REG - Surgical Innovations - Final Results
18/04/2024 07:15
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RNS Number : 0504L Surgical Innovations Group PLC 18 April 2024
Surgical Innovations Group plc
("Surgical Innovations", the "Company" or the "Group")
Final Results
Audited results for the year ended 31 December 2023
Record revenue levels achieved
Surgical Innovations Group plc (AIM: SUN), the designer, manufacturer and
distributor of innovative medical technology for minimally invasive surgery,
reports its audited financial results for the year ended 31 December 2023
("FY23"), having achieved record revenue levels for the reporting period, and
provides an update on current trading and outlook for the Group.
Financial highlights:
· Revenues increased 6% to £12.01m (2022: £11.34m) - slightly
exceeding Board expectations, and the largest recorded over a financial year
· Underlying gross margins fell below the target range to 37.9%
following operational and supply chain headwinds (2022: 42.5%; 2023 H1: 40.5%)
· Adjusted EBITDA(1) profit of £0.20m (2022: £0.70m) - in line with
Board expectations
· Adjusted operating loss before tax(1) of £0.69m (2022: £0.01m
profit)
· Adjusted EPS amounted to a loss(1) of 0.05p per share (2022: 0.036p
profit)
· Net cash generated from operations of £0.26m (2022: £0.23m)
· Net cash(2) at end of period of £0.36m (2022: £0.99m)
· Available gross cash resources totalling £2.21m (2022: £3.20m),
including £1.0m undrawn invoice discounting facility
(1) Adjusted EBITDA, adjusted operating (loss)/ profit and adjusted EPS are
stated before deducting non-recurring exceptional costs of £0.01m (2022:
£0.03m) and share based payment costs of £0.03m (2022: £0.04m).
(2) Net cash equals cash less bank debt
Commercial and operational highlights:
· UK sales grew 8% year on year; UK market, including OEM sales,
represents 64% of total revenues
· Comprehensive review of manufacturing operations and supply chain
complete and measures implemented following persistent challenges throughout
2023
· Initiatives to improve operational efficiencies starting to yield
results - further savings / gains being made including inventory reduction
· Substantial growth of 6.6% in Surgical Innovations ("SI") branded
products, especially in the UK (15%)
· Strong sales momentum across several other regions:
o Sales in Europe (+7%) back above pre-pandemic levels
o Strong sales in APAC (+8%), driven by Japan (Yelloport products), with
India gaining traction
· Investment into new product development ongoing, albeit encountering
some registration delays
o In December 2023, successfully launched in the UK new product LogiTube™,
a gastric calibration tube designed to meet specific needs of the obesity
market
· UKCA mark has been attained, and another successful completion of the
Medical Device Single Audit Program ("MDSAP") audit has been achieved
· The Company's Quality Management System, technical files, and
microbiology data have been brought into compliance with EU Medical Device
Regulation ("MDR"), successfully audited by BSI and fully approved.
Current trading and outlook
· Strong sales momentum persists in APAC and Europe growing 8% over the
same period last year
· The Group continues to trade profitably at the adjusted EBITDA level
· Manufacturing has resumed in the OEM segment, despite supply chain
disruptions; efforts are underway to reduce the resultant backlog of orders
· Efforts concentrated on bringing new products to market quickly:
o Rollout of LogiTube™ across Europe to begin in Q2 2024, with US due to
follow later in the year
o The YelloPort Elite range was completed with the launch in March 2024 of
the 5mm XL cutting trocar aimed at the gynaecology market
· Strong order book maintained, providing a stable foundation for
revenue generation and profitable growth
· Regulatory pathway on schedule for the MDR
· New exclusive UK distribution contracts
o Microline Surgical, five-year deal, worth an estimated £9m in sales over
length of contract
o Peters Surgical, three-year deal, sales value of £1.5m estimated over
contract period
· Strategic growth opportunities exist in SI-branded products,
sustainable products, collaboration with Private Healthcare Providers, and new
product development
Chairman of Surgical Innovations, Jonathan Glenn, said: "I am pleased to
report that the Company finished the year with record revenues and entered
2024 with an encouraging order book. While we faced some operational
challenges during the period, recent actions taken by the Board to improve
operational efficiencies, together with continued increasing sales momentum,
give the Board confidence that we have put the business onto a sustainable
growth trajectory for 2024 and beyond.
"The emphasis on sustainability is addressed by the Company's reposable™
technology and we remain well placed to take advantage as the backlog in
surgery is addressed. Strategic product launches further demonstrate the
Group's commitment to innovation and its ability to identify and capitalise on
market opportunities. Furthermore, the promising order book provides a stable
foundation for future profitable growth in revenue generation. The uptick in
activity within the UK market suggests a favourable trajectory, offering
potential opportunities for expansion and market penetration."
This announcement has been made available online at
https://www.sigroupplc.com/investor-centre
(https://www.sigroupplc.com/investor-centre) . An electronic copy of the
Annual Report and Accounts will be uploaded to the Company's website in due
course and a further notification will be made to confirm its availability.
Investor Presentation
David Marsh, CEO, and Jonathan Glenn, Chairman, will provide a live
presentation relating to the final results via the Investor Meet Company
platform at 11.00am BST today. The presentation will also be available for
playback after the event. Investors can sign up to Investor Meet Company for
free and add to meet Surgical Innovations Group plc via:
https://www.investormeetcompany.com/surgical-innovations-group-plc/register-investor
(https://www.investormeetcompany.com/surgical-innovations-group-plc/register-investor)
.
For further information please contact:
Surgical Innovations Group plc www sigroupplc com (http://www.sigroupplc.com/)
David Marsh, CEO Tel: 0113 230 7597
Singer Capital Markets (Nominated Adviser & Broker) Tel: 020 7496 3000
Aubrey Powell / Oliver Platts
Walbrook PR (Financial PR & Investor Relations) Tel: 020 7933 8780 or si@walbrookpr.com (mailto:si@walbrookpr.com)
Paul McManus / Charlotte Edgar Mob: 07980 541 893 / 07884 664 686
About Surgical Innovations Group plc
The Group specialises in the design, manufacture, sale and distribution of
innovative, high quality medical products, primarily for use in minimally
invasive surgery. Our product and business development is guided and supported
by a key group of nationally and internationally renowned surgeons across the
spectrum of minimally invasive surgical activity.
We design and manufacture and source our branded port access systems, surgical
instruments and retraction devices which are sold directly in the UK home
market through our subsidiary, Elemental Healthcare, and exported widely
through a global network of trusted distribution partners. Many of our
products in this field are based on a "resposable" concept, in which the
products are part reusable, part disposable, offering a high quality and
environmentally responsible solution at a cost that is competitive against
fully disposable alternatives.
