Trinity Biotech plc — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020; the filing is an annual Form 20-F rather than a quarterly filing. Financial statements are prepared under IFRS and presented in U.S. dollars, with amounts generally rounded to the nearest thousand.
Business context
Trinity Biotech develops, manufactures and markets diagnostic products for clinical laboratories and point-of-care settings, including infectious disease, HIV, autoimmune, diabetes and hemoglobin testing products. It also provides reference laboratory services and supplies raw materials to life-science and research customers. Products are sold in approximately 100 countries through direct sales forces, distributors and strategic partners.
Financial performance and position
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $102.0 million | $90.4 million | +12.8% |
| Gross profit | $48.6 million | $38.1 million | +27.4% |
| Gross margin | 47.6% | 42.2% | +5.4 percentage points |
| Operating profit/(loss), continuing operations | $0.1 million | $(24.1) million | Improved |
| Loss before tax | $(6.6) million | $(30.0) million | Improved |
| Loss from continuing operations | $(6.0) million | $(29.0) million | Improved |
| Total loss | $(6.4) million | $(28.9) million | Improved |
| Net financing expense | $6.7 million | $5.9 million | Increased |
| Net cash from operating activities | $23.8 million | $5.4 million | Increased |
| Cash and cash equivalents at year-end | $27.3 million | $15.2 million | Increased |
| Total impairment charges | $17.8 million | $24.3 million | Decreased |
| Capitalized development expenditure | $6.9 million | $9.6 million | Decreased |
Clinical laboratory goods revenue increased 23.7% to $84.3 million, primarily because of strong COVID-19-related sales, particularly viral transport media. Clinical laboratory services revenue declined 22.3% to $8.5 million, and point-of-care revenue declined 19.1% to $9.2 million.
Revenue by customer location was $70.4 million in the Americas, $22.6 million in Asia/Africa and $9.0 million in Europe. Americas revenue increased 34.9%, while Asia/Africa and Europe declined 18.5% and 14.8%, respectively.
Adjusted operating profit, excluding impairment charges, closure costs and recognition of the contingent asset, was $19.0 million in 2020 versus $5.2 million in 2019. This is a non-IFRS-style management measure disclosed by the company and should not be treated as a substitute for reported operating profit.
Liquidity, debt and capital resources
- Cash and cash equivalents were $27.3 million at December 31, 2020; the company reported no short-term investments compared with $1.2 million in 2019.
- Total borrowings and debt-related liabilities had a carrying value of approximately $102.6 million, including $82.7 million of exchangeable senior notes and $18.7 million of lease liabilities.
- The exchangeable notes have a $99.9 million nominal amount, mature in 2045, bear interest at 4%, and may be put to the company at par beginning April 1, 2022.
- Net contractual obligations, including principal, interest, trade payables and lease obligations, totaled approximately $240.9 million; the filing states that the contractual schedule does not reflect potential early exercise of the exchangeable-note put or call options.
- Operating cash flow was $23.8 million, investing cash outflow was $10.2 million and financing cash outflow was $2.7 million. Capital spending included $7.0 million of intangible-asset additions and $3.2 million of property, plant and equipment additions.
- Management concluded that the company can continue as a going concern for at least 12 months from the report date, but acknowledged that refinancing, asset sales or equity or debt financing may be needed to address the 2022 note repayment risk.
Material changes versus 2019
- Revenue growth and higher-margin COVID-19-related products drove a significant improvement in gross profit, gross margin and operating cash flow.
- Non-COVID product lines, including hemoglobin, autoimmune, HIV, infectious disease and clinical chemistry products, were generally negatively affected by reduced healthcare visits, postponed testing and operational restrictions.
- COVID-19 government support contributed $1.8 million to other operating income. Of $4.5 million in PPP loans received, $1.6 million had been forgiven by year-end; three additional loans totaling $2.7 million were forgiven in early 2021, while forgiveness of the remaining $244,000 loan was pending at the filing date.
- Impairment charges declined but remained material at $17.8 million, including $16.7 million related to Primus Corporation. The impairment review also identified charges for Trinity Biotech Do Brasil and Biopool US.
- The company closed its Carlsbad, California manufacturing facility on June 30, 2020 because of declining demand for Western Blot products. Closure costs were $2.4 million.
- A previously unrecognized related-party contingent asset associated with a 2019 tax audit settlement was collected and recognized as $1.3 million of income in 2020.
- Equity remained negative at $(2.2) million at year-end, compared with positive equity of $4.7 million at December 31, 2019.
Guidance, outlook, risks and unusual items
- Management expected non-COVID product demand to increase in 2021, citing a partial recovery in the fourth quarter of 2020. The filing does not provide formal revenue or earnings guidance.
- The duration and level of COVID-19 product demand were described as highly uncertain. The company reported lower viral transport media demand in the first quarter of 2021 because of increased competition and customer stockpiling at the end of 2020.
- Management expected to submit a rapid COVID-19 antibody test for FDA Emergency Use Authorization in the second quarter of 2021 and planned development of a rapid antigen test.
- TrinScreen HIV was submitted to the World Health Organization for approval in March 2021. The company also expected to submit its Premier Resolution hemoglobin analyzer to the FDA in 2021.
- In August 2020, the FDA issued a Warning Letter following an inspection of the Kansas City facility. The company reported voluntary remediation actions and ongoing communication with the FDA.
- The company conducted recalls involving the ultra2 GeneSys and ultra2 Resolution Variant Systems after FDA concerns regarding product modifications and required clearances. A successor Premier Resolution instrument had been launched outside the United States, with a U.S. 510(k) submission planned.
- Key risks include the potential April 2022 exchangeable-note repayment, dependence on refinancing or additional capital, COVID-19 demand volatility, regulatory compliance and product approvals, recalls and product liability, supply-chain interruptions, distributor dependence, competition, foreign-exchange exposure and further impairment of goodwill and intangible assets.
- Inventory provisions increased to $9.8 million, or approximately 24.5% of gross inventory, from $6.7 million, or 17.3%, in 2019, reflecting declining sales of older and discontinued products and pandemic-related demand changes.
- The company reported no material pending legal proceedings and no material off-balance-sheet arrangements. It has no plans to pay cash dividends in the foreseeable future.
Important facts for investors to verify
- Whether the company successfully refinanced or otherwise addressed the $99.9 million exchangeable-note put exposure beginning April 1, 2022.
- The status of FDA remediation related to the Kansas City Warning Letter and the regulatory pathway for Premier Resolution and COVID-19 tests.
- Whether COVID-19 product revenue remains durable after customer stockpiling, increased competition and changes in testing demand.
- Whether non-COVID product volumes and the reference laboratory business recover to pre-pandemic levels.
- The adequacy of cash, operating cash generation and available financing relative to debt, lease and contractual obligations.
- The recoverability of goodwill, capitalized development costs and other intangible assets, particularly after the $17.8 million 2020 impairment charge.
- The increase in inventory provisions and the potential for additional obsolescence or return-related adjustments.
- The dilution implications of approximately 19.5 million outstanding options, including approximately 8.0 million exercisable at December 31, 2020.