Audited Final results&unaudited Q1 business update

RNS Number : 2270I

Yourgene Health PLC

11 August 2021

 

Yourgene Health plc

("Yourgene" or the "Group" or the "Company")

Audited Final results and unaudited Q1 business update

Manchester, UK - 11 August 2021:   Yourgene (AIM: YGEN), the international molecular diagnostics group, announces its full year financial results for the year ended 31 March 2021 ("FY21"), and provides a business update after its first trading quarter of the current financial year (Q1).

The FY21 results, delivered in-line with prior guidance, reflect resilient revenue growth through the unprecedented challenges brought by the Covid-19 pandemic. Despite these challenges, the business evolved further with product mix changes, significant M&A activity and capital and increased operating investments to support key future growth drivers.  As a result, the new financial year has started more strongly, with significant growth in Q1 against a Covid-impacted comparable period but performing in line with our growth plans which are enabled by these strategic investments.

Financial headlines

· As previously reported, revenues increased 10% to 18.3m from £16.6m, with Covid-related revenues and strong European NIPT growth offsetting international pandemic headwinds

· Gross profit up 11% to 11.4m from £10.2m

· Adjusted EBITDA* decreased to a negative £2.0m (FY20: £1.3m positive adjusted EBITDA) after investing £2.4m of additional expenditure in future growth projects, from which we are already seeing substantial benefits in the new financial year

· Total comprehensive loss increased to £12.2m reflecting a goodwill impairment charge arising from pandemic-related challenges in Asian markets (2020: loss of £2.3m)

· Cash used by operations increased to £3.8m from £2.1m, including a £1.6m inventory build primarily for Covid testing products which have bolstered revenues in Q1 of FY22

· £7.4m cash invested mainly in the acquisition of Coastal Genomics, Inc., in the expansion of Genomic Services laboratory facilities, in NIPT instrumentation for key clients transitioning to IONA NX® and in internally generated intangible assets from research and development activities (FY20: £9.0m invested, mainly on acquisitions)

· £15.5m generated from financing activities, principally an equity raise in August 2020 to facilitate the acquisition of Coastal Genomics and generate additional working capital (FY20: generated £12.6m for acquisitions)

· Net cash improved to £6.8m at 31 March 2021 from £2.4m at 31 March 2020

* 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

Operating headlines

· Acquisition of Coastal Genomics in August 2020 adds Ranger® Technology intellectual property portfolio in DNA fragment size selection along with US-focused strategic client portfolio

o  Integrating well, meeting first and second equity earn-out milestones in March 2021 and April 2021 by delivery of strategic commercial partnership

o  Strong pipeline in place for additional new customers, especially in North America

· Non-invasive prenatal testing (NIPT) portfolio significantly strengthened, despite pandemic challenges affecting international markets and delaying new market penetration

o  IONA® Nx NIPT Workflow CE-marked, launched and all key European NIPT accounts transitioned

o  IONA® Nx NIPT awarded contract with St George's NHS Hospital (October 2020)

o  New NIPT partnerships secured in Japan and USA, with launches delayed due to pandemic

o  IONA® Twin Study published

· Appointment of VP Sales in March 2021 to drive commercial penetration in North American markets for Ranger® and Next Generation Sequencing (NGS) technologies such as NIPT

· Launch of Yourgene Genomic Services, including new UK-based Covid-19 and contract research service offerings

· Adapted to the Covid-19 pandemic through the launch of Covid-19 testing services in the UK and the CE-marked Clarigene® SARS CoV-2 PCR assay

o  Accredited for UK government travel-related testing schemes

o  Partnerships with Newcastle Premier Health Limited ("NPH") and others for airport and community testing

o  c£1m invested into laboratory testing capacity, now capable of c100,000 tests per month and suitable for non-Covid services in future

· DPYD testing recommended by multiple UK and international health policy-making bodies

Current trading: Q1 business update (unaudited)

· Q1 revenues over £6m, up 80% vs. Q1 FY20, driven by Covid-related services and product sales as the UK reopens

· Estimated Q1 adjusted EBITDA profit of c.£0.7m, to be enhanced through a further £1.0m of identified, annualised operating expense savings already being implemented via a business refocus programme

· Covid-19 testing routes to market strengthened in the travel sector and expanded into consumer-facing partnerships

· Secured entry into the UK's National Microbiology Framework in all four framework areas within which we are now pursuing multiple opportunities

· US market penetration continues with a multi-year licence and supply agreement for NGS-based reproductive health screening

· Second strategic partnership for Coastal Genomics, again US-focused mainly in the field of non-Covid-19 infectious diseases demonstrating the versatility of the acquired technology

· International distribution network being reinforced

Joint comment from Adam Reynolds, Chairman, and Lyn Rees, CEO: " The last financial year presented many operational and financial challenges to our business operations as a result of the Covid pandemic.  Despite a challenging year operationally, we have maintained focus on our long-term objectives as well as effectively navigating the pandemic in the short-term, and as a result have established a broader platform with increased growth prospects to deliver shareholder value in the medium term.  A chieving double digit growth was a significant achievement, and our accelerated investment in existing and new technologies has positioned us very well for the anticipated strong post-pandemic growth in the global molecular diagnostics market. Despite the impact on group profitability in FY21, this investment is already reaping rewards as demonstrated by the momentum seen in Q1 which is continuing into Q2. After strengthening our in-field commercial resources last year, we have also identified opportunities to refocus our cost base during the current financial year. As a result we look forward to a resumption of profitable growth at Group level, with continuing impetus in the US market specifically."

This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

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
N+1 Singer (Joint Corporate Broker)		Tel: [phone]
Aubrey Powell / Tom Salvesen / George Tzimas
Stifel Nicolaus Europe Limited (Joint Corporate Broker)		Tel: [phone]
Nicholas Moore / Matthew Blawat / Ben Maddison
Walbrook PR Ltd (Media and Investor Relations)	Tel: [phone] or  [e-mail]
Paul McManus / Lianne Cawthorne		Mob: [phone] / Mob: [phone]

About Yourgene Health plc

Yourgene Health is an international molecular diagnostics group which develops and commercialises genomic services and technologies. The Group works in partnership with global leaders in DNA technology to advance diagnostic science. 

Yourgene primarily develops, manufactures, and commercialises simple and accurate molecular diagnostic solutions, for reproductive health, precision medicine and infectious diseases. The Group's flagship in vitro diagnostic products include non-invasive prenatal tests (NIPT) for Down's Syndrome and other genetic disorders, Cystic Fibrosis screening tests, invasive rapid aneuploidy tests and DPYD genotyping.

Yourgene has a range of innovative DNA sample preparation platforms, powered by Ranger® Technology, the Yourgene LightBench® and Yourgene QS250, ideal for cell-free DNA applications in NIPT and oncology including liquid biopsy.

Yourgene Genomic Services is a global laboratory service network equipped to be 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. In addition, Yourgene Genomic Services offers an NIPT and high throughput COVID testing service.

Yourgene Health is headquartered in Manchester, UK with facilities in Taipei, Singapore, the US and Canada, and is listed on the London Stock Exchange's AIM market under the ticker "YGEN". Follow us on  LinkedIn  and  Twitter .  Further information is available at www.yourgene-health.com

 

JOINT STATEMENT FROM THE CHAIRMAN AND THE CEO

Significant progress has been achieved despite the reporting period being aligned with the global Covid-19 pandemic. Despite the many headwinds this has caused, the business has proved adaptable and resilient. Our long-term strategy remains focused on creating shareholder value by improving human health decisions. We have delivered double digit revenue growth, acquired Coastal Genomics and its differentiated Ranger® Technology for selecting DNA fragments by size in sample preparation, and expanded our service and product capabilities.  In addition we have played our part in the response to Covid-19 through the launch of our own Clarigene® SARS-coV-2 assay and a high quality Covid-19 testing service.  In the midst of all this we have also launched our new NIPT solution and transitioned it into our key European NIPT customers and commenced its roll-out to new markets in the US and Asia. 

Revenue Analysed by Geographical Market

Regional segments	Year ended 30 March 2020 £m	% of total	Year ended 30 March 2019 £m	% of total	Growth / decrease
UK	5.4	30%	2.0	12%	+174%
Europe	5.5	30%	4.1	25%	+33%
International	7.4	40%	10.5	63%	-30%
Total	18.3	100%	16.6	100%	+10%

Revenue Analysed by Operating Segments

	2021		2020		Growth / decrease
	£m	% of total	£m	% of total
Genomic Services
NIPT services	1.8	10%	2.6	15%	-29%
Covid-19 services	1.7	10%	-	-	n/a
Other services	2.8	15%	2.9	18%	-4%
	6.4	35%	5.5	33%	+26%
Genomic Technologies
NIPT	5.9	32%	7.4	45%	-20%
Reproductive health	3.6	20%	3.7	22%	-1%
Covid-19 related	1.4	8%	-	-	n/a
Other technologies	1.0	5%	-	-	n/a
	11.9	65%	11.1	67%	+2%
Group Total	18.3	100%	16.6	100%	+10%

Genomic Services

In September 2020 we launched Yourgene Genomic Services as a separate business segment covering our longstanding NIPT testing services in the UK and Taiwan, our oncology and contract research organisation (CRO) testing service in Taiwan, as well as new UK-based Covid and CRO-focused testing services.  Delivering clinical and research testing services to consistently high standards requires considerable focus and the new segment gives our talented teams the necessary focus to compete effectively in this space.  Operating as our own in-house customer for our Genomic Technologies offerings also gives the Group a fantastic insight into our customers' needs.

