REG - Yourgene Health PLC - Half-year Report
21/12/2022 14:30
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RNS Number : 5167K Yourgene Health PLC 21 December 2022
Yourgene Health plc
("Yourgene", the "Group", or the "Company")
Half-year report
Steady growth in core business for H1
Manchester, UK - 21 December 2022: Yourgene (AIM: YGEN), a leading integrated
technologies and service group enabling the delivery of genomic medicine,
announces its unaudited half-year report for the six months ended 30 September
2022 ("H1 FY23"). Unless otherwise stated, comparative data shown is for the
six-month period ended 30 September 2021 ("H1 FY22").
The first half of the financial year saw a steady return to growth in the core
business reflecting a transition away from COVID related services and product
sales which helped generate the higher revenues seen in FY22.
Financial highlights
· Revenues (excluding COVID) up by 14% to £7.9m (H1 FY22: £7.0m)
· Genomic Services segment up 27% to £1.9m
· Genomic Technologies segment up 11% to £6.1m
· Revenue growth in Americas and return to pre-pandemic form in APAC
has led to year-on-year growth of 51% for international (non-UK/Europe) sales
· Reported revenue (including COVID) down by 45% to £9.6m (H1 FY22:
£17.5m)
· Gross profit of £5.2m (H1 FY22: £10.2m) with gross margins at 55%
(H1 FY22: 58%)
· General administrative expenses down by 12% to £7.2m (H1 FY22:
£8.1m)
· Adjusted EBITDA* loss of £1.9m (H1 FY22: £2.1m)
· Net operating cash outflow of £4.1m (H1 FY22: cash neutral)
including £1.1m of debt repayments
· Cash and cash equivalents as at 30 September 2022 of £2.4m (31 March
2022: £4.7m)
Operational highlights
· Progress on Ranger® Technology sample preparation portfolio:
· Launch of LightBench® Detect with unique EDTA capability to support
NIPT growth and other applications
· Ranger® Technology run rate now over US $2.0m per annum
· Ranger® Technology now embedded in 80% of Yourgene NIPT solutions
(included in NIPT revenue)
· Restructure and cost saving programme has reduced annualised H1 FY23
administrative expenses by £3.7m when compared to the previous full financial
year, with further savings to come once all synergy benefits of the move to
new single site at Skelton House are realised
· Dr John Brown CBE appointed as Chairman
Post period end
· Several new NIPT contracts won with annualised revenue of
approximately £2.7m
· Commercial team enhanced with new appointments in key regions
including EMEA and North America
· First DPYD adoption in North America and FDA pre-submission complete
to understand regulatory landscape
· Received HSA regulatory approval for IONA® Nx NIPT Workflow in
Singapore
· Ranger® Technology IP providing exciting market opportunity in the
US
Current Trading and Outlook
Due to uncertainty around the timing and implementation of contract wins and
realisation of recurring revenue pipeline opportunities, and in the interest
of prudence, the Board's expectations for full year revenue are being revised
to within the range of £18m-£20m, which would represent year-on-year growth
of 20% in the Company's core revenue streams. At current gross margins, this
would generate an adjusted EBITDA loss in the range £3.5m - £4.5m before
exceptional items. Guidance for subsequent years will also be tempered,
however the Board believes there is potential to deliver upside against these
expectations from margin improvement, further cost savings and/or an increase
in the rate of pipeline conversion and contract implementation.
The Company continues to benefit from the support of its lender and is in
advanced discussions regarding a possible divestment under a previously
announced operational and strategic review and is also involved in discussions
on a possible strategic investment in the Company. The timelines for
completing these two initiatives run into the next calendar quarter and, as
neither is guaranteed to complete, the Company has also been preparing
additional funding options and a further announcement will be made in this
regard.
Lyn Rees, Chief Executive Officer of Yourgene, commented: "It is pleasing to
see our customer base returning to pre-pandemic growth levels. The US market
remains our largest growth opportunity and it is frustrating that access to
this key market was closed during the pandemic. However, we are encouraged by
recent NIPT contract wins, the completion of our DPYD FDA pre-submission and
the growing body of clinical evidence to support Ranger® Technology
application in different fields. All indicators show that our core markets are
growing.
"In addition, we have a key focus on reducing cost base with operational
efficiencies at our new single site UK headquarters including improvements to
our manufacturing process."
* Adjusted EBITDA is the operating profit/(loss) before interest, tax,
depreciation, amortisation, and expenses shown separately disclosed on the
face of the Income Statement
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation.
The Directors of the Company take responsibility for this announcement.
