BIOHIT GROUP HALF YEAR FINANCIAL REPORT 2018

BIOHIT GROUP HALF YEAR FINANCIAL REPORT 2018

Biohit Oyj Half Year Financial Report 22 August 2018 at 9:30 am local time (EET)

SUMMARY

January-June 2018 

  • Net sales EUR 4.9 million (EUR 4.1 million) which grew by 21.1% compared to H1/2017
  • Operative EBITDA EUR -0.1 million (EUR -0.7 million)
  • Operating profit EUR -0.9 million (EUR 7.4 million). Reference period operating profit includes the profit of EUR 8.4 million booked from the joint venture exit
  • The profit for the reporting period was EUR -1.0 million (EUR 7.2 million)
  • Net cash from operating activities EUR -0.1 million (EUR -0.8 million)
  • Net sales from international operations 97.2% (95.0%) of total net sales
  • Equity ratio 89.4% (89.6%)


PRESIDENT AND CEO SEMI KORPELA:

Biohit business developed as we expected during first half of the year 2018. Our Net Sales grew by 21.1% compared to the reference period H1/2017. The growth in net sales was mainly driven by GastroPanel® tests and strong sales in the UK. During the reference period H1/2017 our Net Sales was negatively impacted by GastroPanel tests delivery problems (EUR 0.3 million) which we did not experience this time. Operative EBITDA which excludes items affecting comparability improved due to Net Sales growth to EUR -0.1 million (EUR -0.7 million) during the review period. Net cash from operating activities improved by EUR 0.6 million comparing to reference period H1/2017 ending up to EUR -0.1 million (EUR -0.8 million). We determinedly continue striving for growth towards profitable operations.  

During the review period we completed CE marking project for Acetium lozenge smoking cessation product which will be launched to Finnish market in Autumn 2018. Previously completed intervention trial confirmed that Acetium Lozenge is an efficient and nicotine-free method which helps to stop smoking. During the review period we signed distribution agreements with Oriola in Finland and Pharmathen Hellas S.A. in Greece for distributing Acetium Lozenge. In addition we got positive study results of colorectal cancer screening tests in Brasil. The clinical state of migraine study was concluded at the end of June. However the checking and reporting of the results are delayed for the next review period.

During the review period Biohit’s distributor Biohit HealthCare (Hefei) Co. Ltd announced that it will expand its production capacity to 75 million tests yearly. In addition to that Biohit Healthcare (Hefei) Co. Ltd acquired from Biohit’s main shareholder Osmo Suovaniemi and from his family 33.2 % of total number of Biohit shares and 29.5 % of the voting rights based on shares.

Both Biohit Biohit Healthcare (Hefei) Co. Ltd  production capacity expansion and ownership of Biohit Oyj create us excellent conditions in the growing Chinese markets.

We expanded our distributor network and advanced product registrations

We continued expanding our distributors network with new agreements and by reorganizing the existing agreements. In the first half of the year 2018, we signed the following contracts for the distribution of Biohit’s diagnostic products: BioVendor – Laboratorní medicína A.S. will sell our diagnostic tests in Czech Republic and Montebello AS in Norway. Trans Continental Medical Products is our new distributor in the Caribbean islands. Dow Biomedica was nominated as as new GastroPanel distributor in the important South-Korean market.

During the review period, Save Health D.o.o in Serbia and Scientronics in Cyprus received exclusive right to sell Acetium®. In Taiwan Mimed Ltd will distribute Acetium® Lozenge. In Greece we signed an agreement with Pharmathen Hellas S.A. for the distribution of the smoking cessation product Acetium lozenge. Furthermore, we signed distribution agreement with Oriola Oyj regarding smoking cessation product Acetium® Lozenge. The product will be distributed in the pharmacies and other Oriola’s distribution channels.

Registration is always carried out in accordance with the requirements of the destination country, whereby the duration of the registration process may vary. The CE mark of our products indicates that the product complies with EU requirements and can be placed on the European Economic Area (EEA) market. The CE mark also promotes the registration of products in non-EEA markets.

Our main market areas are:

1) China

2) EU, Russia and the Middle East


BIOHIT GROUP KEY FIGURES 

 1-6/20181-6/20171-12/2017
Net sales (MEUR)4.94.19.0
EBITDA (MEUR)-0.17.77.9
Operative EBITDA (MEUR)-0.1-0.7-0.4
Operating profit/loss (MEUR)-0.97.46.4
Profit/loss before taxes (MEUR)-1.07.46.4
Profit/loss for the period (MEUR)-1.07.26.1
Average number of personnel51 5051
Number of personnel at the end of the period51 5551
Equity ratio (%)89.4 %89.6 %91.3 %
Earnings per share (EUR), Undiluted-0.070.490.42
Earnings per share (EUR), Diluted-0.070.480.41
Shareholders' equity per share (EUR)1.141.231.16
Average number of shares during the period14 888 34114 717 61914 764 411
Number of shares at the end of the period14 889 27814 776 84314 886 843

REPORTING

Biohit's product portfolio consists of diagnostic tests, analysis systems, products binding carcinogenic acetaldehyde into a harmless compound, monoclonal antibodies, as well as service laboratory operations. The entire product and service portfolio is reported under a single segment.


NET SALES AND RESULT

January-June

Net sales grew by 21.1 % compared to H1/2017. The operating profit was EUR -0.9 million (EUR 7.4 million). Previous period operating profit includes the EUR 8.4 million profit recorded from the joint venture exit. Operative EBITDA was EUR -0.1 million (EUR -0.7 million). The loss of the review period was EUR -1.0 million (profit EUR 7.2 million).

Consolidated net sales and operating income 
 1-6/20181-6/2017Change1-12/2017
Net sales MEUR4.94.10.99.0
Change compared to the previous year (%)21.1 %6.7 % 9.6 %
Operating profit/loss (MEUR)-0.97.4-8.36.4
Operating income
(% of net sales)
-19.2 %181.6 % 70.8 %
      

ALTERNATIVE PERFORMANCE MEASURES

Bridge calculation of operative EBITDA

EUR million1-6/20181-6/2017Change1-12/2017
Operating profit/loss-0.97.4-8.36.4
Depreciation and amortization0.80.30.51.6
IFRS 2 Share based payments0.00.1-0.00.1
Share of profit/loss in Biohit HealthCare (Hefei) Ltd (profit - / loss +) -0.20.2-0.2
Profit from sale of share in Biohit HealthCare (Hefei) Ltd -8.28.2-8.2
Operative EBITDA-0.1-0.70.6-0.4
     
Calculation of free cash flow (FCF) 
     
EUR million1-6/20181-6/20171-12/2017 
Net cash flow from operating activities-0.1-0.8-0.9 
Investments in tangible and intangible assets-0.0-0.1-0.2 
Proceeds from disposal of tangible and intangible assets    
Proceeds from sale of share in joint venture (cash proportion)  1.7 
Free cash flow (FCF)-0.1-1.00.6 

 

BALANCE SHEET

On the 30 June 2018, the balance sheet totalled EUR 18.9 million (EUR 20.3 million 30 June 2017). At the end of the reporting period, our equity ratio stood at 89.4 % (89.6 % 30 June 2017).                                                                          

FINANCING AND OPERATIONAL CONTINUITY

Biohit Oyj has a good financing position, which allows for the necessary actions towards creating an international distributor network as well as the development and commercialization of new products. At the end of the reporting period, the company’s financial assets totalled EUR 9.4 million (EUR 7.0 million 30 June 2017) including EUR 3.9 million (EUR 3.2 million 30 June 2017) worth of Genetic Analysis AS shares.

Despite significant financial investments the company has managed to keep its working capital on a good level and the management believes that working capital will cover the operations for the next 12 months and the company is not depended on external financing to be able to guarantee the continuity of its operations. Cash flow from operating activities was EUR -0.05 million during the review period. Company’s management assessment is that company’s ability to continue its operations is good and there are no indications towards events or circumstances that alone or together might give a significant reason to doubt the organisation’s ability to continue its operations. 


RESEARCH AND DEVELOPMENT

R&D operations focus on innovations, as well as product development and improved usability. Biohit also employs external experts and subcontractors in its R&D operations. Development expenditure has not been capitalised. Research and development expenditure excluding depreciation and amortization during the reporting period amounted to EUR 0.6 million (EUR 0.7 million).

During the review period the main focus in development was exploring the modes how to best exploit the results of smoking intervention trial. We completed CE marking project for the Acetium lozenge smoking cessation product which will be launched to market in Autumn 2018. We also continued developement of the GastroPanel® quick test from blood sample and made a progress in the performance and clinical testing as well as in software development required before the sales can be started. Development of ColonView ELISA test was continued for screening of intestine cancer and its precursors.

CLINICAL RESEARCH

Clinical trials made progress

During the first half of 2018, the actions were initiated in research front by getting external party to repeat the similar trial than 2017 smoking intervention study. This study had outstanding results. In both smoking intervention trials run by Biohit, an identical study design was used, and this has now been offered to research groups abroad to repeat the trial using a similar setting. As stated before, also the second smoking intervention trial comprising 2000 smokers confirmed that Acetium lozenge is an effective and completely nicotine-free method which assists to stop smoking. In the new trial, the probability to stop smoking with Acetium lozenge was 50% higher than in the subjects using placebo. The sample size was large enough to make the study adequately powered.

At the beginning of 2018, we concluded the final study results of the international study ongoing in Brazil since 2014 where two colorectal cancer screening tests were compared head-to-head. This study used the same design as the study reported in 2015, where Biohit ColonView®-FIT test specific to human blood was compared with a conventional guaiac-based test in detection of fecal occult blood (FOB). The research group jointly with Biohit research department has completed the scientific report of the final study results. These results provide additional confirmation to the previously reported comparative study. In fact, the difference in favor of the Biohit ColonView®-FIT test as compared with the conventional guaiac test is even more accentuated than in the first study. ColonView®-FIT like all other similar tests, which are based on the company’s founder’s innovation from 1980s, belongs among the best of all new-generation FIT (fecal immunochemical test) tests. Both its performance (sensitivity, specificity) and medical record being completely superior to that of the conventional guaiac tests, which has now been confirmed in two independent head-to-head comparison studies.

During the first half of 2018, we have concluded the clinical phase of the randomized trial on migraine patients, which has been considerably delayed. However the checking and reporting of the results are delayed for the next review period. During the spring, the study has been closed in all centers as soon as the last patients have completed their post-treatment follow-up visits.

Originally planned cohort size of 200 patients was not reached in Finland. To compensate this we decided to start another trial where two additional centers in Estonia were involved to repeat the same study design. Both centers in Estonia agreed to enroll 80 patients. Enrollment of the patients in Tallinn and Tartu has progressed rapidly, and the entire series of 160 patients is expected to be completed during the Autumn of 2018.

The randomized, double-blind trial ongoing in two centers in Italy since 2016 testing the value of Acetium capsules in the treatment of atrophic gastritis, will not reach the set goals. The study will be restarted in one or several clinics where study protocols can be followed.

The previously published studies on Biohit GastroPanel test will be complemented by a new trial ongoing since 2017, focused on two high-risk groups. These are patients with type 1 diabetes mellitus (DM1) and those with autoimmune thyroid disease (AITD), both known to have a substantially increased risk of other autoimmune diseases, including autoimmune-type of atrophic gastritis. In addition to assessing the magnitude of this risk, it is also important to clarify the optimal modes of monitoring these patients. This study in being conducted at Oulu University Hospital (GastroCenter and Department of Medicine), where all consented patients with DM1 and AITD are being enrolled among the regular attenders of their outpatient department, and subjected to GastroPanel examination. All those with GastroPanel test indicating atrophic gastritis will be referred for gastroscopy to confirm the prevalence of atrophic gastritis which result for example to gastric cancer in these risk groups. Enrollment of the patients was substantially speeded up when information of the study was targeted also outside the hospital by a public announcement in the local newspapers. At the moment, over 100 DM1/AITD patients have been enrolled, and their samples delivered to Biohit laboratory for analysis.


INVESTMENTS

Gross investments during the H1/2018 reporting period totalled EUR 0.0 million (EUR 0.1 million).


PERSONNEL

During the review period, the Biohit Group employed on average 51 (50) people, of whom 43 (40) were employed by the parent company and 8 (10) by the subsidiaries.


SHORT-TERM RISKS AND UNCERTAINTY FACTORS

Biohit’s key risks are related to the investments required for business growth and adequacy of economic resources these require in the medium term. Other risks are involved in areas such as the success of clinical trials, the selection and development of new market areas and distribution channels, personnel recruitment, registration processes and political decision-making affecting the progress of screening programs. Significant short-term risks are associated with the successful selection of new market areas, the timing of expansion into selected markets and product success in these markets. The recent increase in uncertainty factors associated with international politics may have an unfavourable impact on the company's business. 

The duration of the product registration process is different in each market area. For this reason, it is not possible to accurately assess the time taken for the authorities to handle registrations in these areas and for product sales to begin. 

When investing liquid assets, the objective is to gain a return on investment with a minimum risk of equity loss. The investment portfolio consists of deposits, money market investments and corporate loans. A fundamental aspect in portfolio management is sufficient diversification across different asset classes, investment instruments and counterparties. The investment portfolio is subject to interest rate risk, which is managed by adjusting the duration of the portfolio. The rise of one percentage point in interest rates would have a negative impact of EUR 0.1 million on the fair value of the investment portfolio. 

The Group’s investment in unlisted shares of Genetic Analysis AS is subject to changes in the terms of transactions involving the company’s shares that take place between third parties, which are used as input data in the valuation of Biohit’s holding in the company. A negative change of 15 % in the valuation of Genetic Analysis AS shares, would have a negative pre-tax impact of EUR 0.6 million on the Group comprehensive income. Market value change impact was +0.6 million in Group comprehensive income during the review period. Genetic Analysis AS valuation changes have no effect on cash flow. 

Biohit’s operation’s customer base is widely diversified, with the exception of GastroPanel® sales in China, which currently represents a major single business for Biohit. Due to this reason, the company is dependent on the continuation of this business relationship. Otherwise, the company is not significantly dependent on individual customers or project deliveries. Most of the company’s business is conducted in euro, and the indirect effects of currency exchange rate fluctuations are considered insignificant. 


OUTLOOK FOR 2018 

We aim to grow profitable and are strongly committed to taking necessary actions in order to build a profitable future for the company. 

Biohit’s updated view on 2018: 

“Biohit expects its 2018 Net Sales to be at least EUR 9.8 million but not more than EUR 11 million (previous year EUR 9.0 million). The company does not estimate when the comparable profit will turn profitable”. 

Biohit’s previous view on 2018: 

“Revenue is expected to increase during 2018.The company does not estimate when the comparable profit will turn profitable.” 


MAIN EVENTS IN THE FIRST HALF OF THE YEAR (H1) 

Biohit Oyj’s comments on its Chinese distributor´s production capacity expanding 

Biohit Oyj’s distributor, a wholly Chinese owned Biohit HealthCare (Hefei) Co. Ltd has announced that it will expand its GastroPanel production capacity and that it will bring GastroPanel onto new technology platforms and instruments. The announced investment to increase the production capacity is substantial, approximately 38.4 million euros. As a result of the investment, the production capacity can be increased to produce 75 million tests yearly. 

Pharmathen Hellas S.A. to distribute Acetium® lozenge in Greece

Biohit Oyj and Pharmathen Hellas S.A. signed an agreement for the distribution of the smoking cessation product Acetium lozenge in Greece. The contract has been signed for three years with a continuation option.

Dow BioMedica to distribute Biohit GastroPanel® in Korea

Biohit Oyj and Dow BioMedica signed an agreement for the distribution of Biohit GastroPanel in Korea. The contract has been signed for four years with a continuation option. The registration  started during the 1st quarter of 2018.

Changes to Biohit Oyj’s Management Team 

M.Sc. (Econ) Jukka Kainulainen (b. 1982) has been appointed Chief Financial Officer and as a member of the Management Team of Biohit Oyj. He is also responsible for HR function and IT function. 

Biohit GastroPanel® test helps reducing unnecessary gastroscopies in pre-operative evaluation of the patients referred for bariatric surgery

A recently published study from Tartu University Hospital (Estonia) shows that almost one third of these pre-operative gastroscopies can be replaced by non-invasive biomarker testing with GastroPanel.   

GastroPanel test has been validated in different settings, both in diagnosis of stomach disorders in patients with upper abdominal symptoms (dyspepsia) and in screening of the well-known risks of gastric cancer: 1) Helicobacter pylori infection and 2) atrophic gastritis. A cohort of morbidly obese patients in Tartu was tested with GastroPanel as part of their pre-operative evaluation for bariatric surgery. 

Prof. Kari Syrjänen, Chief Medical Director of Biohit Oyj: “Of these 65 patients (the mean BMI of 44) tested before surgery, GastroPanel resulted in a normal biomarker profile in 22, while the rest 43 showed various abnormalities in the biomarker profile. These results had an excellent agreement with the gastroscopy and biopsy results used as the confirmatory test in all patients. Importantly, 20 of these 22 patients with normal GastroPanel profile were also asymptomatic before operation.”  

Mr Semi Korpela, CEO of Biohit Oyj: “This new study delivers an important message to all patients who are referred for bariatric surgery. Based on the results of this study, and as determined from the previously established data on the prevalence of Helicobacter pylori infection and atrophic gastritis, we can estimate that in Western countries, up to 80% of gastroscopies could be replaced by GastroPanel in the primary diagnosis of dyspeptic patients. This could significantly reduce these examinations that are felt uncomfortable by the patients and lead to substantial savings in healthcare costs.” 

Montebello to distribute Biohit products in Norway

Biohit Oyj and Montebello Diagnostics AS have signed an agreement for the distribution of Biohit diagnostic products in Norway. The contract has been signed for three years with a continuation option.

Implementation of GastroPanel in health care is also facilitated by the fact that Montebello has during the past several years, delivered to domestic laboratories numerous analytical instruments suitable e.g. for running of GastroPanel-ELISA-tests, all exploiting the microplate vertical measurement technology widely in global use.

Oriola to distribute Acetium® lozenge in Finland

Biohit Oyj and Oriola Oy signed an agreement for the distribution of the smoking cessation product, Acetium lozenge in Pharmacies and other Oriola sales channels in Finland. Launch date will be in Autumn 2018.

Biohit Oyj B-shares Subscribed with Stock Options I 2013 

A total number of 2 435 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 between 5 December 2017 and 6 February 2018. These shares have been entered into the trade register on March 12, 2018, as of which date the new shares will establish equal shareholder rights with the company's existing B-shares. 

After the subscriptions the number of all Biohit Oyj's shares will rise to 14 889 278 shares and B-shares will rise to 11 913 778 shares. 

Biohit Oyj’s ownership expanded 

Biohit Oyj’s partner Biohit Healthcare (Hefei) Co. Ltd acquired Biohit Oyj’s A shares and listed B shares from Osmo Suovaniemi, his family and their respective Interlab Ltd at a price of EUR 4.26 per share. In the event of the transaction, Biohit Healthcare (Hefei) Co. Ltd has 33.2 % of total number of Biohit shares and 29.5 % of the voting rights based on shares. 

The purpose of this transaction is to extend Biohit Oyj’s ownership and to deepen cooperation with the new owner on the growing Chinese markets, however so that the authority of the company with over 50 % of the voting rights from the shares stays with Osmo Suovaniemi, the founder and Chairman of the board. 

Decisions of the Annual General Meeting of Biohit Oyj

The Annual General Meeting (AGM) of Biohit Oyj held on Wednesday April 25, 2018 adopted the financial statements of the parent company and the consolidated financial statements, and resolved to discharge the members of the Board of Directors and the CEO from liability for the financial year 2017. 

Distribution of dividends 

The AGM resolved in accordance with the proposal of the Board of Directors that no dividend is paid for the financial period ended on December 31, 2017.

Members of the Board of Directors 

The AGM resolved that five (5) members are elected to the Board of Directors) and that Professor (h.c.) Osmo Suovaniemi, CEO Franco Aiolfi, emeritus professor Matti Härkönen, professor Stina Syrjänen and Commercial Counsellor Eero Lehti are elected as members of the Board of Directors until the end of the next AGM.  

Additionally, the AGM resolved that the Chairman of the Board of Directors and the other Board members are paid a meeting fee of EUR 1,500.    

Election of the Auditor and remuneration for the Auditor 

The AGM resolved to authorise public accountants PricewaterhouseCoopers Oy as the auditor of Biohit Oyj until the end of the next AGM and that the auditor is paid remuneration according to invoice presented by the auditor. 

Authorization of the Board of Directors to decide on the issue of shares and to issue special rights entitling the receipt of shares 

The AGM resolved to authorise the Board of Directors to decide on the issue of shares and to issue special rights referred to in Chapter 10, section 1 of the Limited Liability Companies Act entitling the receipt of shares with the following terms and conditions: 

The maximum number of new Series B shares to be issued pursuant to the special rights is 3,000,000, which corresponds to approximately 25.2% of the company’s all existing Series B shares. 

The authorisation includes the Board of Directors’ entitlement to decide on all terms and conditions regarding the issue of special rights. The share issue and the issue of special rights entitling to the receipt of shares can occur in derogation from the pre-emptive subscription right of the shareholders (direct share issue).

The authorisation remains valid for two (2) years from the resolution of the AGM. This authorisation replaces the former authorisations. 

The change of the Articles of Association

The AGM resolved in accordance with the proposal of the Board of Directors that the article 7 and article 8 of the current Articles of Association are changed in their entirety as follows: 

"7 § The company is represented by the Managing Director together with the Chairman of the Board or person authorised to represent the company or holder of procuration." 

"8 § The Board of Directors shall resolve on the granting of procurations and representation rights." 

All decisions of the AGM were made unanimously. 


MAJOR EVENTS AFTER THE CLOSE OF THE REVIEW PERIOD 

Biohit Oyj B-shares Subscribed with Stock Options I 2013 

A total number of 10,054 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 between 7 February 2018 and 4 June 2018. These shares have been entered into the Trade Register on July 2, 2018, as of which date the new shares will establish equal shareholder rights with the company's existing B-shares. After the subscriptions the number of all Biohit Oyj's shares will rise to 14,899,332 shares and B-shares will rise to 11,923,832 share. 

The share subscription price was EUR 2.2766 per share respectively. The entire subscription price of EUR 22,888.94 will be credited to the reserve for invested non-restricted equity, and the company share capital remains unchanged. The shares have no nominal value. 

Changes to Biohit Oyj’s Management Team 

Adjunct professor (molecular mircobiology) and computer science engineer Minna Mäki (b. 1969) was appointed as the R&D and Production Director and a member of the Management Team of Biohit Oyj starting 30 July 2018.

Changes to Biohit Oyj’s Management Team 

Lea Paloheimo has been appointed as the Business Development Director starting 6 August 2018. 

Decisions of the Extraordinary General Meeting of Biohit Oyj

Managing Director of Biohit HealthCare (Hefei) Co., Ltd Mr. Liu Feng was elected as the new member of the Board of Directors starting 16 August 2018. 


ADMINISTRATION 

Biohit Oyj's Management Team 

The members of Biohit's Management Team are: CEO Semi Korpela, CFO Jukka Kainulainen (started after review period 16 July 2018), Production & Research and Development Director Minna Mäki (started after review period 30 July 2018), Business Development Director Lea Paloheimo, Sales and Marketing Director Ilari Patrakka, Quality and Regulatory Affairs Director Daniela Söderström and Chief Medical Director Kari Syrjänen. 

SHARES AND SHAREHOLDERS 

Biohit Oyj’s number of shares is 14 889 278 (14 776 843), of which 2 975 500 (2 975 500) are Series A shares and 11 913 778 (11 723 033) are Series B shares. The Series B shares are quoted on NASDAQ Helsinki in the Small cap/Healthcare group under the code BIOBV. 

BIOBV/NASDAQ OMX Helsinki1-6/20181-6/20171-12/2017
High (EUR)6.426.856.85
Low (EUR)3.575.173.74
Average (EUR)4.565.755.44
Closing (EUR)4.605.973.77
Turnover (EUR)32 364 9788 286 13317 264 322
Turnover volume7 228 0471 429 1513 301 644

Shareholders 

At the end of the reporting period on 30 June 2018, the company had 6 907 shareholders (6 563 on 30 June 2017). Private households held 59.5% (76.3%), companies 4.6% (18.5%) and public sector organisations 0.0% (0.0%). Foreign ownership or nominee registrations accounted for 29.1% (4.25%) of shares. Other owners accounted for 6.8% (1.0%). 

Further information on the shares, major shareholders and management shareholdings is available on the company's website.


ACCOUNTING PRINCIPLES 

This half year financial release has been prepared in accordance with the requirements of the IAS 34 Interim Financial Reporting standard. Biohit Oyj has applied the same accounting principles in preparing this half year financial report as for its financial statements 2017 except 2018 implemented IFRS standard changes and interpretations. Additional information of IFRS 9 and IFRS 15 implementations has been presented in this half year financial report. Other changes in IFRS standards and interpretations has no material impact in this half year financial report. The figures in the half year financial report have not been audited. 

Alternative performance measures 

The new guidance regarding alternative performance measures (APM) by the European Securities and Markets Authority, ESMA, came into effect in 2016. Biohit Group presents certain alternative performance measures to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Operative performance measures have been adjusted for certain non-operative items or non-cash valuation items that affect comparability between periods.

Items affecting comparability

Certain items that are not related to the underlying business or non-cash valuation items that have material effect on the profit and loss for the period are adjusted as items affecting comparability. These items can arise for example from:

- Impairment of assets
- Sale or acquisition of asset or business
- Share based payment expences in accordance with IFRS 2 

Additionally Biohit Oyj presents the following alternative performance measures: 

EBITDAEBIT + depreciation and amortization
Operative EBITDAEBIT + depreciation and amortization – Items affecting comparability 
Free cash flow (FCF)Cash flow from operating activities – Investments in tangible and intangible assets + proceeds from sale of tangible and intangible assets

IFRS9 Financial Instruments 

The Group started to apply IFRS 9 from 1 January 2018. IFRS 9 directs the classification of financial assets and liabilities, impairment accounting and hedge accounting. 

Financial assets are classified in the following measurement categories: 

  • Cash and cash equivalents, trade receivables and loan receivables are measured at amortized cost. This has no impact carrying amounts.
  • Unlisted equity investments which are held for trading are measured at fair value through other comprehensive income or profit and loss. Changes in value of Genetic Analysis AS are measured at fair value through other comprehensive income.
  • Market value changes of money market investments are measured at fair value through profit and loss. 
  • The Group does not have financial liabilities which would be impacted by IFRS 9.
  • Biohit applies the simplified expected credit loss model for booking impairment loss provision of trade receivables. The Group applies a common provision matrix for the calculation of loss provision on all Group trade receivables.
  • The Group has no hedge accounting currently and changes from IFRS 9 have no impact in the Group. 

The standard was applied first time at 1 January 2018. The financial instruments of the Group were following:

Financial Instruments reclassification followed by IFRS 9 adoptionIAS 39 Measurement CategoryIFRS 9 Measurement CategoryCarrying amount MEUR IAS 39Carrying amount MEUR IFRS 9Change
Current assets
Other current financial assetsAvailable-for-sale financial assetsFair value through profit and loss4.24.2 
Other current financial assetsAvailable-for-sale financial assetsFair value through other comprehensive income3.93.9 
Trade receivablesLoans and receivablesAmortized cost1.81.8-0.0 
Other receivablesLoans and receivablesAmortized cost0.30.3 
Cash and cash equivalentsLoans and receivablesAmortized cost1.31.3 

IFRS15 Revenue from Contracts with Customers

The Group started to apply IFRS 15 from 1 January 2018. The new standard establishes a five-stage framework for recognising revenue from contracts with customers and replaces existing revenue standards, including IAS 18, IAS 11 and the related interpretations. 

Revenue from sales of goods and services is recognized when the related risks and benefits have been transferred to the purchasers and there is no significant uncertainty regarding payments or costs of goods and services, or any return on goods. The amount of booked income consists of the compensation from sold goods or services based on fair value, less value-added tax and volume or other discounts, as well as change in exchange rate profits and losses related to the sale. 

The goods sold by the Group comprise diagnostic tests, products that bind acetaldehyde, analysis systems and monoclonal antibodies. Sales of goods are recognized when the item has been delivered and the risk related to the goods has been transferred to the customer. The services sold by the Group comprise analysis of samples at the service laboratory. Revenue from services is recognized as income when the samples have been analyzed. Consolidated net sales include contractual royalties whereby Biohit receives a proportion of the sales made by the contractual partner. Royalties are recognized as net sales on an accrual basis in accordance with the contents of related agreements. Royalties are recognized as income when the income can be reliably determined and the financial benefit related to the transaction is likely to accrue to the Group.


CONSOLIDATED INCOME STATEMENT 

EUR million1-6/20181-6/2017Change1-12/2017
Net sales4.94.10.99.0
Change in inventories of finished goods and work in progress-0.10.0-0.2-0.1
Other operating income0.08.2-8.28.3
Materials and services-1.7-1.5-0.2-3.2
Employee benefit expenses-1.7-1.80.1-3.4
Other operating expenses-1.5-1.50.0-2.7
Share of profit/loss in Joint Venture 0.2-0.20.2
EBITDA-0.17.7-7.87.9
Depreciation and amortization-0.8-0.3-0.5-1.6
Operating profit/loss-0.97.4-8.36.4
Financial income0.10.1-0.00.1
Financial expenses-0.1-0.0-0.0-0.1
Profit/loss before taxes-1.07.4-8.46.4
Income taxes-0.1-0.20.1-0.3
Profit/loss for the financial period-1.07.2-8.36.1
Items of comprehensive income that may later be reclassified through profit or loss    
Translation differences0.0-0.00.0-0.0
Items that will not be reclassified to profit or loss    
Changes in the fair value of equity investments at fair value through other comprehensive income0.6-0.00.6-0.1
Other comprehensive income total0,6-0,00,7-0,2
Comprehensive income for the period-0.47.2-7.66.0

Earnings per share calculated from earnings attributable to the owners of the parent company
 1-6/20181-6/20171-12/2017 
Earnings per share (EUR), Undiluted-0.070.490.42 
Earnings per share (EUR), Diluted-0.070.480.41 
     
CONSOLIDATED BALANCE SHEET   
     
EUR million30.6.201830.6.201731.12.2017 
ASSETS    
NON-CURRENT ASSETS    
Intangible assets6.08.06.8 
Property, plant and equipment0.70.80.7 
Other non-current financial assets0.00.00.0 
Deferred tax assets0.10.10.1 
Total non-current assets6.78.97.5 
     
CURRENT ASSETS    
Inventories0.70.90.7 
Trade and other receivables2.13.42.0 
Other current financial assets8.16.57.4 
Cash and cash equivalents1.30.51.3 
Total current assets12.211.411.4 
     
TOTAL ASSETS18.920.318.9 
     
SHAREHOLDERS' EQUITY AND LIABILITIES    
Shareholders' equity attributable to the owners of the parent company    
Share capital2.42.42.4 
Invested unrestricted equity fund4.84.54.8 
Translation differences-0.1-0.1-0.1 
Retained earnings9.911.410.3 
Total shareholders' equity16.918.217.2 
     
NON-CURRENT LIABILITIES    
Deferred tax liabilities0.50.40.3 
Non-current interest-bearing liabilities0.10.10.1 
Other non-current liabilities0.00.00.0 
Total non-current liabilities0.50.50.4 
     
CURRENT LIABILITIES    
Trade payables0.30.80.4 
Current interest-bearing liabilities0.0 0.0 
Tax liabilities0.00.00.0 
Other liabilities1.10.80.8 
Total current liabilities1.51.61.3 
     
Total liabilities2.02.11.7 
     
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES18.920.318.9 
     

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 

Statement of changes in consolidated shareholders' equity on 30 June 2018 

EUR millionShare capitalInvested unrestricted equity fundTranslation differencesFair value reserveRetained earningsShareholders' equity
Shareholders' equity 1 Jan 20182.44.8-0.10.99.317.2
Accounting policy change IFRS 9   -0.00.0-0.0
Restated shareholders' equity 1 Jan 20182.44.8-0.10.99.417.2
Share based payments    0.00.0
Exercise of share options 0.0   0.0
Total comprehensive income for the period  0.00.6-1.0-0.4
Shareholders' equity 30 June 20182.44.8-0.11.58.416.9
       
Statement of changes in consolidated shareholders' equity on 30 June 2017
       
EUR millionShare capitalInvested unrestricted equity fundTranslation differencesFair value reserveRetained earningsShareholders' equity
Shareholders' equity 1 Jan 20172.44.3-0.11.03.110.7
Share based payments    0.10.1
Exercise of share options 0.2   0.2
Total comprehensive income for the period  -0.0-0.07.27.2
Shareholders' equity 30 June 20172.44.5-0.11.010.418.2
       
       
CASH FLOW STATEMENT      
EUR million1-6/20181-6/20171-12/2017   
CASH FLOW FROM OPERATING ACTIVITIES      
Profit for the period-1.07.26.1   
Adjustments1.0-6.3-6.7   
Change in working capital-0.0-1.8-0.3   
Interest paid and payments on other operating financial expenses-0.0-0.0-0.0   
Interest received0.10.10.1   
Realised exchange rate gains and losses-0.0-0.0-0.1   
Income taxes paid0.0-0.0-0.1   
Net cash flow from operating activities-0.1-0.8-0.9   
       
CASH FLOW FROM INVESTMENTS      
Investments in tangible and intangible assets-0.0-0.1-0.2   
Cash received from divestment of joint venture  1.7   
Net investments in funds and deposits0.00.6-0.4   
Net cash flow from investments-0.00.51.2   
       
CASH FLOW FROM FINANCING ACTIVITIES      
Rights issue0.00.20.4   
Proceeds from non-current loans 0.10.1   
Repayment of loans-0.0-0.0-0.0   
Net cash flow from financing activities0.00.30.5   
       
Increase (+)/decrease (-) in cash and cash equivalents-0.1-0.00.8   
Cash and cash equivalents at the beginning of the period1.30.60.6   
Effect of exchange rates on cash and cash equivalents0.0-0.0-0.0   
Cash and cash equivalents at the end of the period1.30.51.3   


RELATED PARTY TRANSACTIONS 

Biohit Oyj exited Joint Venture Biohit Healthcare Hefei LTD in first half of 2017 and since 1 June 2017 its result is no longer consolidated to Biohit Oyj. 

During the review period Biohit Healthcare (Hefei) Co Ltd. acquired 33.2 % of total number of shares in Biohit Oyj and 29.5 % of the voting rights based on the shares. The transaction was closed on 8 June 2018. As a result of the transaction, Biohit Healthcare (Hefei) Co. Ltd reached significant influence in Biohit Oyj in accordance with IAS 28. Therefore, all transactions between the parties, that occurred during 8.6.2018-30.6.2018 are classified as related party transactions. Biohit Oyj sold EUR 0.7 million worth of goods and services to Biohit Healthcare (Hefei) Co. Ltd during the aforementioned period. 

Biohit Oyj B-shares subscribed with stock options I 2013 during the 1-6/2018 reporting period 

A total number of 2435 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 B. These shares have been entered into the trade register on 12 March 2018, as of which date the new shares established equal shareholder rights with the company's existing B-shares. 

The share subscription price was 2.2766 per share respectively. The entire subscription price of EUR 5543.52 is credited to the reserve for invested non-restricted equity, and the company share capital remains unchanged. The shares have no nominal value.

After the subscriptions the number of all Biohit Oyj's shares increased to 14 889 278 shares and the number of B-shares to 11 913 778 shares. 

The share subscription period with stock options I 2013 B began on 1 June 2015 and will end 31 May 2019.  The terms and conditions of the option schemes with additional information are available on Biohit Oyj website at www.biohithealthcare.com

In order to redeem the stock options, the stock option holder has paid the subscription price in accordance with the stock option plan. The option holder also pays the income tax on the option income. 

COLLATERAL, CONTINGENT LIABILITIES, AND OTHER COMMITMENTS
 30.6.2018   30.6.201731.12.2017
    
Collateral granted on behalf of the parent company   
Guarantees0.00.10.0
    
Collateral granted on behalf of the subsidiaries   
Guarantees0.00.00.0
    
Other liabilities   
Leasing commitments   
Due for payment in less than one year0.00.00.1
Due for payment in more than one year but less than five years0.00.00.0
Due for payment beyond five years0.0  
Total0.10.10.1
    
Other rental commitments   
Due for payment in less than one year0.20.20.2
Due for payment in more than one year but less than five years0.20.40.3
Due for payment beyond five years0.0  
Total0.40.60.5
Other contingent liabilities 0.40.70.5
    
Collateral and contingent liabilities total0.40.80.5


NEXT FINANCIAL REPORT AND 2019 FINANCIAL REPORTING

Biohit will publish a schedule for financial reporting and 2019 Annual General Meeting later this year. 

Helsinki 22 August 2018

Biohit Oyj

Board of Directors

Additional information:

CEO Semi Korpela
tel. +358 9 773 861
investor.relations@biohit.fi
www.biohithealthcare.com  

Biohit Oyj in brief

Biohit is a globally operating Finnish biotechnology company. Biohit mission is “Innovating for Health” – we produce innovative products and services to promote research and early diagnosis. Biohit is headquartered in Helsinki, Finland, and has subsidiaries in Italy and the UK. Biohit Series B share (BIOBV) is quoted on Nasdaq Helsinki in the Small cap/Healthcare group.

www.biohithealthcare.com

 

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