REG - Inspiration Health - Final Results
03/05/2023 07:00
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RNS Number : 1893Y Inspiration Healthcare Group PLC 03 May 2023
3 May 2023
Inspiration Healthcare Group plc
("Inspiration Healthcare", the "Group" or the "Company")
Preliminary Unaudited Results for the year ended 31 January 2023
A Year of Significant Investment For Long Term Growth
Inspiration Healthcare Group plc (AIM: IHC), the global medical technology
company, pioneering best-in-class, specialist neonatal intensive care medical
devices, announces its preliminary results for the twelve months ended 31
January 2023 ("FY2023").
2023 Highlights
· Resilient revenues marginally ahead in a year of unprecedented
global macro-economic uncertainty
· Domestic sales growth of 13%
· Branded Products sales growth of 8%
· Major investment in new state of the art Manufacturing and
Technology Centre
o very low carbon footprint
o enhanced customer education facilities
o increased capacity and capability
o rationalisation of Group property portfolio underway
· Medical Device Regulation (EU) - Technical Files all submitted
· Increasing inventory to secure long term supply chain and meet
customer satisfaction levels
· Project Wave study recruitment complete - analysis underway
· Progressed USA regulatory submissions
· Expanded acute care portfolio with launch of additional
distributed products in the UK and Ireland
2023 Financial Highlights
· Group revenue of £41.2m (FY2022: £41.1m)
Adjusted EBITDA(1) of £4.0m (FY2022: £6.4m) reflecting a gross margin
reduction (44% vs 50%) due to product mix in different territories
· Net cash(2) £(3.8)m (FY2022: £9.3m) due to:
o investment in the Company's Manufacturing and Technology Centre;
o increased inventories to ensure continuity of supply chain and customer
service level;
o higher debtors driven by strong Q4 revenues; and
o non-recurring items particularly aborted acquisition costs
· Invoice discounting facility put in place in December 2022 -
Facility up to £5m. Total available borrowing facilities, including existing
£5m RCF, now £10m
· Proposed final dividend maintained at 0.41p per share (FY2022:
0.41p)
(1)Earnings before interest, tax, depreciation, amortisation, impairment,
share-based payments and non-recurring items
(2)Cash and cash equivalents, less revolving credit facility and invoice
finance borrowings
Post year-end
· Cash generative in Q1 FY2024
· Extension to the SLE6000 ventilator range
Neil Campbell, Chief Executive Officer of Inspiration Healthcare Group plc,
said: "Last year we showed resilience and the ability to adapt our plans to
maintain revenues despite geo-political and macro-economic uncertainty.
Although the growth in the business was not as strong as we had hoped, the
investments made during the year, coupled with increasing revenues in Q4
FY2023 and subsequent cash generation in Q1 FY2024, means the Company is well
positioned to return to growth within this year. On behalf of the Board and
all the team, I would like to thank our shareholders for their continued
support and we look forward to an exciting year ahead."
Enquiries:
Inspiration Healthcare Group plc Tel: +44 (0)330 175 0000
Neil Campbell, Chief Executive Officer
Paul Bergin, Interim Chief Financial Officer
Cenkos Securities plc (Nominated Adviser & Broker) Tel: +44 (0)207 397 8900
Stephen Keys, Katy Birkin, Dan Hodkinson
Walbrook PR Ltd (Media and Investor Relations) Tel: +44 (0)20 7933 8780 or inspirationhealthcare@walbrookpr.com
(mailto:inspirationhealthcare@walbrookpr.com)
Anna Dunphy Mob: +44 (0) 7876 741 001
Stephanie Cuthbert Mob: +44 (0) 7796 794 663
Chairman's Report
This year I am reporting on a year of significant investment and internal
achievements. Despite challenging market conditions that arose during the year
we continued to make progress to position the Company for long-term
sustainable growth.
The conflict in Ukraine and, consequently, inflation and shifting confidence
put significant pressures on healthcare budgets and spending. Coupled with
this, we have to also acknowledge that in China, the largest export market for
the Group's products in the previous year, the pandemic was still
problematic. The authorities determined that the best way to deal with this
terrible disease was further lockdowns, making trade with China more difficult
than in previous years. This also disrupted supply chains for both logistics
and materials sourced.
The Group delivered revenues that were marginally ahead of FY2022 at £41.2m
(FY2022: £41.1m), which reflected growth outside of China and Russia,
traditionally important markets for the Group. When I look back and see the
issues that were thrown at us, (along with many other companies), I am proud
that we achieved much and invested in the business to ensure that we are in
better shape now than we were a year ago.
EBITDA, before non-recurring items, was lower than the previous year at £4.0m
(FY2022: £6.4m) primarily because of sales mix and its effect on gross
margin. Notably we sold more Infusion Therapies Distributed Products into
the UK market and less Branded ventilators due to global market
uncertainties. This switch was a direct result of the external environment
mentioned above.
There was a £13.1m cash outflow in the year resulting in a closing net cash
position of £(3.8)m, driven by investment in the new Manufacturing and
Technology Centre in Croydon, an increased inventory level to ensure
continuity of supply and customer service levels and increased debtors from
strong fourth quarter revenues. Higher than planned spend at the Manufacturing
and Technology Centre was due to high construction cost inflation, an earlier
than expected payment and specification changes. These specification changes
will however deliver long-term cost savings. We delivered a positive cash flow
position in Q1 FY2024, in line with our plan.
