REG - Ergomed plc - Unaudited Preliminary Results for 2016 <Origin Href="QuoteRef">ERGO.L</Origin> - Part 2
28/03/2017 07:06
- Part 2: For the preceding part double click ID:nRSb6771Aa
Revenue
Third party sales 25,777 13,456 - 39,233
Intersegment sales and recharges 670 2 (672) -
Total revenue 26,447 13,458 (672) 39,233
2016 CRS£000s DS&MI£000s Eliminations£000s Consolidatedtotal£000s
Segment result 203 3,586 9 3,798
Research and development (1,040)
Amortisation of acquired fair valued intangible assets (771)
Share-based payment charge (398)
Deferred consideration for acquisition (690)
Write back of deferred consideration for acquisition 460
Acquisition costs (584)
Exceptional items (177)
Operating profit 598
Investment revenues 2
Finance costs (274)
Profit before tax 326
Tax 153
Profit after tax 479
2015 CRS£000s DS&MI£000s Eliminations£000s Consolidatedtotal£000s
Revenue
Third party sales 21,906 8,272 - 30,178
Intersegment sales and recharges 67 9 (76) -
Total revenue 21,973 8,281 (76) 30,178
2015 CRS£000s DS&MI£000s Eliminations£000s Consolidatedtotal£000s
Segment result 1,165 2,102 (2) 3,265
Amortisation of acquired fair valued intangible assets (596)
Share-based payment charge (288)
Acquisition costs (272)
Exceptional items (37)
Operating profit 2,072
Investment revenues 1
Finance costs (1)
Profit before tax 2,072
Tax (520)
Profit after tax 1,552
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Segment profit represents the profit earned by each
segment. This is the measure reported to the Group's Chief Executive Officer
for the purpose of resource allocation and assessment of segment performance.
Segment net assets
2016£000s 2015£000s
CRS 16,489 5,913
DS&MI 18,119 11,023
Consolidated total net assets 34,608 16,936
For the purposes of monitoring segment performance and allocating resources
between segments, the Group's Chief Executive Officer monitors the tangible,
intangible and financial assets attributable to each segment. All assets are
allocated to reportable segments.
Other segment information
Depreciation andamortisation Additions tonon-current assets
2016£000s 2015£000s 2016£000s 2015£000s
CRS 528 286 705 238
DS&MI 499 427 404 317
1,027 713 1,109 555
Information about major customers
In 2016, the Group had two customers that contributed 10% or more to the
Group's revenue. Revenues of approximately £5,479,000 and £4,771,000 were
recognised from these customers respectively for clinical research services.
In 2015, the Group had two customers that contributed 10% or more to the
Group's revenue. Revenues of approximately £5,219,000 and £5,181,000 were
recognised from these customers respectively.
3. FINANCE COSTS
2016£000s 2015£000s
Interest payable (2) (1)
Finance charge for deferred consideration for acquisition (272) -
(274) (1)
4. TAXATION
2016£000s 2015£000s
Current tax
UK corporation tax (credit)/charge for the year (181) 349
Overseas corporation tax 180 308
Adjustment in respect of prior years (16) 13
Current tax (credit)/charge (17) 670
Deferred tax
Origination and reversal of timing differences (40) (143)
Effect of changes in tax rates (96) (7)
Tax (credit)/charge on profit (153) 520
The UK corporation tax credit for the year comprises an R&D tax credit.
In addition to the amounts charged to the income statement and other
comprehensive income, the following amounts have been recognised directly in
equity:
2016£000s 2015£000s
Deferred tax
Change in estimated excess tax deductions related to share-based payments (118) (1)
Total income tax credit recognised directly in equity (118) (1)
5. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the
following data:
2016£'000 2015£'000
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the Company 479 1,552
Effect of dilutive potential ordinary shares - -
Earnings for the purposes of diluted earnings per share 479 1,552
2016No. 2015No.
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share 35,573,733 28,750,000
Effect of dilutive potential ordinary shares
Share options 1,484,600 1,015,223
Weighted average number of ordinary shares for the purposes of diluted earnings per share 37,058,333 29,765,223
6. ACQUISITION OF SUBSIDIARY - HAEMOSTATIX
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. The amounts provisionally
recognised in respect of the identifiable assets acquired and liabilities
assumed are as set out in the table below.
Bookvaluation Fair value adjustments Provisionalvaluation
£000s £000s £000s
Intangible assets - 15,200 15,200
Property, plant and equipment 4 - 4
Deferred tax asset - 1,015 1,015
Total non-current assets 4 16,215 16,219
Trade and other debtors 164 - 164
Clinical trial inventory 45 - 45
Cash and equivalents 63 - 63
Current assets 272 - 272
Trade and other creditors (1,365) - (1,365)
Deferred tax liability - (2,736) (2,736)
Financial liabilities (1,365) (2,736) (4,101)
Total identifiable net assets/(liabilities) (1,089) 13,479 12,390
Goodwill 15,565 (13,479) 2,086
Total consideration 14,476 - 14,476
Satisfied by:
Cash 800 - 800
Equity 6,181 - 6,181
Deferred consideration 7,495 - 7,495
Total consideration 14,476 - 14,476
Net cash outflow arising on acquisition
Cash consideration 800 - 800
Less: cash and cash equivalent balances acquired (63) - (63)
Transaction costs (note 8) 370 - 370
1,107 - 1,107
The provisional fair value of intangible assets relates to the in-process
research and development of PeproStat and ReadyFlow. The provisional fair
value of the financial assets includes receivables with a fair value of
£164,000 and a gross contractual value of £164,000. The best estimate at
acquisition date of the contractual cash flows not to be collected is £nil.
Goodwill is provisionally valued at £2,086,000. None of the goodwill is
expected to be deductible for income tax purposes. Deferred consideration
represents the fair valuation of the additional consideration payable which
could be an aggregate maximum of £20,000,000, subject to the future
performance of the business.
Ergomed plc has a 12 month measurement period from the date of acquisition,
and therefore the measurement period ends on 23 May 2017.
As a research and development company, Haemostatix 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 year ended 31 December 2016 would have
been unchanged and group profit before tax would have been £1,082,000 lower.
7. ACQUISITION OF SUBSIDIARY - O+P and GASD
On 12 June 2016, Ergomed acquired 100 per cent of the issued share capital of
O+P and GASD. O+P is a long established contract research organisation 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.
Bookvaluation Fair value adjustments Provisionalvaluation
£000s £000s £000s
Intangible assets - 615 615
Property, plant and equipment 23 - 23
Total non-current assets 23 615 638
Trade and other debtors 91 - 91
Accrued income 71 - 71
Corporation Tax receivable 6 - 6
Cash and equivalents 498 - 498
Current assets 666 - 666
Trade and other creditors (218) - (218)
Tax payable (2) - (2)
Deferred tax - (164) (164)
Financial liabilities (220) (164) (384)
Total identifiable net assets 469 451 920
Goodwill 938 (451) 487
Total consideration 1,407 - 1,407
Satisfied by:
Cash 802 - 802
Equity 190 - 190
Deferred consideration 415 - 415
Total consideration 1,407 - 1,407
Net cash inflow arising on acquisition
Cash consideration 802 - 802
Less: cash and cash equivalent balances acquired (498) - (498)
Transaction expenses (note 8) 85 - 85
389 - 389
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 £487,000 and is attributable to the
synergies and the 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.
Ergomed plc has a 12 month measurement period from the date of acquisition,
and therefore the measurement period ends on 11 June 2017.
If the acquisition of O+P and GASD had been completed on the first day of the
financial year, group revenues for the year ended 31 December 2016 would have
been £381,000 higher and group profit before tax would have been £134,000
lower.
8. ACQUISITION OF SUBSIDIARY - PHARMINVENT
On 28 November 2016, Ergomed acquired 100 per cent of the issued share capital
of PharmInvent. PharmInvent offers a comprehensive range of pharmacovigilance
and regulatory services to over 100 clients in the global pharmaceutical
industry. Pharmacovigilance services include an outsourced global network of
95 Qualified Persons for Pharmacovigilance (QPPVs) in 50 countries, case
management, risk management, audit, training and consulting services on the
establishment and maintenance of pharmacovigilance systems. Regulatory
services include strategic advice on regulatory strategy, clinical trial and
protocol design and medical writing of regulatory submissions.
