Half Year Report
Interim Results for the six months ended 30 September 2016

Collagen Solutions plc (AIM: COS), the developer and manufacturer of medical grade collagen components for use in regenerative medicine, medical devices and in-vitro diagnostics, announces results for the six months ended 30 September 2016.

  1. Chairman's Statement
  2. Statement of Comprehensive Income
  3. Statement of Financial Position
  4. Statement of Changes in Equity
  5. Cash Flow Statement
  6. Notes

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Financial Highlights

  • Revenue and other income increased by 30% to £1,891,001 (H1 2015: £1,460,218)
  • Adjusted LBITDA* of £418,308 (H1 2015: £79,376)
  • Pre-tax loss of £983,313 (H1 2015: £356,537)
  • Basic and diluted loss per share of 0.60p (H1 2015: 0.26p)
  • Cash and cash equivalents of £1,657,193 at 30 September 2016 (31 March 2016: £2,493,146)

*excluding separately identifiable items

Operational Highlights

  • Appointment of a new CEO, Jamal Rushdy
  • Progress with lead "finished device" (ChondroMimetic) towards initiating 6-year retrospective study and re-establishing manufacturing and European approvals
  • Initiated two additional "finished device" projects for wound repair and bone healing, addressing significant commercial opportunities in the orthopaedic and wound care markets
  • Global commercial team has been strengthened with new hires in sales and marketing
  • Commercial offices have been opened in Seoul, South Korea and Minneapolis, USA
  • Completed several strategic initiatives to build sustainability and scalability in sales, marketing, OEM process and supply chain, including a Global branding launch
  • Continued progress with our distribution channels in Asia and in China via our Cre8ive JV
  • Invited to participate in a second Horizon 2020 grant funded research programme worth c. €500k to the Company over five years

Post Period End

  • The management team has been strengthened by appointment of Kevin Darling as New Zealand General Manager.
  • Distribution agreements have been signed for research markets in South Korea and Japan.

Jamal Rushdy, Chief Executive Officer of Collagen Solutions, commented: "I am pleased to report on the continued momentum in our core biomaterials contract development, supply, and manufacturing business. Recent investment in sales and marketing, and in particular talent, systems and processes, has resulted in improved operational efficiency. In addition, our integration of R&D efforts globally has resulted in a more focused pipeline of near-term finished device projects that will address major markets in orthopaedics and wound care, including our flagship ChondroMimetic programme. We are on track to initiate a six-year retrospective study for ChondroMimetic with new data to demonstrate long-term tissue regeneration with 3D MRI analysis as well as sustainability of the early positive functional results, and in parallel obtain the CE mark in 2017. Together, we believe that the progress made during the period set the strategic foundations on which we will base our objective to grow our revenue by 5x within 5 years."

About Collagen Solutions:

Collagen Solutions Plc is a global provider of medical grade collagen formulations and components for use in regenerative medicine, medical devices and in-vitro diagnostics and research. The capabilities of the Company include the provision of native, soluble and powdered collagen formulations, processed and semi-processed tissues such as pericardium, bone, and blood vessels, and expertise in the development and contract manufacture of collagen components for use as engineered tissue scaffolds and other medical devices. These products are used in a wide variety of applications including orthopaedics, cardiovascular, dental, plastic surgery, wound healing, neurology and urology. Collagen Solutions' unique offering extends beyond material supply and contract services through the highly skilled staff who support customers through the various stages of development and regulatory approval. For additional information, please visit www.collagensolutions.com.

 

Chairman's Statement

I am pleased to present Collagen Solutions' interim results for the six-month period ended 30 September 2016. During the period, we saw substantial progress made, not only in solidifying our core business and strategy, but also in establishing a strong R&D pipeline of finished devices that will create additional value in the next several fiscal years.

The Group's vision is to become the industry's first choice for regenerative biomaterials by assisting customers in expediting the transition of their products from development through to manufacture. Further, we aim to provide cost effective, functional medical grade collagen materials and devices and also to develop our own finished devices across a range of clinical indications, for the ultimate benefit of patients by providing effective and affordable treatments.

Overview
During this six-month period, revenue (including other income) has increased by around 30% over the H1 2015/16. Revenue growth has come both from our material supply and contract manufacturing activities.

