REG - EKF Diagnostics Hldg - Final Results
28/03/2023 07:00
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RNS Number : 3848U EKF Diagnostics Holdings PLC 28 March 2023
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 2022.
Revenues for the year were in-line with market expectations, as previously
confirmed in the Company's trading update released on 6 February 2023. This
reflects strong growth in the core established business(1) (+13%) and the
continued commercial development of the Life Sciences enzyme fermentation
business (+60%).
Financial highlights
· Revenues of £66.6m(2) in-line with market expectations (2021:
£81.8m)
- 17% year-on-year growth in revenues, excluding all COVID-related
activities
· Gross profit before exceptionals of £30.8m (2021: £39.4m)
· Adjusted EBITDA(3) of £14.9m (2021: £26.5m)
- 24% up from pre-pandemic levels (2019: £12.0m)
· Loss before tax of £8.9m (2021: £21.4m profit) after exceptional
transition and restructuring costs of £17.5m
· Cash generated from operations of £12.7m (2021: £14.2m)
· Group cash, net of borrowings (excluding IFRS 16 liabilities), as at
31 December 2022 of £11.4m (31 December 2021: £19.6m), primarily reflecting
cash generated from operations less £4.4m capital expenditure, £2.9m
investments, £3.9m share buyback and £5.5m dividend payment
· Cash dividend paid to shareholders, equivalent to 1.2p per ordinary
share (2021: 1.1p per share), plus dividend in specie of Verici Dx shares
valued at £2.0m
(1) Core established business includes Point-of-Care and Central Laboratory
(2) Includes £3.5m relating to US inventory receipt
(3) Earnings before interest, tax, depreciation and amortisation, excluding
exceptional items and share based payments.
Operational highlights
· 13% year-on-year growth in core established business revenues to
£45.3m (2021: £40.1m)
- Point-of-Care up 14% to £30.8m (2021: £27.0m)
- Central Laboratory up 11% to £14.5m (2021: £13.1m)
· 60% year-on-year growth in Life Sciences to £3.2m (2021: £2.0m)
· Investment to increase fermentation capacity and capability to
deliver significant revenue growth with final larger-scale fermenter
installation to complete in Q3 2023
· Cost reduction, restructuring and operational efficiency measures
implemented to benefit 2023 performance and beyond
· Exit from underperforming Laboratory Testing (disposal of ADL Health)
and UK Contract Manufacturing business
· Board changes: Julian Baines assumed Executive Chair role on a
short-term basis and Mike Salter to concentrate on delivering growth in Life
Sciences, both effective from 6 February 2023
Julian Baines, Executive Chairman of EKF, commented:
"I am delighted that the core established business has grown by 13%
year-on-year and by 12% compared to pre-pandemic levels. These financial
results show the strength and robustness of the business as a whole and the
potential that EKF offers to shareholders.
"EKF has a well-established core business that offers a stable "razor, razor
blade" consumable model in Point of Care, alongside an exciting upside
opportunity within the Life Sciences division for rapid scale up and
significant revenue growth. The business is operationally profitable and cash
generative, has no long-term debt and supports an attractive dividend policy.
"Cost reduction, restructuring and efficiency measures will further improve
our performance in 2023 and onwards. The work to deliver these measures has
already begun in earnest and the Board remains confident that the performance
of the business for the year remains in-line with management expectation, with
EKF now well positioned for long-term sustainable growth."
Investor Presentation
A copy of the investor presentation is available here:
https://www.ekfdiagnostics.com/documents-reports.html
(https://www.ekfdiagnostics.com/documents-reports.html)
EKF Diagnostics will be hosting a live online presentation open to all
investors today at 4.30pm (BST), via the Investor Meet Company
platform. Investors can sign up to Investor Meet Company for free and add to
meet EKF Diagnostics via:
https://www.investormeetcompany.com/ekf-diagnostics-holdings-plc/register-investor
(https://www.investormeetcompany.com/ekf-diagnostics-holdings-plc/register-investor)
EKF Diagnostics Holdings plc www.ekfdiagnostics.com (http://www.ekfdiagnostics.com)
Julian Baines, Executive Chair / Marc Davies, CFO via Walbrook PR
Singer Capital Markets (Nominated Adviser & Broker) Tel: +44 (0)20 7496 3000
Aubrey Powell / George Tzimas / Oliver Platts
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
The persons responsible for arranging the release of this announcement
on behalf of the Company are Julian Baines, Executive Chair, and Marc Davies,
CFO.
About EKF Diagnostics Holdings plc (www.ekfdiagnostics.com
(http://www.ekfdiagnostics.com) )
EKF is an AIM-listed global diagnostics business focussed on:
· Point-of-Care analysers in the key areas of Hematology and Diabetes,
as well as Central Laboratory products including clinical chemistry reagents,
analysers and centrifuges
· Life Sciences services provide specialist manufacture of enzymes and
custom products for use in diagnostic food and industrial applications, as
well as other higher value Contract Manufacturing services
EKF has headquarters in Penarth (near Cardiff) and operates five manufacturing
sites across the US and Germany, selling into over 120 countries world-wide.
Executive Chairman's Statement
We are pleased to announce a solid set of results for 2022 which saw EKF
deliver full year revenues of £66.6m, reflecting both attractive growth from
core established revenues streams and the expected significant drop-off in
COVID revenues during the year.
We have previously set out our aim to return the core established business to
pre-pandemic 2019 levels and position ourselves for future sustainable growth
outside of short-term COVID-related revenues, and we believe we have made
excellent progress.
We are particularly pleased with the strong performance of the core
established business, comprising of Point-of-Care and Central Laboratory,
which has delivered organic growth of 13% year-on-year. In 2022 those two
divisions contributed £45.3m, representing 68% of Group revenues, a 12%
improvement on pre-pandemic levels, and by itself now more than total Group
revenues for 2019, when no COVID related activities were recorded. Not only
have we successfully grown these core divisions to above their respective
pre-pandemic levels, we have delivered respectable double-digit organic growth
across 2022 and expect this momentum to continue into 2023.
A further major contributor to establishing ourselves for future sustainable
growth has been our Life Sciences division, which has already seen significant
year-on-year growth of 60% in 2022 to £3.2m (2021: £2.0m, 2019: £2.7m),
even before the capacity expansion plans at our US enzyme fermentation
facility have been fully implemented. We are confident in the commercial
potential and payback of this growth opportunity and expect to realise the
full impact on revenue growth in 2024.