Our new Manufacturing and Technology Centre has enabled us to close our
Crawley office at the end of January 2023, and in April 2023 we informed the
staff affected that we will be closing our Leicestershire facility. From
these closures, we will see additional operational efficiencies. We have
identified further initiatives within the business, that will improve our
cash-based operating expenses going forward.
It is important to emphasise that, although we are focused strategically on
the neonatal intensive care sector, we have always had a broad portfolio which
provides resilience to the business. This was demonstrated during the year
when slowdown in international sales was offset by increased revenues in our
Domestic market.
Investing for Growth
Our most notable investment is in our new Manufacturing and Technology Centre
in Croydon, which was the home of SLE Ltd, a company we acquired in 2020.
Maintaining the highly skilled workforce was paramount and it was important to
find a site suitable for high tech manufacturing, along with the facilities we
need as a fully integrated company (including research and development and
technology support). Now with approximately 4,200 sq metres (50% more space
than the previous Croydon site), the state-of-the-art design allows for more
efficient warehousing and laboratories for product development and testing,
along with creating a modern working environment for our employees. I am
pleased to say that we completed the move in the first half of the year with
no accidents and with only one day of lost production. The site is now fully
operational and helped us deliver a record month at the end of our financial
year.
The Manufacturing and Technology Centre has been developed with the future in
mind. We have incorporated a number of energy-saving initiatives; solar panels
on the roof help provide hot water and power to our air source heat pumps for
heating the buildings, roof lights have been maintained which allow us to use
low energy lighting and in the summer months turn off lighting altogether.
With the addition of trees and plants that produce no resins or pollens and do
not attract aphids, carbon dioxide is naturally processed within the building,
reducing the number of air changes needed and hence reducing the energy
required for heating and cooling. Numerous other initiatives have been
incorporated and we feel that this is a true demonstration of what can be
achieved by smaller British manufacturing companies.
Our employees are at the heart of the company and in addition, we have
implemented sit/stand desks throughout, modern work benches for manufacturing
and technology support, electric charging points for electric cars, open plan
break out areas for informal meetings and, of course a safe environment that
would minimise disruption in the event of another Covid-19 outbreak, with
ultra-violet and HEPA-filtered air handling alongside modern communication
facilities that allow for a true clear desk policy.
Ahead of New Regulatory Requirements
Around the end of 2022, the European Commission proposed, and subsequently
enacted, to delay the implementation of some aspects of the new Medical Device
Regulations, relieving some pressure on the Notified Bodies. The UK
Government has also postponed the introduction of regulatory legislation.
Our team has been worked hard, mainly in our Research and Development and
regulatory groups, updating our technical documentation, writing new reports
that are required by the new regulations and finally submitting all our
Technical Files to our Notified Body for their review ahead of this
deadline. It has been a huge amount of work and was completed before the
announcement of the postponement of the deadlines. However, the sooner the
files were submitted, the sooner the products would be approved to the latest
regulations, and we take comfort in knowing our technical documentation is
up-to-date. Bringing the companies together is quite a complex regulatory
challenge, aligning quality management systems to work efficiently. This has
been helped by the implementation of Trackwise Digital, our new software tool
for helping our document management compliance, which has received positive
feedback from our Notified Body.
Our market seems to be returning to normal with activity at our biggest trade
shows returning close to pre-pandemic levels. We had a strong presence at
both shows we attended enabling our international sales and marketing team to
meet distributors face-to-face for the first time, in some cases, since
pre-Covid. We have been rolling out a number of marketing initiatives around
branding, bringing more aligned messages across the three operating companies
in the Group and launched a new website that went live at the end of February
2023.
Strengthened Team
During the year we improved the management of our supply chain, with the
critical appointment of Francesca Stenhouse as Head of Procurement and Supply
Chain. This role is pivotal in working with our suppliers, including
internal and external logistics, to drive efficiencies in our business. The
year has been difficult for our suppliers and I thank them for their support
during the year. Without their assistance we would not have been able to
produce the products we did and, although we invested in component stock, our
suppliers helped with their understanding of the situation.
Jon Ballard our Chief Financial Officer, resigned during the year. On behalf
of the Board, I would like to thank Jon for his hard work over the past five
years and wish him all the very best for the future. Paul Bergin joined the
Company as Interim CFO and the recruitment for a new permanent CFO is expected
to conclude in the Summer of this year.
Our employees have endured a tough year. I can only thank them all for their
support of the company during the last 12 months and we hope that we can all
enjoy a better year ahead.
Positioned for Future Growth
Although the external disruptions to supply chain and markets remain, we have
been able to adapt to, and cope with, this new environment. We have introduced
more resilience into our supply chain and this has helped our ability to ease
our customers through these uncertain times with the robust assurance of our
quality and excellence of our life saving products.
Following a strong Q4 FY2023, the year has commenced in line with our plans.
While uncertainties remain, we are cautiously optimistic that we will return
to our usual growth patterns.
The Group's world leading expertise, broad portfolio of best-in-class,
specialist products and established customer relationships enables us to
address the critical needs of the neonatal intensive care market and help save
lives and improve outcomes of premature and sick babies around the world. We
have a clear growth strategy focused on maximising in-market sales, geographic
and portfolio expansion and strategic M&A and we believe we are well
placed to realise our long-term ambition of becoming a world leading provider
of innovative medical technology.
Mark Abrahams
Chairman
3 May 2023
Going concern basis
The Group provides essential equipment to the NHS, to private healthcare
providers and to distributors who provide the equipment to other healthcare
systems internationally. With a focus on neonatal intensive care the use of
the Group's products is not something that can be reduced by election or
choice.
