Announcement PDF Annual Report — 2023 Cryosite Limited Appendix 4E Preliminary final report 1. Company details Name of entity: ABN: Reporting period: Previous period: Reporting Currency: Cryosite Limited 86 090 919 476 For the year ended 30 June 2023 For the year ended 30 June 2022 Australian Dollars 2. Results for announcement to the market $'000 Revenues from ordinary activities up 1.5% to 11,935 Profit from ordinary activities after tax attributable to the owners of Cryosite Limited up 3.3% to 1,409 Profit for the year attributable to the owners of Cryosite Limited 3.3% to 1,409 up Dividends On 24 August 2023 the Board of Cryosite Limited declared an unfranked dividend of 1.5 cents per share will be paid to shareholders for the year ending 30 June 2023. This compares with a 1 cent unfranked final dividend, paid to shareholders, for the year ending 30 June 2022. Commentary on the results to the market Results for the year ending 30 June 2023 reflect a strengthening of trading conditions in the second half of the financial year. ● ● ● ● ● ● Revenue of $ 11,935,000 from ordinary activities up 1.5%. Net Profit of $ 1,409,000 up 3.3%. Earnings per share of 2.89 cents, up 3.3%. 1.5 cents per share unfranked final dividend declared for the year ending 30 June 2023, up 50%. Cash and cash equivalents of $ 4,731,000 with an additional $ 1,000,00 invested in a term deposit. On a combined basis, up $390,000 from prior year’s cash on hand of $5,341,000. No bank borrowings. A further explanation of the result of the current period is set out in the Directors Report contained in the attached audit reviewed Annual Financial report 3. Net tangible assets backing Reporting period Cents Previous period Cents 5.86 3.97 Net tangible assets per ordinary security The calculation of net tangible assets excludes right-of-use assets, intangible assets, and lease liabilities. 4. Audit qualification or review The financial statements have been audited and an unmodified opinion has been issued. Cryosite Limited ABN 86 090 919 476 Annual Report - 30 June 2023 Cryosite Limited Contents 30 June 2023 Corporate directory CEO's message Directors' report Auditor's independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent auditor's report to the members of Cryosite Limited Shareholder information 1 2 3 5 18 19 20 21 22 23 51 52 55 Cryosite Limited Corporate directory 30 June 2023 Directors Steven Waller (Non-Executive Chairman) Andrew Kroger (Non-Executive Director) Nicola Swift (Non-Executive Director) Luis Antonio (Non-Executive Director) Company secretary Dray Andrea Notice of annual general meeting The details of the annual general meeting of Cryosite Limited are yet to be announced. Registered office 13a Ferndell Street South Granville NSW 2142 Tel: +61 2 8865 2000 Email: corporate@cryosite.com Principal place of business 13a Ferndell Street South Granville NSW 2142 Share register Link Market Services Limited Level 12, 680 George Street Sydney NSW, 2000 Sydney NSW, 2000 Auditor Mazars Risk & Assurance Pty Limited Level 12, 90 Arthur Street North Sydney NSW, 2060 Stock exchange listing Cryosite Limited shares are listed on the Australian Securities Exchange (ASX code: CTE) Website www.cryosite.com www.cryosite.com.au Corporate Governance Statement The Directors and management are committed to conducting the business of Cryosite Limited in an ethical manner and in accordance with the highest standards of corporate governance. Cryosite Limited has adopted and substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (`Recommendations') to the extent appropriate to the size and nature of its operations. The Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and identifies and explains any Recommendations that have not been followed, was approved by the Board of Directors at the same time as the Annual Report and can be found on the Company's website at: https://www.asx.com.au/markets/company/CTE 2 Cryosite Limited CEO's message 30 June 2023 CEO Message Dear Shareholders, It has been a busy and productive year for the Group, despite the challenges and uncertainties in the global market. We have • • • • consolidated our position as one of the leading clinical trials organisations in Australia, with a record number of orders handled by our facility. completed and successfully integrated technology into the business, enhancing our efficiency and quality of service. modernised our plant and equipment, added new secondary packaging room and cold chain storage and logistics capacity, and validated our facilities to meet the highest standards. maintained our cord blood storage business, with a growing number of clients renewing their contracts for annual and multi-year terms. These achievements reflect our commitment to excellence, innovation, and customer satisfaction. We continue to monitor and manage the challenges of inflation, rising interest rates, supply chain issues, and changing customer preferences. We are confident that we have the capacity, capability, and experience to overcome these challenges and seize new opportunities in the industry. We will continue to invest in our people, technology, and infrastructure to ensure our long-term growth and profitability. Outlook As the industry emerges from the pandemic era, it undergoes significant changes. These changes present an exciting opportunity for the Group to leverage its large client base, capacity, and capability to take advantage of new market dynamics. Cryosite can offer flexible and