ANNUAL REPORT AND ACCOUNTS 2021
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ENABLING
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IMPACT HUMAN
HEALTH
INTRODUCTION
YOURGENE IS AN
INTERNATIONAL
MOLECULAR
DIAGNOSTICS
GROUP
We develop and
commercialise genomic
services and technologies.
The Group works in partnership with global leaders
in DNA technology to advance diagnostic science.
Yourgene primarily develops, manufactures and
commercialises simple and accurate molecular
diagnostic solutions, for reproductive health,
precision medicine and now infectious diseases.
CONTENTS
Company Overview
Highlights
Strategic Report
At a Glance
Business Model
Promoting the Success of the Group
Our People and Culture
Our Strategy
Our COVID-19 Response
Strategy in Action
Chairman and CEO Joint Statement
Financial Review
Principal Risks and Uncertainties
02
04
06
07
08
10
12
14
16
20
22
Governance
Board of Directors
Corporate Governance Statement
Directors’ Report
Directors’ Responsibilities Statement
24
26
28
30
Financial Statements
Independent Auditor’s Report
31
Consolidated Statement of Comprehensive Income 36
37
Consolidated Statement of Financial Position
38
Consolidated Statement of Changes in Equity
39
Consolidated Statement of Cash Flows
40
Notes to the Consolidated Financial Statements
68
Company Statement of Financial Position
69
Company Statement of Changes in Equity
70
Company Statement of Cash Flows
71
Notes to the Company Financial Statements
79
Glossary
80
Company Information
Our molecular diagnostics solutions:
Genomic Technologies
Sample preparation and
analysis tools
Yourgene has a rang e of innovative DNA han dling
platforms including the Yourge ne SP150 sample
preparation robot and, powered by Range r ®
Techn ology, the Yourgene Lig htBen ch ® and Yourgene
QS250, ideal for cell-free DNA application s in NI PT
an d oncology in cludin g liquid biopsy. I n ad dition , t he
Company has a growing Bioinformatics & Software
por tfolio of analysis and work flow tools across a
range of applications to f it with our k itted prod uct s
an d reagen ts.
In vitro diagnostic products
The G roup’s flag ship in vitro diagnostic produ cts
includ e n on-invasive prenatal tests (NI PT) for Dow n’s
Syn drome an d other g en etic disorders, Cystic
Fibrosis screening tests, invasive rapid an euploidy
tests an d DPYD g enotyping. Some of our prod ucts
are also available as research tools for n on -reg ulate d
markets where a CE mar k isn’t require d. In respon s e
to the pan demic, the Company deve lope d an d
laun ched Clarig ene ™ SARS-CoV-2, making the move
into the f ield of infectious disease.
SEE PAGE 04 FOR MORE INFORMATION
Yourgene Genomic Services
A global laboratory service networ k equipped to
be a full life-cycle par tner for clin ical, rese arch and
pharmaceutical organ isations to suppor t par tn ers
at the preclinical, clin ical, an d post-mar ket st age s
to develop, man ufacture, obtain reg ulator y approva l
an d commercialise n ew products and ser vices.
In add ition, Yourgene G enomic Ser vices offers an
NIPT and high throughput COVI D testin g se rvice .
SEE PAGE 05 FOR MORE INFORMATION
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
01
Genomic Services
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS HIGHLIGHTS
MARKET
GROWTH
This year has seen an expansion into the Americas with the acquisition of Coastal Genomics in August
2020, expanding our footprint into Canada and growing our US customer base. Our international
commercial and technical support teams have expanded to support our market growth across key
regions. The impact of the pandemic has restricted travel and expanding our teams with local talent has
enabled us to not miss opportunities and still be able to support our customers in key markets.
UK
TAIWAN
YOURGENE GENOMIC SERVICES
• Relaunched our international service business as
Yourgene Genomic Services
AMERICAS
• Acquisition of Coastal Genomics, Canada and two subsequent
supply agreements with US partners for Ranger® Technology
• COVID-19 testing service launched with our
• Strategic appointment of Scott Sargent, VP of Sales North America
Clarigene™ assay
• Partnerships to supply COVID-19 PCR testing services with
Newcastle Premier Health Limited to Leeds Bradford Airport, and
with MyHealthChecked plc to support their consumer partnership
with Boots UK Limited
• Partnership with Cytox to run Alzheimers test for cognitive decline
•
IONA® Care NIPT service launched
• Virtual Advisory Board in US held for DPYD
• Multi-year contract signed with strategic partner for reproductive
health screening
•
IBL appointed as US distributor for reagent supply
ASIA PACIFIC
•
IONA® Nx NIPT Workflow approved for sale in Australia by TGA
• Partnership with Take 2 Health for nasopharyngeal cancer test
• Strategic reproductive health partnership in Japan for Flex™ Analysis
Software
• New distribution channels appointed in Vietnam and Taiwan
EMEA
• Launch of IONA® Nx NIPT Workflow across UK and Europe and
secured existing and new customers through the transition
including St George’s NHS Trust, UK
• Appointed AGBL new distribution channel to support Middle East
and Africa regions
• Clarigene™ SARS-CoV-2 CE IVD product sales to support UK
COVID private testing demands and PHE framework tender wins
• DPYD growth with regional reimbursement in Wales, England,
Belgium, Germany and other regions
02
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
£18.3m
Revenue
10%Revenue growth
Revenues by Geographic market £m
Revenues by Geographic Market £m
OPERATIONAL HIGHLIGHTS
• COVID-19 testing service launched (May 2020)
IONA® Nx NIPT Workflow CE marked (June 2020)
•
• Clarigene™ SARS-CoV-2 assay received CE mark (August 2020)
• £16.15m raised and acquisition of Coastal Genomics
(August 2020)
IONA® Nx NIPT Workflow launched (September 2020)
•
• Launch of Yourgene Genomic Services (September 2020)
• Share Incentive Plan launched to employees (October 2020)
IONA® Nx NIPT awarded contract with an NHS Hospital
(October 2020)
•
• Strategic reproductive health partnership in Japan
(October 2020)
• Partnership for consumer COVID-19 testing (December 2020)
• DPYD kits recommended by NHS England (December 2020)
•
IONA® Twin Study published (February 2021)
• Airport partnership for COVID-19 testing (February 2021)
• Appointment of VP Sales North America (March 2021)
20
15
10
5
0
7.4
5.5
5.4
2021
10.5
4.1
2.0
2020
1.0
1.1
1.0
2017
3.9
1.2
1.0
2018
5.9
1.8
1.2
2019
UK Sales
Europe Sales
International Sales
Yourgen Health plc Key �nancials (£000)
Key Financials £m
20
15
10
5
0
-5
-10
16.6
18.3
10.2
11.4
1.0
1.3
(2.0)
8.9
4.6
6.1
3.2
3.1
1.3
(5.1)
(4.4)
(3.6)
2017
2018
2019
2020
2021
Income
Gross Pro�t
Adj. EBITDA
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
03
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS AT A GLANCE
WHAT WE DO
WHAT WE FOCUS ON
Yourgene Health has a growing
portfolio of innovative genomic
services and technologies to enable
applications like precision medicine
and reproductive health.
We develop and commercialise class-leading services
and technologies by understanding our customers and
market needs. Adapting our technologies and services
to the different regulatory landscapes and in different
regions is critical to enable us to support our growing
international customer footprint.
In addition, understanding different clinical pathways,
differing reimbursement and health coverage policies
and adapting our technologies and services
accordingly is key to our success.
GENOMIC SERVICES
NIPT
COVID-19
OTHER
(CRO core
services etc)
GENOMIC TECHNOLOGIES
NIPT
REPRO-
DUCTIVE
HEALTH
COVID
RELATED
RANGER®
& OTHER
04
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
GENOMIC TECHNOLOGIES
NIPT Workflows: Built for Labs
• The launch of IONA® Nx NIPT Workflow opened up new markets
for the Company with freedom to operate. This year saw the
transition of lab customers in the UK and Europe move to the
IONA® Nx workflow on the Illumina Nextseq NGS platform,
including St George’s NHS Trust laboratory – a great
endorsement and vote of confidence in the assay and
Yourgene. The workflow incorporates the game-changing
Yourgene QS250 for increased sample enrichment (powered by
Ranger® Technology from the acquisition of Coastal Genomics)
• The IONA® test workflow on the Ion Torrent NGS platforms
remains a CE-IVD assay and software and remains a reliable, high
performing NIPT workflow in labs across the Middle East and Asia
• Sage 32plex workflow remains a high throughput NIPT workflow
which also utilises the Yourgene QS250 and gives improved
sequencing efficiencies. This NIPT workflow is deployed in
labs across India, SE Asia and some areas in the Middle East
Reproductive Health
• Cystic Fibrosis Screening – a market-leading PCR range of
tests that has different mutational coverage per country and
is used in many newborn screening programmes across
Europe, the UK, Canada and Australia
• QST*R Rapid Aneuploidy Analysis – a market-leading test for
women that have a high risk NIPT result, this is the
confirmatory diagnostic test carried out after amniocentesi
• QST*R Recurrent Pregnancy Loss – a PCR assay for the routine
diagnosis of the six most common chromosomes associated
with pregnancy loss
Other Technologies
• Ranger® Technology – our sample preparation platforms of
LightBench®, Yourgene QS250 and the Hamilton Microlab®
NIMBUS Select for size selection on and sample enrichment
across applications such as NIPT and liquid biopsy for
oncology
• Elucigene® DPYD assay – our CE marked PCR test to predict a
patient’s response to a chemotherapy treatment called 5FU to
prevent toxic reactions
• Clarigene™ SARS-CoV-2 CE-IVD – our PCR assay used for
routine COVID-19 testing during the pandemic
GENOMIC SERVICES
NIPT services
• Our Manchester lab runs the IONA® test and our newly
CRO services
• Our international laboratories offer a range of core services to
launched IONA® Care with additional clinical coverage of sex
chromosome aneuploidies (SCAs) and autosomal aneuploidies
(AAs) such as Turner Syndrome, Klinefelter Syndrome, XYY
Syndrome and Trisomy X have >99% Sensitivity and
Specificity. The IONA® Care launch consisted of a series of
educational webinars to explain more about these conditions
and how the test works. In addition, the new workflow (IONA®
Nx) has enabled the test to be faster and results can be
reported as quickly as two days. Our customer base
is predominantly NHS and private clinics in the UK and clinics
and labs in Europe.
• Our Taipei laboratory runs the Sage™ Prenatal Screen and also
the IONA® Nx NIPT workflow for clinical customers sending
samples into Taipei from across South East Asia, India
and Japan.
COVID-19 services
• Yourgene is uniquely placed to offer COVID-19 testing as
we developed, manufacture and process the Clarigene™
SARS-CoV-2 test in our own laboratory
• Yourgene Genomic Services based at Citylabs 1.0 in
Manchester, UK provides a high-quality Public Health England
cleared COVID-19 testing service. We are listed on the UK
Government website as a provider for general COVID-19
testing, Test to Release for International Travel and day 2 and
day 8 testing for all international travel arrivals in the United
Kingdom. The services use Yourgene Health’s Clarigene™
SARS-CoV-2 test which is a PCR-based assay to detect
SARS-CoV-2 virus RNA targets to confirm the presence of the
virus. Results are available with a rapid turnaround time from
sample receipt.
•
In addition, we offer a COVID-19 NGS sequencing service for
positive samples following a PCR test on day 2 in line with
government requirements. Yourgene is one of the only private
providers in the UK to offer both the PCR and sequencing tests.
clinical research organisations (CRO) which support
pharmaceutical, biotechnology and academic research
lifecycles. Our core services include:
• Extraction services: a rapid and affordable extraction service
which generates high-quality, high-yield DNA or RNA/miRNA
and nucleons
• Quantification services: we have a range of nuclei acid
quantification methods and associated qualitative analysis
including gel electrophoresis
• Genotyping services: we offer a wide range of options
across different platforms such as PCR, next generation
sequencing, sanger sequencing, fragment analysis
and microarray
• Gene expression services: through a consultative approach,
Yourgene offers a highly regulated process where the
information stored in DNA is used to synthesize and convert
the set of instructions into a functional product e.g. a protein
• Methylation services: our epigenetic analysis using several
platforms such as Illumina EPIC microarray, qPCR-based
assays and NGS
• Microarray services: we offer a range of arrays on different
commercial platforms, these genotyping panels offer
genetic coverage of rare and common variants for
genome-wide disease association studies. We offer
solutions for targeted and genome-wide applications
from SNPs, Indels and copy number variations.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
05
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
BUSINESS MODEL
Our strategic drivers that will enable
us to reach our annual and long-term
goals are focused around growth
and adding value.
HOW WE GENERATE GROWTH
Set and exceed
high profit &
performance targets
Be an employer
of choice to attract &
retain talent
Create
innovative, agile &
dynamic partnerships
Invest
in facilities & technology
growth
& value
Develop
best-in-class genomic
services & technologies
to excite & delight
customers
Construct
scalable, quality assured,
lean, business processes
Drive
revenue in new &
existing markets and
geographies
06
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
PROMOTING THE SUCCESS OF THE GROUP
(Companies Act s172 statement)
The Directors understand and respect their obligations under the Companies Act 2006 to act in good
faith to promote the success of the Group for all its stakeholders, having regard to the long-term
consequences of decisions, the interests of the Group’s employees and other stakeholders, and the
impact of the Group on its neighbouring communities and the wider environment. Our Corporate
Governance Statement in this report describes our approach to managing our relationships with
investors and regulators, and the boxes on this page describe how we engage with key stakeholders
and our developing approach to environmental, social and governance matters where we aspire to make
a positive impact in each of these domains.
STAKEHOLDER ENGAGEMENT
Employees
We value our employees and recognise that
their contribution and active engagement is
key to the Group achieving its near and
long-term objectives. We want our diverse
teams to feel safe, valued, recognised and
that their opinions matter. We want to be a
great place to work, which will enable us to
attract, retain and develop great talent,
investing both in their future growth and
that of the company. We operate a number
of initiatives aimed at achieving the above
as described on pages 08-09 in this report.
Shareholders
We want all our shareholders to feel excited
by the future opportunities of the Group and
we want to add long term value to our
shareholders through delivery of our strategic
growth journey. We aim to communicate our
news and updates in a transparent, open
manner with all our shareholders and we aim
to uphold appropriately high standards of
corporate governance through the QCA code
as described in the Corporate Governance
Statement in this report.
Customers
We put our customers at the heart of
everything we do. We want our technologies
and services to meet the highest applicable
regulatory standards, for their performance
to meet our customers’ demanding needs
and those of their patients, and for our
customer service and technical support to be
best in class. We have a broad segmentation
of different customers covering many
different geographical regions and health
policy authorities and we aim to develop and
deliver valued added genomic services and
technologies to meet their needs.
Suppliers
We value our suppliers and have strong
relationships with them that enable us to
maintain key component delivery and supply
for our manufacturing and service
operations. We perform supplier audits and
regularly review their performance, as we
recognise that engaging with our supply
chain in a collaborative way is a critical factor
that is embedded in our quality management
system and business philosophy.
Partners
In addition to the above stakeholders we
also engage closely with key collaboration
partners for the furtherance of clinical and
commercial endeavours over many years.
These partners can include individual
scientific collaborators, organisational
research partnerships, key opinion leaders,
distributors, agents and consultants. We
work closely with these partners to develop
an impactful, clear, open and honest
relationship that focuses on mutually
beneficial goals with joint governance and
key risks and milestones monitored to give
accountability and ensure programmes are
on track.
RESPONSIBLE BUSINESS
We are committed to evolving our responsible business agenda and we
recognise that good environmental, social and governance disciplines
(ESG) will enable us to deliver a strong business to help us reach our goals.
Environmental
During the pandemic we have dramatically
reduced our travel and the impact that this
can have on our environment and we have
made better use of digital media to reach
our customers; we plan to drive this
forward. Our digital transformation has
reduced print and energy usage.
Our labs are looking into ways to be
more environmentally friendly especially
with plastic consumables.
Social
Our Social Huddle has a strong voice in the
culture of Yourgene and represents all our
employees across the globe. The Huddle
has many initiatives across the year which
aim to support local charities and the
community in which we work. All of our
genomic services and technologies have
our mission at the heart of what they do,
having a positive impact on human health,
which fits at the centre of our social agenda.
Governance
We believe that good corporate governance
is vital in supporting our Company’s growth
strategy and in turn its long-term success.
We have many governance initiatives
underway that starts with our Board and
gets implemented throughout the business
by all employees. We have a compliance
focus within our Quality Assurance function
that ensures all our products, services and
processes meet all relevant regulatory
standards and foster a culture of quality
excellence across the Group.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
07
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR PEOPLE AND CULTURE
ENABLING TALENT
TO SHINE
At Yourgene we have a very open, engaged,
international, sociable culture that we nurture
through our different regional teams. During
the pandemic, it has been even more vital to
keep our culture alive despite the challenges
of off-site and hybrid working patterns and
the inability to travel globally.
Here are just a few programmes that the Company
has put into place to keep culture and employee
engagement thriving:
LEARNERBLY
Yourgene greatly values the training and development of our employees and
all staff are allocated a budget each year to access a wealth of resources
through an online platform called Learnerbly. Every employee can set their
own personal learning goals and utilise the resources available on Learnerbly
to control their own learning and development. Learnerbly provides access to
curated learning resources and has over 200 learning partners. Resources are
available in the form of books, articles, videos, podcasts and training courses
to ensure everyone can access learning in a way that suits them.
YOURGENE SOCIAL HUDDLE
Volunteers across the Group have organised online/virtual team activities
to keep us all connected during the pandemic. Our virtual charity team runs
‘Manchester to Taipei’, Big Friday Night Virtual Quiz, online yoga classes,
book clubs, Great British Bake Off, online calligraphy classes amongst
other activities.
08
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
SHARE INCENTIVE PLAN (SIP)
Eligible UK members of staff are able to contribute to an HMRC
approved Share Incentive Plan (SIP). Employees have been offered the
opportunity to purchase Partnership Shares on a monthly basis up to
HMRC limits, currently up to £1,800 per person per year, and the
Company will match-fund these purchases on a 1:1 ratio. This enables
all our eligible employees to be invested in the Company’s future
success as shareholders.
VIRTUAL RESILIENCE BOOTCAMP
During lockdown, the Company ran an online virtual “Resilience
Bootcamp” with a series of weekly topics and guest speakers to
motivate, inspire and harness resilience through wellbeing.
WORKSMART
A global initiative across the business to provide additional training,
tips and guidance on working more effectively. This cross-functional
team has introduced an online collaboration tool for projects with daily
workSMART training tips provided through the intranet Your Source
with the aim of improving work-life balance by enabling teams to be
more effective and productive.
workSMART
OUR VALUES
Our values embody how we work as a business with our stakeholders and
how our employees should work collectively together. Having clear
Company values ensures that all our employees are working towards the
same goals. Our core values support the Company’s mission and shape its
culture, and they enable us to define our relationships with our customers,
partners and shareholders.
This year we reviewed and revised our values, to ensure that they fitted
with the current business, which has gone through a lot of transformation
over the last few years. The Company ran a series of focus groups with our
diverse international employees to gain feedback and insight around our
values and these are our new refreshed values which are making an impact
across the business.
Collaboration:
At Yourgene it’s critical that we all work together
effectively, across regions and cross-functionally, to
achieve our objectives and key results. Each team
member has key strengths and working in collaboration
will enable us to utilise them. Key to our collaborations is
our communication: listening, cascading and information
sharing. We have introduced collaboration training, tools,
and methodologies to empower our teams to
collaborate internally and externally to achieve our goals
and deliver for our partners.
Integrity:
A core value that embodies how we interact with each
other and with our customers and other stakeholders;
with trust, transparency and honesty. Acting with
integrity means that we ensure that our products and
services are of the highest quality and compliant to the
relevant standards. Our product and service portfolio
upholds our responsible and ethical testing practices that
are aligned to our Company mission to make a positive
impact on human health.
Commitment:
We want our teams to believe in what we do and be
committed to working collaboratively to reach our goals.
Yourgene is committed to delivering best-in-class
products to our customers, giving exceptional customer
service and technical support. Commitment is shown
through our passion, discipline, strong work ethic and
a desire to make a positive impact.
Innovation:
At Yourgene, innovation is key to our continued growth
and relevance in a growing, changing market. We listen to
our customers, we respond and adapt, and we aim to
continuously improve through innovation. We are always
striving to deliver the best products, services and
technologies to excite and delight our customers.
Recognition:
At Yourgene we recognise our employees’ hard work,
commitment and loyalty, and teams are inspired to
deliver above and beyond. Having a strong employee
recognition programme enables teams to be motivated,
inspired, encourages high performance, enables the
Company to retain and attract key talent and increases
employee engagement.
180employees in 9 countries
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
09
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR STRATEGY
We have made sound progress in all four
areas of our strategic growth priorities
this year.
STRATEGIC PRIORITIES
STRATEGIC PRIORITIES
Market Penetration
Sell more in existing channels
Drive worldwide sales of our current product and service
portfolio by targeting further expansion through direct
and key distribution channels.
Geographic Reach
Sell into new territories
Expand directly and through distributors
and partners into new regions.
Product Expansion
New product lines and content
Leverage our technical and regulatory expertise and
partnerships to extend our genetic testing offering.
Support diagnostic majors and bioinformatics specialists
with IVD product contract development partnerships.
Mergers and Acquisitions
Consolidator in the market
We are considering additional selective mergers
and acquisitions in the future to support our
business growth.
It’s a fragmented market with few medium-sized entities
which presents a strong opportunity for consolidation.
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10
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC PRIORITIES
ACHIEVEMENTS
ACHIEVEMENTS
FUTURE PLANS
FUTURE PLANS
• Transitioned IONA® Nx NIPT Workflow to existing and new
customers across UK and Europe.
• Secured all four lots in the UK’s National Microbiology Framework.
• DPYD uptake has increased with the change in clinical pathways
and adoption by Wales, England, Belgium and Germany.
• New distribution partners appointed such as AGBL in Middle East.
• Strengthened the sales and product management
•
teams internationally.
Increased uptake in COVID-19 testing and Clarigene™ kit sales to
other UK testing centres.
• Refocus on digital content marketing initiatives.
•
Improved CRM system to support digital marketing outreach globally.
• Canada base following acquisition of Coastal Genomics.
• Key strategic commercial appointment in US with VP Sales.
• Addition of new distribution channels reaching new markets incl.
Middle East and Africa (AGBL), North America (IBL),
Abalat (Mexico).
• Key supply agreements in US for Ranger® Technology and
reproductive health.
• Contract with Japan for Flex™ Analysis software.
• Growing regulatory framework for portfolio.
•
• New IONA® Nx customers in Singapore and Mexico.
IONA® Nx NIPT Workflow approved for sale in Australia.
• Launch of IONA® Nx NIPT Workflow (CE-IVD).
• Launch of IONA® Care service with expanded clinical menu
including SCAs/ AAs.
• Clarigene™ received CE mark and ongoing variant of
concern surveillance.
• Revitalised Gateway Innovation ideas funnel internally.
• Portfolio roadmaps developed.
• COVID-19 sequencing service added to offering.
• Nasopharnygeal Carcinoma assay collaboration.
• Development of PRS Alzheimers assay with Cytox.
•
Integration of Ex5 Genomics into rebranded Yourgene Genomic
Services division.
• Transition of Ex5 Genomics pharma and CRO customer base
•
to Yourgene.
Integration of Coastal Genomics and Ranger® Technology
available in all global markets.
• First two US supply agreements for Ranger® Technology and
subsequent earnouts.
• Transition of AGX-DPNI French customers to IONA® Nx
NIPT Workflow.
•
Increased co-marketing with key customers to
showcase clinical/technical utility.
• Co-marketing campaigns with distributors to support
local markets.
• Refreshed SEO and display ad campaign strategy.
• Strengthen customer service
excellence programme.
• Grow technical support teams.
• Regulatory approval of IONA® Nx for sale in Canada.
• Further commercial focus in LATAM.
• Technical support team expansion into new regions.
• Finalise other regulatory submissions across
the portfolio.
• New international customers for Genomic Services
for NIPT and CRO core services.
• New product launches around precision medicine.
• Bioinformatics and software updates and
developments across the portfolio.
• DPYD and Cystic Fibrosis adapting mutation coverage
for new markets.
• Development of Ranger® Technology across
different applications.
• Expansion of menu for Genomic Service labs.
• Continue to identify M&A opportunities based on
business growth strategy.
• Position Yourgene as a consolidator in the market.
• Completion of additional master supply agreements for
Ranger® Technology to complete earnouts.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
11
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR COVID-19 RESPONSE
AT THE FOREFRONT
OF THE UK’S COVID-19
TESTING CAPABILITY
Yourgene is uniquely positioned within the UK COVID-19 testing
market as one of the only companies that have both a CE marked
SARS-CoV-2 PCR test and also a COVID-19 testing service. Our
employees are immensely proud of our scientific contribution to
the national COVID testing effort and our adaptability and ability
to respond rapidly throughout the pandemic. The UK private
provider testing market is very reactive to regional and national
lockdowns and different testing schemes developed by the
UK Government.
Yourgene Genomic Services launched in September 2020 and
pulls together our NIPT service, our COVID testing services
and our CRO core services. The company has gone on to grow
this division within the Group with infrastructure investments
in laboratory facilities, automation and instrumentation and
headcount to enable the Group to maximise on opportunities.
£3.2m
Revenues
100,000
COVID-19 tests sold or
performed
12
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Our COVID-19 services and technologies
£1.5m
● COVID-19 services
● COVID-19 technologies
£1.7m
Where we add value:
CLARIGENE™ SARS-COV-2 KIT
(CE-IVD)
In August 2020, the Company launched our
CE marked Clarigene™ PCR test for detecting
SARS-CoV-2, a high accuracy assay with
>99.9% specificity. The test has dual viral
RNA targets: SARS-CoV-2 Envelope (E) gene
and Nucleocapsid (N) gene for a more reliable
result and this prevents cross-reactivity with
other Coronaviruses. The Clarigene™ test is
used within the Yourgene Genomic Services
COVID-19 testing laboratory along with being
sold to a number of COVID testing partners with
their own labs. At Yourgene we have a rigorous
viral surveillance programme to continually
monitor for variants of concern and variants
of interest.
KEY PARTNERSHIPS
The Yourgene COVID-19 testing service
operates on a business to business model
and leverages a focused number of strong
key partnerships that in turn reach directly to
the consumer testing market. Our focus is on
supporting those customers to deliver a fast,
reliable and approved service for their customer
base. This commercial infrastructure plays to
our strengths and enables us to give a dedicated
business partnering offering that is competitive
and allows our clinical partners to be accountable
for providing clinical test results direct to
the public.
SCALABLE AND AUTOMATED
To support the opportunity and derived
demand for COVID testing, we have invested
in our laboratory infrastructure with a refitted
automated workflow at Citylabs in Manchester.
A recruitment drive has enabled the team
expansion and we now run a 24-7 split shift
pattern to maximise our instrumentation to
increase testing capacity. Dedicated testing
software has been developed in-house to
support samples tracking and result
processing direct to our partners.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
13
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS STRATEGY IN ACTION
ACQUISITION OF
COASTAL GENOMICS
In August 2020 Yourgene completed the acquisition
of sample preparation specialists Coastal
Genomics of Vancouver, Canada, and a long-term
technology partner of Yourgene. This was achieved
alongside an equity issuance raising £16.2m from
new institutional and existing investors. The
acquisition gives Yourgene additional intellectual
property assets which are deployed within our NIPT
workflows and is also applicable in other fields such
as oncology and liquid biopsy.
The acquisition gave substantial opportunities to grow the Company’s
blue-chip customer base and industry partners, in particular in the US whilst
increasing its geographical penetration in the US and Canada, supplementing
existing coverage in the UK, Europe, MEA and Asia.
