Ergomed Interim Results 2015

RNS Number : 4986A

Ergomed plc

29 September 2015

 

Ergomed plc: Unaudited Interim results for the six months ended 30 June 2015

Strong first half trading performance - revenues up 85% and EBITDA up 66%

Strong backlog of signed contracts

Five co-development projects on track

New co-development deal signed with Dilaforette for orphan drug

Expansion into post-marketing service sector through Sound Opinion acquisition

Opened Asian office in Taipei

Guildford, UK - 29 September 2015: Ergomed plc, ('Ergomed', AIM: ERGO) a profitable UK-based company dedicated to the provision of specialised services to the pharmaceutical industry and the development of new drugs, today announces its interim results for the six months ended 30 June 2015.

KEY HIGHLIGHTS

Unaudited Financial Highlights

Ergomed plc

·      H1 2015 revenues up 85% to £14.5 million from £7.8 million in H1 2014

·      H1 2015 gross profit doubled to £4.2 million from £2.1 million in H1 2014

·      *H1 2015 EBITDA up 66% to £1.5 million from £0.9 million in H1 2014

·      H1 2015 adjusted EBITDA of £1.7 million excludes non-recurring costs of £0.2 million relating to M&A activities and the expense of establishing the new Taipei office

·      Net assets of £15.9 million (H1 2014: £2.6 million; 31 December 2014: £15.3 million)

·      Cash and cash equivalents of £4.9 million as of 30 June 2015 (H1 2014: £1.6 million; 31 December 2014: £4.6 million)

·      Contribution in kind to co-development projects increased to £1.9 million in H1 2015 from £1.2 million in H1 2014

Unaudited Pro Forma** Financial Highlights

·      **Pro forma revenues increased by 39% in H1 2015 to £14.5 million (H1 2014: £10.4 million)

·      **Pro forma gross profit up 27% to £4.2 million in H1 2015 from £3.3 million in H1 2014

*EBITDA is earnings before tax, interest, depreciation, amortisation and share-based payment charge

**Pro forma numbers for H1 2014 are adjusted to include PrimeVigilance (PV), which was acquired in July 2014, in both periods and also adjusted for certain pre-IPO related party costs

Operational Highlights

·      Contracts with a value of £15.0 million signed for clinical studies and pharmacovigilance projects in H1 2015 (£11.2 million signed in H1 2014) - strong backlog of awarded contracts of approximately £60 million at the end of August 2015, in line with expectations

·      Medical Information business expanded in May 2015 through the acquisition of Sound Opinion Limited

·      Signed first orphan disease co-development agreement with Dilaforette for Phase II clinical development of sevuparin in patients with sickle-cell disease (SCD)

·      Three Phase III oncology co-development portfolio assets progressing as planned through on-going studies. Potential to receive over $100 million in future revenues if successful. Two of these Phase III reporting pivotal results in 2016 with Phase III interim analyses expected in Q4 2015

·      One Phase II clinical study also due to report results in 2016

·      Expanded presence in Asia with opening of office in Taiwan. This is in line with the Company's strategic growth plan set out at the IPO and the Taipei base will be used as a first step for expansion into Asia

Post-Period End Highlights

·      Strengthened Board with the appointment of Andrew Mackie as Chief Business Officer

·      Placing of 3.96 million founder shares at 170p per share in July 2015 with institutional shareholders in London and Europe and increasing free float to 37% from 27%

Commenting on the results, Miroslav Reljanovic M.D., Chief Executive Officer of Ergomed plc, said:

"Ergomed has delivered excellent results for the first half of 2015 and is well positioned for the rest of the year and into 2016. We have made very good progress delivering on some of our key strategic aims whilst achieving year-on-year growth.

"Our co-development portfolio is maturing and we are looking forward to our partners' late stage clinical data readouts in 2016. We continue to believe that significant value can be generated through focusing our drug development capability on co-development partnerships and as the portfolio expands, Ergomed will be in a position to place more emphasis on this element of the business. Certainly, we are seeing good opportunities in this sector and as one of the few companies taking a shared-risk approach, expect to be one of the leading beneficiaries of this trend going forward.

"The synergistic acquisition of Sound Opinion is in-line with our strategy to build our post-marketing services business, thereby generating strong recurring profits and a high value, focused business.

"Overall, we continue to believe that our hybrid model of a profitable, healthcare services business, combined with managed investment in an exciting co-development portfolio, has the potential to deliver significant value while balancing the risks over the next few years."

For further information, please contact:

Hume Brophy - for UK enquiries

Mary Clark, Supriya Mathur and Hollie Vile

Tel: + 44 203 440 5654

[e-mail]

Stifel

NOMAD/Broker to the Company

Jonathan Senior

Tel: [phone]

MC Services - for Continental European enquiries

Anne Hennecke

Tel: [phone]

[e-mail]

About Ergomed plc

Founded in 1997, Ergomed plc is a profitable UK-based company, providing drug development services to the pharmaceutical industry and has a growing portfolio of co-development partnerships. It operates in over 40 countries.

Ergomed provides clinical development, trial management and pharmacovigilance services to over 60 clients ranging from top 10 pharmaceutical and generics companies to small and mid-sized drug development companies. Ergomed successfully manages clinical development from Phase I through to late phase programmes.

Ergomed has wide therapeutic expertise, with a particular focus in oncology, neurology and immunology and the development of orphan drugs. Ergomed's approach to clinical trials is differentiated from that of other providers by its innovative Study Site Management model and the use of Study Physician Teams, resulting in a close relationship between Ergomed and the physicians involved in clinical trials.

As well as providing high quality clinical development services, Ergomed is building a portfolio of co-development partnerships with pharma and biotech companies. Here Ergomed shares the risks and rewards of drug development, leveraging its expertise and services in return for carried interest in the drugs under development. - a low risk investment model for potential high returns. For further information, visit: http://ergomedplc.com.

Global pharmacovigilance and medical information services are provided through its group company PrimeVigilance. www.primevigilance.com

Forward Looking Statements

Certain statements contained within the announcement are forward looking statements and are based on current expectations, estimates and projections about the potential returns of Ergomed plc ("Ergomed") and industry and markets in which Ergomed operates, the Directors' beliefs and assumptions made by the Directors. Words such as "expects", "anticipates", "should", "intends", "plans", "believes", "seeks", "estimates", "projects", "pipeline" and variations of such words and similar expressions are intended to identify such forward looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties, outcomes of negotiations and due diligence and assumptions that are difficult to predict, qualify or quantify. Therefore, actual outcomes and results may differ materially from what is expressed in such forward looking statements or expectations. Among the factors that could cause actual results to differ materially are: the general economic climate, competition, interest rate levels, loss of key personnel, the result of legal and commercial due diligence, the availability of financing on acceptable terms and changes in the legal or regulatory environment.

These forward-looking statements speak only as of the date of this announcement. Ergomed expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Ergomed's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.

Interim Management Report

Introduction

The Group has two complementary businesses: Ergomed and PrimeVigilance.

Ergomed is a well-established, global, clinical research business providing services to the pharmaceutical and biotechnology industry. Ergomed also uses this drug development platform to run its co-development business - a growing portfolio of drug development partnerships with pharmaceutical and biotech companies. Under these agreements, Ergomed provides the same clinical research services, while contributing significantly to reduce the total cost of the clinical trial to the partner, and in return will receive a share of any future proceeds generated from the commercialisation of the partnered drug asset. Such proceeds can be generated from shorter term licensing deals and milestones and/or longer term product sales or royalties.

PrimeVigilance is a fast growing post-marketing pharmacovigilance and Medical Information (MI) business that works with pharmaceutical, specialty pharma, generic and also biotech companies assisting them in managing the global safety of their pharmaceutical drug products and late stage drug developments.

The Group has a clear growth strategy to become one of the leading global providers for:

·      Post marketing services e.g. drug safety/pharmacovigilance and Medical Information

·      Co-development partnerships

·      Rare disease/orphan drug development services

The acquisition of Sound Opinion in May 2015 has added to the focus on post-marketing services and the Ergomed Board are looking to continue to develop the range of post-marketing services.

Business Update

We are pleased to report strong progress in the first half of 2015 and are excited by the continued prospects for expansion and we remain on track with the key strategic plans set out during our IPO on the AIM market in July 2014.

Global demand for quality drug development services remains strong and Ergomed is benefiting from this demand. In addition, the buoyant fundraising environment for biotech in the US has increased the need for clinical trial related services. Ergomed has significant experience of working with such biotech companies and has a track record of being able to tailor its full service capability to meet biotech clients' particular requirements. Ergomed is also in the unique position of offering co-development partnerships and is committed to building its portfolio of co-development assets and delivering significant clinical data, thereby creating shareholder value in the next few years.

In the first half of 2015 Ergomed also demonstrated its commitment to geographic expansion with the opening of its first office in the region in Taiwan. This investment is a key element of the Company's strategic growth plan set out at the IPO and the Taipei base will be used as a hub for expansion into Asia. Costs have been incurred in establishing the office in 2015 and it will begin servicing clients and generating revenue in the near future.

The Board was very pleased to acquire Sound Opinion in May 2015. The business is well established and specialised in the provision of Medical Information services related to marketed drugs - post-marketing services. The customers for these services are largely pharmaceutical or specialty pharma companies which offers a good diversification from the historical focus on biotech companies carrying out clinical trials.

Sound Opinion will be combined with Ergomed's existing post-marketing business - PrimeVigilance. The acquisition, which is expected to be accretive in the first year, was paid for from existing cash reserves with an earn-out based on future performance. In line with Ergomed's acquisition strategy, Sound Opinion is a strong brand and has been trading profitably for over 18 years, providing high quality outsourced MI services to pharma and generic companies selling medicines in the UK and Ireland.

Ergomed was also pleased to announce the appointment of Andrew Mackie to the Ergomed Board as Chief Business Officer. Andrew brings with him over 25 years' industry experience in pre-clinical research, clinical development and business development, having held a number of senior R&D roles in pharmaceutical (Eli Lilly, Novartis, Sanofi), service (MDS), and biotech companies (Antisoma). He joins Ergomed from Eli Lilly's Business Development team. Prior to this, Andrew was Head of Life Sciences at IP Group.

Co-development Update

Ergomed's five co-development partnerships continue to progress well. Three partnerships are with US listed companies developing oncology products which are currently in Phase III trials. The fourth agreement is with Ferrer, for a Phase II study for the treatment of insomnia. Ferrer initiated patient recruitment earlier this year. Ergomed signed its fifth co-development deal, and first in orphan drug development with Dilaforette for a Phase II development project in sickle-cell disease (SCD) in February 2015. Under these five agreements, Ergomed is contributing to the cost of the clinical trials and in return, in the first four deals, Ergomed will receive a share of any proceeds generated from the commercialisation of the partnered drug asset. Under the terms of the Dilaforette agreement, Ergomed received equity in the private company. Ergomed has the potential to receive over $100 million in future revenues from the three ongoing co-development deals it has in oncology with the US listed biotechnology companies, Synta Pharmaceuticals, Aeterna Zentaris Inc and CEL-SCI. The actual amounts that will be earned are dependent on the projects' future clinical results and also their subsequent commercialisation.

Synta Pharmaceuticals (NASDAQ:SNTA): Ergomed is in a co-development partnership on Synta's lead development candidate, ganetespib, which is being evaluated in several clinical trials including non-small cell lung cancer (NSCLC), as well as in breast cancer, ovarian cancer and acute myeloid leukemia (AML). To date, over 1,350 patients have been treated with ganetespib. Synta reported final results from the global, randomized, multi-center Phase IIb GALAXY-1 study in advanced non-small cell lung cancer (NSCLC) adenocarcinoma in May 2014. Final results from this trial, in particular encouraging overall survival results and tolerability profile in chemosensitive patients, supported the selection of the chemosensitive population for the pivotal Phase III GALAXY-2 trial. Synta's pivotal Phase III GALAXY-2 trial of ganetespib and docetaxel vs. docetaxel alone for the 2nd line treatment of patients with NSCLC adenocarcinoma remains on track to meet previously guided data readout timelines in the second half of 2015. The final analysis is expected to be conducted in 2016. In July 2014, Synta announced the advancement of ganetespib into a Phase III extension of the AML LI-1 (less intensive) trial in newly diagnosed elderly patients with acute myeloid leukemia (AML) or high-risk myelodysplastic syndrome (MDS) who are not eligible for intensive chemotherapy. In addition, Synta has recently announced that enrolment has begun in the Phase I safety portion of the GANNET53 trial in ovarian cancer. In addition, three investigator initiated studies are underway in breast cancer.

Aeterna Zentaris Inc. (NASDAQ: AEZS; TSX: AEZ): Ergomed is working with Aeterna Zentaris on the Phase III pivotal trial comparing zoptarelin doxorubicin with doxorubicin ("ZoptEC" study) as second line therapy for locally-advanced, recurrent or metastatic endometrial cancer. The ZoptEC study is being conducted in North America, Europe, Israel and other countries under a Special Protocol Assessment and will involve approximately 500 patients. The primary efficacy endpoint is improvement in median overall survival. Aeterna Zentaris announced that all 500 patients have been enrolled by Ergomed on schedule in June 2015. The first interim analysis in the first half of 2015 was satisfactory and a second interim analysis is planned in October 2015. Final results are expected in 2016.

CEL-SCI (NYSE MKT: CVM): Ergomed is working with CEL-SCI on the largest ever Phase III study in head and neck cancer with lead product Multikine. The trial will enrol approximately 880 patients with advanced primary head and neck cancer. CEL-SCI recently announced that a total of 540 patients, (as of 31 August 2015), had been enrolled, representing over 50% of the total enrolment for the study.

Ferrer: Ferrer is a privately-held Spanish pharmaceutical company. It is present in more than 90 countries, with 23 international affiliates. It discovered Lorediplon which, in early research, has demonstrated the potential to be superior to existing insomnia therapies. It is a longer acting non-benzodiazepine (BZD) hypnotic drug that modulates the GABAA receptor. Compared to other non-BZD receptor agonists (such as zolpidem), Lorediplon has demonstrated in preclinical and clinical studies a potent hypnotic profile and extended systemic half-life, properties that could confer potential clinical benefits in terms of sleep maintenance and sleep architecture. In 2014, together with Ildong Pharmaceuticals, Ergomed joined forces to develop the product in a proof of concept Phase II study. The first patient was dosed in H1 2015 and recruitment is ongoing. The study is scheduled to complete by late 2016.

Dilaforette: Sevuparin is an innovative, disease-modifying proprietary polysaccharide drug, which has the potential to restore blood flow and prevent further microvascular obstructions in sickle-cell disease (SCD) patients (via a multimodal, anti-adhesive mechanism). Microvascular obstructions cause the severe pain during Vaso-Occlusive Crisis (VOCs) and the high morbidity through organ damage as well the risk of premature death. Dilaforette, originates from Karolinska Institute and Uppsala University and is part of the Karolinska Development AB (STO: KDEV, 'Karolinska Development') portfolio. Under the terms of the agreement, Ergomed has been appointed as the clinical development organisation to conduct Dilaforette's multicentre, multinational, randomized Phase II study in SCD patients suffering from VOC. The study is planned to start in the second half of 2015. Ergomed is investing a proportion of its revenues from the clinical and regulatory activities of the trial in return for an equity stake in Dilaforette.

Financial Review of Condensed Consolidated Financial Statements

Total Ergomed revenues for H1 2015 increased by 85% to £14.5 million (H1 2014: £7.8 million). The total figure for H1 2014 excludes PrimeVigilance revenue of £2.5 million as PrimeVigilance was acquired in July 2014. Including PrimeVigilance pro forma revenues from service contracts increased by 39% in H1 2015 compared with H1 2014.

*Pro forma gross profit increased to £4.2 million in H1 2015 from £3.3 million in H1 2014, largely driven by the continued high growth in the PrimeVigilance safety services business.

EBITDA for H1 2015 was £1.5 million after the Company had incurred non-recurring/exceptional costs totalling £0.2 million relating to the establishment of the new office in Taipei and advisory costs related to acquisitions. The adjusted EBITDA for H1 2015 is therefore £1.7 million.

Cash and working capital were in line with expectations as of 30 June 2015 at £4.9 million. Cash was used in H1 2015 to acquire Sound Opinion in May, with the first payment being £0.32 million. Ergomed's balance sheet remains strong and sufficient for on-going business requirements.

*Pro forma numbers for H1 2014 are adjusted to include PrimeVigilance (PV) acquired in July 2014 in both periods and also adjusted for certain pre-IPO related party costs

Current Trading and Outlook

Ergomed is on track to deliver another year of good performance. The Company has a strong balance sheet and a considerable backlog of signed contracts that will be delivered over the next few years. The co-development division has an exciting set of leads under discussion and the Board expects to sign new contracts in the future in line with its stated strategy. The PrimeVigilance drug safety business is also trading in line with expectations and has a growing order book. The Sound Opinion acquisition has been integrated into the business and is performing to plan. Ergomed is looking at several growth opportunities to add to its international footprint and to strengthen its post-marketing service offerings as outlined at IPO. In summary, the Board remains confident on the outlook for Ergomed.

INDEPENDENT REVIEW REPORT TO ERGOMED PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 8. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the Group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with accounting policies the group intends to use in preparing its next annual financial statements and the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Cambridge, UK

29 September 2015

Condensed Consolidated Income Statement

For the six months ended 30 June 2015

	Note	Unaudited Six months ended 30 June 2015 £000s	Unaudited Six months ended 30 June 2014 £000s	Audited Year ended 31 December 2014 £000s
REVENUE		14,484	7,849	21,155
Cost of sales		(10,292)	(5,754)	(15,385)
Gross profit		4,192	2,095	5,770
Administrative expenses		(2,606)	(1,140)	(3,677)
Other operating income		52	10	54
Amortisation of acquired intangible assets		(286)	-	(446)
Share-based payment charge		(133)	-	(338)
Exceptional items	7	(162)	-	(584)
OPERATING PROFIT		1,057	965	779
Finance costs		-	(1)	(2)
PROFIT BEFORE TAXATION		1,057	964	777
Taxation		(265)	(218)	(199)
PROFIT FOR THE PERIOD		792	746	578
EARNINGS PER SHARE
Basic	2	2.8p	3.7p	2.4p
Diluted	2	2.7p	3.6p	2.3p

All activities in the current and prior period relate to continuing operations.

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2014

	Unaudited Six months ended 30 June 2015 £000s	Unaudited Six months ended 30 June 2014 £000s	Audited Year ended  31 December 2014 £000s
Profit for the period	792	746	578
Items that may be classified subsequently to profit or loss:
Exchange differences on translation of foreign operations	(411)	(56)	(212)
Other comprehensive income for the period net of tax	(411)	(56)	(212)
Total comprehensive income for the period	381	690	366

Condensed Consolidated Statement of Financial Position

At 30 June 2015

	Note	Unaudited 30 June 2015 £000s	Unaudited 30 June 2014 £000s	Audited 31 December 2014 £000s
Non current assets
Goodwill	3	7,656	1,332	7,282
Other intangible assets		2,733	-	2,927
Property, plant and equipment		242	134	185
Investments		37	-	39
Deferred tax asset		458	2	323
		11,126	1,468	10,756
Current assets
Trade and other receivables	4	6,496	3,049	6,343
Cash and cash equivalents		4,947	1,601	4,576
		11,443	4,650	10,919
Total assets		22,569	6,118	21,675
Current liabilities
Borrowings		(3)	(7)	(7)
Trade and other payables	5	(5,105)	(3,026)	(5,010)
Deferred revenue		(655)	(297)	(594)
Taxation		(333)	(187)	(144)
Total current liabilities		(6,096)	(3,517)	(5,755)
Net current assets		5,347	1,133	5,164
Non-current liabilities
Borrowings		(5)	(4)	(6)
Deferred tax liability		(531)	-	(575)
Total liabilities		(6,632)	(3,521)	(6,336)
Net assets		15,937	2,597	15,339
Equity
Share capital		288	200	288
Share premium account		12,342	-	12,342
Share option reserve		495	24	362
Translation reserve		(704)	(137)	(293)
Retained earnings		3,516	2,510	2,640
Total equity		15,937	2,597	15,339

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2015

	Share  capital £000s	Share premium account £000s	Share option reserve £000s	Translation reserve £000s	Retained earnings £000s	Total £000s
Balance at 31 December 2013*	200	-	24	(81)	1,764	1,907
Profit for the six month period**	-	-	-	-	746	746
Other comprehensive income for the period**	-	-	-	(56)	-	(56)
Total comprehensive income for the period**	-	-	-	(56)	746	690
Balance at 30 June 2014**	200	-	24	(137)	2,510	2,597

* Audited

** Unaudited

	Share  capital £000s	Share premium account £000s	Share option reserve £000s	Translation reserve £000s	Retained earnings £000s	Total £000s
Balance at 31 December 2013*	200	-	24	(81)	1,764	1,907
Profit for the year*	-	-	-	-	578	578
Other comprehensive income for the year*	-	-	-	(212)	-	(212)
Total comprehensive income for the year*	-	-	-	(212)	578	366
Share issues during the year (net of expenses)*	88	12,342	-	-	-	12,430
Share-based payment charge during the year*	-	-	338	-	-	338
Deferred tax credit taken directly to equity	-	-	-	-	298	298
Balance at 31 December 2014*	288	12,342	362	(293)	2,640	15,339
Profit for the six month period**	-	-	-	-	792	792
Other comprehensive income for the period**	-	-	-	(411)	-	(411)
Total comprehensive income for the period**	-	-	-	(411)	792	381
Share-based payment charge during the period**	-	-	133	-	-	133
Deferred tax credit taken directly to equity	-	-	-	-	84	84
Balance at 30 June 2015**	288	12,342	495	(704)	3,516	15,937

* Audited

** Unaudited

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2015

	Unaudited Six months  ended 30 June 2015 £000s	Unaudited Six months  ended 30 June 2014 £000s	Audited Year  ended  31 December 2014 £000s
Cash flows from operating activities
Profit before taxation	1,057	964	777
Adjustment for:
Amortisation and depreciation	327	30	518
Gain on disposal of fixed assets	-	(9)	(5)
Share-based payment charge	133	-	338
Exchange adjustments	(361)	(53)	(208)
IPO costs	-	-	299
Acquisition costs	53	-	285
Finance costs	-	1	2
Operating cash flow before changes in working capital and provisions	1,209	933	2,006
(Increase)/decrease in trade and other receivables	(180)	234	(1,993)
Increase/(decrease) in trade and other payables	21	(1,256)	954
Cash generated from/(utilised in) operations	1,050	(89)	967
Taxation paid	(159)	(222)	(430)
Net cash inflow/(outflow) from operating activities	891	(311)	537
Investing activities
Acquisition of property, plant and equipment	(112)	(20)	(62)
Acquisition of intangible assets	(93)	-	(84)
Investments in joint venture	-	-	(40)
Acquisition of subsidiaries including expenses of acquisition	(313)	-	(6,846)
Receipts from sale of property, plant and equipment	1	9	11
Net cash outflow from investing activities	(517)	(11)	(7,021)
Financing activities
Issue of new shares	-	-	11,000
Expenses of fundraising	-	-	(1,869)
Finance costs paid	-	(1)	(2)
Increase in borrowings	-	-	11
Repayment of borrowings	(3)	(26)	(30)
Net cash (outflow)/inflow from financing activities	(3)	(27)	9,110
Net increase/(decrease) in cash and cash equivalents	371	(349)	2,626
Cash and cash equivalents at start of the period	4,576	1,950	1,950
Cash and cash equivalents at end of period	4,947	1,601	4,576

Notes

1.                     GENERAL INFORMATION

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

The condensed interim financial statements have been prepared using accounting policies and method of computation consistent with those used in the audited statutory financial statements for the year ended 31 December 2014 and International Reporting Standards (IFRSs) adopted for use in the European Union. While the financial information included in this interim statement has been compiled in accordance with the recognition and measurement principles of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs.

The information for the six month period ended 30 June 2015 is unaudited, but reflects all normal adjustments which are, in the opinion of the Board, necessary to provide a fair statement of results and the Group's financial position for and as at the period presented.

Statutory accounts for the year ended 31 December 2014 were approved by the Board of Directors and have been delivered to the Registrar of Companies. The audit report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

At 30 June 2015 Ergomed had cash resources of £4.9 million (30 June 2014: £1.6 million; 31 December 2014: £4.6 million).

Risks and uncertainties

An outline of the key risks and uncertainties faced by the Group was described in the Company's AIM Admission Document from July 2014 which is located in the Company website (www.ergomedplc.com) in the Investors section. These risks include competition; dependence on a small number of customers; legislation and regulation of the pharmaceutical and biotechnology industries; licencees, approvals and compliance; and the potential for cancellation or delay of clinical studies by customers. It is anticipated that the risk profile will not significantly change for the remainder of the year. Risk is an inherent part of doing business and the profitability and strong cash position of the Group, along with the growth profile of the business, leads the Directors to believe that the Group is well placed to manage business risks successfully.

Going concern

The Directors have considered cashflow forecasts for the group, detailing cash inflows and outflows for the period ending 31 December 2016. Based on their review of these forecasts and consideration of the economic environment in which the group operates, the Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the financial information for the six months ended 30 June 2015.

Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred on acquisition is the fair value at the date of transaction for assets and liabilities transferred. All acquisition related costs are expensed as incurred.

Goodwill arises as the excess of acquisition cost over the fair value of the assets transferred at the date of transaction. Goodwill is reviewed for impairment annually, and is carried at cost less accumulated impairment losses. Impairment losses are not reversed in subsequent periods.

Goodwill arising on the acquisition of a foreign operation, including any fair value adjustments to the carrying amounts of assets or liabilities on the acquisition, are treated as assets and liabilities of that foreign operation in accordance with IAS 21 and as such are translated at the relevant foreign exchange rate at the balance sheet date.

Adoption of new and revised standards

The following new standards and amendments have been applied for the first time during the year ended 31 December 2014:

·      IFRS 13 'Fair value measurement' measurement and disclosure requirements are applicable for the financial year.

