Ergomed Preliminary Results 2021
29/03/2022 07:00
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RNS Number : 3137G Ergomed plc 29 March 2022
PRESS RELEASE
Audited Full Year Results for the year ended 31 December 2021
Excellent financial results delivered through strategic execution
Strategic positioning across global markets creates strengthened platform for
growth
· Revenue £118.6 million up 37.3%
· Adjusted EBITDA £25.4 million up 31.2%
· Forward visibility underpinned by strong order book of £239.7
million up 24.2%
· Further strengthening of US strategic presence with US revenues up
59.5%
· Year-end net cash balance of £31.2 million up 64.5%
Guildford, UK - 29 March 2022: 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 audited Full Year Results
for the year ended 31 December 2021.
Selected Financial Highlights
Full Full % change
Year Year
2021 2020
Figures in £ millions, unless otherwise stated
Total Revenue 118.6 86.4 37.3
Service Fee Revenue 100.0 78.4 27.6
Like-for-like Service Fee Revenue (Note 1) 87.3 77.8 12.2
Gross Profit 48.4 39.7 22.0
Gross Margin (%) 40.8% 45.9% -5.1 ppts
Adjusted EBITDA (Note 2) 25.4 19.4 31.2
Net cash at 31 December 31.2 19.0 64.5
Order book at 31 December 239.7 193.0 24.2
Basic adjusted earnings per share (pence) (Note 3) 41.1p 25.8p 59.3
Notes:
(1) Like-for-like Service Fee revenue excludes 2021 revenues of £12.7 million
and 2020 revenues of £0.6 million in MS Clinical Services, LLC and its
subsidiaries ('MedSource') acquired on 11 December 2020.
(2) Adjusted EBITDA is defined as operating profit for the period plus
depreciation and amortisation, share-based payment charge, acquisition related
consideration and costs, less in 2020 only one-off receipts comprising a prior
year R&D tax credit and Serbian employment growth grants (Note 9 to the
financial statements).
(3) Basic adjusted earnings per share is defined as earnings per share after
adjustment for items referred to in Note 8 to the financial statements.
Dr Miroslav Reljanović, Executive Chairman of Ergomed, said: "We have
delivered another outstanding year operationally and financially, with results
ahead of market expectations. The strength of our position in key markets was
demonstrated by further significant organic growth and augmented by our latest
successfully integrated acquisitions, particularly in the US. Our robust order
book, track record of delivery, and the clear demand for our offering in a
growing market create a strong platform for organic growth and for geographic
and service expansion through M&A. We remain extremely confident in
Ergomed's future as a leading global provider of specialised pharmaceutical
services."
Key Financial Highlights
· Revenue of £118.6 million (2020: £86.4 million) increased by
37.3% (up 44.3% in constant currency)
‒ Revenue growth in pharmacovigilance (PV) up 9.9% (up 14.2% in
constant currency) to £60.5 million (2020: £55.1 million)
‒ Revenue growth in Clinical Research Services (CRO) up 85.5% (up
97.3% in constant currency) to £58.1million (2020: £31.3 million) and up
26.2% (up 33.2% in constant currency) to £38.1 million on a like-for-like
basis excluding the acquisition of MedSource
· Gross profit up 22.0% to £48.4 million (2020: £39.7 million)
· Adjusted EBITDA up 31.2% to £25.4 million (2020: £19.4 million)
· Basic adjusted EPS up 59.3% to 41.1p (2020: 25.8p)
· Cash and cash equivalents up 64.5% to £31.2 million at 31
December 2021 (31 December 2020: £19.0 million) with operating cash flow of
£22.3 million, equivalent to 87.8% of adjusted EBITDA
· Order book of £239.7 million future contracted revenue up 24.2%
at 31 December 2021 (31 December 2020: £193.0 million)
Key Operational & Strategic Highlights
· New subsidiaries opened in a number of European countries and
Japan
· US revenue growth of 59.5% over prior year (71.0% in constant
currency) and significant new senior hires, strengthening platform for further
growth in a key strategic market
· Continued expansion in emerging markets, with Asia revenue growth
up 79.5% over prior year
· Successfully integrated, ahead of schedule, MS Clinical Services,
LLC and its subsidiaries ('MedSource'), acquired in December 2020
· Continued to demonstrate resilience during COVID-19, now emerging
strongly from the pandemic
Post-Period End Highlights
· In February 2022, acquired ADAMAS, a leading global regulatory
compliance provider, immediately accretive to earnings and adding a
complementary offering to the Group
· In March 2022, appointed John Dawson CBE to the Board as
independent Non-Executive Director and Chair of the Audit Committee
Conference call for analysts:
A conference call for analysts will be held at 9:30am BST on 29 March 2022.
Conference call details:
Conference call registration:
https://cossprereg.btci.com/prereg/key.process?key=PQWCQV766
(https://cossprereg.btci.com/prereg/key.process?key=PQWCQV766)
Webcast link:
https://www.lsegissuerservices.com/spark/Ergomed/events/2439d37e-026f-48ef-ae6f-94d9ac2cc89f
(https://www.lsegissuerservices.com/spark/Ergomed/events/2439d37e-026f-48ef-ae6f-94d9ac2cc89f)
Enquiries:
Ergomed plc Tel: +44 (0) 1483 402 975
Miroslav Reljanović (Executive Chairman)
Richard Barfield (Chief Financial Officer)
Keith Byrne (Senior Vice President, Capital Markets & Strategy)
Numis Tel: +44 (0) 20 7260 1000
Freddie Barnfield / Euan Brown (Nominated Adviser)
James Black (Broker)
Peel Hunt (Joint Broker) Tel: +44 (0) 20 7418 8852
James Steel / Dr. Christopher Golden
Consilium Strategic Communications Tel: +44 (0) 20 3709 5700
Chris Gardner / Angela Gray ergomed@consilium-comms.com
Matthew Neal
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
(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 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.
Executive Chairman's Statement
ROBUST EXECUTION OF STRATEGY, DELIVERING EXCELLENT RESULTS
Ergomed delivered an outstanding year both operationally and financially, with
results ahead of market expectations. Notwithstanding the pandemic, the Group
delivered significant organic growth demonstrating the strength of our
positioning in our key markets and this was augmented by the contribution of
our latest successfully integrated acquisitions, particularly in the US.
In 2021, we delivered a year of robust operational execution, achieving
significant organic revenue growth whilst maintaining tight cost controls. We
also substantially increased our order book with a strong sales performance in
all parts of the business and benefited significantly from our expanded
geographic presence, with new subsidiaries opened during the year in a number
of European countries and in Japan. The integration of the US businesses,
Ashfield Pharmacovigilance and MedSource, acquired in 2020, was successfully
completed ahead of schedule, enhancing our US platform and related sales
opportunities. We strengthened our Board and leadership team with the
appointments of acknowledged pharmaceutical industry experts to key roles,
augmenting the scale and value of our service offering to our clients. Our
employee base increased all around the world, and the commitment and
professionalism of all our colleagues shone through as one of the core
strengths of our business.
Strong financial results from operational execution
Our exceptional operational execution throughout 2021 delivered excellent
financial results. Revenues for 2021 of £118.6 million were up 37% over prior
year (44% in constant currency), exceeding market expectations despite
continuing FX headwinds. The 31% increase in adjusted EBITDA to £25.4m was
also ahead of market expectations, reflecting tight control of costs and the
benefits of successfully integrating the acquisitions made in 2020 ahead of
schedule. The Group remained debt free at the year end, with cash and
equivalent balances up 64% to £31.2 million (2020: £19.0 million) and
unutilised bank facilities of £30.0 million. Following a strong sales
performance throughout 2021, we finished the year with our order book of
future contracted revenue at £239.7 million, up 24.2% from the beginning of
the year. This robust trading performance, coupled with operational execution,
positions us strongly to achieve our strategic objectives in 2022 and beyond,
and further strengthens our financial platform, enabling us to leverage the
accelerating recovery in our target markets.
Strategic delivery
Ergomed continues to deliver on its core strategic objectives of growing its
sales and revenues in specialised pharmaceutical services and geographic
expansion. These goals are being achieved organically through increasing sales
to new and existing clients, through excellent operational execution and
through the opening of new offices in several countries. Our strategic
objectives are also being achieved through the successful execution of our
acquisition strategy. With the rapid integration of acquisitions and focussed
commercial initiatives in our CRO and PV businesses, as well as investment in
business development and operational infrastructure, we are delivering a
growing order book of contracted long-term future revenues as well as
preparing for further organic and M&A growth.
Revenues grew 37% in the year (44% in constant currency), continuing the trend
of a compound annual revenue growth rate (CAGR) of over 25% since the Group's
IPO in 2014. Revenues in the key strategic market of the US grew 59% over the
prior year on a reported basis (71% on a constant currency basis).
We are also continuing our investments in infrastructure, technology and
digital transformation, with enhanced technology solutions to achieve
significant automation over the coming years in our PV business and virtual
trial capabilities in our CRO business. These solutions are expected to build
on Ergomed's leadership position with specialised service offerings to our
international client base, as well as providing further potential for
profitability improvement.
Acquisition strategy
During the year, we continued to execute on our disciplined M&A strategy.
This is focussed on value-enhancing and strategic acquisitions which
strengthen our position as a premium pharmaceutical services business, whilst
further building our scale in the strategically important US, Europe and APAC
regions.
In 2021, we completed the integration of the two strategic acquisitions closed
in the prior year in the key US market: Ashfield Pharmacovigilance, a
long-established and highly respected provider of pharmacovigilance services,
and MedSource, a specialist provider of oncology and rare disease CRO
services. These two acquisitions in the US have strengthened our strategic
market presence, significantly increased our headcount and expanded our
revenues in the region, which grew by 59% on a reported basis (71% in constant
currency).
In July 2021, following a successful first phase of the integration focussed
on business development and branding, we agreed with the former MedSource
owners to accelerate the earn-out terms, enabling the full integration of all
CRO activities in North America under Ergomed management, and realising fully
and ahead of schedule the benefit of a wider CRO operational base in North
America. These acquisitions are expected to provide further growth and
development potential within the key CRO and PV sectors in the US and
globally.
In February 2022, we acquired ADAMAS Consulting Group Limited. ADAMAS is a
well-established, leading provider of mission-critical regulatory compliance
and consulting services to the global pharmaceutical industry offering a full
range of independent quality assurance services and specialising in the
auditing of pharmaceutical manufacturing processes, as well as auditing
clinical trials and pharmacovigilance systems. ADAMAS has over 100 currently
active clients and has worked with over 700 pharmaceutical companies including
40 of the 50 largest global pharma and biotech companies.
This acquisition adds a new complementary offering, strengthens Ergomed's
premium consulting services and bolsters our position as a specialised
pharmaceutical services provider. It will further enhance Ergomed's global
reach in the US, Europe and APAC, and is expected to be immediately accretive
to Ergomed's future earnings, with further growth synergies and strategic
benefits expected in future years.
These recent acquisitions align with Ergomed's strategy to secure M&A
transactions that further enhance the Group's global presence and broaden our
service offering to clients. The Board continues to actively consider further
acquisition opportunities that will complement and strengthen the existing CRO
and PV service offerings and provide access to new customers and geographies.
Board changes
During the year, we made significant new additions to Ergomed's Board of
Directors, further strengthening our platform to develop the business
internationally in the broader pharmaceutical services market.
Dr Llew Keltner joined the Board in April 2021 as an independent Non-Executive
Director. Dr Keltner has an outstanding track record in the global life
sciences industry and brings over 30 years of experience, having held senior
positions both in industry and academia with a particular focus on oncology
and rare diseases.
Mark Enyedy joined the Board in June 2021 as an independent Non-Executive
Director. Mr Enyedy is currently President and Chief Executive Officer and a
Director of ImmunoGen, Inc., a NASDAQ-listed biotechnology company. Mr Enyedy
has extensive corporate development experience in the US, UK and globally and
is a member of the Board of Directors of the Biotechnology Innovation
Organization (BIO), the world's largest advocacy organisation representing the
biotechnology industry in the US and globally.
The appointments of Dr Keltner and Mr Enyedy are fully aligned with our
strategy to develop our commercial and corporate presence in the USA as we
continue to build our global specialist leadership position.
Post-period end, we announced that John Dawson, CBE has joined the Ergomed
Board as an independent Non-Executive Director and Chair of the Audit
Committee. Mr Dawson is a highly experienced and globally respected figure in
the healthcare sector and was most recently Chief Executive Officer of Oxford
Biomedica plc, widely recognised for the successful delivery at unprecedented
speed of the Oxford/AstraZeneca COVID-19 vaccine. Mr Dawson's wealth of
international experience in the healthcare industry and expert knowledge of
the life sciences sector will be invaluable as the Group continues to grow.
Ian Johnson left the Board in April 2021, followed by Rolf Soderstrom in
September 2021, to pursue other business interests. We thank them both for
their service to Ergomed and we wish them well in all their future endeavours.
