RNS Number : 1816B
EKF Diagnostics Holdings PLC
19 September 2018
 

EKF Diagnostics Holdings plc

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

 

Half Yearly 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 2018. Despite currency headwinds the Company announces earnings marginally ahead of management expectations and continued strong cash generation.

 

Financial Highlights

·     Revenues in-line year-on-year on a constant currency basis at £21.20m (H1 2017: £21.50m)

-      Reported revenues of £20.36m, impacted by exchange rates

·     Adjusted EBITDA* up 7.0% to £4.90m (H1 2017: £4.58m)

·     Net profit of £0.75m generated (H1 2017: Net loss £0.2m)

·     Strong cash generation from operations of £4.35m (H1 2017: £5.00m)

·     Significant capex investments incl. Elkhart enzyme facility of £0.71m and RenalytixAI of £0.33m

·     Net cash £8.82m (30 June 2017: net cash of £4.44m) (31 December 2017: net cash of £7.00m)


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

 

Operational Highlights (including post-period developments)

·     DiaSpect Tm has received FDA 510k CLIA clearance

·     OEM contract with McKesson-Surgical Inc. with exclusive rights for distribution of DiaSpect Tm in all US markets except blood banks, driving further US sales growth following expected November 2018 product launch, with substantial revenue and EBITDA contribution expected from this contract in 2019 and onwards

·     Significant investment in our Elkhart enzyme facility to increase capacity

·     Development of Lactate Scout 4.0 for launch in H1 2019 for clinical care and obstetrics

·     Multi-million dollar enzyme contract with Oragenics, Inc., expected to support further US revenue growth over next 2-3 years

·     Exclusive US distribution contract with Asahi Kasei Pharma Corp for FDA-cleared Glycated Albumin products

·     Quo-Test® submitted for FDA clearance

·     Spin out of sTNFR technology through RenalytixAI proceeding, with intention to distribute EKF's residual interest to its shareholders by way of a dividend in specie, conditional inter alia on shareholder approval at a general meeting to be convened in due course

 

Commenting on EKF's outlook, Christopher Mills, Non-Executive Chairman of EKF, said:

"During the first half of 2018, the Group made significant headway in delivering the strategy mentioned at the time of the 2017 results. Despite currency headwinds and reduced revenues following the completion of the Saudi tender, the Group achieved earnings in H1 which were marginally ahead of management expectations. H2 has started well with organic revenue and EBITDA improving on the same period year-on-year.

 

"At the same time we undertook a number of actions to support the future performance of the business:  delaying the launch of DiaSpect Tm in the US which allowed us to complete a significant distribution agreement with McKesson; substantial investment in enlarging our Elkhart facility ahead of revenue ramp-up from our Oragenics, Inc agreement; the development of Lactate Scout 4.0 for launch in H1 2019 for clinical care and obstetrics; signing a distribution agreement for Asahi Kasei Pharma's Glycated Albumin products; and investment in seeking FDA approval for the launch of Quo-Test next year.  We believe that these actions, alongside new contracts recently signed and a strong order book, will lead to further progress over the final months of the current year and beyond."

 

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 / Lauren Kettle / George Tzimas (Corporate Finance)
Tom Salvesen (Corporate Broking)




Walbrook PR Limited 

Tel: +44 (0) 20 7933 8780 or ekf@walbrookpr.com 

Paul McManus / Lianne Cawthorne

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

 



BUSINESS REVIEW

 

EKF has had a successful first half of 2018, with earnings ahead of the comparative period in 2017 and marginally ahead of management expectations. We continued to demonstrate very strong cash generation even after significant investment in our Elkhart enzyme facility and RenalytixAI, which is currently undertaking further market soundings with institutional investors and other qualifying potential investors, ahead of a potential fundraising and admission of its shares to trading on AIM. Good progress has been made in achieving our aims for 2018.

 

Strategy and operations

 

Strategy

 

We have completed the restructuring programme which started in 2016 and are now fully concentrated on growing the business organically. We have made excellent progress during the period on a number of fronts.