Throughout the reporting period we have invested in the capabilities of our new Genomic Services segment with considerable expansion in our UK Citylabs facility and our new Taipei facility is due to come on-stream in the second half of calendar year 2021.  Capacity expansion has at times run ahead of testing volumes, however, particularly in light of the various UK lockdowns and international travel constraints which affected Taiwan testing volumes.  The Taiwan challenges have given rise to an impairment on the 2017 goodwill but we remain very positive about our prospects for the new laboratory and the wider Asia Pacific region as the pandemic constraints start to normalise.

Overall, despite these challenges the Genomic Services segment delivered 26% revenue growth.  Entering the 2021-22 financial year we have a much expanded capacity, a strong pipeline of opportunities, higher quality standards and better qualified teams, aligned with our aim of creating a substantial service business.

Genomic Technologies

The Genomic Technologies business segment encompasses our other commercial activities including our NIPT range of assays, software and automation, our PCR range of reproductive health and chemotoxicity tests and our newly acquired Ranger® size selection technology.

NIPT

In June 2020 we were delighted to announce the CE-IVD mark for our Illumina-based IONA® test, which was then launched as the IONA® Nx NIPT Workflow. This test runs on the Illumina NextSeq 550Dx Next Generation Sequencing ("NGS") instrument, and as well as satisfying our 2018 legal settlement obligations is a major advancement of our flagship NIPT solution given that Illumina's NGS technology accounts for around 75% of the global NGS market. Since its launch, the IONA® NX workflow has been implemented in our own Manchester service laboratory and in all our key European contracts, including at St George's Hospital in the UK who were successful in winning a key role in NHS England's national NIPT implementation strategy.  The various components of our NIPT solution, including the Flex Analysis software platform, are also already starting to build a presence in our target markets of the USA and Japan despite delays in contract completion, installation and validation created by the pandemic.  Our addressable market has expanded significantly as a result of the IONA® NX launch.

NIPT testing was affected by the Covid-19 pandemic, in particular in our international markets where health tourism slowed significantly and diagnostic testing resources were diverted to Covid-related activities.  As a result of these challenges, we have prudently booked an impairment on the goodwill arising from our 2017 share-for-share acquisition of Yourgene Bioscience in Asia, but we remain confident that this region will bounce back strongly once the pandemic impacts subside.  These international challenges did eclipse strong growth in our European markets where our NIPT market position still has exciting growth potential.

PCR assays

Our reproductive health range of PCR assays proved more resilient as it is more focused on the European healthcare markets, but still experienced some headwinds from the pandemic.  Our chemotoxicity DPYD test however continued to make good traction and is now recommended by NHS England, NHS Wales and Belgium amongst others, to identify the risk of severe side effects in patients who might otherwise receive certain chemotherapy treatments.

Clarigene™ SARS CoV-2 Test

The launch of our Clarigene™ SARS-CoV-2 test in June 2020, and its subsequent CE marking in August 2020, was a significant milestone for the business representing a very rapid new product introduction and also a key mitigation against the risks Covid-19 posed to our core business.  Since its launch we have focused its usage in our service laboratory and with a select but growing network of partners.  Supply chains have been constrained during the pandemic and we wanted to ensure we could maintain high standards of service delivery.  The assay has performed consistently well and has proved reliable in detecting the additional variants that have emerged since its launch.  The test has been approved by various UK government accreditations and has secured us a place in the UK's National Microbiology Framework for the next 2 years.

Our testing partners are particularly focused in the travel and, more recently, retail sectors which has made it very difficult to predict volumes of business during the UK's capricious pattern of lockdowns and international travel restrictions.  Clarigene® did however contribute £0.9m to FY21 revenues as well as underpinning the £1.7m of Covid service testing revenues and we entered FY22 with substantial inventories in anticipation of the vaccine-led reopening we are now seeing.

Ranger® size selection technology

In August 2020 we acquired Coastal Genomics Inc based in Vancouver, Canada.  Coastal has developed the strongly differentiated Ranger® sample preparation technology which enables the targeted size selection of DNA fragments in NIPT, oncology, infectious disease and other clinical applications.  Prior to the acquisition, the Ranger® Technology had already been selected as a key element in our IONA® NX NIPT workflow and we were delighted to bring the Coastal team into the Yourgene Group.  Combining our commercial and operational capabilities with Coastal's technology and US-focused sales pipeline will deliver an enhanced penetration of the US market over time, and offers a complementary technology in our other global markets.  Coastal is an early-stage business requiring additional investment to realise its sizeable market opportunity and the team has blended in well to the Yourgene family.

The acquisition was funded through a mixture of cash and equity issued to the selling shareholders, along with some stretching equity and cash earn-out milestones designed to align incentives with delivery of the significant strategic benefits this acquisition offers.  It is pleasing to note that the first two milestone payments of the earn-out have been triggered (one before the period end and one shortly afterwards) as a result of their strong momentum. The associated fundraise also generated significant capital for investment into the wider business, and we thank our shareholders for their continued support and confidence in our long-term strategy.

The Yourgene Group

Board

The Board during this turbulent reporting period has been resolute, with the addition of Dr Joanne Mason as Chief Scientific Officer in November 2020.  Jo brings a tremendous pedigree of scientific achievements and was instrumental in the launch of our Clarigene® PCR assay for testing for SARS-CoV-2, alongside the completion of the IONA® NX NIPT development phase and its subsequent launch.

Continued Expansion of People Talent

We have continued to invest in the future growth of our business by acquiring talented individuals to the organization, strengthening our team and developing our staff's expertise. Key hires this year include a further senior US commercial recruit, with considerable experience to lead our penetration of that strategically critical market.  In response to the restrictions on international travel we have also invested in more localised commercial resource with other senior hires in France, Germany and in South-East Asia.  In anticipation of further commercial growth, we have also strengthened our product management function.

Conscious of the fact that it is our entire team that delivers service and support to customers, growth in the business and value to shareholders, we introduced a Share Incentive Plan in the UK to ensure that the interests of our staff are aligned with those of our shareholders.  We hope to extend this equity participation to colleagues in our other main employment centres once we have reviewed their respective local tax situations. 

Investing in long-term capabilities

Throughout the reporting period, we have maintained our focus on our long-term strategy to deliver shareholder value by creating a substantial global molecular diagnostics group.  This focus, alongside the expenditure in our Clarigene® SARS-CoV-2 assay and our internal laboratory service capacity to support the Covid-19 pandemic response, has led to a reversal of recent EBITDA improvements, but we remain confident that this is a temporary feature of the Group's journey in scaling to achieve profitable growth.  Some of these investments manifest as administrative expenses, but all are focused on creating revenue and supporting value drivers for the Group in reporting periods to follow.  The strategic pillars to our growth remain unchanged: product penetration, geographic expansion, new products and synergistic M&A.  Key to this growth strategy is our ability to scale our activities in line with expanding our addressable markets and commercial execution.  We have invested significantly in our business systems, the transition to the IONA® NX platform, our UK and Taiwan laboratory service facilities, our US commercial presence and in the Coastal Genomics acquisition.  The benefits of that investment are now being seen in FY22 where we expect to return to more normalised trading patterns. 

Outlook

As we progress into FY22, Yourgene is a much transformed group with a more substantial global presence and a stronger team in place in North America which is now winning significant contracts with market-leading partners based on the enhanced technologies in our portfolio including the Ranger® Technology acquired through Coastal Genomics.  The pandemic continues to affect many parts of the world, but we are proud of our role in helping navigate through it and we welcome the reopening of travel and the global economy.  We are very much looking forward to reconnecting in person with customers, partners and colleagues across the world, and we firmly believe our investments will better support them and deliver accelerated growth in the years to come.  We are also very appreciative of the support of our shareholders in the last year and in particular to our hard-working colleagues who have maintained their entrepreneurial spirit and dedication to our customers throughout this most challenging of times.

Adam Reynolds	Lyn Rees
Non-executive Chairman	Chief Executive Officer
11 August 2021	11 August 2021

FINANCIAL REVIEW

Income Statement

In the trading year revenues grew 10% to £18.3 million (2020: £16.6 million) with pandemic-related challenges in some of our core markets, especially the International segment, being offset by the introduction of Covid-19 related products and services, the full year benefit of the March 2020 acquisition of AGX-DPNI in France and a contribution from the August 2020 acquisition of Coastal Genomics Inc in Canada.  Our Genomic Services operating segment delivered revenue growth of 26% whilst our product-focused segment, Genomic Technologies, held its own with 2% growth.  Gross profits grew slightly faster than revenues by 11% to £11.4m (2020: £10.2m) with gross margins increasing slightly to 62.2% (2020: 61.5%).

General administrative expenses increased to £13.5m (2020: £9.0m). A more detailed breakdown of key administrative expenses is shown in Note 6 and includes expenditure on projects which are expected to generate significant financial improvements which the pandemic deferred into future reporting periods.  The main project expenditures of this nature were £0.4m in cloud-based integrated and scalable business systems, £0.8m in the transition of key customers to IONA NX based on the Illumina NGS platform (a condition of a 2018 legal settlement), £0.3m in market entry and customer acquisition costs in the USA and an additional £0.9m in increased laboratory capacity ahead of anticipated Covid-19 testing revenues once UK-related travel opens up.

