NIOX GROUP PLC

("NIOX" or the "Company" 
and, together with its subsidiaries, the Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023

Oxford, UK - 26 September 2023: NIOX Group plc (AIM: NIOX), a company engaged in the design, development, and commercialisation of medical devices for asthma diagnosis and management, today announces its unaudited interim results for the six months ended 30 June 2023 ("H1 2023").

Financial highlights

·    Revenue growth of 21% to £18.8 million (H1 2022: £15.5 million).

·    Clinical business revenue growth of 28% to £16.7 million (H1 2022: £13.0 million). 90% of clinical revenue from recurring test kit sales.

·    Adjusted EBITDA² of £6.2 million (H1 2022: £3.2 million), reflecting higher sales, improved margins as a result of a higher proportion of test kit sales and a slight reduction in the cost base.

·    Strong balance sheet with no bank debt and cash of £23.8 million as of 30 June 2023 (30 June 2022: £13.8 million, 31 December 2022: £19.4 million).

·    Operating cash flow of £5.0 million (H1 2022: £1.0 million).

Financial progress

¹ Excludes depreciation, amortisation, impairment and share option charge. See note 13 for reconciliation.

² Earnings before interest, tax, depreciation, amortisation, impairment and share option charge. See note 13 for reconciliation.

³ Full amount of Beyond Air settlement recognised in H1 2022.

⁴Includes cash and cash equivalents.

Operational highlights

·      Ongoing transition to distributor-led business model with new arrangements in Europe, the USA and China expected to drive scalable revenue growth.

·      Commenced development of NIOX Pro, the next generation of clinical use device.

Post period end

·      Second payment of $3.5 million received from Beyond Air on 25 August 2023.

·      Net cash at 31 August 2023 increased to £27.3 million.

·      A special dividend of 2.5p per share (equating to a return of cash of £10.5 million) was paid on 15 September 2023 to shareholders on the register as at the close of business on Friday 18 August 2023.

Ian Johnson, NIOX's Executive Chairman, said: "The Group has performed well in the first half of the year with good growth in revenue and profits. Cash generation remained strong with net cash at the half year of £23.8 million, up from £19.4 million at the end of 2022.  Our strong cash generation permitted the payment of a special dividend of 2.5p per share earlier this month and we expect to propose a final dividend for the 2023 year at the time of our full year results next March.

The Group is now in a strong financial position to deploy its cash resources to invest in creating further demand for its products and in developing next generation devices, including a home-use device.

Trading in July and August has been in line with management expectations. While the value of reported sales is subject to fluctuation as a result of exchange rate movements, the impact of this on EBITDA is not expected to be significant and the Board remains confident of achieving management expectations for the full year, which were significantly upgraded in July, and in prospects for 2024 and beyond."

Contacts

NIOX

Ian Johnson, Executive Chairman                                                                Tel: +44 (0) 1865 405 560

Michael Roller, Chief Financial Officer

Singer Capital Markets (Nominated Adviser and Broker)

Aubrey Powell/ Jen Boorer                                                                           Tel: +44 (0) 20 7496 3000

About NIOX

Our mission is to improve asthma diagnosis and management by greater patient access to FeNO testing. Asthma is one of the biggest healthcare issues globally with 340 million sufferers, many of whom are undiagnosed or are misdiagnosed. The Group is engaged in the design, development, and commercialisation of medical devices for the measurement of FeNO, a precise biomarker for asthma. Our market leading device, NIOX VERO®, is increasingly recognised by healthcare professionals as an important tool to improve the diagnosis and management of asthma. NIOX VERO® is also the device of choice by leading clinical research organisations for respiratory studies.

NIOX provides products and services via its direct sales organisation and extensive distributor network in 50 countries. For more information, please visit www.niox.com

The Group's interim results report is available online at www.investors.niox.com/investors/financial-reports/

Forward-looking statements

This press release contains certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of NIOX. The use of terms such as "may", "will", "should", "expect", "anticipate", "project", "estimate", "intend", "continue", "target" or "believe" and similar expressions (or the negatives thereof) are generally intended to identify forward-looking statements. These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Any of the assumptions underlying these forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward-looking statements may not actually be achieved. Nothing contained in this press release should be construed as a profit forecast or profit estimate. Investors or other recipients are cautioned not to place undue reliance on any forward-looking statements contained herein. NIOX undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances.

OPERATING REVIEW  

Introduction

The Group performed well in the first half of 2023 with revenues up 21% to £18.8 million (H1 2022: £15.5 million). The business made a profit at an adjusted EBITDA level of £6.2 million (H1 2022: £3.2 million).

Business review

NIOX is the market leader in point of care FeNO testing for the diagnosis and management of asthma. The NIOX VERO® device is approved and reimbursed in most major markets.  

Clinical sales (to physicians and hospitals for use in clinical practice, and to the Company's distributors) grew by 28% to £16.7 million (H1 2022: £13.0 million). Recurring revenues from test kit sales provide good visibility of earnings and are typically 90% of clinical sales.

In constant currency terms, sales in the APAC region were 70% up on the prior half year mainly as a result of higher testing volumes in Japan and China, whilst EMEA sales were up 32%. Given the recent changes in distribution, we are yet to generate the level of growth in the Americas that we are seeing elsewhere, with sales up 8%.

Research sales for the period (generated from pharmaceutical companies and contract research organisations (CROs) for use in clinical studies) were £2.1 million (H1 2022: £2.5 million). Period comparisons are difficult given the timing and number of clinical trials involving FeNO testing.

Discontinued operations

The discontinued COPD business generated a small profit of £0.5 million in the first half of the year (H1 2022: £0.3 million) as a result of a reduction in the rebate accrual based on information received during the period.

The Group retains an accrual of £1.2 million (31 December 2022: £3.3 million) in respect of potential future rebate payments. No claims for rebates have been received since 31 December 2022.

The accrual for returns was reduced to nil as at 30 June 2023 (31 December 2022: £2.2 million) as returns claims totalling £2.2 million were received.  £1.1 million of this amount was settled in the period, with the remainder settled after the period end in August 2023. No material future product returns are expected.

Beyond Air

As a result of Beyond Air, Inc. ("Beyond Air") receiving approval from the U.S. Food and Drug Administration (FDA) for its LungFit® PH device, the Group is entitled to receive payments of $10.5 million in total, in three instalments as follows:

·      $2.5 million within 60 days of the approval of LungFit® by the FDA ("FDA approval") - received on 24 August 2022

·      $3.5 million within 60 days of the first anniversary of FDA approval - received on 25 August 2023

·      $4.5 million within 60 days of the second anniversary of FDA approval

In addition, the Group is entitled to a royalty of 5% of net sales of the device, commencing on the second anniversary of FDA approval and capped at a maximum of $6 million.

Energy prices and inflation

The Group does not manufacture its own products and accordingly energy costs are a very small component of total costs.  The effect of inflationary pressures on purchase prices from its two main suppliers is mitigated both by the group's high gross margins and its ability to implement price increases in the majority of its markets.

Investments

The Group has commenced development of its new NIOX Pro device; development costs this year will approximate £0.2 million and are likely to be capitalised in accordance with the requirements of accounting standards.  The aggregate development costs of the NIOX Pro, including tooling, should not exceed £2.0 million, with the bulk of these costs being incurred in 2024.

Outlook

Management is continuing to implement a growth strategy that will raise the awareness of the benefits of FeNO testing and significantly improve the availability of NIOX® worldwide by expanding distribution, optimising reimbursement and improving patient access. Exploring use in the home and availability in pharmacies and the workplace will further improve patient access as greater emphasis is placed on managing patients in non-hospital locations.

Trading in July and August has been in line with management expectations. While the value of reported sales is subject to fluctuation as a result of exchange rate movements, the impact of this on EBITDA is not expected to be significant and the Board remains confident of achieving management expectations for the full year, which were significantly upgraded in July, and in prospects for 2024 and beyond.

FINANCIAL REVIEW

The first half of 2023 has been a period of continued growth for NIOX. The level of FeNO testing carried out by our customers continues to grow, resulting in the Group increasing both revenues and adjusted EBITDA.

¹ Earnings before interest, tax, depreciation, amortisation, impairment and share option charge. See note 13 for reconciliation.

Revenue

NIOX® revenues for the period were £18.8 million (H1 2022: £15.5 million) which include clinical sales of £16.7 million (H1 2022: £13.0 million) and research sales of £2.1 million (H1 2022: £2.5 million). NIOX® clinical revenue represents sales to physicians and hospitals for use in clinical practice and to the Company's distributors, while research revenue is from pharmaceutical companies and contract research organisations (CROs) for use in clinical studies.

A significant part of the increase in NIOX® revenue was attributable to a recovery in testing volumes in Japan and China following the Covid-19 pandemic, but there was also good growth in various European markets including the UK and Germany.

Gross profit

Gross profit on NIOX® sales was £13.7 million (H1 2022: £11.0 million), with a gross margin of 73% (H1 2022: 71%). Gross margin was higher than the prior period due to a greater proportion of higher margin test kit sales and a lower proportion of lower margin, device heavy research sales.

Research and development

Research and development costs reduced to £1.2 million (H1 2022: £1.9 million) mainly attributable to lower headcount.

Sales and marketing

Sales and marketing costs increased to £5.6 million (H1 2022: £4.6 million) as sales and marketing activities are returning to normal levels following the Covid-19 pandemic.

Other income

Other income has decreased to £0.1 million (H1 2022: £8.3 million). £0.1 million (H1 2022: £0.2 million) relates to sub-lease rental income in respect of the Chicago property. The prior period figure includes £8.1 million relating to the one-off recognition of the settlement consideration due from Beyond Air.

Earnings per share

Basic profit per share for the period was 0.81p (H1 2022: 2.20p) and diluted profit per share for the period was 0.76p (H1 2022: 2.07p) reflecting a profit for the period of £3.4 million (H1 2022: £9.2 million). Basic profit per share from continuing operations was 0.69p (H1 2022: 2.13p) and diluted profit per share from continuing operations was 0.64p (H1 2022: 2.00p) reflecting a profit from continuing operations for the financial period of £2.9 million (H1 2022: £8.9 million).

The decrease in reported profit per share is largely due to the recognition of the full consideration due from Beyond Air in the prior period. Excluding the impact of the Beyond Air consideration and amortisation, basic profit per share for the period was 1.26p (H1 2022: 0.74p) reflecting an adjusted profit for the period of £5.3 million (H1 2022: £3.1 million). See note 6.

Other comprehensive income

Other comprehensive income of £5.4 million (H1 2022: £1.5 million) relates to exchange differences on the translation of the balance sheets of foreign operations into British pound sterling.

The income consists of a £4.3 million gain (H1 2022: £0.5 million) on the translation of overseas subsidiaries' net assets, a £2.8 million gain (H1 2022: £0.5 million) on the translation of intangible assets and a £0.4 million gain (H1 2022: £0.1 million) on the translation of goodwill, offset by a £2.1 million loss (H1 2022: £0.4 million gain) on the retranslation of intercompany balances which are determined to be long-term investments in nature, and therefore the effect of foreign exchange is recognised through other comprehensive income.

Statement of financial position

Net assets at 30 June 2023 were £80.9 million (31 December 2022: £81.9 million).

Current liabilities at 30 June 2023 were £7.1 million (31 December 2022: £9.2 million). The decrease is mainly due to lower trade payables, in particular lower accruals relating to discontinued operations, as a £1.1 million invoice from AstraZeneca was settled in the period, reflecting returns of out-of-date pharmaceutical products relating to the discontinued COPD business.  A further £1.1 million was settled in August and no material additional returns are expected.

During the period, a Capital Reduction Scheme was concluded by filing an order of the High Court with the Registrar of Companies. This resulted in the share premium of the Company being cancelled.

Cash flow

The Group's cash position (including cash and cash equivalents) increased from £19.4 million at 31 December 2022 to £23.8 million at 30 June 2023. The Group has no bank borrowings.

Cash generated from operations during the period aggregated £5.1 million (H1 2022: £1.2 million), of which £1.1 million (H1 2022: £0.1 million) was used in discontinued operations. The significant increase in cash generation is due to the increased profitability of the Group.

Exchange differences on cash and cash equivalents arose as a result of translation of foreign currency balances at the beginning and end of the relevant period. The exchange loss for the period was £0.4 million (H1 2022: £0.4 million gain).

Michael Roller

Chief Financial Officer

26 September 2023

PRINCIPAL RISKS AND UNCERTAINTIES

NIOX has considered the principal risks and uncertainties facing the Group for the first six months of 2023 and does not consider them to have changed materially from those set out on pages 32 to 35 of the 2022 annual report and accounts, which is available on the Group's website. A summary of these risks and uncertainties is as follows:

Cyber security

If the Group fails to sufficiently detect, monitor, or respond to cyber-attacks against its systems this may result in disruption of service, compromise of sensitive data, financial loss and reputational damage.

Supply Chain

The Group relies on third parties for the supply of key materials, finished products and services, including shipping. Some materials may only be available from one source, and regulatory requirements may make substitution costly and time-consuming.

Covid-19 pandemic

There is a risk that the Covid-19 pandemic may impact the Group, in particular with regard to the level of FeNO testing. Whilst operations are generally back at normal levels, there is still uncertainty in terms of any potential new variants, the timing, extent and length of national or regional lockdowns and their potential impact on our operations, colleagues and customers.

Commercial success

The Group's competitors, some of whom have considerably greater financial and human resources, may develop more effective products, launch products at a lower price or be able to compete more effectively in the markets targeted by the Group.

The Group may face issues selling its products if there is no payer coverage or inclusion of these products by health insurance schemes, or if large payers that currently cover FeNO testing shift to a negative coverage policy.

Compliance with healthcare regulations

The Group must comply with complex regulations in relation to the marketing of its devices. These regulations are strictly enforced. Failure by the Group (or its commercial partners) to comply with relevant legislation and regulations in the countries in which it operates may result in criminal and civil proceedings against the Group.

Foreign exchange fluctuations

Foreign exchange fluctuations may adversely affect the Group's results and financial condition. The Group records its transactions and prepares its financial statements in British pound sterling, but a significant proportion of its income and expenditure is in United States dollar, Swedish krona, Euro and Chinese yuan.

Staff retention

Failure to attract, retain and develop people could lead to a lack of critical skills, knowledge and experience, which could hinder both daily operations and growth potential.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2023

The notes below are an integral part of these condensed interim consolidated financial statements.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2023

The notes below are an integral part of these condensed interim consolidated financial statements.

Ian Johnson                                                                             Michael Roller

Executive Chairman                                                                   Chief Financial Officer
NIOX Group plc                                                                         NIOX Group plc

Registered number: 05822706