REG - Surgical Innovations - Half-year Report
21/09/2022 07:01
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RNS Number : 0622A Surgical Innovations Group PLC 21 September 2022
Surgical Innovations Group plc
("SI", the "Group" or "the Company")
Half-year Report
Interim results for the six-months ended 30 June 2022
Surgical Innovations Group plc (AIM: SUN), the designer, manufacturer and
distributor of innovative medical technology for minimally invasive surgery,
reports its unaudited financial results for the six-month period ended 30 June
2022 ("2022 H1") and provides an update on current trading and the outlook for
the Group's business.
Commercial and operational highlights:
· Geographical expansion and sustainability programmes providing
further opportunities for growth
· Investment in Sales & Marketing, with a focus of driving forward
new initiatives in key markets
· Strategies to address the challenges of retaining and attracting key
personnel are having a positive impact
· Further investment in key processes and people to ensure that the
Company remains on track for Medical Device Regulations (MDR)
· Capex on equipment to build and enhance manufacturing capabilities
and efficiencies
· Maintaining higher than normal levels of inventory and dual sourcing
of materials and parts to mitigate supply chain disruptions
Financial highlights(1):
· Revenues increased 28% on prior year to £5.41m and amounted to 106%
of the comparable pre-pandemic period in 2019 (H1 2021: £4.22m, 2019 H1:
£5.10m(1))
· Strong sales in the UK & APAC (excluding OEM) region,
particularly Japan, providing significant growth in H1, up 39% on prior year
(2022 H1: £3.17 m, 2021 H1: £2.28m, 2019 H1: £2.42m) and providing a good
foundation for growth
· Commercial gross margins improving at 45.3% compared to 2021 H1
despite inflationary pressures (2021 H1: 42.36%; 2019 H1: 44.5%(1))
· Adjusted EBITDA(2)profit of £0.29m (2021 H1: £0.21m; 2019 H1:
£0.65m(1))
· Small adjusted operating loss(2) of £0.01m (2021 H1: £0.15m loss;
2019 H1: £0.22m profit(1))
· Adjusted EPS amounted to a loss(2) of 0.004p per share (2021 H1: loss
of 0.004p; 2019 H1: earnings of 0.023p per share(1))
· Cash generated from operations at £0.22m (full year 2021: £0.53m
cash used)
· Net cash(3) at end of period of £1.53m (as at 31 Dec 2021: £1.76m)
1 Comparative information is shown for the six months ended 30
June 2021, except where otherwise stated. Further comparative information
for the six months ended 30 June 2019 has been included to provide a
comparison with pre-pandemic trading.
2 Adjusted EBITDA, adjusted operating (loss)/ profit and adjusted
EPS are stated before deducting non-recurring exceptional costs of £0.03m
(2021 H1: nil, 2019 H1: £0.1m), amortisation and impairment of intangible
acquisition costs of £nil (2021 H1: nil, 2019 H1: £0.18m) and share based
payment costs of £0.02m (2021 H1 £0.01m, 2019 H1: £0.10m).
3 Net cash equals cash less bank debt and HP leases only.
Current Trading and Outlook
· Revenues have exceeded management expectations in the UK and are
largely recovering towards pre-pandemic levels in most markets
· Group revenues for the first two months of the second half are
approximately 113% above the level seen in the comparable period last year,
and 116% ahead of that seen for the same period in 2019 (pre-pandemic), with
an increased level of backorders at £0.7m
· The Group continues to trade profitably at the level of adjusted
EBITDA, notwithstanding an increasing overhead base
· Further opportunity in UK hospitals is expected as the
well-documented increasing backlogs begin to be addressed - sales backlog,
forward order book and new conversions are expected to provide growth and
further underpin sustainability strategy
· Growth in new markets, along with new collaborative partnerships, are
anticipated for the remainder of 2022 and beyond
· Strong sales in the UK and Japan provide a good foundation for growth
· Planned investment in new product development, facilitating key
product launches in the second half of the current financial year
Chairman of SI, Nigel Rogers, said:
"Revenues in the period to 31 August 2022 have continued to grow and
strengthen, significantly increasing by approximately 113% above the level
achieved in the prior year, and around 116% ahead of the corresponding
pre-pandemic period of 2019, despite being suppressed by a large sales
backorder of £0.7m which is to be shipped in the second half of the year.