	2021				2020
	Genomic Technologies	Genomic Services	Total		Genomic Technologies	Genomic Services	Total
	£m	£m	£m		£m	£m	£m
Revenues	11.9	6.4	18.3		11.1	5.5	16.6
Cost of Sales	(4.7)	(2.2)	(6.9)		(4.3)	(2.1)	(6.4)
Gross Profit	7.2	4.2	11.4		6.8	3.4	10.2
Other income			0.1				0.1
Segmental expenses	(5.3)	(3.4)	(8.7)		(4.7)	(2.2)	(6.9)
Central expenses			(4.8)				(2.2)
Adjusted EBITDA	1.9	0.8	(2.0)		2.1	1.2	1.3
Separately disclosed			(9.7)				(4.5)
Operating Profit / (Loss)	1.9	0.8	(11.7)		2.1	1.2	(3.2)

The Group's two operating segments both delivered positive adjusted EBITDA contributions after segment-specific expenses.  Genomic Services contributed £0.8m (2020: £1.2m) with Covid testing services in the UK offsetting pandemic-related weakness in our Taiwan laboratory services.  Genomic Technologies contributed £1.9m (2020: £2.1m) with headwinds and customer delays in the Group's international markets masking strong performance in the UK and Europe.  Overall adjusted EBITDA after deducting central expenses was a loss of £2.0m (2020: £1.3 million profit).  The increase in central expenses reflects the expansion of the Group through acquisition and the Group's decisions to continue investing in its future growth drivers despite the pandemic headwinds on revenues which delayed the anticipated corresponding income. Adjusted EBITDA is measured as the operating loss before depreciation, amortisation, and separately disclosed items. Underlying EBITDA without the forward-looking projects described above would have been a profit of £0.4m.

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 (i.e. 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.

Within separately disclosed items is an impairment of goodwill which arose in the 2017 acquisition of Yourgene Bioscience which operates primarily in South East Asia.  These markets were particularly badly hit by the economic impacts of the Covid-19 pandemic despite generally managing the social impacts extremely well.  Early and extended national lockdowns restricted health tourism into Taiwan, Singapore and Thailand and delayed a contract launch in Japan.  In addition many countries in Asia redirected resources toward Covid-related health applications, for example resulting in the cancellation of a sizeable oncology project that Yourgene was supporting as funding was reallocated to Covid.  The Group is engaged in restructuring its Asian operations in response to these structural changes and still sees significant value in that region.

Operating Loss

There is a resultant operating loss after total administrative expenses of £11.7 million (2020: £3.2 million).

Finance Income/(Expenses)

During the period the Group incurred net finance expenses of £0.3m (2020: £0.1m) with only modest levels of debt on the balance sheet, mostly related to property leases accounted for under IFRS16.

Taxation and Foreign Exchange

The resulting loss on ordinary activities before taxation of £12.0m (2020: £3.4m) reflects a £0.2m tax charge (2020: £0.9m credit) which is described in note 12 and is primarily the de-recognition of a deferred tax asset from historic losses to mirror the amortisation of a matching deferred tax liability. 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 loss of £0.1 million (2020: gain of £0.1 million) 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 £12.2m (2020: £2.3m).

Earnings per Share

Earnings per share were a loss of 1.8 pence (2020: 0.4 pence loss).

Statement of Financial Position

At the reporting date the Group had total assets of £49.1m (2020: £37.7m). Intangible assets increased to £14.8m (2020: £10.2m) as a result of acquiring customer relationships and intellectual property with Coastal Genomics and customer relationships with Ex5 Genomics. Goodwill reduced to £9.2m (2020: £10.8m) with the Yourgene Bioscience impairment offsetting goodwill acquired with Coastal Genomics.  Property, plant and equipment increased to £4.1m (2020: £2.0m) with capital expenditure on new laboratory facilities in Taiwan and the UK, acquired assets in Vancouver and the deployment of IONA NX workflows into key European accounts to facilitate their transition.  Right of use assets increased to £4.2m (2020: £3.0m). The recognised deferred tax asset decreased to £1.1m (2020: £1.2m) and the 2020 £0.5m non-current tax asset reduced to zero in 2021 due to the receipt of relevant UK R&D tax credit payments.  The current tax asset remained stable at £0.5m (2020: £0.5m).

Total current assets increased to £15.7m (2020: £10.0m) with trade and other receivables slightly reduced after hopefully prudent provisions against pandemic-related situations, and a sizeable increase in inventories in anticipation of significant Covid-19 service volumes early in the new financial year.  There was also an increase in cash and cash equivalents to £7.0m (2020: £2.8m) as described below.

Total equity and liabilities increased to £49.1m (2020: £37.7m) due to the equity-based fundraising to support the Coastal Genomics acquisition, and acquisition related earn-out liabilities as described in note 18.

Statement of Cash Flows

The Group had an opening cash position of £2.8m (2020: £1.3m) and a net cash increase of £4.2m during the year (2020: £1.5m increase). Cash and cash equivalents at the end of the period were £7.0m (2020: £2.8m). During the period the Group used £3.8m (2020: £2.1m) of cash in operating activities including an increase in inventories of £1.6m, a £0.6m reduction in receivables due to debt provisions and investment in operating expenses for future growth drivers as described above, both designed to support anticipated revenue growth in the 2022 reporting period. Cash used in investing activities was £7.4m (2020: £9.0m) reflecting acquisitions during the year, capital expenditure in the year on service capacity and revenue-generating NIPT workflow instrumentation plus capitalisation of internally generated intangible assets.

Financing activities generated a surplus of £15.5m (2020: £12.6m), primarily due to an equity issuance in August 2020 to support the acquisition of Coastal Genomics described in note 18, along with a number of share options and warrant exercises as described in Notes 28 and 29.

As with all businesses at this stage of development and with high growth ambitions, 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 (2020: £nil) due to the need to preserve capital for investing in the Group's growth strategy, which is designed to enhance value over the longer term.

Capital Management

The Board's objective is to maintain a balance sheet that is both efficient for 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 elsewhere in the Annual Report. The COVID pandemic presented significant challenges during the reporting period but the provision of COVID-related services has also provided some risk mitigation against consequential instability in our core markets.  As at 31 March 2021, the Group had net cash of £6.8m (2020: £2.4m) which is stated after borrowings of £0.2m (2020: £0.4m) but before lease liabilities arising under IFRS16 (with their offsetting Right of Use assets). Business growth and the increased scale and revenue generating opportunities, especially COVID-19 testing in the near-term and a range of services and technologies in North America in the medium-term, supported by the Coastal Genomics acquisition, are expected to enable the Group to operate as a going concern for the foreseeable future.

Post-balance Sheet Events

After the end of the reporting period, the Group has continued to expand its UK-based COVID testing routes to market including into the retail pharmacy and travel sectors and through successful entry into the UK Government's National Microbiology Framework.  The Group also entered into a second qualifying commercial agreement for the Ranger® Technology acquired with Coastal Genomics, triggering the second of two equity earn-out issuances, and creating a commercial platform with leading US-based market participants.  In a separate announcement the Group also entered into a multi-year licence and supply agreement with another leading US diagnostic testing partner, furthering its US market penetration.

Barry Hextall

Chief Financial Officer

11 August 2021

Consolidated Statement of Comprehensive Income
For the year ended 31 March 2021
		2021				2020
	Notes	£			£	£	£
Revenue					18,288,028		16,612,779
Cost of sales					(6,912,493)		(6,387,837)
Gross profit					11,375,535		10,224,942
Other operating income					60,313		67,530
Administrative expenses
General administrative expenses					(13,483,114)		(9,037,761)
Adjusted EBITDA					(2,047,266)		1,254,711
Depreciation and amortisation	6	(3,246,887)				(2,093,808)
Impairment of Goodwill	5	(4,788,747)				-
Share-based payments expense	5	(951,983)				(1,601,746)
Costs associated with subsidiary acquisition	5	(286,044)				(264,666)
Acquisition integration expense	5	(388,012)				(533,358)
						-
Total Depreciation, Amortisation and separately disclosed items					(9,661,673)		(4,493,578)
Operating loss	6				(11,708,939)		(3,238,867)
Financing income	10				1,850		19,960
Financing expenses	11				(301,547)		(163,203)
Profit (Loss) on ordinary activities before taxation					(12,008,636)		(3,382,110)
Tax credit / (charge) on loss on ordinary activities	12				(174,996)		948,186
Profit (Loss) for the year					(12,183,632)		(2,433,924)
Other comprehensive expense
Exchange translation differences					(57,790)		139,773
Profit (Loss) and total comprehensive profit (loss) for the Year					(12,241,422)		(2,294,151)
Earnings per share pence	13
Basic: Profit (Loss)					(1.8p)		(0.4p)
Diluted: Profit (Loss)					(1.7p)		(0.4p)

Consolidated statement of financial position
For the year ended 31 March 2021
		2021	2020
	Notes	£	£
Assets
Non-current assets
Goodwill	14	9,180,767	10,805,783
Intangible assets	14	14,750,315	10,191,889
Property, plant and equipment	15	4,108,970	1,969,305
Right of use Asset	16	4,209,013	2,996,753
Tax Asset	23	-	532,691
Deferred tax asset	23	1,145,393	1,181,039
Total non-current assets		33,394,458	27,677,460
Current assets
Inventories	17	2,897,480	1,152,308
Trade and other receivables	19	5,333,109	5,629,287
Tax asset	23	506,587	452,485
Cash and cash equivalents		6,995,438	2,764,117
Total current assets		15,732,614	9,998,197
Total assets		49,127,072	37,675,657
Equity and liabilities attributable to equity holders of the company
Equity
Called up share capital	28	32,668,033	32,561,451
Share premium account	28	67,259,741	51,179,685
Merger relief reserve	28	12,970,330	12,937,796
Reverse acquisition reserve	28	(39,947,033)	(39,947,033)
Foreign exchange translation reserve	28	(65,914)	(8,124)
Other reserves	28	4,914,314	3,069,382
Retained losses	28	(44,876,306)	(33,494,558)
Total equity		32,923,165	26,298,599
Current liabilities
Trade and other payables	20	5,238,721	4,907,813
Lease Liabilities	16	586,637	341,167
Current tax liabilities		542,877	433,337
Borrowings	21	118,705	277,508
Other Liabilities & Provisions	22	2,282,836	512,555
Total current liabilities		8,769,776	6,472,380
Non-current liabilities
Borrowings	21	77,013	85,110
Deferred tax liability	23	2,172,899	1,153,121
Lease Liabilities	16	4,056,558	2,710,123
Other Long Term Liabilities & Provisions	22	1,127,661	956,324
Total non-current liabilities		7,434,131	4,904,678
Total equity and liabilities		49,127,072	37,675,657

Statement of Changes in Equity
For the year ended 31 March 2021
		Share capital	Share premium account	Merger relief reserve	Other reserves	Reverse acquisition reserve	Foreign exchange reserve	Retained losses	Total
	Notes	£	£	£	£	£	£	£	£
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 profit 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: share option schemes	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
Balance at 1 April 2020		32,561,451	51,179,685	12,937,796	3,069,382	(39,947,033)	(8,124)	(33,494,558)	26,298,599
Year ended 31 March 2021:
Loss for the year		-	-	-	-	-	-	(12,183,632)	(12,183,632)
Other comprehensive loss		-	-	-	-	-	(57,790)	-	(57,790)
Total comprehensive loss for the year		-	-	-	-	-	(57,790)	(12,183,632)	(12,241,422)
Transactions with owners
Issue of share capital	28	106,403	17,148,527	-	-	-	-	-	17,254,930
Share issue expenses		-	(1,068,471)	-	-	-	-	-	(1,068,471)
Issue of share Capital on acquisition		179	-	32,534	-	-	-	-	32,713
Issue of Exchange shares on acquisition		-	-	-	1,844,932	-	-	-	1,844,932
Share-based payments: share option schemes	29	-	-	-	-	-	-	801,884	801,884
Warrants issued	30	-	-	-	-	-		-	-
Total transactions with owners		106,582	16,080,056	32,534	1,844,932	-	-	801,884	18,865,988
Balance at 31 March 2021		32,668,033	67,259,741	12,970,330	4,914,314	(39,947,033)	(65,914)	(44,876,306)	32,923,165

Consolidation statement of cash flows
For the year ended 31 March 2021
		2021		2020
	£	£	£	£
Cash flows from operating activities
Loss for the year before tax		(12,008,636)		(3,382,110)
Adjustments for:
Finance costs		301,547		163,203
Finance income		(1,850)		(19,960)
Depreciation and impairment of property, plant and equipment		1,022,756		949,780
Depreciation and impairment of right of use asset		698,511		467,724
Loss on disposal of property, plant and equipment		-		67,289
(Gain) on Revaluation of right of use asset		-		(121,248)
Amortisation of intangible non-current assets		1,525,620		676,304
Impairment of Goodwill		4,788,747		-
Impairment on financial assets (IFRS9)		(38,662)		106,511
Foreign exchange movements		(204,275)		72,127
Share based payment and warrant expense		801,884		1,601,746
Decrease in provisions		(85,094)		(206,353)
Tax (paid) / received		295,870		(16,210)
Movements in working capital:
(Increase)/decrease in inventories		(1,528,302)		26,995
(Increase)/decrease in trade and other receivables		645,792		(1,171,705)
Increase/(decrease) in trade and other payables		44,299		(758,355)
Increase in tax asset		(78,494)		(529,307)
Cash used by operations		(3,820,287)		(2,073,569)
Investing activities
Purchase of subsidiaries	(3,637,249)		(8,369,742)
Cash acquired on purchase of subsidiaries	32,450		684,900
Purchase of property, plant and equipment	(3,003,847)		(617,085)
Capitalisation of intangible assets	(837,734)		(745,520)
Proceeds on disposal of property, plant and equipment	-		13,505
Interest received	1,850		5,010
Net cash used in investing activities		(7,444,530)		(9,028,932)
Financing activities
Net proceeds from issue of shares	16,186,459		13,341,321
Proceeds from borrowings	160,497		-
Repayment of borrowings	(320,860)		(197,503)
Repayment of Lease liability obligations	(318,628)		(364,359)
Interest paid	(211,330)		(163,203)
Net cash generated from financing activities		15,496,138		12,616,256
Net increase in cash and cash equivalents		4,231,321		1,513,755
Cash and cash equivalents at beginning of period		2,764,117		1,250,362
Cash and cash equivalents at end of period		6,995,438		2,764,117

 

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, and Note numbering refers to that document, 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 2021 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 United Kingdom 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 Annual Report and Accounts for 2021 and selectively included in this announcement.

Company information

Yourgene Health plc (the 'Company', the 'Group' or 'Yourgene') is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Citylabs 1.0, Nelson Street, Manchester M13 9NQ.

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 Covid pandemic, underlying organic growth drivers and the cash profiles of various in-year and prior year asset acquisitions and business combinations. 

The Covid pandemic has suppressed organic growth somewhat and has also led to the creation of a significant revenue stream of its own through the provision of Covid testing services in the UK and sales of the Group's SARS-CoV-2 PCR test in the UK and internationally.  Looking forward as the pandemic hopefully recedes the Group anticipates a return to organic growth of the existing business plus the positive long-term benefits of recent acquisitions, not least that of Coastal Genomics Inc which is an early stage cash-consuming business at present but which is a catalyst for the Group's accelerating penetration of the US diagnostics market, the largest in the world.  For the enlarged Group the Directors have assessed the market dynamics in which it operates, the historic and anticipated 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 historically delivered strong progress on its ambitious multi-year business plan and which has proven resilient and agile in the face of the Covid pandemic which ran concurrently with the reporting period.

As described in the Strategic Report, the Group has been investing heavily in future cashflow drivers as a result of a successful equity issuance in August 2020.  This fundraise enabled the acquisition of Coastal Genomics Inc and has also facilitated the significant expansion of the Group's UK laboratory testing services activities, the underlying business systems and the Group's laboratory in Taiwan, all of which are designed to drive cash generative growth in the years to come.  These investments, coupled with the pandemic headwinds which affected the Group's traditional customers and inhibited the penetration into new target markets such as the USA and Japan, have meant that the Group continues to use cash in its trading and that break-even trading performance has not yet been reached. The Group's forecasts include assumptions of further growth in revenue, which are key in achieving positive cash flows. The Directors have also assessed the Group's cost structure as part of the strategic planning process and believe that an ongoing scalability programme will enable costs growth to be contained below gross profit increases.

There remains an ongoing commitment to keep costs and working capital under control so that increasing gross profits can drive positive cash flows. Detailed sensitivity analysis has been performed to assess the potential impact on the Group's liquidity caused by any continuing 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.

If events transpire differently to this assessment, for example if revenues fail to grow at the anticipated pace, there could be lower cash headroom.  To mitigate this scenario the existence of significant share options and warrants are likely to generate additional funds within the forecast horizon. The Group also has a successful track record in raising funds from capital markets and is exploring debt facilities.  Taking all the above into account the Directors believe there is sufficient cash available or accessible 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 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.

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
Computer software and hardware	25%-33% 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 (IFRS 16)

The Group adopted IFRS 16 from 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 IFRS 16 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.

Cloud-based software applications

During the period ended 31 March 2021 the Company started implementing and using cloud-based business and accounting software applications.  Following recently published IFRS guidance, the Company has deemed these applications are not an intangible asset under IAS38 Intangible assets, nor are they a lease under IFRS16 Leases. As such the company expenses the software subscription fees and all the costs of implementing and configuring the software as they are incurred. The costs of implementation and configuration have initially been incurred in the period ended 31 March 2021 and will continue into period ending 31 March 2022 as the software is rolled out globally.

Accounting for Acquisitions

The Group assesses the acquisition of shares in a company under IFRS 3 Business Combinations, to make an initial determination as to whether the acquisition meets the test for the definition "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 IFRS 3 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.

Where the acquisition includes future contingent consideration, this is accrued based on management's judgement of the contingent consideration it considers likely to be paid. Where the actual consideration paid varies to this amount then the difference is written off through General administrative expense in the Statement of Comprehensive Income.

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.  Goodwill impairments are not reversed even if a subsequent fair value assessment would ordinarily give rise to an upward revaluation.

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 and ranges from 4 to 10 years as described in Note 14.

Impairment reviews are undertaken annually and whenever the Directors consider that there has been a potential indication of impairment.

Internally generated intangible assets

Expenditure on research activities is recognised as an expense in the period in which it is incurred. 

An internally generated intangible asset arising from the Group's product and software development expenditure is recognised only if all of the following criteria are satisfied:

· The technical feasibility of completing the intangible asset so that it will be available for use or sale;

· The intention to complete the intangible asset and use or sell it;

· The ability to use the intangible asset or to sell it;

· The way in which the intangible asset will generate probable future economic benefits;

· The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

· The ability to measure reliably the expenditure attributable to the intangible asset during its development.

