Source - LSE Regulatory
RNS Number : 2286I
Niox Group PLC
26 March 2024
 

 

NIOX GROUP PLC

("NIOX" or the "Company" and, together with its subsidiaries, the "Group")

 

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023

 

Oxford, UK - 26 March 2024: NIOX Group plc (AIM: NIOX), a medical device company focused on point of care asthma diagnosis and management, today announces its results for the year ended 31 December 2023 ("FY23").

 

Financial highlights

·      Revenue growth of 18% to £36.8 million (2022: £31.3 million) and 22% on a constant currency basis

·      Clinical revenue1 growth of 24% (29% on a constant currency basis) to £32.6 million (2022: £26.2 million)

·      Group adjusted EBITDA2 of £11.4 million, in line with upgraded consensus estimates (2022: £7.3 million)

·      Net cash £19.9 million (31 December 2022: £19.4 million)

·      A special dividend of 2.5 pence per share (equating to a return of cash of £10.5 million) was paid to shareholders on 15 September 2023

·      The Board is recommending the payment of a final dividend of 1 pence per share

 

Financial progress

 

2023

 

2022

 

£m

£m

Revenue

36.8

31.3

Gross margin

72%

71%

Total expenditure3

(15.1)

(14.9)

Adjusted EBITDA2

11.4

7.3

Adjusted EBITDA margin

31.0%

23.3%

Operating profit

4.6

1.8

Beyond Air settlement consideration

-

8.1

Profit before tax

4.1

10.5

Profit for the year from discontinued operations

1.2

2.0

Profit for the financial year

10.7

16.1

Net cash at year end

19.9

19.4

1 Clinical revenue represents sales to physicians and hospitals for use in clinical practice.

2 Earnings before interest, tax, depreciation, amortisation and share option charge.

3 Excludes depreciation, amortisation, impairment and share option charge.

 

 

Operational highlights

·    New commercial organisation and distributor network in the USA, to drive revenues in primary care.

·      Expanded the depth and breadth of the distributor network in EMEA and APAC.

·      Commenced development of NIOX Pro®, the next generation device for clinical professionals.

·      Second milestone payment of $3.5 million received from Beyond Air in August 2023, with final payment of $4.5 million due by August 2024 and up to a further $6 million in potential royalty payments thereafter.

 

 

Ian Johnson, NIOX's Executive Chairman, said: "I am pleased to report continued strong growth in revenues and operating profit for 2023. Revenue was up 18% to £36.8 million, with our Clinical business performing particularly well growing 29% in constant currency terms. Adjusted EBITDA improved significantly from £7.3 million in 2022 to £11.4 million in 2023 equating to an operating margin of 31% (2022: 23%). Cash generation remained strong with year-end net cash of £19.9 million, following the payment of a special dividend amounting to £10.5 million in September 2023. The Board is therefore recommending the payment of a final dividend for FY23 of 1 pence per share. Going forward, the Board intends to pursue a progressive dividend policy, growing future dividends in line with earnings.

 

Management is continuing to implement the strategy of deepening and broadening global distribution, which coupled with outsourcing sales and manufacturing is expected to drive further profitable growth. Whilst the current focus is on growing sales in primary care, looking ahead, the Company plans to introduce FeNO testing in other healthcare channels such a pharmacies and occupational health and ultimately to launch a product for use by patients to manage their condition at home.

 

The Group has made a positive start to 2024 and continues to be highly cash generative, with cash of £22.4 million at 29 February 2024. The Company has a robust strategy in place to expand the business and generate profitable growth from the large underserved target market and has the financial resources to achieve its objectives and further enhance shareholder value."

 

Contacts


Tel: +44 (0) 3303 309 356

Ian Johnson, Executive Chairman

Michael Roller, Chief Financial Officer




Tel: +44 (0) 20 7496 3000

Aubrey Powell/ Jen Boorer / James Todd




 Tel: +44 (0) 20 7597 4000

Edward Knight / Bruce Garrow / Lydia Zychowska


 

The annual report and audited consolidated financial statements will be available on the Company's website later today. Please visit: https://investors.niox.com/investors/financial-reports/

 

About NIOX

Our mission is to improve asthma diagnosis and management by greater patient access to FeNO testing. Asthma is one of the biggest healthcare issues globally with 340 million sufferers, many of whom are undiagnosed or are misdiagnosed. The Group is engaged in the design, development, and commercialisation of medical devices for the measurement of FeNO, a precise biomarker for asthma. Our market leading device, NIOX VERO®, is increasingly recognised by healthcare professionals as an important tool to improve the diagnosis and management of asthma. NIOX VERO® is also the device of choice by leading clinical research organisations for respiratory studies.

 

An introductory presentation about the NIOX Group is available at:  www.investors.niox.com/resource/category/presentations/

 

At present, NIOX provides products and services in around 50 countries. For more information, please visit www.niox.com

 

Forward-looking statements

This press release contains certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses, and prospects of NIOX. The use of terms such as "may", "will", "should", "expect", "anticipate", "project", "estimate", "intend", "continue", "target" or "believe" and similar expressions (or the negatives thereof) are generally intended to identify forward-looking statements. These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Any of the assumptions underlying these forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward-looking statements may not actually be achieved. Nothing contained in this press release should be construed as a profit forecast or profit estimate. Investors or other recipients are cautioned not to place undue reliance on any forward-looking statements contained herein. NIOX undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances.

 


BUSINESS REVIEW

 

A year of continued progress

 

NIOX is the market leader in point of care FeNO testing for the diagnosis and management of asthma. The NIOX VERO® device is approved and reimbursed in most major markets. FeNO testing rates increased in most major markets as COVID-19 related restrictions were lifted and more patients visited their physicians in person.

 

2023 saw both strong growth in sales and adjusted EBITDA as a result of disciplined execution of the strategy.

 

Revenues for the year ended 31 December 2023 were up 18% to £36.8 million (2022: £31.3 million), and up 22% on a constant currency basis. Pleasingly, the year ended having achieved a 31.0% adjusted EBITDA margin (2022: 23.3%) driven by revenue growth and the benefits of outsourcing sales and manufacturing.

 

NIOX experienced strong demand in the Clinical business (sales to physicians and hospitals for use in clinical practice) which grew by 24% versus 2022 and 29% on a constant currency basis.

 

APAC clinical sales demonstrated the strongest recovery and grew by 42% versus 2022 on a constant currency basis. Japan, the strongest Asia Pacific market, is our largest market and ended the year with sales 57% higher than 2022 in constant currency terms. This was fuelled in the first half by a post-COVID-19 recovery in FeNO testing and in the second half by broadening the penetration of NIOX® devices into new clinics.

 

EMEA clinical sales experienced strong growth of 27% versus 2022 on a constant currency basis. The UK is the largest European market driven by continued uptake of FeNO testing in Primary Care. Growth in Spain and Germany were also strong contributors to the EMEA region's performance.

 

The Americas region grew by 12% on a constant currency basis (compared with previous year growth of 7%). Management made significant changes to the US commercial organisation and distributor network in 2023 with the objective of ensuring that FeNO testing and NIOX reach their considerable full potential in the USA, moving forward.

 

Research sales for the year (sales generated from contract research organisations (CROs) conducting clinical studies on behalf of pharmaceutical companies) fell by 18% (14% on a constant currency basis). The size of the Research market is driven by the number of clinical trials being conducted at any given time, which is wholly determined by the research pipeline of pharmaceutical companies and is thus outside the control of NIOX. This means that year to year comparisons can fluctuate dependent upon the timing and number of clinical trials involving FeNO testing in a given year.

 

The Group's strategy of focussing on accelerating the growth of FeNO testing in Primary Care, where most asthmatics are treated, remains unchanged. Third party distributor arrangements are a key enabler of this strategy and have the benefit of not adding fixed costs to the business.

 

Asthma is one of the biggest healthcare challenges in the world; there are over 340 million asthma sufferers worldwide and this is forecast to grow to more than 400 million by the end of the decade. Asthma causes the loss of 1,000 lives every day and many more suffer asthma attacks that result in emergency call outs and hospital admissions.

 

To help address these challenges, establishing FeNO testing and NIOX® for asthma diagnosis and management in Primary Care is top priority. Healthcare systems are increasingly seeking strategies to care for patients in non-clinic settings and at home. With this in mind, the Company plans to introduce FeNO testing in other healthcare channels such a pharmacies and occupational health and ultimately to introduce a product for use by patients to manage their condition at home.

 

Group expenditure (excluding depreciation, amortisation and share option charge) increased slightly to £15.1 million (2022: £14.9 million). Group headcount remained unchanged at 92.

 

Management expects costs to increase marginally above inflation in 2024 due to investment into the US market. Headcount is also expected to increase slightly during the year.

 

Discontinued operations

The transfer of the COPD products back to AstraZeneca completed on 31 March 2021. An operating profit of £1.2 million was generated by this business in 2023 as the rebate and returns accrual was revised down based on claims received during the year and forward-looking assumptions as to the value of claims expected to be received in future financial periods.

 

NIOX retains legal liability for rebates payable to third parties (primarily Medicaid) and for return of products sold during the period during which it operated the COPD business. NIOX's liability for returns will have been extinguished by 30 April 2024.

 

The cash outflow during the year for rebates and returns totalled £2.0 million (2022: £nil). Remaining accruals related to the discontinued COPD business were £0.9 million as at 31 December 2023 (2022: £4.6 million).

 

Russia and Ukraine

NIOX has no operations in Russia and generates no revenue in Russia. In 2023, revenues derived from Ukraine were less than 1% of Group revenues.

 

Energy prices and inflation

The Group has two strategic manufacturing partners and does not manufacture its own products. The effect of inflationary pressures on purchase prices from its two main suppliers is mitigated both by the Group's high gross margins and its ability to implement price increases in most of its markets. Accordingly, the substantial increase in energy prices has not had a material impact on the Group's operations.

 

Beyond Air

As a result of Beyond Air, Inc. ("Beyond Air") receiving approval from the U.S. Food and Drug Administration (FDA) for its LungFit® PH device, the Group is entitled to receive payments of $10.5 million in total, in three instalments as follows:

·      $2.5 million within 60 days of the approval of LungFit® by the FDA ("FDA approval"), which was received on 24 August 2022;

·      $3.5 million within 60 days of the first anniversary of FDA approval, which was received on 25 August 2023; and

·      $4.5 million within 60 days of the second anniversary of FDA approval, which is due in August 2024.

 

In addition, the Group is entitled to a royalty of 5% of net sales of the device, commencing on the second anniversary of FDA approval and capped at a maximum of $6 million. These royalties have not been recognised due to uncertainties around quantum and timing.

 

Investments

The Group has commenced development of its new NIOX Pro® device. This device will offer improved ergonomics, a larger screen and improved iOS and Android connectivity. It will be fully compatible with existing test kits.

 

Development costs totalling £0.2 million have been capitalised to date in accordance with the requirements of accounting standards. The aggregate development costs of the NIOX Pro®, including tooling, should not exceed £2.0 million, with the bulk of these costs being incurred in 2024.

 

During 2024, we expect to incur approximately £0.2 million on preliminary research and development work associated with a home use device.

 

Employees

On behalf of the Board, I would like to thank all employees within the Group for their hard work and commitment.

 

Board Changes

Jo LeCouilliard will not offer herself for re-election at the forthcoming AGM. Jo has been a Non-Executive Director (and Chair of the Audit and Risk Committee) for six years and I would like to thank her for her significant contribution during that time. A replacement will be announced in due course, and until that time Garry Watts will, in addition to his role as Senior Independent Director, take over as Chair of the Audit and Risk Committee.