Leadership and staff
In 2021, we continued to execute our strategy to further strengthen the
leadership team across all sections of the business as Ergomed continued to
establish its status as an employer of choice for leaders in the
pharmaceutical services sector. We were pleased to welcome to Ergomed and
PrimeVigilance a number of senior executives with significant prior experience
in the CRO, PV and pharma services sectors across a range of disciplines and
specialisms, including our therapeutic focus areas of oncology and rare
disease; global project management; strategy and drug development; medical
affairs; and quality assurance. We have continued to make key new senior
appointments in the current year, further augmenting our leadership and
expertise. Alongside our existing strong team, these new hires will enhance
the quality, speed and professionalism of our service delivery to our clients,
as the scale and complexity of our global services continue to expand.
There has been continued strong growth in the number of colleagues working for
Ergomed businesses around the world. During the year, the number of employees
grew by 225 from 1,146 to 1,371, an increase of 20%. Following the year end,
this growth in employment has continued, both on an organic basis and because
of the acquisition of ADAMAS Consulting Group Limited.
We are delighted to welcome all our new colleagues to the Ergomed Group. These
additions to our global team reflect the growing strength and ambition of our
business, adding to our high-quality professional experience and bolstering
Ergomed's growth potential.
Summary
Our successful operational execution in 2021 and the resulting strong
financial performance reflect the dedication and commitment of all our
colleagues as well as the robustness of our business model, as we continued to
deliver growth through a period impacted by the pandemic. I would like to
express my sincere gratitude to all Ergomed colleagues around the globe for
their outstanding contribution during 2021, and I would like to thank our
investors for their continued support.
Our robust order book, track record of delivery and the clear demand for our
offering in a growing market creates an exceptionally strong platform for
organic growth and continued geographic and service expansion through M&A
during 2022. We remain extremely confident in Ergomed's future as a leading
global provider of pharmaceutical services.
Miroslav Reljanović
Executive Chairman
29 March 2022
Operational Review
Despite the ongoing challenges of the COVID-19 pandemic, Ergomed demonstrated
resilience and maintained its momentum in 2021. The Group has begun 2022 from
a position of strength, with a robust financial platform and a proven growth
strategy, ensuring that we are well-positioned to achieve the longer-term
strategic priorities of the business.
PHARMACOVIGILANCE
Regulatory context
The increasing global requirement for pharmacovigilance ("PV") services
coupled with a perpetual drive to improve drug safety through regulation
continue to drive the transition towards specialist outsourced PV providers
and general market growth.
In Europe, the implementation of Good Pharmacovigilance Practice (GVP) in 2012
and subsequent mandatory compliance has led to an increased demand for
outsourced PV services and has been a consistent driver for Ergomed's growth.
In the US, the existing stringent PV regulatory regime continues to be
regularly strengthened on an ongoing basis. Similarly, PV regulation continues
to be rolled out in China and South East Asia, providing further growth
opportunities for PrimeVigilance, Ergomed's PV business.
Financial performance
Organic growth in PrimeVigilance saw revenues increase by £5.4 million from
£55.1 million in 2020 to £60.5 million in 2021 (9.9% increase, 14.2% on a
constant currency basis). Gross margins continued to be strong for the PV
business at 50.9% in 2021.
Management and staff
The business continued to invest in its employees to support its geographical
expansion, with over 350 employees being promoted during the year.
PrimeVigilance employs around 60 physicians, 650 pharmacists and other life
sciences professionals and 30 in-house EU/ UK Qualified Persons for
Pharmacovigilance ('QPPVs') covering more than 60 countries. This constitutes
one of the largest qualified teams of PV specialist professionals in any
independent pharmaceutical services business globally and it continues to
grow.
The breadth and depth of staff and professionals supporting PrimeVigilance is
reflected in the quality of services provided. Testament to this is
PrimeVigilance's high customer renewal and retention figures and the fact that
PrimeVigilance participated in over 180 regulatory inspections and audits,
representing a more than 53% increase compared to the previous year.
Technology investment
During the year, PrimeVigilance strengthened its partnerships with its key
technology vendors, upgrading its case management and signal detection systems
and deploying more regulatory gateways.
New legal entity and regional office established in Japan
PrimeVigilance Japan KK is based in Tokyo and offers a comprehensive range of
pharmacovigilance services, including a dedicated Japanese safety database.
Full Japanese language Medical Information services are also provided.
The office was established in response to increasing client demand and
provides existing and prospective international PrimeVigilance clients the
opportunity to extend their product coverage into the strategically important
Japanese pharmaceutical market, the fourth largest globally after the US, the
EU and China. It also provides PrimeVigilance the opportunity to provide high
quality specialist services to domestic Japanese companies.
Constantly evolving regulations, geographic expansion, investment in
technology and people, combined with the strength of the PrimeVigilance brand,
mean that our pharmacovigilance business is well placed to continue delivering
its growth strategy into 2022 and beyond.
CLINICAL RESEARCH SERVICES (CRO)
The CRO market has experienced significant expansion with strong annual growth
in oncology and rare disease research expected to continue over the coming
years. This specific growth in Ergomed's core focus areas is underpinned by
broader market trends, including increased investment in drug development by
pharma-biotech companies, a shift towards clinical trial outsourcing and
strong growth in the number of trials in markets such as Asia.
Financial performance
CRO total revenues, including MedSource, increased by £26.8 million from
£31.3 million in 2020 to £58.1 million in 2021 (85.5% increase, 97.3% on a
constant currency basis). Excluding MedSource, the CRO divisional revenue
increased by £7.9 million from £30.2 million in 2020 to £38.1 million in
2021 (26.2% increase, 33.2% on a constant currency basis).
Rare disease and oncology focus
Ergomed's CRO business works across all therapeutic areas, as a specialist
provider of clinical trial services with a particular strength in patient
recruitment in oncology and rare disease trials.
Oncology trials are generally complex, although this varies with the type of
cancer, and studies are often confronted by challenges including low patient
enrolment, changing regulatory requirements, increased research costs and
trial protocols with increased study-related procedures. This helps to explain
why oncology trials receive the highest levels of funding and makes the case
for outsourcing to CROs which are better positioned to address these
challenges. Ergomed's expertise and focus on oncology supports its CRO growth
strategy and is evidenced by the fact that over 90% of new business wins in
2021 related to oncology and rare disease, where similarly specialist
expertise is also required.
Rare disease development is one of the fastest growing areas of drug
development, accounting for approximately 30% of compounds in development.
Ergomed has continued to strengthen relationships with biopharmaceutical
sponsor companies, patient advocacy groups, technology innovators and service
providers to accelerate rare disease drug development.
Patient and clinician focus
Ergomed's focus on rare and orphan drug development is one of its core
strengths. Drug development for rare and orphan diseases is challenging for
many reasons, including complex biology, limited knowledge of the history and
progression of the disease and the inherently small patient population
available for clinical trials, who are usually geographically dispersed.
Ergomed's focus on physician support teams helps ensure efficient patient
recruitment, patient retention and clinical trial management of complex
studies.
In addition, rare diseases are frequently misdiagnosed or undiagnosed. Many
rare diseases also impact infants and young children and more than 50% of rare
disease patients are children. Ergomed adopts a patient-centric approach,
working closely with patient advocacy groups throughout development to fully
understand patient and caregiver needs. Greater patient engagement optimises
clinical study design, outcome measures and endpoint development and Ergomed
maintains a Patient Organisation Advisory Board, comprising representatives of
patient groups in the field of rare diseases with a dedicated Patient
Engagement Officer.
COVID-19
Although the pandemic continued to disrupt the CRO market during 2021,
Ergomed's CRO business demonstrated continued robustness and resilience.
Clinical trials in rare disease and oncology, sectors in which Ergomed
specialises, are focused on critical unmet clinical needs and were therefore
among the therapeutic areas least disrupted by COVID-19.
Restrictions on movement and patient access accelerated the trend towards
remote monitoring, an area which Ergomed was already leading. During the
pandemic, Ergomed successfully implemented remote and risk-based monitoring
techniques, allowing clinical trial activities to continue even when physical
access to sites was not possible.
For early phase studies, where frequent and timely monitoring of safety and
tolerability is required, Ergomed implemented patient profile software that
provides a holistic view of each patient in an interactive and real-time
environment. In addition, study physicians supported trial investigators in
patient identification and procedures resulting in consistent patient
recruitment and milestone achievement.
Business development and commercial integration
A strong business development performance in 2021 resulted in net awards
increasing by 40.3% to £165.3 million (2020: £117.8 million). Key to new
contract wins in both CRO and PV services was Ergomed's broader geographic
footprint arising from expansion into the USA and Asia. As a result, the order
book increased to £239.7 million at the year end, up 24.2% over the course of
2021.
Outlook
Ergomed made excellent progress in delivering its strategy in 2021, despite
the challenges of the COVID-19 pandemic. The resilience and robustness of our
global services business was demonstrated by our continued strong organic
growth in both our pharmacovigilance and CRO businesses.
We have started 2022 in a strong position and post-year end completed the
acquisition of ADAMAS, an international specialist consultancy offering a full
range of independent quality assurance services and specialising in the
auditing of pharmacovigilance systems. The acquisition broadens our service
offering and supports our vision to achieve global leadership in specialised
pharmaceutical services addressing unmet medical needs and patient safety.
For and on behalf of the Board of Directors
Miroslav Reljanović
Executive Chairman
29 March 2022
Financial Review
Firmly positioned to trade strongly into improving markets
Ergomed delivered another strong financial performance in 2021, exceeding
market expectations. The Group's complementary CRO and PV divisions have
demonstrated considerable resilience throughout the pandemic and are emerging
in an even stronger position.
The Group ended the 2021 financial year in a robust financial position, and
this has continued into the beginning of 2022. With continuing strong sales in
the second half of 2021 building on the new awards success achieved in the
first half, the closing order book was at a record high level at 31 December
2021, underpinning visibility for the achievement of management's revenue
growth targets for 2022 and beyond. The rapid integration of MedSource, which
was completed ahead of schedule, substantially expanded and accelerated our
access to a larger client base with significantly enhanced potential for
cross-selling. The Group's strong balance sheet comprises net assets of £67
million, up more than a quarter on the prior year. Our strong cash conversion
and working capital base, with substantial unutilised bank facilities
available, provide support for organic investment and growth in future years,
as well as enabling us to continue our disciplined M&A strategy.
Post-period end, the acquisition of ADAMAS Consulting Group Limited is
expected to be immediately accretive to Ergomed's future earnings, with the
potential for further growth synergies. Ergomed is well positioned for further
organic growth and strategic M&A and expects to continue to trade strongly
into growing global pharmaceutical research and development markets.
KPIs and APMs
Key Performance Indicators (KPIs)
The table below summarises the KPIs that management uses to measure the
financial performance of the Group.
£ millions (unless otherwise stated) 2021 2020
Total revenue 118.6 86.4
CRO 58.1 31.3
PV 60.5 55.1
Gross profit 48.4 39.7
Gross margin 40.8% 45.9%
EBITDA 19.7 18.4
Adjusted EBITDA 25.4 19.4
Basic adjusted earnings per share 41.1p 25.8p
Cash generated from operations 22.3 19.0
Cash and cash equivalents 31.2 19.0
Order book 239.7 193.0
Alternative performance measures (APMs)
In measuring and reporting financial information, management reviews
Alternative Performance Measures (APMs), such as EBITDA, adjusted EBITDA and
basic adjusted earnings per share, which are not defined measures under
financial reporting standards. Management believes that these measures, when
considered in conjunction with defined financial reporting measures, provide
management and stakeholders with a broader understanding of the performance of
the business.
Operating profit is the financial reporting measure under IFRS most comparable
to EBITDA and adjusted EBITDA. The Directors make certain adjustments to
EBITDA to derive adjusted EBITDA, which they consider more reflective of the
Group's underlying trading performance, enabling comparisons to be made with
prior periods. Certain items, such as share-based payments and changes in fair
value of contingent consideration for acquisitions are non-cash items and
reflect adjustments to expected future consideration payments.
In 2021, management also reviewed performance monthly on a constant currency
basis. Constant currency is calculated by restating 2021 performance using
2020 exchange rates for the relevant period. Constant currency allows
management to review underlying performance without the impact of foreign
exchange.
Operating profit is reconciled to EBITDA and adjusted EBITDA as follows:
2021 2020
£000's £000's
Operating profit 14,624 13,534
Adjusted for:
Depreciation and amortisation charges within 'Other selling, general & 3,447 3.511
administration expenses'
Amortisation of acquired fair valued intangible assets 1,599 1,332
EBITDA 19,670 18,377
Adjusted for:
Share-based payment charge 817 742
RDEC income (2017) - (527)
Employment creation grants - Serbia - (307)
Acquisition costs 1,776 853
Earn-out consideration 2,949
Pay in lieu and non-compete compensation 211 232
Adjusted EBITDA 25,423 19,370
Earn-out consideration relates to the cash component of deferred consideration
paid on an accelerated basis to the sellers of MedSource, under the terms of
the purchase agreement. These costs, together with acquisition costs, pay in
lieu and non-compete compensation are cash costs but are not considered as
normal recurring trading items and therefore are not included in adjusted
EBITDA. 2017 RDEC income and grants received were not considered as normal
recurring income items and therefore were not included in adjusted EBITDA.
Adjusted basic earnings per share is calculated on a similar basis to basic
earnings per share but uses a profit measure which, like adjusted EBITDA, is
adjusted for non-recurring trading items (see note 9 of the financial
statements).
Management has previously used order book, (referred to in prior years as
contracted order backlog) as an APM. Order book is the contracted value of
customer revenue relating to in-progress performance obligations which are
expected to be recognised in the future. The use of order book by management
is no longer considered to be an APM as, from 1 January 2018, it is now a
defined financial measure under IFRS 15 and is therefore included in KPIs.
Growth
The strong trading performance seen in Ergomed's complementary Clinical
Research Services (CRO) and Pharmacovigilance (PV) businesses during the first
half of 2021 continued through to the year end. This has resulted in a strong
order book going into 2022, providing significant visibility for the upcoming
period.
Revenues for 2021 were £118.6 million on a reported basis, an increase of
37.3% over prior year (2020: £86.4 million), exceeding market expectations
despite continuing FX headwinds. On a constant currency basis revenues were
£124.7 million, an increase of 44.3% over 2020.
The CRO division, including MedSource acquired in December 2020, saw total
revenue increase by 85.5% from £31.3 million in 2020 to £58.1 million in
2021 (up 9734% in constant currency). Excluding MedSource, the CRO division
revenue increased by 26.2% from £30.2 million in 2020 to £38.1 million in
2021 on a reported basis and by 32.7% to £40.2 million on a constant currency
basis.
The PV division saw revenues increase by 9.9% overall to £60.5 million (2020:
£55.1 million) on a reported basis and by 14.2% to £62.9 million on a
constant currency basis.
The reported 37.3% revenue growth and effective cost management delivered an
increase in gross profit from £39.7 million in 2020 to £48.4 million in
2021. The Ergomed CRO business represented a higher proportion of total
revenues in 2022 than in 2021, whilst its service fee gross margin at 46.1% on
a constant currency basis remained at the same level as in the prior year
(2020: 46.3%) despite FX headwinds. However, higher levels of pass-through
revenues across the CRO division arising from the rapid growth of our US
business caused gross margin on total CRO revenues to decline overall. In
PrimeVigilance, service fee gross margin in 2020 at 52.5% was lifted by
increased case numbers due to COVID-19 and returned to normal levels in 2021
at 51.2%. As a result of these factors, overall gross margin reduced from
45.9% in 2020 to 40.8% in 2021.
Effective cost management resulted in selling, general and administration
expense falling from 28.5% of revenue in 2020 at £24.6 million in 2020 to
23.4% of revenue at £27.7m in 2020.
The strong revenue growth, continued focus on profitability and effective cost
control in 2021 resulted in adjusted EBITDA for 2021 of £25.4 million, an
increase of 31.2% over the prior year (2020: £19.4 million).
Financial strength
The growth in revenue and profitability achieved during 2021 led to strong
cash generation at an operating level. Cash generated from operations was
£22.3 million, an increase of £3.3 million over the prior year (2020: £19.0
million).
The Group's balance sheet continued to strengthen. Cash and cash equivalents
increased by £12.2 million to £31.2 million (2020: £19.0 million) and the
Group was debt free at the year end. This was after cash payments of £2.9
million in August 2021 relating to the earn-out consideration payments for
MedSource acquired in December 2020, following its accelerated integration
ahead of schedule.
As a result of this and the generation of distributable reserves, the
consolidated retained earnings account of the Group stood at £59.1million at
the end of 2021 an increase of £13.7 million over the retained earnings of
£45.4 million reported in 2020.
Ergomed plc has a strong balance sheet with net assets at 31 December 2021 of
£67.2 million up 27.2% on prior year (2020: £52.9 million) and total assets
of £106.0 million (2020: £92.3 million).
Outlook
With a robust business model and strong execution, Ergomed is emerging
strongly from the challenging environment of the COVID-19 pandemic. Trading in
the current year is in line with the Board's expectations. The Group is well
positioned in the resilient and fast-growing rare disease, oncology and
pharmacovigilance sectors and has a strong financial foundation through which
it can grow in these global markets.
Richard Barfield
Chief Financial Officer
29 March 2022
Consolidated income statement
For the year ended 31 December 2021
Notes 2021 2020
£000s £000s
Revenue 2, 3 118,581 86,391
Cost of sales (52,191) (38,686)
Reimbursable expenses (18,028) (8,055)
Gross profit 3 48,362 39,650
Selling, general and administration expenses (34,877) (27,518)
Selling, general and administration expenses comprises:
Other selling, general and administration expenses (27,736) (24,591)
Amortisation of acquired fair valued intangible assets (1,599) (1,332)
Share-based payment charge (817) (742)
Contingent consideration for acquisitions 4 (2,949) -
Acquisition costs 5 (1,776) (853)
Research and development expenses (130) (152)
Net impairment losses on trade receivables and contract assets (324) (285)
Other operating income 6 1,593 1,839
Operating profit 14,624 13,534
Finance income 1 8
Change in fair value of equity investments - (511)
Finance costs 7 (361) (403)
Profit before taxation 14,264 12,628
Income tax expense (1,590) (2,946)
Profit for the year 12,674 9,682
All activities in the current and prior period relate to continuing
operations.
The notes on pages 16 to 22 form an integral part of these financial
statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Notes 2021 2020
£000s £000s
Profit for the year 12,674 9,682
Items that may be classified subsequently to profit or loss:
Exchange differences on translation of foreign operations (682) (59)
Other comprehensive (expense) for the year net of tax (682) (59)
Total comprehensive income for the year 11,992 9,623
2021 2020
pence pence
Earnings Per Share (EPS) 8
Basic 26.1 20.0
Diluted 25.1 19.2
Unaudited
2021 2020
£000's £000's
ADJUSTED EBITDA 9 25,423 19,370
(Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation)
2021 2020
pence pence
Adjusted Earnings Per Share (Adjusted EPS) 8
Basic 41.1 25.8
Diluted 39.4 24.7
Profit or loss and each component of other comprehensive income are
attributable to the owners of the Company.
The notes on pages 16 to 22 form an integral part of these financial
statements.