Elemental also has exclusive UK distribution for a select group of specialist
products employed in laparoscopy, bariatric and metabolic surgery, hernia
repair and breast reconstruction.
In addition, we design and develop medical devices for carefully selected OEM
partners and have also collaborated with a major UK industrial partner to
provide precision engineering solutions to complex problems outside the
medical arena.
We aim for our brands to be recognised and respected by healthcare
professionals in all major geographical markets in which we operate and
provide by development, partnership or acquisition a broad portfolio of cost
effective, procedure specific surgical instruments and implantable devices
that offer reliable solutions to genuine clinical needs in the operating
theatre environment.
Further information
Further details of the Group's businesses and products are available on the
following websites:
www.sigroupplc.com (http://www.sigroupplc.com)
www.surginno.com (http://www.surginno.com)
www.elementalhealthcare.co.uk (http://www.elementalhealthcare.co.uk)
To receive regular updates by email, please contact si@walbrookpr.com
(mailto:si@walbrookpr.com)
Surgical Innovations Group plc
Chairman's Statement
For the year ended 31 December 2023
I am pleased to report that the Company finished the year with record revenues
and entered 2024 with an encouraging order book. While we faced some
operational challenges during the period, recent actions taken by the Board to
improve operational efficiencies, together with continued increasing sales
momentum, give the Board confidence that we have put the business onto a
sustainable growth trajectory for 2024 and beyond.
Market overview
In the current market landscape, healthcare providers continue to contend with
the increasing challenge of reducing the backlog of surgeries, currently still
in excess of 7 million in the UK alone. Increasing supply chain costs and
disruptions also persist, leading to a backorder of key components which in
turn impacts sales. Despite these challenges, as environmental concerns become
increasingly prominent, organisations are recognising the importance of
adopting sustainable practices not only for their own operations but also for
the broader healthcare ecosystem. There is a continued drive amongst
healthcare providers in our key markets to seek more sustainable solutions.
This emphasis on sustainability is addressed by the Company's reposable™
technology and Surgical Innovations remains well placed to take advantage as
the backlog in surgery is addressed.
Financial overview
Revenues were £12.01m, an increase of 6% compared to the previous year (2022:
£11.34m). Additionally, sales demonstrated ongoing momentum, notably
strengthening in the second half of the year, with a significant 13% increase
over the first half (2023H1: £5.65m).
Throughout the financial year, there has been a surge in demand for our
sustainable products, particularly within the UK market, where robust
performance was driven by the sustainability benefits of our products. Our
strategic investments in sales and training specifically tailored for the UK
market have proven to be well-founded. Despite ongoing industrial action
within the NHS, which remains a challenge into 2024, the strong performance of
the UK's business stands out.
In key markets such as Europe, APAC, and the rest of the world (ROW), our
sustainability focus continues to gain momentum and sales have increased year
on year, delivering £1.48m, £1.0m and £0.48m respectively. This trend is
exemplified in Canada, where a change in distributor has revitalised the
sustainability drive, leading to significant conversions among key accounts so
far this year.
However, challenges persist in the US market, where sales were down compared
to the prior financial year (£1.36m in 2023 compared to £1.66m in 2022). In
response, the Company has implemented new initiatives aimed at enhancing our
route to market and unlocking growth opportunities by introducing a programme
of sales training and co-travelling to drive sustainability messages to
healthcare providers. New routes to market for the scissor business, outside
the South Eastern states is being explored and the development of some pricing
are being developed to help drive growth and volume.
Operational and supply chain challenges have adversely affected margins and
efficiencies. Inflationary pressures on crucial components, coupled with
extended lead times and operational processes, as well as regulatory
requirements, have collectively hindered profitability. A project aimed at
mitigating risk and addressing these challenges commenced in Q4 and the
benefits are expected to flow through to the gross margin during 2024.
Inventory increased in the first half of the year to £3.57m. While our
primary focus has been on mitigating exposure to key components, efforts have
been successful in reducing this figure to £2.85m at year end (£3.16m at 31
December 2022).
Operating expenses rose to £4.04m (£3.88m in 2022), primarily attributable
to increased and sustained investment in sales and marketing, as well as
regulatory initiatives. Due to the increased operating expenses and
operational inefficiencies, EBITDA reduced to £0.20m (£0.70m in 2022). This
led to an adjusted loss before tax(1) for the full year of £0.69m,
contrasting with a profit of £0.01m in 2022. Adjusted Loss Per Share amounted
to 0.05 pence (compared to earnings of 0.036 pence in 2022).
To mitigate the increased cost pressures in 2024 the business has implemented
a restructuring programme which has now been completed. This led to a
reduction in headcount of approximately 11%, with overall savings expected to
total approximately £0.45m annually.
Throughout the financial year, the Group generated £0.26m in cash from
operations (2022: £0.23m), supporting ongoing investment activities aimed at
bolstering growth. Capital expenditure was reduced to £0.3m (compared to
£0.7m in 2022). While product innovation remains a key strategic pillar,
total investment in research expenses for the year amounted to 9.2% of revenue
(compared to 10.3% in 2022). The Group's closing net cash(2) balances as of 31
December 2023 amounted to £0.36m (£0.99m 31 December 2022), with available
gross cash resources totalling £2.21m (2022: £3.20m), including an undrawn
invoice discounting facility of £1.0m. The bank continues to provide
continued support, having granted approvals to waive debt service covenant
tests for the remainder of 2023. This ongoing support extends into 2024,
allowing for additional headroom as improvement projects progress and come to
fruition.
(1)Adjusted profit measures and reconciliation to reported measures are set
out in the Operating and Financial Review below
(2)Net cash comprised of cash at Bank of £1.21m (2022; £2.20m) less bank
borrowings £0.85m (2022: £1.21m), excluding leases under IFRS16.
Strategy and development
The Group specialises in the design, manufacture, sale and distribution of
innovative, high quality medical products, primarily for use in minimally
invasive surgery. We design and manufacture and source our branded port access
systems, surgical instruments and retraction devices which are sold directly
in the UK home market through our subsidiary, Elemental Healthcare, and
exported widely through a global network of trusted distribution partners.
Many of our products in this field are based on a "resposable" concept, in
which the products are part re-usable, part disposable, offering a high
quality and environmentally responsible solution at a cost that is competitive
against fully disposable alternatives.
Elemental also has exclusive UK distribution for a select group of specialist
products employed in laparoscopy, bariatric and metabolic surgery, hernia
repair and breast reconstruction. In addition, we design and develop medical
devices for carefully selected OEM partners and have also collaborated with a
major UK industrial partner to provide precision engineering solutions to
complex problems outside the medical arena.
