4m (2019: 3.4m profit) reflects a £0.9m tax credit which is described in note 12 and is primarily the recognition of a deferred tax asset from historic losses to offset the deferred tax liability arising on acquisition of Elucigene's intangible assets. There are still significant historic tax losses in the UK which have not yet been recognised which will help offset taxes arising on future anticipated profits.
The Group made a small gain of £0.1m (2019: gain less than £0.1m) on translation of its foreign subsidiaries and foreign currency balances to the presentational currency.
Total comprehensive loss
The Group recorded a total comprehensive loss of £2.3m (2019: profit of £3.4m).
Earnings per share
Earnings per share were a loss of 0.4 pence (2019: earnings of 0.9 pence).
Statement of financial position
At the balance sheet date the Group had total assets of £37.7m (2019: £15.6m). Intangible assets and goodwill increased to £10.2m and £10.8m respectively (2019: £1.2m and £7.0m respectively) as a result of acquiring customer relationships and intellectual property with Elucigene Diagnostics and customer relationships with AGX-DPNI. Property, plant and equipment was stable at £2.0m (2019: £2.1m) with physical assets being maintained. The adoption of IFRS16 has led to the recognition of a right of use asset of £3.0m relating primarily the properties occupied by the Group in its various operating facilities and their renegotiated leases post the Elucigene acquisition.
Total current assets increased to £10.0m (2019: £5.3m) with rapid revenue growth leading to increased trade and other receivables and a smaller increase in inventories.
Total equity and liabilities increased to £37.7m (2019: £15.6m) due to the equity-based fundraising to support acquisitions, and due to the recognition of a £2.7m lease liability under IFRS16.
Statement of cash flows
The Group had an opening cash position of £1.3m (2019: £0.3m) and a net cash increase of £1.5m (2019: £1.0m). Cash and cash equivalents at the end of the period were £2.8m (2019: £1.3m). During the period the Group used £2.1m (2019: £4.0m) of cash in operating activities due to working capital movements arising from business growth. Cash used in investing activities was £9.0m (2019: £0.6m) reflecting acquisitions during the year, capital expenditure in the year and capitalisation of internally generated intangible assets.
Financing activities generated a surplus of £12.6m (2019: £5.6m) with equity fundraises in April 2019 and March 2020 to support the respective acquisitions of Elucigene Diagnostics and AGX-DPNI described in note 18.
As with all businesses at this early stage of development, the Board assesses carefully the Group's ability to operate as a going concern and has detailed plans for revenue growth, margin improvement and cash flow control which are intended to achieve positive cash flows in the near future. More detail on these plans can be found in the notes to the accounts.
Dividends
No dividend is recommended (2019: £nil) due to the growth stage nature of the Group.
Capital management
The Board's objective is to maintain a balance sheet that is both efficient at delivering long-term shareholder value and also safeguards the Group's financial position in light of variable economic cycles and the principal risks and uncertainties outlined in this report. As at 31 March 2020 the Group had net cash of £2.4m (2019: £1.0m) after borrowings of £0.4m (2019: £0.3m) but before lease liabilities arising under IFRS16 (with their offsetting Right of Use assets). Business growth and the increased scale achieved through the post-period Elucigene acquisition are expected to enable the Group to operate as a going concern for the foreseeable future.
Post-balance sheet events
In May 2020 warrants and share options were exercised generating proceeds of £0.8m. On 3 July 2020 the Group expanded its research services activities by acquiring a small UK company with capabilities in that area. The Group has also been contending with the global Covid-19 pandemic and has responded effectively despite some logistical disruption in the early stages of the pandemic and is now targeting commercial opportunities for Covid-19 testing for further risk mitigation.
