Quarterly Report • Feb 28, 2020
Quarterly Report
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Significant events · Financial position and performance · Consolidated income statement · Condensed presentation of the Group financial position · Condensed consolidated cash flow statement · Selected information about the Group · Events after the end of the quarter · Contact · Financial calendar
BRAIN AG ranks among the technologically leading companies in Europe in the bioeconomy area, and operates in industrial – so-called "white" – biotechnology with its key technologies. BRAIN identifies previously untapped high-performing enzymes, microbial producer organisms and natural materials derived from complex biological systems to transform them into industrially usable applications. Innovative solutions and products developed from this "Toolbox of Nature" are successfully deployed in the chemicals sector, as well as in the cosmetics and food manufacturing industries.
The BioScience segment includes mainly the research and development business with industrial partners ("Tailor-Made Solutions" cooperation business), and the company's own research and development. The BioIndustrial segment comprises mainly the industrially scalable Products business.
As part of its growth-oriented industrialization strategy, in February 2016 B.R.A.I.N. Biotechnology Research and Information Network AG (BRAIN AG; ISIN DE0005203947 / WKN 520394) became the first bioeconomy company to list in the Prime Standard of the Frankfurt Stock Exchange.
Significant events 1 October 2019 to 31 December 2019 4
Financial position and performance 1 October 2019 to 31 December 2019 5–7
Consolidated income statement [unaudited] 1 October 2019 to 31 December 2019 8
Condensed presentation of the Group financial position (consolidated balance sheet) [unaudited] 9
31 December 2019
1 October 2019 to 31 December 2019
1 October 2019 to 31 December 2019
Contact, financial calendar, disclaimer 15
On 2 December 2019, BRAIN AG announced that the Supervisory Board had appointed Adriaan (Aryan) Moelker to the Management Board with effect from 1 February 2020, and also as the future Chairman of the Management Board (CEO). Dr. Jürgen Eck, co-founder of BRAIN, Chief Technology Officer (CTO) for approximately 26 years, and also CEO since 1 August 2015, stepped down from the Management Board as of 31 December 2019 and left the company by mutual agreement. Dr. Eck will continue to be available to BRAIN as a consultant, especially for the innovation pipeline.
The remarks made in the consolidated financial statements for the financial year ending 30 September 2019 about the Group's basis and general conditions continue to be applicable.
In the first three months of the 2019/20 financial year, the BRAIN Group's revenue increased by 9.4% year-on-year from € 9.4 million (or by 15.9% from € 8.9 million excluding Monteil Cosmetics International GmbH) to € 10.3 million. Total operating performance (revenue, research and development grant revenue, changes in inventories, and other income) also rose by € 0.5 million (5.4%) year-on-year from € 9.9 million to € 10.4 million. Organically – excluding Monteil Cosmetics International GmbH in the previous year – total operating performance increased by € 1.1 million, or by 11.4 %, from € 9.3 million to € 10.4 million.
The BioScience segment generated a revenue of € 4.0 million in the reporting period, up 42.8 % from the prior-year quarter. This growth is attributable to higher volumes generated with existing customers and the conclusion of contracts for Tailor Made Solutions projects. Adjusted EBITDA improved from € –0.9 million to € –0.6 million. This improvement in underlying EBITDA occurred mainly due to the higher revenue as well as the improved personnel expense ratio and other expense ratio in the BioScience segment.
Revenue generated by the BioIndustrial segment declined slightly by 4.9 % from € 6.6 million to € 6.3 million in the reporting period. Organically, revenue increased by € 0.2 million or by 3.4 % from € 6.1 million to € 6.3 million. Total operating performance decreased slightly by 5.2 % from € 6.5 million to € 6.2 million. Excluding Monteil Cosmetics International GmbH, total operating performance rose by € 0.2 million (3.3%) from € 6.0 million to € 6.2 million. Adjusted EBITDA fell accordingly by 55.5%, from € 0.8 million to € 0.4 million. The changes in this segment reflect start-up costs for the start-up of the new production facilities in Cardiff and Büttelborn.
As a result of the factors mentioned above, the adjusted Group EBITDA reduced slightly from € –0.0 million in the previous year to € –0.2 million in the first three months of the 2019/20 financial year.