Production activity has been challenging with extended supply chain lead times
and a reduction of skilled labour, but investment in capital expenditure and
people should increase the capacity and improve efficiency in the second half
of the year. The increasing overhead base has put pressure on the business,
but the Group remains profitable at adjusted EBITDA, and this will continue to
improve with further growth opportunities.
"The momentum in UK and Japan is indicative of the successful investment in
Sales and Marketing which has been driving our sustainability initiatives.
With further growth opportunities in the second half of the year as major
markets continue to recover, and the launch of new products into new and
existing key markets, the prospects are certainly encouraging."
For further information please contact:
Surgical Innovations Group Plc www.sigroupplc.com (http://www.sigroupplc.com)
David Marsh, CEO Tel: +44 (0)113 230 7597
Charmaine Day, CFO
Walbrook PR Tel: +44 (0)20 7933 8780 or si@walbrookpr.com (mailto:si@walbrookpr.com)
(Financial PR & Investor Relations)
Paul McManus / Lianne Applegarth Mob: +44 (0)7980 541 893 / +44 (0)7584 391 303
Singer Capital Markets +44 (0)20 7496 3000
(Nominated adviser &Broker)
Aubrey Powell / Rachel Hayes
About Surgical Innovations Group plc
Strategy
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. We have a number of long-term
relationships with key partner including the design, development and
manufacture of the FIX8 device for AMS and more recently for a new
collaboration with a Robotic company, CMR Surgical ('CMR') to design and
develop and access device for their unique instrumentation. We have in the
past worked with and continue to maintain a relationship with a major
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.
Operations
The Group currently employs approximately 100 people across one site in the
UK. Elemental Healthcare was acquired by the Group on 1 August 2017 and
provides direct sales representation in the UK home market and a range of
third-party products for UK distribution. Elemental was originally based in
Berkshire and was successfully relocated in 2021, so all operations are now
located at the Leeds site.
Further information
Further details of the Group's businesses are available on websites:
www.sigroupplc.com (http://www.sigroupplc.com)
www.surginno.com (http://www.surginno.com) , and
www.elementalhealthcare.co.uk (http://www.elementalhealthcare.co.uk)
Investors and others can register to receive regular updates by email at
si@walbrookpr.com (mailto:si@walbrookpr.com)
Surgical Innovations Group plc
Chairman's Statement
For the six-month period ended 30 June 2022
Financial Overview
Trading in the first half of the year increased 28% to £5.41m on the
comparable period last year (2021 H1: £4.22m) and more encouragingly, revenue
growth exceeded pre-pandemic levels, with Group revenues at 106% of the
comparable pre-Covid period (2019 H1: £5.10m).
Demand in the UK market continues to be strong: SI branded products were
£0.68m (2021 H1: £0.58m, 2019 H1: £0.75m), and UK distribution sales were
£2.01m (2021 H1: £1.30m, 2019 H1: £1.49m), up a combined 43% on the prior
corresponding period and achieving robust growth of 120% against the pre-Covid
comparable in 2019. The impetus on the sustainability advantages of our
Resposable(TM) product ranges is driving business wins. This range is
well-placed for further growth as the NHS focus on the implementation of its
'Net Zero' commitment on sustainability and implement measures to address the
increasing backlog of patients on waiting lists.
First half revenues in Europe were 2% above the level achieved last year at
£0.59m (2021 H1: £0.57m) and around 91% of pre-Covid levels (2019 H1:
£0.65m). While some countries have been slower to recover, with focus and
investment in Sales and Marketing and an emphasis on the SI product range, we
are seeing underlying sales growth rates in other countries which are
exceeding internal expectations. New product launches during Q4 in key
countries will provide opportunity for further growth.
Revenues from the US for SI branded products in the first half decreased to
£0.59m (2021 H1: £0.75m, 2019 H1: £0.77m), this in part due to substantial
stocking orders in the first quarter of 2021. Restricted hospital access
affected evaluations at the beginning of the year, increasing activity is
being seen in H2 and expected to continue at a level in line with expectations
for the year. Further investment into the appointment of the international
heads has provided emphasis on supporting the dealer network, and in
conjunction with new product launches, further sales training and marketing
material will be rolled out across the network in the second half of this
year.