Yourgene Health plc Tel: +44 (0)161 669 8122
Lyn Rees, Chief Executive Officer investors@yourgene-health.com (mailto:investors@yourgene-health.com)
Barry Hextall, Chief Financial Officer
Joanne Cross, Director of Marketing
Cairn Financial Advisers LLP (NOMAD) Tel: +44 (0)20 7213 0880
Liam Murray / James Caithie / Ludovico Lazzaretti
Singer Capital Markets (Corporate Broker) Tel: +44 (0)20 7496 3000
Aubrey Powell / Tom Salvesen / George Tzimas
Walbrook PR Ltd (Media and Investor Relations) Tel: +44 (0)20 7933 8780 or yourgene@walbrookpr.com
(mailto:yourgene@walbrookpr.com)
Paul McManus / Lianne Applegarth / Alice Woodings Mob: 07980 541 893 / 07584 391 303 / 07407 804 654
About Yourgene Health
Yourgene Health is an international molecular diagnostics group which develops
and commercialises integrated genomic technologies and services enabling
genomic medicine in over 60 territories. The group works in partnership with
global leaders in DNA technology to advance diagnostic science and support
precision medicine.
Yourgene primarily develops, manufactures, and commercialises simple and
accurate molecular diagnostic solutions, for reproductive health, precision
medicine and now infectious diseases. The Group's flagship products include
non-invasive prenatal tests (NIPT) for Down's Syndrome and other genetic
disorders, Cystic Fibrosis screening tests, invasive rapid aneuploidy tests,
and an extension into the precision medicine space with DPYD genotyping.
Yourgene has a range of innovative DNA sample preparation platforms, and
launched Yourgene Genomic Services in 2020, which has enabled Yourgene to
offer a global laboratory service network equipped to provide high quality
genetic testing and bioinformatics solutions and serve as a full life-cycle
partner for clinical, research and pharmaceutical organisations to support
partners at the preclinical, clinical, and post-market stages to develop,
manufacture, obtain regulatory approval and commercialise new products and
services.
Yourgene Health is headquartered in Manchester, UK with offices in Taipei,
Singapore, the US and Canada, and is listed on the London Stock Exchange's AIM
market under the ticker "YGEN".
For more information visit www.yourgene-health.com
(http://www.yourgene-health.com/) and follow us on twitter @Yourgene_Health.
BUSINESS REVIEW
As announced in the trading update released on 3 November 2022, the first half
of the financial year has delivered a steady 14% increase in core (non-COVID)
revenues to £7.9m (H1 FY22: £7.0m), giving continued confidence that the
original business thesis is back on track following the pandemic. Overall
revenues reflect the slowdown in pandemic testing activities due to the
changes in the UK Government's PCR testing guidelines. Total revenues were
£9.6m for H1 FY23 representing over 40% of consensus market expectation for
the full year and a consistent expected weighting over the two halves of the
year.
In line with other businesses in the UK, inflationary and economic pressures
have impacted margins. Cost base reduction has also been a key focus this
year, including an organisational restructure. Measures and workstreams have
been put in place as we continue to navigate the changing economic landscape
our business is facing. Additional reductions in operating expenditure are
planned over the next 12 to 18 months. The benefits for this will further be
supported by the recent investments in facilities completed with a
consolidated move to a single site in the UK.
Strategy
Our strategy remains to build a global molecular diagnostics business focusing
on our core strength and expertise in cell-free DNA applications such as NIPT,
oncology, liquid biopsy and other precision medicine applications. We remain
on track with our focus on growing our product and service portfolio, as well
as increasing market penetration for key growth drivers, such as Ranger®
Technology. Continued steady geographic expansion through direct and
distributor channels and key strategic partnerships is progressing with
partners such as Ambry Genetics and EKF Diagnostics Holdings plc and we expect
to see further rewards from prior investment in the business and its
technologies.
The expanded capabilities and infrastructure, which were both driven and
funded by COVID testing, have been re-deployed and consolidated within the
Genomic Services offering, to provide additional services such as oncology
panels and whole exome sequencing (WES). In addition, some technical skills
and instrumentation have been utilised to support product development and
front-line customer technical support teams.
