REG - Ergomed plc - Half-year Report <Origin Href="QuoteRef">ERGO.L</Origin> - Part 1

ErgomedAnnouncement

26/09/2016 07:06

RNS Number : 7528K
Ergomed plc
26 September 2016
PRESS RELEASE
Unaudited Interim results for the six months ended 30 June 2016
Strong first half financial performance - revenues up 21% and gross profit up 26%
19 million new contracts signed resulting in a backlog of 60 million
Acquisitions of O+P and GASD strengthens service business
Acquisition of Haemostatix expands product pipeline potential significantly
Completion of 9.2 million fund raising
Guildford, UK - 26 September 2016: Ergomed plc, ('Ergomed', 'the Company', AIM:ERGO) a profitable UK-based company dedicated to the provision of specialised services to the pharmaceutical industry and the development of new drugs, today announces its interim results for the six months ended 30 June 2016.
Commenting on the results, Miroslav Reljanovic M.D., Chief Executive Officer of Ergomed plc, said:
"Ergomed has delivered another set of excellent results for the first half of 2016. We made significant progress against our strategic goals through the continued strong trading performance of our profitable, growing service businesses where overall top-line growth of 21% was driven by revenue growth of 53% in our subsidiary company PrimeVigilance and through the completion of two targeted acquisitions.
The acquisitions of O+P and GASD augment the continuing growth of our services businesses, adding immediate significant, tangible value including an in-house Electronic Data Capture system, "OPVERDI" and biostatistics and data management capabilities. We have already won our first service contract together for a clinical study with a European biotech company underlining the benefits of the acquisition.
We continue to believe we can create significant value by investing in-kind through carefully selected co-development partnerships and we are expecting important clinical data readouts from Ferrer and Aeterna Zentaris around the end of 2016 and early 2017 respectively. The Haemostatix acquisition is an exciting evolution of the co-development model and has the potential to be transformational for Ergomed through the rapid development of its novel treatment for surgical bleeding.
Overall, we continue to believe that our hybrid model of a growing, profitable services business combined with managed risk drug development has the potential to deliver significant shareholder value over the next few years with some exciting newsflow in the next 12 months."
Financial highlights (unaudited)
 Revenues up 21% to 17.6 million from 14.5 million in H1 2015
o Including revenue growth of 53% to 5.5 million from 3.6 million in H1 2015 from PrimeVigilance
 Gross profit up 26% to 5.3 million from 4.2 million in H1 2015
 Adjusted EBITDA up 12% to 1.9 million from 1.7 million in H1 2015 excludes costs of 0.4 million relating to M&A activities and 0.1 million of R&D costs (note 11)
 EBITDA before adjustments for share-based payment charge, M&A costs, exceptional items and R&D of 1.2 million compared with 1.4 million in H1 2015 (note 11)
 Placing of 6.63 million new ordinary shares raised 9.2 million before expenses
 Cash and cash equivalents of 9.9 million as of 30 June 2016 (30 June 2015: 4.9 million; 31 December 2015: 4.0 million)
 Contribution in kind to co-development projects increased to 2.1 million in H1 2016 from 1.9 million in H1 2015
Operational highlights
 Service contracts with a value of 19 million signed in H1 2016 (15 million signed in H1 2015)
 Strong backlog of awarded contracts of approximately 60 million at the end of July 2016
 O+P and GASD, a contract research organisation with a proprietary electronic data capture system, OPVERDI, and a biostatistics and data management company respectively, were acquired on 13 June 2016 (note 8)
 Opening of a new office in Boston, MA to support growth of PrimeVigilance in the US in June 2016
 Five ongoing clinical studies with co-development partnerships proceeding to plan
 Haemostatix, a UK company developing a proprietary platform to control surgical bleeding with two lead products, one of which is Phase IIb ready, was acquired on 24 May 2016 (note 7)
Enquiries:
For further information, please contact
Ergomed Plc
Miroslav Reljanovic (Chief Executive Officer)
Stephen Stamp (Chief Financial Officer) 
Tel: +44 (0) 1483 503205


Numis Securities Limited
Michael Meade / Freddie Barnfield (Nominated Adviser) 
James Black (Joint Broker)
Tel: +44 (0) 20 7260 1000


Stifel Nicolaus Europe Limited
Jonathan Senior (Joint Broker)
Tel: +44 (0) 20 7710 7600


FTI Consulting - for UK enquiries
Simon Conway / Mo Noonan / Natalie Garland-Collins
Tel: +44 (0) 20 3727 1000