The APAC region continues to generate strong revenue growth to £0.48m, a 19%
increase on the comparable period (2021 H1: £0.41m) and surpassing levels
seen in the first half of 2019 (2019 H1: £0.17m). We continue to work closely
with our Japanese distributor as they gain market share. The focus on
sustainability continues to gain traction here also, initial stocking orders
have been placed for launching the Logic reusable instrument range which are
expected to be shipped in the final quarter of 2022.
OEM revenues for the first half more than doubled to £0.92m (2021 H1:
£0.45m), nearly recovering to pre-Covid levels (2019 H1: £1.01m). This
reflects the general recovery trend experienced by our long-standing key OEM
partners in the medical sector, but also the supply chain challenges faced in
the first half of the year which have started to improve in Q3. New
collaborations with CMR Surgical have been successful; the initial stocking
order for YelloPort Elite (TM) was launched in the second quarter of this year
and we expect momentum to continue in the second half with a strong orderbook
from our partners AMS, CMR and Becton Dickinson/ Carefusion.
Commercial or underlying margins remained within target range at 45.3%, with
inflationary pressures from material suppliers mitigated and passed on where
possible. However, the reported gross margin of 34.6% (2021: H1 33.9%, 2019:
H1 43.1%), which includes the net cost of manufacturing, reflects the
increased inflationary challenges on labour costs. In addition, and as a
consequence of the shortage of skilled labour and extended supply chain lead
times, manufacturing productivity reduced and costs were under-recovered. To
mitigate this partially, inventory levels have been maintained at higher
levels; as at 30 June 2022 £3.04m (31 Dec 2021: £2.97m).
Other operating expenses increased to £1.93m (2021 H1: £1.62m), due to
investment in Sales and Marketing and Regulatory functions, combined with
increased employee remuneration as a result of inflationary pressures.
Excluding the effects of exceptional items and share based payments,
operating expenses increased by £0.28m to £1.88m (2021 H1: 1.60m). Despite
these increases, the Group is trading at an adjusted EBITDA profit for the
period of £0.29m (2021 H1: £0.21m). The full effect of these additional
costs will impact the second half of the year but the Group will continue to
be profitable at the adjusted EBITDA level.
Adjusted operating loss before tax for the period (before exceptional items,
acquisition related costs and share based payment charges) was close to
breakeven at £0.01m (2021 H1: loss of £0.15m, 2019 H1: profit of £0.22m).
The reported net loss before taxation amounted to £0.11m against a net loss
before taxation of £0.22m in the first half last year.
The Group reported a tax credit in the period of £0.09m (2021 H1: credit of
£0.13m) which related to an enhanced research and development ("R&D")
claim for 2020. We anticipate submitting the claim for 2021 before the end of
this year. In terms of deferred tax, the Group continues to hold substantial
corporation tax losses on which management takes a cautious view, and
consequently, the Group does not recognise a corresponding deferred tax
asset.
Adjusted net earnings per share amounted to 0.004p (2021 H1: £0.004p, 2019
H1: loss of earnings 0.023p). The net total comprehensive income for the
period amounted to a loss of £0.01m (2021 H1: loss of £0.09m, 2019 H1: loss
of £0.30m).
In March 2022, the Group refinanced its borrowing facilities, and as a result,
the £1.5m Coronavirus Business Interruption scheme (CBILS) loan was extended
to be repayable in May 2026. In addition, to replace the existing loan and RCF
facility, an invoice discounting facility of £1.0m was agreed. This facility
provides headroom for the Group and remains undrawn to date.
For the first half of 2022, cash generated from operations was £0.22m (full
year 2021: £0.53m used, 2021 H1: £0.17m used). After continued investment
into R&D of £0.17m (full year 2021: £0.45m, 2021 H1: £0.18m), capital
expenditure of £0.34m (full year 2021: £0.21m, 2021 H1: £0.17m) and the
refinancing of the existing bank loan, the Company had available cash balances
including the unused invoice discounting facility of £1.0m totalling £4.04m
(31 Dec 2021 £4.04m). Financial covenants have been complied with in full and
continue to be tested on a quarterly basis. The Board is satisfied that the
current financial position and borrowing arrangement provide ample headroom to
support the business.
