In its 1H21 results, SourceBio International (SBI) told investors that it has seen ‘considerable growth’ after revenues soared by 252% in value to £37.3 million from £10.6 million in 1H20.
Throughout the six months to 30 June 2021, gross profit rose by 252% to £16m from £4.6m in 1H20 while adjusted EBITDA increased by 570% to £11.2m compared to £1.7m in 1H20.
Over the period, SourceBio reported a substantial increase in adjusted earnings per share (EPS) which rose to 10.7p per share compared to a loss of 0.2 pence per share in 1H20 while basic and diluted EPS also increased to 10.7p per share from a loss of 8.0 pence per share.
The Company said cash generated from operations increased by 747% to £11.4 million compared to £1.3m in 1H20, with strong cash conversion, exceeding adjusted EBITDA.
Operationally, in 1H21 a total of 613,987 RT-PCR tests were completed making a cumulative 1,372,203 completed since the commencement of COVID-19 testing services in May 2020.
In particular, the Company stated that Cellular Pathology services returned to pre COVID-19 levels of business in the second quarter of 2021, bringing all core business units back to normal levels of activity and showing growth in the second quarter versus the first quarter.
Due to the demand for Cellular Pathology services and as the recovery of elective surgeries gathers pace, SourceBio said momentum continues in its Healthcare Diagnostic business unit.
The Group highlighted that it continues to respond to ‘a very fast-moving COVID-19 testing marketplace’ and that it has continued to offer PCR testing services in the first half, at scale.
Post-period, the ramp-up in RT-PCR COVID-19 testing has continued since the half year-end as the demand had increased following the opening up of travel and relaxation of restrictions.
In September alone, PCR testing throughput was around 14,000 tests per day, compared to an average of 10,824 tests per day in August and an average of 6,868 tests per day in July.
The Company highlighted that this compares to June 2021 PCR testing throughput which averaged 3,673 tests per day and H1 2021 PCR testing which averaged 3,392 tests per day.
Jay LeCoque, Executive Chairman of SourceBio International, commented: “As we reported in July, the Group has looked forward to capitalising on further opportunities in the second half, in particular driven by travel related COVID-19 testing and we have been delighted to see increased PCR testing throughput materialising in the third quarter of 2021.”
While peak testing volumes have hit approximately 19,300 tests per day to date, the changes in the travel guidelines announced on 17 September 2021 are expected to materially reduce the throughput and revenues generated from PCR testing, the Company informed investors.
Despite this, the Company said it is “well positioned to accelerate the rollout of lateral flow technology following the signing of two commercial deals, with Excalibur Healthcare and Everything Genetic, which is expected to mitigate some of the reduction in PCR testing.”
Notwithstanding the anticipated reduced levels of PCR testing in the latter months of the year, the Group anticipates the delivery of very strong revenue, earnings and cash generation and the Board expects revenues to grow by approximately 70% on 2020 revenues of £50.7m.
In addition, the Company highlighted to investors that its three other business units are ‘very well positioned’ in their respective markets and have benefited from investment and are poised for delivering attractive growth going forward, in the current year and beyond.
“Our search for complementary M&A targets to drive further growth in revenues and earnings is progressing well. We anticipate a very busy fourth quarter of 2021 and financial year 2022."
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Since the onset of the pandemic, SourceBio International has pivoted to broaden its infection disease testing business unit to prepare for peak earnings from travel related COVID testing. As a result, it is focused on expanding its existing capacity as well as acquiring further labs.
Addressing shareholders back in June 2021, the company stated that the indicated demand of travel related testing, if materialised, would heavily weigh FY21 earnings to 1H21.
The Group said it expects to continue to see interest in its PCR testing services, particularly for clinical purposes, to address positive results from lateral flow testing, and for out-bound travel, the “Fit to Fly scheme” and for Day 2 and Day 8 tests for arrivals from red list countries.
As was contemplated at IPO, the cash generated from COVID-19 testing to date, plus the further cash generation anticipated, as well the COVID-19 related working capital that will ultimately unwind into cash, all provide the Group with an exceptionally strong balance sheet and the wherewithal to rapidly accelerate the growth of the core business through acquisition.
SourceBio International is an international provider of laboratory services to clients in the pharmaceutical industry, the NHS and to private healthcare providers. The Group is headquartered in Nottingham, with additional facilities in the UK, Ireland and the US.
The company saw a positive start on its first day of trading on AIM, adding around £8m to its initial £120m market capitalisation while the £35m raised at 162p is intended to be used by it to scale up COVID-19 testing capacity as well as paying off shareholder and bank loans.
“We are delighted by the strong support we’ve received from institutional investors. Our IPO on AIM allows us to significantly increase our COVID-19 testing capacity, accelerate earnings growth in our core business and execute on potential M&A opportunities,” said LeCoque.
He said at the time of the IPO: “It’s an exciting time for our business and we look forward to executing on our ambitious growth plans and delivering value to our shareholders.”
In November 2020, SourceBio unveiled that its funds from its IPO were enabling it to further scale its COVID-19 testing services to deliver against expected increases in future testing.
SourceBio previously forecasted total revenue of around £50m (FY19: £21.2m) and EBITDA of c.£14m (FY19: £3.0m) for the year ending 31 December 2020, with the vast majority of this increase in expected earnings driven by the contribution of COVID-19 testing revenues.
The group said in November 2020 that it had been accepted into the Increasing Capacity Framework Agreement for cancer testing services to NHS England, designed to reduce the significant backlog of elective surgeries impacting the NHS due to the pandemic which is expected to support the growth of the Healthcare Diagnostics business unit in 2021.
SourceBio entered into a strategic commercial partnership with Oxford Nanopore Technologies to offer a COVID-19 testing solution to corporate customers at scale via its own lab facilities. Last month, the group entered into a supply agreement to provide ‘state of the art’ products and lab services to an unnamed high street retail and pharmacy group.
Since December 2020, SourceBio has been supplying COVID-19 antigen RT-PCR testing services to the DHSC. It is currently awaiting a potential formal award under Public Health England's National Microbiology Framework in relation to further COVID-19 testing services.
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