MC Services - for Continental European enquiries
Anne Hennecke
Tel: +49 211 529252 22
About Ergomed
Ergomed plc is a profitable UK-based business providing drug development services to the pharmaceutical industry and has a growing portfolio of co-development partnerships. It operates in over 50 countries.
Ergomed successfully manages clinical development from Phase I through to late phase programmes, providing clinical development, trial management and pharmacovigilance services to over 100 clients ranging from top 10 pharmaceutical companies to small and mid-sized drug development companies. Ergomed has a wide therapeutic focus, with a particular expertise in oncology, neurology and immunology and the development of orphan drugs. Ergomed believes its approach to clinical trials is differentiated from that of other providers by its innovative Study Site Management model and the use of Study Physician Teams, resulting in a close relationship between Ergomed and the physicians involved in clinical trials.
Ergomed's subsidiary, PrimeVigilance, is a leading independent pharmacovigilance and medical information business in Europe. PrimeVigilance offers a range of post-approval drug safety surveillance and ancillary services to the pharmaceutical industry. With a compound growth rate of 38% since 2011, PrimeVigilance won the Queens Award for Enterprise in 2014.
As well as providing high quality clinical development services, Ergomed is building a portfolio of co-development partnerships with pharma and biotech companies which share the risks and rewards of drug development. Ergomed leverages its expertise and services in return for carried interest in the drugs under development. Lastly, Ergomed recently acquired Haemostatix, including a pipeline of proprietary development products for haemostasis in surgical settings. 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 returns of Ergomed plc ("Ergomed") and 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
Introduction
Ergomed's hybrid business model has two key components: services and product development.
The Company's profitable services business includes the provision of pre-approval and post-approval services to the pharmaceutical and biotech industry. Services include all phases of clinical research as well as post-marketing drug safety surveillance and medical information through its subsidiary PrimeVigilance - one of the leading pharmacovigilance service providers in Europe and North America.
Ergomed is also building a portfolio of development products by providing in-kind clinical research services in return for minority carried interests in our partners' development products. Ergomed will receive a share of any future proceeds generated from the commercialisation of the partnered drug asset. The Company's product portfolio was enhanced with the acquisition of Haemostatix which includes full ownership of two proprietary lead products, one pre-clinical and one planned to enter Phase IIb in 2017.
Business update
We are very pleased with the continued progress Ergomed has made in the first half of 2016 and remain enthusiastic about the opportunities for growth, both organic and through acquisition. We made significant progress on both fronts in the first half of 2016.
Global demand for out-sourced clinical research and pharmacovigilance services remains very strong, growing at approximately 10% and 17% p.a. respectively. Ergomed's services business continues to benefit from these trends with H1 2016 vs H1 2015 growth rates of 10.6% for pre-approval clinical research services and 53.1% for drug safety monitoring and medical information services. Ergomed is also in the unique position of offering co-development partnerships to its clients and is committed to building its portfolio of co-development assets. Success from this portfolio is in addition to the value that is being generated through our growing, profitable service business.
In line with the strategy laid out at IPO to strengthen our clinical data management and biostatics capability, we acquired O+P and GASD on 13 June 2016. O+P is a full service contract research organisation offering services from Phase II through to Phase IV clinical studies. In its 25 year history, O+P has worked on more than 150 assignments for more than 60 clients and has developed a proprietary FDA validated Electronic Data Capture system called OPVERDI which has been used in 95 clinical trials and can be deployed across the Ergomed global platform. GASD, which specialises in biostatistics and data management, has undertaken more than 180 assignments in all phases of clinical research for over 50 clients and will significantly enhance Ergomed's in-house capabilities. The value of this deal has already been demonstrated through the winning of a substantial new clinical trial contract that will utilise O+P, GASD and Ergomed services.
Ergomed demonstrated its continued commitment to geographic expansion with the opening of a US office in Boston, MA to better serve its post-marketing services clients in the US. PrimeVigilance is already a leading independent pharmacovigilance and medical information provider in Europe with compound annual growth of 38% since 2011. Expansion in the US is expected to provide opportunities to drive this growth further.
We are actively pursuing acquisitions of services businesses which fulfill the criteria we set out at IPO; namely to become the global leader in pharmacovigilance services, the leading CRO in orphan drug development and strengthen our CRO network by filling in geographies and / or service offerings.
Stephen Stamp joined the Ergomed Board as Chief Financial Officer in January 2016 and Neil Clark was promoted to Chief Executive Officer, PrimeVigilance. Stephen brings with him more than 30 years of experience in corporate finance and general management in both public and private companies in the UK and the USA.
Co-Development update
Ergomed shares in the upside potential of promising products by contributing to the cost of clinical trials through significantly reduced fees in return for a carried interest in any future revenues of the product, including any out-licensing milestones and product sales.
The status of Ergomed's current partnerships is:
CEL-SCI (NYSE: CVM): 
CEL-SCI's lead product Multikine is an immunotherapeutic agent (a mixture of cytokines including interleukins, interferons, chemokines, and colony stimulating factors) being developed as a potential first-line head and neck cancer therapy and has the potential to be a first in class immunotherapy. As part of our co-development partnership, we are currently running the largest Phase III study in head and neck cancer and in a phase II for treatment for peri-anal warts in HIV/HPV co-infected patients. The phase III study has reached the initial recruitment target of 880 patients and CEL-SCI has announced its intention to extend the recruitment to add in additional patients.
