REG - Ergomed plc - Half-year Report <Origin Href="QuoteRef">ERGO.L</Origin> - Part 2
26/09/2016 07:06
- Part 2: For the preceding part double click ID:nRSZ7528Ka
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:
UnauditedSix monthsended30 June 2016£000s UnauditedSix monthsended30 June 2015£000s AuditedYearended31 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 für angewandte Statistik + Datenanalyse
mbH ('GASD') on 12June 2016 (see note 8).
4. TRADE AND OTHER RECEIVABLES
Unaudited30 June 2016£000s Unaudited30 June 2015£000s Audited31 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
Unaudited30 June 2016£000s Unaudited30 June 2015£000s Audited31 December 2015£000s
Clinical trial material 67 - -
6. TRADE AND OTHER PAYABLES
Unaudited30 June 2016£000s Unaudited30 June 2015£000s Audited31 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.
Provisionalvaluation
£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.
Provisionalvaluation
£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
UnauditedSix months ended30 June 2016 UnauditedSix months ended30 June 2015 AuditedYearended31 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
UnauditedSix months ended30 June 2016 UnauditedSix months ended30 June 2015 AuditedYearended31 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
UnauditedSix months ended30 June 2016 UnauditedSix months ended30 June 2015 AuditedYear ended31 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
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