 

RenalytixAI

We have formed both a UK and a US entity to form the proposed vehicle for the spin out of our sTNFR (solid tumour necrosis factor) product. Renalytix AI PLC ("RenalytixAI") has confirmed that it intends to talk to investors with the aim of moving towards an initial public offering. EKF is in the process of transferring its licence to certain sTNFR biomarkers to RenalytixAI which already has an exclusive license and collaboration agreement with the Icahn School of Medicine at Mount Sinai in New York, USA. It is anticipated that any equity funding for RenalytixAI would target gross proceeds of approximately £21 - 25 million). The boards of EKF and RenalytixAI currently anticipate a pre-money equity valuation in the range of £43 - 55 million for RenalytixAI. As detailed in the 31 August announcement, it has been confirmed that certain eligible existing EKF shareholders will be able to participate in a restricted offer of new RenalytixAI shares and, irrespective of whether EKF shareholders participate in the separate fundraising, they will in any event have an indirect economic interest in RenalytixAI through their shareholdings in EKFThe Company intends to distribute EKF's residual interest to its shareholders by way of a dividend in specie, conditional inter alia on shareholder approval at a general meeting to be convened in due course.

EKF shareholders should note that the proposed Fundraising process is at a preliminary stage and an initial public offering may or may not be completed by RenalytixAI and, if completed, the valuation achieved and the Fundraising amount may both vary from the ranges currently expected.

 

Operations

 

Point-of-care

i.              Hematology

Hematology sales are slightly lower than in H1 2017 as a result of adverse currency movements. Future prospects have been enhanced by the successful achievement of FDA approval and CLIA waiver for our DiaSpect Tm product, which allows us to sell this product in the USA. In turn this has led to the agreement of an OEM contract with McKesson-Surgical Inc. which gives them exclusive rights for the distribution of DiaSpect Tm in all markets in the United States with the exception of blood banks. McKesson is the largest distributor of hemoglobin products in the US. Whilst these developments resulted in a 6-month delay in the US launch of the DiaSpect Tm we now expect that this will significantly strengthen our position in North America and has the potential to add meaningfully to our sales over the medium term.

 

ii.            Diabetes

Following the ending of the contract in Saudi Arabia, diabetes revenues have reduced by 24.9%. To support our diabetes strategy in the US, we have announced an exclusive distribution contract in the US with Asahi Kasei Pharma Corp for their FDA cleared Glycated Albumin products.

 

Central Laboratory

We have continued to see strong performance from sales of Beta-Hydroxybutyrate (β-HB) Liquicolor reagent, which are up 11% in GBP terms.  Our project to increase capacity and significantly upgrade our main wet chemistry site in Elkhart, Indiana will continue through the second half of the year, but has already borne fruit through the signing of an exclusive, multi-million dollar agreement with Oragenics, Inc., a Florida-based biopharmaceutical company, for the manufacturing of Oragenics' lantibiotic bulk drug substances in the United States. Under the collaboration agreement, EKF Diagnostics will manufacture compounds intended for preclinical and early stage clinical trials.

 

Regulatory Update

 

As well as the successful FDA approval for DiaSpect Tm in the USA, we have submitted our Quo-Test analyser for FDA approval. We have received some feedback and are working to supply supporting information on our submission. In addition, we have received regulatory approval for β-HB in both Mexico and Colombia, as well as registration of DiaSpect Tm in India. We continue to work in our own right and with our partners to extend the span of our registrations.

 

Financial review

 

Revenue

 

Revenue for the period was £20.36m (H1 2017: £21.50m), a decrease of 5.3%. If revenues had been converted at 2017 rates, they would have been £21.20m.

 


Unaudited

6 months ended 30 June 2018

£'000


Unaudited

6 months ended 30 June 2017

£'000


+/- %







Hematology

6,518


6,664


(2.2)%

Diabetes

4,431


5,899


(24.9)%

Central Laboratory

6,557


6,579


(0.3)%

Other

2,851


2,356


+21.0%

Total revenue

20,357


21,498


(5.3)%







As well as benefitting from favourable exchange rates, the H1 2017 comparative revenues benefitted from the contribution of £1.1m of sales from the Saudi tender which was completed in the second half of last year.

