INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2024

NIOX GROUP PLC

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

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024

Oxford, UK - 24 September 2024: 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 2024 ("H1 2024").

Financial highlights

·    Revenue growth of 12% (15% on a constant currency basis) to £21.0 million (H1 2023: £18.8 million).

·    Clinical business revenue growth of 11% (14% on a constant currency basis) to £18.5 million (H1 2023: £16.7 million).

·    Adjusted EBITDA² of £7.1 million (H1 2023: £6.2 million), reflecting higher sales and a broadly flat cost base.

·    Adjusted EBITDA² margin 33.8% (H1 2023: 33.0%).

·    Adjusted basic earnings per share of 1.73p (H1 2023: 1.57p).

·    Cash generated from operations of £6.0 million (H1 2023: £5.1 million), of which £0.9 million (H1 2023: £1.1 million) was used in discontinued operations.

·    Strong balance sheet with no debt and cash of £21.5 million as of 30 June 2024, notwithstanding the payment of a £4.2 million dividend in June 2024 (30 June 2023: £23.8 million, 31 December 2023: £19.9 million).

Financial progress

¹ Excludes depreciation, amortisation and share option charge. See note 12 for reconciliation.

² Earnings before interest, tax, depreciation, amortisation and share option charge. See note 12 for reconciliation.

Operational highlights

·      Expansion of distributor network in the USA to target areas of untapped potential is expected to drive scalable revenue growth.

·      Continued expansion of our distributor network across EMEA.

·      A final dividend for the financial year ended 31 December 2023 of 1.0 pence per share (equating to a return of cash of £4.2 million) was paid on 24 June 2024.

·      Development of NIOX Pro® in progress, the next generation of clinical use device.

Post period end

·      Third payment of $4.5 million received from Beyond Air on 23 September 2024.

·      Tender offer announced today to repurchase approximately 26.25 million shares at 80 pence per share, returning £21.0 million to shareholders if fully taken up.

·      Proforma cash after tender offer (if fully subscribed) and Beyond Air receipt approximately £6.0 million at 24 September 2024.

Ian Johnson, NIOX's Executive Chairman, said: "I am pleased to report that the Group continues to perform well with good growth in revenues and profits in the first half of the year. Cash generation remained strong which has enabled the Board to recommend a further return of capital to shareholders by way of a Tender Offer, details of which are announced today.

The Board remains confident in achieving consensus expectations for the full year."

Contacts

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

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 2024 with revenues up 12% (15% on a constant currency basis) to £21.0 million (H1 2023: £18.8 million). The business made a profit at an adjusted EBITDA level of £7.1 million (H1 2023: £6.2 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 11% (14% on a constant currency basis) to £18.5 million (H1 2023: £16.7 million). Recurring revenues from consumables used for routine testing provide good visibility of earnings and are typically more than 90% of clinical sales.

In constant currency terms, sales in the APAC region were 25% up on the prior half year mainly as a result of higher testing volumes in Japan and China. EMEA sales were up 9% and US sales growth was 8%.   Good progress was made in the US in building out our distributor network to target areas of untapped potential, and we believe that we are continuing to implement firm foundations for our US business to deliver improved growth rates in the future.  Our experience continues to indicate that testing volumes are highest in those countries where awareness of FeNO is highest.

Research sales for the period (generated from pharmaceutical companies and contract research organisations (CROs) for use in clinical studies) were £2.5 million (H1 2023: £2.1 million). Period comparisons are difficult given the timing and number of clinical trials involving FeNO testing fluctuates from year to year.

Discontinued operations

Profit from the discontinued COPD business was £nil in the first half of the year (H1 2023: £0.5 million) as no information was received during the period which would indicate the need for the rebate accrual to be revised.

The Group retains an accrual of £0.4 million (31 December 2023: £0.4 million) in respect of potential future rebate payments. Only de minimis claims for rebates have been received since 31 December 2023.

The accrual for returns was £nil as at 30 June 2024 (31 December 2023: £0.1 million). A small number of claims were received in the period and the remaining trivial balance of the accrual was released. No further return claims will be received as the return claims period for all remaining batches ended on 30 April 2024.

Cash used in discontinued operations was £0.9 million (H1 2023: £1.1 million). A payment of £0.4 million was made in respect of rebate and return claims received in 2023, which was included in trade payables as at 31 December 2023. Additionally, a one-off payment of £0.5 million was made in respect of an expense of the COPD business incurred and accrued for in 2021 but not invoiced until 2024.

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 - received on 23 September 2024.

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 $6.0 million.