Market overview and new product development opportunities
Strong substantial sales growth is evident in the UK, underpinned by our
sustainability and commercial advantages relative to single use plastics,
which have resulted in multiple hospital trials and conversions. In one case
study for a UK NHS Trust, we have mapped a four-month break-even point for the
Trust, with an 85% reduction in plastic waste and 6.4 tonnes of carbon dioxide
emissions saved. Despite this, the UK NHS is suffering from a gap in its
workforce which is impacting the substantial and ever-growing backlog of
elective surgery, diagnosis and treatment across a broad range of procedures.
The UK Government and its agencies are taking steps to streamline processes
and provide additional funding to deal with this issue, including using
private hospitals for capacity as one of the solutions. In addition, record
NHS waiting times appear to be increasing the number of people paying for
private care. As part of the investment into Sales and Marketing, we have a
restructured our resource and now have an experienced and dedicated sales head
to support this area of activity and take advantage of the pent-up demand.
Globally, markets are still recovering from Covid at different rates. In the
US and EU specifically, restrictions have impacted hospital activity levels in
Q1 and evaluations have been pushed back as hospital access was limited.
However, sales activity continues, and recovery levels are getting closer to
those seen in the pre pandemic period of 2019. The Group's investment in Sales
and Marketing is driving our sustainability messaging initiatives and traction
continues. Having a dedicated resource to focus more on training and
supporting key distributors is expected to drive future growth, with training
of the US network being rolled out in H2.
Over the past 18 months, one of our key focuses has been on new product
development, and we are delighted to fully launch in the US and key EU markets
in H2 with the YelloPort™Elite 5mm ('access device') and the Optical Trocar.
In the US, these products will see a full launch in Q4 through the Microline
sales team. Adding enhanced sustainable products to the range in H2 2023 will
further bolster the range and growth potential in these markets.
In Germany, where there is a significant installed base of CMR customers, we
have been developing a partnership with a specialist distribution company and
anticipate initial evaluations this autumn.
In the APAC region, specifically Japan, the market continues to show strong
and significant growth, and this is set to continue as we extend the
sustainable product portfolio and launch the Logic reusable instrumentation
line, along with the YelloPort™Elite 5mm and Optical Trocar, towards the end
of the year.
Underlying revenues in the OEM segment, with which we have long standing
relationships, continue to be somewhat suppressed, not by demand, but due to
supply chain constraints. These issues have hindered sales in the first half
of the year, but have improved in Q3. New collaborations with CMR Surgical
(CMR) continue to strengthen and grow, with their first significant order
placed in Q2. Further substantial orders have been placed for the second half
of the year which give us opportunities to expand into new markets. For
example we are building a new partnership in India, leveraging the CMR
relationship, and expect to complete product registration and training in Q4.
The momentum with the CMR partnership is set to continue throughout the
remainder of the year and beyond. In addition, the Group intends to leverage
its instrument expertise and exploit opportunities within robotics so we can
extend the product range offered.
Operational and Regulatory activities
This year has brought challenges in retaining key skilled manufacturing
personnel, with employee turnover at its highest level for a number of years,
combined with the well publicised challenges of attracting new staff. To
address these issues, the Company has introduced a number of initiates with
the implementation of a four-day working week trial, which started at the
beginning of August, being the most significant. The trial is supported by the
UK pilot programme and has been carefully managed to ensure five-day
continuity of service and support. The scheme is set to benefit from improved
productivity levels from improved employee wellbeing. Efficiency initiatives
are also being rolled out to ensure that the trial remains operationally
effective. In addition, financial packages were increased to be comparable
with market rates which have been exacerbated by the current inflationary
pressures. Since the trial has started, there have been successful hires and
employee turnover has lowered.
Supply chain disruptions continue; lead times on materials and parts needed
for new machinery have been lengthier than historical norms. As a consequence,
this has impacted manufacturing efficiencies and delayed sales orders. At the
end of August, backorders remained high, however, the management team is
working hard to mitigate the risks where possible and, in some cases, have
dual sourced suppliers to maintain supply. Inventory holdings will also remain
at higher levels in the short term to alleviate the pressure. Recently hired
skilled labour should improve the capacity and efficiencies over the coming
months, and combined with investment made into new plant and machinery soon to
be fully operational, will bring some of the manufacturing processes back in
house and provide additional capacity. The improvements made will certainly
provide the capabilities to deal with the pent-up demand and future growth
opportunities of the business.
The regulatory pathway continues to be on track with the EU Medical Device
Regulation (MDR), and additional resource has been brought in to support the
process over the coming months. In August, the Company successfully completed
a quality management system (QMS) audit. The completion of the MDR QMS audit
is significant achievement towards attaining certification in March 2023. In
April, the Company received Medical Device Single Audit Programme (MDSAP)
recertification, maintaining access to the key strategic markets of Canada,
USA, Japan and Australia for a further three years. As previously reported,
there is a significant cost burden associated with the evolving regulatory
requirements which, whilst challenging, represents an increasing barrier to
entry. Some competitors may not be able to attain the new standards, thus
providing more opportunities to capitalise on our market share.
Current trading and outlook
Revenues in the two-month period to 31 August 2022 have continued to grow and
strengthen, significantly increasing by approximately 113% above the level
achieved in the comparable period last year. The recent two months'
performance is also around 116% ahead of the corresponding pre-pandemic period
of 2019, despite being suppressed by a large sales backorder of £0.7m which
is to be shipped in the second half of the year. Production activity has
continued to be challenging with increased supply chain lead times and a
reduction in the availability of skilled labour, but investment in capital
expenditure and people should increase capacity and improve efficiency over
the course of the second half. The increasing overhead base has put pressure
on the business, but the Group remains profitable at the adjusted EBITDA
level, and this will continue to improve with growth opportunities.
The momentum in UK and Japan is indicative of the successful investment in
Sales and Marketing which has been key to driving our sustainability
initiatives. Further growth opportunities persist in the second half of the
year, as major markets continue to recover and with the launch of new products
into new and existing markets, providing encouraging prospects for the Group.
Nigel Rogers
Chairman
21 September 2022
Unaudited consolidated income statement
for the six months ended 30 June 2022
Unaudited Unaudited Audited
six months
six months
Year
ended
ended
ended
30 June
30 June
31 December
2022
2021
2021
Notes £'000 £'000 £'000
Revenue 3 5,413 4,218 9,126
Cost of sales (3,540) (2,788) (5,995)
Gross profit 2 1,873 1,430 3,131
Other operating expenses (1,933) (1,615) (3,611)
Other income - 25 25
Adjusted EBITDA profit * 287 206 500
Amortisation of intangible assets (129) (117) (257)
Impairment of intangible assets - - (145)
Depreciation of tangible assets (164) (234) (445)
Exceptional items (32) - (78)
Share based payments (22) (15) (30)
Operating loss (60) (160) (455)
Finance costs 4 (51) (63) (130)
Finance income - - -
Loss before taxation (111) (223) (585)
Taxation credit/(charge) 5 97 129 129
Loss and total comprehensive income (14) (94) (456)
Earnings per share
Basic 6 (0.002p) (0.010p) (0.049p)
Diluted 6 (0.002p) (0.010p) (0.049p)
* Adjusted EBITDA is earnings before interest, depreciation, amortisation
(including impairment) and exceptional items.
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2022
Notes Share capital Share premium Capital Merger Retained earnings Total
reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 January 2022 9,328 6,587 329 1,250 (6,830) 10,664
Employee share-based payment charge - - - - 22 22
Total - Transaction with owners 9,328 6,587 329 1,250 (6,808) 10,686
Loss and total comprehensive income for the period - - - - (14) (14)
Unaudited balance as at 30 June 2022 9,328 6,587 329 1,250 (6,822) 10,662
Unaudited consolidated balance sheet
as at 30 June 2022
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
Notes £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 623 336 366
Right of Use Assets 795 920 832
Intangible assets 6,255 6,234 6,216
7,673 7,490 7,414
Current assets
Inventories 3,040 2,362 2,965
Trade and other receivables 9 2,054 1,529 1,695
Cash at bank and in hand 3,040 4,692 3,644
8,134 8,583 8,304
Total assets 15,807 16,073 15,718
Equity and liabilities
Equity attributable to equity holders of the parent company
Share capital 9,328 9,328 9,328
Share premium account 6,587 6,587 6,587
Capital reserve 329 329 329
Merger reserve 1,250 1,250 1,250
Retained earnings (6,822) (6,483) (6,830)
Total equity 10,662 11,011 10,664
Non-current liabilities
Dilapidation provision 165 165 165
Right of Use lease liability 705 833 750
Borrowings 8 1,117 - -
1,987 998 915
Current liabilities
Trade and other payables 9 1,945 1,456 1,614
Accruals 653 423 488
Right of Use lease liability 167 156 157
Borrowings 8 393 2,029 1,880
3,158 4,064 4,139
Total liabilities 5,145 5,062 5,054
Total equity and liabilities 15,807 16,073 15,718
Unaudited consolidated cash flow statement
for the six months ended 30 June 2022
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
Notes 2022 2021 2021
£'000 £'000 £'000
Cash flows from operating activities
Loss after tax for the year (14) (94) (456)
Adjustments for:
Taxation (97) (129) (129)
Finance Income - - (-)
Finance Costs 4 51 63 130
Other Income-CBILS interest grant - (23) (23)
Depreciation of property, plant and equipment 80 134 258
Amortisation and impairment of intangible assets 129 117 402
Depreciation of right of use assets 84 99 187
Share-based payment charge 22 15 30
Foreign Exchange (loss)/gain (87) 22 12
Increase in inventories (75) (196) (802)
Increase in current receivables (360) (246) (412)
Increase in trade and other payables 487 64 276
Cash generated / (used) from operations 220 (174) (527)
Taxation received 5 97 129 129
Interest received - - -
Interest paid (32) (10) (35)
Net cash generated / (used) from operating activities 285 (55) (433)
Payments to acquire property, plant and equipment (337) (58) (212)
Acquisition of intangible assets (168) (178) (445)
Net cash used in investment activities (505) (236) (657)
Repayment of bank loan 8 (493) (150) (300)
HP leases 8 131 - -
Payments to Right of Use lease liabilities 7 (109) (123) (232)
Net cash (used)/generated in financing activities (471) (273) (532)
Net (decrease)/increase in cash and cash equivalents (691) (564) (1,622)
Cash and cash equivalents at beginning of period 3,644 5,278 5,278
Effective exchange rate fluctuations on cash held 87 (22) (12)
Net cash and cash equivalents at end of period 3,040 4,692 3,644
Analysis of net borrowings:
Cash at bank and in hand 3,040 4,692 3,644
Bank loan 8 - (529) (380)
CBILS 8 (1,383) (1,500) (1,500)
Obligations under HP leases (127) - -
Obligations under right of use lease liabilities (872) (989) (907)
Net Cash/(debt) at end of period 658 1,674 857
Notes to the Interim Financial Information
1. Basis of preparation of interim financial information
The interim financial information was approved by the Board of Directors on 21
September 2022. The financial information set out in the interim report is
unaudited.
The interim financial information has been prepared in accordance with the AIM
Rules for Companies and on a basis consistent with the accounting policies and
methods of computation as published by the Group in its annual report for the
year ended 31 December 2021, which is available on the Group's website.
The Group has chosen not to adopt IAS 34 Interim Financial Statements in
preparing these interim financial statements and therefore the interim
financial information is not in full compliance with International Financial
Reporting Standards as adopted for use in the European Union.
The financial information set out in this interim report does not constitute
statutory financial statements as defined in section 434 of the Companies Act
2006. The figures for the year ended 31 December 2021 have been extracted
from the statutory financial statements which have been filed with the
Registrar of Companies. The auditor's report on those financial statements
was unqualified and did not contain a statement under sections 498(2) and
498(3) of the Companies Act 2006.
Going concern and funding
The Directors have considered the available cash resources of the Group, with
the additional secured funding in March 2022 and the current internal
anticipated forecasts the Directors have a reasonable expectation that the
Group have adequate resources. The Group is expected to continue to generate
cash from operations over the next 12 months as inventory levels reduce and
operational efficiencies improve, therefore providing ample support and
continue in operational existence for the foreseeable future, considered to be
at least 12 months for the date of approval from the financial statements.