We aim for our brands to be recognised and respected by healthcare
professionals in all major geographical markets in which we operate. Through
internal development, partnership or acquisition, we provide a broad portfolio
of cost-effective procedure specific surgical instruments and implantable
devices that offer reliable solutions to genuine clinical needs in the
operating theatre environment.
Regulatory and new product development
The regulatory pathway remains on schedule for the EU Medical Device
Regulation (MDR), despite a delay in transitioning to MDR, which has
redirected the focus of the notified body to more immediate priorities. The
Company's Quality Management System, technical files, and microbiology data
have been brought into compliance with MDR, successfully audited by BSI and
fully approved. Progress on the product technical files continues, with two
out of three files approved for MDR, and the final file undergoing clinical
review. Additionally, the UKCA mark has been attained, and another successful
completion of the Medical Device Single Audit Program (MDSAP) audit has been
achieved. Despite the ongoing investment posing a burden on the business,
achieving compliance with regulatory standards represents a significant
accomplishment and serves as a formidable barrier to entry for competitors.
Despite registration delays on new products, investment in development of new
products is continuing. The YelloPort Elite range was augmented with the
introduction in key markets of the 5mm Optical in Q4. Meanwhile, supply chain
delays have affected the progress of the Logi Dissect and Grasp instruments,
leading to a revised planned launch in Q2 2024. Additionally, investment in
new product development underpins our commitment to sustainability, with
efforts focused on expediting the process of bringing new products to market
and cost-down initiatives which will enhance the profitability of the
business. In December 2023, we successfully launched LogiTube™, a gastric
calibration tube designed to meet specific needs of the obesity market, in the
UK.
Operational update
The key initiatives aimed at improving efficiencies are beginning to yield
tangible results. The rollback of the four-day workweek has provided immediate
efficiency gains and capacity improvements. Additionally, the drive to reduce
inventory, which had been increased to overcome supply chain challenges, is
proving effective and moving forward should release cash currently tied up in
excess stock.
In recent months, the overhead restructuring to streamline our cost structure
and reallocate resources to focus on strategic priorities has been completed.
The Group has taken a number of steps with relatively low levels of investment
to introduce automation of some key functions that will aid modernising
operations. This will help further improve overhead costs and improve the
consistency in quality control to improve our product offering to customers.
Overall, these initiatives represent a concerted drive to improve operational
efficiencies, maximise productivity, and reduce costs across the organisation.
Board and executive management update
As part of the Company's Board succession planning, two long serving Board
members stepped down from the Board during the financial year. Professor Mike
McMahon, co-founder of Surgical Innovations, resigned at the Annual General
Meeting (AGM) in June. Following this, Nigel Rogers, who had served as Chair
since 2014, stepped down from his position in September and subsequently left
the Board in December. These planned departures facilitated the implementation
of new leadership, and I assumed the role of Chair in September after a short
handover period. Additionally, Keyvan Djamanari joined the Board in December
bringing valuable general management and operational expertise. On behalf of
the Board, I would like to thank Mike and Nigel for the dedicated leadership
and significant contributions during their tenure.
More recently Paul Hardy has announced his intention to step down as an
Independent Non-executive Director at the next AGM having completed over 8
years in the post. The Company will review the composition of the board on an
ongoing basis and will make a further statement in due course. Following
the 19 December 2023
(https://www.londonstockexchange.com/news-article/SUN/directorate-change/16257468)
announcement regarding Charmaine Day's intention to step down from her role
as Chief Financial Officer ("CFO"), the Company confirmed earlier in April
2024 that Charmaine has now left the Group. An experienced interim financial
consultant has been supporting the business since February 2024 and is now
overseeing the finance function which he will continue to do until a permanent
CFO is appointed. The search for a permanent CFO continues and the Company
will review Board composition on an ongoing basis.
Current trading and outlook
The start to the year has seen some impact in the UK from the two prolonged
junior doctors strikes that led to cancellation of elective surgeries, also
the planned reduction in stock levels by NHS Supply Chain reduced order levels
in January and February. The OEM segment has also encountered setbacks due to
supply chain quality disruptions, causing manufacturing delays. Although these
issues took longer to resolve than initially anticipated, manufacturing has
resumed, and efforts are underway to reduce the backlog of orders. Despite
these challenges, the Company maintains a strong order book, reflecting
confidence in the Group's future prospects and a solid foundation for
continued growth and success. The international business has seen the strong
demand for Surgical Innovations branded products continue into 2024, with
sales in key markets - especially APAC and Europe - growing 8% over same
period last year.
Despite a slowdown in product development caused by the MDR, the Company has
identified opportunities, particularly with new product launches targeting the
obesity market. Following the successful launch of LogiTube™ in the UK, we
launched in Europe in April 2024, and this will be followed by a rollout in
the US later in the year. These strategic launches demonstrate our commitment
to innovation and our ability to identify and capitalise on market
opportunities.
Additionally, Elemental has agreed a new five-year exclusive UK distribution
contract with Microline Surgical Inc ("Microline"), Boston, USA. This
continues the relationship with Microline, which started in 2007 and initially
centred on Elemental distributing the Microline portfolio of products in the
UK. The new contract continues the distribution of Microline products by
Elemental for a further five years and, at the current run rate, will be worth
an estimated £9m in sales over the period of the contract. In 2021 the
relationship was expanded under a separate five-year contract lasting into H1
2026, for the distribution of Surgical Innovations' YelloPort access devices
in the USA via Microline's local direct sales team.
Elemental has also signed a further three-year exclusive UK distribution
agreement with Peters Surgical, based in Paris, France with an estimated sales
value in excess of £1.5m over the contract period. It was announced in March
2024 that Advanced Medical Solutions plc (AMS), with whom Surgical Innovations
has a trading relationship dating back to 2014, has entered into an agreement
for the proposed acquisition of Peters Surgical. SI designed, and continues to
manufacture, AMS's Fix8 laparoscopic glue device for the fixation of hernia
mesh.
The renewal of both these agreements is a clear demonstration of the
confidence that suppliers have in the UK Elemental sales team. The strength of
these relationships is further underpinned through Microline and Peters'
existing agreements to distribute Surgical Innovations branded products in the
USA and India respectively.
Furthermore, the promising order book provides a stable foundation for future
profitable growth in revenue generation. The uptick in activity within the UK
market suggests a favourable trajectory, offering potential opportunities for
expansion and market penetration.
Jonathan Glenn
Non-executive Chairman
17 April 2024
Operating and Financial Review
Operational overview
People
Our employees are key to our business strategy, and we aim to attract, retain
and develop talented individuals.
