Abingdon Healt. Regulatory News (ABDX)

Abingdon Health plc

("Abingdon" or "the Company")

Preliminary Results

York, U.K. 18 November 2021: Abingdon Health plc (AIM: ABDX), a leading international developer and manufacturer of high quality and effective rapid tests, announces its preliminary results for the year ended 30 June 2021.

Financial highlights

· Revenue of £11.6m (2020: £5.2m), representing growth of 123%

- Excluding Department of Health and Social Care ("DHSC") revenues, revenues increased by 138% to £6.5m compared with the previous financial year

· Adjusted* EBITDA loss of £3.3m (2020: £0.8m profit)

· Operating Loss of £6.7m (2020: profit £3.3m)

· Gross margin of 36% (2020: 78%, 58% when adjusted for one-time DHSC Research Fee)

· Cash as at 30 June 2021: £5.0m (2020: £4.4m)

· Net cash outflow from operating activities of £12.9m (2020: inflow of £2.1m), reflecting the increase in working capital requirements of trade and other receivables predominantly related to the overdue invoices from DHSC totalling £7.7m (including VAT) as at 30 June 2021

* Adjusted EBITDA stated before deduction of non-recurring costs, impairment of intangibles and share based payment

Operational highlights

· Successful admission to AIM in December 2020 raising £20m (net) to further build operational capacity

· Appointment of Mary Tavener as a Non-Executive Director on the Board

· £8.9m invested in expanding manufacturing capabilities in York and Doncaster

· Manufacturing and supply agreement with Bioporto A/S, manufacturing the lateral flow strips for Bioporto's Generic Rapid Assay Device (gRAD)

· Exclusive lateral flow manufacturing agreement with BioSure

· Completed delivery of 1m units of AbC-19™ COVID-19 rapid antibody test to the DHSC - payment for these tests is still outstanding at this time, but the Group has held positive recent discussions with DHSC regarding collection of the amount due

Post-period end

· Completion of the technical transfer of the BioSure COVID-19 IgG antibody self-test

· Transfer of the Bioporto A/S lateral flow product for its gRAD platform

· Currently in the process of transferring two COVID-19 Antigen tests into routine manufacture - Avacta plc's AffiDx® SARS-CoV-2 lateral flow test, and Vatic Health's KnowNow™ saliva COVID-19 antigen test

· Having regard to the Group's growth plans, working capital shortfall expected to arise in Q1 2022 ahead of any collection of sums due from DHSC

· Indications of funding support provided by certain of the Group's directors and the Group is investigating options to raise further capital

Chris Yates, Chief Executive Officer, Abingdon Health plc, commented:

"It has been a significant and challenging year for Abingdon, against the backdrop of a constantly evolving situation with regards to the COVID-19 pandemic. Following our successful admission to AIM and raise of £20m, we have invested heavily in expanding our manufacturing facilities in order to meet the growing demand for lateral flow tests, with our current manufacturing capacity now totalling 150 million tests in card format and 85 million foiled device format per year.

"Whilst the COVID-19 market environment remains uncertain, the Group is well placed to support our global customers, having expanded the range of COVID-19 rapid tests under manufacture. We now have a range of COVID-19 antigen and antibody lateral flow tests with manufacturing agreements or in the late stages of technical transfer, with our capabilities meaning we are also able to support any changes in product specification in the event of new variants.

"We are optimistic about the opportunities that lateral flow tests can play across multiple disease areas, as well as within the COVID-19 pandemic, and we also look forward to the conclusion of the DHSC Dispute Resolution Process, where constructive talks have taken place in recent weeks. I would like to thank all of our employees for their hard work during the past year."

Enquiries:

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

About Abingdon Health

Abingdon Health is a world leading developer and manufacturer of high-quality rapid tests across all industry sectors, including healthcare and COVID-19. Abingdon is the partner of choice for a growing global customer base and takes projects from initial concept through to routine and large-scale manufacturing and has also developed and marketed its own labelled tests.

The Company offers product development, regulatory support, technology transfer and manufacturing services for customers looking to develop new assays or transfer existing laboratory-based assays to a lateral flow format. Abingdon Health aims to support the increase in need for rapid results across many industries and locations and produces lateral flow tests in areas such as infectious disease, clinical testing including companion diagnostics, animal health and environmental testing. Faster access to results allows for rapid decision making, targeted intervention and can support better outcomes. This ability has a significant role to play in improving life across the world. To support this aim Abingdon Health has also developed AppDx®, a customisable image capturing technology that transforms a smartphone into a self-sufficient, standalone lateral-flow reader.

Founded in 2008, Abingdon Health is headquartered in York, England.

For more information visit: www.abingdonhealth.com

Chairman and CEO Joint Statement

We are pleased to present Abingdon Health Plc's ("Abingdon's") maiden set of results as a listed Group. In December 2020 the Group was admitted to trading on the AIM market of the London Stock Exchange and raised £20m net.

Against the backdrop of significant global economic disruption as a result of the pandemic, the fundraising and flotation were completed in the context of the growing need and use cases for lateral flow testing as a leading diagnostic in the fight against COVID-19. Consequently, Abingdon has been active in supporting its customers in bringing innovative products and solutions to market to mitigate the impact of the pandemic.

Abingdon has invested circa £8.9m since the start of 2020 in the expansion of its manufacturing facilities in York and Doncaster to meet the growing demand within the lateral flow market. The Group's current manufacturing capacity now totals over 150m tests in card format and up to 85m tests to foiled device format per annum.

We remain confident that the lateral flow market will continue to grow through continued need for both antigen and antibody testing for COVID-19 as well as the wider adoption of lateral flow testing which is driving its expansion across a range of clinical, animal health, plant and environmental testing sectors. The Group remains well placed to support our global customers in developing and manufacturing at scale diagnostic tests.

