RNS Number : 0564H
EKF Diagnostics Holdings PLC
23 May 2011
 



EKF DIAGNOSTICS HOLDINGS PLC (the 'Company' or 'Group')

 

Preliminary unaudited financial statements for the year ended 31 December 2010

 

EKF Diagnostics Holdings Plc, (AIM: EKF) the AIM listed point-of-care diagnostics business, announces its unaudited preliminary results for the year ended 31 December 2010.

 

Highlights:

·     Change of strategy during the 2010 financial year to build a Group focused on the in vitro diagnostics industry. This has been progressed through the following transactions completed during the period:

-  Acquisition in July 2010 of EKF Diagnostic Gmbh ("EKF") for total consideration of £11.91 million

-  Further complementary acquisitions of Quotient Diagnostics Limited and Argutus Medical Limited for   

   a total maximum consideration of £7.59 million

-  Disposal of the legacy Admiral Sportswear business for a total consideration of £1.86 million

 

·     Group revenue (since the acquisition of EKF): £6.48 million

·     EBITDA loss from continuing activities: £(1.12) million

·     Adjusted EBITDA from continuing activities (excluding share based payments (£0.15 million) and exceptional items (£1.92 million)): £0.95 million

·     Cash at bank at 31 December 2010: £3.19 million

 

Post Balance sheet events announced today:

·     Proposed acquisition of Stanbio Laboratory, LP for a maximum consideration of $25.5 million (£15.7 million)

·     Distribution agreement with Alere, Inc. for the distribution of EKF's Hemo_Control device

 

David Evans, Executive Chairman of EKF, said:

"Today's announcements, coupled with the acquisitions we have already completed and integrated within the Group, show that we have made very significant progress towards our goal of building a successful, profitable, international IVD business. During the remainder of 2011 we shall be concentrating on the successful integration of the Stanbio business and on continuing to drive the performance of the existing businesses. I am pleased that progress to date in 2011 has been very strong with revenues up 28% in the first quarter when compared to the equivalent period of 2010. We will also continue to seek acquisition targets which we believe will complement our existing businesses and bring long term value to shareholders."

 

Enquiries:

EKF Diagnostics Holdings plc     


David Evans, Executive Chairman

Mob: 07740 084452

Julian Baines, CEO                                        

Mob: 07788 420 859

Paul Foulger, FD          

Tel: 020 7823 1733



Matrix Corporate Capital LLP (Joint Broker)

Tel: 020 3206 7000

Robert Naylor / Stephen Waterman / Jonathan Gosling




Zeus Capital (Nominated Adviser and Joint Broker)           

Tel: 0161 831 1512

Ross Andrews / Tom Rowley




Walbrook PR                                                  

Tel: 020 7933 8780 or Mob: 07980 541 893

Paul McManus                                               

paul.mcmanus@walbrookpr.com

 

EKF will host a conference call for analysts at 8am for further details please contact Walbrook PR

 

Chairman's Statement

 

I am delighted to present to you the inaugural results of EKF Diagnostics Holdings plc in its new form. Since the change in strategy of the former International Brand Licensing Plc was agreed by shareholders on 4 January 2010, we have completed some important steps towards our goals. Further significant progress has been made with the announcement today of the agreed acquisition of Stanbio Laboratory LP ('Stanbio'), which adds distribution capabilities in the critical US market, and of a distribution contract with Alere, Inc., one of the world's largest point of care businesses.

 

Strategy

The agreed new strategy is to build a group focused on the in vitro diagnostics industry, through acquisition and subsequent organic growth. In vitro diagnostic ("IVD") medical devices are used for the examination of specimen samples taken from the human body in order to diagnose patients. In particular, IVD tests are used in point of care testing and self-testing. The initial aim is to focus on applications which will benefit most from the migration of routine diagnostic testing from the clinical laboratory to the point of care, targeting businesses with a proven product record, significant intellectual property and manufacturing expertise.

 

The Board has a wealth of experience in the IVD market and a strong track record of delivering significant returns to the shareholders of companies in which they have been directors.

 

Overview of developments

 

Disposal of legacy business

During the year we announced the completion of the disposal of the legacy Admiral Sportswear business for a total consideration of £1.86m of which £1.22m was unpaid at the year end. The proceeds are being used to fund the continuing operations of the Group.

 

Progress with IVD strategy

 

EKF Diagnostic Gmbh

On 15 June 2010 we announced the acquisition of EKF-diagnostic Gmbh ("EKF") for a total consideration of €14.32m (£11.91m). Alongside this we announced the change of the name of the holding company. EKF, based in Barleben, Germany, was founded in 1990 and focuses on the development, manufacture and selling of diagnostic instruments and reagents to clinical and research laboratories, doctors' offices and sports medicine testing sites worldwide. EKF focuses on diabetes and anaemia testing, two of the main segments of the point of care market. It is an established, profitable and cash generative business within the diagnostic devices industry and has sales and distribution channels into over 65 countries (including the key markets of the US, Europe and Russia). It has its head office, sales service and manufacturing operations and a research & development centre in Germany; sales, service and manufacturing operations in Poland; and owns 60% of its sales and service operation in Russia. EKF offers a strong base for the future growth of the business and good distribution in the EU.