Barry Hextall
Chief Financial Officer
27 July 2020
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2020
2020
2019
Notes
£
£
£
£
Revenue
16,612,779
8,882,362
Cost of sales
(6,387,837)
(4,271,941)
Gross profit
10,224,942
4,610,421
Other operating income
67,530
25,821
Administrative expenses
General administrative expenses
(9,037,761)
(8,067,988)
Adjusted Ebitda
1,254,711
(3,431,746)
Depreciation and amortisation
6
(2,093,808)
(1,099,756)
Share-based payments expense
5
(1,601,746)
(251,004)
Costs associated with subsidiary acquisition
5
(264,666)
-
Acquisition integration expense
5
(533,358)
-
Total Depreciation, Amortisation and separately disclosed items
(4,493,578)
(1,350,760)
Operating loss
6
(3,238,867)
(4,782,506)
Financing income
10
19,960
9,381,761
Financing expenses
11
(163,203)
(1,209,554)
Profit (Loss) on ordinary activities before taxation
(3,382,110)
3,389,701
Tax credit / (charge) on loss on ordinary activities
12
948,186
(491)
Profit (Loss) for the year
(2,433,924)
3,389,210
Other comprehensive expense
Exchange translation differences
139,773
31,563
Profit (Loss) and total comprehensive profit (loss) for the Year
(2,294,151)
3,420,773
Earnings per share pence
13
Basic: Profit (Loss)
(0.4p)
0.9p
Diluted: Profit (Loss)
(0.4p)
0.9p
Consolidated Statement of Financial Position
As at 31 March 2020
2020
2019
Notes
£
£
Assets
Non-current assets
Goodwill
14
10,805,783
7,014,447
Intangible assets
14
10,191,889
1,228,928
Property, plant and equipment
15
1,969,305
2,054,163
Right of use asset
16
2,996,753
-
Tax asset
23
532,691
Deferred tax asset
23
1,181,039
Total non-current assets
27,677,460
10,297,538
Current assets
Inventories
17
1,152,308
739,126
Trade and other receivables
19
5,629,287
2,832,695
Tax asset
452,485
478,232
Deferred tax asset
23
-
-
Cash and cash equivalents
2,764,117
1,250,362
Total current assets
9,996,197
5,300,415
Total assets
37,675,657
15,597,953
Equity and liabilities attributable to equity holders of the company
Equity
Called up share capital
28
32,561,451
32,403,969
Share premium account
28
51,179,685
37,971,265
Merger relief reserve
28
12,937,796
10,012,644
Reverse acquisition reserve
28
(39,947,033)
(39,947,033)
Foreign exchange translation reserve
28
(8,124)
(147,897)
Warrants reserve
28
3,069,382
3,069,382
Retained losses
28
(33,494,558)
(32,662,380)
Total equity
26,298,599
10,699,950
Current liabilities
Trade and other payables
20
4,907,813
4,172,464
Lease Liabilities
16
341,167
Current tax liabilities
433,337
-
Borrowings
21
277,508
76,388
Other Liabilities & Provisions
22
512,555
Total current liabilities
6,472,380
4,248,852
Non-current liabilities
Borrowings
21
85,110
209,302
Deferred tax liability
23
1,153,121
233,496
Lease Liabilities
16
2,710,123
Other Long Term Liabilities & Provisions
22
956,324
206,353
Total non-current liabilities
4,904,678
649,151
Total equity and liabilities
37,675,657
15,597,953
The financial statements were approved and signed by the Directors and authorised for issue on 27 July 2020.
Adam Reynolds, Chairman
Company Registration No. 03971582
Consolidated Statement of Changes in Equity
For the year ended 31 March 2020
Share
capitalShare
premium
accountMerger
relief
reserveWarrants
reserveReverse
acquisition
reserveForeign
exchange
reserveRetained
lossesTotal
Notes
£
£
£
£
£
£
£
£
Balance at 1 April 2018
32,266,188
28,482,061
10,012,644
4,085,546
(39,947,033)
(179,460)
(37,318,758)
(2,598,812)
Year ended 31 March 2019:
Profit (Loss) for the year
-
-
-
-
-
-
3,389,210
3,389,210
Other comprehensive loss
-
-
-
-
-
31,563
-
31,563
Total comprehensive profit for the year
-
-
-
-
-
31,563
3,389,210
3,420,773
Transactions with owners
Issue of share capital
28
137,781
9,716,143
9,853,924
Share issue expenses
(226,939)
(226,939)
Share-based payments
29
-
-
-
-
-
-
251,004
251,004
Warrants exercised
30
-
-
-
(1,016,164)
-
-
1,016,164
-
Total transactions with owners
137,781
9,489,204
-
(1,016,164)
-
-
1,267,168
9,877,989
Balance at 31 March 2019
32,403,969
37,971,265
10,012,644
3,069,382
(39,947,033)
(147,897)
(32,662,380)
10,699,950
Balance at 1 April 2019
32,403,969
37,971,265
10,012,644
3,069,382
(39,947,033)
(147,897)
(32,662,380)
10,699,950
Year ended 31 March 2020:
Profit (Loss) for the year
-
-
-
-
-
-
(2,433,924))
(2,433,924)
Other comprehensive loss
-
-
-
-
-
139,773
-
139,773
Total comprehensive loss for the year
-
-
-
-
-
139,773
(2,433,924)
(2,294,151)
Transactions with owners
Issue of share capital
28
132,901
14,197,534
-
-
-
-
-
14,330,435
Share issue expenses
(989,114)
-
-
-
(989,114)
Issue of share capital on acquisition
24,581
-
2,925,152
-
-
-
-
2,949,733
Share-based payments
29
-
-
-
-
-
-
1,601,746
1,601,746
Warrants issued
30
-
-
-
-
-
-
-
-
Total transactions with owners
157,482
13,208,420
2,925,152
-
-
-
1,601,746
17,892,800
Balance at 31 March 2020
32,561,451
51,179,685
12,937,796
3,069,382
(39,947,033)
(8,124)
(33,494,558))
26,298,599
Consolidated Statement of Cash Flows
For the year ended 31 March 2020
2020
2019
£
£
£
£
Cash flows from operating activities
Profit / (loss) for the year before tax
(3,382,110)
3,389,701
Adjustments for:
Finance costs
163,203
1,209,554
Finance income
(19,960)
(35,672)
Loan payable waived
(9,346,089)
Depreciation and impairment of property, plant and equipment
949,780
944,524
Depreciation and impairment of right of use asset
467,724
(Gain) / Loss on disposal of property, plant and equipment
67,289
469
(Gain) / Loss on Revaluation of right of use asset
(121,248)
Amortisation of intangible non-current assets
676,304
155,232
Impairment on financial assets (IFRS9)
106,511
155,962
Foreign exchange movements
72,127
334,864
Share based payment and warrant expense
1,601,746
251,004
