Sensyne Health
Full Year Results
Oxford, U.K. 30 September 2020: Sensyne Health plc (LSE: SENS) (“Sensyne” or the “Company” or the “Group”), the UK Clinical AI company, today announces its audited full year results for the 12 months ended 30 April 2020.
Lord (Paul) Drayson PhD, CEO of Sensyne Health, said:
“Sensyne has made significant commercial and technological progress in the past 12 months, despite a number of challenges and the dramatic changes triggered by COVID-19. I am particularly proud of how the Company has developed solutions to some of the challenges that have arisen during the course of the pandemic. Sensyne’s achievements over the past year highlight the dedication and proficiency of our employees who are committed to supporting the Company’s mission to improve patient care and accelerate pharmaceutical research.
Recent developments have underlined the growth potential that our model can deliver as healthcare moves towards wider adoption of Clinical AI and remote patient monitoring. We look forward to the future with confidence.”
OPERATING HIGHLIGHTS
- Signed agreements with Cognizant and Agorai as partners for the launch and sale of digital health software products in the US
- Signed first major pharmaceutical collaboration agreement for £5 million with Bayer to accelerate the development of new treatments for stroke and cardiovascular disease using Clinical AI and entered an additional partnership with Bayer on new UK AI ‘LifeHub’ for data-driven drug discovery, disease detection and diagnosis
- Signed research collaboration with Roche to apply AI for clinical trial design
- Signed collaboration with Alexion to study the prevalence and outcomes of patients in disease areas of interest to Alexion
- Launched ‘SENSE™’, a clinical algorithm engine, created in partnership with Microsoft, and signed an agreement with Chelsea & Westminster Hospital NHS Foundation Trust to help provide more personalised care for patients with COVID-19
- Launched COVID-19 web-based CVm-Health™ ‘Good Neighbour’ app in the UK and in the US with support from Microsoft and Cognizant
- Entered into the LAB10x partnership with Evotec, Oxford University Innovation, Oxford Sciences Innovation and the University of Oxford to accelerate the commercialisation of next generation digital therapeutics and data-driven drug discovery
POST-PERIOD EVENTS HIGHLIGHTS
- Launched BPm-Health™ remote monitoring system in the UK for the management of blood pressure in pregnancy in response to COVID-19 pandemic
- Announced the development of DBm-Health™, a new software product for people with or at risk of diabetes
- Supplied GDm-Health™, CVm-Health and BPm-Health products for free to the NHS during COVID-19 pandemic
- Entered into a formal research agreement with the UK Medicines and Healthcare products Regulatory Agency (MHRA) to contribute to the development of methods to validate software algorithms used in digital health
FINANCIAL HIGHLIGHTS
- Total revenues of £2.1m for the year to 30 April 2020 (2019: £0.1m)
- Research and development expenditure of £11.4m (2019: £9.51m)
- Adjusted operating loss from continuing operations of £16.0m (2019: £11.5m)
- Adjusted cash used in operations of £13.5m (2019: £9.8m)
- Cash and cash equivalents of £31.7m at 30 April 2020 (2019: £49.3m)
- Adjusted loss per share of £0.12 (2019: £0.10)
- Operating loss of £22.4 (2019: £19.0m)
Analyst and Investor Briefing
Lord Drayson, Chief Executive Officer, and Michael Norris, Interim Chief Financial Officer, will present the full-year results for analysts and investors today at 14:00 BST. There will be a simultaneous live conference call and webcast. For more details please contact radu@consilium-comms.com at Consilium Strategic Communications. A short scientific presentation will also take place after the results presentation Q&A.
A replay of today's webcast of the meeting and the presentation slides will be available on the investor section of Sensyne Health's website after the event at https://www.sensynehealth.com/investors/investor-hub.
-ENDS-
For more information please contact:
| Sensyne Health (www.sensynehealth.com) | +44 (0) 330 058 1845 |
| Lord (Paul) Drayson PhD FREng, Chief Executive Officer | |
| Michael Norris, Chief Financial Officer | |
| Peel Hunt LLP (Nominated Adviser and Joint Broker) | + 44 (0) 20 7418 8900 |
| Dr Christopher Golden | |
| James Steel | |
| Oliver Jackson | |
| Liberum (Joint Broker) | + 44 (0) 20 3100 2000 |
| Bidhi Bhoma | |
| Euan Brown | |
| Consilium Strategic Communications | +44 (0) 77 0286 8207 |
| Mary-Jane Elliott | |
| Sukaina Virji | |
| Melissa Gardiner | |
| CSCSensynehealth@consilium-comms.com |
About Sensyne Health
Sensyne Health plc is a Clinical AI company that works in partnership with the NHS to improve patient care and accelerate the discovery and development of new medicines. Sensyne is listed on the AIM Market of the London Stock Exchange (SENS.L).
For more information, please visit: www.sensynehealth.com
Chairman’s Statement
I am pleased to deliver the Chairman’s statement for Sensyne following a year of good progress across both of our divisions. We are proud to report a resilient, growing business at a time of global uncertainty and are humbled by and grateful for the hard work of all our staff and partners.
Sensyne’s unique model
Sensyne is a Clinical AI company with two interlocking divisions; Discovery Sciences and Software Products.
The first division focuses on harnessing the value of NHS data for drug development with a financial return to the NHS.
Currently late phase drug development is guided by controlled clinical trials focused on the recruitment of selected patients. This is very expensive and takes years. It is not sustainable.
Simplifying therapeutic developments will be inextricably linked to understanding how more comprehensive real-world healthcare data can be used to accelerate the development of new medicines through the application of data science and machine learning. This is Sensyne’s strength.
Sensyne acts as a docking station between the NHS and pharmaceutical companies, enabling them to collaborate ethically using the Group’s Clinical AI technology. The Group creates value by analysing anonymised patient medical data to develop better targeted drugs and provide financial return to the NHS through a simple model: each partner NHS Trust providing data to Sensyne is a shareholder and thus receives financial return on the revenue generated by the totality of the pooled data. This model is unique and addresses many of the legitimate, sensitive concerns that surround the commercial use of NHS data.
Our second division focuses on software products to enable remote monitoring and management of patients who would otherwise need to attend hospital clinics. Although the obvious clinical and financial benefits of such an approach have been discussed for years, uptake has been very patchy around the world. COVID-19 has changed everything. A concept which had been hovering in the shadows suddenly gained irreversible traction as fears of viral infection took hold and fuelled a rapid focus on implementing remote monitoring and management of patients. The magnitude of the impact is exemplified by the fact that within a fortnight or so of national lockdown, 90% of GP consultations in the English NHS were conducted remotely.
Sensyne has played its part and supported the shift to remote patient monitoring by providing a selection of products to our NHS partners free of charge, for a year, to help them maintain acute services, such as maternity services, during these extraordinary and challenging times.
Consequently, Sensyne is seeing increasing demand for its technology and expertise as individuals, healthcare systems and the biopharmaceutical industry adapt and make plans for a rapidly digitising healthcare future. This is reflected in the signing of a number of important collaborations over the past year with international companies including Bayer and Roche in Europe and Alexion, Cognizant and Agorai in the US. These partnerships are a testament to Sensyne’s capabilities in medical and data science.
Board and governance
The Board has made progress in corporate governance. A&O Consulting was appointed to conduct an independent review of Board effectiveness and this work was completed and reported to the Board in January 2020. The review concluded that overall governance of the Group has been designed appropriately although a number of areas for improvement of internal processes and communications were recommended.
Our people
Effective and appropriate composition and management are at the core of Sensyne. Over the past year the Group has strengthened its senior management team and has grown the total headcount in an increasingly competitive market.
We continue to recruit the best talent and the quality of our staff is a reflection of our superior business model and the inspiring nature of the business. Our employees are highly qualified and suited to bring positive insights and add value to the work we do. Since the year end, we have appointed Michael Macdonnell as Chief Operating Officer. He brings to Sensyne deep healthcare expertise and a strong track-record of driving healthcare improvements through the application of advanced technology.
Outlook
From its inception, Sensyne has been an innovator, bringing together the private and public sector by ethically commercialising clinical data to improve patient outcomes. The Group has successfully imparted its vision of promoting responsible use of machine learning and AI to the pharmaceutical and healthcare industry, the government and the public.
The Group continues to be well positioned for growth in the UK and on the international stage. Despite the challenges faced globally in the past year, Sensyne has continued operating through the COVID-19 pandemic with great resilience thanks to its business model and team, and we anticipate significant growth, backed by the continued support of our partners and shareholders.
We are committed to continuing to create value for our stakeholders through a business model aimed at improving patient outcomes.
Sir Bruce Keogh KBE
Independent Non-Executive Chairman
Chief Executive Officer’s Statement
Our second year as a public company, despite making significant commercial and technological progress, has been marked by a number of negative events that had a significant effect on the Group. As Founder, CEO and a major shareholder, I have felt those effects deeply together with other shareholders. The first was the decline and then collapse of the Woodford Investment Management (WIM) firm in the second half of 2019. WIM was our largest institutional shareholder at the time, having invested throughout the development of the Group and again at our IPO. The demise and then protracted delay in the administration of the WIM Fund created a lengthy period of uncertainty in our shares which has only recently been resolved by the transfer of a portfolio of the ex-WIM holdings, including Sensyne, to Acacia Research Corporation. This transfer is now complete. The Acacia holding will take the proportion of our stock held by US funds to approximately 17% and we welcome this, given our ambition to derive a significant proportion of our future revenues in the US and to increase the proportion of our stock held by US healthcare and technology investors.
Although the WIM issue, which acted as a drag on our share price for several months was not of our making, the second negative event was. In October 2019 we announced that we had not reported at the time the bonuses that had been paid to me and to our former CFO in December 2018. The fact that we did not recognise that these payments should be treated as related party transactions, and not as we thought as remuneration to be reported in our annual report at the year-end, was a clear failing in corporate governance for which I apologised to shareholders at the time. I repeat that apology now. The Non-Executive Directors (NEDs) of the Board have implemented a series of measures over the past nine months to address concerns raised by shareholders at the time, including a Board effectiveness review by A&O Consulting and re-appraisal of our remuneration policy by Aon Hewitt Consultants. We reported on the outcome of these reviews during the financial year and further details are contained in this annual report.
One of the issues raised by some of our shareholders and advisors was the need to replace our CFO and this was implemented in March 2020, leading to a claim for unfair dismissal and accusations against me personally and against the Group under whistle-blowing legislation. The NED members of the Board acted swiftly to appoint a leading law firm to undertake an independent investigation. The investigation found that the allegations against me were not supported by the evidence. In April 2020, despite an interim employment tribunal hearing making overwhelmingly positive observations in favour of the Group and me, the case led to significant negative publicity that again tried the patience of our shareholders and the people that work with us. This was a very difficult period in which to manage the business, and I am proud of the progress that the Group achieved throughout this time, driven by the Sensyne leadership team who, as always, remain focused on implementing the strategy and getting the job done.
In August 2020, the Board decided to settle the employment tribunal case with the Group’s former CFO to avoid any further distraction or cost and to draw a line under the matter.
This period also coincided with the emergence of the global COVID-19 pandemic and the subsequent lock-down, which placed new challenges on the Group and its management team; both in adapting our business practices to the new restrictions and in responding to the crisis and rapidly developing solutions to mitigate the effects of the virus.
It required the Group to monitor and respond to the rapidly changing global situation caused by COVID-19, including guidance and policy changes implemented by governments around the world. The COVID-19 pandemic has had a major impact on NHS pressures, priorities and the allocation of NHS resources. Sensyne’s business has not been directly affected negatively by the pandemic and the Group has responded well by shifting the focus of its work in collaboration with its partner NHS Trusts in line with these changes, both in terms of supporting the shift to remote patient monitoring and in the use of Clinical AI. The Group has not furloughed any staff, nor has it participated in any of the other COVID-19 related government assistance schemes. The Group rapidly deployed IT systems to enable the remote working of its entire workforce in March in accordance with information governance requirements and in collaboration with its partners. Having experienced significant productivity benefits over the past few months, the Board and management team have decided that Sensyne staff should continue remote working for the foreseeable future. This has increased the potential talent pool from which the business can recruit now that it is no longer restricted to recruiting in the Oxford area.
Revenues of £2.1 million (2019: £0.1 million), largely driven by momentum in the second half of the year from our pharmaceutical R&D contracts, delivered a gross profit of £1.2 million (2019: £nil) based upon the analysis of anonymised patient data from the SRAs we have with three NHS Foundation Trusts covering a patient population of 2.8 million people.
Continued investment in R&D, particularly in the development of software applications for remote patient monitoring and the development of our data analysis capabilities using AI and machine learning and the growth in our workforce to 135 people, delivered a net cash position of £31.7 million (2019: £49.3 million) at the year end.
In autumn 2019 Sensyne re-organised its business into two operating divisions, Discovery Sciences (DS) and Software Products (SP), to improve customer focus. The DS division focuses on providing services and products to pharmaceutical clients and the SP division focuses on providing services and products to healthcare providers such as the NHS. This re-organisation has been successfully implemented, led by the Group’s strengthened management team, and has delivered an enhanced performance in H2 2020, providing Sensyne with a good platform for growth, both organically and by potential acquisitions.
Discovery Sciences activities
Over the year, the DS division has grown to a team of more than 35 scientists with backgrounds in machine learning, bioinformatics and epidemiology, working closely with clinicians and biologists, to build a highly skilled interdisciplinary team.
In response to COVID-19, working in close co-operation with clinicians at Chelsea and Westminster NHS Foundation Trust, the DS team has developed algorithms using computer vision for the analysis of images to automatically detect COVID-19 in the lungs and algorithms to identify patients at risk of poor outcomes from COVID-19 infection based on analysis of electronic patient record data.
During the year we signed commercial research agreements with Bayer, Roche and Alexion validating the effectiveness for the global bio pharmaceutical industry of Sensyne’s unique partnership model with the UK’s NHS in Clinical AI.
We established LAB10X, a joint venture with Evotec International GmbH, Oxford Sciences Innovation plc, University of Oxford and Oxford University Innovation Limited, to accelerate the commercialisation of research in the field of digital health and Clinical AI and we began a research collaboration with the UK MHRA (Medicines and Healthcare products Regulatory Agency) to contribute to the development of methods to validate software algorithms used in digital health. We also established with Bayer the LifeHub UK in Reading to accelerate the development of new treatments using Clinical AI, focusing first on AI enabled image analysis. These research collaborations position the Group at the forefront of the application of AI to pharmaceutical R&D.
Our work for pharmaceutical companies depends upon our ability to access anonymised patient data via SRAs with NHS Trusts. During the year, as the UK government reviewed its policies towards the use of NHS patient data following the establishment of NHSX, we have not signed any new SRAs with Trusts since January 2019 due to uncertainty over government policy and this has limited our ability to grow our pool of patient data on this side of our business.
The projects with our existing SRA partners Oxford University Hospitals, Chelsea and Westminster and South Warwickshire NHS Foundation Trusts are progressing well, and the Group has been able to achieve its research objectives for its partners and customers. This has been despite practical challenges that the Group has experienced in working with its partner Trusts in collating and analysing anonymised patient data stored in multiple, separate databases. This experience, whilst slowing the speed of our work more than we would like, has nevertheless led to the development of experience in techniques for data organisation and analysis within NHS IT systems that will be very helpful in the future. No company has more experience than Sensyne in the practicalities of collating and analysing NHS patient data for commercial pharmaceutical research.