 

Excluding these factors shows strong underlying organic growth in like-for-like revenues and we expect to see this pattern of revenue growth continue into the second half compared to H1 2018.

 

Gross profit

 

Gross profit is £10.99m (H1 2017: £11.84m). Gross profit as a percentage of revenue is 54% (H1 2017: 55%). The decrease in gross profit is partly the result of the adverse exchange rates.  In addition, the positive effect of inventory provision releases, which have again been possible because of sales of inventory that had provisions recorded against it, is lower in 2018 than in 2017.

 

Administrative expenses

 

In H1 2018, administrative expenses are £9.10m including research and development (R & D) costs of £0.91m. In addition, further R & D costs of £0.19m have been capitalised. Overall R & D expenses are slightly higher than in H1 2017 as a result of additional expenditure on regulatory approvals. Administrative costs are lower in 2018 partly because of reduced one-off staff costs.

 

 

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

 


Unaudited 6 months ended 30 June 2018


Unaudited 6 months ended 30 June 2017


Audited year ended December 2017

Non-exceptional administration expenditure before R & D capitalisation

8,288


9,718


18,951

Effect of share based payments

1,291


894


1,514

Less R & D capitalised

(187)


(426)


(717)

Effect of exceptional items

(293)


(23)


(1,562)

Total administrative expenses

9,099


10,163


18,186

 

The charge for depreciation of fixed assets and for the amortisation of intangibles is £1.99m (H1 2017: £2.01m).

                                      

 

Operating profit and adjusted earnings before interest tax and depreciation

 

The Group has made an operating profit of £1.91m (H1 2017: £1.70m). We consider a more meaningful measure of underlying performance to be adjusted EBITDA which for H1 2018 was £4.90m (H1 2017: £4.58m). This excludes the effects of share-based payments of £1.29m (H1 2017: £0.89m) and exceptional profits of £0.29m (H1 2017: £0.02m). Share-based payments have risen as result of the increase in share price over the period.

 

Finance costs

 

Finance costs are a little lower at £0.21m (H1 2017: £0.30m). The main charge results from an increase in the fair value of deferred consideration.

 

Tax

 

There is a tax charge of £0.68m (H1 2017: £1.63m). The reduction is mainly the result of a deferred tax charge resulting from the cancellation of share options in the 2017 comparative numbers.

 

Balance sheet

 

We have invested £0.71m (H1 2017: £0.72m) in property plant and equipment. The expenditure is split between additional production equipment in Germany and improvements to our Facility in Elkhart. Further expenditure in Elkhart is planned for the second half of the year. In addition, we invested £0.33m in RenalytixAI in the form of a loan.

 

Intangible assets

 

The value of intangible fixed assets is £42.6m (31 December 2017: £43.60m). The decrease is mainly as a result of amortisation. An amount of £0.25m has been capitalised, most of which is development expenditure.

 

Deferred consideration

The remaining deferred consideration relates to the share-based payment to the former owner of EKF-Diagnostic GmbH. Finalisation of the contracts to conclude the position is still expected to take place in 2018.

 

Cash and working capital

 

The gross cash position at 30 June 2018 was £9.93m (31 Dec 2017: £8.20m), and the Group had net cash of £8.82m (31 Dec 2017: £7.00m).

 

Cash generated from operations in H1 2018 is £4.35m (H1 2017: £5.00m). Trade debtors at period end are higher than at the 2017 year end largely because of timing differences. Inventory continues to reduce, although some of the opportunities we are progressing for later in 2018 and beyond will require an element of inventory building to fulfil contractual requirements. Trade and other payables have increased, mainly because of higher liabilities recognised in respect of cash settled share-based payments.

 

Capital structure

 

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

 

Outlook

During the first half of 2018, the Group made significant headway in delivering the strategy mentioned at the time of the 2017 results. Despite currency headwinds and reduced revenues following the completion of the Saudi tender, the Group achieved earnings in H1 which were marginally ahead of management expectations. H2 has started well with organic revenue and EBITDA improving on the same period year-on-year.

 

At the same time we undertook a number of actions to support the future performance of the business:  delaying the launch of DiaSpect Tm in the US which allowed us to complete a significant distribution agreement with McKesson; substantial investment in enlarging our Elkhart facility ahead of revenue ramp-up from our Oragenics, Inc agreement; the development of Lactate Scout 4.0 for launch in H1 2019 for clinical care and obstetrics; signing a distribution agreement for Asahi Kasei Pharma's Glycated Albumin products; and investment in seeking FDA approval for the launch of Quo-Test next year.  We believe that these actions, alongside new contracts recently signed and a strong order book, will lead to further progress over the final months of the current year and beyond.

 

 

Christopher Mills

Non-Executive Chairman

 

18 September 2018

 



 

 

CONSOLIDATED INCOME STATEMENT







FOR THE 6 MONTHS ENDED 30 JUNE 2018



Unaudited 6 months ended 30 June 2017






Unaudited 6 months ended 30 June 2018



Audited Year ended 31 December 2017


Notes


£'000


£'000


£'000

Continuing operations








Revenue

3


20,357


21,498


41,584

Cost of sales



(9,366)


(9,659)


(18,721)

Gross profit



10,991


11,839


22,863

Administrative expenses



(9,099)


(10,163)


(18,186)

Other income



21


19


52

Operating profit



1,913


1,695


4,729

Depreciation and amortisation



(1,986)


(2,011)


(4,623)

Share-based payments



(1,291)


(894)


(1,514)

Exceptional items

4


293


23


1,562

EBITDA before exceptional items and share based payments



4,897


 

4,577


9,304

Finance income



10


35


53

Finance costs



(209)


(303)


(475)

Profit before income tax



1,714


1,427


4,307

Income tax charge

5


(679)


(1,626)


(1,367)

Profit/(loss) for the period from continuing operations



1,035


(199)


2,940

Loss associated with available-for-sale assets



(288)


-


-

Profit/(loss) for the period



747


(199)


2,940

Profit/(loss) attributable to:








Owners of the parent



668


(267)


2,715

Non-controlling interest



79


68


225




747


(199)


2,940

 

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

 

 

6

 










Pence


Pence


Pence

Basic








From continuing operations



0.21


(0.06)


0.59

Share of loss associated with available-for-sale assets



(0.06)


-


-




0.15


(0.06)


0.59

Diluted








From continuing operations



0.21


(0.06)


0.58

Share of loss associated with available-for-sale assets



(0.06)


-


-




0.15


(0.06)


0.58

 



 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME





FOR THE 6 MONTHS ENDED 30 JUNE 2018



















Unaudited


Unaudited


Audited




6 months ended 30 June 2018


6 months ended 30 June 2017


Year ended 31 December 2017




£'000


£'000


£'000









Profit/(loss) for the period  - continuing



1,035


(199)


2,940

Loss associated with available-for-sale assets



(288)


-


-




747


(199)


2,940

Other comprehensive income:








Currency translation differences



23


(277)


(622)

Other comprehensive gain/(loss) for the period



23


(277)


(622)

Total comprehensive profit/(loss) for the period



770


(476)


2,318









Attributable to:








Owners of the parent



716


(579)


2,096

Non-controlling interests



54


103


222

Total comprehensive profit/(loss) for the period



770


(476)


2,318

 



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION




 

AS AT 30 JUNE 2018







 



Unaudited as at 30 June 2018


Unaudited as at 30 June 2017


Audited as at 31 December 2017

 


Notes

£'000


£'000


£'000

 

Assets







 

Non-current assets







 

Property, plant and equipment


12,329


12,096


12,121

 

Intangible assets

7

42,624


45,165


43,600

 

Investments


152


152


152

 

Deferred tax assets


24


35


34

 

Available-for-sale financial assets


41


-


-

 

Total non-current assets


55,170


57,448


55,907

 








 

Current Assets







 

Inventories


5,563


5,638


5,638

 

Trade and other receivables


7,896


9,366


7,396

 

Deferred tax assets


12


13


13

 

Cash and cash equivalents


9,925


5,719


8,203

 

Total current assets


23,396


20,736


21,250

 

Total assets


78,566


78,184


77,157

 








 

Equity attributable to owners of the parent







 

Share capital


4,576


4,643


4,576

 

Share premium account


-


95,393


-

 

Other reserve


108


41


108

 

Foreign currency reserves


4,940


4,762


4,892

 

Retained earnings


51,062


(46,467)


50,394

 



60,686


58,372


59,970

 

Non-controlling interest


392


410


528

 

Total equity


61,078


58,782


60,498

 








 

Liabilities







 

Non-current liabilities







 

Borrowings


902


1,275


872

 

Deferred tax liability


3,387


4,063


3,467

 

Total non-current liabilities


4,289


5,338


4,339

 








 

Current liabilities







 

Trade and other payables


10,198


10,728


9,429

 

Deferred consideration


1,264


915


1,062

 

Current income tax liabilities


1,500


2,231


1,473

 

Deferred tax liabilities


36


182


23

 

Borrowings


201


8


333

 

Total current liabilities


13,199


14,062


12,320

 

Total liabilities


17,488


19,402


16,659

 

Total equity and liabilities


78,566


78,184


77,157

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS





 

FOR THE 6 MONTHS ENDED 30 JUNE 2018





 


Unaudited 6 months ended 30 June 2018


Unaudited 6 months ended 30 June 2017


 Audited Year to 31 December 2017


£'000


£'000


£'000

Cash flow from operating activities






Profit before income tax

1,714


1,427


4,307

Adjustments for






- Warranty claim

(207)


(223)


(339)

- Depreciation

559


592


1,160

- Amortisation and impairment charges

1,427


1,419


3,463

- Deferred consideration (FV adjust)

202


-


369

- Foreign Exchange

-


-


233

- Profit/(loss) on disposal of assets

-


30


(33)

- Share-based payments

1,291


545


1,510

- Escrow cancellation

-


-


(1,371)

- Net finance costs

(3)


268


53

Changes in working capital






- Inventories

24


286


306

- Trade and other receivables

(40)


(481)


1,535

- Trade and other payables

(615)


1,134


(1,075)

Cash generated by operations

4,352


4,995


10,118

Interest paid

(7)


(68)


(106)

Income tax (paid)/received

(1,077)


141


(959)

Net cash generated by operating activities

3,268


5,068


9,053

Cash flow from investing activities






Purchase of available-for-sale financial assets

(329)


-


-

Purchase of property, plant and equipment (PPE)

(712)


(717)


(1,361)

Purchase of intangibles

(246)


(539)


(852)

Proceeds from sale of PPE

8


119


128

Interest received

10


22


53

Net cash used in investing activities

(1,269)


(1,115)


(2,032)

Cash flow from financing activities






Share buy back

-


-


(241)

New borrowings

-


199


-

Repayment of borrowings

(107)


(4,434)


(4,458)

Dividends paid to non-controlling interests

(190)


(215)


(215)

Cancellation of share options

-


(1,509)


(1,505)

Net cash used in financing activities

(297)


(5,959)


(6,419)

Net increase/(decrease) in cash and cash equivalents

1,702


(2,006)


602

Cash and cash equivalents at beginning of period

8,203


7,874


7,874

Exchange gains/(losses) on cash and cash equivalents

20


(149)


(273)

Cash and cash equivalents at end of period

9,925


5,719


8,203



 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY







FOR THE 6 MONTHS ENDED 30 JUNE 2017








Share Capital

Share Premium

Other Reserve

Foreign Currency Reserve

Retained earnings

Total

Non-controlling interest

Total equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 January 2017

4,643

95,393

41

5,609

(45,236)

60,450

521

60,971

Comprehensive income









Profit for the period

-

-

-

-

(199)

(199)

68

(131)

Other comprehensive income









Currency translation differences

-

-

-

(847)

(68)

(915)

36

(879)

Total comprehensive income

-

-

-

(847)

(267)

(1,114)

104

(1,010)

Transactions with owners

           








Dividends to non-controlling interest

-

-

-

-

-

-

(215)

(215)

Share based payments

-

-

-

-

(964)

(964)

-

(964)

Total contributions by and distributions to owners

-

-

-

-

(964)

(964)

(215)

(1,179)

At 30 June 2017

4,643

95,393

41

4,762

(46,467)

58,372

410

58,782

Comprehensive income








Profit for the period

-

-

-

2,914

2,914

157

3,071

Other comprehensive income








Currency translation differences

-

-

130

166

296

(39)

257

Total comprehensive income

-

-

-

130

3,080

3,210

118

3,328

Transactions with owners








Share Cancellation

(67)



(3,121)

(3,121)

-

(3,121)

Capital reconstruction


(95,393)


95,393

-

-

-

Share based payments

-

-

-

-

1,509

1,509

-

1,509

Total contributions by and distributions to owners

(67)

(95,393)

67

-

93,781

(1,612)

-

(1,612)

At 31 December 2017

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)






668

668

79

747

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 2017

4,576

-

108

4,940

51,062

60,686

392

61,078

 


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 other than RenalytixAI which has been treated as an asset available for sale. 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). 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 2017 and which will form the basis of the 2018 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 15 "Revenue from contracts with customers". The application of IFRS 15 has not resulted in any adjustment to the reported figures.

 

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 2017 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 2018 and 30 June 2017 is unaudited and the twelve months to 31 December 2017 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 available-for-sale financial assets. 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.

 

(b) Available-for-sale financial assets

Available-for-sale assets are non-derivatives that are either designated in this category or not classified as loans and receivables. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

 

Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Company commits to purchase the asset. Assets are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the risk and rewards of ownership have been transferred.

 

Loans and receivables are subsequently carried at amortised cost using the effective interest rate method.

 

Available-for-sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income until the asset is disposed at which time the cumulative gain or loss previously recognised in equity is included in the consolidated income statement for the period. If an available-for-sale investment is determined to be impaired, the cumulative loss previously recognised in equity is included in the income statement for the period.

 

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 initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised cost less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. 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.

 

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

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. Operating lease rentals are charged to the income statement in equal annual amounts over the lease term.

 

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 has 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.

 

 



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

 

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

(201)

(199)

 

Income tax

67

(538)

(110)

(98)

(679)

 

Profit/(loss) for the period - continuing

1,846

3,137

191

(4,139)

1,035

 

Loss associated with available-for-sale assets

-

-

-

(288)

(288)

 

Profit/(loss) for the period

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

 










 

Year ended December 2017 audited


Germany

USA

Russia

Other

Total








£'000

£'000

£'000

£'000

£'000

Income statement






Revenue

21,006

22,856

2,742

4

46,608

Inter segment

(5,024)

-

-

-

(5,024)

External revenue

15,982

22,856

2,742

4

41,584

Adjusted EBITDA*

5,883

7,730

686

(4,995)

9,304

Share based payment

-

-

-

(1,514)

(1,514)

Exceptional items

(207)

19

-

1,750

1,562

EBITDA

5,676

7,749

686

(4,759)

9,352

Depreciation

(808)

(300)

(30)

(22)

(1,160)

Amortisation

(2,673)

(1,036)

(28)

274

(3,463)

Operating profit/(loss)

2,195

6,413

628

(4,507)

4,729

Net finance costs

(48)

14

37

(425)

(422)

Income tax

476

(1,322)

(177)

(344)

(1,367)

Profit/(loss) for the year

2,623

5,105

488

(5,276)

2,940

Segment assets






Operating assets

40,959

24,219

573

26,363

92,114

Inter-segment assets

(168)

-

-

(22,992)

(23,160)

External operating assets

40,791

24,219

573

3,371

68,954

Cash and cash equivalents

3,118

3,376

994

715

8,203

Total assets

43,909

27,595

1,567

4,086

77,157

Segment liabilities






Operating liabilities

13,543

20,467

132

4,472

38,614

Inter-segment liabilities

(8,294)

(14,990)

-

124

(23,160)

External operating liabilities

5,249

5,477

132

4,596

15,454

Borrowings

1,056

-

-

149

1,205

Total liabilities

6,305

5,477

132

4,745

16,659

Other segmental information






Non-current assets - PPE

6,443

4,164

53

1,641

12,121

Non-current assets - Intangibles

28,461

13,638

119

1,382

43,600

Intangible assets -additions

293

484

-

75

852

PPE - additions

1,033

290

23

15

1,361

 

 

 



 

Period ended 30 June 2017 unaudited


Germany

USA

Russia

Other

Total








£'000

£'000

£'000

£'000

£'000

Income statement






Revenue

10,582

11,822

1,140

(2,046)

21,498

Inter segment

(2,046)

-

-

2,046

-

External revenue

8,536

11,822

1,140

-

21,498

Adjusted EBITDA*

2,629

4,056

222

(2,330)

4,577

Share based payment

-

-

-

(894)

(894)

Exceptional items

(184)

-

-

207

23

EBITDA

2,445

4,056

222

(3,017)

3,706

Depreciation

(385)

(157)

(17)

(34)

(593)

Amortisation

(225)

426

-

(1,619)

(1,418)

Operating profit/(loss)

1,835

4,325

205

(4,670)

1,695

Net finance costs

(20)

380

(366)

(272)

(278)

Income tax

(182)

(4)

(1,026)

(404)

(1,616)

Discontinued operations

-

-

-

-

-

Profit/(loss) for the year

1,633

4,701

(1,187)

(5,346)

(199)

Segment assets






Operating assets

50,556

49,206

491

(4,305)

95,948

Inter-segment assets

(201)

-

-

(23,282)

(23,483)

External operating assets

50,355

49,206

491

(27,587)

72,465

Cash and cash equivalents

1,584

2,210

830

1,095

5,719

Total assets

51,939

51,416

1,321

(26,492)

78,184

Segment liabilities






Operating liabilities

14,779

22,099

233

4,491

41,602

Inter-segment liabilities

(8,305)

(15,320)

-

142

(23,483)

External operating liabilities

6,474

6,779

233

4,633

18,119

Borrowings

1,132

151

-

-

1,283

Total liabilities

7,606

6,930

233

4,633

19,402

Other segmental information






Non-current assets - PPE

6,492

4,289

53

1,292

12,096

Non-current assets - Intangibles

29,189

14,457

135

1,384

45,165

Intangible assets -additions

221

67

-

251

539

PPE - additions

566

137

1

13

717

 

*       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 2018


Unaudited

6 months

ended 30

June 2017


Audited

Year ended

31 December 2017



£000


£000


£000








Americas







United States of America


8,516


8,721


17,174

Rest of Americas


1,828


1,524


3,195

Europe, Middles East and Africa (EMEA)







Germany


3,090


3,300


6,016

United Kingdom


135


159


300

Rest of Europe


1,869


1,879


3,423

Russia


1,198


1,140


2,743

Middle East


815


1,679


2,912

Africa


427


962


1,611

Rest of World







China


427


563


915

Rest of Asia


1,989


1,499


3,168

New Zealand/Australia


63


72


127

Total Revenue


20,357


21,498


41,584

 



 

4.              Exceptional items

 

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

 

 



Unaudited 6 months ended 30 June 2018


Unaudited 6 months ended 30 June 2017


Audited year ended 31 December 2017


Note

£000


£000


£000








Exceptional items include:







- Business reorganisation costs

a

(9)


(200)


(183)

- Cancellation of shares

b

-


-


1,406

- Warranty claim

c

207


223


339

- Damages awarded

d

95


-


-








Exceptional items


293


23


1,562

 

 

(a)             Costs associated with the closure of STI, the transfer of production of Quo-Test and Quo-Lab from the UK to Germany, the mothballing of EKF Molecular, and with the closure of the Group's Dublin facility

(b)             Fair value of shares released to EKF by former shareholders of Selah Genomics Inc. which had been issued as part of the consideration for the acquisition of Selah, but held in escrow. These shares have subsequently been cancelled.

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

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

 

5.             Income tax

 



Unaudited

6 months

ended 30

June 2018


Unaudited

6 months

ended 30

June 2017


Audited

Year ended

31 December 2017



£000


£000


£000

Current tax







Current tax on profit/loss for the period


(780)


(1,414)


2,045

Adjustments for prior periods


-


-


(100)

Total current tax


(780)


(1,414)


1,945








Deferred tax







Origination and reversal of temporary differences


101


(212)


(578)

Total deferred tax


101


(212)


(578)

Income tax (charge)/credit


(679)


(1,626)


1,367

 

 

 

 

 

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. The potential shares were not dilutive in H1 2017 as the Group made a loss per share.

 

 

 




Unaudited


Unaudited


Audited year ended 31 December 2017


6 months ended 30 June 2018

6 months ended 30 June 2017




£'000


£'000


£'000

Profit/(loss) attributable to owners of the parent



956


(267)


2,715

Weighted average number of ordinary shares in issue



457,554,636


 

464,262,781


463,098,526

Effect of dilutive potential ordinary shares



4,228,348


9,205,976


6,245,021

Weighted average number of ordinary shares - diluted



461,782,984


 

473,468,757


469,343,547












Pence


Pence


Pence

Basic








From continuing operations



0.21


(0.06)


0.59

Share of loss associated with available-for-sale assets



(0.06)


-


-

Profit/(loss) per share



0.15


(0.06)


0.59












Pence


Pence


Pence

Diluted








From continuing operations


0.21


(0.06)


0.58

Share of loss associated with available-for-sale assets


(0.06)


-


-

Profit/(loss) per share


0.15


(0.06)


0.58



 

 

7. Intangible Fixed Assets

Group

 

 

 

Goodwill
£'000

 

Trademarks trade names & licences

£'000

Non-compete
£'000

Customer relationships

£'000

 

Trade secrets

£'000

 

Develop-ment costs

£'000

 

 

Total

£'000

Cost








At 1 January 2017

27,037

3,052

70

16,376

18,625

8,785

73,945

Additions

-

113

-

-

-

786

899

Exchange differences

37

(45)

-

(354)

255

139

32

At 30 June 2017

27,074

3,120

70

16,022

18,880

9,710

74,876

Additions

-

22

-

-

-

(69)

(47)

Elimination

-

-

(70)

-

-

(434)

(504)

Exchange differences

(75)

27

-

(301)

107

3

(239)

At 31 December 2017

26,999

3,169

-

15,721

18,987

9,210

74,086

Additions

-

59

-

-

-

187

246

Reclassification/transfer

-

-

-

-

-

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









 

Amortisation








 

At 1 January 2017

2,228

1,897

70

6,816

10,594

5,837

27,442

Exchange differences

30

(16)

-

(126)

114

848

850

Charge for the period

-

157

-

662

453

(186)

1,086

Impairment

333

-

-

-

-

-

333

At 30 June 2017

2,591

2,038

70

7,352

11,161

6,499

29,711

Exchange differences

12

20

-

(120)

47

(724)

(765)

Charge for the period

-

116

-

648

464

542

1,770

Elimination

-

-

(70)

-

-

(434)

(504)

Impairment

-

-

-

-

-

274

274

At 31 December 2017

2,603

2,174

-

7,880

11,672

6,157

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

-

8,584

12,107

6,404

31,967

 

 

Net book value








30 June 2018

24,474

803

-

7,279

6,848

3,220

42,624

31 December 2017

24,396

995

-

7,840

7,315

3,054

43,600

30 June 2017

24,483

1,082

-

8,670

7,719

3,211

45,165



 

8.            Dividends

 

No dividends to shareholders of the holding company were provided or paid during the six months to 30 June 2018 (to 30 June 2017 and 31 December 2017: £nil). The Board's policy is to enhance shareholder value mainly through the growth of the Group, and through a programme of share buy backs. The Board will however consider the payment of dividends if and when appropriate.

 

9.            Press

 

A copy of this announcement is available from the Company's website, being 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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