tailored solutions to meet the diverse needs and preferences of our customers. While we are not immune to the macroeconomic environment or geopolitical tensions, we have worked hard to safeguard against future challenges and will continue to operate with resilience. Together with our regulatory and technological experience, we are well placed to attract new business and accommodate industry expansion. We have invested in providing regulated secondary packaging services to the broader market, which will enhance our competitiveness and profitability. Moreover, we have a strong balance sheet that gives us the opportunity to seek out attractive strategic relationships that enhance our market position. With one of the largest single site liquid nitrogen tank farms in Australia, a skilled scientific team, and extensive specialised industry knowledge, that underpin Cryosite's strength in biological and clinical trials logistics we are positioned for industry growth. We expect these segments to generate more revenue and profit in the coming years as Australia continues to be a sought-after destination for pharma and biotech firms seeking high-quality clinical trials. Closing In closing, I would like to take this opportunity to thank our customers and clients for their loyal support as the sector transitioned from the pandemic era. On behalf of the Executive, I would also like to express my sincere thanks to each and every staff member of Cryosite, including the newly welcomed members this year, for your dedication, efforts, and commitment to meeting our customers’ needs and continuing our journey together. I would like to extend once more my thanks to our shareholders for your ongoing support. We will continue to remain diligent and focused to deliver upon our strategic objectives and deliver sustainable growth and shareholder value over the long term. 3 Cryosite Limited CEO's message 30 June 2023 I would like to extend my thanks to the Board, whose guidance, leadership, and direction have been invaluable in positioning the Group where it is today. John Hogg CEO 4 Cryosite Limited Directors' report 30 June 2023 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Cryosite Limited (referred to hereafter as 'Cryosite', the 'Company' or 'parent entity') and the entity it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were directors of Cryosite Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Steven Waller Andrew Kroger Nicola Swift Luis Antonio (appointed on 17 April 2023) Bryan Dulhunty (resigned on 28 February 2023) Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Earnings per share Basic earnings per share Diluted earnings per share Cents 2023 2022 2.89 2.89 2.79 2.79 Dividends On 24 August 2023 the Board of Cryosite declared an unfranked dividend of 1.5 cents per share (2022: 1 cent per share) will be paid as a final dividend for the year ending 30 June 2023. Principal activities During the financial year the principal continuing activities of the Group consisted of: ● Clinical trials and biological storage; and ● Cord blood and tissue storage. Details of the two operating segments are as follows: Clinical trials and biological storage Cryosite provides specialist temperature-controlled storage, logistics and distribution services, and associated process management services for clinical trials medicines, scheduled medicines and biological materials to the clinical trials, research and pharmaceutical industries. Cord blood and tissue storage Cryosite provides long term storage for cord blood and tissue samples. Review of operations The profit for the Group after providing for income tax amounted to $1,409,000 (30 June 2022: $1,364,000). Overview The record financial results for 2023 exceeds the previous record financial result for the year ended 30 June 2022 (prior corresponding period), continuing to build upon our long-term strategy and business turnaround. There has been a return of year-on-year positive momentum at Cryosite in the second half of 2023 as customers' trading patterns emerge from the aftermath of the pandemic. ● ● ● ● ● ● Revenue from ordinary activities increased by 1.5% to $11,935,000 in 2023 from $11,757,000 in 2022. Net profit of $1,409,000. An increase of 3.3% on prior year. Earnings per share: 2.89 cents. An increase of +3.3% on a fully diluted basis from prior year. $4,731,000 of cash and cash equivalents with an additional $1,000,000 in a longer duration term deposit as at 30 June 2023. Combined, this is an increase of $390,000 over the $5,341,000 in cash and equivalents held at 30 June 2022. The Group has no bank borrowings. Net cash from operations of $1,408,000 down by 44% from a record $2,524,000 in the 2022 year. Net tangible asset backing per share increased to 5.9 cents as at 30 June 2023, from 4.0 cents as at 30 June 2022. 