 

Quotient

The completion of the acquisition of Quotient Diagnostics Limited ("Quotient") for a total consideration of £5.41m was announced on 4 October 2010. Quotient, formed in 2003 and based in Walton-on Thames, Surrey, has the worldwide rights to a patented fluorescent quenching technique for the measurement of glycated haemoglobin that allows for a simple and cheap diagnostic test for monitoring the treatment of diabetes. Quotient has developed Quo-Test, a low cost solid-state optoelectronic instrument which utilises a low cost disposable cartridge containing reagent, which it sells through a number of distributors. Quo-Test is a platform which can be used for other point of care tests. Quotient has also developed Quo-Lab, a similar product but one which uses simpler cartridges that can be assembled by the end-user, meaning that this machine and cartridges are cheaper and thus more appealing to the developing world.

 

Argutus

On 2 December 2010 we announced the acquisition of Argutus Medical Limited ("Argutus") for a total consideration of £2.18m. Argutus is a world leader in the discovery and development of novel biomarkers of organ injury and, in particular, urinary biomarkers for the early detection of acute kidney damage. Based in Dublin, Argutus was originally a division of Biotrin Holdings Limited and was acquired in July 2008 by its management team and Enterprise Ireland. Prior to acquisition, the business has generated revenue through the sale of its products to clinical trial and research companies. Its focus going forward is on developing point of care tests for both kidney damage and as an indicator of kidney failure by diabetic patients, which is a far larger market.

 

Argutus, along with Quotient, offers the Group access to next generation, high value point of care technologies.

 

Post Balance Sheet events

Today we have announced the acquisition of Stanbio for a maximum consideration of $25.5m (£15.7m). Founded in 1960, Stanbio is an established, profitable US diagnostics business with a strong brand and robust sales growth. The business is based in Boerne, Texas, and supplies clinical diagnostic reagents, blood analysers, haemoglobin analysers, and various other diagnostic products, including a number of rapid point of care tests. Following completion, the acquisition of Stanbio is expected to double the Group's existing revenues. Full details of the acquisition are shown in the circular published today.

 

In addition, and contingent on the completion of the acquisition of Stanbio, we have today announced a major contract for the distribution of our Hemo_Control haemoglobin instrument with Alere, Inc., a major US diagnostics business.

 

Results highlights

Turnover since the acquisition of EKF has totalled £6.48m and we have achieved a gross profit of £3.71m (57% margin). Adjusted EBITDA, which comprises EBITDA loss of £1.12m adjusted to exclude share based payments (£0.15m) and exceptional items (£1.92m) was £0.95m. As a result of these largely one-off costs, a pre-tax loss of £2.09m was incurred.

 

Our balance sheet is strong and we have very little debt. Cash at bank was £3.19m and we had net assets of £23.53m at year end.

 

Outlook

We have had a successful first period in charge. Today's announcements, coupled with the acquisitions we have already completed and integrated within the Group, show that we have made very significant progress towards our goal of building a successful, profitable, international IVD business. During the remainder of 2011 we shall be concentrating on the successful integration of the Stanbio business and on continuing to drive the performance of the existing businesses. I am pleased that progress to date in 2011 has been very strong with revenues up 28% in the first quarter when compared to the equivalent period of 2010. We will also continue to seek acquisition targets which we believe will complement our existing businesses and bring long term value to shareholders.

 

This has been a period of great change for our new employees who have had to cope with the challenge of moving from private ownership to the greater rigour required by a plc. They have shown excellent commitment and flexibility in achieving the progress made to date. Our shareholders have shown great faith in the new management of the Group and have provided strong support. I would like to record my thanks to both of these stakeholders.

 

David Evans

Executive Chairman

 

 

 

 

 

Chief Executive's Review

 

2010 was a turning point in the history of the EKF Group. Following the final disposal of the remaining Admiral business, we have successfully completed the acquisition of three businesses, made excellent headway with integration, and made important progress with our sales and marketing strategy.

 

Operations review

The acquisition of EKF gave us a strong base consisting of sales, distribution, manufacturing and development operations which support three main product lines for the measurement of haemoglobin (Hemo_Control), glucose (BioSens), and  lactate (BioSens and Lactate SCOUT). The Quotient acquisition gave us complementary products for the testing of glycated haemoglobin (Quo-Test and Quo-Lab). Argutus added the development and marketing of biomarkers for the early detection of kidney injury and failure. The Stanbio acquisition announced today will bring with it increased revenues, a high quality customer base, excellent distribution capabilities in the US and South American markets where EKF has not been strong historically, and a range of clinical chemistry and point of care test products.

 

Since the acquisitions we have put considerable resources into the upgrading of the businesses and their integration. In particular, we have introduced a new sales management team, integrated the EKF and Quotient sales teams and refocused the EKF sales effort. While much work still needs to be done, the new team has already made an impact on revenue which has seen organic growth in EKF of 10% over the equivalent pre-acquisition period. They have been tasked with improving the geographical range of EKF's sales especially targeting key European territories such as Italy, France, Spain and the UK. We are also working to improve the marketing of products in the markets where EKF is already strong.

 

In addition, we have invested in increased financial management, appointing a new multi-lingual finance director in EKF and a Group financial controller in the UK. These appointees have concentrated on upgrading systems to meet the needs of an international listed plc.

 

Also following completion of the acquisition of Argutus, their Chief Executive Officer, Cormac Kilty, became Chief Technical Officer, further strengthening the Group's management team.

 

We have committed to projects to expand and upgrade our manufacturing facilities in Germany, Poland and the UK. The upgrades will require capital expenditure during 2011 of £600,000.

 

The performance of the acquired businesses has been strong. As already noted, revenues have improved strongly and this improvement has continued and accelerated in the first quarter of 2011. Highlights have included a major order for over 3,000 Hemo_Control instruments and associated consumables to MINSA (the Health Ministry of Peru). As part of a new distribution agreement Diagnostica Peruana will deliver, install and maintain the Hemo_Control devices as well as providing instrument training to new users. While the consumables supply contract is subject to tender, we are confident that this instrument order will lead to on-going supplies of consumables to MINSA over an extended period because of the special design of the cuvettes required. We have also recently signed up to supply 800 instruments to Tanzania. And today we have announced a distribution agreement, contingent on the acquisition of Stanbio, with Alere, Inc. which is expected to lead to the supply of over 6,000 Hemo_Control instruments and associated consumables over the next three years.

 

In addition, Quotient has been successful in gaining approval from China's Safety for Food and Drugs Administration for its Quo-Test A1C test. With this approval, Quotient has started the promotion, distribution and sale of the Quo-Test A1c Reagent kit on its proprietary Quo-Test platform into the highly important Chinese market.

 

Research and development

EKF has an established product development facility in Leipzig, Germany where 30 research and development employees are divided between hardware and chemistry development. Core technological expertise includes semi-automated clinical analysers that handle liquids, biosensors and cuvettes. Other expertise resides largely in the design of hardware and software that exploits readily available biomarker reagents. Efforts are mainly concentrated on extending the range of tests available on existing platforms. Quotient has a dedicated team who are working on readying the Quo-Lab test for market in 2011. This team is being integrated into the EKF R&D organisation.

 

To date the Argutus business has generated revenue through the sale of its products to clinical trial and research companies. Its focus, going forward, is on providing point of care platform products for both kidney damage and as an indicator of kidney failure by diabetic patients. A third party has been contracted to develop the point of care device with the aim of a product launch in 2012.

 

The acquisition of Stanbio will bring additional new product launches including a number of hand-held devices. In addition we anticipate that their experience in gaining US FDA regulatory approvals will assist in the introduction of Group products into the important US market.

 

The future

We are well positioned for the future with an excellent base from which to build a good and expanding product line, improved sales capabilities and experienced management. There will undoubtedly be challenges ahead but we have a highly capable team which will meet these challenges with enthusiasm.

 

 

 

Julian Baines

Chief Executive Officer

 



 

Finance Director's Review

 

During the year the Group has been transformed from a shell Company with a residual sportswear business into an international diagnostics Group.

 

Turnover

Turnover for the period was £6.48m. This represented organic growth of 10% for EKF over the equivalent period in the previous year.

 

Gross Margin

Gross profit of £3.71m was achieved. This represents a margin on turnover of 57%.

 

Operating costs and profit

Administrative costs have been affected by the increased investment in sales and finance personnel to aid integration. Research and development expenditure was £0.14m. The Group capitalises research and development expenditure only when a successful product launch is probable and otherwise charges expenditure to the Income Statement account immediately. The charge for depreciation and the amortisation of intangibles was £1.17m. Operating loss for the period was £1.93m.

 

Adjusted Earnings before interest, tax and depreciation

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the year was a loss of £1.12m (as set out in Note 2). A more meaningful measure is considered to be Adjusted EBITDA of £0.95m which excludes  the effects of share based payments (£1.52m) and exceptional items (£1.92m).

 

Exceptional items and share based payments

Following a revision to International Financial Reporting Standard 3 "Business combinations", acquisition costs are now expensed immediately. Acquisition related costs expensed during the period were £1.58m. IFRS 3 also requires that inventory within business acquired is uplifted to fair value, resulting in a £0.34m reduction in post-acquisition gross margin. These have both been treated as exceptional costs. Charges for share based payments were £0.15m.

 

Interest

Interest costs for the period were £0.18m. This represents the cost of servicing the small amount of debt acquired within EKF, offset by interest on deposits and the interest element on deferred consideration on acquisition.

 

Non-controlling interest

This represents the non-controlling interest of 40% in the profits of EKF Russia.

 

Loss before tax

The loss before tax was £2.08m. The loss is in line with management expectations and was incurred because of the high level of exceptional items associated with acquisition costs, plus the investments required in the development of the Group.

 

Taxation

Taxation was a credit of £49,000 and represented a percentage rate of 2%. The low rate is as a result of losses that have not been recognised as a deferred tax asset, and the range of corporation tax rates in the countries in which the Group operates.

 

Loss per share and dividend

The basic and diluted loss per share was 2.08p from continuing operations only.

 

The directors do not recommend the payment of a dividend as they believe the Company needs to retain its cash resources at present to fund the future development of the Group. Once it is commercially prudent to declare a dividend, it is the intention of the Board to implement a progressive dividend policy.

 

Balance sheet

The Group had non-current assets at 31 December 2010 of £26.08m. These consist of plant property and equipment of £5.47m, intangible assets of £20.26m, available for sale assets of £0.14m and deferred tax assets of £0.22m. The intangible assets mainly relate to the trade names, customer relationships, trade secrets and goodwill on acquisitions.

 

The Group had cash in hand at 31 December 2010 of £3.19m.

 

The Group's main current assets are inventories totalling £2.98m, and debtors of £3.63m. Current liabilities are £4.97m. Creditors due after one year, which consist principally of deferred consideration on acquisitions of £4.17m and deferred tax liabilities of £2.92m, amounting to £7.48m.

 

Key Performance Indicators ("KPIs")

The Group intends to establish other key performance indicators in due course once the Group has matured sufficiently. The Group does not use and does not at present intend to use non-financial key performance indicators.

 

 

Paul Foulger

Finance Director



 

Consolidated income statement



2010


2009


Notes

£'000


£'000

Continuing operations





Revenue

2

6,483


-

Cost of sales


(2,775)


-

Gross profit


3,708


-

Administrative expenses

3

(6,068)


(596)

Other income


430


-

Operating loss


(1,930)


(596)

  Depreciation and amortisation


(815)


(3)

  Exceptional items

3

(1,919)


(207)

EBITDA before exceptional items


804


(386)

Finance income

4

28


29

Finance costs

4

(187)


(1)

Loss before income tax


(2,089)


(568)

Income tax credit

5

49


75

Loss for the year from continuing operations


(2,040)


(493)

Discontinued operations





(Loss)/profit for the year from discontinued operations

9

(1,372)


290

Loss for the year

2

(3,412)


(203)

Loss attributable to:





Owners of the parent


(3,435)


(203)

Non-controlling interest


23


-



(3,412)


(203)

 

Loss per ordinary share from continuing and discontinued operations attributable to the equity holders of the Company during the year


Pence

Pence

From continuing operations




Basic and diluted

6

(2.08)

(1.44)

From discontinued operations




Basic and diluted

6

(1.40)

0.84

Continuing and Discontinued operations

Basic loss per share

 

6

 

(3.51)

 

(0.59)

 



Consolidated statement of comprehensive income




2010

£'000

2009

£'000






Loss for the year



(3,412)

(203)

Other comprehensive income:





Actuarial loss on pension scheme



(11)

-

Fair value adjustment in respect of available

 for sale financial assets



(6)

(130)

Currency translation differences



705

(218)

Other comprehensive income for the year



688

(348)

Total comprehensive income for the year



(2,724)

(551)






Attributable to:





Owners of the parent



(2,745)

(551)

Non-controlling interest



21

-

Total comprehensive income for the year



(2,724)

(551)

 



Consolidated Balance Sheet



2010

2009



£'000

£'000

Assets




Non-current assets




Property, plant and equipment


5,467

-

Intangible assets


20,260

1,949

Investments in subsidiaries


-

-

Deferred tax assets


217

94

Available-for-sale financial assets


135

141

Total non-current assets


26,079

2,184

Current assets




Inventories


2,983

-

Trade and other receivables


3,625

703

Available-for-sale financial assets


100

473

Cash and cash equivalents


3,192

3,037

Total current assets


9,900

4,213

Total assets


35,979

6,397

Equity attributable to owners




Ordinary shares


1,681

420

Share premium account


23,013

4,077

Other reserve


244

244

Foreign currency reserves


1,972

1,265

Retained earnings


(3,686)

(386)



23,224

5,620

Non-controlling interest


305

-

Total equity


23,529

5,620

Liabilities




Non-current liabilities




Borrowings


309

-

Deferred consideration


4,168

-

Deferred tax liabilites


2,916


Retirement benefit obligation


88

-

Total non-current liabilities


7,481

-

Current liabilities




Trade and other payables


3,969

622

Current income tax liabilities


210

155

Borrowings


229

-

Provisions for other liabilities & charges


561

-

Total current liabilities


4,969

777

Total liabilities


12,450

777

Total equity and liabilities


35,979

6,397

 

 


Consolidated Statement of cash flows



2010

2009


Notes

£'000

£'000

Cash Flow from operating activities




Cash generated from operations

8

(2,268)

(663)

Interest paid


(187)

(1)

Income tax paid


(232)

(12)

Net cash used in operating activities


(2,687)

(676)





Cash flow from investing activities




Acquisition of subsidiary, net of cash acquired

10

(8,463)

-

Purchase of property, plant and

equipment (PPE)


(2,474)

-

Purchase of intangibles


(4)

-

Proceeds from sale of PPE


3

-

Proceeds from sale of intangible assets


1,428

362

Purchase of available-for-sale financial assets


-

(250)

Interest received


28

29

Net cash (used in)/generated by investing activities


(9,482)

141





Cash flow from financing activities




Proceeds from issuance of ordinary shares


14,499

1,071

Repayments of borrowings


(2,496)

-

Net cash generated by financing activities


12,003

1,071





Net (decrease)/increase in cash and cash equivalents


(166)

536

Cash and cash equivalents at beginning of year


3,037

2,501

Exchange gains/(losses) on cash and cash

Equivalents


321

-

Cash and cash equivalents at end of year


3,192

3,037

 



Consolidated Statement of Changes in Shareholders' Equity

 



 

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

As at 1 January 2009


336

3,090

244

1,483

(83)

5,070

-

5,070

Comprehensive income










Loss for the year


-

-

-

-

(203)

(203)

-

(203)

Other comprehensive

income










Fair value adjustment in

respect of available-for-

sale financial assets


-

-

-

-

(130)

(130)

-

(130)

Currency translation

differences


-

-

-

(218)

-

(218)

-

(218)

Total comprehensive

Income


-

-

-

(218)

(333)

(551)

-

(551)

Transactions with

Owners










Proceeds from shares

Issued


84

987

-

-

-

1,071

-

1,071

Share based payments


-

-

-

-

30

30

-

30

At 1 January 2010


420

4,077

244

1,265

(386)

5,620

-

5,620

Comprehensive income










Loss for the year


-

-

-

-

(3,435)

(3,435)

23

(3,412)

Other comprehensive

Income










Actuarial loss on pension


-

-

-

-

(11)

(11)

-

(11)

Fair value adjustment in

respect of available-for-

sale financial assets


-

-

-

-

(6)

(6)

-

(6)

Currency translation

Differences


-

-

-

707

-

707

(2)

705

Total comprehensive

Income


-

-

-

707

(3,452)

(2,745)

21

(2,724)

Transactions with

Owners








 

 


Proceeds from shares

Issued


1,261

18,936

-

-

-

20,197

-

20,197

Share based payments


-

-

-

-

152

152

-

152

Total contributions by and
distributions  to owners


1,261

18,936

-

-

152

20,349

 

-

20,349

Non controlling interest
 on business combinations


-

-

-

-

-

-

 

284

284

At 31 December 2010


1,681

23,013

244

1,972

(3,686)

23,224

305

23,529

 

 



 

Notes to the preliminary financial statements

1.   Basis of preparation

 

a.   EKF Diagnostics Holdings Plc (formerly known as International Brand Licensing plc) is a company incorporated in the United Kingdom. The Company is a public limited company, which is listed on the AIM market of the London Stock Exchange

b.   These financial results do not comprise statutory accounts for the year ended 31 December 2010 within the meaning of Section 434 of the Companies act 2006. Those financial statements have not yet been delivered to the Registrar, nor have the auditors reported on them. Statutory accounts for the year ended 31 December 2009 were approved by the Board of Directors on 10 June 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

c.   This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

d.   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.

 

2.   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 Board and the monthly management reports are used by the Group to make strategic decisions and allocate resources. The key performance measure used by the CODM is EBITDA.

 

During 2010 the Group discontinued its licensing business and disposed of its portfolio of sports and lifestyle brands in order to focus on building a business within the "in vitro" diagnostic devices market place.

 

The principal activity of the Group, following the disposal of the licensing business, is the design, development, manufacture and selling of diagnostic instruments, reagents and certain ancillary products. This activity takes place across various countries, Germany, Poland, Russia, United Kingdom and Ireland, 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 given the recent acquisitions, all segments should be maintained and reported, given potential future growth of the segments.

 

The reportable segments drive their revenue primarily from the manufacture and sale of diagnostic equipment.  Other services include the servicing and distribution of other Company products under separate distribution agreements.

 

The segment information provided to the Board for the reportable segments for the year ended 31 December 2010 is as follows:

 


Germany

UK

Ireland

Poland

Russia

Switzerland

Other

Total







(Discontinued)




£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Income statement









Revenue

10,092

185

50

486

1,478

-

-

12,291

Inter segment

(5,808)

-

-

-

-

-

-

(5,808)

External revenue

4,284

185

50

486

1,478

-

-

6,483

EBITDA

1,044

(91)

(37)

151

18

-

(2,200)

(1,115)

Depreciation

(342)

(11)

(3)

(6)

(3)

-

-

(365)

Amortisation

(304)

(44)

(15)

(64)

(23)

-

-

(450)

Operating profit/(loss)

398

(146)

(55)

81

(8)

-

(2,200)

(1,930)

Net finance costs

(247)

-

-

-

-

-

88

(159)

Income tax

(17)

12

77

(11)

(12)

-

-

49

Discontinued operations

-

-

-

-

-

(1,372)

-

(1,372)

Retained profit/(loss)

134

(134)

22

70

(20)

(1,372)

(2,112)

(3,412)

Segment assets









Operating assets

21,552

6,075

2,183

1,284

688

1,534

9,100

42,415

Inter segment assets

(1,090)

-

-

-

-

(1,344)

(7,194)

(9,628)

External operating assets

20,462

6,075

2,183

1,284

688

190

1,906

32,787

Cash

811

76

202

13

203

112

1,775

3,192

Total assets

21,273

6,151

2,385

1,297

891

302

3,681

35,979

Segment liabilities









Operating liabilities

12,702

1,438

517

304

178

14

6,387

21,540

Inter segment liabilities

(7,473)

(775)

-

(35)

-

464

(1,809)

(9,628)

External operating liabilities

5,229

663

517

269

178

478

4,578

11,912

Borrowings

538

-

-

-

-

-

-

538

Total liabilities

5,767

663

517

269

178

478

4,578

12,450

Other segmental information









Non current assets - PPE

3,378

243

112

56

8

-

1,670

5,467

Non current assets - Intangibles

11,006

5,573

2,111

1,022

548

-

-

20,260

 

Other primarily relates to the Holding company.

  

The segment information provided to the Board for the reportable segments for 2009 changed following the significant change in strategy of the business during 2010. During 2009, the Group's business was attributable to a single segment, being its licensing business, all these operations are considered discontinued. The segment information provided to the Board for the reportable segments for the year ended 31 December 2009 is as follows:


Discontinued

Other

Consolidation

Total


Ops


Adjustments



£'000

£'000

£'000

£'000

Income statement





Revenue

-

-

-

-

EBITDA

-

(593)

-

(593)

Depreciation

-

(3)

-

(3)

Operating profit/(loss)

-

(596)

-

(596)

Net finance costs

-

28

-

28

Discontinued operations

290

-

-

290

Income tax

-

75

-

75

Retained profit/(loss)

290

(493)

-

(203)

Segment assets





Operating assets

-

3,360

-

3,360

Cash

-

3,037

-

3,037

Total assets

-

6,397

-

6,397

Segment liabilities





Operating liabilities

-

777

-

777

Total liabilities

-

777

-

777

Other segmental information





Non current assets - Intangibles

-

1,949

-

1,949


-

1,949

-

1,949

 

Disclosure of Group revenues by geographic location


2010

£'000

2009

£'000

Americas


-

United States of America

888

-

Rest of Americas

1,028

-

Europe, Middle East and Africa (EMEA)


-

Germany

975

-

United Kingdom

45

-

Rest of Europe

1,016

-

Middle East

208

-

Africa

189

-

Rest of World


-

Russia

1,528

-

China

355

-

Asia

224

-

New Zealand / Australia

27

-

Total revenue

6,483

-

  

 

3.   Exceptional items

 

Included within Cost of sales and Administrative expenses are exceptional items as shown below;


 

Note

2010

£'000

2009

£'000

Exceptional items include:




- Transaction costs relating to business combinations

a

1,582

-

- Loss on stock

b

337

-

- Other costs

c

-

207

Exceptional items - continuing


1,919

207

Exceptional items - discontinued

d

364

(362)

 

(a) Transaction costs relating to business combinations - included within administrative costs

     The Group incurred acquisition expenses of £1,582,000 associated with the acquisition of EKF Diagnostic Gmbh, Quotient Diagnostics Limited and Argutus Medical Limited which are included within administrative expenses in the consolidated income statement.

 

(b) Loss on stock - included within Cost of sales

     Under the requirements of IFRS 3 'Business combinations' the value of inventory acquired with the acquisition of EKF Diagnositc Gmbh, Quotient Diagnostics Limited and Argutus Medical Limited was uplifted to its sales value less cost to sell. The post acquisition impact of selling the acquired inventory at its uplifted sales value has been to reduce gross profit by £337,000.

 

 

 

(c) Other costs - included within Administrative costs

     Other costs related to bad debt write-offs (£67,000), future change of strategy costs (£36,000) and termination payments to a director (£104,000).

 

(d) Discontinued exceptional items relate to an impairment charged in 2010 and a profit on sale of intangibles in 2009.

 

 

4.   Finance income and costs


2010

£'000

2009

£'000

Interest expense:



- Bank borrowings

47

- Finance lease liabilities

2

-Net pension finance cost

5

- Interest on other loans

111

- Other interest

22

Finance costs

187

1

Finance income


- Interest income on cash and short term deposits

28

Finance income

28

29




Net finance costs

159

28

 

  

 

5.   Income tax expense


2010

£'000

2009

£'000

Current tax:



Current tax on loss for the year

132

-

Adjustments in respect of prior years

-

(42)

Total current tax

132

(42)

Deferred tax:



Origination and reversal of temporary differences

(181)

(33)

Total deferred tax

(181)

(33)

Income tax credit

(49)

(75)

 

The tax on the Group's loss before tax differs from the theoretical amount that would arise using the standard tax rate applicable to the profits of the consolidated entities as follows:


2010

£'000

2009

£'000

Loss before tax

(2,089)

(568)




Tax calculated at domestic tax rates applicable to UK standard rate of tax of 28%

(585)

(119)

Tax effects of:



- Expenses not deductible for tax purposes

201

86

- Losses carried forward

331


- Adjustment in respect of prior years

-

(42)

- Impact of different tax rates in other jurisdictions

4

-

Tax credit

(49)

(75)

 

6.   Loss per share

 

(a)      Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 


2010

£'000

2009

£'000

Loss attributable to equity holders of the Company

(3,435)

(203)

Loss from continuing operations attributable to equity holders of the Company

(2,040)

(493)

Loss/profit from discontinued operations attributable to equity holders of the Company

(1,372)

290

Weighted average number of ordinary shares in issue

97,800,087

34,293,228

Basic (loss) per share

(3.51) pence

(0.59) pence

Basic (loss) per share from continuing operations

(2.08) pence

(1.44) pence

Basic (loss)/earnings per share from discontinued operations

(1.40) pence

0.84 pence

 

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has three categories of dilutive potential ordinary share: equity based long term incentive plans, equity based bonus incentive plans and share options.

 

Loss from continuing operations is used as the control number to establish whether potential ordinary shares are dilutive or antidilutive. There is no dilutive effect of the long term incentive plan or share options as the Group has made a loss from continuing operations.

 

7.   Dividends

 

There are no dividends paid or proposed by the Company in either year.

 

8.   Cash used from operations


2010

2009


£'000

£'000

Loss before income tax

(2,089)

(568)

Adjustments for:



- Discontinued activities

(1,372)

290

- Depreciation

365

3

- Amortisation

804

-

- Share based payments

152

61

- Loss on disposal of intangibles

414

(361)

- Foreign exchange losses/(gains) on operating activities

(163)

(22)

- Finance costs

159

(28)

Changes in working capital



- Inventories

80

-

- Trade and other receivables

4,554

(173)

- Trade and other payables

(5,172)

135

Net cash used in from the operations

(2,268)

(663)

 

  

9.   Discontinued Operations

 

Analysis of (loss)/profit and cash flows for the year from discontinued operations

The results and cash flows of the discontinued legacy Admiral Sportswear business included in the consolidated income statement and consolidated cash flow statement for 2010 and 2009 are set out below.

 


2010

£'000

2009

£'000

Profit/(loss) from discontinued operations



Revenue

212

256

Operating expenses

(789)

(327)

Exceptional impairment of intangible

(354)

-

Exceptional (loss)/gain on sale of intangible assetss

(414)

362

Taxation

(27)

(1)

(Loss)/profit for the year from discontinued operations

(1,372)

290

Cash flow from discontinued operations



Net cash flow from operating activities

(605)

(72)

Net cash flow from investing activities

1,428

362

Net cash flow

823

290

 

 

10.  Acquisitions

 

(a) Acquisition of EKF-diagnostic Gmbh

 

On 2 July 2010, the Group acquired 100% of the share capital of EKF-diagnostic Gmbh, a Group focused on the design, development, manufacture and sale of diagnostic instruments, reagents and ancillary products.

 

The goodwill of £4,535,000 arising from the acquisition is attributable to the expected future profitability of the acquired business and synergies expected to arrive from the incorporation of the business within the Group.

 

None of the goodwill recognised is expected to be deductible for income tax purposes.  The following table summarises the consideration paid for EKF-diagnostic Gmbh and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.


£'000

Consideration at 2 July 2010


Cash

9,405

Deferred consideration  (16,732,482 ordinary shares - to be issued on second anniversary)

2,505

Total consideration

11,910

Acquisition-related costs (included in operating expenses in the consolidated income statement for the year ended 31 December 2010)

1,425

Recognised amounts of identifiable assets acquired and liabilities assumed


Cash and cash equivalents

664

Property, plant and equipment

3,011

Licences - included in intangibles

13

Trade names - included in intangibles 

380

Customer relations -  included in intangibles 

1,600

Trade secrets - included in intangibles 

5,820

Inventories

2,738

Trade and other receivables

7,056

Trade and other payables

(7,748)

Retirement benefit obligations - pensions

(156)

Borrowings

(2,756)

Taxation

(306)

Provisions and contingent liability 

(606)

Deferred tax liabilities

(2,106)

Deferred tax assets

55

Non-controlling interest - Russia

(284)

Total identifiable net assets

7,375

Goodwill

4,535

 

 

The fair value of the 16,732,482 ordinary shares to be issued on the second anniversary of the acquisition, as part of the consideration paid for EKF-diagnostic Gmbh was based on the published share price on 2 July 2010. 

 

The fair value of trade and other receivables is £7,056,000.  The gross contractual amount for trade and other receivables is £7,268,000 of which £212,000 is expected to be uncollectable.

 

The fair value of inventories is £2,738,000.  Finished goods and work in progress inventories have been uplifted by £337,000 to sales value less cost to complete and cost to sell, after taking into account a £177,000 fair value provision against old and obsolete inventory.

 

The revenue included in the consolidated statement of comprehensive income since 2 July 2010 contributed by EKF-diagnostic Gmbh was £6,248,000. EKF-diagnostic Gmbh also contributed profit of £584,000 over the same period.

 

Had EKF-diagnostic Gmbh been consolidated from 1 January 2010, the consolidated statement of comprehensive income would show revenue of £10,632,000 and profit of £797,000.

 

 (b) Acquisition of Quotient Diagnostics Limited

 

On 23 September 2010, the Group acquired 100% of the share capital of Quotient Diagnostics Limited, a Company focused on the design, development, manufacture and sale of diagnostic instruments and ancillary products.

 

The goodwill of £3,390,000 arising from the acquisition is attributable to the expected future profitability of the acquired business and synergies expected to arrive from being part of a larger medical diagnostic Group.

 

None of the goodwill recognised is expected to be deductible for income tax purposes.  The following table summarises the consideration paid for Quotient Diagnostics Limited and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.

 


£'000

Consideration at 23 September 2010


Equity instruments (15,979,766 ordinary shares)

3,516

Contingent consideration

1,643

Total consideration

5,159

Acquisition-related costs (included in operating expenses in the consolidated income statement for the year ended 31 December 2010)

94

Recognised amounts of identifiable assets acquired and liabilities assumed


Cash and cash equivalents

59

Property, plant and equipment

115

Trade secrets - included in intangibles   

2,300

Inventories

263

Trade and other receivables

220

Trade and other payables

(169)

Borrowings

(398)

Deferred tax liabilities

(621)

Total identifiable net assets

1,769

Goodwill

3,390

 

The fair value of the 15,979,766 ordinary shares issued as part of the consideration paid for Quotient Diagnostics Limited was based on the published share price on 23 September 2010. 

 

The contingent consideration arrangement requires the Group to pay the former owners of Quotient Diagnostics Limited additional consideration agreed at a maximum of £1,900,000 that is directly linked to the number of quo test and quo lab systems sold over a 42 month period post acquisition.

 

The fair value of the contingent consideration of £1,643,000 was estimated based on the maximum potential pay out, discounted at a rate of 5%.

 

The revenue included in the consolidated statement of comprehensive income since 23 September 2010 contributed by Quotient Diagnostics Limited was £185,000. Quotient Diagnostics Limited also contributed a loss of £207,000 over the same period.

 

Had Quotient Diagnostics Limited been consolidated from 1 January 2010, the consolidated statement of comprehensive income would show revenue of £442,000 and loss of £1,072,000.

 

 (c) Acquisition of Argutus Medical Limited

 

On 2 December 2010, the Group acquired 100% of the share capital of Argutus Medical Limited, a Company focused on developing and commercialising laboratory test kits for identifying early signs of injury to the kidney, liver and pancreas.

 

The goodwill of £1,041,000 arising from the acquisition is attributable to synergies anticipated to be reduced from the incorporation of the business within an enlarged medical diagnostic Group.

 

None of the goodwill recognised is expected to be deductible for income tax purposes.  The following table summarises the consideration paid for Argutus Medical Limited and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.

 


£'000

Consideration at 2 December 2010


Equity instruments (9,731,387 ordinary shares)

2,183

Total consideration

2,183

Acquisition-related costs (included in operating expenses in the consolidated income statement for the year ended 31 December 2010)

63

Recognised amounts of identifiable assets acquired and liabilities assumed


Cash and cash equivalents

219

Property, plant and equipment

113

Trade secrets - included in intangibles

980

Customer relations - included in intangibles 

140

Inventories

62

Trade and other receivables

201

Trade and other payables

(422)

Taxation

151

Deferred tax liabilities

(302)

Total identifiable net assets

1,142

Goodwill

1,041

 

The fair value of the 9,731,387 ordinary shares issued as part of the consideration paid for Argutus Medical Limited was based on the published share price on 2 December 2010.

 

The revenue included in the consolidated statement of comprehensive income since 2 December 2010 contributed by Argutus Medical Limited was £50,000. Argutus Medical Limited also contributed profit of £35,000 over the same period.

 

Had Argutus Medical Limited been consolidated from 1 January 2010, the consolidated statement of comprehensive income would show revenue of £723,000 and loss of £508,000.

 

11.  Post balance sheet events

 

As of the date of these financial statements EKF Diagnostics Holdings plc acquired the share capital of Stanbio Laboratory LP, a supplier of point of care diagnostic devices, for a maximum consideration of $25.5m (£15.7m).

 

EKF Diagnostic Holdings plc have also completed a major distribution contract with Alere Inc for the Group's Hemo_Control haemoglobin instrument.

 

12.  Annual Report & Accounts

 

Copies of the audited Annual Report & Accounts for the year ended 31 December 2010 will be posted to shareholders and may also be obtained from the Company's registered office at 14 Kinnerton Place South, London, SW1X 8EH


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR SEAFUEFFSEII
admin Final Results 4249602 A Mon, 05/23/2011 - 07:00 Results and Trading Reports EKF