Interim Results

11 December 2024

RUA Life Sciences plc

("RUA Life Sciences", the "Company" or the "Group")

Interim Results

RUA Life Sciences, the holding company of a group of medical device businesses focused on the exploitation of the world's leading long-term implantable biostable polymer (Elast-Eon^TM), today announces its unaudited interim results for the six months ended 30 September 2024.

Highlights:

·      Revenue increased 92% to £1,524k (H1 FY2024: £794k)

·      Strong Gross profit margin growing from 78% to 83%

·      Strategic purchase of Abiss - £1.1m assets purchased for £68k

·      Profit before taxation - £631k (H1 FY2024: Loss £1,396k) 

·    Cash burn over half year significantly reduced

·    Cash balance £3,779k (30 September 2023: £493k, 31 March 2024: £3,931k) 

Geoff Berg, Chairman of RUA Life Sciences, commented:

"The focus of management has been to maximise revenue from Contract Manufacturing, reduce costs and secure deals for longer term growth. Success has been demonstrated in each of these areas which together with the Abiss purchase has resulted in a profit being reported for the period, marking a significant milestone."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596), which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

For further information contact:

RUA Life Sciences                                                                                     Tel: +44 (0)1294 317073  

Geoffrey Berg, Non-Executive Chairman                                                

Bill Brown, Chief Executive                                                                   

Lachlan Smith, Group Chief Financial Officer

Cavendish Capital Markets Limited

(Nominated Adviser and Broker)                                                             Tel: +44 (0)20 7220 0500

Giles Balleny/Dan Hodkinson (Corporate Finance)                                  

Charlie Combe (Broking)

Michael Johnson (Sales)

About RUA Life Sciences

RUA Life Sciences plc is the ultimate parent company of the Group, whose principal activities comprise exploiting the value of its IP & know-how, medical device contract manufacturing and development of medical devices.

CHAIRMAN'S STATEMENT

At this time last year, the company outlined a strategy focused on achieving short-term profitability by expanding contract manufacturing and leveraging the commercialising of R&D efforts undertaken in recent years. I am pleased to report good progress towards this goal during the six months ended 30 September 2024 (the "period"), along with the establishment of strong foundations for future growth.

On 6 September 2024, the Group completed the strategic acquisition of the Abiss Group, a medical device manufacturer based in France, with a subsidiary in Poland specialising in the distribution of medical devices. The results presented include the consolidation of the Abiss group from the date of acquisition.

Taking into account the progress made on delivering on strategy and the initial benefits of the strategic acquisition of Abiss, it is pleasing to be able to report a consolidated profit of £636,000 for the period.

Unaudited interim results for the six months to 30 September 2024

Consolidated revenues for the Group increased 92% from £794k to £1,524k in the period. Of the revenues achieved, £238k (H1 2023 £199k) was represented by the Group's Biomaterials business, which enjoyed year-on-year growth of 20%. Other revenues delivered from the sale of Medical Devices and Components increased 116% from £595k to £1,286k in the period.

It is recognised that revenues in the comparative period were adversely affected by delays in shipments which were recovered in the second half of the year. A more appropriate comparator is the average revenues across each of the two half years in FY24 of £840k. Against this more challenging comparator, revenue growth from the Sale of Medical Devices and Components was 53% including the benefit of the Abiss group or 47% on a like-for-like basis.

Gross Profit margins continued to improve from the 78% achieved in the first half of FY24 and 81% over FY24, to 83% in the period. The gross profit margin achieved from Medical Devices and Components was 80% in the period compared to 76% in the comparative period.

Administrative expenses were reduced by £326k (16%) from £2,020k (H1 24) to £1,694k in the first half of the current year. The like-for-like reduction in costs (excluding Abiss) was £375k.

Included in other income for the period is the initial bargain purchase gain from the acquisition of the Abiss group. The profit on acquisition is £1,062,000, representing the excess of the book value of assets acquired over the purchase price of £68,000. An exercise to calculate the fair value of assets purchased, including any intangible assets identifiable, is currently being undertaken, and the final acquisition accounting adjustments will be included in the second interim period to 31 March 2025. As plant, machinery and other fixed assets utilised in the business have a current written down value of only £23k compared to the original cost of £730k, it is anticipated that a further bargain purchase gain will be recognised at the second interim period to 31 March 2025.