Potential consideration
USD
Associated equity
fundraise GBP
$13.5m
£16.2m
The acquisition supports all of our strategic growth initiatives:
HOW THIS ACQUISITION
SUPPORTS OUR STRATEGY
Market Penetration:
Sell more in existing channels
Geographic Reach:
Sell into new territories
Product Expansion:
New product lines and content
Mergers and Acquisitions:
Consolidator in the market
Market Penetration
The acquisition gives the ability to accelerate the Company’s
diversification into the oncology market and provides access
to the DNA sample preparation market. Yourgene was an
early adopter of this technology which is now core to both
Thermo and Illumina NIPT platforms, offering a valuable
differentiator to our customer base.
Product Expansion
Having access to the Ranger® Technology sample
preparation platforms and reagents has broadened and
supplemented our product portfolio. The technology can be
utilised across a wide range of applications including, but not
limited to, NIPT, oncology, liquid biopsy and quality control
for NGS workflows.
Geographic Reach
This supports our US growth plans and gives an established
technical base in Canada to support North America. Already
the company has completed two master supply agreements
for Ranger® Technology, with US lab partners, growing our
US customer footprint with these strategic partners.
14
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
We believe this is a key
technology platform for
our entry into the US
diagnostics market, the
largest in the world.
Lyn Rees
Chief Executive Officer
Lyn: How have your first 100 days in
the role been?
Scott: I’m really enjoying it, we have achieved
a lot in that time, but so much more to do!
Firstly, we have already grown the team to be
able to support our North American customers
– that has been key – we have recently recruited
a Regional Marketing Manager and a Technical
Support Specialist within the region. The team
and I have been getting to know our customers
and exploring new partnerships and
collaborations to grow the business. Initially,
I won’t have a large regional sales team to cover
the US, so we are investing in a digital marketing
strategy to raise brand awareness and generate
leads through social media, email campaigns,
webinars etc and digital content.
Lyn: Good luck Scott, great to have
you on board and I look forward to
updating shareholders with your
progress on our ambitious growth
plans for the US market.
Scott Sargent joined Yourgene in March 2021 as VP Sales for
North America. He brings with him a wealth of industry
experience along with great connections and networks. Equally
as important, Scott is tenacious and hungry for the role, he is a
great cultural fit with the team and a true self-starter with an
excellent sales track record of growing revenues and forming
strong strategic partnerships with customers.
Q&A with Lyn Rees – CEO and Scott Sargent – VP Sales for North America.
Discussing Yourgene’s expansion plans into the Americas.
Lyn: Scott, what made you want to
come and work for Yourgene?
Scott: I was really excited by the portfolio that
the Company has across products, technology
and software in both reproductive health and
oncology – two of the fastest growing and
largest applications in molecular diagnostics.
The market opportunity to take these into the
US I felt was very compelling, that coupled with
my experience in this sector and a solid
understanding of the clinical lab market, it felt
like a very good synergy.
Lyn: What do you see as the key
product offerings for the US market
that will drive growth in the short to
medium term?
Scott: I see two key drivers, firstly NIPT and
secondly Ranger® Technology. Our NIPT
solutions for US clinical labs include
bioinformatics analysis software, sample prep
technology and reagents. The US NIPT market
has grown rapidly over the last year with the
expansion of healthcare coverage to include
all pregnant women, not just those that are
high-risk.
The Ranger® Technology that came from the
acquisition of Coastal Genomics is really a
game-changer for sample preparation during a
next generation sequencing workflow, with
multiple applications and opportunities.
Lyn: How big is the US NIPT market
opportunity and how does Yourgene
stand out here from the competition?
Scott: Great question Lyn! The US NIPT
market alone is expected to be worth $5 billion
by 2030. There is a growing trend away from
large centralised laboratories performing NIPT,
to smaller regional laboratories and hospitals
performing NIPT in-house. The Yourgene NIPT
solution gives a democratised, flexible, scalable,
efficient and highly accurate bespoke workflow
with on-site local software analysis.
Incorporating the Ranger® Technology, our
secret sauce in our NIPT workflow, it enriches
the sample prior to sequencing to give more
efficient and effective NIPT test results.
Lyn: Back to the Ranger® Technology,
Yourgene has recently announced a
few master supply agreements for
this, what next?
Scott: These agreements are a great
endorsement of the technology and its broad
capabilities, along with the instrument sale,
they bring an ongoing reagent and consumable
revenue. I anticipate we will have many further
agreements like this with key blue-chip
partners, not just in the US but globally.
In addition, we are working to take the
LightBench to oncology organisations,
both commercial or academic groups who
wish to push the boundaries with their
research into liquid biopsy.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
15
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRMAN AND CEO JOINT STATEMENT
WE HAVE MAINTAINED
FOCUS ON OUR
LONG-TERM GOALS AS
WELL AS EFFECTIVELY
NAVIGATING THE
PANDEMIC, AND OUR
FUTURE PROSPECTS ARE
AS STRONG AS EVER
Adam Reynolds
Non-executive Chairman
Lyn Rees
Chief Executive Officer
16
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Significant progress has been achieved despite the reporting
period being aligned with the global COVID-19 pandemic. Despite
the many headwinds this has caused, the business has proved
adaptable and resilient. Our long-term strategy remains focused on
creating shareholder value by improving human health decisions.
We have delivered double digit revenue growth, acquired Coastal
Genomics and its differentiated Ranger® Technology for selecting
DNA fragments by size in sample preparation, and expanded our
service and product capabilities. In addition we have played our
part in the response to COVID-19 through the launch of our own
Clarigene® SARS-CoV-2 assay and a high quality COVID-19 testing
service. In the midst of all this we have also launched our new NIPT
solution and transitioned it into our key European NIPT customers
and commenced its roll-out to new markets in the US and Asia.
Revenue Analysed by Geographical Market
Regional segments
UK
Europe
International
Total
Revenue Analysed by Operating Segments
Genomic Services
NIPT services
COVID-19 services
Other services
Genomic Technologies
NIPT
Reproductive health
COVID-19 related
Other technologies
2021
£m
5.4
5.5
7.4
18.3
2021
£m
1.9
1.7
2.8
6.4
5.9
3.6
1.4
1.0
11.9
18.3
% of
total
30%
30%
40%
100%
% of
total
10%
10%
15%
35%
32%
20%
8%
5%
65%
100%
2020
£m
2.0
4.1
10.5
16.6
2020
£m
2.6
–
2.9
5.5
7.4
3.7
–
–
11.1
16.6
% of
total
12%
25%
63%
100%
% of
total
15%
–
18%
33%
45%
22%
–
–
67%
100%
Growth/
decrease
+174%
+33%
-30%
+10%
Growth/
decrease
-29%
n/a
-4%
+26%
-20%
-1%
n/a
n/a
+2%
+10%
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
17
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
CHAIRMAN AND CEO JOINT STATEMENT CONTINUED
Genomic Services 2021
Genomic Technologies 2021
8%
29%
12%
44%
50%
30%
27%
● NIPT services ● COVID-19 services ● Other services
● NIPT ● Reproductive health ● COVID-19 related ● Other technologies
Genomic Services
In September 2020 we launched Yourgene Genomic Services as a separate
business segment covering our longstanding NIPT testing services in the UK
and Taiwan, our oncology and contract research organisation (CRO) testing
service in Taiwan, as well as new UK-based COVID and CRO-focused testing
services. Delivering clinical and research testing services to consistently high
standards requires considerable focus and the new segment gives our
talented teams the necessary focus to compete effectively in this space.
Operating as our own in-house customer for our Genomic Technologies
offerings also gives the Group a fantastic insight into our customers’ needs.
Throughout the reporting period we have invested in the capabilities of our
new Genomic Services segment with considerable expansion in our UK
Citylabs facility and our new Taipei facility is due to come on-stream in the
second half of calendar 2021. Capacity expansion has at times run ahead of
testing volumes, however, particularly in light of the various UK lockdowns
and international travel constraints which affected Taiwan testing volumes.
The Taiwan challenges have given rise to an impairment on the 2017 goodwill
but we remain very positive about our prospects for the new laboratory and
the wider Asia Pacific region as the pandemic constraints start to normalise.
Overall, despite these challenges the Genomic Services segment delivered
26% revenue growth. Entering the 2021-22 financial year we have a much
expanded capacity, a strong pipeline of opportunities, higher quality
standards and better qualified teams, aligned with our aim of creating a
substantial service business.
NIPT
In June 2020 we were delighted to announce the CE-IVD mark for our
Illumina-based IONA® test, which was then launched as the IONA® Nx NIPT
Workflow. This test runs on the Illumina NextSeq 550Dx Next Generation
Sequencing (“NGS”) instrument, and as well as satisfying our 2018 legal
settlement obligations is a major advancement of our flagship NIPT solution
given that Illumina’s NGS technology accounts for around 75% of the global
NGS market. Since its launch, the IONA® NX workflow has been implemented
in our own Manchester service laboratory and in all our key European
contracts, including at St George’s Hospital in the UK who were successful in
winning a key role in NHS England’s national NIPT implementation strategy.
The various components of our NIPT solution, including the Flex Analysis
software platform, are also already starting to build a presence in our target
markets of the USA and Japan despite delays in contract completion,
installation and validation created by the pandemic. Our addressable market
has expanded significantly as a result of the IONA® NX launch.
NIPT testing was affected by the COVID-19 pandemic, in particular in our
international markets where health tourism slowed significantly and
diagnostic testing resources were diverted to COVID-related activities. As a
result of these challenges, we have prudently booked an impairment on the
goodwill arising from our 2017 share-for-share acquisition of Yourgene
Bioscience in Asia, but we remain confident that this region will bounce back
strongly once the pandemic impacts subside. These international challenges
did eclipse strong growth in our European markets where our NIPT market
position still has exciting growth potential.
Genomic Technologies
The Genomic Technologies business segment encompasses our other
commercial activities including our NIPT range of assays, software and
automation, our PCR range of reproductive health and chemotoxicity tests
and our newly acquired Ranger® size selection technology.
PCR Assays
Our reproductive health range of PCR assays proved more resilient as it is
more focused on the European healthcare markets, but still experienced
some headwinds from the pandemic. Our chemotoxicity DPYD test
however continued to make good traction and is now recommended by
NHS England, NHS Wales and Belgium amongst others, to identify the risk
of severe side effects in patients who might otherwise receive certain
chemotherapy treatments.
18
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Clarigene™ SARS-CoV-2 Test
The launch of our Clarigene™ SARS-CoV-2 test in June 2020, and its
subsequent CE marking in August 2020, was a significant milestone for the
business representing a very rapid new product introduction and also a key
mitigation against the risks COVID-19 posed to our core business. Since its
launch we have focused its usage in our service laboratory and with a select
but growing network of partners. Supply chains have been constrained during
the pandemic and we wanted to ensure we could maintain high standards
of service delivery. The assay has performed consistently well and has
proved reliable in detecting the additional variants that have emerged
since its launch. The test has been approved by various UK Government
accreditations and has secured us a place in the UK’s National Microbiology
Framework for the next two years.
Our testing partners are particularly focused in the travel and, more recently,
retail sectors which has made it very difficult to predict volumes of business
during the UK’s capricious pattern of lockdowns and international travel
restrictions. Clarigene® and related COVID-19 technologies contributed
£1.5m to our revenues in the 2021 reporting period as well as underpinning
the £1.7m of COVID-19 service testing revenues we generated. We entered
the 2022 reporting period with substantial inventories in anticipation of the
vaccine-led reopening we are now seeing.
.
Ranger® Size Selection Technology
In August 2020 we acquired Coastal Genomics Inc based in Vancouver,
Canada. Coastal has developed the strongly differentiated Ranger® sample
preparation technology which enables the targeted size selection of DNA
fragments in NIPT, oncology, infectious disease and other clinical
applications. Prior to the acquisition, the Ranger® Technology had already
been selected as a key element in our IONA® NX NIPT workflow and we were
delighted to bring the Coastal team into the Yourgene Group. Combining our
commercial and operational capabilities with Coastal’s technology and
US-focused sales pipeline will deliver an enhanced penetration of the US
market over time, and offers a complementary technology in our other global
markets. Coastal is an early-stage business requiring additional investment
to realise its sizeable market opportunity and the team has blended in well to
the Yourgene family.
The acquisition was funded through a mixture of cash and equity issued to
the selling shareholders, along with some stretching equity and cash
earn-out milestones designed to align incentives with delivery of the
significant strategic benefits this acquisition offers. It is pleasing to note that
the first two milestone payments of the earn-out have been triggered (one
before the period end and one shortly afterwards) as a result of their strong
momentum. The associated fundraise also generated significant capital for
investment into the wider business, and we thank our shareholders for their
continued support and confidence in our long-term strategy.
The Yourgene Group
Board
The Board during this turbulent reporting period has been resolute, with the
addition of Dr Joanne Mason as Chief Scientific Officer in November 2020.
Jo brings a tremendous pedigree of scientific achievements and was
instrumental in the launch of our Clarigene® PCR assay for testing for
SARS-CoV-2 alongside the completion of the IONA® NX NIPT development
phase and its subsequent launch.
Continued Expansion of People Talent
We have continued to invest in the future growth of our business by acquiring
talented individuals to the organization, strengthening our team and
developing our staff’s expertise. Key hires this year include a further senior
US commercial recruit, with considerable experience to lead our penetration
of that strategically critical market. In response to the restrictions on
international travel we have also invested in more localised commercial
resource with other senior hires in France, Germany and in South-East Asia.
In anticipation of further commercial growth, we have also strengthened
our product management function.
Conscious of the fact that it is our entire team that delivers service and
support to customers, growth in the business and value to shareholders,
we introduced a Share Incentive Plan in the UK to ensure that the interests of
our staff are aligned with those of our shareholders. We hope to extend this
equity participation to colleagues in our other main employment centres
once we have reviewed their respective local tax situations.
Investing in Long-term Capabilities
Throughout the reporting period, we have maintained our focus on our
long-term strategy to deliver shareholder value by creating a substantial
global molecular diagnostics group. This focus, alongside the expenditure in
our Clarigene® SARS-CoV-2 assay and our internal laboratory service
capacity to support the COVID-19 pandemic response, has led to a reversal
of recent EBITDA improvements, but we remain confident that this is a
temporary feature of the Group’s journey in scaling to achieve profitable
growth. Some of these investments manifest as administrative expenses,
but all are focused on creating revenue and supporting value drivers for the
Group in reporting periods to follow. The strategic pillars to our growth
remain unchanged: product penetration, geographic expansion, new
products and synergistic M&A. Key to this growth strategy is our ability to
scale our activities in line with expanding our addressable markets and
commercial execution. We have invested significantly in our business
systems, the transition to the IONA® NX platform, our UK and Taiwan
laboratory service facilities, our US commercial presence and in the Coastal
Genomics acquisition. The benefits of that investment are now being seen
in FY22 where we expect to return to more normalised trading patterns.
Outlook
As we progress into FY22, Yourgene is a much transformed group with a
more substantial global presence and a stronger team in place in North
America which is now winning significant contracts with market-leading
partners based on the enhanced technologies in our portfolio including the
Ranger® Technology acquired through Coastal Genomics. The pandemic
continues to affect many parts of the world, but we are proud of our role in
helping navigate through it and we welcome the reopening of travel and the
global economy. We are very much looking forward to reconnecting in person
with customers, partners and colleagues across the world, and we firmly
believe our investments will better support them and deliver accelerated
growth in the years to come. We are also very appreciative of the support of
our shareholders in the last year and in particular to our hard-working
colleagues who have maintained their entrepreneurial spirit and dedication
to our customers throughout this most challenging of times.
Adam Reynolds
Non-executive Chairman
11 August 2021
Lyn Rees
Chief Executive Officer
11 August 2021
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
19
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
FINANCIAL REVIEW
STRENGTHENED
FINANCIAL POSITION
DESPITE PANDEMIC
TURBULENCE
Income Statement
In the trading year revenues grew 10% to £18.3 million (2020: £16.6 million) with pandemic-related challenges in some of our core markets, especially the
International segment, being offset by the introduction of COVID 19-related products and services, the full year benefit of the March 2020 acquisition of
AGX-DPNI in France and a contribution from the August 2020 acquisition of Coastal Genomics Inc in Canada. Our Genomic Services operating segment
delivered revenue growth of 26% whilst our product-focused segment, Genomic Technologies, held its own with 2% growth. Gross profits grew slightly faster
than revenues by 11% to £11.4m (2020: £10.2m) with gross margins increasing slightly to 62.2% (2020: 61.5%).
General administrative expenses increased to £13.5m (2020: £9.0m). A more detailed breakdown of key administrative expenses is shown in note 6 and
includes expenditure on projects which are expected to generate significant financial improvements which the pandemic deferred into future reporting
periods. The main project expenditures of this nature were £0.4m in cloud-based integrated and scalable business systems, £0.8m in the transition of key
customers to IONA NX based on the Illumina NGS platform (a condition of a 2018 legal settlement), £0.3m in market entry and customer acquisition costs in
the USA and an additional £0.9m in increased laboratory capacity ahead of anticipated COVID-19 testing revenues once UK-related travel opens up.
Revenues
Cost of Sales
Gross Profit
Other income
Segmental expenses
Central expenses
Adjusted EBITDA
Separately disclosed
Operating Profit / (Loss)
Genomic
Technologies
£m
2021
Genomic
Services
£m
11.9
(4.7)
7.2
(5.3)
1.9
1.9
6.4
(2.2)
4.2
(3.4)
0.8
0.8
Genomic
Technologies
£m
2020
Genomic
Services
£m
11.1
(4.3)
6.8
(4.7)
2.1
2.1
5.5
(2.1)
3.4
(2.2)
1.2
1.2
Total
£m
18.3
(6.9)
11.4
0.1
(8.7)
(4.8)
(2.0)
(9.7)
(11.7)
Total
£m
16.6
(6.4)
10.2
0.1
(6.9)
(2.2)
1.3
(4.5)
(3.2)
The Group’s two operating segments both delivered positive adjusted EBITDA contributions after segment-specific expenses. Genomic Services contributed
£0.8m (2020: £1.2m) with COVID testing services in the UK offsetting pandemic-related weakness in our Taiwan laboratory services. Genomic Technologies
contributed £1.9m (2020: £2.1m) with headwinds and customer delays in the Group’s international markets masking strong performance in the UK and
Europe. Overall adjusted EBITDA after deducting central expenses was a loss of £2.0m (2020: £1.3 million profit). The increase in central expenses reflects the
expansion of the Group through acquisition and the Group’s decisions to continue investing in its future growth drivers despite the pandemic headwinds on
revenues which delayed the anticipated corresponding income. Adjusted EBITDA is measured as the operating loss before depreciation, amortisation, and
separately disclosed items. Underlying EBITDA without the forward-looking projects described above would have been a profit of £0.4m.
Separately Disclosed Items
Significant items within administrative expenses are shown separately in the Consolidated Statement of Comprehensive Income, with further details in note 5.
These separately disclosed items include non-cash accounting charges for share-based payments which reflect the improved business performance (i.e. the
likelihood of achieving performance targets) and the increases in the Company’s share price in the second half of the reporting period. The costs of
acquisitions and the associated integration expenses are also shown separately as non-trading expenses and for greater transparency.
20
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Within separately disclosed items is an impairment of goodwill which arose in
the 2017 acquisition of Yourgene Bioscience which operates primarily in
South East Asia. These markets were particularly badly hit by the economic
impacts of the COVID-19 pandemic despite generally managing the social
impacts extremely well. Early and extended national lockdowns restricted
health tourism into Taiwan, Singapore and Thailand and delayed a contract
launch in Japan. In addition many countries in Asia redirected resources
toward COVID-related health applications, for example resulting in the
cancellation of a sizeable oncology project that Yourgene was supporting as
funding was reallocated to COVID. The Group is engaged in restructuring its
Asian operations in response to these structural changes and still sees
significant value in that region.
Operating Loss
There is a resultant operating loss after total administrative expenses of
£11.7 million (2020: £3.2 million).
Finance Income/(Expenses)
During the period the Group incurred net finance expenses of £0.3m (2020:
£0.1m) with only modest levels of debt on the balance sheet, mostly related
to property leases accounted for under IFRS16.
Taxation and Foreign Exchange
The resulting loss on ordinary activities after taxation of £12.2m (2020:
£2.4m) reflects a £0.2m tax charge (2020: £0.9m credit) which is described
in note 12 and is primarily the de-recognition of a deferred tax asset from
historic losses to mirror the amortisation of a matching deferred tax liability.
There are still significant historic tax losses in the UK which have not yet been
recognised which will help offset taxes arising on future anticipated profits.
The Group made a small loss of £0.1 million (2020: gain of £0.1 million) on
translation of its foreign subsidiaries and foreign currency balances to the
presentational currency.
Total Comprehensive Loss
The Group recorded a total comprehensive loss of £12.2m (2020: £2.3m).
Earnings per Share
Earnings per share were a loss of 1.8 pence (2020: 0.4 pence loss).
Statement of Financial Position
At the reporting date the Group had total assets of £49.1m (2020: £37.7m).
Intangible assets increased to £14.8m (2020: £10.2m) as a result of acquiring
customer relationships and intellectual property with Coastal Genomics and
customer relationships with Ex5 Genomics. Goodwill reduced to £9.2m
(2020: £10.8m) with the Yourgene Bioscience impairment offsetting goodwill
acquired with Coastal Genomics. Property, plant and equipment increased to
£4.1m (2020: £2.0m) with capital expenditure on new laboratory facilities in
Taiwan and the UK, acquired assets in Vancouver and the deployment of
IONA NX workflows into key European accounts to facilitate their transition.
Right of use assets increased to £4.2m (2020: £3.0m). The recognised
deferred tax asset decreased slightly to £1.1m (2020: £1.2m) and the 2020
£0.5m non-current tax asset reduced to zero in 2021 after the receipt of
relevant UK R&D tax credit payments. The current tax asset remained stable
at £0.5m (2020: £0.5m).
Total current assets increased to £15.7m (2020: £10.0m) with trade and
other receivables slightly reduced after hopefully prudent provisions against
pandemic-related situations, and a sizeable increase in inventories in
anticipation of significant COVID-19 service volumes early in the new
financial year. There was also an increase in cash and cash equivalents to
£7.0m (2020: £2.8m) as described below.
Total equity and liabilities increased to £49.1m (2020: £37.7m) due to the
equity-based fundraising to support the Coastal Genomics acquisition,
and acquisition related earn-out liabilities as described in note 18.
Statement of Cash Flows
The Group had an opening cash position of £2.8m (2020: £1.3m) and a net
cash increase of £4.2m during the year (2020: £1.5m). Cash and cash
equivalents at the end of the period were £7.0m (2020: £2.8m). During the
period the Group used £3.8m (2020: £2.1m) of cash in operating activities
including an increase in inventories of £1.6m, a £0.6m reduction in
receivables due to debt provisions, and investment in operating expenses for
future growth drivers as described above, both designed to support
anticipated revenue growth in the 2022 reporting period. Cash used in
investing activities was £7.4m (2020: £9.0m) reflecting acquisitions during
the year, capital expenditure in the year on service capacity and revenue-
generating NIPT workflow instrumentation plus capitalisation of internally
generated intangible assets.
Financing activities generated a surplus of £15.5m (2020: £12.6m) primarily
due to an equity issuance in August 2020 to support the acquisition of
Coastal Genomics described in note 18, along with a number of share
options and warrant exercises as described in notes 28 and 29.
As with all businesses at this stage of development and with high growth
ambitions, the Board assesses carefully the Group’s ability to operate as a
going concern and has detailed plans for revenue growth, margin
improvement and cash flow control which are intended to achieve positive
cash flows in the near future. More detail on these plans can be found in the
notes to the accounts.
Dividends
No dividend is recommended (2020: £nil) due to the need to preserve capital
for investing in the Group’s growth strategy, which is designed to enhance
value over the longer term.
Capital Management
The Board’s objective is to maintain a balance sheet that is both efficient for
delivering long-term shareholder value and also safeguards the Group’s
financial position in light of variable economic cycles and the principal risks
and uncertainties outlined elsewhere in the Annual Report. The COVID
pandemic presented significant challenges during the reporting period
but the provision of COVID-related services has also provided some risk
mitigation against consequential instability in our core markets. As at
31 March 2021 the Group had net cash of £6.8m (2020: £2.4m) which is
stated after borrowings of £0.2m (2020: £0.4m) but before lease liabilities
arising under IFRS16 (with their offsetting Right of Use assets). Business
growth and the increased scale and revenue generating opportunities,
especially COVID-19 testing in the near-term and a range of services and
technologies in North America in the medium-term, supported by the
Coastal Genomics acquisition, are expected to enable the Group to operate
as a going concern for the foreseeable future.
Post-balance Sheet Events
After the end of the reporting period the Group has continued to expand its
UK-based COVID testing routes to market including into the retail pharmacy
and travel sectors and through successful entry into the UK Government’s
National Microbiology Framework. The Group also entered into a second
qualifying commercial agreement for the Ranger Technology acquired with
Coastal Genomics, triggering the second of two equity earn-out issuances,
and creating a commercial platform with leading US-based market
participants. In a separate announcement the Group also entered into a
multi-year licence and supply agreement with another leading US diagnostic
testing partner, furthering its US market penetration.
Barry Hextall
Chief Financial Officer
11 August 2021
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
21
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of risks and uncertainties associated with the Group’s activities. The Board
believes the following are the principal risks, along with the mitigation actions being pursued.
R I S K
Environmental Risks
I M PAC T
M I T I G AT I O N
Infectious
Diseases
The global COVID-19 pandemic highlights the need for all
businesses to be vigilant about the potential impacts of
infectious disease outbreaks on their business activities
and Yourgene is no exception. Risks include the inability for
staff to access Group facilities, for ill-health to reduce the
available capacity in the business, for products to be
shipped to new and existing customers, for suppliers to
maintain supply of critical raw materials and for staff to
travel to support existing and potential accounts or engage
in business development activities.
There are also downstream risks as Yourgene’s customers
are diagnostic laboratory groups who may be affected by
diverting resources towards infectious disease testing
activities and away from the Group’s core product portfolio.
Climate Change Global climate change may have unpredictable impacts on
the business, its customers, employees and supply chains.
Associated regulatory pressures may also impact the
Group’s operating activities.
Regulations
The Group’s products include materials that are sometimes
classed as hazardous substances and which require careful
compliance both for safety and for responsible
environmental impacts.
The Group’s IT infrastructure is primarily cloud-based which enabled
the business to move to remote working for all but laboratory-based
staff very efficiently. Laboratory safety protocols have been
implemented to minimise the risks of infection, and thankfully the
Group’s employees have not been significantly affected. Some supply
difficulties have been caused by international lockdowns but close
management of the situation by a senior ‘COBRA’ committee has
ensured the business has been able to continue to trade effectively
throughout the current pandemic and lay down improved resilience
protocols for future events of this nature.
To offset potential demand weakness where customers are diverted
to infectious disease testing, the Group has launched its own testing
service and launched Clarigene™, its own SARS-CoV-2 testing
product. It has also partnered with other organisations in the global
pandemic response and is building a longer-term infectious disease
strategy which looks beyond COVID-19.
The Group’s activities are not especially carbon intensive but all life
sciences companies are consumers of plastics and other raw materials
with an environmental impact. The Group is initiating formal
Environmental, Social and Governance (ESG) reporting mechanisms
to identify and monitor its environmental impact and to instigate
appropriate impact reduction strategies.
The Group operates a quality management system that ensures all
materials are risk assessed and meet appropriate environmental,
handling and storage standards.
Legal & Regulatory Risks
Intellectual
Property (IP)
Litigation
Patents
Changes in
Legislation and
Regulatory
Regimes
Brexit
The life sciences industry is characterised by significant
litigation from patent-holders and their licensees who try to
erect legal barriers to entry via IP rights. Non-invasive
prenatal testing, in particular, has seen a high level of
activity in the USA, Europe and elsewhere, primarily
involving Illumina Inc who have acquired or licensed IP in this
sector.
The Group is focused on protecting its IP. To protect its key
products the Group has secured and is seeking to secure
patents. However, there remains the risk that the Group
may face opposition from third parties to patents that it
seeks to have granted. The Group also faces the risk of third
parties infringing its IP. No such situations have arisen
during the reporting period or since.
Changes in laws, legislation and international relations
affecting the diagnostics market could have a negative
impact on the Group’s business activities and consequently
may have a detrimental effect upon the trading
performance of the Group. The diagnostics industry is
highly regulated by authorities across the world where the
Group intends to market its products. No assurance can be
given that the Group’s products will successfully obtain any
necessary regulatory approvals in these territories.
In carrying out its activities the Group may also face
contractual and statutory claims, or other types of claim
from customers, suppliers, employees and/or investors. In
addition, the Group is exposed to potential product liability
risks that are inherent in the research, development,
production and supply of its products.
The UK completed its transition period and exited the EU in
January 2021. The Group is impacted in terms of its
product registrations and the shipping activities for its EU
to UK supply chain and for its UK to EU product shipments.
Being outside the EU’s simplified VAT regime adds
additional administrative complexity and could affect
cashflows. Customer perceptions of the UK as a more
distant and complicated trading partner might also affect
the attractiveness of trading with Yourgene compared to
EU-based competitors.
22
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
In September 2018 the Group settled a long-running patent
infringement dispute with Illumina in the UK and entered into a Licence
and Supply Agreement covering the UK and other international
territories where NIPT patents are granted. Since this agreement was
signed the Group has developed an updated version of its IONA® Test,
which received CE-IVD certification in June 2020 and has now been
implemented in the relevant territories. Access to new territories are
now opening up to the Group without the historic IP risks.
The Group engages reputable legal advisers to mitigate the risk of
patent infringement and to advise on the protection of the Group’s IP.
The acquisition of Coastal Genomics has added further patent
protections into the Group’s IP portfolio.
The Group has implemented, and proactively manages, quality
assurance and health and safety systems to meet regulatory
requirements and to ensure ongoing compliance through its team of
experienced quality and regulatory specialists.
The Group also monitors closely the regulatory rules which apply to
the Group’s products in order to anticipate changes and ensure the
Group’s products are available for sale.
The Group retains a suite of insurance policies to protect it from the
most likely areas of claim, and undertakes risk management practices
to minimise the number and size of claims arising.
The Group had made significant preparations for the most likely Brexit
scenarios by changing its regulatory Notified Body to one based in the
EU, through the acquisition of a French trading company and the
repurposing of an existing German legal entity and recruitment of
EU-based individuals in sales and support functions to create a
genuine EU commercial presence. Product shipments were more
problematic in the first few months after Brexit but have now
stabilised and the Group is exploring EU-based distribution locations
for longer-term stability. The other mitigations are working well and
most EU-based customers have now transferred to our French or
German legal entities which act as a bridge into the EU’s simplified VAT
regime for example.
R I S K
Market Risks
Competition
I M PAC T
M I T I G AT I O N
The Group is in competition with other providers of
molecular diagnostic services and products. There is a risk
that they achieve greater than expected market
penetration and/or continue with aggressive price
discounting and bundling of NIPT with other genetic or
clinical service offerings.
The Group’s continuing product development, marketing activities
and collaboration with NGS platform providers are designed to ensure
that the IONA® Test remains at the forefront of the NIPT market. The
acquisitions of Elucigene in 2019 and Coastal Genomics in 2020 plus
the internal product development pipeline also diversify the Group’s
product range.
Technology
Technologies used within the diagnostics marketplace are
constantly evolving and improving. Therefore there is a risk
that the Group’s products may become outdated as
improvements in technology are made.
Procurement
Financial Risks
Future Funding
Requirements
There is a risk that UK and international procurement
practices may create market segments in which the Group
is unable to effectively offer its products and services.
Similarly, competitors may seek to influence procurement
practices to the disadvantage of the Group.
The Group may need to raise additional funding to continue
to invest in the activities of the Group. There is no certainty
that this will be possible at all or on acceptable terms. In
addition, the terms of any such financing may be dilutive to,
or otherwise adversely affect, shareholders.
Third-party
Reimbursement
Technology
The Group may be adversely affected by third-party
reimbursement decisions. The Group may not be able to
sell its products profitably if reimbursement from these
sources is unavailable or limited.
Operational Risks
Dependence on
Key Personnel
Information
Technology
Contracts
The Group has a global leadership team and the future
success of the Group, in common with other businesses of
a similar size, will be highly dependent on the expertise and
experience of the Board and key management. However,
the retention of such key personnel cannot be guaranteed.
The loss of any key personnel, or the inability to attract
appropriate personnel could materially adversely impact
the Group’s business, prospects, financial condition or
results of operations.
The Group relies on information technology networks,
hardware, third-party and in-house software to execute its
business activities and meet its external obligations on data
protection for example. Failure of these technologies, or
external threats such as malware, hacking or ransomware
could have a material impact on the Group’s financial
position, operational effectiveness and/or external
reputation.
There can be no certainty that third parties will perform, or
be able to perform, their obligations under various
contracts with the Group or that the Group will be able to
recover damages for breach of contract. The insolvency of
third parties or their default under the terms of such
contracts could have a material adverse effect on the
Group and its operations.
The Group has a research and development function which seeks to
keep up with the latest developments in the genetic-testing sector.
The acquisitions of Elucigene in 2019 and Coastal Genomics in 2020
diluted this technological risk, deepened the Group’s R&D capabilities
and extended the Group’s access to insights into how international
markets are evolving.
The Group works with policymakers, trade organisations and legal
advisers to monitor and influence any changes in such practices, and
also to highlight areas where procurement practices may not be fair
and transparent.
To manage this risk the Group is actively building its revenue-
generating capabilities and monitors its cash flow requirements
closely. Activities are adjusted according to available funding through
its periodic business planning process to control cash consumption,
whilst maintaining a dialogue with potential future funders. The
fundraise concluded in August 2020 alongside the Coastal Genomics
acquisition provided significant funding runway as the Group nears
self-sufficiency in operating cash flows.
The Group proactively engages with the clinical community to align its
product offering with current medical requirements in order to ensure
its commercial model is supported by reimbursement regimes. To
date, reimbursement has been more of an opportunity than a risk as
growing international coverage increases NIPT testing volumes.
Clarigene™, the Group’s SARS-CoV-2 test is subject to emergency use
authorisation protocols globally and the Group has been selective
about expanding beyond the UK. Other products are more mature
and less sensitive to reimbursement decisions.
The Group provides attractive remuneration incentives, including
share options, and endeavours to maintain an empowering culture to
encourage retention of key individuals, as well as recruiting suitable
deputies over time. The acquisitions of Elucigene and Coastal
Genomics have also strengthened the breadth and depth of
leadership within the Group.
The Group uses outsourced IT partners and secure cloud-based
software wherever possible and is investing in upgraded networks and
a cloud-based Enterprise Resource Planning system. In-house
software development is managed to in vitro diagnostic standards.
The Group has recently appointed an external Data Protection Officer
and an external IT Consultant to assist in staying ahead of
technological progress and the risks posed by cyber criminals.
The Group monitors its contractual commitments and outstanding
exposures, supplier strength and outstanding debtor exposures
closely, developing specific plans where the potential impacts would
be significant.
Increased risk
Decreased risk
No change
The Strategic Report on pages 04 to 23 of the Annual Report and Accounts 2021 has been approved by the Board of Directors.
By order of the Board
Barry Hextall
Company Secretary
11 August 2021
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
23
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS BOARD OF DIRECTORS
Adam Reynolds C
Non-executive Chairman
Adam has been on the Board of Yourgene
(then Premaitha Health plc) since its IPO in
June 2014 and became Chairman in September
2016. He began his career as a stockbroker
and established his own PR/IR and Corporate
Finance firm, Hansard Group Plc which sold in
2004. In 2005, Adam became Executive
Chairman of International Brand Licensing Plc,
today it is known as EKF Diagnostics Plc where
Adam remains a Non-executive Director and
a substantial shareholder. He is also Non-
executive Chairman of MyHealthChecked
(formerly Concepta) Plc and Belluscura Plc and
a Non-executive Director of online fashion
giant Sosandar. Adam has been named as one
of the 50 most influential people in the City
by Growth Company Investor. At Yourgene
Adam chairs the combined Nominations and
Remuneration Committee and is a member of
the Audit Committee at Yourgene Health.
Lyn Rees
Chief Executive Officer
Lyn is a seasoned executive in global healthcare
and IVD markets. Since joining Yourgene in
2018 he has been instrumental in the
transformation of the business. He has led the
Group through four acquisitions including
Elucigene Diagnostics and Coastal Genomics,
and the fundraising to underpin those deals.
Prior to joining Yourgene Health in June 2018,
Lyn was Group CEO at the BBI Group for over
nine years. Lyn completed seven acquisitions
during his tenure at BBI Group, all of which were
successfully integrated. He founded BBI
Detection and BBI Animal Health and
demonstrated a strong track record of organic
and acquisitive growth. Before that he spent
several years as the Managing Director and
founded BBI Healthcare in 2006. He first began
his business career as the European Marketing
Manager at Shimano Europe BV. Lyn is also a
Non-executive Director with MyHealthChecked
plc and Abingdon Health plc.
Dr Stephen Little
Vice Chairman
Stephen is a British scientist and entrepreneur
with a long and successful career in the fields
of personalised medicine and molecular
diagnostics. Following time spent as a research
leader with Celltech and later AstraZeneca PLC
he founded the pioneering personalised health
company DxS. Following the sale of DxS to
QIAGEN, Stephen went on to establish
Premaitha Health, now Yourgene Health PLC,
as a leader in reproductive genetics. He
retains an active role at Yourgene and is also
enthusiastically involved in the encouragement
of exciting and interesting early stage
companies such as Dxcover and BioCaptiva.
Dr John Brown CBE
Senior Independent Director
John joined the Board at Yourgene in July 2019
and has over 20 years’ capital markets
experience in the healthcare and life sciences
sector. He is currently a Senior Independent
Director of Acacia Pharma and is Chairman
of the Cell and Gene Therapy Catapult.
Additionally, he has previous significant board
experience with roles including Chairman of
Axis-Shield, Chairman of BTG, Senior
Non-executive Director of Vectura and Chief
Executive Officer of Acambis. At Yourgene
John is a member of the Nominations/
Remuneration and Audit Committees and is
the Senior Independent Director on the Board.
Dr Bill Chang
Chief Entrepreneur
Bill was the Founder of Yourgene Bioscience
in Taipei where he was CEO for several years
before it was acquired by Yourgene Health in
March 2017. Bill’s first role after his PhD was
with Academia Sinica, the national academy
of Taiwan, as a research specialist and he
established the bioinformatics core facility at
the Institute of Plant and Microbial Biology after
which he co-founded Sofiva Genomics in 2012
to provide prenatal genetic testing services.
Bill has a PhD in Bioinformatics and is also an
Honorary Fellow at the Faculty of Veterinary
Science, University of Melbourne. Bill actively
presents technical results at many
international conferences.
Barry Hextall
Chief Financial Officer
Barry joined Yourgene (then Premaitha) as
CFO in June 2015 and is a Chartered
Management Accountant with over 25 years’
experience in senior financial roles, including
with international AIM-listed organisations. He
has managed many businesses through major
changes and rapid growth, and has significant
experience working in the global medical
devices and in vitro diagnostic sectors. His
previous employers include Immunodiagnostic
Systems plc, JRI Orthopaedics Ltd, C J Garland
& Co Ltd, Ernst & Young LLP and Zeneca plc
(originally ICI). Barry holds a Diploma in
Company Direction from the Institute of
Directors, and an MBA from Cranfield School
of Management.
24
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
COMMITTEE KEY:
Audit Committee:
C Chair
Member
Nominations
and Remuneration
Committee:
C Chair
Member
She advised the Department of Health
(DOH) Rare Disease Policy Board and
Forum, the Medicines and Healthcare
products Regulatory Agency (MHRA)
Genomics for Diagnosis Forum and the
UK National External Quality Assessment
(NEQAS) – Genomics England Steering
Committee, Genomics England
Sequencing Advisory Board and
Bioindustry Association (BIA) Genomics
Advisory Committee. Dr Mason also
worked for Oxford University Hospitals
NHS Foundation Trust where she set up
and managed an NGS Core facility leading
translational research, offering disease-
specific diagnostic panels and introducing
whole genome sequencing into the
diagnostic setting. Prior to this role,
Dr Mason managed an NGS Core facility
in Malaysia and led the Comparative
Genomics group at Public Health England
studying novel and dangerous pathogens.
Dr Mason holds a PhD from Cambridge in
Molecular and Cellular Biology.
Nicholas (Nick) Mustoe C
Non-executive Director
Nick has been on the Board at Yourgene since
its IPO in June 2014 and started his career in
London in advertising agency Foote Cone and
Belding and at Lowe Howard Spink, before
establishing his own agency, Mustoes Merriman
Levy (Mustoes). In 2008 Mustoes merged
with a leading PR agency Geronimo to
form Kindred, a creative PR agency. Nick
subsequently led an MBO of Kindred in 2010
and remains Chairman. He is also Chairman
of charity Starlight Children’s Foundation and
of Big Sofa Technology Plc, as well as a
Non-executive Director of Sosander Plc.
At Yourgene Nick is a member of the
Nominations/Remuneration Committee and
chairs the Audit Committee.
Jonathan Seaton
Non-executive Director
Jonathan joined the Board of Yourgene in
August 2019 and has extensive experience
working for leading global life sciences and
diagnostic companies having worked on over
40 merger and acquisition transactions. At
Roche Diagnostics he held the position of
Vice Director, Global Business Development,
advising leading merger and acquisition activity
and strategic partnerships. Jonathan also held
key strategic roles as a healthcare investment
banker at Deutsche Bank Securities, a strategic
senior role at Becton, Dickinson and Company
and Head of Corporate and Business
Development and Government Affairs at
Illumina. Jonathan is now the Senior Vice
President, Corporate Business Development at
Bio-Rad Laboratories.
Hayden Jeffreys
Chief Operating Officer
Hayden was appointed to the Board in October
2018 and has over 20 years’ experience in the
clinical diagnostics industry. Hayden has a
strong strategic commercial background
including business development, mergers
and acquisitions and driving commercial teams
for transformational international delivery
and growth. Prior to joining Yourgene Health,
Hayden was Chief Operating Officer at
Cambridge Epigenetix. Hayden also held
several international senior positions within
the ERBA diagnostics group including CEO and
Head of Corporate Business Development and
Strategy. Hayden holds an MSc in Management
Studies from the University of Oxford.
Dr Joanne (Jo) Mason
Chief Scientific Officer
Jo was appointed to the Board in November
2020 after a period as Director of Research
& Development since joining the Company
in December 2019. Jo has been a champion
of modernising diagnostics with the use
of genomic technologies, having
previously held positions as Vice President
Biodiscovery with Cambridge Epigenetix,
where she led the development of clinical
epigenomic technologies, and as Director
of Sequencing and Sample Acquisition for
Genomics England, where she managed
the delivery of samples and whole
genome sequencing for the UK’s 100,000
Genomes Project.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
25
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 MARCH 2021
The Board recognises the importance of sound corporate governance and has elected to implement the
Corporate Governance Code for Small and Mid-Size Quoted Companies, as published by the Quoted
Companies Alliance (the QCA Code), to the extent it is considered appropriate in light of the Group’s size,
stage of development, risk profile and resources. The Company is also subject to the UK City Code on
Takeovers and Mergers. Further information on the Group’s governance practices, the business model
and strategy can be found in the Company Overview, Strategic Report and Governance sections in this
Annual Report and Accounts.
This Governance Statement was last reviewed and updated on 10 August 2021.
QCA Governance Principles
Explanation
1
Strategy and
Business Model
(QCA Principle 1)
Yourgene develops molecular diagnostic products and services that will have a positive impact on human health and deliver
long-term shareholder value. The Group has a clear strategy to increase penetration of sales in the markets in which it operates, to
expand the geographic markets in which it operates and to launch new products and services into these markets. This strategy is
being driven organically, and through acquisitions where target companies are found which support one or more of these four
strategic ‘pillars’.
The Group is currently focused on delivering high-quality genomic services, products and technologies to support a growing
international customer base of laboratories and healthcare professionals. The Group provides customers with clinical and research
genetic testing services across different fields such as reproductive health, oncology and infectious diseases, from its facilities in
the UK and Taiwan. In addition to these genomic services the Group manufactures a range of reagents and instrumentation to
support these service offerings and also to enable third parties to offer genomic testing services through their own laboratory and
clinical networks. Yourgene has also established a contract development partnership programme for customers, building on our
expertise in developing in vitro diagnostic products. In June 2020, Yourgene launched its first infectious disease product which is a
COVID-19 diagnostic test, Clarigene™ and at the same time launched an in-house COVID-19 testing service.
The IONA® test is a CE-IVD marked test for prenatal screening which enables clinical laboratories around the world to establish their
own quality assured non-invasive prenatal screening service. In other regions we offer the Sage™ Prenatal Screen which provides a
greater clinical depth of data that is reported and allows labs and clinics greater flexibility with the analysis work package. By having
these two complementary prenatal screening solutions we meet a wider scope of customer and market needs. The Group
continues to expand the range of in vitro diagnostic technologies into different fields as demonstrated by the August 2020
acquisition of Coastal Genomics Inc of Canada, after a series of other acquisitions in recent years.
2
3
4
Meeting
Shareholder
Needs
(QCA Principle 2)
The Company places a great deal of importance on communicating with its shareholders. All shareholders are given at least 21 days’
notice of the Annual General Meeting and are encouraged to attend. An opportunity is provided for them to ask questions at the
meeting. Throughout the year the Chairman, Chief Executive Officer and Chief Financial Officer are in regular contact with the
Company’s major investors and respond to queries from private investors through an investor contact email or via the Company’s
financial PR firm, Walbrook PR. The CEO is responsible for ensuring that shareholders’ views are communicated to the Board as a
whole. The Group is supported by its joint brokers N+1 Singer and Stifel Nicolaus as well as its Nominated Adviser, Cairn Financial,
and its Registrar, Link Asset Services, to further improve the quality and quantity of investor relations activities.
Manage Our
Responsibilities
to Wider
Stakeholders
(QCA Principle 3)
We take seriously our responsibilities to our staff, trading partners, neighbours, the clinical, research and laboratory communities we
supply and the pregnant and patient populations we support. We operate a high standard of quality management to ensure we
comply with the appropriate regulations in the various territories in which we operate, and that we thoroughly investigate any
occurrences which fall below our high standards so we can implement corrective and improvement actions.
Family-friendly and flexible employee policies, rigorous health, safety and environmental practices are very important additions to
the quality management system in ensuring we manage our stakeholder and social responsibilities appropriately.
Risk Management
(QCA Principle 4)
The environment in which we operate presents certain general risks as well as particular risks that are specific to our own
circumstances, as exemplified by the COVID-19 pandemic. The Board monitors the key legal, regulatory, market, financial and
operational risk areas to identify relevant risks, assess their potential impact and to develop mitigation strategies that will enable
the Group to flourish. Principal risks and uncertainties are described in the appropriate section in this Annual Report and Accounts
and are set out below.
The Audit Committee monitors key risks and is responsible for:
•
reviewing the Company’s external reporting process, including the financial statements, reports and announcements
and the accounting policies and judgements that underline them, and making recommendations to the Board before
release;
• monitoring the statutory audit of the annual accounts;
• monitoring of the independence of the external auditors and the establishment of a policy for their use for
non-audit work; and
• monitoring the Group’s risk register and mitigation strategies.
26
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
QCA Governance Principles
Explanation
5
Maintain a
Well-functioning
Board (QCA
Principle 5)
The Chairman has considerable experience of Boards operating in the AIM environment and ensures the Board has an appropriate
composition of skills. The Board now comprises five Non-executive Directors and five Executive Directors. Whilst this does not meet
QCA guidance in this area the Board believes this is compensated by the breadth of skills, geographic coverage and experience that is
represented and that there is adequate challenge to the Executives with this structure. Board composition is monitored and it is
intended to migrate to a best practice structure as the business evolves.
6
7
8
9
Ensure Directors
have Necessary,
Up-to-date Skills
(QCA Principle 6)
Evaluate Board
Performance
(QCA Principle 7)
Promote a
Values-based
Corporate Culture
(QCA Principle 8)
Maintain
Fit-for-purpose
Governance
Structures
(QCA Principle 9)
The role of the Board
The Directors collectively bring a broad range of business experience to the Board which is considered essential for the effective
management of the Company. The Board is responsible for strategic and major operational issues affecting the Company. It reviews
financial performance, regulatory compliance, monitors key performance indicators and will consider any matters of significance to
the Company, including corporate activity. Certain matters can only be decided by the Board and these are contained in the
schedule of matters reserved to the Board. The day-to-day management of the Company’s business is delegated to the Chief
Executive Officer and Executive Directors of the Company. During the reporting period the Board held eight meetings and there
were three Audit Committee meetings. All Directors eligible to participate attended all meetings.
The composition of the Board and division of responsibilities
The Board currently consists of a Non-executive Chairman, a Vice Chairman, three further Non-executive Directors, a Chief
Executive Officer and four other Executive Directors. The composition of the Board ensures that no single individual or group of
individuals is able to dominate the decision-making process. Board composition remains under review going forward to move
towards QCA compliance. Details of the individual Directors and their biographies are set out in this Annual Report and Accounts
and on the website www.yourgene-health.com
Roles of Chairman and Chief Executive Officer
The roles of the Chairman and the Chief Executive Officer are separate to ensure a clear division of authority and responsibility at
the most senior level within the Company.
Directors are provided with access to the Company’s Nominated Adviser and Corporate lawyers who provide briefings on
necessary legislation and regulations from time to time. Directors are supported if required to ensure their skills remain up to date,
including training and continuing professional development and participation in peer networks via the Institute of Directors, the
Quoted Companies Alliance and external advisers.
The Board to date has operated an informal performance review and succession planning process but is committed to
implementing formal procedures. The focus is currently on psychometric profiling and performance management of the senior
management team which may be extended to the Board in due course.
The Board sets great store by its values-based corporate culture and ethical reputation which is crucial to the Group’s reputation in
the highly regulated field in which it operates. The Company manages a highly regarded quality management system which is used
to monitor any complaints or deviations from expected behaviours. The Board monitors any significant non-compliance matters
that may arise. In addition, ethical considerations are factored into discussions on Board matters as and when this is appropriate.
Recruitment practices are heavily focused on recruiting people with similarly strong values, and the Group’s senior management
team have recently reviewed and updated the values, behaviours and communication practices to ensure they remain fit-for-
purpose as the Group continues to expand.
The Company has adopted and operates a share-dealing code governing the share dealings of the Directors and applicable
employees to ensure compliance with the AIM Rules.
Chairman: the Chairman is responsible for the leadership of the Board and ensuring the effective running and management of the
Board. He is also responsible for the Board’s oversight of the Company’s affairs, which includes ensuring that the Directors receive
accurate, timely and clear information, ensuring the effective contribution of the Non-executive Directors and implementing
effective communication with shareholders.
Chief Executive Officer: the Chief Executive Officer is responsible for the day-to-day management and the executive leadership of
the business. His other responsibilities include the progress and development of objectives for the Company, managing the
Company’s risk exposure, implementing the decisions of the Board and ensuring effective communication with shareholders and
regulatory bodies.
Non-executive Directors and independence: Non-executive Directors are required to allocate sufficient time to the Company to
discharge their responsibilities effectively. The Board considers the Non-executive Directors to be sufficiently independent to
provide appropriate oversight and scrutiny.
Re-election of Directors: in accordance with the Company’s Articles of Association all serving Directors are subject to re-election
every three years, and a minimum of one-third of Directors are subject to re-election each year. Newly appointed Directors are
re-elected at the first Annual General Meeting after their appointment.
Board meetings and information to the Directors: before each Board meeting the Directors receive, on a timely basis, comprehensive
papers and reports on the issues to be discussed at the meeting. In addition to Board papers, Directors are provided with relevant
information between meetings. The Board has regular scheduled meetings which occur at least quarterly and often monthly.
Board committees and Senior Independent Director
The Board has two committees, namely the Audit Committee and a combined Nominations and Remuneration Committee. In
addition, it has identified a Senior Independent Director (SID).
Audit Committee: the Audit Committee is chaired by Nicholas Mustoe with Adam Reynolds and Dr John Brown as members.
Nominations and Remuneration Committee: due to the size of the Board and the infrequency of senior appointments these two
committees have been merged. The Committee has delegated responsibility from the Board for identifying and appointing
Executive Directors, and for developing the remuneration policy of the Company and for setting the remuneration of its Executive
Directors and senior managers. Adam Reynolds chairs the Committee which is also attended by Nick Mustoe and Dr John Brown.
The Committee’s activities were reported to the Board throughout the period.
Senior Independent Director: Dr John Brown fulfilled the duties of the Senior Independent Director throughout the reporting
period. The Senior Independent Director provides an alternative contact point for Directors and shareholders for matters where
they do not wish to approach the Chairman directly.
10
Communicate
Governance and
Performance with
Shareholders
(QCA Principle 10)
The Board communicates regularly with shareholders providing updates on Group performance to shareholders via interim and
annual financial reports, trading updates, investor presentations and a regular news flow of significant developments for the Group.
Governance practices are described fully in this Annual Report and Accounts and the Company’s website is maintained to be
up-to-date and informative.
The enhanced Audit Report in these accounts is representative of the Audit Committee’s focus areas
Adam Reynolds
Chairman
11 August 2021
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
27
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 MARCH 2021
The Corporate Governance Statement set out on pages 26 and 27 forms part of this report.
Results and Dividends
The results for the year are set out on page 36.
No ordinary dividends were paid. The Directors do not recommend payment of a final dividend.
Directors
The Directors who held office during the year and up to the date of signature of the financial statements were as follows:
Adam Reynolds
Dr Stephen Little
Dr John Brown CBE
Nicholas Mustoe
Jonathan Seaton
Lyn Rees
Dr Bill Chang
Barry Hextall
Hayden Jeffreys
Dr Joanne Mason (appointed 5 November 2020)
Table of Board of Committees April 2020-March 2021
Director
Adam Reynolds
Dr Stephen Little
Dr John Brown CBE
Nick Mustoe
Jonathan Seaton
Lyn Rees
Dr Bill Chang
Barry Hextall
Hayden Jeffreys
Dr Joanne Mason
Board Meeting
Audit Committee
Remuneration Committee
Attended
Eligible
Attended
Eligible
Attended
Eligible
11
11
11
11
8
11
11
11
11
5
11
11
11
11
11
11
11
11
11
5
3
–
3
3
–
3
–
3
–
–
3
–
3
3
–
3
–
3
–
–
1
–
1
1
–
1
–
1
–
–
1
–
1
1
–
1
–
1
–
–
Directors’ Beneficial Interests and Share Options
Details of Directors’ beneficial interests in the issued share capital of the Company as at 31 March 2021 were as follows (and see also note 9):
Adam Reynolds
Nicholas Mustoe
Dr Stephen Little
Lyn Rees
Dr Bill Chang
Barry Hextall
Hayden Jeffreys
Dr John Brown
Dr Joanne Mason (appointed on 5 November 2020)
Details of Directors’ share options are as follows:
Adam Reynolds
Nicholas Mustoe
Dr Stephen Little
Lyn Rees
Dr Bill Chang
Barry Hextall
Hayden Jeffreys
Jonathan Seaton
Dr Joanne Mason (appointed on 5 November 2020)
28
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Ordinary shares of
£0.01 each
Percentage held
6,743,773
8,186,869
6,726,735
1,037,902
80,000,142
549,675
333,494
352,450
27,476
0.93%
1.13%
0.93%
0.14%
11.06%
0.08%
0.05%
0.05%
0.00%
At 1 April 2020
At 31 March 2021
Date from
which exercisable
Expiry date
591,666
591,666
1,500,000
10,555,984
1,700,000
10,000,000
4,000,000
300,000
400,000
400,000
1,000,000
4,000,000
400,000
3,000,000
2,400,000
591,666
19/03/2018
19/03/2024
591,666
19/03/2018
19/03/2024
1,500,000
10,555,984
1,700,000
10,000,000
4,000,000
300,000
400,000
400,000
1,000,000
4,000,000
400,000
3,000,000
2,400,000
14/07/2017
04/09/2016
01/07/2019
01/07/2019
01/07/2020
31/03/2019
01/07/2019
01/07/2020
14/07/2017
01/07/2019
01/07/2020
01/07/2019
01/07/2020
14/07/2025
05/09/2024
30/06/2028
30/06/2028
31/05/2029
01/03/2027
30/06/2028
31/05/2029
14/07/2025
30/06/2028
31/05/2029
03/10/2028
31/05/2029
1,500,000
1,500,000
01/07/2020
28/10/2029
250,000
750,000
30/09/2022
30/09/2021
21/03/2031
17/06/2030
Qualifying Third-party Indemnity Provisions
The Group has arranged qualifying third-party indemnity for Directors’ and
Officers’ liability insurance for the sum of £5 million.
dynamics in which it operates, the historic and anticipated rate of growth of
gross profits, decisions available to them for management of the cost base
of the Group and the potential for future fundraising.
Stakeholder responsibility
In line with Section 172(1) of the Companies Act 2006 we are pleased to describe
the ways we engage with stakeholders to both fulfil our obligations and achieve
our vision. These are described in various parts of our Strategic Report.
The Group operates a strategic planning process which has historically
delivered strong progress on its ambitious multi-year business plan and
which has proven resilient and agile in the face of the COVID pandemic
which ran concurrently with the reporting period.
Supplier Payment Policy
The Company’s current policy concerning the payment of trade creditors is to:
• settle the terms of payment with suppliers when agreeing the terms of
each transaction;
• ensure that suppliers are made aware of the terms of payment by
inclusion of the relevant terms in contracts; and
• pay in accordance with the Company’s contractual and other legal
obligations.
Principal Activities, Trading Review and Future Developments
A detailed review of the business, post-reporting date events and likely future
developments is given in the Strategic Report on pages 4 to 23.
Key Performance Indicators
The key performance indicators are discussed in the Company Overview on
pages 1 to 3 and in the Strategic Report on pages 4 to 23.
Financial Instruments
Details and required disclosure of the financial instruments used by the
Group are contained in notes 24-27, 29 and 30 in the financial statements.
Auditor
Saffery Champness LLP were reappointed at the Group’s Annual General
Meeting in September 2020 and in accordance with the Company’s articles,
a resolution proposing that Saffery Champness LLP be reappointed as
auditor of the Company will be put at a General Meeting.
Events After the Reporting Date
Significant events that have occurred since the reporting date are
described in the Strategic Report on page 21 and in note 34 of
these financial statements.
Risks and Uncertainties
The principal risks and uncertainties facing the Group are discussed in the
principal risks and uncertainties section of this report on pages 22 and 23.
Donations and Political Contributions
The Group made no donations or political contributions in the current or
prior periods.
Going Concern
In their assessment of the Group’s ability to continue as a going concern,
the Directors have focused on the implications of the COVID pandemic,
underlying organic growth drivers and the cash profiles of various in-year
and prior year asset acquisitions and business combinations.
The COVID pandemic has suppressed organic growth somewhat and has
also led to the creation of a significant revenue stream of its own through the
provision of COVID testing services in the UK and sales of the Group’s
SARS-CoV-2 PCR test in the UK and internationally. Looking forward as the
pandemic hopefully recedes the Group anticipates a return to organic growth
of the existing business plus the positive long-term benefits of recent
acquisitions, not least that of Coastal Genomics Inc which is an early-stage
cash-consuming business at present but which is a catalyst for the Group’s
accelerating penetration of the US diagnostics market, the largest in the
world. For the enlarged Group the Directors have assessed the market
As described in the Strategic Report, the Group has been investing heavily in
future cashflow drivers as a result of a successful equity issuance in August
2020. This fundraise enabled the acquisition of Coastal Genomics Inc and
has also facilitated the significant expansion of the Group’s UK laboratory
testing services activities, the underlying business systems and the Group’s
laboratory in Taiwan, all of which are designed to drive cash-generative
growth in the years to come. These investments, coupled with the pandemic
headwinds which affected the Group’s traditional customers and inhibited
the penetration into new target markets such as the USA and Japan, have
meant that the Group continues to use cash in its trading and that break-
even trading performance has not yet been reached. The Group’s forecasts
include assumptions of further growth in revenue, which are key in achieving
positive cash flows. The Directors have also assessed the Group’s cost
structure as part of the strategic planning process and believe that an
ongoing scalability programme will enable costs growth to be contained
below gross profit increases.
There remains an ongoing commitment to keep costs and working capital
under control so that increasing gross profits can drive positive cash flows.
Detailed sensitivity analysis has been performed to assess the potential
impact on the Group’s liquidity caused by any continuing delays in revenue
growth against expected levels along with potential mitigating actions which
can be taken to safeguard the Group’s cash position. These include working
capital controls and reductions in discretionary spending.
If events transpire differently to this assessment, for example if revenues fail
to grow at the anticipated pace, there could be lower cash headroom. To
mitigate this scenario the existence of significant share options and warrants
are likely to generate additional funds within the forecast horizon. The Group
also has a successful track record in raising funds from capital markets and is
exploring debt facilities. Taking all the above into account the Directors
believe there is sufficient cash available or accessible to avoid a cash shortfall.
The Directors have concluded that considering the circumstances described
above and mitigation strategies in place, the Directors have a reasonable
expectation that the Group and Company will have adequate resources to
continue in operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
Substantial Shareholdings
As at 5 August 2021, the following interests in 3% or more of the issued
ordinary share capital appear in the register:
Number of shares
Percentage of
issued share capital
Dr Bill Chang (through Changsform
80,000,142
11.1%
Innovations Pte Ltd)
BGF Investment Management Limited
Mr Steven Myers
Life Technologies Ltd
TB Amati Investment Funds Ltd
65,931,278
55,100,000
41,356,165
37,824,468
9.1%
7.6%
5.7%
5.2%
This report was approved by the Board of Directors on 11 August 2021 and
signed on its behalf by:
Adam Reynolds
Chairman
11 August 2021
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
29
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Strategic Report and Directors’ Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the Group financial
statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Directors have elected to prepare
the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable laws, including FRS 101 ‘Reduced disclosure framework’). 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 and profit or loss of the Company and Group for that period. In preparing these 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;
•
for the consolidated financial statements state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material
departures disclosed and explained in the financial statements;
for the Parent Company financial statements state whether applicable UK Accounting Standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
•
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors confirm that:
• so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
•
the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and
to establish that the Company’s auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in
the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
This statement was approved by the Board of Directors on 11 August 2021 and signed on its behalf by:
Adam Reynolds
Chairman
11 August 2021
30
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF YOURGENE HEALTH PLC
Opinion
We have audited the financial statements of Yourgene Health Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 March 2021
which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Financial Position, the Company Statement of Changes in Equity,
the Company Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and international accounting standards (IAS) in conformity with the requirements of the Companies
Act 2006.
In our opinion the financial statements:
• give a true and fair view of the state of affairs of the group and of the parent company as at 31 March 2021 and of the group’s loss for the period
then ended;
• have been properly prepared in accordance with IAS in conformity with the requirements of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and the
parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to SME listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the directors’ assessment of the group and the parent company’s ability to continue to adopt the going concern
basis of accounting included:
• obtaining and critically appraising the directors’ profit and loss and cashflow forecasts supporting their formal going concern assessment;
•
reviewing the forecasts for mathematical accuracy, reconciling the opening positions contained within the forecast to management accounts and
cash balances;
• challenging the key assumptions underpinning the cashflow forecasts supporting the directors’ assessment of going concern
• performing sensitivity analysis on key assumptions underlying the directors’ assessment of going concern, including revenue growth, gross profit margin
analysis and significant movements in the cost base of the business;
• discussion with directors of events after the reporting date to assess their impact on the going concern assumption, including comparison of the post year
end cash balances to forecast positions.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the group or the parent company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
31
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF YOURGENE HEALTH PLC
Our approach to the audit
We tailored the scope of our audit work to ensure we obtained sufficient evidence to support our opinion on the financial statements as a whole, taking into
account the structure of the group and the parent company, the accounting processes and controls and the industry in which the group operates.
As group auditors we carried out the audit of the parent company financial statements and, in accordance with ISA (UK) 600, obtained sufficient appropriate
audit evidence regarding the audit of the group’s material Taiwan subsidiary, Yourgene Health (Taiwan) Co. Ltd. We also performed a statutory audit of the
group’s UK subsidiary Yourgene Health UK Limited. These subsidiaries were deemed to be significant to the group financial statements due to their size. The
group audit team directed, supervised and reviewed the work of the component auditors in Taiwan, which involved issuing detailed instructions, holding
discussions with component audit teams and performing a review of key working papers. Audit work in Taiwan was performed at materiality levels of £54,000,
lower than group materiality.
We also performed targeted audit procedures in respect of Delta Diagnostics (UK) Limited, Ex5 Genomics Ltd, Yourgene Health France S.A.S., Yourgene
Health Canada Ltd, Yourgene Health Canada Investments Ltd and Coastal Genomics Inc., none of which were identified as significant components
requiring full scope audits. We also made enquiries of the work performed by the auditors of the group’s Singaporean subsidiary Yourgene Health
(Singapore) Pte Limited.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including
evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement.
Key audit matters
Key Audit Matter
Acquisition of Coastal Genomics Inc.
During the period the Group acquired 100% of the issued share capital of
Coastal Genomics Inc. Consideration for the acquisition included shares and
cash with a proportion of contingent consideration. The transaction has been
accounted for as a business combination under IFRS 3.
At the date of acquisition, a fair value exercise was performed of the consideration
transferred and the identifiable assets acquired and the liabilities assumed which
resulted in the recognition of £4.54m of previously unrecognised intangible
assets including licenced technology and customer relationships. Goodwill of
£3.10m was also recognised as a result of the transaction, being the difference
between the fair value of assets acquired and the consideration transferred.
Due to the significance of the transaction to the Group and the level of
judgement involved in the fair value exercise, the accounting treatment of the
acquisition is considered to be a key audit matter.
How our audit addressed the key audit matter
Our audit procedures included the following:
• Obtaining and reviewing the underlying Share Purchase Agreement
governing the terms of the acquisition;
• Agreeing the contractual cash and share consideration to bank
payment and share issue documents;
• Understanding and challenging management’s assessment of the
likelihood and timing of future earnout payments and the impact of
discounting those future payments;
• Challenging the technical treatment of shares issued in a
subsidiary and the principles applied in the valuation of them and
further assessing the existence of non-controlling interests after
the transaction;
• Reviewing the basis on which future earnouts to be settled in equity
were recorded as liabilities rather than as equity;
• Obtaining management’s assessment of the fair values of assets and
liabilities acquired;
• Reviewing and challenging the basis upon which the value of
customer relationships and Ranger Technology intellectual property
was determined;
• Reviewing the mathematical accuracy of models used to determine
the fair value of newly identified intangible assets;
• Understanding the basis for the useful life of newly identified
intangible assets and the allocation of newly generated goodwill for
impairment purposes; and
• Examining the appropriateness and accuracy of disclosures.
Based on our procedures, we consider that the Coastal Genomics Inc.
acquisition has been accounted for in accordance with IFRS 3 and that
there is no material misstatement in assets and liabilities recognised as a
result of the acquisition.
32
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Key Audit Matter
How our audit addressed the key audit matter
Carrying value of goodwill and other intangible assets
At 31 March 2021, the Group held intangibles assets with a carrying value of
£23.93m, comprising goodwill of £9.18m and other intangible assets of £14.75m.
There were significant intangible asset additions of £9.16m during the year
including £7.93m from the acquisition of Coastal Genomics Inc.
Due to the Group’s further diversified service offerings, the Board changed
the determination of cash generating units for the purposes of testing goodwill
and other assets for impairment. An impairment of £4.79m was recorded
against goodwill.
Due to the material additions in the year, the overall significance of intangible
assets on the Statement of Financial Position and the change in approach to the
determination of cash generating units, the carrying value of intangible assets
was considered a key audit matter.
Our audit procedures included the following:
• Reviewing and challenging the cashflow forecasts used by
management in the goodwill and intangible impairment assessment
models including the justification and basis for a change in
determination of the group’s cash generating units;
• Evaluating and challenging the key judgements applied in forecast
models such as the revenue growth rate, the discount rate, the gross
margins achieved and the time period over which forecast cash flows
are appropriate and performing sensitivity analysis;
• Understanding the basis and rationale for the forecast growth in
certain products and geographies;
• Assessing the Directors’ assessment for the allocation of goodwill
to cash generating units and reviewing potential impairment on
that basis;
• Reperforming amortisation calculations and assessing the
judgement applied in assessing useful economic lives; and
In light of identified impairments, reviewing the suitability and
accuracy of disclosures.
•
Based on our procedures, we noted no material misstatement in the
carrying value of goodwill and other intangible assets and that the
impairment charge recognised in the period is appropriate.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in evaluating the effect of any identified misstatements and in forming our audit
opinion. Our overall objective as auditor is to obtain reasonable assurance that the financial statements as a whole are free from material misstatement,
whether due to fraud or error. We consider a misstatement to be material where it could reasonably be expected to influence the economic decisions of the
users of the financial statements.
We have determined a materiality of £350,000 for both the group and parent company financial statements. This is based on 2% of revenue per draft financial
information at the planning stage for the group and 1% of gross assets of the parent company, with an upper limit of the group materiality. A separate
performance materiality was applied to transactions with Directors and related parties.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the
financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent
with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
•
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
33
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF YOURGENE HEALTH PLC
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not
visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
•
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 30, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and the parent 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 the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the group and parent financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are
capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including
through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these
controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws
and regulations that are of significance in the context of the group and parent company by discussions with directors, communication with component
auditors and by updating our understanding of the sector in which the group and parent company operate.
Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006, the AIM Rules for Companies
and UK tax legislation as well as similar laws and regulations prevailing in each country in which we identified a significant component.
In addition, the group and the parent company are subject to other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to their ability to operate or to avoid a material penalty. These include consumer product law such as product safety,
contract legislation including the Group’s use of trademarks, copyright and patents and the CE marking regulatory approval process for in vitro diagnostics.
34
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a
review of group and parent company financial statement disclosures. We reviewed the parent company’s records of breaches of laws and regulations, minutes
of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company’s policies
and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and
regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of
any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal
entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in
making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review
included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with
laws and regulations and fraud.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according
to their particular circumstances. Our communications with component auditors included a request to identify instances of non-compliance with laws and
regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Simon Kite (Senior Statutory Auditor)
for and on behalf of Saffery Champness LLP
Chartered Accountants
Statutory Auditors
Trinity
16 John Dalton Street
Manchester M2 6HY
11 August 2021
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
35
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2021
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
General administrative expenses
Adjusted EBITDA
Depreciation and amortisation
Impairment of goodwill
Share-based payments expense
Costs associated with subsidiary acquisition
Acquisition integration expense
Total depreciation, amortisation and separately disclosed items
Operating loss
Financing income
Financing expenses
Loss on ordinary activities before taxation
Tax (charge)/credit on loss on ordinary activities
Loss for the year
Other comprehensive expense: to be subsequently reclassified
to profit or loss
Exchange translation differences
Loss and total comprehensive profit/(loss) for the year
Earnings per share pence
Basic: Loss
Diluted: Loss
Notes
2021
£
(3,246,887)
(4,788,747)
(951,983)
(286,044)
(388,012)
6
6
5
5
5
5
6
10
11
12
13
£
18,288,028
(6,912,493)
11,375,535
60,313
(13,483,114)
(2,047,266)
(9,661,673)
(11,708,939)
1,850
(301,547)
(12,008,636)
(174,996)
(12,183,632)
(57,790)
(12,241,422)
(1.8p)
(1.7p)
2020
£
£
16,612,779
(6,387,837)
10,224,942
67,530
(9,037,761)
1,254,711
(2,093,808)
–
(1,601,746)
(264,666)
(533,358)
(4,493,578)
(3,238,867)
19,960
(163,203)
(3,382,110)
948,186
(2,433,924)
139,773
(2,294,151)
(0.4p)
(0.4p)
36
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2021
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use asset
Tax asset
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Tax asset
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities attributable to equity holders of the Company
Equity
Called up share capital
Share premium account
Merger relief reserve
Reverse acquisition reserve
Foreign exchange translation reserve
Other reserves
Retained losses
Total equity
Current liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Borrowings
Other liabilities and provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liability
Lease liabilities
Other long-term liabilities and provisions
Total non-current liabilities
Total equity and liabilities
The financial statements were approved and signed by the Directors and authorised for issue on 11 August 2021.
Adam Reynolds
Chairman
Company Registration No. 03971582
2021
2020
Notes
£
£
14
14
15
16
23
23
17
19
23
28
28
28
28
28
28
28
20
16
21
22
21
23
16
22
9,180,767
14,750,315
4,108,970
4,209,013
–
1,145,393
10,805,783
10,191,889
1,969,305
2,996,753
532,691
1,181,039
33,394,458
27,677,460
2,897,480
5,333,109
506,587
6,995,438
1,152,308
5,629,287
452,485
2,764,117
15,732,614
9,998,197
49,127,072
37,675,657
32,668,033
67,259,741
12,970,330
(39,947,033)
(65,914)
4,914,314
(44,876,306)
32,561,451
51,179,685
12,937,796
(39,947,033)
(8,124)
3,069,382
(33,494,558)
32,923,165
26,298,599
5,238,721
586,637
542,877
118,705
2,282,836
4,907,813
341,167
433,337
277,508
512,555
8,769,776
6,472,380
77,013
2,172,899
4,056,558
1,127,661
85,110
1,153,121
2,710,123
956,324
7,434,131
4,904,678
49,127,072
37,675,657
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
37
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2021
Share
capital
£
Share
premium
account
£
Merger
relief
reserve
£
Other
reserves
£
Reverse
acquisition
reserve
£
Foreign
exchange
reserve
£
Retained
losses
£
Total
£
Notes
32,403,969 37,971,265 10,012,644
3,069,382
(39,947,033)
(147,897)
(32,662,380) 10,699,950
–
–
–
–
–
–
28
132,901 14,197,534
(989,114)
–
–
–
–
–
–
24,581
29
–
–
–
2,925,152
–
157,482 13,208,420
2,925,152
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
139,773
(2,433,924)
–
(2,433,924)
139,773
139,773
(2,433,924)
(2,294,151)
–
–
–
–
–
–
–
–
14,330,435
(989,114)
2,949,733
1,601,746
1,601,746
1,601,746 17,892,800
Balance at 1 April 2019
Year ended 31 March 2020:
Loss for the year
Other comprehensive profit
Total comprehensive profit/
(loss) for the year
Transactions with owners
Issue of share capital
Share issue expenses
Issue of share capital
on acquisition
Share-based payments:
share option schemes
Total transactions
with owners
Balance at 31 March 2020
32,561,451 51,179,685 12,937,796
3,069,382
(39,947,033)
(8,124)
(33,494,558) 26,298,599
Balance at 1 April 2020
32,561,451 51,179,685 12,937,796
3,069,382
(39,947,033)
(8,124)
(33,494,558) 26,298,599
Year ended 31 March 2021:
Loss for the year
Other comprehensive loss
Total comprehensive loss for
the year
Transactions with owners
Issue of share capital
Share issue expenses
Issue of share capital
on acquisition
Issue of share options
on acquisition
Share-based payments:
share option schemes
Total transactions
with owners
–
–
–
–
–
–
28
18
29
106,403 17,148,527
(1,068,471)
–
179
–
–
–
–
–
–
–
–
–
–
32,534
–
–
–
–
–
–
–
–
1,844,932
–
106,582 16,080,056
32,534
1,844,932
–
–
–
–
–
–
–
–
–
– (12,183,632) (12,183,632)
(57,790)
–
(57,790)
(57,790) (12,183,632) (12,241,422)
–
–
–
–
–
–
–
–
–
–
17,254,930
(1,068,471)
32,713
1,844,932
801,884
801,884
801,884 18,865,988
Balance at 31 March 2021
32,668,033 67,259,741 12,970,330
4,914,314 (39,947,033)
(65,914) (44,876,306) 32,923,165
38
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2021
Cash flows from operating activities
Loss for the year before tax
Adjustments for:
Finance costs
Finance income
Depreciation and impairment of property, plant and equipment
Depreciation and impairment of right-of-use asset
Loss on disposal of property, plant and equipment
Gain on revaluation of right-of-use asset
Amortisation of intangible non-current assets
Impairment of goodwill
Impairment on financial assets (IFRS 9)
Foreign exchange movements
Share-based payment and warrant expense
Decrease in provisions
Tax (paid)/received
Movements in working capital:
(Increase)/Decrease in inventories
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Increase in tax asset
Cash used by operations
Investing activities
Purchase of subsidiaries
Cash acquired on purchase of subsidiaries
Purchase of property, plant and equipment
Capitalisation of intangible assets
Proceeds on disposal of property, plant and equipment
Interest received
Net cash used in investing activities
Financing activities
Net proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liability obligations
Interest paid
2021
£
£
2020
£
£
(12,008,636)
(3,382,110)
301,547
(1,850)
1,022,756
698,511
–
–
1,525,620
4,788,747
(38,662)
(204,275)
801,884
(85,094)
295,870
(1,528,302)
645,792
44,299
(78,494)
(3,820,287)
163,203
(19,960)
949,780
467,724
67,289
(121,248)
676,304
–
106,511
72,127
1,601,746
(206,353)
(16,210)
26,995
(1,171,705)
(758,355)
(529,307)
(2,073,569)
(3,637,249)
32,450
(3,003,847)
(837,734)
–
1,850
16,186,459
160,497
(320,860)
(318,628)
(211,330)
(8,369,742)
684,900
(617,085)
(745,520)
13,505
5,010
(7,444,530)
(9,028,932)
13,341,321
–
(197,503)
(364,359)
(163,203)
Net cash generated from financing activities
15,496,138
12,616,256
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
See note 31 for analysis of change in net cash/(debt).
4,231,321
2,764,117
6,995,438
1,513,755
1,250,362
2,764,117
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
39
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
1 Accounting Policies
Company information
Yourgene Health PLC is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is Citylabs 1.0, Nelson
Street, Manchester M13 9NQ.
The principal activity of Yourgene Health PLC and its subsidiaries is that of a molecular diagnostics business for research into, and the development and
commercialisation of gene analysis techniques for prenatal screening and other clinical applications in the early detection, monitoring and treatment of disease.
The financial statements are presented in British Pounds Sterling, the currency of the primary economic environment in which the Company’s headquarters
is operated.
Accounting convention
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), including IFRIC interpretations issued by
the International Accounting Standards Board (IASB), as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The Company financial statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced
disclosure framework’ (FRS 101).
The financial statements have been prepared under the historical cost convention, except for those transactions recognised at fair value as detailed below.
The consolidated financial statements of the Company as at and for the year ended 31 March 2021 comprise the Company and its subsidiaries (together
referred to as ‘the Group’). The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries, which
are all owned 100%) made up to 31 March each year.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary.
Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the
date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company. Total comprehensive income of the
subsidiaries is attributed to the owners of the Company.
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 intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are
eliminated on consolidation.
Going concern
In their assessment of the Group’s ability to continue as a going concern, the Directors have focused on the implications of the COVID pandemic, underlying
organic growth drivers and the cash profiles of various in-year and prior year asset acquisitions and business combinations.
The COVID pandemic has suppressed organic growth somewhat and has also led to the creation of a significant revenue stream of its own through the
provision of COVID testing services in the UK and sales of the Group’s SARS-CoV-2 PCR test in the UK and internationally. Looking forward as the pandemic
hopefully recedes the Group anticipates a return to organic growth of the existing business plus the positive long-term benefits of recent acquisitions, not least
that of Coastal Genomics Inc which is an early-stage cash-consuming business at present but which is a catalyst for the Group’s accelerating penetration of the
US diagnostics market, the largest in the world. For the enlarged Group the Directors have assessed the market dynamics in which it operates, the historic and
anticipated rate of growth of gross profits, decisions available to them for management of the cost base of the Group and the potential for future fundraising.
The Group operates a strategic planning process which has historically delivered strong progress on its ambitious multi-year business plan and which has
proven resilient and agile in the face of the COVID pandemic which ran concurrently with the reporting period.
As described in the Strategic Report, the Group has been investing heavily in future cashflow drivers as a result of a successful equity issuance in August 2020.
This fundraise enabled the acquisition of Coastal Genomics Inc and has also facilitated the significant expansion of the Group’s UK laboratory testing services
activities, the underlying business systems and the Group’s laboratory in Taiwan, all of which are designed to drive cash-generative growth in the years to
come. These investments, coupled with the pandemic headwinds which affected the Group’s traditional customers and inhibited the penetration into new
target markets such as the USA and Japan, have meant that the Group continues to use cash in its trading and that break-even trading performance has not
yet been reached. The Group’s forecasts include assumptions of further growth in revenue, which are key in achieving positive cash flows. The Directors have
also assessed the Group’s cost structure as part of the strategic planning process and believe that an ongoing scalability programme will enable costs growth
to be contained below gross profit increases.
There remains an ongoing commitment to keep costs and working capital under control so that increasing gross profits can drive positive cash flows. Detailed
sensitivity analysis has been performed to assess the potential impact on the Group’s liquidity caused by any continuing delays in revenue growth against
expected levels along with potential mitigating actions which can be taken to safeguard the Group’s cash position. These include working capital controls and
reductions in discretionary spending.
40
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
If events transpire differently to this assessment, for example if revenues fail to grow at the anticipated pace, there could be lower cash headroom. To mitigate
this scenario the existence of significant share options and warrants are likely to generate additional funds within the forecast horizon. The Group also has a
successful track record in raising funds from capital markets and is exploring debt facilities. Taking all the above into account the Directors believe there is
sufficient cash available or accessible to avoid a cash shortfall.
The Directors have concluded that considering the circumstances described above and mitigation strategies in place, the Directors have a reasonable
expectation that the Group and Company will have adequate resources to continue in operational existence for the foreseeable future. For these reasons,
they continue to adopt the going concern basis in preparing the Annual Report and Accounts.
Revenue
Revenue from the sale of goods, equipment and related services is recognised in accordance with IFRS 15 ‘Revenue from Contracts with Customers’ in the
Statement of Comprehensive Income when the deemed Contractual Performance Obligations have been completed, which is determined to be at the point
of despatch of the product or service unless there are specific provisions in the relevant contract. Revenue from the provision of testing and reporting
services is recognised upon delivery of the report to the customer. Invoices are typically raised upon delivery of the products or reporting services, unless
there is a different contractual requirement, for payment according to credit terms which are usually 30–75 days from date of invoice. For some contracts
advance invoices are raised and payments received. These are held on the Statement of Financial Position as ‘payments received on account’ (see note 20)
and are only recognised as revenue once the performance obligations have been deemed satisfied as described above.
Grant income and income for research projects is recognised when all conditions for receiving the grant or research income have been satisfied.
Separately disclosed items
Separately disclosed items are those significant items, within Total administrative expense which in management’s judgement should be highlighted on the
face of the Statement of Comprehensive Income by virtue of their size or incidence to enable a full understanding of the Group’s financial performance.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. Cost includes the original purchase price, costs directly attributable to bringing the
asset to its working condition for its intended use, dismantling and restoration costs. Depreciation is provided on all items of property, plant and equipment to
write off the carrying value of items over their expected useful lives. Depreciation is applied at the following rates:
Leasehold land and buildings
Plant and equipment
Computer software and hardware
20% straight line
20–25% straight line
25%–33% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset and is
recognised in the Statement of Comprehensive Income.
Leases and right-of-use assets (IFRS 16)
The Group adopted IFRS 16 from 1 April 2019. Leases are recognised as a right-of-use asset and lease liability at the transition date of 1 April 2019 or the date
of any new leases after 1 April 2019. Right-of-use assets and lease liabilities are valued on a present value basis of the lease payments over the lease term.
On adoption of IFRS 16 the right-of-use assets and lease liability were measured at the present value of the remaining lease payments and lease term. The
right-of-use asset is depreciated over the term or remaining term of the lease.
Where there is potential for future increases in lease payments, amounts are not included in the lease liability until they are implemented. The leases are
reviewed annually and where the lease liability is increased the lease liability is reassessed and adjusted against the right-of-use asset. When a lease is
terminated, or a term amended, the lease liability and right-of-use asset are recalculated and adjusted accordingly.
Lease payments are divided between principal and interest expense. The interest expense is charged to finance expense in the statement of
comprehensive income.
In adopting IFRS 16, the Group used the following practical expedients permitted by the standard:
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
•
reliance on previous assessments of whether leases are onerous;
•
the accounting for operating leases, with a remaining lease term of less than 12 months as at 1 April 2019, as short-term leases;
•
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
•
the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
•
The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before
the transition date, the Group relied on its assessment made in applying IAS 17 and IFRIC 4, ‘Determining whether an Arrangement contains a Lease’.
Cloud-based software applications
During the period ended 31 March 2021 the Company started implementing and using cloud-based business and accounting software applications. Following
recently published IFRS guidance, the Company has deemed these applications are not an intangible asset under IAS 38 ‘Intangible Assets’, nor are they a
lease under IFRS 16 ‘Leases’. As such the Company expenses the software subscription fees and all the costs of implementing and configuring the software
as they are incurred. The costs of implementation and configuration have initially been incurred in the period ended 31 March 2021 and will continue into the
period ending 31 March 2022 as the software is rolled out globally.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
41
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
1 Accounting Policies continued
Accounting for acquisitions
The Group assesses the acquisition of shares in a company under IFRS 3 ‘Business Combinations’, to make an initial determination as to whether the
acquisition meets the test for the definition “a business”. This is defined as: “An integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating
ther income from ordinary activities.” For acquisitions that meet the test, the accounting treatment will follow IFRS 3 protocols to arrive at fair values.
Where the test for a business is not met, then the assets of the acquired company will be accounted for as acquired tangible or intangible assets as
described in these policies.
Where the acquisition includes future contingent consideration, this is accrued based on management’s judgement of the contingent consideration it
considers likely to be paid. Where the actual consideration paid varies to this amount then the difference is written off through General administrative expense
in the Statement of Comprehensive Income.
Goodwill
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an
asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment,
or earlier if there is an indication of impairment. Goodwill impairments are not reversed even if a subsequent fair value assessment would ordinarily give rise to
an upward revaluation.
Acquired intangible assets
Intangible assets acquired directly or as part of business combinations are capitalised at fair value at the date of acquisition. Following the initial recognition,
the carrying amount of an intangible is its cost less accumulated amortisation and any accumulated impairment losses. Amortisation is charged on the basis
of the estimated useful life on a straight-line basis and the expense is taken to the Statement of Comprehensive Income.
The Group has recognised customer relationships as separately acquired intangible assets. The useful economic life attributed to each intangible asset is
determined at the time of the acquisition and ranges from 4 to 10 years as described in note 14.
Impairment reviews are undertaken annually and whenever the Directors consider that there has been a potential indication of impairment.
Internally generated intangible assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group’s product and software development expenditure is recognised only if all of the following
criteria are satisfied:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale;
• The intention to complete the intangible asset and use or sell it;
• The ability to use the intangible asset or to sell it;
• The way in which the intangible asset will generate probable future economic benefits;
• The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• The ability to measure reliably the expenditure attributable to the intangible asset during its development.
Internally generated intangible assets are stated at cost and held at cost less accumulated amortisation and impairment losses, and are recognised as an
expense on a straight line basis over their estimated useful lives. Useful life is determined with reference to estimated useful life which varies according to the
nature of the asset, eg software or in vitro medical device. The useful life of the Group’s development expenditure is currently assessed between 3 and 10
years. Amortisation of development expenditure commences when development has been completed to management satisfaction, in accordance with the
Group’s product development governance methodology and the related project is ready for its intended use. Where no internally generated intangible asset
can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
Impairment of tangible and intangible assets
At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
42
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Inventories
Inventories are stated at the lower of cost and net realisable value, after making allowance for obsolete and slow-moving items. Cost includes expenditure
incurred in acquiring the inventories and other cost in bringing them to their existing location and condition.
Fair value measurement
IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather
provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the
principles that the Group uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or
disclosed. IFRS 13 mainly impacts the disclosures of the Group. It requires specific disclosures about fair value measurements and disclosures of fair values,
some of which replace existing disclosure requirements in other standards.
Short-term financial assets
Short-term financial assets comprise deposits placed in an escrow account which is jointly controlled by a third party.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments maturing within 90 days
from the date of acquisition that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Financial assets
Financial assets are recognised in accordance with IFRS 9 Financial Instruments in the Group’s Statement of Financial Position when the Group becomes party
to the contractual provisions of the instrument. Financial assets are classified into specified categories. The classification depends on the nature and purpose
of the financial assets and is determined at the time of recognition.
Financial assets are initially measured at fair value plus transaction costs, other than those classified as fair value through profit and loss, which are measured at
fair value.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through
the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary assets. They are measured
subsequent to initial recognition at amortised cost using the effective interest rate method.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired in either of the following situations:
(a) Where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been affected. The Group considers a financial asset to be in default if there is explicit external information that
indicates the debtor is unlikely to pay its creditors, including the Group. In the event of a default the full value of the financial asset is impaired. Financial
assets are written off when there is deemed to be no realistic prospect of recovery and enforcement activities have ceased.
(b) Where there are expected credit losses in the next reporting period as required by IFRS 9, the Group recognises expected credit losses (ECL) for trade and
other receivables. If the credit risk on a financial instrument has increased significantly since its initial recognition then ECL are assessed on a lifetime ECL
basis. If the credit risk has not increased significantly then ECL are assessed based on the likelihood of default in the next 12 months. In assessing whether
the credit risk on a financial instrument has increased significantly since initial recognition, the Group considers quantitative and qualitative information
including historical debt default or delinquency and forward-looking information that is available without undue cost or effort. Forward-looking factors
include the economic and political context for the financial assets as well as anticipated customer-specific developments.
De-recognition of financial assets
Financial assets are de-recognised only when the contractual rights to the cash flows from the asset expire, or when there is a transfer of the financial asset
and substantially all the risks and rewards of ownership to another entity.
Financial liabilities
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument. A financial liability is a contractual obligation to either deliver cash or another financial asset to
another entity or to exchange a financial asset or financial liability with another entity, including obligations which may be settled by the Group using its equity
instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The
accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Classification and subsequent measurement of financial liabilities
Financial liabilities are measured at transaction price initially and measured subsequently at amortised cost using the effective interest method, except for
derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reporting in profit or loss are included within finance costs or
finance income.
Other financial liabilities
At initial recognition, financial liabilities (trade and other payables) are measured at their fair value plus, if appropriate, any transaction costs that are directly
attributable to the issue of the financial liability. These financial liabilities are subsequently carried at amortised cost.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
43
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
1 Accounting Policies continued
De-recognition of financial liabilities
Financial liabilities are de-recognised when, and only when, the Group’s obligations are discharged, cancelled or they expire.
Financial liabilities recognised at fair value
Financial liabilities are classified as FVTPL when the financial liability is held for trading. A financial liability is classified as held for trading if:
•
• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of
it has been incurred principally for the purpose of repurchasing it in the near term; or
short-term profit taking; or
it is a derivative that is not designated and effective as a hedging instrument.
•
Financial liabilities at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit or loss in the ‘other gains and losses’
category. Interest paid on the financial liability is included in the finance costs line item in the Statement of Comprehensive Income.
Compound instruments
The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with the
substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate
for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished
upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair
value of the compound instrument as a whole. This is recognised and included in equity net of income tax effects and is not subsequently remeasured.
Equity instruments
Instruments classified as equity under IAS 32 ‘Financial Instruments’, are measured at fair value on inception. Subsequent changes in the value of the
instrument are not recognised in the financial statements.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from
proceeds. Deferred shares arose on share splits in previous reporting periods and are not tradable and carry no economic or voting rights. Share warrants that
are issued within the scope of IFRS 2 ‘Share-based Payments’ (as detailed in note 29) are measured at fair value at each reporting period end. They are
classified as equity instruments based on the substance of the contractual arrangements entered into.
Merger relief reserve
The reserve represents a premium on the issue of the ordinary shares for the acquisition of subsidiary undertakings. The relief is only available to the issuing
company securing at least a 90% equity holding in the acquired undertaking in pursuance of an arrangement providing for the allotment of equity shares in the
issuing company on terms that the consideration for the shares allotted is to be provided by the issue of equity shares in the other company.
Other reserves
Other reserves comprise the following:
• Warrants reserve: The warrants reserve represents the fair value of warrants issued to Thermo Fisher which are in issue but not exercised at the
reporting date.
• Exchange share reserve: The exchange share reserve represents the fair value of exchange shares issued in Yourgene Health Canada Investments Ltd
but not exchanged for shares in Yourgene Health PLC at the reporting date. These shares were issued as part consideration for the acquisition of Coastal
Genomics Inc.
Taxation
The tax expense represents the sum of the tax currently payable 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 reporting end date.
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 balance sheet 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
goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is not probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered, or to the extent that there are deferred tax liabilities recognised that would not fall due as
a result of previously unrecognised deferred tax assets. Where deferred tax assets not recognised in prior periods begin to meet the criteria for recognition,
their value is assessed based on a discounted view of five-year profit forecasts for the relevant taxable entity or Group 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. Deferred tax is charged or credited in the income statement,
except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities
are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes
levied by the same tax authority.
44
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Provisions
A provision is recognised when the Group has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic
resources will be required to settle the obligation, the provision is reversed. Where the effect of the time value of money is material, provisions are discounted
using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of
inventories or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the Group is demonstrably committed to terminate the employment of an employee or
to provide termination benefits.
Retirement benefits
The Group operates a defined contribution scheme for the benefit of its employees. Contributions payable are charged to the Statement of Comprehensive
Income in the period they are payable.
Share-based payments
Where share options are awarded to employees or other stakeholders, the fair value of the options at the date of grant is charged to the Statement of
Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected
to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after
the modification, is also charged to the Statement of Comprehensive Income over the remaining vesting period. Where equity instruments are granted to
persons other than employees, the income statement is charged with the fair value of goods and services received.
Leases
Leases are classified under IFRS 16 ‘Leases’ as lease liabilities with corresponding right-of-use assets in most circumstances except for leases of low value or a
lease term of less than 12 months, in which circumstances the lease payments are expensed as incurred. Lease incentives are recognised over the lease term.
Foreign and presentation currencies
The functional currency of the Parent entity is Pounds Sterling and this is used as the presentation currency for these accounts as the Directors consider this
to be a most useful form of presentation to the shareholders. Transactions entered into by Group entities in a currency other than the reporting currency are
recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the Statement
of Financial Position date. Exchange differences arising on the retranslation of the unsettled monetary assets and liabilities are similarly recognised in the
income statement.
On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place.
On consolidation, assets and liabilities of overseas operations are translated at the reporting date closing rate. Exchange differences are charged or credited
to other comprehensive income and recognised in the foreign exchange translation reserve. On disposal of an overseas operation, exchange differences are
recognised in the income statement as part of the gain or loss on sale.
Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly
by the Group’s chief operating decision-maker (‘CODM’) to make decisions about resources to be allocated to the segment and assess its performance, and
for which discrete financial information is available. In accordance with IFRS 8 ‘Operating Segments’, the Group determines and presents operating segments
based on the information that internally is provided to the Board of Directors. Accordingly, the Board of Directors, which reviews internal monthly management
reports, budget and forecast information is deemed to be the Group’s CODM.
Financing income and expenses
Financing expenses comprise interest payable and finance charges recognised in profit or loss using the effective interest method. Financing income
comprises interest receivable on funds invested. Interest income and interest payable is recognised within profit or loss as it is accrued, using the effective
interest rate method.
Research and development tax credits
The Group undertakes research and development activities in the UK which potentially attract a tax credit. Where such activities give rise to a tax credit,
amounts receivable are recorded in the Statement of Financial Position as a tax asset and the associated credit is recorded within administrative expenses.
The research and development tax credit is recognised in the financial statements in the same year in which the research and development expenditure
occurred. This treatment is in line with the recognition of government grants to which the UK research and development tax credits scheme approximates.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
45
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
2 Adoption of New and Revised Standards and Changes in Accounting Policies
Adoption of new and revised standards
During the financial year, the Group has adopted the following new IFRSs (including amendments thereto) and IFRIC interpretations, that became effective for
the first time.
Standard
Conceptual Framework and Amendments to References to the Conceptual Framework in IFRS Standards
Amendments to IFRS 3 Business Combinations
Amendments to IAS 1 and IAS 8: Definition of Material
Interest Rate Benchmark Reform: amendments to IFRS 9, IAS 39 and IFRS 7
Their adoption has not had any material impact on the disclosures or amounts reported in the financial statements.
Effective date, annual period
beginning on or after
1 January 2020
1 January 2020
1 January 2020
1 January 2020
Standards issued but not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied
in these financial statements, were in issue but were not yet effective. In some cases, these standards and guidance have not been endorsed for use in the
United Kingdom.
Standard
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
COVID 19-Related Rent Concessions (Amendment to IFRS 16 Leases)
Updating a Reference to the Conceptual Framework (Amendments to IFRS 3 Business Combinations)
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
Effective date, annual period
beginning on or after
1 January 2021
1 April 2021 (previously
1 June 2020)
1 January 2022
1 January 2022
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets)
1 January 2022
Annual Improvements 2018-2020 cycle
Classification of Liabilities as Current or Non-Current: amendments to IAS 1
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2
Making Materiality Judgements)
Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors)
1 January 2022
1 January 20231
1 January 2023
1 January 2023
1 In July 2020, the implementation date was extended by one year to 1 January 2023.
The Directors are evaluating the impact that these standards will have on the financial statements of the Group.
3 Critical Accounting Estimates and Judgements
In the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amount
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.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are
outlined below.
46
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Critical judgements
Accounting for acquisitions of a business and intangible assets
During the year the group acquired Ex5 Genomics Ltd (July 2020), and Coastal Genomics Inc (August 2020). The acquisition of Coastal Genomics Inc was
deemed to meet the IFRS 3 criteria for a business combination as it was a full standalone trading business. The acquisition of Ex5 Genomics Ltd was deemed
to be the acquisition of assets in the form of plant and equipment and customer relationships, as there were no significant trading activities.
The acquisition of Coastal Genomics also contained provisions for earn-out payments to the vendors, based on achieving certain sales performance and
concluding contracts with strategic partners post acquisition. These targets were based on business forecasts and deemed sufficiently probable to be met
such that they are recorded as provisions rather than contingent liabilities.
Note 14 Intangibles and Note 18 Subsidiaries provide further information on these acquisitions including the basis on which fair values were determined for
the acquired intangible assets and their carrying values.
Accounting for the capitalisation of development costs
The Group has now been in operation for several years and has resolved some significant technical challenges in bringing its products to market. In certain
circumstances this leads to reduced technical risk during the product development cycle. The Group has also started to decouple some previously integrated
components of its products, for example its software applications. Development costs are capitalised where it is judged that a development project has met
the IAS 38 criteria as described in the accounting policy for internally generated intangible assets above.
Accounting for share-based payments
The Group’s rapid growth in revenues and gross profits resulted in its first adjusted EBITDA profit in the prior reporting period. Despite the COVID-19
pandemic the Group has continued to increase revenues and gross profits but continued investment in business growth drivers has generated an adjusted
EBITDA loss in the current reporting period. The Directors assessment is that the external context for this reporting period is exceptional and that future
business results will return to the historic sustained growth in earnings per share, the key basis on which share based payments are measured. This
performance trajectory is forecast to continue which increases the likelihood that share options will become exercisable in the future. As a result the
assumptions for share-based payments have been increased and a significant charge recognised in the Consolidated Income Statement.
Accounting for deferred tax
The Group has generated significant historic losses during its development stage, which have not been recognised as a deferred tax asset due to lack of
visibility of future profitability within a realistic time horizon. As the Group now moves towards profitability, such visibility is becoming more likely in the near
term. The Group has therefore started to recognise some of these losses where it deems it has a prudent basis on which to do so, including where there are
deferred tax liabilities arising on acquisition that can be offset against historic tax losses.
Key sources of estimation uncertainty
Impairment of goodwill
The Group’s management undertakes an impairment review annually, or more frequently if events or changes in circumstances indicate that the carrying
value may not be recoverable. In respect of impairment reviews, the key assumptions are as follows:
Growth rates
The value in use of the intangible assets is calculated from cash flow projections for the relevant business activities based on the latest financial projections
covering the anticipated useful economic life of the intangible assets.
Discount rates
The pre-tax discount rate used to calculate value is determined in relation to the relevant business activities and their geographic location, using external
benchmarks where possible to arrive at a relevant weighted average cost of capital.
Cash flow assumptions
The key assumptions for the value-in-use calculations are those regarding discount rates, growth rates and expected cash flows. Changes in revenues and
expenditures are based on past experience and expectations of future growth.
As a result of this exercise, £4,788,747 of Goodwill was impaired as described in note 14.
4 Segment Reporting
In the opinion of the Directors, the Group has two business segments; Genomic Technologies and Genomic Services which are monitored by the Group’s
chief operating decision maker (CODM). Strategic decisions are made on the basis of unadjusted operating results. The Genomic Technologies segment
represents the in vitro diagnostic products, software and instrumentation manufactured by the Group and distributed globally through the Group’s direct and
indirect sales channels. These technologies are often integrated with each other and require the support of the same internal and external resources. The
Genomic Services segment operates testing laboratories in Taiwan and the UK and provides services to clinicians, third party clinical service providers and
contract research organisations. These services require similar technical, commercial and managerial competences in the two host countries, and sometimes
consume the output from the Genomic Technologies segment, but also from third party suppliers where appropriate. Genomic Technologies and Genomic
Services are subject to different regulatory requirements, registrations and assessment bodies. In previous reporting periods the CODM deemed the Group
was a single operating segment. This new assessment reflects rapid business growth in recent years both organically and through acquisitions. Prior year
figures have been restated to provide comparatives for the two operating segments.
The Group also has three geographic regions, defined as UK, Europe and International.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
47
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
4 Segment Reporting continued
Revenue
Revenue analysed by geographical market:
UK
Europe
International
Revenue analysed by business segment:
Genomic Services
NIPT services
COVID-19 services
Other services
Genomic Technologies
NIPT
Reproductive health
COVID-19-related
Other technologies
During the reporting period no customers represented more than 10% of Group revenues (2020: none).
Non-current assets
The Group’s non-current assets are located in the following geographic regions:
UK
Europe
International
Operating profit/(loss) by segment
2021
£
2020
£
5,439,817
5,462,264
7,385,947
1,974,632
4,142,073
10,496,074
18,288,028
16,612,779
2021
£
2020
(restated)
£
1,832,643
1,730,093
2,819,582
2,568,459
–
2,933,897
6,382,318
5,502,356
2021
£
2020
£
5,924,758
3,602,506
1,436,805
941,641
7,423,857
3,649,028
–
37,538
11,905,710
11,110,423
18,288,028
16,612,779
2021
£
2020 (restated)
£
15,811,975
4,205,914
13,376,569
15,145,289
3,595,904
8,936,267
33,394,458
27,677,460
Revenues
Cost of sales
Gross profit
Other operating income
Segmental expenses
Central overheads
Adjusted EBITDA
Depreciation and amortisation
Goodwill impairment
Share-based payments expense
Costs associated with
subsidiary acquisition
Acquisition integration expense
2021
2020 (restated)
Genomic
Technologies
£
Genomic
Services
£
11,905,710
(4,689,939)
6,382,318
(2,222,554)
7,215,771
–
(5,338,501)
–
4,159,764
–
(3,399,624)
–
1,877,270
–
–
–
760,140
–
–
–
Central
£
Total
£
Genomic
Technologies
£
Genomic
Services
£
Central
£
Total
£
–
–
18,288,028 11,110,423
(4,267,054)
(6,912,493)
5,502,356
(2,120,783)
–
–
16,612,779
(6,387,837)
–
60,313
–
(4,744,989)
(4,684,676)
(3,246,887)
(4,788,747)
(951,983)
11,375,535
60,313
(8,738,125)
(4,744,989)
(2,047,266)
(3,246,887)
(4,788,747)
(951,983)
6,843,369
–
(4,721,560)
-
2,121,809
–
–
–
3,381,573
–
(2,165,229)
–
1,216,344
–
–
–
–
67,530
–
(2,150,972)
(2,083,442)
(2,093,808)
–
(1,601,746)
10,224,942
67,530
(6,886,789)
(2,150,971)
1,254,711
(2,093,808)
–
(1,601,746)
–
–
–
–
(286,044)
(388,012)
(286,044)
(388,012)
–
–
–
–
(264,666)
(533,358)
(264,666)
(533,358)
Operating profit/(loss)
1,877,270
760,140
(14,346,349) (11,708,939)
2,121,809
1,216,344
(6,577,020)
(3,238,867)
48
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
5 Separately Disclosed Items
Impairment of goodwill
Share-based payment expense
Costs associated with the acquisition of subsidiary
Acquisition integration expense
2021
£
2020
£
(4,788,747)
(951,983)
(286,044)
(388,012)
–
(1,601,746)
(264,666)
(533,358)
(6,414,786)
(2,399,770)
Impairment of goodwill relates to the goodwill arising on the acquisition of Yourgene Health Taiwan in 2017 (formerly Yourgene Bioscience), see note 14 for
further details.
Share-based payment expense comprises £801,884 (2020: £1,601,746) relating to the longstanding share option schemes and £150,099 (2020: £nil) relating
to the new share incentive plan, both as detailed in note 29. The Share-based payment expense relating to the option schemes is provided for in accordance
with IFRS 2 ‘Share-based payment’ following the issue of share options to employees under the Company’s share option schemes, as set out in note 29.
Costs associated with the acquisition of subsidiaries represents costs incurred during the acquisition of Ex5 in July 2020, and Coastal Genomics Inc in
August 2020.
Acquisition integration expense relates to the expense incurred integrating Delta Diagnostics UK Ltd, Yourgene Health France SAS, EX5 Ltd and Coastal
Genomics Inc into the Yourgene Health PLC Group.
6 Operating Loss
Operating loss for the year is stated after charging/(crediting):
Research and Development expense excluding salaries
Research and Development tax credit
Debtor provisions, impairment and bad debts
IONA® Nx Transition costs
Cloud ERP Services and Implementation costs
Acquisition contingent consideration adjustment (see notes 18 and 22)
UK Genomic Service laboratory expenses
US market entry expenses
IFRS16 Lease Liability adoption (gain) / loss
(Profit)/ Loss on disposal of property, plant and equipment
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
7 Auditor’s Remuneration
Fees payable to the Group’s auditor:
For audit services
Audit of the financial statements of the Company
Audit of the financial statements of the Company’s subsidiaries
For other services
All other assurance services
All other tax advisory services
Total non-audit fees
2021
£
2020
£
406,165
(78,494)
639,547
766,510
396,835
(85,094)
1,181,172
316,172
–
–
1,022,756
698,510
1,525,620
2021
£
75,000
30,000
105,000
2021
£
16,000
–
16,000
518,378
(560,204)
139,039
–
–
–
245,150
–
(131,548)
(7,564)
949,780
467,724
676,304
2020
£
35,500
26,250
61,750
2020
£
14,500
38,830
53,330
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
49
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
8 Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:
Directors
Administrative
Research and development
Their aggregate remuneration comprised:
Wages and salaries
Social security cost
Pension cost
Share-based payments: share incentive plan (note 29)
Share-based payments: share option schemes (note 29)
9 Directors’ Remuneration
The remuneration of the Directors during the period was as follows:
2021
Number
9
117
54
180
2020
Number
9
81
46
136
2021
£
2020 (restated)
£
6,950,459
684,289
321,664
150,099
801,884
5,110,252
479,009
278,744
–
1,601,746
8,908,395
7,469,751
A Reynolds
Dr S Little
N Mustoe
L Rees
Dr B Chang
B Hextall
H Jeffreys
Dr J Brown
J Seaton
Dr J Mason (appointed 1 November 2020)
Keng Hsu (resigned 10 July 2019)
Salaries
£
–
61,800
–
237,500
150,489
175,000
175,000
40,000
–
48,875
–
888,664
Fees
£
53,333
–
30,000
–
–
–
–
–
47,592
–
–
130,925
Pension
£
–
3,090
–
25,000
–
8,750
8,750
–
–
2,444
–
48,034
BIK
£
–
5,276
–
36,506
850
5,260
3,053
–
–
1,080
–
52,023
2021
£
53,333
70,166
30,000
299,006
151,339
189,010
186,803
40,000
47,592
52,398
–
1,119,646
2020
£
71,863
66,751
30,000
219,739
154,479
192,968
184,074
27,128
17,485
–
28,853
993,340
The number of Directors to whom pension benefits are accruing under money purchase schemes is five (2020: four).
The share-based payments charge to the Consolidated Statement of Comprehensive Income for Directors’ share options was £580,185 (2020: £977,670).
During the period the Directors did not exercise any options.
10 Finance Income
Interest income:
Bank deposits
Loans and receivables
Total finance income
11 Finance Expense
Interest on bank overdrafts and loans
Interest on other loans and borrowings
IFRS 16 Interest
Total finance expense
50
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
2021
£
1,189
661
1,850
2021
£
7,912
92,461
201,174
301,547
2020
£
5,010
14,950
19,960
2020
£
15,673
4,656
142,874
163,203
12 Income Tax Expense
Current tax
UK corporation tax on profits for the current period
Foreign corporation tax
Current tax for period
Deferred tax
Origination and reversal of temporary differences: UK
Origination and reversal of temporary differences: foreign
Deferred tax for period
Total tax charge/(credit)
2021
£
2020
£
89,294
294,612
383,906
–
328,808
328,808
(17,422)
(191,489)
(1,024,489)
(252,505)
(208,910)
(1,276,994)
174,996
(948,186)
As described in the critical accounting judgements section of this report, deferred tax assets are recognised where there is deemed to be a reasonable
probability that future taxable profits will be capable of being offset by historic tax losses.
The charge for the year can be reconciled to the loss per the income statement as follows:
Loss before taxation
Expected tax credit based on a corporation tax rate of 19% (2020: 19%)
Effect of expenses not deductible in determining taxable profit
Unutilised tax losses carried forward
Change in unrecognised deferred tax assets
Prior year adjustment
Effect of overseas tax rates
R&D tax credit
Deferred tax
Taxation charge/(credit) for the year
2021
£
2020
£
(12,008,636)
(3,382,110)
(2,281,641)
1,327,431
1,336,505
45,713
89,294
8,501
(141,897)
(208,910)
(642,601)
440,168
778,591
86,361
–
16,105
(349,816)
(1,276,994)
174,996
(948,186)
The UK R&D tax credit of £78,494 (2020: £560,204) is shown as a deduction against general administrative expenses.
The Group is required to estimate the income tax in each of the jurisdictions in which it operates. This requires an estimation of the current tax liability together
with an assessment of the temporary differences which arise as a consequence of different accounting and tax treatments. These temporary differences
result in deferred tax assets or liabilities which are included within the Statement of Financial Position. Deferred tax assets and liabilities are measured using
substantially enacted tax rates expected to apply when the temporary differences reverse. Management judgement is required to determine the total
provision for income tax. Amounts accrued are based on management’s interpretation of country-specific tax law and the likelihood of settlement.
Factors that may affect future tax charges
The Group has estimated trading losses of £14,544,692 (2020: £15,455,325), excess management fees of £16,696,013 (2020: £13,193,592), non-trade loan
relationship deficits of £1,320,319 (2020: £1,328,796) and capital losses of £1,934,399 (2020: £1,934,399).
The tax losses have resulted in a potential deferred tax asset of approximately £6,554,130 (2020: £5,695,765), which has been partially recognised £823,490
(2020: £925,364) to offset a deferred tax liability arising on the acquisition of Delta Diagnostics UK Ltd which should be available to be sheltered by those
losses. Further recognition in future reporting periods is subject to the extent that future taxable profits will be sufficient to utilise the losses, in accordance
with current and expected future UK tax rates.
13 Earnings Per Share
Basic
Basic earnings per share is calculated by dividing the loss for the period of £12,183,632 (2020: loss £2,433,924) by the weighted average number of ordinary
shares in issue during the period 685,643,605 (2020: 590,467,253).
Diluted
Diluted earnings per share dilute the basic earnings per share to take into account share options, exchangeable shares and warrants. The calculation includes the
weighted average number of ordinary shares that would have been issued on the conversion of all the dilutive share options, exchangeable shares and warrants
into ordinary shares. The adjusted weighted average number of shares used to calculate diluted earnings per share is 726,355,871 (2020: 608,687,226).
28,159,443 options and warrants (2020: 26,039,443) have been excluded from this calculation as the effect would be anti-dilutive.
After the reporting period end:
A further 550,000 new ordinary shares were issued against share options, and 174,116 new ordinary shares against the first and second earn-out payment
milestones for the acquisition of Coastal Genomics Inc.
In addition, following the issue of 998,785 unlisted shares in Yourgene Health Canada Investments Ltd under the terms of the Coastal Genomics Acquisition
first and second earn-out payment milestones there are now total of 20,233,409 unlisted Yourgene Health Canada Investments Ltd shares issued which are
exchangeable on a one-for-one basis for Yourgene Health Plc shares, subject to certain lock-in provisions over the next one to six years.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
51
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
14 Intangible Assets
Cost
At 1 April 2019
Additions
Exchange differences
At 31 March 2020
Additions
Business combinations
Exchange differences
Goodwill
£
7,014,447
3,791,336
–
10,805,783
–
3,097,398
66,333
Customer
relationships
£
1,552,328
6,840,696
51,206
8,444,230
389,840
1,453,939
(56,731)
–
2,051,699
–
2,051,699
47,516
3,354,990
71,850
At 31 March 2021
13,969,514
10,231,278
5,526,055
Amortisation and impairment
At 1 April 2019
Charge for the year
Exchange differences
At 31 March 2020
Charge for the year
Impairment
Exchange differences
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
–
–
–
–
–
4,788,747
–
323,400
488,232
278
811,910
974,160
–
(9,627)
4,788,747
1,776,443
–
188,073
–
188,073
420,290
–
1,315
609,678
Product IP
Trademarks & brand
names
Software
development
cost
Product
development
cost
–
256,132
–
256,132
147,357
–
–
–
439,810
–
439,810
642,861
–
–
Total
£
8,566,775
13,379,673
51,206
21,997,654
1,227,574
7,929,953
81,958
403,489
1,082,671
31,237,139
–
–
–
–
42,030
–
–
42,030
–
–
–
–
85,941
–
–
85,941
323,400
676,305
278
999,983
1,525,620
4,788,747
(8,293)
7,306,057
–
–
–
–
–
23,626
506
24,132
–
–
–
–
3,199
–
19
3,218
9,180,767
8,454,835
4,916,377
20,914
10,805,783
7,632,320
1,863,626
–
361,459
256,132
996,730
23,931,082
439,810
20,997,671
The intangible assets arose as part of the business combinations of Yourgene Health Taiwan (March 2017), Delta Diagnostics UK Ltd (April 2019) and Coastal
Genomics Inc (August 2020), and also the asset purchases of Yourgene Health France SAS (March 2020, formerly AGX-DPNI SAS) and Ex5 Genomics Ltd
(July 2020). The following intangible assets are amortised over a useful economic life defined upon acquisition:
Customer relationships
Product IP
Trademarks & brand names
Software development cost
Product development cost
Useful economic life
Remaining useful life
10 years
10 years
5 years
4 years
5 years
6–10 years
8–10 years
4–5 years
3–4 years
3–5 years
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified as the Group’s operating segments with Genomic Technologies as a single CGU
and Genomic Services as two CGUs, representing the distinct local markets of Europe and Asia. Genomic Services Europe has no goodwill assigned to it.
Genomic Services Asia goodwill is a revenue-based allocation of the goodwill associated with the acquisition of Yourgene Health Taiwan (March 2017).
Genomic Technologies goodwill represents a revenue-based allocation of the goodwill arising on the acquisition of Yourgene Bioscience (Taiwan) in March
2017, since renamed Yourgene Health Taiwan; plus all the goodwill arising on the acquisitions of Delta Diagnostics Ltd (April 2019) and Coastal Genomics Inc
(August 2020). These CGU definitions are different to the single Group CGU approach adopted in previous reporting periods, reflecting the Group’s expansion
through organic growth and multiple acquisitions in recent years.
Genomic Technologies
Genomic Services Asia
2021
£
2020
£
8,708,678
472,088
5,544,948
5,260,835
9,180,767
10,805,783
Intangible assets are subject to an annual impairment review to ascertain if the value in use is greater than the carrying value in the financial statements.
The intangible assets arising from the acquisitions above are tested over a five-year forecast period plus a terminal value to represent their remaining useful
economic life as deemed appropriate for the diagnostics sector in which the Group operates which tends to see lifecycles for intangible assets which are
longer than 5 years. A cash flow model for each CGU is used based on historical performance, in which future expectations of growth are forecast based on
internal budgets for 12 months, and then on growth rates judged to be relevant to the respective CGUs. Growth rates for Genomic Technologies range from
23% down to 16% over the forecast period, Genomic Services Asia growth rates range from 40% down to 29% reflecting an anticipated bounce back after
the pandemic reduced business levels in that CGU. Genomic Services Europe revenues are expected to reduce by 44% after the COVID pandemic recedes,
with CGU revenues then growing at 5% per annum thereafter. Growth rates for all CGUs reduce to 2% per annum for the terminal value estimation. Pre-tax
discount rates were set at 10%, being the representative cost of capital. These assumptions are reviewed and benchmarked to ensure they remain
appropriate. Discount rates have been reduced from 13% in previous years due to movements in the Company’s preferred NYU Stern benchmark dataset and
the removal of specific risk associated with the Company’s historic IP issues with Illumina, now that all conditions for the legal settlement have been met.
52
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
The impairment assessments for Genomic Technologies and for Genomic Services Europe showed assessed values that exceeded the carrying values with
significant headroom. In both cases a discount rate sensitivity of 25% did not give rise to an impairment. Reducing the growth rate of Genomic Technologies
by 12%, which almost eliminates the assumed growth in the latter part of the forecast period, resulted in an impairment of that CGU. A growth rate reduction
of 50% in Genomic Services Europe equates to a revenue decline of between 94% to 45%, which still did not give rise to an impairment of that CGU. For
Genomic Service Asia, using the assumptions described above, the recoverable amount of the Genomic Services Asia CGU is deemed to give rise to an
impairment charge of £4,788,747 (2020: nil) recognised against goodwill. The impairment charge within the Genomic Services Asia CGU arose as a result of
the impact of the COVID-19 pandemic which reduced health tourism in the CGU’s core South East and East Asian markets. In addition certain key customers
have reallocated resources towards Covid-related initiatives and away from the reproductive health and oncology services offered by the CGU. Sensitivity
analysis with respect to this impairment has been performed, where a reasonably possible change in average revenue growth rate has been modelled.
Reducing the average growth rate by 5% per annum would result in an increase of £981,756 in the impairment of the remaining intangible asset values for this
CGU. Similarly an increase in the discount rate to 25% would give rise to an increase of £1,438,758 in the impairment of all this CGU’s remaining intangible
asset carrying values. Conversely, increasing the average growth rate by 5% per annum would reduce the impairment charge by £,1,054,814. Reducing the
discount rate by 1% would reduce the impairment charge by £332,171.
15 Property, Plant and Equipment
Cost
At 1 April 2019
Additions
Business combinations
Disposals
Foreign currency adjustments
At 31 March 2020
Additions
Business combinations
Foreign currency adjustments
At 31 March 2021
Accumulated depreciation and impairment
At 1 April 2019
Charge for the year
Eliminated on disposal
Foreign currency adjustments
At 31 March 2020
Charge for the year
Foreign currency adjustments
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Leasehold land and
buildings
£
Plant and
equipment
£
706,595
150,309
81,153
(206,353)
5,635
737,339
480,363
–
(9,920)
4,894,361
407,978
164,863
(15,827)
93,562
5,544,937
2,682,049
79,632
(130,690)
Computer
software
£
24,708
58,798
40,641
–
1,758
125,905
1,595
4,861
(1,044)
Total
£
5,625,664
617,085
286,657
(222,180)
100,955
6,408,181
3,164,007
84,493
(141,654)
1,207,782
8,175,928
131,317
9,515,027
541,790
170,764
(131,548)
4,697
585,703
60,481
(3,678)
3,010,160
758,220
(9,838)
52,722
3,811,264
933,501
(50,756)
642,506
4,694,009
19,551
20,796
–
1,561
41,908
28,774
(1,140)
69,542
3,571,501
949,780
(141,386)
58,980
4,438,875
1,022,756
(55,574)
5,406,057
565,276
3,481,919
151,636
1,733,673
61,775
83,997
4,108,970
1,969,306
Business combination refers to assets acquired in the acquisition of Coastal Genomics Inc in August 2020, see note 18.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
53
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
16 Leases
Lease liabilities
The Group has a number of leases for property in the UK, Taiwan, Singapore and Canada. On adoption of IFRS 16, the Group recognised lease liabilities in
relation to property leases which had previously been classified as operating leases under the principles of IAS 17 ‘Leases’. The Group adopted IFRS 16 from
1 April 2019 using the modified retrospective approach. The incremental borrowing rate applied to the lease liabilities is based on comparable loan interest
rates in the relevant jurisdiction where the lease is operable.
At 1 April 2019 on transition
Additions
Business combinations
Lease payments
Interest expense
Terminations and amendments
Foreign currency adjustments
At 31 March 2020
Additions
Business combinations
Lease payments
Interest expense
Terminations and amendments
Foreign currency adjustments
At 31 March 2021
Current
Non-current
At 31 March
Property
£
1,198,368
2,823,388
1,557,960
(507,233)
142,874
(2,166,524)
2,457
3,051,290
1,689,553
64,169
(416,734)
193,395
–
(68,577)
4,513,096
Motor
vehicles
£
–
–
–
–
–
–
–
–
82,982
–
(29,292)
3,385
–
–
57,075
Equipment
£
Total
£
–
–
–
–
–
–
–
–
142,606
–
(73,976)
4,394
–
–
1,198,368
2,823,388
1,557,960
(507,233)
142,874
(2,166,524)
2,457
3,051,290
1,915,141
64,169
(520,002)
201,174
–
(68,577)
73,024
4,643,195
2021
2020
586,637
4,056,558
341,167
2,710,123
4,643,195
3,051,290
Right-of-use assets
Right-of-use assets for these property leases were measured at the amount equal to the lease liability as at the IFRS 16 adoption date. There were no
onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Cost
At 1 April 2019 on transition
Additions
Business combinations
Transfer
Terminations and amendments
Foreign currency adjustments
At 31 March 2020
Additions
Business combinations
Transfer
Terminations and amendments
Foreign currency adjustments
At 31 March 2021
Accumulated depreciation and impairment
Charge for the year
Transfer
Eliminated on termination and amendment
Foreign currency adjustments
At 31 March 2020
Charge for the year
Transfer
Eliminated on termination and amendment
Foreign currency adjustments
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
54
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Property
£
Equipment
£
1,198,368
2,823,388
1,484,996
–
(2,262,172)
3,729
3,248,309
1,689,553
64,169
–
(43,968)
(74,258)
4,883,805
467,724
–
(216,897)
729
251,556
652,127
–
(43,968)
(5,918)
853,797
–
–
–
–
–
–
–
142,406
–
–
–
–
142,406
–
–
–
–
–
23,734
–
–
–
23,734
Motor
vehicles
£
–
–
–
–
–
–
–
82,982
–
–
–
–
82,982
–
–
–
–
–
22,649
–
–
–
22,649
Total
£
1,198,368
2,823,388
1,484,996
–
(2,262,172)
3,729
3,248,309
1,914,941
64,169
–
(43,968)
(74,258)
5,109,193
467,724
–
(216,897)
729
251,556
698,510
–
(43,968)
(5,918)
900,180
4,030,008
2,996,753
118,672
60,333
4,209,013
–
–
2,996,753
Changes to property leases
The Group acquired Delta Diagnostics UK Ltd (April 2019), and Coastal Genomics Inc (August 2020) including their IFRS 16 property lease liabilities and
right-of-use assets, shown above as business combinations. Delta Diagnostics UK Ltd has been integrated with the Company’s other UK trading subsidiary,
Yourgene Health UK Ltd. In 2019, as part of this integration project, UK property leases were surrendered and others renegotiated with extended terms.
The UK property lease restructure was completed in September 2019. To support the Company’s growth further, UK property leases have been taken out in
March, October and November 2020. The property lease in Taiwan was extended into 2021, and to allow for expansion a new property has been leased in
Taiwan which is currently being fitted out and it is anticipated will be occupied in the third quarter of 2021.
Operating lease commitments
In addition to the property leases disclosed above under IFRS 16 the Group has a small number of low-value asset operating leases.
Minimum lease payments under operating leases
2021
£
2020
£
59,870
91,236
At the reporting period date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall
due as follows:
Within one year
Between one and five years
In over five years
17 Inventories
Raw materials
Work in progress
Finished goods
Finished goods recognised at cost of sales in the year amounted to £5,794,269 (2020: £6,123,807).
18 Subsidiaries
Details of the Group’s subsidiaries at 31 March 2021 are shown in the table below:
Name of undertaking
Yourgene Health UK Ltd
Delta Diagnostics (UK) Ltd
Ex5 Genomics Ltd
Elucigene Ltd
Yourgene Health GmbH
Yourgene Health France SAS
Yourgene Health Inc
Yourgene Health Canada Ltd
Yourgene Health Canada Investments Ltd
Coastal Genomics Inc
Yourgene Health (Taiwan) Co. Ltd.
Kang Qiao Bioscience Co. Ltd
Jian Qiao Bioscience Co. Ltd
Yourgene Bioscience Co. Ltd
Yourgene Health (Singapore) Pte Limited
2021
£
25,412
8,597
–
34,009
2021
£
980,247
712,282
1,204,951
2020
£
46,316
15,526
–
61,842
2020
£
406,472
405,158
340,678
2,897,480
1,152,308
Country of
incorporation
Ownership
interest (%)
Nature of
business
UK
UK
UK
UK
Germany
France
USA
Canada
Canada
Canada
Taiwan
Taiwan
Taiwan
Taiwan
Singapore
100
100
100
100
100
100
100
100
100
100
100
100*
100*
100*
100*
See below
See below
See below
Non-trading
See below
See below
See below
See below
See below
See below
See below
See below
See below
See below
See below
* Yourgene Health (Taiwan) Co. Ltd owns a 100% interest in each of Kang Qiao Bioscience Ltd, registered office 3F., No. 3, Ln. 160, Junying St., Shulin Dist., New Taipei City 238, Taiwan (R.O.C.);
Jian Qiao Bioscience Co. Ltd, registered office No.376-5, Fuxing Rd., Shulin Dist., New Taipei City 23871, Taiwan (R.O.C.); Yourgene Bioscience Co. Ltd, registered office No.376-5, Fuxing Rd.,
Shulin Dist., New Taipei City 23871, Taiwan (R.O.C.); and Yourgene Health (Singapore) Pte Limited (formerly named Yourgene Bioscience Singapore Pte Limited.), registered office 3
Fusionopolis Place #05-54 Galaxis, Singapore 138523.
Yourgene Health UK Ltd’s principal activity is that of a molecular diagnostics company employing next generation DNA analysis technology to develop,
manufacture and sell molecular diagnostic products intended to have a major beneficial impact on human health. The registered office is at Citylabs 1.0,
Nelson Street, Manchester, M13 9NQ. Yourgene Health UK Ltd was formerly named Premaitha Ltd until 11 December 2019.
Delta Diagnostics (UK) Ltd, trading as Elucigene, is a molecular diagnostics manufacturer and developer with a suite of in vitro diagnostic CE marked products
focused on reproductive health and oncology. The registered office is at Citylabs 1.0, Nelson Street, Manchester, M13 9NQ.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
55
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
18 Subsidiaries continued
Ex5 Genomics Ltd provides research and extraction services to the healthcare industry. The registered office is at Citylabs 1.0, Nelson Street, Manchester,
M13 9NQ.
Yourgene Health GmbH, formerly Premaitha GmbH, is a German subsidiary whose principal activity is that of a sales office for Yourgene Health UK Ltd.
The registered office is at Speditionstrasse 15a, 40221 Düsseldorf, Germany.
Yourgene Health France SAS, formerly AGX-DPNI S.A.S., is a French subsidiary whose principal activity is that of a distributor for Yourgene Health UK Ltd.
The registered office is at 65 avenue Kléber, Paris,75116, France.
Yourgene Health Inc is a US subsidiary whose principal activity is that of a sales office and distributor for Yourgene Health UK Ltd. The registered office is at
1680 Michigan Ave, Suite 700 #232, Miami Beach, FL 33139, USA.
Yourgene Health Canada Ltd is a wholly owned subsidiary of Yourgene Health PLC, and is a holding company to facilitate the acquisition of Coastal Genomics
Inc. The registered office is 300-350 Lansdowne Street, Kamloops, British Columbia V2C 1Y1, Canada.
Coastal Genomics Inc is a wholly owned subsidiary of Yourgene Health Canada Investments Ltd, which in turn is a wholly owned subsidiary of Yourgene Health
Canada Ltd. Coastal Genomics Inc is a manufacturer of genetic size selection instrumentation and reagents. The registered office of Coastal Genomics Inc is
#182-4664 Lougheed Highway, Burnaby, British Columbia V5C 5T5, Canada. The registered office of Yourgene Health Canada Investments Ltd is 300-350
Lansdowne Street, Kamloops, British Columbia V2C 1Y1, Canada.
Elucigene Ltd is a non-trading entity, formerly named Yourgene Health UK Ltd until 6 December 2019. The registered office is at Citylabs 1.0, Nelson Street,
Manchester, M13 9NQ.
Yourgene Health (Taiwan) Co. Ltd was formerly named Yourgene Bioscience Co. Ltd. It is a Taiwanese subsidiary where the principal activities of the Group
headed by this Company are within the same sector as Yourgene Health UK Ltd. Its registered office is No.376-5, Fuxing Rd., Shulin Dist., New Taipei City
23871, Taiwan (R.O.C.).
Acquisition of Coastal Genomics Inc
The Group acquired 100% of the equity interests in Coastal Genomics Inc, a Canadian manufacturer of genetic size selection instrumentation and reagents,
on 6 August 2020 for an expected total consideration of £7,039,849 (US$9,222,203). Prior to the acquisition the business was a supplier to the Group and
Yourgene had conducted significant evaluation of its technology after which it was deemed sufficiently complementary to the Group’s technology portfolio to
warrant acquisition. A summary of the net assets acquired and the consideration paid is shown below. The Goodwill acquired reflects the opportunity to
benefit from synergies arising from deeper technical integration with the Group’s other offerings, and also the commercial synergies expected to arise from
combining sales pipelines in the US and globally.
Cash and cash equivalents
Intangible assets
Property, plant and equipment
Licences and patents
Right-of-use asset (IFRS 16)
Trade and other receivables
Inventories
Trade and other payables
Lease liability under IFRS 16
Deferred tax liability
Goodwill
Total fair value
Satisfied by:
Cash paid
Issue of shares
Issue share options
Future performance consideration
Total consideration
Net cash outflow arising on acquisition:
Cash consideration
Cash and cash equivalents acquired
Book value
£
19,963
–
84,492
290,920
64,169
260,282
216,870
(245,470)
(64,168)
–
627,058
Fair value
£
19,963
4,541,635
84,492
290,920
64,169
260,282
216,870
(245,470)
(64,168)
(1,226,242)
3,942,451
3,097,398
7,039,849
2,541,733
32,712
1,844,932
2,620,472
7,039,849
(2,541,733)
19,963
(2,521,770)
The acquisition consideration will include both upfront and deferred payments to the shareholders of Coastal Genomics Inc.. Additional consideration will be
payable in tranches of shares and cash based on the achievement of accelerated growth objectives. The contingent share consideration can be paid in cash at
the Company’s discretion in certain circumstances. The fair values for the consideration components reflect the monetary values committed to in the share
purchase agreement at the time of the acquisition which are deemed to be financial liabilities (recognised or contingent). Exchange shares issued have a fixed
conversion ratio to Yourgene Health plc shares and so are not deemed to be financial instruments.
56
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
The total consideration payable by the Group will be up to US$13.5m, depending on the acquired business performance, and will comprise the following:
• US$3.0 million cash consideration on completion;
• US$2.5m consideration payable by the issuance on completion of initial consideration shares in Yourgene Health Canada Investments Ltd, exchangeable
•
for shares in Yourgene Health Plc, subject to a 3 year lock-up period
two further elements of consideration of US$1.0m each for early strategic customer wins, payable in Yourgene Health Canada Investment Ltd shares,
exchangeable for shares in Yourgene Health Plc, and subject to lock-up periods of 12 months.
• cash consideration of US$2.0m should Coastal Genomics generate revenues of at least US$4.0m for the year ended 31 March 2022, which would become
payable in April 2022, or rolled over to the year ended 31 March 2023 which would become payable in April 2023; and
• contingent cash consideration of US$4.0m should Coastal Genomics generate revenues of at least US$8.5m in the financial year to 31 March 2023, which
would become payable in April 2023. The Group has deemed this a stretch target which is not included in the fair value assessment above which is based
on more cautious cashflows than would trigger this stretch target payment. This consideration will either be earned or not and there is no contractual
provision for partial payment. As such, this amount is disclosed as a contingent liability.
The first US$1.0m additional consideration condition was satisfied on 1 March 2021 and the resulting shares were issued on 12 April 2021. The condition for
the second US$1.0m additional consideration was satisfied on the 21 June 2021 and the shares will be issued in August 2021. As disclosed in this note, the
acquisition of Coastal Genomics Inc. resulted in the recognition of newly identified intangible assets principally relating to the Ranger® Technology as well as
strategic customer relationships. As set out in the Strategic Report, the acquisition was completed as part of the Group’s strategic plan to expand the Group’s
global reach and supplement the Group’s product portfolio with new technological capabilities. As such, Coastal Genomics will support the activities of other
Yourgene Group entities as well as generating its own external revenues. The Board therefore consider that the post-acquisition performance of Coastal
Genomics as a standalone entity is not relevant or material to users.
Acquisition of Ex5 Genomics Ltd
On 3 July 2020, Yourgene Health plc completed the acquisition of Ex5 Genomics Ltd for an initial cash consideration of £275,000 plus earn-outs of £275,000
which have all subsequently crystallised and a modest working capital adjustment. The acquisition was primarily of laboratory equipment and customer
relationships without contract backing and as such has been treated as an acquisition of assets rather than a business combination. This equipment has
been relocated to Yourgene’s Citylabs facility and brought into service. In parallel the customer relationships are being converted to active work packages,
crystallising the earn-outs and supplementing existing NIPT and COVID-19 testing activities. These services extend the Group’s geographic reach for
partnering with research organisations from Taiwan and into the UK, and have now been grouped together into Yourgene Genomic Services which was
launched in September 2020.
Acquisition of Yourgene Health France SAS
The Group acquired 100% of the equity interest in Yourgene Health France SAS, formerly AGX-DPNI SAS in March 2020 for an initial cash consideration of
€2,355,000 and up to a maximum of €1,655,000 in performance consideration payments based on sales growth performance criteria. The acquisition
purpose was to give the Group greater presence in the French market where its distributor had built a strong competitive position. This rationale has been
successful as reflected in the achievement of performance-related earn-out consideration milestones resulting in a payment of €577,500 which was made
in October 2020, and as at the period end date a further earn-out liability of €977,500 was held, which was paid in April 2021. The total performance
consideration payments made were €1,555,000. The stretch criteria for the remaining €100,000 was not met and has been written off through Administrative
expenses in the Statement of Comprehensive Income as detailed here and in note 22.
19 Trade and Other Receivables
Trade receivables
Provision for doubtful trade receivables
Loss allowance due to expected credit losses under IFRS 9
Net trade receivables
Other receivables
Provision for doubtful other receivables
VAT recoverable
Other loans and receivables at amortised cost
Net other loans and receivables at amortised cost
Prepayments
2021
£
£
2020
£
£
4,523,117
(459,007)
(62,532)
597,618
(269,111)
148,398
–
4,001,578
476,905
854,626
5,333,109
4,808,174
(83,161)
(101,836)
–
131,010
–
284,628
11,588
4,623,177
427,226
578,884
5,629,287
An amount of £459,007 (2020: £83,161) has been provided for doubtful receivable amounts overdue from specific customers. A bad debt of £29,698 (2020
£nil) has been written off in the year as unrecoverable. An amount of £269,111 (2020: £nil) has been provided for against a specific amount in other
receivables, where the company is taking legal action to recover this amount.
A loss allowance against trade receivables of £62,532 (2020: £101,836) for expected credit losses has been provided for as required under IFRS 9. These
expected credit losses were calculated after analysing the Group’s receivable risks in geographic groupings which are deemed to reflect appropriate credit
risk categories. Delinquency rates are deemed to be very low in Asia Pacific with high political stability leading to no impairment of receivables. In Europe and
America increased risk due to COVID-19 issues is reflected in a 2.5% (2020 2.5%) expected credit loss risk. In the Middle East and Africa region COVID-19 and
general political instability have been deemed to give an expected credit loss risk rating of 5% (2020 5%). In India expected credit loss risk has been estimated
to be greater at 15% (2020: 15%) due to specific customer delays and COVID-19 issues.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
57
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
20 Trade and Other Payables
Trade payables
Payments received on account
Accruals
Social security, taxation and pensions
VAT payable
Other payables
The book value of trade and other payables approximates to the fair values. See note 26 for maturity analysis.
21 Borrowings
Unsecured borrowings at amortised cost
Bank loans
Other loans
2021
£
3,124,671
373,376
1,208,751
383,729
135,004
13,190
2020
£
2,674,449
1,170,017
612,554
167,235
–
283,557
5,238,721
4,907,813
2021
£
2020
£
195,718
–
195,718
362,618
–
362,618
Analysis of borrowings
Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting
date, as follows:
Current liabilities
Non-current liabilities
The continuing borrowings as at 31 March 2021 are:
2021
£
118,705
77,013
195,718
2020
£
277,508
85,110
362,618
During the year Yourgene Health (Taiwan) Co. Ltd refinanced its bank loan repaying the loan (1.97% rate) due December 2021 in September 2020. This was
replaced by a loan repayable in September 2023 at an interest rate of 0.66%.
Borrowings incurred by Delta Diagnostics (UK) Ltd are payable by October 2021. The loan incurs interest at 4.94% pa over base rate. The borrowings have
covenants attached to them and the Group has been compliant with these covenants throughout the year.
22 Provisions for Liabilities
Acquisition – additional consideration
2021
£
2020
£
3,410,497
1,468,878
Analysis of provisions
Provisions are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting
date, as follows:
Current liabilities
Non-current liabilities
2021
£
2,282,836
1,127,661
2020
£
512,554
956,324
3,410,497
1,468,878
58
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Movements on provisions
At 1 April 2019
Release of provision
Increase in provision
At 31 March 2020
At 1 April 2020
Release of provision
Increase in provision
Foreign currency variance
Payment made
At 31 March 2021
Acquisition–
additional
consideration
£
–
–
1,468,878
1,468,878
1,468,878
(85,094)
2,710,689
(163,485)
(520,491)
3,410,497
Dilapidation
provision
£
206,353
(206,353)
–
–
–
–
–
–
–
–
Total
£
206,353
(206,353)
1,468,878
1,468,878
1,468,878
(85,094)
2,710,689
(163,485)
(520,491)
3,410,497
Dilapidation provision
As part of the Group’s property leasing arrangements there was an obligation to return certain premises in the same state that they were received and repair
damages which incur during the life of the lease, such as wear and tear. The Group has adopted IFRS 16 and these costs have now been recognised as part of
the cost of the right-of-use asset and lease liability – please see note 16.
Acquisitions – additional consideration
The March 2020 acquisition of the Group’s French distribution channel gave rise to a provision for two cash payments dependent on NIPT sales growth during
the current reporting period. Of these payments €0.6m (£0.5m) was paid in April 2020. At the period end €1.0 (£0.8m) was accrued to meet these obligations
– see note 18.
Following the acquisition of Coastal Genomics Inc three additional contractual consideration payments of an aggregate US$4.0m (£2.9m) are deemed
payable based on estimated performance on certain performance criteria and is accrued at the period end, see note 18. The third of these additional
consideration payment for US$2m is expected to be paid in 2023, and has been discounted to present value in these financial statements, and provided for as
total additional consideration of US$3.5m (£2.6m). A fourth consideration payment of US$4.0m is contractually payable in April 2023 if the acquired
company’s revenues achieve a stretch target in the financial year to 31 March 2022. This stretch target is not deemed probable to be achieved and the liability
for the fourth payment is deemed a contingent liability.
23 Deferred Taxation and Current Taxation Assets and Liabilities
The deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period are shown below.
The deferred tax assets and deferred tax liabilities are not offset and are both deemed non-current.
Deferred tax liability at 1 April 2019
Deferred tax movements
Acquired in business combination
Credit to profit or loss
Foreign exchange revaluation
Deferred tax liability at 31 March 2020
Deferred tax movements
Acquired in business combination
Credit to profit or loss
Foreign exchange revaluation
Deferred tax liability at 31 March 2021
Deferred tax asset at 1 April 2019
Deferred tax movements
Acquired in business combination
Charge to profit or loss
Foreign exchange revaluation
Deferred tax asset at 31 March 2020
Deferred tax movements
Acquired in business combination
Credit to profit or loss
Foreign exchange revaluation
Deferred tax asset at 31 March 2021
£
233,496
1,018,750
(99,125)
–
1,153,121
1,226,241
(232,234)
25,771
2,172,899
£
–
925,364
252,505
3,170
1,181,039
–
(23,323)
(12,323)
1,145,393
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
59
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
23 Deferred Taxation and Other Tax Assets continued
Tax assets are sums arising from enhanced R&D reliefs available in the UK and tax prepayments in Germany. UK R&D tax credits are allocated between current
and non-current according to the Company’s view on when the benefits will arise.
Tax asset at 1 April
Tax movements
Business combination
Tax prepayments
Refund received
Reclass
Foreign currency revaluation
Credit to profit or loss
Tax asset at 31 March
Non-current tax asset
Current tax asset
As at 31 March
Tax liabilities are taxes payable to tax authorities in the UK and Taiwan and are payable within the next 12 months.
Tax liability at 1 April
Tax movements
Business combination
Tax paid
Foreign currency revaluation
Credit to profit or loss
Tax liability at 31 March
Non-current tax liability
Current tax liability
As at 31 March
2021
£
2020
£
985,176
478,232
–
6,284
(459,433)
8,305
(208)
(33,537)
506,587
2021
£
–
506,587
506,587
2021
£
433,337
5,299
(157,279)
(10,357)
271,877
542,877
2021
£
–
542,877
542,877
(48,028)
–
–
–
–
554,972
985,176
2020
£
532,691
452,485
985,176
2020
£
–
98,963
(16,210)
–
350,584
433,337
2020
£
433,337
433,337
24 Financial Instruments
The principal instruments used by the Group, from which the financial instrument risk arises, include cash and cash equivalents, trade receivables,
trade payables and borrowings.
Risk and sensitivity analysis
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks
or the methods used to measure them from previous periods unless otherwise stated in this note.
The Group and Company are exposed through their operations to one or more of the following financial risks: foreign currency risk, liquidity risk, credit risk,
investment risk and interest rate risk. The policy for managing these risks is set by the Board and all such risks are managed at a Group level within the
organisation. The Board’s objective is to ensure an appropriate balance of risk and opportunity and monitors key risk factors in each Board meeting to
determine whether that balance is deemed satisfactory. Where practical risks will be mitigated, e.g. through natural hedging of foreign currency exposures
or insurance.
There have been no changes from previous years in the way the Group and Company manages risks, other than the use of forward foreign exchange contracts
in specific situations where future currency trades can be accurately forecast. The policies for these risks are described further within the following notes.
25 Financial Instruments – Market Risk
Foreign exchange risk
Foreign currency exchange risk arises because the Group has asset and liabilities denominated in foreign currencies. Subsidiary operations are located in the
UK, Germany, France, USA, Canada, Singapore and Taiwan whose functional currency outside the UK is not the same as the Group’s functional currency
(Sterling). The net assets from such overseas operations are exposed to currency risk giving rise to gains or losses on translation to Sterling for the purposes
of the consolidated financial statements.
Subsidiaries within the Group trade internationally outside their own country. The Group seeks to naturally hedge its currency risk by allowing subsidiaries
to operate multi-currency bank accounts to match foreign currency income and expenditure. The bank balances are monitored at Group level on a weekly
reporting basis, allowing the management of exchange risk across the Group. When necessary any specific currency surplus or shortage can be transferred
or translated using either spot or forward currency contracts to meet future requirements of each subsidiary.
60
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows:
GBP
Euro
US$
New Taiwan Dollars
Singapore Dollar
Canadian Dollar
Other (AUD/ZAR/CHF/AED)
Assets
2021
£
7,393,462
1,640,917
426,659
2,865,761
439,036
227,293
164,148
2020
£
3,527,249
1,649,019
745,177
3,011,105
526,253
–
175,452
Liabilities
2021
£
7,539,726
772,622
134,873
2,653,228
159,757
2,748,550
22,251
2020
£
7,001,309
721,917
178,157
2,310,766
199,541
–
14,678
13,157,276
9,634,255
14,031,007
10,426,368
The following table illustrates the sensitivity of profit and equity in regard to the Group’s financial assets and financial liabilities and the SGD/GBP, TWD/GBP,
USD/GBP, Euro/GBP and CAD/GBP exchange rates ‘all other things being equal’. It assumes +/- 6% changes of the SGD/GBP and Euro/GBP (2020: 6% and
7%), a +/- 9% change of the TWD/GBP (2020: 7%). +/- 9% and +/- changes are considered for USD/GBP (2020: 9%) and +/- 7% CAD/GBP (2020: N/A)
respectively. All of these percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The
sensitivity analysis is based on the Group’s foreign currency financial instruments held at each reporting date.
If the GBP had strengthened against the SGD and Euro by 6% (2020: 6% and 7%), TWD and Euro by 9% (2020: 7%), USD by 8% (2020: 9%) and CAD by 7%
(2020: N/A) respectively then this would have had the following impact:
The carrying amounts of the Group’s foreign currency denominated non-monetary assets and liabilities are as follows:
Profit/(loss) for the year
Other Assets
SGD
£
TWD
£
USD
£
Euro
£
CAD
£
Total
£
SGD
£
TWD
£
USD
£
Euro
£
CAD
£
Total
£
31 March 2021
(15,808)
(17,549)
(21,614)
(49,149) 164,942
60,822
(3,227)
(196,291)
(81)
(168,497)
(48,195)
(416,291)
31 March 2020
(18,493)
(45,817)
(46,818)
(60,652)
–
(171,780)
(1,403)
(37,136)
–
(141,118)
–
(179,657)
If the GBP had weakened against the SGD and Euro by 6% (2020: 6% and 7%), TWD by 9% (2020: 7%), USD by 8% (2020: 9%) and CAD by 7% (2020: N/A)
respectively then this would have had the following impact:
Profit/(loss) for the year
SGD
£
TWD
£
USD
£
Euro
£
CAD
£
Total
£
SGD
£
TWD
£
31 March 2021
17,826
21,020
25,373
55,423
(189,772)
(70,130)
3,639
235,118
31 March 2020
20,854
52,714
56,079
69,782
–
199,429
1,582
42,727
Other Assets
USD
£
95
–
Euro
£
CAD
£
Total
£
190,007
55,450
484,309
162,362
–
206,671
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to
be representative of the Group’s exposure to currency risk.
Interest rate risk
The Group’s interest rate risk arises from interest-bearing assets and liabilities. The Group has in place a policy of maximising finance income by ensuring that
cash balances earn a market rate of interest, offsetting where possible, cash balances and by forecasting and financing its working capital requirements. Bank
loans shown in note 21 are asset finance facilities in Taiwan which are subject to fixed interest rates at 0.66% and interest rate of 4.94% over base rate on loan
facility for Delta Diagnostics (UK) Ltd.
Investment risk
Investment risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk),
foreign exchange rates (currency risk) or other market factors (other price risk).
The Group is exposed to interest rate risk from its interest-earning financial assets. The floating rate assets are held in a money market account earning
interest at Bank of England base rate at 0.01%. The interest rate risk is mitigated by the fact cash is held in short-term deposits allowing rapid transfer of funds
to alternative commercial banks to obtain improved interest rates. There are no financial assets earning interest at fixed rates.
Capital
As described in note 28 the Group considers its capital to comprise its ordinary share capital, share premium and accumulated deficit as its capital reserves. In
managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through capital
growth. In order to achieve this objective, the Group seeks to commercialise the development which has been undertaken to date, through major sales in a
number of markets.
There have been no other significant changes to the Group’s capital management objectives, policies and processes in the period nor has there been any
change in what the Group considers to be its capital.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
61
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
26 Financial Instruments – Liquidity Risk
Liquidity risk is the risk that the Group fails to have sufficient funds to meet its debts as they become due. The liquidity risk of the Group is managed centrally.
The Group holds funds in short-term bank deposits so that they are available when required.
The following table details the remaining contractual maturity for the Group’s financial liabilities with agreed repayment periods. The contractual maturity is
based on the earliest date on which the Group may be required to pay.
At 31 March 2020
Interest-bearing loans and borrowings
Lease liabilities under IFRS 16
Trade payables
Accruals
Other payables
At 31 March 2021
Interest-bearing loans and borrowings
Lease liabilities under IFRS 16
Trade payables
Accruals
Other payables
1 year or less
£
2 to 5 years
£
More than 5 years
£
Total
£
277,508
341,167
2,674,449
612,554
1,453,574
85,110
2,710,123
–
–
–
5,359,252
2,795,233
118,705
586,637
3,124,671
1,208,751
521,570
77,013
4,056,558
–
–
–
5,560,334
4,133,571
–
–
–
–
–
–
–
–
–
–
–
–
362,618
3,051,290
2,674,449
612,554
1,453,574
8,154,485
195,718
4,643,195
3,124,671
1,208,751
521,570
9,693,905
The Board believes the current level of financial liabilities to be in line with expectations. The level of cash balances and trade and other receivables is sufficient
to discharge the Group’s financial liabilities.
27 Financial Instruments – Credit Risk
During the period, the Group’s credit risk was primarily attributable to its cash balances, other loans receivable, and its trade receivables. Credit risk is the risk
that the counterparty fails to discharge its obligation in respect of the instrument. The credit risk on liquid funds is limited as the funds are held at banks with
high credit ratings. The risk to the Group of trade receivables going bad is regarded as low to medium in most regions due to the current COVID-19 pandemic
and medium in the Middle East, Africa and India regions; these are described in detail in note 19.
Trade receivables consist of a large number of customers in various geographical areas. Based on historical information about customer default rates,
management consider the credit quality of trade receivables that are not past due or impaired to be good.
The Group’s maximum exposure to credit risk by class of financial assets amounts to their carrying value of £12,725,071 (2020: £9,634,255). The Group
deems that entities from whom credit exposure arises are of adequately strong credit quality and will therefore be able to pay the amounts due when
they arise.
The Group does not hold any collateral or other credit enhancements to cover this credit risk other than the equipment security stated above.
Credit quality of financial assets
As at the balance sheet date, the Group had a total of £2,521,197 (2020: £3,786,895) of unimpaired trade receivables which were between 0-30 days past due
and £1,258,248 (2020: £836,282) which were more than 30 days past due. These figures exclude amounts owing that have been fully provisioned due to
specific impairment circumstances and also ECL under IFRS 9.
28 Share Capital and Reserves
At 1 April
Shares issued: Placing
Shares issued: Options exercised
Shares issued: Consideration
Shares issued: Warrant exercised
Ordinary shares 0.1p each
Deferred shares 0.9p each
Deferred shares 9.9p each
2021
2020
2021
2020
2021
2020
616,482,205
95,000,000
9,990,898
178,753
1,411,427
458,999,688 1,039,640,244 1,039,640,244
–
157,482,517
–
–
–
–
–
–
–
–
–
–
228,163,709
–
–
–
–
228,163,709
–
–
–
–
At 31 March
723,063,283
616,482,205 1,039,640,244 1,039,640,244
228,163,709
228,163,709
Nominal value at 31 March
£723,064
£616,483
£9,356,762
£9,356,762
£22,588,207
£22,588,207
All ordinary shares in issue have equal voting rights and rights to dividends or other distributions. The deferred shares rank equally in all respects but do not
have any voting rights or rights to receive dividends or other distributions and will not have any return on capital on a winding up. The Company’s Annual
General Meeting (AGM) each year delegates authority to the Board of Directors for the issuance of new shares until the subsequent AGM. Any issuance
beyond these delegated authorities requires an Extraordinary General Meeting. As at the reporting date all authorised shares have been issued.
62
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Shares issued during the reporting period, in May 2020 – 6,437,565 options exercised and 1,411,427 warrants exercised; August 2020 – 95,000,000 by way
of placing, and 178,753 shares issued as consideration to one former shareholder of Coastal Genomics who elected to take Company shares in place of
exchangeable shares in Yourgene Health Canada Investments Ltd (see note 18); September 2020 – 1,000,000 options exercised; March 2021 – 2,553,333
options exercised. For a combined total of 106,581,078 new shares. There are no Treasury shares in issue and shares associated with the Company’s Share
Incentive Plan are managed by an independent trustee.
The following describes the nature and purpose of each reserve within shareholders’ equity:
Reserve
Description and purposes
Share premium account
Amount subscribed for share capital in excess of nominal value.
Retained
losses
Cumulative net gains and losses recognised in the consolidated income statement.
The share option expense is recognised directly through the accumulated deficit reserve.
Merger relief reserve
Represents a premium on the issue of the ordinary shares for the acquisition of subsidiary undertakings.
Reverse acquisition
Effect on equity of the reverse acquisition of Premaitha Limited.
reserve
Other
reserves
Includes a) Equity element of Thermo Fisher warrants in issue and not yet exercised, b) Equity element of exchange shares in
Yourgene Health Canada Investments Ltd not yet exchanged for shares in Yourgene Health PLC.
Foreign exchange
Represents cumulative foreign exchange gains and losses arising on consolidation and exchange differences arising on
translation reserve
translation of foreign operations.
29 Share-based Payment Transactions
Share options
The Group operates two equity-settled share-based remuneration schemes for employees: an HMRC-approved EMI scheme and an unapproved scheme,
jointly known as the ‘option scheme’. Under the scheme employees may be granted options to purchase shares, which vest over varying periods up to four
years and must be exercised within 10 years from the date of grant. The options are forfeited by the employee if they leave the Company before the options
are exercised.
The Group recognised a total share-based payment charge of £801,884 in the period (2020: £1,601,746). The 2020 higher expense is primarily due to the
Group’s increased expectations of the number of shares expected to vest from 2020 onwards.
The exercise price of options outstanding at the end of the year ranged between 7.75p and 242p and their weighted average remaining contractual life was
6.3 years (2020: 6.8 years).
The weighted average fair value of each option granted during the year was 7.83p (2020: 4.65p).
Market-based options
The Company issued options between October 2012 and March 2014 with market-based conditions attached such that they are only exercisable if the share
price of the Company exceeds 50p per ordinary share. In August 2019 1,183,332 options had their performance conditions modified to be aligned with other
senior incentives; the exercise price of these options remains unchanged.
At 31 March 2021, the following market-based options were outstanding in respect of ordinary shares:
Date of grant
31 October 2012
2 January 2013
19 March 2014
Outstanding at 31 March 2021
Exercise period
1 November 2012 to 1 November 2022
3 January 2013 to 3 January 2023
18 April 2014 to 19 March 2024
The following principal assumptions were used in the valuations:
Share price
Exercise price
Volatility
Dividend yield
Risk-free interest rate
Expected option life
2021
Number
25,558
13,681
–
39,239
Oct 2012
Jan 2013
242p
242p
108.25%
0%
1.602%
5 years
225p
225p
108.15%
0%
1.11%
5 years
2020
Number
25,558
13,681
–
39,239
Mar 2014
21.5p
10p
88.97%
0%
1.969%
5 years
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
63
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
29 Share-based Payment Transactions continued
Earnings per share options
The Company issued options between March 2014 and March 2021 with conditions attached such that they are only exercisable if the earnings per share
exceeds that for the financial year preceding the grant of the option.
At 31 March 2021, the following options were outstanding in respect of ordinary shares:
Date of grant
19 March 2014
6 September 2014
15 July 2015
21 October 2016
2 March 2017
30 October 2017
2 July 2018
4 October 2018
31 May 2019
29 October 2019
27 March 2020
18 June 2020
25 September 2020
7 January 2021
22 March 2021
Exercise period
18 April 2014 to 19 March 2024
4 September 2016 to 5 September 2024
14 July 2017 to 14 July 2025
1 April 2018 to 26 October 2026
31 March 2019 to 1 March 2027
28 September 2018 to 29 October 2027
9 July 2019 to 30 June 2028
9 July 2019 to 30 June 2028
27 July 2020 to 30 May 2029
27 July 2020 to 28 October 2029
27 July 2020 to 26 March 2030
1 July 2021 to 17 June 2030
1 July 2021 to 17 June 2030
1 July 2021 to 6 January 2031
1 July 2022 to 21 March 2031
2021
Number
2020
Number
1,183,332
15,886,601
4,705,000
470,000
300,000
2,485,000
17,200,000
3,000,000
9,920,000
2,500,000
500,000
470,000
750,000
450,000
1,400,000
1,183,332
23,124,226
4,705,000
470,000
550,000
2,755,000
19,400,000
3,000,000
10,120,000
2,500,000
500,000
–
–
–
–
Outstanding at 31 March
61,219,933
68,307,558
The following principal assumptions were used in the valuations:
Share price
Exercise price
Volatility
Dividend yield
Risk-free interest rate
Expected option life
Mar-14
Sep-14
Jul-15
Oct-16
Mar-17
Oct-17
Jul-18
Oct-18
May-19
Oct-19
Mar-20
Jun-20
Sep-20
Jan-21
Mar-21
21.5p
10.75p
21.375p
9.25p
12.875p
7.75p
7.75p
10.05p
10.875p
12.375p
14.5p
17.5p
19.25p
14p
16.75p
10p
10p
20p
20p
10p
10p
7.75p
10p
10.25p
12p
14p
18p
18p
14.25p
18p
88.97%
51.88%
102.79%
50.07%
54.34%
38.24%
64.00%
72.75%
46.85%
32.73%
85.55%
96.68%
56.45%
40.79%
45.26%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
1.97%
1.97%
1.80%
0.60%
1.00%
1.34%
1.26%
1.46%
0.89%
0.71%
0.36%
0.23%
0.19%
0.28%
0.82%
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
5 years
The fair values of the options granted were determined using a variation of the Black-Scholes model, incorporating the dilutive effects of the options. Share
price volatility is determined by calculating the historic volatility over the prior six-month period. In addition, the model was amended for the market-based
options to incorporate the probability of the 50p trigger being met, with this being done by pricing an Up & In call option with a barrier set at 50p. The earnings
per share options are estimated to have a 75% to 100% probability of meeting the earnings per share conditions over the required vesting periods and this
was incorporated in determining the number of options expected to vest.
Options and weighted average exercise prices are as follows for the reporting periods presented:
Outstanding at 1 April 2020
Granted
Exercised
Lapsed
Outstanding at 31 March 2021
Exercisable at 31 March 2021
In June 2021 employees chose to exercise 550,000 of the above exercisable share options.
Market-based options
Earnings per share options
Number
39,239
–
–
–
39,239
39,239
p
236
–
–
–
236
236
Number
68,307,558
3,070,000
(9,990,898)
(166,667)
61,219,993
41,892,559
p
11
17
10
10
11
11
64
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Share Incentive Plan
In September 2020 the Group introduced an HMRC-approved Share Incentive Plan (‘SIP’). The SIP is operated on behalf of the Group by Link Market Services
Trust Limited as independent Trustee for the SIP. Certain employees based on eligibility criteria are issued bonus shares up to a maximum £3,600 as part of
their annual performance review. On 29 September 2020 520,350 ordinary shares of 0.1p each were purchased in relation to the bonus share award based on
the market price of 20p on 29 September 2020.
In addition to the bonus share awards, the Group also operates a matching and partnership share arrangement whereby for each single share purchased by
the employee via salary deduction a matching share was awarded by the Group. The maximum amount that can be subscribed for by employees via salary
deduction is £1,800 per annum. As at 31 March 2021, 38 eligible employees had made binding commitments to subscribe for partnership shares during the
period ending 31 March 2021.
Bonus share and matching share awards to date have generally been met from continued on-market purchases by Link Market Services Trustees Limited as
trustee of the SIP. As at 31 March 2021, the Trustee held 806,522 (2020: nil) ordinary shares of 0.1p on behalf of the SIP. In respect of the SIP shares the Group
recognised a share-based payment charge of £150,099 (2020: £nil).
Exchange shares
In August 2020 the Company acquired Coastal Genomics Inc. As part of the consideration the Company issued 10,249,624 shares in its subsidiary Yourgene
Health Canada Investments Ltd, these shares can be exchanged after three years for ordinary shares in Yourgene Health PLC subject to certain conditions. As
at 31 March 2021, none of the shares had been exchanged.
Exchange shares outstanding at 31 March 2021:
Date of issue
11 August 2020
2021
Number
10,249,624
2020
Number
–
Issue
price
18.3p
Post period end, as part of satisfying the earn-out conditions for the acquisition of Coastal Genomics Inc, shares in Yourgene Health Canada Investments Ltd
were issued which are exchangeable for 4,696,055 ordinary shares in Yourgene Health PLC at an exchange price of 14.8 pence (April 2021) and for 5,305,720
ordinary shares at an exchange price of 13.2 pence (August 2021).
Standard warrants
The Company issued 2,822,454 warrants as part of a share placing on 4 July 2014, of which 1,411,427 expired in July 2017, and 1,411,427 were exercised in
May 2020. The warrants have a conversion price of 11p per share.
At 31 March 2021, the following options were outstanding in respect of ordinary shares:
Date of grant
Exercise period
4 July 2014
4 July 2014 to 3 July 2020 (by agreement extended by 1 year)
2021
Number
2020
Number
–
1,411,427
The fair values of the warrants granted were determined using a variation of the Black-Scholes model, incorporating the dilutive effects of the warrants. The
following principal assumptions were used in the valuations, based on independently sourced information:
Share price
Volatility
Dividend yield
Risk-free interest rate
Expected option life
Options and weighted average exercise prices are as follows for the reporting periods presented:
Outstanding at 1 April 2020
Exercised
Outstanding at 31 March 2021
Exercisable at 31 March 2021
Standard
warrants
11p
102.62%
0%
1.779%
3 years
Number of
share options
1,411,427
(1,411,427)
–
–
Weighted average
exercise price
p
11
11
–
–
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
65
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
30 Thermo Fisher Scientific Loan and Warrants
Thermo Fisher 2016 and March 2017 warrants
On 22 September 2016, the Group granted two further tranches of warrants to Thermo Fisher on the same terms. These are respectively the 2016 and
March 2017 warrants.
The 2016 warrants issued by the Group on 22 September 2016 are over 17,094,018 shares with an exercise price of 11.7p per share and a term of 7.25 years.
The March 2017 warrants issued by the Group on 31 March 2017 are over 16,913,319 shares with an exercise price of 11.825p per share and a term of
6.75 years.
Application of IAS 32/IAS 39
The Group assessed the accounting treatment of the warrants and concluded, having considered the terms of all of the warrants, that they represented
equity instruments. The warrants are accounted for at fair value on inception in accordance with IAS 32.
February 2019 Corporate and commercial restructure
In February 2019 the Group agreed a corporate and commercial restructure of its relationship with Thermo Fisher, through its Life Technologies subsidiary.
As part of the restructure, Thermo Fisher exercised some of the warrants it was holding. The notional £3.8 million proceeds of this warrant conversion were
offset against outstanding loans owed by the Group to Thermo Fisher. The second part of the restructure was the cancellation of £9.4 million of debt, being
all remaining borrowings owing to Thermo Fisher, including any accrued interest. All security held by Thermo Fisher associated with these loans was also
cancelled. The third part of the restructure was a new Commercial Agreement between the parties which gave Thermo Fisher certain exclusive commercial
rights in specified South East Asian countries for a period of three years until 2022, and Thermo Fisher entered into a Lock-in Deed for its converted warrant
shares for the same period. Under the terms of the Commercial Agreement the Group will pay a modest sales commission, once it achieves positive cash
flows. This commission is capped at £6.5 million. In addition, the Group agreed to a £6.5 million contingent liability as described below. Future share gains made
by Thermo Fisher on the converted warrants will initially lower the commission cap and, once that is fully satisfied, will erode the contingent liability until that is
extinguished. As at 31 March 2021, the share price gains achieved since the warrants were exercised was £2.1 million and, if sustained, the commission cap
would be reduced by this amount.
Contingent liability
A part of the February 2019 restructure was the creation of a £6.5 million contingent liability, which is payable by the Company to Thermo Fisher only in the
event of a sale of the Company or an insolvency event.
Warrants outstanding
At 31 March 2021, the following warrants were outstanding in respect of ordinary shares:
Date of grant
11 December 2015
22 September 2016
31 March 2017
Exercise period
11 December 2015 to 10 December 2023
22 September 2016 to 10 December 2023
31 March 2017 to 10 December 2023
2021
Number
2020
Number
20,325,204
17,094,018
16,913,319
20,325,204
17,094,018
16,913,319
The fair values of the warrants granted were determined using a variation of the Black-Scholes model, incorporating the dilutive effects of the warrants. The
following principal assumptions were used in the valuations:
Share price
Exercise price
Volatility
Dividend yield
Risk-free interest rate
Expected option life
Options and weighted average exercise prices are as follows for the reporting periods presented:
Outstanding at 1 April 2019
Granted
Outstanding at 31 March 2020
Granted
Exercisable at 31 March 2021
2015
warrants
20.63p
24.6p
68%
0%
1.74%
8 years
2016
warrants
10.625p
11.7p
48.63%
0%
0.6%
7.25 years
2017
warrants
11.625p
11.825p
59%
0%
0.979%
6.75 years
Number of
share options
54,332,541
–
54,332,541
–
54,332,541
Weighted average
exercise price
p
17
–
17
–
17
66
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
31 Analysis of Changes in Net Cash/(Debt)
Cash and bank balances
Bank loan – see note 21
Net cash/(debt)
01-Apr-20
£
Cash flow
£
2,764,117
(362,618)
4,231,321
320,860
2,401,499
4,552,181
Acquisitions and
disposals
£
Exchange
movements
£
–
(160,497)
(160,497)
–
6,537
6,537
31-Mar-21
£
6,995,438
(195,718)
6,799,720
32 Related Party Transactions
Key management personnel are considered to be the Directors; their emoluments are disclosed in note 9.
During the period the Group was charged £53,333 (2020: £71,863) in relation to the Directors’ fees of Mr A Reynolds, a Director of the Company by Reyco
Limited. At the period end £nil (2020: £nil) was due to Reyco Limited in respect of these costs.
During the period the Group was charged £30,000 (2020: £30,000) in relation to the Directors’ fees of Mr N Mustoe. At the period end £nil (2020: £nil) was due
to Mr Mustoe in respect of these costs.
During the period the Group was charged £47,592 (2020: £17,485) in relation to the Directors’ fees of Mr J Seaton, a Director of the Company by Seaton Life
Science Advisors. At the period end £7,500 (2020: £2,500) was due to Seaton Life Science Advisors in respect of these costs.
Adam Reynolds is a non-executive director of EKF Diagnostics Holdings plc (‘EKF’) and together with Lyn Rees of Myhealthchecked plc (‘Concepta’). During
the period the Group invoiced £8,210 to EKF for services and was owed £210 by EKF at year end; and was invoiced £342,903 exclusive of VAT by EKF for
goods; £92,869 inclusive of VAT was owed to them at year end. During the year the Group invoiced £157,275 exclusive of VAT for goods and services to a
subsidiary of Concepta, of which £164,090 inclusive of VAT was outstanding at year end.
All products and services were charged on an arm’s length basis.
33 Controlling Party
The Company does not have an ultimate controlling party.
34 Events After the Reporting Date
After the end of the reporting period the Group has continued to expand its UK-based COVID testing routes to market including into the retail pharmacy and
travel sectors and through successful entry into the UK Government’s National Microbiology Framework. The Group also entered into a second qualifying
commercial agreement for the Ranger® Technology acquired with Coastal Genomics, triggering the second of two equity earn-out issuances, and creating a
commercial platform with leading US-based market participants. In a separate announcement the Group also entered into a multi-year licence and supply
agreement with another leading US diagnostic testing partner, furthering its US market penetration.
Post period end additional ordinary shares of 81,899 (April 2021) and 85,124 (August 2021) were issued as consideration shares in relation to the Coastal
Genomics Inc acquisition first and second earn out targets. As part of satisfying the same earn-out conditions shares in Yourgene Health Canada Investments
Ltd were issued which are exchangeable for 4,696,055 ordinary shares in the Company at an exchange price of 14.8 pence (April 2021) and for 4,880,971
ordinary shares in the Company at an exchange price of 14.3 pence (August 2021). A further 550,000 ordinary shares were issued when employee share
options were exercised in June 2021.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
67
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2021
Non-current assets
Property, plant and equipment
Right-of-use asset
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Lease liabilities
Other liabilities and provisions
Total current liabilities
Net current assets
Non-current liabilities
Lease liabilities
Other long-term liabilities and provisions
Net assets
Equity
Called up share capital
Share premium account
Merger relief reserve
Other reserves
Retained losses
Total equity
Notes
2021
£
2020
£
3
6
4
5
7
6
8
6
8
316,271
2,847,914
12,844,075
211,003
2,956,495
20,302,344
16,008,260
23,469,842
11,858,090
3,186,306
15,628,787
350,142
15,044,396
15,978,929
1,243,121
346,235
831,795
1,964,581
300,511
512,554
2,421,151
2,777,646
12,623,245
13,201,283
2,925,660
–
2,710,123
956,324
2,925,660
3,666,447
25,705,845
33,004,678
11
12
12
12
12
32,668,033
67,259,741
12,970,330
4,914,314
(92,106,573)
32,561,452
51,179,685
12,937,797
3,069,382
(66,743,638)
25,705,845
33,004,678
The Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these statements.
The Company’s loss after tax was £26,164,819 (2020: loss £4,000,851).
The financial statements were approved by the Board of Directors and authorised for issue on 11 August 2021 and are signed on its behalf by:
Adam Reynolds
Chairman
Company Registration No. 03971582
68
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2021
Balance at 31 March 2019
Year ended 31 March 2020
Profit and total comprehensive profit for
the year
Transactions with owners
Issue of share capital
Issue of share capital on acquisition
Share-based payment
Share issue expenses
Notes
Share capital
£
Share premium
account
£
Other
reserves
£
Merger relief
reserve
£
Retained
losses
£
Total
£
32,403,969
37,971,265
3,069,382
10,012,644
(64,344,533)
19,112,727
–
–
132,902
24,581
–
–
14,197,534
–
–
(989,114)
–
–
–
–
–
–
(4,000,851)
(4,000,851)
–
2,925,153
–
–
–
–
1,601,746
–
14,330,436
2,949,734
1,601,746
(989,114)
Balance at 31 March 2020
32,561,452
51,179,685
3,069,382
12,937,797
(66,743,638)
33,004,678
Year ended 31 March 2021
Loss and total comprehensive loss
for the year
Transactions with owners
Issue of share capital
Issue of share capital on acquisition
Share issue expenses
–
–
–
–
(26,164,819)
(26,164,819)
11
106,402
179
–
17,148,527
–
(1,068,471)
–
1,844,932
–
32,533
–
–
–
–
801,884
17,287,462
1,845,111
(266,587)
Balance at 31 March 2021
32,668,033
67,259,741
4,914,314
12,970,330
(92,106,573)
25,705,845
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
69
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
2021
£
2020
£
(26,164,819)
(4,000,851)
192,929
(474,907)
9,540,064
12,388,483
71,053
513,757
–
801,884
(85,094)
(31,499)
115,072
(402,982)
–
104,521
305,437
–
(26,002)
1,601,746
–
17,978
(6,265,235)
(721,459)
(5,089,685)
1,253,352
(10,234,843)
(6,121,414)
(176,322)
(2,602,286)
–
(207,290)
(6,339,667)
3,595
(2,778,608)
(6,543,362)
16,186,459
(143,915)
(192,929)
13,341,321
(225,296)
(115,072)
15,849,615
13,000,953
2,836,164
350,142
3,186,306
336,177
13,965
350,142
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2021
Cash flow from operating activities
Loss for the year before tax
Adjustments for:
Finance costs
Finance income
Impairment of Investments
Impairment of Intercompany loans
Depreciation and impairment of property, plant and equipment
Depreciation and impairment of right of use asset
Gain on revaluation of right of use asset
Share-based payment and warrant expense
Decrease in provisions
Foreign exchange movement
Movements in working capital:
Increase in trade and other receivables
Increase/(Decrease) in trade and other payables
Net cash outflow from operating activities
Investing activities
Purchase of property, plant and equipment
Investment in subsidiaries
Interest received
Net cash used in investing activities
Financing activities
Net proceeds from issue of shares
Repayment of Lease liability obligations
Interest paid
Net cash generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
70
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2021
1 Accounting Policies
Company information
Yourgene Health PLC (the Company), is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is
Citylabs 1.0, Nelson Street, Manchester, England, M13 9NQ.
Accounting convention
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance
with applicable accounting standards.
The financial statements have been prepared under the historical cost convention, except for those transactions recognised at fair value as detailed below.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
(a) The requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of:
(i) Paragraph 79(a)(iv) of IAS 1;
(ii) Paragraph 73(e) of IAS 16 ‘Property, Plant and Equipment’.
(b) The requirements of paragraphs 10(d), 10(f), 39(c) and 134–136 of IAS 1 ‘Presentation of Financial Statements’.
(c) The requirements of IFRS 2 paragraph 45 (b) and 46-52.
(d) The requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67 of IFRS 3
Business Combinations.
(e) The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
(f) The requirements of IFRS 7 ‘Financial Instruments: Disclosures’.
(g) The requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’.
(h) The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more members of the Group,
provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the financial statements.
The principal accounting policies adopted are set out below.
Going concern
See note 1 to the consolidated financial statements for the Group’s going concern policy.
Revenue
Revenue is recognised at the fair value of the consideration received or receivable for management services provided and is shown net of VAT and other
sales-related taxes. Revenue is recognised when services are provided.
Property, plant and equipment
Property, plant and equipment are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is provided to write off the cost, less estimated residual values, of all non-current assets, evenly over their expected useful lives. It is calculated at
the following rates:
Leasehold land and buildings
Plant and equipment
Computer software and hardware
20% straight line
20%–25% straight line
25%–33% straight line
Non-current investments
Investments held as fixed assets are stated at cost less any provision for impairment. The investments are reviewed for impairment at the balance sheet date
in addition to whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected discounted future cash
flow from the use of the assets and their eventual disposition is less than the carrying amount of the assets, an impairment loss is recognised and measured
using the asset’s fair value or discounted cash flows.
Impairment of tangible and intangible assets
Property, plant and equipment are reviewed for impairment at the balance sheet date in addition to whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the expected discounted future cash flow from the use of the assets and their eventual disposition is less
than the carrying amount of the assets, an impairment loss is recognised and measured using the asset’s fair value or discounted cash flows.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
71
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
1 Accounting Policies continued
Fair value measurement
IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather
provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the
principles that the Company uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised
or disclosed. IFRS 13 mainly impacts the disclosures of the Company. It requires specific disclosures about fair value measurements and disclosures of fair
values, some of which replace existing disclosure requirements in other standards.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments maturing within 90 days
from the date of acquisition that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Financial assets
Financial assets are recognised in the Company’s Statement of Financial Position when the Company becomes party to the contractual provisions of
the instrument.
Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is determined at the
time of recognition.
Financial assets are initially measured at fair value plus transaction costs, other than those classified as fair value through profit and loss, which are measured at
fair value.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through
the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are measured
subsequent to initial recognition at amortised cost using the effective interest rate method.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired (a) where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been affected, or (b) where there are expected credit losses in the next reporting
period as required by IFRS 9.
De-recognition of financial assets
Financial assets are de-recognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership to another entity.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost
using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net
carrying amount on initial recognition.
De-recognition of financial liabilities
Financial liabilities are de-recognised when, and only when, the Company’s obligations are discharged, cancelled, or they expire.
Equity instruments
Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs. Dividends payable on equity instruments are
recognised as liabilities once they are no longer at the discretion of the Company.
72
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Provisions
Provisions are recognised when the Company has a legal or constructive present obligation as a result of a past event, it is probable that the Company will be
required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into
account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset
if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of
inventories or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the Company is demonstrably committed to terminate the employment of an
employee or to provide termination benefits.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Share-based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the profit and loss account over the vesting
period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so
that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions
are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after
the modification, is also charged to the statement of comprehensive income over the remaining vesting period.
Where share-based options are awarded to employees of subsidiaries the charge in respect to the share-based payments is treated as a capital contribution
and forms part of the investment in that subsidiary.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees.
The adoption of the IFRS 16 standard has resulted in the Company recognising a right-of-use asset and related lease liability in connection with former
operating leases except for those identified as low-value or having a remaining lease term of less than 12 months.
Foreign exchange
The functional currency of the Company is Pounds Sterling. Foreign currency transactions are translated at the rates ruling when they occurred.
Foreign currency monetary assets and liabilities are translated at the rates of exchange ruling at the balance sheet dates. Any differences are taken
to the income statement.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
73
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
2 Critical Accounting Estimates and Judgements
The preparation of the Company’s financial statements requires the Company to make estimates and judgements that effect the application of policies and
reported amounts. In applying these policies the Directors are required to make estimates and subjective judgements that may affect the reported amounts
of assets and liabilities at the reporting date and reported profit or loss for the period. Although the Directors base these on a combination of past experience
and any other evidence that is relevant to the particular circumstance, the actual results could ultimately differ from those estimates.
Included in the note are accounting policies which cover areas that the Directors consider require estimates and assumptions which have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities within the next financial period. These policies together with references to the
related notes to the financial statements can be found below:
Critical judgements
Note 3 to the consolidated financial statements describes those judgements which affect the Group’s consolidated accounts. Company-specific critical
judgements are noted below.
Impairment and investments
Investments and amounts receivable from subsidiaries are held subject to impairment review. The Group’s management undertakes an impairment review
annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Prior year impairments have also
been reviewed to assess whether the conditions for impairment remain in place or if there are sufficient grounds to reverse some or all of the impairments
made. No impairment reversals have been deemed appropriate in the current reporting period and impairments have been made to the Company’s
investment in Yourgene Health Taiwan Co Ltd and its receivables due from Yourgene Health UK Ltd as described in notes 4 and 5 in these Company accounts.
Growth rates
The value in use of the investment is calculated from cash flow projections for the relevant entity based on financial projections covering a period of five years
plus a terminal value, assumed growth rates and discount rates relevant to the individual entity.
Discount rates
The pre-tax discount rate used for the purpose of impairment assessment for Yourgene Health UK Ltd is 10% (2020: 13%). For the Company’s investments in
Yourgene Health UK Ltd (formerly Premaitha Ltd), Yourgene Health Taiwan (formerly Yourgene Bioscience), Delta Diagnostics Ltd, Yourgene Health France,
Yourgene Health GmbH, Ex5 Genomics and Coastal Genomics Inc, a discount rate of 10% (2020: 13%) was also used for consistency. These discount rates
were benchmarked against externally available cost of capital data and are deemed to be therefore representative.
Cash flow assumptions
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected cash flows. Changes in revenues and
expenditures are based on past experience and expectations of future growth.
3 Property, Plant and Equipment
Cost
At 31 March 2019
Additions
At 31 March 2020
Additions
Disposal
At 31 March 2021
Accumulated depreciation and impairment
At 31 March 2019
Charge for the year
At 31 March 2020
Charge for the year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
4 Investments
Investments in subsidiaries
74
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Leasehold land
and buildings
£
107,523
150,308
257,831
202,582
–
460,413
75,266
30,931
106,197
60,481
166,678
Plant and
equipment
£
524,201
20,878
545,079
9,844
–
554,923
448,224
73,590
521,814
10,573
532,387
293,735
151,634
22,536
23,265
Computer
software
£
–
36,104
36,104
–
(36,104)
–
–
–
–
–
–
–
36,104
Total
£
631,724
207,290
839,014
212,426
(36,104)
1,015,336
523,490
104,521
628,011
71,054
699,065
316,271
211,003
Current
2021
£
–
2020
£
Non-current
2021
£
2020
£
–
12,844,075
20,302,344
Movements in non-current investments
Cost
At 1 April 2020
Investment in subsidiaries
Additions
At 31 March 2021
Impairment of Investments
Charge for the year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Shares
£
20,302,344
2,081,795
22,384,139
9,540,064
9,540,064
12,844,075
20,302,344
Refer to note 18 to the consolidated financial statements for details of subsidiary entities.
The additions in the year represent the investment in Ex5 Genomics and Yourgene Health Canada Ltd.
The impairment provision of £9,540,064 (2020: NIL) recognised in the current year is in respect of the Company’s investment in Yourgene Health (Taiwan) Co.
Ltd. This resulted from significantly lower forecast cashflows which could not support the carrying value of the investment. The investment value was
impaired in full.
The Company indirectly acquired Coastal Genomics Inc in August 2020 through its wholly-owned Yourgene Health Canada Ltd subsidiary. The acquisition was
undertaken because of the exciting opportunities open to its Ranger® Technology in the USA and globally, and in multiple fields of application. The impairment
test of Yourgene Health plc’s investment in Yourgene Health Canada Ltd reflects these significant opportunities and results in no impairment, with headroom
of £1.8m (against an investment and intercompany receivables amount of £4.9m). This impairment test is based on high anticipated revenue and margin
growth in Coastal Genomics Inc which as a result generates profits and cash. If revenue is 9% lower than expected then an impairment would be required.
Even if revenues do grow as anticipated, if margins are 6% below those anticipated then an impairment will also be required.
A fourth consideration payment of US$4.0m is contractually payable in April 2023 if the acquired company’s revenues achieve a stretch target in the financial
year to 31 March 2022. This stretch target is not deemed probable to be achieved and the liability for the fourth payment is deemed a contingent liability.
5 Trade and Other Receivables
Trade and other receivables
VAT recoverable
Amounts due from subsidiary undertakings
Prepayments
Current
2021
£
219,564
114,803
11,264,210
259,513
2020
£
123,212
115,338
15,229,426
160,810
11,858,090
15,628,787
The outstanding loan receivable from Yourgene Health UK Ltd of £16,014,003 was tested for impairment. The impairment testing identified the forecast
cashflows could not support the carrying value of the outstanding loan, as result the outstanding loan has been partially impaired by £12,388,483 (2020: nil).
Non loan trading amounts due from subsidiary undertakings were assessed in accordance with IFRS 9, it is deemed that there is no significant increase in
credit risk and that a 12-month Expected Credit Losses assessment is appropriate, as defined by IFRS 9. Expected credit losses in the next 12 months are
deemed to be zero as the conditions for partial default are not deemed to be present.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
75
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
6 Leases
Lease liabilities
The Company has a number of leases for property. On adoption of IFRS 16 it recognised lease liabilities in relation to property leases which had previously
been classified as operating leases under the principles of IAS 17 ‘Leases’. The lessee’s incremental borrowing rate applied to the lease liabilities on
1 April 2019 was based on comparable loan interest rates in the relevant jurisdiction where the lease is operable.
At 1 April 2019 on transition
Additions
Lease payments
Interest expense
Terminations and amendments
At 31 March 2020
Additions
Lease payments
Interest expense
At 31 March 2021
Current
Non-current
At 31 March
Property
£
Motor vehicles
£
1,104,101
2,817,382
(336,014)
110,718
(685,553)
3,010,634
322,193
(305,431)
187,424
–
–
–
–
–
–
82,982
(29,292)
3,385
Total
£
1,104,101
2,817,382
(336,014)
110,718
(685,553)
3,010,634
405,175
(334,723)
190,809
3,214,820
57,075
3,271,895
2021
2020
346,235
2,925,660
300,511
2,710,123
3,271,895
3,010,634
Right-of-use assets
Right-of-use assets for these property leases were measured at the amount equal to the lease liability as at the IFRS 16 adoption date. There were no
onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Cost
At 1 April 2019 on transition
Additions
Terminations and amendments
At 31 March 2020
Additions
At 31 March 2021
Accumulated depreciation and impairment
Charge for the year
Eliminated on termination and amendment
At 31 March 2020
Charge for the year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Right-of-use asset:
property
£
Motor vehicles
£
Total
£
1,104,101
2,817,382
(777,176)
3,144,307
322,193
3,466,500
305,437
(117,626)
187,811
491,108
678,919
–
–
–
–
82,982
82,982
–
–
–
22,649
22,649
1,104,101
2,817,382
(777,176)
3,144,307
405,175
3,549,482
305,437
(117,626)
187,811
513,757
701,568
2,787,581
2,956,496
60,333
2,847,914
–
2,956,496
Changes to property leases
To support the growth of the UK business further UK property leases were taken out in March, October and November 2020.
76
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
7 Trade and Other Payables
Trade payables
VAT payable
Amounts due to fellow Group undertakings
Accruals
Social security and other taxation
Other payables
8 Provisions for Liabilities
Current liabilities
Acquisition – additional consideration
Non-current liabilities
Acquisition – additional consideration
Current
2021
£
384,994
23,299
606,876
155,772
65,326
6,854
2020
£
601,861
–
1,181,100
128,582
32,475
20,563
1,243,121
1,964,581
Non-current
2021
£
2020
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2021
£
–
831,795
–
–
2020
£
–
512,554
–
956,324
The current liability represents the contingent consideration due on the acquisition of Yourgene Health France SAS (formerly AGX-DPNI SAS), The
outstanding amount was paid in April 2021.
Following the acquisition of Coastal Genomics Inc a consideration payment of US$4.0m is contractually payable in April 2023 if the acquired company’s
revenues achieve a stretch target in the financial year to 31 March 2022. This stretch target is not deemed probable to be achieved and the liability for the
fourth payment is deemed a contingent liability.
Movements on provisions
At 1 April 2020
Release of provision
Foreign currency variance
Payment made
At 31 March 2021
Acquisition–
additional
consideration
£
1,468,878
(85,094)
(31,498)
(520,491)
831,795
For further details on the nature of provisions and payment see notes 18 and 22 of the consolidated financial statements.
9 Retirement Benefit Schemes
Defined contribution schemes
The Company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the
Company in an independently administered fund.
The total costs charged to income in respect of defined contribution plans is £45,590 (2020: £38,090).
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
77
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2021
10 Share-based Payment Transactions
The Company issues share options to both its own employees and employees of its subsidiary. In September 2020 the Group introduced an HMRC-approved
Share Incentive Plan (‘SIP’) for employees of Yourgene Health Plc and its subsidiaries. Details of the Share option scheme and share incentive plan are detailed
in note 29 of consolidated financial statements.
11 Thermo Fisher Scientific Loans and Warrants
On 11 December 2015, the Group entered into a share warrant agreement with Thermo Fisher, issuing warrants over 20,325,204 shares to Thermo Fisher.
The warrants have an exercise price of 24.6p per share, and have a term of eight years. On 22 September 2016, the Group granted two further tranches of
warrants to Thermo Fisher on the same terms. These are respectively the 2016 and March 2017 warrants. The Group assessed the accounting treatment of
the warrants based on their fair values. In February 2019 Thermo Fisher converted two tranches of warrants into ordinary shares and cancelled all remaining
loans as part of a commercial and corporate restructuring as described in note 30 to the consolidated financial statements.
12 Share Capital
For details of share capital see note 28 of the consolidated financial statements.
13 Reserves
Refer to note 28 to the consolidated financial statements.
14 Related Party Transactions
No guarantees have been given or received.
The Company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose transactions with entities that are wholly owned
subsidiaries of Yourgene Health PLC.
There are no other related party transactions other than those relating to Directors that have been disclosed in note 32 to the consolidated financial statements.
15 Controlling party
The Company does not have an ultimate controlling party.
16 Events After the Reporting Date
After the end of the reporting period the Company has continued to support its subsidiary companies which are expanding their UK-based COVID testing
routes to market including into the retail pharmacy and travel sectors and through successful entry into the UK Government’s National Microbiology
Framework. The Company’s US-based subsidiary also entered into a second qualifying commercial agreement for the Ranger® Technology acquired in
August 2020 with Coastal Genomics Inc, another Company subsidiary, triggering the second of two equity earn-out issuances, and creating a commercial
platform with leading US-based market participants. In a separate announcement, the US subsidiary also entered into a multi-year licence and supply
agreement with another leading US diagnostic testing partner, furthering its US market penetration.
Post period end additional ordinary shares of 81,899 (April 2021) and 85,124 (August 2021) were issued as consideration shares in relation to the Coastal
Genomics Inc acquisition first and second earn out targets. As part of satisfying the same earn-out conditions shares in Yourgene Health Canada Investments
Ltd were issued which are exchangeable for 4,696,055 ordinary shares in the Company at an exchange price of 14.8 pence (April 2021) and for 4,880,971
ordinary shares in the Company at an exchange price of 14.3 pence (August 2021). A further 550,000 ordinary shares were issued when employee share
options were exercised in June 2021.
78
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
GLOSSARY
OF TECHNICAL TERMS AND MEASUREMENTS
Autosomal aneuploidies
Aneuploidy is the presence of an abnormal number of chromosomes in a cell, but not including the sex
chromosome aneuploidies. An extra or missing chromosome is a common cause of some genetic disorders. Some
cancer cells also have abnormal numbers of chromosomes.
Amniocentesis
Cystic Fibrosis (CF)
CVS
Fetal Fraction
IFU
IVD
An invasive diagnostics procedure that involves removing and testing a small sample of cells from the amniotic fluid.
It is offered to pregnant women if there is a high risk that the fetus could have a genetic condition. It carries
a small risk of miscarriage.
Cystic Fibrosis is a genetic disorder that affects mostly the lungs, but also the pancreas, liver, kidneys and intestine.
Long-term issues include difficulty breathing and coughing up mucus as a result of frequent
lung infections.
Chorionic Villus sampling (CVS) is a prenatal test that is used to detect birth defects, genetic diseases and
other problems during pregnancy. During the test, a small sample of cells (called chorionic villi) is taken from
the placenta.
Fetal fraction is the amount of the cell-free DNA in the maternal blood that is of fetal origin compared to maternal
origin. If the fetal fraction is too small an NIPT screening will not produce a result.
Instructions For Use – a detailed document that explains how to use the kit within the lab for that intended use.
‘In vitro’ diagnostic.
Male Factor Infertility (MFI)
Inability to conceive conception after 12 months due to the presence of some genetic mutations in the
male partner.
Microdeletion
Mutation
A small, missing (or ‘deleted’) piece of a chromosome is called a microdeletion. Microdeletions are usually not
inherited from a parent. Some microdeletions cause intellectual disability and birth defects, while others have little
impact on a child’s health and life.
A mutation is a change that occurs in our DNA sequence, either due to mistakes when the DNA is copied or as
the result of environmental factors.
Next Generation Sequencing (NGS)
Next Generation Sequencing, also known as high-throughput sequencing, is the catch-all term used to describe
a number of different modern sequencing technologies that has revolutionised the study of genomics and
molecular biology.
NHS
NIPT
PCR
Plasma
Precision Medicine
Sex aneuploidy
National Health Service in the UK.
Non-invasive prenatal test.
Polymerase Chain Reaction.
Plasma is the largest single component of blood and makes up about 55% of total blood volume. It is a clear,
straw-coloured liquid and it carries the DNA.
Precision medicine is an emerging approach for disease treatment and prevention that takes into account individual
variability in genes, environment and lifestyle for each person. This approach will allow doctors and researchers to
predict more accurately which treatment and prevention strategies for a particular disease will work in which groups
of people.
Sex chromosome aneuploidies are conditions in which there is a change from the usual two copies of
sex chromosomes in males (XY) or females (XX). These conditions may cause mental or physical defects,
with different levels of severity.
Thrombosis
The formation of a blood clot inside a blood vessel, obstructing the flow of blood through the circulatory system.
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
79
COMPANY OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Non-executive Chairman
Non-executive Vice Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Chief Executive Officer
Chief Entrepreneur
Chief Financial Officer
Chief Operating Officer
Chief Scientific Officer
Nplus1 Singer Capital Markets Limited
One Bartholomew Lane
London EC2N 2AX
COMPANY INFORMATION
Directors
Company Secretary and Registered Office
Nominated Adviser
Joint Brokers
Independent Auditor
Solicitors
Financial PR
Bankers
Registrars
Adam Reynolds
Dr Stephen Little
Nicholas Mustoe
Dr John Brown CBE
Jonathan Seaton
Lyn Rees
Dr Bill Chang
Barry Hextall
Hayden Jeffreys
Dr Joanne Mason
Barry Hextall
Citylabs 1.0
Nelson Street
Manchester M13 9NQ
Cairn Financial Advisers LLP
Cheyne House
Crown Court
62–63 Cheapside
London EC2V 6AX
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Saffery Champness LLP
Trinity
16 John Dalton Street
Manchester M2 6HY
Addleshaw Goddard LLP
One St Peter’s Square
Manchester M2 3DE
Walbrook PR Ltd
4 Lombard Street
London EC3V 9HD
The Royal Bank of Scotland Group
Commercial Banking
1st Floor
1 Hardman Boulevard
Manchester M3 3AQ
Link Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Company Number
03971582
Country of Incorporation of Parent Company
England
80
YOURGENE PLC ANNUAL REPORT AND ACCOUNTS 2021
Y
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1
YOURGENE HEALTH PLC
Citylabs 1.0
Nelson Street
Manchester
M13 9NQ, UK
T: +44 (0) 161 669 8122
Investors@yourgene-health.com
www.yourgene-health.com