·      Amendments to IAS 1 'Presentation of financial statements' are applicable for the financial year. The Group has included the relevant disclosure requirements within the condensed interim financial statements.

·      In addition, IFRS 10 'Consolidated financial statements' is applicable for the financial year and have not had a material impact on the Group.

There are no new standards that have been issued but are not yet effective for the financial year that are expected to have a material impact on the Group.

2.         EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

	Unaudited Six months ended 30 June 2015 £000s	Unaudited Six months ended 30 June 2014 £000s	Audited Year ended 31 December 2014 £000s
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the Company	792	746	578
Effect of dilutive potential ordinary shares	-	-	-
Earnings for the purposes of diluted earnings per share	792	746	578
	No.	No.	No.
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	28,750,000	20,000,000	24,075,342
Effect of dilutive potential ordinary shares
Share options	1,043,764	993,750	993,600
Weighted average number of ordinary shares for the purposes of diluted earnings per share	29,793,764	20,993,750	25,068,942

3.         GOODWILL

	£000s
Cost
At 1 January 2014 and 30 June 2014	1,332
Accumulated impairment losses
At 1 January 2014 and 30 June 2014	-
Net book value
At 31 December 2013 and 30 June 2014	1,332

	£000s
Cost
At 1 January 2014	1,332
Arising on acquisition of subsidiary	6,827
Revaluation of provisional values in accordance with IFRS 3	(877)
At 31 December 2014	7,282
Arising on acquisition of subsidiary	374
At 30 June 2015	7,656
Accumulated impairment losses
1 January 2014, 31 December 2014 and 30 June 2015	-
Net book value
At 30 June 2015	7,656
At 30 June 2014	1,332
At 31 December 2014	7,282

The goodwill at 1 January 2014 and 30 June 2014 related to the acquisition of Ergomed Virtuoso Sarl on 30 September 2013. That valuation of goodwill was a preliminary assessment. During the second half of the year ended 31 December 2014, a valuation exercise was completed on Intangible assets acquired as part of Ergomed Virtuoso Sarl, resulting in a revaluation of goodwill in accordance with IFRS 3 during 2014.

The goodwill arising during the year ended 31 December 2014 relates to the acquisition of PrimeVigilance Limited and its subsidiaries on 15 July 2014.

The goodwill arising during the period ended 30 June 2015 relates to the acquisition of Sound Opinion Limited on 26 May 2015 (see note 6).

4.         TRADE AND OTHER RECEIVABLES

	Unaudited 30 June 2015 £000s	Unaudited 30 June 2014 £000s	Audited 31 December 2014 £000s
Trade receivables	4,383	2,319	4,675
Amounts receivable from related parties	33	252	14
Other receivables	302	259	327
Prepayments	306	219	205
Accrued income	1,416	-	999
Corporation tax receivable	56	-	123
	6,496	3,049	6,343

5.         TRADE AND OTHER PAYABLES

	Unaudited 30 June 2015 £000s	Unaudited 30 June 2014 £000s	Audited 31 December 2014 £000s
Trade creditors	2,390	1,290	2,650
Amounts payable to related parties	11	654	12
Social security and other taxes	251	88	332
Other payables	381	62	275
Accruals	2,072	932	1,741
	5,105	3,026	5,010

6.         ACQUISITION OF SUBSIDIARY - SOUND OPINION LIMITED

On 26 May 2015, Ergomed plc acquired 100 per cent of the issued share capital of Sound Opinion Limited, a leading provider of medical information services. Sound Opinion Limited was acquired in order to broaden the range of healthcare services provided by the business and to thereby increase the profitability of Ergomed plc.

The amounts provisionally recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.

	£000s
Property, Plant and Equipment	2
Total non current assets	2
Trade and other debtors	36
Accrued income	4
Cash and equivalents	62
Current assets	102
Trade and other creditors	(54)
Tax payable	(24)
Financial liabilities	(78)
Total identifiable net assets	26
Goodwill	374
Total consideration	400
Satisfied by:
Cash	320
Deferred consideration	80
Total consideration transferred	400
Net cash outflow arising on acquisition
Cash consideration	320
Less: cash and cash equivalent balances acquired	(62)
	258

The provisional fair value of the financial assets includes receivables with a fair value of £36,000 and a gross contractual value of £36,000. The best estimate at acquisition date of the contractual cash flows not to be collected is £nil.

Goodwill is provisionally valued at £374,000 which arises from the excess of purchase price of £400,000 over net assets of £26,000 and is attributable to the broadened customer base and enhanced offering of the Ergomed group following the acquisition. None of the goodwill is expected to be deductible for income tax purposes. Deferred consideration represents the maximum additional consideration payable, subject to the future performance of the business.

