Trinity Biotech plc Form 20-F Summary
Business context and reporting period
Trinity Biotech plc is an Ireland-incorporated developer, manufacturer and marketer of diagnostic products for clinical laboratories and point-of-care settings, with approximately 850 products sold in about 100 countries. Its portfolio covers infectious diseases, HIV, diabetes and haemoglobin testing, autoimmune diagnostics, clinical chemistry and laboratory services. The filing reports the fiscal year ended December 31, 2019, under IFRS in U.S. dollars. Although the request references 2019 Q4, this filing is an annual Form 20-F rather than a quarterly report.
Key financial metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | US$90.435 million | US$97.035 million | Down 6.8% |
| Gross profit | US$38.120 million | US$41.449 million | Down 8.0% |
| Gross margin | 42.2% | 42.7% | Down 50 basis points |
| Operating loss | US$24.112 million | US$20.227 million | Loss increased 19.2% |
| Loss from continuing operations | US$28.991 million | US$22.658 million | Loss increased 28.0% |
| Net loss attributable to shareholders | US$28.914 million | US$22.090 million | Loss increased 30.9% |
| Basic loss per ADS | US$1.38 | US$1.06 | Higher loss per ADS |
| Cash generated from operations | US$5.875 million | US$5.978 million | Down US$0.103 million |
| Net cash from operating activities | US$5.417 million | US$7.229 million | Down US$1.812 million |
| Capital expenditure and intangible additions | US$11.836 million | US$17.391 million | Lower investment outflow |
Product-line revenue was US$68.127 million for clinical laboratory products, US$11.393 million for point-of-care products and US$10.915 million for laboratory services. Laboratory services grew 3.2%, while clinical laboratory revenue declined 4.9% and point-of-care revenue declined 23.2%.
At December 31, 2019, cash and cash equivalents were US$15.231 million and short-term investments were US$1.169 million, compared with combined liquidity of US$30.277 million at December 31, 2018. Net current assets were US$51.941 million, down from US$69.057 million. Total assets were US$131.071 million and shareholders’ equity was US$4.713 million, down from US$44.054 million.
Total indebtedness had a carrying value of approximately US$102.2 million, including US$82.021 million of exchangeable notes. The notes have a 4% coupon, a nominal balance of US$99.9 million, mature in 2045 and are first puttable by holders on April 1, 2022. Lease liabilities totaled US$20.149 million following adoption of IFRS 16.
Material changes versus the prior comparable period
- Revenue declined primarily because Lyme disease customers migrated from Western Blot testing to alternative platforms, U.S. HIV point-of-care sales were discontinued, and Fitzgerald’s unusually strong 2018 sales normalized.
- Americas revenue fell 9.3% to US$52.183 million; Asia/Africa revenue fell 6.0% to US$27.686 million; Europe increased 5.6% to US$10.566 million.
- SG&A excluding impairment and the tax settlement declined 6.2% to US$27.661 million as a result of cost reductions, lower amortization and currency effects.
- The company recorded US$24.295 million of impairment charges, including US$16.570 million against goodwill and intangible assets, US$6.349 million against property, plant and equipment and US$1.376 million against prepayments. The 2018 impairment charge was US$26.932 million.
- A tax audit settlement resulted in a US$5.042 million income-statement charge, excluding US$1.0 million of related interest. The total settlement paid was US$6.442 million, partially offset by a prior US$0.4 million provision.
- IFRS 16 was adopted using the modified retrospective approach, adding US$21.185 million of lease liabilities at transition and reducing opening accumulated surplus by US$11.099 million for impairment of right-of-use assets.
- No dividends were paid in 2019, and the company did not repurchase shares during the year.
Outlook, commentary, risks and unusual items
Management stated that existing cash resources, operating cash flow, expenditure reductions and government pandemic support should provide sufficient funding for at least the next 12 months. The filing does not provide formal revenue or earnings guidance.
Management identified continued development of the TrinScreen HIV screening test, Premier haemoglobin products, the Autoimmune Smart Reader and COVID-19-related antibody tests as development priorities. Capitalized development expenditure was US$9.569 million in 2019, and capitalized development costs carried on the balance sheet were US$22.778 million.
In early 2020, management decided to close the Carlsbad, California manufacturing facility by June 30, 2020 because of declining Lyme Western Blot volumes. A US$2.4 million closure provision was recorded in first-quarter 2020, primarily for inventory write-offs and redundancy costs; no provision was recorded in the 2019 financial statements.
The COVID-19 pandemic materially reduced expected 2020 revenue, particularly for haemoglobin, autoimmune, HIV, infectious disease and clinical chemistry products. Sales increased for transport medium, certain respiratory tests and coronavirus-related antibodies. The company furloughed employees, reduced discretionary spending and received US$4.5 million of U.S. Paycheck Protection Program loans, which it expected to be partially or substantially forgiven.
The filing states that a COVID-19-sensitive impairment analysis would have increased the December 31, 2019 impairment loss by approximately US$1.8 million for Primus and US$1.7 million for Immco. Other major risks include high leverage and the April 2022 note put option, regulatory clearance and recall risks, product obsolescence, distributor dependence, foreign-exchange exposure, receivable collectability, inventory obsolescence, competition, litigation and uncertainty over the realization of approximately US$17.814 million of unrecognized deferred tax assets.
Most important facts for investors to verify
- Whether revenue declines in Lyme, HIV point-of-care and Fitzgerald products have stabilized or continued after 2019.
- Actual COVID-19 revenue effects, operating cash flow and liquidity after May 31, 2020, including the treatment and forgiveness of PPP loans.
- Funding plans and refinancing capacity ahead of the April 1, 2022 earliest put date for the exchangeable notes.
- Progress, regulatory status and commercialization prospects for TrinScreen, Premier Resolution, Autoimmune Smart Reader and COVID-19 tests.
- Final costs and operating effects of the Carlsbad facility closure and manufacturing transfers.
- Potential additional impairment charges, particularly for Primus, Immco and Fitzgerald, given sensitivity to revenue growth, discount rates and market conditions.
- Collection of the US$1.231 million contingent contribution from Darnick Company relating to the tax settlement.
- Potential dilution from 12.304 million outstanding options, including 6.623 million exercisable options, and from exchangeable notes if settled in shares.