Group revenue Unaudited YoY Unaudited Audited
by territory
6 months to
Change
6 months to
12 months to
30 Sept 2022
30 Sept 2021
31 Mar 2022
£m £m £m
UK 3.7 -70% 12.5 26.5
Europe 2.0 -17% 2.4 5.5
International 3.9 +50% 2.6 5.6
9.6 -45% 17.5 37.6
Total excl. COVID 7.9 +14% 7.0 14.4
Unaudited YoY Unaudited Audited
6 months to
Change
6 months to
12 months to
30 Sept 2022
30 Sept 2021
31 Mar 2022
£m £m £m
Genomic Services
NIPT services 1.3 +44% 0.9 1.6
COVID-19 services 0.3 -97% 9.0 18.7
Other services 0.6 - 0.6 1.3
2.2 -79% 10.5 21.6
Total excl. COVID 1.9 +27% 1.5 2.9
Unaudited YoY Unaudited Audited
6 months to
Change
6 months to
12 months to
30 Sept 2022
30 Sept 2021
31 Mar 2022
£m £m £m
Genomic Technologies
NIPT 2.7 +18% 2.3 5.4
Reproductive health 1.8 - 1.8 3.9
COVID related assays 1.3 -7% 1.4 4.5
Precision Medicine (Ranger®, DPYD and other) 1.5 +6% 1.4 2.2
7.4 +7% 6.9 16.0
Total excl. COVID 6.1 +11% 5.5 11.5
Genomic Services
Genomic Services has seen a dramatic reduction in COVID-19 services revenue
since UK testing guidelines changed in March 2022, with revenue of £0.3m
during the period, a decrease of 97% against H1 FY22. The small testing volume
still seen is due to private testing with third-party partners.
However, a rise in demand for NIPT services for both the UK and Taiwan labs
has been evident, with a 44% increase against the same period last year. In
the UK, the acquisition of a new customer partner with a broad network of
clinics has been a growth driver. A broader clinical menu, through the launch
of microdeletions, has enabled a more competitive offering for all regions as
a number of customers were calling for this service as this capability is
increasingly part of customer tenders/requests.
Additional research and clinical genome testing services, offered from
Yourgene's UK and Taipei laboratories, continued to perform in line with last
year with sales of £0.6m.
Genomic Technologies
The Genomic Technologies business stream provides an integrated portfolio of
instruments, reagents, consumables and software, all aimed at supporting
global clinical laboratory customers. Our flagship screening and diagnostic
products include NIPT, Cystic Fibrosis, DPYD genotyping and other reproductive
health assays. In addition, we supply our Ranger® Technology portfolio of
platforms and consumables, which provides next generation size selection in
cell-free DNA applications such as NIPT, oncology and liquid biopsy. The
Ranger® Technology is a key component of our NIPT workflows, providing a
highly differentiated offering of enhanced fetal fraction enrichment both for
our NIPT service and in those operated by our customers using Yourgene's
technologies.
Our Clarigene® SARS-CoV-2 PCR product supplied to third-party UK testing
providers contributed revenues of £1.3m in the period (H1 FY22: £1.4m), a
reduction of 7%. Reflecting reduced testing levels, further reductions are
expected with substantially decreased clinical demand for the product from H2
FY23.
Non-COVID technologies revenue for the first half was up 11% to £6.1m (H1
FY22: £5.5m), showing a steady return to pre-pandemic growth. Run rate
revenues from the differentiated Ranger® Technology is now over US $2.0m per
annum, with a pipeline of opportunity for further growth.
NIPT product revenue is returning to growth again with an increase of 18% to
£2.7m (H1 FY22 £2.3m). This is due to growth in Americas with new lab
installations completed in USA and Mexico, and the commencement of Ambry's
NIPT programme. Growth has also been seen in APAC with new NIPT installs
across India, Taiwan, Singapore in the first half, with a pipeline of further
opportunities for the second half for Malaysia, Australia and Japan. We
continue to evaluate third-party products to offer our customer base, and to
support our portfolio growth ambitions.
FINANCIAL REVIEW
The Company's results for the six months to 30 September 2022 are presented in
the financial statements below and show a reduction in reported revenue of 45%
to £9.6m (H1 FY22: £17.5m), due to the decline in COVID revenue to £1.6m
(H1 FY22: £10.5m). Core (non-COVID) revenues increased by 14% to £7.9m over
the period (H1 FY22: £7.0m). This was driven by NIPT services (44% growth),
NIPT product sales (18% growth) and Ranger® Technology sales to third party
customers, i.e. excluding where Ranger® is embedded in NIPT bundled revenues
(17% growth).
Gross margins slipped back to 55% (H1 FY22: 58%) due to inflationary pressures
and the mix effect of the reduction in higher margin COVID services towards
lower margin NIPT sales as well as some inventory run-off expenses.
General administrative expenses decreased to £7.2m (H1 FY22: £8.1m) with the
notes to the accounts providing a breakdown of some of the significant items.
This overall reduction in expenditure is after increased investment in future
growth drivers such as: £1.1m spend on the operating resource and
infrastructure expenditure in Canada to facilitate continued growth of
Ranger® sales (H1 FY22: £0.7m); £0.6m spend on US market entry (H1 FY22:
£0.5m), reflecting further investment in commercial resource; and net R&D
spend of £0.8m (H1 FY22: £0.6m).