Consolidated balance sheet
As at 31 December 2021
Notes 2021 2020
£000s £000s
Non-current assets
Goodwill 10 23,903 24,605
Other intangible assets 11 7,653 9,618
Property, plant and equipment 1,966 1,742
Right-of-use assets 2,691 4,715
Equity investments - -
Deferred tax asset 9,433 4,898
45,646 45,578
Current assets
Trade and other receivables 12 25,143 22,224
Accrued revenue 3,958 5,553
Cash and cash equivalents 13 31,243 18,994
60,344 46,771
Total assets 105,990 92,349
Current liabilities
Lease liabilities (1,249) (1,978)
Trade and other payables 14 (15,207) (15,702)
Deferred consideration 4 - (328)
Deferred revenue (17,752) (13,829)
Current tax liability (1,172) (1,775)
(35,380) (33,612)
Net current assets 24,964 13,159
Non-current liabilities
Lease liabilities (1,432) (3,128)
Provisions (19) (317)
Deferred tax liability (1,920) (2,426)
(3,371) (5,871)
Total liabilities (38,751) (39,483)
Net assets 67,239 52,866
Equity
Share capital 15 493 489
Share premium account 545 3
Merger reserve 1,349 1,349
Share-based payment reserve 5,859 5,042
Translation reserve (67) 615
Retained earnings 59,060 45,368
Total equity 67,239 52,866
The notes on pages 16 to 22 form an integral part of these financial
statements.
Approved by the Board of Directors and authorised for issue on 29 March 2022.
Richard Barfield
Chief Financial Officer
Company Registration No. 04081094
Consolidated statement of changes in equity
For the year ended 31 December 2021
Notes Share Share Merger Share- Translation Retained Total equity
capital premium reserve based reserve earnings £000s
£000s account £000s payment £000s £000s
£000s reserve
£000s
Balance at 1 January 2020 473 25,790 11,088 4,300 674 (5,505) 36,820
Profit for the year - - - - - 9,682 9,682
Other comprehensive income for the year - - - (59) - (59)
Total comprehensive income - - - - (59) 9,682 9,623
Transactions with shareholders
Shares issued during the year for cash 15 14 1,855 - - - - 1,869
Share-based payment charge for the year - - - 742 - - 742
Deferred tax credit taken directly to equity - - - - - 2,461 2,461
Shares issued for non-cash consideration 2 - 1,349 - - - 1,351
Transactions with shareholders - capital reduction
Capitalisation of Merger reserve to B Ordinary Shares 11,088 - (11,088) - - - -
Cancellation of B Ordinary Shares (11,088) - - - - 11,088 -
Cancellation of Share Premium - (27,642) - - - 27,642 -
Total transactions with shareholders 16 (25,787) (9,739) 742 - 41,191 6,423
Balance at 31 December 2020 489 3 1,349 5,042 615 45,368 52,866
Profit for the year - - - - - 12,674 12,674
Other comprehensive income for the year - - - - (682) - (682)
Total comprehensive income (682) 12,674 11,992
Transactions with shareholders
Shares issued during the year for cash 15 4 542 - - - - 546
Share-based payment charge for the year - - - 817 - - 817
Deferred tax credit taken directly to equity - 1,018 1,018
Total transactions with shareholders 4 542 - 817 - 1,018 2,381
Balance at 31 December 2021 493 545 1,349 5,859 (67) 59,060 67,239
The notes on pages 16 to 22 form an integral part of these financial
statements.
Consolidated cash flow statement
For the year ended 31 December 2021
Notes 2021 2020
£000s £000s
Cash flows from operating activities
Profit before taxation 14,264 12,628
Adjustment for:
Amortisation and depreciation 5,046 4,843
(Profit) / Loss on disposal of non-current assets (413) 16
Share-based payment charge 817 742
Change in the fair value of equity investments - 511
RDEC income 6 (956) (1,188)
Finance costs 7 361 403
Other non-cash movements (25) (8)
Exceptional Items (Earn-out on acquisitions) 4 2,949 -
Operating cash inflow before changes in working capital and provisions 22,043 17,947
Increase in trade, other receivables and accrued revenue 367 (6,137)
Increase in trade, other payables and deferred revenue 217 7,182
Decrease in provisions (298) (18)
Cash generated from operating activities 22,329 18,974
Taxation (paid) (3,646) (926)
Net cash inflow from operating activities 18,683 18,048
Investing activities
Finance income received 1 8
Acquisition of intangible assets 11 (30) (542)
Acquisition of property, plant and equipment (953) (432)
Proceeds from the sale of property, plant and equipment 103 46
Proceeds on the disposal of equity investments - 175
Acquisition of subsidiaries, net of cash acquired - (12,031)
Acquisition related earn-out paid (3,267) -
Net cash outflow from investing activities (4,146) (12,776)
Financing activities
Proceeds from the issue of new ordinary shares 15 546 1,869
Finance costs paid (169) (157)
Proceeds from borrowings - 15,000
Repayment of borrowings - (15,000)
Payment of lease liabilities (2,490) (2,189)
Net cash outflow from financing activities (2,113) (477)
Net change in cash and cash equivalents 12,424 4,795
Effect of foreign currency on cash balances (175) (60)
Cash and cash equivalents at start of year 18,994 14,259
Cash and cash equivalents at end of year 13 31,243 18,994
The notes on pages 16 to 22 form an integral part of these financial
statements.
Notes to the financial statements
For the year ended 31 December 2021
1. Basis of preparation
The consolidated financial statements of the Group have been prepared on the
going concern basis in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, the IFRS
Interpretations Committee ('IFRS-IC') interpretations and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on a historical cost
basis except that the following assets and liabilities are stated at their
fair value: certain financial assets and financial liabilities measured at
fair value, and liabilities for cash-settled share‑based payments.
The same accounting policies, presentation and methods of computation have
been followed in these condensed financial statements as were applied in the
preparation of the Group's financial statements for the year ended 31 December
2021.
The financial statements for 2020 have been delivered to the Registrar of
Companies and the 2021 financial statements will be delivered after the Annual
General Meeting.
The Auditor has reported on both sets of accounts without qualification, did
not draw attention to any matters by way of emphasis without qualifying their
report, and did not issue a statement under Section 498(2) or 498(3) of the
Companies Act 2006.
Going concern
The financial statements have been prepared on the going concern basis, which
assumes that the Group and Company 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 of signing of the financial statements. The
Directors have reviewed a cash flow forecast for the period to 31 December
2024, which is derived from the 2022 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 2022 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 2022 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 of approval of the financial statements.
Because of the above factors and, having made appropriate enquiries, the
Directors have a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing these financial statements.
2. Revenue
The Group's revenue is disaggregated by geographical market and major service
lines:
Geographical market and major service lines
2021
Major service lines
CRO PV Total
£000s £000s £000s
Geographical market by client location
UK 5,415 8,785 14,200
Rest of Europe, Middle East and Africa 9,585 12,981 22,566
North America 38,388 36,028 74,416
Asia 4,687 2,532 7,219
Australia 2 178 180
58,077 60,504 118,581
2020
Major service lines
CRO PV Total
£000s £000s £000s
Geographical market by client location
UK 3,589 8,590 12,179
Rest of Europe, Middle East and Africa 10,146 13,183 23,329
North America 15,828 30,836 46,664
Asia 1,753 2,269 4,022
Australia - 197 197
31,316 55,075 86,391
3. Operating segments
Products and services from which reportable segments derive their revenues
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.
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.
2021
CRO PV Consolidated
£000s £000s total
£000s
Segment revenues 58,077 60,504 118,581
Cost of sales (22,906) (29,285) (52,191)
Reimbursable expenses (17,621) (407) (18,028)
Segment gross profit 17,550 30,812 48,362
Selling, general and administration expenses (34,877)
Selling, general and administration expenses comprises:
Other selling, general and administration expenses (27,736)
Amortisation of acquired fair valued intangible assets (1,599)
Share-based payment charge (817)
Contingent consideration for acquisitions (2,949)
Acquisition costs (1,776)
Exceptional items
Research and development expenses (130)
Net impairment of trade receivables and contract assets (324)
Other operating income 1,593
Operating profit 14,624
Finance income 1
Change in fair value of equity investments -
Finance costs (361)
Profit before tax 14,264
2020
CRO PV Consolidated
£000s £000s total
£000s
Segment revenues 31,316 55,075 86,391
Cost of sales (12,737) (25,949) (38,686)
Reimbursable expenses (7,584) (471) (8,055)
Segment gross profit 10,995 28,655 39,650
Selling, general and administration expenses (27,518)
Selling, general and administration expenses comprises:
Other selling, general and administration expenses (24,591)
Amortisation of acquired fair valued intangible assets (1,332)
Share-based payment charge (742)
Acquisition costs (853)
Exceptional items -
Research and development expenses (152)
Net impairment of trade receivables and contract assets (285)
Other operating income 1,839
Operating profit 13,534
Finance income 8
Change in fair value of equity investments (511)
Finance costs (403)
Profit before tax 12,628
4. Contingent consideration for acquisitions
Where contingent consideration is deemed to be employment related the cost is
recognised in the income statement as an employment related cost over the
period which it is earned. Contingent consideration not classified on the
remuneration basis is reported as acquisition consideration.
Contingent and deferred consideration recognised at the point of acquisition
are included as a financial liability. Financial assets and liabilities are
subsequently measured at fair value through the profit and loss.
Contingent consideration in relation to MS Clinical Services LLC was valued at
£nil at the date of acquisition and as at 31 December 2020.
To facilitate the full integration of MS Clinical Services, LLC the management
of the Company and MedSource agreed a revised earn-out and settlement
agreement on 23 July 2021. The revised earn-out and settlement agreement gave
rise to a charge to the profit and loss of £2,949,000 ($3,800,000).
Contingent consideration charged to profit and loss
2021 2020
£000s £000s
Contingent Consideration for acquisitions - MedSource 2,949 -
Deferred consideration payable
Group Company
2021 2020 2021 2020
£000s £000s £000s £000s
Due within one year:
MedSource - 328 - -
- 328 - -
The deferred consideration payable for MS Clinical Services, LLC and its
subsidiaries ('MedSource') of £328,000 was due upon the verification of the
net assets acquired by the Group at the acquisition date and was settled in
cash during 2021.
5. Acquisition costs
2021 2020
£000s £000s
Acquisition of Ashfield Pharmacovigilance - 14
Acquisition of MedSource (note 16) 406 825
Acquisition of ADAMAS (note 17) 240 -
Aborted and other acquisition costs 1,130 14
1,776 853
In line with company strategy, Ergomed has considered a number of potential
acquisitions in 2021. Costs of £406,000 were incurred in relation to the
acquisition of MedSource in 2021 (2020: £825,000) and £240,000 were incurred
in 2021 in relation to the acquisition of ADAMAS which completed on 9 February
2022. Ergomed incurred costs of £1,130,000 in relation to aborted
acquisitions.
6. Other operating income
Research and Development Expenditure Credit ('RDEC')
The Group is eligible, within the UK, to claim tax credits against certain
R&D expenditure under the Research and Development Expenditure Credit
('RDEC') scheme. During the year, the Group submitted claims in respect of the
2019 and 2020 financial years and recognised the related profit and loss
charge within other operating income in the current financial year.
2021 2020
£000s £000s
Foreign grant income 629 574
RDEC income 956 1,188
Other income 8 77
1,593 1,839
7. Finance costs
2021 2020
£000s £000s
Loan and other interest payable 170 158
Interest on lease liabilities 191 245
361 403
8. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings
2021 2020
£000s £000s
Profit for the purposes of earnings per share - net profit attributable to 12,674 9,682
owners of the Company
Adjust for:
Amortisation of acquired fair valued intangible assets (note 11) 1,605 1,332
Share-based payment charge 817 742
Acquisition-related contingent consideration (note 4) 2,949 -
Acquisition costs (note 5) 1,776 853
Pay in lieu and non-compete compensation 211 232
Change in fair value of equity investments - 511
RDEC income (2017) - (527)
Employment creation grants - Serbia - (307)
Tax effect of adjusting items (102) (41)
Adjusted earnings for the purposes of adjusted earnings per share (unaudited) 19,930 12,477
Number of shares
2021 2020
Number
Number
Weighted average number of Ordinary Shares for the purposes of basic earnings 48,466,740 48,323,814
per share
Incremental shares in respect of employee share schemes 2,102,588 2,176,170
Weighted average number of Ordinary Shares for the purposes of diluted 50,569,328 50,499,984
earnings per share
Earnings per share (EPS)
2021 2020
pence
pence
Basic 26.1 20.0
Diluted 25.1 19.2
Adjusted earnings per share (Adjusted EPS)
Unaudited 2021 2020
pence
pence
Basic 41.1 25.8
Diluted 39.4 24.7
9. EBITDA and Adjusted EBITDA
Unaudited 2021 2020
£000's £000's
Operating profit 14,624 13,534
Adjusted for:
Depreciation and amortisation charges within selling, general & 3,447 3,511
administration expenses
Amortisation of acquired fair valued intangible assets 1,599 1,332
EBITDA 19,670 18,377
Adjusted for:
Share-based payment charge 817 742
Acquisition related contingent compensation (note 4) 2,949 -
RDEC income - (527)
Employment creation grants - Serbia - (307)
Acquisition costs (note 5) `1,776 853
Pay in lieu and non-compete compensation 211 232
Adjusted EBITDA 25,423 19,370
10. Goodwill
Goodwill £000s
Cost
At 1 January 2020 15,523
Arising on business combinations 11,261
Translation movement (36)
At 31 December 2020 26,748
Fair value adjustment arising on business combinations (477)
Translation movement (225)
At 31 December 2021 26,046
Impairment losses
At 1 January 2020 and 2021 2,143
At 31 December 2020 and 2021 2,143
Net book value
At 31 December 2021 23,903
At 31 December 2020 24,605
The fair value adjustment arising on business combinations during the year
ended 31 December 2021 relates to the acquisitions of MS Clinical Services,
LLC ('MedSource') (note 17).
