Ergomed Interim Results 2023
22/09/2023 07:00
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RNS Number : 2910N Ergomed plc 22 September 2023
PRESS RELEASE
Interim results for the six months ended 30 June 2023
Strong, resilient H1 performance: solid growth and positive outlook as
announced in the trading update on 25 July 2023
· Revenue £76.7 million, up 10% over H1 2022
· Adjusted EBITDA £15.7 million, up 14% over H1 2022
· Strong order book of £310 million with growth of 9% year over
year (11% adjusting for foreign exchange) providing excellent visibility into
H2 2023 and beyond
· New business pipeline growth of 30% over H1 2022, reflecting the
benefits of commercial investments
· Cash balance of £26.0 million, and debt free with available
facilities of up to £80.0 million
· Shareholders are referred to the announcement on 4th September
2023 of a recommended cash offer of 1,350p per Ergomed share by Eden
AcquisitionCo Limited, a newly incorporated company controlled and owned by
funds advised by Permira Advisers LLP
Guildford, UK - 22 September 2023: Ergomed plc (LSE: ERGO) ("Ergomed"' or the
"Company" or the "Group"), a Company focused on providing specialised services
to the pharmaceutical industry, today announces its interim results for the
six months ended 30 June 2023.
Financial Summary
First First %
Half Half change
2023 2022
Figures in £ millions, unless otherwise stated
Total Revenue 76.7 69.9 9.8
Gross Profit 31.6 28.9 9.4
Adjusted EBITDA (Note 7) 15.7 13.8 13.7
Cash at 30 June 26.0 12.0 117.4
Order book at 30 June 309.6 284.5 8.8
Basic adjusted earnings per share (pence) (Note 3) 21.9p 20.4p 7.7
Notes:
(1) Adjusted EBITDA is defined as operating profit for the period plus
depreciation and amortisation, share-based payment charge, acquisition related
consideration and costs (Note 7 to the financial statements).
(2) Basic adjusted earnings per share is defined as basic earnings per share
after adjustment for items referred to in Note 3 to the financial statements.
Dr Miroslav Reljanović, Executive Chairman of Ergomed, said:
"As announced in the trading update on 25 July 2023, Ergomed has made a very
solid start to the year demonstrating continued growth and reflecting the
global appeal of our offering to our clients, the strength of our business
model and the resilience of the markets we address. We have continued to
execute on our strategy to transform the business by investing in technology
and our commercial infrastructure and believe the potential of these
investments is reflected in the robust year over year growth of our new
business pipeline. In addition, we have maintained our focus on prudent cost
management, and executing our disciplined approach to M&A. We expect to
deliver on our expectations for financial results for 2023, and we look
forward with confidence to the rest of this year and beyond."
Key Highlights
· Revenue of £76.7 million (H1 2022: £69.9 million) increased by
10% (up 7% in constant currency)
· Clinical Research Services (CRO) division delivered strong growth
with revenue up 11% (up 8% in constant currency) to £38.0 million (H1 2022:
£34.3 million)
· Pharmacovigilance (PV) division delivered strong growth with
revenue up 9% (up 6% in constant currency) to £38.7 million (H1 2022: £35.6
million)
· Gross profit up 9% to £31.6 million (H1 2022: £28.9 million)
· Adjusted EBITDA up 14% to £15.7 million (H1 2022: £13.8
million)
· Basic adjusted EPS up 8% to 21.9p (H2 2022: 20.4p)
· Cash and cash equivalents of £26.0 million (31 December 2022:
£19.1 million)
· Order book of £310 million, up 5% in H1 2023 (31 December 2022:
£295 million) and up 9% over H1 2022 (11% adjusting for foreign exchange)
· New business pipeline growth of 30% over H1 2022 reflecting the
benefits of commercial investments
· Available debt facilities of up to £80.0 million
· Revenue and adjusted EBITDA for full year 2023 anticipated to be
in line with market expectations
Enquiries:
Ergomed plc Tel: +44 (0) 1483 402 975
Miroslav Reljanović (Executive Chairman)
Jonathan Curtain (Chief Financial Officer)
Keith Byrne (Senior Vice President, Capital Markets & Strategy)
Numis (Nominated Advisor and Joint Broker) Tel: +44 (0) 20 7260 1000
Freddie Barnfield / Euan Brown / Jack McLaren
Peel Hunt (Joint Broker)
James Steel / Dr Christopher Golden Tel: +44 (0) 20 7418 8552
Consilium Strategic Communications - for UK enquiries Tel: +44 (0) 20 3709 5700
Chris Gardner / Matthew Neal ergomed@consilium-comms.com
About Ergomed plc
Ergomed provides specialist services to the pharmaceutical industry spanning
all phases of clinical development, post-approval pharmacovigilance and
medical information. Ergomed's fast-growing services business includes an
industry-leading suite of specialist pharmacovigilance (PV) solutions,
integrated under the PrimeVigilance brand, a full range of high-quality
clinical research and trial management services under the Ergomed brand (CRO)
and mission-critical regulatory compliance and consulting services under the
ADAMAS brand. For further information, visit: http://ergomedplc.com
Forward-looking Statements
Certain statements contained within the announcement are forward-looking
statements and are based on current expectations, estimates and projections
about the potential results of Ergomed plc ("Ergomed") and the industry and
markets in which Ergomed operates, the Directors' beliefs and assumptions made
by the Directors. Words such as "expects", "anticipates", "should", "intends",
"plans", "believes", "seeks", "estimates", "projects", "pipeline" and
variations of such words and similar expressions are intended to identify such
forward-looking statements and expectations. These statements are not
guarantees of future performance or the ability to identify and consummate
investments and involve certain risks, uncertainties, outcomes of negotiations
and due diligence and assumptions that are difficult to predict, qualify or
quantify. Therefore, actual outcomes and results may differ materially from
what is expressed in such forward-looking statements or expectations. Among
the factors that could cause actual results to differ materially are: the
general economic climate, competition, interest rate levels, loss of key
personnel, the result of legal and commercial due diligence, the availability
of financing on acceptable terms and changes in the legal or regulatory
environment.