5 Cryosite Limited Directors' report 30 June 2023 The Group experienced stronger trading conditions in the second half 2023, contributing to the Group reporting record revenues from ordinary activities of $11,935,000 (2022: $11,757,000) and net profit of $1,409,000 (2022:1,364,000). It is particularly pleasing to report a 1.5% growth in revenue from ordinary activities in 2023, as revenue in the prior corresponding period was exceptionally strong. The Group tightly controls costs but purposefully invests in facilities, systems and staff, to optimally position the Group for continued growth. A positive expansion in gross margins was offset with an increase in operational expenses, primarily driven by inflation. The Group delivered $1,409,000 net profit after tax, versus $1,364,000 in the prior corresponding year. The reported net cash from operations of the Group during 2023 was $1,408,000 (2022: $2,524,000) driven by increased working capital requirements. Within the year, timing differences which negatively impacted the first half, were not a factor during the second half. The Group has no debt facilities and continues to hold $4,731,000 cash on hand plus an additional $1,000,000, in a term deposit, with a duration of longer than three months at inception. The $5,731,000 of available cash to the Group as at 30 June 2023, is an increase of $390,000 over the $5,341,000 reported at 30 June 2022. The Board has declared a 50% increase in the final unfranked dividend to 1.5 cents per share, for 2023, following the resumption of a dividend payments in 2022 with a final unfranked dividend of 1.0 cent per share declared for that year. The net tangible assets per ordinary share have been increased by 1.9 cents, from 4.0 cents on 30 June 2022 to 5.9 cents on 30 June 2023. After several years of high investment in capital expenditure, the Group is in a position to leverage these assets, resulting in a moderate capital investment of $334,000 in 2023. Segment performance ● Clinical trials and biological storage Revenue: Trading in this segment remains buoyant and experienced strong monthly demand through our facility in 2023. Revenue increased to $9,599,000 in 2023, from $9,297,000 in prior corresponding period, an increase of 3% (up $302,000). Revenue growth was driven by existing customers increasing their clinical trial activities, new products from existing clients, and on-boarding of new customers. Expenses: The cost of providing services in this segment increased to $5,376,000 in 2023, from $5,258,000 in the prior corresponding period, a small increase of 2% resulting from inflationary pressures. Profit: Net profit before tax from the segment increased to $4,223,000 in 2023, from $4,039,000 in the prior corresponding period, an increase of 5% or $184,000. This profit growth is primarily driven by growth in volumes and efficiencies, which helped offset increases in operational expenses primarily driven by inflation. ● Cord blood and tissue storage Cryosite continues to securely store approximately 17,000 cords of which the large majority are under longterm contract. It should be noted that the cord blood database of approximately 17,000 customers has no carrying value on the balance sheet. Revenue: Revenue from the segment declined by $123,000 to $2,336,000 in 2023. Of the $2,336,000, $397,000 was revenue generated in the current financial year and $1,939,000 related to revenue recognised from historical long term contracts. (Refer note 4 and note 5). 6 Cryosite Limited Directors' report 30 June 2023 Expenses: Tight operational controls and increased automation of processes, along with a reduction in deferred costs, led to a 2% ($30,000) decline in expenses to $1,681,000 in 2023 from $1,711,000 in the prior corresponding period. Profit: Net profit before tax from the segment declined to $655,000 in 2023, from $749,000 in prior corresponding period, a decrease of 13% ($94,000) in line with the recognition of revenue from contracts with customers per the details in note 5. Cashflow Cash on hand as at 30 June 2023 was $4,731,000, in addition to which the Group holds a $1,000,000 investment in a term deposit with a duration in excess of three months at inception. Combined this provides the Group with $5,713,000 of internal available cash (2022: $5,431,000), an increase of $390,000 in 2023. For the year ended 30 June 2023 net cash from operating activities was $1,408,000 (2022: $2,524,000), after a year-on-year increase in working capital requirements. Within the year timing differences were not a factor in the second half, which had impacted the first half. Cashflow used in investing activities was $1,223,000 reflecting fixed asset purchases of $301,000 (2022: $863,000) and an investment of $1,000,000 in a term deposit as part of our short-term cash management strategy, partially offset by a rise in interest received. Cashflow used in financing activities was $796,000 which include monies paid for the lease of our facility and the dividend payment of $488,000 (2022: cash flow used in financing activities was $181,000 as lease payments were partially offset by receipt of $117,000 in option proceeds). Outlook Cryosite provides highly regulated specialist storage and logistics solutions to the clinical trials and biologicals segments of the broader pharmaceuticals market. Whilst the growth strategy is expected to continue to deliver an increase in revenue, inflationary pressure is increasing the cost of consumables, transport, energy and talent. Continued re-engineering of processes and increased automation will offset increases in some of those costs through increased productivity. The Group has balance sheet strength to take advantage of strategic opportunities as they arise and to invest in additional capacity to accommodate new products from existing and new customers. The Group continues to drive high standards of quality and compliance and embraces new opportunities in growing technologies, which positions the Group favourable in this highly regulated segment within which we operate. The Board would like to thank all the Group's stakeholders, including our dedicated management and employee team, our customers, clients, suppliers, partners, and shareholders for their ongoing support of Cryosite. Environmental, social and governance Cryosite is committed to developing energy and greenhouse gas management systems to reduce our Greenhouse Gas Emissions and to using sustainable technology. Material business risks The following is a summary of material business risks that could adversely affect our financial performance and growth potential in future years and how we propose to mitigate such risks. 