Internally generated intangible assets are stated at cost and held at cost less accumulated amortisation and impairment losses, and are recognised as an expense on a straight line basis over their estimated useful lives. Useful life is determined with reference to estimated useful life which varies according to the nature of the asset, e.g. software or in vitro medical device. The useful life of the Group's development expenditure is currently assessed between 3 and 10 years. Amortisation of development expenditure commences when development has been completed to management satisfaction, in accordance with the Group's product development governance methodology and the related project is ready for its intended use. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Impairment of tangible and intangible assets

At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories

Inventories are stated at the lower of cost and net realisable value, after making allowance for obsolete and slow-moving items. Cost includes expenditure incurred in acquiring the inventories and other cost in bringing them to their existing location and condition.

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Group's chief operating decision-maker ('CODM') to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. In accordance with IFRS 8 Operating Segments, the Group determines and presents operating segments based on the information that internally is provided to the Board of Directors. Accordingly, the Board of Directors, which reviews internal monthly management reports, budget and forecast information is deemed to be the Group's CODM.

Research and development tax credits

The Group undertakes research and development activities in the UK which potentially attract a tax credit. Where such activities give rise to a tax credit, amounts receivable are recorded in the Statement of Financial Position as a tax asset and the associated credit is recorded within administrative expenses. The research and development tax credit is recognised in the financial statements in the same year in which the research and development expenditure occurred. This treatment is in line with the recognition of government grants to which the UK research and development tax credits scheme approximates.

Critical judgements

Accounting for acquisitions of a business and intangible assets

During the year the group acquired Ex5 Genomics Ltd (July 2020), and Coastal Genomics Inc (August 2020). The acquisition of Coastal Genomics Inc was deemed to meet the IFRS 3 criteria for a business combination as it was a full standalone trading business. The acquisition of Ex5 Genomics Ltd was deemed to be the acquisition of assets in the form of plant and equipment and customer relationships, as there were no significant trading activities.

The acquisition of Coastal Genomics also contained provisions for earn-out payments to the vendors, based on achieving certain sales performance and concluding contracts with strategic partners post-acquisition. These targets were based on business forecasts and if deemed sufficiently probable to be met that they are recorded as provisions rather than contingent liabilities.

Note 14 Intangibles and Note 18 Subsidiaries provide further information on these acquisitions including the basis on which fair values were determined for the acquired intangible assets and their carrying values.

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 the IAS 38 criteria as described in the accounting policy for internally generated intangible assets above.

Accounting for share-based payments

The Group's rapid growth in revenues and gross profits resulted in its first adjusted EBITDA profit in the prior reporting period. Despite the Covid-19 pandemic the Group has continued to increase revenues and gross profits but continued investment in business growth drivers has generated an adjusted EBITDA loss in the current reporting period.  The Directors assessment is that the external context for this reporting period is exceptional and that future business results will return to the historic 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.

As a result of this exercise £4,788,747 of Goodwill was impaired as described in Note 14.

4 Segment Reporting

In the opinion of the Directors, the Group has two business segments; Genomic Technologies and Genomic Services which are monitored by the Group's chief operating decision maker (CODM). Strategic decisions are made on the basis of unadjusted operating results.  The Genomic Technologies segment represents the in vitro diagnostic products, software and instrumentation manufactured by the Group and distributed globally through the Group's direct and indirect sales channels.  These technologies are often integrated with each other and require the support of the same internal and external resources.  The Genomic Services segment operates testing laboratories in Taiwan and the UK and provides services to clinicians, third party clinical service providers and contract research organisations.  These services require similar technical, commercial and managerial competences in the two host countries, and sometimes consume the output from the Genomic Technologies segment, but also from third party suppliers where appropriate.  Genomic Technologies and Genomic Services are subject to different regulatory requirements, registrations and assessment bodies.  In previous reporting periods the CODM deemed the Group was a single operating segment.  This new assessment reflects rapid business growth in recent years both organically and through acquisitions.  Prior year figures have been restated to provide comparatives for the two operating segments. 

The Group also has three geographic regions, defined as UK, Europe and International.

Revenue

Revenue analysed by geographical market

	2021	2020
	£	£
UK	5,439,817	1,974,632
Europe	5,462,264	4,142,073
International	7,385,947	10,496,074
	18,288,028	16,612,779

Revenue analysed by business segment :

	2021	2020 (restated)
	£	£
Genomic Services
NIPT services	1,832,643	2,568,459
Covid-19 services	1,730,093	-
Other services	2,819,582	2,933,897
	6,382,318	5,502,356
Genomic Technologies
NIPT	5,924,758	7,423,857
Reproductive health	3,602,506	3,649,028
Covid-19 related	1,436,805	-
Other technologies	941,641	37,538
	11,905,710	11,110,423
	18,288,028	16,612,779

During the reporting period no customers represented more than 10% of Group revenues (2020: none).

Non-current assets

The Group's non-current assets are located in the following geographic regions:

	2021	2020 (restated)
	£	£
UK	15,811,975	15,145,289
Europe	4,205,914	3,595,904
International	13,376,569	8,936,267
	33,394,458	27,677,460

Operating Profit / (loss) by segment

	2021	2020 (restated)
	Genomic Technologies	Genomic Services	Central	Total	Genomic Technologies	Genomic Services	Central	Total
	£	£		£	£	£		£
Revenues	11,905,710	6,382,318	-	18,288,028	11,110,423	5,502,356	-	16,612,779
Cost of Sales	(4,689,939)	(2,222,554)	-	(6,912,493)	(4,267,054)	(2,120,783)	-	(6,387,837)
Gross Profit	7,215,771	4,159,764	-	11,375,535	6,843,369	3,381,573	-	10,224,942
Other operating income	-	-	60,313	60,313	-	-	67,530	67,530
Segmental expense	(5,338,501)	(3,399,624)	-	(8,738,125)	(4,721,560)	(2,165,229)	-	(6,886,789)
Central overhead	-	-	(4,744,989)	(4,744,989)	-	-	(2,150,972)	(2,150,972)
Adjusted EBITDA	1,877,270	760,140	(4,684,676)	(2,047,266)	2,121,809	1,216,344	(2,083,442)	1,254,711
Depreciation and amortisation	-	-	(3,246,887)	(3,246,887)	-	-	(2,093,808)	(2,093,808)
Goodwill impairment	-	-	(4,788,747)	(4,788,747)	-	-	-	-
Share-based payments expense	-	-	(951,983)	(951,983)	-	-	(1,601,746)	(1,601,746)
Costs associated with subsidiary acquisition	-	-	(286,044)	(286,044)	-	-	(264,666)	(264,666)
Acquisition integration expense	-	-	(388,012)	(388,012)	-	-	(533,358)	(533,358)
Operating Profit / (Loss)	1,877,270	760,140	(14,346,349)	(11,708,939)	2,121,809	1,216,344	(6,577,020)	(3,238,867)

5 Separately Disclosed Items

	2021	2020
	£	£
Impairment of goodwill	(4,788,747)	-
Share-based payment expense	(951,983)	(1,601,746)
Costs associated with the acquisition of subsidiary	(286,044)	(264,666)
Acquisition integration expense	(388,012)	(533,358)
	(6,414,786)	(2,399,770)

Impairment of goodwill relates to the goodwill arising on the acquisition of Yourgene Health Taiwan in 2017 (formerly Yourgene Bioscience), see note 14 for further details

Share-based payment expense comprises £801,884 (2020: £1,601,746) relating to the longstanding share option schemes and £150,099 (2020: £nil) relating to the new share incentive plan, both as detailed in note 29.  The Share-based payment expense relating to the option schemes is provided for in accordance with IFRS 2 'Share-based payment' following the issue of share options to employees under the Company's share option schemes, as set out in note 29.

Costs associated with the acquisition of subsidiaries represents costs incurred during the acquisition of Ex5 in July 2020, and Coastal Genomics Inc in August 2020.

Acquisition Integration expense relates to the expense incurred integrating Delta Diagnostics UK Ltd, Yourgene Health France SAS, EX5 Ltd and Coastal Genomics Inc into the Yourgene Health Group.