We have refined our goal to create significant shareholder value by setting an ambitious, but achievable, target to grow our revenue by 5x within 5 years, and set upon a detailed multi-phase approach to achieve this:

  • Revenue acceleration of core business with business-to-business sales and marketing investments, and improved processes
  • Establishing channel partners in selected segments, including distributors for the research markets based in the USA, UK, South Korea and Japan
  • Geographic expansion, such as in China with the Cre8ive JV
  • Commercialisation through licensing and partnering of "finished devices" including ChondroMimetic, which represents a significant value-creating opportunity, followed by next stage products for wound and bone healing.

In September 2016, the Group was invited to join a second Horizon 2020 grant funded research programme, related to cell-based tissue regeneration techniques. The project is expected to begin in early 2017 and will run for approximately five years, over which Collagen Solutions will receive approximately €500,000 of European Union funding.

Results

The Group's results for the six months ended 30 September 2016 are set out in the Consolidated Statement of Comprehensive Income. Revenue (including other income) for the first six months was up significantly to £1,891,001 (H1 2015: £1,460,218), driven by new products and customers as well as increased revenues from existing customers. Administrative expenses (excluding separately identifiable items) were £1,341,652 (H1 2015: £898,284) reflecting the increase in headcount over the comparable period in the areas of R&D, quality, operations and finance and administration, and also the increased costs of additional office and production space. Selling and marketing costs were £417,143 (H1 2015: £266,300) due to the strengthening of the global commercial team, with four new hires in sales and marketing, together with the execution of various marketing initiatives. Adjusted LBITDA for the first six months was £418,308 (H1 2015: £79,376), and the basic and diluted loss per share 0.60p (H1 2015: 0.26p).

Net cash used in operations during the period was £696,751. The Group's cash balance at 30 September 2016 was £1,657,193 (31 March 2016: £2,493,146).

Board and management

In May 2016, we announced a leadership change which will allow the Group to accelerate its strategic plans and initiatives. Jamal Rushdy, who originally joined the senior management team as Chief Business Officer and has over 20 years' experience in the medical device arena took on the role of Chief Executive Officer. He has a track record of building businesses with successful exits and transforming organisations through integration and performance improvement. Under his direction, the Executive Team will focus on execution of the strategic plan.

Moving to the role of Chief Scientific Officer, Dr Stewart White, Collagen Solutions' founder, now leads our R&D and product-related corporate activities and is focusing on the Company's product development and innovation platform, whilst also realising further opportunities from the portfolio of IP asset acquired from Orthomimentics.

In October 2016, we appointed Kevin Darling as General Manager of our New Zealand operations to succeed Geoff Bennett. Kevin has 20 years commercial, sales and marketing and operational experience with organisations such as 3M (Medical), ensuring the continued scalability of this critical segment of our core business.

Geoff will transition to a Non-Executive role on 1 January 2017, bringing a balance to the composition of the Board and providing continuity and oversight of our New Zealand business.

Current Outlook

We now have greater clarity and visibility not only into our core business and near-term pipeline, but also with respect to specific strategic initiatives. Over the coming years, these initiatives will build upon the strong foundation of customers, people and technologies we have developed since the inception of the Group. In particular I am encouraged by the focus and resource dedication to our three main finished device projects, including the exciting progress being made with ChondroMimetic.

While we are still early in the transformation and acceleration of the Company, I believe we have made prudent investments in our core business and the management team is focused on the right priorities for sustainable growth towards our goals for this fiscal year.

In the longer term, I feel confident that our target of 5x revenue within 5 years is achievable, based upon the strategy that the management team is executing against.

I continue to be excited about the vision for Collagen Solutions to become the industry's first choice for regenerative biomaterials and thank you for your support.

 

David E Evans
Chairman

16 December 2016

 

Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2016

    Unaudited six
months ended 30
September 2016
Unaudited six
months ended 30
September 2015
Audited year
ended 31
March 2016
  Notes £ £ £
REVENUE   1,830,662 1,441,866 3,129,862
         
Cost of sales   (525,512) (351,010) (811,327)
         
Gross profit   1,305,150 1,090,856 2,318,535
Share-based compensation   (25,002) (24,000) (35,831)
Administrative expenses        
(excluding separately identifiable items)   (1,341,652) (898,284) (2,473,689)
Separately identifiable items                                    4 (294,229) - 152,365
Total Administrative expenses   (1,635,881) (898,284) (2,321,324)
Selling and marketing costs   (417,143) (266,300) (333,426)
Other income   60,339 18,352 114,395
         
LOSS BEFORE INTEREST TAX        
DEPRECIATION AND AMORTISATION   (712,537) (79,376) (257,651)
         
Amortisation and depreciation   (206,224) (155,593) (346,569)
Finance income   2,106 5,136 10,262
Finance expense   (66,658) (126,704) (272,332)
         
LOSS BEFORE TAXATION   (983,313) (356,537) (866,290)
         
Taxation   (53,326) (92,950) (114,174)
         
LOSS FOR THE PERIOD   (1,036,639) (449,487) (980,464)
Attributable to:        
Owners of the parent   (1,026,955) (449,487) (980,464)
Non-controlling interest   (9,684) - -
    (1,036,639) (449,487) (980,464)
         
Currency translation difference   1,387,568 (225,047) (113,585)
Other comprehensive income/(loss)   1,387,568 (225,047) (113,585)
         
TOTAL COMPREHENSIVE GAIN/(LOSS) FOR THE PERIOD   350,929 (674,534) (1,094,049)
Attributable to:        
Owners of the parent   351,597 (674,534) (1,094,049)
Non-controlling interest   (668) - -
    350,929 (674,534) (1,094,049)
         
Basic and diluted loss per share – pence attributed to owners of the parent 3 (0.60p) (0.26p) (0.57p)

 

Consolidated Statement of Financial Position
As at 30 September 2016

ASSETS
Non-current assets
Notes Unaudited
30 September
2016
Unaudited
30 September
2015
Audited
31 March
2016
    £ £ £
Intangible assets   14,326,420 12,883,225 12,971,078
Property, plant and equipment   1,250,552 892,443 1,160,852
    15,576,972 13,775,668 14,131,930
Current assets        
Inventories   410,081 213,842 264,074
Trade and other receivables   851,529 523,785 636,044
Cash and cash equivalents   1,657,193 3,104,230 2,493,146
    2,918,803 3,841,857 3,393,264
Total assets   18,495,775 17,617,525 17,525,194
         
EQUITY AND LIABILITIES        
Equity attributable to equity holders of the parent company        
Share capital 5 1,841,213 1,759,038 1,759,038
Share premium   8,835,508 7,845,973 7,892,330
Share-based payment reserve   112,226 75,393 87,224
Shares to be issued reserve   1,025,353 - 2,050,706
Merger reserve   4,531,798 4,578,155 4,531,798
Non-controlling interest reserve   132,665 - -
Translation reserve   1,537,970 47,956 159,418
Retained deficit   (3,611,009) (2,053,077) (2,584,054)
Total equity   14,405,724 12,253,438 13,896,460
         
Non-current liabilities        
Deferred tax   235,992 271,551 253,112
Other financial liabilities   2,538,779 2,541,703 2,437,100
Borrowings   60,138 64,542 62,837
    2,834,909 2,877,796 2,753,049
Current liabilities        
Trade and other payables   888,721 409,396 829,354
Income tax liabilities   15,293 74,392 -
Other financial liabilities   325,703 1,984,829 25,353
Borrowings   25,425 17,674 20,978
    1,255,142 2,486,291 875,685
Total liabilities   4,090,051 5,364,087 3,628,734
Total liabilities and equity   18,495,775 17,617,525 17,525,194

 

Consolidated Statement of Changes in Equity
For the six months ended 30 September 2016

  Share
Capital
Share
Premium
Account
Share-Based
Payment
Reserve
Shares to be
issued
Reserve
Merger
Reserve
Translation
Reserve
Retained
Deficit
Total Non-
Controlling
Interest
Total
Equity
  £ £ £ £ £ £ £ £ £ £
As at 1 April 2015 1,754,689 7,845,973 51,393   4,531,798 273,003 (1,603,590) 12,853,266 - 12,853,266
Issue of shares on acquisition of assets 4,349 - - - 46,357 - - 50,706 - 50,706
Total transactions with owners in their capacity as owners 4,349 - - - - - - 50,706 - 50,706
Share Based Compensation - - 24,000 -       24,000 - 24,000
Loss for period - - - - - - (449,487) (449,487) - (449,487)
Currency translation difference - - - - - (225,047)  
-
(225,047) - (225,047)
Loss and total comprehensive income for period - - - - - (225,047) (449,487) (674,534) - (674,534)
As at 30 September 2015 1,759,038 7,845,973 75,393 - 4,578,155 47,956 (2,053,077) 12,253,438 - 12,253,438
Shares to be issued to                    
Collbio vendors as contingent consideration - - - 2,000,000 - - - 2,000,000 - 2,000,000
Shares to be issued on acquisition of assets - 46,357 - 50,706 (46,357) - - 50,706 - 50,706
Share Based Compensation - - 11,831 - - - - 11,831 - 11,831
Loss for period - - - - - - (530,977) (530,977) - (530,977)
Currency translation difference - - - - - 111,462 - 111,462 - 111,462
Loss and total comprehensive income for period - - - - - 111,462 (530,977) (419,515) - (419,515)
As at 31 March 2016 1,759,038 7,892,330 87,224 2,050,706 4,531,798 159,418 (2,584,054) 13,896,460 - 13,896,460
Issue of shares on acquisition of assets 2,175 23,178 - (25,353) - - - - - -
Issue of shares to Collbio vendors 80,000 920,000 - (1,000,000) - - - - - -
Total transactions with owners in their capacity as owners 82,175 943,178 - (1,025,353) - - - - - -
Share Based Compensation - - 25,002 - - - - 25,002 - 25,002
Non-controlling interest share of net assets - - - - - - - - 133,333 133,333
                     
Loss for period - - - - - - (1,026,955) (1,026,955) (9,684) (1,036,639)
Currency translation difference - - - - - 1,378,552  
-
1,378,552 9,016 1,387,568
Loss and total comprehensive income for period - - - - - 1,378,552 (1,026,955) 351,597 (668) 350,929
As at 30 September 2016 1,841,213 8,835,508 112,226 1,025,353 4,531,798 1,537,970 (3,611,009) 14,273,059 132,665 14,405,724

 

Consolidated Statement of Cash Flows
For the six months ended 30 September 2016

  Unaudited six
months ended 30
September 2016
Unaudited six
months ended
30 September 2015
Audited year
ended 31
March 2016
  £ £ £
CASH FLOW FROM OPERATING ACTIVITIES      
Loss before taxation (983,313) (356,537) (866,290)
Share based compensation 25,002 24,000 35,831
Depreciation 114,126 72,505 175,039
Amortisation 92,098 83,088 171,350
Increase/(decrease) in contingent consideration 294,229 - (192,393)
Finance expense 66,658 126,704 272,332
Finance income (2,106) (5,136) (10,261)
Loss on sale of property, plant and equipment - - (689)
Increase in inventories (136,061) (5,289) (47,773)
(Increase)/decrease in trade and other receivables (140,561) 87,673 (9,954)
Increase in trade and other payables 22,056 75,427 479,308
CASH (USED IN)/GENERATED FROM OPERATIONS (647,872) 102,435 6,680
Interest paid (3,513) (3,160) (7,844)
Taxation paid (45,366) (63,831) (193,657)
Net cash (used in)/generated from operations (696,751) 35,444 (194,821)
INVESTING ACTIVITIES      
Proceeds from sale of fixed assets - - 746
Payments to acquire property, plant and equipment (98,915) (149,245) (464,327)
Payments to acquire licensed IP, patents and intangibles (70,803) (92,523) (206,692)
Interest received 2,106 5,136 10,261
Payment of deferred consideration (25,353) - -
Net cash used in investing activities (192,965) (236,632) (660,012)
FINANCING ACTIVITES      
Repayment of related party loan (11,050) (13,864) (25,591)
NET CASH USED IN FINANCING ACTIVITIES (11,050) (13,864) (25,591)
Net decrease in cash and cash equivalents (900,766) (215,052) (880,424)
Effect of foreign exchange rates on the balance of cash held in foreign currencies 64,813 (72,074) (17,786)
Net decrease in cash and cash equivalents (835,953) (287,126) (898,210)
Cash and cash equivalents at the beginning of the financial period 2,493,146 3,391,356 3,391,356
Cash and cash equivalents at the end of the financial period 1,657,193 3,104,230 2,493,146

 

Notes

The notes to the financial statement are available in the PDF download.

 

Page last updated: 19 December 2016