These forward-looking statements speak only as of the date of this
announcement. Ergomed expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statements
contained herein to reflect any change in Ergomed's expectations with regard
thereto, any new information or any change in events, conditions or
circumstances on which any such statements are based, unless required to do so
by law or any appropriate regulatory authority.
INTERIM MANAGEMENT REPORT
OPERATIONAL REVIEW
Introduction
Ergomed operates in growing end markets, benefiting from tailwinds of
increasing complexity, regulatory requirements and outsourcing rates across
the rare disease, oncology, pharmacovigilance, and GXP audit markets. The
global regulatory environment also continues to evolve, with increasing
legislation that creates complexity and drives the need for specialised
outsourcing.
Ergomed delivered a period of robust operational and financial performance in
the first half of 2023, achieving significant strategic progress, in part
driven by investments in commercial infrastructure and technology.
Ergomed continues to demonstrate its resilience and competitive strength, as
shown by a strong first half of 2023. Ergomed's order book grew to £310
million at the end of H1 2023, providing excellent visibility of revenue for
the second half of 2023 and beyond, and is supported by robust new business
pipeline growth of 30% over H1 2022.
Shareholders are referred to the announcement on 4(th) September 2023 of a
recommended cash offer for the entire issued and to be issued share capital of
Ergomed plc by Eden AcquisitionCo Limited, a newly incorporated company
controlled and indirectly wholly owned by the Permira funds advised by Permira
Advisors LLP.
Financial summary
Ergomed reported a strong financial performance in the first half of 2023 with
total revenues of £76.7 million (H1 2022: £69.9 million), an increase of 10%
(7% in constant currency).
Adjusted EBITDA in H1 2023 was 20.4% of revenues in the first half of 2023 and
was up 14% to £15.7 million compared to £13.7 million in H1 2022.
Cash at 30 June 2023 was £26.0 million (H1 2022: £12.0 million), with good
underlying operating cash flow generation during the period. The Company
remains in a robust financial position, debt free, with a strong balance
sheet, and unutilised facilities of up to £80.0 million to support continued
expansion both organically and through acquisitions.
Clinical Research Services (CRO)
Ergomed's CRO business saw total revenue increase to £38.0 million in H1 2023
from £34.3 million in H1 2022, up by 11% (8% in constant currency). Reported
gross profit increased by 27.2% to £12.3 million (H1 2022: £10.6 million)
and gross margin improved to 32.2% (H1 2022: 31.0%).
The CRO business has seen another period of strong growth during the first
half of 2023. The continued success of Ergomed's unique and innovative site
support model, which focuses on patient advocacy whilst simultaneously
reducing the burden on trial physicians, along with our specialist expertise
across the rare disease and oncology therapeutic areas, continues to drive the
strong growth in our CRO business.
PrimeVigilance
Ergomed's pharmacovigilance (PV) business saw total revenue increase to £38.7
million in H1 2023 from £35.6 million in H1 2022, up by 9% (6% in constant
currency). Reported gross profit increased from £18.3 million to £19.4
million, up 9%, whilst gross margin remained robust at 50.0% (H1 2022: 51.3%).
PrimeVigilance's continued growth has been delivered by employees in over 20
countries with capabilities across 150 countries, delivering a high-quality
specialised service to both new and repeat customers. Continued investment and
the deployment of proprietary automation technology has further enhanced
PrimeVigilance's capabilities, while enhancing efficiencies and productivity
enabling the delivery of differentiated and high-quality solutions to meet the
increasingly complex global pharmacovigilance regulations.
Current trading and outlook
Revenue and adjusted EBITDA for the full year 2023 are anticipated to be in
line with market expectations(1), demonstrating the Company's resilience and
ability to maintain its strong financial performance despite the continued
challenging macro-economic environment.
Dr Miroslav Reljanović
Executive Chairman
Notes:
1. This guidance in this announcement constitutes an ordinary course
profit forecast for the purposes of Rule 28.1 of the City Code on Takeovers
and Mergers (the "Code") and the Company will provide the requisite directors'
confirmation statement pursuant to Rule 28.1(c)(i) in the Scheme Document
(when published).