In November 2023, we made the decision to reverse the efficiency initiative of
the four-day working week to enhance productivity. We collaborated closely
with employees to identify a solution that accommodated individual
circumstances while ensuring continued flexibility, alongside yielding
significant cost savings for the future.
Supply chain
Despite some alleviation in supply chain disruptions, challenges persisted
throughout 2023, particularly with extended lead times on components impacting
production efficiency. However, efforts to enhance relations with key
suppliers, including investments in key personnel, have yielded improvement. A
comprehensive review of these efforts will continue into 2024 as part of the
ongoing focus on the operational improvement plan.
Financial overview
Revenue
In 2023, the Group achieved record revenue growth, with an increase of 6.0% to
£12.01m, compared to £11.34m in the prior financial year. Specifically,
revenues from the sale of Surgical Innovations Branded (SI Branded) products
saw robust growth of 6.6% to £5.93m, compared to £5.56m in 2022.
Distribution sales encompass third-party products that complement the
manufactured product portfolio. In 2023, this segment contributed 35.4% of the
revenue, maintaining similar levels as in 2022. Notably, there was growth of
5.2% compared to the previous year.
Overall, OEM sales experienced growth, reaching £1.83m in 2023 compared to
£1.74m in 2022. However, this growth was hindered by external factors in the
supply chain. This has persisted into 2024.
Sales momentum strengthened in the second half of the financial year, with a
significant 13% increase over the first half, which recorded revenues of
£5.65m in 2023.
The UK market has played a substantial role in the Group's overall revenue,
representing 64% of the total. This revenue is predominantly attributed to
third-party distribution products sold by our subsidiary, Elemental Healthcare
Ltd, but also includes OEM sales.
Year-on-year growth is evident in our key markets, with our sustainability
drive gaining momentum. This trend is especially pronounced in Canada, where a
change in distributor has reignited the sustainability drive, leading to
substantial conversions among key accounts.
Nevertheless, challenges persist in the US market, where sales declined from
£1.36m in 2023 to £1.66m in 2022. In response, we are launching new
initiatives aimed at enhancing our route to market and identifying growth
opportunities.
Margins
For margin analysis, the Group has divided the assessment between the
underlying gross margin and the overall contribution margin.
The underlying gross margins fell below the target range, registering at 37.9%
(compared to 42.5% in 2022). This marks a decrease from the reported figures
in the first half of the year, which stood at 40.5% in H1 2023.
The reported gross margin gradually declined to 28.7% during the year,
reflecting the operational challenges the business continued to experience.
Manufacturing productivity and supply chain disruptions impacted profitability
more so in the second half of the year (2023H1:33.0%).
A comprehensive operational review of both manufacturing operations and the
supply chain has been conducted. Measures have already been implemented,
including the removal of the four-day working week and investments in the
supply chain to enhance efficiencies and productivity.
Furthermore, given the mounting pressure on both direct and indirect costs, a
thorough review of absorption rates has been undertaken.
As part of this evaluation, the Group has implemented a restructuring
programme and transitioned from average costing to standard costing in early
2024.The emphasis on continuously improving margins is anticipated to remain a
top priority throughout the current year.
2023 2022
£'000
£'000
Revenue 12,014 11,340
Cost of Sales (7,461) (6,525)
Underlying Gross Margin 4,553 4,815
Underlying Gross Margin % 37.9% 42.5%
Net Cost of Manufacturing(*) (1,105) (893)
Contribution Margin 3,448 3,922
Contribution Margin % 28.7% 34.6%
(*)The net cost of manufacturing reflects the shortfall in recovering both
fixed and variable costs, encompassing both direct and indirect expenses.
Use of adjusted measures
Adjusted KPIs are used by the Board to understand underlying performance and
exclude items which distort comparability, as well as being consistent with
broker forecasts and measures. The method of adjustments is consistently
applied but is not defined in International Financial Reporting Standards
(IFRS) and, therefore, are considered to be non-GAAP (Generally Accepted
Accounting Principles) measures. Accordingly, the relevant IFRS measures are
also presented where appropriate.
Adjusted EBITDA
Adjusted EBITDA serves as a key measure of business performance, offering
insight into the underlying performance of the Group. This metric excludes
items that may distort comparability, such as the charge for share-based
payments, which is a non-cash expense typically excluded from market
forecasts.
EBITDA*
As stated: £0.16m
Share based payments £0.03m
Other expense/non-recurring items £0.01m
Adjusted Measure £ 0.20m
*EBITDA is defined as earnings before interest, taxation, depreciation and
amortisation (including impairment). EBITDA is calculated as operating loss of
£0.60m adding back depreciation £0.48m, amortisation £0.28m and impairment
£nil.
Adjusted EBITDA decreased in 2023 to £0.20m, primarily attributable to
operational challenges, and their impact on available margins, compared to
£0.70m in 2022.
Operating expenses increased to £4.04m in 2023, compared to £3.88m in 2022.
This rise is primarily attributable to increased and sustained investment in
sales and marketing, as well as regulatory initiatives. Other
expensed/non-recurring items amount to £8,000 and primarily relate to M&A
activities.
Financial position
Capital expenditure on tangible assets decreased compared to the prior year,
amounting to £0.28m in 2023 (compared to £0.66m in 2022). The Group remains
committed to reviewing its capital expenditure and will continue to enhance
its investment plans. A review of the business priorities and operational
improvements will guide our focus in this area as we move further into 2024.
Investment in new product development continues £0.41m (2022: £0.42m). The
YelloPort Elite saw enhancements with the launch of the 5mm Optical in key
markets in Q4 2023. However, supply chain delays have impacted the progress of
the Logi Dissect and Grasp instruments, prompting a planned launch in Q2 2024.
Efforts are concentrated on expediting the process of bringing new products to
market, such as the LogiTube™ (gastric calibration tube). Additionally,
further investment is directed towards implementing cost- reduction
initiatives aimed at enhancing the profitability.
As part of the annual review development expenditure underwent impairment
testing, and it was determined that all current projects continue to provide
economic benefit. Therefore, no impairment was recognised in 2023 (compared to
nil in 2022).
A review of the goodwill arising from the acquisition of Elemental Healthcare
Ltd was conducted to assess further impairment. The trading environment in the
UK market was significantly affected by the pandemic throughout 2020 and
continued into 2021, resulting in a cumulative impairment of £2.76m. However,
the UK market has exhibited strong signs of recovery, which has persisted into
2023. With increased visibility on the outlook, the Directors anticipate
improved forecasting of future net inflows on this cash-generating unit (CGU).
Based on this assessment, the recoverable amount of the CGU exceeds its
carrying value by £0.56m.
The presence of several impairment indicators within the business this year
necessitated a broader consideration of asset impairment beyond goodwill. A
review of the CGU of Surgical Innovations Ltd was conducted, and based on the
assessment, the recoverable amount of the CGU exceeds its carrying value by
£0.06m.
Working Capital
Inventory levels saw an increase in the first half of the year, reaching
£3.57m, as a measure to mitigate risks associated with extended lead times.
While our primary focus has been on mitigating exposure to key components,
efforts have been directed towards reducing this figure to £2.85m, compared
to £3.16m in 2022. Inventory holdings remain under review with the aim of
further reducing exposure in 2024.
Trade receivables decreased to £1.58m at the year-end (compared to £1.76m in
2022), with minimal risk associated with overdue balances. Trade creditors
decreased over the same period (2023: £1.17m, 2022: £1.42m). While debtor
days have remained relatively consistent, efforts to reduce creditor days have
improved as we have decreased inventory levels.
Net cash generated from operations amounted to £0.40m in 2023, compared to
£0.49m in 2022. This reflects the improvement in the reduction of inventory
levels, offset by operational challenges.
The Group concluded the year with net cash balances of £0.36m (excluding
leases), compared with an opening net cash balance of £0.99m. The movement
was primarily impacted by profitability. Total gross cash resources available
amounted to £2.21m (compared to £3.20m as of December 31, 2022), including
an undrawn invoice discounting facility of £1.0m.
The bank has continued to provide constructive support and, following prior
discussions in the summer, granted approvals to waive debt service covenant
tests for the remainder of 2023. This ongoing support extends into 2024,
allowing for additional headroom as improvement projects progress and come to
realisation
The Group recorded a corporation tax credit of £0.22m relating to an enhanced
Research and Development claim in respect of the 2022. (2022: credit of
£0.32m relating to 2020 and 2021). The tax charge on Elemental Healthcare
this year has been relieved through Group losses. Overall, the Group continues
to hold substantial tax losses on which it holds a cautious view, and
consequently the Group has chosen not to recognise those losses.
Key Performance Indicators ("KPIs")
The Group considers the key performance indicators of the business to be:
2023 2022 Target Measure
Underlying Gross Profit Margin Gross profit (before net manufacturing cost)/ revenue 37.9% 42.5% >40%
Direct Gross Profit Margin Gross profit / revenue 28.7% 34.6% >40%
Net Cash/(Net Debt)* Cash less debt £0.36m £0.99m N/A
*Net cash is stated after bank borrowings £0.85m (2022: £1.21m), excluding
leases under IFRS16.
Reconciliation of adjusted KPI / measures:
EBITDA* Loss before taxation
As stated £0.16m (£0.73m)
Share based payments £0.03m £0.03m
Other expense/non-recurring items £0.01m £0.01m
Adjusted Measure £ 0.20m (£0.69m)
*EBITDA is defined as earnings before interest, taxation, depreciation and
amortisation (including impairment). EBITDA is calculated as operating loss of
£0.60m adding back depreciation £0.48m, amortisation £0.28m and impairment
£nil.
Earnings per share EPS
Basic EPS (0.06p)
Loss attributable to shareholders (£0.51m)
Add: Share based payments £0.03m
Add: other expense/non-recurring items £0.01m
Adjusted loss attributable to shareholders (£0.47m)
Adjusted EPS (0.05p)
Principal risks and uncertainties
The management of the business and the nature of the Group's strategy are
subject to a number of risks which the Directors seek to mitigate wherever
possible. The principal risks are set out below:
Issue Indication of risk on prior year Risk and description Mitigating actions
Funding risk Increased The Group currently has a mixture of borrowings comprising a balance of Liquidity and covenant compliance is monitored carefully across varying time
£0.85m CBILS arrangement, with additional headroom of an undrawn £1.0m horizons to facilitate short term management and also strategic planning. This
invoice discounting facility. The Group remains dependent upon the support of monitoring enables the management team to consider and to take appropriate
these funders and there is a risk that failure in particular to meet covenants actions within suitable time frames.
attaching to the CBILS could have financial consequences for the Group.
During the year, the Group sought bank support while addressing operational
challenges. The covenant test (EBITDA to debt service) for the periods ending
30 June 2023, 30 September 2023, and 31 December 2023 was waived by the
lender, demonstrating their full support and providing additional headroom in
2024. (Further details available in disclosure note 12)
Margin erosion due to operational challenges Increased The Group encountered operational inefficiencies, resulting in a natural A comprehensive operational review of both manufacturing operations and the
erosion of the gross margin in the second half of the year. supply chain has been conducted. Measures have already been implemented,
including the removal of the four-day working week and investments in the
supply chain to enhance efficiencies and productivity.
A review of absorption rates has been undertaken.
As part of this evaluation, the Group has implemented a redundancy plan and
transitioned from average costing to standard costing in early 2024.The
emphasis on continuously improving margins is anticipated to remain a top
priority throughout the current year.
Shortage of skilled labour Decreased In the early part of the 2022 the Group struggled to attract and retain key Investment in people remains a central focus of our business strategy, aimed
skilled personnel. This has since settled in 2023. at retaining, attracting, and developing talented individuals.
In November 2023, we made the decision to reverse the efficiency initiative of
the four-day working week to enhance productivity. We collaborated closely
with our employees to identify a solution that accommodated individual
circumstances while ensuring continued flexibility, alongside yielding
significant cost savings for the future.
Customer concentration At same level The Group exports to over thirty countries and distributors around the world, The majority of distributors, including the most significant, are well
but certain distributors are material to the financial performance and established and their relationship with the Group spans many years. Credit
position of the Group. As disclosed in note 2 to the financial statements, one levels and cash collection is closely monitored by management, and issues are
customer accounted for 12.5% of revenue in 2023 and the loss, failure or quickly elevated both within the Group and with the distributor.
actions of this customer could have a severe impact on the Group.
Foreign Increased The Group's functional currency is UK Sterling; however, it makes significant The Group monitors currency exposures on an on-going basis and enters into
purchases in Euros and US Dollars. forward currency arrangements where considered appropriate to mitigate the
exchange risk
risk of material adverse movements in exchange rates impacting upon the
business. Euro and US Dollar cash balances are monitored regularly and spot
rate sales into sterling are conducted when significant currency deposits have
The hedging of US Dollars and Euros is typically achieved through sales, accumulated. The accounting policy for foreign exchange is disclosed in
creating a natural hedge. Nevertheless, shifts in the supply chain dynamics accounting policy 1d.
have resulted in a rise in the volume of foreign transactions.
Regulatory At same level As an international business a significant proportion of the Group's products The Group has a dedicated Compliance department which assists product
require registration from national or federal regulatory bodies prior to being development teams with support as required to minimise the risk of regulatory
approval offered for sale. The majority of our major product lines have FDA approval in approval not being obtained on new products and ensures that the Group
the US and we are therefore subject to MDSAP audit and inspection of our operates processes and procedures necessary to maintain relevant regulatory
manufacturing facilities. approvals.
There is no guarantee that any product developed by the Group will obtain and
maintain national registration or that the Group will always pass regulatory
audit of its manufacturing processes. Failure to do so could have severe Whilst there is no guarantee that this will be sufficient, the Group has
consequences upon the Group's ability to sell products in the relevant invested in people with the appropriate experience and skills in this area
country. which mitigates this risk significantly.
The Group has until the end of 2028 to transition the current product MDR transitions are well underway and completed for all but one range. We have
portfolio to fall under the Medical Device Regulations (MDR), currently held an extension to current MDD certificates as approved by the EU for this
under Medical Device Directive (MDD). Time constraints of BSI the notified product.
body are out of our control.
Economic factors At same level Current broader economic factors are influencing inflationary rates, with the As part of the recruitment and retention strategy the Group reviewed the
cost of living across the UK remaining high in 2023. The UK inflation rate market rates and compensated employees accordingly during 2023. Additional
stood at four percent in January 2024, consistent with the previous month. benefits have also been implemented.
Between September 2022 and March 2023, the UK encountered seven months of
double-digit inflation, reaching its peak at 11.1 percent in October 2022 and
gradually decreasing throughout 2023.
The Energy contract was renewed in July 2023, fixed for a year at a higher
tariff than previously agreed. Energy rates are beginning to decrease in 2024.
The pressures on employment costs, energy and raw materials have impacted the
business and continue to do so in 2024.
Raw material purchases undergo review, with economies of scale applied.
Investment in the supply chain will yield benefits through enhanced supplier
relations, while more effective inventory management will mitigate further
Inflationary pressures persist into the current year, affecting both raw exposure.
materials and labour costs, exacerbated by a 10% increase in the National
Living Wage in early 2024.
Increases in the cost of goods are mitigated and passed on where possible.
Supply chain delays in raw materials and finished goods have impacted the
business during 2023, although not to the extent experienced in the previous
year.
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023 2022
Notes £'000 £'000
Revenue 2 12,014 11,340
Cost of sales 2 (8,566) (7,418)
Gross profit 3,448 3,922
Other operating expenses 2 (4,044) (3,881)
Operating (loss) /profit (596) 41
Finance costs (132) (98)
Loss before taxation (728) (57)
Taxation credit 219 321
(Loss)/profit and total comprehensive Income (509) 264
(Loss)/profit per share, total and continuing
Basic (0.06p) 0.03p
Diluted 3 (0.06p) 0.03p
The Consolidated statement of comprehensive income above relates to continuing
operations.
(Loss)/profit and total comprehensive income relate wholly to the owners of
the parent Company.
Consolidated statement of changes in equity
for the year ended 31 December 2023
Share Share Capital Merger Retained
capital premium reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 January 2022 9,328 6,587 329 1,250 (6,830) 10,664
Share based payment - - - - 35 35
Total - transactions with owners - - - - 35 35
Profit and total comprehensive income for the period - - - - 264 264
Balance as at 31 December 2022 9,328 6,587 329 1,250 (6,531) 10,963
Share based payment - - - - 30 30
Total - transactions with owners - - - - 30 30
Loss and total comprehensive income for the period - - - - (509) (509)
Balance as at 31 December 2023 9,328 6,587 329 1,250 (7,010) 10,484
The merger reserve arose from a business combination in 2017
Consolidated balance sheet
at 31 December 2023
2023 2022
Notes £'000 £'000
Assets
Non-current assets
Property, plant, and equipment 898 858
Right-of-use assets 804 918
Intangible assets 4 6,529 6,403
8,231 8,179
Current assets
Inventories 2,854 3,162
Trade and other receivables 2,023 2,055
Cash at bank and in hand 1,212 2,199
6,089 7,416
Total assets 14,320 15,595
Equity and liabilities
Equity attributable to equity holders of the parent company
Share capital 7 9,328 9,328
Share premium account 6,587 6,587
Capital reserve 329 329
Merger reserve 1,250 1,250
Retained earnings (7,010) (6,531)
Total equity 10,484 10,963
Non-current liabilities
Borrowings 5 502 825
Dilapidation provision 165 165
Lease liability 549 722
1,216 1,712
Current liabilities
Trade and other payables 6 1,632 1,886
Accruals 377 420
Borrowings 352 382
Lease liability 259 232
2,620 2,920
Total liabilities 3,836 4,632
Total equity and liabilities 14,320 15,595
Consolidated cash flow statement
for the year ended 31 December 2023
2023 2022
Notes £'000 £'000
Cash flows from operating activities
(Loss)/Profit after tax for the year (509) 264
Adjustments for:
Taxation (219) (321)
Finance costs 131 98
Depreciation of property, plant and equipment 244 167
Amortisation and impairment of intangible assets 4 279 232
Depreciation Right-of-Use assets 234 188
Share-based payment charge 30 35
Foreign exchange 27 (82)
Decrease/(Increase) in inventories 308 (197)
Decrease/(Increase) in trade and other receivables 34 (360)
(Decrease)/Increase in payables 6 (299) 204
Cash generated from operations 260 228
Taxation received 219 321
Interest paid (79) (63)
Net cash generated from operating activities 400 486
Cash flows from investing activities
Payments to acquire property, plant and equipment (284) (659)
Development cost additions (404) (419)
Net cash used in investing activities (688) (1,078)
Repayment of bank loan - (375)
Repayment of CBILS 5 (353) (294)
Repayment of lease liabilities (319) (266)
Net cash used in financing activities (672) (935)
Net decrease in cash and cash equivalents (960) (1,527)
Cash and cash equivalents at beginning of year 2,199 3,644
Effective exchange rate fluctuations on cash held (27) 82
Cash and cash equivalents at end of year 1,212 2,199
Notes to the consolidated financial statements
1. Group accounting policies under IFRS
(a) Basis of preparation
Surgical Innovations Group PLC (the "Company") is a public AIM listed company
incorporated, domiciled and registered in England in the UK. The registered
number is 02298163 and the registered address is Clayton Wood House, 6 Clayton
Wood Bank, Leeds, LS16 6QZ.
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards and with the requirements of the
Companies Act 2006 and as applicable to companies reporting under IFRS. The
preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The financial statements have been prepared under the historical
cost convention, are presented in Sterling and are rounded to the nearest
thousand.
Going concern
Notwithstanding the losses recorded in the year, the Directors continue to
adopt the going concern basis in the preparation of the financial statements.
In the current year we have taken actions to address the cost base, reducing
headcount by11% with further efficiencies identified in the business both from
a manufacturing perspective to increase margin and also to take out further
costs if required. In addition, cash headroom has remained steady during Q1
with the invoice discounting facility continuing to be unused whilst pipeline
sales remain strong despite backlog caused by component availability.
The Directors have prepared forecasts for the period to December 2025 based on
a full evaluation of the Group's trading activities and costs base, sensitized
to reflect a rational judgement of the level of inherent risk.
To fortify the integrity of our projected forecasts, the Group has secured
additional backing from the bank through the modification of covenant tests
for the fiscal year 2024. This adjustment grants us additional leeway,
facilitating continued progress in enhancing profitability within our
operations. (Covenant information is provided at disclosure note 12).
Financial headroom as at 31 December 2023 was £2.21m with the invoice
discounting facility remaining undrawn.
The Board is satisfied that there is ample headroom including testing any
sensitivities under reasonably possible scenarios, and the Directors conclude
that it continues to be appropriate to prepare the Annual Report and Accounts
on a going concern basis.
2. Segmental reporting
Information reported to the Board, as Chief Operating Decision Makers, and for
the purpose of assessing performance and making investment decisions is
organised into three operating segments. The Group's operating segments under
IFRS 8 are as follows:
SI Brand - the research, development, manufacture and distribution of SI branded
minimally invasive devices
OEM - the research, development, manufacture and distribution of minimally invasive
devices for third party medical device companies through either own label or
co-branding. As well as Precision Engineering, the research, development,
manufacture and sale of minimally invasive technology products for precision
engineering applications
Distribution _ Distribution of specialist medical products sold through Elemental Healthcare
Ltd
The measure of profit or loss for each reportable segment is gross margin less
amortisation of product development costs. Assets and working capital are
monitored on a Group basis, with no separate disclosure of asset by segment
made in the management accounts, and hence no separate asset disclosure is
provided here. The following segmental analysis has been produced to provide a
reconciliation between the information used by the chief operating decision
maker within the business and the information as it is presented under IFRS.
SI Brand Distribution OEM Total*
£'000
£'000
Year ended 31 December 2023 £'000 £'000
Revenue 5,925 4,255 1,834 12,014
Expenses (4,862) (2,560) (1,423) (8,845)
Result
Segment result 1,063 1,695 411 3,169
Unallocated expenses (3,765)
Other Income -
(Loss) from operations (596)
Finance income -
Finance costs (132)
(Loss) before taxation (728)
Tax credit 219
Loss for the year (509)
*There were no revenues transactions between the segments during the year
Included within the segment/operating results are the following significant
non-cash items:
SI Brand Distribution OEM Total
Year ended 31 December 2023 £'000 £'000 £'000 £'000
Amortisation of intangible assets 279 - - 279
Impairment of intangible assets - - - -
Unallocated expenses for 2023 include sales and marketing costs (£633,000),
research and development costs (£1,099,000), central overheads (£869,000),
Direct (Elemental Healthcare) sales & marketing overheads (£1,126,000),
share based payments (£30,000), Other expensed/Non-recurring (£8,000).
SI Brand Distribution OEM Total*
£'000
£'000
Year ended 31 December 2022 £'000 £'000
Revenue 5,557 4,044 1,739 11,340
Expenses (4,223) (2,410) (1,017) (7,650)
Result
Segment result 1,334 1,634 722 3,690
Unallocated expenses (3,649)
Other income
(Loss) from operations 41
Finance income -
Finance costs (98)
(Loss) before taxation (57)
Tax charge 321
(Loss) for the year 264
*There were no revenues transactions between the segments during the year
Included within the segment results are the following items:
SI Brand Distribution OEM Total
Year ended 31 December 2022 £'000 £'000 £'000 £'000
Amortisation of intangible assets 232 - - 232
Impairment of intangible assets - - - -
Unallocated expenses for 2022 include sales and marketing costs (£577,000),
research and development costs (£1,164,000), central overheads (£745,000),
Direct (Elemental Healthcare) sales & marketing overheads (£1,096,000),
share based payments (£35,000), Other expensed/Non-recurring (£32,000).
Disaggregation of revenue
The Group has disaggregated revenues in the following table:
Year ended 31 December 2023 SI Brand Distribution OEM Total
£'000 £'000 £'000 £'000
United Kingdom 1,935 4,255 1,508 7,698
Europe 1,478 - - 1,478
US 1,032 - 326 1,358
APAC(1) 998 - - 998
Rest of World 482 - - 482
5,925 4,255 1,834 12,014
Year ended 31 December 2022 SI Brand Distribution OEM Total
£'000 £'000 £'000 £'000
United Kingdom 1,683 4,044 1,315 7,042
Europe 1,377 - - 1,377
US 1,240 - 424 1,664
APAC(1) 926 - - 926
Rest of World 331 - - 331
5,557 4,044 1,739 11,340
(1)APAC-Asia Pacific
Revenues are allocated geographically on the basis of where revenues were
received from and not from the ultimate final destination of use. During 2023
£1,503,000 (12.5%) of the Group's revenue depended on one distributor in the
OEM segment (2022: £933,000 (8.2%)), and £868,000 (7.2%) in the SI Brand
segment (2022: £921,000 (8.1%).
Sales of goods were £12,014,000 (2022: £11,306,000) and sales relating to
services in the UK were £Nil (2022: £34,000).
3. (Loss)/profit per ordinary share
Basic (loss)/profit per ordinary share
The calculation of basic earnings per ordinary share for the year ended 31
December 2023 was based upon the loss attributable to ordinary shareholders of
£509,000 (2022: profit of £264,000) and a weighted average number of
ordinary shares outstanding for the year ended 31 December 2023 of 932,816,177
(2022: 932,816,177).
Diluted (loss)/profit per ordinary share
The loss incurred by the Group means that the effect of any outstanding
options would be anti-dilutive and is ignored for the purposes of the diluted
loss per share calculation. The calculation of diluted earnings per ordinary
share for the year ended 31 December 2022 was based upon the profit
attributable to ordinary shareholders of £264,000 and a weighted average
number of ordinary shares outstanding for the year ended 31 December 2022 of
935,945,943.
Adjusted (loss)/profit per ordinary share
The calculation of adjusted earnings per ordinary share for the year ended 31
December 2023 was based upon the adjusted loss attributable to ordinary
shareholders (profit before non-recurring costs and amortisation and
impairment costs relating to the acquisition of Elemental Healthcare,
impairment of capitalised development costs and share based payments) of
£471,000 (2022: profit of £331,000) and a weighted average number of
ordinary shares outstanding for the year ended 31 December 2023 of 932,816,177
(2022: 932,816,177).
No. of shares used in calculation of earnings per ordinary share ('000s)
2023 2022
No. of Shares No. of Shares
Basic earnings per share 932,816 932,816
Dilutive effect of unexercised share options 850 3,129
Diluted earnings per share 933,666 935,945
4. Intangible assets
Capitalised development costs Single use product knowledge transfer Exclusive Supplier Agreements
Goodwill Total
£'000 £,000 £'000 £'000 £'000
Cost
At 1 January 2022 14,147 225 8,180 8,180 1,799 24,351
Additions 419 - - - 419
At 1 January 2023 14,566 225 8,180 1,799 24,770
Additions 404 - - - 404
At 31 December 2023 14,970 225 8,180 1,799 25,174
Accumulated amortisation
At 1 January 2022 (13,354) (225) (2,757) (1,799) (18,135)
Charge for the year (232) - - - (232)
At 1 January 2023 (13,586) (225) (2,757) (1,799) (18,367)
Charge for the year (278) - - - (278)
At 31 December 2023 (13,864) (225) (2,757) (1,799) (18,645)
Carrying amount
At 31 December 2023 1,106 - 5,423 - 6,529
At 31 December 2022 980 - 5,423 - 6,403
At 1 January 2022 793 - 5,423 - 6,216
Goodwill and intangibles are allocated to the cash generating unit (CGU) that
is expected to benefit from the use of the asset.
Capitalised development costs
Capitalised development costs represent expenditure incurred in developing new
products that fulfil the requirements met for capitalisation as set out in
paragraph 57 of IAS38. These costs are amortised over the future commercial
life of the product, commencing on the sale of the first commercial item, up
to a maximum product life cycle of ten years, and taking account of expected
market conditions and penetration.
Capitalised development expenditure was tested for impairment, it was decided
that the current projects all continue to provide future economic benefit and
therefore no impairment was recognised (2022: £Nil).
Goodwill
The Group tests goodwill at each reporting date for impairment and whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. The recoverable amount of a cash generating unit (CGU) is
determined based on value in use calculations. These calculations use cash
flow projections based on five-year financial budgets approved by management.
Cash flows beyond the five-year period are extrapolated using estimated long
term growth rates.
An impairment review is carried out annually for goodwill. Goodwill arose on
the acquisition of Elemental Healthcare Limited in 2017 and is related to both
the Distribution and SI Brand segments of the Group. Elemental Healthcare
Limited is considered to be a separate cash-generating unit (CGU) of the Group
whose recoverable amount has been calculated on a value in use basis by
reference to discounted future cash flows over a five-year period plus a
terminal value. Principal assumptions underlying this calculation are the
growth rate into perpetuity of 1.5% (2022:1.5%) and a pre-tax discount rate of
16.3% (2022:15.7%) applied to anticipated cash flows. In addition, the value
in use calculation assumes a gross profit margin of 41.8% (2022:43.3%) using
past experience of sales made and future sales that were expected at the
reporting date based on anticipated market conditions.
The trading environment in the UK market was significantly impacted by the
pandemic throughout 2020 and 2021, which impacted the cumulative impairment by
£2.7m. The UK market since has shown strong signs of recovery and with
greater visibility on the outlook the directors anticipate improved
forecasting of future net inflows on this CGU and on this basis, the
recoverable amount of the CGU exceeds its carrying value by £1.9m.
5. Borrowings
2023 2022
Bank Loan £'000 £'000
Current liabilities 352 382
Non-current liabilities 502 825
Lease liabilities
Current liabilities 259 232
Non-current liabilities 549 722
1,662 2,161
In March 2022, the Group refinanced its existing debt with Yorkshire bank
consisting of the following:
• Extension to the CBILS of £1.5m repayable in May 2026, interest is calculated
at rate of 2.94% repayable monthly over the Bank of England base rate. Monthly
instalments are £0.029m.
• Covenants attached to the CBILS comprise of EBITDA to debt servicing costs at
at a minimum of 1.25x.
• Additional headroom with an Invoice Discounting facility of £1.0m across the
Group, 2.5% on margin with a maximum of nominal administration fee of a
maximum of £0.018m if not utilised. As at the date of this announcement this
facility remains undrawn.
• The bank waived the tests for the following periods during 2023: 30 June 2023,
30 September 2023, 31 December 2023 to provide the business with headroom to
focus on operational efficiencies.
• In March 2024, the bank extended its support by resetting the testing
parameters. They excluded 31 March 2024 and initiated the rolling test from
June 2024, based on EBITDA being 1x the debt service. Subsequent testing
periods included September 2024 (1x, on a 6-month rolling basis), December
2024 (1.25x, on a 9-month rolling basis), and then on a 12-month rolling basis
thereafter.
Changes in liabilities arising from financing activities Non-current loans and borrowings Current loans and borrowings Total
At 1 January 2022 - 1,880 1,880
Cash flows for repayment of bank loan - (375) (375)
Cash flows for refinance-CBILS (294) (294)
Transfer between non-current and current 825 (825) -
Interest paid in the period (57) (57)
Interest accrued in the period - 53 53
At 31 December 2022 825 382 1,207
Cash flows for repayment of CBILS - (353) (353)
Transfer between non-current and current (352) 352 -
Interest paid in the period - (79) (79)
Interest accrued in the period 79 79
At 31 December 2023 473 381 854
6. Trade and other payables
2023 2022
£'000 £'000
Trade payables 1,169 1,420
Other tax and social security 218 172
Other payables 245 294
1,632 1,886
The Group and Company's financial liabilities have contractual maturities
(including interest payments where applicable) which are summarised below.
Amounts due in less than 1 year Amounts due in 2-5 years Amounts due in 5-10 years Total financial liabilities
As at 31 December 2023 £'000 £'000 £'000 £'000
Trade payables 1,169 - - 1,169
Other payables 245 - - 245
Bank borrowings - Current 352 - - 352
Bank borrowings - Non-current - 502 - 502
1,766 502 - 2,268
Amounts due in less than 1 year Amounts due in 2-5 years Amounts due in 5-10 years Total financial liabilities
As at 31 December 2022 £'000 £'000 £'000 £'000
Trade payables 1,420 - - 1,420
Other payables 294 - - 294
Bank borrowings - Current 382 - - 382
Bank borrowings - Non-current - 825 - 825
2,096 825 - 2,921
7. Share Capital
Shares in issue reconciliation (Authorised, allotted, called up and fully
paid)
2023 2022
Opening no of shares in issue 932,816,177 932,816,177
Issued in satisfaction of share options exercised - -
Closing number of shares in issue 932,816,177 932,816,177
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