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EKF Diagnostics Hldg (EKF)

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Tuesday 10 September, 2019

EKF Diagnostics Hldg

Half-year Report

RNS Number : 7346L
EKF Diagnostics Holdings PLC
10 September 2019
 

EKF Diagnostics Holdings plc

("EKF", the "Company" or the "Group")

 

Half-year Report

 

EKF Diagnostics Holdings plc (AIM: EKF), the AIM listed point-of-care business, announces its unaudited interim results for the six months ended 30 June 2019. The Company announces earnings ahead of management expectations and continued good cash generation.

 

Financial Highlights

·     Revenue up 5.3% to £21.44m (H1 2018: £20.36m)

·     Adjusted EBITDA* up 13.9% to £5.58m (H1 2018: £4.90m)

·     Net profit of £1.43m (H1 2018: £0.75m)

·     Strong cash generation from operations of £4.34m (H1 2018: £4.35m)

·     Continued capital investments in Germany and USA of £0.71m;

·     Investment in inventory protects delivery of major projects in H2 2019

·     Further investment in RenalytixAI of £0.12m

·     Net cash £11.78m (30 June 2018: £8.82m) (31 December 2018: net cash of £9.40m)

·     First dividend to be paid following AGM H1 2020 subject to shareholder approval


* Earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments

 

Operational Highlights

·     Preferred Partnership Agreement with Mount Sinai Innovation Partners giving EKF the opportunity to be the first to review all digital diagnostic opportunities that exist within the Mount Sinai hospital group

·     Successful full launch of Consult Hb analyser with McKesson-Surgical Inc. and first revenue contribution

·     Further investment in Elkhart enzyme facility to increase capacity

·     Revenue contribution from enzyme contract with Oragenics, Inc.

 

Christopher Mills, Non-Executive Chairman of EKF, commented:

 

"The outlook for the second half is encouraging with Q3 trading to date in line with management expectations. Revenues are expected to show continuing momentum over the balance of the year, in part due to the increasing contribution from the OEM contract with McKesson Medical-Surgical Inc. for the distribution of DiaSpect Tm in the US and further growth from the enzyme business with Oragenics, Inc."

 

EKF Diagnostics Holdings plc

www.ekfdiagnostics.com

Christopher Mills, Non-executive Chairman

Tel: +44 (0) 29 2071 0570

Julian Baines, CEO

 

Richard Evans, FD & COO

 

 

 

N+1 Singer

Tel: 020 7496 3000

Aubrey Powell / George Tzimas (Corporate Finance)
Tom Salvesen (Corporate Broking)

 

 

 

Walbrook PR Limited

Tel: +44 (0) 20 7933 8780 or [email protected] 

Paul McManus / Lianne Cawthorne

Mob: +44 (0) 7980 541 893 / +44 (0) 7584 391 303 

     

 

 

BUSINESS REVIEW

 

We are pleased to announce that the current financial year has started well. Revenue at £21.44m (H1 2018: £20.36m) is in line with market forecasts, but tight cost control has meant that adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, adjusted for exceptional items and share-based payments) for the six months ended 30 June 2019 reached £5.58m (H1 2018: £4.90m), ahead of management expectations. Even with continued investment in the business, cash generation has continued to be very good.

Strategy and operations

 

Strategy

 

The significant progress with our strategy made in 2018 has continued into 2019.

 

Following the highly successful spin-off of Renalytix AI plc ("RenalytixAI") in November 2018, which included EKF acquiring shares in the placing at a cost of £3.1m, we acquired a further 100,074 ordinary RenalytixAI shares in April 2019 at an average cost of 123.5973 pence per share. EKF's interest in RenalytixAI is now 2,677,981 Ordinary Shares, which at 30 June 2019 represented 4.98% of RenalytixAI's issued share capital. At 30 June 2019 our shareholding in RenalytixAI had a market value of £8.5m.

 

Building on this success we have today announced a Preferred Partnership Agreement with Mount Sinai Innovation Partners ("MSIP") which gives EKF the opportunity to be the first to review all digital diagnostic opportunities that exist within the Mount Sinai hospital group. It is clear that the relationship between Mount Sinai and EKF will allow leaders in their field an opportunity to make a significant difference to the health of millions of people worldwide. As the first fruit of this relationship, MSIP and EKF have signed a non-binding Heads of Terms in the field of Inflammatory Bowel Disease, which affects 3 million people in the US alone.

 

The Consult Hb was launched on the 1st April 2019 by McKesson in the US and although we are at early stages the growth potential is very positive with sales reaching $280k in the first 3 months, beating management expectations. It was always the strategy to significantly grow our haemoglobin market in the US and the partnership with McKesson will help us achieve this.

 

We are experiencing significant growth opportunities in our enzyme facility in Elkhart, USA, which is now at full capacity. EKF has signed a lease on a second site close to our existing facility so we can fulfil the exciting opportunities we have with new customers such as Oragenics,  iGenomics, Ixcela and Vitacyte. First revenues from the new facility are expected before the end of this year.

 

The Company's capital structure has been further simplified through the cancellation of 250,000 share options at the election of the option holder in return for the payment of a one-off cash sum.

 

In light of the continued strong cash generation, the Board now intends to recommend a dividend of 1p per share in respect of the financial year ended 2019 which will be subject to shareholder approval at the next Annual General Meeting ("AGM") to be held in H1 2020.

 

Operations

 

Point-of-care
 

i.              Hematology

 

Hematology sales have risen by 2.2% over H1 2018. 

In August 2018 EKF signed a private label distribution agreement with McKesson Medical-Surgical Inc. ("McKesson"), for the DiaSpect Tm. The DiaSpect Tm is sold in the US by McKesson under its own branded line, as the McKesson Consult® Hb  analyser.

The agreement follows US Food and Drug Administration 510(k) clearance and CLIA waiver for the DiaSpect Tm in April 2018, approving the product for use in point-of-care and Certificate of Waiver settings. 

The full launch of the McKesson Consult® Hb  analyser took place on 1st April 2019. Initial sales of $280,000 over the first 90 days have been encouraging and ahead of EKF management's expectations. Sales in H1 2018 benefited from a major project in Pakistan which completed prior to H1 2019, and accounted for over £400,000 of revenue in the comparable period in 2018.

ii.            Diabetes

 

Sales of our Diabetes range increased by 8.7%, driven by increased sales of Quo-Test (+41.7%) where we are finally gaining traction in the UK and seeing continued growth in APAC.

We have commenced development of a new Biosen R-Line range, a research use only version of our successful analyser for use in non-medical applications.

iii.           Central Laboratory

 

Despite increased competitive pressures, β-HB sales have continued to perform very strongly, up a further 11.8% in H1 2019 over the same period last year, and once again driving the overall increase in Central Laboratory sales of 12.8%. Prospects for the product in the USA and other territories have been enhanced by an agreement with Ortho Clinical Diagnostics to bring our β-HB reagent to their platforms.

 

Sales to Oragenics, Inc. (from the outsourced manufacture of the enzyme for its Lantibiotic product) have contributed to growth in the first half of the year, with Life Sciences revenues up 23.8% as a result. Our new facility in South Bend, close to Elkhart, will allow us to better service new and existing customers.

 

As a replacement for our STAT-Site M β-HB product, we are looking forward to the launch of our new STAT-Site Whole Blood analyser in early 2020. We are also completing pre-launch activities for the new Glycated Albumin product in the USA. In addition we have won a tender with the Jordanian Army for 26 Altair Clinical Chemistry analysers.

 

iv.           Other

 

This category includes sales of a number of products including our Lactate Scout sports medicine product and other diagnostic tests, the most important of which is for pregnancy.

 

Regulatory Update

 

Regulatory pressures in diagnostics continue to grow and we are adding additional resources to our regulatory team to cover this.

 

Our local partner has been successful in achieving regulatory approval for Quo-Lab in China. The pre-market processes required to open this market are also now complete.

 

 

 

 

 

Financial review

 

Revenue

 

Revenue for the period was £21.44m (H1 2018: £20.36m), an increase of 5.3%.

 

 

Unaudited

6 months ended 30 June 2019

£'000

 

Unaudited

6 months ended 30 June 2018

£'000

 

+/- %

 

 

 

 

 

 

Hematology

6,664

 

6,518

 

2.2%

Diabetes

4,815

 

4,431

 

8.7%

Central Laboratory

7,394

 

6,557

 

12.8%

Other

2,563

 

2,851

 

(10.1%)

Total revenue

21,436

 

20,357

 

5.3%

 

 

 

 

 

 

 

Gross profit

 

Gross profit is £11.53m (H1 2018: £10.99m). Gross profit as a percentage of revenue is 54% (H1 2018: 54%). The gross margin percentage has been sustained through increased sales of high margin products including βHB, offset by increasing quality and regulatory expenses to comply with more stringent In Vitro Diagnostics Medical Device Regulations (IVDR) requirements.

 

Administrative expenses

 

In H1 2019, administrative expenses were broadly flat at £9.12m (H1 2018: £9.10m), representing 42.5% of revenue for the period (H1 2018: 44.7%). Administrative expenses include research and development (R & D) costs of £0.78m (H1 2018: £0.91m). In addition, further R & D costs of £0.18m (H1 2018: £0.19m) have been capitalised. Non-exceptional administrative costs are higher in 2019 partly due to enhanced investment in the US sales team. In this statement we have implemented IFRS 16 "Leases" for the first time. There is no impact on administrative expenses as a result of this accounting policy change, however £0.18m of costs have moved from rental expenses to deprecation leading to an increase in AEBITDA by the same amount.

 

To aid understanding, administrative expenses in each period are made up as follows:

 

 

Unaudited 6 months ended 30 June 2019

 

Unaudited 6 months ended 30 June 2018

 

Audited Year ended 31 December 2018

Non-exceptional administration expenditure before R & D capitalisation

8,394

 

8,288

 

16,660

Effect of share-based payments

1,135

 

1,291

 

939

Less capitalised R & D

(183)

 

(187)

 

(559)

Effect of exceptional items

(229)

 

(293)

 

(6,454)

Total administrative expenses

9,117

 

9,099

 

10,586

 

The charge for depreciation of fixed assets and for the amortisation of intangibles is £2.24m (H1 2018: £1.99m). The large exceptional item in 2018 primarily relates to the accounting profit recognised on the spin-out of Renalytix AI plc.

                                      

 

Operating profit and adjusted earnings before interest tax and depreciation

 

The Group has made an operating profit of £2.44m (H1 2018: £1.91m). We consider a more meaningful measure of underlying performance to be adjusted EBITDA which for H1 2019 was £5.58m (H1 2018: £4.90m). This excludes the effects of share-based payments of £1.14m (H1 2018: £1.29m) and exceptional profits of £0.23m (H1 2018: £0.29m).

 

Finance costs

 

Finance costs are £0.25m (H1 2018: £0.21m). The main charge results from an increase in the fair value of deferred consideration.

 

Tax

 

There is a tax charge of £0.79m (H1 2018: £0.68m). The charge is higher than would otherwise have been the case because of a prior year adjustment in the UK, relating to the taxation of the profit made on the spin-out of Renalytix AI plc.

 

Balance sheet

 

Fixed assets

 

We have capitalised £0.71m (H1 2018: £0.71m) in property plant and equipment. The expenditure is in relation to additional production equipment in Germany and improvements to our facility in Elkhart in the US. Further expenditure in Elkhart and in Germany is planned for the second half of the year.  In addition we have recognised £0.8m of right-of-use assets as a result of the implementation of IFRS 16 "Leases". More details are given in Note 7.

 

Intangible assets

 

The value of intangible fixed assets is £40.76m (31 December 2018: £41.77m). The decrease is mainly as a result of amortisation. An amount of £0.38m has been capitalised.

 

Investments

 

This largely consists of our investment in Renalytix AI plc. During the year we acquired further shares via an on-market purchase at a cost of £0.12m. The investment is held at fair value which has been calculated based on the market value of the shares, less a discount to reflect the continuing restrictions placed on the shares.

 

Deferred consideration

 

The remaining deferred consideration relates to the share-based payment to the former owner of EKF-Diagnostic GmbH. Finalisation of the position has been delayed but is expected to conclude in 2019.

 

Cash and working capital

 

The gross cash position at 30 June 2019 was £12.75m (31 Dec 2018: £10.28m), and the Group had net cash of £11.78m (31 Dec 2018: £9.40m).

 

Cash generated from operations in H1 2019 is £4.34m (H1 2018: £4.35m). Inventory levels have increased partially due to accumulating stock for the fulfilment of DiaSpect Tm instruments for the McKesson contract. Trade debtors at period end are higher than at the 2018 year end largely because of timing differences. Trade and other payables have increased, mainly because of higher liabilities recognised in respect of cash settled share-based payments and timing differences.

 

Capital structure

 

We have not made any share buy backs during the period. Our authorisation to make further share buy backs remains in place and we will make further purchases if considered appropriate.

 

We have spent £0.02m on buying out an employee's share option agreement.

 

Outlook

 

Each of our major areas of operations is growing its existing business and there are new initiatives underway to open up new markets with existing products as well as projects aimed at bringing in additional capabilities which should have positive impact over the next few years in particular those in Life Sciences.

 

The outlook for the second half is encouraging with Q3 trading to date in line with management expectations. Revenues are expected to show continuing momentum over the balance of the year, in part due to the increasing contribution from the OEM contract with McKesson Medical-Surgical Inc. for the distribution of DiaSpect Tm in the US and further growth from the enzyme business with Oragenics, Inc.

 

 

Christopher Mills

Non-Executive Chairman

 

10 September 2019

 

 

 

CONSOLIDATED INCOME STATEMENT

 

 

 

 

 

 

FOR THE 6 MONTHS ENDED 30 JUNE 2019

 

 

Unaudited 6 months ended 30 June 2018

 

 

 

 

 

Unaudited 6 months ended 30 June 2019

 

 

Audited Year ended 31 December 2018

 

Notes

 

£'000

 

£'000

 

£'000

Continuing operations

 

 

 

 

 

 

 

Revenue

3

 

21,436

 

20,357

 

42,543

Cost of sales

 

 

(9,904)

 

(9,366)

 

(19,847)

Gross profit

 

 

11,532

 

10,991

 

22,696

Administrative expenses

 

 

(9,117)

 

(9,099)

 

(10,586)

Other income

 

 

24

 

21

 

89

Operating profit

 

 

2,439

 

1,913

 

12,199

Depreciation and amortisation

 

 

(2,239)

 

(1,986)

 

(3,991)

Share-based payments

 

 

(1,135)

 

(1,291)

 

(939)

Exceptional items

4

 

229

 

293

 

6,454

EBITDA before exceptional items and share-based payments

 

 

5,584

 

 

4,897

 

10,675

Finance income

 

 

34

 

10

 

43

Finance costs

 

 

(247)

 

(209)

 

(77)

Profit before income tax

 

 

2,226

 

1,714

 

12,165

Income tax charge

5

 

(792)

 

(679)

 

(1,866)

Profit for the period from continuing operations

 

 

1,434

 

1,035

 

10,299

Loss associated with available-for-sale assets

 

 

-

 

(288)

 

-

Profit for the period

 

 

1,434

 

747

 

10,299

Profit attributable to:

 

 

 

 

 

 

 

Owners of the parent

 

 

1,326

 

668

 

10,110

Non-controlling interest

 

 

108

 

79

 

189

 

 

 

1,434

 

747

 

10,299

 

Profit/(loss) per ordinary share attributable to the owners of the parent during the period

 

 

6

 

 

 

 

 

 

 

 

 

 

Pence

 

Pence

 

Pence

Basic

 

 

 

 

 

 

 

From continuing operations

 

 

0.29

 

0.21

 

2.21

Share of loss associated with available-for-sale assets

 

 

-

 

(0.06)

 

-

 

 

 

0.29

 

0.15

 

2.21

Diluted

 

 

 

 

 

 

 

From continuing operations

 

 

0.29

 

0.21

 

2.19

Share of loss associated with available-for-sale assets

 

 

-

 

(0.06)

 

-

 

 

 

0.29

 

0.15

 

2.19

                 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

FOR THE 6 MONTHS ENDED 30 JUNE 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

6 months ended 30 June 2019

 

6 months ended 30 June 2018

 

Year ended 31 December 2018

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Profit for the period - continuing

 

 

1,434

 

1,035

 

10,299

Loss associated with available-for-sale assets

 

 

-

 

(288)

 

-

 

 

 

1,434

 

747

 

10,299

Other comprehensive income:

 

 

 

 

 

 

 

Changes in fair value of equity instruments at fair value through other comprehensive income

 

 

1,369

 

-

 

-

Currency translation differences

 

 

251

 

23

 

1,383

Other comprehensive gain for the period

 

 

1,620

 

23

 

1,383

Total comprehensive profit for the period

 

 

3,054

 

770

 

11,682

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of the parent

 

 

2,906

 

716

 

11,526

Non-controlling interests

 

 

148

 

54

 

156

Total comprehensive profit for the period

 

 

3,054

 

770

 

11,682

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

AS AT 30 JUNE 2019

 

 

 

 

 

 

 

 

 

Unaudited as at 30 June 2019

 

Unaudited as at 30 June 2018

 

Audited as at 31 December 2018

 

 

Notes

£'000

 

£'000

 

£'000

 

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

 

12,376

 

12,329

 

12,469

 

Right-of-use assets

7

817

 

-

 

-

 

Intangible assets

8

40,759

 

42,624

 

41,773

 

Investments

 

4,764

 

152

 

3,271

 

Deferred tax assets

 

33

 

24

 

36

 

Available-for-sale financial assets

 

-

 

41

 

-

 

Total non-current assets

 

58,749

 

55,170

 

57,549

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Inventories

 

7,220

 

5,563

 

6,115

 

Trade and other receivables

 

7,775

 

7,896

 

7,434

 

Deferred tax assets

 

-

 

12

 

-

 

Cash and cash equivalents

 

12,749

 

9,925

 

10,282

 

Total current assets

 

27,744

 

23,396

 

23,831

 

Total assets

 

86,493

 

78,566

 

81,380

 

 

 

 

 

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

 

 

 

Share capital

 

4,541

 

4,576

 

4,541

 

Other reserve

 

143

 

108

 

143

 

Foreign currency reserves

 

6,517

 

4,940

 

6,309

 

Retained earnings

 

55,218

 

51,062

 

52,536

 

 

 

66,419

 

60,686

 

63,529

 

Non-controlling interest

 

463

 

392

 

375

 

Total equity

 

66,882

 

61,078

 

63,904

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

 

832

 

902

 

695

 

Lease liabilities

 

540

 

-

 

-

 

Deferred tax liability

 

2,913

 

3,387

 

3,179

 

Total non-current liabilities

 

4,285

 

4,289

 

3,874

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

11,056

 

10,198

 

10,094

 

Lease liabilities

 

277

 

-

 

-

 

Deferred consideration

 

1,341

 

1,264

 

1,104

 

Current income tax liabilities

 

2,513

 

1,500

 

2,219

 

Deferred tax liabilities

 

-

 

36

 

-

 

Borrowings

 

139

 

201

 

185

 

Total current liabilities

 

15,326

 

13,199

 

13,602

 

Total liabilities

 

19,611

 

17,488

 

17,476

 

Total equity and liabilities

 

86,493

 

78,566

 

81,380

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

 

 

FOR THE 6 MONTHS ENDED 30 JUNE 2019

 

 

 

 

 

 

Unaudited 6 months ended 30 June 2019

 

Unaudited 6 months ended 30 June 2018

 

 Audited Year to 31 December 2018

 

£'000

 

£'000

 

£'000

Cash flow from operating activities

 

 

 

 

 

Profit before income tax

2,788

 

1,714

 

12,165

Adjustments for

 

 

 

 

 

- Warranty claim

(234)

 

(207)

 

(31)

- Depreciation

794

 

559

 

1,158

- Amortisation and impairment charges

1,445

 

1,427

 

2,833

- Deferred consideration (FV adjust)

237

 

202

 

42

- Foreign Exchange

(70)

 

-

 

(83)

- Profit/(loss) on disposal of assets

-

 

-

 

13

- Share-based payments

573

 

1,291

 

939

- Profit on sale of Renalytix

-

 

-

 

(6,356)

- Net finance costs

(3)

 

(3)

 

(8)

- Loan write back

-

 

-

 

(90)

Changes in working capital

 

 

 

 

 

- Inventories

(1,052)

 

24

 

(461)

- Trade and other receivables

(54)

 

(40)

 

11

- Trade and other payables

(86)

 

(615)

 

(271)

Cash generated by operations

4,338

 

4,352

 

9,861

Interest paid

(7)

 

(7)

 

(35)

Income tax paid

(757)

 

(1,077)

 

(1,503)

Net cash generated by operating activities

3,574

 

3,268

 

8,323

Cash flow from investing activities

 

 

 

 

 

Purchase of available-for-sale financial assets

-

 

(329)

 

-

Purchase of investments

(124)

 

-

 

(3,119)

Purchase of property, plant and equipment (PPE)

(710)

 

(712)

 

(1,220)

Purchase of intangibles

(380)

 

(246)

 

(632)

Proceeds from sale of PPE

1

 

8

 

-

Interest received

10

 

10

 

43

Net cash used in investing activities

(1,203)

 

(1,269)

 

(4,928)

Cash flow from financing activities

 

 

 

 

 

Share buy back

-

 

-

 

(940)

Repayment of borrowings

94

 

(107)

 

(242)

Dividends paid to non-controlling interests

(60)

 

(190)

 

(309)

Cancellation of share options

(16)

 

-

 

-

Net cash used in financing activities

18

 

(297)

 

(1,491)

Net increase in cash and cash equivalents

2,389

 

1,702

 

1,904

Cash and cash equivalents at beginning of period

10,282

 

8,203

 

8,203

Exchange gains on cash and cash equivalents

78

 

20

 

175

Cash and cash equivalents at end of period

12,749

 

9,925

 

10,282

                                   

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

 

 

FOR THE 6 MONTHS ENDED 30 JUNE 2019

 

 

 

 

 

 

 

Share Capital

Share Premium

Other Reserve

Foreign Currency Reserve

Retained earnings

Total

Non-controlling interest

Total equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

At 1 January 2018

4,576

-

108

4,892

50,394

59,970

528

60,498

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

956

956

79

1,035

Loss associated with available-for-sale assets

-

-

-

-

(288)

(288)

-

(288)

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

48

-

48

(25)

23

Total comprehensive income

-

-

-

48

668

716

54

770

Transactions with owners

           

 

 

 

 

 

 

 

Dividends to non-controlling interest

-

-

-

-

-

-

(190)

(190)

Total contributions by and distributions to owners

-

-

-

-

-

-

(190)

(190)

At 30 June 2018

4,576

-

108

4,940

51,062

60,686

392

61,078

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

9,442

9,442

110

9,552

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

1,369

(1)

1,368

(8)

1,360

Total comprehensive income

-

-

1,369

9,442

10,810

102

10,912

Transactions with owners

 

 

 

 

 

 

 

 

Share Cancellation

(35)

-

35

-

(940)

(940)

-

(940)

Dividends to non-controlling interest

-

-

-

-

-

-

(119)

(119)

Distribution in specie

-

-

-

-

(7,027)

(7,027)

-

(7,027)

Share-based payments

-

-

-

-

-

-

-

-

Total contributions by and distributions to owners

(35)

-

35

-

(7,967)

(7,967)

(119)

(8,086)

At 31 December 2018

4,541

-

143

6,309

52,536

63,529

375

63,904

Comprehensive income

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

1,326

1,326

108

1,434

 

 

 

 

 

1,326

1,326

108

1,434

Other comprehensive income

 

 

 

 

 

 

 

 

Changes in fair value of equity instruments at fair value through other comprehensive income

-

-

-

-

1,369

1,369

-

1,369

Currency translation differences

-

-

-

208

3

211

40

251

Total comprehensive income

-

-

-

208

2,698

2,906

148

3,054

Transactions with owners

 

 

 

 

 

 

 

 

Dividends to non-controlling interest

-

-

-

-

-

-

(60)

(60)

Share option cancellation

-

-

-

-

(16)

(16)

-

(16)

Total contributions by and distributions to owners

-

-

-

(16)

(16)

(60)

(76)

At 30 June 2019

4,541

-

143

6,517

55,218

66,419

463

66,882

 

 

NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS

 

1.              General information and basis of presentation

 

EKF Diagnostics Holdings plc is a public limited company incorporated in the United Kingdom (Registration Number 04347937). The address of the registered office is Avon House, 19 Stanwell Road, Penarth, CF64 2EZ.

 

The Group's principal activity continues to be that of a business focused within the In-Vitro Diagnostics devices ("IVD") market place.

 

The financial information in these interim results is that of the holding company and all of its subsidiaries. It has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs), IFRS IC interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2018 and which will form the basis of the 2019 financial statements except for a number of new and amended standards which have become effective since the beginning of the previous financial year. These new and amended standards are not expected to materially affect the Group with the exception of IFRS 16 "Leases" and the possible exception of IFRS 15 "Revenue from contracts with customers". The effect of IFRS 16 is set out in note 7. The application of IFRS 15 has not, to date, resulted in any adjustment to the reported figures.

 

Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.

 

The financial information presented herein does not constitute full statutory accounts under Section 434 of the Companies Act 2006 and was not subject to a formal review by the auditors. The financial information in respect of the year ended 31 December 2018 has been extracted from the statutory accounts which have been delivered to the Registrar of Companies. The Group's Independent Auditor's report on those accounts was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial information for the half years ended 30 June 2019 and 30 June 2018 is unaudited and the twelve months to 31 December 2018 is audited.

 

These interim accounts have not been prepared in accordance with IAS 34.

 

2.               Significant accounting policies

 

Going concern

The Group meets its day-to-day working capital requirements through the use of cash reserves and existing bank facilities.

 

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance, that the Group should be able to operate within the level of its current funding arrangements.

 

The Directors believe that the Company and the Group have adequate resources to continue in operation for the foreseeable future. For this reason they have adopted the going concern basis in the preparation of the financial statements.

 

Foreign currency translation

(a) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in British Pounds Sterling, which is the Company's functional and presentational currency.

 

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within 'administrative expenses'.

 

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentational currency are translated into the presentational currency as follows:

·     assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

·     income and expenses for each income statement are translated at average exchange rates; and

·     all resulting exchange differences are recognised in other comprehensive income.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

 

Government grants

Government grants receivable in connection with expenditure on property, plant and equipment are accounted for as deferred income, which is credited to the income statement over the expected useful economic life of the related assets, on a basis consistent with the depreciation policy. Revenue grants for the reimbursement of costs charged to the income statement are credited to the Income Statement in the year in which the costs are incurred.

 

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Any borrowing costs associated with qualifying property plant and equipment are capitalised and depreciated at the rate applicable to that asset category.

 

 

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method or reducing balances method to allocate their cost to its residual values over their estimated useful lives, as follows:

 

Buildings

2%-2.5%

Fixtures and fittings

20%-25%

Plant and machinery

20%-33.3%

Motor vehicles

25%

 

The assets' residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting period.

 

An asset's carrying value is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

 

Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognised in administration expenses in the income statement.

 

Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of the acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Goodwill has an infinite useful life and is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

 

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment.

 

(b) Trademarks, trade names and licences

Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of between 8 and 12 years and is charged to administrative expenses in the income statement.

 

(c) Customer relationships

Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The contractual customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship of between 6 and 15 years and is charged to administrative expenses in the income statement.

 

(d) Trade secrets

Trade secrets, including technical know-how, operating procedures, methods and processes, acquired in a business combination are recognised at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trade secrets over their estimated useful lives of between 6 and 15 years and is charged to administrative expenses in the income statement. 

 

(e) Development costs

Development costs acquired in a business combination are recognised at fair value at the acquisition date. Development costs have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over their estimated useful lives of 15 years and is charged to administrative expenses in the income statement.

 

Expenditure incurred on the development of new or substantially improved products or processes is capitalised, provided that the related project satisfies the criteria for capitalisation, including the project's technical feasibility and likely commercial benefit. All other research and development costs are expensed as incurred.

 

Development costs are amortised over the estimated useful life of the products with which they are associated, currently 4 to 5 years. Amortisation commences when a new product is in commercial production. The amortisation is charged to administrative expenses in the income statement. The estimated remaining useful lives of development costs are reviewed at least on an annual basis.

 

The carrying value of capitalised development costs is reviewed for potential impairment at least annually and if a product becomes unviable and an impairment is identified the deferred development costs are immediately charged to the income statement.

 

Impairment of non-financial assets

Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount.

 

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of the money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognised in the financial statements.

 

Investments

Investments where the Group does not have a controlling interest are initially recognised at cost. The carrying value is tested annually for impairment and an impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount.

 

Financial assets

Classification

The Company classifies its financial assets in the following categories: loans and receivables and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired and management determines the classification of its financial assets at initial recognition.

 

 

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Company's loans and receivables comprise 'trade and other receivables' and cash and cash equivalents in the balance sheet.

 

(b) Financial assets at fair value through profit or loss

The Group classifies the following financial assets at fair value through profit or loss (FVPL):

•              debt investments that do not qualify for measurement at either amortised cost or fair value through Other Comprehensive Income

•              equity investments that are held for trading, and

•              equity investments for which the entity has not elected to recognise fair value gains and losses through Other Comprehensive Income.

 

(c) Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income comprise equity securities that are not held for trading and which the Group has irrevocably elected at initial recognition to recognise in this category. The Group considers this category to be more relevant for assets of this type.

 

Inventories

Inventories and work in progress are stated at the lower of cost and net realisable value. Cost is calculated on a first in and first out basis and includes raw materials, direct labour, other direct costs and attributable production overheads, where appropriate. Net realisable value represents the estimated selling price less all estimated costs of completion and applicable selling costs. Where necessary, provision is made for slow-moving and obsolete inventory. Inventory on consignment and their related obligations are recognised in current assets and payables respectively.

 

Trade and other receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other than in the case of certain intercompany receivables, they are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised cost less provision for impairment. The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.  Trade receivables that are less than three months past due are not considered impaired unless there are specific financial or commercial reasons that lead management to conclude that the customer will default. Older debts are considered to be impaired unless there is sufficient evidence to the contrary that they will be settled. The amount of the provision is the difference between the asset's carrying value and the present value of the estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.

 

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other cash balances.

 

For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above net of outstanding bank overdrafts where there is a right of offset.

 

Share capital

Ordinary Shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.

 

Where Ordinary Shares are acquired for cash and then cancelled, the nominal value of shares is deducted from the value of equity and credited to the Capital Redemption reserve. The amount paid is debited to reserves.

 

Financial liabilities

Debt is measured at fair value, being net proceeds after deduction of directly attributable issue costs, with subsequent measurement at amortised cost with the exception of deferred equity consideration which is categorised as a financial liability at fair value through profit and loss. Debt issue costs are recognised in the income statement over the expected term of such instruments at a constant rate on the carrying amount.

 

Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

Borrowings

Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

 

Borrowing costs are expensed in the consolidated Group income statement under the heading 'finance costs'. Arrangement and facility fees together with bank charges are charged to the income statement under the heading 'administrative expenses'.

 

Current and deferred income tax

The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred tax is recognised, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in respect of all temporary differences except where the deferred tax liability arises from the initial recognition of goodwill in business combinations.

 

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.

 

The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

Provisions

Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably measured.

 

Leases

The Group has adopted IFRS 16 "Leases" for the first time. Details of the effect of this change in accounting policy are shown in note 7.

 

Leases which transfer substantially all the risks and rewards of ownership of an asset are treated as a finance lease. Assets held under finance leases are capitalised at their fair value at the inception of the lease and depreciated over the estimated useful economic life of the asset or lease term if shorter. The finance charges are allocated to the income statement in proportion to the capital amount outstanding.

 

All other leases are classified as operating leases. Assets held under operating leases are capitalised at their fair value at the inception of the lease and depreciated over the estimated useful economic life of the asset or lease term if shorter. The finance charges are allocated to the income statement in proportion to the capital amount outstanding.

 

Deferred consideration

Deferred consideration is recognised at fair value. Where the value of deferred consideration is based on a future event, management estimate the likelihood of the consideration becoming payable. Deferred consideration is discounted to take account of the time value of money at rates based on those used for the valuation of related intangible assets.

 

Employee benefits

(a) Pension obligations

Group companies operate various pension schemes all of which are defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred. The Group has no further obligations once the contributions have been paid.

 

The Group no longer has any defined benefit schemes.

 

(b) Share-based compensation

The Group operates a number of equity-settled, share-based compensation plans, under which the Group receives services from employees and others as consideration for equity instruments of the Group. Equity-settled share-based payments are measured at fair value at the date of grant and are expensed over the vesting period based on the number of instruments that are expected to vest. For plans where vesting conditions are based on share price targets, the fair value at the date of grant reflects these conditions. Where applicable the Group recognises the impact of revisions to original estimates in the income statement, with a corresponding adjustment to equity for equity-settled schemes. Fair values are measured using appropriate valuation models, taking into account the terms and conditions of the awards.

 

When the share-based payment awards are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

 

The Group operates a cash-settled compensation plan for certain senior employees. Cash-settled share-based payments are measured at fair value at the date of grant and are expensed over the expected vesting period. The fair value amount is recognised in liabilities.

 

National insurance on share options

To the extent that the share price at the balance sheet date is greater than the exercise price on options granted under unapproved share-based payment compensation schemes, provision for any National Insurance Contributions has been based on the prevailing rate of National Insurance. The provision is accrued over the performance period attaching to the award.

 

Revenue recognition

The Group adopted IFRS 15 "Revenue from Contracts with Customers" for the first time for the financial year commencing 1 January 2018. Because of the nature of the Group's contracts in the periods, the adoption of IFRS 15 does not result in a material impact on the Group's results in either the current or prior periods.

 

(a) Sale of goods

Revenue for the sale of medical diagnostic instruments and reagents is measured at the fair value of the consideration received or receivable and represents the invoiced value for the sale of the goods net of sales taxes, rebates and discounts. Revenue from the sale of goods is recognised when a Group Company has delivered products to the customer, the customer has accepted delivery of the products and collectability of the related receivables is reasonably assured.

 

(b) Sale of services

Revenue for the sale of services is measured at the fair value of the consideration received or receivable and represents the invoiced value for the sale of the services net of sales taxes, rebates and discounts. Revenue from the sale of services is recognised when a Group Company has completed the services and collectability of the related receivables is reasonably assured.

 

(c) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

 

(d) Royalty and licence income

Royalty and licence income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

 

Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

 

Other income

Other income includes grant income and R & D tax credits passed through income where this is permitted by the relevant jurisdiction.

 

Exceptional items

These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items relating to business combinations, such as acquisition expenses.

 

 

3.              Segmental reporting

 

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources.

 

The principal activity of the Group is the design, development, manufacture and selling of diagnostic instruments, reagents and certain ancillary items. This activity takes place across various countries, such as the USA, Germany, Russia, and the United Kingdom, and as such the Board considers the business primarily from a geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management has concluded that all segments should be maintained and reported.

 

The reportable segments derive their revenue primarily from the manufacture and sale of medical diagnostic equipment. Other services include the servicing and distribution of third party company products under separate distribution agreements.

 

Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, adjusted for exceptional items and share-based payments).

 

 

The segment information provided to the Board for the reportable geographic segments is as follows:

 

Period ended 30 June 2019 unaudited

 

 

Germany

USA

Russia

Other

Total

 

 

£'000

£'000

£'000

£'000

£'000

 

Income statement

 

 

 

 

 

 

Revenue

11,777

11,722

1,305

-

24,804

 

Inter segment

(3,368)

-

-

-

(3,368)

 

External revenue

8,409

11,722

1,305

-

21,436

 

Adjusted EBITDA

3,495

3,676

321

(1,908)

5,584

 

Share-based payment

-

-

-

(573)

(573)

 

Exceptional items

231

-

-

(2)

229

 

EBITDA

3,726

3,676

321

(2,483)

5,240

 

Depreciation

(383)

(209)

(9)

(193)

(794)

 

Amortisation

(414)

-

-

(1,031)

(1,445)

 

Operating profit/(loss)

2,929

3,467

312

(3,707)

3,001

 

Net finance costs

(10)

-

14

(217)

(213)

 

Income tax

(299)

(265)

(66)

(162)

(792)

 

Profit/(loss) for the period

2,620

3,202

260

(4,086)

1,996

 

Segment assets

 

 

 

 

 

 

Operating assets

40,258

25,941

583

22,448

89,230

 

Inter segment assets

(108)

-

-

(16,747)

(16,855)

 

External operating assets

40,150

25,941

583

5,701

72,375

 

Cash and cash equivalents

4,193

3,798

872

3,886

12,749

 

Total assets

44,343

29,739

1,455

9,587

85,124

 

Segment liabilities

 

 

 

 

 

 

Operating liabilities

10,545

16,396

198

7,794

34,933

 

Inter segment liabilities

(4,701)

(12,154)

-

-

(16,855)

 

External operating liabilities

5,844

4,242

198

7,794

18,078

 

Borrowings

971

-

-

-

971

 

Total liabilities

6,815

4,242

198

7,794

19,049

 

Other segmental information

 

 

 

 

 

 

Non-current assets - PPE

6,099

4,444

64

1,769

12,376

 

Non-current assets - Right-of-use assets

134

315

6

362

817

 

Non-current assets - Intangibles

27,184

13,212

99

264

40,759

 

Intangible assets -additions

355

25

-

-

380

 

PPE - additions

318

157

-

235

710

 

Right-of-use assets - additions

134

315

6

362

817

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 2018 audited

 

Germany

USA

Russia

Other

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

Income statement

 

 

 

 

 

Revenue

21,937

23,478

2,687

5

48,107

Inter segment

(5,564)

-

-

-

(5,564)

External revenue

16,373

23,478

2,687

5

42,543

Adjusted EBITDA*

6,291

7,824

762

(4,202)

10,675

Share-based payment

-

-

-

(939)

(939)

Exceptional items

(580)

97

-

6,937

6,454

EBITDA

5,711

7,921

762

1,796

16,190

Depreciation

(847)

(271)

(24)

(16)

(1,158)

Amortisation

(2,137)

(1,096)

(13)

413

(2,833)

Operating profit

2,727

6,554

725

2,193

12,199

Net finance costs

(24)

-

15

(25)

(34)

Income tax

(327)

(1,064)

(170)

(305)

(1,866)

Profit for the year

2,376

5,490

570

1,863

10,299

Segment assets

 

 

 

 

 

Operating assets

38,933

25,849

463

35,101

100,346

Inter-segment assets

(99)

-

-

(29,149)

(29,248)

External operating assets

38,834

25,849

463

5,952

71,098

Cash and cash equivalents

2,980

2,749

698

3,855

10,282

Total assets

41,814

28,598

1,161

9,807

81,380

Segment liabilities

 

 

 

 

 

Operating liabilities

10,167

17,008

129

18,540

45,844

Inter-segment liabilities

(5,000)

(12,093)

-

(12,155)

(29,248)

External operating liabilities

5,167

4,915

129

6,385

16,596

Borrowings

880

-

-

-

880

Total liabilities

6,047

4,915

129

6,385

17,476

Other segmental information

 

 

 

 

 

Non-current assets - PPE

6,204

4,779

73

1,413

12,469

Non-current assets - Intangibles

27,026

13,638

91

1,018

41,773

Intangible assets -additions

506

126

-

-

632

PPE - additions

501

659

47

13

1,220

 

 

 

 

 

Period ended 30 June 2018 unaudited

 

Germany

USA

Russia

Other

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

Income statement

 

 

 

 

 

Revenue

10,473

11,213

1,197

5

22,888

Inter segment

(2,531)

-

-

-

(2,531)

External revenue

7,942

11,213

1,197

5

20,357

Adjusted EBITDA*

2,965

3,717

307

(2,092)

4,897

Share-based payment

-

-

-

(1,291)

(1,291)

Exceptional items

(446)

95

-

644

293

EBITDA

2,519

3,812

307

(2,739)

3,899

Depreciation

(399)

(137)

(13)

(10)

(559)

Amortisation

(336)

-

-

(1,091)

(1,427)

Operating profit/(loss)

1,784

3,675

294

(3,840)

1,913

Net finance costs

(5)

-

7

(210)

(199)

Income tax

67

(538)

(110)

(98)

(679)

Profit/(loss) for the year - continuing

1,846

3,137

191

(4,139)

1,035

Loss associated with available-for-sale assets

-

-

-

(288)

(288)

Profit/(loss) for the year

1,846

3,137

191

(4,427)

747

Segment assets

 

 

 

 

 

Operating assets

40,552

24,985

484

25,205

91,226

Inter-segment assets

(86)

-

-

(22,499)

(22,585)

External operating assets

40,466

24,985

484

2,706

68,641

Cash and cash equivalents

3,140

4,264

801

1,720

9,925

Total assets

43,606

29,249

1,285

4,426

78,566

Segment liabilities

 

 

 

 

 

Operating liabilities

12,465

19,911

179

6,415

38,970

Inter-segment liabilities

(7,585)

(15,000)

-

-

(22,585)

External operating liabilities

4,880

4,911

179

6,415

16,385

Borrowings

1,005

-

-

98

1,103

Total liabilities

5,885

4,911

179

6,513

17,488

Other segmental information

 

 

 

 

 

Non-current assets - PPE

6,522

4,446

88

1,273

12,329

Non-current assets - Intangibles

27,767

13,477

98

1,282

42,624

Intangible assets -additions

185

62

-

-

247

PPE - additions

325

334

50

3

712

 

*       Adjusted EBITDA represents earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments
 

'Other' primarily relates to the holding company and head office costs.

 

 

 

Disclosure of Group revenues by geographic location

 

 

Unaudited

6 months

ended 30

June 2019

 

Unaudited

6 months

ended 30

June 2018

 

Audited

Year ended

31 December 2018

 

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

Americas

 

 

 

 

 

 

United States of America

 

9,308

 

8,516

 

18,253

Rest of Americas

 

1,648

 

1,828

 

3,925

Europe, Middles East and Africa (EMEA)

 

 

 

 

 

 

Germany

 

3,126

 

3,090

 

6,208

United Kingdom

 

231

 

135

 

324

Rest of Europe

 

1,810

 

1,869

 

3,583

Russia

 

1,305

 

1,198

 

2,687

Middle East

 

704

 

815

 

1,467

Africa

 

1,042

 

427

 

1,229

Rest of World

 

 

 

 

 

 

China

 

361

 

427

 

994

Rest of Asia

 

1,847

 

1,989

 

3,751

New Zealand/Australia

 

54

 

63

 

122

Total Revenue

 

21,436

 

20,357

 

42,543

 

 

 

4.              Exceptional items

 

Included within administration expenses and cost of sales are exceptional items as shown below:

 

 

 

Unaudited 6 months ended 30 June 2019

 

Unaudited 6 months ended 30 June 2018

 

Audited year ended 31 December 2018

 

Note

£000

 

£000

 

£000

 

 

 

 

 

 

 

Exceptional items include:

 

 

 

 

 

 

- Business reorganisation costs

a

(8)

 

(9)

 

(120)

- Warranty claim

b

237

 

207

 

31

- Damages awarded

c

-

 

95

 

97

- A Webb loan

d

-

 

-

 

90

- Renalytix

f

-

 

-

 

6,356

Exceptional items

 

229

 

293

 

6,454

 

(a)             Costs associated with the reorganisation of the business

(b)             Warranty claim in relation to the acquisition of EKF-diagnostic GmbH

(c)              Damages awarded as a result of litigation brought against a customer

 

5.             Income tax

 

 

 

Unaudited

6 months

ended 30

June 2019

 

Unaudited

6 months

ended 30

June 2018

 

Audited

Year ended

31 December 2018

 

 

£000

 

£000

 

£000

Current tax

 

 

 

 

 

 

Current tax on profit/loss for the period

 

(782)

 

(780)

 

2,248

Adjustments for prior periods

 

(274)

 

-

 

5

Total current tax

 

(1,056)

 

(780)

 

2,253

 

 

 

 

 

 

 

Deferred tax

 

 

 

 

 

 

Origination and reversal of temporary differences

 

264

 

101

 

(387)

Total deferred tax

 

264

 

101

 

(387)

Income tax (charge)/credit

 

(792)

 

(679)

 

1,866

 

6.             Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the period.

 

Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares outstanding assuming conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary share, being share options.

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited year ended 31 December 2018

 

6 months ended 30 June 2019

6 months ended 30 June 2018

 

 

 

£'000

 

£'000

 

£'000

Profit attributable to owners of the parent

 

 

1,326

 

956

 

10,110

Weighted average number of ordinary shares in issue

 

 

454,093,227

 

 

457,554,636

 

457,207,272

Effect of dilutive potential ordinary shares

 

 

4,339,557

 

4,228,348

 

4,282,345

Weighted average number of ordinary shares - diluted

 

 

458,432,784

 

 

461,782,984

 

461,489,617

 

 

 

 

 

 

 

 

 

 

 

Pence

 

Pence

 

Pence

Basic

 

 

 

 

 

 

 

From continuing operations

 

 

0.29

 

0.21

 

2.21

Share of loss associated with available-for-sale assets

 

 

-

 

(0.06)

 

-

Profit per share

 

 

0.29

 

0.15

 

2.21

 

 

 

 

 

 

 

 

 

 

 

Pence

 

Pence

 

Pence

Diluted

 

 

 

 

 

 

 

From continuing operations

 

 

0.29

 

0.21

 

2.19

Share of loss associated with available-for-sale assets

 

 

-

 

(0.06)

 

-

Profit per share

 

 

0.29

 

0.15

 

2.19

 

7.             Change in accounting policies

 

The Group has adopted IFRS 16 from 1 January 2019 but it has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.

 

Adjustments recognised on adoption of IFRS 16

 

On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17, 'Leases.' The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 0%.

 

 

 

2019

 

 

£000

 

 

 

Operating lease commitments disclosed as at 31 December 2018

 

663

Adjustments

 

299

Lease liability recognised as at 1 January 2019

 

962

  Of which are:

Current lease liabilities

 

358

Non-current lease liabilities

 

604

Lease liability recognised as at 1 January 2019

 

962

 

 

Right-of-use assets

 

Right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

 

The recognised right-of-use assets relate to the following types of asset:

 

 

 

 30 June 2019

 

 

1 January 2019

 

 

£000

 

£000

Properties

 

670

 

763

Equipment

 

69

 

99

Motor vehicles

 

 

100

Total right-of-use

 

 

962

 

 

 

 

 

 

The change in accounting policy affected the following items in the balance sheet on 1 January 2019:

·     Right-of-use assets - increase by £962,000

·     Lease liabilities - increase by £962,000

Adjustment recognised on adoption of IFRS 16

 

Practical expedients applied

In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:

 

·     the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

·     reliance on previous assessments of whether leases are onerous;

·     the accounting for operating leases, with a remaining lease term of less than 12 months as at 1 January 2019, as short-term leases;

·     the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and

·     the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The group has also elected not to reassess whether a contract is or contains a lease at the date of initial application, Instead, for contracts entered into before the transition date, the group relied on its assessment made in applying IAS 17 and IFRIC 4, 'Determining whether an Arrangement contains a Lease'.

 

 

 

 

8.             Intangible Fixed Assets

Group

 

 

 

Goodwill
£'000

 

Trademarks trade names & licences

£'000

Customer relationships

£'000

 

Trade secrets

£'000

 

Develop-ment costs

£'000

 

 

Total

£'000

Cost

 

 

 

 

 

 

At 1 January 2018

26,999

3,169

15,721

18,987

9,210

74,086

Additions

-

59

-

-

187

246

Elimination

-

-

-

-

86

86

Exchange differences

73

(151)

142

(32)

141

173

At 30 June 2018

27,072

3,077

15,863

18,955

9,624

74,591

Additions

-

14

-

-

372

386

Elimination

-

-

-

-

(86)

(86)

Disposals

-

-

-

-

(646)

(646)

Exchange differences

471

166

431

204

98

1,370

At 31 December 2018

27,543

3,257

16,294

19,159

9,362

75,615

Additions

-

197

-

-

183

380

Reclassification/transfer

-

-

-

-

-

-

Exchange differences

21

(6)

82

(24)

(15)

58

At 30 June 2019

27,564

3,448

16,376

19,135

9,530

76,053

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

At 1 January 2018

2,603

2,174

7,881

11,672

6,156

30,486

Exchange differences

(5)

(40)

48

(17)

(18)

(32)

Reclassification/transfer

-

-

-

-

86

86

Charge for the period

-

140

656

452

179

1,427

At 30 June 2018

2,598

2,274

8,585

12,107

6,403

31,967

Exchange differences

33

22

214

108

178

555

Charge for the period

-

200

690

476

40

1,406

Reclassification/transfer

-

-

-

-

(86)

(86)

At 31 December 2018

2,631

2,496

9,489

12,691

6,535

33,842

Exchange differences

-

(18)

58

(13)

(20)

7

Reclassification/transfer

-

-

-

-

-

-

Charge for the period

-

171

664

459

151

1,445

At 30 June 2019

2,631

2,649

10,211

13,137

6,666

35,294

                       

 

 

Net book value

 

 

 

 

 

 

 

30 June 2019

24,933

799

6,165

5,998

2,864

40,759

 

31 December 2018

24,912

761

6,805

6,468

2,827

41,773

 

30 June 2018

24,474

803

7,279

6,848

3,220

42,624

 

                         
 

 

8.            Dividends

 

No dividends to shareholders of the holding company were provided or paid during the six months to 30 June 2019 (six months to 30 June 2018 and year to 31 December 2018: both £nil). In light of the continued strong cash generation, the Board now intends to recommend a dividend of 1p per share in respect of the financial year ended 2019 which will be subject to shareholder approval at the next Annual General Meeting ("AGM") to be held in H1 2020.

 

9.            Availability of this announcement

 

This announcement is available from the Company's website, www.ekfdiagnostics.com. If you would like to receive a hard copy of the interim report,  please contact the EKF Diagnostics Holdings plc offices on +44 (0) 29 2071 0570 to request a copy.

 

 


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