Rule 26.1
In accordance with Rule 26.1 of the Code, a copy of this announcement will be
available on the Company's website at www.ergomedplc.com
(http://www.ergomedplc.com) by no later than 12 noon (London time) on the
business day following the date of this announcement.
FINANCIAL REVIEW
The primary financial statements of Ergomed plc for the six months ended 30
June 2023 are presented later in this announcement along with the key
accounting policies and notes to the financial statements.
Key performance indicators
The Directors consider the principal financial performance indicators of the
Group to be:
£ million (unless stated otherwise) H1 2023 H1 2022
Total revenue 76.7 69.9
Gross profit 31.6 28.9
Gross margin % 41.2% 41.4%
Profit after tax 7.3 7.3
Adjusted EBITDA (Note 7) 15.7 13.8
Cash and cash equivalents 26.0 12.0
Cash generated from operating activities 11.9 7.7
Basic adjusted earnings per share (Note 3) 21.9p 20.4p
Consolidated income statement
Total revenue on a reported basis for the six months ended 30 June 2023 was
£76.7 million (H1 2022: £69.9 million), an increase of 10% (7% on a constant
currency basis), driven by growth in the PV division (up 9%) and the CRO
division (up 11%).
Gross profit was £31.6 million and gross margin was 41.2% (H1 2022: gross
profit £28.9 million and gross margin 41.4%), the slightly lower gross margin
percentage being a result of unfavourable foreign exchange rates. Selling,
general and administration expenses including acquisition related costs were
£22.0 million (H1 2022: £19.9 million). Research and development costs
expensed in the period were £0.1 million (H1 2022: £0.1 million).
Adjusted EBITDA increased by 14% to £15.7 million in H1 2023 from £13.8
million in H1 2022, with profit after tax up 0.5% at £7.3 million (H1 2022:
£7.3 million). Basic adjusted earnings per share was up 7.7% to 21.9p (H1
2022: 20.4p).
Consolidated balance sheet
Net assets increased by £6.1 million during the first half of 2023 and
amounted to £90.9 million at 30 June 2023 (31 December 2022: £84.8 million)
including net cash and cash equivalents of £26.0 million (31 December 2022:
£19.1 million).
Consolidated cash flow statement
At 30 June 2023, the Group's net cash balance was £26.0 million.
Cash generated from operating activities was £12.3 million (H1 2022: £12.0
million) before changes in working capital, representing 78.7% of adjusted
EBITDA in H1 2023. Ergomed has no debt and has increased its multi-currency
revolving credit facility (RCF) from £30.0 million to £80.0 million,
comprising a £50.0 million facility and an additional £30.0 million
accordion.
Net outflows from investing activities decreased to £1.0 million (H1 2022:
£24.7 million) due to the £24.2 million net cash purchase of ADAMAS in 2022.
Net outflows on financing activities for the period of £1.3 million were
primarily related to lease costs and interest paid.
Jonathan Curtain
Chief Financial Officer
Condensed Consolidated Income Statement
For the six months ended 30 June 2023
Note Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
REVENUE 2 76,745 69,917 145,262
Cost of sales (45,096) (40,990) (86,117)
GROSS PROFIT 31,649 28,927 59,145
Selling, general and administrative expenses (22,015) (19,923) (41,627)
Selling, general and administrative expenses comprises:
Other selling, general and administrative expenses (19,898) (17,123) (36,193)
Amortisation of acquired intangible assets (1,101) (1,404) (2,763)
Share-based payment charge (602) (557) (1,002)
Acquisition costs 6 (414) (839) (1,669)
Other operating income 5 366 385 1,355
OPERATING PROFIT 10,000 9,389 18,873
Finance income 18 - -
Finance costs 4 (406) (239) (920)
PROFIT BEFORE TAXATION 9,612 9,150 17,953
Taxation 8 (2,277) (1,836) (2,971)
PROFIT FOR THE PERIOD 7,335 7,314 14,982
All activities in the current and prior periods relate to continuing
operations.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
OTHER COMPREHENSIVE INCOME
Profit for the period 7,335 7,314 14,982
Exchange differences on translation of foreign operations (1,942) 2,121 2,979
Other comprehensive income for the period net of tax (1,942) 2,121 2,979
Total comprehensive profit for the period 5,393 9,435 17,961
All activities in the current and prior periods relate to continuing
operations.