Alongside these strong positive developments, there has been some 'drag' on
performance in 2022, namely from the longer than anticipated transition to
non-COVID revenues in both Contract Manufacturing and Laboratory Testing.
Whilst progress has been made in this regard, in 2023 there is a significant
focus on cost reduction and restructuring within these divisions, as well as
more general operational efficiency measures being introduced across the
Group. This has resulted in the decision to close down the Contract
Manufacturing operations in the UK and the disposal of the Laboratory Testing
subsidiary, Advanced Diagnostic Laboratory LLC ("ADL Health") in the US. The
Group now has a clear focus on the Point-of-Care, Central Laboratory and Life
Sciences divisions.
Adjusted EBITDA for the year was £14.9m (2021: £26.5m) which, while lower
than originally anticipated, reflects a 24% improvement on pre-pandemic levels
(2019: £12.0m). Adjusted EBITDA was reduced as a result of the
underperformance in Contract Manufacturing and Laboratory Testing. As
confirmed above, action has been taken to ensure this is non-recurring.
Cash levels remain healthy, with net cash after borrowings of £11.4m (31
December 2021: £19.6m) and cash and cash equivalents of £11.6m (31 December
2021: £20.3m). This position is after the significant investment in
increasing our enzyme fermentation capacity, as well as the funding of our
share purchase programme, payment of shareholder dividend and other
investments made during the year. Cash held in our Russian subsidiary at year
end was £2.4m (31 December 2021: £1.3m) and is discussed further in the
Chief Financial Officer's statement.
Whilst 2022 has been a year of significant transition, the Board is confident
that EKF has well-established foundations from which to execute its next phase
of sustainable growth.
OPERATIONAL OVERVIEW
As already mentioned, the highlights of our 2022 results have been the
performance of the core established business year-on-year, and in comparison
to pre-pandemic levels, as well as the strong growth coming from our Life
Sciences division using existing fermentation capacity levels. The table below
highlights this strong performance:
Divisional revenues 2022 2021 +/- % 2019 +/- %
Yr-on-Yr
2022 vs. 2019
£ millions (pre-pandemic)
Core established business 45.3 40.1 13.1% 40.6 11.6%
- Point-of-Care 30.8 27.0 14.0% 27.3 12.8%
- Central Laboratory 14.5 13.1 11.2% 13.3 9.0%
Life Sciences 3.2 2.0 60.2% 2.7 18.5%
Contract Manufacturing 9.5 36.3 (73.8%) 0.2 4,650%
Laboratory Testing* 2.6 1.0 155.3% - -
Other 6.0† 2.4 143.1% 1.4 328.6%
Total Group Revenues 66.6 81.8 (18.6%) 44.9 48.3%
*Contribution from 27 September
2021 †Includes
£3.5m relating to US inventory receipt
Point-of-Care & Central Laboratory
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, doctors' 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 (manufacture and supply of reagents and materials, as
indicated below), and laboratory equipment including small lab analysers and
centrifuges.
Beta-Hydroxybutyrate (β-HB) LiquiColor, Glycated Albumin, Glycated Serum
Protein, Nitro-tab, Procalcitonin
Our core established business, a combination of our Point-of-Care (POC) and
Central Laboratory divisions, performed well, growing revenues by 13% to
£45.3m (2021: £40.1m). We continue to focus on driving organic growth from
these stable and established businesses, leveraging existing products and
routes to markets, and innovating and expanding into new territories. We
expect to see continued growth into 2023.
As well as showing strong year-on-year growth, Point-of-Care sales in 2022
were some 13% above the level of sales seen pre-pandemic in 2019. In 2022 we
saw a strong sales performance from our range of hematology analysers and
tests, and in particular from the continued use of the consumables associate
with them. Revenues from our flagship hemoglobin analyzer, Hemo Control, grew
by 37% in the year, and is the largest contributor to this division, now
representing just short of a quarter of POC revenues. Sales of our HemataStat
product, a light and efficient centrifuge for fast hematocrit sampling, grew
by 31%. DiaSpect Tm sales were slightly down year-on-year, but did so on the
back of strong growth in 2021, and sales still remain over 30% above
pre-pandemic levels. The newly updated DiaSpect Tm, now powered by our data
management platform EKF Link and with additional functionality, is expected to
inject greater impetus for sales of this palm-sized haemoglobin analyzer.
We have also seen growth across all our diabetes instrument range, driven by
high growth from our Quo-Lab HbA1c analyzer (sales up by 23%) and a solid
performance from our second largest contributor to POC sales, Biosen, a lab
accurate glucose and lactate analyzer, which showed 15% growth. Revenues from
Lactate Scout, a handheld lactate analyzer for sports performance monitoring,
remained broadly flat year-on-year. The launch of Lactate Scout Vet in Q4
2022, will utilise our existing product technology to open up new and
attractive markets in animal health, with considerably lower barriers to
entry.
Central Laboratory also performed well in 2022 delivering 11% growth compared
to 2021, and maintaining revenue levels 9% ahead of pre-pandemic levels at
£14.5m. The vast majority of sales in this division are derived from our
β-HB (Beta-Hydroxybutyrate) reagent, which is used to detect ketones to
identify patients suffering from diabetic ketoacidosis, amongst many other
clinical applications. In 2022 β-HB sales increased by 10% to around £12m,
as a result of increased demand generated from our US distribution partners.
Life Sciences
Life Sciences Enzyme fermentation, Custom products and Bulk fermentation
Our Life Sciences division grew by 60% to £3.2m (2021: £2.0m). We believe
that this is a highly-scalable business unit, where we can take advantage of
a demand-driven opportunity to produce research and diagnostic enzymes in the
molecular and clinical chemistry markets, and in industrial and agricultural
enzymes settings as well as food grade fermentation digestive proteins. Our
production expansion is for customers that we have established relationships
with, and who are well advanced in the process of transferring to our enzyme
contract manufacturing services delivered from our two US sites in Indiana.
As we updated shareholders recently, we expect to have our largest fermenter
(14,500 litre) installed and validated in Q3 2023. This means all our
fermentation capacity and capability investment in South Bend will be
installed and validated towards the end of Q3 2023.