Aeterna Zentaris Inc. (NASDAQ: AEZS; TSX: AEZ):
Zoptrex (or zoptaerlin doxorubicin) is the well-known chemotherapeutic agent doxorubicin conjugated to a peptide to help it localise to the tumour. The Phase III pivotal study comparing Zoptrex with standard of care for second line therapy for locally-advanced, recurrent or metastatic endometrial cancer has included all the patients and the study is due to complete towards the end of 2016 and report early in 2017. The Zoptrex study is being conducted at 115 sites in North America, Europe, Israel and other countries under a Special Protocol Assessment.
Ferrer:
Lorediplon is a novel, longer acting non-BZD hypnotic drug that modulates the GABAa receptor for the treatment of insomnia. Compared to similar products (such as zolpidem), lorediplon initial preclinical and clinical studies show a potent hypnotic profile and extended systemic half-life, properties that could confer potential clinical benefits in terms of sleep maintenance and sleep architecture. The Phase II study in insomnia has reached the recruitment target and is due to complete during 2016. Results are due towards the end of the year.
Dilaforette:
Sevuparin is an innovative, proprietary polysaccharide drug, which has potential to restore blood flow and prevent furthermicrovascular obstruction in patients with Sickle-Cell Disease (SCD). Dilaforette was granted Orphan Drug Designation by the US Food and Drug Administration (FDA). The study is due to have its first interim analysis in October and we hope to complete the initial cohort of 77 patients in the first half of 2017. Dilaforette is part of the Karolinska Development AB (STO: KDEV) portfolio. Results from the first 77 patients should be available in H1 2017.
Haemostatix acquisition
We have been looking to enhance our co-development portfolio by striking deals which provide Ergomed with greater control over the development plans and monetisation of products with the expectation of a greater share of the upside in return for bearing more of the development costs. It was in this context we started discussions with Haemostatix, a company with a proprietary platform technology being used to develop products to address the $2.5 billion global market for haemostats in surgical bleeding. Closed on 24 May 2016, the Haemostatix acquisition represents a landmark event for Ergomed. In the Board's view, based on encouraging results from the Phase I study and a rapid clinical development programme with relatively low costs, it is an opportunity for strong value creation. It is also targeting an attractive market and we believe Haemostatix' platform has the potential to create significant shareholder value for Ergomed based on successful near term clinical milestones and longer term product sales.
Financial review of Condensed Consolidated Financial Statements
Consolidated revenues for H1 2016 increased by 21% to 17.6 million (H1 2015: 14.5 million). Consolidated revenue includes 12.0 million from pre-approval clinical research services (H1 2015: 10.9 million) and 5.6 million from drug safety monitoring and medical information services (H1 2015: 3.6 million).
Gross profit increased by 26% to 5.3 million from 4.2 million in H1 2015. Gross margin increased to 30% from 29% in H1 2015, largely driven by the continued high growth in the post-approval drug safety and medical information service business.
Administrative expenses increased by 37% to 3.6 million from 2.6 million in H1 2015, driven by strengthened management and corporate infrastructure to support increased M&A activity and other corporate initiatives.
Adjusted EBITDA was 1.9 million (H1 2015: 1.7 million) after being adjusted by 0.4 million relating to non-recurring M&A costs and 0.1 million relating to research and development activities.
Cash in hand as of 30 June 2016 was 9.9 million (30 June 2015: 4.9 million). Cash of 1.5 million was used in H1 2016 as part of the initial consideration payments for the acquisitions of Haemostatix in May and O+P and GASD in June. The Company raised 9.2 million, net of expenses in the placing in May.
Impact of Brexit vote
On 23 June 2016, in a referendum regarding its continued membership, the UK voted to leave the EU.
The devaluation of pounds sterling against both the Euro and US Dollar in the lead up to the referendum generally favoured the translation of foreign currency earnings in the six months ended 30 June 2016. The immediate impact of the referendum vote to leave the EU was a sharp devaluation of pounds sterling against both the Euro and US Dollar. To the extent that the pound sterling remains at current levels for the remainder of the year, there will be a net positive impact on the translation of foreign currency earnings in the six months ended 31 December 2016.
The impact of an exit from the EU on Ergomed longer term is unlikely to be significant since more than 75% of its revenues are generated outside the UK. Ergomed already has well established regulatory and legal capabilities through its fully staffed offices inside and outside of the EU in Europe and so can continue to provide full services if and when current rules are changed.
Current trading and Outlook
Ergomed is on track to deliver another year of strong trading performance. The Company has a strong balance sheet with its highest ever cash reserves and is profitable. The strong backlog of signed service contracts means that substantially all of 2016 planned revenues have been contracted. The Board is actively evaluating several potential service business acquisitions that would increase profitability and complement our current range of service offerings and/or expand our geographical coverage. We also have a number of leads under discussion for additional co-development partnerships. In summary, the Board remains confident on the outlook for Ergomed.
INDEPENDENT REVIEW REPORT TO ERGOMED PLC
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the Group intends to use in preparing its next annual financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with accounting policies the group intends to use in preparing its next annual financial statements and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Cambridge, UK
25 September 2016
ERGOMED PLC
INTERIM STATEMENT
Condensed Consolidated Income Statement
For the six months ended 30 June 2016

Note
Unaudited
Six months 
ended
30 June 2016
000s
Unaudited
Six months 
ended
30 June 2015
000s
Audited
Year 
ended
31 December 2015
000s





REVENUE

17,553
14,484
30,178





Cost of sales

(12,276)
(10,292)
(21,808)


Gross profit

5,277
4,192
8,370





Administrative expenses

(3,566)
(2,606)
(5,186)
Research and development

(102)
-
-
Other operating income

73
52
81
Amortisation of acquired intangible assets

(307)
(286)
(596)
Share-based payment charge

(204)
(133)
(288)
M&A costs
9
(352)
(125)
(272)
Exceptional items
10
-
(37)
(37)


OPERATING PROFIT

819
1,057
2,072





Investment revenues

1
-
1
Finance costs

-
-
(1)


PROFIT BEFORE TAXATION

820
1,057
2,072





Taxation

(184)
(265)
(520)


PROFIT FOR THE PERIOD

636
792
1,552


EARNINGS PER SHARE




Basic 
2
2.0p
2.8p
5.4p 


Diluted 
2
2.0p
2.7p
5.2p


All activities in the current and prior period relate to continuing operations.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2016

Unaudited
Six months 
ended 
30 June 2016
000s
Unaudited
Six months 
ended 
30 June 2015
000s
Audited
Year 
ended
31 December 2015
000s




Profit for the period
636
792
1,552

Items that may be classified subsequently to profit or loss:



Exchange differences on translation of foreign operations
474
(411)
(244)

Other comprehensive income for the period net of tax
474
(411)
(244)

Total comprehensive income for the period
1,110
381
1,308

Condensed Consolidated Statement of Financial Position
At 30 June 2016

Note
Unaudited
30 June 2016
000s
Unaudited
30 June 2015
000s
Audited
31 December 2015
000s





Non-current assets




Goodwill
3
25,208
7,656
7,488
Other intangible assets

2,703
2,733
2,819
Property, plant and equipment

436
242
335
Investments

262
37
183
Deferred tax asset

375
458
365




28,984
11,126
11,190


Current assets




Trade and other receivables
4
12,322
6,496
9,528
Inventory
5
67
-
-
Cash and cash equivalents

9,876
4,947
3,974




22,265
11,443
13,502


Total assets

51,249
22,569
24,692


Current liabilities




Borrowings

(2)
(3)
(5)
Trade and other payables
6
(7,133)
(5,105)
(5,955)
Deferred revenue

(1,155)
(655)
(795)
Taxation

(148)
(333)
(478)
Total current liabilities

(8,438)
(6,096)
(7,233)


Net current assets

13,827
5,347
6,269


Non-current liabilities




Borrowings

(8)
(5)
(7)
Deferred consideration on acquisitions

(9,069)
-
-
Deferred tax liability

(461)
(531)
(516)


Total liabilities

(17,976)
(6,632)
(7,756)


Net assets

33,273
15,937
16,936


Equity




Share capital

399
288
288
Share premium account

20,938
12,342
12,342
Merger reserve

6,326
-
-
Share option reserve

854
495
650
Translation reserve

(63)
(704)
(537)
Retained earnings

4,819
3,516
4,193


Total equity

33,273
15,937
16,936


Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2016

Share
capital
000s
Share premium account
000s
Share option reserve
000s
Translation reserve
000s
Retained earnings
000s
Total
000s