 

Michael Roller, Chief Financial Officer, has agreed with the Board that he will reduce his time commitment to the Group to three days per week with effect from 1 April 2024.  Michael is supported by a strong team including the Group's Financial Controller and Company Secretary and the Group Operating Finance Director.

 

Summary and outlook

2023 was another good year for the Group. The results demonstrate the clear ability of our business model to generate profitable growth.

 

Management is continuing to implement a growth strategy that will raise the awareness of the benefits of FeNO testing and significantly improve the availability of NIOX® worldwide by expanding distribution, optimising reimbursement, and improving patient access. As first steps on the journey to home FeNO testing, the Company plans to make NIOX® available in pharmacies and through occupational health organisations.

 

The business has made a positive start to 2024 and the Board expects another year of solid progress.

 

OPERATING REVIEW

 

Key strategic drivers of the Group

 

The opportunity

Asthma affects over 340 million people worldwide with a further 100 million estimated to be affected by 2025. There are an estimated 1,000 deaths globally due to asthma every day. In 50% of cases, asthma is either not diagnosed or is misdiagnosed, which leads to a delay in asthma patients receiving the care that they need. Following a diagnosis of asthma, it is important to be able to regularly monitor the condition to confirm the effectiveness of treatment and adherence by the patient.

 

In 2023 NIOX, the clear market leader in FeNO testing worldwide, sold approximately five million tests.

 

FeNO

Asthma is a condition that is characterised by inflammation of the airways and lungs. Nitric oxide is produced by inflammatory cells and can be precisely measured in exhaled breath, this is known as FeNO (fraction of exhaled nitric oxide). Measuring FeNO helps medical professionals to understand the level of inflammation in the lungs of an asthmatic and is a precise biomarker of type 2 airway inflammation. FeNO measurements can improve the chances of a correct diagnosis by up to seven times.

 

The American Thoracic Society (ATS) recommended that FeNO testing should be part of the ongoing care of asthmatics as well as being used as a tool for diagnosing asthma. This is the latest example from an increasing body of highly credible, influential evidence based medical guidelines around the world that have recommended the use of FeNO testing as a routine part of diagnosing and managing asthma. The guidelines are based on a substantial body of published clinical trials that demonstrate the benefits of FeNO testing. Measuring FeNO as part of ongoing asthma management has been shown to decrease asthma exacerbations by 50%.

 

Further impetus is coming from a new class of biologic anti-inflammatory medicines for the treatment of type 2 inflammatory asthma. Biologic medicines are targeted at asthmatics with increased inflammation and therefore elevated FeNO. The cost of these new medicines is significant. This means that some pharmaceutical companies are investing resources to raise the awareness and usage of FeNO testing in order to identify the patients that are most likely to respond to treatment as they seek to establish this new class of drugs as an effective line of therapy.

 

Our products

The Company's NIOX VERO® is the market leading device for measuring FeNO. This is a non-invasive, point-of-care system which accurately measures the patient's FeNO level. It is quick, easy to use and reliable. The system comprises a small portable device and a range of consumables including sensors, individual disposable mouthpieces and breathing handles. The quality and innovation of NIOX VERO® has been recognised with several awards over recent years, including the 2022 Research and Development Award and 2023 Best Asthma Diagnosis and Management Company.

 

NIOX® is registered and reimbursed in all major markets and available in more than 50 countries via NIOX's international network of distribution partners.

 

Our business

NIOX VERO® is the market leading device for FeNO testing with more than 50 million FeNO tests sold to date.

 

NIOX® revenues in 2023 for clinical diagnosis and management of asthma were £32.6 million (2022: £26.2 million). Approximately 90% of these revenues are from recurring sales of consumables used for routine testing.

 

Revenues in 2023 from CROs were £4.2 million (2022: £5.1 million). A lower proportion of these revenues are from sales of consumables as clinical trial sales are for a defined time period and are typically on a one-time sale basis.

 

Principal challenges

Today the awareness and usage of FeNO testing and NIOX® amongst the respiratory specialist community is relatively high. The majority of asthmatics are under the care of Primary Care doctors, where the awareness and usage of FeNO is significantly lower than the specialist community. This means that there is huge untapped potential in the FeNO testing market. The primary challenge the NIOX® business faces is to increase the awareness and usage of FeNO testing, specifically in the Primary Care customer group.

 

The Company continues to engage with respiratory professionals to promote the use of FeNO tests in new and under-served customer segments such as primary care settings and pharmacies which provide a significant opportunity for the Group.

 

Conclusion

The Company's mission is to improve asthma diagnosis and management by greater patient access to FeNO testing. The Group has a robust strategy in place to expand the business and generate profitable growth from this large underserved market and has the financial resources to achieve its objectives.


FINANCIAL REVIEW

 

This has been a year of continued growth for NIOX. The level of FeNO testing carried out by our customers increased, resulting in higher revenues and adjusted EBITDA, which the Group considers to be key KPI's.

 


 

2023

2022

 

 

£m

£m

Revenue

 

36.8

31.3

Cost of sales

 

(10.3)

(9.1)

Gross profit

 

26.5

22.2

Gross margin

 

72%

71%

Research and development costs

 

(2.3)

(3.2)

Sales and marketing costs

 

(11.2)

(9.7)

Administrative expenses

 

(8.4)

(7.5)

Adjusted EBITDA1

 

11.4

7.3

Operating profit

 

4.6

1.8

Other (losses) and gains

 

(1.3)

0.4

Other income

 

0.2

8.3

Net finance income

 

0.6

-

Profit before tax

 

4.1

10.5

Taxation

 

5.4

3.6

Profit for the financial year from continuing operations

 

9.5

14.1

Profit for the financial year from discontinued operations2

 

1.2

2.0

Profit for the financial year

 

10.7

16.1

Cash and cash equivalents

 

19.9

19.4

1 Earnings before interest, tax, depreciation, amortisation and share option charge.

2 On 9 April 2020, the Group announced that that the development and commercialisation agreement with AstraZeneca was terminating and as such the results of the COPD business are classified as a discontinued operation.