Decrease in provisions
(206,353)
(756,305)
Tax (paid) / received
(16,210)
(12,933)
Movements in working capital:
(Increase)/decrease in inventories
26,995
(462,360)
(Increase)/decrease in trade and other receivables
(1,171,705)
(910,663)
Increase/(decrease) in trade and other payables
(758,355)
380,352
Decrease/(increase) in tax asset
Decrease/(increase) in tax asset
(529,307)
653,994
Cash used by operations
(2,073,569)
(4,048,366)
Investing activities
Purchase of subsidiaries
(8,369,742)
-
Cash acquired on purchase of subsidiaries
684,900
-
Purchase of property, plant and equipment
(617,085)
(1,066,699)
Capitalisation of intangible assets
(745,520)
-
Proceeds on disposal of property, plant and equipment
13,505
-
(Investment)/reduction in short-term financial assets
-
475,385
Interest received
5,010
553
Net cash (used in)/generated from investing activities
(9,028,932)
(590,761)
Financing activities
Net proceeds from issue of shares
13,341,321
9,626,985
Proceeds from borrowings
-
128,992
Repayment of borrowings
(197,503)
(4,139,100)
(Increase)/decrease in lease liability
-
-
Repayment of Lease liability obligations
(364,359)
-
Interest paid
(163,203)
(9,820)
Net cash generated from financing activities
12,616,256
5,607,057
Net increase/(decrease) in cash and cash equivalents
1,513,755
967,930
Cash and cash equivalents at beginning of period
1,250,362
282,432
Cash and cash equivalents at end of period
2,764,117
1,250,362
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
Notes to the financial statements are taken directly from the Annual Report and Accounts, which is now available to view in full here: https://www.yourgene-health.com/investors/key-documents/financial-reports
1 Accounting policies
Basis of Preparation
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 and 435 of the Companies Acct 2006. The financial information for the year ended 31 March 2019 has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include any statement under section 498(2) or (498(3) of the Companies Act 2006.
The financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), adopted for use in the European Union and including IFRIC interpretations issued by the International Accounting Standards Board (IASB) and the Companies Act (2006).
The consolidated financial information has been prepared on the basis of accounting policies set out in the Group's financial statements for 2019.
Company information
Yourgene Health plc (Premaitha Health plc until 7 November 2018, 'the Company' or 'Yourgene') is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Enterprise House, Lloyd Street North, Manchester M15 6SE.
The principal activity of Yourgene Health plc and its subsidiaries is that of a molecular diagnostics business for research into, and the development and commercialisation of gene analysis techniques for prenatal screening and other clinical applications in the early detection, monitoring and treatment of disease.
The financial statements are presented in British Pounds Sterling, the currency of the primary economic environment in which the Company's headquarters is operated.
Going concern
In their assessment of the Group's ability to continue as a going concern, the directors have focused on the implications of the organic growth of the existing business plus the in-year acquisitions of the profitable Elucigene Diagnostics in April 2019, and the profit-enhancing customer relationships acquired in March 2020 from the Group's French distributor AdGeniX SarL. For the enlarged Group the Directors have assessed the market dynamics in which it operates, the historic and antiicpated rate of growth of gross profits, decisions available to them for management of the cost base of the Group and the potential for future fundraising.
The Group operates a strategic planning process which has delivered strong progress on its ambitious multi-year business plan.
As described in the strategic report, the Group has made progress towards achieving positive cashflows through growth in revenues since launching the IONA® test in February 2015, acquiring Yourgene Bioscience in March 2017, acquiring Elucigene Diagnostics ("Elucigene") in April 2019 and acquiring the customer relationships of its French distributor in March 2020. The Group has reported a positive adjusted EBITDA for the first time, however it continues to use cash in its trading operations albeit at a much-reduced level; which reflects that break-even levels of revenues have not yet been reached. The Group's forecasts include assumptions of further growth in revenue, which are key in achieving positive cashflows. The Directors have also assessed the Group's cost structure as part of the strategic planning process and are investing in a scalability programme aimed at ensuring costs growth can be contained below gross profit increases.
There is an ongoing commitment to keep costs and working capital under control so that increasing gross profits can drive positive cashflows. Detailed sensitivity analysis has been performed to assess the potential impact on the Group's liquidity caused by delays in revenue growth against expected levels along with potential mitigating actions which can be taken to safeguard the Group's cash position. These include working capital controls and reductions in discretionary spending. These sensitivities have been applied more aggressively this year in light of the Covid-19 pandemic, although to mitigate its potential negative impacts the Group is generating revenues through its contract manufacturing services, the development of its own Covid-19 diagnostic product (launched June 2020) and launching its own Covid-19 testing services (July 2020).