Balance at 31 December 2014*
288
12,342
362
(293)
2,640
15,339
Profit for the six month period**
-
-
-
-
792
792
Other comprehensive income for the period**
-
-
-
(411)
-
(411)

Total comprehensive income for the period**
-
-
-
(411)
792
381
Share-based payment for the period**
-
-
133
-
-
133
Deferred tax credit taken directly to equity**
-
-
-
-
84
84

Balance at 30 June 2015**
288
12,342
495
(704)
3,516
15,937

* Audited
** Unaudited

Share
capital
000s
Share premium account
000s
Merger reserve
000s
Share option reserve
000s
Translation reserve
000s
Retained earnings
000s
Total
000s








Balance at 31 December 2014*
288
12,342
-
362
(293)
2,640
15,339
Profit for the year*
-
-
-
-
-
1,552
1,552
Other comprehensive income for the year*
-
-
-
-
(244)
-
(244)

Total comprehensive income for the year*
-
-
-
-
(244)
1,552
1,308
Share-based payment for the year*
-
-
-
288
-
-
288
Deferred tax credit taken directly to equity*
-
-
-
-
-
1
1

Balance at 31 December 2015*
288
12,342
-
650
(537)
4,193
16,936
Profit for the six month period**
-
-
-
-
-
636
636
Other comprehensive income for the period**
-
-
-
-
474
-
474

Total comprehensive income for the period**
-
-
-
-
474
636
1,110
Share-issue during the period for cash (net of expenses)**
66
8,596
-
-
-
-
8,662
Share-issues during the period for non-cash consideration**
45
-
6,326
-
-
-
6,371
Share-based payment for the period**
-
-
-
204
-
-
204
Deferred tax charge taken directly to equity**
-
-
-
-
-
(10)
(10)

Balance at 30 June 2016**
399
20,938
6,326
854
(63)
4,819
33,273

* Audited
** Unaudited
The balance on the merger reserve has arisen through the acquisition of Haemostatix Limited, Oestreich + Partner GmbH and Gesellschaft fur angewandte Statistik + Datenanalyse mbH (see notes 7 and 8)
Condensed Consolidated Cash Flow Statement
For the six months ended 30 June 2015

Unaudited
Six months
ended 
30 June 2016
000s
Unaudited
Six months
ended 
30 June 2015
000s
Audited
Year
ended
31 December 2015
000s




Cash flows from operating activities



Profit before taxation
820
1,057
2,072




Adjustment for:



Amortisation and depreciation
410
327
713
(Gain)/loss on disposal of fixed assets
(4)
-
4
Share-based payment charge
204
133
288
Acquisition of shares for non-cash consideration
(54)
-
(142)
Exchange adjustments
339
(361)
(251)
Acquisition costs
349
53
54
Investment revenues
(1)
-
(1)
Finance costs
-
-
1

Operating cash flow before changes in working capital and provisions
2,063
1,209
2,738




Increase in trade and other receivables
(2,659)
(180)
(2,898)
Increase in trade and other payables
132
21
1,012
Increase in inventory
(67)
-
-

Cash (utilised in)/generated from operations
(531)
1,050
852




Taxation paid
(399)
(159)
(588)

Net cash (outflow)/inflow from operating activities
(930)
(891)
264

Investing activities



Investment revenues received
1
-
1
Acquisition of property, plant and equipment
(157)
(112)
(270)
Acquisition of intangible assets
(197)
(93)
(285)
Investments in joint venture
-
-
(1)
Acquisition of subsidiaries including expenses of acquisition
(1,505)
(313)
(312)
Receipts from sale of property, plant and equipment
31
1
2

Net cash outflow from investing activities
(1,827)
(517)
(865)

Financing activities



Issue of new shares
9,185
-
-
Expenses of fundraising
(523)
-
-
Finance costs paid
-
-
(1)
Increase in borrowings
-
-
7
Repayment of borrowings
(3)
(3)
(7)

Net cash inflow/(outflow) from financing activities
8,659
(3)
(1)

Net increase/(decrease) in cash and cash equivalents
5,902
371
(602)