 

Revenue

NIOX® revenues for the year were £36.8 million (2022: £31.3 million). NIOX® clinical revenue of £32.6 million (2022: £26.2 million) represents sales to physicians and hospitals for use in clinical practice and to the Company's distributors. NIOX® research revenue of £4.2 million (2022: £5.1 million) is from pharmaceutical companies and contract research organisations (CROs) for use in clinical studies.

A significant part of the growth in NIOX® revenues was attributable to an increase in testing volumes to more normal levels in Japan and China as COVID-19 related restrictions were removed in these countries. There was also good growth in Europe, in particular the UK and Germany, due to greater focus on increasing the awareness of FeNO testing.

Gross profit

Gross profit on NIOX® revenue was £26.5 million (2022: £22.2 million), with a gross margin of 72% (2022: 71%). Gross margin was higher than the prior period mainly due to product mix. In the year there was a greater proportion of higher margin test kit sales and a reduced proportion of lower margin, device heavy research sales.

Research and development

Research and development costs decreased to £2.3 million (2022: £3.2 million). Included in this category are, £0.2 million of Quality costs (2022: £0.3 million), £0.2 million of Regulatory costs (2022: £0.3 million), £0.1 million of Medical Affairs costs (2022: £0.3 million), £nil Device Development costs (2022: £0.4 million) and £1.8 million of depreciation and amortisation (2022: £1.9 million). The decrease in costs is mainly attributable to lower headcount, particularly in the Device Development department. The development of the new NIOX Pro® device has been outsourced to our manufacturing partner and the costs meeting the eligibility criteria will be capitalised. In the current year, £0.2 million was capitalised.

Sales and marketing

Sales and marketing costs increased to £11.2 million (2022: £9.7 million). Costs were higher in the current year mainly on account of a strategic realignment in the US to unlock the full sales potential in both the clinical and research businesses, which has increased headcount. Additionally, global marketing activities are returning to normal levels following the COVID-19 pandemic.

Administrative expenditure

Administrative expenditure, which includes overheads relating to corporate functions, centrally managed support functions and corporate costs, increased to £8.4 million (2022: £7.5 million). This was mainly attributable to a higher share option charge.

Other income

Other income has decreased to £0.2 million (2022: £8.3 million). The current year figure includes £0.2 million (2022: £0.2 million) of sub-lease rental income relating to the Chicago office, which ends in February 2024. The prior period figure includes £8.1 million relating to the one-off recognition of the settlement consideration due from Beyond Air.

 

Taxation

Taxation for the year was a credit of £5.4 million (2022: £3.6 million). The deferred tax asset recognised in respect of carried trading losses increased due to improved expectations regarding future financial performance.

Earnings per share

Basic earnings per share for the year was 2.55p (2022: 3.84p) and diluted earnings per share for the year was 2.38p (2022: 3.63p) reflecting a profit after tax of £10.7 million (2022: £16.1 million). The decrease in reported earnings per share is largely due to the recognition of the full consideration due from Beyond Air in the prior period.

Excluding the impact of depreciation, amortisation, share option charge and the one-off Beyond Air consideration, adjusted basic earnings per share from continuing operations for the year was 3.87p (2022: 2.73p). See note 9.

Basic earnings per share from continuing operations was 2.26p (2022: 3.36p) and diluted earnings per share for the year was 2.11p (2022: 3.19p) reflecting a profit from continuing operations for the financial year of £9.5 million (2022: £14.1 million).

Profit from discontinued operations

A profit of £1.2 million (2022: £2.0 million) was generated by discontinued operations in the year as the rebate and returns accrual was revised down based on claims received and forward-looking assumptions as to the value of claims expected to be received in future financial periods.

Statement of financial position

The Group's net assets at 31 December 2023 were £83.8 million (2022: £81.9 million).

Current liabilities at the end of the year were £7.2 million (2022: £9.2 million). The decrease is mainly due to lower trade payables, in particular lower accruals relating to discontinued operations, as £2.0 million of invoices were settled with AstraZeneca in the period.

Share premium reduced significantly to £0.1 million as at 31 December 2023 (2022: £640.3 million). During the year, a Capital Reduction Scheme was concluded by filing an order of the High Court with the Registrar of Companies. This resulted in the share premium of the Company being cancelled.

Other comprehensive expense

The Group's other comprehensive expense of £0.2 million (2022: £1.9 million) relates to exchange differences on the translation of foreign operations into British pound sterling.

The current year expense is mainly due to the strengthening of the British pound against the Swedish krona. It was offset by a £0.5 million (2022: £0.7 million) adjustment to record the net gain on foreign exchange translation on certain intercompany balances through other comprehensive income. During the year, a number of long-term intercompany balances were designated as being in the nature of long-term-investments and as such the associated foreign exchange translation gain was removed from the income statement.

Cash flow

The Group's cash position (including cash and cash equivalents) increased from £19.4 million at 31 December 2022 to £19.9 million at 31 December 2023.

Cash generated from operations during the year amounted to £11.7 million (2022: £6.9 million). Included in this was £2.0 million (2022: £nil) used in the COPD discontinued operations and £2.8 million (2022: £2.0 million) received from Beyond Air under the terms of the relevant settlement agreement.

A special dividend totalling £10.5 million (2022: £nil) was paid to shareholders.

Exchange differences on cash and cash equivalents arose as a result of translation of foreign currency balances at the beginning and end of the relevant period. The exchange loss for the period was £0.3 million (2022: £0.7 million gain).