The amounts provisionally recognised in respect of the identifiable assets
acquired and liabilities assumed are as set out in the table below.
Bookvaluation Fair value adjustments Provisionalvaluation
£000s £000s £000s
Intangible assets - 1,291 1,291
Property, plant and equipment 161 - 161
Total non-current assets 161 1,291 1,452
Trade and other debtors 786 - 786
Cash and equivalents 252 - 252
Current assets 1,038 - 1,038
Trade and other creditors (300) - (300)
Tax payable (45) - (45)
Deferred tax liability - (245) (245)
Financial liabilities (345) (245) (590)
Total identifiable net assets 854 1,046 1,900
Goodwill 3,270 (1,046) 2,224
Total consideration 4,124 - 4,124
Satisfied by:
Cash 3,299 - 3,299
Equity 825 - 825
Total consideration 4,124 - 4,124
Net cash inflow arising on acquisition
Cash consideration 3,299 - 3,299
Less: cash and cash equivalent balances acquired (252) - (252)
Transaction expenses (note 8) 118 - 118
3,165 - 3,165
The provisional fair value of the financial assets includes receivables with a
fair value of £786,000 and a gross contractual value of £786,000. The best
estimate at acquisition date of the contractual cash flows not to be collected
is £nil.
Goodwill is provisionally valued at £2,224,000 and is attributable to the
enhanced offering of the Ergomed group following the acquisition. None of the
goodwill is expected to be deductible for income tax purposes.
In addition to the consideration identified above, deferred consideration is
payable subject to the achievement of commercial milestones and conditional
upon the continued employment of the vendors by the company. In accordance
with IFRS 3 - Business Combinations, £690,000 has been charged to the profit
and loss account in respect of deferred consideration relating to the year
ended 31 December 2016.
Ergomed plc has a 12 month measurement period from the date of acquisition,
and therefore the measurement period ends on 27 November 2017.
If the acquisition of PharmInvent had been completed on the first day of the
financial year, group revenues for the year ended 31 December 2016 would have
been £3,216,000 higher and group profit before tax would have been £593,000
higher.
9. ACQUISITION COSTS
2016£000s 2015£000s
Acquisition of Sound Opinion Limited 7 54
Acquisition of Haemostatix (note 5) 370 -
Acquisition of O+P and GASD (note 6) 85 -
Acquisition of PharmInvent (note 7) 118 -
Other M&A activities 4 218
584 272
10. EXCEPTIONAL ITEMS
2016£000s 2015£000s
Establishment of Taiwan office - 37
Establishment of PrimeVigilance U.S. office 177 -
177 37
11. RELATED PARTY TRANSACTIONS
Ergomed d.o.o., a company registered in Croatia, is under the control of Dr.
Miroslav Reljanović, who is a Director and shareholder of the Company. During
the year the Company and its subsidiaries were charged £240,000 (2015:
£160,000) by Ergomed d.o.o. and its subsidiaries in respect of clinical
research costs and other administrative services. At 31 December 2016 a
balance of £37,000 was owed by the Company and its subsidiaries to Ergomed
d.o.o. in respect of these costs (2015: £57,000). In addition, during the
year, the Group sold medical equipment to a subsidiary of Ergomed d.o.o. for
£33,000 (2015: £nil).
Chesyl Pharma Limited is a company owned by Rolf Stahel, who is a Director of
the Company. During the year, the Company was charged consultancy fees of
£52,000 (2015: £54,000) in relation to the services of Rolf Stahel. At 31
December 2016, amounts payable to Chesyl Pharma in relation to such
consultancy services and associated expenses were £12,000 (2015: £5,000).
All transactions with related parties take place on an arm's length basis.
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
12. EBITDA AND EBITDA (adjusted)
2016 2015
£'000s £'000s
Operating profit 598 2,072
Adjust for:
Depreciation and amortisation charges within Other administrative expenses 256 117
Amortisation of acquired fair valued intangible assets 771 596
EBITDA 1,625 2,785
Share-based payment charge 398 288
Deferred consideration for acquisition 690 -
Write-back of deferred consideration for acquisition (460) -
Acquisition costs 584 272
Exceptional items 177 37
EBITDA (adjusted) 3,014 3,382
13. ADJUSTED EARNINGS PER SHARE
2016£'000 2015£'000
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the Company 479 1,552
Effect of dilutive potential ordinary shares - -
Earnings for the purposes of diluted earnings per share 479 1,552
Adjust for:
Amortisation of acquired fair valued intangible assets 771 596
Share-based payment charge 398 288
Deferred consideration for acquisition 690 -
Write-back of deferred consideration for acquisition (460) -
Acquisition costs 584 272
Exceptional items 177 37
Adjusted earnings for the purposes of diluted earnings per share 2,639 2,745
ADJUSTED EARNINGS PER SHARE
Basic 7.4p 9.5p
Diluted 7.1p 9.2p
14. RESTATEMENT OF PRIOR YEAR BALANCE SHEET
In July 2014, Ergomed plc acquired the entire issued share capital of
PrimeVigilance Limited for consideration comprising £6,000,000 in cash, and
1,875,000 shares of £0.01 each, valued at £1.60 per share. The excess of share
value over the nominal value of those shares was taken to the share premium
account. However, under the Companies Act 2006, these amounts should have been
posted to the merger reserve. An adjustment has been made to the Consolidated
balance sheet as at 31 December 2014 and 31 December 2015. This adjustment has
no impact on the net assets of the Group, the Consolidated income statement or
the Consolidated cash flow statement. The impact on the Consolidated balance
sheet is set out below.
2015 Previously reported Adjustment 2015 Re-stated
£'000s £'000s £'000s
Non-current assets
Goodwill 7,488 - 7,488
Other intangible assets 2,819 - 2,819
Property, plant and equipment 335 - 335
Investments 183 - 183
Deferred tax asset 365 - 365
11,190 - 11,190
Current assets
Trade and other receivables 9,528 - 9,528
Cash and cash equivalents 3,974 - 3,974
13,502 - 13,502
Total assets 24,692 - 24,692
Current liabilities
Borrowings (5) - (5)
Trade and other payables (5,955) - (5,955)
Deferred revenue (795) - (795)
Current tax liability (478) - (478)
Total current liabilities (7,233) - (7,233)
Net current assets 6,269 - 6,269
Non-current liabilities
Borrowings (7) - (7)
Deferred tax liability (516) - (516)
Total liabilities (7,756) - (7,756)
Net assets 16,936 - 16,936
Equity
Share capital 288 - 288
Share premium account 12,342 (2,981) 9,361
Merger reserve - 2,981 2,981
Share-based payment reserve 650 - 650
Translation reserve (537) - (537)
Retained earnings 4,193 - 4,193
Total equity 16,936 - 16,936
2014Previously reported Adjustment 2014 Re-stated
£'000s £'000s £'000s
Non-current assets
Goodwill 7,282 - 7,282
Other intangible assets 2,927 - 2,927
Property, plant and equipment 185 - 185
Investments 39 - 39
Deferred tax asset 323 - 323
10,756 - 10,756
Current assets
Trade and other receivables 6,343 - 6,343
Cash and cash equivalents 4,576 - 4,576
10,919 - 10,919
Total assets 21,675 - 21,675
Current liabilities
Borrowings (7) - (7)
Trade and other payables (5,010) - (5,010)
Deferred revenue (594) - (594)
Current tax liability (144) - (144)
Total current liabilities (5,755) - (5,755)
Net current assets 5,164 - 5,164
Non-current liabilities
Borrowings (6) - (6)
Deferred tax liability (575) - (575)
Total liabilities (6,336) - (6,336)
Net assets 15,339 - 15,339
Equity
Share capital 288 - 288
Share premium account 12,342 (2,981) 9,361
Merger reserve - 2,981 2,981
Share-based payment reserve 362 - 362
Translation reserve (293) - (293)
Retained earnings 2,640 - 2,640
Total equity 15,339 - 15,339
This information is provided by RNS
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