Balance Sheet Strengthened

The Group's drive to profitability, together with the Abiss acquisition has had a positive impact on the balance sheet of the Group. Cash at 30 September amounted to £3,779k, a net reduction of only £152k over the period compared to reductions of £523k (excluding proceeds of the equity issue) in the second half of FY24 and £976k in the comparative period. Total Assets increased £1,637k over the period with the £833k increase in liabilities (attributable to the acquisition of Abiss group) resulting in a net increase in equity of £682k from £7,182k to £7,864k over the period.

RUA Vascular and Structural Heart

The objectives for RUA Vascular and Structural Heart are to find alternative ways to fund the remaining regulatory pathway for the polymer sealed graft products and to introduce the Group's heart valve leaflet material (AurTex^TM) to the wider industry as a realistic alternative to animal tissue in heart valves.

As noted in the trading update of 30 October 2024, while the AurTex materials tested under the Company's Material Transfer Agreement ("MTA") with a heart valve company successfully met all the expected results for the tests undertaken, at this point, it is not expected to lead to a commercial agreement due to current priorities of the Company's MTA partner.  Notwithstanding this, the results of the MTA have confirmed the management's belief in the potential for AurTex.

The team working on the vascular project has continued to make good progress with significant improvements made in the handling of the graft to address feedback from potential partners.

Several opportunities are being pursued for each of the Vascular and Structural Heart businesses, and further updates will be made as appropriate.

Abiss Acquisition

RUA was introduced to the Abiss Group ("Abiss") by our major customer around a year ago. The former parent company of Abiss had been placed into liquidation by the French Courts, and our customer was motivated to ensure a seamless continuity in the supply of products and devices supplied to it by Abiss. The Abiss Group comprises two European businesses: Abiss France and Abiss Poland. Abiss France is a CE mark holder of a number of medical devices and is a licensor and subcontract manufacturer of devices. Abiss Poland is a 60% subsidiary of Abiss France and is a distributor of gynaecological and urology devices into hospitals. In Poland, Abiss holds a market-leading position in Stress Urinary Incontinence (SUI) and pelvic floor repair. Around 70% of the revenues generated by Abiss France were dependent upon sales to the major customer.

Having reviewed the future product demand from the major customer and satisfied ourselves on any product liability issues, RUA agreed to participate in a formal auction process to acquire the entire issued share capital of Abiss France. The Abiss group was sold as a going concern. Although financial information was made available by Abiss, detailed financial due diligence was not possible nor were any warranties on the purchase available from the French courts. However, the strong relationship that RUA has with its customer provided it with significant comfort on matters which might be perceived as risks by other bidding parties. As a result, RUA's offer of €80,000 for the share capital of Abiss France was the highest bid and was accepted by the French courts with the purchase completing on 6 September 2024.

Strategic Integration

There are many similarities between Abiss and RUA's Contract Manufacturing business unit, not least the customer relationship. Going forward, it is anticipated that Abiss will be reported as part of the expanded Medical Devices and Components business unit. The acquisition has enabled us to achieve our stated objective of doubling the scale of this business unit, with many other opportunities for further growth. The acquisition of Abiss came with a €900k order backlog due to a shortage of packaging materials, and the short-term priority has been to catch up with those orders, which are expected to be completed in the second interim period. The objective for the enlarged business unit and Abiss specifically is to grow revenues through broadening the product range offered to the division's largest customer. RUA has held unexploited IP related to integrating Elast-Eon^TM into SUI devices to address the complications occasionally suffered by patients.

Change of accounting reference date

The Group announced on 30 October 2024, that it will be changing its accounting reference date and financial year end from 31 March to 30 September. Going forward, interim and annual accounts will be prepared and published for the six months ending 31 March and the twelve months ending 30 September, respectively.

The Company has changed its financial year end to better guide business planning and international business unit assimilation.

As a result of this change, the Company's future reporting calendar is expected to be as follows:

·      Publication of unaudited accounts for the 12-month period ending 31 March 2025 in mid-June 2025.

·    Publication of audited accounts for the 18-month period ending 30 September 2025 by end of January 2026.

·     Publication of unaudited interim accounts for the six-month period ending 31 March 2026 in mid-June 2026; and

·      Publication of audited accounts for the 12-month period ending 30 September 2026 by the end of January 2027.