Note Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
pence pence pence
EARNINGS PER SHARE 3
Basic 14.5 14.8 30.1
Diluted 14.2 14.2 29.2
Note Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
pence pence pence
ADJUSTED EARNINGS PER SHARE 3
Basic 21.9 20.4 42.6
Diluted 21.6 19.6 41.4
£000s £000s £000s
ADJUSTED EBITDA 7 15,654 13,760 28,356
(Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation)
Condensed Consolidated Balance Sheet
As at 30 June 2023
Unaudited Unaudited Audited
Note 30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Non-current assets
Goodwill 9 40,766 41,076 41,404
Other intangible assets 10 15,092 16,910 15,844
Property, plant and equipment 2,228 1,974 2,466
Right-of-use assets 2,936 2,639 2,864
Deferred tax asset 5,515 6,999 8,530
66,537 69,598 71,108
Current assets
Trade and other receivables 11 32,739 30,653 34,450
Contract assets 8,017 9,198 4,611
Cash and cash equivalents 12 26,025 11,973 19,096
Derivative assets 143 - 84
66,924 51,824 58,241
Total assets 133,461 121,422 129,349
Current liabilities
Lease liabilities (1,592) (1,322) (1,236)
Trade and other payables 13 (15,671) (15,469) (17,640)
Derivative liability - (783) (134)
Contract liabilities (18,662) (22,975) (18,749)
Current tax liability (1,388) (468) (1,134)
(37,313) (41,017) (38,893)
Net current assets 29,611 10,807 19,348
Non-current liabilities
Lease liabilities (1,424) (1,264) (1,672)
Provisions (144) (19) (144)
Deferred tax liability (3,634) (4,069) (3,891)
(5,202) (5,352) (5,707)
Total liabilities (42,515) (46,369) (44,600)
Net assets 90,946 75,053 84,749
Equity
Share capital 14 508 499 503
Share premium account 1,007 711 1,007
Merger reserve 1,349 1,349 1,349
Share-based payment reserve 7,462 6,416 6,861
Translation reserve 970 2,054 2,912
Retained earnings 79,650 64,024 72,117
Total equity 90,946 75,053 84,749
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share Merger reserve Share-based payment Translation Retained Total
capital premium reserve reserve earnings
account £000s
£000s
£000s £000s £000s £000s £000s
Balance at 1 January 2022 493 545 1,349 5,859 (67) 59,060 67,239
Profit for the period - - - - - 7,314 7,314
Other comprehensive income for the period - - - - 2,121 - 2,121
Total comprehensive income for the period - - - - 2,121 7,314 9,435
Shares issued on exercise of share options 6 166 - - - - 172
Equity-settled share-based payment charge - - - 557 - - 557
Deferred tax credit taken directly to equity - - - - - (2,350) (2,350)
Total transactions with shareholders in their capacity as shareholders 6 166 - 557 - (2,350) (1,621)
Balance at 30 June 2022 499 711 1,349 6,416 2,054 64,024 75,053
Profit for the period - - - - - 7,668 7,668
Other comprehensive income for the period - - - - 858 - 858
Total comprehensive income for the period - - - - 858 7,668 8,526
Shares issued on exercise of share options 4 296 - - - - 300
Equity-settled share-based payment charge - - - 445 - - 445
Deferred tax credit taken directly to equity - - - - - 425 425
Total transactions with shareholders in their capacity as shareholders 4 296 - 445 858 425 1,170
Balance at 31 December 2022 503 1,007 1,349 6,861 2,912 72,117 84,749
Profit for the period - - - - - 7,335 7,335
Other comprehensive loss for the period - - - - (1,942) - (1,942)
Total comprehensive income for the period - - - - (1,942) 7,335 5,393
Shares issued on exercise of share options 5 - - - - - 5
Share-based payment charge - - - 601 - - 601
Deferred tax credit taken directly to equity - - - - - 198 198
Total transactions with shareholders in their capacity as shareholders 5 - - 601 - 198 804
Balance at 30 June 2023 508 1,007 1,349 7,462 970 79,650 90,946
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2023
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Cash flows from operating activities
Profit for the period 7,335 7,314 14,982
Adjustment for:
Amortisation and depreciation 2,606 2,937 5,838
Profit on disposal of non-current assets - (28) (109)
Share-based payment charge 602 557 1,002
RDEC income (338) (293) (698)
Finance costs 406 239 920
Other non-cash movements (565) (609) (1,275)
Tax expense 2,277 1,836 2,971
Operating cash flow before changes in working capital and provisions 12,323 11,953 23,631
Decrease/(increase) in trade, other receivables and accrued revenue 1,678 (8,765) (6,605)
(Decrease)/increase in trade, other payables and deferred revenue (2,055) 4,536 1,378
Increase in provisions - - 125
Cash generated from operating activities 11,946 7,724 18,529
Taxation paid (2,138) (2,346) (3,680)
Net cash from operating activities 9,808 5,378 14,849
Cash flows from investing activities
Finance income received 18 - -
Acquisition of intangible assets (749) (124) (634)
Acquisition of property, plant and equipment (272) (344) (1,282)
Proceeds from the sale of property, plant and equipment - 6 32
Proceeds on the disposal of equity investments - - 23
Acquisition of subsidiaries, net of cash acquired - (24,243) (24,243)
Net cash used in investing activities (1,003) (24,705) (26,104)
Cash flows from financing activities
Proceeds from the issue of new ordinary shares 5 172 472
Finance costs paid (323) (169) (761)
Payment of lease liabilities (986) (964) (2,084)
Proceeds from borrowings - 15,000 15,000
Repayment of borrowings - (15,000) (15,000)
Net cash used in financing activities (1,304) (961) (2,373)
Net change in cash and cash equivalents 7,501 (20,288) (13,628)
Effect of foreign currency on cash balances (572) 1,018 1,481
Cash and cash equivalents at start of the period 19,096 31,243 31,243
Cash and cash equivalents at end of period 26,025 11,973 19,096
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2023
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared in
accordance with the recognition and measurement requirements of International
Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the
International Accounting Standards Board (IASB) adopted by the UK.
