Global leaders
in the fight against
infectious diseases
Novacyt Annual Report
and Accounts for the year
ended 31 December 2022
Contents
3
04
Financial Statements
Responsibility Statement of the Directors
in Respect of the Annual Financial Report
Statutory Auditors Report on the Statement
Consolidated Financial Statements
05
Accounts And Notes
70
70
72
76
06
Company Information
142
Contents
01 Business Overview
Novacyt Key Strengths
Group at a Glance –
Transitioning Beyond COVID-19
02 Strategic Report
Chairman’s Statement
04
06
08
10
11
Shaping the Future with the Right Portfolio
12
Chief Executive Officer’s Review
Section 172 (1) Statement
Financial Review
Sustainability
03 Governance
The Board of Directors
Directors’ Report
An Introduction from the Chairman
QCA Principles
Nomination Committee Report
Directors’ Remuneration Report
Performance Share Awards Scheme
Audit Committee Report
Principle Risks and Risk Management
16
21
22
26
34
35
38
42
44
53
54
57
58
62
4
5
Business
Overview
Novacyt is a diagnostics
solution provider, manufacturing
diagnostic and pathogen testing
kits based on molecular and
protein technologies sold into
human clinical, life science, food
and industrial markets.
Our purpose
Our vision
We protect lives from invisible
threats by providing actionable
health information in the right
place, at the right time
Global leaders in the fight
against infectious diseases
Business OverviewAnnual Report and Accounts 6
7
Novacyt Key Strengths
01 Clinical Diagnostics
02 Life Sciences
04 Instruments
06 World-class R&D Team
The molecular diagnostics market is made up of an
ever-increasing breadth of different healthcare provider
models that requires diagnostics to guide treatment
decisions. Our goal is to improve access to insights
that guide treatment decisions, with particular focus on
infectious diseases, by providing precise and accurate
data and information at the right place at the right
time. We do this by partnering with public and private
laboratories as well as commercial partners to provide
clinical diagnostic testing workflows, which historically
included qPCR instrumentation and high-quality qPCR
reagents but are being expanded to introduce solutions
for automated liquid handling and automated nucleic
extraction systems and associated kits.
The most recent addition to our Primer DesignTM range
of clinical assays is genesigTM SARS-CoV-2 Winterplex.
The assay is a multiplex for the detection of all strains
of Influenza A, Influenza B, RSV and three separate
SARS-CoV-2 (COVID-19) targets.
Differentiation between these infections is key to
the clinical management strategy of patients with
acute respiratory illness1. The Company’s genesigTM
SARS-CoV-2 Winterplex testing has been received
well in UK and European markets, receiving top rated
performance assessment scores, and growing our
business in hospital triage environments.
We have a passion for patient-centric solutions that
advance the science behind diagnostics. This fuels
our drive to deliver high-quality and reliable reagents
and instruments for the Life Sciences market. We
continue to add to our comprehensive range of qPCR
assays (1200+), developed in combination with
our high-performance qPCR instrument offering, to
enable personalised solutions customised to meet
the needs of Life Sciences research across veterinary,
animal health, food protection and adulteration,
human pathogen and many more market sectors.
Our dedicated team of technical and field support
specialists continue to provide round-the-clock
support to our customers to ensure they achieve
success in their fields through instrument servicing
and repair, software updates, and technical advice
and documentation to support training, use and
quality requirements.
03 Global First Responder
As a pioneer in clinical diagnostics, Novacyt has a
proven history of responding quickly to changing
global health needs and key outbreaks worldwide,
including testing solutions for Zika, Swine Flu, and
Ebola viruses. Solidifying this position, Novacyt was
among the first to respond to the COVID-19 pandemic
in 2020, providing a rapid and reliable gold standard
SARS-CoV-2 test kit that the received WHO approval.
Our streamlined research and development (R&D)
pipelines and commitment to better innovation to meet
patients’ needs have enabled us to respond quickly to
global outbreaks, achieving accurate identification and
detection with our proprietary molecular and protein
detection technologies.
2022 saw also Novacyt granted a UK patent for the
design of the ORF1ab assay for COVID detection.
1 https://www.covid19treatmentguidelines.nih.gov/special-populations/influenza/
As a global leader in qPCR innovation, our UK
manufacturing site has been delivering gold standard
real-time PCR instrumentations for decades. The
genesigTM q and MyGo series of qPCR instruments
empower our customers to take real-time PCR tests
out of the laboratory, with portable options to run
the instrument on 12 Volt vehicle outlets. Our qPCR
instruments are designed to offer mobility, versatility,
and speed to meet any testing needs. The capability
to operate multiple units at once enables efficient and
cost-saving operations.
Most recently the q16 and q32 instruments have
been successfully registered as IVD devices allowing
diagnostic testing on the platforms. This development
has been supported by a successful external audit of
the instrumentation manufacturing site.
In addition, the next generation of q32 instruments
offer flagship level optical and thermal performance
to enable higher multiplex assays currently being
developed by the company.
05 Bioinformatics Surveillance
Global tracking of virus mutations enables our R&D
team to quickly identify development opportunities,
particularly in relation to viruses and their mutations
that can result in outbreaks detrimental to healthcare
systems and global supply chains including food
production. Our in-house bioinformatics surveillance
group worked within a global network of virologists
to track the SARS-CoV-2 variants to identify the
mutations expected to pose the most significant
challenges to healthcare and vaccine efficacy during
the pandemic, and has more recently supported
development of new MPox (previously monkeypox)
and updated H5N1 Flu assays.
The expertise in our research and development team
encompasses all aspects of our customer journey. Our
team have a deep scientific understanding in designing
and developing quantitative real-time polymerase chain
reaction (qPCR) assays. Additionally, we understand
that the test itself is not the only part of the story
and that the supporting workflow drives quality in
results. To this end our instrumentation and software
teams support our wide breadth of scientific, medical,
industrial and veterinary users to answer questions
that support their work around the globe by delivering
results they can rely on.
Our R&D strategy ensures continual surveillance of our
current portfolio to ensure our offerings are relevant in a
changing genetic landscape. Additionally, our new product
development and validation ensures we advance our
proprietary technology platforms and drive manufacturing
process improvement across Novacyt. With an in-house
clinical and validation team, our R&D can leverage insights
and data to progress cutting-edge technology designs
to meet the diagnostic needs of our customers and
their patients. By collaborating as part of a UK-based
manufacturing network we retain the ability to closely
control all forms of development and product quality that
our customers demand.
Seamless links between R&D and manufacturing
teams support our successes. For our assay portfolio,
the bioinformatics core-function identifies optimal
sequences for incorporation into final assay designs
and once placed on the market are subject to
continuous ongoing surveillance, such that redesigns
can be applied when necessary. Once assay design
phases are completed, applied research combines the
bioinformatics design with their breadth of reagent
chemistry knowledge to realise finalised product
prototypes, that are passed to an analytical validation
team with core expertise in validation of research use
and diagnostic product specifications using clinical
materials. Completing this chain of development is a
team that maintain our products post-launch, supporting
any requirements for technical investigations, as well
as providing expert technical support for end-users and
business development opportunities.
Annual Report and AccountsBusiness Overview
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Annual Report
and Accounts
Business
Overview
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9
Group at a Glance
– Transitioning Beyond COVID-19
01
Post-COVID-19
Assay Development
• Development of genesigTM PLEX Gastrointestinal Bacterial
Real-Time PCR Multiplex Kit
• Developed and relaunched two single analyte transplant
viral assay panels for the Epstein-Barr virus and BK virus
• Added over 40 CE IVD assays, through a 3rd party
distribution agreement
• Launched and UK CTDA approval of genesigTM Real-time
PCR SARS-CoV-2 Winterplex panel covering RSV, Flu A&B
and COVID-19
• Re-launched RUO portfolio globally and developed Monkeypox
and Adenovirus F41 RUO assays
02
Workflow and Instrumentation
Development
• Launched and CE marked an automated liquid handling system
(CO-Prep™) and validated a nucleic acid extraction system to
enhance post-COVID-19 integrated sample-to-result molecular
workflow solution
• Launched new lateral flow test (LFT) readers
03
COVID-19
Assay Development
• Six UK CTDA approvals in the year taking the total number of
Novacyt products approved by the CTDA to seven, the most of
any UK-based company
• CE marked two lyophilised PROmateTM products
• CE marked PathFlowTM COVID-19 Rapid Antigen Self-Test, one of
the first saliva-based COVID-19 assays to be launched in the EEA
04
Geographic Expansion
• Commercialised Winterplex panel with sales to hospitals in both
the UK and Europe
• Partnering with salmon farming in North America to develop
solutions for testing infectious salmon anaemia virus and bacterial
kidney disease
• Signed a contract with a leading global non-governmental
organisation (NGO) to support the detection of arboviruses,
including dengue, Zika and Chikungunya
• Partnering with a leading Health care company in India to supply
both reagents and instrumentation
05
Financial Highlights
• Group revenue for FY2022 was £21.0m, in line with guidance, compared
to £92.6m1 for FY2021, due to the expected decline in COVID-19 related
sales
• Revenue from COVID-19 products in 2022 totalled £14.7m (FY2021:
£84.0m1)
• Revenue for the non-COVID-19 portfolio in 2022 totalled £6.3m
(FY2021: £8.6m1). As previously announced, this decline was
predominantly driven by lower instrument sales compared to FY2021
which benefited from COVID-19 demand
• Group gross profit totalled £5.7m (27%) in FY2022 (FY2021: £28.2m
(30%)). The FY2022 gross profit was reduced as a result of significant
stock provisions based on lower forecasted COVID-19 sales in addition
to writing off stock that had not been provided for previously. Excluding
the impact of these items, the margin would be in excess of 60%
• Group EBITDA loss in FY2022 is £13.5m before exceptional items
(FY2021: £3.1m1 profit) as a result of the expected decline in revenue
and in line with guidance
• Discontinued operations loss of £3.5m in FY2022 (FY2021: £3.7m loss)
• Loss after tax increased to £25.7m in FY2022 (FY2021: £9.7m loss)
• Cash position at 31 December 2022 was £87.0m (2021: £101.7m) and
the Company remains debt free
1 In accordance with IFRS 5, the net result of the Lab21 Products business has been reported on a separate line “loss from discontinued operations” in
the consolidated income statement for 2021 and 2022.
Annual Report and AccountsBusiness Overview 10
11 11
Strategic Report
James Wakefield
Chairman, Novacyt S.A.
“The Company intends to continue to focus on its
core strengths of in-vitro diagnostic product and
instrumentation development and commercialisation
by driving value from its Primer Design and IT-IS
businesses. We intend to continue to grow both
organically and through selective acquisition.”
Chairman’s Statement
In my report last year, I said that we were predicting a
significant reduction in the demand for COVID-19 tests, but
that it would be extremely difficult to predict exactly what
the requirements and the rate of fall off in demand would
be. We took the view that the most prudent measure was
to plan for a rapid reduction and to assume that we needed
to diversify away from almost all COVID-19 products and
seek to service a wider geographic area with a broader
range of related products. This turned out to be exactly
what happened with regular testing in different industries
reducing significantly, with the film industry being one of
the last sectors to continue with testing throughout 2022
and only stopping as a matter of course during H1 2023.
The Group has re-focused on its core activities of RUO and
clinical diagnostics in conjunction with its instrumentation
manufacture and distribution. A core skill of our highly
experienced staff is identifying new trends in the market
at an early stage, being extremely nimble and developing
new tests rapidly as a particular disease outbreak occurs.
Our R&D team has a very strong reputation in the market
for developing tests very quickly due to their significant
skills and commitment combined with the Group’s
willingness and ability to adapt to ever-changing situations
and priorities. We are continuing to develop new products
in our test portfolio and to develop new derivatives of
existing tests. In parallel, a number of other longer term
R&D projects are ongoing to ensure that we retain a leading
edge in our product portfolio development.
On behalf of the Board, I would like to acknowledge the
efforts of David Allmond during the short period he was
with us as CEO, when a significant drop in revenue was
inevitable post COVID-19. I would also like to particularly
thank James McCarthy for his efforts since stepping into
the position of acting CEO. In addition, there have been a
number of other changes within the executive management
team as we have responded to the post COVID-19 era by
making necessary cost reductions.
We remain committed and focused on becoming a leading
global clinical diagnostics company in the fight against
infectious diseases as we build towards the next phase of
growth. We will continue to make a significant contribution
to global health, whilst seeking to continually deliver value
to our Shareholders. We are investing in non-COVID-19
product development to tackle high unmet needs and
bolster our business development efforts, with a clear
strategic focus.
Novacyt has a track record of speed and agility in
delivering critical products, as demonstrated in its
response to the COVID-19 pandemic, and previous
outbreaks including Zika, H1N1 (Swine Flu), and Ebola.
During the 2022 period under review, we generated
revenues of £21 million. The Company remains debt
free with a cash position at 31 December 2022 of over
£80 million. We are delighted to be working with Allegra
Finance as our French listing sponsor and SP Angel
Corporate Finance LLP as our Nominated Advisor/
Broker; Numis continues to act as our joint broker.
Following a detailed review of the Lab21 and Microgen
businesses at the start of 2022, the decision was taken
to close both businesses and consolidate operations
at Primer Design in Southampton, Hampshire and ITIS
in Stokesley, North Yorkshire. The Company intends
to continue to focus on its core strengths of in-vitro
diagnostic product and instrumentation development
and commercialisation by driving value from its Primer
Design and IT-IS businesses. We intend to continue to
grow both organically and through selective acquisition.
We are not proposing to pay a dividend for the financial
year ended 2022. The future dividend policy will
be reviewed on an annual basis as part of a wider
review of capital allocation, which will be formulated
in conjunction with the requirements for continued
investment in the business or future acquisitions to
maximise Shareholder value, taking into account the
prevailing financial conditions in the markets in which
the business operates.
The Company is listed on two stock exchanges:
Euronext Growth Paris and AIM London. As such, the
Board remains committed to maintaining the highest
standards of transparency, ethics and corporate
governance, whilst also providing leadership, controls
and strategic oversight to ensure that we deliver value
to all our stakeholders.
Finally, I would like to take this opportunity of thanking
you, the Shareholders, for your continued support, and
also to thank the Board, the Executive management
team and all of our staff for their commitment and
contribution to the business.
James Wakefield
Chairman
Strategic ReportAnnual Report and Accounts 12
Shaping the Future with
the Right Portfolio
With a heritage of diagnostic testing in the food and veterinary industries
for the Life Sciences and Clinical Diagnostics areas, Novacyt will continue
to develop into a global leader in the fight against infectious diseases.
The COVID-19 pandemic has carved out a new segment for simple,
scalable molecular diagnostics in decentralised settings with a targeted
multi-panel approach.
Scalable decentralised testing
Portfolio development
Before the pandemic, molecular testing was primarily
confined to medium to large-size laboratories with
high-output instruments. However, there has been
a shift towards acute, decentralised settings where
syndromic testing is being adopted. To address this
trend, Novacyt has committed to providing versatile
solutions for decentralised testing, including a
range of innovative products and technologies such
as mobile processing laboratories (VersaLabTM
MPL), lab-in-a-box products (VersaLabTM Portable),
small-scale automated liquid handling systems
(CO-PrepTM), and a user-friendly direct-to-PCR
platform (PROmateTM). The company’s goal is to
make molecular diagnostics accessible to everyone,
everywhere, and to provide accurate and reliable test
results even in decentralised settings.
At the height of the COVID-19 pandemic, our
PROmateTM technology was developed to provide
total viral inactivation, with a ready prepared master
mix containing internal control for run validity. This
means there is no need for a category 2 laboratory to
handle the live virus, so the risk in handling is nullified,
and tests can be performed nearer to patients. With
the success of accurate detection of SARS-CoV-2,
PROmateTM is being explored with other pathogens to
continue the application of Novacyt’s innovation and
expertise to support other healthcare threats.
Novacyt conducted a comprehensive market study in
2022 to identify high-growth infectious disease areas.
Based on the findings, Novacyt has prioritised the
commercialisation of diagnostic products for gastro-
intestinal infections, insect-borne pathogens, respiratory
illnesses, and sexually transmitted infections (STIs).
These represent the current developmental focus for
Novacyt in 2023, with the gastro-intestinal diagnostic
products scheduled for launch in 2024; insect-borne,
2025. In addition to these priority disease areas, Novacyt
has identified other disease areas as opportunities
for growth and menu differentiation. As a result, the
company will be launching a range of new products over
the course of 2023, initially targeting the Life Sciences
sector. These products will be used for prevalence
monitoring and in clinical laboratories as laboratory-
developed tests (LDTs), with a view to adding to the
diagnostic roadmap based on market feedback.
Each new product will be developed in conjunction
with Novacyt’s instrumentation, enabling effective
deployment in decentralised laboratories. These
products will add to Novacyt’s diagnostic portfolio,
which already includes COVID tests and our genesigTM
Winterplex kit for seasonal respiratory illnesses (Flu,
RSV, SARS-CoV-2). Additionally, Novacyt distributes an
infectious disease portfolio in partnership with Clonit srl.
13
Test Opportunity Comparison
Test Opportunity Comparison
Better Fit
STI
Common
Illnesses
V
GI Viral
B
GI Bacterial
Less
Attractive
Blood-borne
Viruses
Other Resp
Viruses
V
UTI
Meningitis/
Encephalitis
Transplant
More
Attractive
Insect-borne
Eye
Infection
Joint
Infection
Atypical
Pneumonia
B
Worse Fit
Recommended
Legend
Bubble size indicates
relative size of total
addressable market
MARKET ATTRACTIVENESSSTRATEGIC FIT FOR NOVACYTStrategic ReportAnnual Report and Accounts 15
14
Shaping the Future with
the Right Portfolio
Seasonal respiratory illnesses
Sexually-Transmitted Infections
Sexually-Transmitted Infections (STIs) are a major
public health concern globally, with over 376 million
new cases reported each year. The total market value
of this segment was estimated at $22.42 billion in
2019 and is expected to grow at a CAGR of 8.2% to
reach $39.11 billion by 2027. The market is made up
of molecular diagnostics, immunoassays, and other
diagnostic tests, with molecular diagnostics accounting
for the largest share of the market.
Molecular diagnostics are highly accurate and
sensitive in detecting STIs, making them the preferred
method for diagnosis. The most common STIs that
can be detected using molecular diagnostics include
Chlamydia, Gonorrhoea, Human Papillomavirus
(HPV), Herpes Simplex Virus (HSV) and Human
Immunodeficiency Virus (HIV). Early detection of STIs
is critical as it can prevent the spread of the infection
and reduce the risk of complications such as infertility,
pelvic inflammatory disease and cancer.
Overall, the STI testing market is a rapidly growing field,
with molecular diagnostics playing a central role in
accurate and sensitive diagnosis. As the burden of STIs
continues to rise, particularly in developing countries,
the need for effective testing and treatment is critical.
The use of molecular diagnostics in STI testing is
expected to grow significantly in the coming years,
particularly for early detection and screening purposes.
The COVID-19 pandemic has taught us that identifying
the right seasonal respiratory testing solutions and
ensuring healthcare providers have the right tools to
support optimal treatment is more critical than ever.
Prioritisation of seasonal respiratory diagnostics,
especially where winter diseases are prevalent,
remains essential to governmental policies and
health economies worldwide. The global addressable
market of seasonal respiratory diagnostics is estimated
to be $1,372 million for 2022 growing at a CAGR of
4% to 2026.
Viral and bacterial gastrointestinal disease
Diagnostics offer valuable insights when a patient is
suspected of suffering from a gastrointestinal (GI)
disease or disorder; or if a patient reports unexplained
symptoms in their gut. Diagnostic tests and procedures
can range from invasive to non-invasive and can help
healthcare professionals learn more about the causes,
symptoms, and severity of different health conditions.
Providing simple and easy-to-use test solutions
saves time to diagnose and provide vital information
on patients’ health, eventually saving lives. Global
GI diagnostics (including viral and bacterial) total
addressable market is estimated to be $632 million
for 2022 growing at a CAGR of 5% to 2026.
Insect-borne pathogens: connecting to
clinical and first responder strategy
Insect-borne or vector-borne diseases are emerging
or re-emerging in many geographical areas, especially
in tropical and subtropical regions, and they
disproportionately affect the poorest populations.
The emergence of these diseases is starting to
raise alarms on new health threats and economic
losses. Besides vector control, the WHO has urged
other medical organisations to provide technical
support to manage cases and outbreaks. With our
established relationships with aid agencies, it remains
an opportunity for us to provide diagnostics tools that
can rapidly give results. The total addressable market
of insect-borne diagnostics globally is estimated to be
$156 million for 2022 growing at a CAGR of 5% to 2026.
Strategic ReportAnnual Report and Accounts 16
17 17
Chief Executive Officer’s Review
James McCarthy
Acting Chief Executive Officer
In early 2022 the business set out a new strategy to transition to a post-
COVID-19 market and this remains in place today. This strategy focused
on the twin objectives of portfolio development and geographic expansion
underpinned by our credentials as an agile, world-leading provider of
integrated RUO and clinical diagnostics. In parallel the business will continue
to evaluate strategic opportunities, which would accelerate our growth
including licensing, partnerships and acquisitions.
Whilst the strategy has not changed, the 2022
trading environment was much more volatile than
expected. 2022 saw a sharp reduction in COVID-19
sales, falling from £10.6m in Q1 2022 to £4.1m for
the total Q2-Q4 period. This decline which was much
faster than expected prompted the business to
accelerate its post-COVID-19 product development
efforts both internally and externally and to execute
a significant cost rightsizing to protect investment
in R&D and commercial activities. As we accelerate
our product development activities it is also worth
noting that the application of IVDR from May 2022
means that product development cycles for clinical
products from product design to launch are likely to
be in the 24-month range going forward versus
6 months under the previous IVD process.
Product development
In July 2022 the Company relaunched its extensive and
established RUO portfolio ensuring primers and probes
were best in class to reliably target current pathogens.
By year-end the team optimised and verified the re-
designs of 25 RUO products as well as new RUO assays
for Monkeypox and Adenovirus F41.
As the product development pathway for clinical
products is significantly extended under IVDR the
company will now develop RUO versions of its
target therapeutic areas as a first step. This activity
is well underway with the development of up to
10 new multiplex products in 2023 in the areas of
gastrointestinal, respiratory and insect-borne infections.
Through a combination of internal R&D and 3rd party
sourcing the Company has already launched a portfolio
of CE marked clinical assays in the following areas:
• A winter respiratory panel with the internally
developed genesigTM Real-time PCR SARS-CoV-2
Winterplex launched in Europe and CTDA approved
for UK launch in October 2022
• Sexually-transmitted infections (STIs)
(e.g. Chlamydia trachomatis, Neisseria
gonorrhoeae, Trichomonas vaginalis)
• Gastrointestinal infections (e.g. Clostridium
difficile, Enterovirus)
• Respiratory (RI) (e.g. Mycoplasma pneumoniae)
• Two single analyte transplant viral assay panels for
the Epstein-Barr virus and BK virus for use on open
instrument platforms during the period.
These products and enhanced workflow will be targeted
where there is a need for cost-effective, rapid and highly
precise diagnostic testing. Based on market research,
we believe the key market for this offering is in routine
testing in mid-to-low volume spoke laboratories and
non-routine services in hub laboratories. As identified
in April 2022 at the strategy update, we will target these
markets due to our differentiated customer offering.
For Europe, which is our initial target geography with CE
marked products, the Company estimates a market size
of circa £470m growing at a CAGR of 10%. The mid-
term goal is to offer this to customers worldwide.
Strategic ReportAnnual Report and Accounts 18
19
19
Chief Executive Officer’s Review
Our molecular portfolio is complemented by an
extensive range of lateral flow (LFT) diagnostic tests
for clinical use. The range aligns with the target disease
areas covered by the molecular portfolio and has been
further enhanced with the launch of two new LFT
readers for use in conjunction with a number of key
assays within Novacyt’s PathflowTM product portfolio.
The small, lightweight reader is designed to provide
digital test results based on optical imaging technology,
thereby removing the ambiguity of manually interpreting
a reading. The result is available in a matter of seconds
(~10-12 secs) in a digital form that can be exported to
other systems.
Instrumentation & workflow
Novacyt has made considerable progress enhancing its
post-COVID-19 integrated sample-to-result molecular
workflow solution. We have validated a nucleic acid
extraction system and we have launched an automated
liquid handling system (CO-PrepTM) for assay set up that
complements our proprietary q16 and q32 instruments
and user-friendly direct-to-PCR assays to deliver an
end-to-end scalable workflow solution capable of
processing over 1,000 tests per day. The new workflow
reduces hands-on time and risk of contamination
whilst providing robust sample stewardship to reduce
the chance of human error. The complete workflow
platform can be used where currently decentralised
sample-to-result solutions are not easily scalable, slow,
and costly.
COVID-19 portfolio
To ensure Novacyt remains well positioned for any
future COVID-19 outbreaks in both developed and
developing markets, the Company has consolidated
its portfolio. To this end, Novacyt secured CE mark
accreditation for its saliva-based PathFlowTM COVID-19
Rapid Antigen Self-Test and an ambient version of
its PROmateTM COVID-19 2G assay designed for
international shipping. Both tests complement the
Company’s established genesigTM COVID-19 Real-Time
PCR portfolio and PROmateTM COVID-19 direct to PCR
1G and 2G assays.
Geographic expansion
Business development
In addition to the internal development of the new
portfolio, the Company continues to assess strategic
M&A, partnership and licencing opportunities as a
priority to add scale and diversification to support the
long-term growth of the business.
In January 2023 Novacyt entered into an exclusive
development agreement with Eluceda Ltd, a specialist
developer of electrochemical sensors, to develop novel
biosensor technology in the fields of human and animal
in vitro diagnostics, life science research and animal
speciation. This follows a collaboration in 2022, where
the companies worked together to deliver a proof-of-
principle human infectious disease biosensor. Both
Novacyt and Eluceda believe that the technology has
the potential to be highly disruptive in the assigned
fields. Development of two products has started and
the first product is expected to launch early in 2024.
I would like to thank the Board and our shareholders for
their continued support throughout the year and all our
employees for their passion, resilience and hard work
during a difficult year of transition as we build the post
COVID-19 portfolio.
James McCarthy
Acting Chief Executive Officer
During the period, Novacyt has focused on deploying
talent in key geographies and optimising its global
distributor network to build coverage in new markets
to ensure optimal coverage for its recently relaunched
RUO portfolio and its growing clinical offering. Through
this work, coverage has been increased across EMEA
and the Company has begun conducting distributor
training on its full portfolio, including its expanded
clinical portfolio and workflow.
• Commercialised Winterplex panel with sales to
hospitals in both the UK and Ireland
• Partnering with a global fisheries company in the
development of tests and workflow for more efficient
management of fish stocks, initial sales have been
focussed on their North American subsidiary and we
are now engaging with other global sites to identify
their testing needs
• As the APAC region begins to open up post
COVID, we are re-engaging with new and existing
distributors across the region with the RUO reagent
and instrument products
• Signed a contract with a leading global non-
governmental organisation (NGO) to support the
detection of arboviruses, including dengue, Zika and
Chikungunya. This has now been extended to include
West Nile Fever, Hepatitis A & E, haemorrhagic fever
with further orders received. We also anticipate
sales of our RSV test in the near term and they are
currently evaluating our Winterplex product for
deployment across the African region
• Partnering with a leading Health care company in
India to supply both reagents and instrumentation
The company expects to launch an updated version of
www.novacyt.com in H1, that will include a transition
of all e-commerce from legacy sites to the updated
site. All existing product pages from legacy sites will
also be transferred, plus new product page content
will be added. The new site will also include webshop
functionality, as well as a customer portal offering
instrument registration and software upgrades.
Annual Report and AccountsStrategic Report 20
21 21
Section 172(1) Statement
The Directors acknowledge their duty under s172 of the Companies Act
2006 and consider that they have, both individually and together, acted in the
way that, in good faith, would be most likely to promote the success of the
Company for the benefit of its members as a whole. In doing so, they have
had particular regard to:
The likely consequences of any decision
in the long term
The impact of the Company’s operations
on the community and the environment
The Group’s long-term strategic objectives, including
progress made during the year, and principal risks to
these objectives, are set out in the Chief Executive
Officer’s Review on pages 16 to 19, and in the
Principal Risks and Risk Management section on
pages 62 to 69 respectively.
