REG - EKF Diagnostics Hldg - Half-year Report
EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Half-year Report
Further upgrade to current year trading
EKF Diagnostics Holdings plc (AIM: EKF), the AIM listed point-of-care business, announces its unaudited interim results for the six months ended 30 June 2021, as well as a further upgrade to current year trading.
The strong trading from the beginning of the year continued into the second quarter of 2021. This continues to reflect improving trading in the core business and ongoing strong demand for EKF's contract manufacturing services for COVID-19 sample collection devices and associated kits. The Board is now very confident that trading for the full year will be comfortably ahead of already materially upgraded management expectations.
Financial Highlights
· Revenue up 46.5% to £38.56m (H1 2020: £26.33m)
· Adjusted EBITDA* up 42.9% to £12.76m (H1 2020: £8.93m)
· Net profit after tax up 122% to £9.19m (H1 2020: £4.14m)
· Net cash generated from operations of £1.13m (H1 2020: £6.94m)
· Net cash of £20.38m (30 June 2020: £16.28m) (31 December 2020: £21.41m)
· Dividend of 1.1p per ordinary share to be paid on 1 December 2021 (record date: 5 November 2021)
* Earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments
Operational Highlights
· Core business revenues up £1.21m (6%) in first six months of 2021
· Life Sciences revenues including contract manufacturing for PrimeStore MTM and PBS up 142%
to £18.50m· Signed multi-million dollar global supply contract for phosphate-buffered saline (PBS) with
global private sector partner, whilst also broadening customer base and reducing reliance on this single customer· Opened new PrimeStore MTM and PBS manufacturing facilities in Cardiff and Boerne to meet wider customer demand in UK and USA
· Trellus Health admitted to AIM on 28 May 2021
Christopher Mills, Non-Executive Chairman of EKF, commented:
"The Board is very confident that trading for the year ending 31 December 2021 will be comfortably ahead of already upgraded management expectations.
"The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years."
A copy of the investor presentation is available here: https://www.ekfdiagnostics.com/documents-reports.html
EKF Diagnostics will be hosting a live online presentation open to all investors on Wednesday 15 September 2021 at 5.15 pm (BST), via video conference call. If you would like to register, please contact Walbrook PR on 020 7933 8780 or email ekf@walbrookpr.com.
EKF Diagnostics Holdings plc
Christopher Mills, Non-executive Chairman
Tel: +44 (0) 29 2071 0570
Julian Baines, CEO
Richard Evans, FD & COO
Singer Capital Markets
Tel: +44 (0)20 7496 3000
Aubrey Powell / George Tzimas (Corporate Finance)
Tom Salvesen (Corporate Broking)
Investec Bank plc (Joint Broker)
Tel: +44 (0)20 7597 4000
Gary Clarence / Daniel Adams
Walbrook PR Limited
Tel: +44 (0) 20 7933 8780 or ekf@walbrookpr.com
Paul McManus / Lianne Cawthorne
Mob: +44 (0) 7980 541 893 / +44 (0) 7584 391 303
BUSINESS REVIEW
The strong trading from 2020 and the beginning of the year continued into the second quarter of 2021. This continues to reflect improving trading in the core business and ongoing strong demand for our contract manufacturing services for COVID-19 sample collection devices and associated kits. The Board is now very confident that trading for the full year will be comfortably ahead of already materially upgraded management expectations.
Revenues for the six months ended 30 June 2021 were £38.56m (H1 2020: £26.33m), an increase of 46.5%. Adjusted EBITDA was up by 42.9% at £12.76m (H1 2020: £8.93m). Earnings per share have increased by 126%.
Strategy
Our aim over the next four years is to use our internally generated resources to:
1. invest in the existing core business to maximise the value of our distribution network and drive aggressive organic growth (including investment in the existing contract fermentation business);
2. continue to maximise value for EKF shareholders from 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 the further success that we are confident Trellus Health plc will see;
3. seek out complementary and targeted earnings-enhancing acquisitions with key strategic value to the core business;
4. deliver against these aims and allow us to continue to follow a progressive dividend policy and to generate enhanced shareholder returns; and
5. continue to maximise the opportunity to assist clients to control the impact of COVID-19, and to evolve our new contract manufacturing capabilities in this area to a broader range of diagnostic and other healthcare settings.
We have made good progress against these objectives, as set out below. Discussions are progressing as planned for a number of earnings enhancing acquisitions, and we have identified a number of potential products to expand our existing core business.
Operations
Diabetes
Sales in the diabetes segment have seen good growth in the period, reaching £10.18m, an increase of 8%, with improvements coming across the majority of the diabetes portfolio as our distribution partners saw growth returning. In particular, sales of β-HB (Beta-Hydroxybutyrate) were up 14% year-on-year, including a contribution from an OEM agreement with a leading distributor. Sales of Quo-Test and Quo-Lab are up 24% and 18% respectively, however sales of the STAT-Site product line have reduced following the discontinuation of STAT-Site β-HB due to obsolescence of components.