The condensed consolidated financial statements have been prepared in
accordance with International Accounting Standard 34 ("IAS 34") - Interim
Financial Reporting, and should be read in conjunction with the Group's last
annual consolidated financial statements as at and for the year ended 31
December 2022. Selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual financial
statements.
The condensed consolidated financial statements have been prepared under the
historical cost convention, except for the fair value of certain financial
instruments which are further detailed in note 16.
The same accounting policies, presentation and methods of computation have
been followed in these condensed consolidated financial statements as were
applied in the preparation of the Group's financial statements for the year
ended 31 December 2022.
These condensed consolidated financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006. A copy
of the Group's audited statutory accounts for the year ended 31 December 2022
were approved by the Board of Directors and have been delivered to the
Registrar of Companies. The audit report on those accounts was unqualified,
did not draw attention to any matters by way of emphasis and did not contain
any statement under section 498(2) or (3) of the Companies Act 2006.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group was described
in the Annual Report and Accounts 2022 which is available on the Company
website (www.ergomedplc.com). The principle risks were: Cancellation or delay
of clinical trials or projects by customers including as a result of a global
pandemic; Lower contracted order book realisation or conversion of sales
pipeline to contract; significant regional or national event (pandemic,
natural disaster, conflict or terrorism); Quality and third party oversight
('TPO'); Cybersecurity; Information technology transformation; Access to and
cost of capital; Retention of senior and key employees; Dependence on a
limited number of key clients; Data privacy; Outsourcing trends in the
pharmaceutical and biotechnology industries; Recoverability of the Group's
long-term assets and Environmental, social and governance.
Critical accounting judgements and key sources of estimation uncertainty
In preparing these interim financial statements, management has made
judgements and estimates that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expense.
The significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the
same as those described in the last annual financial statements and are
summarised below.
Source of estimation uncertainty Overview
Revenue from customer Revenue for CRO services is recognised based on the costs incurred on a
project as a proportion of total expected costs to determine a percentage of
contracts completion which is applied to the estimate of the transaction price. Given
the long-term nature and complexity of clinical trials, estimation is used to
determine the forecast costs to complete, which can impact the timing and
value of revenue recognised for the CRO business.
Impairment of goodwill The impairment provision against goodwill at the period end was £2,143,000
(2022: £2,143,000) and related fully against the investment in Haemostatix
Limited. £nil (2022: £nil) was charged to the Income Statement in the
period.
Going concern
The interim financial statements have been prepared on the going concern
basis, which assumes that the Group will have sufficient funds to continue in
operational existence for the foreseeable future, being a period of no less
than 12 months from the date these interim financial statements are approved.
The Directors have reviewed cash flow forecasts for the period through to 31
December 2024, which is derived from the 2023 Board approved budget and a
medium-term cash flow forecast through to 31 December 2024, which is an
extrapolation of the approved budget under multiple scenarios and growth
rates. The 2023 budget and medium‑term forecast represents the Directors'
best estimate of the Group's future performance and necessarily includes a
number of assumptions, including the level of revenues. The 2023 budget and
medium-term forecast demonstrate that the Directors have a reasonable
expectation that the Group will be able to meet its liabilities as they fall
due for a period of at least 12 months from the date these interim financial
statements are approved.
On the basis of the above factors and, having made appropriate enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the interim
financial statements.
Business Combinations
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration transferred on acquisition is the fair
value at the date of transaction for assets and liabilities transferred. All
acquisition related costs are expensed as incurred.
Goodwill arises as the excess of acquisition cost over the fair value of the
assets transferred at the date of transaction. Goodwill is reviewed for
impairment annually and is carried at cost less accumulated impairment losses.
Impairment losses are not reversed in subsequent periods.
Goodwill arising on the acquisition of a foreign operation, including any fair
value adjustments to the carrying amounts of assets or liabilities on the
acquisition, are treated as assets and liabilities of that foreign operation
in accordance with IAS 21 and as such are translated at the relevant foreign
exchange rate at the statement of financial position date.
2. REVENUE AND OPERATING SEGMENTS
The Group's revenue is disaggregated by geographical market and major service
lines:
30 June 2023 Geographical market and major service lines
CRO services PV services Total services
£000s
£000s £000s
Geographical market by client location
UK 4,824 4,548 9,859
Rest of Europe, Middle East and Africa 8,461 7,719 17,232
North America 22,980 25,343 46,657
Rest of World 1,756 1,114 2,997
38,021 38,724 76,745
30 June 2022 Geographical market and major service lines
CRO services PV services Total services
£000s
£000s £000s
Geographical market by client location
UK 6,046 4,021 10,067
Rest of Europe, Middle East and Africa 6,180 6,470 12,650
North America 20,231 24,026 44,257
Rest of World 1,872 1,071 2,943
34,329 35,588 69,917
31 December 2022 Geographical market and major service lines
CRO services PV services Total services
£000s
£000s £000s
Geographical market by client location
UK 11,593 8,642 20,235
Rest of Europe, Middle East and Africa 14,537 14,726 29,263
North America 42,238 48,323 90,561
Rest of World 2,995 2,208 5,203
71,363 73,899 145,262
Operating segments
Information reported to the Company's Board, which is the chief operating
decision maker ('CODM'), for the purpose of resource allocation and assessment
of segment performance, is focused on the Group operating as two business
segments, being Clinical Research Services ('CRO') and Pharmacovigilance
('PV'). All revenues arise from direct sales to customers. The segment
information reported below all relates to continuing operations. Following the
acquisition of ADAMAS by the Group in February 2022, the associated revenues
have been allocated between CRO and PV based on the nature of the revenues
generated.