7 Cryosite Limited Directors' report 30 June 2023 Macroeconomic Cryosite occupies a leading position in Australia, providing highly regulated specialist storage and logistics services for pharmaceutical and bio-tech clinical trials. We manage the entire clinical trial supply chain from importation, receipt, specialised ambient, cold, frozen, and liquid nitrogen storage for temperature-sensitive products, distribution and reverse logistics management. Having some of the world’s largest pharmaceutical companies as clients mitigates macroeconomic risk, but the Group is still impacted by external conditions it cannot control, such as inflation and supply chain constraints. Our smaller Cord Blood business offers a storage service which is discretionary for many customers. The division’s financial performance can be impacted by current and future economic conditions which it cannot control, such as increases in interest rates and inflation. The Group stays abreast of these conditions, focuses on its internal debtor controls and diversifies its Cord Blood customer base to help manage these risks. Regulatory compliance The Group’s purpose-built, modern facility is licensed by the Therapeutic Goods Administration (TGA) of Australia and is Good Manufacturing Practice (GMP) certified to support the specialised needs of highly regulated, temperature-sensitive products. We take our quality obligations and responsibilities seriously. Cryosite maintains accreditations, has thorough knowledge of regulatory systems and utilises best-in-class management systems to ensure our quality processes. Cryosite employs regular and extensive audits to mitigate our risk and ensure our storage facilities meet TGA and our customers’ standards. Additionally, the Group maintains sufficient internal controls to ensure continued compliance with its regulatory obligations as well as all Australian laws and regulations. Privacy, Cybersecurity and IT infrastructure The Group handles personal and sensitive information. It is dedicated to keeping its workforce appropriately trained and updated with privacy and data breach training and initiatives. Throughout the financial year, the Group issued training to all staff in relation to privacy, cybersecurity and data breaches. Having invested heavily in this area in recent years, the Group continues to work with an external consultant to augment its vigilance regarding cybersecurity and to aid the optimal performance of its IT infrastructure. The Group regularly reviews its cybersecurity resilience and constantly monitors for alerts issued by the Australian Cyber Security Centre. Work, health and safety (‘WHS’) The Group has a zero-risk tolerance for serious safety incidents. The Group deploys a continuous improvement process to its WHS practices, emphasising its established safety culture throughout the organisation, and providing scheduled training for the workforce. Operating risks ● Supply Chain disruption. The Group is part of a global supply chain facilitating the conduct of clinical trials in Australia. Disruption to this supply chain, as we saw during Covid, brings both challenges and opportunities requiring the Group to remain agile in its response. ● Commercial Partners: The Group is aware of the importance of global pharmaceutical and bio-tech companies within its Clinical Trials division and mitigates risk through consistently high levels of customer service, the attraction of new clients, and expansion of its licenses and services. ● Competition: The Group is vigilant regarding the possibility of a new market entrant or a change in the delivery model for Clinical Trials in Australia. It mitigates this risk by holding a number of licenses and certifications, investing in its facilities, services and people and by remaining closely connected to its customers. The Group continually invests in its brand and enjoys a high reputation in Australia and internationally. Employees and diversity As at 30 June 2023, the Group employed 25 full-time equivalent employees (2022: 22 employees). We are proud that our staff have a rich mix of backgrounds, experiences and perspectives, giving the Group a unique culture and a competitive advantage. The Group strives to create an inclusive environment that empowers everyone to contribute and make a real difference. This enables our teams to support the success of our clients, and helps our people reach their full potential. 8 Cryosite Limited Directors' report 30 June 2023 The Group recognises the value of diversity in the workplace. With over ten different ethnic backgrounds, our staff create a culturally and linguistically diverse workplace. There are numerous religions and cultures. Where possible the Group endeavours to offer flexible work practices. Work life balance is seen as a key retention tool. The Group is committed to providing equal opportunity for all its staff. An overall staff mix of 64% females and 36% males, is also reflected in the direct reports to the CEO with 67% female. Cryosite is committed to providing a workplace free from any form of harassment, bullying and discrimination. 