Horizon Discovery today announces an unaudited pre-close period update for the year ended 31 December 2017.
- Revenue growth of approximately 51% on a reported basis (FY16: £24.1m), net of approximately £1.3m foreign exchange headwind during the year
- Expansion of gross margins to approximately 60% from 54% in FY16
- Strong Dharmacon performance in period since acquisition
Cambridge, UK, 1 February 2018: Horizon Discovery Ltd. (LSE: HZD) (“Horizon” or “the Group”), a global leader in gene editing and gene modulation technologies, today announces an unaudited pre-close period update for the year ended 31 December 2017. The Group intends to announce its preliminary full year 2017 results on 8 May 2018.
The Board reports that the Group grew strongly in the second half of the year, providing full year results within its guidance range before the impact of foreign exchange. The Group expects FY17 revenues to have grown by approximately 51% on a reported basis (FY16: £24.1m), net of approximately £1.3m foreign exchange headwinds, with growth driven in particular by bioproduction cell line and diagnostic reagent product sales in the United States and China. Notably, Dharmacon product sales have performed well under Horizon management following the acquisition on 1 September 2017.
Gross margins are expected to be approximately 60% on a reported basis, in line with previous guidance and significantly ahead of prior year (FY16: 54%). This margin expansion has been driven by increased product volumes, with gross margins for research products anticipated to have increased to just over 62%, including a strong performance from Dharmacon, and applied bioproduction and diagnostic product gross margins of at least 70%. Services gross margins are expected to have increased significantly to just over 54% (FY16: 40%).
With a substantial proportion of the Group’s revenue now derived in US dollars, the strengthening of Sterling throughout 2017 is expected to reduce reported revenues for the year as stated above. However, the increased US presence of the Group means it expects to derive future benefit from the recent reduction in the top rate of US corporation tax from 35% to 21%, as well as the ability to utilise tax losses carried forward.
During a transformational year, the Group has completed the acquisition of Dharmacon, reorganised its commercial team, consolidated operations from Vienna and Boston into its UK headquarters and reduced its organic headcount by 5%, delivering cost and operational efficiencies across the enlarged business. As a result, the Group is expected to report a positive trend towards profitability in the second half of the year with Q4 trading expected to have generated positive EBITDA. The Group expects that reported EBITDA before exceptional items and discontinued operations for the full year will be in line with the analyst consensus forecast loss of (£1.7) million and that our consolidation and ongoing integration of the business will bear further fruit in 2018.
The Group expects to report a robust year end cash position of approximately £29 million, with positive gross accounts receivable of approximately £11.4 million, bolstered by the £80m placing completed in August 2017 that funded the cash investment in the Dharmacon acquisition and settlement of the revolving credit facility.
Dr. Darrin M Disley, Chief Executive Officer, Horizon Discovery, commented: “Horizon is at an exciting point in its development. The past year has seen a focus on operational excellence which has included site consolidations, commercial team reorganisation and the ongoing integration of Dharmacon. I am pleased at the momentum built, and Horizon now has the commercial structure, operational discipline, technology platforms, business systems, and balance sheet strength in place to drive the Group through its next phase of growth.
“Supported by encouraging initial results following the acquisition of Dharmacon, our outlook for growth in 2018 remains strong and we are committed to achieving near-term profitability and free cash generation as revenues and margins continue to scale beyond our predominantly fixed cost base.”
