Half-year Report

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 Lyn Rees, Chief Executive Officer	Tel: [phone] [e-mail]
Barry Hextall, Chief Financial Officer
Joanne Cross, Director of Marketing
Cairn Financial Advisers LLP (NOMAD)	Tel: [phone]
Liam Murray / James Caithie / Ludovico Lazzaretti
Singer Capital Markets (Corporate Broker)	Tel: [phone]
Aubrey Powell / Tom Salvesen / George Tzimas
Walbrook PR Ltd (Media and Investor Relations)	Tel: [phone] or [e-mail]
Paul McManus / Lianne Applegarth / Alice Woodings	Mob: [phone]

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 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 by territory	Unaudited 6 months to 30 Sept 2022	YoY Change	Unaudited 6 months to 30 Sept 2021	Audited 12 months to 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 6 months to 30 Sept 2022	YoY Change	Unaudited 6 months to 30 Sept 2021	Audited 12 months to 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 6 months to 30 Sept 2022	YoY Change	Unaudited 6 months to 30 Sept 2021	Audited 12 months to 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 .  Copies can also be requested from; The Company Secretary, Yourgene Health plc, Skelton House, Lloyd Street North, Manchester, M15 6SH or by email: [e-mail] .

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 6 months to 30 September 2022	Unaudited 6 months to 30 September 2021	Audited 12 months to 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 6 months to 30 September 2022	Unaudited 6 months to 30 September 2021	Audited 12 months to 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 30 September 2022					Unaudited 6 months to 30 September 2021					Audited 12 months to 31 Mar 2022
		Genomic Technologies	Genomic Services	Central	Total		Genomic Technologies	Genomic Services	Central	Total		Genomic Technologies	Genomic Services	Central	Total
		£	£		£		£	£		£		£	£		£
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 credits	788	647	1,777
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.

 

END

 

 

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