The interests of the Company’s employees
Our employees are fundamental to the Group
achieving its long-term strategic objectives,
and further disclosure on how we look after the
interests of our employees is contained in Principle
3 of the Corporate Governance Statement on pages
44 to 45.
The need to foster the Company’s
business relationships with suppliers,
customers and others
A consideration of our relationship with wider
stakeholders and their impact on our long-term
strategic objectives is disclosed in Principles 2 and
3 of the Corporate Governance Statement on pages
44 and 45.
The Group operates honestly and transparently. We
consider the impact of our day-to-day operations on
the community and the environment, and how this
can be minimised, as more fully explained in Principle
3 of the Corporate Governance Statement on pages
44 to 45. Further disclosure on how we promote
a corporate culture based on ethical values and
behaviours is included in Principle 8 of the Corporate
Governance Statement on page 50.
The desirability of the Company
maintaining a reputation for high
standards of business conduct
Our intention is to behave in a responsible manner,
operating within a high standard of business conduct
and good corporate governance. This is explained
more fully in our Corporate Governance Statement
on pages 44 to 52, and is also encapsulated in our
risk management framework on pages 62 to 69.
The need to act fairly as between
members of the Company
Our intention is to behave responsibly towards our
Shareholders and to treat them fairly and equally
so that they may also benefit from the successful
delivery of our strategic objectives.
Strategic ReportAnnual Report and Accounts 22
Financial Review
James McCarthy
Chief Financial Officer
Novacyt S.A.
Novacyt’s 2022 performance was impacted by a
faster than anticipated decline in COVID-19 related
sales and, as such, is reporting a loss for the year.
During the second half of 2022 the Group made good
progress on i) transitioning away from its reliance
on COVID-19 revenue and ii) right sizing its cost
base. During the period the Group carried out a large
restructuring exercise to reduce its opex cost base,
which saw over 100 employees leave the Group.
23 23
Novacyt generated sales of £21.0m, an EBITDA loss of
£13.5m and a loss after tax of £25.7m.
Cash at the end of 2022 was £87.0m, which continues
to provide the Group with a solid foundation for its
future strategy.
Discontinued operations
In early 2022, Novacyt carried out a strategic review
of the Lab21 Healthcare and Microgen Bioproducts
businesses to consider the merits of maintaining
multiple company entities/names under the Novacyt
Group umbrella versus a simplified business model
and brand, which the Directors believed could be
more impactful. Novacyt announced its intention to
discontinue both businesses in April 2022, and they had
ceased day-to-day trading at the end of June 2022.
In accordance with IFRS 5, the net results of Lab21
Healthcare and Microgen Bioproducts have been reported
on a separate line “loss from discontinued operations” in
the consolidated income statement for FY2022 and 2021.
Revenue
Revenue for 2022 fell to £21.0m compared with
£92.6m in 2021, driven by reduced demand for
COVID-19 testing as we emerge from the pandemic.
Primer Design delivered sales totalling £19.6m whilst
IT-IS International delivered sales of £1.4m for 2022.
Gross profit
The business delivered a gross profit of £5.7m (27%),
compared with £28.2m (30%) in 2021. The margin, at
27%, is significantly below the Group’s historic margin
(60%+) predominantly driven by the impact of stock
in the form of i) booking a higher stock provision than
normal as a result of lower forecast COVID-19 sales
and ii) writing off stock that had not been provided for
previously. Excluding the impact of these items, the
margin would be in excess of 60%. The 2021 gross profit
was impacted by the £35.8m one-time cost of sales
exceptional charge relating to the DHSC dispute.
Operating expenditure
Group operating costs fell by £5.8m to £19.3m in 2022
compared with £25.1m in 2021. Savings are mainly due to
lower staff costs, as average headcount for the continuing
operations has fallen from circa 239 in December 2021
to circa 137 in December 2022 as a result of the Group-
wide restructuring programme. Further savings have
been made in legal and professional fees, commercial
insurance, as the business contracts, and facilities.
The business continued to invest in research and
development, which saw a year-on-year increase in
expenditure that supported bringing a number of new
products to the market.
EBITDA
The Group reported an EBITDA loss of £13.5m for
2022 compared with a profit of £3.1m in 2021. The
£16.6m swing from EBITDA profitability in 2021 to an
EBITDA loss in 2022 is driven by reduced gross profit
contributions of £22.5m as a result of lower sales,
partially offset by a £5.8m fall in operating expenditure.
Operating loss
The Group reported an operating loss of £23.4m
compared with a 2021 loss of £3.9m, predominantly
driven by lower year-on-year sales. Year-on-year,
depreciation and amortisation charges have increased
by £0.3m to £2.1m due to the annualised effect of
reporting twelve months of depreciation on a number
of material asset additions during late 2021.
Other operating expenses have increased from
£5.2m to £7.7m. The main items making up the
2022 charge are i) a £5.2m impairment charge
in relation to the goodwill and intangible assets
associated with IT-IS International acquisition due
to reduced future expected cash flow generation,
ii) £1.3m restructuring expenses predominantly
covering redundancy payments, iii) £0.9m costs in
relation to the ongoing DHSC contract dispute and
iv) £0.3m of other expenses.
Loss after tax from continuing operations
The Group reported a loss after tax from continuing
operations of £22.2m, compared to a loss of £6.0m
in 2021. Other financial income and expenses netted
to a £3.3m income compared with a £1.7m charge in
2021. The two key items making up the balance are
i) a £2.4m net financial foreign exchange gain mainly
resulting from revaluations of the 2017 to 2020 LTIP
Strategic ReportAnnual Report and Accounts 24
Financial Review
scheme liability and bank and intercompany accounts
held in foreign currencies and ii) with interest rates rising
the Group received £0.6m interest on deposits held in
bank accounts. Taxation at £2.1m compared with £0.3m
in 2021 is predominantly as a result of the movement in
deferred tax.
Loss from discontinued operations
In accordance with IFRS 5, the net result of the Lab21
Products business has been reported on a separate line
“Loss from discontinued operations” in the consolidated
income statement for 2022 and 2021.
Lab21 Products reported a loss after tax of £3.5m in 2022
versus a loss of £3.7m in 2021. The 2022 loss includes
closure costs totalling circa £1.8m made up of i) a £1.0m
impairment charge of right-of-use assets (Camberley
facility lease), ii) £0.6m impairment charge of remaining
property, plant and equipment and iii) £0.2m redundancy
costs. The 2022 tax expense of £0.4m is primarily due
to the release of all deferred tax balances, as unused tax
losses cannot be utilised by the Group post closure.
Earnings per share
2022 saw a loss per share of £0.36 compared to
a loss per share of £0.14 in 2021, as a result of the
loss widening.
Non-current assets
Goodwill has fallen from £11.5m in 2021 to £6.6m in
2022. Following the 2022 impairment review, goodwill
associated with the acquisition of IT-IS International
Ltd has been impaired by £5.2m as a result of reduced
future expected cash flow. The remaining £0.3m is due to
exchange revaluations on the acquisition of Primer Design
goodwill balance, which is held in Euros.
Right-of-use assets have decreased from £1.8m at 31
December 2021 to £0.5m at 31 December 2022, largely as
a result of fully impairing the right-of-use asset associated
with the Camberley facility following the closure of the
Lab21 Products business that operated from that site.
Property, plant and equipment has decreased by £1.8m
from 31 December 2021 to £2.8m at 31 December 2022,
driven by four main factors i) £1.0m depreciation costs,
ii) £0.6m impairment costs for fixed assets associated
with the Lab21 Products business, iii) £0.4m impairment
costs for lab equipment that will not be of use to
the Novacyt Group and iv) offset by capital purchases
of £0.2m.
Deferred tax assets have decreased from £3.1m at
31 December 2021 to £0.6m at 31 December 2022.
The 2022 balance relates to Primer Design, where a
£0.6m deferred tax asset, relating to carried forward tax
losses, has been recognised to offset its £0.6m deferred
tax liability on accelerated capital allowances. The
remaining deferred tax assets have not been recognised
at 31 December 2022 on the basis that they may not be
recoverable in the near-term. At 31 December 2022, the
Group has unused tax losses of over £70.9m (covering
France & the UK) available for offset against future
relevant profits and their period of use is unlimited.
Other non-current assets have reduced by £0.8m to
£3.1m as at 31 December 2022 largely driven by the
amortisation of intangible assets.
Current assets
Inventories and work in progress has fallen significantly
from £11.5m at 31 December 2021 to £3.0m at 31
December 2022, this is mainly due to i) providing for
stock that is at risk of not being sold due to the fall in
expected future demand for COVID-19 related products
and ii) writing off stock that has expired in 2022 that was
not previously provided for.
Trade and other receivables has fallen by £4.8m to
£33.7m at 31 December 2022 in line with a decline in
sales. The trade receivables balance includes a £24.0m
unpaid DHSC invoice raised in December 2020, in respect
of products delivered during 2020 that remains unpaid
at the date of publishing the accounts. Recovery of the
invoice is dependent on the outcome of the contract
dispute. Also included in trade and other receivables is a
£8.3m VAT receivable balance (December 2021: £8.2m),
that mainly relates to UK VAT paid on sales invoices in
dispute with the DHSC. As these sales have not been
recognised in accordance with IFRS 15, the revenue, trade
receivable and VAT element of the transactions have
been reversed, resulting in a VAT debtor balance.
Tax receivables has fallen by £3.9m to £1.1m at 31
December 2022, as the Group received a refund for the
overpayment of 2020 corporation tax from HMRC in
25
25
March 2022. The current balance relates to 2021 losses
that can be carried back for relief against 2020 taxable
profits totalling £0.5m and a Research and Development
Expenditure Credit (RDEC) accrual covering 2021 and
2022 totalling £0.6m.
Other current assets have increased to £2.4m from £2.0m
in 2021, driven by a £0.2m increase in prepayments and
a £0.2m increase in short-term deposits, which includes
rent deposits due back to the Group. Prepayments at 31
December 2022 include the annual Group commercial
insurance, rent, rates, prepaid support costs and stock
that had not been delivered at the reporting date.
Current liabilities
Contingent consideration fell from £0.8m to £nil in
2022 as a result of settling the final earnout milestones
associated with the IT-IS International acquisition
concluding the payments for the acquisition.
Short-term provisions remained flat year-on-year at
£20.3m (2021: £20.0m). A product warranty provision
for £19.8m booked in 2020 to cover Management’s view
of the maximum cost of replacing products in relation to
the ongoing commercial dispute with the DHSC remained
unchanged in 2022.
Trade and other liabilities fell to £2.8m at 31 December
2022 from £17.2m at 31 December 2021, predominantly
as a result of payments made during the year in relation
to the 2017 to 2020 LTIP scheme, together with a £2.6m
decrease in trade payables and accrued invoices in line
with reduced sales.
Non-current liabilities
Non-current liabilities has fallen by £1.5m to £1.4m at 31
December 2022. The main driver for this is the reduction
in the long-term lease liability as a result of Microgen
Bioproducts negotiating the surrender of its Watchmoor
Point leased facility based in Camberley, which was
agreed in 2022 and settled in early 2023.
Cash flow
Cash held at the end of 2022 totalled £87.0m compared
with £101.7m at 31 December 2021. Net cash used in
operating activities was £13.7m for 2022 made up of a
working capital outflow of £0.2m and an EBITDA loss
of £13.5m, compared to 2021 that generated a cash
inflow of £15.7m.
Net cash used in investing activities fell to £1.2m from
£5.0m in 2021. Capital expenditure in 2022 fell to
£0.4m compared with £4.1m in 2021, when the Group
heavily invested in insourcing manufacturing during
2021. In addition, acquisition related cash outflows
reduced by £0.1m year-on-year as a result of the final
earnout milestone associated with the IT-IS acquisition
being lower than the previous year’s payment.
Net cash generated from financing activities in 2022
totalled £0.1m compared to a cash outflow of £0.6m
in 2021. The Group has benefited from interest rate
rises throughout 2022, generating £0.6m interest
income from its cash balances, which has been offset
by lease payments totalling £0.5m.
The Group remains debt free at 31 December 2022.
Patent box
On 30 March 2022 Novacyt (specifically Primer Design
Ltd) received confirmation that the UK Intellectual
Property Office had granted the key patent (ORF1a/b),
with patent number GB2593010. This means that the
effective rate of tax on profits (adjusted for certain
rules) derived from the sale of products incorporating
this patent is close to 10% rather than the current
(FY2022) UK corporation tax rate of 19%.
The effective tax rate is given via a tax deduction and
due to the uncertainty over the precise timing of the
tax relief available to the company and the complexity
involved in making a claim for the first time, a tax
asset has not been recognised. The asset will only be
recognised when Management can reliably measure
and predict the outcome of a Patent Box claim in
terms of value and timing.
James McCarthy
Chief Financial Officer
Novacyt S.A.
Annual Report and AccountsStrategic Report 26
Sustainability
Novacyt continues to focus on Environment, Social and Governance
(“ESG”) matters. We are pleased to share ESG data in this Annual Report
and will continue to develop our approach over time. Environment and
Social information is covered in this section, while our overall approach to
Governance is addressed on page 42.
Methodology
The following methodology was applied in the
preparation and presentation of this data:
•
the Greenhouse Gas Protocol published by
the World Business Council for Sustainable
Development and the World Resources Institute
(the “WBCSD/WRI GHG Protocol”);
• application of appropriate emission factors to
Novacyt’s activities to calculate GHG emissions;
• application of location-based emission factors for
electricity supplies;
•
inclusion of all the applicable Kyoto gases,
expressed in carbon dioxide equivalents, or
CO2e; and
• presentation of gross emissions as Novacyt does
not purchase carbon credits (or equivalents).
Environment: measuring our impact
Streamlined Energy & Carbon Reporting
This report is Novacyt’s third year of reporting
under the new Streamlined Energy & Carbon
Reporting requirements.
The reporting period is the same as the Company’s
financial year, 1 January 2022 to 31 December 2022.
Organisation boundary and scope of
emissions
We have reported on all of the emission sources
required under the Companies Act 2006 (Strategic
Report and Directors’ Reports) Regulations 2018.
These sources fall within Novacyt’s consolidated
financial statement.
An operational control approach has been used in order
to define the organisational boundary. This is the basis
for determining the Scope 1, 2 and 3 emissions for
which Novacyt is responsible, and includes emissions
from Novacyt’s two operational facilities:
• Primer Design, based in Southampton, UK; and
•
IT-IS International, based in Stokesley,
Middlesbrough.
The Microgen and Lab21 businesses were closed
during 2022 therefore we have removed the data
relating to them from both 2021 and 2022 to create a
comparable baseline.
27
27
Total energy use
The total energy use for Novacyt for the year ending 31 December 2022 was 588,023 kWh excluding Microgen
and Lab21. This represents a 16% decrease in total emissions compared to the year ending 31 December 2021
(700,334 kWh) excluding Microgen and Lab21. The decrease in total emissions in 2022 relative to 2021 can be attributed
to the reduction in operations and production post COVID-19 during the course of 2022.
2021
2022
Primer Design
IT-IS
Total
Primer Design
IT-IS
Total
Gas1
98,689
107,077
205,766
73,787
106,575
180,362
Electricity2
392,045
102,523
494,569
356,991
50,670
407,661
Transport3
-
-
-
-
-
-
Total
490,734
209,600
700,334
430,778
157,245
588,023
References:
1 Scope 1 covers direct emissions from sources owned or controlled by the Company, including emissions from fuel combustion (e.g. emissions
from combustion in owned or controlled boilers, furnaces, vehicles, etc.), process emissions (e.g. emissions from chemical production in owned or
controlled process equipment), and fugitive emissions (e.g. intentional and unintentional). Of the aforementioned facilities or assets, only natural gas
combustion within boilers is applicable to Novacyt’s operations.
2 Scope 2 covers energy use and related emissions from electricity purchased for Novacyt’s own use.
3 Scope 3 covers energy use and related emissions from business travel in rental cars or employee-owned vehicles where Novacyt is responsible for
purchasing the fuel. Novacyt does not purchase fuel for business travel or employee-owned vehicles, as such Scope 3 emissions are not applicable
based on the defined organisational boundary.
Annual Report and AccountsStrategic Report 28
Sustainability
Absolute emissions
The total Scope 1, 2 and 3 GHG emissions from
Novacyt’s operations in the year ending 31 December
2022 were 110.8 tonnes of CO2 equivalent (tCO2e)
excluding Microgen and Lab21, using a ‘location-based’
emission factor methodology for Scope 2 emissions.
This represents a 22% decrease in total emissions
compared to the year ending 31 December 2021
(142.7tCO2e) excluding Microgen and Lab21. As with
total energy use, the decrease in total emissions in
2022 relative to 2021 can be attributed to the reduction
in operations and production post COVID-19 during the
course of 2022.
Primer Design
18.1
83.2
-
101.3
2021
IT-IS
19.6
21.8
-
41.4
Total
Primer Design
37.7
105.0
-
142.7
13.4
68.3
-
81.7
2022
IT-IS
19.4
9.7
-
29.1
Total
32.9
77.9
-
110.8
Scope 14
Scope 25
Scope 36
Total
References:
4 Scope 1 data calculated by multiplying total fuel consumption (gas – kWh) by the UK Government GHG Conversion Factor for natural gas defined for
the given year (2021: 0.18316kg CO2e/kWh; 2022: 0.18219 kg CO2e/kWh).
5 Scope 2 data calculated by multiplying total electricity consumption (kWh) by the UK Government GHG Conversion Factor for electricity generated
defined for the given year (2021: 0.21233 kg CO2e/kWh; 2022: 0.19121 kg CO2e/kWh).
6 Novacyt does not purchase fuel for business travel or employee-owned vehicles, as such Scope 3 emissions are not applicable based on the defined
organisational boundary.
29
29
Intensity ratios
As well as reporting the absolute emissions, Novacyt’s
GHG emissions are reported below on the metrics of
kg of CO2 equivalent per full-time employee (“FTE”)
and kg of CO2 equivalent per square foot of occupied
areas. These are the most appropriate metrics given
that the majority of emissions result from the operation
of Novacyt’s offices and the day-to-day activities of
the employees. All of the intensity ratios have been
calculated using Scope 1 and Scope 2 emissions only.
The intensity metrics based on floor area in the year
ending 31 December 2022 was 27 kg CO2e per m2
which is a reduction of 22% versus last year, excluding
Microgen and Lab21. The employee number metric in
the year ending 31 December 2022 was 551.3 kg CO2e
per FTE using the location-based method which is a
reduction of 11% versus prior year, excluding Microgen
and Lab21.
2021
2022
kg CO2e/FTE7
kg CO2e/m8
kg CO2e/FTE9
kg CO2e/m10
Scope 1
Scope 2
Scope 3
163.2
454.6
-
Total GHG emissions
617.7
9.2
25.6
-
34.74
163.5
387.8
-
551.3
8.0
19.0
-
27.0
References:
7 Number of FTE equivalents in 2021 was 231 excluding Microgen and Lab21.
8 Building area in 2021 was 4.108 m2 excluding Microgen and Lab21.
9 Average number of FTE equivalents in 2022 was 201 excluding Microgen and Lab21. This decrease can be attributed to the
reduction in operations and production post COVID-19 during the course of 2022.
10 Building area in 2020 was 4108 m2 which is the same as 2022 excluding Microgen and Lab21.
Annual Report and AccountsStrategic Report 30
Sustainability
Energy efficiency actions undertaken
Novacyt has taken a number of actions to increase
the business’s energy efficiency in the year ending 31
December 2022, focused on:
i. Reducing absolute energy consumption through
capital investment projects; and
ii. Reducing energy consumption per unit output
through scaling up production (economies
of scale), increasing asset utilisation, and
increasing automation.
Principal actions reported have had a direct impact on
the energy efficiency related to Scope 1 and Scope 2
emissions, as defined by the Company’s operational
boundary for the year ending on 31 December 2022.
For increased transparency in emissions disclosure
reporting, additional information has been provided
on actions impacting the energy efficiency related
to Scope 3 emissions despite falling outside the
Company’s operational boundary.
Principal actions
Scope 1 (Gas Consumption) and Scope 2 (Electricity Usage)
Additional information Scope 3 (Transport)
Reduced energy consumption (absolute)
Reduced transportation across the value chain
• Capital investment projects
• Much of the manufacturing capability that previously required 3rd
Novacyt has reduced operational facilities with the closure
of Microgen and Lab21. In addition, the Primer Design site is
in the process of consolidating its operations facilities from
two to one site
Reduced energy consumption (per unit output)
party sub-contractors has been brought in house
• Site consolidation to one site has eliminated the transfer of stock
between sites
• Where possible, reducing partial shipments to customers
minimising shipping costs and impact on the environment
•
Improved energy efficiency through reduction of footprint
Managing waste
Novacyt has decreased manufacturing capacity with the change
in demand by decreasing the real estate footprint, leading to
increased output relative to overhead energy consumption
•
Increased asset utilisation
Novacyt has improved asset utilisation efficiency by optimising
manufacturing batch size, adopting more efficient practices
•
Increased automation
New lab equipment has been purchased creating efficiencies by
reducing cycle time and cost
• There is a continued drive within the organisation to get to right-
first-time to eliminate wasted product
• Supply chain teams have adopted planning systems and worked
with customers to provide forecasts to reduce unsold product
• Within office space, shredded bins have been introduced and
paper waste goes to recycling. Office lights have been transferred
to LEDs and are now automatic
• Unwanted furniture where possible has been donated to charities
and universities
• As part of the site consolidation and improvement projects,
materials have been recycled rather than being disposed of
Novacyt has taken action to reduce single-use waste by increasing
the materials reused and recycled through the Company’s operation.
This includes an updated anti-contamination procedure to move
from single-use disposable lab coats to reusable lab coats, and
implementation of a standard recycling practice across all sites using
recycling bins, compactors, and third-party recycling organisations
31
31
The importance of talent to Novacyt
Novacyt prides itself in the talented people we
employ, who are critical to our vision to become
global leaders in the fight against infectious diseases,
whilst ensuring we retain our competitive advantage
in a challenging market. They are passionate,
resilient, committed and continue to drive successful
performance. Our employees rapidly respond to
opportunities with innovation and agility.
How we attract and retain talent
We use several methods to attract talent from the
market. We have partnerships with a select number
of recruitment consultancies that represent us
internationally. Our “Refer A Friend” programme
rewards existing employees that recommend their
friends and family to apply to and join Novacyt and
vacancies are advertised internally across our sites.
We leverage our expertise across a wide range of
platforms such as the Novacyt career webpage, social
media sites and job boards to promote our brand and
advertise our career opportunities.
Novacyt’s workforce reduced in 2022, due to the
closure of the Microgen and Lab21 businesses plus a
further restructuring to align with projected revenue
in the post-COVID environment. The average number
of full-time equivalents fell from 276 in 2021 to 222
in 2022 (including Microgen and Lab21).
How we support our employees
We provide an Employee Assistance Programme in
order to help all our employees and their families when
faced with adversity in their lives. It offers confidential
assessments, short-term counselling, referrals, and
follow-up services to employees who have personal
and/or work-related issues. We also partner with
a specialist occupational health organisation that
provides advice to Novacyt on how we re-engage with
people who have been absent due to health issues or
extenuating circumstances that have occurred in their
lives. They help our people with how they can best
settle back into their job and career.
We offer a comprehensive and competitive range
of employment benefits for our people. We also
hold regular all employee meetings to support
communication and engagement.
Social diversity and inclusion
Novacyt actively supports diversity and inclusion
and seeks to create a culture where everyone feels
comfortable to be themselves at work and have their
contribution valued and where individual differences
can be celebrated. This approach is captured in our
Equality, Inclusion and Diversity policy.
Novacyt
Employees
Novacyt is currently 47% female: 53% male
across its employee population
Female
Male
Manager
Base
Our manager base is 46% female: 54% male
Female
Male
Annual Report and AccountsStrategic Report 33
33
32
Sustainability
Social – training and development
Supporting communities and wider society
Novacyt’s Manager Development Programme
completed in 2022 providing much appreciated
upskilling in our people management capability
with 14 employees completing the course and
receiving certification. Feedback was extremely
positive and we are seeing many of the attendees
demonstrating the skills and confidence gained
with Line Management reported in the latest
engagement survey as one of the Company’s
current strengths. Alongside internal product
training, our talented Field Application Services
team also continue to invest in upskilling our
external partners.
We support employees who
wish to undertake professional
qualifications or apprenticeships
Novacyt provides individuals with ad hoc training
courses as and when required to meet their role
requirements and career aspirations. Where possible,
we also support employees who wish to undertake
professional qualifications or apprenticeships.
Health and Safety
We have a clear policy on health and safety. Employees
are provided with health and safety training, and
protective clothing and other equipment if required.
Novacyt complies with the OHSAS 18001 standard.
Charitable giving
At Novacyt, we believe in contributing to communities
where we operate, and we have made donations to a
number of schools and charities from all over the UK
including Southampton and Middlesbrough.
During 2022, a sum of £16,000
was dedicated to supporting 35
fundraising campaigns throughout
the UK.
Following the transformational financial performance
of Novacyt in 2020, a Charity Committee was created
from key employees within the Group tasked with
identifying charities in need of support. During 2022,
a sum of £16,000 was dedicated to supporting
35 fundraising campaigns throughout the UK. We
contributed to projects supporting education, the
Ukrainian crisis, mental health, critically ill children
and adults, the homeless, old age pensioners, war
veterans and animal welfare.
The Novacyt Group is proud to have played a part in
supporting local communities and is truly humbled by
the impact our charitable donations have made to so
many people in 2022.
Annual Report and AccountsStrategic Report 34
35
The Board of Directors
Governance
James Wakefield
Non-Executive Director and Chairman
of the Board
James is an experienced private equity investor, having
spent over 35 years in the finance industry. He has
been involved with over 50 businesses of varying sizes
and stages of development across a wide range of
sectors, including Board representation as Chairman
or non-executive director in a number of these. He is
Chairman of WestBridge Capital LLP of which he was a
founder partner in 2008. He previously spent 18 years
at Bridgepoint (previously NatWest Equity Partners)
and, prior to that, spent four years at NatWest Markets/
NatWest Investment Bank.
He is also Chairman of the Nomination Committee and
a graduate of Harvard Business School (AMP).
James McCarthy
Acting Chief Executive Officer and Chief
Financial Officer
James assumed the role of Acting CEO following
the departure of David Allmond in November 2022
having joined the Group as Chief Financial Officer in
January 2021 and being appointed as a member of
the Board in October 2021. He has over 30 years of
finance experience in international businesses in both
consumer and B2B and in both private equity and
publicly listed companies. During his career, he has
led large-scale transformation initiatives both organic
and supported by M&A. He has also held general
management roles, which gives him broad commercial
experience and a strong appreciation for effective
business partnership. He is a Fellow of the Association
of Chartered Certified Accountants.
GovernanceAnnual Report and Accounts 36
37
The Board of Directors
Juliet Thompson
Independent Non-Executive Director
Juliet has 20 years of experience working as an
investment banker and strategic advisor to healthcare
companies in Europe. She has built a strong track
record of advising companies on corporate strategy,
equity and debt fundraisings and international M&A.
Her experience includes senior roles (managing
director, head of corporate finance and partner) at Stifel
Financial Corp, Nomura Code Securities and WestLB
Panmure. Juliet sits on the Board of: Indivior PLC, a
FTSE 250 UK global pharmaceutical company working
to develop medicines to treat addiction; Organox
Ltd, a private company that was spun out of Oxford
University; and Angle plc, an AIM listed company with
an FDA approved product with application in the liquid
biopsy market. Juliet is also a trustee of Leadership
through Sport & Business, a social mobility-focused
charity, and trustee of the De Hann family trusts and
Director of their associated investment companies. She
is a member of the Institute of Chartered Accountants
in England and Wales (ACA) and holds a BSc degree in
Economics from the University of Bristol, UK.
Juliet is Chair of the Audit Committee and is a member
of the Remuneration and Nomination Committees.