6 Operating Loss

	2021	2020
	£	£
Operating loss for the year is stated after charging/(crediting):
Research and Development expense excluding salaries	406,165	518,378
Research and Development tax credit	(78,494)	(560,204)
Debtor provisions, impairment and bad debts	639,547	139,039
IONA® Nx Transition costs	766,510	-
Cloud ERP Services and Implementation costs	396,835	-
Acquisition contingent consideration adjustment (see Notes 18 and 22)	(85,094)	-
UK Genomic Service laboratory expenses	1,181,172	245,150
US market entry expenses	316,172	-
IFRS16 Lease Liability adoption (gain) / loss	-	(131,548)
(Profit)/ Loss on disposal of property, plant and equipment	-	(7,564)
Depreciation of property, plant and equipment	1,022,756	949,780
Depreciation of right of use assets	698,510	467,724
Amortisation of intangible assets	1,525,620	676,304

8 Employees

The average monthly number of persons (including Directors) employed by the Group during the year was:

	2021	2020
	Number	Number
Directors	9	9
Administrative	117	81
Research and Development	54	46
	180	136

Their aggregate remuneration comprised:

	2021	2020 (restated)
	£	£
Wages and salaries	6,950,459	5,110,252
Social security cost	684,289	479,009
Pension cost	321,664	278,744
Share-based payments: share incentive plan (note 29)	150,099	-
Share-based payments: share option schemes (note 29)	801,884	1,601,746
	8,908,395	7,469,751

12 Income Tax Expense

	2021	2020
	£	£
Current tax
UK corporation tax on profits for the current period	89,294	-
Foreign corporation tax	294,612	328,808
Current tax for period	383,906	328,808
Deferred tax
Origination and reversal of temporary differences: UK	(17,422)	(1,024,489)
Origination and reversal of temporary differences: Foreign	(191,489)	(252,505)
Deferred tax for period	(208,910)	(1,276,994)
Total tax charge / (credit)	174,996	(948,186)

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:

	2021	2020
	£	£
Loss before taxation	(12,008,636)	(3,382,110)
Expected tax credit based on a corporation tax rate of 19% (2020: 19%)	(2,281,641)	(642,601)
Effect of expenses not deductible in determining taxable profit	1,327,431	440,168
Unutilised tax losses carried forward	1,336,505	778,591
Change in unrecognised deferred tax assets	45,713	86,361
Prior year adjustment	89,294	-
Effect of overseas tax rates	8,501	16,105
R&D tax credit	(141,897)	(349,816)
Deferred tax	(208,910)	(1,276,994)
Taxation charge / (credit) for the year	174,996	(948,186)

The UK R&D tax credit of £78,494 (2020: £560,204) is shown as a deduction against general administrative expenses.

The Group is required to estimate the income tax in each of the jurisdictions in which it operates. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different accounting and tax treatments. These temporary differences result in deferred tax assets or liabilities which are included within the Statement of Financial Position. Deferred tax assets and liabilities are measured using substantially enacted tax rates expected to apply when the temporary differences reverse. Management judgement is required to determine the total provision for income tax. Amounts accrued are based on management's interpretation of country specific tax law and the likelihood of settlement.

Factors that may affect future tax charges

The Group has estimated trading losses of £14,544,692 (2020: £15,455,325), estimated excess management fees of £16,696,013 (2020: £13,193,592), non-trade loan relationship deficits of £1,320,319 (2020: £1,328,796) and capital losses of £1,934,399 (2020: £1,934,399).

The tax losses have resulted in a potential deferred tax asset of approximately £6,554,130 (2020: £5,695,765). The tax losses resulted in the partial recognition of a deferred tax asset in the prior year to offset a deferred tax liability which should be available to be sheltered by those losses. The deferred tax asset has been increased, although not fully recognised, in the year based upon management's forecast of future taxable profits arising which will be available to offset those losses. Further recognition in future reporting periods 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.

13 Earnings Per Share

Basic

Basic earnings per share is calculated by dividing the loss for the period of £12,183,632 (2020: loss £2,433,924) by the weighted average number of ordinary shares in issue during the period 685,643,605 (2020: 590,467,253).

Diluted

Diluted earnings per share dilute the basic earnings per share to take into account share options, exchangeable shares 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, exchangeable shares and warrants into ordinary shares. The adjusted weighted average number of shares used to calculate diluted earnings per share is 726,355,871 (2020: 608,687,226).

28,159,443 options and warrants (2020: 26,039,443) have been excluded from this calculation as the effect would be anti-dilutive.

After the reporting period end:

A further 550,000 new ordinary shares were issued against share options, and 174,116 new ordinary shares against the first and second earn-out payment milestones for the acquisition of Coastal Genomics Inc.

In addition, following the issue of 10,001,775 unlisted shares in Yourgene Health Canada Investments Ltd under the terms of the Coastal Genomics Acquisition first and second earn-out payment milestones there are now total of 20,251,399 unlisted Yourgene Health Canada Investments Ltd shares issued which are exchangeable on a one-for-one basis for Yourgene Health Plc shares, subject to certain lock-in provisions over the next one to six years.

14 Intangible Assets

	Goodwill	Customer relationships	Product IP	Trademarks & Brand Names	Software Development cost	Product Development cost	Total
	£	£					£
Cost
At 1 April 2019	7,014,447	1,552,328	-	-	-	-	8,566,775
Additions	3,791,336	6,840,696	2,051,699	-	256,132	439,810	13,379,673
Exchange differences	-	51,206	-	-	-	-	51,206
At 31 March 2020	10,805,783	8,444,230	2,051,699	-	256,132	439,810	21,997,654
Additions	-	389,840	47,516	-	147,357	642,861	1,227,574
Business Combinations	3,097,398	1,453,939	3,354,990	23,626	-	-	7,929,953
Exchange differences	66,333	(56,731)	71,850	506	-	-	81,958
At 31 March 2021	13,969,514	10,231,278	5,526,055	24,132	403,489	1,082,671	31,237,139
Amortisation and impairment
At 1 April 2019	-	323,400	-	-	-	-	323,400
Charge for the year	-	488,232	188,073	-	-	-	676,305
Exchange differences	-	278	-	-	-	-	278
At 31 March 2020	-	811,910	188,073	-	-	-	999,983
Charge for the year	-	974,160	420,290	3,199	42,030	85,941	1,525,620
Impairment	4,788,747	-	-	-	-	-	4,788,747
Exchange differences	-	(9,627)	1,315	19	-	-	(8,293)
At 31 March 2021	4,788,747	1,776,443	609,678	3,218	42,030	85,941	7,306,057
Carrying amount
At 31 March 2021	9,180,767	8,454,835	4,916,377	20,914	361,459	996,730	23,931,082
At 31 March 2020	10,805,783	7,632,320	1,863,626	-	256,132	439,810	20,997,671

The intangible assets arose as part of the business combinations of Yourgene Health Taiwan (March 2017). Delta Diagnostics UK Ltd (April 2019), and Coastal Genomics Inc (August 2020), and also the asset purchases of Yourgene Health France SAS (March 2020, formerly AGX-DPNI SAS) and Ex5 Genomics Ltd (July 2020). The following intangible assets are amortised over a useful economic life defined upon acquisition:

	Useful economic life	Remaining useful life
Customer Relationships	10 years	6-10 years
Product IP	10 years	8-10 years
Trademarks & Brand Names	5 years	4-5 years
Software Development cost	4 years	3-4 years
Product Development cost	5 Years	3-5 years

Goodwill is allocated to the Group's cash-generating units (CGUs) identified as the Group's operating segments with Genomic Technologies as a single CGU and Genomic Services as two CGUs, representing the distinct local markets of Europe and Asia.  Genomic Services Europe has no goodwill assigned to it. Genomic Services Asia goodwill is a revenue-based allocation of the goodwill associated with the acquisition of Yourgene Health Taiwan (March 2017).  Genomic Technologies goodwill represents a revenue-based allocation of the goodwill arising on the acquisition of Yourgene Bioscience (Taiwan) in March 2017, since renamed Yourgene Health Taiwan; plus all the goodwill arising on the acquisitions of Delta Diagnostics Ltd (April 2019) and Coastal Genomics Inc (August 2020).  These CGU definitions are different to the single Group CGU approach adopted in previous reporting periods, reflecting the Group's expansion through organic growth and multiple acquisitions in recent years.

	2021 £	2020 £
Genomic Technologies	8,708,678	5,544,948
Genomic Services Asia	472,088	5,260,835
	9,180,767	10,805,783

Intangible assets are subject to an annual impairment review 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 as deemed appropriate for the diagnostics sector in which the Group operates which tends to see lifecycles for intangible assets which are longer than 5 years. A cash flow model for each CGU is used based on historical performance, in which future expectations of growth are forecast based on internal budgets for 12 months, and then on growth rates judged to be relevant to the respective CGUs.  Growth rates for Genomic Technologies range from 23% down to 16% over the forecast period, Genomic Services Asia growth rates range from 40% down to 29% reflecting an anticipated bounce back after the pandemic reduced business levels in that CGU.  Genomic Services Europe revenues are expected to reduce by 44% after the Covid pandemic recedes, with CGU revenues then growing at 5% per annum thereafter.  Growth rates for all CGUs reduce to 2% per annum for the terminal value estimation. Pre-tax discount rates were set at 10%, being the representative cost of capital. These assumptions are reviewed and benchmarked to ensure they remain appropriate. Discount rates have been reduced from 13% in previous years due to movements in the Company's preferred NYU Stern benchmark dataset and the removal of specific risk associated with the Company's historic IP issues with Illumina, now that all conditions for the legal settlement have been met.

The impairment assessments for Genomic Technologies and for Genomic Services Europe showed assessed values that exceeded the carrying values with significant headroom. In both cases a discount rate sensitivity of 25% did not give rise to an impairment. However, using the assumptions described above, the recoverable amount of the Genomic Services Asia CGU is deemed to give rise to an impairment charge of £4,788,747 (2020: nil) recognised against goodwill. The impairment charge within the Genomic Services Asia CGU arose as a result of the impact of the COVID-19 pandemic which reduced health tourism in the CGU's core South East and East Asian markets.  In addition certain key customers have reallocated resources towards Covid-related initiatives and away from the reproductive health and oncology services offered by the CGU.  Sensitivity analysis with respect to this impairment has been performed, where a reasonably possible change in average revenue growth rate has been modelled. Reducing the average growth rate by 5% per annum would result in an increase of £981,756 in the impairment of the remaining intangible asset values for this CGU.  Similarly an increase in the discount rate to 25% would give rise to an increase of £1,438,758 in the impairment of all this CGU's remaining intangible asset carrying values.  Conversely, increasing the average growth rate by 5% per annum would reduce the impairment charge by £1,054,814.  Reducing the discount rate by 1% would reduce the impairment charge by £332,171.