As part of our $14.2m investment programme, we will have installed 65L, 300L,
1,500L, 3,000L and 14,500L units as well as key upstream and downstream
process capabilities, to complement the existing capacity provided by our
existing BioFlo 10L (x2), 125L and 1,600L units in our established Elkhart
facility. We have a strong pipeline of opportunities to take up our enlarged
capacity, and current customer onboarding processes (internal audit,
validation and tech transfer) continue to progress well. We remain confident
that all of the planned fermenters will be operational in Q3 2023, and we will
deliver significant revenue growth from this opportunity, with the full impact
seen in 2024 financial results and further growth beyond.
As we expect Life Sciences to become a larger contributor to Group performance
we have performed an internal reorganisation to record higher value,
non-COVID, Contract Manufacturing activity performed by our US operation in
this division. This reinforces management's focus on the core business (i.e.
all non-COVID related products and services) and will increase visibility and
reduce complexity in our Group, becoming effective in 2023 reporting.
Contract Manufacturing & Laboratory Testing
Contract Manufacturing Bulk formulation, Sample collection kits, Private labelling, Molecular and
forensic kits
Laboratory Testing Laboratory testing services certified under the Clinical Laboratory
Improvement Amendments ("CLIA") for high complexity testing.
The key focus for both Contract Manufacturing & Laboratory Testing has
been to transition these businesses into non-COVID activities and build
revenues by broadening our high-value services offering.
In Contract Manufacturing this process has taken longer than originally
expected and as already described to shareholders in our recent trading
update, EKF is now focussed on taking out significant costs from this
division, using pre-pandemic levels as a benchmark. Furthermore, the Company
is extending its reorganisation programme and efficiency drives as discussed
in the Half-Yearly results. Our UK Contracting Manufacturing operation, which
was set up in 2020 to meet COVID related demand, has been closed in Q1 2023,
and its existing business is being transferred to other EKF locations where
commercially viable. This division was loss making and so the Board has taken
decisive action to adjust the cost base accordingly.
As discussed above, in 2023 all activity relating to the high value non-COVID
Contract Manufacturing services performed from the US will be recorded in Life
Sciences. Any residual COVID related Contract Manufacturing will be captured
in Other, which is not expected to be material.
As announced on 23 March 2023, Management has determined that Laboratory
Testing will no longer form part of EKF's core offering and, therefore, ADL
Health was disposed to Medical Management Partners, LLC, an entity which is
100% controlled by Stan Crawford, a member of the management team of ADL
Health. The Disposal will provide cost savings to EKF, allow Management time
to focus on growth initiatives in other areas, and also simplify the reporting
structure of the wider group.
The performance of these two divisions had a significant impact on overall
2022 Group performance. However, quick action to realign the cost base and to
undertake appropriate reorganisational steps will ensure that they will no
longer act as a drag on growth in gross margin and adjusted EBITDA moving
forward.
In addition to the above business divisions, there was a further £6.0m
revenues recorded in Other, which mainly related to shipping and handling
recharges, repairs and other sundries (2021: £2.4m). However, in 2022 £3.5m
of revenue in Other relates to the one-off US inventory receipt received in
May 2022 which is non-recurring.
In light of the operational changes mentioned above we will present the EKF
business going forward under two simplified divisions:
Point-of-Care (Products) incorporating the core established businesses of Point-of-Care & Central
Laboratory
Life Sciences (Services) incorporating the Life Sciences division (enzyme fermentation services) and
the remaining high-value contract manufacturing services offered to customers
looking to outsource the production of their diagnostic or life sciences
products
Transition and restructuring activities
In light of the significant macro changes during 2022, the Board took swift
action to transition and restructure the business activities of the Group.
This centred around transitioning the structure and costs base associated with
COVID related activities as well as prioritising the resources of the Group
towards sustainable, high value business with strong potential for growth.
This resulted in an exceptional charge of £17.5m being recognised for 2022.
The Board believes these actions will provide a solid platform for the further
development of the business. Further actions have been taken in 2023,
including exiting underperforming business units, and it is expected these
processes will be completed within the first half of 2023.
The main transition and restructuring activities performed in 2022 were:
- Impairment of the ADL Health business, which was subsequently
disposed of in March 2023
- Provisioning against excess COVID related and other inventory
throughout the Group in light of the decision to transition away from these
areas
- Exit from unprofitable commercial arrangements in order to focus
on the Group's restructure
- Scaling back of property portfolio in light of current and future
requirements
- Reduction of Group personnel to align with demand for products and
services
- Corporate reorganisation to simplify Group structure and mirror
operational needs
In addition, the restructuring costs associated with the announcement in
February 2023 of the closure of the UK Contract Manufacturing business will be
recognised in the 2023 financial statements.
Whilst a number of decisions taken during the year have been challenging, they
reflect the change necessary to simplify and refocus EKF and to support the
robust platform being built for growth.
Board changes
Post-period end, we announced a number of Board changes in recognition of the
critical success factors around the delivery of expected growth in our Life
Sciences division. Mike Salter is now fully focussed on these critical
operational tasks in the US and does so unencumbered by the additional duties
he had as Chief Executive Officer (CEO). Mike remains a key part of the
Management, reporting directly to the Board, and the Board is very grateful to
Mike both for his time as CEO and his continued commitment to focus on
delivering these key operational aspects of our strategy.
For the time being, I have assumed the role of Executive Chair, and previously
announced that the Board would begin the process of recruiting a new CEO. The
Board believes the recruitment focus should be on an experienced operational
leader given the stated focus on our core established business and the Life
Sciences expansion. Christopher Mills stood down as Non-executive Chair but
remains on the Board as a Non-executive Director. We are hugely grateful to
Christopher for his stewardship as Non-executive Chair and are very pleased to
retain his counsel and guidance in a non-executive capacity. Carl Contadini
retired from the Board in February 2022, and we wish him well for the future.
The Board now comprises five members - two Executive Directors and three
Non-executive Directors:
· Julian Baines, Executive Chair
· Marc Davies, Chief Financial Officer
· Christian Rigg, Senior Independent Non-executive Director
· Jenny Winter, Independent Non-executive Director
· Christopher Mills, Non-executive Director
Until the appointment of a new CEO, the Board believes that any other revision
to Board composition would be inappropriate. We have adopted the Corporate
Governance Code issued by the Quoted Company Alliance and our two independent
Non-executive Directors, Chris Rigg and Jenny Winter, continue to play very
important roles. Further details of compliance to our adopted governance code
can be found in the Corporate Governance Statement of the Annual Report and on
the Company's website.
Outlook
I am delighted that the core established business has grown by 13%
year-on-year and by 12% compared to pre-pandemic levels. These financial
results show the strength and robustness of the business as a whole and the
potential that EKF offers to shareholders.