30 June 2023 All employees Male Female Total 9 16 25 Management Team lead Age range 3 4 7 2 1 3 Board of Directors 31-68 29-62 3 1 4 30 June 2023 All employees % Male Female Total 36 64 100 Management Team lead % % 43 57 100 67 33 100 Average age Board of Directors % 47 41 75 25 100 Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group. Environmental regulation The Group provides a range of services that require compliance with legislation and regulations administered by government authorities and statutory bodies, including the Therapeutic Goods Administration (TGA), the Office of Drug Control, the Australian Government Department of Agriculture Fisheries and Forestry and the New South Wales Department of Health. The Group holds and maintains a Good Manufacturing Practice(GMP) Certification. Additionally, the Group must comply with environmental guidance within the quality system requirements of many of its customers. Cryosite has a Group-wide quality management system to ensure that it meets or exceeds the requirements of all these interests. There have been no significant known breaches of Cryosite's license conditions or any regulations to which it is subject. The Group, to the best of its knowledge, is not subject to any specific environmental regulations. 9 Cryosite Limited Directors' report 30 June 2023 Information on directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Steven Waller (appointed 10 March 2022) Non-Executive Chairman B Pharm (Sydney), MBA (Macq), GAlCD. Steven Waller was appointed as a Non-Executive Director of Cryosite Limited as of 19 November 2021. On 10 March 2022, Steven replaced Bryan Dulhunty as Non-Executive Chairman. Steven has extensive experience with large pharmaceutical companies, both in Australia and internationally. In Australia Steven held senior management roles at Sigma Healthcare Limited and Aspen Pharmacare Australia Pty Limited. Between 1996 and 2007, Steven held several international roles in sales, marketing and general management with Johnson and Johnson in the Middle East, Europe, the US and Asia-Pacific. Steven also owns a consulting business which provides services to the pharmaceutical industry and the broader health care industry in Australia, including government agencies. Steven is a registered pharmacist, has Master of Business from Macquarie University, and is a graduate of the Australian Institute of Company Directors. None None Member of Nomination and Remuneration Committee, Member of the Audit and Risk Committee until 17 April 2023 None None Andrew Kroger (appointed 21 November 2011) Non-Executive Director BEc., LLB (Monash) Andrew Kroger had a career in stockbroking, law and general management including two years running Forsayth Group in 1990 which was Australia’s ninth largest gold producer at that time. Andrew is the owner of Process Wastewater Technologies LLC, a company with its major business being in wastewater in the United States. Andrew has a Bachelor of Economics and a Bachelor of Laws from Monash University. Andrew was appointed to the Cryosite Limited board in November 2011. None None None 22,543,702 ordinary shares None Nicola Swift (appointed 31 October 2016) Non-Executive Director BA (Mod) Legal Science (TCD), MA (TCD), CFA, GAICD. Nicola Swift has an extensive background in the international investment management and securities industry as a research director, portfolio manager and equity analyst in London, Sydney and Boston with various global institutional investors. Nicola is a Chartered Financial Analyst, a graduate of the Australian Institute of Company Directors and holds an Honours Law degree and a Master of Arts from Trinity College Dublin. Nicola was appointed to the Board on 3 November 2016. None None Chair of the Remuneration and Nominations Committee and Chair of Audit and Risk Committee None None 10 Cryosite Limited Directors' report 30 June 2023 Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Luis Antonio (appointed on 17 April 2023) Non-Executive Director BA (UNSW), BA (CSU), MBA (Curtin), CPA, GAICD. Luis Antonio brings more than 20 years’ experience in the pharmaceutical and medical device industries to this role. He is an accomplished finance professional who, over the last 6 years, has held senior sales, marketing, and general management roles in international medical device companies. His experience and expertise complement Cryosite’s logistics and storage business. Luis has professional interests in operations and finance excellence, new information systems and analytics, commercial collaboration and business strategy. Previously, Luis has held positions as Head of Finance for Johnson & Johnson Medical Asia-Pacific, Vicepresident of International Finance at Wright Medical, Vice-president Sales and Marketing Europe, MEA and Canada at Wright Medical, and Vicepresident Asia-Pacific and MEA at Wright Medical. Luis is currently Area Vice-president Asia Pacific for Paragon28. None None Member of Audit and Risk Committee from 17 April 2023 None None 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Dray Andrea (appointed on 18 January 2023) Dray is a member of the Company Matters Pty Ltd team (part of Link Group, including Link Market Services share registry). Kim Bradley-Ware (appointed on 11 January 2022; resigned on 18 January 2023) Kim is a member of the Company Matters Pty Lt