Strategy

Our mission at Abingdon is to improve life by making rapid results accessible to all. We can achieve this by delivering our vision to be a leading global automated manufacturer of lateral flow tests.

Our long-term strategic objective is to become the largest automated manufacturer of lateral flow tests globally, providing development and contract manufacturing services to clients spanning a range of applications across the healthcare and non-healthcare sectors.

We focus on providing our contract service customers with a comprehensive, large-scale, end-to-end contract development and manufacturing capability. In addition, we will continue to utilise our development and manufacturing capabilities to develop our own products, typically in partnership with knowledge leaders in their field.

Our dedicated contract service team provides our customers with access to significant lateral flow expertise in developing lateral flow tests and scaling-up the production, through our technical transfer process, into high-throughput automated manufacture. Our contract development process manages product development through our quality management system and works closely with our customer(s) to develop and optimise their product(s) to design freeze (where all design work is complete and the product is capable of scalable manufacture) in a manner that meets the customer's, and the end-users' requirements, and importantly with the ability for the product to be manufactured at scale. Our technical transfer team takes this design frozen product and manufactures three batches on our automated equipment to ensure the product can be manufactured in a consistent and robust way. Following successful completion of technical transfer, our manufacturing team will work with our customers to meet their production requirements on an ongoing basis and will manufacture batches on our automated equipment.

In addition to our contract service business, we will continue to develop, manufacture and commercialise, our own products. We believe that COVID-19 is a catalyst for the expansion of self-testing across a range of other clinical areas and we will focus on developing and launching a range of complementary infectious disease products targeting the consumer market. Our route to market will be through commercial partners and we will focus our efforts on leveraging our development and manufacturing engine to launch innovative, high quality, easy-to-use infectious disease self-tests.

Since IPO, we have further enhanced our short-term strategic objectives which are focused on the following areas:

· Expanding our automated manufacturing capability;

· Investing in our technical transfer capability and knowledge leadership;

· Improving our processes & systems with a focus on scalability;

· Building close and effective partnerships with our customers; and

· Retaining, developing and engaging our people.

To maintain a competitive advantage in the lateral flow market we will continue to offer a comprehensive service proposition but believe it also critical to continue to innovate and invest in our operations and people. We strongly believe that we are at the start of a paradigm-shift in the use and application of rapid testing, initially within the COVID-19 area and this will transfer over time to other sectors such as infectious disease, animal health, plant and environmental testing.

Performance in period

Revenue for the full year was £11.6m (2020: £5.2m) which represented growth of 123% compared to the prior year. Excluding revenue from the Department for Health & Social Care ("DHSC"), revenue was £6.5m (2020: £2.7m) representing normalised growth of 138% and highlighting the strong underlying performance of the business.

We launched the AbC-19™ antibody test in July 2020 and sold 1 million tests to DHSC (£5.15m of revenue) with the order completed in January 2021. Payment for these tests is still outstanding at this time, but the Board is encouraged by positive recent discussions with DHSC regarding substantial collection of the amounts due (further detail on this can be found in note 5). We saw limited sales traction with AbC-19™ during the financial year as Governments across the world focused on antigen lateral flow testing and PCR testing. However, with the levels of immunity increasing due to previous infection and an increase in the vaccinated population we are confident that the "right to know" your antibody status will become increasingly important to, for example, stratify the patient population to focus on booster jabs for those that need them. We have submitted registrations for AbC-19™ in over 50 territories and the regulatory pathway in many of these territories are in differing stages of completion, which, once passed, is expected to unlock order volumes.

Excluding DHSC revenues from both 2020 and 2021 our revenues increased by 138% to £6.5m compared with the previous financial year. This was due to an increase in other COVID-19 development service revenue of £0.5m (884% increase compared with 2020), non-COVID-19 contract manufacturing activity of £0.5m (54% increase compared with 2020) and other COVID-19 product revenues of £2.8m (540% increase compared with 2020), which was due principally to increased sales of our PCRD lateral flow products.

Order Book

Much of our development work outside of AbC-19™ was focused on scaling-up our customers' antigen and antibody COVID-19 test production. We were pleased to announce in August 2021 the completion of the technical transfer of the BioSure COVID-19 IgG antibody self-test, the first antibody test that has been approved by a Notified Body and CE marked for self-test home use. Technical transfer is the process whereby three or more independent production runs are manufactured, at increasing scale, and validated to illustrate the product is suitable for mass manufacture.

In addition, in July 2021 we announced the completion of the transfer of the Bioporto A/S lateral flow product for its Generic Rapid Assay Device (gRAD) platform, Bioporto's proprietary patented technology for rapid lateral flow test development. The 10-year manufacturing agreement provide Bioporto with immediate access to high volume manufacturing to meet their anticipated global demand for its product.

As announced on 12 August 2021 we are in the process of transferring two COVID-19 Antigen tests into routine manufacture. On 30 September 2021 Avacta PLC ("Avacta") as part of their full year results presentation noted that their AffiDx® SARS-CoV-2 lateral flow test was in the process of transfer to Abingdon to allow commercial product to be manufactured and released. In October 2021 Vatic Health Limited ("Vatic") announced the strategic partnership with Abingdon for the development and manufacture of the Vatic KnowNow™ saliva COVID-19 antigen test.

We have received significant purchase orders for manufacturing batches from Vatic and Avacta, in advance of completion of technical transfer of their products, and we are putting in place the required component stock to allow us to seamlessly move into manufacturing in due course. The transfer of these antigen tests is timely given the move towards private-sector testing in the UK, the transition to cost-effective lateral flow testing from PCR testing for travel as well as the increased focus on antigen testing starting to emerge in the United States. 

Pipeline

The pipeline of opportunities behind these technical transfers is encouraging and we have an additional two technical transfer contracts signed which we anticipate commencing in the second quarter of FY 2022. These opportunities are non-clinical lateral flow tests. Our priority is to focus on products in the late-stage of development which require transfer and scale-up to manufacturing.

Capacity

We made significant strides in expanding our manufacturing capabilities in both York and Doncaster during the financial year, with £8.9m committed to expanding the footprint at both sites and our investment in automated equipment. Our Doncaster site is focused on primary production, effectively the production of laminated lateral flow cards and has been expanded to include three new clean rooms. Our York site is focused on primary and secondary production, which involves cutting cards and placing them in housed devices which are then individually foiled and packaged and we built seven new cleanrooms in this facility this year. Our overall capacity is currently over 150 million tests in laminated card format and up to 85 million foiled devices and we have the space to bring in additional automation taking our secondary production capacity to over 140 million foiled devices. This dual-site capability provides significant flexibility as we can manufacture the same products on both sites and offers our customers assurance from a risk management perspective in the event that one site is unable to operate for a period (e.g. due to a COVID-19 outbreak).

Team

During the financial year we increased our average staff numbers from 51 to 151. In our August 2021 trading statement, we noted the impact that the dispute with DHSC was having on our business and the need to manage cash and reduce our workforce through a combination of redundancy and natural attrition. As at 31 October 2021 our headcount was 132, with our highest headcount during the year being 192.

Governance and People

Mary Tavener was appointed senior-independent Non-Executive Director in November 2020 prior to flotation. Abingdon's other non-executive Directors Dr Chris Hand and Lyn Rees (independent) are both experienced healthcare diagnostics professionals with a strong understanding of the AIM market.

Our Audit Committee comprises Mary Tavener (Chair) and Lyn Rees; and our Remuneration Committee comprises Lyn Rees (Chair) and Mary Tavener. The Board has concluded that at this time the Group does not currently require a Nominations Committee but will review this assessment on a regular basis including discussing the matter with its Nominated Advisor.

The Board remains focused on ensuring its own effectiveness and that of the governance processes throughout the Group, and that these governance structures remain fit for purpose as the Group develops and grows over time.

Save As You Earn Scheme ("SAYE")

All eligible members of staff were invited to join the HMRC approved SAYE scheme which launched in April 2021 and allows employees to save up to £500 per month over a three-year vesting period. The employee then has the option at the end of that period to convert into shares and become shareholders in the Group or funds can be returned, providing flexibility to the employees.

COVID-19

The pandemic impacted the Group from the outset in March 2020. Initially our focus was predominantly on supporting the UK Government's requirement for a COVID-19 antibody test. This test was developed during the last quarter of FY20 and then transferred into manufacturing during the early part of FY21. The Group, along with its consortium partners in the UK Rapid Test Consortium ("UK-RTC"), produced one million AbC-19™ tests for the DHSC by January 2021.

During the Summer/Autumn 2020 the UK Government's priority shifted towards antigen and PCR testing and away from antibody testing. It is our understanding that the requirement for a COVID-19 antibody test in the initial period of the pandemic was due to the UK Government's initial focus on herd immunity which would have been gained at the time from high levels of infection. However, herd immunity has returned to the agenda again, due to high levels of vaccination as well as immunity derived from infection. Throughout the financial year we have also engaged with our contract customers on developing their COVID-19 antigen and antibody tests. We now have a range of tests being manufactured or in the late-stages of technical transfer that cover a range of different lateral flow COVID-19 applications and provide the Group with a number of material revenue generating opportunities over this and future financial years.

DHSC Dispute and Judicial Review Process

The Good Law Project ("GLP") is currently engaged in judicial review proceedings brought against the Secretary of State for Health and Social Care, which is due to be heard in May 2022. The DHSC is resisting the claims by the GLP. It is noted that the Group is an interested party, not a defendant in this case. The Group set out on its website on 9 August 2021 its detailed Grounds of Resistance as well as publishing the letter issued to the GLP via their solicitors, which corrected factual inaccuracies the GLP had continued to publish as part of its case. The Group continues to engage in this process to ensure that its reputation and good standing are not impugned and to ensure accurate information is made available to the judicial review.

As at the signing of these accounts the Group is owed £8.9m by DHSC for a combination of tests delivered (£5.2m), components bought on behalf of DHSC (£3.3m), plus a further commitment of (£0.4m) for goods not yet delivered to which DHSC retain legal title (this is further broken down in note 5). The Group believes that there are no legal grounds as to why these monies are not being paid in full and as such is following the Dispute Resolution Process as outlined in the contracts with DHSC. There have been two separate meetings with DHSC in an effort to find a resolution through mediation to this issue. During the second mediation both parties reached a non-binding agreement in principle which would, if concluded, lead to the outstanding monies being substantially collected and resolve all outstanding disputes with DHSC. The delay in these monies being paid has had a material impact on the Group, as previously announced to the market and has led the Board to conclude that there is a material uncertainty in relation to the going concern of the Group in the near term, linked to the non-recovery of these funds in line with the contractual obligations. We look forward to the conclusion of the dispute resolution process in due course so we can focus our efforts on building our business, creating jobs in the Northern Powerhouse region and supporting our customers' innovation and growth plans.

Outlook

The COVID-19 market environment remains uncertain and there is no clear understanding of the direction that the pandemic will take.

In this uncertain environment Abingdon has sought to expand the range of COVID-19 rapid tests under manufacture to enable it to support Governments and private sector companies in dealing with the impact of the pandemic. Abingdon has a range of antigen and antibody lateral flow tests with manufacturing agreements in place or in the late stages of technical transfer.

Importantly, our significant technical transfer and manufacturing capability means we are ideally placed to support any changes in product specification of existing products if new variants emerge which require product changes. We remain optimistic on the opportunities for AbC-19™ and COVID-19 antibody testing in general, and this is now starting to lead to material orders.

DHSC non-payment has, as previously disclosed, put pressure on the Group's cash position. The Group could take action aimed at preserving cash, albeit the Board is reluctant to take such measures, as these would have an adverse impact on the Group's longer term prospects. Given the Board's growth plans for the Group and the likely timing of recovery of any monies due from DHSC, the Board anticipates that a working capital shortfall could arise during Q1 2022 if sufficient amounts from the DHSC are not collected. Certain Directors have indicated that they would be prepared to advance further funding to the Group and the Board is investigating options to raise further capital for the Group. The Board will provide further updates as appropriate.

It has been a challenging start to life as a listed Group; however, we remain excited by the opportunity for the part that lateral flow tests can play as a key diagnostic tool across multiple disease areas. We also look forward to the conclusion of the DHSC Dispute Resolution Process where good progress has been made in recent weeks. We would like to thank all our employees for their hard work, dedication and commitment during the past year despite the challenges we have faced in an uncertain economic climate. We are confident with our contract services customer base and our current pipeline means we are well positioned to grow our business and deliver shareholder value going forward.

Stakeholder Engagement

The Board of Directors of the Group considers that, individually and collectively, it has acted in the way which in good faith would be most likely to promote the success of the Group for the benefit of its stakeholders, employees, customers, suppliers, local government and communities in accordance with the stakeholder and matters noted in S172(1)(a-f) of the Act in the decisions taken during the year reported on, having regard to:

• The likely consequences of any decision in the long term;

• The interests of the Group's employees;

• The need to foster the Group's business relationships with suppliers, customers and others;

• The need to regularly communicate with our shareholders;

• The impact of the Group's operations on the community and the environment;

• The desirability of the Group in maintaining a reputation for high standards of business conduct; and

• The need to act fairly between members of the Group.

The Board looked to promote the success of the Group, having regard to the long term, whilst considering the interests of all stakeholders. Our strategy is designed to secure the long-term financial viability of the Group to the benefit of its members and all stakeholders. A main feature of this is to continue to operate the business within tight budgetary controls and in line with regulatory requirements. During the year this was done by reference to:

• our response to the Covid-19 pandemic;

• our continued and ongoing communication with our employees;

• our continued and ongoing communication with our shareholders

• our continued priority for health and safety improvement measured through ongoing risk assessments;

• the approval of our strategic objectives ('our strategy') for the Group; and

• the business plan for the next financial year ('our plan').

Stakeholder interests are considered by the Board through a combination of methods.

Shareholders

We communicate with our shareholders through planned investor relation activities, Regulatory News Service ("RNS") announcements and the publication of our annual and half year reports. Through this we ensure our shareholders are provided with insight into the Group strategy and how we create value that will generate strong and sustainable results. We also engage with shareholders through the AGM, one on one investor meetings and discussions with shareholders where appropriate. Prior to the IPO the Board discussed the merits of completing an IPO through regular engagement with existing shareholders including discussion at Board meetings with shareholder representatives. After asserting that the shareholders were all supportive of the admission, the Board proceeded with the process. Throughout this process, the Board considered the benefits to the Company's shareholders and its wider stakeholders such as improving the ability of Abingdon to raise capital in the future to both fund investment in organic growth opportunities and acquisitions, improving the liquidity of the Company's shares, raising the profile of the Group as a plc and a listed company and increasing the opportunities to incentivise employees, for example by the Save As You Earn Scheme. The Board considered carefully the additional workload that being a listed Group would bring and the impact that would have on the Board and employees. Consideration was also given to the fact that the fundraising on IPO would dilute existing shareholders but when weighed against the potential benefits the Board determined that the IPO was on balance more beneficial to the shareholders and other stakeholders.

Customers

Our customers are central to the strategic goals of the Group, and we strive to deliver products that meet not only their specific needs, but the highest applicable regulatory standards. We engage regularly with our customer base and conduct annual customer experience surveys, taking action where appropriate. We also meet our customers' needs by maintaining facilities that are compliant to appropriate quality and regulatory standards.

Employees

We appreciate the value of diversity within our employee base and recognise that the skills and knowledge of our employees is a key part of creating value within the organisation. We strive to create a friendly and open culture within the Group, holding regular all-staff calls led by either the CEO, CFO or COO and encourage career progression within the Group. Employees were a key consideration during the IPO process, which is covered in the Shareholder section above.

Making the working environment safe is critical and is of even higher importance during the current pandemic environment. The Group conducts an annual employee feedback survey, the results of which are reported to the Board and fed back to the employees along with any resulting actions. The Group has also encouraged the creation of an Employee Forum to more directly communicate both employee thoughts, considerations and needs to the Senior Management.

Open door sessions have also been conducted during the year to ensure open communication regarding matters such as health and safety, COVID-19 concerns and the launch of the SAYE scheme.

As a result of the DHSC dispute and the delay in receiving monies owed, the Group undertook a series of cost saving measures. The final measure taken was to review all departments and reduce headcount where possible. The business reluctantly entered redundancy consultations with employees in roles that were identified 'at risk'. At every stage of the process employees were kept informed and provided with appropriate support.

Dr Chris Hand Chris Yates

Non-Executive Chairman Chief Executive Officer

18 November 2021Operating and Financial Review

Revenue and Margins

In the year revenue grew 123% to £11.6m (2020: £5.2m) with £5.15m (2020: £2.5m) of this being related to the sales and development of the AbC-19™ antibody test to the DHSC. Underlying sales growth was 138% when removing DHSC revenues from both comparative periods.

Revenue by Geographical Market

Revenue by Operating Segment

Contract Manufacturing (manufacture of products to a defined specification leading to recurring revenues, secured by customer contracts) grew 83% over the period, mainly in the Animal Health and Environmental sectors.

Product sales (own products that are part of our product catalogue that can be ordered via the website or through a network of distributors) comprised sales of non-covid products to the customer base, with growth year-on-year of 431%. New customers made up 88% of those sales but these speculative devices have yet to be proven in their chosen markets and so recurrent sales are difficult to predict at this time. Revenue in this segment also reflected sales generated from the launch of AbC-19™, which was the key driver of the total year-on-year increase of 1,282%.

Contract Development (R&D activity based on a day rate, developing and scaling up customer products as a fee for service) decreased 58% year-on-year with the comparative period including the £2.5m development fee from DHSC for AbC-19™. Excluding this contract, the underlying contract development revenue grew by 30%.

Other income (Grant Income) relates to Innovate UK Projects undertaken by the R&D team in the period.

Gross margin in the financial year was 36%. Gross margin in the prior year was inflated due to the £2.5m DHSC AbC-19™ research contract and normalised margin in FY20 excluding this contract was 58%. The main driver of this fall in margin was labour overhead, as we built and carried a larger headcount ramping up manufacturing capability to deliver beyond the 1m units delivered initially to DHSC.

Adjusted EBITDA

The Group uses adjusted EBITDA as this excludes items which can distort comparability as well as being the measure of profit that most accurately reflects the cash generating activities of the Group. The reconciliation of these adjustments is as follows:

Adjusted EBITDA loss in the period was £3.3m (2020: profit £0.8m).

Headcount in the Group increased to an average of 151 (2020: 51) peaking at 192 in the reporting period. Consequently, staff costs overall increased to £7.4m (2020: £2.8m) reflecting the investment of the business in building a sustainable, people infrastructure.

Further to the Group listing on the AIM market, its professional costs also increased to £1.9m (2020: £0.4m) with other increases being related to legal costs incurred in contract drafting. Other cost increases mainly relate to capacity growth. The footprint of the York site increased by 13,000 sq ft and the full year cost effect of the Doncaster site following the acquisition of the site in April 2020.

Non-recurring items are related to the costs associated with listing, employee termination payments and legal costs associated with the ongoing contract dispute discussions with the DHSC. Legal costs within the financial year relating to the contractual dispute with the DHSC totalled £120k, and a further £81k has been invoiced to 31 October 2021 with further costs likely to be incurred before these matters are concluded.

Obsolescence provisions totalling £1.0m have been made in the period. These predominantly fall into two categories, being those non AbC-19™ raw materials (£0.1m) that fall into ageing categories under which we automatically provide against and certain finished goods and semi-finished goods relating to AbC-19™ (£0.9m) which are flagged as an obsolescence risk due to the slower than anticipated take up of the product in the market, relating to regulatory clearance.

Cash Resources

Net cash outflow from operating activities was £12.9m (2020: inflow £2.1m) mainly due to the increase in working capital requirements of trade and other receivables predominantly related to the overdue invoices from DHSC totalling £7.7m. This amount has subsequently increased to £8.9m due to further invoicing relating to the component procurement contract with the DHSC as purchase orders placed on behalf of the DHSC, which could not be subsequently cancelled, were fulfilled.

The net proceeds from financing activities were from the completion of the IPO process in December 2020 when the Group was listed on the AIM market. Altogether this represented a net cash increase of £0.6m when compared to the prior year, with a closing cash position of £5.0m (2020: £4.4m).

Financing

The principal source of funding of £20m (net of fees) came from the issue of new equity shares on completion of the IPO on 15 December 2020.

Earnings per Share

Earnings per share was a loss of 2.65p in the period and adjusted EPS was a loss of 1.25p in the same period.

Principal Risks and Uncertainties

Going concern

The Directors have prepared cash flows for the foreseeable future, being a period of at least 12 months from the expected date of approval of the financial statements and continue to evaluate financial forecasts. The Group continues to focus on gaining regulatory approvals and securing sales of existing and new products but the £8.9m of monies owed by the DHSC means that there may be a need to investigate further funding as well as reduce costs further to ensure that the Group has adequate financial resources to meet its obligations for the next twelve-month period with reasonable certainty. Based on the forecasts and the various sensitivities applied to this information, as well as consideration of the risks and mitigations that can also be applied, there is a material uncertainty in relation to going concern, with the business having a cash requirement in the near-term.

The Group has received an offer of funding support from some of its existing shareholders, although this is non-binding at this stage and continues to also investigate other fundraising options available to the Group as well as considering more severe cost saving initiatives it can implement, whilst being mindful of the longer-term impact that these may have. As noted further immediately below in the Events after the reporting date section, the Group is also progressing matters with the DHSC to seek collection of the overdue amounts.

As a result of the above, we continue to adopt a going concern basis for the preparation of the accounts, but the above factors represent a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern.

Events after the reporting date

Following the second mediation meeting between the Directors and the DHSC on 9 November 2021, both parties reached a non-binding agreement in principle, which would, if concluded, lead to the outstanding monies being substantially collected and resolve all outstanding disputes with the DHSC.

Consolidated Statement of Comprehensive Income

For the Year Ended 30 June 2021

Consolidated Statement of Financial Position

As at 30 June 2021

Consolidated Statement of Changes in Equity

For the Year Ended 30 June 2021

Consolidated Statement of Cash Flows

For the Year Ended 30 June 2021

Consolidated Statement of Cash Flows

For the Year Ended 30 June 2021

* Net of costs set against the share premium account only. Additional costs of admission to AIM are included within the Statement of Comprehensive Income and are shown as Operating cashflows.

Abingdon Health PLC

Notes to the Financial Statements

For the Year Ended 30 June 2021

Company information

Abingdon Health PLC ("the Company") is a public limited company domiciled and incorporated in England and Wales. The Company is quoted on the London Stock Exchange's Alternative Investment Market ("AIM"). The registered office is York Biotech Campus, Sand Hutton, York, YO41 1LZ. The consolidated financial information (or "financial statements") incorporates the financial information of the Company and entities (its subsidiaries) controlled by the Company (collectively comprising the "Group").

The principal activity of the Group is to develop, manufacture and distribute diagnostic devices and provide consultancy services to businesses in the diagnostics sector.

Basis of preparation

The financial information for the year ended 30 June 2021 and the year ended 30 June 2020 does not constitute the Company's statutory accounts for those years. Statutory accounts for the year ended 30 June 2020 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2021 were approved by the Board on 17 November 2021 and will be delivered to the Registrar of Companies in due course. The statutory accounts for the period ended 30 June 2021 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on the Group's website.

The Group's statutory financial statements for the year ended 30 June 2021, from which the financial information presented in this announcement has been extracted, were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared on the historical cost basis with the exception of certain items which are measured at fair value as disclosed in the principal accounting policies set out in the Group's Annual Report. These policies have been consistently applied to all years presented except for as disclosed in note 8.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.

The auditor's reports on the accounts for 30 June 2021 and 30 June 2020 were unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The auditor's report for the year ended 30 June 2020 did not draw attention to any matters by way of emphasis. The auditor's report for the year ended 30 June 2021 did include reference to a material uncertainty related to going concern, drawing attention to the fact that the company is dependent on the recoverability of amounts owed by the Department of Health and Social Care which is currently being pursued through the dispute resolution process in the Contract, or is required to investigate further funding and reduce costs further in the near term without qualifying their report. The opinion was not modified in respect of this matter.

Judgements and key sources of estimation uncertainty

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:

Trade receivable recoverability

The Group is subject to a contract with the Department of Health and Social Care ("DHSC"), to which it has significant exposure at the year end. The Directors expect full recovery of this receivable based on evidence available to them. Further details are given in note 5.

Right of use asset recognition

Management have assessed each lease liability for recognition under IFRS 16 and recognised a right of use asset where appropriate.

One lease includes a material component of service charge by comparison to the headline rental payments, where this service charge partially covers shared areas and facilities which would normally form part of a rental price. The Directors have applied judgement in splitting this service charge into rent-like components of £24,000 per annum (which qualify for capitalisation as a right of use asset), utility fees of £104,000 per annum, and ongoing shared costs of £72,000 per annum (which the latter two do not qualify for capitalisation as a right of use asset, nor recognition as a lease liability). The lease runs for a 7-year term and the total value of rent-like components capitalised is £161,000.

Revenue recognition

In line with IFRS 15 management are required to determine appropriate revenue recognition points for all revenue streams. Where multiple contracts are entered into with a single counterparty any instalment payments are not considered to be a key indicator of the satisfaction of a performance obligation, although linked contracts with a counterparty are considered in conjunction when identifying the appropriate point for revenue recognition.

Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:

Valuation of intangible assets (Group 2021: £465,000; 2020: £16,000)

Management judgements are required to estimate the useful lives of intangible assets, having reference to future economic benefits expected to be derived from use of the asset. Economic benefits are based on the fair values of estimated future cash flows.

In the current year management have reviewed the useful life of the capitalised development assets to be the same period as the commercialisation agreement is for. As such, the capitalised development costs are amortised over the period from which sales began until the agreement ends in August 2025.

Valuation and impairment of goodwill (Group carrying values - 2021: £763,000; 2020: £763,000)

Goodwill is tested annually for impairment. The test considers future cash flow projections of cash-generating units that give rise to the goodwill. Where the discounted cash flows are less than the carrying value of goodwill, an impairment charge is recognised for the difference.

Share based payments

The determination of the fair values of EMI and SAYE options has been made by reference to the Black-Scholes model with the inputs set out in note 7. The key inputs to this model include the estimated value of the group as at July 2020 and October 2020 when two significant schemes were incepted, prior to the Group having an observable market price.

Going concern

The Directors have considered the principal risks and uncertainties facing the business, along with the Group's objectives, policies and processes for managing its exposure to financial risk. In making this assessment the Directors have prepared cash flows until June 2023, being a period of at least 12 months from the expected date of approval of the financial statements (as dated on the Statement of Financial Position) and continue to evaluate financial forecasts.

The Group continues to focus on gaining regulatory approvals and securing sales of existing and new products, but the delay in recovery of monies owed by DHSC, which are described more fully in note 5, means that there may be a need to investigate further funding as well as reduce costs further in the near term to ensure that the Group has adequate financial resources to meet its obligations as they fall due for the next twelve month period with reasonable certainty. Along with the potential timing of achieving regulatory approvals required to develop the level of turnover of the Group, the above factors represent a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.

As explained in note 5, the Group is in the process of contractual dispute resolution negotiations with DHSC and through this process expects that the monies owed will be recovered, however the exact timing of this is uncertain as at the date of approval of the financial statements. In the event that this receivable is recovered in full in the near term, then the financial forecasts evidence that the Group remains a going concern without the potential funding requirement noted above.

In case the DHSC receivable remains unpaid for an extended period, the Directors have looked at alternative sources of funding and have received an initial offer of funding support from a number of existing shareholders, although this is non-binding at this stage. The Directors are of the opinion that this indication of support provides further comfort that the Group will have access to the funds that will permit it to remain a going concern, and as such the Directors continue to adopt a going concern basis for the preparation of these financial statements.

Non-recurring income and costs

The Group seeks to highlight certain items as exceptional operating income or costs. These are considered to be exceptional in size, frequency and/or nature rather than indicative of the underlying day to day trading of the Group. These may include items such as acquisition costs, restructuring costs, obsolescence costs, employee exit and transition costs, legal costs, profits or losses on the disposal of subsidiaries, and loan impairments. All of these items are charged or credited before calculating operating profit or loss.

The Directors apply judgement in assessing the particular items, which by virtue of their size and nature are disclosed separately in the Statement of Comprehensive Income and the notes to the financial statements as non-recurring income and costs. The Directors believe that the separate disclosure of these items is relevant to understanding the Group's financial performance.

Events after the reporting date

The Group is at present negotiating for payment on a key contract, as described further in note 5. As at the date of signing these accounts, Abingdon have met with the DHSC on two occasions in an effort to mediate a resolution to this issue and during the second mediation meeting both parties signed a non-binding heads of agreement which would, if concluded, lead to the outstanding monies being substantially collected and resolve all outstanding disputes with DHSC.

Guarantees, commitments and contingent liabilities

The Group as at 30 June 2021 had no contingent liabilities (2020 - none); and had contracted for capital commitments of approximately £0.8 million (2020 - £1.7 million). These amounts have not been reflected in the financial statements.

1. Revenue

The Group applies IFRS 15 'Revenue from contracts with customers'. Under IFRS 15, the Group applies the 5-step method to identify contracts with its customers, determine performance obligations arising under those contracts, set an expected transaction price, allocate that price to the performance obligations, and then recognises revenues as and when those obligations are satisfied.

Segmental analysis of revenue

Revenue analysed by geographical market

All revenue received in the current and comparative years has been recognised at a point in time in accordance with the Group's revenue recognition policy.

2. Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The charge for the year can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:

The UK corporation tax rate was 19% throughout the year.

A reduction in the UK corporation tax rate from 19% to 17% (effective from 1 April 2020) was enacted in March 2017. A change to the main UK corporation tax rate, announced in the Budget on 11 March 2020, was substantially enacted on 17 March 2020. The rate applicable from 1 April 2020 remains at 19%, rather than the previously enacted reduction to 17%.

The UK budget on 3 March 2021 announced the intention to increase the tax rate from the current rate of 19% to 25%, with effect from April 2023. Therefore, deferred tax balances at the reporting date are measured at 25% (2020: 19%, 2019: 17%).

3. Dividends

No dividends were paid in the current or prior year.

4. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

The diluted EPS is the same as the Basic EPS as there is a loss for each of the periods concerned.

In each period there were share options outstanding. As at 30 June 2021, all of these options are out of the money and as such the calculation of the weighted average number of dilutable shares is equal to the non-diluted shares.

The Directors use adjusted earnings before certain non-recurring costs ("Adjusted Earnings") as a measure of ongoing performance and profitability. These non-recurring costs are presented as separate items on the face of the Consolidated Income Statement.

The calculated Adjusted Earnings for the current and comparative periods are as follows:

The calculation of Adjusted Earnings is consistent with the presentation of Adjusted Earnings before Interest, Tax, Depreciation, and Amortisation, as presented on the face of the Statement of Comprehensive Income. This adjusted element also removes non-recurring items, as explained further above. The Directors have presented this Alternative Performance Measure ("APM") because they feel it most suitably represents the underlying performance and cash generation of the business, and allows comparability between the current and comparative period in light of the rapid changes in the business (most notably its admission to AIM and associated costs), and will allow an ongoing trend analysis of this performance based on current plans for the business.

5. Impact of Department of Health and Social Care ("DHSC") Contract on the Statement of Financial Position ("SFP")

As at 30 June 2021 the Group retained a significant exposure to a number of transactions and balances under contracts with DHSC. These contracts ultimately related to two elements:

1. Component procurement, where the Group procures raw materials; DHSC retain legal title for the raw materials but where those materials are under the control of the Group; and

2. The manufacturing of tests which is enacted through the deemed purchase of those raw materials from DHSC, which are then sold to DHSC in final format and the sale price to the DHSC is discounted to represent the contractual value of those free issued materials.

Under the first element, the raw materials are purchased in the name of the Group, which incurs a contractual liability in its own name with third parties. The inventories acquired are recognised as assets of the Group on the Statement of Financial Position ("SFP") because management has assessed that the Group controls the inventories at this point. In forming this judgement, management have considered that although the DHSC hold legal title to the raw materials, the Group retains physical possession of the goods and may have further obligations under element two of the contract to transform the raw materials into finished tests meaning the Group continues to direct the use of the raw materials as it determines the manufacturing process. At this point the Group controls inventories which it does not have legal title to under the DHSC contract, and as such it recognises a liability to DHSC in respect of those inventories (equivalent to a contract liability), and a receivable for amounts due. No revenue is recognised at this stage due to control of the goods having not deemed to have passed to DHSC.

When the Group manufactures tests, raw material plus manufacturing costs are recognised within work-in-progress or finished goods balances as appropriate. When the final tests are dispatched to DHSC and all contractual revenue recognition criteria have been fulfilled, the Group recognises revenue at contractually agreed rates, and a cost of sale equal to the cost of inventories used in delivering those tests. It also recognises a trade receivable from DHSC which reflects the normal commercial sale of those tests.

The Group delivered one million AbC-19TM tests to DHSC during the financial year, a receivable for which remains outstanding as at the year end and as at the date of approval of the financial statements, contrary to the contractual provisions of the DHSC contracts. As at 30 June 2021 Abingdon was owed a total of £6.4m (excluding VAT) and £7.7m (including VAT), plus interest from the DHSC for:

1. Components that Abingdon procured on the DHSC's behalf of £2.1m (excluding VAT).

2. AbC-19TM kits totalling £4.3m (excluding VAT); net of the DHSC material discount noted in point 2 above, which the Group has delivered to the DHSC in the period November 2020 through to January 2021.

The Component Contract was signed on 2 June 2020, and this allowed the Group to procure, on behalf of DHSC, the components needed to produce AbC-19TM Tests. The total value of the components expected to be purchased under the Component Contract was £8.6m (excluding VAT). In the event, fewer components were procured such that total expenditure is expected to be circa £7.2m (excluding VAT). The Group managed the procurement of these components and approximately £0.4m (excluding VAT) of component orders have yet to be received by the Group or billed on to DHSC, but are included in the £7.2m (excluding VAT).

As at 30 June 2021 the Group had paid suppliers £4.0m (net of VAT) for components, which it has invoiced to DHSC and for which it has received payment from DHSC. It had paid suppliers for £2.1m (excluding VAT) of components, which had been invoiced to DHSC, but in respect of which it has not received payment from DHSC. The component procurement receivable has subsequently increased to £2.7m (excluding VAT) as at the date of approval of the financial statements, as a result of additionally invoiced inventories where non-cancellable orders were placed by the Group prior to the conclusion of the contract with DHSC. As at November 2021, the Group has incurred commitments to pay, or paid, a further £0.4m (excluding VAT) to companies from which it procured components on behalf of the DHSC and for which it would expect reimbursement under the terms of the contract.

The Group therefore has the following overall carrying amounts on the SFP as at 30 June 2021 and as at the date of approval of the financial statements:

(1) After deduction of £4.0m (excluding VAT) of cash received from DHSC for purchase of inventories.

(2) This is net of £0.9m (excluding VAT) of inventories which have been utilised in delivering 1 million tests now recognised within Revenue and Trade Receivables.

(3) Subsequent to the year end the Group has raised a number of inventory recharge invoices to DHSC, which have not been settled.

* These balances are held in Trade receivables including VAT which total £7.7m as at 30 June 2021 and £8.4m at the date of approval of these financial statements.

The Group is contractually entitled to late payment interest on the overdue trade receivables, which is to be calculated at 8% above base rate. This has not been recognised in the current year's Group Income Statement, or on the SFP, as it remains uncertain as to the settlement of this or certainty

of ultimate cash inflows. Any such element will be recognised in full once the Group's entitlement to receipt is confirmed.

The Directors of the Group are of the opinion that all balances are recoverable in full and have placed into the public domain a number of documents and statements which justify and support this position. These financial statements have been prepared on the explicit assumption that all contractual provisions of the DHSC contract have been met, and that DHSC will uphold their legal responsibilities under this contract in respect of full cash settlement of the contractually due balances. In this outcome, the Group would receive full settlement of its receivables in cash, plus late payment interest. The Directors, as at 30 June 2021, consider that this balance is recoverable within one year and have therefore presented it as a Debtor due in

However, should any element of the trade receivable become irrecoverable the Group would be entitled to recover the VAT paid on that balance, equal to 20% of the net amount not recovered. Any remaining balance would be recognised as an impairment to the Group Income Statement, which would be entirely recognised within future reported profits and losses. Any adjustments to inventories would likely not impact the Group Income Statement as a result of the Contract liability shown above, however this may bring certain elements of those inventories into the Group's ownership. Such inventories are expected to be utilisable in other product production by the Group, but in the event that no such utilisation can occur this may result in an inventory impairment for those materials. The Directors have not attempted to quantify the financial impact of such a scenario as they consider these events to be unlikely to materialise.

The Group is at present following the Dispute Resolution Process ("DRP") set out in the DHSC contract, which as at the date of approval of the financial statements is taking the form of a mediation process. This mediation does not change the Directors' opinion of the balances recognised on the SFP as at the year end. As noted earlier in the Strategic Report and Directors Report, mediation has currently resulted in both parties reached a non-binding agreement in principle which would, if concluded, lead to the outstanding monies being substantially collected and resolve all outstanding disputes with DHSC.

We note the impact the non-collection of this Trade Receivable, to date, has had on the Group, in our Strategic Review and also the impact of the timing of collection of this Trade Receivable has had for our assessment of Going Concern, which is explained further in the Strategic Review section above.

6. Share capital and reserves

On 22 October 2020 the Group undertook a 3 for 1 bonus issue of shares for all existing shareholders with 45,969,828 new shares of £0.001 being issued and £45,970 transferred from share premium to share capital. Immediately after the bonus issue these shares were redesignated as deferred shares which carry no voting rights.

On 14 December various reorganisation steps were taken in advance of the IPO, as follows:

- Exercise of options over 1,322,440 ordinary shares of £0.001 each;

- Conversion of all convertible loan notes and accrued interest into 1,159,271 ordinary shares of £0.001;

- Re-designation of 390,625 deferred shares into ordinary shares of £0.001;

- Re-designation of all A ordinary shares into ordinary shares of £0.001;

- Division of each deferred shares of £0.001 into 4 deferred shares of £0.00025 each and each ordinary shares of £0.001 into 4 ordinary shares of £0.00025 each.

On 15 December 2020 the Company announced the admission of its entire issued and to be issued ordinary share capital to trading on the AIM market of the London Stock Exchange. The Company raised £22 million (before expenses) by way of a placing of 22,916,666 ordinary shares of 0.025 pence each.

Reconciliation of movements during the year:

Reserves of the Company represent the following:

Share capital - Shares in the Company held by shareholders at a proportional level with equal voting rights per share.

Share premium - Excess over share capital of any investments.

Retained earnings - This comprises the accumulated trading results of the Group.

Share-based payment reserve - This reserve comprises the fair value of options share rights recognised as an expense. Upon exercise of options or performance share rights, any proceeds received are credited to share capital.

7. Share options

1,322,440 options were exercised during the year, as part of the Group's admission to AIM.

The options outstanding at 30 June 2021 had an exercise price ranging from £0.00025 to £0.70 and a remaining contractual life of between 2 years 9 months and 9 years 9 months. The options exist at 30 June 2021 across the following share option schemes:

The fair value of the scheme is being expensed over the vesting period. All share options expire 10 years after the date of issue.

8. Restatement

During the current period the directors have re-analysed expenditure that was previously classified as an administrative expense. As a consequence, £340k was identified which was previously included within administrative expenses whereas it should have been classified as a cost of sale. The expense items reflect staff used in manufacturing of products, and the costs of rental for premises space used for manufacturing. The adjustment has no impact on reported loss for the year.

The following adjustment has been made to the prior periods filed accounts: