REG - EKF Diagnostics Hldg - Final Results
29/03/2022 07:00
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RNS Number : 3098G EKF Diagnostics Holdings PLC 29 March 2022
This announcement contains inside information
for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part
of UK law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR")
EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Final results
EKF Diagnostics Holdings plc (AIM: EKF), the AIM-listed global diagnostics
business, announces its final results for the year ended 31 December 2021.
Comparative data is provided for the year ended 31 December 2020, unless
otherwise indicated.
Financial Highlights
• Revenue up 25% to £81.8m (2020: £65.3m)
- Core(1) business revenues up 14% to £42.1m (2020: £37.1m)
• Gross profit up 5% to £39.4m (2020: £37.4m)
• Adjusted EBITDA(2) up 4% to £26.5m (2020: £25.5m), reflecting the changes in the mix of Contract Manufacturing related products as well as increased costs in the supply chain.
• Profit before tax of £21.4m (2020: £15.4m), including effect of share-based payments
• Basic earnings per share of 3.47p (2020: 2.45p)
• Cash generated by operating activities of £10.2m (2020: £13.8m)
• Cash at 31 December 2021 of £20.3m (2020: £21.9m), net cash after borrowings of £19.6m (2020: £21.4m)
• Value of investments in marketable securities at year end of £7.6m (2020: £6.5m)
• Cash dividend of £5.1m paid to shareholders, equivalent to 1.1p per ordinary share (2020: 1.0p per share)
Operational Highlights
· Focus on returning core business to pre-pandemic 2019 levels and
positioned for future sustainable growth outside of short-term contract
manufacturing
· New reporting of business division revenues:
- Point-of-Care - up 18% to £27.0m
- Central Laboratory - up 7% to £13.1m
- Life Sciences - up 3% to £2.0m
- Contract Manufacturing - up 38% to £36.3m, driven by COVID sample
collection kits manufacture
- Laboratory Testing Services - ADL Health contributed £1.0m following
acquisition in September 2021
· Significant investment in South Bend, Indiana, facility to expand
EKF Life Sciences' fermentation capabilities
· $10m acquisition of ADL Health, an earnings enhancing and cash
generative CLIA certified testing laboratory
(1) Core business includes Point of Care, Central Laboratory and Life Sciences
(2) Earnings before interest, tax, depreciation and amortisation, share-based
payments and exceptional items, as laid out in the income statement
Christopher Mills, Non-Executive Chairman of EKF, commented:
"2021 was a year that delivered record revenue and adjusted EBITDA
performance. Our key focus remains on implementing our strategy to position
our core business for sustainable future growth, utilising cash generated from
short-term contract manufacturing activities. At the end of 2019, and
pre-pandemic, we had a core business that generated revenues of £43.3m and an
adjusted EBITDA of £12m. These results show that in 2021 our core business
revenues were broadly in-line with these levels and we have already
implemented our investment plans to support growth in our core business in
2022.
"Current trading is strong and we expect to deliver a solid first quarter
performance in line with that of 2021. However, we are adopting a pragmatic
view that we expect there will be a significant reduction in pandemic-related
contract manufacturing activity for the remainder of the year and guiding
analysts accordingly. The new management team is keenly focused on delivering
the growth plan through to 2024 which assumes no benefit from further
COVID-related manufacturing, but instead is targeting sustainable revenue
growth in our expanded core operations."
EKF Diagnostics Holdings plc www.ekfdiagnostics.com (http://www.ekfdiagnostics.com)
Christopher Mills, Non-Executive Chairman Tel: +44 (0)29 2071 0570
Mike Salter, CEO
Marc Davies, CFO
Singer Capital Markets (Nominated Adviser & Joint Broker) Tel: +44 (0)20 7496 3000
Aubrey Powell / George Tzimas / Tom Salvesen
Investec Bank plc (Joint Broker) Tel: +44 (0)20 7597 4000
Gary Clarence / Daniel Adams / Ben Farrow
Walbrook PR Limited Tel: +44 (0)20 7933 8780 or ekf@walbrookpr.com
Paul McManus / Lianne Applegarth Mob: +44 (0)7980 541 893 / +44 (0)7584 391 303
About EKF Diagnostics Holdings plc (www.ekfdiagnostics.com
(http://www.ekfdiagnostics.com) )
EKF is a leading global diagnostics business with custom manufacturing
facilities across sites in the US, UK and Europe for a variety of life science
products. EKF is focussed on the following areas:
Point-of-Care Providing a portfolio of Point-of-Care analysers and consumables, particularly
for use in the area of Hematology and Diabetes, for use in hospital and
research laboratories, doctor's offices, blood banks and for in-field anaemia
screening programmes. EKF has an estimated 80,000 hemoglobin, hematocrit,
HbA1c, glucose and lactate analysers in regular use across more than 100
countries.
Central Laboratory Clinical chemistry, Small lab analysers, Centrifuges
Beta-Hydroxybutyrate (β-HB) LiquiColor, Glycates Albumin, Glycated Serum
Protein, Nitro-tab, Procalcitonin
Life Sciences Enzyme fermentation, Custom products and Bulk fermentation
Contract Manufacturing Bulk formulation, Sample collection kits, Private labelling, Molecular and
forensic kits
Laboratory Services In September 2021, EKF completed the acquisition of Advanced Diagnostic
Laboratory LLC ("ADL Health"), a Texas based testing laboratory certified
under the Clinical Laboratory Improvement Amendments ("CLIA") for high
complexity testing. The laboratory provides testing for a variety of clinical,
forensic and microbiological sample types using a range of analytical
techniques. This acquisition positions EKF as a leading 'one stop' provider of
diagnostic products and services from sample collection to results.
In May 2021, EKF announced its strategy for delivering growth to 2024 and
beyond, and continuing to deliver shareholder value. The strategy for growth
can be summarised as:
• continuing innovation in products and services in Point-of-Care, Central
Laboratory and Life Sciences leveraging new and existing routes to market and
relationships;
• investment in expanded production and kitting capabilities to offer a suite of
diagnostic Contract Manufacturing solutions to third party businesses;
• expansion of CLIA Laboratories Testing offering, building on the acquired
capabilities in ADL Health; and
• identify complementary earnings-enhancing acquisitions with key strategic
value.
EKF will also continue to generate enhanced shareholder value through:
• a progressive dividend policy; and
• its agreement with Mount Sinai Innovation Partners ("MSIP"), which allows us
advanced access to innovative commercial opportunities and where we can build
on the ongoing successes of Renalytix plc, Verici Dx plc and Trellus Health
plc.
Chairman's Statement
2021 has been another record-breaking year for EKF, with revenue increasing by
25% to £81.8m (2020: £65.3m), and core business revenues returning to
pre-pandemic levels. We have delivered another strong earnings performance
with £26.5m of adjusted EBITDA generated in the year (2020: £25.5m) and
basic earnings per share having improved materially at 3.47p per share (2020:
2.45p). Cash levels remain strong with net cash after borrowings of £19.6m
(2020: £21.4m), despite considerable investment (£5.6m compared with 2020:
£2.1m) to drive the future growth of the business and shareholder value
generation outside of COVID-related contract manufacturing revenues.
The story of 2021 has been one of expansion, including laying the foundations
for further growth: building on our successes in 2020; building on the
capabilities that we developed in response to COVID and readying them to be
applied to new areas; building new facilities and structures to support a
return to growth across our core business; and building a new leadership team
to drive the business forward.
It is our current view that COVID-related revenues from contract manufacturing
will materially reduce in 2022, given the rapid step-back in testing
requirements across global markets. COVID-related revenues were always going
to be of indeterminate duration and quantity, so our focus and strategy have
already turned to positioning the business to deliver growth across all core
business areas, whilst redirecting the capabilities developed for COVID into
other activities. We are delighted to report that in 2021 every single product
group delivered year-on-year growth and the expansion of contract development
and manufacture of diagnostic test kits, along with the laboratory acquisition
in the United States, positions us well for capturing further work in other
healthcare applications.
The short-term benefits derived from our COVID-related contract manufacturing
success has allowed the Group to fuel growth by investing in facilities and
equipment for the future, as well as the acquisition of a new business in an
area which not only widens our offering but also brings synergy potential by
adding to the relationships and abilities we have gained over the last two
years. We remain confident in our strategy for growth to 2024 and we believe
that the core business alone has the potential to deliver significant revenue
growth without reliance on COVID in that timescale and we are focussed on
developing a sustainable business that can deliver EBITDA growth over the next
three years.
Growth strategy
In May last year, we announced our strategy for delivering growth to 2024 and
beyond, and continuing to deliver shareholder value. The strategy for growth
has been updated and can be summarised as:
· continuing innovation in products and services in Point-of-Care,
Central Laboratory and Life Sciences leveraging new and existing routes to
market and relationships;
· investment in expanded production and kitting capabilities to offer a
suite of diagnostic Contract Manufacturing solutions to third party
businesses;
· expansion of CLIA Laboratories Testing offering building on the
acquired capabilities in ADL Health; and
· identify complementary earnings-enhancing acquisitions with key
strategic value.
We also believe we can continue to generate enhanced shareholder value
through:
· a progressive dividend policy; and
· our agreement with Mount Sinai Innovation Partners ("MSIP"), which
allows us advanced access to innovative commercial opportunities and where we
can build on the ongoing successes of Renalytix plc, Verici Dx plc and Trellus
Health.
The operational performance of our business, and the COVID-related contract
manufacturing business, are outlined in the Chief Executive's Statement. This
also focusses on the progress we have made in positioning the business for
growth and the execution of that strategy, including our recent acquisition in
the laboratory testing space.
MSIP Preferred Partnership Agreement and related activities
Our Preferred Partnership Agreement, signed with MSIP in 2019, provides us
with advanced access to innovative commercial opportunities arising from Mount
Sinai Health System owned technologies in the field of healthcare
technologies. This partnership has already led to the development of three new
businesses, all of which are listed on AIM, with Renalytix plc shares also
trading on Nasdaq as RNLX:
· Renalytix plc (AIM: RENX), the developer of artificial
intelligence-enabled diagnostics for kidney disease;
· Verici Dx plc (AIM: VRCI), a developer of advanced clinical
diagnostics for organ transplant; and
· Trellus Health plc (AIM: TRLS), a resilience-drive healthcare company
working to transform the way complex chronic conditions are treated through
whole-patient care, with an initial focus on Inflammatory Bowel Disease (IBD).
Trellus Health plc's IPO was completed in May 2021, with EKF's retained voting
rights being transferred to shareholders. Based on the IPO issue price of 40p
this transfer represented a distribution of £11.2m to EKF shareholders. The
value of our remaining holding in Renalytix plc (1.39%) was worth £6.2m at 31
December 2021 (2020: £4.9m).
Our initial holding in Verici Dx plc ("Verici"), which we received by way of a
dividend from Renalytix plc during 2020, was worth £1.4m (2020: £1.5m) at
year end. On 7 March 2022, we announced that we had agreed to invest a further
£2.5m by participating in Verici's secondary fundraising. This additional
funding round will accelerate the progress Verici has already made to date
towards commercial launch of its two lead products, as well as the development
of its third product and expansion of other capabilities. Following this
funding exercise we currently own 5.77% of Verici's enlarged share capital. It
remains our stated intention to distribute this enlarged holding to underlying
shareholders as soon as reasonably practicable and subject to appropriate
arrangements to maintain an orderly market in Verici's shares following such
distribution.
We will continue to consider additional investment in the existing stable of
spin-outs and to explore other opportunities with MSIP and will update
shareholders should any of these prospects become candidates with the
potential to deliver further value to our investors.
Dividend
In December 2021, the Company paid a cash dividend of 1.1p (2020: 1.0p) per
share as a final dividend for 2020, a total pay-out of £5.1m (2020: £4.6m).
We are pleased to confirm that, given the progress in EKF's business and its
strong cash generation, we intend to make a further dividend payment to
shareholders of 1.2p per ordinary share in respect of the performance of the
business in 2021. If approved by shareholders at the Company's next Annual
General Meeting, payment will be on 1 December 2022.
Share capital
During the year to 31 December 2021, we did not utilise the permission we
obtained from shareholders to make on-market purchases of shares for
cancellation or otherwise. The Board will subsequently today announce plans to
undertake a targeted exercise to buy back up to a maximum of 9,000,000 shares
(subject to a maximum spend of approximately £4.0 million) and we believe
this is an appropriate use of our cash reserves and an effective means of
further improving shareholder value (the "Buyback").
The purpose of the Buyback is to return cash to shareholders and to reduce the
share capital of the Company. The Buyback will be funded from the Company's
existing surplus cash resources and all ordinary shares of 1p each in the
capital of the Company (the "Ordinary Shares"), purchased will be held in
treasury. Any repurchases made following the Company's next AGM being held on
18 May 2022 will be conditional upon a further shareholder approval of the
Company's general buyback authority being obtained at that meeting and subject
to the limit of 69,589,585 Ordinary Shares, or such other number as would
represent approximately 15 per cent of the Company's issued share capital at
the time of issue of notice of the 2022 AGM. The Company currently intends to
operate the Buyback from the date of this announcement until the earlier of:-
the date on which purchase of 9,000,000 Ordinary Shares has been completed;
the date of the 2022 Annual General Meeting in the event further shareholder
approval is not obtained; or 31 December 2022.
Board changes
It has been a year of significant change at Board level in EKF, we believe we
have a newly focussed Executive team with an excellent track record for
delivering and managing substantial growth in the Lifesciences and Healthcare
sector, as well an experienced and complementary non-executive team to provide
appropriate challenge and support to them as they execute our growth strategy
into 2024.
Mike Salter, Chief Executive Officer
Mike Salter, who led our US operations since joining EKF in October 2017 and
has been instrumental in delivering much of the growth we have seen in this
region, became Chief Executive Officer on 1 October 2021. Mike is an organic
Chemist by training, and based in San Antonio, Texas and previously headed up
our Americas business. Mike was responsible for overseeing the growth of
our Diabetes and Haematology business in the US and, by leveraging his
business network, he secured licensing agreements, built production capacity
and signed orders for our COVID-19 sample collection kit business. Mike has
been a passionate leader of our US team and has been instrumental in securing
many of our largest US contracts and growth opportunities and was selected as
the ideal candidate to deliver our strategy of accelerated organic growth.
Mike has over 35 years of experience in the Life Science and Diagnostics
Industry. He joined Amersham plc, the UK's largest Life Science company, in
1984 and spent 20 years in various Operational, Product Management and
Business Development roles. When Amersham was acquired by GE in 2004 to become
GE Healthcare, Mike moved into senior commercial and business development
roles leading new strategic Diagnostic initiatives. In 2016, Mike became
General Manager of the Global Custom Genomics Business. Throughout his time at
GE Healthcare, Mike managed a successful multi-million dollar business
providing Biotech and Lifesciences companies with products and services to
support the development and launch of their new products. At EKF in his role
as President, Americas, Mike was responsible for delivering over $20m of new
contract manufacturing revenues from the US operations.
Marc Davies, Chief Financial Officer
Marc Davies, joined as Chief Financial Officer on 1 January 2022, having moved
on from his role as Group Finance and Operations Director at Flexicare Medical
("Flexicare"), a medical device designer, manufacturer and supplier. At
Flexicare Marc was responsible for overseeing a period of substantial revenue
growth, driven by both organic performance and acquisition. During his five
years at Flexicare, Marc led several corporate finance transactions including
post-transaction integration.
Previously, Marc was a Corporate Finance Director at PwC, providing mid-market
private business and private equity focused corporate finance advice as Head
of the PwC West and Wales Corporate Finance Team. Before joining PwC in
February 2013, Marc was an AIM focussed Corporate Finance Adviser for over
five years, during which he spent four years at WH Ireland, including work
within its Nominated Adviser function. Marc began his career in finance as
part of the PwC Corporate Recovery team. Marc is a Fellow Chartered
Accountant (FCA) and an Oxford graduate with an MSc in Mathematical
Modelling and Scientific Computation and an MA in Mathematical Science.
Mike and Marc replaced Julian Baines, MBE, co-founder of EKF in its present
form, and Richard Evans respectively. We cannot thank Julian enough for his
leadership and hard work on behalf of EKF's shareholders over the previous 12
years. He remains on the Board as Non-Executive Deputy Chair. Our thanks also
go to Richard for the guidance he has given the Board and the Group over the
significant time he has spent with us.
We also welcomed two new Non-executive Directors: Christian (Chris) Rigg, a
chartered accountant with experience in listed businesses at Chief Executive
Officer, Chief Financial Officer and Non-executive Director level, and Jenny
Winter, currently Chief Executive of Animalcare Group plc, an AIM listed
animal healthcare group.
Our thanks also go to the Non-executive Directors who have retired through the
year. Adam Reynolds was a Director of the business in its previous guise as a
sports products company, and has provided sage advice over the long term since
the EKF business reversed into International Brands plc as it was then known.
Carl Contadini has served on the Board since 2016 and offered invaluable input
to the operations of the business throughout that time. We thank them both for
their valued contributions.
The Board now comprises six members - two Executive Directors and four
Non-executive Directors:
· Mike Salter, Chief Executive Officer
· Marc Davies, Chief Financial Officer
· Christopher Mills, Non-executive Chairman
· Julian Baines, Deputy Non-executive Deputy Chairman
· Christian Rigg, Senior Independent Non-executive Director
· Jenny Winter, Independent Non-executive Director
We believe that Executive and Non-executive Directors have the right mix of
skills and expertise to lead our excellent team around the World to attain our
objectives for continuing success.
The Board believes that the revised make-up of the Board is appropriate. We
have adopted the Corporate Governance Code issued by the Quoted Company
Alliance. Further details of compliance are found in the Corporate Governance
Statement and on the Company's website.
Cash-settled share-based incentive
The Company has for some years operated a cash-settled, share price based
incentive for its executive directors (the "Incentive"), designed to pay out
in the event that the Company was acquired by a third party (an "Exit").
During the present year EKF shareholders have benefited from very strong
increases in value through the improved performance of the Group and the
investment opportunities that we have followed. Reflecting this continued
delivery of value to shareholders by the Executive Directors, EKF's
Remuneration Committee determined that, in the absence of any other
performance related pay mechanism, it was appropriate to distribute, as
performance-related pay, a portion of the amount that would otherwise be
payable under the Incentive on an Exit. The Executive Directors each received
an equal payment of £0.5m million in January 2021, followed by a final equal
payment of £2.0m each in July 2021. After these payments, the original scheme
was terminated, as was the similar scheme for Mr Salter, from which no
payments were made. As a result of the terminations, the fair value amount
accrued but unpaid relating to the schemes totalling £1.9m was written back
through the income statement.
In September 2021 Mr Salter was granted a replacement cash settled share-based
incentive award. The new award vests if a controlling interest in the Company
is acquired by a third party at any time. In these circumstances an award is
payable to Mr Salter, which increases by reference to the sale price achieved.
It is anticipated that this scheme will be extended to include Mr Davies in
due course.
Outlook
2021 was a year that delivered record revenue and adjusted EBITDA performance.
Our key focus remains on implementing our strategy to position our core
business for sustainable future growth, utilising cash generated from
short-term contract manufacturing activities. At the end of 2019 and
pre-pandemic we had a core business that generated revenues of £43.3m and an
adjusted EBITDA of £12.0m. The results for 2021 show that our core business
revenues were broadly in-line with these levels and we have already
implemented our investment plans to support growth in our core business in
2022.
We are particularly excited about the prospect of our recent acquisition in
the laboratory testing space. Not only is this earning enhancing and cash
generative, but also an excellent strategic fit within our existing
diagnostics offering that will strengthen our offering to our customer base.
The investment in additional fermentation will also drive organic growth as
our larger volume enzyme production capacity comes on-line this year.
Current trading is strong and we expect to deliver a solid first quarter
performance in line with that of 2021. However, we are adopting a pragmatic
view that there will be a significant reduction in pandemic-related contract
manufacturing activity for the remainder of the year. The new management team
is keenly focused on delivering the growth plan through to 2024 which assumes
no benefit from further COVID-related manufacturing, but instead is targeting
sustainable revenue growth in our expanded core operations.
Christopher Mills
Non-Executive Chairman
29 March 2022
Chief Executive Officer Review
I am delighted that we have delivered record results for 2021, with
significant year-on-year revenue growth (up 25% from £65.3m in 2020 to
£81.8m).
I am also proud that the team was again able to rapidly react and support the
growing need for sample collection devices, kits and sample media to support
the testing needs triggered by the global pandemic.
A significant proportion of EKF's top line growth in 2021 has come from
COVID-related contract manufacturing, which is an area of the business that we
anticipate will reduce in prominence as the world begins to 'live with COVID'
and governments significantly reduce their ongoing testing requirements.
However, we have now positioned ourselves as a leading provider of products
and services to support any future testing demand whether COVID related or
other public health requirement.
More significant for the outlook for the business is the fact that, during
2021, revenues from our core business increased 14% to £42.1m (2020: £37.1m)
with growth across all key product verticals. These business revenue levels
also see us broadly in-line with pre-pandemic revenue levels as seen in 2019
and the core business represents a compelling platform in its own right.
Having focussed on recovering the existing core business to previous levels,
we believe this progress, coupled with investments already made, and
additional future investments, will fuel sustainable growth across our
business.
Operational overview
As a new management team, we have taken the opportunity to recalibrate how we
report revenues going forward to more closely align with our product groups
and the way in which business divisions report into senior management.
These are shown below:
Key products/services
Point-of-Care Hematology:
Providing a portfolio of analyser and consumables, particularly for use in Hemo Control, DiaSpect Tm, HemataStat II, Ultracrit
Hematology and Diabetes
Diabetes:
Biosen C-Line, Quo-Lab A1c, Quo-Test A1c, STAT-Site WB)
Other:
Creamatocrit Plus, Pregnancy Tests, Lactate Scout, Uri-Trak
Clinical chemistry
Clinical chemistry, Small lab analysers, Centrifuges Beta-Hydroxybutyrate (β-HB) LiquiColor, Glycates Albumin,
Glycated Serum Protein, Nitro-tab, Procalcitonin
Life Sciences Enzyme fermentation, Custom products and Bulk fermentation
Contract Manufacturing Bulk formulation, Sample collection kits, Private labelling, Molecular and
forensic kits
Laboratory Services Following the acquisition of Advanced Diagnostic Laboratory LLC ("ADL Health")
CLIA certified facility
Division 2021 2020
£ millions
Revenue Revenue
Point-of-Care 27.0 22.9
Central Laboratory 13.1 12.2
Life Sciences 2.0 2.0
Contract Manufacturing 36.3 26.3
Laboratory Services* 1.0 -
*contribution from 27 September 2021
Point-of-Care
Sales of our hemoglobin analyzers Hemo Control and DiaSpect Tm showed strong
growth as blood banks and anaemia programmes came back online. Our HemataStat
product, meanwhile, showed significant growth of 29% as we see a return to
normality. We have also seen growth across all our diabetes instrument ranges,
with revenues overall increasing by 13%, driven by high growth from our
Quo-Test product line.
Professional sports medicine has been returning to normal as shown by a 27%
increase in Lactate Scout revenues. We have continued development work for our
clinically focussed Response product.
For 2022, we are looking forward to healthcare and customer development
programmes returning to normal.
Central Laboratory
β-HB LiquiColor sales remain strong and increased by 8% contributing the
majority of growth in this area, with sales of other chemistry products
broadly flat, due to customers concentrating on COVID-related business
revenues. We now expect these to come back on stream during the course of
2022.
Life Sciences
Across contract fermentation and other non-COVID related contract
manufacturing, sales remained flat at £2.0m. We continue to see a strong
pipeline of opportunities to supply contract manufacturing services from our
Elkhart and South Bend sites, in Indiana, and have committed resources to add
capacity.
To take advantage of a demand-driven opportunity in the research and molecular
enzyme areas, as well as food grade fermentation digestive proteins area, we
are investing around $10m in the construction and installation of new 1,500L,
3,000L and 14,000L fermenters by third party, specialist turn-key contractors.
We expect this to support significant revenues growth in this area by 2024.
Contract Manufacturing
Once again, the majority of our contract manufacturing revenues related to
supporting testing requirements in relation to the Global Pandemic. The market
dynamics for COVID test collection kits changed during 2021 and to meet demand
our focus switched from sales of reagents for molecular transport media, which
had characterised our activities in 2020, to the manufacture of filled tubes
and sample collection kits. While the revenues from these product lines
increased significantly, the nature of these products meant that the gross
margin percentages were lower. As governments across the world changed their
responses to COVID, often at very short notice, we and our customers were
required to be extremely flexible to vary activity levels in response to
demand which often changed overnight.
Our sample collection related revenues at the beginning of the current year
have held up well, however we expect to see this specific revenue line
significantly decrease over the year as the demand for testing drops. We have
continued to use temporary workers and to add facilities on short term bases
where possible to limit our risk. We have developed excellent transferable and
scalable skills as a result of our pandemic response, and we are looking
forward to applying these skills to new areas. We have identified a number of
potential opportunities through partners which we believe have great potential
going forward and are working hard to bring these to fruition.
Upon review of COVID related stock at year end we have increased our overall
inventory provision by a further £384k. We believe this is prudent given the
anticipated decrease in COVID related activities.
Laboratory Services
On 27 September 2021, we acquired ADL Health, a San Antonio based CLIA
certified testing laboratory focussed on high complexity testing and covering
the fields of clinical, forensic and microbiological tests. Using its
expertise in Polymerase Chain Reaction (PCR) testing, ADL Health also
provides COVID testing needs for dozens of Fortune 500 companies and
government agencies. ADL Health is expanding its range of testing capabilities
across a broader suite of healthcare applications.
The cost of acquisition of ADL was an initial $10m largely funded through the
issue of ordinary EKF shares after a working capital true-up payable in cash,
with the consideration shares subject to a phased lock-in and orderly market
agreement, plus contingent consideration based on the achievement of certain
earnings targets over the following three years. The ADL Health business is
cash generative and is expected to have a strong first quarter significantly
exceeding revenues recorded in the final quarter of 2021.
The EKF Board believes that ADL Health's wider testing offer, including
current and planned capabilities, provides an attractive platform to both
complement and broaden the Group's existing diagnostics offering. Having CLIA
lab capacity in-house also provides us with a means to strengthen our customer
relationships by providing wider testing services, and allows us to build
synergistically on the relationships with industry leaders that we have
developed over the last two years.
Since the acquisition, we have already secured a strategic partnership with
our existing customer, Yourgene Health plc, whereby ADL Health will offer a
non-invasive pre-natal testing (NIPT) service to the US market, utilising
Yourgene's proprietary technology and ADL Health's accredited US laboratory to
process returned samples.
ADL Health contributed £1.0m to 2021 revenues, following its acquisition on
27 September 2021.
In addition to the above business divisions there was a further £2.4m
revenues related to shipping and handling recharges, repairs and other
sundries (2020: £1.9m).
Regulatory update
Our regulatory team is fully committed to meet the new requirements of the In
Vitro Diagnostic Regulation (IVDR) which affects all our products in the EU.
We have adapted to the significant changes the IVDR bring such that we are
ready to meet the immediate requirements in May 2022, and have a defined plan
for the amended transitional provisions as published in January. For the UK,
to meet the requirements of the MHRA we have established the UK Responsible
Person for our non-UK operating entities, and are set to meet UKCA marking
requirements.
Russia and Ukraine
EKF owns 60% of O.O.O. EKF Diagnostika, a distribution subsidiary located in
Moscow which sells EKF Point-of-Care products and other third-party products
into Russia and neighbouring states. As a supplier of medical products with no
dual use it would not be appropriate to end supplies to the region, but we are
seeing some disruption caused by the Western sanctions relating to foreign
exchange controls. We are working with the staff and management of this
business to keep it as stable as possible, but we have already discounted
sales from this region from our growth forecasts as a precaution. Financial
details of our business in Russia, which represents less than 5% of Group
revenue and Adjusted EBITDA at the consolidated level, are shown in the
segmental analysis in Note 3.
We also have a distributor in Ukraine with whom we have worked for some years,
we wish that all our friends in Ukraine stay safe and well.
Summary
We are absolutely delighted with the performance of our core business over the
last twelve months and the cash generated from contract manufacturing has
allowed us to invest in future growth opportunities - both organically,
particularly in the area of enzyme production, but also through acquisition
with the addition of ADL to the Group and the exciting prospects that adding a
laboratory testing capacity to our overall offering opens up for us.
When I became CEO in October 2021, we had set out ambitious growth plans for
EKF that would see the core business positioned to deliver substantial growth
in both revenues and adjusted EBITDA. We can already see the signs of this
strategy coming to fruition and I am confident that the investment put in
place will see further progress in 2022 and beyond.
As a Board we remain confident in delivering on our strategy for growth into
2024 and I welcome the support from my colleagues and investors alike, as we
continue to focus on execution of our plans to generate value for
shareholders.
Mike Salter
Chief Executive Officer
29 March 2022
Chief Financial Officer's Review
Revenue
Revenue for 2021 was £81.8m (2020: £65.3m), an increase of 25% on the prior
year. At constant 2020 exchange rates, revenue for the year excluding ADL
would have been £85.5m, an organic growth rate of 29%.
Revenue by geographical segment based on the legal entity locations from which
sales are made, is as follows:
2021 2020
£'000 £'000 +/- %
Germany 34,171 20,286 +68%
USA 36,056 37,692 (4%)
UK 8,323 4,378 +90%
Russia 3,286 2,904 +13%
Total 81,836 65,260 +25%
Revenue EBITDA*
£'000 £'000
Germany 34,171 11,480
USA 36,056 12,735
UK 8,323 1,293
Russia 3,286 981
Total 81,836 26,489
* Adjusted EBITDA excludes exceptional items and share-based payments.
Germany - Significant revenue increase primarily due to sample collection
tubes and kits contract manufacturing activity
USA - Contract manufacture of bulk molecular transport media and PBS for
public health and private sector customers tailed off during H2
UK - Increased demand and full year effect of sample collection tubes and kits
contract manufacturing activity
Russia - Increased demand in Point-of-Care portfolio. EKF's Russian entity is
60% owned by the Group but 100% of its results are consolidated, with the
non-controlling interest shown separately in the income statement and
statement of financial position.
As referred to in the Chief Executive Officer Review, we have taken the
opportunity to recalibrate how we report revenues going forward to more
closely align with our product groups and the way in which business divisions
report into senior management.
Gross profit
Gross profit is £39.4m (2020: £37.4m), which represents a gross margin
percentage of 48% (2020: 58%). The increased gross profit was largely due to
the higher volumes. The reduction in gross margin percentage was primarily
caused by changes in the mix of Contract Manufacturing related products as
well as increased costs in the supply chain.
Administration costs and research and development
Administration costs have decreased to £17.7m (2020: £20.7m).
To aid understanding, administrative expenses in each period are made up as
follows:
Year ended 31 December 2021 Year ended 31 December 2020
£'000
£'000
Non-exceptional administration expenditure before R&D capitalisation 19,511 17,234
Effect of share-based payments (1,238) 5,292
Less capitalised R&D (659) (586)
Effect of exceptional items 95 (1,282)
Total administrative expenses 17,709 20,658
The reduction is largely caused by the effect of the closure of the cash
settled share-based payment schemes, which, after payments made out during the
year, allowed a write-back of the remaining accrued balance of £1.9m.
Research and development costs included in administration expenses were £1.4m
(2020: £1.4m). A further £0.7m (2020: £0.6m) was capitalised as an
intangible asset, resulting from our development work to broaden and improve
our product portfolio, bringing gross R&D expenditure for the year to
£2.1m (2020: £2.0m). The charge for depreciation of fixed assets and
amortisation of intangible assets increased to £5.9m (2020: £4.6m). The
increase was mainly associated with higher amortisation of development
projects, and increased depreciation on right of use assets capitalised in
accordance with IFRS 16.
Operating profit and adjusted earnings before interest, tax, depreciation and
amortisation
The Group generated an operating profit of £21.7m (2020: £16.9m). This was a
result of the higher revenue levels seen during the year and the lower
administration costs. We continue to consider that adjusted earnings before
interest, tax, depreciation and amortisation, share-based payments and
exceptional items (Adjusted EBITDA) is a better measure of the Group's
progress as the Board believes it gives a clearer comparison of the underlying
operating performance between periods. In 2021 we achieved adjusted EBITDA of
£26.5m (2020: £25.5m), an increase of 4%. The calculation of this non-GAAP
measure is shown on the face of the income statement. It excludes the effect
of a non-cash share-based payment credit of £1.2m (2020: charge of £5.3m),
and exceptional losses of £0.1m (2020: profit of £1.3m), the main elements
of which are costs relating to the acquisition of ADL.
Finance costs
Net finance costs are £0.3m (2020: £1.5m). The main cost results from a
decrease in the fair value of deferred consideration which is valued using the
Company's share price. Although the Group holds net cash, achievable financial
returns on this are very low because of low interest rates around the world.
Tax
There is an income tax charge of £5.3m, an increase from the prior year
charge (2020: £4.0m), but a decrease in the tax rate to 25% from 26%.
Deferred tax of £1.5m, calculated on the increase in the market value of
listed investments over cost, has been charged direct to Other Comprehensive
Income.
Dividend
A cash dividend of 1.1p per ordinary share was paid in December 2021, in
respect of the final dividend for 2020. Dividends are shown in the Statement
of Changes in Equity, and not in the Income Statement.
Balance sheet
Property plant and equipment and right-of-use assets
Additions to fixed assets were £5.7m (2020: £2.1m), and fixed assets rose by
a further £0.9m recognised on the acquisition of ADL. Major programmes
include the continuing work on the fit out of the new factory building in
nearby South Bend and upgrading and refurbishment of the Group's manufacturing
facility in Elkhart, USA and the; and the capitalisation of new and
replacement leases under IFRS 16 including new properties in the UK and USA.
These leases are either for three years or less, or have break clauses that
limit our commitment to a maximum of three years.
Intangible assets
The carrying value of intangible assets has increased, from £37.1m at the end
of 2020 to £41.9m as at 31 December 2021. This is due to the intangible
assets of £8.0m recognised on the acquisition of ADL.
Investments
At year-end, the Company continues to hold 1.39% of the issued share capital
of Renalytix plc, a developer of artificial intelligence enabled acute kidney
injury products, and 1.89% of Verici Dx plc, a developer of advanced clinical
diagnostics for organ transplant. The market value of these investments
increased by £1.1m during the year. Post year end the Company invested a
further £2.5m in Verici alongside other existing and new investors
participating in a placing of new ordinary shares. Further to the investment,
the Company holds 5.8% of Verici DX plc. EKF intends that its holding in
Verici will be distributed to its own underlying shareholders as soon as
reasonably practicable and subject to appropriate arrangements to maintain an
orderly market in Verici's shares following such distribution.
Deferred consideration
The deferred consideration of £2.9m at the start of last year has been
written back, along with its associated warranty claim debtor, following
settlement of the dispute. A small payment has been made to the former owner
of EKF's German operations. The new balance of £0.6m (2020: £2.9m) is for
deferred and contingent consideration relating to ADL, which has been
estimated at its fair value.
Cash and working capital
Net cash (which excludes marketable securities and lease creditors assessed in
relation to IFRS 16 assets) has decreased to £19.6m from £21.4m. Gross cash
has fallen to £20.3m (2020: £21.9m). Existing Borrowings reduced in line
with repayments to £0.3m (2020: £0.5m), while borrowings overall rose as a
result of borrowings held by ADL on acquisition of £0.4m, which have been
settled post year end. Cash generated by operations is £14.2m (2020: £20.8m)
mainly influenced by the effect of share-based payments.
Investment has been made in the acquisition of fixed assets (£4.3m excluding
IFRS 16 leases). Working capital grew by £6.7m during the period,
particularly as a result of additional inventory carried in the USA. Payments
during the year under the now closed previous exit bonus scheme totalled
£5.3m. The dividend paid in December 2021 totalled £5.1m.
Marc Davies
Chief Financial Officer
29 March 2022
Consolidated Income Statement
for the year ended 31 December 2021
2021 2020
£'000 £'000
Revenue 81,836 65,260
Cost of (42,470) (27,840)
sales
Gross profit 39,366 37,420
Administrative (17,709) (20,658)
expenses
Other income 90 133
Operating profit 21,747 16,895
Depreciation and (5,885) (4,611)
amortisation
Share-based payments 1,238 (5,292)
Exceptional (95) 1,282
items
EBITDA before exceptional items and share-based 26,489 25,516
payments
Finance 45 53
income
Finance (357) (1,592)
costs
Profit before income tax 21,435 15,356
Income tax (5,277) (3,971)
charge
Profit for the year 16,158 11,385
Profit attributable to:
Owners of the parent 15,851 11,114
Non-controlling interest 307 271
16,158 11,385
Pence Pence
Earnings per Ordinary Share attributable to the owners of the parent during
the year
From continuing operations
Basic 3.47 2.45
Diluted 3.44 2.42
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
2021 2020
£'000 £'000
Profit for the year 16,158 11,385
Other comprehensive (loss)/income:
Items that will not be reclassified to profit or loss
Changes in fair value of equity instruments at fair value through other
comprehensive (loss)/income (net of tax)
(321) 3,276
Items that may be subsequently reclassified to profit or loss
Currency translation differences (1,226) 734
Other comprehensive (loss)/income (net of tax) (1,547) 4,010
Total comprehensive income for the year 14,611 15,395
Attributable to:
Owners of the parent 14,315 15,235
Non-controlling interests 296 160
Total comprehensive income for the year 14,611 15,395
Consolidated Statement of Financial Position
as at 31 December 2021
Group 2021 Group 2020
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 15,991 12,620
Right-of-use asset 1,875 1,019
Intangible assets 41,894 37,051
Investments 7,789 6,608
Deferred tax assets 15 14
Total non-current assets 67,564 57,312
Current assets
Inventories 13,238 8,487
Trade and other receivables 13,428 13,182
Current income tax receivable 548 371
Cash and cash equivalents 20,341 21,913
Total current assets 47,555 43,953
Total assets 115,119 101,265
Equity attributable to owners of the parent
Share capital 4,639 4,550
Share Premium 7,375 200
Other reserves 5,033 5,354
Foreign currency reserves 2,813 4,028
Retained earnings 74,264 63,516
94,124 77,648
Non-controlling interest 618 552
Total equity 94,742 78,200
Liabilities
Non-current liabilities
Lease liabilities 1,095 690
Borrowings 431 323
Deferred consideration 170 -
Deferred tax liabilities 5,031 2,636
Total non-current liabilities 6,727 3,649
Current liabilities
Trade and other payables 9,078 14,435
Lease liabilities 838 380
Deferred consideration 465 2,901
Current income tax liabilities 3,004 1,515
Borrowings 265 185
Total current liabilities 13,650 19,416
Total liabilities 20,377 23,065
Total equity and liabilities 115,119 101,265
Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Group Group
2021 2020
£'000 £'000
Cash flow from operating activities
Cash generated by operations 14,208 20,798
Interest (paid)/received (36) (47)
Income tax paid (3,934) (6,942)
Net cash generated by operating activities 10,238 13,809
Cash flow from investing activities
Purchase of investments - (3,810)
Purchase of property, plant and equipment (PPE) (4,335) (1,631)
Purchase of intangibles (1,314) (1,014)
Acquisition of subsidiaries, net of cash acquired 84 -
Proceeds from sale of PPE 43 68
Proceeds from sale of investments - 7,670
Interest received 45 53
Net cash (used in)/generated by investing activities (5,477) 1,336
Cash flow from financing activities - (7)
Share option buy back
Proceeds from issuance of Ordinary shares - 209
Dividend (5,103) (4,550)
Repayments on borrowings (178) (183)
Principal lease payments (643) (469)
Dividend payment to non-controlling interest (231) (209)
Net cash used in financing activities (6,155) (5,209)
Net(decrease)/ increase in cash and cash equivalents (1,394) 9,936
Cash and cash equivalents at beginning of year 21,913 12,074
Exchange losses on cash and cash equivalents (178) (97)
Cash and cash equivalents at end of year 20,341 21,913
Consolidated Statement of Changes in Equity
Share capital Share premium account Other reserves Foreign currency reserve Retained earnings Non-controlling interest Total equity
Total
Consolidated £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 4,541 - 6,648 3,183 56,199 70,571 601 71,172
Comprehensive income/(expense)
Profit for the year - - - - 11,114 11,114 271 11,385
Other comprehensive income/(expense)
Changes in fair value of equity instruments at fair value through other - - 4,348 - - 4,348 - 4,348
comprehensive income/(expense)
Transfer of gain on disposal of equity investments at fair value through other - - (5,642) - 5,642 - - -
comprehensive income/(expense) to retained earnings
Taxation on profit on disposal of equity instruments at fair value - - - - (1,072) (1,072) - (1,072)
Currency translation differences - - - 845 - 845 (111) 734
Total comprehensive income/(expense) - - (1,294) 845 15,684 15,235 160 15,395
Transactions with owners
Proceeds from share issue 9 200 - - - 209 - 209
Share option cancellation - - - - (7) (7) - (7)
Dividends to non-controlling interest - - - - - - (209) (209)
Dividends to owners - - - - (8,360) (8,360) - (8,360)
Total distributions to owners 9 200 - - (8,367) (8,158) (209) (8,367)
At 31 December 2020 and 1 January 2021 4,550 200 5,354 4,028 63,516 77,648 552 78,200
Comprehensive income/(expense)
Profit for the year - - - - 15,851 15,851 307 16,158
Other comprehensive expense
Changes in fair value of equity instruments at fair value through other - - (321) - - (321) - (321)
comprehensive expense
Currency translation differences - - - (1,215) - (1,215) (11) (1,226)
Total comprehensive income - - (321) (1,215) 15,851 14,315 296 14,611
Transactions with owners
Issue of ordinary shares as consideration for a business combination, net of 89 7,175 - - - 7,264 - 7,264
transaction costs
Dividends to non-controlling interest - - - - - - (230) (230)
Dividends to owners - - - - (5,103) (5,103) - (5,103)
Total distributions to owners 89 7,175 - - (5,103) 2,161 (230) 1,931
At 31 December 2021 4,639 7,375 5,033 2,813 74,264 94,124 618 94,742
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2021
1. General information and basis of presentation
EKF Diagnostics Holdings plc is a public limited company incorporated in the
United Kingdom (Registration Number 04347937), which is listed on the AIM
market of the London Stock Exchange. 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") marketplace.
The financial information within this preliminary announcement is extracted
from the Group's consolidated financial statements for the year ended 31
December 2021, which were approved by the Board of Directors on 29 March 2022.
This financial information does not constitute statutory accounts within the
meaning of sections 434(3) and 435(3) of the Companies Act 2006 or contain
sufficient information to comply with the disclosure requirements of UK
adopted International Accounting Standards (IFRS).
The Group's consolidated financial statements for the year ended 31 December
2021 have been prepared in accordance with UK adopted International Accounting
Standards (IFRS) and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards. The Company's
auditor, PricewaterhouseCoopers LLP, has given an unqualified report on the
consolidated financial statements for the year ended 31 December 2021. The
auditor's report did not include reference to any matters to which the auditor
drew attention without qualifying its report and did not contain any statement
under section 498 of the Companies Act 2006. The consolidated financial
statements will be filed with the Registrar of Companies, subject to their
approval by the Company's shareholders on 18 May 2022 at the Company's Annual
General Meeting.
Statutory accounts for the year to 31 December 2020 have been delivered to the
Registrar of Companies. The audit report for those accounts was unqualified
and did not contain statements under 498 (2) or (3) of the Companies Act 2006
and did not contain any emphasis of matter.
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. Significant accounting policies - Going concern
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 plausible changes in financial performance, that the Group will be
able to operate within the level of its current funding arrangements.
While we have continued to see some disruption to our core business as a
result of the COVID-19 pandemic, we have protected our core business as far as
possible and core revenue has grown by 14% this year. It is clear that
healthcare activities are returning to normal and that our base case forecasts
for our core business are still applicable. While the pandemic has sadly been
very costly for many in lives and income, EKF has been able to learn new
skills and develop a business model which offers great possibilities in the
post-pandemic world. However, we are adopting a pragmatic view that there will
be a significant reduction in pandemic-related contract manufacturing activity
for the remainder of the year.
The Group has revenues from customers in Russia and an entity based there. As
a result of the sanctions recently imposed on Russia by the EU, the USA and
other countries, there are enhanced risks in respect of our Russian entity,
including credit risk to cash balances, its ability to collect debtors, and
our ability to import products into Russia. In preparing a downside going
concern forecast we have discounted sales from this region.
While any further economic disruption stemming from the pandemic is impossible
to forecast, the strength of the Group's balance sheet aligned to the
continuing performance of the business gives the Directors confidence that the
business can continue to meet its obligations as they fall due, even under our
worst case scenarios, for at least the next 12 months. Accordingly, the
directors are satisfied they can prepare the accounts on a going concern
basis.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
IFRS, this announcement does not itself contain sufficient information to
comply with IFRSs. The Company will publish its full financial statements for
the year ended 31 December 2021 by 22 April 2022, which will be available on
the Company's website at www.ekfdiagnostics.com
(http://www.ekfdiagnostics.com) and at the Company's registered office at Avon
House, 19 Stanwell Road Penarth CF64 2EZ. The Annual General Meeting will be
held on Wednesday 18 May 2022.
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 sale of diagnostic instruments, reagents and certain ancillary products,
as well as central laboratory reagents. 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 and reagents. Other services include
the servicing and distribution of third-party company products under separate
distribution agreements. Transactions between segments consist of the sale of
products for resale. The basis of accounting for these transactions is the
same as for external revenue.
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 segments for
the year ended 31 December 2021 is as follows:
Germany USA Russia UK Total
2021 £'000 £'000 £'000 £'000 £'000
39,665 38,974 3,286 8,514 90,439
Income statement
Revenue
Inter-segment (5,494) (2,918) - (191) (8,603)
External revenue 34,171 36,056 3,286 8,323 81,836
11,480 12,735 981 1,293 26,489
Adjusted EBITDA*
Exceptional items (Note 4) (452) - - 357 (95)
Share-based payments - - - 1,238 1,238
11,028 12,735 981 2,888 27,632
EBITDA
Depreciation (752) (938) (57) (294) (2,041)
Amortisation (1,525) (1,383) - (936) (3,844)
8,751 10,414 924 1,658 21,747
Operating profit/(loss)
Finance income - 7 38 - 45
Finance cost (31) (37) - (289) (357)
Income tax (2,806) (2,402) (193) 124 (5,277)
Profit for the year 5,914 7,982 769 1,493 16,158
29,672 59,803 431 29,860 119,766
Segment assets
Operating assets
Inter-segment assets (1,441) (16,712) - (6,835) (24,988)
External operating assets 28,231 43,091 431 23,025 94,778
Cash 8,384 5,734 1,344 4,879 20,341
Total assets 36,615 48,825 1,775 27,904 115,119
6,387 24,796 167 13,319 44,669
Segment liabilities
Operating liabilities
Inter-segment liabilities (608) (17,703) - (6,677) (24,988)
External operating liabilities 5,779 7,093 167 6,642 19,681
Borrowings 303 393 - - 696
Total liabilities 6,082 7,486 167 6,642 20,377
5,628 8,291 80 1,992 15,991
Other segmental information
Non-current assets - PPE
Non-current assets - Intangibles 15,429 16,911 76 9,478 41,894
PPE - additions 693 3,366 17 1,610 5,686
Intangible assets - additions 694 8,171 - 521 9,386
* Adjusted EBITDA excludes exceptional items and share-based payments.
The UK includes head office costs
Germany USA Russia UK ^ Total
2020 £'000 £'000 £'000 £'000 £'000
25,637 39,459 2,904 4,432 72,432
Income statement
Revenue
Inter-segment (5,351) (1,767) - (54) (7,172)
External revenue 20,286 37,692 2,904 4,378 65,260
7,343 20,094 833 (2,754) 25,516
Adjusted EBITDA*
Exceptional items (Note 4) 877 - - 405 1,282
Share-based payments - - - (5,292) (5,292)
8,220 20,094 833 (7,641) 21,506
EBITDA
Depreciation (787) (511) (24) (522) (1,844)
Amortisation (1,646) (1,120) (1) - (2,767)
5,787 18,463 808 (8,163) 16,895
Operating profit/(loss)
Finance income 2 13 39 (1) 53
Finance cost (26) - - (1,566) (1,592)
Income tax (820) (3,497) (171) 517 (3,971)
Profit for the year 4,943 14,979 676 (9,213) 11,385
39,961 36,899 355 30,529 107,744
Segment assets
Operating assets
Inter-segment assets (112) (11,427) - (16,853) (28,392)
External operating assets 39,849 25,472 355 13,676 79,352
Cash 3,130 7,459 1,257 10,067 21,913
Total assets 42,979 32,931 1,612 23,743 101,265
7,135 17,836 158 25,820 50,949
Segment liabilities
Operating liabilities
Inter-segment liabilities (1,332) (14,915) - (12,145) (28,392)
External operating liabilities 5,803 2,921 158 13,675 22,557
Borrowings 508 - - - 508
Total liabilities 6,311 2,921 158 13,675 23,065
5,912 4,632 93 3,002 13,639
Other segmental information
Non-current assets - PPE
Non-current assets - Intangibles 24,039 10,979 77 1,956 37,051
PPE - additions 779 575 54 741 2,149
Intangible assets - additions 679 335 - - 1,014
* Adjusted EBITDA excludes exceptional items and share-based payments.
^ The UK segment was presented as "Other" in the 2020 financial information.
There have been no changes to the numbers presented.
The UK includes head office costs
Disclosure of Group revenues by geographic location of customer is as follows:
2021 2020
£'000 £'000
Americas
United States of America 31,522 33,474
Rest of Americas 3,248 2,391
Europe, Middle East and Africa (EMEA)
Germany 7,942 5,873
United Kingdom 8,848 4,522
Ireland 14,292 5,408
Rest of Europe 4,616 3,127
Russia 3,286 2,904
Middle East 1,464 1,261
Africa 2,323 2,553
Asia and Rest of World
China 985 767
Rest of Asia and Oceania 3,310 2,980
Total revenue 81,836 65,260
Revenues of £14,225,000 (17%) were derived from one external customer.
Sales to this customer all relate to Europe. In 2020 revenues of £16,960,000
(26%) were derived from a different customer, all of whose revenues relate to
the USA.