Adjusted EBITDA was a loss of £1.9m (H1 FY22: profit of £2.0m). Exceptional
costs of £1.3m were incurred (H1 FY22: nil), encompassing £0.7m of
restructuring costs, primarily from redundancy processes undertaken in the UK
and Taiwan, and £0.5m of relocation costs arising from the move to a single
UK site at Skelton House.
Net financing expenses were £0.6m (H1 FY22: £0.2m) reflecting the drawdown
of a new bank debt facility of £5.0m at the end of FY22. The total
comprehensive loss for the period was £6.8m (H1 FY22: loss of £0.5m).
Earnings per share were a loss of 0.8 pence (H1 FY22: 0.0 pence per share;
FY22: loss of 0.3 pence).
In the reporting period, the Company incurred operational cash outflows of
£4.1m (H1 FY22: cash neutral), which included £0.6m adverse net working
capital movement, primarily from the payments of large COVID related
liabilities at the start of FY23 (net payables reduction of £3.1m), which
were only partly offset by the unwind of receivables (£1.8m) and inventories
(£0.8m). Capex of £0.5m is consistent with that incurred in FY22 (£0.9m) on
a run rate basis.
Skelton House lease cash incentives of £0.7m were received from the landlord,
which were invested in the fit out of the new premises. The Skelton House
lease is rent free up until August 2024. The previous UK premises have been
partially exited, which resulted in a £1.0m reduction in the IFRS16 lease
liability. Some legacy premises costs remain, so the synergy benefit from the
Skelton House move has not yet been fully realised.
At the end of the reporting period, the Group had £2.4m in cash and cash
equivalents (H1 FY22: £7.0m). Borrowings outside IFRS16 lease commitments
were £4.1m (SVB bank loan), with net debt of £1.7m (30 Sept 2021: £4.6m).
The reduction in cash was weighted to the first quarter of the financial year
and was affected by year end creditor and VAT overhangs arising from a sharp
drop in COVID-related activity running alongside a significant business
restructuring. Cash burn rates reduced for the second quarter of the reporting
period to c£0.5m per month on average. Cash levels continue to be carefully
managed and on current burn rates additional capital injections will be
required to navigate the business to a self-sustaining cash position. The
Company is pursuing multiple avenues to ensure the availability of funding to
enable it to pursue its strategic plan.
Post period end
Since the end of September 2022, the Group has won several new NIPT contracts
which are now going through their installation cycles, with further
opportunities in the pipeline. The opening up of North American travel has
enabled a recommencement of face-to-face partner visits and closer
collaboration with our Canadian colleagues on their scale-up journey, both of
which are expected to accelerate momentum for the next financial year.
Following the consolidation of the Company's UK operations to a single site,
the Board has identified a number of operational efficiencies to help improve
the Company's margins. These include tighter controls around purchasing,
improving manufacturing process and enhancing logistical efficacy.
Outlook
Despite the strong performance of the underlying core business in H1 FY23 and
the Company's focus on building sustainable recurring revenue streams, there
continues to be timing uncertainty over the ramp-up for recent NIPT and
Genomic Services wins, as well as the conversion of recurring revenue pipeline
opportunities. While the Company may continue to benefit from one-off
equipment sales which could compensate for these timing implications, the
Board believes that it would be prudent to revise revenue guidance for the
current financial year towards a range of £18m-£20m. This range would still
represent approximately 20% year-on-year growth in core revenues, a growth
rate the Company expects to be able to maintain or exceed over the next two
financial years. Management remains keenly focussed on accelerating the
implementation of recently won contracts, which represents a significant lever
in improving growth.
If this revenue range is achieved, and the Company is able to maintain H1 FY23
gross margins of 55%, then adjusted EBITDA losses for the financial year would
be in the range of £3.5m - £4.5m. As described above, the Company is
continuing to reduce its operating cost base with a view to recovering the
recent margin erosion and returning to positive EBITDA in the next financial
year and achieving positive free cash flows by the financial year ending 31
March 2025.
For the remainder of the financial year the Company will continue its
strategic focus on building its core business pipelines for both Genomic
Services and Genomic Technologies segments.