Conclusion and Outlook

The focus of management has been to maximise revenue from Contract Manufacture, reduce costs and secure deals for longer term growth. Success has been demonstrated in each of these areas which together with the Abiss purchase has resulted in a profit being reported for the period, marking a significant milestone.

The Group's development is centred on two key platforms: leveraging its intellectual property (IP) and advancing subcontract development and manufacturing of medical devices. Recent priorities have focused on strengthening the solid financial foundation established through last year's equity fundraise by elevating Contract Manufacturing to the next level.

The targets for the Group's graft IP and AurTex are to commercialise the investment made to date to license the Group's IP and to generate revenues through the manufacture of devices and components based on the Group's graft and AurTex technology.

Geoff Berg, Chairman
10 December 2024

CONDENSED INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS

CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.   Reporting entity

The interim consolidated financial statements cover the consolidated entity RUA Life Sciences plc and the entities it controlled at the end of, or during, the interim period to 30 September 2024 ("the Group").

RUA Life Sciences plc ("the Company") is a public limited company and is domiciled and incorporated in Scotland with number SC170071. The Company is listed on the AIM market of the London Stock Exchange (ticker: RUA, ISIN: GB0033360586)

The registered office is

c/o Davidson Chalmers Stewart LLP

163 Bath Street

Glasgow

G2 4SQ.

RUA Life Sciences plc is the ultimate parent company of the Group, whose principal activities are contract design and manufacture of medical devices and exploiting the value of its IP and know-how.

2.   Basis of preparation

These condensed consolidated interim financial statements are for the six months ended 30 September 2024 and have been prepared with regard to the requirements of IAS 34 on "Interim Financial Reporting".  They do not include all of the information required for full financial statements and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 March 2024.

The financial information for the six months ended 30 September 2024 and the comparative figures for the six months ended 30 September 2023 are unaudited.  They have been prepared on the basis of the accounting policies set out in the consolidated financial statements of the Group for the year ended 31 March 2024 and, on the recognition, and measurement principles of IFRS in issue as effective at 30 September 2024. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

The figures for the year ended 31 March 2024 have been extracted from the audited statutory accounts which were approved by the Board of Directors on 23 July 2024, prepared under IFRS. The Independent Auditor's Report on the Report and Financial Statements for the year ended 31 March 2023 was unqualified but did draw attention to Note 1 of those financial statements which explains that the Group and Parent Company's ability to continue as a going concern is dependent on the execution of its business plan together with its ability to raise sufficient capital to meet capital and liquidity requirements.  The auditors report did not contain any statements under sections 498(2) or 498(3) of the Companies Act 2006.

The financial information is presented in pounds Sterling which is the functional and presentational currency of the Company. Balances are rounded to the nearest thousand (£'000) except where otherwise indicated.

The Interim Financial Statements were approved by the Board of Directors on 10 December 2024.

Going concern

The Directors have considered the applicability of the going concern basis in the preparation of the financial statements. This included the review of financial results, internal budgets and cash flow forecasts for the period of at least 12-months following the date of approval of these interim financial statements (the "Going Concern Period").

In assessing whether the going concern assumption is appropriate, the directors have considered the Group's existing working capital and are of the opinion that the Group has adequate resources to undertake its planned program of activities for the 12 months from the date of approval of these financial statements.

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 22-24 of the Annual Report 2024, a copy of which is available on the Company's website www.rualifesciences.com 

Profit/(Loss) per share

Profit/(Loss) per share has been calculated on the basis of the result for the period after tax, divided by the weighted average number of ordinary shares in issue in the period of 62,060,272.  (30 September 2023: 22,184,798 and 31 March 2024: 33,546,577).

3.   BUSINESS SEGMENTS AND REVENUE ANALYSIS

The principal activity of the RUA Life Sciences Group comprises exploiting the value of its IP & know-how, medical device manufacturing and development of cardiovascular devices.

Following the acquisition of the ABISS Group on 6^th September 2024 and an internal organisation and reporting review, the Board has decided to rename the business segment Contract Manufacturing to Medical Devices and Components to more accurately describe it. This change incorporates revenues generated from contract manufacturing of medical devices, manufacturing and sale & distribution of medical devices into a single reporting segment. This change is consistent with both how the business will be managed and be reported internally in the future. The following analysis by segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Chief Operating Decision Maker (considered to be the Chief Executive Officer) to assess performance and make strategic decisions about the allocation of resources. Segmental results are calculated on an IFRS basis.

A brief description of the segments of the business is as follows:

·      Biomaterials - Licensor of Elast-Eon^TM polymers to the medical device industry.

·   Medical Devices and Components - End-to-end contract developer, manufacturer, and seller of medical devices and implantable fabric specialist.

·    Vascular - Development and commercialisation of the Group's Elast-Eon sealed Vascular Graft products.

·      Structural Heart - Development of the Group's Elast-Eon composite heart valve material AurTex^TM.

Operating results which cannot be allocated to an individual segment are recorded as central and unallocated.

Segment revenue represents revenue from external customers arising from sale of goods and services. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

The Group's revenue from continuing operations to destinations outside the UK amounted to 100% (6 months to 30 September 2023: 100%; year to 31 March 2024: 100%). The revenue analysis below is based on the country of registration of the customer:

The Group's revenue for six months to 30 September 2024 is segmented as follows:

The Group's revenue for six months to 30 September 2023 is segmented as follows:

The Group's revenue for 12 months to 31 March 2024 is segmented as follows:

The Group's Segmental analysis for six months to 30 September 2024 is segmented as follows:

The Group's Segmental analysis for six months to 30 September 2023 is segmented as follows:

The Group's Segmental analysis for 12 months to 31 March 2024 is segmented as follows:

4.     BUSINESS COMBINATIONS

On 6 September 2024, RUA Life Sciences acquired the assets of Analytic Biosurgical Solutions SAS, ("Abiss") for a cash consideration of £68,000 (€80,000) through a transaction facilitated by the French courts. Abiss was part of a wider medical devices group which went into insolvent liquidation in June 2021 because of the impacts of Covid. Although the parent company was in liquidation, Abiss itself was not placed in receivership/liquidation. Abiss has continued to trade solvently and has traded within its own financial resources. There is no future, deferred or contingent consideration due on this transaction. Further details of the acquisition are detailed in the Chairmans statement.

As part of the acquisition, the net identifiable assets' carrying value was determined to be £1,130,000, which exceeds the total consideration transferred of £68,000. Consequently, a gain on a bargain purchase of £1,062,000 has been recognised in profit or loss as of the acquisition date.

This gain reflects the favourable terms of the transaction, arising primarily from the purchase through court proceedings at a value significantly below the fair value of the assets acquired. Due to the timing and nature of the transaction, no fair value adjustments have been made to the assets acquired, and the amounts presented represent the carrying values at the date of acquisition. Thus, the accounting is currently provisional. The Group intends to complete a thorough review of the fair value of the acquired assets and liabilities during the annual reporting process for the 18-month period ending 30 September 2025, as permitted under IFRS 3-Business Combinations.

The ABISS Group had an operating loss from the date of acquisition to 30 September 2024 of £40,000. Abiss was impacted by supply chain challenges, resulting in back orders expected to be completed in the second interim period. Cash consumed in operating activities since the acquisition date amounted to £55,000.

Details of the Acquisition:

·      Date of Acquisition: 6 September 2024

·      Consideration Transferred: £68,000

·      Carrying Value of Identifiable Net Assets Acquired: £1,130,000

·      Gain on Bargain Purchase: £1,062,000

·      Recognition of Gain: Included under "Other Income" in the Statement of Comprehensive Income for the period ended 30 September 2024

The fair value assessment of the net assets acquired is provisional and subject to adjustments as the Group finalises the purchase price allocation. Any changes to this assessment will be reported in the annual reporting process for the year ending 30 September 2025 in accordance with IFRS 3 - Business Combinations.

Details of the consideration paid and the fair value of net assets acquired are as follows:

5.     GOODWILL

The final valuation following the acquisition of RUA Medical Devices Limited gave rise to adjustments being required to the value of intangibles recognised in the Interim Report for the six months ended 30 September 2020, and lead to the following goodwill being recognised:

No impairment review has been carried out in the six-month period.

6.     OTHER INTANGIBLE ASSETS

7.   PROPERTY, PLANT AND EQUIPMENT

Included in the net carrying amount of property plant and equipment are right-of-use assets as follows: