Latest Results

Financial Review

Financial results summary

For the year ended 31 March 2024, the Group reported revenue of £9.8 million (2023: £7.5 million), an EBITDA loss of £0.1 million (2023: EBITDA loss of £2.6 million), an adjusted EBITDA of £0.2 million (2023: EBITDA loss of £2.0 million), and a statutory loss before tax of £0.7 million (2023: £3.3 million).

Revenue of £9.8 million (2023: £7.5 million) was 30% above prior year, with improvements due to organic growth in our main product lines, FoodPrint® and CNSLab, and a contribution from the higher-than-normal order book brought forward from 2023.

From a geographic point of view, we saw growth in a number of key regions including the UK where our direct laboratory operation grew by 58%, largely fuelled by our direct-to-consumer channels. The Middle East and Africa region remains an important territory with 85% growth, whilst North American sales grew by 63% and Asia and the Far East by 30%. 

A summary of Health and Nutrition revenue is in the table below:

The gross profit margin percentage has increased to 61.9% (2023: 47.0%), driven by investment and a focus on production and operational improvements with further impact coming from the sales mix of high margin FoodPrint® products.

Excluding net exceptional costs, administrative overheads increased by £0.5 million to £5.3 million (2023: £4.8 million).

Sales and marketing costs decreased by £0.1 million to £1.4 million (2023: £1.5 million).

Exceptional items

During the year, the Group incurred net exceptional costs of £0.2 million (2023: £0.5 million). Income of £0.1 million was received in relation to the surrender of the lease for the planned new manufacturing facility in Ely. The lease for the current Littleport site was extended to June 2025 with talks ongoing to further extend whilst continuing to evaluate the needs of the business in the future.  Costs of £0.2 million were incurred in relation to compensation for loss of office for three employees who left the organisation throughout the financial year. £0.1 million of expenditure was incurred on the ongoing dispute with DHSC as legal costs increased due to the mediation meeting and continued correspondence.

Adjusted EBITDA

Alongside the key performance indicators of revenue and gross margin percentage, the Group continues to consider EBITDA and adjusted EBITDA as being more appropriate performance measures which are better aligned with the cash-generating activities of the business. The Group made an EBITDA loss of £0.1 million (2023: EBITDA loss of £2.6 million), with no further costs incurred in relation to discontinued operations. The adjusted EBITDA (before net exceptional costs and share-based payment charges) is £0.2 million (2023: EBITDA loss of £2.0 million).

The Group has recorded a loss after tax of £0.3 million (2023: £3.2 million).

Taxation

The current year tax credit of £0.4 million (2023: £0.4 million) arises from a review of the deferred tax asset. Other than to offset any deferred tax liabilities which may crystallise in the future, based on the Group’s trading assumptions the deferred tax asset in respect of trading losses will begin being realised from 2025 onwards, when the Group starts to generate taxable profits. The deferred tax asset has been valued based upon a future UK corporation tax of 25%.

Loss per share

The loss per share was 0.1 pence (2023: 1.7 pence) based on a statutory loss after tax of £0.3 million (2022: loss of £3.9 million). The adjusted profit per share was 0.0 pence (2023: loss of 1.4 pence). The adjusted profit after tax was £0.1 million (2023: loss of £3.1 million) and the profit per share is calculated on the basic average of 238.1 million shares (2023: 231.8 million shares) in issue.

Research and development

During the year, the Group invested a total of £0.3 million in all development activities, £0.1 million lower than the prior year (2023: £0.4 million), representing 3.5% (2023: 4.7%) of revenue. Of the total expenditure, £nil (2023: £0.1 million) has been capitalised in accordance with IAS 38 – Development Costs, whilst earlier stage expenditure and expenditure not qualifying in accordance with IAS 38 criteria of £0.3 million (2023: £0.3 million) has been expensed through the income statement.

Property, plant and equipment

Total expenditure on property, plant and equipment in the year was £0.05 million (2023: £0.03 million).

As at 31 March 2024, the outstanding liabilities in connection with leases recognised under IFRS 16 includes short-term liabilities of £0.1 million (2023: £0.02 million) and long-term liabilities of £0.03 million (2023: £nil). 

Financing and going concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Company and Group can continue in operational existence through a period of at least twelve months from the date of approving the financial statements (the going concern period). The Directors have determined that the going concern period for the purposes of these financial statements is the period through to 31 July 2025. The Group realised a loss of £0.3 million for the year ended 31 March 2024 (2023: loss of £3.9 million). As at 31 March 2024, the Group had net current assets of £6.4 million, including cash and deposits of £5.4 million.

The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review.

The Directors have prepared trading and cash flow base case forecasts to 31 July 2025 and have applied reverse stress tests to the base case forecasts. The stress tests have been applied to take account of the impact of potential uncertain outcomes that are, to an extent, outside of management’s control, as well as reduced trading forecasts, taking into account current macro-economic conditions. These scenarios include:

• The reverse stress test indicates revenue could fall by a further 45% and a gross margin could deteriorate by an additional 11% before forecast cash resources are exhausted.
• After taking legal advice and making an assessment of the terms and conditions contained within the contract with the DHSC, the Directors do not believe the Group will be required to repay the pre-production payment of £2.5 million. We are also considering claims against DHSC for additional losses that we have suffered as a result of DHSC's conduct pursuant to the contract. We are continuing to explore potential ways to resolve this dispute without the need for legal proceedings. As such, the Directors believe that there will be no cash outflow in the form of a repayment to the DHSC in the going concern period and repayment is not included in the base case or as a sensitivity. However, the Directors acknowledge that there is a risk that a repayment of some or all of this amount may be required, the timing and quantum of which is uncertain.

The Board has a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the period to 31 July 2025. On this basis, the Directors continue to adopt the going concern basis of preparation. Accordingly, these financial statements do not include the adjustments that would be required if the Company and Group were unable to continue as a going concern. 

Operational Strategy

Our vision is for CNS to be a best-in-class operation which is highly effective at delivering products and services on time and in full at a competitive cost. The Group is already on this journey and by updating and improving the structured approach, with the ongoing commitment of the whole CNS team behind this vision, we are going from strength to strength. There are four key elements that are driving the team:

• Being data driven – KPIs have been reviewed and improved. This enables the team to identify the highest priority areas and achieve the biggest return on investment for its efforts.
• Aligning priorities – The senior operations team has clear areas of responsibility and communicates regularly through structured meetings. This prevents any duplication of effort and potential road blocks are addressed before they become a problem.
• Effective communication – A network of structures is used to communicate with the wider business about the initiatives. This results in cross-functional feedback and wider awareness of changes and improvements.
• Using improvement tools and structures – The team uses a number of methodologies and structures when managing projects, solving problems and communicating updates. This means that work is more effective, results are replicable and new team members can be quickly onboarded.
  

Continuous improvements

We are applying these in three different areas, each of which is helping on the journey to be best in class.

1. Improving current processes
   Example: The CNSLab project has delivered a four-fold increase in the lab capacity.
   This involved analysing the way we currently operate, identifying how we can improve through small changes to the existing processes and implementing them in a timely manner.
2. Implementing quick wins
   Example: The filling department was spending a large amount of time hand labelling components. The team identified a quick fix and we installed an inline labelling unit. This has resulted in a substantial saving, reducing the run time by 66%.
   This takes us a step further than point one and considers what would need to be true to deliver a big improvement in efficiency or a step change in yield. If a solution can be implemented quickly and economically the team pushes ahead to realise the benefits.
3. Investing and planning future improvements
   Example:  We are considering which print technology and materials could yield the best product in the future, both from a quality and cost perspective. This is primarily carried out by the development team; however, the operations team is also involved to offer input on the practicality and feasibility of proposals and ideas.
   Here we consider opportunities identified in step 2 that require higher effort or resource to implement and deliver significant benefits once active.

All three of these areas offer substantial benefits for the key stakeholders in CNS:

• Customers – Improvements in the design of our products benefit our customers through a better user experience. One example is an improvement to the Sample Collection Pack which is detailed later. This update will improve customer experience and usability as well as reducing the environmental impact of the pack as we shift from plastic to cardboard.
• Shareholders – Delivery of improvements like these increases the capacity and reduces the cost. This delivers an improvement in the margin in the short term and the ability to grow in the medium-long term.
• Employees – Improvements to how we work that reduce repetitive or difficult manual tasks result in a better working environment. Reductions in time spent on these areas also opens up the possibility for training and personal development of the team. In recent months we have begun to focus on cross training both within production and between key departments. This benefits everyone by upskilling individuals, developing appreciation for other areas and improving flexibility.

As we continue the journey to be a best-in-class operation we are involving all areas of the Group. This has resulted in a great number of ideas and improvements, many of which have been implemented and are making a real impact. This is a circular process that has no end; therefore we will continue to search out opportunities and continuously challenge ourselves to improve into the future. The Board has a vital role to play in this process as they help the Group to realise its full potential by celebrating success, advising on challenges and pushing it further.

James Cooper
Chief Operating Officer
24 July 2024