Goodwill acquired in a business combination is allocated, at acquisition, to
the cash-generating units ('CGUs') that are expected to benefit from that
business combination. The carrying amount of goodwill has been allocated as
follows:
Cash-generating unit 2021 2020
£000s £000s
CRO 10,190 10,859
PV 13,713 13,746
23,903 24,605
11. Other intangible assets
Software Customer Customer Brands In-process Technology Total
£000s contracts relationships £000s R&D £000s £000s
£000s £000s £000s
Cost
At 1 January 2020 3,478 1,258 3,395 817 15,200 419 24,567
Acquisitions through business combinations - 1,739 6,075 916 - - 8,730
Additions 542 - - - - - 542
Translation movement 120 (23) (149) (11) - - (63)
At 31 December 2020 4,140 2,974 9,321 1,722 15,200 419 33,776
IFRS3 Revaluation - 90 240 38 - - 368
Additions 30 - - - - - 30
Disposals (211) - - - - - (211)
Translation movement (7) 6 2 (21) - - (20)
At 31 December 2021 3,952 3,070 9,563 1,739 15,200 419 33,943
Amortisation
At 1 January 2020 1,675 1,258 2,826 434 15,200 419 21,812
Charge for the year 934 553 675 104 - - 2,266
Translation movement 42 - 33 5 - - 80
At 31 December 2020 2,651 1,811 3,534 543 15,200 419 24,158
Charge for the year 577 425 906 267 - - 2,175
Translation movement (6) (5) (20) (12) - - (43)
At 31 December 2021 3,222 2,231 4,420 798 15,200 419 26,290
Net book value
At 31 December 2021 730 839 5,143 941 - - 7,653
At 31 December 2020 1,489 1,163 5,787 1,179 - - 9,618
12. Trade and other receivables
2021 2020
£000s £000s
Trade receivables 20,234 19,079
Other receivables 869 1,241
Prepayments 1,818 1,482
Corporation tax receivable 2,222 422
25,143 22,224
13. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term deposits.
2021 2020
£000s £000s
Cash at bank 31,243 18,994
Cash net of borrowings 31,243 18,994
The carrying amount of cash and cash equivalents approximates to their fair
value at the reporting date and are denominated in the following currencies:
2021 2020
£000s £000s
GBP 15,083 1,598
Euro 3,118 5,732
USD 11,757 10,213
Other 1,285 1,451
31,243 18,994
14. Trade and other payables
2021 2020
£000s £000s
Trade payables 3,102 4,197
Amounts payable to related parties 3 55
Social security and other taxes 1,302 1,112
Other payables 1,802 1,295
Customer advances 47 408
Accruals 8,951 8,635
15,207 15,702
Customer advances relate to deposits made by customers as security over future
services and third-party costs incurred in relation to those services.
15. Ordinary share capital
Group and Company
2021 2020
Number £000s Number £000s
Ordinary shares of £0.01 each
At 1 January 48,719,526 487 47,286,289 473
Exercise of share options 418,545 4 1,433,237 14
Shares to be issued for non-cash consideration 155,558 2 155,558 2
At 31 December 49,263,629 493 48,875,084 489
16. Acquisition of subsidiary - MedSource
On 11 December 2020, the Group acquired all of the issued share capital in MS
Clinical Services, LLC, MedSource UK Ltd and MS Clinical Services (Canada)
Inc. ('MedSource'") for $16,200,000 in cash, adjusted for net debt, and paid
at the closing of the transaction, with further consideration of $1,800,000
payable in Ergomed plc equity issued at a price based on the average daily
closing price for 30 days preceding the acquisition (155,558 shares at a price
of £8.76) upon the satisfaction of certain representations and warranties.
In order to facilitate the full integration of all CRO activities under the
Ergomed CRO brand and management, and fully realise the benefit of a wider CRO
operational base in North America before the originally planned and
anticipated earn-out and handover period at the end of 2021, the management of
the Company and MedSource agreed a revised earn-out and settlement agreement
on 23 July 2021. The revised earn-out and settlement agreement gave rise to
final payments totaling £2,949,000 ($3,800,000) in 2021 (note 4).
MedSource is a full-service CRO with a focus on complex diseases and study
designs. The acquisition greatly expands the geographical presence of
Ergomed's CRO service offering in the US whilst complementing the current
business specialism in oncology and rare disease.
Book Fair Final
value value valuation
£000s adjustments £000s
£000s
Intangible assets 475 6,072 6,547
Property, plant and equipment 89 - 89
Right-of-use assets - 131 131
Deferred tax asset - 3,393 3,393
Total non-current assets 564 9,596 10,160
Trade and other receivables 3,062 - 3,062
Cash and cash equivalents 4,346 - 4,346
Current assets 7,408 - 7,408
Trade and other payables (2,348) - (2,348)
Lease liability - (131) (131)
Deferred Revenue (6,528) (3,208) (9,736)
Deferred tax liability - (1,683) (1,683)
Financial liabilities (8,876) (5,022) (13,898)
Total identifiable net assets (904) 4,574 3,670
Goodwill 6,773
Total consideration 10,443
Satisfied by:
Cash 9,092
Equity 1,351
Total consideration 10,443
Net cash outflow arising on acquisition
Cash consideration 8,764
Less: cash and cash equivalent balances acquired (4,346)
Add: deferred consideration 328
Add: Earn-Out and settlement agreement 2,949
Transaction expenses 1,231
8,926
The fair value of intangible assets relates to customer relationships of
£4,317,000, brand of £954,000 and contracted order book of £1,276,000. The
Group incurred acquisition related costs of £825,000 related to due diligence
and legal activities in the year ended 31 December 2020 and £406,000 in the
period to 31 December 2021. These costs have been included in acquisition
costs within selling and administrative expenses in the Group's consolidated
income statement.
The Company has a 12-month measurement period from the date of acquisition and
the measurement period ended on 11 December 2021.
17. Post-year end acquisition of subsidiary - ADAMAS
On 9 February 2022, the Group acquired all the issued share capital in ADAMAS
Consulting Group Limited. 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
million 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. The subsidiary acquisition was post-year end
and has not contributed to the consolidated profit of the Group for the year
ended 31 December 2021.
Ergomed plc has a 12-month measurement period from the date of acquisition
ending on 9(th) February 2023.
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