Cash and cash equivalents at start of the period
3,974
4,576
4,576

Cash and cash equivalents at end of period
9,876
4,947
3,974

Notes
1. GENERAL INFORMATION
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.
The condensed interim financial statements have been prepared using accounting policies and method of computation consistent with those used in the audited statutory financial statements for the year ended 31 December 2015 and International Reporting Standards (IFRSs) adopted for use in the European Union. While the financial information included in this interim statement has been compiled in accordance with the recognition and measurement principles of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs.
The information for the six month period ended 30 June 2016 is unaudited, but reflects all normal adjustments which are, in the opinion of the Board, necessary to provide a fair statement of results and the Group's financial position for and as at the period presented.
Statutory accounts for the year ended 31 December 2015 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.
At 30 June 2016 Ergomed had cash resources of 9.9 million (30 June 2015: 4.9 million; 31 December 2015: 4.0 million).
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group was described in the Company's AIM Admission Document from July 2014 which is located in the Company website (www.ergomedplc.com) in the Investors section. These risks include competition; dependence on a small number of customers; legislation and regulation of the pharmaceutical and biotechnology industries; licensees, approvals and compliance; and the potential for cancellation or delay of clinical studies by customers. It is anticipated that the risk profile will not significantly change for the remainder of the year. Risk is an inherent part of doing business and the profitability and strong cash position of the Group, along with the growth profile of the business, leads the Directors to believe that the Group is well placed to manage business risks successfully.
Going concern
The Directors have considered cashflow forecasts for the group, detailing cash inflows and outflows for the period ending 31 December 2017. Based on their review of these forecasts and consideration of the economic environment in which the group operates, the Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the financial information for the six months ended 30 June 2016.
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.
Adoption of new and revised standards
Amendments to IFRSs that are mandatorily effective for the current year
In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2015 (except as noted below). Their adoption has not had any material impact on the disclosures or on the amounts reported in these interim financial statements.
Annual Improvements to IFRSs 2010 - 2012 Cycle
(The amendments are effective in the EU for accounting periods beginning on or after 1 February 2015. However, earlier application is permitted so that companies applying IFRSs as adopted in the EU are able to adopt the amendments in accordance with the IASB effective date of 1 July 2014) 
The Group has adopted the amendments to IFRSs included in theAnnual Improvements to IFRSs 2010 - 2012 Cycle for the first time in the current year.
The majority of the amendments are in the nature of clarifications rather than substantive changes to existing requirements. However, the amendments to IFRS 8 Operating Segments - Aggregation of operating segments and IAS 24 Related Party Disclosures - Key management personnel represent changes to existing requirements.
The amendments to IFRS 8 require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have similar economic characteristics.
The amendments to IAS 24 clarify that a management entity providing key management personnel services to a reporting entity is a related party of the reporting entity. Consequently, the reporting entity must disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.
The application of the amendments has had no material impact on the disclosures or on the amounts recognised in the Group's consolidated interim financial statements.
Annual Improvements to IFRSs 2011 - 2013 Cycle
The Group has adopted the amendments to IFRSs included in the Annual Improvements to IFRSs 2011 - 2013 Cycle for the first time in the current year.
The amendments are in the nature of clarifications rather than substantive changes to existing requirements.
The application of the amendments has had no material impact on the disclosures or on the amounts recognised in the Group's consolidated interim financial statements.
New and revised IFRSs in issue but not yet effective
At the date of authorisation of these interim financial statements, the following Standards and Interpretations which have not been applied in these interim financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 9
Financial Instruments
IFRS 15
Revenue from Contracts with Customers
IFRS 11 (amendments)
Accounting for Acquisitions of Interests in Joint Operations
IAS 1 (amendments)
Disclosure Initiative
IAS 16 and IAS 38 (amendments)
Clarification of Acceptable Methods of Depreciation and Amortisation IAS 16 and IAS 41 (amendments) Agriculture: Bearer Plants
IAS 27 (amendments)
Equity Method in Separate Financial Statements
IFRS 10 and IAS 28 (amendments)
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
IFRS 10, IFRS 12 and IAS 28 (amendments)
Investment Entities: Applying the Consolidation Exemption
Annual Improvements to IFRSs: 2012-2014 Cycle
Amendments to: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34 Interim Financial Reporting
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments and IFRS 15 may have an impact on revenue recognition and related disclosures. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 and IFRS 15 until a detailed review has been completed.
2. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:

Unaudited
Six months
ended
30 June 2016
000s
Unaudited
Six months
ended
30 June 2015
000s
Audited
Year
ended
31 December 2015
000s
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the Company
636
792
1,552
Effect of dilutive potential ordinary shares
-
-
-

Earnings for the purposes of diluted earnings per share
636
792
1,552






No.
No.
No.
Number of shares



Weighted average number of ordinary shares for the purposes of basic earnings per share
31,116,420
28,750,000
28,750,000
Effect of dilutive potential ordinary shares



Share options
1,368,600
1,043,764
1,015,223

Weighted average number of ordinary shares for the purposes of diluted earnings per share
32,485,020
29,793,764
29,765,223

3. GOODWILL

000s
Cost

At 1 January 2015*
7,282
Arising on acquisition of subsidiary*
374

At 30 June 2015**
7,656


000s
Cost

At 1 January 2015*
7,282
Arising on acquisition of subsidiary*
374
Revaluation of provisional values in accordance with IFRS 3*
(168)

At 31 December 2015*
7,488
Arising on acquisition of subsidiaries**
17,720

At 30 June 2016**
25,208

Accumulated impairment losses

1 January 2015*, 30 June 2015**, 31 December 2015* and 30 June 2016**
-

Net book value

At 30 June 2016**
25,208

At 30 June 2015**
7,656

At 31 December 2015*
7,488

* Audited
** Unaudited
The goodwill at 1 January 2015 related to the acquisitions of Ergomed Virtuoso Sarl on 30 September 2013 and PrimeVigilance Limited and its subsidiaries on 15 July 2014.
The goodwill arising during the period ended 30 June 2015 relates to the acquisition of Sound Opinion Limited on 26 May 2015.
The goodwill arising during the period ended 30 June 2016 relates to the acquisitions of Haemostatix Ltd on 24 May 2016 (see note 7) and Oestreich + Partner GmbH ('O+P') and Gesellschaft fr angewandte Statistik + Datenanalyse mbH ('GASD') on 12June 2016 (see note 8).
4. TRADE AND OTHER RECEIVABLES

Unaudited
30 June 2016
000s
Unaudited
30 June 2015
000s
Audited
31 December 2015
000s




Trade receivables
8,358
4,383
6,412
Amounts receivable from related parties
-
33
-
Other receivables
485
302
381
Prepayments
483
306
376
Accrued income
2,774
1,416
1,989
Corporation tax receivable
222
56
370


12,322
6,496
9,528

5. INVENTORY

Unaudited
30 June 2016
000s
Unaudited
30 June 2015
000s
Audited
31 December 2015
000s




Clinical trial material
67
-
-

6. TRADE AND OTHER PAYABLES

Unaudited
30 June 2016
000s
Unaudited
30 June 2015
000s
Audited
31 December 2015
000s




Trade creditors
3,148
2,390
2,381
Amounts payable to related parties
29
11
71
Social security and other taxes
389
251
374
Other payables
432
381
381
Accruals
3,135
2,072
2,748


7,133
5,105
5,955

7. ACQUISITION OF SUBSIDIARY - HAEMOSTATIX LIMITED
On 24 May 2016, Ergomed Plc acquired 100 per cent of the issued share capital of Haemostatix, a research and development company based in Nottingham, UK developing novel products for the surgical bleeding market. The acquisition of Haemostatix enhances Ergomed's portfolio of development products with the potential to generate significant shareholder value.

Provisional
valuation

000s


Property, Plant and Equipment
4

Total non-current assets
4

Trade and other debtors
114
Cash and equivalents
62

Current assets
176

Trade and other creditors
(1,366)

Net financial liabilities
(1,190)

Total identifiable net liabilities
(1,186)
Goodwill
16,763

Total consideration
15,577

Satisfied by:

Cash
800
Equity
6,181
Deferred consideration
8,596

Total consideration
15,577

Net cash outflow arising on acquisition

Cash consideration
800
Less: cash and cash equivalent balances acquired
(62)
Transaction costs (note 9)
269