Lyn Rees
Chief Executive Officer
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30-Sep 30-Sep 31-Mar
2022 2021 2022
£'000 £'000 £'000
Revenue 9,556 17,450 37,562
Cost of sales (4,308) (7,296) (16,197)
Gross profit 5,248 10,154 21,365
Other operating income 1 41 7
Administrative expenses
General administrative expenses (7,155) (8,096) (17,967)
Adjusted EBITDA (1,906) 2,099 3,405
Depreciation and amortisation (2,317) (2,095) (4,588)
Impairment of goodwill - - (1,045)
Share-based payments expense (141) (118) (312)
Exceptional expenses (1,263) - -
Acquisition integration expense - (17) -
Total Depreciation, Amortisation and separately disclosed items (3,721) (2,230) (5,945)
Operating loss (5,627) (131) (2,540)
Financing income - - 5
Financing expenses (603) (175) (656)
Profit /(loss) on ordinary activities before taxation (6,230) (306) (3,191)
Tax credit/(charge) on loss on ordinary activities (265) 69 1,275
Profit/(loss) for the period (6,495) (237) (1,916)
Other comprehensive expense
Exchange translation differences (286) 138 68
Profit/(loss) and total comprehensive profit/(loss) for the period (6,781) (99) (1,848)
Earnings per share pence
Basic: Profit/(loss) (0.8p) 0.0p (0.3p)
Diluted: Profit/(loss) (0.8p) 0.0p (0.3p)
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30-Sep 30-Sep 31-Mar
2022 2021 2022
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 9,149 9,214 8,881
Intangible assets 12,698 14,083 12,932
Property, plant and equipment 4,457 4,334 4,752
Right of Use Asset 13,627 4,649 13,475
Tax Asset - - -
Deferred tax asset 1,919 1,305 2,282
Total non-current assets 41,850 33,585 42,322
Current assets
Inventories 5,202 4,901 5,987
Trade and other receivables 5,129 8,827 6,982
Tax asset 221 308 343
Cash and cash equivalents 2,404 4,674 8,429
Total current assets 12,956 18,710 21,741
Total assets 54,805 52,295 64,063
Equity and liabilities attributable to equity holders of the company
Equity
Called up share capital 32,672 32,669 32,672
Share premium account 67,786 67,315 67,786
Merger relief reserve 12,994 12,994 12,994
Reverse acquisition reserve (39,947) (39,947) (39,947)
Foreign exchange translation reserve (276) 72 2
Other reserves 5,832 6,307 5,833
Retained losses (53,037) (45,031) (46,595)
Total equity 26,025 34,379 32,745
Current liabilities
Trade and other payables 5,708 8,592 8,403
Lease liability 844 1,175 1,250
Current tax liabilities 319 495 405
Borrowings 2,095 42 2,193
Other Liabilities & Provisions 509 - -
Total current liabilities 9,475 10,304 12,251
Non-current liabilities
Borrowings 2,000 81 3,027
Deferred tax liability 2,022 2,260 2,060
Lease Liability 12,999 4,043 12,641
Long term provisions 2,284 1,228 1,339
Total non-current liabilities 19,305 7,612 19,067
Total equity and liabilities 54,805 52,295 64,063
Consolidated Statement of changes in equity
Share capital Share premium account Merger relief reserve Other reserve Reverse acquisition reserve Foreign exchange reserve Retained losses Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Six months ended 30 September 2021 (unaudited)
Balance at 1 April 2021 32,668 67,260 12,970 4,914 (39,947) (66) (44,876) 32,923
Loss for the period - - - - - - (237) (237)
Other comprehensive Gain - - - - - 138 - 138
Total comprehensive loss for the period - - - - - 138 (237) (99)
Transactions with owners
Issue of share capital 1 55 - - - - - 56
Issue of share capital on acquisition - - 24 - - - - 24
Issue of share options on acquisition - - - 1,393 - - - 1,393
Share-based payments - - - - - - 82 82
Balance at 30 September 2021 32,669 67,315 12,994 6,307 (39,947) 72 (45,031) 34,379
Consolidated Statement of changes in equity
Share capital Share premium account Merger relief reserve Other reserve Reverse acquisition reserve Foreign exchange reserve Retained losses Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
12 months ended 31 March 2022 (audited)
Balance at 1 April 2021 32,667 67,260 12,971 4,914 (39,947) (66) (44,877) 32,923
Profit for the year - - - - - - (1,916) (1,916)
Other comprehensive loss - - - - - 68 - 68
Total comprehensive profit for the year - - - - - 68 (1,916) (1,848)
Transactions with owners
Issue of share capital 4 526 24 919 - - - 1,472
Share-based payments: share option schemes - - - - - - 198 198
Balance at 31 March 2022 32,672 67,786 12,994 5,833 (39,947) 2 (46,595) 32,745
Six months ended 30 September 2022 (unaudited)
Balance at 1 April 2022 32,672 67,786 12,994 5,833 (39,947) 2 (46,595) 32,746
Loss for the period - - - - - - (6,495) (6,495)
Other comprehensive Gain - - - (1) - (278) (7) (286)
Total comprehensive loss for the period - - - (1) - (278) (6,502) (6,781)
Transactions with owners
Share-based payments - - - - - - 60 60
Balance at 30 September 2022 32,672 67,786 12,994 5,832 (39,947) (276) (53,037) 26,025
Consolidation statement of cash flows
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30-Sep 30-Sep 31-Mar
2022 2021 2022
£'000 £'000 £'000
Cash flows from operating activities
Profit / (loss) for the year before tax (6,230) (306) (3,190)
Adjustments for:
Finance costs 603 175 656
