RUA Life Sciences flags smaller EBITDA loss

(Sharecast News) - RUA Life Sciences said in an update on Friday that it expected to report a smaller EBITDA loss, broadly reaching breakeven on an adjusted basis, after revenue growth in its UK contract development and manufacturing and biomaterials businesses offset weaker trading at Abiss.

The AIM-traded medical device group said revenue for the six months ended 31 March was expected to rise about 6% to £2.8m, from £2.6m a year earlier.

Revenue from its UK contract development and manufacturing, or CDMO, business increased 32% to £1.3m, driven by new development contracts.

The biomaterials business grew 41% to £0.5m, helped by historical underpayments identified following an audit of royalties from licensees.

Those gains were partly offset by weaker trading at Abiss, the group's France-based implantable device manufacturer, where sales fell 23% to £1.0m after a major customer reduced inventory during the period.

Direct sales of Abiss's own products grew 3%.

RUA said gross margin was expected to edge up to 75% from 74%, while administrative costs were expected to fall 8% to £2.3m as a result of continued cost control.

The group expects to be at EBITDA breakeven for the period, adjusted for share-based payments and non-recurring items, representing an improvement of about £0.4m compared with the same period last year.

Cash at 31 March stood at £2.4m after £0.9m of cash consumption during the period, which RUA said was traditionally more working capital intensive.

It expected the position to normalise in the second half as accrued income is billed and paid and research and development tax credits are received.

The company said the recently announced £3m fundraising and spin-out of RUA Structural Heart would affect its second-half accounts.

The business will be accounted for as an investment rather than a subsidiary, with RUA expecting to recognise a gain of about £4.9m from prior research and development expenditure being recognised as an asset.

RUA said the elimination of Structural Heart costs would provide a net cash benefit of about £500,000.

It will also accrue around £250,000 of payment-in-kind interest annually following the conversion of inter-company debt with RUA Structural Heart into £4.8m of convertible loan notes.

The CDMO business was expected to benefit from new development contracts worth around £500,000 over the rest of the 2026 calendar year.

RUA said development work had grown fourfold over the past year and could potentially convert into more than £5m a year of manufacturing contracts.

At Abiss, the company said it was in discussions with the major customer reducing inventory to align stock levels while providing revenue visibility for the next two years.

RUA said it expected activity to recover in the second half and remain on track with budget.

Chief executive Bill Brown said RUA had achieved "a great deal" over the past two years, including development of the CDMO business, the funding of RUA Structural Heart and the acquisition of Abiss.

"Despite lower trading levels over the past six months, Abiss remains a major opportunity, to not only deepen relationships with customers but develop independently to commercialise its own product base," he said.

RUA said it expected to publish interim accounts for the six months ended 31 March at the end of June.

At 1345 BST, shares in RUA Life Sciences were up 3.81% at 21.8p.

Reporting by Josh White for Sharecast.com.

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