EKF has a well-established core business that offers a stable "razor, razor
blade" consumable model in Point-of-Care, alongside an exciting upside
opportunity within the Life Sciences division for rapid scale up and
significant revenue growth. The business is operationally profitable and is
cash generative, has no long-term debt and supports an attractive dividend
policy.
Cost reduction, restructuring and efficiency measures will further improve our
performance in 2023 and onwards. The work to deliver these measures has
already begun in earnest and the Board remains confident that the performance
of the business for the year remains in-line with management expectations,
with EKF now well positioned for long-term sustainable growth.
Julian Baines
Executive Chairman
28 March 2023
Chief Financial Officer's Review
Revenue for 2022 was £66.6m (2021: £81.8m), a decrease of 19% on the prior
year, reflecting the anticipated reduction in revenues from COVID-19 related
products and services. At constant 2021 exchange rates, revenue for the year
would have been £62.7m. Revenue in 2022 included £3.5m relating to a one-off
US inventory receipt.
Revenue by geographical segment based on the legal entity locations from which
sales are made, is as follows:
2022 2021
£'000 £'000 +/- %
Germany 24,192 34,171 (29%)
USA 36,822 36,056 2%
UK 1,419 8,323 (83%)
Russia 4,202 3,286 28%
Total 66,635 81,836 (19%)
Adjusted
EBITDA*
Revenue
£'000
£'000
Germany 24,192 8,089
USA 36,822 8,309
UK 1,419 (3,057)
Russia 4,202 1,563
Total 66,635 14,904
* Adjusted EBITDA excludes exceptional items and share-based payments.
Observations by geographical segment:
Germany - Significant reduction in revenue primarily due to sample collection
tubes and kits contract manufacturing activity following COVID drop off in Q1
2022.
USA - Strong core sales growth offsetting reduction in contract manufacturing
following COVID drop off in Q1 2022.
UK - Reduced contract manufacturing activity following COVID drop off in the
first quarter of 2022. The UK contract manufacturing facility was closed in Q1
2023.
Russia - Solid demand in Point-of-Care portfolio and foreign exchange benefit.
EKF's Russian entity is 60% owned by the Group with 100% of its results
consolidated, with the non-controlling interest shown separately in the income
statement and statement of financial position.
Russia Update
During 2022 EKF continued to supply essential medical products to its 60%
owned Russian subsidiary, in compliance with current international sanctions
guidance and following regular management review. International sanctions mean
that the Company remains unable to distribute cash dividends from this
subsidiary and this situation is not expected to change in 2023. As at 31
December 2022, cash held in Russia totalled £2.4m (31 December 2021: £1.3m).
Management continues to assess the situation in Russia and are mindful of the
growing financial and operational challenges.
Gross profit
Gross profit was £24.0m (2021: £39.4m), which represents a gross margin of
36% (2021: 48%). Before exceptional costs of £6.8m (2021: £nil) the gross
margin was £30.8m, representing a gross margin percentage of 46%. The
decreased gross profit was largely due to the lower sales volumes following
the COVID drop off. The reduction in gross margin was primarily caused by
changes in the mix of products as well as increased costs in the supply chain.
Administration costs and research and development
Administration costs, excluding exceptional items, have increased to £23.2m
(2021: £17.6m), largely as a result of higher sales administration costs in
the USA, the full year effect of ADL Health and the accounting treatment
associated with the one-off US inventory receipt.
To aid understanding, administrative expenses in each period are made up as
follows:
Year ended Year ended
31 December 2022 31 December 2021
£'000
£'000
Non-exceptional administration expenditure before R&D capitalisation 24,877 19,511
Effect of share-based payments (308) (1,238)
Less capitalised R&D (1,392) (659)
Total administrative expenses 23,177 17,614
Research and development costs included in administration expenses were £1.5m
(2021: £1.4m). A further £1.4m (2021: £0.7m) 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
£2.9m (2021: £2.1m). The charge for depreciation of fixed assets and
amortisation of intangible assets increased to £6.7m (2021: £5.9m). The
increase was mainly associated with the capital programme in recent periods.
Operating profit and adjusted earnings before interest, tax, depreciation and
amortisation
The Group generated an operating loss of £9.0m (2021: £21.7m profit). This
was a result of the lower revenue levels seen during the year and the
significant exceptional 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 provides a clearer comparison of the
underlying operating performance between periods. In 2022 we achieved adjusted
EBITDA of £14.9m (2021: £26.5m), a decrease of 44%. 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 £0.3m (2021: credit of
£1.2m), and exceptional costs of £17.5m (2021: £0.1m), the main element of
which in 2022 is the transition and restructuring of the business to enhance
future profitability including the impairment of assets in relation to the ADL
Health business. This is outlined in more detail in note 4.
Finance costs
Net finance costs are £0.03m (2021: £0.3m). The benefit of interest received
on cash balances, mainly those held in Russia, is offset by charges relating
to leases accounted for in accordance with IFRS 16. Although the Group holds
net cash, achievable financial returns on this remain very low because of low
interest rates around the world.
Tax
There is an income tax charge of £0.6m, a decrease from the prior year charge
(2021: £5.3m). Deferred tax of £(1.5m), associated with the decrease in the
market value of listed investments, has been credited direct to Other
Comprehensive Income.
Dividend
A cash dividend of 1.2p per ordinary share was paid in December 2022, in
respect of the final dividend for 2021. In addition, the majority of the
Group's investment in Verici Dx plc was transferred to shareholders by way of
a dividend in specie in June 2022, at a value of £2.0m. We can confirm that
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 2022. If
approved by shareholders at the Company's next Annual General Meeting, payment
of the dividend will be made on Friday 1 December 2023. The associated record
date for this dividend is Friday 3 November 2023, and the ex-dividend date
would be Thursday 2 November 2023.
Balance sheet
Property plant and equipment and right-of-use assets
Additions to fixed assets were £7.0m (2021: £5.7m). Major programmes include
the continuing work on the fit out of the new factory building in South Bend,
Indiana; upgrading and refurbishment of the Group's manufacturing facility in
Elkhart, Indiana; new equipment at ADL Health; and the capitalisation of new
and replacement leases under IFRS 16 including replacement leases on
properties in the USA and Germany. These leases are generally for short terms
or have break clauses that limit our commitment.
Intangible assets
The carrying value of intangible assets has decreased, from £41.9m at the end
of 2021 to £33.8m as at 31 December 2022. This is largely due to the
impairment of goodwill and intangible assets associated with ADL Health.
Investments
During the year the Company invested an additional £0.4m in Renalytix plc, a
developer of artificial intelligence enabled acute kidney injury products. At
year-end, the Company held approximately 1.53% of the issued share capital of
Renalytix plc. In addition, the Company invested £2.5m in Verici Dx plc, a
developer of advanced clinical diagnostics for organ transplant. Subsequently,
the majority of the Company's holding in Verici Dx was transferred to its
shareholders by way of a dividend in specie. The fair value reduction of the
Company's investments was £7.6m during the year.
Due to the stated strategic focus on the core established business and Life
Sciences we do not expect to make any further external investments in 2023.
Deferred consideration
The Group made a payment of £0.4m in respect of deferred consideration
relating to the acquisition of ADL Health. The remaining deferred
consideration, which is contingent on the performance of ADL Health over a
three year period commencing at the date of acquisition in September 2021, has
been written back. No deferred consideration was payable for the period to
September 2022. Post year end, ADL Health has been disposed of and hence there
are no further deferred consideration obligations.
Cash and working capital
Group cash, net of borrowings (which excludes marketable securities and lease
creditors assessed in relation to IFRS 16 assets), has decreased to £11.4m
from £19.6m. Excluding cash held in Russia the cash balance net of borrowings
is £9.0m (2021: £18.3m). Gross cash has fallen to £11.6m (2021: £20.3m).
Existing borrowings reduced in line with repayments to £0.1m (2021: £0.7m),
this included the repayment of borrowings taken on at the acquisition of ADL
Health. Cash generated by operations is £12.7m (2021: £14.2m). Investment
has been made in the acquisition of fixed assets (£4.4m excluding IFRS 16
leases), and in support of existing investments in AIM listed businesses. The
dividend paid in December 2022 totalled £5.5m.
The Company has agreed a funding line with North Atlantic Smaller Companies
Investment Trust PLC ("NASCIT"). Christopher Mills, Non-executive Director of
the Company, sits on the Board as Chief Executive Officer of NASCIT and is a
substantial shareholder of both the Company and the lender. This is a
committed facility for a maximum value of £3.0m which, as at the date of this
statement, is not drawn down. The terms of the facility are substantially
similar to those considered to be commercially available to the Company. This
facility partially sets off the exposure currently faced by the Group given
the inability to access cash reserves held in Russia. The Board believes it is
a prudent measure to have access to additional cash if needed and further that
the facility demonstrates the continued support from its largest shareholder,
Christopher Mills. The direct and indirect shareholdings of Mr. Mills in the
Company include those of the NASCIT.
The lending facility is available for three years from the date of this
announcement and any amounts drawn down carry interest at 2.5% above the Bank
of England base rate from time to time, payable quarterly in arrears. Any loan
under the facility is required to be fully repaid at the end of the facility
term. The Company may repay any such loan early, in part or in full, but may
not re-borrow such amounts.
As a Substantial Shareholder (as defined in the AIM Rules), the arrangement of
a debt facility with NASCIT represents a related party transaction pursuant to
AIM Rule 13. The independent Directors of EKF (being the Directors of the
Company other than Christopher Mills), having consulted with Singer Capital
Markets as the Company's nominated adviser, consider that the terms of the
agreement governing the debt facility from NASCIT are fair and reasonable in
so far as shareholders are concerned.
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, even taking into account
severe but plausible changes in financial performance, that the Group will be
able to operate as outlined below.
Following the year of transition away from COVID related activities in 2022,
the business continues to grow its core base under both Point-of-Care and
Central Laboratory, funding the investment into Life Sciences at the new
facility in South Bend. The Directors have modelled a range of sensitivities
from the base internal budget including lower revenues, and continued
restrictions in Russia in relation to accessing cash. In addition, the Group
has taken actions including cost reductions through the closure of the UK
manufacturing operations and the divestment of ADL Health, and securing the
committed £3m of funding from NASCIT to be drawn down should the worst-case
scenario materialise.
Considering the range of sensitivities which account for a severe downturn
versus expectation in 2023, plus the range of mitigation options available the
business demonstrates sufficient headroom giving the Directors confidence that
the business can continue to meet its obligations as they fall due, even under
the 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.
Share capital
During the year the Company acquired 9 million of its own ordinary shares at a
cost of £3.9m, paying an average price of 43.3p per share. These shares were
subsequently cancelled.
Post Balance Sheet Events
In February 2023 the Group's UK manufacturing operations were closed down.
This resulted in a small number of redundancies.
The transition of the Laboratory Testing business towards generating non-COVID
revenues has presented certain challenges following the rapid drop in demand
for COVID testing worldwide since Q1 2022. ADL Health contributed a loss in
2022, which has led to EKF's Management reviewing the business and its
rationale in the context of the Group's wider strategy.
Following the review undertaken in early 2023, Management determined that
Laboratory Testing will no longer form part of EKF's core offering and,
therefore, disposed of ADL Health to Medical Management Partners, LLC, an
entity which is 100% controlled by Stan Crawford, a member of the management
team of ADL Health. The disposal will provide cost savings to EKF, allow
Management time to focus on growth initiatives in other areas, and also
simplify the reporting structure of the wider group. In the year ending 31
December 2022, ADL Health generated revenue of £2.6 million and loss before
tax of approximately £1.0 million, with net assets of £0.1 million as at 31
December 2022. The disposal was classified as a related party transaction
under the AIM Rules by virtue of Stan Crawford being a director of a
subsidiary of the Company. Further details of this transaction and related
regulatory disclosures are contained in the announcement made on 23 March
2023.
The consideration will primarily comprise 1,200,000 EKF shares of ordinary
shares of 1p each in the capital of the Company to be held, initially, in
treasury.
Marc Davies
Chief Financial Officer
28 March 2023
Consolidated Income Statement
for the year ended 31 December 2022
2022 2021
£'000 £'000
Revenue 66,635 81,836
Cost of (35,823) (42,470)
sales
Exceptional items - other charged to cost of sales (6,774) -
Gross profit 24,038 39,366
Administrative (23,177) (17,614)
expenses
Exceptional items - impairment of assets (10,384) -
Exceptional items - other (367) (95)
Other 919 90
income
Operating (loss)/profit (8,971) 21,747
Depreciation and (6,658) (5,885)
amortisation
Share-based payments 308 1,238
Exceptional (17,525) (95)
items
EBITDA before exceptional items and share-based 14,904 26,489
payments
Finance 131 45
income
Finance (102) (357)
costs
(Loss) / profit before income tax (8,942) 21,435
Income tax (634) (5,277)
charge
(Loss)/profit for the year (9,576) 16,158
(Loss)/profit attributable to:
Owners of the parent (10,101) 15,851
Non-controlling interest 525 307
(9,576) 16,158
Pence Pence
(Loss)/earnings per Ordinary Share attributable to the owners of the parent
during the year
Basic (2.21) 3.47
Diluted (2.21) 3.44
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
£'000 £'000
(Loss)/profit for the year (9,576) 16,158
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)
(6,096) (321)
Items that may be subsequently reclassified to profit or loss
Currency translation differences 6,811 (1,226)
Other comprehensive income/(loss) (net of tax) 715 (1,547)
Total comprehensive (loss)/income for the year (8,861) 14,611
Attributable to:
Owners of the parent (9,420) 14,315
Non-controlling interests 559 296
Total comprehensive (loss)/income for the year (8,861) 14,611
Consolidated Statement of Financial Position
as at 31 December 2022
Group Group
2022 2021
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 20,435 15,991
Right-of-use asset 1,279 1,875
Intangible assets 33,772 41,894
Investments 1,119 7,789
Deferred tax assets 925 15
Total non-current assets 57,530 67,564
Current assets
Inventories 9,434 13,238
Trade and other receivables 10,739 13,428
Current income tax receivable 10 548
Cash and cash equivalents (including restricted cash of £2,366,000 (2021: 11,578 20,341
£nil))
Total current assets 31,761 47,555
Total assets 89,291 115,119
Equity attributable to owners of the parent
Share capital 4,549 4,639
Share Premium 7,375 7,375
Other reserves (629) 5,033
Foreign currency reserves 9,590 2,813
Retained earnings 52,461 74,264
73,346 94,124
Non-controlling interest 1,177 618
Total equity 74,523 94,742
Liabilities
Non-current liabilities
Lease liabilities 537 1,095
Borrowings - 431
Deferred consideration - 170
Deferred tax liabilities 2,493 5,031
Total non-current liabilities 3,030 6,727
Current liabilities
Trade and other payables 8,288 9,078
Lease liabilities 873 838
Deferred consideration - 465
Current income tax liabilities 2,440 3,004
Borrowings 137 265
Total current liabilities 11,738 13,650
Total liabilities 14,768 20,377
Total equity and liabilities 89,291 115,119
Consolidated Statement of Cash Flows
for the year ended 31 December 2022
Group Group
2022 2021
£'000 £'000
Cash flow from operating activities 12,655
Cash generated from operations 14,208
Interest received 85 45
Interest paid (46) (81)
Income tax paid (3,006) (3,934)
Net cash generated from operating activities 9,688 10,238
Cash flow from investing activities (2,930)
Payment for investments -
Payment for property, plant and equipment (PPE) (4,434) (4,335)
Payment for intangibles (1,394) (1,314)
Payment for acquisition of subsidiaries, net of cash acquired (403) 84
Proceeds from sale of PPE 229 43
Interest received - 45
Net cash used in investing activities (8,932) (5,477)
Cash flow from financing activities
Payment for shares bought back (3,896) -
Dividends paid to company shareholders (5,459) (5,103)
Repayments of borrowings (613) (178)
Principal elements of lease payments (1,071) (643)
Dividend payment to non-controlling interest - (231)
Net cash used in financing activities (11,039) (6,155)
Net decrease cash and cash equivalents (10,283) (1,394)
Cash and cash equivalents at beginning of year 20,341 21,913
Exchange gains/(losses) on cash and cash equivalents 1,520 (178)
Cash and cash equivalents at end of year 11,578 20,341
Cash and cash equivalents totalling £2,366,000 (2021: £1,344,000) are held
by the Group's 60% owned subsidiary company in Russia. As a result of action
by the Russian Government following international sanctions being imposed on
Russia, access to this cash is currently restricted.
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 2021 4,550 200 5,354 4,028 63,516 77,648 552 78,200
Comprehensive income
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 and 1 January 2022 4,639 7,375 5,033 2,813 74,264 94,124 618 94,742
Comprehensive (expense)/income
(Loss)/profit for the year - - - - (10,101) (10,101) 525 (9,576)
Other comprehensive (expense)/income
Changes in fair value of equity instruments at fair value through other - - (7,598) - - (7,598) - (7,598)
comprehensive expense
Deferred tax on the above 1,502 1,502 1,502
Currency translation differences - - - 6,777 (1)- 6,776 34 6,810
Total comprehensive (expense)/income - - (6,096) 6,777 (10,102) (9,421) 559 (8,862)
Transactions with owners
Cancellation of ordinary shares (90) - 90 - (3,896) (3,896) - (3,896)
Reserve transfer 344 (344) - - -
Dividends to owners - - - - (7,461) (7,461) - (7,461)
Total distributions to owners (90) - 434 - (11,701) (11,357) - (11,357)
At 31 December 2022 4,549 7,375 (629) 9,590 52,461 73,346 1,177 74,523
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2022
1. General information
EKF Diagnostics Holdings Plc is a company incorporated and domiciled in the
United Kingdom. The Company is a public limited company (registration number
4347937), which is listed on the Alternative Investment Market of the London
Stock Exchange. The address of the registered office is Avon House, 19
Stanwell Road, Penarth, Cardiff CF64 2EZ.
The principal activity of the Group is the development, manufacture and supply
of products and services into the in-vitro diagnostic (IVD) market place. The
Group has presence in the UK, USA, Germany, and Russia, and sells throughout
the world including Europe, the Middle East, the Americas, Asia, and Africa.
The financial information within this preliminary announcement is extracted
from the Group's consolidated financial statements for the year ended 31
December 2022, which were approved by the Board of Directors on 28 March 2023.
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 Company will publish
its full financial statements for the year ended 31 December 2022 by 24 April
2023, which will be available on the Company's website at
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 17 May 2023.
The Group's consolidated financial statements for the year ended 31 December
2022 have been prepared in accordance with 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 2022. 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 17 May
2023 at the Company's Annual General Meeting.
Statutory accounts for the year to 31 December 2021 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 that, even taking into
account severe but plausible changes in financial performance, the Group will
be able to operate as outlined below.