Finance income - - (5)
Depreciation, impairment and loss on disposal of property, plant and equipment 960 733 1,756
Depreciation, impairment of right-of-use asset 456 422 959
Loss on revaluation of right-of-use asset - - 25
Amortisation of intangible non-current assets 901 940 1,874
Impairment of goodwill and intangibles - - 1,044
Impairment on financial assets (IFRS9) 15 2 13
Non-cash foreign exchange movements (406) 4 (421)
Share based payment and warrant expense 60 82 198
Tax (paid) / received 92 234 144
Movements in working capital:
(Increase)/decrease in inventories 785 (2,004) (3,089)
(Increase)/decrease in trade and other receivables 1,837 (3,496) (1,661)
Increase/(decrease) in trade and other payables (3,146) 3,353 3,165
Decrease/(increase) in tax asset (70) (103) (158)
Cash generated / (used by) operations (4,143) 36 1,309
Investing activities
Purchase of subsidiaries - (832) (832)
Purchase of property, plant and equipment (475) (908) (2,334)
Capitalisation of intangible assets (239) (201) (324)
Interest received - - 5
Net cash (used in) investing activities (713) (1,941) (3,484)
Financing activities
Net proceeds from issue of shares - 56 55
Proceeds from borrowings - - 5,286
Proceeds from lease incentives 652 - -
Loan arrangement fee - - (159)
Repayment of borrowings (1,132) (78) (289)
Decrease or repayment of lease liability obligations (217) (291) (935)
Interest paid (472) (103) (349)
Net cash (used in) / generated from financing activities (1,169) (416) 3,609
Net (decrease)/increase in cash and cash equivalents (6,025) (2,321) 1,434
Cash and cash equivalents at beginning of period 8,429 6,995 6,995
Cash and cash equivalents at end of period 2,404 4,674 8,429
Notes to the interim financial statements
General information
The principal activity of Yourgene Health plc (the "Company") and its
subsidiaries (together, the "Group") is that of a molecular diagnostics
business for the development and commercialisation of gene analysis techniques
for non-invasive prenatal screening, reproductive health and oncology
diagnostics, and the provision of DNA sequencing services for the early
detection, monitoring and treatment of disease. The Company is incorporated
and domiciled in the United Kingdom. The address of its registered office is
Skelton House, Lloyd Street North, Manchester, M15 6SH. The registered number
is 03971582.
As permitted, this Interim Report has been prepared in accordance with the AIM
rules and not in accordance with IAS 34 "Interim Financial Reporting". The
consolidated financial statements are prepared under the historical cost
convention.
This Consolidated Interim Report and the financial information for the six
months ended 30 September 2022 does not constitute full statutory accounts
within the meaning of section 434 of the Companies Act 2006 and are unaudited.
This unaudited Interim Report was approved by the Board of Directors on 21
December 2022.
The Group's financial statements for the period ended 31 March 2022 have been
filed with the Registrar of Companies. The Group auditor's report on these
financial statements was unqualified and did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Electronic communications
The Company is not proposing to bulk print and distribute hard copies of this
Interim Report for the six months ended 30 September 2022 unless specifically
requested by individual shareholders. The Board believes that by utilising
electronic communication it delivers savings to the Company in terms of
administration, printing and postage, and environmental benefits through
reduced consumption of paper and inks, as well as speeding up the provision of
information to shareholders.
News updates, Regulatory News and Financial statements can be viewed and
downloaded from the Group's website, www.yourgene-health.com
(http://www.yourgene-health.com) . Copies can also be requested from; The
Company Secretary, Yourgene Health plc, Skelton House, Lloyd Street North,
Manchester, M15 6SH or by email: investors@yourgene-health.com
(mailto:investors@yourgene-health.com) .
1. Accounting policies
Basis of preparation
This financial information has been prepared in accordance with International
Financial Reporting Standards (IFRS), including IFRIC interpretations issued
by the International Accounting Standards Board (IASB) as adopted by the
United Kingdom and in accordance with the accounting policies which will be
adopted in presenting the Group's Annual Report and Financial Statements for
the year ending 31 March 2023. These are consistent with the accounting
policies used in the Financial Statements for the year ended 31 March 2022 and
are prepared on a going concern basis.
2. Revenues
Revenue analysed by geographical region.
Unaudited Unaudited Audited
6 months to
6 months to
12 months to
30 September 2022
30 September 2021
31 Mar 2022
£'000 £'000 £'000
UK 3,714 12,450 26,503
Europe 1,975 2,436 5,436
International 3,867 2,564 5,623
9,556 17,450 37,562
Total excl. COVID-related revenues 7,939 6,992 14,318
Revenue analysed by operating segment.
Unaudited Unaudited Audited
6 months to
6 months to
12 months to
30 September 2022
30 September 2021
31 Mar 2022
£'000 £'000 £'000
Genomic Services
NIPT services 1,250 879 1,609
COVID services 328 9,045 18,714
Other services 616 624 1,266
2,194 10,548 21,589
Genomic Services excluding COVID-related 1,866 1,503 2,875
Genomic Technologies
NIPT 2,718 2,570 5,385
Reproductive health 1,824 1,776 3,841
COVID-19 related 1,289 1,413 4,530
Other technologies 1,531 1,143 2,217
7,362 6,902 15,973
Genomic Technologies excl. COVID-related 6,073 5,489 11,443
Total Group Revenues 9,556 17,450 37,562
Total excl. COVID-related 7,939 6,992 14,318
3. Operating profit / (loss) by segment
Unaudited 6 months to Unaudited 6 months to Audited 12 months to
30 September 2022
30 September 2021
31 Mar 2022
Genomic Genomic Central Total Genomic Genomic Central Total Genomic Genomic Central Total
Technologies
Services
Technologies
Services
Technologies
Services
£ £ £ £ £ £ £ £ £
Revenues 7,367 2,189 - 9,556 6,902 10,548 - 17,450 15,980 21,582 - 37,562
Cost of Sales (3,107) (1,201) - (4,308) (3,273) (3,867) - (7,140) (6,557) (9,640) - (16,197)
Gross Profit 4,260 988 - 5,248 3,629 6,681 - 10,310 9,423 11,942 - 21,365
Other operating income - - 1 1 - - 41 41.00 7 - - 7
Segmental expense (2,316) (964) - (3,280) (1,716) (1,654) - (3,370) (5,657) (6,540) - (12,197)
Central overhead - - (3,875) (3,875) - - (4,882) (4,882) - - (5,770) (5,770)
Adjusted EBITDA 1,944 24 (3,874) (1,906) 1,913 5,027 (4,841) 2,099 3,773 5,402 (5,770) 3,405
Depreciation and amortisation - - (2,317) (2,317) - - (2,095) (2,095) - - (4,588) (4,588)
Goodwill impairment - - - - - - - - - - (1,045) (1,045)
Share-based payments expense - - (141) (141) - - (118) (118) - - (312) (312)
Exceptional expenses - - (1,263) (1,263) - - - - - - - -
Acquisition integration expense - - - - - - (17) (17) - - - -
Operating Profit / (Loss) 1,944 24 (7,595) (5,627) 1,913 5,027 (7,071) (131) 3,773 5,402 (11,715) (2,540)
4. Operating loss for the period is stated after charging / (crediting)
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30-Sep 2022 30-Sep 2021 31-Mar 2022
£000 £000 £000
UK Genomic Services laboratory expenses 1,218 1,350 3,157
Research and development expenditure net of capitalisation, grants and tax 788 647 1,777
credits
Yourgene Health Canada operating expenses 1,095 687 1,675
US market entry expense 591 457 1,068
Depreciation of property, plant, and equipment 961 733 1,755
Depreciation of right of use assets 456 423 959
Amortisation of intangible assets 901 940 1,874
5. Exceptional Items
In April 2022 the Company announced it was restructuring its operations to
reduce its operating expenses to reflect the impact of post-pandemic
reductions in revenues. In parallel the Company has consolidated all of its
UK activities into a single new facility which is in close proximity to its
various prior locations in Manchester, and which is a key enabler for the
continuing cost reduction exercise and associated efficiency drives. The
costs associated with this restructuring and relocation have been shown as
exceptional items in order to assist readers of the accounts to understand the
underlying financial structure of the Company post-restructure.
The relocation costs (and associated capitalised fit-out expenses) are
substantially offset by a rent-free period negotiated in the lease for the new
facility which is amortised over the life of the lease in accordance with
IFRS16.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30-Sep 2022 30-Sep 2021 31-Mar 2022
£000 £000 £000
Restructuring expenses 742 - -
UK relocation expenses 521 - -
6. Taxation
Taxes on income in the interim periods are accrued using the rate of tax that
would be applicable to expected total annual earnings.
The research and development tax credit of £140k (30 Sept 2021: £103k; 31
March 2022: £137k) is shown as a deduction against general administrative
expenses.
Deferred tax liability of £2,022k (30 Sept 2021: £2,260k; 31 March 2022:
£2,060k) is recognised in respect of the intangible fixed assets acquired in
business combinations in March 2017, April 2019, and August 2020.
A deferred tax asset of £1,919k (30 Sept 2021: £1,305k; 31 March 2022
£2,282k) has been recognised to offset the deferred tax liability arising on
the acquisition of Delta Diagnostics UK Ltd in April 2019 which should be
available to be sheltered by those losses. Further recognition in future
reporting periods is subject to the extent that future taxable profits will be
sufficient to utilise the losses, in accordance with current and expected
future UK tax rates. The deferred tax asset reduction from 31 March 2022 is
due to more cautious forecasts of future taxable profits because of
uncertainty over the impact of macroeconomic conditions.
7. Earnings/Loss per share
Basic
Basic loss per share is calculated by dividing the loss for the period of
£6,495k (30 Sept 2021: loss £237k; 31 March 2022: loss £1,916k) by the
weighted average number of ordinary shares in issue during the period
727,100,243 (30 Sept 2021: 723,439,822; 31 March 2022: 724,248,137).
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 ordinary shares used to
calculate diluted earnings / loss per share is 727,100,243 (30 Sept 2021:
754,536,235; 31 March 2022: 739,276,004).
114,158,439 options and warrants (30 Sept 2021: 28,439,443; 31 March 2022:
69,314,463) have been excluded from this calculation as the effect would be
anti-dilutive.
8. Acquisitions of Subsidiaries
Acquisition of Coastal Genomics Inc, now named Yourgene Health Canada Inc
Remaining deferred consideration has been amended to reflect COVID pandemic
delays and to retain incentivisation and is payable under the terms of the
acquisition as follows:
· cash consideration of US$2.0m should Yourgene Health Canada generate
revenues of at least US$4.0m cumulatively from 1 April 2022. If this target
is achieved before 31 March 2024 then 65% will become payable in April 2024.
If the target is achieved before 31 March 2023 then 35% becomes payable in
April 2023. If the target is achieved between 1 April 2023 and 30 September
2023 then the 35% will become payable in October 2023 and if the target is
achieved between 1 October 2023 and 31 March 2024 then the 35% is payable in
April 2024 alongside the 65% portion. If the target is not achieved by 31
March 2024 then the deferred consideration lapses entirely. Based on
current projections the performance condition will be achieved prior to 31
March 2023.
· contingent cash consideration of US$4.0m should Yourgene Health
Canada generate revenues of at least US$8.5m in the financial year to 31 March
2023, which would become payable in April 2023. The Group has deemed this a
stretch target which was not included in the fair value assessment at
acquisition, which is based on more cautious cashflows than would trigger this
stretch target payment. This consideration will either be earned or not and
there is no contractual provision for partial payment. As such, this amount is
disclosed as a contingent liability and is not expected to crystallise before
it lapses on 31 March 2023.
9. Share capital
During the period the Company issued no new ordinary shares and its issued
share capital remained at 727,100,243 ordinary shares of 0.1 pence each (30
September 2021: 723,780,306).
There are 16,506,723 unlisted YGEN-HCIL shares in issue which arose from the
2020 acquisition of Coastal Genomics Inc which are held by the former
shareholders of that company and which are exchangeable on a one-for-one basis
for the Company's shares.
Thermo Fisher holds 54,332,541 warrants in the Company which are currently
below their various exercise prices of 24.6p (20,325,204 warrants), 11.7p
(17,094,018 warrants) and 11.8p (16,913,319 warrants) and which all expire on
10 December 2023.
As at 30 September 2022 there are 59,095,139 outstanding options, of which
48,685,893 are exercisable. During the six month period to 30 September 2022;
no options were exercised, 1,090,000 new options were options issued, and
160,000 options were forfeited.
10. Contingent liabilities
The Company has two contingent liabilities. The first arose as part of the
February 2019 capital restructure which created a £6.5 million liability,
payable to Thermo Fisher only in the event of a sale of the Company or an
insolvency event. The second arose upon the August 2020 acquisition of Coastal
Genomics Inc (now renamed Yourgene Health Canada Inc). The consideration for
the acquisition of Coastal Genomics included performance-based earn-out
payments, the last of which is a US$ 4 million payment in the event of the
acquired company achieving stretch target revenues of US$ 8.5 million in
financial year 2022-23. This final payment was not included in the fair
valuation of the acquired company as that was based on more conservative
cashflows than would trigger this final earn-out payment, and it is therefore
regarded as a contingent liability. At the current reporting date it is not
expected that the Coastal Genomics contingent liability will crystallise
before it lapses on 31 March 2023.
11. Events after the reporting period
In the period between the reporting date and the publication of these interim
results to Company has continued to trade at similar rates of year-on-year
growth in its core business to those shown in these interim statements.
Equally the Company continues to execute its previously announced
restructuring plan to bring administrative expenses into line with its revenue
expectations after the elevated levels achieved during the COVID-19
pandemic. Other than this there are no specific notable post balance
sheet events to report.
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.
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