 

 

Michael Roller

Chief Financial Officer

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

 



2023

2022


Notes

£m

£m

Continuing operations




 




Revenue from contracts with customers


36.8

31.3

Cost of sales


(10.3)

(9.1)

Gross profit


26.5

22.2



 


Research and development costs


(2.3)

(3.2)

Sales and marketing costs


(11.2)

(9.7)

Administrative expenses


(8.4)

(7.5)

Operating profit

4

4.6

1.8



 


Other (losses) and gains - net


(1.3)

0.4

Other income

5

0.2

8.3

Finance costs

6

(0.2)

(0.3)

Finance income

6

0.8

0.3

Profit before tax


4.1

10.5



 


Taxation

8

5.4

3.6

Profit from continuing operations


9.5

14.1

 


 


Profit from discontinued operations (attributable to equity holders of NIOX Group plc)

7

1.2

2.0



 


Profit for the year


10.7

16.1

 


 


Other comprehensive expense


 


Items that may be reclassified to profit or loss


 


Exchange differences on translation of foreign operations


(0.2)

(1.9)

Other comprehensive expense for the year, net of tax


(0.2)

(1.9)

Total comprehensive income for the year


10.5

14.2  

 

Earnings per share attributable to owners of the parent during the year

(expressed in pence per share)

 

 

 


2023

2022

Basic earnings per share

Notes

Pence

Pence

Basic earnings per share for profit from continuing operations

9

2.26

3.36

Basic earnings per share for profit for the year

9

2.55

3.84

                                                                                                                                                                                                                                                                                                                                                                                                                              

 


2023

2022

Diluted earnings per share


Pence

Pence

Diluted earnings per share for profit from continuing operations

9

2.11

3.19

Diluted earnings per share for profit for the year

9

2.38

3.63  

                                                                                                                                                                                                                                                                                                                                                                                                                               

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023

 

 



2023

2022


Notes

£m

£m

Assets


 


Non-current assets


 


Property, plant and equipment


0.3

0.2

Right-of-use assets


1.1

0.9

Goodwill

10

4.6

4.7

Intangible assets


28.2

32.4

Trade and other receivables


-

3.5

Deferred tax assets


23.8

25.4

 


58.0

67.1



 


Current assets




Inventories


4.8

4.1  

Trade and other receivables


8.8

7.9

Cash and cash equivalents


19.9

19.4



33.5

31.4

Total assets


91.5

98.5

 

Equity


 


Share capital


0.3

0.3

Share premium


0.1

640.3

Other reserves

11

18.2

15.7

Retained earnings/ (accumulated losses)


65.2

(574.4)

Total equity

 

83.8

81.9

 

Liabilities

Non-current liabilities


 


Lease liabilities


0.5

0.4

Deferred tax liabilities


-

7.0

 


0.5

7.4

 


 


Current liabilities


 


Trade and other payables


6.6

8.6

Lease liabilities


0.6

0.6

 


7.2

9.2

Total liabilities


7.7

16.6

Total equity and liabilities


91.5

98.5

 

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

 

 

 

Ian Johnson                                                                                                         Michael Roller

Executive Chairman                                                                                           Chief Financial Officer
NIOX Group plc                                                                                                    NIOX Group plc

 

Registered number: 05822706



 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

 

 



2023

2022


Notes

£m

£m

Cash flows from operating activities


 


Cash generated from operations

13

11.7

6.9

Interest paid


(0.1)

(0.2)

Net cash generated from operating activities


11.6

6.7



 


Cash flows from investing activities


 


Payments for property, plant and equipment


(0.1)

(0.1)

Payments for intangible assets


(0.2)

-

Net cash used in investing activities


(0.3)

(0.1)



 


Cash flows from financing activities

 

 


Interest received


0.6

0.1

Principal element of lease payments


(0.7)

(0.6)

Dividends paid


(10.5)

-

Proceeds received from exercise of share options


0.1

-

Net cash used in financing activities


(10.5)

(0.5)



 


Net increase in cash and cash equivalents


0.8

6.1

Cash and cash equivalents at 1 January


19.4

12.6

Effects of exchange rate changes on cash and cash equivalents


(0.3)

0.7

Cash and cash equivalents at 31 December


19.9

19.4

 

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

 

 


Share capital

Share premium

Other reserves1

(Accumulated losses)/ retained earnings

Total equity


 

 

£m

 

£m

 

£m

 

£m

 

£m

At 1 January 2022


0.3

640.3

16.7

(590.5)

66.8








Profit for the year


-

-

-

16.1

16.1

Exchange differences on translation of foreign operations


-

-

(1.9)

-

(1.9)

Total comprehensive (expense)/ income


-

-

(1.9)

16.1

14.2

Transactions with owners:







Employee share schemes - value of employee services


-

-

0.9

-

0.9

At 31 December 2022


0.3

640.3

15.7

(574.4)

81.9

 

 

 

 

 

 

 

Profit for the year


-

-

-

10.7

10.7

Exchange differences on translation of foreign operations


-

-

(0.2)

-

(0.2)

Total comprehensive (expense)/ income


-

-

(0.2)

10.7

10.5








Amounts recycled through profit and loss:







Share premium2


-

(640.3)

-

640.3

-

Own shares reserve3


-

-

0.9

(0.9)

-








Transactions with owners:







Issue of new shares


-

0.1

-

-

0.1

Dividends


-

-

-

(10.5)

(10.5)

Employee share schemes - value of employee services


-

-

1.8

-

1.8

At 31 December 2023


0.3

0.1

18.2

65.2

83.8

1 Other reserves include share option reserve, translation reserve, treasury shares reserve, and transactions with non-controlling interests reserve.

2 On 8 February 2023, a Capital Reduction Scheme was concluded by filing an order of the High Court with the Registrar of Companies and the share premium account was recycled through profit and loss.