If events transpire differently to this assessment, for example if revenues fail to grow at the anticipated pace, then there could be lower cash headroom. Given the successful fundraise which took place alongside the acquisitions of Elucigene and the French customer relationships, the Directors believe there is sufficient cash available to avoid a cash shortfall.
The Directors have concluded that considering the circumstances described above and mitigation strategies in place, the Directors have a reasonable expectation that the Group and Company will have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.
Revenue
Revenue from the sale of goods, equipment and related services is recognised in accordance with IFRS 15 Revenue from Contracts with Customers in the Statement of Comprehensive Income when the deemed Contractual Performance Obligations have been have been completed, which is determined to be at the point of despatch of the product or service unless there are specific provisions in the relevant contract. Revenue from the provision of testing and reporting services is recognised upon delivery of the report to the customer. Invoices are typically raised upon delivery of the products or reporting services, unless there is a different contractual requirement, for payment according to credit terms which are usually 30-75 days from date of invoice. For some contracts advance invoices are raised and payments received. These are held on the statement of financial position as 'payments received on account' (see note 20) and are only recognised as revenue once the performance obligations have been deemed satisfied as described above.
Grant income and income for research projects is recognised when all conditions for receiving the grant or research income have been satisfied.
Separately disclosed items
Separately disclosed items are those significant items, within Total administrative expense which in management's judgement should be highlighted on the face of the Statement of Comprehensive Income by virtue of their size or incidence to enable a full understanding of the Group's financial performance. Significant items in Finance Income are disclosed in note 5.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs. Depreciation is provided on all items of property, plant and equipment to write off the carrying value of items over their expected useful lives. Depreciation is applied at the following rates:
Leasehold land and buildings
20% straight line
Plant and equipment
20-25% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset and is recognised in the Statement of Comprehensive Income.
Leases and Right of Use assets (IFRS16)
The Group has adopted IFRS 16 from 1 April 2019 but it has not restated comparatives for the prior reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening Statement of Financial Position on 1 April 2019.
Leases are recognised as a right of use asset and lease liability at the transition date of 1 April 2019 or the date of any new leases after 1 April 2019. Right of use assets and lease liabilities are valued on a present value basis of the lease payments over the lease term. On adoption of IFRS16 the right of use assets and lease liability were measured at the present value of the remaining lease payments and lease term. The right of use asset is depreciated over the term or remaining term of the lease.
Where there is potential for future increases in lease payments, amounts are not included in the lease liability until they implemented. The leases are reviewed annually and where the lease liability is increased the lease liability is reassessed and adjusted against the right of use asset. When a lease is terminated, or term amended the lease liability and right of use asset are recalculated and adjusted accordingly.
Lease payments are divided between principal and interest expense. The interest expense is charged to finance expense in the statement of comprehensive income.
In adopting IFRS 16, the group has used the following practical expedients permitted by the standard:
· the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
· reliance on previous assessments of whether leases are onerous;
· the accounting for operating leases, with a remaining lease term of less than 12 months as at 1 April 2019, as short-term leases;
· the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
· the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The group has also elected not to reassess whether a contract is or contains a lease at the date of initial application, Instead, for contracts entered into before the transition date, the group relied on its assessment made in applying IAS 17 and IFRIC 4, 'Determining whether an Arrangement contains a Lease'.
Accounting for Acquisitions
The Group assesses the acquisition of shares in a company under IFRS3 - Business Combinations, to make an initial determination as to whether the acquisition meets the test for the definition a "a business". This is defined as "An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities." For acquisitions that meet the test, the accounting treatment will follow IFRS3 protocols to arrive at fair values. Where the test for a business is not met, then the assets of the acquired company will be accounted for as acquired tangible or intangible assets as described in these policies.
Goodwill
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment, or earlier if there is an indication of impairment.
Acquired intangible assets
Intangible assets acquired directly or as part of business combinations are capitalised at fair value at the date of acquisition. Following the initial recognition, the carrying amount of an intangible is its cost less accumulated amortisation and any accumulated impairment losses. Amortisation is charged on the basis of the estimated useful life on a straight-line basis and the expense is taken to the Statement of Comprehensive Income.
The Group has recognised customer relationships as separately acquired intangible assets. The useful economic life attributed to each intangible asset is determined at the time of the acquisition.
Impairment reviews are undertaken annually and whenever the Directors consider that there has been a potential indication of impairment.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
3 Critical accounting estimates and judgements
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.
Critical judgements
Accounting for acquisitions of a business and intangible assets
In April 2019 the Group acquired Delta Diagnostics UK Ltd (trading as Elucigene) and in March 2020 it also acquired AGX-DPNI SAS. The acquisition of Elucigene was deemed to meet the IFRS 3 criteria for a business combination as it was a full standalone trading business. The acquisition of AGX-DPNI was deemed to be the acquisition of an intangible asset in the form of customer relationships, as there were no employees, facilities or other significant trading activities.
The acquisition of AGX-DPNI also contained provisions for earn-out payments to the vendors, based on achieving certain sales performance targets in the first year post-acquisition. These targets were based on existing business forecasts and were deemed sufficiently probable to be met that they are recorded as provisions rather than contingent liabilities.