Andrew Heath MD, PhD
Independent Senior Non-Executive Director
Andrew is a healthcare and biopharmaceutical Executive
with in-depth knowledge of the US and UK capital
markets, with international experience in marketing,
sales, R&D and business development. In addition to his
role as Senior Independent Director for Novacyt since
2015, he is also currently Chairman of TauC3 Biologics
Ltd. He served as Chairman of Shield Therapeutics
plc from 2016–2018 and as a Non-Executive Director
of Oxford Biomedica plc from 2010-2021. From
1999–2008, Andrew was the Chief Executive Officer
of Protherics plc, taking the company from 30 to 350
members of staff and managing its eventual acquisition
by BTG plc for £220 million. Prior to this, he served as
vice president of marketing and sales for Astra Inc in the
US, and worked within clinical and academic medicine at
Vanderbilt University. He is also a former Director of The
BioIndustry Association. He graduated in medicine from
the University of Gothenburg, Sweden, where he also
completed his doctoral thesis in human toxicology. He is
a fellow of the American Academy of Clinical Toxicology
and a fellow of the UK Institute of Directors.
Andrew is Chairman of the Remuneration Committee,
and a member of the Audit and Nomination Committees.
Jean-Pierre Crinelli
Independent Non-Executive Director
Jean-Pierre is one of Novacyt’s founders, having
established the business in July 2006. He has some
30 years of experience in the car and electrical
components industry, with various roles in M&A and
business restructuring. During this period, he was
located for 10 years in Singapore, North America,
Belgium and Italy. He holds a Diplôme from ESC Le
Havre (business school, France) and a DECS (Diplôme
d’Études Comptable Supérieures, national diploma).
Jean-Pierre is a member of the Audit Committee
and was appointed a member of the Remuneration
Committee in 2023.
Annual Report and AccountsGovernance 38
Directors’ Report
General information and principal activity
Directors
Novacyt S.A. is a public limited company
incorporated and registered in France with registered
number 491 062 527.
The Directors of the Company who served during the
year ended 31 December 2022, and up to the date of
this Report are listed below.
Likely future developments in the business of the Group
are discussed in the Strategic Report.
James McCarthy
Review of business
The Chairman’s Statement on page 11, the Chief
Executive Officer’s Review on pages 16 to 19 and the
Strategic Report on pages 10 to 33, provide a review
of the business, the Group’s trading for the year ended
31 December 2022, key performance indicators and
an indication of future developments and risks, and
form part of this Directors’ Report.
The Company is listed on both Euronext Growth Paris
and on the Alternative Investment Market (“AIM”) of
the London Stock Exchange. Its principal activities in
the year under review were specialising in infectious
disease diagnostics.
Future developments
Results and dividends
The results for the period and financial position of the
Company and the Group are as shown in the financial
statements and are reviewed in the Strategic Report.
Since its inception, the Company has not paid
any dividends and the Directors do not intend to
recommend a dividend at present. In the future, the
Company’s dividend policy will form part of a wider
review of capital allocation, which will be formulated
in conjunction with the requirements of the business.
The Directors will only recommend dividends
when appropriate, and they may, from time to
time, revise the Company’s dividend policy. No
dividends will be proposed for the financial year
ended 31 December 2022 so we can continue to
invest in R&D, manufacturing and commercial
aspects of the business.
The brief biographical details of the currently serving
Directors are set out on pages 35 to 37.
Director
Capacity
James Wakefield
Non-Executive
Director and Chairman
of the Board
David Allmond
Chief Executive Officer
(until 10th November)
Chief Financial Officer
Acting Chief
Executive Officer
(from 10th November)
Company Secretary
Juliet Thompson
Independent
Non-Executive Director
Andrew Heath
Independent Senior
Non-Executive Director
Jean-Pierre Crinelli
Independent
Non-Executive Director
Edwin Snape
Independent
Non-Executive Director
(until 31st December)
39
Directors’ interests
The Directors’ interests in the Company’s shares
and the Novacyt LTIP are shown in the Directors’
Remuneration Report on pages 54 to 56.
No Director has any beneficial interest in the share
capital of any subsidiary or associate undertaking.
Directors’ indemnity provisions
The Directors have the benefit of an indemnity,
which is a qualifying third-party indemnity provision
as defined by s236 of the Companies Act 2006.
The indemnity was in force throughout the financial
period and at the date of approval of the financial
statements. In addition, the Group has purchased
and maintains Directors’ and Officers’ liability
insurance in respect of itself and its Directors.
Political and charitable donations
The Company created a Charity Committee who were
responsible for organising a number of charitable
donations and activities during the reporting period,
as explained further on page 32.
Financial instruments – risk management
The Group’s financial risk management policy is set out
in note 41 to the financial statements.
Share capital structure
The Company’s share capital, traded on Euronext
Growth Paris and AIM, comprises a single class of
ordinary shares each having a nominal value of 1/15th
of one Euro. Except as otherwise provided by law,
every Shareholder has one vote for every fully paid up
share of which they are the holder. Each ordinary share
creates a share in the Company’s assets, profits and
in any liquidation surplus. In the event of a liquidation
of the Company, any outstanding cash would be
distributed to each Shareholder in proportion to their
holdings in the Company.
The share rights follow the ordinary shares from owner
to owner and any transfers of the shares include all
dividends due and unpaid, and those due and, where
applicable, the share of the reserves (following payment
of any outstanding liabilities) of the Company.
Movements in the Company’s issued share capital
during the year under review are set out in note 33 to
the financial statements.
As of 31 December 2022, the Company’s share capital
of €4,708,416.54 was divided into 70,626,248 shares
with a par value of 1/15th of a Euro each.
Major interests
As at 31 March 2023, the Company had no
shareholders with significant shareholdings above 3%
of the issued share capital of the Company.
UK Bribery Act 2010
The Group is committed to complying with the UK
Bribery Act 2010, both within its UK and overseas
business activities.
As such, the Group has implemented an anti-bribery
policy, which has been adopted by the Board,
designed to ensure that the Group operates in an
open, transparent and ethical manner. This policy
applies to the Board and employees of the Group, and
to temporary workers, consultants, contractors and
agents acting for, or on behalf of, the Group (both in
the UK and overseas). The policy generally sets out
their responsibilities in observing and upholding a
“zero tolerance” position on bribery in all jurisdictions
in which the Group operates, as well as providing
guidance to those working within the Group on how
to recognise and deal with bribery issues and the
potential consequences.
Management at all levels of the Group is responsible
for ensuring that those reporting to them, internally
and externally, are made aware of and understand
this policy.
Significant agreements
The Company is not party to any significant agreement
that takes effect, alters or terminates upon a change
of control of the Company other than the Directors’
service contracts, details of which are set out in the
Remuneration Report.
Annual Report and AccountsGovernance 41
40
Directors’ Report
Statement of engagement with suppliers,
customers and others in a business
relationship with the Group
The Directors are mindful of their statutory duty to act
in a way they each consider, in good faith, would be
most likely to promote the success of the Group for
the benefit of its members as a whole, as set out in the
s172(1) statement on page 21. A review of the Group’s
approach to developing and maintaining relationships
with its wider stakeholders, and the impact on the
Group’s long-term strategic objectives, is set out under
Principle 3 of the Corporate Governance Statement on
pages 44 and 52.
Going concern
The Directors have, at the time of approving the
financial statements, a reasonable expectation that
the Company has adequate resources to continue in
operational existence for the foreseeable future. Thus,
they adopt the going concern basis of accounting in
preparing the financial statements.
The going concern model covers the period up to and
including April 2024. In making this assessment, the
Directors have considered the following elements:
• The working capital requirements of the business;
• A positive cash balance at 31 December 2022 of
£86,973,000;
• Payment of the Long-Term cash Incentive Plan
(“LTIP”) that commenced in 2021 and vests at the
end of 2023; and
• The DHSC commercial dispute having a trial date set
for June 2024.
The forecast prepared by the Group shows that it is
able to cover its cash needs during the financial year
2023 up until April 2024.
Independent auditor
Deloitte LLP has indicated that they are willing to
continue in office as the Group’s auditor. Under French
law the company were required to appoint a second
auditor and Alberis Audit were appointed for a period of
six years to approve the financial statements up to the
year ended 31 December 2026.
Disclosure of information to the auditor
As far as the Directors are aware, there is no
relevant audit information (that is, information
needed by the Group’s auditor in connection
with preparing their report) of which the Group’s
auditor is unaware, and each Director has taken all
reasonable steps that they ought to have taken as
a Director in order to make themself aware of any
relevant audit information and to establish that the
Group’s auditor is aware of that information.
Annual General Meeting
The Annual General Meeting of the Company will be
held on 15th June, further information can be found on
the companies website at www.novacyt.com.
By order of the Board
James McCarthy
Chief Financial Officer
Annual Report and AccountsGovernance 42
43
An Introduction from the Chairman
James Wakefield
Non-Executive Director and Chairman of the Board
Novacyt S.A.
Dear Shareholders,
As Chairman of Novacyt S.A., it is my responsibility to lead the Board to
ensure that the Group has in place the strategy, people, structure and culture
to deliver value to Shareholders and other stakeholders of the Group over the
medium to long term. During 2022, the Group focused on building its post-
COVID-19 growth strategy to become a leading, global clinical diagnostics
company in the fight against infectious diseases through product portfolio
expansion, geographic expansion, and business development. Following
his departure in November 2022, I would like to thank David Allmond for his
focus on helping to formulate a post-COVID-19 strategy for the Company.
I would also like to thank Edwin Snape for his
significant contribution and the support he has provided
to the Board over many years. Ed took the decision to
retire at the end of 2022 after being a Board member
for over 10 years.
Internal control procedures continue to be reviewed,
with improvements made when identified. On behalf
of the Board, I am, therefore, pleased to present our
Corporate Governance Statement for the year ended
31 December 2022.
Novacyt S.A. is incorporated in France and is listed
on Euronext Growth Paris and AIM. The Directors
recognise the value and importance of high standards
of corporate governance. As the Company is traded on
AIM, it is not required to comply with the UK Corporate
Governance Code. However, the Board has adopted
the 2018 Quoted Companies Alliance Corporate
Governance Code (the “QCA Code”) as the basis of the
Group’s governance framework. The Company complies
with the provisions of the QCA Code as far as is
practicable for a company of Novacyt S.A.’s size, nature
and stage of development, and in accordance with
the regulatory framework that applies to companies
admitted to trading on AIM.
The Company also continues to comply with all the
requirements of being listed on Euronext Growth
Paris. It is the responsibility of the Board to ensure
that the Group is managed for the long-term benefit of
all Shareholders and stakeholders, with effective and
efficient decision-making. Corporate governance is
an important aspect of this, reducing risk and adding
value to our business. As individual Directors, we are
mindful of our statutory duty to act in the way each
of us considers, in good faith, would be most likely to
promote the success of the Company for the benefit
of its members as a whole, as set out in our s172(1)
statement on page 21.
The QCA Code sets out ten principles, in three
broad categories, and in this Corporate Governance
Statement, I have set out the Group’s application of
the QCA Code, including, where appropriate, cross
references to other sections of the Annual Report
and to our website.
James Wakefield
Non-Executive Director and
Chairman of the Board
Annual Report and AccountsGovernance 44
QCA Principles
Deliver growth
1. Establish a strategy and business
model that promote long-term value
for Shareholders
The Board is responsible to Shareholders for setting
the Group’s strategy by: maintaining the policy and
decision-making process around which the strategy is
implemented; ensuring that necessary financial and
human resources are in place to meet strategic aims;
monitoring performance against key financial and
non-financial indicators; providing leadership whilst
maintaining the controls for managing risk; overseeing
the system of risk management; and setting values and
standards in corporate governance matters.
The Board has established a strategy and business
model which seek to promote long-term value for
Shareholders and the business focused on the twin
objectives of portfolio development and geographic
expansion underpinned by our credentials as a global
first responder. In parallel the business will use its
balance sheet to accelerate the strategy through
licensing, partnerships or acquisitions.
2. Seek to understand and meet Shareholder
needs and expectations
The Company has a strong commitment to market
communication, with the Directors seeking to be
accountable against the stated strategic objectives
of the Group. The Company maintains regular contact
with Shareholders through publications such as the
Annual Report and Accounts, operational updates,
regular press announcements made via a regulatory
information service and the Company’s website.
The Company is responsive to Shareholder telephone
and email enquiries throughout the year and the Board
regards the AGM as a particularly important opportunity
for Shareholders and members of the Board to meet
and exchange views.
The Company receives occasional feedback direct from
investors, which is carefully considered by the Board,
with appropriate action being taken where the Board
believes it is in the interests of Shareholders to do so.
3. Take into account wider stakeholder and
social responsibilities and their implications
for long-term success
In addition to its Shareholders, the Company believes
its main stakeholder groups are its employees, clients,
suppliers and relevant statutory authorities in its areas
of operation.
The Group is committed to maintaining the highest
standards of corporate social responsibility in its
business activities by: aiming to comply with all
applicable laws and regulations, wherever the Group
operates; achieving and complying with relevant quality
and people management standards; consulting with
and responding to the concerns of its stakeholders;
working towards realising the Group’s mission and vision
statements; and behaving with honesty and integrity in
all the Group’s activities and relationships with others
and rejecting bribery and corruption in all its forms.
The Board recognises the benefits of a diverse
workforce, which enables the Group to make better
decisions about how to optimise resources and work
by eliminating structural and cultural barriers and bias.
It allows us to: protect and enhance our reputation by
recognising and respecting the needs and interests
of diverse stakeholders; deliver strong performance
and growth by attracting, engaging and retaining
diverse talent and; innovate by drawing on the diversity
of perspectives, skills, styles and experience of our
employees and stakeholders.
The Group is committed to ensuring that it treats
its employees fairly and with dignity. This includes
being free from any direct or indirect discrimination,
harassment, bullying or other form of victimisation.
The Group has policies in place to encourage
employees to speak up about any inappropriate
practices or behaviour.
It was important for us to continue looking after our
employees during 2022 as they remain keyworkers
therefore we continued to enforce a COVID-19
screening programme throughout the year. During this
time, we reminded our employees of the Employee
Assistance Programme, which provides 24/7 support
for any issues they were facing, particularly with mental
health challenges, relationship issues, etc.
45
The Group believes that having empowered and
responsible employees who display sound judgement
and awareness of the consequences of their decisions
or actions, and who act in an ethical and responsible
way, is key to the success of the business.
The operation of a profitable business is a priority and
that means investing for growth as well as providing
returns to its Shareholders. To achieve this, the Group
recognises that it needs to operate in a sustainable
manner and therefore has adopted core principles to
its business operations, which provide a framework
for both managing risk and maintaining its position
as a good “corporate citizen”, and also to facilitate the
setting of goals to achieve continuous improvement.
The Group encourages feedback from its clients
through engagement with individual customers.
As a consequence of such feedback, the Group has
collaborated with multiple existing and prospective
clients to develop and validate new products, work
flows and know-how to improve accuracy, testing
turnaround times, cost per test, and ultimately deliver
improved clinical outcomes for millions of individual
patients globally.
The Board is aware of the need to maintain good
working relationships with the Group’s key suppliers
and receives regular updates from the Executive team
on key supply agreements.
Health and safety
The Group is committed to complying with all relevant
health and safety regulations in its operations. As
such, all employees are trained on the relevant health
and safety procedures upon commencement of
employment within the Group. This training includes:
emergency procedures; security recommendations;
accidents/incidences and first aid; manual handling/
lifting and moving; work-related upper limbs
disorders (including strains to hands and arms); and
display screen equipment/visual display equipment
assessment. We also have a section in our employee
handbook covering alcohol, drugs and smoking.
The Group is not aware of any orders made in respect of a
breach of health and safety regulations during the period.
Environment
The Directors consider that the nature of the Group’s
activities is not detrimental to the environment.
The Group adopts a systematic approach to its
environmental responsibility and has good knowledge
of the environmental impacts caused by its operations.
The Group aims to meet all relevant environmental
standards in its production and products. The Group
aims to establish, implement and maintain a risk-
based programme to reduce or minimise any negative
environmental impact caused by its operations, taking
precautionary measures as soon as there is reason to
believe that an action could harm the environment.
4. Embed effective risk management,
considering both opportunities and threats,
throughout the organisation
The Board has overall responsibility for the Group’s
system of internal control and for reviewing the
effectiveness of internal control to safeguard
Shareholders’ investment and the Group’s assets. There
is an ongoing process for identifying, evaluating and
managing the significant risks the Group faces.
The Board delegates to the Executive team the
responsibility for designing, operating and monitoring
both the risk management and internal control
systems, and the maintenance of effective internal
controls within the Group. The Company also has a
whistleblowing policy.
The systems and controls in place include policies and
procedures, which relate to the maintenance of records
that fairly and accurately reflect transactions, correctly
evidence and control the Group’s assets, provide
reasonable assurance that transactions are recorded
as necessary to enable the preparation of financial
statements in accordance with International Financial
Reporting Standards (“IFRS”), and review and reconcile
reported results.
Annual Report and AccountsGovernance 46
QCA Principles
The Group’s key internal controls are:
• establishing a comprehensive risk register for
the Group;
• a regular review of the Group’s insurance policies with
its insurance broker to ensure that the policies are
appropriate for the Group’s activities and exposures;
• a comprehensive system for consolidating financial
results from Group companies and reporting these
financial results to the Board;
• reviewing cash flow, annual revenue and capital
forecasts regularly during the year, along with regular
monitoring of management accounts and capital
expenditure reported to the Board and comparisons
with forecasts;
• financial controls and procedures, including in
respect of bank payments, bank reconciliations
and petty cash;
• monthly review of outstanding debtors;
• regular meetings of the Executive team;
• an Audit Committee that approves audit plans and
published financial information and reviews reports
from the external auditor arising from the audit and
deals with significant control matters raised;
• an independent review on whether the Group’s tax
processes and controls are appropriate to manage
tax risk and compliance for Senior Accounting
Officer (‘SAO’) purposes.
The Board monitors the activities of the Group through
regular Board meetings and it retains responsibility
for approving any significant financial expenditure or
commitment of resources.
Risk management is focused around the operational
areas of the Group. The Group has a dedicated Head
of Quality Assurance/Regulatory Affairs, who has
extensive operational experience, and particularly
strong experience in quality system development and
regulatory compliance. They are responsible for a
Regulatory team operating across the Group, working
at identifying and prioritising operational risks and
working with the operational teams to mitigate the
identified risks. This work is supported by the risk
assessment procedure in place across the Group,
with the objective to ensure that risk assessment of
the Group’s equipment, procedures and processes is
approached consistently across the Group.
With the assistance of the Audit Committee, the Board’s
review process is principally based on reviewing regular
reports from the Executive team to consider whether
significant risks are identified, evaluated, managed
and controlled effectively, and whether any significant
weaknesses are promptly remedied. The system is
designed to manage rather than eliminate the risk of
failure to achieve the Company’s objectives, and can
only provide reasonable and not absolute assurance
against material misstatement or loss. In assessing
what constitutes reasonable assurance, the Board
considers the materiality of financial and non-financial
risks and the relationship between the cost of, and
benefit from, internal control systems.
Details of the principal risks currently facing the Group
and how they are mitigated are set out on pages 62 to
69. The Board confirms that it has, during the reporting
period, reviewed on an ongoing basis the effectiveness
of the Company’s system of internal controls including
financial, operational and compliance controls and risk
management systems and has reviewed insurance
provisions. No significant failing or weaknesses have
been identified.
47
Maintain a dynamic management
framework
5. Maintain the Board as a well-functioning,
balanced team led by the Chair
considered and determined that, all Directors are
independent of the Executive management and free
from any relationship that could materially affect
the exercise of their independent judgement. None
have beneficial or non-beneficial shareholdings in the
Company exceeding 3%.
The Chairman, James Wakefield, is responsible for
leadership of the Board, ensuring its effectiveness in all
aspects of its role. The Company is satisfied that the
current Board is sufficiently resourced to discharge its
governance obligations on behalf of all stakeholders.
To enable the Board to discharge its duties, all Directors
receive appropriate and timely information. Briefing
papers are distributed to all Directors in advance of
Board and Committee meetings. All Directors have
access to the advice and services of the Chief Financial
Officer/Company Secretary, who is responsible for
ensuring that the Board procedures are followed, and
that applicable rules and regulations are complied
with. In addition, procedures are in place to enable the
Directors to obtain independent professional advice
in the furtherance of their duties, if necessary, at the
Company’s expense. In between Board meetings, the
Executive Directors maintain regular informal contact
with the Non-Executive Directors. Whilst the Board
retains overall responsibility for, and control of, the
Group, day-to-day management of the business is
conducted by the Executive Directors, who meet with
the senior management team on a weekly basis.
Board of Directors
The composition of the Board during the period is
summarised in the table on page 38 of the Directors’
Report. As at the date of this Report, the Board
comprises five members, of which four are Non-
Executive Directors, all of whom are independent,
namely James Wakefield, Andrew Heath, Juliet
Thompson and Jean-Pierre Crinelli.
Independence of Directors
The Directors acknowledge the importance of the
principles of the QCA Code that recommend that
a company should have at least two independent
Non-Executive Directors. The Board has, therefore,
All the Non-Executive Directors constructively challenge
and help develop proposals on strategy and bring
strong, independent judgement, knowledge and
experience to the Board’s deliberations. The Non-
Executive Directors are of sufficient experience and
competence that their views carry significant weight
in the Board’s decision-making and when relevant,
would record their concerns about the running of
the Company. At each meeting, the Board considers
Directors’ conflicts of interest.
The Non-Executive Directors have regular opportunities
to meet without Executive Directors being present
(including time after Board and Committee meetings).
Time commitments
Non-Executive Directors receive a formal appointment
letter on joining the Board, which identifies the terms
and conditions of their appointment.
A potential director candidate (whether an Executive
Director or Non-Executive Director) is required to
disclose all significant outside commitments prior to
their appointment.
The Board is satisfied that both the Chairman and the
Non-Executive Directors are able to devote sufficient
time to the Company’s business.
If considered appropriate, the Board may authorise
the Executive Director to take Non-Executive positions
in other companies and organisations, provided the
time commitment does not conflict with the Director’s
duties to the Company, since such appointments
should broaden their experience. The acceptance
of appointment to such positions is subject to the
approval of the Chairman.
Annual Report and AccountsGovernance 48
QCA Principles
Attendance at Board and
Committee meetings
The Directors meet regularly for formal Board meetings
to discuss and decide the Group’s business, financial
performance and strategic decisions. In addition,
and as required, the Board meets more frequently
by conference call to discuss and decide on matters
considered more urgent, such as those relating to
acquisitive growth.
During the reporting period, the Board met in person
or via conference calls twelve times.
In advance of each meeting of the Directors, the Board is
provided with relevant information to ensure that it can
properly carry out its role. For each meeting, the Directors
generally consider the minutes of the previous meeting
and any action points, recent forecast and operations,
cash flows and progress on any particular projects.
The attendance of each Director at Board and
Committee meetings during the period is set out in the
table below. Attendance is expressed as the number of
meetings attended/number eligible to attend. Directors’
attendance by invitation at meetings of Committees
of which they are not a member is not reflected in the
following table.
Director
Board
Audit Committee
Nomination Committee Remuneration Committee
James Wakefield
James McCarthy
Andrew Heath
Juliet Thompson
Jean-Pierre Crinelli
*Edwin Snape
*David Allmond
12/12
12/12
11/12
12/12
12/12
12/12
10/10
-
-
4/4
4/4
4/4
-
-
5/5
-
5/5
5/5
-
-
-
-
-
3/3
3/3
-
2/3
-
* David Allmond stepped down as Director on 10 November 2022 and Edwin Snape retired as Director on 31 December 2022.
49
6. Ensure that, between them, the Directors
have the necessary up-to-date experience,
skills and capabilities
responsible for ensuring that Board procedures are
followed, that the Company complies with company law
and with the Euronext Growth Paris and AIM Rules.
The Board currently comprises one Executive and four
Non-Executive Directors with an appropriate balance of
sector, financial and public market skills and experience
to deliver the Group’s strategy for the benefit of
Shareholders over the medium to long term. The Board
considers that the Non-Executive Directors bring a wide
experience at a senior level of business operations
and strategy and have an expanse of knowledge and
expertise gained from other areas of business.
The skills and experience of the Board are set out
in their biographical details on pages 35 to 37. The
experience and knowledge of each of the Directors
gives them the ability to constructively challenge the
strategy and to scrutinise performance. The Board also
has access to external advisors where necessary.
New Directors are presented with appropriate levels
of background information on the Company, meet
the management, visit sites and spend time with
the Chairman and other Directors as required. The
induction is tailored to meet each new Director’s
specific needs.
Throughout their period in office, the Directors are
continually updated on the Group’s business, the
industry and competitive environment in which it
operates, corporate social responsibility matters and
other changes affecting the Group by written briefings
and meetings with senior Executives.
Each Director takes responsibility for maintaining their
skill set, which includes roles and experience with other
boards and organisations as well as attending formal
training and seminars.
The Company is a strong supporter of diversity in
the boardroom and, during the reporting period, the
Board comprised one female and six male Directors,
including David Allmond who stepped down as Director
10 November and Edwin Snape who retired on 31
December. The Company remains of the opinion that
appointments to the Board should be made relative
to a number of different criteria including diversity of
gender, background and personal attributes, alongside
the appropriate skill set, experience and expertise.
7. Evaluate Board performance based on
clear and relevant objectives, seeking
continuous improvement
Board evaluation
The Board is mindful that it needs to continually
monitor and identify ways in which it might improve
its performance. The Chairman routinely assesses
the performance of the Board and its members and
discusses any issues, problems, or shortcomings
with the relevant Director(s). Likewise, the Senior
Independent Director reviews the performance of
the Chairman.
Although it is not an AIM requirement for an external
Board appraisal to be undertaken, the Board believes
that gaining independent input on a regular basis is best
practice. It therefore intends to implement an external
Board appraisal on a three-year rolling basis. The current
intention is to conduct the first of these within the next
12 months. The terms of reference of the report will
seek input from all Board members both in the form of a
questionnaire and one-to-one interviews covering:
The Directors receive regular and ongoing updates from
their professional advisors covering financial, legal, tax
and the Euronext Growth Paris and AIM Rules.
•
•
the themes from the questionnaire;
the assessment of the Director’s individual
performance; and
The Company Secretary provides information and
advice on corporate governance and individual support
to Directors on any aspect of their role, particularly
supporting the Chairman and those who chair
Board Committees. The Company Secretary is also
• feedback on Board colleague’s individual performance.
In addition, the independent review will have access
to certain historic nonconfidential Board items and
other information.
Annual Report and AccountsGovernance 50
QCA Principles
Final feedback is likely to be in the form of a full report
for internal use. It is intended that this includes an
Executive summary and key findings, together with a
detailed analysis of the responses to the questionnaire
and anonymised comments made in response to the
questionnaire and during the interviews. The report
will also include recommendations for consideration
together with benchmarking against best practice.
The aim of the review will be to ensure that the
Board contains the necessary skills to enable it to
be satisfied that:
•
the Board continues to meet its regulatory
requirements and ensures that appropriate
processes are in place for setting the strategic
direction of the Group;
• each Committee continues to be effective and that
all members were considered to have made valuable
contributions, and individual Directors continue to
perform effectively; and
• feedback will be provided through the Chairman to
individual Board members.
8. Promote a corporate culture that is based
on ethical values and behaviours
The Company recognises the importance of investing
in its employees to provide foundations and leadership
to drive performance further regardless of age, race,
religion, gender or sexual orientation or disability.
Our core Company values are the building blocks for
developing our dynamic and challenging culture within
the Group.
These values represent our philosophy, which, through
our people and organisation, will help the business
deliver our Company goals. The values represent
how each of us can contribute to the success of the
Company both now and in the future as an individual
and also as part of the wider team.
• To treat each other with trust, dignity and respect
• Enabling, empowering and energising others to
make things happen
• Work as a team with colleagues and
across functions
•
Innovation, inspiration and motivation,
creating an open culture where people are
valued for their contribution
• Novacyt endeavours to deliver the best quality
service to all of our internal and external customers
The Group recognises the importance of investing
in its employees and, as such, the Group provides
opportunities for training and personal development
and encourages the involvement of employees in the
planning and direction of their work. These values are
applied regardless of age, race, religion, gender,
sexual orientation or disability.