3 In 2014 the Company set up an employee benefit trust (the "Trust") for the purposes of buying and selling shares on employees' behalf. During the year, all shares remaining in the Trust were sold or transferred out. On 28 April 2023, a Deed of Termination was signed, and the Trust was closed. The balance on the treasury shares reserve was recycled through profit and loss.

 

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.


NOTES TO THE FINANCIAL STATEMENTS

 

1.     General information

 

Basis of preparation

The financial information set out in this results announcement does not constitute the Company's statutory financial statements for the years ended 31 December 2023 or 2022 but is derived from those financial statements. Statutory financial statements for 2022 have been delivered to the registrar of companies and those for 2023 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The announcement for the year ended 31 December 2023 was approved by the Board for release on 26 March 2024.

The announcement will be published on the Company's website. The maintenance and integrity of the website is the responsibility of the directors. The work carried out by the auditors does not involve consideration of these matters. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

2.     Operating segments

The chief operating decision-maker, the Executive Chairman, examines the Group's performance from a product perspective, and has identified one reportable segment in the continuing business:

-       NIOX® relates to the portfolio of products used to improve asthma diagnosis and management by measuring fractional exhaled nitric oxide (FeNO).

The COPD business has been classified as a discontinued operation. Information about the results of this segment is provided in note 7; information regarding its assets is presented below.

The table below presents operating profit/ (loss) information regarding the Group's operating segments for the years ended 31 December 2023 and 2022. Only the results for the Group's continuing activities are included in order to aid comparison.

 Segment operating profit/ (loss)

 

Year ended 31 December 2023

NIOX®

Head office

Total

 

£m

£m

£m

Revenue (from external customers, based on the destination of the customer)

 

 

 

US

8.7

-

8.7

UK

3.3

-

3.3

EU

10.3

-

10.3

Asia Pacific

13.8

-

13.8

Rest of world

0.7

-

0.7

Total segment revenue

36.8

-

36.8





Cost of sales

(10.3)

-

(10.3)





Research and development costs

(2.3)

-

(2.3)

Sales and marketing costs

(11.2)

-

(11.2)

Administrative expenses

(3.9)

(4.5)

(8.4)

Operating profit/ (loss) from continuing operations

9.1

(4.5)

4.6

 

 

 

 

Depreciation and amortisation included above

(4.4)

-

(4.4)

 

 

 

 

 



 

Year ended 31 December 2022

NIOX®

Head office

Total


£m

£m

£m

Revenue (from external customers, based on the destination of the customer)




US

8.1

-

8.1

UK

2.8

-

2.8

EU

9.5

-

9.5

Asia Pacific

10.7

-

10.7

Rest of world

0.2

-

0.2

Total segment revenue

31.3

-

31.3





Cost of sales

(9.1)

-

(9.1)





Research and development costs

(3.2)

-

(3.2)

Sales and marketing costs

(9.7)

-

(9.7)

Administrative expenses

(4.5)

(3.0)

(7.5)

Operating profit/ (loss) from continuing operations

4.8

(3.0)

1.8





Depreciation and amortisation included above

(4.6)

-

(4.6)

 

Assets by segment

 

As at 31 December 2023

NIOX®

Head office

Total

 

£m

£m

£m

Cash and cash equivalents

19.9

-

19.9

Property, plant and equipment

0.3

-

0.3

Right-of-use assets

1.1

-

1.1

Goodwill

4.6

-

4.6

Intangible assets

28.2

-

28.2

Deferred tax assets

23.8

-

23.8

Inventories

4.8

-

4.8

Trade and other receivables

5.4

3.4

8.8

Total assets

88.1

3.4

91.5

 

 

 

 

As at 31 December 2022

NIOX®

Head office

Total


£m

£m

£m

Cash and cash equivalents

19.4

-

19.4

Property, plant and equipment

0.2

-

0.2

Right-of-use assets

0.9

-

0.9  

Goodwill

4.7

-

4.7

Intangible assets

32.4

-

32.4

Deferred tax assets

25.4  

-

25.4  

Inventories

4.1  

-

4.1  

Trade and other receivables

5.1

2.8

7.9

Trade and other receivables - non-current

-

3.5

3.5

Total assets

92.2  

6.3

98.5

 

 

3.     Employees and directors

 

Monthly average number of people (including Executive and Non-Executive Directors) employed:

 

 

 

 

2023

Number

2022

Number

Office and management

 

27

28

Sales and marketing

 

63

62

Research and development

 

4

9

Average headcount

 

94

99

 

The Group's total headcount at 31 December 2023 was 92 (2022: 92).

 


Employee benefit costs

 

 

 

2023

£m

2022

£m

Wages and salaries

8.4

8.4

Social security costs

1.1

1.1

Pension costs

0.5

0.5

Share option charge

2.4

0.9

Total employee benefit costs

12.4

10.9

 

Key management personnel

 

Key management personnel during the year included directors (Executive and Non-Executive), Regional VP APAC, Senior VP Americas and Research, VP Supply Chain and Technical Operations, Regional VP EMEA, and Senior VP Global Human Resources. Key management personnel in the prior year included the VP of Product Development. The compensation paid or payable to key management is set out below.

 

 

 

2023

£m

2022

£m

Short-term employee benefits (including bonus)

3.2

3.3

Share option charge

               2.2

0.9

               5.4

4.2

 

4.     Breakdown of expenses by nature

 


Notes

2023

£m

2022

£m

Employee benefit costs

3

12.4

10.9

Depreciation charge of property, plant and equipment


-

0.1                          

Depreciation charge of right-of-use assets


0.7

         0.6

Amortisation charge of intangible assets


3.7

3.9

 

5.     Other income

 

2023

2022

 

£m

£m

Sub-lease rental income

0.2

0.2

Beyond Air consideration

-

8.1

Total other income

0.2

8.3

 

Beyond Air was granted FDA approval of the LungFit® PH product on 28 June 2022, and therefore other income and a corresponding receivable was recognised for the total consideration of $10.5 million (£8.1 million). The consideration was measured by discounting the asset to its present value, with the unwinding of the discount recognised as finance income.