1,007

The provisional fair value of the financial assets includes receivables with a fair value of 114,000 and a gross contractual value of 114,000. The best estimate at acquisition date of the contractual cash flows not to be collected is nil.
Goodwill is provisionally valued at 16,763,000 which arises from the excess of purchase price of 15,577,000 over net liabilities 1,186,000 and is attributable to the development portfolio of the company. None of the goodwill is expected to be deductible for income tax purposes. Deferred consideration represents the provisional fair valuation of the additional consideration payable, subject to the future performance of the business.
Owing to the limited time between acquisition and the presentation of these interim results, there has been insufficient time to complete an external valuation exercise. Accordingly, the amounts presented as goodwill represent the excess consideration above the value of net liabilities and a full fair value exercise of identifiable assets acquired and liabilities assumed will be performed within the measurement period which ends on 23 May 2017.
It is intended that an updated acquisition note showing any amendments arising from the valuation exercise will be included in the audited financial statements for the year ended 31 December 2016. Ergomed plc has a 12 month measurement period from the date of acquisition, and therefore the final results will be included in the financial statements for the year ended 31 December 2017.
As a research and development company, Haemostatix Limited is investing in its development portfolio and does not currently generate revenues. If the acquisition of Haemostatix had been completed on the first day of the financial year, group revenues for the six months ended 30 June 2016 would have been unchanged and group profit would have been 1,493,000 lower.
8. ACQUISITION OF SUBSIDIARY - O+P and GASD
On 12 June 2016, Ergomed acquired 100 per cent of the issued share capital of Oestreich + Partner GmbH ("O+P") and of Gesellschaft fur angewandte Statistik + Datenanalyse mbH ("GASD"). O+P is a long established contract research organization based in Cologne, Germany and GASD is a specialist data management and biostatistics company. The acquisition of O+P and GASD brings, among other things, a proprietary electronic data capture system and specialist biostatics expertise which can be deployed across the Ergomed global platform.
O+P and GASD were acquired as a single unit. The amounts provisionally recognised in relation to both entities in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.

Provisional
valuation

000s


Property, Plant and Equipment
23

Total non-current assets
23

Trade and other debtors
91
Accrued income
71
Corporation Tax receivable
6
Cash and equivalents
464

Current assets
632

Trade and other creditors
(184)
Tax payable
(2)

Financial liabilities
(186)

Total identifiable net assets
469
Goodwill
957

Total consideration
1,426

Satisfied by:

Cash
802
Equity
190
Deferred consideration
434

Total consideration
1,426

Net cash inflow arising on acquisition

Cash consideration
802
Less: cash and cash equivalent balances acquired
(464)
Transaction expenses (note 9)
73


411

The provisional fair value of the financial assets includes receivables with a fair value of 91,000 and a gross contractual value of 91,000. The best estimate at acquisition date of the contractual cash flows not to be collected is nil.
Goodwill is provisionally valued at 957,000 which arises from the excess of purchase price of 1,426,000 over net assets of 469,000 and is attributable to the broadened customer base and enhanced offering of the Ergomed group following the acquisition. None of the goodwill is expected to be deductible for income tax purposes.
Deferred consideration represents the provisional fair valuation of the additional consideration payable, subject to the future performance of the business.
Owing to the limited time between acquisition and the presentation of these interim results, there has been insufficient time to complete an external valuation exercise. Accordingly, the amounts presented as goodwill represent the excess consideration above net asset value and a full fair value exercise of identifiable assets acquired and liabilities assumed will be performed within the measurement period which ends on 12 June 2017.
It is intended that an updated acquisition note showing any amendments arising from the valuation exercise will be included in the audited financial statements for the year ended 31 December 2016. Ergomed plc has a 12 month measurement period from the date of acquisition, and therefore the final results will be included in the financial statements for the year ended 31 December 2017.
If the acquisition of O+P and GASD had been completed on the first day of the financial year, group revenues for the six months ended 30 June 2016 would have been 381,000 higher and group profit would have been 134,000 lower.
9. M&A COSTS

Unaudited
Six months
ended
30 June 2016
Unaudited
Six months ended
30 June 2015
Audited
Year
ended
31 December 2015

000s
000s
000s




Acquisition of Haemostatix (note 7)
269
-
-
Acquisition of O+P & GASD (note 8)
73
-
-
Acquisition of Sound Opinion
7
54
54
Other M&A activity
3
71
218


352
125
272

10. EXCEPTIONAL ITEMS

Unaudited
Six months
ended
30 June 2016
Unaudited
Six months ended
30 June 2015
Audited
Year
ended
31 December 2015

000s
000s
000s




Establishment of Taiwan office
-
37
37


-
37
37

In line with the way the Board and chief operating decision makers review the business, large one-off exceptional costs are separately identified and shown as exceptional costs. In the first half of 2015, these are directly related to the establishment of operations in Taipei, Taiwan.
11. EBITDA

Unaudited
Six months 
ended
30 June 2016
Unaudited
Six months 
ended
30 June 2015
Audited
Year 
ended
31 December 2015

'000s
'000s
'000s




Operating profit
819
1,057
2,072




Adjust for:



Depreciation and amortisation charges within Administrative expenses
103
42
117
Amortisation of acquired intangible assets
307
286
596

EBITDA
1,229
1,385
2,785
Share-based payment charge
204
133
288
M&A Costs
352
125
272
Exceptional items
-
37
37
R&D activity (Haemostatix)
102
-
-

Adjusted EBITDA
1,887
1,680
3,382


This information is provided by RNS
The company news service from the London Stock Exchange
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