Following the year of transition away from COVID related activities in 2022,
the business continues to grow its core base under both Point-of-Care and
Central Laboratory, funding the investment into Life Sciences at the new
facility in South Bend. The Directors modelled a range of sensitivities from
the base internal Budget including lower revenues, and continued restrictions
in Russia in relation to accessing cash. In addition, the Group has taken
actions including cost reductions through the closure of the UK manufacturing
operations and the divestment of ADL Health, and securing a committed £3m of
funding from the North Atlantic Smaller Companies Investment Trust PLC to be
drawn down should the worst-case scenario materialise.
Considering the range of sensitivities which account for a severe downturn
versus expectation in 2023, plus the range of mitigation options available the
business demonstrates sufficient headroom giving the Directors confidence that
the business can continue to meet its obligations as they fall due, even under
the 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.
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 2022 is as follows:
Germany USA Russia UK Total
2022 £'000 £'000 £'000 £'000 £'000
30,384 37,220 4,202 1,427 73,233
Income statement
Revenue
Inter-segment (6,192) (398) - (8) (6,598)
External revenue 24,192 36,822 4,202 1,419 66,635
8,089 8,309 1,563 (3,057) 14,904
Adjusted EBITDA*
Exceptional items - impairments (Note 4) (32) (10,324) - (28) (10,384)
Exceptional items - other (Note 4) (1,857) (4,909) - (375) (7,141)
Share-based payments - - - 308 308
6,200 (6,924) 1,563 (3,152) (2,313)
EBITDA
Depreciation (744) (1,925) (21) (408) (3,098)
Amortisation (1,667) (1,835) - (58) (3,560)
3,789 (10,684) 1,542 (3,618) (8,971)
Operating profit
Finance income 1 1 118 11 131
Finance cost (33) (4) - (65) (102)
Income tax (790) 644 (348) (140) (634)
Profit for the year 2,967 (10,043) 1,312 (3,812) (9,576)
41,835 57,213 873 13,246 113,167
Segment assets
Operating assets
Inter-segment assets (10,608) (22,634) - (2,212) (35,454)
External operating assets 31,227 34,579 873 11,034 77,713
Cash 2,774 5,785 2,366 653 11,578
Total assets 34,001 40,364 3,239 11,687 89,291
7,211 27,125 207 15,542 50,085
Segment liabilities
Operating liabilities
Inter-segment liabilities (986) (21,908) - (12,560) (35,454)
External operating liabilities 6,225 5,217 207 2,982 14,631
Borrowings 137 - - - 137
Total liabilities 6,362 5,217 207 2,982 14,768
5,982 13,590 155 1,987 21,714
Other segmental information
Non-current assets - PPE
Non-current assets - Intangibles 18,606 8,822 87 6,257 33,772
PPE - additions 877 5,909 84 102 6,972
Intangible assets - additions 832 192 - 370 1,394
*Adjusted EBITDA excludes exceptional items and share-based payments. The UK
includes head office costs.
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 3,867 17,866
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 including acquisitions 694 8,171 - 521 9,386
Disclosure of Group revenues by geographic location of customer is as follows:
2022 2021
£'000
£'000
Americas
United States of America 30,941 31,522
Rest of Americas 4,126 3,248
Europe, Middle East and Africa (EMEA)
Germany 8,001 7,942
United Kingdom 1,886 8,848
Ireland 5,253 14,292
Rest of Europe 3,715 4,616
Russia 4,202 3,286
Middle East 1,449 1,464
Africa 1,945 2,323
Asia and Rest of World
China 1,014 985
Rest of Asia and Oceania 4,103 3,310
Total revenue 66,635 81,836
In 2022 no customer represented more than 10% of revenues. In 2021 revenues of
£14,225,000 (17.4%) were derived from one external customer, all of whose
revenues relate to Europe.
4. Exceptional items
Included within cost of sales and administrative expenses are exceptional
items as shown below:
2022 2021
Note £'000 £'000
- Warranty claim a - 285
- Deferred consideration and settlement of warranty claim a 2 (179)
- Business reorganisation costs - other charged to cost of sales b (6,774) -
- Business reorganisation costs - Impairment c (10,384) -
- Business reorganisation costs - other charged to operating d (369)
expenses
(37)
- Acquisition costs e - (164)
Exceptional items (17,525) (95)
a) Change in the value of deferred consideration relating to the acquisition
of Advanced Diagnostic Laboratory LLC. The 2021 amount relates to the
resolution of a warranty claim against the former owner of EKF-Diagnostic
GmbH.
b) Costs associated with the transition and restructure of certain operations
in the US as well as ADL Health, UK and Germany, which have been charged to
cost of sales. The costs include provisions against certain COVID-19 related
and other inventory and provisions for certain onerous contracts following the
decision to focus on its other businesses.
c) Impairments associated with the transition and restructure of certain
operations in the US, UK and Germany, which have been charged to operating
expenses. These costs include the impairment of Plant, Property and Equipment
and intangible assets relating to ADL Health (£9.8m) as well as the
impairment of a number of development projects which have been terminated
(£0.6m).
d) Costs associated with the transition and restructure of certain operations
in the US, UK and Germany, including redundancy costs (£0.4m) which have been
charged to operating expenses. These costs include redundancy costs. The
amount has been partly offset by the write back of the value of deferred
consideration in respect of Advanced Diagnostic Laboratory LLC (£0.3m).
e) Professional fees relating to the acquisition of Advanced Diagnostic
Laboratory LLC in 2021
5. Income tax charge
2022 2021
Group £'000 £'000
Current tax:
Current tax on profit for the year 2,815 5,096
Adjustments for prior periods 62 96
Total current tax 2,877 5,192
Deferred tax (note 29):
Origination and reversal of temporary differences (2,243) 85
Total deferred tax (2,243) 85
Income tax charge 634 5,277
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.
2022 2021
£'000 £'000
(Loss)/profit attributable to owners of the parent (10,101) 15,851
Weighted average number of Ordinary Shares in issue 457,180,086 457,001,067
Basic (loss)/profit per share (2.21) pence 3.47 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. The potential shares were not dilutive in
2022 as the Group made a loss.