 

6.     Finance costs and income

 

2023

2022

 

£m

£m

Finance costs:

 


Bank charges

(0.1)

(0.2)

Interest charges for lease liabilities

(0.1)

(0.1)

Total finance costs

(0.2)

(0.3)

 

 


Finance income:

 


Bank interest receivable

0.6

0.1

Discount unwind on Beyond Air consideration

0.2

0.2

Total finance income

0.8

0.3

 


7.     Discontinued operations

 

On 9 April 2020, an agreement was signed to hand back the Tudorza® and Duaklir® licences to AstraZeneca and as such, the results of the COPD operating segment are reported as a discontinued operation. There were no assets or liabilities classified as held for sale in relation to the discontinued operation.

 

Profit for the year

 

 

 


 


2023

£m

2022

£m

 

Revenue

 

1.2

2.0

 

Profit from discontinued operations

 

1.2

2.0

 

 

 



 

Cash flow


2023

2022

 

 


£m

£m

 

Net cash outflow from operating activities

 

(2.0)

-

 

Net cash used in discontinued operations

 

(2.0)

-

 

 

 

Revenue relates to a revision of the rebate accrual based on information and claims received during the year and forward-looking assumptions as to the value of claims expected to be received in future financial period.

 

The cash outflow relates to the settlement of certain contractual liabilities relating principally to rebates and returns, which were accrued for at the time the business was discontinued.

 

Remaining accruals related to the discontinued operation totalled £0.9 million at 31 December 2023 (31 December 2022: £4.6 million).

  

8.     Taxation

 

 

 

 

2023

£m

2022

£m

Deferred tax

 


Deferred tax credit

(5.4)

(3.6)

 

 


Tax is attributable to:

 


Profit from continuing operations

(5.4)

(3.6)

 

The tax credit (2022: credit) for the year is lower (2022: lower) than the standard rate of corporation tax in the UK of 23.52% (2022: 19.00%). The differences are explained below:

 

 

2023

£m

2022

£m

Profit from continuing operations before tax

4.1

10.5

Profit from discontinued operations before tax

1.2

2.0

Profit before tax

5.3

12.5

Tax at the UK tax rate of 23.52% (2022: 19.00%)

1.2

2.4

Expenses not deductible for tax purposes

1.0

0.1

Employee share options

0.4

0.2

Tax losses for which no deferred income tax asset was recognised

(8.0)

(6.3)

Tax credit for the year

(5.4)

(3.6)

 

In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax rate would increase to 25% (rather than remaining at 19%, as previously enacted). This new law was substantively enacted on 24 May 2021. For the financial year ended 31 December 2023, the current weighted averaged tax rate was 23.52%.

 

Deferred taxes at the balance sheet date are measured using the substantially enacted tax rates in the relevant jurisdictions in which the Group operates.

 

At 31 December 2023, the Group has tax losses to be carried forward of approximately £491.0 million (2022: £510.4 million). These can be utilised against future taxable profits with no restrictions, except as stated below. A proportion of these tax losses has been recognised as a deferred tax asset.

 

NIOX Group plc and NIOX Healthcare Limited had tax losses to be carried forward of approximately £169.4 million (2022: £163.2 million). These losses have no expiry date, however, the utilisation of these losses will be restricted to 50% of profits in excess of £5.0 million generated in the United Kingdom.

 

NIOX Inc. had federal tax losses to be carried forward of approximately £123.1 million (2022: £129.4 million). Federal losses generated after 1 January 2018 have no expiry date, however, the utilisation of these losses will be restricted to 80% of profits generated in the United States. Federal losses generated before 1 January 2018 expire after 20 years.

 

NIOX Inc. also had state losses to be carried forward of approximately £82.4 million (2022: £87.2 million) which have been generated across multiple states and have a range of expiry periods from 5 to 20 years.

  

9.     Earnings per share

 

Basic earnings per share

2023

Pence

2022

Pence

From continuing operations

2.26

3.36

From discontinued operations

0.29

0.48

Total basic earnings per share attributable to the ordinary equity holders of the Company

2.55

3.84

 

Diluted earnings per share

2023

Pence

2022

Pence

From continuing operations

2.11

3.19

From discontinued operations

0.27

0.44

Total diluted earnings per share attributable to the ordinary equity holders of the Company

2.38

3.63

 

Reconciliation of earnings used in calculating earnings per share

2023

£m

2022

£m

Basic and diluted earnings per share

 


Profit attributable to the ordinary equity holders of the Company used in calculating basic and dilutive earnings per share:

 


From continuing operations

9.5

14.1

From discontinued operations

1.2

2.0

Profit used as the basis of calculating basic and diluted earnings per share

10.7

16.1

 

The earnings used in calculating basic and diluted earnings per share is the same.

 

Adjusted basic earnings per share eliminates depreciation, amortisation, share option charge and the impact of the Beyond Air settlement consideration. The prior year signed financial statements only excluded the impact of the Beyond Air settlement consideration. The comparatives have been restated.