Owing to the limited time between acquisition and the presentation of these interim results, there has been insufficient time to complete an external valuation exercise. Accordingly, the amounts presented are management best estimates, and a full fair value exercise of identifiable assets acquired and liabilities assumed will be performed within the measurement period which ends on 25 May 2016.

It is intended that an updated acquisition note showing any amendments arising from the valuation exercise will be included in the audited financial statements for the year ended 31 December 2015. Ergomed plc has a 12 month measurement period from the date of acquisition, and therefore the final results will be included in the financial statements for the year ended 31 December 2016.

If the acquisition of Sound Opinion Limited had been completed on the first day of the financial year, group revenues for the six months ended 30 June 2015 would have been £155,000 higher and group profit would have been £45,000 higher.

7.         EXCEPTIONAL ITEMS

	Six months ended 30 June 2015 £000s	Six months ended 30 June 2014 £000s	Year ended 31 December 2014 £000s
Establishment of subsidiary	37	-	-
M&A activity	125	-	-
Expenses in relation to IPO	-	-	299
Expenses in relation to acquisition of PrimeVigilance	-	-	285
	162	-	584

In line with the way the Board and chief operating decision makers reviews the business, large one-off exceptional costs are separately identified and shown as exceptional costs. In the first half of 2015, these are directly related to the establishment of operations in Taipei, Taiwan and M&A activities. During 2014, these are directly related to IPO costs that were not eligible to be taken to the Share premium account, and to the acquisition of PrimeVigilance.

8.         SUBSEQUENT EVENTS

On 20 July 2015, the Chief Executive and founder of the Company placed 3,958,020 shares at 170p each to new institutional shareholders in UK and Western Europe. Following this placing Dr Reljanovic's shareholding was reduced from 73% to 60% of total issued share capital.

PRO FORMA FINANCIAL INFORMATION - UNAUDITED AND UNREVIEWED

On 15 July 2014, Ergomed plc acquired the entire share capital of PrimeVigilance Limited. The following Pro Forma financial information combines the financial results of Ergomed plc and PrimeVigilance Limited prior to that date for illustrative purposes. The results of PrimeVigilance Limited for the six months ended 30 June 2014 and the statement of financial position as at 30 June 2014 and the Pro forma adjustments are unaudited and unreviewed. In addition, the results of Ergomed plc presented in this Pro Forma 2014 financial information are adjusted to remove the profit margin charged by a related party in relation to services provided to Ergomed plc, as such services will be provided from internal resources in the period following the IPO.

Pro Forma Consolidated Statement of Comprehensive Income - Unaudited and Unreviewed

For the six months ended 30 June 2014

	Six months ended 30 June 2014
	Ergomed £000s	Prime Vigilance £000s	Pro Forma  £000s
REVENUE	7,849	2,539	10,388
Cost of sales	(5,614)	(1,475)	(7,089)
Gross profit	2,235	1,064	3,299
Administrative expenses	(1,040)	(713)	(1,753)
Depreciation expense	(30)	(18)	(48)
Other operating income	10	2	12
OPERATING PROFIT	1,175	335	1,510
Finance costs	(1)	(1)	(2)
PROFIT BEFORE TAXATION	1,174	334	1,508
Taxation	(265)	(35)	(300)
PROFIT FOR THE PERIOD	909	299	1,208

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2014

	Unaudited and Unreviewed
	30 June 2014
	Ergomed £000s	Prime Vigilance £000s	Pro Forma £000s
Non current assets
Goodwill	1,332	-	1,332
Intangible assets	-	280	280
Property, plant and equipment	134	62	196
Deferred tax asset	2	-	2
	1,468	342	1,810
Current assets
Trade and other receivables	3,049	1,045	4,094
Cash and cash equivalents	1,601	302	1,903
	4,650	1,347	5,997
Total assets	6,118	1,689	7,807
Current liabilities
Borrowings	(7)	-	(7)
Trade and other payables	(3,323)	(1,035)	(4,358)
Taxation	(187)	(8)	(195)
Total current liabilities	(3,517)	(1,043)	(4,560)
Net current assets	1,133	304	1,437
Non-current liabilities
Borrowings	(4)	-	(4)
Deferred tax liability	-	(25)	(25)
Total liabilities	(3,521)	(1,068)	(4,589)
Net assets	2,597	621	3,218

 

END

 

 

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