15 Property, Plant and Equipment

	Leasehold land and buildings	Plant and equipment	Computer  software	Total
	£	£	£	£
Cost
At 1 April 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
Disposals	(206,353)	(15,827)	-	(222,180)
Foreign currency adjustments	5,635	93,562	1,758	100,955
At 31 March 2020	737,339	5,544,937	125,905	6,408,181
Additions	480,363	2,682,049	1,595	3,164,007
Business combinations	-	79,632	4,861	84,493
Foreign currency adjustments	(9,920)	(130,690)	(1,044)	(141,654)
At 31 March 2021	1,207,782	8,175,928	131,317	9,515,027
Accumulated depreciation and impairment
At 1 April 2019	541,790	3,010,160	19,551	3,571,501
Charge for the year	170,764	758,220	20,796	949,780
Eliminated on disposal	(131,548)	(9,838)	-	(141,386)
Foreign currency adjustments	4,697	52,722	1,561	58,980
At 31 March 2020	585,703	3,811,264	41,908	4,438,875
Charge for the year	60,481	933,501	28,774	1,022,756
Foreign currency adjustments	(3,678)	(50,756)	(1,140)	(55,574)
At 31 March 2021	642,506	4,694,009	69,542	5,406,057
Carrying amount
At 31 March 2021	565,276	3,481,919	61,775	4,108,970
At 31 March 2020	151,636	1,733,673	83,997	1,969,306

Business combination refers to assets acquired in the acquisition of Coastal Genomics Inc in August 2020, see note 18

17 Inventories

	2021	2020
	£	£
Raw materials	980,247	406,472
Work in progress	712,282	405,158
Finished goods	1,204,951	340,678
	2,897,480	1,152,308

Finished goods recognised at cost of sales in the year amounted to £5,794,269 (2020: £6,123,807)

18 Subsidiaries

Details of the Group's subsidiaries at 31 March 2021 are shown in the table below:

Name of undertaking	Country of	Ownership	Nature of
	incorporation	interest (%)	business
Yourgene Health UK Ltd	UK	100	See below
Delta Diagnostics (UK) Ltd	UK	100	See below
Ex5 Genomics Ltd	UK	100	See below
Elucigene Ltd	UK	100	Non trading
Yourgene Health GmbH	Germany	100	See below
Yourgene Health France SAS	France	100	See below
Yourgene Health Inc	USA	100	See below
Yourgene Health Canada Ltd	Canada	100	See below
Yourgene Health Canada Investments Ltd	Canada	100	See below
Coastal Genomics Inc	Canada	100	See below
Yourgene Health (Taiwan) Co. Ltd.	Taiwan	100	See below
Kang Qiao Bioscience Co. Ltd	Taiwan	100*	See below
Jian Qiao Bioscience Co. Ltd	Taiwan	100*	See below
Yourgene Bioscience Co Ltd	Taiwan	100*	See below
Yourgene Health (Singapore) Pte Limited	Singapore	100*	See below

Yourgene Health UK Ltd principal activity is that of a molecular diagnostics company employing next generation DNA analysis technology to develop, manufacture and sell molecular diagnostic products intended to have a major beneficial impact on human health. The registered office is at Citylabs 1.0 Nelson Street, Manchester, M13 9NQ. Yourgene Health UK Ltd was formerly named Premaitha Ltd until 11 December 2019.

Delta Diagnostics (UK) Ltd trading as Elucigene is a molecular diagnostics manufacturer and developer with a suite of in vitro diagnostic CE marked products focused on reproductive health and oncology. The registered office is at Citylabs 1.0 Nelson Street, Manchester, M13 9NQ.

Ex5 Genomics Ltd provides research and extraction services to the healthcare industry. The registered office is at Citylabs 1.0 Nelson Street, Manchester, M13 9NQ.

Yourgene Health Gmbh, formerly Premaitha GmbH is a German subsidiary whose principal activity is that of a sales office for Yourgene Health UK Ltd. The registered office is at Speditionstrasse 15a 40221 Düsseldorf, Germany.

Yourgene Health France SAS, formerly AGX-DPNI S.A.S. is a French subsidiary whose principal activity is that of a distributor for Yourgene Health UK Ltd. The registered office is at 65 avenue Kléber, Paris,75116, France.

Yourgene Health Inc is a US subsidiary whose principal activity is that of a sales office and distributor for Yourgene Health UK Ltd. The registered office is at 1680 Michigan Ave, Suite 700 #232, Miami Beach FL 33139 USA.

Yourgene Health Canada Ltd is a wholly owned subsidiary of Yourgene Health Plc, and is a holding company to facilitate the acquisition of Coastal Genomics Inc. The registered office is 300-350 Lansdowne street, Kamloops, British Columbia V2C 1Y1, Canada.

Coastal Genomics Inc is a wholly owned subsidiary of Yourgene Health Canada Investments Ltd, which in turn a wholly owned subsidiary of Yourgene Health Canada Ltd. Coastal Genomics Inc is a manufacturer of genetic size selection instrumentation and reagents. The registered office Coastal Genomics Inc is #182-4664 Lougheed Highway, Burnaby, British Columbia V5C 5T5, Canada.  The registered office of Yourgene Health Canada Investments Ltd is 300-350 Lansdowne street, Kamloops, British Columbia V2C 1Y1, Canada.

Elucigene Ltd is a non-trading entity, formerly named Yourgene Health UK Ltd until 6 December 2019. The registered office is at Citylabs 1.0 Nelson Street, Manchester, M13 9NQ.

Yourgene Health (Taiwan) Co. Ltd was formerly named Yourgene Bioscience Co. Ltd. It is a Taiwanese subsidiary where the principal activities of the Group headed by this Company are within the same sector as Yourgene Health UK Ltd. Its registered office is No.376-5, Fuxing Rd., Shulin Dist., New Taipei City 23871, Taiwan (R.O.C.).

*  Yourgene Health (Taiwan) Co. Ltd owns a 100% interest in each of Kang Qiao Bioscience Ltd, registered office 3F., No. 3, Ln. 160, Junying St., Shulin Dist., New Taipei City 238, Taiwan (R.O.C.); Jian Qiao Bioscience Co. Ltd, registered office No.376-5, Fuxing Rd., Shulin Dist., New Taipei City 23871, Taiwan (R.O.C.); Yourgene Bioscience Co. Ltd, registered office No.376-5, Fuxing Rd., Shulin Dist., New Taipei City 23871, Taiwan (R.O.C.); and Yourgene Health (Singapore) Pte Limited (formerly named Yourgene Bioscience Singapore Pte Limited.), registered office 3 Fusionopolis Place #05-54 Galaxis Singapore 138523.

Acquisition of Coastal Genomics Inc

The Group acquired 100% of the equity interests in Coastal Genomics Inc, a Canadian manufacturer of genetic size selection instrumentation and reagents, on 6 August 2020 for an expected total consideration of £7,039,849 (US$9,222,203). Prior to the acquisition the business was a supplier to the Group and Yourgene had conducted significant evaluation of its technology after which it was deemed sufficiently complementary to the Group's technology portfolio to warrant acquisition.  A summary of the net assets acquired and the consideration paid is shown below.  The Goodwill acquired reflects the opportunity to benefit from synergies arising from deeper technical integration with the Group's other offerings, and also the commercial synergies expected to arise from combining sales pipelines in the US and globally.

	Book value	Fair value
	£	£
Cash and cash equivalents	19,963	19,963
Intangible assets	-	4,541,635
Property, plant and equipment	84,492	84,492
Licences and Patents	290,920	290,920
Right of use asset (IFRS16)	64,169	64,169
Trade and other receivables	260,282	260,282
Inventories	216,870	216,870
Trade and other payables	(245,470)	(245,470)
Lease liability under IFRS16	(64,168)	(64,168)
Deferred tax liability	-	(1,226,242)
	627,058	3,942,451
Goodwill		3,097,398
Total Fair value		7,039,849
Satisfied by:
Cash Paid		2,541,733
Issue of shares		32,712
Issue share options		1,844,932
Future performance consideration		2,620,472
Total Consideration		7,039,849
Net cash outflow arising on acquisition:
Cash consideration		(2,541,733)
Cash and cash equivalents acquired		19,963
		(2,521,770)

The acquisition consideration will include both upfront and deferred payments to the shareholders of Coastal Genomics Inc.. Additional consideration will be payable in tranches of shares and cash based on the achievement of accelerated growth objectives. The contingent share consideration can be paid in cash at the Company's discretion in certain circumstances.  The fair values for the consideration components reflect the monetary values committed to in the share purchase agreement at the time of the acquisition which are deemed to be financial liabilities (recognised or contingent).  Exchange shares issued have a fixed conversion ratio to Yourgene Health plc shares and so are not deemed to be financial instruments. 

