ESPERITE N.V. (ESP) publishes its half-year report
Revenues and results were unexpectedly impacted by pending legal actions.
CEO, Frédéric Amar will convert 1.5 million shares and will subscribe to 1 million new shares to support the business.
Zutphen, the Netherlands – 2 October 2017
- Esperite NV (Euronext: ESP, “Esperite” or “the Group”) has published its financial results (unaudited) for the period of six months ended June 30, 2017 showing a decrease in total revenue to EUR 8.3 million, and cost of sales decreased by 48%.
- The negative EBITDA was balanced by the external financing which is expected to support the future development in addition to the new contribution of the CEO, Frédéric Amar.
- The restructuring and consolidation of the different activities has proven a significant reduction of the OPEX. The Management is confident in the future of the company and in its strategy.
- Despite the pending liquidation process of Genoma, which has affected more than expected the business and the image of the Group, the predictive medicine activity is still promising.
- Genoma Swiss Biotechnology’s unique proprietary technology allowed the Group to launch successfully AGAATA, the new Diagnostic System for Genetic Clinical Laboratories. AGAATA is an advanced diagnostic system covering not only Prenatal diagnostic and Preconception screening but also Oncology and Inherited Diseases. AGAATA will during Q4 2017 offer CE-IVD diagnostic tests in oncology. Breast Cancer and Colo-rectal Cancer Diagnostic are almost finalised as well as a large, 36 genes Cancer Panel.
- AGAATA is distributed through the large network of the Group over more than 20 countries and online. It allows any compatible laboratory to deliver clinical report faster and more reliable
than any competitor.
- CryoSave is consolidating and expanding its distribution network. The company has terminated inefficient distribution agreements and replaced them by internal and better controlled sales teams.
- The Group has created a new technological platform to serve CryoSave and offer Contract Development and Manufacturing Organization (CDMO) to new clients of the pharmaceutical industry.
- Esperite is expanding its growth on new territories. Esperite is developing Russia and Middle East while reinforcing its European footprint with a new partner in Ukraine.
Frédéric Amar, CEO of Esperite Group:
Esperite has experienced turbulent headwind but is now stable again. The new perimeter of the company highlights an efficient structure, cost effective and ready to grow again. The external funding, in addition to my personal contribution, will give the necessary resources to foresee a positive development. Our goal is to become profitable and to reach our financial and commercial targets. The company continues to expand its international presence. Our unique and advanced technology puts us ahead of most of our competitors. Our new regenerative medicine organisation is ready to address new markets in addition to the historical Cord blood offer.
ESPERITE Group, listed at Euronext Amsterdam and Paris, is a leading international company in regenerative and predictive medicine established in 2000.
(all amounts in millions of Euro)
Consolidated revenue decreased by 44% to EUR 8.3 million mainly as a result of the pending liquidation process of Genoma SA, one of the predictive medicine entities of the Group.
Esperite faces some turbulent headwind but currently is recovering market share in several markets. The Management remains confident in the future of the company.
Gross profit margin increased to 59% compared to 56% over the same period last year. The consolidation of the lab activities, renegotiated purchase contracts and change in market approach where sales are mainly made through agents resulted in this increase.
The cost saving program is providing positive results. Operating expenses decreased almost EUR 2.0 million from EUR 9.8 million to EUR 7.9 million. Research and development cost are capitalized in full.
EBITDA for the first half year decreased from EUR 1.5 million negative over the first half year of 2016 to EUR 3.0 million negative over the same period in 2017. Thanks to the new financing the Group was able to finance this result.
Amortisation and depreciation increased due to an impairment of intangible assets regarding Genoma SA for the amount of EUR 1.0 million.
Net finance result increased significantly. The finance income increased due to the change in fair value of the derivative tranche warrant. Finance expense increased due to the amortisation of the accrued interest relating to the tranche warrants.
As a result of the deconsolidation of Genoma SA a gain has been reported amounting to EUR 3.4 million. The negative equity value of Genoma exceeded the invested financing by this amount.
The tax expense consists of 2 major elements. Firstly the deferred tax asset of Genoma SA has been impaired for an amount of EUR 1.5 million. Secondly a deferred tax liability has been recorded in relation to the timing differences regarding the accrued interest and recognised derivative amounting to EUR 0.9 million.
Composition of the Group
On 4 May 2017 Genoma SA, a subsidiary of the Company, was filed for liquidation. Then the deferred tax assets have been impaired by EUR 1.5 million and intangible assets by EUR 1.0 million Based on the control principle in accordance with IFRS, Genoma SA and its subsidiaries Genoma France and Genoma India have been excluded from consolidation.
Genoma SA represented a negative equity value amounting, after deduction of the intercompany finance, to EUR 3.4 million. This amount has been recorded as gain in the condensed consolidated statement of income on a separate line item.
On 8 March 2017 Esperite secured external financing of up to EUR 9 million with L1 Capital to support its commercial activity and development of innovative technologies. The total financing can reach up to EUR 13 million upon exercise of share subscription warrants by the investor. The 100 tranche warrants of the first commitment representing an investment of EUR 1.0 million were exercised on 8 March 2017 into convertible loans and have been fully converted. On 31 May 2017 the company issued the remaining 800 tranche warrants (the “tranche warrants of the second commitment”). From the tranche warrants of the second commitment, 85 tranche warrants representing an investment of EUR 0.9 million have been exercised as per 30 June 2017 of which 82 have been converted into shares. Each tranche warrant gives the investor access to 1 convertible note with a principal amount of EUR 10.000, each with share subscription warrants attached.
During the period under review 250,000 share subscription warrants have been exercised representing an investment amounting to EUR 0.1 million.
In accordance with IFRS the following accounting treatment has been applied:
- Tranche warrants
The initial measurement of the tranche warrants will be at fair value (plus related transaction costs) and subsequent changes in the instrument’s fair value will be recognised in the profit and loss account.
- Convertible notes
The initial measurement of the convertible note will be fair value (plus related transaction costs) and the subsequent measurement will be at amortised cost.
- Share subscription warrants
The initial measurement of the share subscription warrants will be fair value (plus related transaction costs) and recorded in equity. Subsequent changes in the instrument’s fair value will not be recognised.
Total assets remained stable at EUR 42.2 million. On one hand, assets decreased due to impairments recognized in Genoma SA regarding deferred tax assets (EUR 1.5 million) and intangible assets (EUR 1.0 million) and the subsequent deconsolidation of Genoma SA. Furthermore trade and other receivables decrease due to decreased revenue levels.
On the other hand, assets increased due to the accrued interest related to the Tranche warrant. The Tranche warrant has a significant initial value which represents the interest compensation to the investor for providing funding. The interest compensation will be recorded as an interest accrual at amortized cost.
Total liabilities decreased by EUR 0.8 million compared to 31 December 2016 to an amount of EUR 35.0 million. Due to the deconsolidation of Genoma SA liabilities decreased and liabilities increased as a result of the recognition of the derivative liability and a deferred tax liability.
Equity increased by 0.5 million. The net loss amounting to EUR 2.9 million was offset by equity investment from L1 Capital amounting to EUR 1.9 million and EUR 1.4 million regarding the valuation of the share subscription warrants. The remaining EUR 0.1 million was recorded in other comprehensive income.
The operational cash flow decreased mainly due to the operational losses incurred in the period under review.
The cash flow of investing activities amounts to EUR 0.7 million and relates mainly to capitalization of development.
The cash flow from financing activities relates mainly to the investments made by L1 Capital.
Principal risks and uncertainties
Pages 26 – 37 of Esperite’ s Financial Annual report 2016 include an extensive overview of the Group’s principal risks and uncertainties, which are also applicable for the first six months of 2017.
Declaration of Management
The Chief Executive Officer declares that, as far as he is are aware and to the best of his knowledge, the financial statements in this half year report, made up according to the applicable standards for financial statements, give a true and fair view of the equity, financial position and the results of the Group and its consolidated companies. The Chief Executive Officer further declares that this report to the shareholders gives a true and fair view on the information that has to be contained therein.
Zutphen, the Netherlands, 2 October 2017
Frédéric Amar, Chief Executive Officer