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Segment profit represents the gross profit earned by each
segment. Other amounts, including selling, general and administration expenses
were not allocated to a segment. This was the measure reported to the CODM for
the purpose of resource allocation and assessment of segment performance.
30 June 2023 CRO PV Consolidated
£000s £000s total
£000s
Segment revenues 38,021 38,724 76,745
Cost of sales (25,771) (19,325) (45,096)
Segment gross profit 12,250 19,399 31,649
Selling, general and administration expenses (22,015)
Selling, general and administration expenses comprises:
Other selling, general and administration expenses (19,898)
Amortisation of acquired fair valued intangible assets (1,101)
Share-based payment charge (602)
Acquisition costs (414)
Other operating income 366
Operating profit 10,000
Finance income 18
Finance costs (406)
Profit before tax 9,612
30 June 2022 CRO PV Consolidated
£000s £000s total
£000s
Segment revenues 34,329 35,588 69,917
Cost of sales (23,688) (17,302) (40,990)
Segment gross profit 10,641 18,286 28,927
Selling, general and administration expenses (19,923)
Selling, general and administration expenses comprises:
Other selling, general and administration expenses (17,123)
Amortisation of acquired fair valued intangible assets (1,404)
Share-based payment charge (557)
Acquisition costs (839)
Other operating income 385
Operating profit 9,389
Finance income -
Finance costs (239)
Profit before tax 9,150
31 December 2022 CRO PV Consolidated
£000s £000s total
£000s
Segment revenues 71,363 73,899 145,262
Cost of sales (49,276) (36,841) (86,117)
Segment gross profit 22,087 37,058 59,145
Selling, general and administration expenses (41,627)
Selling, general and administration expenses comprises:
Other selling, general and administration expenses (36,193)
Amortisation of acquired fair valued intangible assets (2,763)
Share-based payment charge (1,002)
Acquisition costs (1,669)
Research and development expenses (121)
Other operating income 1,355
Operating profit 18,873
Finance income -
Finance costs (920)
Profit before tax 17,953
Segment net assets
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
CRO 41,346 34,939 36,318
PV 49,572 40,114 48,431
Consolidated total net assets 90,918 75,053 84,749
3. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the
following data:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
EARNINGS
Profit for the purposes of earnings per share - net profit attributable to
owners of the Company
7,335 7,314 14,982
Adjust for:
Amortisation of acquired fair valued intangible assets 1,101 1,404 2,763
Share-based payment charge* 1,106 557 1,049
Acquisition costs (note 6) 414 839 1,669
Reorganisation and integration costs 1,528 38 927
Tax effect of adjusting items (382) (66) (176)
Adjusted earnings for the purposes of adjusted earnings per share (unaudited) 11,102 10,086 21,214
No. No. No.
NUMBER OF SHARES
Weighted average number of shares for the purposes of basic earnings per share 50,596,573 49,520,505 49,775,107
Incremental shares in respect of employee
Share schemes 904,605 1,822,690 1,515,528
Weighted average number of ordinary shares for the purposes of diluted
earnings per share
51,501,178 51,343,195 51,290,635
* Includes £505,000 of employment tax expense incurred by the Group in
relation to share options exercised in the year
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
pence pence pence
EARNINGS PER SHARE
Basic 14.5 14.8 30.1
Diluted 14.2 14.2 29.2
ADJUSTED EARNINGS PER SHARE
Basic 21.9 20.4 42.6
Diluted 21.6 19.6 41.4
4. FINANCE COSTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Loan and other interest payable - - 455
Interest on lease liabilities 83 70 158
Other finance costs 323 169 170
406 239 920
5. OTHER OPERATING INCOME
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Foreign grant income - 78 203
RDEC income 338 293 698
Other income 28 14 454
366 385 1,355
6. ACQUISITION COSTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Acquisition of ADAMAS 8 700 816
Acquisition of MedSource - - 79
Aborted and other acquisition costs 406 139 774
414 839 1,669
7. EBITDA and Adjusted EBITDA
Unaudited Unaudited Unaudited
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Operating profit 10,000 9,389 18,873
Adjusted for:
Depreciation and amortisation charges within selling, general &
administration expenses
1,505 1,533 3,075
Amortisation of acquired fair valued intangible assets
1,101 1,404 2,763
EBITDA 12,606 12,326 24,711
Adjusted for:
Share-based payment charge* 1,106 557 1,049
Acquisition costs (note 6) 414 839 1,669
Reorganisation and integration costs 1,528 38 927
Adjusted EBITDA 15,654 13,760 28,356
* Includes £505,000 of employment tax expense incurred by the Group in
relation to share options exercised in the year
8. INCOME TAX EXPENSE
Income tax expense is recognised at an amount determined by multiplying the
profit before tax for the interim reporting period by management's best
estimate of the weighted-average annual income tax rate, adjusted for the tax
effect of certain items recognised in full in the interim period. As such, the
effective tax rate in the interim financial statements may differ from
management's estimate of the effective tax rate for the annual financial
statements.
The Group's consolidated effective tax rate in respect of continuing
operations for the six months ended 30 June 2023 was 23.7% (six months ended
30 June 2022: 20.1%).
9. GOODWILL
Reconciliation of carrying amount: Total
£000s
Balance at 1 January 2023 41,404
Arising on business combinations -
Translation movement (638)
Balance at 30 June 2023 40,766
As at 30 June 2023, the Group performed an assessment to identify indicators
of impairment relating to goodwill allocated to cash generating units (CGUs).
This included a review of internal and external indicators of impairment
including considering the year-to-date performance of the relevant CGUs and
any changes in key assumptions. The outcome of this assessment was that there
were no indications of impairment which could reasonably be expected to
eliminate the headroom computed at 31 December 2022. As a result of this
assessment no impairment charges were recorded in the first half of 2023
(2022: first half £nil; full-year £nil).
A full detailed impairment review will be conducted on all CGUs at 31 December
2023.
10. OTHER INTANGIBLE ASSETS
Total
£000s
Cost
At 1 January 2023 45,574
Additions 749
Disposals (12)
Translation movement (329)
At 30 June 2023 45,981
Amortisation
At 1 January 2023 29,730
Charge for the period 1,239
Disposals (14)
Translation movement (66)
At 30 June 2023 30,889
Net Book Value
At 30 June 2023 15,092
At 31 December 2022 15,844
At 30 June 2022 16,910
11. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Trade receivables 23,257 25,265 28,006
Other receivables 1,130 1,466 970
Prepayments 2,476 1,884 2,971
Corporation tax receivable 5,876 2,038 2,503
32,739 30,653 34,450
Trade receivables is recorded net of impairment losses of
£805,000 (2022: £344,000).
12. CASH AND CASH EQUIVALENTS AND BORROWINGS
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Cash and cash equivalents 26,025 11,973 19,096
Borrowings - - -
Cash and cash equivalents net of borrowings 26,025 11,973 19,096
The Group has undrawn £80.0 million committed multi-currency revolving credit
facility (RCF) at the period ended 30 June 2023.
13. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Trade payables 4,324 4,915 6,507
Social security and other taxes 1,234 1,356 2,122
Other payables 1,818 2,077 1,564
Accruals 8,295 7,121 7,447
15,671 15,469 17,640
14. ORDINARY SHARE CAPITAL
£000s
Number
Ordinary shares of £0.01 each
Balance at 30 June 2022 49,880,029 499
Exercise of share options 420,776 4
Balance at 31 December 2022 50,300,805 503
Exercise of share options 476,000 5
Balance at 30 June 2023 50,776,805 508
15. ACQUISITION OF SUBSIDIARY
There has been no acquisition of subsidiaries in the period to 30 June 2023.
On 9 February 2022, the Group acquired all of the issued share capital in
ADAMAS Consulting Group Limited and its subsidiaries ("ADAMAS"). The
acquisition has been completed for a cash consideration of £25.6 million,
representing an enterprise value of £24.2 million and cash acquired of £1.4
million. Ergomed Plc drew down on its £15.0 million on multi-currency rolling
credit facility ('RCF) on 1 February 2022 and utilised the funds and existing
Group cash reserves to fund the acquisition.
ADAMAS is an international specialist consultancy offering a full range of
independent quality assurance services and specialising in the audit of
pharmaceutical manufacturing processes, as well as auditing clinical trials
and pharmacovigilance systems.
In the period from 9 February 2022 to 31 December 2022, ADAMAS contributed
revenue of £10.2 million and profit of £1.0 million to the Group's results.
If the acquisition had occurred on 1 January 2022, management estimates that
consolidated revenue would have been £10.8 million, and profit for the period
would have been £1.0 million. In determining these amounts, management has
assumed that the fair value adjustments, determined provisionally, that arose
on the date of acquisition would have been the same if the acquisition had
occurred on 1 January 2022.
Identifiable assets acquired and liabilities assumed Final
valuation
£000s
Intangible assets 10,013
Property, plant and equipment 19
Deferred tax assets 3
Trade and other receivables 1,864
Contract assets 233
Cash and equivalents 1,411
Trade and other payables (1,252)
Contract liabilities (14)
Taxation payable (32)
Deferred tax liability (2,412)
Total identifiable net assets 9,833
Goodwill 15,821
Total consideration 25,654
Satisfied by
Cash consideration 25,654
Total consideration 25,654
Net cash outflow arising on acquisition
Cash consideration 25,654
Less: cash and cash equivalent balances acquired (1,411)
Transaction expenses 1,056
25,299
Included within intangible assets are customer relationships of £8,541,000,
brand of £738,000 and contracted orderbook of £723,000 recognised on
acquisition. The Group incurred acquisition related costs of £240,000 related
to due diligence and legal activities in the year ended 31 December 2021 and
£816,000 in period to 31 December 2022. These costs have been included in
acquisition costs within selling and administrative expenses in the Group's
consolidated income statement.
16. FINANCIAL INSTRUMENTS
Categories of financial instruments
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities at the reporting date.
30 June 2023 Carrying amount Fair value
Financial Financial Financial Financial Total Total
assets assets at liabilities at liabilities at £000s £000s
at fair value amortised amortised fair value
through cost cost through
profit and £000s £000s profit and
loss loss
£000s £000s
Financial assets
Trade receivables - 23,257 - - 23,257 23,257
Other receivables - 902 - - 902 902
Cash and cash equivalents - 26,025 - - 26,025 26,025
Derivative assets 143 - - - 143 143
143 50,184 - - 50,327 50,327
Financial liabilities
Lease liabilities - - 3,016 - 3,016 3,016
Trade payables - - 4,324 - 4,324 4,324
Amounts payable to related parties - - - - - -
Other payables - - 1,818 - 1,818 1,818
Derivative liabilities - - - - - -
Accruals - - 8,295 - 8,295 8,295
- - 17,453 - 17,453 17,453
30 June 2022 Carrying amount Fair value
Financial Financial Financial Financial Total Total
assets assets at liabilities at liabilities at £000s £000s
at fair value amortised amortised fair value
through cost cost through
profit and £000s £000s profit and
loss loss
£000s £000s
Financial assets
Trade receivables - 25,265 - - 25,265 25,265
Other receivables - 1,451 - - 1,451 1,451
Cash and cash equivalents - 11,973 - - 11,973 11,973
Derivative assets 15 - - - 15 15
15 38,689 - - 38,704 38,704
Financial liabilities
Lease liabilities - - 2,586 - 2,586 2,586
Trade payables - - 4,915 - 4,915 4,915
Other payables - - 2,077 - 2,077 2,077
Derivative liabilities - - - 783 783 783
Accruals - - 7,121 - 7,121 7,121
- - 16,699 783 17,482 17,482
31 December 2022 Carrying amount Fair value
Financial Financial Financial Financial Total Total
assets assets at liabilities at liabilities at £000s £000s
at fair value amortised amortised fair value
through cost cost through
profit and £000s £000s profit and
loss loss
£000s £000s
Financial assets
Trade receivables - 28,006 - - 28,006 28,006
Other receivables - 745 - - 745 745
Cash and cash equivalents - 19,096 - - 19,096 19,096
Derivative assets 84 - - - 84 84
84 47,847 - - 47,931 47,931
Financial liabilities
Lease liabilities - - 2,908 - 2,908 2,908
Trade payables - - 6,507 - 6,507 6,507
Other payables - - 1,561 - 1,561 1,561
Derivative liabilities - - - 134 134 134
Accruals - - 7,447 - 7,447 7,447
- - 18,423 134 18,557 18,557
Financial instruments measured at fair value
The financial instruments measured at fair value have been categorised within
the fair value hierarchy based on the valuation technique used to determine
fair value at the reporting date.
30 June 2023 30 June 2022 31 December 2022
£000s £000s £000s
Financial assets
Equity investments - Level 1 - 38 -
Foreign currency forward contracts used for hedging - Level 2 143 15 84
Financial assets measured at fair value 143 53 84
Financial liabilities
Foreign currency forward contracts used for hedging - Level 2 - 783 134
Financial liabilities measured at fair value - 783 134
Foreign currency forward contracts (Level 2)
The Group's foreign currency forward contracts are not traded in active
markets. These contracts have been fair valued using observable forward
exchange rates and interest rates corresponding to the maturity of the
contract. The effects of non-observable inputs are not significant for foreign
currency forward contracts.
Equity investments (Level 1)
Equity investments which are publicly quoted are measured based on the quoted
market price.
The level 1 investment held in Modus Therapeutics Holding AB was disposed of
during the year ended 31 December 2022 for proceeds (net of sale costs) of
£11,000.
17. SUBSEQUENT EVENTS
On 4 September 2023, Ergomed plc (the "Company") announced that they have
reached agreement on the terms of a recommended cash acquisition pursuant to
which Eden AcquisitionCo Limited, a newly incorporated company controlled and
indirectly wholly owned by the Permira funds advised by Permira Advisers LLP
("Permira"), will acquire the entire issued and to be issued ordinary share
capital of the Company (the "Acquisition").
It is intended that the Acquisition will be implemented by means of a
Court-sanctioned scheme of arrangement under Part 26 of the Companies Act (the
"Scheme") expected to be effective during Q1 2024, subject to the satisfaction
or (where applicable) waiver of all relevant conditions. The conditions
include, amongst other things, the approval by shareholders of the acquisition
and the obtaining of relevant authorisation and regulatory clearances in
certain countries in which the Company operates.
Under the terms of the Acquisition, each Scheme Shareholder will be entitled
to receive 1,350 pence in cash for each Ergomed Share valuing the Company at
approximately £703.1 million.
Other than as described above, there were no material post balance sheet
events between the balance sheet date and the date of this report.
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