The total consideration payable by the Group will be up to US$13.5m, depending on the acquired business performance, and will comprise the following:

· US$3.0m cash consideration on completion;

· US$2.5m consideration payable by the issuance on completion of initial consideration shares in Yourgene Health Canada Investments Ltd, exchangeable for shares in Yourgene Health Plc, subject to a 3 year lock-up period;

· two further elements of consideration of US$1.0m each for early strategic customer wins, payable in Yourgene Health Canada Investment Ltd shares, exchangeable for shares in Yourgene Health Plc, and subject to lock-up periods of 12 months;

· cash consideration of US$2.0m should Coastal Genomics generate revenues of at least US$4.0m for the year ended 31 March 2022, which would become payable in April 2022, or rolled over to the year ended 31 March 2023 which would become payable in April 2023; and

· contingent cash consideration of US$4.0m should Coastal Genomics 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 is not included in the fair value assessment above 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.

The first US$1.0m additional consideration condition was satisfied on 1 March 2021 and the resulting shares were issued on 12 April 2021. The condition for the second US$1.0m additional consideration was satisfied on the 21 June 2021 and the shares will be issued in August 2021.  As disclosed in this note, the acquisition of Coastal Genomics Inc. resulted in the recognition of newly identified intangible assets principally relating to the Ranger® Technology as well as strategic customer relationships.  As set out in the Strategic Report, the acquisition was completed as part of the Group's strategic plan to expand the Group's global reach and supplement the Group's product portfolio with new technological capabilities. As such, Coastal Genomics will support the activities of other Yourgene Group entities as well as generating its own external revenues.  The Board therefore consider that the post-acquisition performance of Coastal Genomics as a standalone entity is not relevant or material to users.

Acquisition of Ex5 Genomics Ltd

On 3 July 2020, Yourgene Health plc completed the acquisition of Ex5 Genomics Ltd for an initial cash consideration of £275,000 plus earn-outs of £275,000 which have all subsequently crystallised and a modest working capital adjustment. The acquisition was primarily of laboratory equipment and customer relationships without contract backing and as such has been treated as an acquisition of assets rather than a business combination. This equipment has been relocated to Yourgene's Citylabs facility and brought into service. In parallel the customer relationships are being converted to active work packages, crystallising the earn-outs and supplementing existing NIPT and COVID-19 testing activities. These services extend the Group's geographic reach for partnering with research organisations from Taiwan and into the UK, and have now been grouped together into Yourgene Genomic Services which was launched in September 2020. 

Acquisition of Yourgene Health France SAS

The Group acquired 100% of the equity interest in Yourgene Health France SAS, formerly AGX-DPNI SAS in March 2020 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.  The acquisition purpose was to give the Group greater presence in the French market where its distributor had built a strong competitive position.  This rationale has been successful as reflected in the achievement of performance-related earn-out consideration milestones resulting in a payment of €577,500 which was made in October 2020, and as at the period end date a further earn-out liability of €977,500 was held, which was paid in April 2021. The total performance consideration payments made were €1,555,000. The stretch criteria for the remaining €100,000 was not met and has been written off through Administrative expenses in the Statement of Comprehensive Income as detailed here and in Note 22.

19 Trade and Other Receivables

		2021		2020
		£		£
Trade receivables	4,523,117		4,808,174
Provision for doubtful trade receivables	(459,007)		(83,161)
Loss allowance due to expected credit losses under IFRS 9 adoption	(62,532)		(101,836)
Net Trade Receivables		4,001,578		4,623,177
Other receivables	597,618		131,010
Provision for doubtful Other receivables	(269,111)		-
VAT recoverable	148,398		284,628
Other loans and receivables at amortised cost	-		11,588
Net other loans and receivables at amortised cost		476,905		427,226
Prepayments		854,626		578,884
		5,333,109		5,629,287

An amount of £459,007 (2020: £83,161) has been provided for doubtful receivable amounts overdue from specific customers. A bad debt of £29,698 (2020 £nil) has been written off in the year as unrecoverable. An amount of £269,111 (2020: £nil) has been provided for against a specific amount in other receivables, where the company is taking legal action to recover this amount.

A loss allowance against trade receivables of £62,532 (2020: £101,836) for expected credit losses has been provided for as required under IFRS 9. These expected credit losses were calculated after analysing the Group's receivable risks in geographic groupings which are deemed to reflect appropriate credit risk categories. Delinquency rates are deemed to be very low in Asia Pacific with high political stability leading to no impairment of receivables. In Europe and America increased risk due to COVID-19 issues is reflected in a 2.5% (2020 2.5%) expected credit loss risk. In the Middle East and Africa region COVID-19 and general political instability have been deemed to give an expected credit loss risk rating of 5% (2020 5%). In India expected credit loss risk has been estimated to be greater at 15% (2020: 15%) due to specific customer delays and Covid-19 issues.

20 Trade and Other Payables

	2021	2020
	£	£
Trade payables	3,124,671	2,674,449
Payments received on account	373,376	1,170,017
Accruals	1,208,751	612,554
Social Security, taxation and pensions	383,729	167,235
VAT Payable	135,004	-
Other payables	13,190	283,557
	5,238,721	4,907,813

The book value of trade and other payables approximates to the fair values. See note 26 for maturity analysis.

21 Borrowings

	2021	2020
	£	£
Unsecured borrowings at amortised cost
Bank loans	195,718	362,618
Other loans	-	-
	195,718	362,618

Analysis of borrowings

Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

	2021	2020
	£	£
Current liabilities	118,705	277,508
Non-current liabilities	77,013	85,110
	195,718	362,618

The continuing borrowings as at 31 March 2021 are:

During the year Yourgene Health (Taiwan) Co. Ltd refinanced its bank loan repaying the loan (1.97% rate) due December 2021 in September 2020. This was replaced by a loan repayable in September 2023 at an interest rate of 0.66%

Borrowings incurred by Delta Diagnostics (UK) Ltd are payable by October 2021. The loan incurs interest at 4.94% pa over Base Rate. The borrowings have covenants attached to them and the Group has been compliant with these covenants throughout the year.

22 Provisions for Liabilities

	2021	2020
	£	£
Acquisition - additional consideration	3,410,497	1,468,878

Analysis of provisions:

Provisions are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

	2021	2020
	£	£
Current liabilities	2,282,836	512,554
Non-current liabilities	1,127,661	956,324
	3,410,497	1,468,878

Movements on provisions:

	Acquisition Additional consideration	Dilapidation provision	Total
	£	£	£
At 1 April 2019	-	206,353	206,353
Release of provision	-	(206,353)	(206,353)
Increase in provision	1,468,878	-	1,468,878
At 31 March 2020	1,468,878	-	1,468,878
At 1 April 2020	1,468,878	-	1,468,878
Release of provision	(85,094)	-	(85,094)
Increase in provision	2,710,689	-	2,710,689
Foreign currency variance	(163,485)	-	(163,485)
Payment made	(520,491)	-	(520,491)
At 31 March 2021	3,410,497	-	3,410,497

Dilapidation provision

As part of the Group's property leasing arrangements there was an obligation to return certain premises in the same state that they were received and repair damages which incur during the life of the lease, such as wear and tear. The Group has adopted IFRS 16 and these costs have now been recognised as part of the cost of the right-of-use asset and lease liability - please see note 16.

Acquisitions - additional consideration

The March 2020 acquisition of the Group's French distribution channel gave rise to a provision for two cash payments dependent on NIPT sales growth during the current reporting period.  Of these payments €0.6m (£0.5m) was paid in April 2020.  At the period end €1.0 (£0.8m) was accrued to meet these obligations - see note 18.

Following the acquisition of Coastal Genomics Inc three additional contractual consideration payments of an aggregate US$4.0m (£2.9m) are deemed payable based on estimated performance on certain performance criteria and is accrued at the period end, see note 18. The third of these additional consideration payment for US$2m is expected to be paid in 2023, and has been discounted to present value in these financial statements, and provided for as total additional consideration of US$3.5m (£2.6m).  A fourth consideration payment of US$4.0m is contractually payable in April 2023 if the acquired company's revenues achieve a stretch target in the financial year to 31 March 2022.  This stretch target is not deemed probable to be achieved and the liability for the fourth payment is deemed a contingent liability.

31 Analysis of Changes in Net Cash/(Debt)

	01-Apr-20	Cash Flow	Acquisitions and disposals	Exchange movements	31-Mar-21
	£	£	£	£	£
Cash and bank balances	2,764,117	4,231,321	-	-	6,995,438
Bank Loan see note 21	(362,618)	320,860	(160,497)	6,537	(195,718)
Net cash / (debt)	2,401,499	4,552,181	(160,497)	6,537	6,799,720

34 Events After the Reporting Date

After the end of the reporting period the Group has continued to expand its UK-based Covid testing routes to market including into the retail pharmacy and travel sectors and through successful entry into the UK Government's National Microbiology Framework.  The Group also entered into a second qualifying commercial agreement for the Ranger Technology acquired with Coastal Genomics, triggering the second of two equity earn-out issuances, and creating a commercial platform with leading US-based market participants.  In a separate announcement the Group also entered into a multi-year licence and supply agreement with another leading US diagnostic testing partner, furthering its US market penetration.

Post period end additional ordinary shares of 81,899 (April 2021) and 85,124 (August 2021) were issued as consideration shares in relation to the Coastal Genomics Inc acquisition first and second earn out targets. As part of satisfying the same earn-out conditions shares in Yourgene Health Canada Investments Ltd were issued which are exchangeable for 4,696,055 ordinary shares in the Company at an exchange price of 14.8 pence (April 2021) and for 4,880,971 ordinary shares in the Company at an exchange price of 14.3 pence (August 2021).  A further 550,000 ordinary shares were issued when employee share options were exercised in June 2021.

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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