2022 2021
£'000 £'000
(Loss)/profit attributable to owners of the parent (10,101) 15,851
Weighted average number of Ordinary Shares including potentially dilutive 457,180,086 460,957,933
shares
Diluted (loss)/profit per share (2.21) pence 3.44 pence
2022 2021
Weighted average number of Ordinary Shares in issue 457,180,086 457,001,067
Adjustment for:
- Assumed conversion of share awards - 12,640
- Assumed payment of equity deferred consideration - 3,944,226
Weighted average number of Ordinary Shares including potentially dilutive 457,180,086 460,957,933
shares
7. Dividends
In December 2022, the Company paid a final dividend for 2021 of 1.2p (2021:
1.1p) per ordinary share, at a total value of £5,459,000 (2021: £5,103,000).
The Board intends to follow an active dividend policy. The Directors propose,
subject to approval at the Company's next Annual General Meeting, the payment
of a final dividend for 2022 of 1.2p per EKF Ordinary share held on 2 November
2023. Payment will be made on 1 December 2023. to shareholders on the register
at the close of business on 3 November as the date of record. The expected
total value of the dividend for 2022 is £5,459,000.
In addition to the cash dividend described above, in June 2022 the Company
made a distribution in specie whereby the majority of the Company's
shareholding in Verici Dx plc was distributed to Ordinary shareholders of the
Company at a total value of £2,001,694. The fair value per EKF share was 0.44
pence.
8. Property, plant and equipment
Group Land and buildings Fixtures & fittings Plant and machinery Motor vehicles Assets under Construction Right-of-use asset Total
£'000
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2021 10,210 1,389 11,809 201 735 1,600 25,944
Acquired with subsidiary 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
Cost
At 1 January 2022 10,711 2,012 13,188 160 2,470 3,010 31,551
Additions 564 133 1,588 48 4,237 402 6,972
Exchange differences 838 180 985 22 276 195 2,496
Transfers 40 10 393 - (443) - -
Disposals (3) (363) (1,277) (20) (125) (285) (2,073)
At 31 December 2022 12,150 1,972 14,877 210 6,415 3,322 38,946
Accumulated depreciation
At 1 January 2022 2,595 1,249 8,625 81 - 1,135 13,685
Charge for the year 525 308 1,249 - - 1,016 3,098
Exchange differences 226 150 611 10 - 52 1,049
Impairment 1 - 1,129 - - 111 1,241
Disposals (3) (336) (1,217) (14) - (271) (1,841)
At 31 December 2022 3,344 1,371 10,397 77 - 2,043 17,232
Net book value at 31 December 2022 8,806 601 4,480 133 6,415 1,279 21,714
9. 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 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
Charge for the year - 237 1,221 1,730 548 108 3,844
Disposals (1,407) (19) (749) (1,073) (288) - (3,536)
Exchange differences (21) (144) (203) (454) (24) 1 (845)
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
Cost
At 1 January 2022 28,558 4,284 15,706 17,328 5,023 3,370 74,269
Additions - - - - 1,392 2 1,394
Disposals (1,177) - - (3,950) (598) (25) (5,750)
Exchange differences 1,995 348 1,567 672 349 384 5,315
At 31 December 2022 29,376 4,632 17,273 14,050 6,166 3,731 75,228
Accumulated amortisation and impairment
At 1 January 2022 1,177 3,021 11,825 14,664 1,579 109 32,375
Charge for the year - 327 1,438 762 472 561 3,560
Disposal (1,177) - - (3,950) (598) - (5,725)
Impairment 4,254 463 1,157 - 608 2,661 9,143
Exchange differences - 236 1,166 538 150 13 2,103
At 31 December 2022 4,254 4,047 15,586 12,014 2,211 3,344 41,456
Net book value at 31 December 2022 25,122 585 1.687 2,036 3,955 387 33,772
10. Cash generated by operations
Group
2022 2021
£'000 £'000
(Loss)/profit before tax (8,942) 21,435
Adjustments for:
- Depreciation 3,098 2,041
- Amortisation 3,560 3,844
- Exceptional items 17,525 (285)
- Loss/(profit) on disposal of fixed assets 28 (13)
- Share-based payments (308) (6,586)
- Fair value adjustment - 285
- Foreign exchange (71) 61
- Cash outflows relating to exceptional items (617) -
- Bad debt written down 127 58
- Net finance (income)/cost (29) 26
Changes in working capital
- Inventories (815) (4,601)
- Trade and other receivables 1,276 (3,274)
- Trade and other payables (2,177) 1,217
Net cash generated by operations 12,655 14,208
11. Post Balance sheet events
In February 2023 the Group's UK manufacturing operations were closed down.
This resulted in a small number of redundancies.
The transition of the Laboratory Testing business towards generating non-COVID
revenues has presented certain challenges following the rapid drop in demand
for COVID testing worldwide since Q1 2022. ADL Health contributed a loss in
2022, which has led to EKF's Management reviewing the business and its
rationale in the context of the Group's wider strategy.
Following the review undertaken in early 2023, Management determined that
Laboratory Testing will no longer form part of EKF's core offering and,
therefore, disposed of ADL Health to Medical Management Partners, LLC, an
entity which is 100% controlled by Stan Crawford, a member of the management
team of ADL Health. The disposal will provide cost savings to EKF, allow
Management time to focus on growth initiatives in other areas, and also
simplify the reporting structure of the wider group. In the year ending 31
December 2022, ADL Health generated revenue of £2.6 million and loss before
tax of approximately £1.0 million, with net assets of £0.1 million as at 31
December 2022.
The consideration will primarily comprise 1,200,000 EKF shares of ordinary
shares of 1p each in the capital of the Company ("Ordinary Shares") to be
held, initially, in treasury.
The Company has agreed a funding line with North Atlantic Smaller Companies
Investment Trust PLC. Christopher Mills, Non-executive Director of the
Company, sits on the Board as Chief Executive Officer of NASCIT and is a
substantial shareholder of both the Company and the lender. This is a
committed facility for a maximum value of £3.0m which, as at the date of this
statement, is not drawn down. The terms of the facility are substantially
similar to those considered to be commercially available to the Company. This
facility partially sets off the exposure currently faced by the Group given
the inability to access cash reserves held in Russia. The Board believes it is
a prudent measure to have access to additional cash if needed and further that
the facility demonstrates the continued support from its largest shareholder,
Christopher Mills. The direct and indirect shareholdings of Mr. Mills in the
Company include those of the NASCIT.
The lending facility is available for three years from the date of this
announcement and any amounts drawn down carry interest at 2.5% above the Bank
of England base rate from time to time, payable quarterly in arrears. Any loan
under the facility is required to be fully repaid at the end of the facility
term. The Company may repay any such loan early, in part or in full, but may
not re-borrow such amounts.
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