The Group believes that it has robust policies and
procedures for combating bribery and corruption.
A copy of the Group’s Anti-Corruption and Bribery
Policy can be found on the Group’s website
www.novacyt.com.
The Group recognises that commercial success
depends on the full commitment of all its employees
and commits to respecting their human rights, to
provide them with favourable working conditions that
are free from unnecessary risk and to maintain fair
and competitive terms and conditions of service at
all times.
The performance and reward system endorses
the desired ethical behaviours across all levels of
the Group.
51
9. Maintain governance structures and
processes that are fit for purpose and
support good decision-making by the Board
The Chairman, James Wakefield, is responsible for
leading the Board, facilitating the effective contribution
of all members and ensuring that it operates effectively
in the interests of the Shareholders. James McCarthy,
the Acting Chief Executive Officer, is responsible for the
leadership of the business and implementation of the
strategy. By dividing responsibilities in this way, no one
individual has unfettered powers of decision-making.
The Board reserves for itself a range of key decisions
to ensure that it retains proper direction and control of
the Group, and a formal schedule of matters reserved
for decision by the Board has been adopted by the
Board since admission to AIM; a copy of which can
be found at www.novacyt.com. Such matters include
business strategy and management, financial reporting
(including the approval of the annual budget), Group
policies, corporate governance matters, major capital
expenditure projects, material acquisitions and
divestments and the establishment and monitoring of
internal controls. This schedule may be updated by the
Board and approved by the Board only. The day-to-day
management of the business has been delegated to the
Chief Executive Officer and the wider Executive team.
The appropriateness of the Board’s composition and
corporate governance structures are reviewed through
the ongoing Board evaluation process and on an ad
hoc basis by the Chairman together with the other
Directors, and these will evolve in parallel with the
Group’s objectives, strategy and business model as
the Group develops.
Board Committees
The Board has established an Audit Committee,
a Remuneration Committee and a Nomination
Committee; the terms of these Committees reflect
market practice on AIM. These Committees of the
Board have formally delegated responsibilities.
Copies of each Committee’s terms of reference
are available on the Company’s website at
www.novacyt.com.
Audit Committee
The Audit Committee is chaired by Juliet Thompson,
and has primary responsibility for monitoring the
quality of internal controls, ensuring that the financial
performance of the Group is properly measured and
reported on, and for reviewing reports from the Group’s
auditor relating to the Group’s accounting and internal
controls, in all cases having due regard to the interests
of Shareholders. The Audit Committee meets at least
twice a year. Andrew Heath and Jean-Pierre Crinelli are
the other members of the Audit Committee.
A report on the duties of the Audit Committee and how
it discharges its responsibilities is provided on pages
58 to 60.
Remuneration Committee
The Remuneration Committee is chaired by
Andrew Heath, and reviews the performance of
the Executive Directors, and determines their terms
and conditions of service, including their remuneration,
having due regard to the interests of Shareholders.
The Remuneration Committee meets at least
twice a year. Juliet Thompson is a member of the
Remuneration Committee together with Jean-Pierre
Crinelli who was made a member in 2023 following
the retirement of Edwin Snape.
The Directors’ Remuneration Report and details of the
activities and responsibilities of the Remuneration
Committee are set out on pages 54 to 56.
Nomination Committee
The Nomination Committee is chaired by James
Wakefield, and identifies and nominates, for the
approval of the Board, candidates to fill Board
vacancies as and when they arise. The Nomination
Committee meets at least once a year. Andrew Heath
and Juliet Thompson are the other members of the
Nomination Committee. Details of the activities and
responsibilities of the Nomination Committee are set
out on page 53.
Annual Report and AccountsGovernance 52
53
QCA Principles
Nomination Committee Report
Build trust
10. Communicate how the Company is
governed and is performing
As explained earlier in this Corporate Governance
Statement, the Board has established a Nomination
Committee, an Audit Committee and a Remuneration
Committee. The work of each of the Board Committees
undertaken during the year ended 31 December 2022
is detailed on pages 53 to 60.
The Board places its responsibility to the
Company’s Shareholders and setting the Group’s
strategy for achieving long-term success as a high
priority. The Group’s website is regularly updated
with all press releases, AGM and EGM results and
investor presentations.
The results of the votes received in relation to the
2022 AGM and EGM are available on the Company’s
website. All ordinary resolutions proposed were
passed at the 2022 General Assembly. As part
of the AGM, the Company also met to hold an
extraordinary general meeting. The meeting was
not deemed quorate due to the minimum number
of voting rights under French company law not
being present or represented at the meeting.
Consequently, the meeting did not take place.
The Board maintains a healthy dialogue with all of
its stakeholders. Throughout the course of the year,
the Board communicates with Shareholders directly
on any views, concerns and expectations they may
wish to express.
The Company established a Nomination Committee during 2017
prior to its admission onto the AIM market.
James Wakefield acts as Chairman of the Nomination
Committee and its other members are Juliet Thompson
and Andrew Heath. All members of the Nomination
Committee are considered independent.
The Nomination Committee is responsible for
identifying and nominating for the approval of the
Board candidates to fill Board vacancies as and when
they arise, and to ensure that the Board consists
of members with the range of skills and qualities
needed to meet its principal responsibilities in a
way that promotes the protection of the interests of
stakeholders and compliance with the requirements of
the AIM Rules.
The Nomination Committee will meet at least once a
year and at such other times as the Chairman or any
other member of the Nomination Committee requires.
During 2022 the Nomination Committee met more
often than would usually be the case in view of the
departure of David Allmond as CEO and the retirement
of Edwin Snape.
Annual Report and AccountsGovernance 54
55
Directors’ Remuneration Report
Composition and meetings
The Remuneration Committee comprises at least
two members, and all members are Non-Executive
Directors considered independent. Andrew Heath
acts as Chairman of the Remuneration Committee,
Juliet Thompson and Jean-Pierre Crinelli are the
other members. Only members of the Remuneration
Committee have the right to attend meetings,
but other Directors and external advisors may be
invited to attend all or part of any meeting as and
when appropriate. No Director may be involved in
discussions relating to their own remuneration. The
Remuneration Committee meets as appropriate but
not less than twice a year. During the period, the
Remuneration Committee met three times. Details
of meeting attendance are shown in the table in the
Corporate Governance Statement on page 48.
Policy on Executive remuneration
The Remuneration Committee is responsible
for determining and agreeing with the Board the
framework or broad policy for the remuneration
of the Executive team. In determining such policy,
the Remuneration Committee takes into account
all factors that it deems necessary including
the relevant legal and regulatory requirements
and corporate governance guidelines. The
Remuneration Committee also takes into account
emerging best practice and guidance from major
institutional Shareholders. The objective of the
Company’s remuneration policy is to attract, retain
and motivate individuals of the quality required
to run the Company successfully without paying
more than is necessary, having regard to views of
Shareholders and other stakeholders.
The Remuneration Committee recognises that
the remuneration policy should have regard to
the risk appetite of the Company and alignment
to the Company’s long-term strategic goals,
with a significant proportion of remuneration
being structured to link rewards to corporate and
individual performance, designed to promote the
long-term success of the Company.
The Remuneration Committee, when setting
the remuneration policy for Executive Directors,
also has regard to the pay and employment
Andrew Heath
Chairman of the
Remuneration Committee
Key responsibilities
The Remuneration Committee determines performance
related targets for the members of the Executive
team, reviews their performance and makes
recommendations to the Board on matters relating to
their remuneration and terms of employment.
The Remuneration Committee also makes
recommendations to the Board on proposals relating
to all long-term incentive scheme structures and any
future option schemes, and the granting of any share
options under such schemes. The remuneration and
terms and conditions of appointment of the Non-
Executive Directors are set by the Board.
As Chairman of the Remuneration Committee, I am
pleased to present our Directors’ Remuneration Report
for the year ended 31 December 2022.
This report does not constitute a Directors’
Remuneration Report in accordance with the
Companies Act 2006. As a Company whose shares
are admitted to trading on AIM, the Company is not
required by the Companies Act to prepare such a report.
We do, however, have regard to the principles of the
QCA Code, which we consider to be appropriate for an
AIM company of our size. The report provides a general
statement of policy on Directors’ remuneration as it is
currently applied, and details the remuneration for all
Directors during the year. It also provides a summary of
the Novacyt LTIP, which was established during 2022.
conditions across the Group, particularly when
conducting salary reviews. The main elements
of the remuneration packages of the Executive
Directors are as follows.
Basic annual salary and pension
Basic salary is reviewed annually by the
Remuneration Committee, usually in February,
and takes into account a number of factors,
including the current position and progress of
the Group, individual contribution and market
salaries for comparable organisations. The
Company makes contributions into the private
pension schemes of the Executive Directors.
Discretionary bonus
At the discretion of the Remuneration Committee,
taking into account performance against certain
financial and individual targets, an Executive
Director may be entitled to an annual discretionary
cash bonus on such terms and subject to such
conditions as may be decided from time to time
by the Remuneration Committee.
The Novacyt 2022 Performance Share
Awards Scheme
This LTIP replaced the previous phantom share award
scheme which ended in November 2020.
The 2022 Performance Share Awards (structured as
nil-cost options1) currently applies to James McCarthy
as Acting Chief Executive Officer and Chief Financial
Officer, and Paul Oladimeji as Group Head of R&D.
The performance shares will vest (“Vest”) after three
financial years (the “Performance Period”) subject
to the Company achieving Total Shareholder Return
(“TSR”) Growth conditions as follows:
TSR Growth
% of the Award
that may vest
Less than 10% p.a.
Nil
Equal to 10% p.a.
25%
Greater than 10% p.a.
but less than 30% p.a.
Pro-rata between
25% and 100% on a
straight-line basis
Equal to or greater
than 30% p.a.
100%
The baseline for TSR is based on the average closing
price of the Company’s shares in December 2021,
which was £3.54. This will then be compared to the
equivalent figure in December 2024.
Once vested, a Performance Share Award shall
normally remain exercisable up until the tenth
anniversary of the date of grant (3 February 2022
for these awards).
As Acting Chief Executive Officer and Chief Financial
Officer James McCarthy will be required to hold 50%
of vested shares, or such other percentage determined
by the Board from time to time (less any shares sold to
pay any tax liability) for a minimum period of one year
after the vesting date.
Benefits in kind
Executive Directors are entitled to benefits in
kind commensurate with their position, including
company car allowance, private medical and death
in service insurance.
1 Executive salary and short-term bonus was reviewed and agreed.
Annual Report and AccountsGovernance 56
57
Directors’ Remuneration Report
Directors’ remuneration
The remuneration of the Directors who served on the Company’s Board during the year to 31 December 2022
was as follows:
Year ended 31 December 2022
Year ended 31 December 2021
Executive Directors
Basic salary
and fees
James McCarthy3
354,517
David Allmond3, 6
372,708
Non-Executive Directors
James Wakefield
128,333
Andrew Heath
49,399
Juliet Thompson
49,399
Jean-Pierre Crinelli1
33,686
Edwin Snape2, 7
36,784
Bonus Pension
LTIP
Total
Basic salary
and fees
Bonus
Pension
LTIP
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
354,517
73,883
-
372,708
85,744
200,0004
128,333
95,000
49,399
47,500
49,399
47,500
33,686
32,672
36,784
31,802
-
-
-
-
-
-
-
-
-
-
-
-
150,0005
223,883
-
-
-
-
-
-
285,744
95,000
47,500
47,500
32,672
31,802
1 Salaries paid in Euros and disclosed in GBP, translated at the average exchange rate of 1.173187 in 2022 (2021: 1.163068)
2 Salary paid in USD and disclosed in GBP, translated at the average exchange rate of 1.236969 in 2022 (2021: 1.375659)
3 James McCarthy and David Allmond were elected as Directors during the AGM held on 18 October 2021
4 Payment received by way of a signing on bonus
5 Cash payment received in lieu of 2021 LTIP entitlement
6 David Allmond stepped down as Director on 10 November 2022
7 Edwin Snape retired as Director on 31 December 2022
Performance Share
Awards Scheme
Directors’ shareholdings and share interests
The interests of the Directors who served during
the year in the share capital of the Company as of
31 December 2022, 31 December 2021 and the date
of this report were as follows:
Directors’ share interests under the 2022
Performance Share Awards Scheme
The Performance Share Awards allocated to the
Executive team under the 2022 Performance Share
Awards Scheme, which represent 0.4% of the current
issued share capital, are as follows:
As at the
date of
report
31
December
2022
31
December
2021
49,670
49,670
10,000
43,839
43,839
36,839
20,000
20,000
20,000
Participants
James
McCarthy1
Acting Chief
Executive
Officer and
Chief Financial
Officer
LTIP Award #
Shares
228,333
Paul Oladimeji
Head of R&D
Total
57,452
285,785
-
-
-
1James McCarthy is a member of the Novacyt Board
33,981
33,981
30,773
43,500
-
Conclusion
-
-
17,919
17,919
This report is intended to explain clearly the
remuneration approach adopted by the Company
and to enable Shareholders to appreciate how it
underpins the Group’s business growth and strategic
objectives. The Board considers that the current
remuneration policy is fair and is fully aligned with
the interests of Shareholders.
1 David Allmond stepped down as Director on 10 November 2022
2 Edwin Snape retired as Director on 31 December 2022
All interests are beneficially held. There is no requirement
for Directors to hold shares in the Company.
Andrew Heath
Chairman of the Remuneration Committee
James
McCarthy
James
Wakefield
Andrew
Heath and
family
Juliet
Thompson
Jean-Pierre
Crinelli
David
Allmond1
Edwin
Snape2
Annual Report and AccountsGovernance 58
Audit Committee Report
Summary of the role of the
Audit Committee
The Audit Committee’s primary responsibility is to
monitor the quality of internal controls and ensure
that the financial performance of the Group is
properly measured and reported on.
It receives and reviews reports from the Executive
team and external auditors relating to the interim
and annual accounts and the accounting and internal
control systems in use throughout the Group.
The Audit Committee meets as appropriate, but not
less than twice a year, and minutes are recorded for
each meeting by the Chief Financial Officer.
The Audit Committee is able to call for information
from the Executive team and has unrestricted
access to the Company’s external auditors.
The Audit Committee operates within specific terms
of reference that include:
• Reviewing management procedures to monitor
the effectiveness of the accounting systems,
accounting policies and internal controls;
• Conducting a regular and ongoing process of
risk assessment;
• Reviewing the scope and planning of the
external audit;
• Reviewing the findings of the external auditor’s
and management’s response;
• Reviewing the annual financial statements before
their submission to the Board for approval;
• Making recommendations to the Board
concerning the appointment and remuneration
of the external auditor;
• Reviewing any profit forecasts or working
capital statements published in any bid
document or listing particulars as investigated
and verified by the Company’s auditor and/or
reporting accountant;
• Reviewing from time to time the cost
effectiveness of the audit including a review
of the performance of the external auditor;
Juliet Thompson
Chair of the
Audit Committee
Key responsibilities
The Audit Committee administers the financial
reporting of the company and related risks, internal
controls, compliances, and ethics.
It must coordinate with management and the auditors
to come up with financial reporting for the Group results
that is compliant with International Financial Reporting
Standards, as adopted by the EU, and French GAAP for
the parent Company.
Ensuring the financial reports are accurate, the audit
committee should be aware of the processes and internal
controls put in place by the company’s management.
The Audit Committee is responsible for appointing
individual auditors, along with evaluating their
performance and compensation. In some organisations,
they may oversee the internal auditors as well.
The Audit Committee comprises at least two members,
with at least one Non-Executive Director considered
independent, including the Chairman.
In addition, the Chief Financial Officer and other
members of the Company may be invited to attend
as required.
Independent Non-Executive Director, Juliet Thompson,
being a chartered accountant, acts as Chair of the Audit
Committee, and its other members are Jean-Pierre
Crinelli and Andrew Heath.
• Monitoring the fees paid to the external auditor and
where the external auditor supplies a substantial
volume of non-audit services to the Company, to
keep the nature and extent of such services under
review, in order to achieve a balance between
objectivity and value for money; and
• Having the right to obtain outside legal help
and any professional advice, at the Company’s
expense, which might be necessary for the
fulfilment of its duties.
The Audit Committee is responsible for ensuring
the “right tone at the top” and that the ethical and
compliance commitments of the Executive team and
other employees are understood throughout the Group.
External auditors
The Audit Committee is responsible for making
recommendations to the Board on the appointment,
reappointment and removal of the external auditor
and assesses annually the qualifications, expertise,
resources, remuneration and independence of the
external auditor. The Audit Committee receives
reports on the external audit firm’s own internal quality
control procedures and confirmation of the auditor’s
independence. The Audit Committee ensures that
appropriate plans are in place for the external auditor
each annual cycle.
The Group’s external auditors are Deloitte LLP and
Alberis Audit. Under French law, the mandatory term
for auditors is six years. Deloitte LLP was reappointed
as external auditor during the AGM held in 2018 and
has now been the auditor for eleven years at the end
of the audit of the annual accounts for the year ended
31 December 2022, in addition, Alberis Audit were
appointed in 2021 for a period of six years to approve
the financial statements up to the year ended
31 December 2026.
The Audit Committee annually reviews the
effectiveness of the external auditor. This process
involves overseeing the relationship with the Group’s
external auditor, including reporting to the Board each
year whether it considers the audit contract should be
put out to tender, adhering to any legal requirements
for tendering or rotation of the audit services contract
as appropriate, reviewing and monitoring the external
auditor’s objectivity and independence, agreeing the
scope of their work and fees paid to them for audit,
and assessing the effectiveness of the audit process.
The external auditor presents to the Audit Committee
the output of its detailed year-end work and the Audit
Committee challenges significant judgements (if
any). In making its assessment of external auditor
effectiveness, the Audit Committee reviews the audit
engagement letters before signature, reviews the
external auditor’s summary of Company issues, and
59
conducts an overall review of the effectiveness of the
external audit process and the external auditor. The
Audit Committee reports its findings to the Board.
The Audit Committee and the Board have been satisfied
with the performance of the external auditors during the
year and with the policies and procedures they have in
place to maintain their objectivity and independence.
The Audit Committee also approves in advance any
non-audit services to be performed by the auditor such
as tax compliance and advisory work, audit related
assurance services (e.g. reviews of internal controls
and reviewing the Group’s interim financial statements).
Any non-audit services that are to be provided by the
external auditor are reviewed in order to safeguard
auditor objectivity and independence. Accordingly,
the Board can confirm that, during the reporting
period, there have been no non-audit services that
are considered to have impaired the objectivity and
independence of the external auditor. A full breakdown
of payments made to the external auditor during
the financial year is disclosed within note 43 to the
financial statements.
Work undertaken by the Audit Committee
during the period
The Audit Committee met four times during the
period. Details of meeting attendance are shown in the
Corporate Governance Statement on page 48.
Deloitte LLP and Alberis Audit, as the auditors, were
also present at one of the meetings.
The key matters considered by the Audit Committee
whilst discharging its duties and responsibilities are set
out below:
• Review of the Annual Report and Accounts for the
year ended 31 December 2021;
• Consideration and approval of the unaudited
interim financial statements for the period ended
30 June 2022;
• Review of the financial integrity of the Group’s
financial statements including relevant corporate
governance statements;
• Review of the Company’s interim report for the
six months ended 30 June 2022;
• Approval of the audit fees for the financial year
ended 31 December 2022;
• Approval of non-audit work to be carried out
by the auditor;
• Consideration of the independence and objectivity
of the external auditor;
• Review of the internal controls and risk management
systems within the Group;
Annual Report and AccountsGovernance 60
61
Audit Committee Report
• Consideration of the requirement for the Group to
Going concern
have an internal audit function;
The Directors have, at the time of approving the
financial statements, a reasonable expectation that
the Group has adequate resources to continue in
operational existence for the foreseeable future.
Thus, they adopt the going concern basis of accounting
in preparing the financial statements.
The going concern model covers the period up to and
including April 2024.
In making this assessment, the Directors have
considered the following elements:
• The working capital requirements of the business;
• A positive cash balance at 31 December 2022 of
£86,973,000;
• Payment of the Long-Term cash Incentive Plan
(“LTIP”) that commenced in 2021 and vests at the
end of 2023; and
• The DHSC commercial dispute having a trial date set
for June 2024.
The forecast prepared by the Group shows that it is
able to cover its cash needs during the financial year
2023 up until April 2024.
Approved by on behalf of the Board.
Juliet Thompson
Chair of the Audit Committee
• Review of the effectiveness of the external auditor,
as more fully described above;
• Discussions with the auditor on the audit approach
and strategy, the audit process, significant audit risks
and key issues of focus for the annual audit;
• Review and approval of the continuing appointment
of Deloitte LLP as the Group’s auditor and Alberis
Audit as 2nd auditor.
The ultimate responsibility for reviewing and approving
the financial statements in the interim and annual
reports remains with the Board.
The Audit Committee, in conjunction with the auditor,
has considered there are no significant issues relating
to the preparation of the financial statements contained
in this Annual Report.
Risk management and internal control
The Board has overall responsibility for the Group’s
system of internal control and for reviewing the
effectiveness of internal control to safeguard
Shareholders’ investment and the Group’s assets.
There is an ongoing process for identifying, evaluating
and managing the significant risks the Group faces.
The Board regularly reviews the process, which has
been in place throughout the period and up to the date
of approval of the Annual Report and Accounts.
The Board’s internal control and risk management
review process (conducted with the assistance of the
Audit Committee) is outlined on pages 62 to 69.
Internal audit
The Board has reviewed the need for a separate internal
audit function and concluded that such a function is not
currently appropriate for a size of company such as the
Group, and because the internal audit principles already
fall under the remit of the Audit Committee.
Annual Report and AccountsGovernance
62
Principle Risks
and Risk Management
The Group’s risk management
strategy is a key responsibility of the
Board of Directors. The Board ensures
that all major risks are understood
and appropriately managed in light of
the Group’s strategy and objectives
and is satisfied that the Group’s risk
management and internal control
systems are adequate.
The Group’s risk management framework supports
the risk assessment procedure across the Group,
with the objective of ensuring that the assessment
of the strategic, operational, financial and external
risks of the Group is approached consistently
Group-wide.
At this stage of the Company’s development, the
Board does not consider it to be appropriate to
establish an internal audit function, but this will be
kept under review.
The principal risks faced by the Group are set
out below.
The pace of
development in
the healthcare
industry
The Group operates within the biotechnology sector, a complex area of the healthcare
industry. Rapid scientific and technological change within the biotechnology sector
could lead to other market participants creating approaches, products and services
equivalent or superior to the diagnostic testing products and services offered by
the Group, which could adversely affect the Group’s performance and success. If
the Group is unable to keep pace with these changes in the biotechnology sector
and in the wider healthcare industry, the demand for its technological platforms and
associated products and services could fall.
Competitive
pressures
Companies operating within the biotechnology sector are subject to competitive forces
that may result in price discounting and product obsolescence.
Better resourced competitors may be able to devote more time and capital towards
the R&D process, which, in turn, could lead to scientific and/or technological
breakthroughs that may materially alter the outlook or focus for markets in which the
Group operates.
In addition, a certain number of the Group’s competitors may have significantly greater
financial and human resource capacity and, as such, better manufacturing capability
or sales and marketing expertise. Competitors could also resort to price discounting
or other sales and marketing strategies. Equally, new companies with alternative
technologies and products may also emerge.
Geographic
markets
The Group is largely based in the UK, and its products are distributed to and sold
across multiple jurisdictions. In each of these jurisdictions, there may be a number
of associated risks in respect of which the Group will have no, or limited, control.
These may include: contract renegotiation, contract cancellation, economic, social or
political instability or change, hyperinflation, currency non-convertibility or instability,
and changes of laws affecting foreign ownership, taxation, working conditions, rates of
exchange, exchange control and licensing.
63
Product
development
Additional products and services developed through the element of the Group’s
strategy focused on R&D transformation will be required to drive the Group’s growth,
such as Primer Design’s focus on transferring assays from RUO to clinical CE-IVD
products. The development of such additional diagnostic testing products and
services may take longer than expected or not be successful at all, which may
adversely impact the Group’s ability to generate revenues and achieve sustainable
profitability. In addition, the value of additional diagnostics tests and products may
not prove as robust as currently envisaged by the Group. Any delays or unbudgeted
expenditures incurred by the Group could postpone or halt the commercialisation of
particular diagnostics tests and products.
Product liability
claims
The Group faces an inherent risk of product liability and associated adverse
publicity as a result of the sales of its products.
Criminal or civil proceedings might be filed against the Group by patients, the
regulatory authorities, pharmaceutical companies and any other third party using or
marketing its products. Any such product liability claims may include allegations of
defects in manufacturing, defects in design, negligence, strict liability, a breach of
warranties and a failure to warn of dangers inherent in the product.
If the Group cannot successfully defend itself against product liability claims, it
may incur substantial liabilities or be required to limit commercialisation of its
products, if approved. Even successful defence could require significant financial
and management resources.
Although the Group maintains a level of insurance that is customary for its
industry to cover its current business, any claim that may be brought against the
Group could result in a court judgement or settlement in an amount that is not
covered, in whole or in part, by its insurance or that is in excess of the limits of
its insurance coverage.
Its insurance policies also have various exclusions and the Group may be subject to
a product liability claim for which the Group has no coverage.
Due to the specific and innovative nature of some of the Group’s products, there
may only be a single supplier of goods or services to the Group in respect of those
products or services, which may or may not be pursuant to the terms of exclusive
supplier agreements. The Group’s purchases may be delayed if that single supplier,
in respect of any one product or service, has its own manufacturing difficulties or is
not able to meet the purchase requirements of the Group within a reasonable time
frame. Further, any exclusive supplier arrangements may be terminated by either the
supplier or the Company on notice. In the event of serious delays or non-performance
by such suppliers, or upon such arrangements being terminated, the Group’s own
stock levels could diminish or be exhausted. The Group may consider expanding its
current supplier base to reduce the reliance on certain suppliers. However, there is
no guarantee that they will be successful in doing so in a manner that complies with
regulatory requirements.
Reliance on sole
suppliers
Annual Report and AccountsGovernance 64
Principle Risks
and Risk Management
Reliance on third-
party distributors
The Group uses third-party distributors in a number of its business areas. Although
the Group enters into agreements with such distributors, it cannot ultimately control
their actions and they may underperform or not act in the best interests of the Group.
Furthermore, the distribution agreements may be terminated by the distributors or the
Group. If so, and if appropriate from the Group’s strategy at that time, the Group may
seek to find a replacement distributor but there can be no guarantee that they will be
successful in doing so.
Acquisition
strategy
Litigation and
arbitration
Key personnel
Tenders
A core part of the Group’s strategy is to undertake acquisitions that are strategically
complementary to its existing businesses. The success of such a strategy will depend
on the Group’s ability to identify potential targets, complete the acquisition of such
targets on favourable terms, including securing appropriate financing, and to generate
value from the acquired targets. This strategy may not be successful under all or any
market conditions. The Group may not be able to acquire targets on attractive terms or
to generate resulting returns for Shareholders and prospective investors.
From time to time, the Group may be subject to litigation arising from its operations,
distribution and sales. Damages claimed, awarded, settled or paid under any litigation
or arbitration may be material or may be indeterminate, and the outcome of such
litigation or arbitration may have a material adverse effect on the Group’s business,
financial condition, capital resources, results and/or future operations. Please refer to
notes 44 and 45 of the accounts regarding the ongoing DHSC dispute.
The Group depends on the services of its key personnel, which includes a number of
individuals some of whom are currently on a short notice period of three months or
less. The Group’s ability to manage its R&D and product development activities, wider
operations and financing will depend in large part on the efforts of its key personnel.
The loss of services of key personnel, the inability to attract, retain and integrate
suitably qualified personnel or delays in hiring required personnel, could delay the
achievement of the Group’s objectives and strategy.
A proportion of the Group’s revenues stem from tenders awarded to the Group and it
is not possible to control and/or predict the outcomes of these tender processes. The
success of such tender awards is based upon the ability of the organisation or country
to finance tenders, and then it is based upon the historical performance, price and
quality of the competitors who have been invited to participate in the tender process.
The Group may not be successful in future tender processes.
The failure to gain new business through the award of tender contracts may have a
material adverse effect on the Group’s business, financial condition, capital resources,
results and/or future operations.
65
Regulatory
environment
The Group’s products are subject to various laws, regulations and standards in each
of the jurisdictions in which products are manufactured and distributed. These laws,
regulations and standards may change and, if the Group fails to meet those regulatory or
other requirements, it could face delays or prohibitions on the operation of its business.
New IVDR
regulations
The Group’s ability to conduct business is predicated on being in compliance with
all licence requirements as specified by each relevant jurisdiction. The Group may
not continue to hold all of the necessary consents, approvals and licences required
to conduct its business, and where new permissions are required, these may be
delayed or not forthcoming. If any new approvals or licences are required in order
for the Group to carry on its business, the Group could face delays or prohibitions on
the development, manufacture, sale or distribution of its products, which may have a
material adverse effect on the Group’s business, financial condition, capital resources,
results and/or future operations.
The entire IVD industry within the EU has undergone a significant regulatory transition
from the In Vitro Diagnostic Directive (“IVDD”) (98/79/EC) to the new In Vitro
Diagnostic Regulation (“IVDR”) (2017/746). There are a limited number of notified
bodies available to IVDD manufacturers, which reflects a risk that the industry may
not be ready when the new IVDR regulations come into force. In recognition of this,
the European Commission has delayed the full implementation of IVDR for existing
products until 2025, 2026 or 2027 depending on the risk classification of the device
(COVID tests must meet the requirements by 2025). Whilst there is now more time
to meet requirements for existing tests, any new products launched after May 2022
must meet IVDR requirements. The cumulative effect of the introduction of the new
regulation has significantly increased the burden on IVD manufacturers to maintain
regulatory compliance and this may result in older products being discontinued due
to the additional cost of compliance. The IVDR applies to any products sold in Europe.
The UK, in turn, is applying its own regulatory regime to IVDDs, which will involve
applying a UK certification mark for any products sold in the UK and this increases the
regulatory burden.
Employment laws
The Group is also subject to various UK and US regulations governing the Group’s
relationship with employees, including such matters as the treatment of part-time
or agency workers, employers’ National Insurance contributions, overtime and other
working conditions. A failure to comply with one or more regulations could result in the
imposition of sanctions, including the closing of facilities for an indeterminate period
of time or third-party litigation.
European General
Data Protection
Regulation
The Group is committed to ensuring compliance with European General Data
Protection Regulation (“GDPR”). Failure to demonstrate appropriate actions to comply
with GDPR could result in a one-off discretionary caution or can escalate to a fine of up
to 4% of annual global turnover.
Annual Report and AccountsGovernance 66
Principle Risks
and Risk Management
Information
technology
Brexit
The Group is heavily reliant upon its information technology systems to enable it
to manage a growing business and to service its customers online. Information
systems are used across all aspects of the Group’s business, including R&D, product
development, sales, production, stock control, distribution, and accounting and
finance. The Group’s business would be adversely affected by a material or sustained
breakdown in its key computer and communication systems.
In addition, the Group may face online security breaches, including hacking and
vandalism. The Group cannot guarantee absolute protection against unauthorised
attempts to access its information technology and communication systems, including
malicious third-party applications that may interfere with or exploit security flaws in its
products and services.
On 23 June 2016, the UK held a referendum on the UK’s continuing membership of the
EU, the outcome of which was a decision for the UK to leave the EU (Brexit). Following
Royal Assent of the European Union (Withdrawal Agreement) Act on 23 January
2020 and ratification of the Withdrawal Agreement by the European Parliament on 24
January 2020, the UK left the EU on 31 January 2020 and became a third country with
a transition period running to 31 December 2020.
As the IVDD applies to all products placed on the market, the Company still need to
comply with IVDD and IVDR but as we are now considered a non-EU manufacturer, we
have to appoint a European Authorised Representative and Importer based in the EU,
to make labelling changes and register our products with an EU Competent authority.
This adds cost and complexity to selling in Europe. In addition, the UK Government is
currently drafting new UK Regulations requiring IVDs placed on the UK market to undergo a
regulatory process that could mirror the CE marking process, with a separate registration in
the UK and the application of a UKCA mark adding further cost and complexity.
67
Protection of
intellectual
property rights
The Group’s ability to compete depends, in part, upon the successful protection of its
intellectual property, in particular its patents, trademarks, know-how and trade secrets.
The Group seeks to protect its intellectual property through the filing of worldwide
patent and trademark applications, as well as robust confidentiality obligations on its
employees (and any contractors).
Infringement
of third-party
patents and
other intellectual
property rights
Despite these precautions that may be taken by the Group to protect its intellectual
technology and products, unauthorised third parties may attempt to copy, or obtain
and use, its technology and products.
A third party may infringe upon the Group’s intellectual property, release information
considered confidential about the Group’s intellectual property and/or claim
technology that is registered to the Group. In addition, the Group may fail to discover
infringement of its intellectual property, and/or any steps taken or that will be taken by
it may not be sufficient to protect its intellectual property rights or prevent others from
seeking to invalidate its intellectual property, or block sales of its products by alleging
a breach of their intellectual property. Applications filed by the Group in respect of new
patents and trademarks may also not be granted.
The Directors are committed to defending the Group’s intellectual property vigorously
through litigation and other means.
The Group’s products may infringe or may be alleged to infringe existing patents or
patents that may be granted in the future, which may result in costly litigation and
could result in the Group having to pay substantial damages or limit the Group’s ability
to commercialise its products.
If the Group is sued for patent infringement, the Group would need to demonstrate that
its products or methods either do not infringe the patent claims of the relevant patent
or that the patent claims are invalid, and the Group may not be able to do this. If the
Group is found to have infringed a third-party’s patent, the Group could be required
to obtain a licence from such third party to continue developing and marketing its
products and technology or the Group may elect to enter into such a licence in order
to settle litigation or in order to resolve disputes prior to litigation. However, the Group
may not be able to obtain any required licence on commercially reasonable terms or
at all. Even if the Group is able to obtain a licence, it could be non-exclusive, thereby
giving its competitors access to the same technologies licensed to the Group, and
could require the Group to make substantial royalty payments. The Group could also
be forced, including by court order, to cease commercialising the infringing technology
or products.
A finding of infringement could prevent the Group from commercialising its products
or force the Group to cease some of its business operations, which could materially
harm its business. Claims that the Group has misappropriated the confidential
information or trade secrets of third parties could have a similarly negative impact on
its business.
Annual Report and AccountsGovernance 68
Principle Risks
and Risk Management
Protection of
trademarks
Customer
concentration
Bad debts
The Group owns certain trademarks that are important to its business and competitive
position. Third parties may infringe or misappropriate these rights by, for example,
imitating the Group’s products, asserting rights in, or ownership of, the Group’s
trademarks or other intellectual property rights or in trademarks that are similar
to trademarks that the Group owns. In addition, the Group may fail to discover
infringement of its intellectual property, and/or any steps taken or that will be taken
by it may not be sufficient to protect its intellectual property rights or prevent others
from seeking to invalidate its trademarks by alleging a breach of their trademarks and
intellectual property.
Applications filed by the Group in respect of new trademarks may not be granted.
In addition, some of the Group’s intellectual property may not be capable of being
registered as belonging to the Group in all types of trademarks and all classes
and the Group may, therefore, have difficulty protecting such intellectual property.
Further, the Group may not be able to prevent others from using its brands (or other
intellectual property that is not registered as belonging to the Group) at all or in a
particular market.
If the Group is unable to protect its intellectual property rights against infringement
or misappropriation, or if others assert rights in or seek to invalidate its intellectual
property rights, this could have a material adverse effect on the Group’s business,
financial condition, capital resources, results and/or future operations.
There was no customer that contributed 10% or more to the Group’s revenue in 2022.
The Group sells to companies of all sizes from small to medium-sized enterprises
to blue-chip institutions, and operates in emerging markets, such as the Middle East,
Asia-Pacific, Africa and South America. Whilst the Group has, to date, successfully
managed the risk of being paid for products and services sold into these companies
and regions, as the Group grows and its customer base and distribution channels
expands, there could be a higher risk that new customers do not pay in a timely
manner and that bad debt increases.
69
Foreign exchange
rates
SARS-CoV2
Pandemic
The Group operates on a global basis and it has exposure to foreign exchange risk on
purchases and sales that are denominated in currencies other than the Pound Sterling,
Euro and US Dollar, which are the currencies of most of its receivables, expenditures, cash
reserves and borrowings. The Pound Sterling, Euro and US Dollar exchange rates have
fluctuated significantly in the past and may do so in the future. Consequently, revenue,
expenditure, cash and borrowings may be higher or lower than anticipated by the Group.
In addition, the financial statements of the Group are denominated in Pounds Sterling
which, therefore, give further exposure to foreign exchange rate fluctuations and may
impact the financial results reported to its Shareholders, particularly as profits and losses
arising from foreign currency transactions and on settlement of amounts receivable and
payable in foreign currency are dealt with through the profit and loss statement.
The global pandemic caused significant disruption and volatility to the entire
diagnostics market. However, the threat from COVID-19 to public health has now
eased considerably due to vaccination and natural immunity in the general population
with testing requirements for travel, work and leisure now rarely required. Following the
pandemic, the UK health care system is struggling with significant patient backlogs at
a time where funding has come under pressure as government budgets struggle with
the global cost of living crisis. This means more volatility in demand for diagnostics
companies and uncertainty in planning and forecasting future demand.
Annual Report and AccountsGovernance 70
71
Financial
Statements
Company law requires the Directors
to prepare Group and parent
company financial statements
for each financial year. Under that
law, they are required to prepare
the Group financial statements
in accordance with International
Financial Reporting Standards, as
adopted by the EU, and applicable
law, and have elected to prepare
the parent company financial
statements under French GAAP.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and parent company and of their profit or loss for
that period.
In preparing each of the Group and parent company
financial statements, the Directors are required to:
• Select suitable accounting policies and then apply
them consistently;
• Make judgements and accounting estimates that are
reasonable and prudent;
• State whether they have been prepared in
accordance with IFRSs as adopted by the EU; and
• Prepare the financial statement’s on the going
concern basis unless it is inappropriate to presume
that the group and the parent company will continue
in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the parent company and enable them to
ensure that the Group’s financial statements comply
with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that complies with
that law and those regulations.
Responsibility Statement of the Directors in
Respect of the Annual Financial Report
We confirm that to the best of our knowledge:
• The financial statements, prepared in accordance
with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the
undertakings included in the consolidation taken as
a whole; and
• The Strategic report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
Financial StatementsAnnual Report and Accounts 72
73
Financial Statements
Statutory Auditors Report on the Statement
Consolidated Financial Statements
For the year ended 31 December 2022
This is a translation into English of the statutory
auditor’s report on the consolidated financial
statements of the Company issued in French and
it is provided solely for the convenience of English
speaking users.
This statutory auditor’s report includes information
required by European regulation and French law, such
as information about the appointment of the statutory
auditors or verification of the management report and
other documents provided to Shareholders.
This report should be read in conjunction with,
and construed in accordance with, French law and
professional auditing standards applicable in France.
To the NOVACYT Shareholders’ Meeting
Opinion
In compliance with the engagement entrusted
to us by your annual general meeting, we have
audited the accompanying consolidated financial
statements of NOVACYT for the year ended 31
December 2022.
In our opinion, the consolidated financial
statements give a true and fair view of the assets
and liabilities and of the financial position of
the Group as at 31 December 2022 and of the
results of its operations for the year then ended in
accordance with International Financial Reporting
Standards as adopted by the European Union.
Basis for opinion
Audit framework
We conducted our audit in accordance with
professional standards applicable in France. We believe
that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further
described in the “Statutory Auditors’ Responsibilities
for the Audit of the Consolidated Financial Statements”
section of our report.
Independence
We conducted our audit engagement in compliance
with independence requirements of the French
Commercial Code (code de commerce) and the
French Code of Ethics (code de déontologie) for
statutory auditors, for the period from 1 January 2022
to the date of our report.
Emphasis of matter
We draw attention to the following matter:
• Notes 44, Contingent Liabilities and 45,
Subsequent Events, identifying an ongoing
commercial dispute and disclosing the underlying
assumptions and the potential impacts in the
consolidated financial statements.
Our opinion is not modified in respect of this matter.
Justification of assessments
In accordance with the requirements of Articles L. 823-
9 and R. 823-7 of the French Commercial Code relating
to the justification of our assessments, we inform you
of the following assessments that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period.
These matters were addressed in the context of our
audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, and we do
not provide a separate opinion on specific items of the
consolidated financial statements.
Goodwill
Goodwill was subject to impairment tests according to
the procedures described in the “Impairment testing”
note to the consolidated financial statements. We
reviewed the procedures used to implement these tests
as well as the cash flow forecasts and assumptions
used for this purpose, and we verified that the
“Impairment testing” and “Goodwill” notes provided
appropriate disclosures.
Specific verifications
We have also performed, in accordance with
professional standards applicable in France, the
specific verifications required by law and regulations
of the information pertaining to the Group presented in
the Board of Directors’ management report.
We have no matters to report as to its fair
presentation and its consistency with the
consolidated financial statements.
Responsibilities of Management and
Those Charged with Governance for the
Consolidated Financial Statements
Management is responsible for the preparation
and fair presentation of the consolidated financial
statements in accordance with International
Financial Reporting Standards as adopted by the
European Union, and for such internal control as
management determines is necessary to enable the
preparation of consolidated financial statements
that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements,
management is responsible for assessing the
Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern and using the going concern basis of
accounting unless it is expected to liquidate the
Company or to cease operations.
The consolidated financial statements were
approved by the Board of Directors.
Statutory Auditors’ Responsibilities for
the Audit of the Consolidated Financial
Statements
Our role is to issue a report on the consolidated
financial statements. Our objective is to obtain
reasonable assurance about whether the
consolidated financial statements as a whole are
free from material misstatement. Reasonable
assurance is a high level of assurance but is
not a guarantee that an audit conducted in
accordance with professional standards will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and
are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of these financial statements.
Financial StatementsAnnual Report and Accounts 74
75
Financial Statements
However, future events or conditions may cause the
Company to cease to continue as a going concern.
If the statutory auditor concludes that a material
uncertainty exists, there is a requirement to draw
attention in the audit report to the related disclosures
in the consolidated financial statements or, if such
disclosures are not provided or inadequate, to
modify the opinion expressed therein.
• Evaluates the overall presentation of the
consolidated financial statements and assesses
whether these statements represent the underlying
transactions and events in a manner that achieves
fair presentation.
• Obtains sufficient appropriate audit evidence
regarding the financial information of the
entities or business activities within the Group to
express an opinion on the consolidated financial
statements.The statutory auditor is responsible for
the direction, supervision and performance of the
audit of the consolidated financial statements and
for the opinion expressed on these consolidated
financial statements.
Cergy and Paris-La Défense,
26th April 2023
The Statutory Auditors
French original signed by
Alberis Audit
Deloitte & Associés
Guillaume TURCHI
Benoit PIMONT
As specified in Article L. 823-10-1 of the French
Commercial Code, our statutory audit does not include
assurance on the viability of the Company or the quality
of management of the affairs of the Company.
As part of an audit conducted in accordance with
professional standards applicable in France, the
statutory auditor exercises professional judgement
throughout the audit and furthermore:
•
Identifies and assesses the risks of material
misstatement of the consolidated financial
statements, whether due to fraud or error, designs
and performs audit procedures responsive
to those risks, and obtains audit evidence
considered to be sufficient and appropriate to
provide a basis for his opinion. The risk of not
detecting a material misstatement resulting from
fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of
internal control.
• Obtains an understanding of internal control relevant
to the audit in order to design audit procedures
that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the
effectiveness of the internal control.
• Evaluates the appropriateness of accounting
policies used and the reasonableness of
accounting estimates and related disclosures
made by management in the consolidated
financial statements.
• Assesses the appropriateness of management’s
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
a material uncertainty exists related to events or
conditions that may cast significant doubt on the
Company’s ability to continue as a going concern.
This assessment is based on the audit evidence
obtained up to the date of his audit report.
Financial StatementsAnnual Report and Accounts 76
Accounts
and Notes
Consolidated income statement for the years ended 31 December
2022 and 31 December 2021
Amounts in £’000
Continuing Operations
Revenue
Cost of sales
Cost of sales – exceptional
Total cost of sales
Gross profit
Sales, marketing and distribution expenses
Research and development expenses
General and administrative expenses
Governmental subsidies
Operating (loss) / profit before exceptional items
Other operating income
Other operating expenses
Operating loss after exceptional items
Financial income
Financial expense
Loss before tax
Tax expense
Year ended
31 December
2022
Year ended
31 December
2021 (*)
Notes
5
7
8
9
10
11
12
12
13
13
21,040
-15,294
-
-15,294
92,603
-28,607
-35,770
-64,377
5,746
28,226
-4,826
-5,047
-12,090
562
-6,225
-4,645
-16,359
308
-15,655
1,305
-
-7,738
-23,393
3,969
-629
65
-5,286
-3,916
787
-2,531
-20,053
-5,660
14
-2,148
-349
Loss after tax from continuing operations
-22,201
-6,009
Loss from discontinued operations
Loss after tax attributable to owners of the Company (**)
Loss per share (£)
Diluted loss per share (£)
Loss per share from continuing operations (£)
Diluted loss per share from continuing operations (£)
Loss per share from discontinued operations (£)
Diluted loss per share from discontinued operations (£)
38
15
15
15
15
15
15
-3,529
-3,719
-25,730
-0.36
-0.36
-0.31
-0.31
-0.05
-0.05
-9,728
-0.14
-0.14
-0.09
-0.09
-0.05
-0.05
* The 2021 consolidated income statement is presented to reflect the impact of the application of IFRS 5 relative
to discontinued operations, by stating the Lab21 Products activity on a single line ‘Loss from discontinued
operations’.
** There are no non-controlling interests.
Annual Report and Accounts
Consolidated statement of comprehensive income for the years
ended 31 December 2022 and 31 December 2021
Statement of financial position for the years ended 31 December
2022 and 31 December 2021
Amounts in £’000
Loss for the period recognised in the income
statement
Items that may be subsequently reclassified to profit
or loss:
Year ended
31 December
2022
Year ended
31 December
2021 (*)
-25,730
-9,728
Translation reserves
-843
862
Total comprehensive loss
-26,573
-8,866
Comprehensive loss attributable to:
Owners of the Company (**)
-26,573
-8,866
* The 2021 consolidated income statement is presented to reflect the impact of the application of IFRS 5 relative
to discontinued operations, by stating the Lab21 Products activity on a single line ‘Loss from discontinued
operations’.
**There are no non-controlling interests.
Amounts in £’000
Notes
Year ended
31 December
2022
Year ended
31 December
2021
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Non-current financial assets
Deferred tax assets
Other long-term assets
Total non-current assets
Inventories and work in progress
Trade and other receivables
Tax receivables
Prepayments and short-term deposits
Investments short-term
Cash and cash equivalents
Total current assets
Total assets
Lease liabilities short-term
Contingent consideration short-term
Provisions short-term
Trade and other liabilities
Other current liabilities
Total current liabilities
Net current assets
Lease liabilities long-term
Provisions long-term
Deferred tax liabilities
Other long-term liabilities
Total non-current liabilities
Total liabilities
Net assets
16
17
18
19
20
21
22
28
23
24
25
27
29
30
31
25
29
20
32
6,646
3,121
2,751
521
-
624
-
13,663
3,027
33,662
1,149
2,418
9
86,973
127,238
11,471
3,710
4,594
1,788
144
3,143
64
24,914
11,461
38,499
5,034
2,034
9
101,746
158,783
140,901
183,697
609
-
20,300
2,787
540
24,236
424
836
19,956
17,190
498
38,904
103,002
119,879
263
95
1,041
50
1,449
1,446
308
1,224
-
2,978
25,685
41,882
115,216
141,815
Statement of financial position for the years ended 31 December
2022 and 31 December 2021 (continued)
Statement of changes in equity for the years ended 31 December
2022 and 31 December 2021
Amounts in £’000
Notes
Year ended
31 December
2022
Year ended
31 December
2021
Share capital
Share premium account
Own shares
Other reserves
Equity reserve
Retained earnings
Total equity – owners of the Company
33
34
35
36
37
4,053
50,671
-91
-2,017
1,155
61,445
115,216
4,053
50,671
-78
-1,174
1,155
87,188
141,815
Total equity
115,216
141,815
Amounts in £’000
Other Group reserves
Share
capital
Share
premium
Own
shares
Equity
reserves
Acquisition of
the shares of
Primer Design
Translation
reserve
OCI on
retirement
benefits
Retained
earnings
Total
equity
Total
Balance at 1 January
2021
Translation
differences
Loss for the period
Total
comprehensive
income / (loss) for
the period
Own shares acquired
/ sold in the period
Balance at 31
December 2021
Translation
differences
Loss for the period
Total
comprehensive loss
for the period
Own shares acquired
/ sold in the period
Other
Balance at 31
December 2022
4,053
50,671
-49
1,155
-2,407
–
–
–
–
–
–
–
–
–
–
–
-29
–
–
–
–
–
–
–
–
379
862
–
862
–
-8
-2,036
96,916
150,710
–
–
–
–
862
–
862
–
-9,728
-9,728
862
-9,728
-8,866
–
–
-29
4,053
50,671
-78
1,155
-2,407
1,241
-8
-1,174
87,188
141,815
–
–
–
–
–
–
–
–
–
–
–
–
–
-13
–
–
–
–
–
–
–
–
–
–
–
-843
–
-843
–
–
–
–
–
–
–
-843
–
-843
–
-25,730
-25,730
-843
-25,730
-26,573
–
–
–
-13
-13
-13
4,053
50,671
-91
1,155
-2,407
398
-8
-2,017
61,445
115,216
Statement of cash flows for the years ended 31 December 2022 and
31 December 2021
Notes
39
Amounts in £’000
Net cash (used in) / from operating activities
Operating cash flows from discontinued operations
Operating cash flows from continuing operations
Investing activities
Purchases of patents and trademarks
Purchases of property, plant and equipment
Variation of deposits
Acquisition of subsidiary net of cash acquired
Interest received
Net cash used in investing activities
Investing cash flows from discontinued operations
Investing cash flows from continuing operations
Financing activities
Repayment of lease liabilities
Purchase of own shares – net
Net cash used in financing activities
Financing cash flows from discontinued operations
Financing cash flows from continuing operations
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
Year ended
31 December
2022
Year ended
31 December
2021
-13,729
-1,955
-11,774
-260
-156
-12
-787
638
-577
28
-605
-503
-13
-516
-142
-374
-14,822
101,746
49
86,973
15,689
2,180
13,509
-330
-3,770
16
-943
40
-4,987
-247
-4,740
-610
-29
-639
-261
-378
10,063
91,765
-82
101,746
NOTES TO THE ANNUAL ACCOUNTS
1. APPLICABLE ACCOUNTING STANDARDS
Novacyt is an international diagnostics business delivering a broad portfolio of in vitro and
molecular diagnostic tests for a wide range of infectious diseases, enabling faster, more
accurate, accessible testing to improve healthcare outcomes. The Company provides
customers with a seamless sample-to-result workflow using its integrated and scalable
instrumentation/solutions. The Company specialises in the design, manufacture, and supply
of real-time PCR kits, reagents and a full range of laboratory and qPCR instrumentation for
molecular biology research and clinical use. Novacyt offers one of the world’s most varied and
comprehensive
range of qPCR assays, covering human, veterinary, biodefence,
environmental, agriculture and food testing. Its registered office is located at 13 Avenue
Morane Saulnier, 78140 Vélizy-Villacoublay.
The financial information contained in this report comprises the consolidated financial
statements of the Company and its subsidiaries (hereinafter referred to collectively as the
“Group”). They are prepared and presented in Great British Pounds (“GBP”), rounded to the
nearest thousand (“£’000s”).
The 2022 consolidated financial statements were approved by the Board of Directors on 26
April 2023.
2. ADOPTION OF NEW STANDARDS AND AMENDMENTS TO EXISTING STANDARDS
- Standards, interpretations and amendments to standards with mandatory application for
the period beginning on or after 1 January 2022 had no material impact on Novacyt’s
consolidated financial statements at 31 December 2022. These are:
o Amendment to IFRS 4 : Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
Contracts;
o Amendment to IAS 16 regarding proceeds received before the intended use of an
property, plant and equipment;
o Amendment to IAS 37 about which costs to include for the purpose of assessing
whether a contract is onerous;
o Amendment to IFRS 3 about the criteria that activities and assets must meet to be
considered as a business;
o
o
o
o
Improvement to IAS 41: disclosure of the method of calculating the fair value of
agricultural assets;
Improvement to IFRS 1: treatment of the individual accounts of subsidiaries
adopting IFRS for the first time;
Improvement to IFRS 9: consideration of fees and commissions for the
derecognition of a financial liability; and
Improvement to IFRS 16 regarding rental incentives.
- Standards or interpretations not mandatorily applicable in 2022 that would be available
Basis of consolidation
for an early application.
o Amendment to IAS 1: information to disclose regarding accounting principles and
policies;
o Amendment to IAS 8 regarding the definition of an accounting estimate; and
o
IFRS 17 – Insurance contracts.
The company has not adopted the standards and amendments listed above early.
The texts adopted by the European Union are available on the website of the European
Commission.
3. SUMMARY OF ACCOUNTING POLICIES APPLIED BY THE GROUP
The financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRSs”). The financial statements have also been prepared in
accordance with IFRSs adopted by the European Union.
The financial information has been prepared on the historical cost basis except in respect of
those financial instruments that have been measured at fair value. Historical cost is generally
based on the fair value of the consideration given in exchange for the goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date, regardless of
whether that price is directly observable or estimated using another valuation technique. In
estimating the fair value of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants would take those characteristics
into account when pricing the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in the financial information is determined on such
a basis, except for leasing transactions that are within the scope of IFRS 16, and
measurements that have some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 or value in use in IAS 36.
The areas where assumptions and estimates are material in relation to the financial
information are the measurement of goodwill (see note 16), the carrying amounts and useful
lives of the other intangible assets (see note 17), deferred taxes (see note 20), trade
receivables (see note 22) and provisions for risks and other provisions related to the operating
activities (see note 29).
The accounting policies set out below have been applied consistently to all periods presented
in the financial information.
The financial information includes all companies under control. The Group does not exercise
joint control or have significant influence over other companies. Subsidiaries are consolidated
from the date on which the Group obtains effective control.
Controlled companies are consolidated by the full consolidation method with recognition of
non-controlling interests. Under IFRS 10, an investor controls an investee when it is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
When the Group has less than a majority of the voting rights of an investee, it considers that
it has power over the investee when the voting rights are sufficient to give it the practical
ability to direct the relevant activities of the investee unilaterally. The Group considers all
relevant facts and circumstances in assessing whether or not the Group’s voting rights in an
investee are sufficient to give it power, including:
•
•
•
•
the size of the Company’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
potential voting rights held by the Company, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not
have, the current ability to direct the relevant activities at the time that decisions need
to be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and
ceases when the Group loses control of the subsidiary. Specifically, the results of subsidiaries
acquired or disposed of during the year are included in the consolidated income statement
from the date the Group gains control until the date when the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the
owners of the Group and to the non-controlling interests. Total comprehensive income of the
subsidiaries is attributed to the owners of the Group and to the non-controlling interests even
if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring
the accounting policies used into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to
transactions between the members of the Group are eliminated on consolidation. The
Group’s scope of consolidation included the following companies, all fully consolidated when
included in the scope.
At 31 December 2022
At 31 December 2021
Discontinued operations and assets held for sale
Companies
Interest
percentage
Consolidation
method
Interest
percentage
Consolidation
method
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
FC
FC
DO
FC
FC
DO
FC
FC
FC
FC
FC
Biotec Laboratories Ltd
IT-IS International Ltd
Lab21 Healthcare Ltd
Novacyt US Inc
Novacyt Inc
Microgen Bioproducts Ltd
Novacyt SA
Novacyt Asia Ltd
Novacyt China Ltd
Novacyt UK Holdings Ltd
Primer Design Ltd
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
FC
FC
DO
FC
FC
DO
FC
FC
FC
FC
FC
Legend: FC: Full consolidation
DO: Discontinued operation
Consolidation methods
The consolidated historical financial information is prepared using uniform accounting
policies for transactions and other similar events in similar circumstances.
o
Elimination of intercompany transactions
The intercompany balances arising from transactions between consolidated companies, as
well as the transactions themselves, including income, expenses and dividends, are
eliminated.
o
Translation of accounts denominated in foreign currency
The historical financial information is presented in £’000 GBP. The financial statements of
companies whose functional currency is not GBP are translated into GBP as follows:
-
Items in the statement of financial position are translated at the closing exchange rate,
excluding equity items, which are stated at historical rates; and
- Transactions in the income statement and statement of cash flows are translated at
the average annual exchange rate.
in other
Translation differences on earnings and equity are recognised directly
comprehensive income under “Translation reserves” for the portion attributable to the
Group. On disposal of a foreign company, the translation differences relating thereto and
recognised in other comprehensive income are reclassified to profit or loss.
Exchange differences arising from intragroup balances are recognised as exchange losses or
gains in the consolidated income statement.
A discontinued operation is a component that either has been disposed of, or is classified as
held for sale, and
(a) represents a separate major line of business or geographical area of operations,
(b) is part of a single co-ordinated plan to dispose of a separate major line of business or
geographical area of operations, or
(c) is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are presented in the consolidated income statement as a single
amount comprising the total of:
- The post-tax profit or loss of the discontinued operation,
- The post-tax gain or loss recognised on the measurement to fair value less costs to
sell, and
- The post-tax gain or loss recognised on the disposal of assets or the disposal group
making up the discontinued operation.
Where material, the analysis of the single amount is presented in the relevant note (see note
38).
In the statement of cash flows the net cash flow attributable to the operating, investing and
financing activities of discontinued operations have been disclosed separately.
No adjustments have been made in the statement of financial position.
Comparatives for discontinued operations are restated.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable
expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. Thus, they adopt the going concern basis of accounting in preparing
the financial statements.
The going concern model covers the period up to and including April 2024. In making this
assessment, the Directors have considered the following elements:
- The working capital requirements of the business;
- A positive cash balance at 31 December 2022 of £86,973,000;
- Payment of the Long-Term cash Incentive Plan (“LTIP”) that commenced in 2021 and vests
at the end of 2023; and
- The DHSC commercial dispute having a trial date set for June 2024.
The forecast prepared by the Group shows that it is able to cover its cash needs during the
financial year 2023 up until April 2024.
Business combinations and measurement of goodwill
o Business combinations
Business combinations are accounted for using the purchase method (see IFRS 3).
Each time it acquires a company or group of companies constituting a business, the Group
identifies and measures the assets acquired and liabilities assumed, most of which are carried
at fair value. The difference between the fair value of the consideration transferred, including
the recognised amount of any non-controlling interest in the acquiree, and the net amount
recognised in respect of the identifiable assets acquired and liabilities assumed measured at
fair value, is recognised as goodwill.
Pursuant to IFRS 3, the Group applies the following principles:
- Transaction costs are recognised immediately as operating expenses when incurred;
- Any purchase price adjustment of an asset or a liability assumed is estimated at fair
value at the acquisition date, and the initial assessment may only subsequently be
adjusted against goodwill in the event of new information related to facts and
circumstances existing at the acquisition date if this assessment occurs within the 12-
month allocation period after the acquisition date. Any adjustment of the financial
liability recognised in respect of an additional price subsequent to the intervening
period or not meeting these criteria is recognised in the Group’s comprehensive
income;
- Any negative goodwill arising on acquisition is immediately recognised as income; and
- For step acquisitions, the achievement of control triggers the remeasurement at fair
value of the interest previously held by the Group in profit or loss. Loss of control
results in the remeasurement of the possible residual interest at fair value in the same
way.
For companies acquired during the year, only the results for the period following the
acquisition date are included in the consolidated income statement.
o Measurement of goodwill
Goodwill is broken down by cash-generating unit (“CGU”) or group of CGUs, depending on
the level at which goodwill is monitored for management purposes. In accordance with
IAS 36, none of the CGUs or groups of CGUs defined by the Group are greater in size than an
operating segment.
o
Impairment testing
Goodwill is not amortised, but is subject to impairment testing when there is an indication of
loss of value, and at least once a year at the reporting date.
Such testing consists of comparing the carrying amount of an asset to its recoverable amount.
The recoverable amount of an asset, a CGU or a group of CGUs is the greater of its fair value
less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from
the sale of an asset, a CGU or a group of CGUs in an arm’s length transaction between well-
informed, willing parties, less the costs of disposal. Value in use is the present value of future
cash flows expected to arise from an asset, a CGU or a group of CGUs.
It is not always necessary to determine both the fair value of an asset less costs to sell and its
value in use. If either of these amounts exceeds the carrying amount of the asset, the asset is
not impaired and it is not necessary to estimate the other amount.
Intangible fixed assets
o
Customer relationships
In accordance with IFRS 3, the Group’s acquisition of Primer Design and IT-IS International
resulted in the recognition of the value of the acquired customer base on the statement of
financial position. The value of these assets was determined by discounting the additional
margin generated by customers after remuneration of the contributing assets.
Customer relationships are amortised on a straight-line basis over nine years, unless they are
deemed to be impaired.
o
Trademark
The acquisition price of Primer Design and IT-IS International by the Group has led to the
recognition of a number of trademarks. The value of these assets has been determined by
discounting the cash flows that could be generated by licensing the trademark, estimated as
a percentage of revenue derived from information available on comparable assets.
Trademarks are amortised on a straight-line basis over nine years, unless they are deemed to
be impaired.
o Other intangible assets
Intangible assets include licences and patents recognised at cost and amortised over useful
lives of between 7 and 20 years.
Property, plant and equipment
Items of property, plant and equipment are recognised at their acquisition cost (purchase
price plus incidental expenses and acquisition costs).
Depreciation and amortisation
Property, plant and equipment and intangible assets are depreciated or amortised on a
straight-line basis, with major components identified separately where appropriate, based on
the following estimated useful lives:
-
Leasehold improvements:
Straight-line basis – 2 to 15 years
- Trademarks:
- Customer relationships:
- Plant and machinery:
Straight-line basis – 9 years
Straight-line basis – 9 years
Straight-line basis – 3 to 6 years
- General fittings, improvements:
Straight-line basis – 3 to 5 years
- Transport equipment:
- Office equipment:
- Computer equipment:
Straight-line basis – 5 years
Straight-line basis – 3 years
Straight-line basis – 2 to 3 years
Any leased buildings, equipment or other leases that fall under the scope of IFRS 16 have been
capitalised as a right-of-use asset and will be depreciated on a straight-line basis over the
shorter of the estimated useful life and the lease term.
The depreciation or amortisation of property, plant and equipment begins when they are
ready for use and ceases at their disposal, scrapping or reclassification as assets held for sale
in accordance with IFRS 5.
Given the nature of its assets, the Group does not recognise residual value on the items of
property, plant and equipment it uses.
Depreciation and amortisation methods and useful lives are reviewed at each reporting date
and revised prospectively if necessary.
Asset impairment
Depreciable and non-depreciable assets are subject to impairment testing when indications
of loss of value are identified. In assessing whether there is any indication that an asset may
be impaired, the Group considers the following external and internal indicators:
External indicators:
- Drop in the market value of the asset (to a greater extent than would be expected
solely from the passage of time or the normal use of the asset);
- Significant changes with an adverse effect on the entity, either having taken place
during the period or expected to occur in the near future, in the technical, economic
or legal environment in which the Group operates or in which the asset is used; and
-
Increases in market interest rates or other market rates of return during the year when
it is likely that such increases will significantly reduce the market value and/or value
in use of the asset.
Internal indicators:
- Existence of indication of obsolescence or physical damage of an asset unforeseen in
the depreciation or amortisation schedule;
- Significant changes in the way the asset is used;
- Weaker-than-expected performance by the asset; and
- Significant reduction in the level of cash flow generated by the asset.
If there is an indication of impairment, the recoverable amount of the asset is compared with
its carrying amount. The recoverable amount is the greater of fair value less costs to sell and
value in use. Value in use is the present value of future cash flows expected to flow from an
asset over its estimated useful life.
The recoverable amount of assets that do not generate independent cash flows is determined
by that of the CGU to which it belongs; a CGU being the smallest homogeneous group of
identifiable assets generating cash flows that are largely independent of other assets or
groups of assets.
The carrying amount of an asset is its gross value less accumulated depreciation, for
depreciable property, plant and equipment, and impairment losses.
In the event of loss of value, an impairment charge is recognised in the income statement.
Impairment is reversed in the event of a change in the estimate of the recoverable value or if
indications of loss of value disappear. Impairment is recognised under “Depreciation,
amortisation and provisions for impairment of property, plant and equipment and intangible
assets” in the income statement.
Intangible assets not subject to amortisation are tested for impairment at least once a year.
Leases
The Group assesses whether a contract is or contains a lease, at the inception of the contract.
The Group recognises a right-of-use asset and a lease liability at lease commencement for all
lease arrangements in which it is the lessee, except for short-term leases and leases of low-
value assets.
• The Group records right-of-use assets at cost at the commencement date of the lease,
which is the date the underlying asset is available for use, less any accumulated
depreciation and impairment losses, and adjusted for subsequent remeasurement of
lease liabilities. Cost includes the amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement date, less any lease
incentives received. The Group charges depreciation to the income statement on a
straight-line basis over the shorter of the estimated useful life and the lease term.
• The lease liability is initially measured at the present value of the future lease payments
discounted using the discount rate implicit in the lease (or if that rate cannot be readily
determined, the lessee’s incremental borrowing rate). Subsequently, the lease liability is
adjusted for interest and lease payments, as well as the impact of lease modifications,
amongst others.
Inventories
Inventories are carried at the lower of cost and net realisable value. Cost includes materials
and supplies, and, where applicable, direct labour costs incurred in transforming them into
their current state. It is calculated using the weighted average cost method. The recoverable
amount represents the estimated selling price less any marketing, sales and distribution
expenses.
The gross value of goods and supplies includes the purchase price and incidental expenses.
A provision for impairment, equal to the difference between the gross value determined in
accordance with the above terms and the current market price or the realisable value less any
proportional selling costs, is recognised when the gross value is greater than the other stated
item.
Trade receivables
Financial liabilities
The Group has an established credit policy under which the credit status of each new
customer is reviewed before credit is advanced, including external credit evaluations where
possible. Credit limits are established for all significant or high-risk customers, which
represent the maximum amount permitted to be outstanding without requiring additional
approval from the appropriate level of senior management. Outstanding debts are continually
monitored by each division. Credit limits are reviewed on a regular basis, and at least annually.
Customers that fail to meet the Group’s benchmark creditworthiness may only transact with
the Group on a prepayment basis.
Trade receivables are recorded initially at fair value and subsequently measured at amortised
cost. This generally results in their recognition at nominal value less an allowance for any
doubtful debts. Trade receivables in foreign currency are transacted in their local currency
and subsequently revalued at the end of each reporting period, with any foreign exchange
differences being recognised in the income statement as an income/expense.
The allowance for doubtful debts is recognised based on Management’s expectation of losses
without regard to whether an impairment trigger happened or not (an “expected credit loss”
model). Through implementation of IFRS 9, the Group concluded that no real historical default
rate could be determined due to a low level of historical write offs across the business. The
Group therefore recognises an allowance for doubtful debts on the basis of invoice ageing.
Once an invoice is overdue from its due date, based on agreed credit terms, by more than 90
days, this invoice is then more likely to default than those invoices operating within 90 days
of their due date. As such, these invoices will be provided for in full as part of an expected
credit loss model, except where Management have reviewed and judged otherwise.
Trade receivables are written off when there is no reasonable expectation of recovery.
Indicators that there may be no reasonable expectation of recovery may include the failure
of the debtor to engage in a payment plan, and failure to make contractual payments within
365 days of the original due date.
Cash and cash equivalents
Cash equivalents are held to meet short-term cash commitments rather than for investment
or other purposes. For an investment to qualify as a cash equivalent, it must be readily
convertible into a known amount of cash and be subject to an insignificant risk of change in
value. Cash and cash equivalents comprise cash funds, current bank accounts and marketable
securities (cash Undertakings for Collective Investment in Transferable Securities (“UCITS”),
negotiable debt securities, etc) that can be liquidated or sold within a very short time
(generally with original maturities of three months or less) and which have a negligible risk of
change in value. All such items are measured at fair value, with any adjustments recognised
in the income statement.
The Group records bank and other borrowings initially at fair value, which equals the proceeds
received, net of direct issue costs, and subsequently at amortised cost. The Group accounts
for finance charges, including premiums payable on settlement or redemption and direct
issue costs, using the effective interest rate method.
•
IT-IS International Ltd contingent consideration
The Group negotiated a contingent consideration for the acquisition of the IT-IS International
securities with its former shareholders in 2020, subject to the achievement of a production
volume target.
In accordance with IFRS 9, the financial liability has been remeasured at its fair value as of the
statement of financial position date.
•
Trade payables
Trade payables are obligations to provide cash or other financial assets. They are recognised
in the statement of financial position when the Group becomes a party to a transaction
generating liabilities of this nature. Trade and other payables are recognised in the statement
of financial position at fair value on initial recognition, except if settlement is to occur more
than 12 months after recognition. In such cases, they are measured using the amortised cost
method. The use of the effective interest rate method will result in the recognition of a
financial expense in the income statement. Trade and other payables are eliminated from the
statement of financial position when the corresponding obligation is discharged.
Trade payables have not been discounted, because the effect of doing so would be
immaterial.
Provisions
In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, a
provision is recognised when the Group has a current obligation as of the reporting date in
respect of a third party and it is probable or certain that there will be an outflow of resources
to this third party, without at least equivalent consideration from the said third party.
Provisions for risks and charges cover the amount corresponding to the best estimate of the
future outflow of resources required to settle the obligation.
The provisions are for the restoration of leased premises, risks related to litigations and
product warranties.
Long-Term Incentive Plan
Novacyt granted shares to certain employees under a LTIP adopted on 1 November 2017. The
exercise price was set at the share price on the grant date and the options were settled in
cash. The options fully vested on the third anniversary of the grant date, 1 November 2020.
The payment expenses were calculated in accordance with IFRS 2 “Share-based Payment”.
The accounting charge has been spread across the vesting period to reflect the services
received and a liability was recognised in the statement of financial position. The final
tranches were settled in 2022 and the scheme has now been fully settled.
In December 2021, Novacyt implemented a cash LTIP to qualifying employees, based on
achieving certain annual EBITDA targets over a three-year qualifying period. The plan will vest
on the third anniversary of the grant date and will be settled in cash.
In February 2022, a Performance Share Awards programme for executive management was
created as part of its new LTIP. This LTIP replaced the previous phantom share award scheme
which ended in November 2020.
The 2022 Performance Share Awards programme is structured as nil-cost options, giving a
right to acquire a specified number of shares at a nil exercise price per share (i.e. for no
payment) in accordance with the rules, governed by sections L-225-197-1 and seq. of the
French Commercial Code (“actions gratuites").
The awards will vest over a three-year performance period, starting 1 January 2022 and
ending on 31 December 2024, subject to the Company achieving certain total shareholder
return growth conditions. The baseline for total shareholder return is based on the average
closing price of the Company’s shares in December 2021, which was £3.54. This will be
compared to the equivalent figure in December 2024.
Consolidated revenue
IFRS 15 “Revenue from Contracts with Customers” establishes a principles-based approach to
recognising revenue only when performance obligations are satisfied, and control of the
related goods or services is transferred. It addresses items such as the nature, amount, timing
and uncertainty of revenue, and cash flows arising from contracts with customers. IFRS 15
applies a five-step approach to the timing of revenue recognition and applies to all contracts
with customers except those in the scope of other standards:
• Step 1 – Identify the contract(s) with a customer
• Step 2 – Identify the performance obligations in the contract
• Step 3 – Determine the transaction price
• Step 4 – Allocate the transaction price to the performance obligations in the contract
• Step 5 – Recognise revenue when (or as) the entity satisfies a performance obligation
The Group principally satisfies its performance obligations at a point in time and revenue
recognised relating to performance obligations satisfied over time is not significant. As such,
revenue is generally recognised at the point of sale, with little judgement required in
determining the timing of transfer of control.
Some contracts with customers contain a limited assurance warranty that is accounted for
under IAS 37 (see Provisions accounting policy). If a repair or replacement is not possible
under the assurance warranty, a full refund of the product price may be given. The potential
refund liability represents variable consideration.
Under IFRS 15.53, the Group can use either:
• The expected value (sum of probability weighted amounts); or
• The most likely amount (generally used when the outcomes are binary).
The method used is not a policy choice. Management use the method that it expects will best
predict the amount of consideration based on the terms of the contract. The method is
applied consistently throughout the contract. Variable revenue is constrained if appropriate.
IFRS 15 requires that revenue is only included to the extent that it is highly probable that
there will not be a significant reversal in future periods.
In making this assessment, Management have considered the following factors (which are not
exclusive):
•
If the amount of consideration is highly susceptible to factors outside the Group’s
influence;
• Whether the uncertainty about the amount of consideration is not expected to be
resolved for a long period of time;
• The Group’s experience (or other evidence) with similar types of contract;
• The Group has a practice of either offering a broad range of price concessions or changing
the payment terms and conditions of similar contracts in similar circumstances; and
• The contract has a large number and broad range of possible consideration amounts.
The decision as to whether revenue should be constrained is considered to be a significant
judgement as the term ‘highly probable’ is not defined in IFRS 15, Management consider
highly probable to be significantly more likely than probable.
o
Primer Design
Primer Design Ltd is a designer, manufacturer and marketer of molecular ‘real-time’ qPCR
testing devices and reagents in the area of infectious diseases based in Eastleigh, UK.
Revenue is recognised upon delivery of products sold and, where appropriate, after formal
customer acceptance.
o
IT-IS International
IT-IS International Ltd is a diagnostic instrument development and manufacturing company
specialising in the development of PCR devices for the life sciences and food testing industry.
Revenue is recognised upon delivery of products sold and, where appropriate, after formal
customer acceptance.
o
Lab21 Products
Lab21 Healthcare Ltd and Microgen Bioproducts Ltd were a developer, manufacturer and
distributor of a large range of protein-based infectious disease IVD products.
Revenue was recognised upon delivery of products sold and, where appropriate, after formal
customer acceptance.
Microgen Bioproducts and Lab21 Healthcare ceased trading during 2022 and they are being
treated as discontinued operations.
Taxation
Income tax on profit or loss for the period comprises current and deferred tax.
• Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
net profit as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other years, and it further excludes items that are
never taxable or deductible. The Group’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the end of the reporting period.
A provision is recognised for those matters for which the tax determination is uncertain but
it is considered probable that there will be a future outflow of funds to a tax authority. The
provisions are measured at the best estimate of the amount expected to become payable.
The assessment is the result of the Group’s judgement based on the advice of external tax
professionals and supported by previous experience in respect of such activities.
• Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and is accounted for using the liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference arises from the initial recognition
of goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries and associates, and interests in joint ventures, except where the
Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such investments and interests are
only recognised to the extent that it is probable that there will be sufficient taxable profits
against which to utilise the benefits of the temporary differences in the near-term.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered in the near-term.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled, or the asset is realised based on tax laws and rates that have been enacted
or substantively enacted at the reporting date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that
would follow from the manner in which the Group expects, at the end of the reporting period,
to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in the income statement, except when they relate to
items that are recognised in other comprehensive income or directly in equity, in which case,
the current and deferred tax are also recognised in other comprehensive income or directly
in equity respectively. Where current tax or deferred tax arises from the initial accounting for
a business combination, the tax effect is included in the accounting for the business
combination.
UK Patent Box regime
The UK Patent Box regime is a special low corporate tax rate used to incentivise research and
development by taxing revenues from patented products differently from other revenues. On
30 March 2022 Novacyt (specifically Primer Design Ltd) received confirmation that the UK
Intellectual Property Office had granted the key patent (ORF1a/b), with patent number
GB2593010. This means that the effective rate of tax on profits (adjusted for certain rules)
derived from the sale of products incorporating this patent is close to 10% rather than the
current UK corporation tax rate of 19%.
The effective tax rate is given via a tax deduction and due to the uncertainty over the precise
timing of the tax relief available to the company and the complexity involved in making a claim
for the first time, a tax asset has not been recognised. The asset will only be recognised when
Management can reliably measure and predict the outcome of a Patent Box claim in terms of
value and timing.
Research and development expenditure credits
Primer Design Ltd and IT-IS International Ltd benefit from a R&D expenditure credit in respect
of some of their research activities. The tax credit is calculated per financial year as 13% of
the actual expenditure and is shown in the income statement against governmental subsidies.
The credit is taxable and therefore the tax charge on this credit is included in the tax line of
the income statement.
Profit/loss per share
The Group reports basic and diluted profit/loss per ordinary share. Basic profit/loss per share
is calculated by dividing the profit/loss attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding during the period.
Diluted profit/loss per share is determined by adjusting the profit/loss attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding, taking into
account the effects of all potential dilutive ordinary shares, including options.
Exceptional items
Exceptional items are those costs or incomes that in the view of the Board of Directors,
require separate disclosure by virtue of their size or incidence, and are charged or credited in
arriving at operating profit on the face of the consolidated income statement.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATE
UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 3, the
directors are required to make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised and to make estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical accounting judgements
• Constraint of revenue
Revenue is only constrained if it is highly probable there will not be a significant reversal of
revenue in the future. Highly probable is not defined in IFRS 15 and so it is a significant
judgement to be exercised by Management. The value of revenue related to performance
obligations fulfilled in 2020 to which constraint has not been applied is £130,642,000 and
relates to the DHSC dispute, further details are disclosed in note 44.
• Measurement and useful lives of intangible assets
Other intangible assets (except for goodwill) are considered to have a finite economic useful
life. They are amortised over their estimated useful lives that are reviewed at each reporting
date. In the event of impairment, an estimate of the asset’s recoverable amount is made.
The main intangible assets requiring estimates and assumptions are the trademarks and the
customer relationships identified as a result of the acquisition of Primer Design, and IT-IS
International.
The value of the intangible assets is tested whenever there are indications of impairment and
reviewed at each annual closing date or more frequently should this be justified by internal
or external events.
o Trademarks
The value of these assets was determined by discounting the cash flows that could be
generated by licensing the trademark, estimated as a percentage of revenue derived from
information available on comparable assets.
Trademarks are amortised on a straight-line basis over a period of nine years, estimated as
their useful life. They are also tested for impairment at least annually. Their recoverable
amount is determined using forecasts of future cash flows. The total amount of anticipated
cash flows reflects Management’s best estimate of the future benefits and liabilities expected
from the operation of the trademark. The resulting estimates are subject to discount rate,
percentage of revenue and useful life assumptions.
The carrying amount of trademarks at 31 December 2022 is £791,000 (2021: £938,000). The
amortisation charge for the period is £156,000 (2021: £157,000) and the cumulative
amortisation is £636,000 (2021: £458,000).
o Customer relationships
The value of these assets was determined by discounting the additional margin generated by
customers after remuneration of the contributing assets.
Customer relationships are amortised on a straight-line basis over a period of nine years,
estimated as their useful life. They are also tested for impairment at least annually. Their
recoverable amount is determined using forecasts of future cash flows over an estimated
period of time. The total amount of anticipated cash flows reflects Management’s best
estimate of the future benefits and liabilities expected from customer relationships. The
resulting estimates are subject to assumptions in respect of the discount rate, additional
margin generated by customers after remuneration of contributing assets and useful lives.
The carrying amount of customer relationships at 31 December 2022 is £1,888,000 (2021:
£2,339,000). The amortisation charge for the period is £501,000 (2021: £502,000) and the
cumulative amortisation is £2,733,000 (2021: £2,113,000).
• Deferred taxes
Deferred tax assets are only recognised to the extent that it is considered probable that the
Group will have future taxable profits against which the corresponding temporary difference
can be offset. Deferred tax assets are reviewed at each reporting date and derecognised if it
is no longer probable there will be taxable profits against which the deductible temporary
differences can be utilised.
For deferred tax assets on tax losses carried forward, the Group uses a multi-criteria approach
that takes into account the recovery timeframe based on the strategic plan, but which also
factors in the strategy for the long-term recovery of tax losses in each country.
Deferred tax liabilities relate to the assets acquired as part of the IT-IS International
acquisition and accelerated capital allowances.
• Trade and other receivables
An estimate of the risks of non-receipt based on commercial information, current economic
trends and the solvency of individual customers is made to determine the need for
impairment on a customer-by-customer basis. Management use significant judgement in
determining whether a credit loss provision is required.
At the year end, the Group had trade receivables of £25,485,000 against which a credit loss
provision of £214,000 has been applied. At the date of signing the financial statements,
£23,957,000 of the 31 December 2022 receivables, relating to products delivered during
2020, were overdue due to the contract dispute with the Department of Health and Social
Care “DHSC” (see notes 44 and 45). Management considers it to be more likely than not that
the 31 December 2022 balances are recoverable; this is a significant judgement.
• Provisions
The carrying value of provisions at 31 December 2022 and 2021 are as per the table below:
Amounts in £’000
Provisions for restoration of premises
Provision for litigation
Provisions for product warranty
Year ended
31 December
2022
Year ended
31 December
2021
425
157
19,813
308
157
19,799
o Provisions for product warranty
The value of provision required is determined by Management based on available
information, experience and, in some cases, expert estimates. Product warranty provisions
are only included if it is considered to be probable that an outflow of economic benefit will
be required. Determination of probable is a significant judgement especially in light of the
dispute described in notes 44 and 45.
Key sources of estimation uncertainty
The Group has a number of key sources of estimation uncertainty. Of these items, only the
measurement of goodwill (see note 16) is considered likely to result in a material adjustment.
Where there are other areas of estimates these have been deemed not material.
• Measurement of goodwill
Goodwill is tested for impairment on an annual basis. The recoverable amount of goodwill is
determined mainly on the basis of forecasts of future cash flows. The total amount of
anticipated cash flows reflects Management’s best estimate of the future benefits and
liabilities expected for the relevant CGU. The assumptions used and the resulting estimates
sometimes cover very long periods, taking into account the technological, commercial and
contractual constraints associated with each CGU. These estimates are mainly subject to
assumptions in terms of volumes, selling prices and related production costs, and the
exchange rates of the currencies in which sales and purchases are denominated. They are also
subject to the discount rate used for each CGU.
The value of the goodwill is tested whenever there are indications of impairment and
reviewed at each annual closing date or more frequently should this be justified by internal
or external events.
The carrying amount of goodwill in the statement of financial position and related impairment
loss over the period is shown below:
Total provisions
20,395
20,264
Amounts in £’000
o Provisions for restoration of premises
The value of provision required is determined by Management on the basis of available
information, experience and, in some cases, expert estimates. When these obligations are
settled, the amount of the costs or penalties that are ultimately incurred or paid may differ
significantly from the amounts initially provisioned. Therefore, these provisions are regularly
reviewed and may have an effect on the Group’s future results.
To the Group’s knowledge, there is no indication to date that the parameters adopted as a
whole are not appropriate, and there are no known developments that could significantly
affect the amount of provision.
Goodwill Primer Design
Cumulative impairment of goodwill
Net value
Goodwill IT-IS International
Cumulative impairment of goodwill
Net value
Total goodwill
Year ended
31 December
2022
Year ended
31 December
2021
6,384
-
6,384
9,437
-9,175
262
6,646
6,053
-
6,053
9,437
-4,019
5,418
11,471
Sensitivity analysis has been performed on the goodwill balance. There is significant
headroom associated with the Primer Design balance, but there is limited headroom on the
IT-IS International goodwill balance, which could result in future impairments. The goodwill
sensitivity analysis is presented in note 16.
• Litigations
The Group may be party to regulatory, judicial or arbitration proceedings which may have an
impact on the Group’s financial position.
The Group’s Management regularly reviews current proceedings, their progress and assesses
the need to establish appropriate provisions or to change their amount if the occurrence of
events during the course of the proceedings necessitates a reassessment of the risk. Internal
or external advisors are involved in determining the costs that may be incurred.
The decision to set aside provisions to cover a risk and the amount of such provisions are
based on the risk assessment on a case-by-case basis, Management’s assessment of the
unfavourable nature of the outcome of the proceeding in question (probability) and the
ability to reliably estimate the associated amount.
5. REVENUE
The table below shows revenue on a geographical basis:
Amounts in £’000
Geographical area
United Kingdom
Europe (excluding UK)
America
Asia-Pacific
Middle East
Africa
Total revenue
Year ended
31 December
2022
Year ended
31 December
2021
10,123
3,849
4,481
1,852
377
358
21,040
42,108
31,400
8,829
8,638
518
1,110
92,603
Revenue has fallen year on year as a result of COVID-19 sales reducing as the demand for tests
has fallen.
During 2021, £40,861,000 (excluding VAT) of product and services were delivered and
invoiced to the DHSC which has now been included as part of the ongoing dispute.
Management have made the judgement that per IFRS 15, Revenue from Contracts with
Customers, it is not appropriate at this stage to recognise as revenue, any sales invoices raised
to the customer in 2021 that are in dispute. However, Management remains committed to
obtaining payment for these products and services.
A portion of the Group’s revenue is generated in foreign currencies (particularly in Euros and
US Dollars). The Group has not hedged against the associated currency risk.
The breakdown of revenue by operating segment and geographical area is presented in
note 6.
6. OPERATING SEGMENTS
Segment reporting
Pursuant to IFRS 8, an operating segment is a component of an entity:
-
that engages in business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions with other
components of the same entity);
- whose operating results are regularly reviewed by the Group’s Chief Executive to
make decisions regarding the allocation of resources to the segment and to assess its
performance; and
-
for which discrete financial information is available.
The Group has identified four operating segments, whose performance and resources are
monitored separately. Following the Group's announcement to discontinue the Microgen
Bioproducts and Lab21 Healthcare businesses earlier this year, the Lab21 Products segment,
which is made up of these businesses, is being treated as a discontinued operation:
o
Primer Design
This segment represents the activities of Primer Design Ltd, which is a designer, manufacturer
and marketer of molecular ‘real-time’ qPCR testing devices and reagents in the area of
infectious diseases based in Eastleigh, UK.
o
IT-IS International
This segment represents the activities of IT-IS International Ltd, a diagnostic instrument
development and manufacturing company specialising in the development of PCR devices for
the life sciences and food testing industry based in Stokesley, UK.
o
Lab21 Products
This segment represents the activities of Lab21 Products, which was a developer,
manufacturer and distributor of a large range of protein-based infectious disease IVD
products covering Microgen Bioproducts Ltd and Lab21 Healthcare Ltd, both based in
Camberley, UK. As these businesses ceased trading in June 2022, this segment is being treated
as a discontinued operation.
o
Corporate
This accounting treatment does not change the Group’s legal position or rights in relation to
the dispute with the DHSC.
This segment represents Group central/corporate costs. Where appropriate, costs are
recharged to individual business units via a management recharge process.
o
Intercompany eliminations
This represents intercompany transactions across the Group that have not been allocated to
an individual operating segment. It is not a discrete segment.
Breakdown of result by operating segment
o
Year ended 31 December 2022
The Chief Operating Decision Maker is the Chief Executive Officer.
Headcount
The average headcount by segment is presented in the table below:
Segment
Primer Design
Lab21 Products
IT-IS International
Corporate
Total headcount
2022
141
21
31
29
222
2021
169
45
38
24
276
Breakdown of revenue by operating segment and geographical area
o
Year ended 31 December 2022
Amounts in £’000
Primer Design
IT-IS International
Total
Geographical area
United Kingdom
Europe (excluding UK)
America
Asia-Pacific
Middle East
Africa
Total revenue
10,051
3,372
4,134
1,373
347
357
19,634
72
477
347
479
30
1
1,406
10,123
3,849
4,481
1,852
377
358
21,040
There were no sales in France in 2022.
o
Year ended 31 December 2021
Amounts in £’000
Primer Design
IT-IS International
Total
Geographical area
United Kingdom
Europe (excluding UK)
America
Asia-Pacific
Middle East
Africa
Total revenue
41,944
31,045
8,047
7,262
501
1,053
89,852
164
355
782
1,376
17
57
2,751
42,108
31,400
8,829
8,638
518
1,110
92,603
There were sales totalling £262,000 in France in 2021 contained within the line Europe
(excluding UK).
Amounts in £’000
Primer Design
Lab21
Products
IT-IS
International Corporate
Intercompany
eliminations
o
Year ended 31 December 2021
Amounts in £’000
Primer Design
Lab21
Products
IT-IS
International Corporate
Intercompany
eliminations
Revenue
Cost of sales
Sales and marketing costs
Research and development
General and administrative
Governmental subsidies
Earnings before interest, tax,
depreciation and amortisation as per
management reporting
19,634
-14,710
-4,231
-4,458
-7,668
490
-10,943
Depreciation and amortisation
-1,699
Operating (loss) / profit
before exceptional items
-12,642
-
-
-
-
-
-
-
-
-
Revenue
Cost of sales
Cost of sales - exceptional
Sales and marketing costs
Research and development
General and administrative
Governmental subsidies
ADJUSTED Earnings before interest,
tax, depreciation, amortisation and
cost of sales – exceptional, as per
management reporting
Earnings before interest, tax,
depreciation and amortisation as per
management reporting
Depreciation and amortisation
Operating profit / (loss)
before exceptional items
89,856
-27,582
-37,192
-5,659
-4,148
-12,439
254
40,282
3,090
-1,372
1,718
-
-
-
-
-
-
-
-
-
-
-
1,417
-2,026
-321
-589
-1,046
72
-
-
-274
-
-1,261
-
-11
1,442
-
-
-
-
Total
21,040
-15,294
-4,826
-5,047
-9,975
562
-2,493
-1,535
1,431
-13,540
-405
-44
33
-2,115
-2,898
-1,579
1,464
-15,655
9,270
-5,131
-3,984
-228
-497
-1,493
54
-
-
-
-338
-
-637
-
-6,523
4,106
5,406
-
-
-
-
Total
92,603
-28,607
-35,770
-6,225
-4,645
-14,569
308
1,975
-975
-2,417
38,865
-2,009
-975
2,989
3,095
-404
-24
10
-1,790
-2,413
-999
2,999
1,305
Assets and liabilities are not reported to the Chief Operating Decision Maker on a segmental
basis and are therefore not disclosed.
Please note that in accordance with IFRS 5 the results of the Lab21 Products segment for 2022
and 2021 have been reported on a separate line ‘Loss from discontinued operations’ which is
shown below EBITDA and thus all items above EBITDA have a nil value.
8. COST OF SALES - EXCEPTIONAL
7. COST OF SALES
Amounts in £’000
Cost of inventories recognised as an expense
Change in stock provision
Freight costs
Direct labour
Product warranty
Other
Total cost of sales
Year ended
31 December
2022
Year ended
31 December
2021
17,509
-6,473
73
4,141
14
30
15,294
20,373
-10,404
405
17,624
11
598
28,607
Total cost of sales has fallen year on year reflecting the reduction in sales.
In 2022 the stock provision relating to continuing operations decreased by a net £6,473,000
(2021: £10,404,000). A large amount of stock, which had previously been provided for, was
written off and disposed of during 2022, with the cost being charged to ‘Cost of inventories
recognised as an expense’ and a corresponding release of the stock provision being made.
Amounts in £'000
Cost of inventories recognised as an expense
Change in stock provision
Direct labour
Other
Total cost of sales - exceptional
Year ended
31 December
2022
Year ended
31 December
2021
-
-
-
-
-
4,802
26,098
4,133
737
35,770
During 2022 no costs were classified as cost of sales - exceptional relating to the DHSC dispute.
Due to the DHSC dispute mentioned in note 44, Management booked a number of one-off,
non-recurring cost of sales charges in 2021. Two of the key items were a £26,098,000 stock
provision, as a result of the Group buying stock to fulfil expected future DHSC orders that did
not materialise, and the expensing of £6,884,000 of stock delivered to the DHSC which has
not been paid for as it is now included in the ongoing contract dispute.
9. SALES, MARKETING AND DISTRIBUTION EXPENSES
Direct labour (including subcontractor costs) has decreased year on year as a result of scaling
back production to align to lower sales.
Amounts in £’000
A large amount of stock, which had previously been provided for, was written off and
disposed of during 2021, with the cost being charged to ‘Cost of inventories recognised as an
expense’ and a corresponding release of the stock provision being made.
Advertising expenses
Distribution expenses
Employee compensation and social security contributions
Travel and entertainment expenses
Other sales and marketing expenses
Total sales, marketing and distribution expenses
Year ended
31 December
2022
Year ended
31 December
2021
459
258
3,606
184
319
4,826
743
539
4,519
107
317
6,225
Labour costs have reduced year on year as a result of the restructuring programme
undertaken by the Group in 2022 to reduce its cost base.
10. RESEARCH AND DEVELOPMENT EXPENSES
12. OTHER OPERATING INCOME AND EXPENSES
Amounts in £’000
Year ended
31 December
2022
Year ended
31 December
2021
Employee compensation and social security contributions
Other expenses
Total research and development expenses
2,704
2,343
5,047
2,756
1,889
4,645
Other expenses includes R&D consumables, non-capitalised development costs and quality
control/assurance expenses that supported the launch and development of new products.
Amounts in £’000
Other operating income
Total other operating income
Impairment of IT-IS International goodwill
DHSC contract dispute costs
Restructuring expenses
Acquisition related expenses
Other expenses
Year ended
31 December
2022
Year ended
31 December
2021
-
-
-5,156
-927
-1,255
-325
-75
65
65
-4,019
-802
-422
-
-43
11. GENERAL AND ADMINISTRATIVE EXPENSES
Total other operating expenses
-7,738
-5,286
Amounts in £’000
Year ended
31 December
2022
Year ended
31 December
2021
Purchases of non-stored raw materials and supplies
Lease and similar payments
Maintenance and repairs
Insurance premiums
Legal and professional fees
Banking services
Employee compensation and social security contributions
Depreciation and amortisation of property, plant and equipment
and intangible assets
Other general and administrative expenses
323
477
370
1,024
1,622
55
5,144
2,115
960
376
397
499
1,451
2,404
88
7,890
1,790
1,464
Total general and administrative expenses
12,090
16,359
Legal and professional fees include advisors’ fees, audit fees and legal fees.
Labour costs have reduced year on year predominantly as a result of the restructuring
programming undertaken by the Group in 2022 to reduce its cost base.
Depreciation and amortisation of property, plant and equipment and intangible assets
increased in 2022 due to the annualised effect of reporting twelve months of depreciation on
a number of material asset additions during late 2021.
Other general and administrative expenses include costs such as building rates, regulatory
fees and IT expenses. 2021 included approximately £500,000 charitable donations.
Operating income
Other operating income in 2021 predominantly relates to the settlement of a legal claim
against a third party.
Operating expenses
Goodwill associated with the IT-IS International Ltd acquisition was impaired in 2022 and 2021
due to reduced future expected cash flow generation.
DHSC contract dispute costs relate to legal and professional fees and product storage costs
incurred in the ongoing commercial dispute.
Restructuring expenses have increased in 2022 driven by the Group restructuring programme.
Acquisition related expenses primarily include costs associated with potential merger and
acquisition targets.
13. FINANCIAL INCOME AND EXPENSE
Amounts in £’000
Financial foreign exchange gains
Discount of financial instruments
Interest received from discontinued operations
Other financial income
Total financial income
Interest on IFRS 16 liabilities
Financial foreign exchange losses
Discount of financial instruments
Interest paid to discontinued operations
Other financial expense
Total financial expense
Year ended
31 December
2022
Year ended
31 December
2021
2,506
3
779
681
3,969
-45
-139
-31
-413
-1
-629
337
33
363
54
787
-66
-2,214
-54
-150
-47
-2,531
Financial foreign exchange gains and losses are driven by revaluations of the LTIP liability and
bank and intercompany accounts held in foreign currencies.
Interest received from or paid to discontinued operations relates to interest on intercompany
balances with Microgen Bioproducts Ltd and Lab21 Healthcare Ltd.
Other financial income relates to interest received on cash balances.
14. INCOME TAX
The standard rate of corporation tax applied to reported profit is 19%, which is the tax rate
applicable to the companies in the United Kingdom for the financial year 2022 (due to rise to
25% on 1 April 2023). It was 19% for the year 2021.
Taxation for other jurisdictions (mainly France) is calculated at the rates prevailing in the
respective jurisdictions.
The Group’s tax charge is the sum of the total current and deferred tax.
Amounts in £’000
Current tax expense
Current year (expense) / income
Deferred tax expense
Deferred tax expense
Total taxation expense in the income statement
Year ended
31 December
2022
Year ended
31 December
2021
-224
411
-1,924
-2,148
-760
-349
The expense for the period can be reconciled to the loss before tax as follows:
Amounts in £’000
Loss before taxation
Tax at the UK corporation tax rate (2022 and 2021: 19%)
Year ended
31 December
2022
Year ended
31 December
2021
-20,053
3,810
-5,660
1,075
Effect of different tax rates of subsidiaries operating in other jurisdictions
Change of the tax rate for the calculation of the deferred tax
Effect of non-deductible expenses and non-taxable income
Derecognition of deferred tax assets
Change in unrecognised deferred tax assets
Other adjustments
Total taxation expense for the year
95
3,571
-1,224
-8,047
-287
-66
-2,148
115
-
-822
-
-712
-5
-349
At 31 December 2022, the Group has unused tax losses of £70,909,000 (2021: £9,432,000)
available for offset against future relevant profits and their period of use is unlimited.
The key item making up the non-deductible expenses in 2022 and 2021 is the impairment of
goodwill.
Matters affecting the tax charge
On 30 March 2022 Novacyt (specifically Primer Design Ltd) received confirmation that the UK
Intellectual Property Office had granted the key patent (ORF1a/b), with patent number
GB2593010. This means that the effective rate of tax on profits (adjusted for certain rules)
derived from the sale of products incorporating this patent is close to 10% rather than the
current UK corporation tax rate of 19%.
The effective tax rate is given via a tax deduction and due to the uncertainty over the precise
timing of the tax relief available to the Company and the complexity involved in making a
claim for the first time, a tax asset has not been recognised. The asset will only be recognised
when Management can reliably measure and predict the outcome of a Patent Box claim in
terms of value and timing.
15. LOSS PER SHARE
16. GOODWILL
The loss per share is calculated based on the weighted average number of shares outstanding
during the period. The diluted loss per share is calculated based on the weighted average
number of shares outstanding and the number of shares issuable as a result of the conversion
of dilutive financial instruments. At 31 December 2022 there are no outstanding dilutive
instruments.
Amounts in £’000
Net loss attributable to owners of the Company
Impact of dilutive instruments
Net diluted loss attributable to owners of the Company
Weighted average number of shares
Impact of dilutive instruments
Weighted average number of diluted shares
Loss per share (£)
Diluted loss per share (£)
Loss per share from continuing operations (£)
Diluted loss per share from continuing operations (£)
Loss per share from discontinued operations (£)
Diluted loss per share from discontinued operations (£)
Year ended
31 December
2022
Year ended
31 December
2021
-25,730
-
-25,730
-9,728
-
-9,728
70,626,248
-
70,626,248
70,626,248
-
70,626,248
-0.36
-0.36
-0.31
-0.31
-0.05
-0.05
-0.14
-0.14
-0.09
-0.09
-0.05
-0.05
Goodwill is the difference recognised, upon consolidation of a company, between the fair
value of the purchase price of its shares and the net assets acquired and liabilities assumed,
measured in accordance with IFRS 3.
Cost
At 1 January 2021
Exchange differences
At 31 December 2021
Exchange differences
At 31 December 2022
Accumulated impairment losses
At 1 January 2021
Impairment of the IT-IS International goodwill
Impairment of the Lab21 Products goodwill
Exchange differences
At 31 December 2021
Impairment of the IT-IS International goodwill
Exchange differences
At 31 December 2022
Carrying value at 31 December 2020
Carrying value at 31 December 2021
Carrying value at 31 December 2022
Primer Design
£’000
31,982
-1,624
30,358
1,144
31,502
14,105
4,019
1,822
-1,059
18,887
5,156
813
24,856
17,877
11,471
6,646
The impairment testing of the CGU as at 31 December 2022 was carried out using the DCF
method, with the key assumptions as follows:
o Five-year business plan;
o Extrapolation of cash flows beyond five years based on a growth rate of 1.5%; and
o Discount rate corresponding to the expected rate of return on the market for a
similar investment, regardless of funding sources, equal to 12.1%.
The implementation of this approach demonstrated that the value in use amounted to
£36,112,000, which is greater than the carrying amount of this asset. As such, no impairment
was recognised in the year ended 31 December 2022.
Sensitivity of the value derived from the discounted cash flow model to changes to the
assumptions used for the Primer Design acquisition
Sensitivity of the value derived from the discounted cash flow model to changes to the
assumptions used for the IT-IS International acquisition
36,112
8.0%
9.0%
10.0%
11.0%
12.0%
12.1%
13.0%
14.0%
15.0%
s
e
t
a
r
C
C
A
W
Terminal growth rates
1.0%
0.0%
2.5%
2.0%
0.5%
3.0%
1.5%
53,908 57,323 61,226 65,729 70,983 77,192 84,643
46,640 49,233 52,151 55,457 59,236 63,597 68,684
40,857 42,880 45,127 47,639 50,465 53,667 57,327
36,153 37,765 39,538 41,498 43,675 46,109 48,846
32,258 33,565 34,991 36,553 38,272 40,171 42,281
31,905 33,186 34,583 36,112 37,792 39,646 41,705
28,983 30,059 31,225 32,493 33,875 35,389 37,055
26,196 27,093 28,059 29,103 30,233 31,462 32,802
23,797 24,553 25,363 26,233 27,171 28,183 29,279
1,992
8.0%
9.0%
10.0%
11.0%
12.0%
12.1%
13.0%
14.0%
15.0%
0.0%
3,281
2,749
2,327
1,986
1,704
1,679
1,468
1,269
1,098
1.0%
3,826
3,160
2,645
2,238
1,908
1,878
1,635
1,407
1,214
s
e
t
a
r
C
C
A
W
Terminal growth rates
1.25%
3,988
3,279
2,736
2,309
1,964
1,934
1,681
1,446
1,246
1.5%
4,162
3,406
2,833
2,384
2,024
1,992
1,730
1,485
1,279
1.75%
4,350
3,542
2,935
2,463
2,086
2,053
1,780
1,526
1,314
2.0%
4,553
3,687
3,043
2,546
2,152
2,117
1,833
1,569
1,349
3.0%
5,571
4,391
3,554
2,931
2,451
2,408
2,070
1,761
1,506
This sensitivity table shows the difference in the recoverable amounts of the Enterprise Value
depending on changes in the discount rate (WACC) and the terminal growth rate. The
sensitivity analysis shows that an increase of 1% in the WACC would not result in the need to
impair the Primer Design goodwill.
IT-IS International
The impairment testing of the CGU as at 31 December 2022 was carried out using the DCF
method, with the key assumptions as follows:
o Five-year business plan;
o Extrapolation of cash flows beyond five years based on a growth rate of 1.5%; and
o Discount rate corresponding to the expected rate of return on the market for a
similar investment, regardless of funding sources, equal to 12.1%.
The implementation of this approach demonstrated that the value in use amounted to
£1,992,000, which is lower than the carrying amount of this asset. As such an impairment
charge has been recognised in the year ended 31 December 2022 due to reduced future
expected revenue generation.
This sensitivity table shows the difference in the recoverable amounts of the Enterprise Value
depending on changes in the discount rate (WACC) and the terminal growth rate. The
sensitivity analysis shows that an increase of 1% in the WACC would result in the need to
further impair the IT-IS International goodwill.
17. OTHER INTANGIBLE ASSETS
18. PROPERTY, PLANT AND EQUIPMENT
Amounts in £’000
Cost
At 1 January 2021
Acquisitions
Other disposals
Foreign exchange impact
At 31 December 2021
Acquisitions
Other disposals
Foreign exchange impact
At 31 December 2022
Amortisation
At 1 January 2021
Amortisation for the year
Other disposals
Foreign exchange impact
At 31 December 2021
Amortisation for the year
Other disposals
Foreign exchange impact
At 31 December 2022
Net book value
At 1 January 2021
At 31 December 2021
At 31 December 2022
Customer
relationships Trademarks
Development
costs
Patents
Other
Total
5,005
–
-313
-240
4,452
–
–
169
4,621
-2,055
-502
313
131
-2,113
-501
–
-119
-2,733
2,950
2,339
1,888
1,486
–
-47
-43
1,396
–
–
31
1,427
-372
-157
47
24
-458
-156
–
-22
-636
1,114
938
791
277
–
–
–
277
–
-80
–
197
-153
-55
–
–
-208
-46
80
–
-174
124
69
23
89
300
-5
–
384
74
-149
–
309
-54
-3
–
–
-57
-21
4
–
-74
35
327
235
260
30
-59
-4
227
188
-65
1
351
-228
-21
55
4
-190
-41
65
-1
-167
32
37
184
7,117
330
-424
-287
6,736
262
-294
201
6,905
-2,862
-738
415
159
-3,026
-765
149
-142
-3,784
4,255
3,710
3,121
Amounts in £’000
Cost
At 1 January 2021
Acquisitions
Other disposals
Reclassifications
At 31 December 2021
Acquisitions
Other disposals
At 31 December 2022
Depreciation
At 1 January 2021
Depreciation for the year
Other disposals
Reclassifications
At 31 December 2021
Depreciation for the year
Other disposals
At 31 December 2022
Net book value
At 1 January 2021
At 31 December 2021
At 31 December 2022
Leasehold
improvements
Plant and
machinery
Fixtures and
fittings
877
375
-85
127
1,294
31
-575
750
-421
-135
81
-9
-484
-531
575
-440
456
810
310
1,793
3,104
-270
–
4,627
93
-811
3,909
-971
-518
270
–
-1,219
-866
454
-1,631
822
3,408
2,278
762
291
-65
-127
861
32
-380
513
-397
-159
62
9
-485
-202
337
-350
365
376
163
Total
3,432
3,770
-420
–
6,782
156
-1,766
5,172
-1,789
-812
413
–
-2,188
-1,599
1,366
-2,421
1,643
4,594
2,751
Other disposals in 2022 include over £1,200,000 of property, plant and equipment associated
with the Camberley site that was vacated in late 2022, due to the closure of Lab21 Products,
and over £390,000 of laboratory equipment no longer of use to the Novacyt Group.
19. RIGHT-OF-USE ASSETS
20. DEFERRED TAX ASSETS AND LIABILITIES
Amounts in £’000
Cost
At 1 January 2021
Additions
Disposals
Policy adjustment
At 31 December 2021
Additions
Disposals
Reclassifications
At 31 December 2022
Depreciation
At 1 January 2021
Depreciation for the year
Disposals
Policy adjustment
At 31 December 2021
Depreciation for the year
Disposals
Reclassifications
At 31 December 2022
Net book value
At 1 January 2021
At 31 December 2021
At 31 December 2022
Land and
buildings
Plant and
machinery
2,745
148
-225
-3
2,665
153
-1,359
10
1,469
-507
-443
67
-2
-885
-1,415
1,359
-10
-951
2,238
1,780
518
54
–
-15
–
39
8
-29
–
18
-33
-10
12
–
-31
-13
29
–
-15
21
8
3
Total
2,799
148
-240
-3
2,704
161
-1,388
10
1,487
-540
-453
79
-2
-916
-1,428
1,388
-10
-966
2,259
1,788
521
The large 2022 reduction is due to Microgen Bioproducts negotiating the surrender of its
Watchmoor Point leased facility based in Camberley. This was agreed in 2022 and settled in
early 2023.
The table below shows the movements in deferred tax assets and liabilities during the
reporting period:
Amounts in £’000
Accelerated
capital
allowances
Intangible
assets
Intra-Group
profit
Long-term
incentive
plan
Other
temporary
differences
Tax losses
Total
At 1 January 2021
-238
-489
897
2,125
Credit / (charge) to
“Discontinued operations”
(Charge) / credit to income
statement
At 31 December 2021
(Charge) / credit to
“Discontinued operations”
(Charge) / credit to income
statement
-30
-512
-780
68
66
-
47
-442
-
47
-
487
170
657
-73
2,222
-
457
104
31
-760
1,919
-
-569
328
-
-
2,125
-
-
-480
-
-412
-328
-2,125
447
624
-31
-1,924
-
-417
At 31 December 2022
-646
-395
-
-
At 31 December 2022, deferred tax liabilities amounting to £646,000 (2021: £780,000) reflect
the tax advantage from investments in fixed assets that is obtained in advance of depreciation
charges.
At 31 December 2022, deferred tax liabilities amounting to £395,000 (2021: £442,000) result
from the recognition of brand and customer relationships intangible assets as part of the
October 2020 IT-IS International acquisition.
Primer Design has recognised a £624,000 deferred tax asset relating to carried forward tax
losses to offset its £624,000 deferred tax liability on accelerated capital allowances, leaving
Primer Design with a £nil deferred tax balance at the reporting date. The remaining deferred
tax assets have not been recognised at 31 December 2022 on the basis that they may not be
recoverable in the near-term.
The £2,125,000 deferred tax asset balance at 31 December 2021 related to the portion of the
Long-Term Incentive Plan charge that was recognised by Novacyt UK Holdings in 2020, but
was not deducted for taxation until payments were made in 2022.
Deferred tax assets and liabilities are recognised on the statement of financial position as
follows:
22. TRADE AND OTHER RECEIVABLES
Amounts in £’000
Deferred tax assets
Deferred tax liabilities
Net deferred tax (liabilities) / assets
Year ended
31 December
2022
Year ended
31 December
2021
624
-1,041
-417
3,141
-1,222
1,919
The following table shows the deferred tax assets not presented in the statement of financial
position:
Amounts in £’000
Novacyt SA
Novacyt UK Holdings
Lab21 Healthcare
IT-IS International
Primer Design
Total unrecognised deferred tax assets
21. INVENTORIES AND WORK IN PROGRESS
Amounts in £’000
Raw materials
Work in progress
Finished goods
Stock provisions
Total inventories and work in progress
Year ended
31 December
2022
Year ended
31 December
2021
2,299
3,645
-
725
10,623
17,293
990
-
1,368
-
-
2,358
Year ended
31 December
2022
Year ended
31 December
2021
8,562
2,854
3,404
-11,793
19,382
3,350
7,831
-19,102
3,027
11,461
Total inventories and work in progress has reduced significantly since December 2021,
predominantly as a result of providing for, writing off and disposing of stock that had either
expired or is deemed excess stock as a result of lower future forecasted COVID-19 sales.
Stock provisions have fallen as a result of provided for stock being written off and disposed
of during 2022.
Amounts in £’000
Trade and other receivables
Expected credit loss provision
Tax receivables – Value Added Tax
Receivables on sale of businesses
Other receivables
Year ended
31 December
2022
Year ended
31 December
2021
25,485
-214
8,312
69
10
30,279
-89
8,213
66
30
Total trade and other receivables
33,662
38,499
Trade receivables have decreased since 31 December 2021 in line with falling monthly sales.
The trade receivables balance includes a £23,957,000 unpaid DHSC invoice raised in
December 2020, in respect of products delivered during 2020, that remains unpaid at the date
of publishing the annual accounts. Recovery of the invoice is dependent on the outcome of
the contract dispute.
During 2021, £49,034,000 (including VAT) of products and services were delivered and
invoiced to the DHSC which has now been included as part of the ongoing dispute. As these
sales have not been recognised in accordance with IFRS 15, the revenue, trade receivable and
VAT element of the transactions have been reversed. This accounting treatment does not
change the Group’s legal position or rights in relation to the dispute with the DHSC.
The ‘Tax receivables – Value Added Tax’ balance of £8,312,000 mainly relates to VAT paid in
the UK on sales invoices in dispute with the DHSC. As these sales have not been recognised in
accordance with IFRS 15, the revenue, trade receivable and VAT element of the transactions
have been reversed, resulting in a VAT debtor balance.
Trade receivables balances are due within one year. Once an invoice is more than 90 days
overdue, it is deemed more likely to default and as such, these invoices have been provided
for in full as part of an expected credit loss model, except where Management have reviewed
and judged otherwise.
The movement in the expected credit loss provision is shown below:
24. CASH AND CASH EQUIVALENTS
Amounts in £’000
Balance at the beginning of the period
Impairment losses recognised
Amounts written off during the year as uncollectible
Impairment losses derecognised
Amounts recovered during the year
Balance at the end of the period
Year ended
31 December
2022
Year ended
31 December
2021
89
453
-14
-157
-157
214
160
100
-44
-
-127
89
The split by maturity of the clients’ receivables is presented below:
Amounts in £’000
Less than one month
Between one and three months
Between three months and one year
More than one year
Year ended
31 December
2022
Year ended
31 December
2021
970
143
121
24,251
5,818
217
24,200
44
Balance at the end of the period
25,485
30,279
23. PREPAYMENTS AND SHORT-TERM DEPOSITS
Amounts in £’000
Liquidity contract
Short-term deposits
Prepaid expenses
Total prepayments and short-term deposits
Year ended
31 December
2022
Year ended
31 December
2021
51
183
2,184
2,418
61
12
1,961
2,034
Prepaid expenses include the annual Group commercial insurance, rent, rates and prepaid
support costs. In addition, 2022 prepaid expenses includes prepaid stock that had not been
delivered at the reporting date.
The net cash available to the Group includes the following items:
Amounts in £’000
Available cash
Year ended
31 December
2022
Year ended
31 December
2021
86,973
101,746
Total cash and cash equivalents
86,973
101,746
Cash and cash equivalents comprise bank and cash balances, call deposits and short-term
notice accounts with original maturities of three months or less, with a number of them
earning interest.
The carrying amount of cash and cash equivalents approximates fair value.
25. LEASE LIABILITIES
The following tables show lease liabilities carried at amortised cost.
o Maturities
Amounts in £’000
Lease liabilities short-term
Lease liabilities long-term
Total lease liabilities
Year ended
31 December
2022
Year ended
31 December
2021
609
263
872
424
1,446
1,870
Closing
1,870
872
o
Change in lease liabilities in 2022 and 2021
Amounts in £’000
Changes in 2021
Changes in 2022
Opening
Repayment
Non-cash
movements
2,378
1,870
-610
-503
102
-495
The reduction in the total lease liability balance is predominantly as a result of Microgen
Bioproducts negotiating the surrender of its Watchmoor Point leased facility based in
Camberley, which was agreed in 2022 and settled in early 2023.
26. RECONCILIATION OF THE MOVEMENTS OF THE BORROWINGS AND LEASE
29. PROVISIONS
LIABILITIES WITH THE STATEMENT OF CASH-FLOWS
Repayment of borrowings and lease liabilities in 2022
Note 25 – Lease liabilities
Change in lease liabilities in 2022: repayment
Total repayments in 2022 as per note 25
Statement of cash flows for the year 2022
Cash used in financing activities: repayment of lease liabilities
Total repayments as per the statement of cash flows
Repayment of borrowings and lease liabilities in 2021
Note 25 – Lease liabilities
Change in lease liabilities in 2021: repayment
Total repayments in 2021 as per note 25
Statement of cash flows for the year 2021
Cash used in financing activities: repayment of lease liabilities
Total repayments as per the statement of cash flows
£’000
-503
-503
-503
-503
£’000
-610
-610
-610
-610
27. CONTINGENT CONSIDERATION
Amounts in £’000
Contingent consideration short-term
Total contingent consideration
Year ended
31 December
2022
Year ended
31 December
2021
-
-
836
836
The final tranche of the contingent consideration relating to the acquisition of IT-IS
International was settled during 2022. No further liabilities exist at 31 December 2022.
28. TAX RECEIVABLES
The main items making up the 2022 tax receivable balance of £1,149,000 relates to research
and development expenditure credits and carried back corporation tax losses.
The main item that made up the corporation tax receivable balance at 31 December 2021
related to an overpayment of 2020 corporation tax totalling approximately £4,225,000, which
HMRC repaid in March 2022.
The table below shows the nature of and changes in provisions for risks and charges for the
period from 1 January 2022 to 31 December 2022:
Amounts in £’000
Provisions for restoration of
premises
Provisions long-term
Provisions for restoration of
premises
Provision for litigation
Provisions for product
warranty
At
1 January
2022
-
308
308
–
157
19,799
Provisions short-term
19,956
Increase Reduction
Other
movements
Reclass
At
31 December
2022
–
–
–
–
14
14
–
–
–
–
–
–
95
95
330
157
19,813
117
-330
117
-330
330
–
–
–
–
–
–
330
20,300
The table below shows the nature of and changes in provisions for risks and charges for the
period from 1 January 2021 to 31 December 2021:
Amounts in £’000
At
1 January
2021
-
Increase Reduction
Other
movements
Change in
exchange
rates
At
31 December
2021
Provisions for restoration of
premises
242
117
Provisions long-term
Provision for litigation
Provisions for product
warranty
242
68
19,788
117
157
11
Provisions short-term
19,856
168
-67
-67
-65
–
-65
16
16
–
–
–
–
–
-3
–
-3
308
308
157
19,799
19,956
Provisions chiefly cover:
- Risks related to litigations;
- The restoration expenses of the premises as per the lease agreements; and
- Product assurance warranties.
The provisions for the restoration of the premises are an estimation of amounts payable to
cover dilapidations at the end of the rental periods, thus at the following dates:
- Microgen Bioproducts Ltd: January 2023 (lease surrender date);
- Primer Design Ltd: May 2023 and November 2025 as there are two sites that do not have
-
co-terminus leases;
IT-IS International Ltd: December 2023 and September 2025, as there are two sites that
do not have co-terminus leases.
The provision for product assurance warranties predominantly relates to the notification of a
product warranty claim with the DHSC (see notes 44 and 45). Management have assessed the
DHSC product warranty provision held at 31 December 2021 and have deemed that it is still
appropriate at 31 December 2022.
32. OTHER LIABILITIES LONG-TERM
Amounts in £’000
Year ended
31 December
2022
Year ended
31 December
2021
Share-based payment benefits – LTIP, long-term
Total other liabilities long-term
50
50
-
-
30. TRADE AND OTHER LIABILITIES
The 2022 other liabilities long-term balance relates to the 2022 to 2024 share-based LTIP
scheme.
Amounts in £’000
Trade payables
Accrued invoices
Social security liabilities
Tax liabilities – Value Added Tax
Other liabilities
Year ended
31 December
2022
Year ended
31 December
2021
278
2,035
455
6
13
1,363
3,534
954
115
11,224
Total trade and other liabilities
2,787
17,190
33. SHARE CAPITAL
As of 31 December 2022 and 2021, the Company’s share capital of €4,708,416.54 was divided
into 70,626,248 shares with a par value of 1/15th of a Euro each.
The Company’s share capital consists of one class of share. All outstanding shares have been
subscribed, called and paid.
Amount of
share capital
£’000
Amount of
share capital
€’000
Unit value
per share
€
Number of
shares
issued
Trade payables and accrued invoices have decreased in line with reduced sales.
Balance at 1 January 2021
4,053
4,708
0.07
70,626,248
Other liabilities have fallen as a result of settling all outstanding liabilities in relation to the
2017 to 2020 LTIP scheme during 2022.
Balance at 31 December 2021
4,053
4,708
0.07
70,626,248
Balance at 31 December 2022
4,053
4,708
0.07
70,626,248
31. OTHER CURRENT LIABILITIES
Amounts in £’000
Year ended
31 December
2022
Year ended
31 December
2021
34. SHARE PREMIUM ACCOUNT
Amounts in £’000
Deferred income and advance payments received from customers
540
498
Total other current liabilities
540
498
The balances above predominantly relate to customer payments in advance of receiving the
products.
Balance at 1 January 2021
Balance at 31 December 2021
Balance at 31 December 2022
50,671
50,671
50,671
35. OTHER RESERVES
Amounts in £’000
Balance at 1 January 2021
Translation differences
Balance at 31 December 2021
Translation differences
Balance at 31 December 2022
36. EQUITY RESERVE
Amounts in £’000
Balance at 1 January 2021
Balance at 31 December 2021
Balance at 31 December 2022
This reserve represents the equity component of warrants and loans.
37. RETAINED EARNINGS/LOSSES
Amounts in £’000
Balance at 1 January 2021
Loss for the year
Balance at 31 December 2021
Loss for the year
Adjustment of the LTIP contribution
Balance at 31 December 2022
-2,036
862
-1,174
-843
-2,017
1,155
1,155
1,155
96,916
-9,728
87,188
-25,730
-13
61,445
38. DISCONTINUED OPERATIONS
In early 2022, Novacyt commenced a strategic review of the business, which included a review
of the Microgen Bioproducts and Lab21 Healthcare businesses to consider the merits of
maintaining multiple company entities/names under the Novacyt Group umbrella versus a
simplified business model and brand, which the directors believed could be more impactful.
In April 2022, Novacyt announced its intention to discontinue both businesses, and as at the
end of June 2022 they had ceased day to day trading operations.
In accordance with IFRS 5, the net result of the Lab21 Products segment has been reported in
the line ‘Loss from discontinued operations’ on the consolidated income statement.
The table below presents the detail of the loss generated by these two businesses as of 31
December 2022 and 2021:
Amounts in £’000
Revenue
Cost of sales
Gross profit
Sales, marketing and distribution expenses
Research and development expenses
General and administrative expenses
Operating loss before exceptional items
Other operating expenses
Operating loss after exceptional items
Financial income
Financial expense
Loss before tax
Taxation (expense) / income
Loss after tax from discontinued operations
Year ended
31 December
2022
Year ended
31 December
2021
1,448
-1,102
346
-320
-22
-3,059
-3,055
-290
-3,345
1,181
-953
-3,117
-412
-3,529
3,177
-1,725
1,452
-800
-170
-2,474
-1,992
-1,887
-3,879
192
-482
-4,169
450
-3,719
39. NOTES TO THE CASH FLOW STATEMENT
40. LEASES
Amounts in £’000
Loss for the year
Loss from discontinued operations
Loss from continuing operations
Adjustments for:
Depreciation, amortisation, impairment loss and provisions
Unwinding of discount on contingent consideration
Losses on disposal of assets
Surrendering the Watchmoor Point lease (non-cash impact)
Income tax charge / (credit)
Operating cash flows before movements of working capital
Decrease in inventories (*)
Decrease in receivables
Decrease in payables
Cash (used in) / from operations
Income taxes received / (paid)
Finance costs
Net cash (used in) / from operating activities
Operating cash flows from discontinued operations
Operating cash flows from continuing operations
Year ended
31 December
2022
Year ended
31 December
2021
-25,730
-3,529
-22,201
7,918
133
543
281
1,998
-14,857
8,434
4,625
-15,624
-17,422
4,223
-530
-13,729
-1,955
-11,774
-9,728
-3,719
-6,009
7,882
-17
75
-
-409
-2,197
18,427
42,754
-23,996
34,988
-19,437
138
15,689
2,180
13,509
(*) The variation of the inventories value results from the following movements:
Amounts in £’000
Decrease in the gross value of inventories
Variation of the stock provision
Total variation of the net value of inventories
Year ended
31 December
2022
Year ended
31 December
2021
15,743
-7,309
8,434
2,392
16,035
18,427
The details for the change in the stock provision are covered in notes 7, 8 and 21.
In application of IFRS 16, the Group has recognised on the statement of financial position
some “right-of-use” assets and lease liabilities.
Novacyt SA
Novacyt SA rents a small office in Vélizy, on a rolling 12-month basis.
Primer Design Ltd
The York House leased premises is used for office, storage and laboratory purposes. The
annual charge for the site (with service charges) is now £311,584 per annum, with all leases
running to November 2025.
In November 2020, the company took out a new lease at a nearby site ‘Unit A’, primarily for
storage purposes. The annual charge for the site (with service charges) is now £146,750 per
annum, with the lease running to May 2023.
Microgen Bioproducts Ltd
The Watchmoor Point leased premises had a mixed use for office, storage and laboratory
purposes. This commenced in May 2017 and would have run until May 2032. There were rent
review clauses in May 2022 and 2027. The annual charge for the site was £175,643 per annum
(including service charges). This lease was surrendered in January 2023.
IT-IS International Ltd
Units 1, 3 and 4 Wainstones Court leased premises have a mixed use for office, storage and
production purposes. This commenced in October 2022 and will run until September 2025.
The annual charge for the site is £31,500 per annum (including service charges).
In December 2020, the company took out a new lease at a nearby site ‘MMC House’, for mixed
use of office, storage and production purposes. The lease runs to December 2023 with an
annual charge of £60,000.
In September 2020, the company took out a 12-month lease at a nearby site ‘Pulrose House’
for production purposes. The annual charge for the site was £17,000 per annum. The lease
was not renewed after the initial 12-month period.
The table below presents the impact of the leases in the consolidated income and cash flow
statements of the financial years 2022 and 2021:
Amounts in £’000
Cash outflows for leases accounted for as per IFRS 16
Expenses related to short-term and low-value leases
Total cash outflows for leases
Year ended
31 December
2022
Year ended
31 December
2021
503
530
1,033
610
445
1,055
41. FINANCIAL INSTRUMENTS
Categories of financial instruments
Amounts in £‘000
Financial assets
Cash and cash equivalents
Short term investments and receivables
Financial liabilities
Fair value through profit and loss
Amortised cost
Year ended
31 December
2022
Year ended
31 December
2021
86,973
25,359
101,746
30,439
-
3,710
836
17,991
Financial risk management objectives
The Group’s finance function is responsible for managing the financial risks relating to the
running of the business. These risks include market risk (including currency risk, interest rate
risk and price risk), credit risk and liquidity risk.
If a material risk is identified then the Group would look to mitigate that risk through the
appropriate measure, such as hedging against currency fluctuations.
The Group does not use complex derivative financial instruments to reduce its economic risk
exposures.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency
exchange rates.
There has been no change to the Group’s exposure to market risks or the way these risks are
managed and measured.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as
a going concern whilst maximising the return to shareholders through the optimisation of
debt and equity balances. The Group’s overall strategy is to ensure there is sufficient working
capital to optimise the performance of the business.
The capital structure of the Group consists of net debt (comprising debt less cash and cash
equivalents) and equity of the Group (comprising issued capital, reserves and retained
earnings in notes 33 to 37).
The Group is not subject to any externally imposed capital requirements.
The Group is focused on cash management and this is reviewed on a regular basis by the
Group Finance Director and the Chief Financial Officer. The funding mix of the business is
reviewed and managed regularly by the Chief Financial Officer and the Chief Executive Officer.
Gearing ratio
The gearing ratio at the year end is as follows:
Amounts in £’000
Debt (lease liabilities)
Cash and cash equivalents
Net (cash) / debt
Equity
Net (cash) / debt to equity ratio
Year ended
31 December
2022
Year ended
31 December
2021
872
86,973
-86,101
1,870
101,746
-99,876
115,216
141,815
-75%
-70%
Debt is defined as long-term and short-term borrowings and lease liabilities (excluding
derivatives and financial guarantee contracts) as detailed in notes 25 and 26.
For both years, 2022 and 2021, debt in the table above relates to IFRS 16 lease liabilities.
Equity includes all capital, premiums and reserves of the Group that are managed as capital.
Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for
recognition, the basis of measurement and the bases for recognition of income and expenses)
for each class of financial asset, financial liability and equity instrument are disclosed in
note 3.
Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies; consequently,
exposures to exchange rate fluctuations arise. Exchange rate exposures are not managed
utilising forward foreign exchange contracts.
The carrying amounts of the Group’s foreign currency denominated monetary assets and
monetary liabilities at the reporting date are as follows:
Assets and liabilities denominated
in EUR
Assets and liabilities denominated
in USD
Amounts in £’000
Year ended 31
December 2022
Year ended 31
December 2021
Year ended 31
December 2022
Year ended 31
December 2021
Assets
Liabilities
Net Exposure
17,395
-2,063
15,332
15,028
-1,419
13,609
5,151
-8
5,143
9,100
-39
9,061
Foreign currency sensitivity analysis
The Group is mainly exposed to the Euro and US Dollar currencies.
The following table details the Group’s sensitivity to a 5% increase and decrease in GBP
against the relevant foreign currencies. 5% represents Management’s assessment of the
reasonably possible change in foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their translation at
the period end for a 5% change in foreign currency rates. The sensitivity analysis includes
external loans as well as loans to foreign operations within the Group where the
denomination of the loan is in a currency other than the currency of the lender or the
borrower. A positive number below indicates an increase in profit and other equity.
Amounts in £’000
EUR
Conversion rate
Impact GBP strengthening: FX + 5%
Impact GBP weakening: FX - 5%
USD
Conversion rate
Impact GBP strengthening: FX + 5%
Impact GBP weakening: FX - 5%
Net Assets and Liabilities
Year ended 31
December 2022
Year ended 31
December 2021
15,332
13,609
1.12932
-730
807
1.19107
-648
716
5,143
9,061
1.20582
-245
271
1.34894
-431
477
Amounts in £’000
EUR
Conversion rate
Impact GBP strengthening: FX + 5%
Impact GBP weakening: FX - 5%
USD
Conversion rate
Impact GBP strengthening: FX + 5%
Impact GBP weakening: FX - 5%
Income Statement
Year ended 31
December 2022
Year ended 31
December 2021
1,932
6,854
1.17319
-161
26
1,16307
-169
534
3,020
5,871
1.23697
-216
79
1.37566
-392
185
Interest rate risk management
The Group is debt free and therefore it is not exposed to significant interest rate risk.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Group. The Group has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means
of mitigating the risk of financial loss from defaults. The Group uses publicly available financial
information and its own trading records to rate its major customers’ risk levels. The Group’s
exposure and the credit ratings of its counterparties are continuously monitored and the
aggregate value of transactions concluded is spread amongst approved counterparties.
The Group uses debt collection agencies and government-backed schemes to collect difficult
aged debts as a last resort.
Trade receivables generally consists of a large number of customers, spread across diverse
geographical areas. Ongoing credit evaluation is performed on the financial condition of
accounts receivable and, where appropriate, credit guarantee insurance cover is purchased.
The credit risk on liquid funds is limited because the counterparties are banks with high credit
ratings assigned by international credit-rating agencies.
The carrying amount of the financial assets recorded in the historical financial information,
which is net of impairment losses, represents the Group’s maximum exposure to credit risk
as no collateral or other credit enhancements are held.
Reliance on major customers and concentration risk
In 2022 the Group was not dependent on one particular customer and there were no
customers generating sales accounting for over 10% of revenue.
In 2021 Primer Design’s revenue included approximately £9,702,000 from sales to the Group’s
largest customer. No other customers contributed 10% or more to the Group’s revenue in
2021.
94% of trade receivables are with one counterparty, with whom there is a contract dispute as
disclosed in note 44. Management considers it to be more likely than not that the 31
December 2022 balances are recoverable.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which
has established an appropriate liquidity risk management framework for the management of
the Group’s short, medium and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and
reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and
by matching the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
The following table details the Group’s remaining contractual maturity for its non-derivative
financial liabilities with agreed repayment periods. The table has been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and principal cash flows.
Effective
interest
rate
Less
than 1
month
1–3
months
3 months
to 1 year
%
£’000
£’000
£’000
1–5
years
£’000
–
315
5+ years
£’000
–
–
Total
£’000
–
1,243
–
231
31 December 2022
Variable interest rate
instruments
Fixed interest rate instruments
1.2
31 December 2021
Variable interest rate
instruments
–
634
–
Fixed interest rate instruments
1.2
1,408
–
63
–
91
–
–
11,638
1,086
–
859
–
15,082
The following table details the Group’s expected maturity for its non-derivative financial
assets. The table below has been drawn up based on the undiscounted contractual maturities
of the financial assets including any interest that will be earned on those assets. The inclusion
of information on non-derivative financial assets is necessary to understand the Group’s
liquidity risk management as the liquidity is managed on a net asset and liability basis.
Effective
interest
rate
%
–
0.7
–
0.1
31 December 2022
Non-interest
bearing
Variable interest
rate instruments
31 December 2021
Non-interest
bearing
Variable interest
rate instruments
Less than 1
month
£’000
1–3 months
£’000
3 months
to 1 year
£’000
1–5 years
£’000
Total
£’000
8
1,040
86,973
–
112
–
24,393
–
25,553
86,973
5,737
278
24,296
101,746
–
–
188
–
30,499
101,746
Fair value measurements
The information set out below provides information about how the Group determines fair
values of various financial assets and financial liabilities.
The following table provides an analysis of financial instruments that are measured
subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree
to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in
active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include
inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
Fair value of the Group’s financial assets and financial liabilities that are measured at fair
value on a recurring basis
Some of the Group’s financial assets and financial liabilities are measured at fair value at the
end of each reporting period. The following table gives information about how the fair values
of these financial assets and financial liabilities are determined (in particular, the valuation
technique(s) and inputs used).
Financial assets / financial
liabilities
Fair value as at
Fair value
hierarchy
Valuation technique(s) and key input(s)
Significant
unobservable input(s)
Relationship of unobservable
inputs to fair value
31/12/22
31/12/21
1) Contingent
-
836
2
consideration in
relation to the IT-IS
International
acquisition (current and
non-current portion)
Payment made in September 2021 and
October 2022. Estimated according to
the probability of payment.
Fair value measurements recognised in the statement of financial position
Amounts in £’000
Financial liabilities at FVTPL
Debts from the acquisition of shares
Total liabilities at FVTPL
Amounts in £’000
Financial liabilities at FVTPL
Debts from the acquisition of shares
Total liabilities at FVTPL
Year ended 31 December 2022
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
–
–
836
836
–
–
836
836
There were no transfers between Levels during the current or prior year.
The table above only shows the fair value of the financial liabilities as the fair value of the
applicable financial assets are not materially different from their carrying value.
Fair value of financial liabilities that are not measured at fair value (but fair value disclosures
are required)
There are no financial liabilities in the statement of financial position at 31 December 2022 or
31 December 2021 that are not measured at fair value but for which fair value must be
disclosed.
42. RELATED PARTIES
Parties related to Novacyt SA are:
-
-
the managers, whose compensation is disclosed below; and
the Directors of Novacyt SA.
Remuneration of key management personnel
Amounts in £’000
Fixed compensation and company cars
Variable compensation
Social security contributions
Contributions to supplementary pension plans
Termination benefits
Cash based payment benefits – LTIP
Total remuneration
Aggregate Directors’ remuneration
Fixed compensation and company cars
Variable compensation
Social security contributions
Contributions to supplementary pension plans
Fees
Total remuneration
Year ended
31 December
2022
Year ended
31 December
2021
1,605
15
224
26
-
17
1,887
2,176
590
412
48
371
-
3,597
Year ended
31 December
2022
Year ended
31 December
2021
988
-
155
-
38
897
350
181
11
32
1,181
1,471
Related party transactions were made on terms equivalent to those that prevail in arm’s
length transactions.
Year ended 31 December 2021
Level 1
Level 2
Level 3
Total
Amounts in £’000
43. AUDIT FEES
Amounts in £’000
On 15 June 2022, Novacyt and Primer Design Ltd filed a defence of the claim received on 25
April 2022, and Primer Design Ltd made a counterclaim of circa £81,500,000 including interest
and VAT against the DHSC.
Year ended
31 December
2022
Year ended
31 December
2021
The Group remains committed to defending the case and asserting its contractual rights,
including recovering outstanding sums due from the DHSC.
Management have reviewed the position at 31 December 2022 and deem this to be an
appropriate reflection of the current commercial dispute.
Management and the Board of Directors have reviewed the product warranty provision
totalling £19,753,000 booked in 2020 in relation to the DHSC dispute and have deemed that
it remains appropriate at 31 December 2022.
45. SUBSEQUENT EVENTS
On 30 January 2023, Novacyt announced that the UK High Court had directed Novacyt, that
the hearing of the case between Primer Design Ltd / Novacyt SA and the DHSC has been listed
to commence on 10 June 2024 and is expected to last 16 days.
Fees payable to the Company’s Auditor and its associates in respect of the audit
Group audit of these financial statements
Audit of the Company’s subsidiaries’ financial statements
Total audit remuneration
Fees payable to the Company’s Auditor and its associates in respect of non-audit-
related services
Audit-related assurance services
All other services
Total non-audit-related remuneration
Estimated 2021 audit fees were over accrued, this reversed in 2022.
67
200
267
-
-
-
103
260
363
-
5
5
44. CONTINGENT LIABILITIES
During 2021, the Group received notification of a contract dispute between its subsidiary,
Primer Design Ltd, and the DHSC related to revenue totalling £129,125,000 in respect of
performance obligations satisfied during the financial year to 31 December 2020.
During 2021, a further £49,034,000 (including VAT) of products and services were delivered
and invoiced to the DHSC which have subsequently been included as part of the ongoing
dispute. Management made the judgement that in accordance with IFRS 15, Revenue from
Contracts with Customers, it was not appropriate at that stage in the dispute to recognise as
revenue, any sales invoices raised to the customer in 2021 that were in dispute. However,
Management remains committed to obtaining payment for these goods and services.
Payment for £23,957,000 of invoices in respect of products delivered during 2020 remains
outstanding at the date of publishing the annual accounts and recovery of the debt is
dependent on the outcome of the dispute.
On 25 April 2022, legal proceedings were issued against Novacyt and Primer Design Ltd in
respect of amounts paid to Primer Design Ltd totalling £134,635,000 (including VAT) by the
DHSC. This refers to £132,814,000 (including VAT) of reagent sales out of a total disputed
amount of £154,950,000 (£129,125,000 excluding VAT as previously reported) plus
£1,821,000 (£1,517,000 excluding VAT) of q16 instruments which have been added to the
dispute. This takes the total 2020 revenue in dispute to £130,642,000.
142
Annual Report
and Accounts
Company
Information
143
Company
Information
Directors
Company
Secretary
Registered office
Registered
number
James Wakefield
James McCarthy
Andrew Heath
Juliet Thompson
Jean-Pierre Crinelli
James McCarthy
Novacyt S.A.
13 Avenue Morane Saulnier
78140 Vélizy-Villacoublay
France
491 062 527 (France)
French Auditors
Deloitte & Associés
6 place de la Pyramide
92908 Paris-La Défense Cedex
France
UK Auditors
Alberis Audit
2 rue Colmar
92400 Courbevoie
France
Constantin Limited
Statutory Auditor
25 Hosier Lane
London
EC1A 9LQ
United Kingdom
Company website
www.novacyt.com
Bankers
Nominated
Advisor and
Joint Broker
Joint Broker
French Listing
Sponsor
Legal advisers
to the Company
S. P. Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
United Kingdom
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
United Kingdom
Allegra Finance
213 Boulevard Saint-Germain
75007 Paris
France
English law:
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
United Kingdom
Pitmans LLP
47 Castle Street
Reading
RG1 7SR
United Kingdom
French law:
Stance Avocats
37-39 Avenue de Friedland
Paris 75008
France
Banque Populaire Val de France
Accueil Entreprises Trs
2 Avenue De Milan
37924 Tours Cedex 9
Barclays Bank plc
48a-50 Lord Street
Liverpool
L2 1TD
United Kingdom
National Westminster Bank plc
Southampton University
Southampton Customer Service Centre
Brunswick Gate
23 Brunswick Place
SO15 2AQ
Investec Bank PLC
30 Gresham Street
London
EC2V 7QP
United Kingdom
HSBC
Bonham Strand Commercial
Service Centre
35-45 Bonham Strand
Sheung Wan
Hong Kong
Bank of China
First Floor
No. 50 Tai Nan Road
Pudong
Shanghai
200131w
Headquarters:
Novacyt Group (UK)
York House
School Lane
Chandler’s Ford
Eastleigh
SO53 4DG
T +44 (0) 2380 748830
E investor.relations@novacyt.com
www.novacyt.com
Registered Address:
Novacyt Group (France)
13 Avenue Morane Saulnier
78140 Vélizy-Villacoublay
France
Registered Number:
491 062 527