Note 14 provides more information on these acquisitions including the basis on which fair values were determined for the acquired intangible assets.
Accounting for the capitalisation of development costs
The Group has now been in operation for several years and has resolved some significant technical challenges in bringing its products to market. In certain circumstances this leads to reduced technical risk during the product development cycle. The Group has also started to decouple some previously integrated components of its products, for example its software applications. Development costs are capitalised where it is judged that a development project has met both of these IAS38 criteria.
Accounting for share-based payments
The Group's rapid growth in revenues and gross profits resulted in its first adjusted EBITDA profit in this reporting period. Excluding the one-off loan cancellation benefit in the prior reporting period, the Group has therefore shown sustained growth in earnings per share, the key basis on which share based payments are measured. This performance trajectory is forecast to continue which increases the likelihood that share options will become exercisable in the future. As a result the assumptions for share-based payments have been increased and a significant charge recognised in the Consolidated Income Statement.
Accounting for deferred tax
The Group has generated significant historic losses during its development stage, which have not been recognised as a deferred tax asset due to lack of visibility of future profitability within a realistic time horizon. As the Group now moves towards profitability, such visibility is becoming more likely in the near term. The Group has therefore started to recognise some of these losses where it deems it has a prudent basis on which to do so, including where there are deferred tax liabilities arising on acquisition that can be offset against historic tax losses.
Key sources of estimation uncertainty
Impairment of goodwill
The Group's management undertakes an impairment review annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. In respect of impairment reviews, the key assumptions are as follows:
Growth rates
The value in use of the intangible assets is calculated from cash flow projections for the relevant business activities based on the latest financial projections covering the anticipated useful economic life of the intangible assets.
Discount rates
The pre-tax discount rate used to calculate value is determined in relation to the relevant business activities and their geographic location, using external benchmarks where possible to arrive at a relevant weighted average cost of capital.
Cash flow assumptions
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected cash flows. Changes in revenues and expenditures are based on past experience and expectations of future growth.
4 Segment reporting
In the opinion of the Directors, the Group has one class of business in three geographic areas, a molecular diagnostics business sells into the UK, Europe and other countries referred to as 'International'. The Group sells into three highly interconnected clinical markets: non-invasive prenatal testing (NIPT), reproductive health and oncology/research services. The Group is therefore considered to have a single operating segment which is monitored by the Group's chief operating decision makers. Strategic decisions are made on the basis of unadjusted operating results.
Revenue
Revenue, analysed by category, was as follows:
2020
2019
£
£
Turnover
Sale of goods
11,071,492
4,976,470
Rendering of services
5,541,287
3,905,892
16,612,779
8,882,362
Revenue analysed by geographical market
2020
2019
£
£
UK
1,974,632
1,215,722
Europe
4,142,073
1,780,384
International
10,496,074
5,886,256
16,612,779
8,882,362
Revenue analysed by clinical market
2020
2019
£
£
NIPT
10,144,312
7,853,507
Reproductive health
3,651,142
-
Precision medicine
2,817,325
1,028,855
16,612,779
8,882,362
During the reporting period no customers represented more than 10% of Group revenues (2019: two customers generated revenues of £2,374,372 representing a combined 27% of Group revenues).
Non-current assets
The Group's non-current assets are located in the following geographic regions, which support the three clinical markets in a highly integrated manner:
2020
2019
£
£
UK
25,327,904
10,845,876
Europe
2,157,093
-
International
592,449
748,352
Intra-Group eliminations & adjustments
(2,113,716)
(1,296,690)
25,963,730
10,297,538
5 Separately disclosed items
2020
2019
£
£
Share-based payment expense
(1,601,746)
(251,004)
Costs associated with the acquisition of subsidiary
(264,666)
-
Acquisition integration expense
(533,358)
-
(2,399,770)
(251,004)
Share-based payment expense relates to the provision made in accordance with IFRS 2 'Share-based payment' following the issue of share options to employees under the company's share options schemes, as set out in note 29.
Costs associated with the acquisition of subsidiaries represents costs incurred during the acquisition of Delta Diagnostics UK Ltd in April 2019, and AGX-DPNI in March 2020.
Acquisition Integration expense relates to the expense incurred integrating Delta Diagnostics UK Ltd into the Yourgene Health Group.
6 Operating loss
2020
2019
£
£
Operating loss for the year is stated after charging/(crediting):
Research and Development expense excluding salaries
518,378
691,239
Research and Development tax credit
(560,204)
(473,950)
Depreciation of property, plant and equipment
949,780
944,524
Depreciation right of use assets
467,724
-
(Profit)/ Loss on disposal of property, plant and equipment
(7,564)
469
Amortisation of intangible assets
676,304
155,232
IFRS16 Lease Liability adoption (gain) / loss
(131,548)
-
Impairment on financial assets IFRS9
106,511
155,962
8 Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:
2020
2019
Number
Number
Directors
9
8
Administrative
81
49
Research and Development
46
37
135
93
Their aggregate remuneration comprised:
2020
2019
£
£
Wages and salaries
4,756,240
3,832,974
Social security cost
490,802
347,938
Pension cost
208,175
150,971
Share-based payments (note 29)
1,601,746
251,004
7,056,963
4,582,887
10 Finance income
2020
2019
£
£
Interest income:
Bank deposits
5,010
285
Loans and receivables
14,950
35,387
Total interest income
19,960
35,672
Other finance income:
Thermo Fisher loan waived (see note 30)
-
9,389,210
Loan agreement and warrant issue expense
-
(43,121)
Total other finance income
-
9,346,089
Total finance Income
19,960
9,381,761
11 Finance expenses
2020
2019
£
£
Interest on bank overdrafts and loans
15,673
7,252
Interest on other loans and borrowings (see note 30)
4,656
1,202,302
IFRS16 Interest
142,874
-
Total finance expense
163,203
1,209,554
12 Income tax expense
As described in the critical accounting judgements section of this report, deferred tax assets are recognised where there is deemed to be a reasonable probability that future taxable profits will be capable of being offset by historic tax losses.
The charge for the year can be reconciled to the loss per the income statement as follows:
2020
2019
£
£
Loss before taxation
(3,382,110)
3,389,701
Expected tax credit based on a corporation tax rate of 19% (2019: 19%)
(642,601)
644,043
Effect of expenses not deductible in determining taxable profit
440,168
(45,518)
Unutilised tax losses carried forward
778,591
(941,372)
Change in unrecognised deferred tax assets
86,361
78,338
Effect of overseas tax rates
(236,400)
24,474
Effect of enhanced R&D deduction
(349,816)
270,020
Deferred tax
(1,024,489)
(29,494)
Taxation (credit)/charge for the year
(948,186)
491
13 Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit or loss for the period of £2,433,924 (2019: profit £3,389,210) by the weighted average number of ordinary shares in issue during the period 590,467,253 (2019: 396,597,093).
Diluted
Diluted earnings per share dilute the basic earnings per share to take into account share options and warrants. The calculation includes the weighted average number of ordinary shares that would have been issued on the conversion of all the dilutive share options and warrants into ordinary shares. The adjusted weighted average number of shares used to calculate diluted earnings per share is 608,687,226 (2019: 399,636,919).
26,039,443 options and warrants (2019: 92,269,091) have been excluded from this calculation as the effect would be anti-dilutive.
After the reporting period end a further 7,848,992 new ordinary shares were issued against share options and standard warrants, see note 29.
14 Intangible assets
Goodwill
Customer
relationshipsProduct IP
Product
Development
costTotal
£
£
£
£
£
Cost
At 1 April 2018
7,014,447
1,552,328
-
-
8,566,775
Additions
-
-
-
-
-
At 31 March 2019
7,014,447
1,552,328
-
-
8,566,775
Additions
3,791,336
6,840,696
2,051,699
695,942
13,430,879
Exchange differences
-
51,206
-
-
-
At 31 March 2020
10,805,783
8,444,230
2,051,699
695,942
21,997,654
Amortisation and impairment
At 1 April 2018
-
168,168
-
-
168,168
Charge for the year
-
155,232
-
-
155,232
At 31 March 2019
-
323,400
-
-
323,400
Charge for the year
-
488,226
188,078
-
676,304
Exchange differences
-
278
-
-
278
At 31 March 2020
-
811,904
188,078
-
999,982
Carrying amount
At 31 March 2019
7,014,447
1,228,928
-
-
8,243,375
At 31 March 2020
10,805,783
7,632,326
1,863,621
695,942
20,997,672
The intangible assets arose as part of the acquisition of Yourgene Health Taiwan (March 2017). Delta Diagnostics UK Ltd (April 2019) and AGX-DPNI SAS (March 2020). The assets are amortised over a useful economic life defined upon acquisition:
Useful economic life
Remaining useful life
Customer Relationships
10 years
7 - 10 years
Product IP
10 years
9 - 10 years
Product Development cost
5 - 10 Years
3 - 10 years
Amortisation has been charged to General administrative expenses in the consolidated statement of Comprehensive Income.
Goodwill is allocated to the Group's cash-generating units (CGUs) identified according to product segment. A product segment-level summary of the goodwill allocation is presented below.
2020
2019
£
£
NIPT
7,014,447
7,014,447
Reproductive health
3,791,336
-
Precision medicine
-
-
10,805,783
7,014,447
NIPT goodwill represents the goodwill arising on the acquisition of Yourgene Bioscience (Taiwan) in March 2017, since renamed Yourgene Health Taiwan. The Reproductive Health goodwill arose on the acquisition of Elucigene in April 2019.
Intangible assets are subject to an annual impairment test to ascertain if the value in use is greater than the carrying value in the financial statements. The intangible assets arising from the acquisitions above, are tested over a five-year forecast period plus a terminal value to represent their remaining useful economic life. A cashflow model for each business unit is used based on historical performance, in which future expectations of growth are forecast based on internal budgets for 12 months, and then on an initial growth rate ranging from 10% - 30% reducing down to 2 - 5 % per annum for the terminal value estimation, reflecting the rapid growth of the Group's markets and the opportunities for greater market penetration through geographic expansion. Discount rates were set at 13%, being the representative cost of capital. These assumptions are reviewed and benchmarked to ensure they remain appropriate.
The impairment assessments showed assessed values that exceeded the carrying values with significant headroom. In the case of Elucigene a discount rate sensitivity of 20% did not give rise to an impairment, and the headroom for Yourgene Health Taiwan was even higher.
15 Property, plant and equipment
Leasehold land and buildings
Plant and equipment
Computer software
Total
£
£
£
£
Cost
At 1 April 2018
682,641
3,867,040
24,408
4,574,089
Additions
23,696
1,043,003
-
1,066,699
Transfer
-
(32,755)
-
(32,755)
Disposals
-
(1,254)
-
(1,254)
Foreign currency adjustments
258
18,327
300
18,885
At 31 March 2019
706,595
4,894,361
24,708
5,625,664
Additions
150,309
407,978
58,798
617,085
Business combinations
81,153
164,863
40,641
286,657
Transfer
-
-
-
-
Disposals
(206,353)
(15,827)
-
(222,180)
Foreign currency adjustments
5,635
93,562
1,758
100,955
At 31 March 2020
737,339
5,544,938
125,905
6,408,181
Accumulated depreciation and impairment
At 1 April 2018
421,831
2,217,360
15,492
2,654,683
Charge for the year
120,537
820,098
3,889
944,524
Transfer
(32,755)
(32,755)
Eliminated on disposal
-
(785)
(785)
Foreign currency adjustments
(578)
6,242
170
5,834
At 31 March 2019
541,790
3,010,160
19,551
3,571,501
Charge for the year
170,764
758,220
20,796
949,780
Transfer
-
-
-
-
Eliminated on disposal
(131,548)
(9,838)
-
(141,386)
Foreign currency adjustments
4,697
52,722
1,561
58,981
At 31 March 2020
585,703
3,811,265
41,909
4,438,876
Carrying amount
At 31 March 2020
151,636
1,733,673
83,996
1,969,305
At 31 March 2019
164,805
1,884,201
5,157
2,054,163
Business combination refers to assets acquired in the acquisition of Delta Diagnostics UK Ltd in April 2019, see note 18
16 Leases
Lease liabilities
The company has a number of leases for property in the UK, Taiwan and Singapore. On adoption of IFRS 16, the group recognised lease liabilities in relation to property leases which had previously been classified as operating leases under the principles of IAS 17 Leases. The group adopted IFRS16 from 1st April 2019 using the modified retrospective approach, the comparative information for 2019 is not restated. The incremental borrowing rate applied to the lease liabilities on 1 April 2019 was based on comparable loan interest rates in the relevant jurisdiction where the lease is operable.
Lease Liability
£
At 1 April 2019 on transition
1,198,368
Additions
2,823,388
Business combinations
1,557,960
Lease Payments
(507,233)
Interest Expense
142,874
Terminations and amendments
(2,166,524)
Foreign currency adjustments
2,457
At 31 March 2020
3,051,290
Current
341,167
Non-current
2,710,123
At 31 March 2020
3,051,290
Right of use assets
Right-of-use assets for these property leases were measured at the amount equal to the lease liability as at the IFRS16 adoption date. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Right of use asset: property
Cost
£
At 1 April 2019 on transition
1,198,368
Additions
2,823,388
Business combinations
1,484,996
Transfer
Terminations and amendments
(2,262,172)
Foreign currency adjustments
3,729
At 31 March 2020
3,248,309
Accumulated depreciation and impairment
Charge for the year
467,724
Transfer
-
Eliminated on termination and amendment
(216,897)
Foreign currency adjustments
729
At 31 March 2020
251,556
Carrying amount
At 31 March 2020
2,996,753
Changes to property leases after 1 April 2019
On 26 April 2019 the Company acquired Delta Diagnostics UK Ltd including its IFRS16 property lease liability and right-of-use asset, as described in the note below. Delta Diagnostics UK Ltd is in the process of being integrated with Company's other UK trading subsidiary, Yourgene Health UK Ltd. As part of this integration project some UK property leases have been surrendered and others renegotiated with extended terms. The UK property lease restructure was completed in September 2019. A further UK property lease was taken out in March 2020 due to the integration and expansion of the UK business. The property lease in Taiwan was extended a further six months whilst a review of alternative locations is undertaken to allow for expansion of operations in Taiwan.
Operating lease commitments
In addition to the property leases disclosed above under IFRS16 the group has a small number of low value asset operating leases.
2020
2019
£
£
Minimum lease payments under operating leases
91,236
205,699
2019 lease payments include property lease payments of £176,368, see above property lease liability payments for 2020.
At the reporting period date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
2020
2019
£
£
Within one year
46,316
227,336
Between one and five years
15,526
529,802
In over five years
-
-
61,843
757,138
18 Subsidiaries
Acquisition of Delta Diagnostics UK Ltd (trading as Elucigene Diagnostics)
The Group acquired 100% of the equity interests in Delta Diagnostics UK Ltd on 25 April 2019 for a total consideration of £9,280,743. This UK-registered company is a leading molecular diagnostics manufacturer and developer of a complementary product range to that of the Group. A summary of the net assets acquired, and the consideration paid is shown below.
Book value
Fair value
£
£
Cash and cash equivalents
627,268
627,268
Intangible assets
-
5,361,840
Property, plant and equipment
286,657
286,657
Right of use asset (IFRS16)
1,484,996
1,484,996
Trade and other receivables
1,707,060
1,707,060
Inventories
440,177
440,177
Trade and other payables
(1,444,619)
(1,444,619)
Tax liability
(115,175)
(115,175)
Borrowings
(258,271)
(258,271)
Lease liability under IFRS16
(1,557,960)
(1,557,960)
Deferred tax liability
(23,816)
(1,042,566)
1,146,317
5,489,407
Goodwill
3,791,336
Total Fair value
9,280,743
Satisfied by:
Cash
6,331,010
Issue of shares
2,949,733
9,280,743
Net cash outflow arising on acquisition:
Cash consideration
(6,331,010)
Cash and cash equivalents acquired
627,268
(5,703,742)
At the time of acquisition, it was expected that all Trade receivables would be collected. The Goodwill arising on acquisition represents the perceived inherent value to the Group of, for example, the additional skilled colleagues in the Elucigene business, the higher grade facilities made available to the Group as a result of the acquisition, operational synergies through combining certain business functions, the future value of products in development that did not meet the requirements for explicit recognition and the opportunity to offer a combined product range to prospective and existing customers of both businesses.
The acquisition consideration was satisfied by a combination of cash raised through an equity fundraise and the issue new shares as non-cash consideration. The non-cash consideration comprised 24,581,111 new ordinary shares valued at a contractual share price of 12 pence per new ordinary share issued which reflected the closing share price on the day prior to completion of the acquisition.
The revenue recognised in the Consolidated statement of comprehensive income for Delta Diagnostics UK Ltd is £2,632,344 revenue, had the acquisition occurred on the first day of the reporting period this would have been £2,715,168. It is not practicable to state the comparable profit figures as there has been significant transfer of employees and leases to Yourgene Health UK Ltd.
Acquisition of French Distribution channel
The Group acquired 100% of the equity interest in AGX-DPNI S.A.S., a newly formed entity comprised of the NIPT distribution business of AdGeniX S.a.r.L ("AdGeniX"), the Company's current French distribution partner for its IONA® test, for an initial cash consideration of €2,355,000 and up to a maximum of €1,655,000 in performance consideration payments based on sales growth performance criteria. A further two cash payments of €577,500 each will be payable in October 2020 and April 2021 dependent on NIPT sales growth during the period, with a final cash bonus of up to €500,000 due in April 2021 if NIPT sales exceed additional agreed targets. The acquisition has been treated as an acquisition of assets, and the future performance consideration payments recorded as a provision by the group due to the expected probability - based on an assessment of market dynamics and individual customer growth plans - that these targets will be achieved, and the ability to accurately estimate the value of the potential liability.
31 Analysis of changes in net cash/(debt)
01-Apr-19
Cash Flow
Acquisitions and disposals
Exchange movements
31-Mar-19
£
£
£
£
£
Cash and bank balances
1,250,362
1,513,755
-
2,764,117
Thermo Fisher Loan see note 21 / 30
-
-
-
-
Bank Loan see note 21
(285,690)
197,503
(258,272)
(16,159)
(362,618)
Net cash / (debt)
964,672
1,711,258
(258,272)
(16,159)
2,401,499
34 Events after the reporting date
After the reporting date 1,411,427 warrants were exercised at a price of 11 pence, and 6,437,565 share options were exercised at a price of 10 pence. The new shares issued to satisfy these exercises raised £799k for the Company. Following the issue of these new shares on 26 May 2020 the enlarged issued share capital of the Company comprised 624,331,197 ordinary shares of 0.1p each. On 19 June 2029 an additional 470,000 share options under the Group's existing share option scheme issued to two employees.
On 3 July 2020 the Company completed the acquisition of Ex5 Genomics Ltd, a small UK-based research services company for an initial cash consideration of £275,000, with a further potential cash earn-out potential of up to £275,000. It is anticipated that this acquisition will be accounted for as the purchase of property, plant and equipment and an intangible asset in the form of customer relationships, as the Company does not deem it meets the criteria for IFRS3 Business Combinations.
Since the reporting date, and just prior, the Group has been contending with the global Covid-19 pandemic. The effects of this on the Group have been some logistical challenges for shipments to customers and staff travel to customer locations, as well as local adjustments required to allow the Group's various operating sites to adapt to local lockdowns and related disruptions. Some customers have diverted resources to Covid-19 testing activities. Overall the Group has managed this turbulence effectively in an otherwise robust sector of medical diagnostic testing. The Group has also identified commercial opportunities to support the global response to the virus through the provision of contract manufacturing services to a Covid-19 test manufacturer, the launch of Covid-19 testing services from its Manchester site, and from the launch of its own ClarigeneTM Sars-Cov2 test in June 2020.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDFR KKOBNDBKBFOB
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