Although the Group has no information to suggest such a scenario might occur,
it has modelled a significant downside scenario based on its main risks,
including a significant downturn in forecast revenue of 15%. If such a
scenario occurred, the Group would implement procedures to reduce overheads
and if necessary, utilise the remaining undrawn Invoice Discounting Facility
and Revolving Credit Facility (due for renewal June 2024).
As at 31 March 2023 net cash of the Group was (£2.0m), and there was cash
headroom of £8.0m. The Group has access to borrowing facilities of up to
£10.0m. Consequently, the Directors believe that the Group has sufficient
liquidity to meet obligations as they fall due up to the end of May 2024 and
consider it appropriate to prepare the financial statements on the going
concern basis.
Operating and Financial Review
I am pleased to report on the Group performance for the financial year ended
31 January 2023 ("FY2023").
REVENUE
Group revenue increased 0.4% to £41.2m (FY2022: £41.1m).
Group Domestic revenue increased by 13% to £19.9m (FY2022: £17.6m) primarily
driven by continuing growth in Infusion Therapies, partially offset by the
planned exiting of domestic service revenue from distributed ventilation
products. Macro-economic uncertainty, particularly in China, as well as the
geopolitical consequence of the conflict in Ukraine, resulted in International
revenue reducing overall by 9% to £21.3m (FY2022: £23.4m).
It is worth highlighting that 31% of full year revenue was generated in the
fourth quarter. This expected increase in our order inflow and subsequent
delivery of product was driven by increased Domestic and International capital
purchases, particularly of ventilators.
BRANDED PRODUCTS
Branded Products revenue grew 8% to £24.4m (FY2022: £22.5m) driven by the
fourth quarter increase in ventilator sales, referred to above, and also due
to the planned exit of distributed products following the acquisition of SLE
Ltd. This growth was despite the impact of global market uncertainty on
certain export markets.
DISTRIBUTED PRODUCTS
Distributed Products revenue was flat year-on-year at £13.6m (FY2022:
£13.6m). Continued growth in our Infusion product range was offset by the
planned exit from third-party ventilator sales. These third-party ventilators
are being replaced with SLE ventilators in the UK and Ireland, contributing to
an increase in Branded Products.
TECHNOLOGY SUPPORT
Technology Support revenue reduced 37% to £2.9m (FY2022: £4.6m). This
reduction was impacted by the planned exiting of third-party ventilators and
the Tecotherm cooling device change of service arrangements related to its end
of life. Group total revenue also includes £0.3m of freight (FY2022: £0.4m).
GROSS PROFIT
Gross profit of £18.1m was 12% lower than the prior year (FY2022: £20.6m).
With revenue broadly flat, this reflected a gross margin reduction from 50.2%
to 43.9%. This reduction was driven by the mix of products in different
territories and a lower revenue from Technology Support which is at high
margins.
OPERATING PROFIT
The Group reported Adjusted Operating Profit (before non-recurring items) of
£1.6m (FY2022: £4.3m).
Administrative expenses were broadly flat year-on-year at £16.5m (FY2022:
£16.3m), despite the highly inflationary macro-economic environment.
There were £1.2m of non-recurring items in the year (FY2022: nil), comprising
£0.5m of leased property impairment relating to the consolidation of our
property portfolio following the move to the new Manufacturing and Technology
Centre, £0.5m of aborted acquisition costs and £0.2m of other costs (see
note 4).
This resulted in an Operating profit, post non-recurring items, of £0.4m
(FY2022: £4.3m).
Adjusted EBITDA reduced to £4.0m (FY2022: £6.4m). With revenue and
administrative expenses broadly flat year-on-year, this reduction was
primarily driven by the mix of products in different territories. Adjusted
EBITDA margin reduced from 15.6% to 9.7%.
2023 2022 Change
£'000 £'000 £'000
Operating Profit 431 4,255 (3,824)
Non-recurring items 1,158 - 1,158
Adjusted Operating Profit 1,589 4,255 (2,666)
Depreciation 1,354 1,069 285
Amortisation of intangible assets 931 837 94
Impairment of right of use asset - 122 (122)
Share based payment 132 139 (7)
Adjusted EBITDA 4,006 6,422 (2,416)
Taxation
The Group has recorded a tax credit of £196,000 (FY2022: £271,000).
Earnings Per Share ("EPS")
Basic EPS and diluted EPS were 0.40p per share and 0.39p per share,
respectively (FY2022: 6.22p and 6.16p).
Adjusted basic and diluted EPS (before non-recurring items) were 2.99p and
2.95p, respectively (FY2022: 7.11p and 7.04p).
Cash Flow
Net cash (cash and cash equivalents less the Company's Revolving Credit
Facility "RCF" and invoice financing facility) was £(3.8)m as at 31 January
2023 (FY2022: £9.3m). The £13.1m decrease in the year was driven by the
investment in the new Manufacturing and Technology Centre in Croydon
(including an earlier than expected payment), increased inventory levels to
ensure continuity of supply chain and customer service level, higher debtors
due to strong fourth quarter revenues and non-recurring items.
Net cash flows used in operating activities was a £3.5m outflow (FY2022:
£3.6m inflow), with the decrease reflecting the increased working capital
level, referred to above, as well as lower profitability.
Cash outflow on investing activities was £8.3m (FY2022: £4.0m) of which
£2.0m related to capital development expenditure and the majority of the
balance to investment in the new Manufacturing and Technology Centre. There
was also £1.3m of financing outflows.
The Group has a £5m RCF in place and during December 2022 entered into an
invoice discounting facility of up to £5m. As at 31 January 2023, £4.0m of
the RCF and £2.1m of the invoice discounting facility were utilised. Total
headroom as at 31 January was £6.2m.
Net Assets
The value of non-current assets as at 31 January 2023 totalled £30.8m
(FY2022: £25.1m). The net £5.7m year-on-year increase mostly relates to
investment in the new Manufacturing and Technology Centre.
Inventory increased to £9.9m (FY2022: £6.4m) which was impacted by the need
to secure components to ensure continuity of supply chain. Trade and other
receivables increased by £2.6m to £11.9m (FY2022: £9.3m), reflecting a
planned strong fourth quarter order and revenue level. Trade and other
payables decreased by £0.8m to £5.8m (FY2022: £6.6m).
Net Assets remained flat at £35.5m as at 31 January 2023.
Dividends
The interim dividend of 0.205p per share (FY2022: 0.205p) was paid on 28
December 2022. The Board is recommending a final dividend of 0.41p per share
(FY2022: 0.41p) to make a total dividend for the year of 0.615p per share
(FY2021: 0.615p). If approved by shareholders at the AGM, the final dividend
will be paid on 28 July 2023 to shareholders on the register on 30 June 2023.
Review of Business and Future Developments
On a Group basis the business review and future prospects are set out in the
Chairman's Report above.
Share Price During the Year
The range of market prices during the year from 1 February 2022 to 31 January
2023 was 52p to 113.5p and the mid-market price of the Company's ordinary
shares at 31 January 2023 was 52p.
Neil Campbell
Chief Executive Officer
3 May 2023
Consolidated Income Statement
for the year ended 31 January 2023
2023 2023 2023 2022
Note Non-recurring items Total Total
£'000 £'000 Restated
Adjusted £'000
£'000
Revenue 2 41,233 - 41,233 41,050
Cost of sales (23,140) (23,140) (20,458)
-
Gross profit 18,093 - 18,093 20,592
Administrative expenses 4 (16,504) (1,158) (17,662) (16,337)
Operating profit 1,589 (1,158) 431 4,255
Finance income 40 - 40 9
Finance expense (395) - (395) (301)
Profit before tax 1,234 (1,158) 76 3,963
Income tax 3 196 - 196 271
Profit for the year attributable to
owners of the parent company 1,430 (1,158) 272 4,234
Earnings per share, attributable to owners of the
parent company
Basic expressed in pence per share 5 2.99p 0.40p 6.22p
Diluted expressed in pence per share 5 2.95p 0.39p 6.16p
A Prior Year Adjustment has been made in relation to Deferred Tax and
consequently, an adjustment to Income Tax has been made to the Consolidated
Income Statement for the year ended 31 January 2022. Please see Note 12 for
further detail.
Consolidated Statement of Comprehensive Income
for the year ended 31 January 2023
2023 2023 2023 2022
Non-recurring items Total Restated
£'000 £'000 £'000
Adjusted
£'000
Profit for the year 1,430 (1,158) 272 4,234
Other comprehensive income
Items that may be reclassified to profit or loss
Cash flow hedges - - - 9
Total other comprehensive income for the year - - - 9
Total comprehensive income for the year 1,430 (1,158) 272 4,243
Consolidated Statement of Financial Position
as at 31 January 2023
(Registered Number: 03587944)
2023 Restated
2022
Note £'000 £'000
Assets
Non-current assets
Intangible assets 7 17,004 15,825
Property, plant and equipment 8 7,497 1,798
Right of use assets 5,970 7,383
Deferred tax asset 11 324 87
30,795 25,093
Current assets
Inventories 9,935 6,449
Trade and other receivables 11,888 9,313
Cash and cash equivalents 9 2,276 9,253
24,099 25,015
Total assets 54,894 50,108
Liabilities
Current liabilities
Trade and other payables (5,812) (6,552)
Lease liabilities (822) (647)
Borrowings 10 (2,079) -
Contract liabilities (531) (524)
(9,244) (7,723)
Non-current liabilities
Lease liabilities (6,176) (6,896)
Borrowings 10 (4,000) -
(10,176) (6,896)
Total liabilities (19,420) (14,619)
Net assets 35,474 35,489
Shareholders' equity
Called up share capital 6,813 6,812
Share premium account 18,842 18,838
Reverse acquisition reserve (16,164) (16,164)
Share based payment reserve 405 278
Retained earnings 25,578 25,725
Total equity 35,474 35,489
A Prior Year Adjustment has been made in relation to Deferred Tax and
consequently, adjustments to Goodwill and Deferred Tax have been made in the
Consolidated Statement of Financial Position as at 31 January 2022. Please see
Note 12 for further detail.
Consolidated Statement of Changes in
Shareholders' Equity
Share
Issued Share Reverse based
share premium acquisition payment Other Retained
capital account reserve reserve Reserves earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
6,812 18,838 (16,164) 139 (9) 21,903 31,519
At 1 February 2021 (Restated)
Profit for the year (Restated) - - - - - 4,234 4,234
Cash flow hedges: - - - - 9 - 9
Income recognised on hedging instruments
Total comprehensive income for the year - - - - 9 4,234 4,243
Transactions with owners in
their capacity as owners
Dividends - - - - - (412) (412)
Employee share scheme expense - - - 139 - - 139
Total transactions with owners - - - 139 - (412) (273)
At 31 January 2022 (Restated) 6,812 18,838 (16,164) 278 - 25,725 35,489
Profit for the year - - - - - 272 272
Total comprehensive income for the year - - - - - 272 272
Transactions with owners in
their capacity as owners
Issue of ordinary shares, net of transaction costs and tax 1 4 - (5) - - -
Dividends - - - - - (419) (419)
Employee share scheme expense - - - 132 - - 132
Total transactions with owners 1 4 - 127 - (419) (287)
At 31 January 2023 6,813 18,842 (16,164) 405 - 25,578 35,474
Consolidated Cash Flow Statement
for the year ended 31 January 2023
2023 Restated
2022
Note £'000 £'000
Cash flows from operating activities
Profit for the year 272 4,234
Adjustments for:
Depreciation and amortisation 2,285 1,906
Remeasurement of leases (25) (46)
Impairment of right of use assets 446 122
Employee share scheme expense 132 139
(Profit)/Loss on disposal of tangible assets (26) 192
Loss on disposal of intangible assets 6 133
Finance income (40) (9)
Finance expense 395 301
Income tax 3 (196) (271)
3,249 6,701
(Increase)/decrease in inventories (3,486) 1,741
Increase in trade and other receivables (2,501) (4,037)
Decrease in trade and other payables (740) (266)
Increase/(Decrease) in contract liabilities 7 (9)
Cash flows (used in)/generated from operations (3,471) 4,130
Taxation paid 3 - (554)
Net cash (used in)/generated from operating activities (3,471) 3,576
Cash flows from investing activities
Bank interest received 5 1
Interest received on leases 35 8
Purchase of property, plant and equipment (6,226) (1,425)
Purchase of intangible assets 7 (140) (338)
Capitalised development costs 7 (1,976) (2,208)
Net cash used in investing activities (8,302) (3,962)
Cash flows from financing activities
Principal elements of lease payments (697) (382)
Principle elements of lease receipts 217 74
Interest paid on lease liabilities (300) (244)
Interest paid on loans and borrowings (84) (50)
Dividends paid to the holders of the parent (419) (412)
Proceeds from loans and borrowings 10 6,079 -
Net cash generated from/(used in) financing activities 4,796 (1,014)
Net decrease in cash and cash equivalents (6,977) (1,400)
Cash and cash equivalents at the beginning of the year 9,253 10,653
Cash and cash equivalents at the end of the year 2,276 9,253
Notes forming part of the Consolidated Financial Statements
1 Accounting
Policies
Inspiration Healthcare Group plc ("Company") is a public limited company
incorporated in England and Wales and domiciled in England. The Company's
registered address is Unit 2, Satellite Business Village, Crawley, West
Sussex, RH10 9NE and the registered company number is 03587944. The Company's
ordinary shares are traded on the AIM Market of the London Stock Exchange plc.
The principal activities of Inspiration Healthcare Group plc and its
subsidiaries (together, the "Group") continue to be the sale, service and
support of critical care equipment to the medical sector including hospitals.
Basis of preparation
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been consistently
applied unless otherwise stated.
The individual financial statements of each entity in the Group are presented
in the currency of the primary economic environment in which it operates (the
functional currency). The Group Financial Statements are presented in pounds
sterling, which is the presentation currency of the Group.
Alternative financial measures
In the reporting of its financial performance, the Group uses certain measures
that are not defined under IFRS, the Generally Accepted Accounting Principles
(GAAP) under which the Group reports. The Directors believe that these
non-GAAP measures assist with the understanding of the performance of the
business. These non-GAAP measures are not a substitute for, or superior to,
any IFRS measures of performance but they have been included as the Directors
consider them to be an important means of comparing performance year-on-year
and they include key measures used within the business for assessing
performance.
The Group refers to the following alternative financial measures, please refer
to the Operating and Financial Review for further information.
· Adjusted EBITDA
· Adjusted Operating Profit
· Adjusted EPS
2 Revenue
The Group derives revenue from the transfer of goods and services over time
and at a point in time in the following geographical split:
2023 2022
£'000 £'000
Domestic
- UK 19,340 17,078
- Ireland 547 545
International
- Europe 5,315 5,955
- Asia Pacific 9,458 10,230
- Middle East & Africa 5,386 5,456
- Americas 1,187 1,786
Total 41,233 41,050
Significant categories of revenue
2023 2022
£'000 £'000
Revenue recognised at a Point in Time
- Branded Products 24,360 22,524
- Distributor Products 13,624 13,606
- Technology Support * 261 304
- Freight 360 356
Revenue recognised Over Time
- Technology Support 2,628 4,260
Total 41,233 41,050
* Technology Support revenue recognised at a point in time relates to the
rental of our AlphaCore(5) patient warming equipment.
3 Income tax
(a) Analysis of tax charge for the year
2023 2022
£'000 £'000
Domestic current year tax *
UK corporation tax
Current year 14 -
Prior year adjustment 28 56
Total current tax expense 42 56
Deferred tax
Origination and reversal of temporary timing differences (306) (311)
Prior year adjustment 68 (16)
Total deferred tax (238) (327)
Tax expense on profit on ordinary activities (196) (271)
* All tax in both FY2023 and FY2022 arose in the UK.
(b) Analysis of current corporation tax assets
2023 2022
£'000 £'000
Net liability at 1 February 185 (313)
Tax payments
Final payments relating to prior year - 554
Total tax payments made during the year - 554
Current year UK corporation tax charge (14) -
Prior year adjustment (28) (56)
Net asset at 31 January 143 185
(c) Factors affecting tax charge for the year
The tax assessed for the year is lower (2022: lower) than the standard rate of
corporation tax in the UK 19.00% (2022: 19.00%) as explained below:
Effective Tax Rate
2023 2022 2023 2022
Restated Restated
£'000 £'000 % %
Profit on ordinary activities before taxation 76 3,963
Tax using the effective UK corporation tax rate of 19.00% (2022: 19.00%) 14 753
19.0 19.0
Effects of:
Non-deductible expenses 188 56 247.3 1.4
Additional deduction for research and development (314) (497)
(413.7) (12.5)
Fixed asset differences 44 49 58.3 1.2
Other permanent differences - 12 - 0.3
Adjustment in respect of prior periods 96 40 126.5 1.0
Amendments to deferred tax and timing (224) (684) (295.2) (17.3)
Total tax expense (196) (271)
Effective tax rate (257.8) (6.9)
The effective tax rate for FY2023 is lower than FY2022. This decrease is
largely due to the recognition of previously unrecognised losses. The
non-deductible expenses largely relate to aborted acquisition costs incurred
in the year.
Budget 2021 announced that the UK corporation tax rate was to increase from
19% to 25% with effect from 1 April 2023. A small profits rate of 19% applies
for taxable profits of £50,000 or less and a tapered rate will apply to
companies with taxable profits between £50,001 and £249,999. This provision
was substantively enacted on 24 May 2021 and the deferred tax balances have
been calculated at 25%.
(d) Factors that may affect future tax charges
The Group has gross unrecognised losses estimated at £6,019,271 (FY2022:
£6,019,271) which were transferred to the Group due to the reverse
acquisition of Inditherm. Brought forward losses transferred to the Group due
to the reverse acquisition are potentially available for relief against future
trading profits generated from the same trade. See note 11 Deferred Tax, for
more information.
4 Non-recurring Items
During the year, the Group recognised the following non-recurring items:
2023
£'000
Impairments of leased properties 446
Aborted acquisition costs 467
Other 245
Total Non-recurring items 1,158
Impairment of leased properties:
Following the move to our new Manufacturing and Technology Centre, the Group
took the decision to consolidate its property portfolio and as a result, there
was an impairment of our right of use assets of £446,000, relating to our
Crawley and former Croydon properties.
Aborted acquisition costs:
£467,000 were financial and tax due diligence work and consultancy fees
related to an aborted acquisition.
Other
£105,000 relates to project consultancy costs incurred in the year. £140,000
were legal fees relating to a contract dispute.
5 Earnings per ordinary share
Basic earnings per share for the year is calculated by dividing the profit
attributable to ordinary shareholders for the year after tax by the weighted
average number of shares in issue.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue to assume conversion of all potential
dilutive ordinary shares.
FY2022 earnings per share have been restated as a result of the Prior Year
adjustment relating to deferred tax, please see Note 12 for further detail.
2023 2022
Restated
£'000 £'000
Profit
Profit attributable to equity holders of the company 272 4,234
Add back non-recurring items 1,158 -
Add back amortisation of intangible assets acquired through business 605 605
combinations
Numerator for adjusted earnings per share calculation 2,035 4,839
The weighted average number of shares in issue and the diluted weighted
average number of shares in issue were as follows:
2023 2022
Shares
Number of ordinary shares in issue at the beginning of the year 68,127,447 68,121,447
Weighted average number of shares issued during the year 5,771 -
Weighted average number of ordinary shares in issue during the year 68,133,218 68,121,447
for the purposes of basic earnings per share
Dilutive effect of potential ordinary shares:
Weighted average number of share options 691,392 672,175
Diluted weighted average number of shares in issue during the year
for the purposes of diluted earnings per share 68,824,610 68,793,622
The basic and diluted earnings per share for the year are as follows:
Basic Diluted Basic Diluted
2023 2023 2022 2022
Restated Restated
pence pence pence pence
Earnings per share 0.40 0.39 6.22 6.16
Adjust for:
Non recurring items 1.70 1.68 - -
Add back amortisation of intangible assets acquired through business 0.89 0.88 0.89 0.88
combinations
Adjusted earnings per share 2.99 2.95 7.11 7.04
An adjusted basic earnings per share and an adjusted diluted earnings per
share have also been calculated as in the opinion of the Directors this will
allow shareholders to gain a clearer understanding of the trading performance
of the Group.
6 Dividends
The interim dividend for the year ended 31 January 2023 of 0.205p per share
(2021: 0.2p per share) was paid on 28 December 2022. The proposed final
dividend of 0.41p per share (2022: 0.4p per share) is subject to approval by
shareholders at the AGM and has not been recognised as a liability as at 31
January 2023. If approved, the final dividend will be paid on 28 July 2023 to
shareholders on the register on 30 June 2023.
7 Intangible assets
Intangible assets Development Intellectual Software
Goodwill acquired costs property costs Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 February 2021 (Restated) 7,610 5,528 2,035 276 485 15,934
Capitalised in the year - - 2,208 - 338 2,546
Disposals - - (116) - (67) (183)
At 1 February 2022 7,610 5,528 4,127 276 756 18,297
Capitalised in the year - - 1,976 - 140 2,116
Disposals - - (6) - - (6)
At 31 January 2023 7,610 5,528 6,097 276 896 20,407
Accumulated Amortisation
At 1 February 2021 - 423 625 276 361 1,685
Charge in the year - 605 155 - 77 837
Disposal - - - - (50) (50)
At 1 February 2022 - 1,028 780 276 388 2,472
Charge in the year - 605 157 - 169 931
At 31 January 2023 - 1,633 937 276 557 3,403
Net book value
At 31 January 2023 7,610 3,895 5,160 - 339 17,004
At 31 January 2022 (Restated) 7,610 4,500 3,347 - 368 15,825
The Group tests goodwill for impairment on an annual basis, or more frequently
if there are indications that the goodwill may be impaired. The recoverable
amounts of the cash-generating unit are determined from value in use
calculations. The key assumptions for the value in use calculations are the
discount and growth rates used for future cash flows and the anticipated
future changes in revenue and costs. The assumptions used reflect the past
experience of management and future expectations.
The forecasts covering a five-year period are based on the detailed budget for
the year ended 31 January 2024 approved by management. The cashflows beyond
the budget are extrapolated for a further four-year period based on future
expectations. This forecast is then extrapolated to perpetuity using a 2%
(2022: 2%) growth rate.
Annual growth rates for revenues for the five-year forecast period have been
included between 10% and 15% year-on-year and costs between 5% and 10%
year-on-year. A post-tax discount rate of 13% (2022: 13%) has been used in
these calculations. The discount rate uses weighted average cost of capital
which is reflective of a medical device Company operating both domestically
and internationally. A discount rate of 19% (2022: 31%) would need to be
applied for there to be zero headroom.
Sensitivity analyses have been performed on the carrying value of all
remaining goodwill using post-tax discount rates up to 13%. Revenue growth
would need to reduce by 4.1% year-on-year with no change in cost growth
assumptions for there to be zero headroom.
8 Property, Plant and Equipment
Leasehold improvements Fixtures and fittings Plant, machinery, office equipment Motor Total
vehicles
£'000 £'000 £'000 £'000 £'000
Cost
At 1 February 2021 467 121 1,516 58 2,162
Additions in the year 899 2 525 - 1,426
Disposals in the year (220) (17) (154) - (391)
At 1 February 2022 1,146 106 1,887 58 3,197
Additions in the year 5,894 6 326 - 6,226
Disposals in the year - - (6) - (6)
At 31 January 2023 7,040 112 2,207 58 9,417
Accumulated Depreciation
At 1 February 2021 114 61 1,061 7 1,243
Charge in the year 73 24 249 17 363
Disposals in the year (58) (17) (132) - (207)
At 1 February 2022 129 68 1,178 24 1,399
Charge in the year 241 8 257 17 523
Disposals in the year - - (2) - (2)
At 31 January 2023 370 76 1,433 41 1,920
Net book value
At 31 January 2023 6,670 36 774 17 7,497
At 31 January 2022 1,017 38 709 34 1,798
Depreciation charged for the financial year is split between cost of sales
£60,000 (2022: £19,000) and administrative expense £463,000 (2022:
£344,000) in the Consolidated Income Statement.
9 Cash and cash equivalents
Cash and cash equivalents comprise solely of cash at bank available on
demand.
The Group currently use four banks; Royal Bank of Scotland plc, HSBC Bank plc,
Bank of Scotland plc and National Westminster Bank plc. Moody's give
long-term ratings of A1 for all four banks as at 31 January 2023.
10 Borrowings
2023 2022
Note £'000 £'000
Revolving Credit Facility ("RCF") 4,000 -
Invoice Financing 2,079 -
6,079 -
£4m has been presented as a non-current liability in the Statement of
Financial Position as at 31 January 2023 and £2.1m has been presented as a
current liability.
Revolving Credit Facility
The Group has a £5m RCF facility in place, which expires in 2024 with the
option to extend and attracts a 2.5% margin above SONIA. During the year, the
Group utilised £4m of the RCF facility. Banking covenants of EBITDA / finance
charges and net debt / EBITDA are in place and are tested quarterly. All
covenants have been complied with during the year ended 31 January 2023.
Drawdowns can be made on a 1, 2 or 3 month basis which can be rolled as
required until the facility expires.
The movement in the RCF facility during the year was as follows:
.
£'000
At 1 February 2022 -
Proceeds from drawdown of loans 4,000
Interest payable 84
Interest paid (84)
At 31 January 2023 4,000
Invoice Financing Facility
During the year, the Group entered into an invoice financing facility to
borrow cash against notifiable trade receivables. The arrangement with the
bank is such that the customers remit cash directly with the bank and invoices
are settled against the facility directly. The Group continues to bear the
credit risk relating to any defaulting customers and therefore the related
trade receivables continue to be recognised on the Group's Statement of
Financial Position.
11 Deferred tax
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting year.
The Group has made a prior year adjustment in respect of the FY2021 deferred
tax asset arising on acquisition of SLE Limited. This note has been restated
accordingly. Please see Note 12 for further detail of the prior year
adjustment.
Note that the effective future tax rate is 25% (2022: 25%).
2023 2022
Restated
£'000 £'000
Asset at beginning of year 2,012 900
Credit to the Income Statement for the year 351 1,112
Asset at end of year 2,363 2,012
2023 2022
£'000 £'000
Liability at beginning of year (1,925) (1,141)
Charge to the Income Statement for the year (114) (784)
Liability at end of year (2,039) (1,925)
The elements of deferred taxation provided for are as follows:
Restated
2023 2022
£'000 £'000
Unused tax losses relating to SLE 1,959 1,661
Unused tax losses relating to Inditherm 331 351
Short term timing differences 73 -
Deferred tax asset 2,363 2,012
2023 2022
£'000 £'000
Accelerated capital allowances (186) (140)
Intangible assets (879) (751)
Intangibles arising on business combinations (974) (1,125)
Short term timing differences - 91
Deferred tax liability (2,039) (1,925)
Presentation on the Consolidated Statement of Financial Position
2023 2022
Deferred tax asset 324 87
At the year end date the Group had gross unused losses of £15,248,186 (2022:
£13,988,205) potentially available to offset against future profits. Unused
trading losses of £7,905,283 (2022: £6,645,302) arose in SLE Limited prior
to the acquisition by Inspiration Healthcare Group plc on 7 July 2020 and
brought forward losses transferred to the Group due to the reverse acquisition
of Inditherm plc amount to £7,342,903 (2022: £7,342,903). The Group has
received advice that these losses can be carried forward and utilised against
future taxable profits of the same business from which they were generated.
A streaming methodology has been devised to estimate profits from the business
relating to Inditherm plc. This has been projected forwards and it is
estimated that taxable profits will be generated in the future and
consequently, a deferred tax asset has been recognised in respect of these
losses. A deferred tax asset has also been recognised in respect of the
brought forward losses transferred to the Group following the acquisition of
SLE Limited. A prior year adjustment has been made to recognise a deferred tax
asset to the extent of the deferred tax liability relating to the intangibles
recognised on the acquisition of SLE Limited.
The amounts of deferred tax not recognised are as follows:
2023 2022
£'000 £'000
Unused tax losses 1,505 1,485
Budget 2021 announced that the UK corporation tax rate was to increase from
19% to 25% with effect from 1 April 2023. A small profits rate of 19% applies
for taxable profits of £50,000 or less and a tapered rate will apply to
companies with taxable profits between £50,001 and £249,999. This provision
was substantively enacted on 24 May 2021 and the deferred tax balances have
been calculated at 25%.
12 Prior Year Adjustment
A Prior Year Adjustment has been made in respect of the Group's deferred tax
asset. In FY2021, the Group recognised a deferred tax liability relating to
taxable temporary differences that arose from the recognition of intangibles
on the acquisition of SLE Limited in July 2020. At the time of the
acquisition, a deferred tax asset was not recognised. However, accounting
standards require a deferred tax asset to be recognised to the extent of the
existing deferred tax liability and therefore a deferred tax asset should have
been recognised in FY2021. This has been corrected by restating each of the
affected financial statement line items for prior periods. The following
tables summarise the impacts on the Group's Consolidated Financial Statements.
Consolidated Statement of Financial Position
Impact of correction of error
31 January 2022 As previously reported Adjustments As restated
£'000 £'000 £'000
Intangibles 16,782 (957) 15,825
Deferred Tax Asset 470 (383) 87
Other 34,197 (1) 34,196
Total Assets 51,449 (1,341) 50,108
Deferred Tax Liability (1,925) (1,925) -
Other (14,619) - (14,619)
Total Liabilities (16,544) (1,925) (14,619)
Retained Earnings 25,141 584 25,725
Other 9,764 - 9,764
Total Equity 34,905 584 35,489
Consolidated Income Statement
Impact of correction of error
For the year ended 31 January 2022 As previously reported Adjustments As restated
£'000 £'000 £'000
Profit before tax 3,963 - 3,963
Income Tax (370) 641 271
Profit for the year 3,593 641 4,234
Earnings Per Share Impact of correction of error
For the year ended 31 January 2022
As previously reported Adjustments As restated
Basic EPS 5.28p 0.94p 6.22p
Diluted EPS 5.22p 0.94p 6.16p
Statement of directors' responsibilities
In preparing this preliminary announcement and summary financial statements
the directors have considered their statutory responsibilities in relation to
the preparation and approval of the annual report and financial statements.
In preparing the summary financial statements, the directors have:
• selected suitable accounting policies and then apply them consistently;
• stated whether applicable IFRSs as adopted by the European Union have been
followed for the Group summary financial statements and United Kingdom
Accounting Standards, comprising FRS 101, have been followed for the Company
financial statements, subject to any material departures disclosed and
explained in the summary financial statements;
• made judgements and accounting estimates that are reasonable and prudent;
and
• prepared the summary financial statements on the going concern basis
unless it is inappropriate to presume that the group and company will continue
in business.
In the case of each director in office at the date the summary financial
statements are approved:
• so far as the director is aware, there is no relevant audit information of
which the Group and Company's auditors are unaware; and
• they have taken all the steps that they ought to have taken as a director
in order to make themselves aware of any relevant audit information and to
establish that the Group and Company's auditors are aware of that
information.
Publication of non-statutory accounts
The financial information included in this preliminary announcement does not
constitute the Company's statutory accounts for the year ended 31 January 2023
and for the year ended 31 January 2022 but is derived from those accounts.
Statutory accounts for the year ended 31 January 2022 have been delivered to
the registrar of companies, and those for year ended 31 January 2023 will be
delivered in due course. The auditor has reported on those accounts; their
reports were (i) unqualified (ii) did not include a reference to any matters
to which the auditor drew attention to by way of emphasis without qualifying
their report, and (iii) did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006. The consolidated financial statements of the
Company have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and in
accordance with the UK adopted international accounting standards.
Forward looking statements
Certain statements contained in this document constitute forward-looking
statements. Such forward-looking statements involve risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Inspiration Healthcare Group plc to be materially different from any future
results, performance or achievements expressed or implied by such statements.
Such risks, uncertainties and other factors include, among others: general
economic conditions and business environment.
Annual Report
A further announcement will be made when the 2023 Annual Report and Financial
Statements are available on the Company's website
(www.inspirationhealthcaregroup.plc.uk
(http://www.inspirationhealthcaregroup.plc.uk/) ) and copies are sent to
shareholders.
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