Hematology
Overall, revenues from our hematology portfolio have been flat. Within this we have seen 12% growth of our DiaSpect Tm product, primarily driven by our OEM agreements with Fresenius and McKesson. Meanwhile, global hematology screening programmes have continued to be affected by the COVID-19 pandemic, although we have seen signs of programmes beginning to come online again in the latter part of the year, and in particular our major customer in Peru has started to significantly increase their orders as the territory opens up and much needed screening programmes are coming back online.
Contract Manufacturing
Infectious disease test kits
We have continued to see strong demand for our contract manufacturing product lines across our manufacturing sites in the US, Germany, and the UK. Due to our direct relationships with major end users, we have switched towards end user customers and away from sales direct to Longhorn to the mutual benefit of Longhorn and EKF. At the same time, we have seen a change in the mix of products we are being requested to manufacture, with emphasis moving from PrimeStore MTM filled tubes towards tubes filled with Phosphate Buffered Saline (PBS) which we have introduced as a low-cost alternative to MTM. However, we continue the production of PrimeStore MTM tubes for public health systems customers in the UK and Ireland, as well as the manufacture and collation of home testing kits that are distributed through the two largest high street pharmacy chains in the UK, and a new contract for supply of PrimeStore MTM to testing labs based at major UK airports.
In addition, we continue to manufacture kits for employee testing purposes as well as home testing kits including PBS and swab for distribution in US and Europe via our major industrial partner.
This business is servicing customers in the US, the UK, and Europe, including public health authorities in the UK and Ireland, universities, and private laboratories, as well as our major industrial partner. Whilst this major industrial partner represented less than half of our contract manufacturing revenues for PrimeStore MTM and PBS for the first half of the year, we have already seen a shift to a wider mix of revenues from a broader customer base. We expect to see the share of revenue contribution from other customers continue to rise as we move through the year.
In addition, with the expectation that sales of these products will continue for the foreseeable future, we are adding two further factory units to our existing site in Cardiff which was opened in January, and have added off-site manufacturing space in Boerne.
It is a measure of our success in creating and servicing this business, which we started from scratch last year, that we are now discussing the supply of products for non-COVID-19 indications, driven by demand from our customers. These products include areas such as in molecular diagnostics for which work has already started in the US. We see this as a significant growth opportunity for EKF.
Central Laboratory & Life Sciences
Our Central laboratory and Life Sciences sector combines revenues derived from Clinical Chemistry, lab analysers, contract fermentation and enzymes. Central Laboratory sales continue to be affected by the pandemic, mainly in the USA.
We continue to see a strong pipeline of opportunities to supply contract manufacturing services from our Elkhart and South Bend sites, and have committed resources to add capacity. The construction of new fermenters is in progress, work having commenced on a new fermentation facility with a total investment of $9.3m, of which $3.4m has already been paid on deposit, and the aim of delivering significant revenues by 2024. These opportunities are arising in the research and molecular enzyme areas as well as food grade fermentation digestive proteins.
Other
This category includes sales of a number of products including our Lactate Scout sports medicine product and other diagnostic tests, the most important of which is for pregnancy. With an end to the shutdown of professional sports in Europe we have seen an improvement in Lactate Scout sales which have grown by 40% year on year.
PartnerShip with Mount Sinai
Our Preferred Partnership Agreement (PPA) with Mount Sinai Innovation Partners (MSIP) provides us with advanced access to innovative commercial opportunities arising from Mount Sinai Health System owned technologies, managed by MSIP, in the field of healthcare technologies. This relationship had already lead to the successful spin-out of Renalytix plc ("Renalytix") and their subsequent spin-out of Verici Dx plc ("Verici"). Our residual holding in Renalytix is valued at £10.8m (as at 30 June), and our holding in Verici, received as a dividend from Renalytix, is valued at 30 June at £1.8m.
In May 2021, Trellus Health plc, which was formed by MSIP, EKF, and its management in 2020, successfully floated on AIM. EKF's investment in Trellus was transferred to relevant EKF shareholders in 2020.
Following the completion of his tenure as CEO of the Group, Julian Baines will take responsibility for the management of our relationship with MSIP. A pipeline of new opportunities has been identified.
Financial review
Revenue
Revenue for the period was £38.56m (H1 2020: £26.33m), an increase of 46.5%.
Unaudited
6 months ended 30 June 2021
£'000
Unaudited
6 months ended 30 June 2020
£'000
+/- %
Hematology
5,856
5,853
0.1%
Diabetes (including βHB)
10,183
9,419
8.1%
Central Laboratory
2,372
2,639
(10.1%)
Contract Manufacturing
17,469
6,459
170.5%
Other
2,679
1,959
36.8%
Total revenue
38,559
26,329
46.5%
Gross profit
Gross profit is £18.54m (H1 2020: £14.91m). The gross profit margin is 48% (H1 2020: 57%). The gross margin percentage has reduced mainly as a result of the product mix.
Administrative expenses
In H1 2021, administrative expenses have reduced to £7.02m (H1 2020: £8.25m), representing 18.2% of revenue for the period (H1 2020: 31.3%). The reduction is largely caused by a credit for share-based payments following the ending of the cash-settled share-based payment incentive scheme for two Directors. The scheme for a senior employee remained in place at the period end. Administrative expenses include research and development (R & D) costs of £0.61m (H1 2020: £0.63m). In addition, further R & D costs of £0.32m (H1 2020: £0.31m) have been capitalised. Non-exceptional administrative costs have increased by 3.4% compared to H1 2020 mainly due to increased sales volumes, as well as further expenditure on quality assurance and regulatory costs as a result of the increased regulatory burden in Europe.
To aid understanding, administrative expenses in each period are made up as follows:
Unaudited 6 months ended 30 June 2021
Unaudited 6 months ended 30 June 2020
Audited Year ended 31 December 2020
Non-exceptional administration expenditure before R & D capitalisation
8,960
8,668
17,234
Effect of share-based payments
(1,392)
300
5,292
Less capitalised R & D
(317)
(308)
(586)
Effect of exceptional items
(234)
(408)
(1,282)
Total administrative expenses
7,017
8,252
20,658
The charge for depreciation of fixed assets and for the amortisation of intangibles is £2.83m (H1 2020: £2.32m).
Operating profit and adjusted earnings before interest tax and depreciation
The Group generated an operating profit of £11.56m (H1 2020: £6.72m). We consider a more meaningful measure of underlying performance is obtained by examining adjusted EBITDA, which for H1 2021 was £12.76m (H1 2020: £8.92m). This excludes the effects of a credit for share-based payments of £1.39m (H1 2020: charge of £0.30m) and exceptional profits of £0.23m (H1 2020: £0.41m). The increase in operating profit and adjusted EBITDA is caused by the substantial increase in volumes associated with sales of contract manufacturing products.
Finance costs
Finance costs are £0.16m (H1 2020: £0.47m). The main charge results from an increase in the fair value of deferred consideration, the size of which is determined by the increase in EKF's share price.
Tax
There is a tax charge of £2.24m (H1 2020: £2.11m). The increase partly reflects the increase in profit, but also that expenses relating to the cash-settled share-based payment incentive scheme, accrued in previous years, are now deductible for tax purposes as a result of payments having been made.
Earnings per share
Basic earnings per share has increased to 1.99p (H1 2020: 0.88p), an increase of 126%. Diluted earnings per share are 1.98p (H1 2020: 0.87p)
Balance sheet
Fixed assets
We have capitalised £1.47m (H1 2020: £1.19m) of property plant and equipment. The expenditure includes continuing work on improvements to the facilities in South Bend and Elkhart in the US, further automation in Germany, and the cost of fitting out the first stage of the new manufacturing facility in Cardiff. Further expenditure in South Bend and Elkhart, in Germany, and for the second stage of the Cardiff facility is planned for the second half of the year.
Intangible assets
The value of intangible fixed assets is £35.13m (31 December 2020: £37.05m). The decrease is mainly the result of amortisation plus exchange rate movements. An amount of £0.62m has been capitalised.
Investments
Investments includes our holdings in Renalytix plc and Verici Dx plc. The investments are held at fair value which has been calculated based on the market value of the shares which at 30 June 2021 was £10.80 (31 December 2020: £4.875) per share for Renalytix and £0.685 (31 December 2020: £0.585) per share for Verici. The resulting unrealised gain during H1 2021 of £6.21m is shown as a movement in Other comprehensive income.
Deferred consideration
The remaining deferred consideration relates to the share-based payment to the former owner of EKF-Diagnostic GmbH. Finalisation of the position is expected to conclude shortly.
Cash and working capital
The gross cash position at 30 June 2021 was £20.78m (31 Dec 2020: £16.90m), and the Group had cash net of bank borrowings of £20.38m (31 Dec 2020: £16.28m).
Cash generated from operations in H1 2020 is £1.13m (H1 2020: £6.94m). Inventory levels have increased as a result of the increase in order volume but also to ensure security of component supply. Trade debtors have increased as a result of increased trading activity and because of extended terms granted to certain commercial partners. We have continued to see very little evidence to date of collection difficulties as a result of COVID-19. Payables have reduced because of payments made in relation to the cash-settled share-based payment incentive scheme.
Capital structure
We have not made any share buy backs during the period. Our authorisation to make further share buy backs remains in place and we will make further purchases if considered appropriate.
Dividend
At the Annual General Meeting in May 2021 shareholders approved the payment of a dividend of 1.1p per ordinary share, to be paid on 1 December 2021 to shareholders on the register at close of business on 5 November 2021. As this declaration is irrevocable, the value of £5.005m is shown as a liability with the debit shown in the statement of changes in equity.
Outlook
The Board is very confident that trading for the year ending 31 December 2021 will be comfortably ahead of already materially upgraded management expectations.
The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years.
Christopher Mills
Non-Executive Chairman
14 September 2021
CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTHS ENDED 30 JUNE 2021
Unaudited 6 months ended 30 June 2020
Unaudited 6 months ended 30 June 2021
Audited Year ended 31 December 2020
Notes
£'000
£'000
£'000
Continuing operations
Revenue
3
38,559
26,329
65,260
Cost of sales
(20,019)
(11,417)
(27,840)
Gross profit
18,540
14,912
37,450
Administrative expenses
(7,017)
(8,252)
(20,658)
Other income
34
57
133
Operating profit
11,557
6,717
16,895
Depreciation and amortisation
(2,830)
(2,316)
(4,611)
Share-based payments
1,392
(300)
(5,292)
Exceptional items
4
234
408
1,282
EBITDA before exceptional items and share-based payments
12,761
8,925
25,516
Finance income
22
29
53
Finance costs
(155)
(497)
(1,592)
Profit before income tax
11,424
6,249
15,356
Income tax charge
5
(2,237)
(2,108)
(3,971)
Profit for the period
9,187
4,141
11,385
Profit attributable to:
Owners of the parent
9,069
4,011
11,114
Non-controlling interest
118
130
271
9,187
4,141
11,385
Earnings per ordinary share attributable to the owners of the parent during the period
6
Pence
Pence
Pence
Basic
1.99
0.88
2.45
Diluted
1.98
0.87
2.42
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTHS ENDED 30 JUNE 2021
Unaudited
Unaudited
Audited
6 months ended 30 June 2021
6 months ended 30 June 2020
Year ended 31 December 2020
£'000
£'000
£'000
Profit for the period
9,187
4,141
11,385
Other comprehensive income/(expense):
Changes in fair value of equity instruments at fair value through other comprehensive income (net of tax)
4,040
4,445
3,276
Currency translation differences
(1,334)
3,951
734
Other comprehensive income (net of tax)
2,706
8,396
4,010
Total comprehensive income for the period
11,893
12,537
15,395
Attributable to:
Owners of the parent
11,779
12,456
15,235
Non-controlling interests
114
81
160
Total comprehensive income for the period
11,893
12,537
15,395
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2021
Unaudited as at 30 June 2021
Unaudited as at 30 June 2020
Audited as at 31 December 2020
Notes
£'000
£'000
£'000
Assets
Non-current assets
Property, plant and equipment
12,957
13,331
12,620
Right-of-use assets
890
941
1,019
Intangible assets
7
35,134
39,347
37,051
Investments
12,818
14,345
6,608
Deferred tax assets
14
21
14
Total non-current assets
61,813
67,985
57,312
Current Assets
Inventories
9,766
8,144
8,487
Trade and other receivables
16,107
10,545
13,182
Corporation tax receivable
-
-
371
Cash and cash equivalents
20,784
16,895
21,913
Total current assets
46,657
35,584
43,953
Total assets
108,470
103,569
101,265
Equity attributable to owners of the parent
Share capital
4,550
4,546
4,550
Share premium
200
95
200
Other reserve
9,394
11,093
5,354
Foreign currency reserves
2,698
7,210
4,028
Retained earnings
67,580
55,637
63,516
84,422
78,581
77,648
Non-controlling interest
435
472
552
Total equity
84,857
79,053
78,200
Liabilities
Non-current liabilities
Borrowings
310
422
323
Lease liabilities
475
721
690
Deferred tax liability
4,586
2,940
2,636
Total non-current liabilities
5,371
4,083
3,649
Current liabilities
Trade and other payables
13,152
14,211
14,435
Lease liabilities
456
248
380
Deferred consideration
3,033
1,840
2,901
Current income tax liabilities
1,512
3,946
1,515
Borrowings
89
188
185
Total current liabilities
18,242
20,433
19,416
Total liabilities
23,613
24,516
23,065
Total equity and liabilities
108,470
103,569
101,265
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 6 MONTHS ENDED 30 JUNE 2021
Unaudited 6 months ended 30 June 2021
Unaudited 6 months ended 30 June 2020
Audited Year to 31 December 2020
£'000
£'000
£'000
Cash flow from operating activities
Profit before income tax
11,424
6,249
15,356
Adjustments for
- Warranty claim
(251)
(455)
(1,414)
- Depreciation
919
872
1,844
- Amortisation and impairment charges
1,911
1,444
2,767
- Deferred consideration (FV adjust)
132
455
1,516
- Foreign Exchange
(40)
-
26
- Bad debt written down
-
-
45
- Profit/(loss) on disposal of assets
(9)
14
(22)
- Loss on disposal of intangible assets
-
-
8
- Share-based payments
(1,392)
300
4,775
- Dividend received
-
-
(31)
- Net finance costs
1
13
23
Changes in working capital
- Inventories
(1,450)
(2,056)
(2,557)
- Trade and other receivables
(2,960)
(1,974)
(3,426)
- Trade and other payables
(5,126)
2,075
1,888
Cash generated by operations
3,159
6,937
20,798
Interest paid
(11)
(29)
(47)
Income tax paid
(2,019)
(849)
(6,942)
Net cash generated by operating activities
1,129
6,059
13,809
Cash flow from investing activities
Purchase of investments
-
-
(3,810)
Purchase of property, plant and equipment (PPE)
(1,342)
(1,187)
(1,631)
Purchase of intangibles
(623)
(393)
(1,014)
Proceeds from sale of PPE
14
27
68
Proceeds from sale of investments
-
-
7,670
Interest received
22
29
53
Net cash used in investing activities
(1,929)
(1,524)
1,336
Cash flow from financing activities
Proceeds from issue of ordinary shares
-
100
209
Dividend
-
-
(4,550)
Share option buy back
-
-
(7)
Repayment of borrowings
(89)
(126)
(183)
Principal lease payments
(257)
(166)
(469)
Dividends paid to non-controlling interests
(231)
(210)
(209)
Net cash used in financing activities
(577)
(402)
(5,209)
Net increase in cash and cash equivalents
(1,377)
4,133
9,936
Cash and cash equivalents at beginning of period
21,913
12,074
12,074
Exchange gains on cash and cash equivalents
248
688
(97)
Cash and cash equivalents at end of period
20,784
16,895
21,913
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 6 MONTHS ENDED 30 JUNE 2021
Share Capital
Share Premium
Other Reserve
Foreign Currency Reserve
Retained earnings
Total
Non-controlling interest
Total equity
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2020
4,541
-
6,648
3,183
56,199
70,571
601
71,172
Comprehensive income
Profit for the period
-
-
-
-
4,011
4,011
130
4,141
Other comprehensive income
Changes in fair value of equity instruments at fair value through other comprehensive income
-
-
4,445
-
-
4,445
-
4,445
Currency translation differences
-
-
-
4,027
(27)
4,000
(49)
3,951
Total comprehensive income
-
-
4,445
4,027
3,984
12,456
81
12,537
Transactions with owners
Dividends to non-controlling interest
-
-
-
-
-
-
(210)
(210)
Dividend declared but not paid
-
-
-
-
(4,546)
(4,546)
-
(4,546)
Issue of ordinary shares
5
95
-
-
-
100
-
100
Total contributions by and distributions to owners
5
95
-
-
(4,546)
(4,446)
(210)
(4,656)
At 30 June 2020
4,546
95
11,093
7,210
55,637
78,581
472
79,053
Comprehensive income
Profit for the period
-
-
-
-
7,103
7,103
141
7,244
Other comprehensive income
Changes in fair value of equity instruments at fair value through other comprehensive income
-
-
(97)
-
-
(97)
-
(97)
Transfer of gain on disposal of
equity investments at fair value
through other comprehensive
income to retained earnings
-
-
(5,642)
5,642
-
-
-
Taxation on profit on disposal
of equity instruments at fair
value
-
-
-
-
(1,072)
(1,072)
-
(1,072)
Currency translation differences
-
-
-
(3,182)
27
(3,155)
(62)
(3,217)
Total comprehensive income
-
-
(5,739)
(3,182)
11,700
2,779
79
2,858
Transactions with owners
Share cancellation
-
-
-
-
(7)
(7)
-
(7)
Proceeds from share issue
4
105
-
-
-
109
-
109
Dividend to owners
-
-
-
-
(3,814)
(3,814)
-
(3,814)
Dividends to non-controlling interest
-
-
-
-
-
-
1
1
Total contributions by and distributions to owners
4
105
-
-
(3,821)
(3,712)
1
(3,711)
At 31 December 2020
4,550
200
5,354
4,028
63,516
77,648
552
78,200
Comprehensive income
Profit for the period
-
-
-
-
9,069
9,069
118
9,187
Other comprehensive income
Changes in fair value of equity instruments at fair value through other comprehensive income
-
-
4,040
-
-
4,040
-
4,040
Currency translation differences
-
-
-
(1,330)
-
(1,330)
(4)
(1,334)
Total comprehensive income
-
-
4,040
(1,330)
9,069
11,779
114
11,893
Transactions with owners
Dividends to owners
-
-
-
-
(5,005)
(5,005)
-
(5,005)
Dividends to non-controlling interest
-
-
-
-
-
-
(231)
(231)
Total contributions by and distributions to owners
-
-
-
-
(5,005)
(5,005)
(231)
(5,236)
At 30 June 2021
4,550
200
9,394
2,698
67,580
84,422
435
84,857
NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
1. General information and basis of presentation
EKF Diagnostics Holdings plc is a public limited company incorporated in the United Kingdom (Registration Number 04347937). The address of the registered office is Avon House, 19 Stanwell Road, Penarth, CF64 2EZ.
The Group's principal activity is the development, manufacture, and supply of products into the in-vitro diagnostics (IVD) market place. Within this area, the Group has a growing business in contract manufacturing.
The financial information in these interim results is that of the holding company and all of its subsidiaries. It has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ("IFRS"). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2020 and which will form the basis of the 2021 financial statements except for a number of new and amended standards which have become effective since the beginning of the previous financial year. These new and amended standards are not expected to materially affect the Group.
Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.
The financial information presented herein does not constitute full statutory accounts under Section 434 of the Companies Act 2006 and was not subject to a formal review by the auditors. The financial information in respect of the year ended 31 December 2020 has been extracted from the statutory accounts which have been delivered to the Registrar of Companies. The Group's Independent Auditor's report on those accounts was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial information for the half years ended 30 June 2021 and 30 June 2020 is unaudited and the twelve months to 31 December 2020 is audited.
These interim accounts have not been prepared in accordance with the UK-adopted International Accounting Standard 34, "Interim Financial Reporting".
2. Significant accounting policies
Going concern
The Group meets its day-to-day working capital requirements through the use of cash reserves and existing bank facilities.
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance, that the Group should be able to operate within the level of its current funding arrangements. While we have seen some disruption to our core business as a result of the COVID-19 pandemic, current trading suggests that our base case forecasts are still applicable. In addition, our range of COVID related products has been highly successful, bringing significant benefits to the Group, including higher revenue, profits, and cash balances. We believe the Group is in a strong position, however it is difficult to assess reliably whether there will be any material disruption in the future, and for how long our COVID range will remain relevant. We have modelled a number of scenarios covering reductions in revenue of 10% and 50%, without taking into account the potential benefits of any mitigation strategies such as potential cost savings or insurance claims. While the eventual severity and length of the economic disruption stemming from the pandemic is impossible to forecast these models give the Directors reasonable confidence that the business can survive our worst case scenarios for reductions in revenue for at least the next 12 months.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason the Group continues to adopt the going concern basis in the preparation of the financial statements.
3. Segmental reporting
Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources.
The principal activity of the Group is the design, development, manufacture and selling of diagnostic instruments, reagents and certain ancillary items. This activity takes place across various countries, such as the USA, Germany, Russia, and the United Kingdom, and as such the Board considers the business primarily from a geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management has concluded that all segments should be maintained and reported.
The reportable segments derive their revenue primarily from the manufacture and sale of medical diagnostic equipment. Other services include the servicing and distribution of third party company products under separate distribution agreements.
Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, adjusted for exceptional items and share-based payments).
The segment information provided to the Board for the reportable geographic segments is as follows:
Period ended 30 June 2021 unaudited
Germany
USA
Russia
Other
Total
£'000
£'000
£'000
£'000
£'000
Income statement
Revenue
17,288
19,772
1,384
4,481
42,925
Inter-segment
(2,746)
(1,616)
-
(4)
(4,366)
External revenue
14,542
18,156
1,384
4,477
38,559
Adjusted EBITDA*
5,326
7,521
364
(450)
12,761
Share-based payment
-
-
-
1,392
1,392
Exceptional items
251
-
-
(17)
234
EBITDA
5,577
7,521
364
925
14,387
Depreciation
(342)
(246)
(11)
(320)
(919)
Amortisation
(438)
(61)
-
(1,412)
(1,911)
Operating profit/(loss)
4,797
7,214
353
(807)
11,557
Net finance costs
(8)
5
16
(146)
(133)
Income tax
(692)
(1,464)
(75)
(6)
(2,237)
Profit/(loss) for the period
4,097
5,755
294
(959)
9,187
Segment assets
Operating assets
41,595
67,395
432
(618)
108,804
Inter-segment assets
(143)
(16,480)
-
(4,495)
(21,118)
External operating assets
41,452
50,915
432
(5,113)
87,686
Cash and cash equivalents
4,382
6,177
966
9,259
20,784
Total assets
45,834
57,092
1,398
4,146
108,470
Segment liabilities
Operating liabilities
5,714
21,240
230
17,148
44,332
Inter-segment liabilities
(446)
(17,794)
-
(2,878)
(21,118)
External operating liabilities
5,268
3,446
230
14,270
23,214
Borrowings
399
-
-
-
399
Total liabilities
5,667
3,446
230
14,270
23,613
Other segmental information
Non-current assets - PPE
5,796
5,014
82
2,065
12,957
Non-current assets - Right-of-use assets
78
585
2
225
890
Non-current assets - Intangibles
24,376
10,416
77
265
35,134
Intangible assets -additions
366
120
-
137
623
PPE - additions
456
679
-
206
1,341
Right-of-use assets - additions
44
(35)
15
103
127
Year ended December 2020 audited
Germany
USA
Russia
Other
Total
£'000
£'000
£'000
£'000
£'000
Income statement
Revenue
25,637
39,459
2,904
4,432
72,432
Inter-segment
(5,351)
(1,767)
-
(54)
(7,172)
External revenue
20,286
37,692
2,904
4,378
65,260
Adjusted EBITDA*
7,343
20,094
883
(2,754)
25,516
Share-based payment
-
-
-
(5,292)
(5,292)
Exceptional items
877
-
-
405
1,282
EBITDA
8,220
20,094
833
(7,641)
21,506
Depreciation
(787)
(511)
(24)
(522)
(1,844)
Amortisation
(1,646)
(1,120)
(1)
-
(2,767)
Operating profit/(loss)
5,787
18,463
808
(8,163)
16,895
Net finance costs
(24)
13
39
(1,567)
(1,539)
Income tax
(820)
(3,497)
(171)
517
(3,971)
Profit/(loss) for the year
4,943
14,979
676
(9,213)
11,385
Segment assets
Operating assets
39,961
36,899
355
30,529
107,744
Inter-segment assets
(112)
(11,427)
-
(16,853)
(28,392)
External operating assets
39,849
25,472
355
13,676
79,352
Cash and cash equivalents
3,130
7,459
1,257
10,067
21,913
Total assets
42,979
32,931
1,612
23,743
101,265
Segment liabilities
Operating liabilities
7,135
17,836
158
25,820
50,949
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
Other segmental information
Non-current assets - PPE
5,912
4,632
93
1,983
12,620
Non-current assets - ROU assets
-
-
-
1,019
1,019
Non-current assets - Intangibles
24,039
10,979
77
1,956
37,051
Intangible assets -additions
679
335
-
-
1,014
ROU assets - additions
-
-
-
518
518
PPE - additions
779
575
54
223
1,631
Period ended 30 June 2020 unaudited
Germany
USA
Russia
Other
Total
£'000
£'000
£'000
£'000
£'000
Income statement
Revenue
10,713
17,160
1,360
100
29,333
Inter-segment
(2,981)
(23)
-
-
(3,004)
External revenue
7,732
17,137
1,360
100
26,329
Adjusted EBITDA
2,827
7,575
395
(1,872)
8,925
Share-based payment
-
-
-
(300)
(300)
Exceptional items
451
-
-
(43)
408
EBITDA
3,278
7,575
395
(2,215)
9,033
Depreciation
(452)
(201)
(10)
(209)
(872)
Amortisation
(403)
(52)
-
(989)
(1,444)
Operating profit/(loss)
2,423
7,322
385
(3,413)
6,717
Net finance costs
(7)
7
21
(488)
(467)
Income tax
(376)
(1,563)
(80)
(90)
(2,109)
Profit/(loss) for the period
2,040
5,766
326
(3,991)
4,141
Segment assets
Operating assets
40,718
28,894
608
26,138
96,358
Inter-segment assets
(288)
-
-
(9,396)
(9,684)
External operating assets
40,430
28,894
608
16,742
86,674
Cash and cash equivalents
3,375
5,337
798
7,385
16,895
Total assets
43,805
34,231
1,406
24,127
103,569
Segment liabilities
Operating liabilities
8,062
14,026
137
11,366
33,591
Inter-segment liabilities
(2,222)
(7,463)
-
-
(9,685)
External operating liabilities
5,840
6,563
137
11,366
23,906
Borrowings
610
-
-
-
610
Total liabilities
6,450
6,563
137
11,366
24,516
Other segmental information
Non-current assets - PPE
6,370
5,425
111
1,425
13,331
Non-current assets - Right-of-use assets
93
634
-
214
941
Non-current assets - Intangibles
26,700
12,431
88
128
39,347
Intangible assets -additions
343
50
-
-
393
PPE - additions
333
609
51
115
1,108
Right-of-use assets - additions
58
4
-
17
79
* Adjusted EBITDA represents earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments
'Other' primarily relates to the holding company and head office costs.
Disclosure of Group revenues by geographic location
Unaudited
6 months
ended 30
June 2021
Unaudited
6 months
ended 30
June 2020
Audited
Year ended
31 December 2020
£000
£000
£000
Americas
United States of America
16,016
14,702
33,474
Rest of Americas
1,026
1,390
568
Europe, Middles East and Africa (EMEA)
Germany
4,286
2,984
5,873
United Kingdom
4,621
242
4,522
Ireland
4,384
2
5,408
Rest of Europe
2,920
1,621
3,127
Russia
1,384
1,360
2,904
Middle East
661
572
1,261
Africa
939
1,623
2,553
Rest of World
China
424
338
767
Rest of Asia
1,861
1,448
2,883
New Zealand/Australia
37
46
97
Total Revenue
38,559
26,328
65,260
Revenue by disease state, which is presented for illustrative purposes only, is as follows:
Unaudited
6 months ended 30 June 2021
£'000
Unaudited
6 months ended 30 June 2020
£'000
+/- %
Hematology
5,856
5,853
0.1%
Diabetes (including βHB)
10,183
9,419
8.1%
Central Laboratory
2,372
2,639
(10.1%)
Contract Manufacturing
17,469
6,459
170.5%
Other
2,679
1,959
36.8%
Total revenue
38,559
26,329
46.5%
4. Exceptional items
Included within administration expenses and cost of sales are exceptional items as shown below:
Unaudited 6 months ended 30 June 2021
Unaudited 6 months ended 30 June 2020
Audited year ended 31 December 2020
Note
£000
£000
£000
Exceptional items include:
- Business reorganisation costs
a
(17)
(15)
(58)
- Warranty claim
b
251
455
1,414
- Trellus
c
-
(32)
(74)
Exceptional items
234
408
1,282
(a) Costs associated with the restructuring of the business
(b) Increase in the value of an estimated warranty claim in relation to the acquisition of EKF-diagnostic GmbH. The increase is a result of a higher share price.
(c) Start-up costs associated with the set-up of Trellus Healthcare Limited
5. Income tax
Unaudited
6 months
ended 30
June 2021
Unaudited
6 months
ended 30
June 2020
Audited
Year ended
31 December 2020
£000
£000
£000
Current tax
Current tax on profit for the period
(2,387)
(1,885)
(3,913)
Adjustments for prior periods
(4)
(87)
(89)
Total current tax
(2,391)
(1,972)
(4,002)
Deferred tax
Origination and reversal of temporary differences
154
(136)
31
Total deferred tax
154
(136)
31
Income tax charge
(2,237)
(2,108)
(3,971)
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the period.
Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares outstanding assuming conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary share, being share options.
Audited year ended 31 December 2020
Unaudited
6 months ended 30 June 2021Unaudited 6 months ended 30 June 2020
£'000
£'000
£'000
Profit attributable to owners of the parent
9,069
4,011
11,114
Weighted average number of ordinary shares in issue
454,993,227
454,247,073
454,524,101
Effect of dilutive potential ordinary shares
4,056,090
4,290,848
4,278,975
Weighted average number of ordinary shares - diluted
459,049,317
458,537,921
458,803,076
Pence
Pence
Pence
From continuing operations
Basic
1.99
0.88
2.45
Diluted
1.98
0.87
2.42
7. Intangible Fixed Assets
Group
Goodwill
£'000
Trademarks trade names & licences
£'000
Customer relationships
£'000
Trade secrets
£'000
Develop-ment costs
£'000
Software
£'000
Total
£'000
Cost
At 1 January 2020
26,371
2,799
15,580
18,436
9,060
299
72,545
Disposal
-
(19)
-
-
(1,419)
-
(1,438)
Additions
-
62
-
-
308
23
393
Exchange differences
1,570
654
1,081
894
505
(10)
4,694
At 30 June 2020
27,941
3,496
16,661
19,330
8,454
312
76,194
Additions
-
84
-
-
278
259
621
Disposals
-
19
-
-
(4,063)
-
(4,044)
Exchange differences
(938)
(282)
(1,120)
(274)
(216)
22
(2,808)
At 31 December 2020
27,003
3,317
15,541
19,056
4,453
593
69,963
Additions
-
238
-
-
317
68
623
Disposal
-
(2)
-
-
-
-
(2)
Exchange differences
(718)
275
(338)
(498)
(116)
(14)
(1,409)
At 30 June 2021
26,285
3,828
15,203
18,558
4,654
647
69,175
Amortisation
At 1 January 2020
2,550
2,389
10,358
13,141
6,340
-
34,778
Exchange differences
87
373
700
592
311
-
2,063
Disposal
-
(19)
-
-
(1,419)
-
(1,438)
Reclassification/transfer
-
-
-
-
-
-
-
Charge for the period
-
144
681
469
129
21
1,444
At 30 June 2020
2,637
2,887
11,739
14,202
5,361
21
36,847
Exchange differences
(32)
(172)
(747)
(191)
(80)
-
(1,222)
Disposal
-
19
-
-
(4,055)
-
(4,036)
Charge for the period
-
213
564
450
117
(21)
1,323
At 31 December 2020
2,605
2,947
11,556
14,461
1,343
-
32,912
Exchange differences
(54)
(84)
(251)
(362)
(30)
-
(781)
Disposal
-
(1)
-
-
-
-
(1)
Impairment
-
-
-
-
(8)
-
(8)
Charge for the period
-
(52)
588
1,234
107
42
1,919
At 30 June 2021
2,551
2,810
11,893
15,333
1,412
42
34,041
Net book value
30 June 2021
23,734
1,018
3,310
3,225
3,242
605
35,134
31 December 2020
24,398
370
3,985
4,595
3,110
593
37,051
30 June 2020
25,304
611
4,922
5,127
3,093
290
39,347
8. Dividends
A dividend to shareholders of the holding company of 1.1p per ordinary share has been provided during the period following shareholder approval at the Annual General Meeting of the Company in May 2021 (six months to 30 June 2020 and year to 31 December 2020: both 1p). It will be paid on 1 December 2021 to shareholders on the register of members at the close of business on 5 November 2021.
9. Availability of this announcement
This announcement is available from the Company's website, www.ekfdiagnostics.com. If you would like to receive a hard copy of the interim report, please contact the EKF Diagnostics Holdings plc offices on +44 (0) 29 2071 0570 to request a copy.
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