The following table shows the reconciliation of the reported EBITDA to the adjusted EBITDA.
| € thousand | 3M 2019/20 | 3M 2018/19 |
|---|---|---|
| EBITDA | –313 | –116 |
| Personnel expenses from the employee share scheme at AnalytiCon Discovery GmbH |
0 | –35 |
| Share-based employee compensation | –79 | –36 |
| Acquisition and integration costs incurred in the expansion of the BRAIN Group |
–8 | –5 |
| Adjusted EBITDA | –226 | –40 |
Depreciation and amortization increased from € 0.7 million in the same period of the previous year to € 0.9 million, which is mainly due to the first-time application of IFRS 16 as detailed in the selected notes to the consolidated financial statements below.
Total assets rose from € 66.1 million to € 70.4 million as at 31 December 2019. The first-time application of IFRS 16 is a significant influence in this change. In accordance with IFRS 16 "Leases", rights-of-use are recognized as non-current assets, with corresponding lease liabilities being recognized.
Non-current assets increased from € 35.2 million as at 30 September 2019 to € 42.3 million as at 31 December 2019, which is attributable to the first-time application of IFRS 16. Current assets reduced from EUR 31.0 million to EUR 28.1 million, mainly due to the reduction in cash and cash equivalents.
Equity decreased from € 17.1 million as at 30 September 2019 to € 15.2 million as at 31 December 2019. This reduction of € 1.9 million is almost entirely attributable to the result for the period. No capital measures were implemented during the reporting period.
Non-current liabilities rose from € 34.2 million to € 40.7 million, reflecting the first-time application of IFRS 16. Current liabilities decreased slightly from € 14.9 million to € 14.5 million due to the net effect of the first-time application of IFRS 16 and a reduction in deferred income.
The Group's gross cash flow decreased from € –0.8 million in the previous year to € –1.7 million in the reporting period. This change is mainly due to the € 1.0 million reduction in the net result for the period and to the receipt of deferred income of € 0.5 million.
Owing to the sharp reduction in capital employed in the previous year, it was not possible to repeat the positive effect on cash flow from operating activities. In consequence, although cash flow from operating activities was € 1.1 million better than gross cash flow, it worsened year-onyear from € –0.1 million to € –0.6 million.
Cash flow from investment activities increased slightly from € –1.3 million in the previous year to € –1.6 million in the period under review. This was due to capital expenditure on property, plant and equipment and investments in expanded production capacities at the Cardiff, UK and Büttelborn, Germany sites.
Cash flow from financing activities which in the reporting period mainly reflects the proceeds from borrowings made, amounted to € 0.2 million in the first quarter, compared with € –0.2 million in the previous year.
Compared to 30 September 2019, cash and cash equivalents decreased from € 15.2 million to € 13.2 million, which is attributable to the aforementioned effects.
[UNAUDITED] 1 October 2019 to 31 December 2019
| € thousand | 3M 2019/20 | 3M 2018/19 |
|---|---|---|
| Revenue | 10,323 | 9,440 |
| Research and development grant revenue | 177 | 423 |
| Change in inventories of finished goods and work in progress | –231 | –213 |
| Other income | 122 | 211 |
| 10,390 | 9,861 | |
| Cost of materials | ||
| Cost of raw materials and supplies, and purchased merchandise | –3,292 | –3,122 |
| Cost of purchased services | –899 | –391 |
| –4,191 | –3,513 | |
| Personnel expenses | ||
| Wages and salaries | –3,673 | –3,457 |
| Share-based employee compensation | –79 | –36 |
| Social security and post-employment benefit costs | –737 | –749 |
| –4,488 | –4,242 | |
| Other expenses | –2,024 | –2,222 |
| EBITDA | –313 | –116 |
| Depreciation, amortization and impairment | –874 | –723 |
| Operating result (EBIT) | –1,186 | –839 |
| Share of profit or loss from equity-accounted investments | –879 | –98 |
| Finance income | 7 | 2 |
| Finance costs | –186 | –306 |
| –1,058 | –402 | |
| Pretax loss for the reporting period | –2,244 | –1,241 |
| Income tax expense/income | ||
| a) Current tax expense | –82 | –93 |
| b) Deferred tax income | 92 | 70 |
| 10 | –23 | |
| Net loss for the reporting period | –2,234 | –1,264 |
| of which attributable to: | ||
| Non-controlling interests | 24 | 54 |
| Shareholders of BRAIN AG | –2,258 | –1,317 |
| Earnings per share, basic (undiluted) | –0,13 | –0,07 |
| Number of shares taken as basis | 18,055,782 | 18,055,782 |
| Earnings per share, diluted | –0,13 | –0,07 |
| Number of shares taken as basis | 18,055,782 | 18,055,782 |
| € thousand | 31.12.2019 | 30.09.2019 |
|---|---|---|
| Non-current assets | 42,292 | 35,167 |
| Current assets | 28,118 | 30,957 |
| ASSETS | 70,410 | 66,123 |
| Equity | 15,227 | 17,091 |
| Non-current liabilities | 40,657 | 34,160 |
| Current liabilities | 14,527 | 14,873 |
| EQUITY AND LIABILITIES | 70,410 | 66,123 |
| € thousand | 3M 2019/20 | 3M 2018/19 | 3M 2017/18 |
|---|---|---|---|
| Gross cash flow | –1,690 | –824 | –2,472 |
| Cash flow from operating activities | –574 | –138 | 1,350 |
| Cash flow from investing activities | –1,572 | –1,315 | –239 |
| Cash flow from financing activities | 199 | –233 | –601 |
| Net change in cash and cash equivalents | –1,947 | –1,686 | 510 |
| Cash and cash equivalents at start of reporting period | 15,160 | 25,539 | 38,954 |
| Cash and cash equivalents at end of reporting period1 | 13,249 | 23,823 | 39,463 |
1 A € 36 thousand change in the cash position arose as at 31 December 2019, reflecting changes in currency exchange rates.
1 October 2019 to 31 December 2019
With effect from 1 October 2019, BRAIN applied IFRS 16 "Leases" for the first time. The effects of the introduction of this standards on the financial reporting are presented below. Further adjustments to standards and new interpretations that are also mandatory for BRAIN AG for the first time from 1 October 2019 have no material impact on the financial position and performance of BRAIN AG. The company has not voluntarily applied accounting standards that have been published but are not yet mandatory.
On 13 January 2016, the International Accounting Standards Board (IASB) published its new accounting standard on lease accounting (IFRS 16 "Leases"). According to this standard, all leases and accompanying contractual rights and obligations are to be recognized on the lessee's balance sheet. For leases with a term of up to one year and low-value leases, the lessee has the option to apply accounting in accordance with current operating leases.
For all leases, the lessee recognizes a lease liability on its balance sheet for the obligation to render lease payments in the future. At the same time, the lessee capitalizes a right-of-use to the underlying asset corresponding to the present value of the future lease payments, including any directly attributable costs. During the term of the lease agreement, the lease liability is carried forward applying a financial-mathematical method similar to IAS 17 "Leases" regulations for financing leases, while the right-of-use is amortized on a straight-line basis over the term of the lease contract, which generally leads to higher expenses at the start of a lease term. The regulations on lease accounting on the lessor's side remain largely unchanged.
The new regulations are to be applied to the entire contract portfolio, whereby with some practical expedients the initial application is to be implemented either fully retrospectively, or with a cumulative effect in equity at the start of the year of first-time application, without restating the previous year's figures. IFRS 16 also includes a number of further regulations on reporting and
in relation to disclosures to be made in the notes to the financial statements, as well as on saleand-leaseback transactions.
The new regulations of IFRS 16 apply to BRAIN AG primarily as a lessee and in connection with leasing agreements for buildings and vehicles. The transition to IFRS 16 was made using the modified retrospective approach with recognition of the cumulative transition effect as at 1 October 2019. Comparative figures for the previous year were not adjusted.
On transition to IFRS 16, payment obligations from existing operating leases were discounted at the corresponding incremental borrowing rates. The interest rates were determined on the basis of the leases' remaining terms. The weighted average interest rate applied to discount the leases existing as at 1 October 2019 was 3.3%. The resulting present values were recognized as lease liabilities. The leased assets' rights-of-use were adjusted to reflect the amount of the lease liabilities, with directly attributable costs being capitalized. In determining the term of the leases, hindsight information was taken into account in determining the probability of extension or termination options being exercised.
BRAIN AG has made use of the following IFRS 16 practical expedients:
The following table shows the adjustments resulting from the first-time application of IFRS 16 in the consolidated balance sheet as of 1 October 2019.
| € thousand Opening balance sheet — IFRS 16 adjustments |
01.10.2019 |
|---|---|
| Property, plant, and equipment | |
| Land and buildings | 3,010 |
| Operating and office equipment | 54 |
| Rights-of-use | 3,064 |
| Total assets | 3,064 |
| Retained earnings | 62 |
| Non-current liabilities | |
| Leasing liabilities | 2,727 |
| Current liabilities | |
| Leasing liabilities | 275 |
| Total equity and liabilities | 3,064 |
Based on the payment obligation for operating leases (IAS 17) as at 30 September 2019, the opening balance sheet value of the lease liability as at 1 October 2019 was reconciled as follows:
| € thousand Opening balance sheet — reconciliation of leasing liabilities |
01.10.2019 |
|---|---|
| Payment obligations for operating leases as at 30.09.2019 (IAS 17) | 1,714 |
| Low-value leases | 33 |
| Extension options | 1,628 |
| Other | –92 |
| Undiscounted lease liabilities as at 01.10.2019 | 3,284 |
| Discounting | –270 |
| IFRS 16 leasing liabilities as at 01.10.2019 | 3,003 |
| Liabilities from finance leases as at 30.09.2019 (IAS 17) | 1,351 |
| Leasing liabilities as at 01.10.2019 | 4,354 |
Compared with the consolidated financial statements as at 30 September 2019, no changes have occurred in relation to segment reporting. The segment results are presented in the following overview.
| BioScience | BioIndustrial | Consolidation 3M 2019/20 | ||||
|---|---|---|---|---|---|---|
| € thousand | 3M 2019/20 | 3M 2018/19 | 3M 2019/20 | 3M 2018/19 | Reconciliation | Group |
| Revenue | 4,021 | 2,817 | 6,302 | 6,626 | 0 | 10,323 |
| Adjusted EBITDA |
–637 | –861 | 366 | 823 | 45 | –226 |
| Average for the reporting period 2 | 3M 2019/20 | FY 2018/19 |
|---|---|---|
| Total employees, of which | 273 | 281 |
| Salaried employees | 249 | 256 |
| Industrial employees | 24 | 25 |
Furthermore, BRAIN employs scholarship/grant holders (7, FY 18/19: 4), temporary employees (13, FY 18/19: 12) and trainees (6, FY 18/19: 7).
2 Excluding the members of the parent company's Management Board (3) and the subsidiaries' managing directors
The Management Board is not aware of any events of particular significance, or with considerable effects on the financial position and performance, after the end of the quarter on 31 December 2019.
Zwingenberg, 28 February 2020
The Management Board
Adriaan Moelker Manfred Bender Ludger Roedder
For questions please contact:
Investor Relations [email protected] Fon: +49 (0) 6251/9331–0
| 28.02.2020 | Publication of the quarterly statement as at 31.12.2019 (3M) |
|---|---|
| 05.03.2020 | Annual General Meeting, Zwingenberg |
| 29.05.2020 | Publication of the half-year report as at 31.03.2020 (6M) |
| 31.08.2020 | Publication of the quarterly statement as at 30.06.2020 (9M) |
This interim report might contain certain forward-looking statements that are based on current assumptions and forecasts made by the management of the BRAIN Group and other currently available information. Various known and unknown risks and uncertainties as well as other factors can cause the company's actual results, financial position, development or performance to diverge significantly from the estimates provided here. BRAIN AG does not intend and assumes no obligation of any kind to update such forward-looking statements and adapt them to future events or developments. The interim report can include information that does not form part of accounting regulations. Such information is to be regarded as a supplement to, but not a substitute for, information prepared according to IFRS. Due to rounding, it is possible that some figures in this and other documents do not add up precisely to the stated sum, and that stated percentages do not reflect the absolute figures to which they relate. This document is a translation of a document originally prepared in German. Where differences occur, precedence is given to the original German version.
Publication date: 28 February 2020
Biotechnology Research And Information Network AG Darmstädter Straße 34–36
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