 

Adjusted basic earnings per share

2023

Pence

2022

Pence

From continuing operations

3.87

2.73

From discontinued operations

0.29

0.48

Total adjusted basic earnings per share attributable to the ordinary equity holders of the Company

4.16

3.21

 

Reconciliation of earnings used in calculating adjusted earnings per share

2023

£m

2022

£m

Basic earnings per share

 


Profit attributable to the ordinary equity holders of the Company used in calculating basic and dilutive earnings per share:

 


From continuing operations

9.5

14.1

From discontinued operations

1.2

2.0

Deduct Beyond Air settlement consideration

-

(8.1)

Add back:

 


Depreciation

0.7

0.7

Amortisation

3.7

3.9

Share option charge

2.4

0.9

Adjusted profit used as the basis of calculating adjusted basic earnings per share

17.5

13.5

 

 

Weighted average number of shares

2023

2022

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

      420,205,077

      419,199,013

Adjustments for calculation of diluted earnings per share:

 


Share options

        28,443,873

        23,799,062

Deferred shares

             629,308

                       -  

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share

      449,278,258

      442,998,075

 

10.          Goodwill

               

 

 

2023

£m

2022

£m

At 1 January

 


Cost

4.7

4.8

Net book amount

4.7

4.8


 

 

Year ended 31 December

 

 

Opening net book amount

4.7

4.8

Exchange differences

(0.1)

(0.1)

Closing net book amount

4.6

4.7


 

 

At 31 December

 

 

Cost

4.6

4.7

Net book amount

4.6

4.7

 

The carrying value of goodwill is allocated to the NIOX® CGU and was generated in June 2015 on the acquisition of Aerocrine.

 

The recoverable amount of a CGU is assessed using a value in use model. The value in use for the NIOX® CGU was calculated over a five-year period using a discount factor of 12.7% (being a weighted average cost of capital rate for the CGU). The calculations use post-tax cash flow projections. Cash flows over five years have been considered appropriate based on the product lifecycle. Cash flows beyond the five-year period were extrapolated using the estimated terminal growth rate stated below. The growth rate does not exceed the long-term average growth rate for the business. The discount rate used is post-tax and reflects specific risks relating to the Group and uncertainties surrounding the cash flow projections.

 

The key assumptions used for the valuation of the NIOX® CGU are as follows:

 

Assumption

Approach used to determine values

Valuation basis

Value in use

Sales

Based on past performance and management's expectations of market development. The growth rate for 2024-2028 reflects a more cautious growth level than historical CAGR.

Gross margin

Based on past performance and management's expectations for the future.

Operating costs

Management forecasts these costs based on the current structure of the

business, adjusting for inflationary increases but not reflecting any future restructurings or cost-saving measures.

Period of specified projected cash flows

2023 - 5 years

2022 - 5 years

Long-term growth rate

Terminal growth rates based on management's estimate of future long-term average growth rate.

2023 - 1%

2022 - 1%

Discount rate

Reflects specific risks relating to the relevant segments and the countries in which they operate.

2023 - 12.7%

2022 - 13.1%

 

Impact of possible changes in key assumptions - NIOX® CGU

The level of headroom available before sensitivities were applied was £130.9 million. Management's estimates of NIOX® sales in the value in use calculation would have to be greater than 38% lower than the forecasted amounts as at 31 December 2023 in order for an impairment to be recognised. This steep hypothetical reduction in sales represents significantly slower growth than historic levels.

 

Management have considered and assessed reasonably possible changes for other key assumptions and have not identified and instances that could cause the carrying amount of goodwill and intangible assets to exceed its recoverable amount.


11.  Other reserves

 

 

 

Share option reserve

 

 

Translation reserve

 

Treasury shares reserve

Transactions with non-controlling interests

 

 

Total other reserves

£m

£m

£m

£m

£m

At 1 January 2022

15.0

8.7

(0.9)

(6.1)

16.7

Employee share option scheme

0.9

-

-

-

0.9

Exchange differences on translation of foreign operations

-

(1.9)

-

-

(1.9)

At 31 December 2022

15.9

6.8

(0.9)

(6.1)

15.7

Employee share option scheme

1.8

-

-

-

1.8

Exchange differences on translation of foreign operations

-

(0.2)

-

-

(0.2)

Reclassification of foreign exchange

(0.3)

0.3

-

-

-

Closure of the Employee Benefit Trust

-

-

0.9

-

0.9

At 31 December 2023

17.4

6.9

-

(6.1)

18.2

 

12.  Dividends

 

 

2023

£m

2022

£m

Special dividend for the year ended 31 December 2023 of 2.5 pence (2022: nil) per fully paid share

10.5

-

 

In addition to the above dividend, since year end the directors have recommended the payment of a final dividend of 1 pence per fully paid ordinary share (2022: £nil). The aggregate amount of the proposed dividend expected to be paid after the reporting date, out of retained earnings at 31 December 2023, but not recognised as a liability at year end is £4.2 million (2022: £nil).

 

13.  Cash generated from operations

 

Reconciliation of profit before tax to net cash generated from/ (used in) operations:

 

 

 

Notes

2023

£m

2022

£m

Profit from continuing operations before tax


4.1

10.5

Profit from discontinued operations before tax

7

1.2

2.0

Profit before tax


5.3

12.5

Adjustments for:




Finance income

6

(0.8)

(0.3)

Finance costs

6

0.2

0.3

Depreciation charge of property, plant and equipment

4

-

0.1

Depreciation charge of right-of-use assets

4

0.7

0.6

Amortisation charge of intangible assets

4

3.7

3.9

Share-based payment charge

3

2.4

0.9

Foreign exchange on non-operating cash flows


0.8

(0.4)

Changes in working capital:




Decrease/ (increase) in trade and other receivables


2.7

(6.7)

Increase in inventories


(0.8)

(1.4)

Decrease in trade and other payables


(2.5)

(2.6)

Cash generated from operations


11.7

6.9

 

14.  Related party transactions

 

There is no ultimate controlling party of the Group as ownership is split between the Company's shareholders. The most significant shareholders as at 31 December 2023 and 2022 are as follows:

 

 

Ownership interest

Name

2023

2022

Griffiths R I

23.94%

27.77%

Harwood Capital LLP*

18.48%

18.54%

AstraZeneca PLC

16.89%

16.94%

* Harwood Capital LLP acts as investment manager to North Atlantic Smaller Companies Investment Trust plc

 

There were no transactions with related parties during the years ended 31 December 2023 and 2022 as classified under IAS24.

 

15.  Events occurring after the reporting date

 

Refer to note 12 for details of the final dividend recommended by the directors which is to be paid after the reporting date.

 

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