4. Exceptional items
2021 2020
Note £'000 £'000
- Warranty claim a 285 1,414
- Settlement of warranty claim and deferred consideration a (179) -
- Business reorganisation costs b (37) (58)
- Acquisition costs c (164) -
- Cost of Trellus set-up d - (74)
Exceptional items (95) 1,282
a. Change in the value of an estimated warranty claim which offsets the deferred
consideration of £3.2m (2020: £2.9m) relating to a share-based payment to
the former owner of EKF-Diagnostic GmbH. The dispute has now been settled
resulting in a payment in cash to the former owner of £179,000. The remaining
warranty claim and deferred consideration have both been written down and
there is no further liability.
b. Restructuring costs, mainly closure costs, associated in 2020 with the closure
of EKF's Polish facility and other restructuring activities, and in 2021 with
EKF Ireland.
c. Professional fees relating to the acquisition of Advanced Diagnostic
Laboratory LLC
d. Start-up costs in 2020 associated with the set-up of Trellus Health plc.
5. Income tax charge
2021 2020
Group £'000 £'000
Current tax:
Current tax on profit for the year 5,096 3,913
Adjustments for prior periods 96 89
Total current tax 5,192 4,002
Deferred tax (note 29):
Origination and reversal of temporary differences 85 (31)
Total deferred tax 85 (31)
Income tax charge 5,277 3,971
6. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to
owners of the parent by the weighted average number of Ordinary Shares in
issue during the year.
2021 2020
£'000 £'000
Profit attributable to owners of the parent 15,851 11,114
Weighted average number of Ordinary Shares in issue 457,001,067 454,524,101
Basic profit per share 3.47 pence 2.45 pence
(b) Diluted
Diluted earnings 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 shares being share options.
2021 2020
£'000 £'000
Profit attributable to owners of the parent 15,851 11,114
Weighted average number of Ordinary Shares including potentially dilutive 460,957,933 458,803,076
shares
Diluted profit per share 3.44 pence 2.42 pence
2021 2020
Weighted average number of Ordinary Shares in issue 457,001,067 454,524,101
Adjustment for:
- Assumed conversion of share awards 12,640 235,035
- Assumed payment of equity deferred consideration 3,944,226 4,043,940
Weighted average number of Ordinary Shares including potentially dilutive 460,957,933 458,803,076
shares
7. Property, Plant and equipment
Group Land and buildings Fixtures Plant and machinery Motor vehicles Assets under Construction Right-of-use asset Total
£'000
£'000 & fittings £'000 £'000 £'000 £'000
£'000
Cost
At 1 January 2020 9,760 1,552 10,275 178 614 1,341 23,720
Additions 63 122 340 54 1,052 518 2,149
Exchange differences 85 26 412 (30) 18 (14) 497
Transfers 302 (285) 928 - (945) - -
Disposals - (26) (146) (1) (4) (245) (422)
At 31 December 2020 10,210 1,389 11,809 201 735 1,600 25,944
Accumulated depreciation
At 1 January 2020 1,814 1,166 7,117 103 - 339 10,539
Charge for the year 302 128 902 23 - 489 1,844
Exchange differences (4) 22 300 (18) - (2) 298
Transfers 188 (188) - - - - -
Disposals - (26) (105) - - (245) (376)
At 31 December 2020 2,300 1,102 8,214 108 - 581 12,305
Net book value at 31 December 2020 7,910 287 3,595 93 735 1,019 13,639
Cost
At 1 January 2021 10,210 1,389 11,809 201 735 1,600 25,944
Acquired with subsidiary (Note 20) 4 - 818 - - 111 933
Additions 480 643 740 17 2,455 1,351 5,686
Exchange differences (195) (48) (271) (2) (19) 12 (523)
Transfers 219 130 339 - (688) - -
Disposals (7) (102) (247) (56) (13) (64) (489)
At 31 December 2021 10,711 2,012 13,188 160 2,470 3,010 31,551
Accumulated depreciation
At 1 January 2021 2,300 1,102 8,214 108 - 581 12,305
Charge for the year 328 290 786 24 - 613 2,041
Exchange differences (26) (42) (137) (2) - 5 (202)
Transfers - - - - - - -
Disposals (7) (101) (238) (49) - (64) (459)
At 31 December 2021 2,595 1,249 8,625 81 - 1,135 13,685
Net book value at 31 December 2021 8,116 763 4,563 79 2,470 1,875 17,866
8. Intangible assets
Goodwill Trademarks, trade name Customer relationships Trade secrets Development costs Software & website Total
and Licences
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2020 26,371 2,799 15,580 18,436 9,060 299 72,545
Additions - 146 - - 586 282 1,014
Disposals - - - - (5,482) - (5,482)
Exchange differences 632 372 (39) 620 289 12 1,886
At 31 December 2020 27,003 3,317 15,541 19,056 4,453 593 69,963
Accumulated amortisation and impairment
At 1 January 2020 2,550 2,389 10,358 13,141 6,340 - 34,778
Disposals - - - - (5,474) - (5,474)
Exchange differences 55 201 (47) 401 231 - 841
Charge for the year - 357 1,245 919 246 - 2,767
At 31 December 2020 2,605 2,947 11,556 14,461 1,343 - 32,912
Net book value at 31 December 2020 24,398 370 3,985 4,595 3,110 593 37,051
Cost
At 1 January 2021 27,003 3,317 15,541 19,056 4,453 593 69,963
Acquisition of subsidiary 3,755 467 1,166 - - 2,684 8,072
Additions - 104 - - 1,137 73 1,314
Transfer - 152 - - (152) - -
Disposals (1,407) (19) (749) (1,073) (288) - (3,536)
Exchange differences (793) 263 (252) (655) (127) 20 (1,544)
At 31 December 2021 28,558 4,284 15,706 17,328 5,023 3,370 74,269
Accumulated amortisation and impairment
At 1 January 2021 2,605 2,947 11,556 14,461 1,343 - 32,912
Disposals (1,407) (19) (749) (1,073) (288) - (3,536)
Exchange differences (21) (144) (203) (454) (24) 1 (845)
Charge for the year - 237 1,221 1,730 548 108 3,844
At 31 December 2021 1,177 3,021 11,825 14,664 1,579 109 32,375
Net book value at 31 December 2021 27,381 1,263 3,881 2,664 3,444 3,261 41,894
9. Dividends
In December 2021, the Company paid a final dividend for 2020 of 1.1p (2020:
1.0p) per ordinary share, at a total value of £5,103,000 (2020: £4,550,000).
Subject to continuing strong performance and the needs of the business, the
Board intends to follow a progressive dividend policy. The Directors propose,
subject to approval at the Company's next Annual General Meeting, the payment
of a final dividend for 2021 of 1.2p per EKF Ordinary share held on 3 November
2022. Payment will be made on 1 December 2022. The expected total value is
£5,567,000.
10. Cash generated by operations
Group
2021 2020
£'000 £'000
Profit/(loss) before tax 21,435 15,356
Adjustments for:
- Depreciation 2,041 1,844
- Amortisation 3,844 2,767
- Warranty claim (285) (1,414)
- (Profit)/loss on disposal of fixed assets (13) (22)
- Loss on disposal of intangible assets - 8
- Share-based payments (6,586) 4,775
- Dividend received - (31)
- Fair value adjustment 285 1,516
- Foreign exchange 61 26
- Bad debt written down 58 45
- Net finance cost/(income) 26 23
Changes in working capital
- Inventories (4,601) (2,557)
- Trade and other receivables (3,274) (3,426)
- Trade and other payables 1,217 1,888
Net cash generated by operations 14,208 20,798
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