Positive momentum persists

2022 was a pivotal year for NIOX as it moved firmly into sustainable profitability and cash generation. The foundations for a scalable platform are now well-established and the group enters 2023 with strong momentum (revenues in the first two months of the year were +19%). Having upgraded our forecasts following the trading update in January, we push through further EBITDA upgrades on improved margin assumptions. NIOX is a rare asset and fully deserves a premium rating. We stay at Buy, with an i

Confirming further upgrades post positive update

At the trading update earlier this week, NIOX indicated FY22 EBITDA would be around £7.0m, ~15% ahead of already upgraded expectations, with net cash coming in at £19.4m. This was driven by 15% underlying revenue growth, improved gross margins on mix and ongoing operational efficiencies. We formally update our estimates in this note, increasing our FY22 PBT/EPS forecast by 20% but, prudently, leaving FY23/24 unchanged for now. The outlook remains positive with latent growth potential in the US a

FY22 EBITDA ahead of upgraded expectations

NIOX has again exceeded expectations, with FY22 EBITDA expected at around £7.0m, ahead of both our and consensus expectations, which had already been upgraded twice in the year. This was driven by better than expected gross margins and ongoing operating efficiencies. The balance sheet is strong, with good cash generation and the first instalment of the BeyondAir settlement received. Net cash (pre-IFRS16) was slightly ahead of expectations at £19.4m, providing optionality over investment and shar

Strong interims – on track for FY

Niox (formerly Circassia) has delivered a strong set of interim results, which has continued into H2. Revenues in July and August increased by a strong +25% and trading is in line with already upgraded EBITDA expectations. Cash reserves continue to build and we increase further our Y/E cash assumptions by £3m, reflecting lower than expected legacy rebate payments. The board is seeking approval to create distributable reserves to facilitate potential returns to shareholders in due course. We reit

Positive update leads to material further upgrades

Circassia has delivered another positive update, demonstrating yet again the benefits of management’s restructuring actions in recent years. Notable highlights were a strong Gross Margin performance on favourable mix effects and continued progress on reducing the overhead base. Net, this resulted in EBITDA of £3.2m in H1, some 78% of our previous FY estimate. We push through material profit upgrades this year (+50% to EBITDA) and trickle these through to outer years. With cash generation now fol

Continued growth and margin improvement prompt further upgrades

A positive AGM update confirms strong revenue growth has continued YTD and further margin improvement means management again expect EBITDA to be materially ahead of expectations. The business model is now settled, with additional distributors appointed in the US which should help drive further penetration into the Primary Care market there. China revenues were strong and with no sign yet of any slowdown, despite being cognisant of renewed lockdowns there. Gross margins have remained robust on po

Prelims in line with upgraded forecasts

Circassia has delivered strong growth in revenues and a positive adj EBITDA, in line with upgraded expectations. This represents a key milestone for the company as it moves into sustainable profitability and cash generation. We leave our forecasts unchanged for now, but see upside potential as Clinical markets normalise and the awareness of the benefits of routine FeNO testing continue to grow. We stay at Buy with a TP of 51p.

FY21 slightly ahead of expectations

Circassia has delivered a strong outturn to FY21, with revenues 2% ahead at £27.9m (+17% YoY) and a maiden positive adj EBITDA, ahead of our expectations of a small loss, which had already been upgraded during the year. Gross margins remained steady at 68% and 84% recurring revenues was also consistent with the previous year. Net cash was also ahead at £12.6m, with the underlying NIOX business generating £1.1m of cash in H2, another notable milestone. We leave our outer years forecasts prudently

Positive interims, further upgrades

Momentum is building in Circassia, with the recovery from the pandemic gaining traction and actions taken by management to focus the business having a material impact on the bottom line. Having already upgraded in July, we are upgrading forecasts again today to reflect the further progress on reducing fixed costs. We now expect the group to trade close to EBITDA breakeven this year and for significantly improved profitability and cash generation from next year onwards.

Focus pays off, drives upgrades

Circassia’s focus on its Niox business is paying off, with revenues recovering rapidly and further progress made in reducing the fixed cost base. As a result, management now expects FY21E EBITDA to be ahead of market expectations. We upgrade our forecasts accordingly, now looking for narrower EBITDA losses this year and a comfortable move into profitability in FY22E. We see further potential upside as the recovery becomes more established and visibility improves further, which should lead to mat

Settlement with Beyond Air provides optionality

Circassia has reached a settlement with Beyond Air regarding a disputed contract over rights to the latter’s LungFit product. Under the terms of the settlement, Circassia will surrender its rights in exchange for staged cash payments of up to $16.5m, contingent on FDA approval. Per Beyond Air’s recent statements, this is pending and could be received in H2 this year. We view this as a positive outcome for Circassia, providing a potential source of non-dilutive funding over the next few years.

Encouraging trading YTD

Trading for the first 4 months of the year is reported to be slightly ahead of expectations, up 9% YoY to £9.3m. This has been driven by a recovery in activity levels in the Clinical business and a stronger than expected performance from sales into the Research market. Costs remain tightly controlled and the business traded at close to EBITDA breakeven in the period (pre-HO costs). We make no changes to forecasts at this stage, but view this as a highly encouraging update. We continue to see a s

Gold standard asthma diagnostics

Circassia is now focussed on NIOX, a gold standard device for diagnosing and managing asthma patients. It is the global market leader in FeNO testing and has regulatory approval and agreed reimbursement in all major territories. A new management team has rapidly addressed legacy issues, eliminating a substantial debt overhang, rightsizing the cost base and optimising routes to market. Whilst the Covid-19 pandemic has impacted revenues, we see scope for a rapid recovery as activity normalises. Th

FY22 in line – focus on core increasing

FY22 results are in line with revised estimates. Management continues to intensify its focus on the growing, profitable and cash generative Point-of-Care and Life Sciences activities, where confidence in the latter opportunity is increasing. We make some modest changes to our forecasts to reflect further streamlining post-period end and point to the strong growth outlook from FY24 onwards. We believe this is being overly discounted by the market and view the shares as being in deep value territo

Clean exit from ADL Health

EKF has announced a clean solution has been found for the non-core Laboratory Testing business ADL Health, selling the business back to one of its management team. Having pared back our estimates for this division in February, we expect no further material impact on earnings from this move. Strategically, we view it as positive, removing a distraction and further re-focussing activities back towards the core established Point-of-Care & Central Labs business and the growing new Life Sciences acti

Hybridan Small Cap Feast - 23 Mar 23

23 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

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Hybridan Small Cap Feast - 06 Mar 23

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Tissue Regenix - FY 2022 – a pivotal year to a sustainably profitable business

Tissue Regenix reported full-year results to 31 December in line with its January trading update that indicated it had reached EBITDA profitability in Q4. What was undisclosed then was that it included a $0.45m provision, without which it would have generated an adjusted EBITDA of c.$0.4m in H2, illustrating the positive underlying progression to a profitable and sustainable growth company. The outlook remains positive – new products, new geographies and additional distributors/strategic partner

Morning Note – 27 March 2023

Hybridan Small Cap Feast - 21 Mar 23

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Hybridan Small Cap Feast - 24 Mar 23

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SHORE CAPITAL - Warpaint London+ (W7L, House Stock at 198p)

Hybridan Small Cap Feast - 14 Mar 23

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LIBERUM: Medica Group PLC* - Two deals and on track for FY’23

Hybridan Small Cap Feast - 16 Mar 23

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Hybridan Small Cap Feast - 20 Mar 23

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Hybridan Small Cap Feast - 27 Mar 23

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