DGAP-News: Vita 34 AG: Special items reflected in significant decline in earnings despite operational success in fiscal 2021

Special items reflected in significant decline in earnings despite operational success in fiscal 2021

- Revenues of EUR 28.4 million after first-time consolidation of PBKM FamiCord up 44.5 percent on previous year as of 8 November
- EBITDA after special effects down significantly at EUR 0.8 million
- Core operating business weakened at the end of the year as a result of the Omicron wave
- Significant increase in cash and cash equivalents as a foundation for new expansion initiatives

Leipzig, 30 April 2022 - Vita 34 AG (ISIN: DE000A0BL849; WKN: A0BL84), Europe's leading cell bank and the third largest in the world, closed the year 2021 with a towards the end of the year purely operationally weakened, but nevertheless overall positive business development. Against the background of the merger with PBKM FamiCord, the Group grew to a new magnitude in terms of revenues and earnings in the past fiscal year. A number of non-recurring special effects were reflected in a negative earnings performance at the bottom line.

Group revenues increased by 44.5 percent to EUR 28.4 million (2020: EUR 19.7 million), with the results of the PBKM FamiCord subgroup consolidated for just under two months. Against the backdrop of the Omicron wave, which reached new highs at the end of 2021, the positive development of the first nine months of 2021 could not be fully continued in the fourth quarter. Both Vita 34 and PBKM FamiCord experienced an overall slowdown in new customer business. Earnings before interest, taxes, depreciation and amortization (EBITDA) were down significantly by 83.5 percent to EUR 0.8 million (2020: EUR 4.9 million). Although the core operating business of the combined company made a clearly positive contribution to earnings at the EBITDA level of EUR 7.3 million. However, a number of special effects caused countervailing trends to a considerable extent.

The costs reported for legal and professional advice, the preparation and implementation of the capital increase, and the share exchange including squeeze-out totaled EUR 2.7 million. At the same time, at the level of the PBKM FamiCord subgroup, additional expenses in the amount of EUR 1.0 million in the consolidation period in the two new expanding areas had a negative impact on earnings in the consolidation period.

However, the most significant effect results from the harmonization of accounting under IFRS 15 (revenue recognition). For the PBKM subgroup, this leads to a significantly lower reporting of revenue and earnings contributions. With the application of the Vita 34 accounting guidelines, which, according to current prevailing opinion and practice in Germany, must be strictly oriented to the so-called legal principle for the interpretation of IFRS 15, the revenue recognition for the PBKM subgroup had to be adjusted both for the past and the current business. According to this principle, revenue may only be recognized at the beginning of the customer contract for a sufficiently secure terms and conditions of the contract with the clients. As a result, revenues and earnings previously recognized in the first year of the contract are recognized pro rata temporis in later periods over the term of the contract. Due to the retroactive recognition of this effect, which is also required for the initial consolidation of PBKM, additional positive revenue and earnings contributions will be recognized in future periods. The effect on earnings from the harmonization of accounting in accordance with IFRS 15 amounts to EUR -1.6 million in the financial year 2021 and has no impact on liquidity.

Against the background of the aforementioned effects, earnings before interest and taxes (EBIT) decreased significantly to EUR -3.1 million (2020: EUR 2.0 million). The result for the period amounted to -3.9 million EUR (2020: 1.4 million EUR)

The key figures for business development are as follows:

The fundamentally positive operating business development over the year as a whole was reflected in an operating cash flow of EUR 2.7 million (2020: EUR 3.5 million). Although this also declined by 22.8 percent, the decrease was considerably less than the decline at the earnings level. Against the background of the cash acquired in connection with the business combination with PBKM FamiCord, cash and cash equivalents increased significantly and amounted to EUR 33.3 million at the end of 2021 (31 December 2020: EUR 10.4 million). Its stable financial foundation provides the company with an optimal basis for future accelerated growth in its core business as well as in the new expanding business areas of cell and gene therapies (incl. CAR-T) and CDMO, i.e. the service business for established pharmaceutical companies worldwide.

"It cannot be denied that the merger of Vita 34 and PBKM FamiCord is accompanied by a considerable growth pain," explains Jakub Baran, CEO of Vita 34 AG. "However, as by far the largest cell bank in Europe, we now have completely new opportunities to shape our industry, establish new products and services, and thus position Vita 34 much more broadly and potently. We are more than certain that our investments today will be reflected in an even more attractive market position for Vita 34 in the future and will establish the company in new, even far more attractive markets."

The current economic environment, particularly with regard to Russia's attack on Ukraine and the effects of the pandemic situation, has led to a downward trend in new customer business in the course of the new fiscal year 2022 to date. While around the turn of the year - the peak of the Omicron wave - it was primarily negatively impacted by COVID-19, in the last weeks mainly war-related uncertainties led to a change in customer demand, which is expected to result in an overall weaker development of Vita 34 in 2022. The company plans to dynamically adjust marketing and sales costs in 2022 depending on market developments. However, the research and development projects, where significant progress is expected, will continue with undiminished intensity in 2022.

Accordingly, the Management Board assumes that Vita 34 should be able to show more attractive growth rates in the medium and long term. The current financial year 2022 will therefore essentially have the character of a transition year, in which a main focus will be placed on integrating all companies of the new group into the Group and thus preparing the company for the next growth spurt.

With regard to the effects of the harmonization of accounting in accordance with IFRS 15 described above, the Management Board expects that, with appropriate adjustments to the terms and conditions of customer contracts, it will again be possible to recognize a greater portion of revenue from newly concluded contracts with a longer term from the second half of the year onwards.

Based on a current assessment against the backdrop of the tense economic environment, the Management Board accordingly expects consolidated revenues of between EUR 68 and 75 million for the full year 2022. Despite initial cost-cutting measures already initiated - mainly in the areas of marketing, production, and from the post-merger integration process - the Management Board currently anticipates a significant decline in earnings. In this context, it should be emphasized that the ongoing initiatives in the cell and gene therapy area as well as in the CDMO area will have a significant negative impact on the expected financial results. Accordingly, earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be in the range of EUR -2 to 1 million. The estimate is based on a constant exchange rate of the euro to the Polish zloty and other currencies (HUF, RON, TRY, GBP) compared to 31 March 2022. Effects from potential acquisitions considered in 2022, including resulting transaction costs, as well as other non-recurring effects are not included in the forecast. With regard to the effects of the harmonization of accounting in accordance with IFRS 15 described above in the PBKM subgroup segment and in section 3 of the notes to the consolidated financial statements, the Management Board assumes that, with appropriate adjustments to the terms and conditions of customer contracts, it will again be possible to recognize a greater volume of revenue from newly concluded contracts at the beginning of the contract from the second half of the year. A corresponding volume of revenues has been assumed for the forecast.

Due to the difficult economic environment, the Management Board expects a moderate decline in sales and EBITDA for Vita AG itself.

The Management Board of Vita 34 AG will be available to institutional investors, analysts and representatives of the press on 4 May at 11:30 a.m. in a video conference for additional explanations of the business development. Registration for this takes place by e-mail via the Investor Relations departments (ir@vita34.de).

Contact:
Ingo Middelmenne
Investor Relations
Vita 34 AG
Phone: +49 (0341) 48792 - 0
Mobile: +49 (0174) 9091190
Email: ingo.middelmenne@vita34.de

Company profile

Vita 34 was founded in Leipzig in 1997 and is today by far the leading cell bank in Europe and the third largest worldwide. As Europe's first private cord blood bank and a pioneer in cell banking, the company has since offered collection logistics, processing and storage of stem cells from umbilical cord blood, umbilical cord tissue and other postnatal tissue as a full-service provider for cryopreservation. Based on the expansion of the business model in 2019, Vita 34 intends to also offer the storage of immune cells from peripheral blood as well as stem cells derived from adipose tissue in the future. Endogenous cells are a valuable starting material for medical cell therapy and are kept alive in vapors of liquid nitrogen. Customers from around 50 countries have already provided for their family's health with more than 850,000 units of stored biological materials at Vita 34.