Since the year end and despite the challenges mentioned above, recent developments which have underlined the benefits to the NHS of the unique Sensyne model have given us confidence that we will be able to sign new SRAs with NHS Foundation Trusts and grow our database to over 5 million unique patient records in the current financial year. This in turn will enable us to grow our commercial research agreements with pharmaceutical companies. Whilst these new SRAs will be non-exclusive in nature, we are confident that our unique model and the positive experiences of other NHS Foundation Trusts will attract other progressive NHS Foundation Trusts to work with us.
Existing SRA agreements that the Group entered into in 2019 with Wye Valley and George Eliot NHS Trusts are awaiting approval by NHSX. Foundation NHS Trusts do not need such approval.
Software Products activities
The complementary side to our work for pharmaceutical companies is our focus on developing and supplying software applications for patient monitoring, particularly in remote situations. The Group has seen an acceleration in the adoption of tools by the NHS that enable remote monitoring of patients and this has led to increased demand and interest in the Group’s new and existing remote monitoring products including GDm-Health (diabetes in pregnancy monitoring), CVm-Health (remote COVID-19 symptom tracker) and BPm-Health (blood pressure monitoring in pregnancy).
The anonymised data sets generated by these products have in turn increased significantly. Sensyne expects that the recent growth in remote patient monitoring will be maintained post the pandemic and the Group is well placed to grow its business in this area in the future.
The GDm-Health prescribed digital therapeutic product for the remote management of diabetes in pregnancy has been adopted by 44 NHS Trusts across the NHS with a further 12 Trusts awaiting go-live and an additional 17 Trusts are in discussions to implement the system in their hospitals. The work with Jefferson Health for the clinical and economic evaluation of GDm-Health within a US hospital system is progressing well. The first clinical use of the product commenced in March 2020 and the product is on track for US launch, as planned, later in the 2021 financial year.
With the collaboration of our clinical partners, Sensyne has continued to develop the SYNE™ GDM/001 algorithm to identify mothers at risk of transitioning to medication therapy for diabetes during pregnancy.
The benefit to patients and real-world impact in using GDm-Health continues to grow, with 16,955 women using GDm-Health in the UK since its launch at the date of this report. These trends have continued since the year end and we have recently achieved 47% market share across NHS England for our GDm-Health product. This has been boosted by our free 12-month offer during the pandemic period, which will convert to a revenue generating offer afterwards. The success of GDm-Health led to clinicians asking for a software application for use by diabetic patients who are not pregnant. In response to this demand, we announced recently the development of DBm-Health for use by all diabetic patients and those people at risk of developing diabetes. This new product leverages the experience we have gained with GDm-Health and the large and fast-growing patient database the wider adoption of GDm-Health is creating. We are excited about the significant commercial potential of the DBm-Health product in both the UK and United States given the growing incidence of diabetes world-wide and the additional risks to diabetic patients from COVID-19 infection. We are confident that the trend towards remote patient management is now a pillar of healthcare delivery that will be sustained post the pandemic, both in the UK and the United States and this provides an excellent growth opportunity for the Group, building on our experience to date.
In November 2019 we signed agreements with Cognizant and Agorai to launch and scale our digital health software applications in the US. Since then we have been working closely, together with Jefferson Health, to prepare for the product launches planned for later in 2020. These plans are being adapted to take into account the effect of COVID-19 on clinical practice and reimbursement policies within the US healthcare system.
The collaborations with Cognizant and Microsoft are delivering results as demonstrated by the rapid development of CVm-Health, accelerating the rate of development and deployment of software applications developed by the SP division, and we expect these to underpin further progress and the entry of the Group’s products in the US market in the 2021 financial year.
Sensyne has continued to invest in its quality and regulatory system framework for digital health applications and Clinical AI to facilitate the development and launch of its clinically validated products and services in its two lead markets: the UK and US. This included a number of notable achievements that underpin the strength of the Group’s Quality Management System and information governance and compliance to the Medical Device Directive, the Medical Device Regulation and 21.CFR.820 (US-FDA).
Outlook
We are strengthening our Board, senior management team and corporate governance processes in light of the Board effectiveness review undertaken during the year. As such we have appointed Michael Macdonnell as COO and I am delighted he has chosen to join the Sensyne mission.
Sensyne’s progress over the past year has been delivered by a team of highly dedicated and skilled personnel who are committed to the Group’s mission to improve patient care and accelerate pharmaceutical research. I am very grateful to all of them for their hard work which has contributed to these results and the social impact they have delivered.
Notwithstanding the challenges of the past year, that we feel are now behind us, and the dramatic changes in healthcare caused by the COVID-19 pandemic, the unique business model that Sensyne is applying through its partnership with the NHS is delivering results. Recent developments have underlined the growth potential that our model can deliver as healthcare moves towards wider adoption of Clinical AI and remote patient monitoring. We look forward to the future with confidence.
Lord Drayson
Chief Executive Officer
Chief Financial Officer’s Statement
Sensyne’s first full year as a public company has been a challenging one in unprecedented times but we have also achieved great progress.
Discovery Sciences
The signing of our first major pharmaceutical deal with Bayer, followed by further contracts with Roche and Alexion, gives significant validation to our model of being the trusted “docking station” between the NHS and pharmaceutical companies. This brings confidence that our signing of SRAs with NHS Trusts in return for equity, financial support and a royalty on sales is a genuine route to helping the NHS provide better services for patients.
In the year to April 2020, the Discovery Sciences division produced a revenue of £1.7 million (2019: £nil) with a gross margin of £1.0 million (2019: £nil).
Software Products
During the year, our GDm-Health product was successfully rolled out to an additional 16 NHS Trusts, bringing the total users at year end to 11,030. We also have two live customers for our SEND product, which monitors patients’ vital signs in hospital, and we have provided significant support services to the LAB10x collaboration.
In November 2019 we announced that Cognizant, the American multinational corporation and leading provider of information technology, consulting and business process services in healthcare, and Agorai, a data infrastructure specialist, will be our partners for the launch and sale of our digital health software products in the US. We will be looking to advance this partnership in the coming year.
In the year to April 2020, the Software Products division produced a revenue of £0.4 million (2019: £0.1 million) with a gross margin of £0.2 million (2019: £nil).
COVID-19 impact
The use of remote monitoring within health systems has significantly increased during the COVID-19 pandemic as clinicians and payers have moved at pace to reduce physical contacts. As part of this effort, we decided to make our GDm-Health product available to any NHS Trust free of charge to encourage its uptake. We are now seeing our product used in 56 Trusts and we are approaching a 47% market share within NHS England.
Total R&D expenditure
Our expenditure rose to £11.4 million in the year (2019: £9.5 million), which primarily consists of employee and related costs.
Adjusted operating loss
Our adjusted operating loss was £16.0 million for the year (2019: £11.5 million). This was driven by our increased employee costs of £8.9 million (2019: £8.1 million), with the majority of other expenditure being employee-related items such as fees paid to recruiters and use of personnel supplied by external contractors. Our statutory operating loss of £22.5 million (2019: £19.0 million) includes non-cash items such as share-based payments of £0.2 million (2019: £0.8 million), and amortisation of our SRAs of £3.5 million (2019: £2.9 million). It also includes exceptional items, of which £1.4 million (2019: £nil) relates to litigation with the former CFO.
Adjusted loss per share
The adjusted loss per share was £0.12 (2019: £0.10), an increase of 20%, principally reflecting the increase in R&D expenditure. The statutory loss per share was £0.17 (2019: £0.16).
Adjusted cash used in operations
The adjusted cash used in the year was £13.5 million (2019: £9.8 million), which tracks the adjusted operating loss set out above and our management of working capital.
Cash at year end
Performance in the year resulted in a cash balance at year end of £31.7 million (2019: £49.3 million). At 31 August 2020, the Group had a cash balance of £22.7m.
Statement of financial position
Other than cash, the largest balance at year end is intangible assets of £14.9 million (2019: £18.1 million). The largest component is the carrying value of our SRAs, which is £12.7 million (2019: £16.2 million).
Outlook and going concern
We expect to perform in line with our expectations for the current financial year.
Although the Group has recognised revenue from commercial deals during the year, it is still largely reliant on cash balances to fund on-going operations.
The Group made adjusted operating losses before tax for the year ended 30 April 2020 of £16.0m (2019: £11.5m) and had cash balances at 30 April 2020 of £31.7m (2019: £49.3m) with an underlying cash burn during the year of £17.6m (2019: cash inflow of £44.7m following an IPO that raised net proceeds of £61.8m). In assessing the appropriateness of the going concern assumption, the Board has considered the availability of funding alongside the possible cash requirements of the Group and Company, taking into account the unprecedented circumstances caused by the COVID-19 pandemic.
We have prepared cashflow forecasts for 19 months from the date of approval of these financial statements under two modelled scenarios, which we considered an appropriate approach to our assessment and are reasonably possible outcomes. We have prepared a base case which is our full budgeted growth forecast. The base case allows investment in the full range of planned market and product development activities, which includes opening a US office, to achieve our revenue targets over this forecast period. However, in order to fulfil our growth targets, we will require additional funding, which we believe would be available from raising new equity, debt facilities, partnerships, joint-ventures etc. Although we consider that there are strong grounds for believing that such funding could be secured, there can be no guarantee that would be the case. As such, a downside case financial forecast has been prepared.
The downside case is a projection of a severe but plausible scenario whereby the likelihood of securing additional funding becomes remote and management are required to deploy a programme of significant mitigating cost reductions and cash protection actions, within the control of the Board, commencing in December 2020. For example, these might include significant salary deferrals for senior management, non-payment of discretionary bonuses, and the reduction in the size of certain functions across the business. We have the ability to scale back and delay certain development activities yet to commence that will save on significant resource without compromising the viability of the current business. In this scenario, the Group and Company remain cash positive and have adequate cash balances for a minimum of 12 months from approval of these financial statements.
After due consideration, the Board has concluded that there is a reasonable expectation that the Group and Company have adequate resources to meet its liabilities as they fall due for at least 12 months from the date of this report.
Please also see note 2 to these financial statements.
Michael Norris
Interim Chief Financial Officer
Laura Hillier
Company Secretary
| Consolidated Statement of Comprehensive Income | ||||
| For the year ended 30 April 2020 | ||||
| Year ended | Year ended | |||
| 30 April 2020 | 30 April 2019 | |||
| Note | £000s | £000s | ||
| Revenue | 2,050 | 136 | ||
| Cost of sales | (893) | (172) | ||
| Gross profit/(loss) | 1,157 | (36) | ||
| Research and development expenses | (11,078) | (8,283) | ||
| Sales and marketing expenses | (1,364) | (1,248) | ||
| Other general and administration expenses | (9,754) | (6,099) | ||
| Other general and administration expenses - exceptional items | 4 | (1,410) | (3,344) | |
| Operating loss | (22,449) | (19,010) | ||
| Finance costs | (347) | (233) | ||
| Finance income | 254 | 256 | ||
| Share of loss of investments accounted for using equity method | (89) | - | ||
| Loss before taxation | (22,631) | (18,987) | ||
| Income tax credit | 792 | 28 | ||
| Loss for the year from continuing operations | (21,839) | (18,959) | ||
| Loss for year from discontinued operations attributable to equity owners of the parent Company | - | (2,975) | ||
| Loss and total comprehensive loss for the year attributable to equity holders of the parent Company | (21,839) | (21,934) | ||
| Adjusted operating loss | ||||
| Operating loss for the period from continuing operations | (22,449) | (19,010) | ||
| Exceptional items | 4 | 1,410 | 3,344 | |
| Amortisation of intangible assets | 5 | 4,214 | 3,106 | |
| Depreciation of property, plant and equipment | 452 | 163 | ||
| Depreciation of right of use asset | 132 | 91 | ||
| Loss on disposal of property, plant and equipment | - | 21 | ||
| Share-based payments | 235 | 772 | ||
| Adjusted operating loss | (16,006) | (11,513) | ||
| Earnings per share for loss attributable to the owners of the parent Company during the year | ||||
| Basic and diluted loss per share – continuing operations (£) | 3 | (0.17) | (0.16) | |
| Basic and diluted loss per share – discontinued operations (£) | 3 | - | (0.59) | |
| Consolidated Statement of Financial Position | ||||
| As at 30 April 2019 | ||||
| 30 April 2020 | 30 April 2019 | |||
| Note | £000s | £000s | ||
| Non-current assets | ||||
| Intangible assets | 5 | 14,901 | 18,068 | |
| Property, plant and equipment | 1,421 | 757 | ||
| Right of use assets | 1,618 | 1,724 | ||
| Investments accounted for using equity method | 467 | - | ||
| 18,407 | 20,549 | |||
| Current assets | ||||
| Trade and other receivables | 3,049 | 784 | ||
| Corporation tax credit for research and development | 820 | 208 | ||
| Cash and cash equivalents | 31,657 | 49,252 | ||
| 35,526 | 50,244 | |||
| Current liabilities | ||||
| Trade and other payables | (7,535) | (3,368) | ||
| Provisions | (397) | - | ||
| Short term lease liability | (392) | (242) | ||
| (8,324) | (3,610) | |||
| Net current assets | 27,202 | 46,634 | ||
| Total assets less current liabilities | 45,609 | 67,183 | ||
| Non-current liabilities | ||||
| Long term lease liability | (1,717) | (1,769) | ||
| Provisions | (30) | - | ||
| (1,747) | (1,769) | |||
| Net assets | 43,862 | 65,414 | ||
| Equity | ||||
| Share capital | 12,857 | 12,857 | ||
| Share premium account | 59,485 | 59,485 | ||
| Other reserves | (86,643) | (86,930) | ||
| Retained earnings | 56,163 | 80,002 | ||
| Total equity | 43,862 | 65,414 |
| Consolidated Statement of Cash Flows | ||||
| For the year ended 30 April 2019 | ||||
| Year ended | Year ended | |||
| 30 April 2020 | 30 April 2019 | |||
| Note | £000s | £000s | ||
| Cash used in operations | 6 | (14,907) | (13,123) | |
| Finance income received | 254 | 256 | ||
| Cash flows from continuing operating activities | (14,653) | (12,867) | ||
| Cash flows from discontinued operating activities | - | (2,068) | ||
| Total net cash outflow from operating activities | (14,653) | (14,935) | ||
| Investing activities | ||||
| Purchase of property, plant and equipment | (1,116) | (846) | ||
| Purchase of other intangible assets | 5 | (1,047) | (1,460) | |
| Investments accounted for using equity method | (556) | - | ||
| Cash outflow from continuing investing activities | (2,719) | (2,306) | ||
| Cash flows from discontinued investing activities | - | 149 | ||
| Net cash outflow from investing activities | (2,719) | (2,157) | ||
| Financing activities | ||||
| Proceeds from the issue of share capital | - | 64,778 | ||
| Financing and share issue costs | - | (2,934) | ||
| Payments against lease liability | (267) | (20) | ||
| Net cash (outflow)/inflow from financing activities | (267) | 61,824 | ||
| Net (decrease)/increase in cash and cash equivalents | (17,639) | 44,732 | ||
| Cash and cash equivalents at the start of the year | 49,252 | 4,541 | ||
| Effect of foreign exchange rate change | 44 | (21) | ||
| Cash and cash equivalents at the end of the year | 31,657 | 49,252 | ||
Consolidated statement of changes in equity
| For the year ended 30 April 2020 | |||||
| Share capital | Share premium | Other reserves | Retained earnings/(accumulated losses) | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| At 1 May 2018 | 109,900 | - | (69,850) | (27,835) | 12,215 |
| Loss and total comprehensive loss for the year | - | - | - | (21,934) | (21,934) |
| Exchange difference on translation of foreign operations | - | - | (21) | - | (21) |
| Issue of share capital | 35,214 | 59,485 | (17,831) | - | 76,868 |
| Capital reduction | (129,771) | - | - | 129,771 | - |
| Capital repayment | (2,486) | - | - | - | (2,486) |
| Share-based payment charge | - | - | 772 | - | 772 |
| At 30 April 2019 | 12,857 | 59,485 | (86,930) | 80,002 | 65,414 |
| Loss and total comprehensive loss for the year | - | - | - | (21,839) | (21,839) |
| Exchange difference on translation of foreign operations | - | - | 52 | - | 52 |
| Share-based payment charge | - | - | 235 | - | 235 |
| At 30 April 2020 | 12,857 | 59,485 | (86,643) | 58,163 | 43,862 |
Notes to the Accounts
Year ended 30 April 2020
1. Basis of Preparation
The financial information in this preliminary announcement has been extracted from the Group audited financial statements for the year ended 30 April 2020 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group financial statements and this preliminary announcement were approved by the Board of Directors on 30 September 2020.
The auditors have reported on the Group's financial statements for the year ended 30 April 2020 under s495 of the Companies Act 2006. The Auditors' report is unqualified and does not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 April 2020 will be filed with the Registrar of Companies following the Company's Annual General Meeting.
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') and IFRS Interpretations Committee ('IFRS IC') as adopted and endorsed by the European Union and have been prepared under the historical cost convention.
The same accounting policies, presentation and computation methods are followed in this preliminary announcement as in the preparation of the Group financial statements. The accounting policies have been applied consistently by the Group year-on-year.
2. Going concern
Although the Group has recognised revenue from commercial deals during the year, it is still largely reliant on cash balances to fund on-going operations.
The Group made adjusted operating losses before tax for the year ended 30 April 2020 of £16.0m (2019: £11.5m) and had cash balances at 30 April 2020 of £31.7m (2019: £49.3m) with an underlying cash burn during the year of £17.6m (2019: cash inflow of £44.7m following an IPO that raised net proceeds of £61.8m).
In assessing the appropriateness of the going concern assumption, the Board has considered the availability of funding alongside the possible cash requirements of the Group and Company, taking into account the unprecedented circumstances caused by the COVID-19 pandemic.
We have prepared cashflow forecasts for 19 months from the date of approval of these financial statements under two modelled scenarios, which we considered an appropriate approach to our assessment and are reasonably possible outcomes.
We have prepared a base case which is our full budgeted growth forecast. The base case allows investment in the full range of planned market and product development activities, which includes opening a US office, to achieve our revenue targets over this forecast period. However, in order to fulfil our growth targets, we will require additional funding, which we believe would be available from raising new equity, debt facilities, partnerships, joint-ventures etc . Although we consider that there are strong grounds for believing that such funding could be secured, there can be no guarantee that would be the case. As such, a downside case financial forecast has been prepared.
The downside case is a projection of a severe but plausible scenario whereby the likelihood of securing additional funding becomes remote and management are required to deploy a programme of significant mitigating cost reductions and cash protection actions, within the control of the Board, commencing in December 2020. For example, these might include significant salary deferrals for senior management, non-payment of discretionary bonuses, and the reduction in the size of certain functions across the business. We have the ability to scale back and delay certain development activities yet to commence that will save on significant resource without compromising the viability of the current business. In this scenario, the Group and Company remain cash positive and have adequate cash balances for a minimum of 12 months from approval of these financial statements.
After due consideration, the Board has concluded that there is a reasonable expectation that the Group and Company have adequate resources to meet its liabilities as they fall due for at least 12 months from the date of this report.
| 3. Loss per share | |||||||||||
| Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. | |||||||||||
| Group | 2020 | 2019 | |||||||||
| Weighted average number of shares in issue for the purpose of basic and adjusted loss per share | 128,571,514 | 118,398,830 | |||||||||
| Loss attributable to equity owners of the parent Company- continuing operations (£'000) | (21,839) | (18,959) | |||||||||
| Basic loss per share – continuing operations (£) | (0.17) | (0.16) | |||||||||
| Adjusting items including exceptional items, amortisation and depreciation attributable to continuing operations (£’000) | 5,833 | 7,446 | |||||||||
| Adjusted loss attributable to equity owners of the parent Company – continuing operations (£’000) | (16,006) | (11,513) | |||||||||
| Adjusted Basic loss per share – continuing operations (£) | (0.12) | (0.10) | |||||||||
| Loss attributable to the discontinued operations (£’000) | - | (2,975) | |||||||||
| Basic loss per share – discontinued operations (£) | - | (0.03) | |||||||||
| Adjusting items including exceptional items, amortisation and depreciation attributable to discontinued operations (£’000) | - | 2,500 | |||||||||
| Adjusted loss attributable to the discontinued operations (£’000) | - | (475) | |||||||||
| Adjusted Basic loss per share – discontinued operations (£) | - | - | |||||||||
| As net losses were recorded in the years ended 30 April 2019 and 2018, the dilutive potential shares are anti-dilutive and therefore were excluded from the earnings per share calculation. | |||||||||||
| 4. Exceptional items | |||||||||||
| Group | |||||||||||
| Exceptional costs are analysed as follows: | |||||||||||
| 2020 | 2019 | ||||||||||
| £’000 | £’000 | ||||||||||
| Professional fees incurred following departure of former CFO | 1,410 | - | |||||||||
| Transaction costs | - | 2,652 | |||||||||
| Consortium for national data strategy | - | 692 | |||||||||
| 1,410 | 3,344 | ||||||||||
During the year a legal claim was made by the former CFO, Lorimer Headley. Professional fees were incurred by the Company to represent the Company and its Directors and to conduct an independent internal investigation in respect to claims made against the Company and its Directors. In August 2020, the Company agreed to make a payment as compensation for loss of office of £150,000 and a contribution of £200,000 towards legal fees, national insurance contributions were paid respectively. As part of that settlement the Board has also agreed to provide outplacement assistance up to a value of £30,000. This constitutes full and final settlement of all claims in relation to his employment and a provision has been made for the year ended 30 April 2020.
In the prior period transaction costs totalling £5,540,000 were incurred in respect to the application made to the London Stock Exchange for all the issued and to be issued Ordinary share capital to be admitted to trading on AIM of which £2,652,000 has been included within the operating loss to 30 April 2019 and £2,888,000 was offset against the Share Premium account in accordance with IAS 32 ‘Financial Instruments: Presentation.’
Consortium for national data strategy costs relate to professional fees incurred.
| 5. Intangible assets | |||||
| Group | Software licences | Other licences | Development costs | Patents and trademarks | Total |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Cost | |||||
| At 1 May 2018 | 120 | 5,092 | 453 | 12 | 5,677 |
| Additions | 4 | 15,090 | 1,191 | 175 | 16,460 |
| At 30 April 2019 | 124 | 20,182 | 1,644 | 187 | 22,137 |
| Additions | - | - | 943 | 104 | 1,047 |
| At 30 April 2020 | 124 | 20,182 | 2,587 | 291 | 23,184 |
| Accumulated amortisation | |||||
| At 1 May 2018 | 31 | 932 | - | - | 963 |
| Amortisation for the year | 26 | 2,901 | 139 | 40 | 3,106 |
| At 30 April 2019 | 57 | 3,833 | 139 | 40 | 4,069 |
| Amortisation for the year | 24 | 3,537 | 606 | 47 | 4,214 |
| At 30 April 2020 | 81 | 7,370 | 745 | 87 | 8,283 |
| Net book value | |||||
| At 1 May 2018 | 89 | 4,160 | 453 | 12 | 4,714 |
| At 30 April 2019 | 67 | 16,349 | 1,505 | 147 | 18,068 |
| At 30 April 2020 | 67 | 12,812 | 1,842 | 204 | 14,901 |
| Other licences are rights to commercialise digital health products and capitalised SRAs. The Group has capitalised four SRAs, with remaining useful economic lives of eight years and three months; three years and three months; three years and three months; and two years and one month. The £15,000,000 addition in the prior year was acquired through the issue of shares. At the year end, the four SRAs have carrying amounts of £4,125,000, £3,250,000, £3,250,000 and £2,083,000 respectively. | ||||||
| The development costs are capitalised research and development costs in relation to our Digital Health Operating System to support our Digital Health Software products that meet the criteria for capitalisation set out in the accounting policies. Amortisation is charged from the month the product goes live. | ||||||
| Patents and trademarks are capitalised legal and application costs for various registrations that the business obtains to protect its intellectual property. Amortisation is charged once the application is granted and secured. There were no indications for impairment during the 2020 and 2019 financial year. | ||||||
| 6. Notes to the Cash Flow Statement | |||
| Group reconciliation of loss before income tax to cash used in operations | |||
| 2020 | 2019 | ||
| £’000 | £’000 | ||
| Loss before income tax | (22,631) | (18,987) | |
| Adjustments for: | |||
| Finance costs | 347 | 233 | |
| Finance income | (254) | (256) | |
| Amortisation of intangible assets | 4,214 | 3,106 | |
| Depreciation of property, plant and equipment | 452 | 163 | |
| Depreciation of right of use assets | 132 | 91 | |
| Loss on disposal of property, plant and equipment | - | 21 | |
| Share of loss in investments accounted for using equity method | 89 | - | |
| Share based payments | 235 | 772 | |
| Increase in trade and other receivables | (2,085) | (434) | |
| Increase in trade and other payables | 4,167 | 2,168 | |
| Increase in provisions | 427 | - | |
| Cash used in operations | (14,907) | (13,123) |
Adjusted cash used in operations is £13,497,000 (2019: £9,779,000), being cash used in operations less exceptional items. IPO costs are included within exceptional items in the 2019 financial year.
| 7. Subsequent events | ||||||
| In July 2020 employee share options were surrendered and cancelled under the share option scheme and a fresh option scheme was put in place. | ||||||
| On 10 September 2020 Sensyne announced to the market the appointment of Michael Macdonnell to its senior management team as Chief Operating Officer (COO) reporting to the CEO Lord Drayson. Michael joined Sensyne on 28 September 2020. | ||||||