REG - Inspiration Health - Final Results
26/06/2024 07:00
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RNS Number : 8631T Inspiration Healthcare Group PLC 26 June 2024
26 June 2024
Inspiration Healthcare Group plc
("Inspiration Healthcare", the "Group" or the "Company")
Preliminary Unaudited Results for the year ended 31 January 2024
Inspiration Healthcare Group plc (AIM: IHC), the global medical technology
company, pioneering, specialist neonatal intensive care medical devices,
announces its unaudited preliminary results for the year ended 31 January 2024
("FY2024").
Financial Highlights
· Group revenue of £37.6m (FY2023: £41.2m)
· Gross profit reduced by 1.1% to £17.9m (FY2023: £18.1m) as
gross margin improved to 47.5% (FY2023: 43.9%)
· Adjusted EBITDA(1) of £2.0m (FY2023: £4.0m)
· Adjusted operating loss(2) before non-recurring items of £(0.7)m
(FY2023: profit of £1.6m)
· Operating loss of £5.2m (FY2023: profit of £0.4m)
· Operating cash inflow of £2.0m (FY23: outflow of £3.5m)
· Net debt(3) (excluding IFRS16 lease liabilities) increased to
£6.0m (FY2023: £3.8m)
(1)Earnings before interest, tax, depreciation, amortisation, impairment,
share-based payments and non-recurring items
(2)Earnings before interest, tax, impairment, share-based payments and
non-recurring items
(3)Cash and cash equivalents, less revolving credit facility and invoice
finance borrowings
Operational Highlights
· Launch of SLE1500 for non-invasive ventilation of neonatal
patients
· Launch of SLE6000N a non-invasive version of our flagship product
expanding market opportunities
· Acquisition of Airon Corporation provides established platform to
advance North America growth strategy
· MDSAP Certification achieved, accessing Canadian market,
registrations now underway ahead of planned H2 FY2025 launch
Post year-end
· Launched new infusion pump as a distributed product from partner
Micrel Medical Devices SA
· Neil Campbell stepped down as CEO and became a Non-executive
Director
· Roy Davis, Non-executive Chair appointed Executive Chair and
Interim CEO
· Planned closure of Hailsham site from end July 2024, further
rationalising the Group's operating sites and expected to realise annualised
savings of approximately £0.5m
Equity raise
· Equity raise to be announced today of £2.5m (gross), with an
additional retail offer of up to £0.5m
Roy Davis, Executive Chairman and Interim CEO of Inspiration Healthcare,
said: "Inspiration Healthcare has a solid portfolio of best-in-class,
life-saving neonatal technologies and infusion products that are addressing a
critical need. Over the course of the year, we have seen underlying growth in
our core neonatal and infusion businesses due to increased demand. The
acquisition of Airon in January 2024 provides us with an established platform
to advance our commercial strategy in North America, which will be a key
medium-term growth driver. Despite challenging market conditions, the Group
has a number of significant market opportunities and is well placed to deliver
long-term sustainable growth.
"The equity raise, announced today, will provide us with additional working
capital, a strengthened balance sheet and provide us with liquidity headroom.
On behalf of the whole team, I would like to thank our shareholders for their
continued support, and we look forward to updating the market further in due
course."
For further information, please contact:
Inspiration Healthcare Group plc Tel: +44 (0)330 175 0000
Roy Davis, Executive Chairman
Alan Olby, Chief Financial Officer
Liberum (Nominated Adviser & Broker) Tel: +44 (0)20 3100 2000
Phil Walker
Richard Lindley
Will King
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
Louis Ashe-Jepson Mob: +44 (0) 7747 515 393
About Inspiration Healthcare
Inspiration Healthcare (AIM: IHC) designs, manufactures and markets pioneering
medical technology. Based in the UK, the Company specialises in neonatal
intensive care medical devices, which are addressing a critical need to help
to save the lives and improve the outcomes of patients, starting with the very
first breaths of life.
The Company has a broad portfolio of its own products and complementary
distributed products, for use in neonatal intensive care designed to support
even the most premature babies throughout their hospital stay. Its own branded
products range from highly sophisticated capital equipment such as ventilators
for life support through to single-use disposables.
The Company sells its products directly to hospitals and healthcare providers
in the UK and Ireland, where it also distributes a range of advanced medical
technologies for infusion therapy. In the rest of the world the Company has
an established network of distribution partners around the world giving access
to more than 75 countries.
The Company operates in the UK from its world-class Manufacturing and
Technology Centre in Croydon, South London and from its facility in Hailsham,
East Sussex, and in the USA from its facility in Melbourne, Florida.
Further information on Inspiration Healthcare can be found at
www.inspirationhealthcaregroup.com (http://www.inspirationhealthcaregroup.com)
Executive Chair and Interim CEO Report
Welcome to my first review as Executive Chairman and Interim CEO of
Inspiration Healthcare Group plc. It is a privilege to take on this role at
this time. Despite the challenges of the past couple of years I believe we
have a number of significant opportunities ahead of us in both the UK and
International markets, including North America, which is a significant
strategic market and future growth opportunity for the Group.
Overall however, the year was disappointing with revenues down 8.7% to £37.6m
(FY2023: £41.2m) which consequently meant that Adjusted EBITDA was reduced to
£2.0m (FY2023: £4.0m). Cash was impacted as was working capital with net
debt increasing to £(6.0)m (excluding IFRS16 lease liabilities). Despite
recent challenging market conditions, the Company has invested in the business
to expand its manufacturing capabilities and product portfolio, building the
foundations to deliver long-term sustainable growth.
My initial focus as Chairman has been to examine the key factors impacting the
business and identify a constructive path forward. The last couple of years
have been difficult for the medical device sector, which has added pressure on
the internal resources within the Group.
The Group operates within a single business segment, providing essentially
medical technology. Within this segment, the Group sells products and services
into two main market areas: 'Neonatal' and 'Infusion Therapies'.
Neonatal focuses on intensive care equipment for premature and sick babies.
We design, manufacture and sell our equipment around the world to over 75
countries and we also distribute complementary products in the UK and Ireland.
Infusion Therapies focuses on infusion pumps and associated consumables in the
UK and Ireland where we are an active distributor of these technologies into
various therapy areas.
Neonatal
Neonatal revenues were lower than last year at £28.9m (FY2023: £32.1m), this
was impacted by delays in receiving a large Middle Eastern order and a key
distributed product not receiving its CE marking under the new European
Medical Device Regulations ('MDR'). We also saw increased competition in the
neonatal ventilator market, due to the saturation of the adult ventilator
market following increased purchasing during the Covid-19 pandemic and those
manufacturers seeking new markets for their products. We expect the markets to
normalise over the next 12-18 months, particularly with the withdrawal of
Medtronic from the adult ventilator market.
During the year, supply chain issues continued to require attention. The
limited availability of certain components has required the company to devise
new solutions, taking up valuable R&D resources and requiring us to
acquire parts at elevated prices impacting both gross margin and working
capital as we held more stock. Although these solutions are not ideal, it
does give us the security of being able to manufacture our products.
The changes to the European regulatory landscape, with the implementation of
the EU Medical Device Regulation has also resulted in the early
discontinuation of some of our products. Our commitment to our customers means
that we have to maintain the supply of spare parts for seven years, which has
increased working capital in some areas. Additionally, we have invested time
and resources to ensure our products remain compliant within both the EU and
the UK under the new legislation despite the EU extending the deadline for
compliance to MDR to 2027.
During the year we also launched several new products.
· SLE1500 - A compact respiratory support system that provides
non-invasive ventilation ("NIV") modes, which is considered the gold standard
of care for preterm infants with respiratory distress syndrome ('RDS') and is
gradually becoming the first choice for respiratory support. The SLE1500
gives respiratory support to babies that have a breathing reflex by providing
nasal continuous positive airway pressure ('CPAP') and High Flow Oxygen
therapy. We have also included our Oxygenie patented automatic Oxygen
control algorithm.
· SLE6000N - A non-invasive version of our leading specialist
neonatal ventilator, which facilitates precise, controlled ventilation for
critically ill infants and can also feature Oxygenie. This has allowed us to
enter slightly different markets. This also led to a re-branding of other
variants of the SLE6000 to differentiate the entire portfolio and we now have
three variants across critical care, high dependency care and non-invasive
respiratory support. The SLE6000N is CE marked and available where CE marking
allows products to be registered.
· LifeStart - having received feedback from US customers we
launched a new version of LifeStart, our specialist unit that can be used as a
stabilisation platform for babies that have experienced a difficult birth. The
new version is more aligned with US user requirements, allowing US
manufactured accessories to be added to the platform.
China continues to be an important market for us and remains challenging due
to local legislation favouring locally manufactured goods. To address this,
we have instigated a project for assembly of the SLE6000 ventilator range in
China. This will allow us to protect our current market position and opens
up a larger part of the market that we have not been able to enter previously.
There is also significant growth potential in our consumables business, and we
are looking to expand our portfolio of disposable products. We have
undertaken a thorough review of our consumables for Neonatal Intensive Care
and have identified a number of overlapping products along with gaps in the
portfolio. This will lead to us improving our product offerings, whilst
streamlining the number of products and working closely with existing
suppliers.
Our technical support offering for maintenance programmes and spare parts
represents another opportunity for growth. We have been running a project
entitled 'service as a product' to challenge the way we approach technical
service, which has identified many areas in which we can grow our technical
service revenues, and with greater consumables and a better focus on technical
support, we expect to drive growth in recurring revenue streams over FY2025
and beyond.
Infusion Therapies
The Infusion Therapies products delivered revenues of £8.5m in the year (FY
2023: £9.1m), the decline was primarily due to a one-off de-stocking of a
major customer during H1. This de-stocking, which meant sales for the year
were below our initial expectations, was over by the end of the first half
when order patterns returned to traditional levels. Revenues in H2 saw a
strong recovery in line with the prior year, albeit from a lower base at the
end of H1.
We have continued to invest in sales and marketing in this area of our
business and have introduced new products into the range in new therapy areas,
which are starting to gain traction. This diversification is a key part of our
growth strategy for this business, and we are working to develop the market by
further expanding our product portfolio through distribution agreements and
looking at new therapy areas for the existing portfolio.
We were delighted to be able to launch a key new pump from our partner
Micrel. With the UK NHS increasingly looking to treat patients out of
hospital, it is important that new devices have the capability of being able
to be monitored remotely. The new pump from Micrel will allow for this
making it an attractive option for our existing customer base and allowing for
future growth.
North America Strategy
North America accounts for approximately 50% of the world market for neonatal
intensive care products and is a significant strategic market and key focus
for our long-term growth. In January 2024, we acquired Airon Corporation
('Airon') in Melbourne, Florida, providing an established platform to support
and de-risk the Company's US commercial operations. The acquisition was the
first step in advancing our US/North American strategy, which aims to reduce
the Group's reliance on markets dominated by large tenders. The Company is
looking to expand its product portfolio in the US through the regulatory
approval of existing technologies and is also evaluating complementary
acquisition and licensing opportunities.
Airon is a leading manufacturer of pneumatic ventilators, which can be used in
transport and MRI for babies through to adults. It has established sales
channels, through national distributor(s), and provides a good platform to
launch Inspiration Healthcare's existing products into the USA. It also allows
the export of Airon products through the Group's international distribution
network. The acquisition is in line with our long-term strategy to acquire
companies with both complementary technologies and sales reach to expand the
Group's global footprint, add scale and accelerate growth. It is expected to
be earnings accretive in the second full year of ownership.
We are excited to be working with our new colleagues as we welcome them into
the Group and execute our North America strategy together. Although it is a
small business, it is already showing signs of growth and potential through
its national distributor.
In the summer of 2023, we submitted an initial application to the FDA for
clearance of the SLE6000 ventilator, albeit with some features removed. In
light of recently amended FDA guidelines, particularly pertaining to cyber
security, we have opted to reassess the most effective employment of our
resources to comply with these new regulations. As a result, we have withdrawn
our preliminary application for the SLE6000. Anticipation remains for a
resubmission of our application after we have had further clarification from a
meeting with the FDA, planned for the summer of 2024.
In January 2024, the Company received Medical Device Single Audit Program
("MDSAP") certification, confirming its Quality Management System processes
comply with the requirements of the EU, USA, Japan, Australia and Canada.
MDSAP is compulsory for Canada and following certification, we have initiated
the registration process of our product range in Canada, which is expected to
be commercially available during FY2025.
The Board continues to evaluate the focus of the Group, including the market
and products along with the resources and structure of the Group. This has led
to the appointment of a new Chief Commercial Officer reporting directly to me
as Interim CEO. This new pivotal role will bring together all our commercial
activities and will help drive our business forward.
In June 2024, we announced that we would close our Hailsham facility at the
end of July. Activities undertaken at Hailsham are either being outsourced to
a long-standing supplier or moved to the Group's Croydon site. This impacts 12
employees with several expected to transfer to Croydon. This further
rationalises the Group's operations into a single site and is anticipated to
realise annualised savings of approximately £0.5m (savings are already
included in market guidance for the full year).
With the advancement of our North American strategy, a restructure of the
commercial team and the addition of new products, I am confident that we are
taking the right steps to deliver the longer-term growth ambitions of the
Company.
The Group also strengthened the Board during the year with the appointments of
Alan Olby as Chief Financial Officer and Marlou Janssen as Non-executive
Director. Both bring significant commercial expertise in the medical device
space and their experience will be instrumental as the Group continues to
execute on its growth strategy.
Post year end there were two additional changes to the Board, Mark Abrahams
retired as Chairman in March 2024 and Neil Campbell stepped down as CEO in May
2024 to become a Non-executive Director of the Group. On behalf of the
Company and the shareholders, I would like to thank both Mark and Neil for
their service and commitment to the Company over the past nine years and look
forward to continuing to work with Neil as a Non-Executive Director and in his
capacity as a Global Advocate supporting key relationships and business
development opportunities.
Outlook
While there have been challenges beyond our control presented by volatility in
the international markets we serve, we continue to be robustly positioned in a
stable global long term growth sector with a best-in-class product portfolio.
We are actively executing our growth strategy to increase our presence in more
stable markets, most notably North America, where our recent acquisition of
Airon provides a suite of complementary products and a ready-made platform to
grow. This strategic move not only aims to mitigate the impact of short-term
market volatility, but also will be a future growth driver for the Group.
While revenues are expected to be second half weighted in FY25, current
trading is in line with management's expectations. We are grateful to our
shareholders for their continuing support, and we look forward to a successful
FY25 and beyond.
I would like to thank our dedicated team around the world for all of their
hard work and our customers for their continued use of our products, we are
proud to support clinicians around the world in the life saving work that they
do.
I would like to summarise by re-iterating my excitement for and confidence in
the Group's ability to capitalise on the opportunities ahead. I believe our
Group has a solid portfolio of best-in-class, life-saving neonatal
technologies and infusion products that are addressing a critical need and is
well placed to deliver significant long-term sustainable growth.
Roy Davis
Executive Chairman and Interim CEO
Financial Review
REVENUE
Group revenue decreased 8.7% to £37.6m (FY2023: £41.2m). This includes
£0.2m revenue from Airon Corporation in the period following completion of
the acquisition on 3 January 2024. Going forwards, Airon revenue will be
included within Neonatal product revenues.
Neonatal
Neonatal products achieved revenues of £29.1m for FY2024, a decline of 9.3%
from the £32.1m in FY2023. There were several factors in this performance:
· Loss of revenue from a distributed product of £1.0m, resulting
from the loss of regulatory approval for the product
· The Group has chosen to discontinue a number of products due to
the increasing cost of parts and costs associated with maintaining CE marking
making these uneconomic to continue with. Revenue from these products
declining by £1.3m in FY24, with a similar decline predicted in FY25.
· Revenue from the remaining Neonatal products declined by 5.0% in
the year with order and delivery patterns significantly impacting reported
revenues. The Group shipped 247 ventilators in January 2023, boosting FY23
revenues, while only 47 ventilators were shipped in FY24, partly due to
production being diverted for the anticipated Middle East order. Ignoring the
final month of the year, unit sales of ventilators, which make up 55% of the
neonatal product revenues, increased by 10% in the period from February to
December 2023 compared to the same period in the prior year, and in revenue
terms increased by 21%. This demonstrates that underlying demand for one of
the Group's key products remains strong, despite the decline in reported
revenue for the year.
Infusion
Revenues for the Infusion products were £8.5m in the year, representing a
decline of 6.6% from the £9.1m reported for FY2023. This followed a
challenging first half of the year during which our leading customer was
de-stocking, resulting in a 14% fall in first half revenue. The second half of
the year showed a marked improvement as this customer returned to normal
ordering patterns and revenues were in-line with the same period in FY2023.
With a new pump launched in April 2024, combined with a focus on growth
opportunities outside the homecare sector, we are optimistic of a return to
growth for the Infusion products in FY2025.
GROSS PROFIT
Gross profit of £17.9m was 3.6% lower than the prior year (FY2023: £18.1m)
and represents a gross margin of 47.5% for FY2024, increased from the 43.9%
achieved in FY2023. The margin improvement was driven by an improving sales
mix of neonatal products, and increased absorption of manufacturing overheads
into finished goods.
OPERATING LOSS
The Group reported an Operating loss of £5.2m for the year (FY2023: profit of
£0.4m). This included non-recurring items of £4.5m (FY2023: £1.2m) and
amortisation of acquired intangible assets of £0.6m (FY2023: £0.6m) leading
to an Adjusted Operating Loss (before non-recurring items) of £(0.7)m
(FY2023: profit of £1.6m).
Administrative expenses increased year-on-year by 12.7% to £18.6m (FY2023:
£16.5m), partly reflecting the high inflationary macro-economic environment.
Employment costs which represent approximately 60% of administrative expenses
increased by 8% in the year because of a 7% pay increase for the year and a
small increase in headcount. Other increases were in marketing expenses and
travel as activity continued to recover from covid related restrictions in
previous years. There were also increases in insurance premiums, foreign
exchange variances and amortisation charges.
There were £4.5m of non-recurring items in the year (FY2023: £1.2m),
comprising a £4.1m impairment of capitalised development costs, £0.1m of
acquisition costs relating to the Airon acquisition and £0.3m of
restructuring and other professional fees (see note 4).
Adjusted EBITDA reduced to £2.0m (FY2023: £4.0m) because of the lower gross
profit and the increase in administrative expenses outlined above. A
reconciliation of operating loss to adjusted EBITDA is set out below:
2024 2023
£'000 £'000
Operating (loss)/profit (5,214) 431
Non-recurring items 4,527 1,158
Adjusted Operating (loss)/profit (687) 1,589
Depreciation 1,293 1,354
Amortisation of intangible assets 1,144 931
Share based payment 235 132
Adjusted EBITDA 1,985 4,006
Finance expenses increased to £0.8m (FY2023: £0.4m) reflecting the increased
level of net debt, combined with the increase in effective interest rates seen
through the year.
The Group recorded a tax charge of £0.4m for the year (FY2023: credit of
£0.2m) which is mainly a deferred tax charge resulting from a resulting from
a write off of previously recognised deferred tax assets.
LOSS Per Share ("LPS")
Basic and diluted LPS were 9.27p per share for FY2024 as a result of the loss
for the year (FY2023: EPS 0.40p and 0.39p).
Cash Flow
The Group generated net cash flow from operations of £2.0m in the year,
significantly better than the operating cash outflow of £3.5m in FY2023. This
was a combination of EBITDA profit and a reduction in working capital.
Cash outflow on investing activities was significantly reduced at £2.5m
compared with £8.3m in FY2023. This included £1.1m outflow relating to the
acquisition of Airon. Capitalised development costs reduced to £1.1m in the
year (FY2023: £2.0m) and capital expenditure reduced significantly to £0.4m
(FY2023: £6.2m) following completion of the new Manufacturing and Technology
Centre in 2023.
Net debt (excluding IFRS16 lease liabilities) increased to £6.0m at 31
January 2024, compared with £3.8m last year, an increase of £2.2m.
In February 2024, the Group renewed and increased its Revolving Credit
Facility ('RCF') with a £10m RCF now in place, expiring in February 2027,
with an option to extend for a further year. The Group also continues to have
access to its invoice discounting facility of up to £5.0m. As at 31 January
2024, £5.0m of the RCF and £1.7m of the invoice discounting facility were
utilised.
The Group has received waivers from its bank in relation to the covenant tests
due at 31 January and 30 April 2024 caused as a result of the delay to the
anticipated large Middle East order. Following these waivers, revised
covenants have been put in place for the period until 31 January 2025 and bank
consent is required for further drawings on the RCF.
Subsequently, the bank has agreed to remove any restrictions on access to the
RCF subject to the Company undertaking an equity raise which has been
announced separately today.
Net Assets
The value of non-current assets as at 31 January 2024 totalled £26.5m
(FY2023: £30.8m). The net £4.3m year-on-year decrease mostly relates to the
amortisation and impairment of capitalised development costs, net of goodwill
arising on the acquisition of Airon.
Inventory increased by £3.8m in the year to £13.7m (FY2023: £9.9m) through
a combination of weaker revenues and ongoing supply chain disruptions
requiring the Group to secure increased holding of various components to
ensure continuity of supply for customers, the anticipated Middle East order;
as well as inventory of £0.4m acquired as part of the Airon acquisition.
Trade and other receivables decreased by £3.1m to £8.8m (FY2023 £11.9m)
largely because of weaker revenues in the final quarter of the year compared
with last year.
Overall net assets at 31 January 2024 were£29.0m (FY2023: £35.5m).
Dividends
An interim dividend of 0.205p per share (FY2023: 0.205p) was paid on 29
December 2023. As a result of the performance of the business, the Board is
not recommending payment of a final dividend (FY2023: 0.41p) making a total
dividend for the year of 0.205p per share (FY2023: 0.615p). Going forward, the
Board has decided to suspend payments of dividends until further notice and
will keep the dividend policy under review.
Alan Olby
Chief Financial Officer
Consolidated Income Statement (Unaudited)
for the year ended 31 January 2024
2024 2024 2024 2023
Note Non-recurring items Total Total
£'000 £'000 £'000
Adjusted
£'000
Revenue 2 37,630 - 37,630 41,233
Cost of sales (19,743) (19,743) (23,140)
-
Gross profit 17,887 - 17,887 18,093
Administrative expenses 3 (18,574) (4,527) (23,101) (17,662)
Operating (loss)/profit (687) (4,527) (5,214) 431
Finance income 61 - 61 40
Finance expense (810) - (810) (395)
(Loss)/Profit before tax (1,436) (4,527) (5,963) 76
Income tax 4 (358) - (358) 196
(Loss)/Profit for the year attributable to
owners of the parent company (1,794) (4,527) (6,321) 272
Loss per share
Basic (pence per share) 5 (9.27)p 0.40p
Diluted (pence per share) 5 n/a 0.39p
Consolidated Statement of Comprehensive Income (Unaudited)
for the year ended 31 January 2024
2024 2024 2024 2023
Non-recurring items Total Total
£'000 £'000 £'000
Adjusted
£'000
Loss for the year (1,794) (4,527) (6,321) 272
Other comprehensive income
Items that may be reclassified to profit or loss - - - -
Total other comprehensive income for the year - - - -
Total comprehensive income for the year (1,794) (4,527) (6,321) 272
Consolidated Statement of Financial Position (Unaudited)
as at 31 January 2024
(Registered Number: 03587944)
2024 2023
Note £'000 £'000
Assets
Non-current assets
Intangible assets 7 13,278 17,004
Property, plant and equipment 8 7,137 7,497
Right of use assets 5,578 5,970
Deferred tax asset - 324
25,993 30,795
Current assets
Inventories 9 13,743 9,935
Trade and other receivables 10 8,669 11,888
Cash and cash equivalents 609 2,276
23,021 24,099
Total assets 49,014 54,894
Liabilities
Current liabilities
Trade and other payables 11 (6,591) (5,812)
Lease liabilities (697) (822)
Borrowings 12 (1,654) (2,079)
Contract liabilities (625) (531)
(9,567) (9,244)
Non-current liabilities
Lease liabilities (5,477) (6,176)
Borrowings 12 (5,002) (4,000)
(10,479) (10,176)
Total liabilities (20,046) (19,420)
Net assets 28,968 35,474
Shareholders' equity
Called up share capital 6,823 6,813
Share premium 18,905 18,842
Reverse acquisition reserve (16,164) (16,164)
Share based payment reserve 567 405
Retained earnings 18,837 25,578
Total equity 28,968 35,474
Consolidated Statement of Changes in Equity (Unaudited)
Issued Reverse Share based
share Share acquisition payment Retained
capital premium reserve reserve earnings
Total
£'000 £'000 £'000 £'000 £'000 £'000
6,812 18,838 (16,164) 278 25,725 35,489
At 1 February 2022
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
Loss for the year - - - - (6,321) (6,321)
Total comprehensive income for the year - - - - (6,321) (6,321)
Transactions with owners in their capacity as owners
Issue of ordinary shares, net of transaction costs and tax 10 63 - (73) - -
Dividends - - - - (420) (420)
Employee share scheme expense - - - 235 - 235
Total transactions with owners 10 63 - 162 (420) (185)
At 31 January 2024 6,823 18,905 (16,164) 567 18,837 28,968
Consolidated Cash Flow Statement (Unaudited)
for the year ended 31 January 2024
2024 2023
Note £'000 £'000
Cash flows from operating activities
Profit for the year (6,321) 272
Adjustments for:
Depreciation and amortisation 2,437 2,285
Remeasurement of leases (210) (25)
Impairment of right of use assets - 446
Impairment of intangible assets 4,120 -
Employee share scheme expense 235 132
Loss/(profit) on disposal of tangible assets 108 (26)
Loss on disposal of intangible assets - 6
Finance income (61) (40)
Finance expense 810 395
Income tax 4 358 (196)
1,476 3,249
Changes in working capital
Increase in inventories (3,410) (3,486)
Decrease/(increase) in trade and other receivables 2,862 (2,501)
Increase/(decrease) in trade and other payables 982 (740)
(Decrease)/increase in contract liabilities (120) 7
Cash flows (used in)/generated from operations 1,790 (3,471)
Taxation received 3 190 -
Net cash generated/(used in) from operating activities 1,980 (3,471)
Cash flows from investing activities
Bank interest received 21 5
Interest received on leases 40 35
Acquisition of subsidiary, net of cash acquired (917) -
Purchase of property, plant and equipment (402) (6,226)
Purchase of intangible assets 7 (63) (140)
Capitalised development costs 7 (1,135) (1,976)
Net cash used in investing activities (2,456) (8,302)
Cash flows from financing activities
Principal elements of lease payments (829) (697)
Principle elements of lease receipts 281 217
Interest paid on lease liabilities (272) (300)
Interest paid on loans and borrowings (527) (84)
Dividends paid to the holders of the parent (420) (419)
Proceeds from loans and borrowings 10 576 6,079
Net cash generated from/(used in) financing activities (1,191) 4,796
Net decrease in cash and cash equivalents (1,667) (6,977)
Cash and cash equivalents at the beginning of the year 2,276 9,253
Cash and cash equivalents at the end of the year 609 2,276
Notes forming part of the Consolidated Financial Statements
1 Basis of the announcement
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.
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.
The financial information included in this preliminary announcement does not
constitute the Company's statutory accounts for the year ended 31 January 2024
but is derived from those accounts. Statutory accounts for the year ended 31
January 2023 have been delivered to the registrar of companies. The auditor
has reported on those accounts; their report was (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.
Going concern
The Group is reliant on borrowing facilities from external lenders to finance
its ongoing operations. As at 31 May 2024, the Group's net debt was
£8.9million, excluding IFRS 16 lease liabilities. The Group has access to a
revolving credit facility ('RCF') of £10.0million and an invoice finance
facility of up to £5.0million. The RCF facility contains certain financial
covenants relating to the Group.
As a result of ongoing delays in receiving a material export order, the Group
sought and received a waiver from its lender in relation to the covenant test
as at 30 April 2024, and has agreed alternate covenants for the period to 30
April 2025. Any further drawdown of the RCF will be subject to lender consent.
On 25 June 2024, the Company announced a placing and subscription to raise
£2.27million, net of expenses, by the issue of 17,857,142 new Ordinary Shares
in the Company. The placing is conditional upon shareholder approval and
admission of shares to trading on AIM. Conditional upon the placing completing
as expected, the Group's lender has agreed to release any restriction on
further drawdown of the RCF which will provide the Group with additional
liquidity of £3.5million, subject only to continued compliance with the
revised covenants.
The Directors have considered financial projections for the next 18months
covering several scenarios, both with and without the material export order,
these include a significant (10%) revenue downside versus the base case budget
for the period. These projections demonstrate that the Group can operate
within the revised headroom available following completion of the placing for
the foreseeable future.
The Directors, after taking into account the expected proceeds of the placing
and availability of the RCF, believe that they have a reasonable basis for
concluding that the Group has adequate facilities to continue as a going
concern and have therefore adopted the going concern basis in the preparation
of these financial statements. The financial statements do not reflect any
adjustments that would be required if they were prepared on a basis other than
the going concern basis.
The Directors acknowledge, however, that the placing is conditional on
shareholder approval and the release of the current restrictions on further
drawdowns of the RCF are conditional on the completion of the placing. The
Directors therefore consider that material uncertainties exist which may cast
significant doubt on the Group's ability to continue as a going concern and
therefore they may be unable to realise their assets and discharge their
liabilities in the normal course of business. These unaudited preliminary
results do not include any adjustments that would result from the basis of
preparation being inappropriate.
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 Financial Review for further information and reconciliations to the
relevant GAAP measure.
· Adjusted EBITDA
· Adjusted Operating Profit
· Net Debt excluding IFRS 16 lease liabilities
2 Revenue
The Group derives revenue from the transfer of goods and services over time
and at a point in time in the following product and geographical split:
2024 2023
£'000 £'000
Products:
Neonatal products 29,097 32,105
Infusion products 8,533 9,128
Total 37,630 41,233
Geography:
Domestic
- UK 17,680 19,340
- Ireland 1,001 547
International
- Europe 4,354 5,315
- Asia Pacific 8,436 9,458
- Middle East & Africa 4,206 5,386
- Americas 1,953 1,187
Total 37,630 41,233
3 Non-recurring Items
During the year, the Group recognised the following non-recurring items:
2024 2023
£'000 £'000
Impairment of capitalised development costs 4,120 -
Impairment (credit)/charge on leased properties (86) 446
Acquisition costs 69 467
Restructuring 142 -
Other 282 245
Total Non-recurring items 4,527 1,158
An impairment charge of £4,120,000 has been recognised in relation to
capitalised development costs, following the decision to cease work on a
number of projects and to focus resources on a smaller number of strategic
projects.
An impairment credit of £86,000 has been recognised in the year following the
sub-lease of vacant properties that were impaired in the prior year. In 2023,
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 and leases of £446,000,
relating to our Leicester, Crawley and former Croydon properties.
Acquisition costs in the year of £69,000 were incurred including legal and
professional fees in relation to the acquisition of Airon Corporation. In the
prior year, acquisition costs of £467,000 covered professional fees relating
to an aborted acquisition.
Restructuring costs of £142,000 include redundancy and severance costs
incurred as a result of consolidation of the Group's property portfolio and
moving all roles to the Group's new premises in Croydon.
Other non-recurring charges include £133,000 relates to project consultancy
costs incurred in the year. £149,000 were legal and professional fees
relating to a contract dispute.
4 Income tax
Analysis of tax charge for the year is as follows:
2024 2023
£'000 £'000
UK corporation tax
Current year - 14
Prior year adjustment 37 28
37 42
Deferred tax
Origination and reversal of temporary timing differences 321 (306)
Prior year adjustment - 68
321 (238)
Tax charge/(credit) on (loss)/profit on ordinary activities 358 (196)
The tax assessed for the year is higher (2023: lower) than the standard rate
of corporation tax in the UK 24.0% (2023: 19.0%) as explained below:
2024 2023
£'000 £'000
(loss)/Profit on ordinary activities before taxation (5,963) 76
Tax using the effective UK corporation tax rate of 24.0% (2022: 19.0%) (1,431) 14
Effects of:
Non-deductible expenses 320 188
Additional deduction for research and development - (314)
Fixed asset differences 112 44
Adjustment in respect of prior periods 37 (137)
Tax losses not recognised 1,320 9
Total tax charge/(credit) 358 (196)
Budget 2021 announced that the UK corporation tax rate was to increase from
19% to 25% with effect from 1 April 2023. This provision was substantively
enacted on 24 May 2021 and therefore deferred tax balances have been
calculated at 25%.
5 Loss per ordinary share
Basic (loss)/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 (loss)/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. No
diluted loss per share is presented for the year ended 31 January 2024 as the
exercise of share options would have the effect of reducing loss per share and
is therefore not dilutive
2024 2023
(Loss)/Profit attributable to equity holders of the company £'000 (6,321) 272
Weighted average number of shares in issue during the year 68,216,532 68,133,218
Dilutive effect of potential ordinary shares: n/a 691,392
Diluted weighted average number of shares in issue during the year n/a 68,824,610
Basic and diluted loss/earnings per share for the year are as follows:
Basic Diluted Basic Diluted
2024 2024 2023 2023
(Loss)/Earnings per share (pence) (9.27) n/a 0.40 0.39
6 Dividends
The interim dividend for the year ended 31 January 2024 of 0.205p per share
(2023: 0.2p per share) was paid on 29 December 2023. The Board are not
proposing to pay a final dividend (2023: 0.41p per share).
7 Intangible assets
Intangible assets Development Intellectual
Goodwill acquired costs property Software Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 February 2022 7,610 5,528 4,127 276 756 18,297
Additions - - 1,976 - 140 2,116
Disposals - - (6) - - (6)
At 31 January 2023 7,610 5,528 6,097 276 896 20,407
Additions - 12 1,135 - 63 1,210
Additions arising on business combinations 328 - - - - 328
At 31 January 2024 7,938 5,540 7,232 276 959 21,945
Accumulated amortisation and impairment
At 1 February 2022 - 1,028 780 276 388 2,472
Charge for the year - 605 157 - 169 931
At 31 January 2023 - 1,633 937 276 557 3,403
Charge for the year - 605 338 - 201 1,144
Impairment - - 4,120 - - 4,120
At 31 January 2024 - 2,238 5,395 276 758 8,667
Net book value
At 31 January 2024 7,938 3,302 1,837 - 201 13,278
At 31 January 2023 7,610 3,895 5,160 - 339 17,004
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 2025 approved by the Board. The cashflows beyond the
budget period are extrapolated for a further four-years based on future
expectations. This forecast is then extrapolated to perpetuity using a 2.0%
(2023: 2.0%) growth rate.
Annual growth rates for revenues for the five-year forecast period have been
included between 5% and 7.5% year-on-year and costs between 3% and 5%
year-on-year. A post-tax discount rate of 12.5% (2023: 13.0%) 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 13.3% (2023: 19%) would need to be
applied for there to be zero headroom.
Leasehold improvements Fixtures and fittings Plant, machinery, office equipment Motor Total
vehicles
£'000 £'000 £'000 £'000 £'000
Cost
At 1 February 2022 1,146 106 1,887 58 3,197
Additions 5,894 6 326 - 6,226
Disposals - - (6) - (6)
At 31 January 2023 7,040 112 2,207 58 9,417
Additions 168 11 255 - 434
Disposals (289) (45) (23) (8) (365)
At 31 January 2024 6,919 78 2,439 50 9,486
Accumulated Depreciation
At 1 February 2022 129 68 1,178 24 1,399
Charge for the year 241 8 257 17 523
Disposals - - (2) - (2)
At 31 January 2023 370 76 1,433 41 1,920
Charge for the year 375 7 290 13 685
Disposals (192) (41) (19) (4) (256)
At 31 January 2024 553 42 1,704 50 2,349
Net book value
At 31 January 2024 6,366 36 735 - 7,137
At 31 January 2023 6,670 36 774 17 7,497
8 Property, Plant and Equipment
Depreciation charged for the financial year is split between cost of sales
£82,000 (2023: £60,000) and administrative expense £603,000 (2023:
£463,000) in the Consolidated Income Statement.
9 Inventory
2024 2023
£'000 £'000
Raw materials 8,414 7,749
Work in progress 1,964 563
Finished goods 3,365 1,623
Total 13,743 6,449
Inventories are presented net of provisions of £225,000 (2023: £337,000) to
write down the values to management's estimate of net realisable value.
10 Trade and other receivables
2024 2023
£'000 £'000
Trade receivables 8,071 10,393
Loss allowance (498) (266)
Net trade receivables 7,573 10,127
UK corporation tax receivable - 143
Other taxes and social security - 304
Net investment in leases 489 616
Other receivables 245 183
Prepayments and accrued income 362 515
Total 8,669 11,888
11. Trade and other payables
2024 2023
£'000 £'000
Trade payables 4,359 4,081
UK corporation tax 82 -
Other taxes and social security 583 257
Other payables 606 434
Accrued expenses 961 1,040
Total 6,591 5,812
12. Borrowings
2024 2023
£'000 £'000
Current liabilities
Invoice Financing 1,654 2,079
Non-current liabilities
Revolving Credit Facility 5,002 4,000
Total 6,656 6,079
Invoice Financing Facility
The Group continues to benefit from an invoice financing facility to borrow
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. 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. Availability
under the facility is capped at £5.0m and borrowings bear interest at 2.05%
over SONIA. There are no covenants relating to this facility.
Revolving Credit Facility ('RCF')
On 22 February 2024, the Group renewed and extended its £5.0m RCF facility.
The new facility is for a committed amount of £10.0m and will expire in
February 2027 with the option to extend for a further year and attracts
interest at a 2.85% margin above SONIA. RCF covenants of EBITDA/finance
charges and net debt/EBITDA are in place which tested quarterly. On 31 January
2024, the Company received a waiver in respect of the 31 January covenant
tests because of the delay to a material Middle East order that was
anticipated to be received before the year end.
The movement in the RCF facility during the year was as follows:
2024 2023
£'000 £'000
At 1 February 4,000 -
Proceeds from drawdown of loans 1,002 4,000
At 31 January 5,002 4,000
13 Business Combinations
On 3 January 2024, the Group purchased 100% of the share capital in Airon
Corporation, a specialist respiratory device company based in Florida, USA.
Airon Corporation is recognised as a leading manufacturer of specialist
pneumatic oxygen-powered life support ventilators. These devices have diverse
applications, including use in Magnetic Resonance Imaging (MRI) machines and
transportation for neonates to adults. The company also offers a range of
continuous positive airway pressure (CPAP) devices, crucial in emergency
medicine for supporting children and adult patients.
Details of the consideration paid, the provisional fair value of assets
acquired and liabilities assumed, and goodwill arising are as follows:
Book value Adjustments Fair value
£'000 £'000 £'000
Non-current assets
Intangible assets - 12 12
Right of use assets - 50 50
- 62 62
Current assets
Inventories 430 - 430
Trade and other receivables 217 - 217
Cash and cash equivalents 261 - 261
908 - 908
Total assets 908 62 970
Current liabilities
Trade and other payables (67) - (67)
Lease liabilities - (50) (50)
(67) (50) (117)
Non-current liabilities
Deferred tax liability - (2) (2)
- (2) (2)
Total liabilities (67) (52) (119)
Net assets 841 10 851
Goodwill 328
Total Consideration 1,179
Satisfied by Cash consideration 1,179
Net cash outflow arising on acquisition
Cash consideration 1,179
Cash acquired (262)
917
In the period from acquisition to 31 January 2024, Airon contributed £181,000
of net revenue to the Group and £28,000 of operating profit.
Acquisition-related fees amounting to £69,000 have been excluded from
consideration transferred and have been recognised as an expense in the Income
Statement in the current period.
Goodwill arising on acquisition
Goodwill arose in the acquisition because the consideration paid for the
combination effectively included amounts in relation to the benefit of
expected synergies, in particular associated with the ability to commercialise
the Group's products in the USA. These benefits are not recognised separately
from goodwill because they do not meet the recognition criteria for
identifiable intangible assets.
None of the goodwill is expected to be deductible for tax purposes.
Contingent consideration
Contingent consideration is due to the shareholders of Airon, based on revenue
targets for the 12month period ending on 30 April 2025. The maximum amount
payable is $1,000,000 if the highest revenue target is achieved. Any
contingent consideration due is payable in June 2025. None of the contingent
consideration has been provided for as at 31 January 2024.
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