Investments

The Group has continued the development of its new NIOX Pro® device; development costs incurred in the period are £0.2 million and have been capitalised in accordance with the requirements of accounting standards.

The aggregate development costs including tooling of the NIOX Pro®, the next generation of clinical device, should not exceed £2.0 million, with the bulk of these costs being incurred in 2024. Initial revenues from this device are not expected until late 2025.

Outlook

Trading during July and August has been slightly ahead of management expectations. However, the ongoing strength of Sterling is negatively impacting reported revenues, albeit with a negligible effect on EBITDA as the geographic mix of our operations ensures that, in aggregate, costs are largely incurred in the same currencies as revenue.

As at 31 August 2024, the Company's cash balance amounted to £23.7 million and the Company had no debt. As a result of the Group's strong cash generation, the Board is pleased to announce a return of cash to shareholders by way of a tender offer which, if fully taken up, will return £21.0 million to shareholders.

The Board remains confident in achieving consensus expectations for the full year and in the Group's prospects for sustained growth in 2024 and beyond.

FINANCIAL REVIEW

The first half of 2024 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 and share option charge. Adjusted EBITDA reconciles to operating profit as shown in note 12.

² On 9 April 2020, the Group announced that that the development and commercialisation agreement with AstraZeneca was terminating and as such the results of the COPD business are classified as a discontinued operation.

Revenue

NIOX® revenues for the period were £21.0 million (H1 2023: £18.8 million) which include clinical sales of £18.5 million (H1 2023: £16.7 million) and research sales of £2.5 million (H1 2023: £2.1 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 the growth in testing volumes in Japan and China.

Gross profit

Gross profit on NIOX® sales was £15.2 million (H1 2023: £13.7 million), with a gross margin of 72% (H1 2023: 73%). Gross margin was lower than the prior period due to a higher proportion of lower margin, device heavy research sales and a lower proportion of higher margin test kit sales.

Sales and marketing costs

Sales and marketing costs increased to £5.7 million (H1 2023: £5.6 million). Labour costs were higher due to increased headcount in the US.

Administrative expenses

Administrative expenses increased to £4.1 million (H1 2023: £3.9 million) due to higher labour costs, particularly in relation to the accrued cash bonus payable to the Executive Directors, which was previously paid as shares and thus did not affect adjusted EBITDA.

Earnings per share

Basic profit per share for the period was 1.04p (H1 2023: 0.81p) and diluted profit per share for the period was 0.97p (H1 2023: 0.76p) reflecting a profit for the period of £4.4 million (H1 2023: £3.4 million). Basic profit per share from continuing operations was 1.04p (H1 2023: 0.69p) and diluted profit per share from continuing operations was 0.97p (H1 2023: 0.64p) reflecting a profit from continuing operations for the financial period of £4.4 million (H1 2023: £2.9 million).

Excluding the impact of depreciation, amortisation and share option charge, adjusted basic profit per share for the period was 1.73p (H1 2023: 1.57p) reflecting an adjusted profit for the period of £7.3 million (H1 2023: £6.6 million). See note 6.

Statement of financial position

Net assets as at 30 June 2024 decreased to £81.8 million (31 December 2023: £83.8 million) largely as a result of a lower intangible assets value following amortisation, partly offset by a higher cash balance.

Current liabilities as at 30 June 2024 were £5.4 million (31 December 2023: £7.2 million). The decrease is mainly due to lower trade payables, in particular lower accruals relating to discontinued operations, as £0.9 million was settled in the period.

Cash flow

The Group's cash position (including cash and cash equivalents) increased from £19.9 million as at 31 December 2023 to £21.5 million as at 30 June 2024. The Group has no debt.

Cash generated from operations during the period aggregated £6.0 million (H1 2023: £5.1 million), of which £0.9 million (H1 2023: £1.1 million) was used in discontinued operations. The increase in cash generation is due to the increased profitability of the Group.

A dividend totalling £4.2 million (H1 2023: £nil) was paid to shareholders in the period.

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 £0.1 million (H1 2023: £0.4 million).

Michael Roller

Chief Financial Officer

24 September 2024

PRINCIPAL RISKS AND UNCERTAINTIES

NIOX has considered the principal risks and uncertainties facing the Group for the first six months of 2024 and does not consider them to have changed materially from those set out on pages 38 to 41 of the 2023 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.

Commercial success

The Group's competitors, some of whom have considerably greater financial and human resources, may develop more effective products, launch similar 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 cashflows are in United States dollars, Swedish krona, euros 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 2024

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 2024

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