2. Disaggregation of gross margin
The Group has disaggregated margins in the following table: Six months ending 30 June 2022 Six months ending 30 June 2021 12 months ending 31 Dec 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revenue 5,413 4,218 9,126
Cost of Sales (2,959) (2,431) (5,268)
Underlying Gross Margin 2,454 1,787 3,858
Underlying Gross Margin % 45.34% 42.36% 42.28%
Net Cost of Manufacturing (581) (357) (727)
Contribution Margin 1,873 1,430 3,131
Contribution Margin % 34.60% 33.90% 34.31%
Underlying gross margin (excluding net costs of manufacturing) is an adjusted
KPI measure. Nets costs of Manufacturing are overheads that have not been
effectively absorbed due to reduced productivity.
Adjusted KPIs are used by the Board to understand underlying performance and
exclude items which distort comparability. The method of adjustments are
consistently applied but are 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.
3. Disaggregation of revenue
The Group has disaggregated revenues in the following table: SI Brand Distribution OEM Total
Six months ended 30 June 2022 (unaudited) £'000 £'000 £'000 £'000
United Kingdom 679 2,006 676 3,361
Europe 587 - - 587
US 596 - 240 836
APAC 484 - - 484
Rest of World 145 - - 145
2,491 2,006 916 5,413
SI Brand Distribution OEM Total
Six months ended 30 June 2021 (unaudited) £'000 £'000 £'000 £'000
United Kingdom 582 1,295 408 2,285
Europe 574 - - 574
US 750 - 37 787
APAC 406 - - 406
Rest of World 166 - - 166
2,478 1,295 445 4,218
SI Brand Distribution OEM Total
Year ended 31 December 2021 (audited) £'000 £'000 £'000 £'000
United Kingdom 1,306 3,116 1,008 5,430
Europe 1,075 - - 1,075
US 1,333 - 189 1,522
APAC 743 - - 743
Rest of World 356 - - 356
4,813 3,116 1,197 9,126
Revenues are allocated geographically on the basis of where revenues were
received from and not from the ultimate final destination of use.
4. Finance Costs
Finance costs: Six month ended 30 June Six month ended 30 June 12 months ended 31 Dec
2022 2021 2021
£'000 £'000 £'000
On bank borrowings 24 33 74
On right-of-use assets 26 30 56
On HP leases 2 - -
51 63 130
5. Tax
Current taxation
During 2021 the Group submitted an enhanced Research and development claim in
respect of 2020 amounting to £0.97m this was paid in the current year.
Deferred taxation
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 fully.
6. Earnings per share
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Earnings per share
Basic (0.002p) (0.010p) (0.049p)
Diluted (0.002p) (0.010p) (0.049p)
Adjusted 0.004p 0.004p (0.022p)
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of shares in issue.
Diluted earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the diluted weighted average number of shares in
issue. Adjusted Earnings per share is calculated by dividing the adjusted
earnings attributable to ordinary shareholders (profit before exceptional and
amortisation and impairment costs relating to the acquisition of Elemental
Healthcare and share based payments) by the weighted average number of shares
in issue.
The anti-dilutive effect of unexercised shares options has not been taken into
account and therefore the diluted earnings per share is equal to the basic
earnings per share.
The Group has one category of dilutive potential ordinary shares being share
options issued to Directors and employees. The impact of dilutive potential
ordinary shares on the calculation of weighted average number of shares is set
out below.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
'000s '000s '000s
Basic earnings per share 932,816 931,573 936,564
Dilutive effect of unexercised share options 5,049 1,243 2,220
Diluted earnings per share 937,865 932,816 938,784
7. IFRS16
Impact on the statement of financial
position
30 June
2022 30 June
2021 31 December 2021
Assets Liabilities Assets Liabilities Assets Liabilities
£'000 £'000 £'000 £'000 £'000 £'000
Right of use assets and lease liabilities 795 872 920 989 833 907
Of which are:
Current lease liabilities 167 156 157
Non-Current lease liabilities 705 833 750
Impact on Equity (77) (69) (74)
Total impact on statement of financial position 795 795 920 920 833 833
8. Net borrowings
At amortised cost Six month ended Six month ended 12 months ended 31 Dec
30 June 2022
30 June 2021
2021
£'000 £'000 £'000
Cash & cash equivalents 3,040 4,692 3,644
Bank borrowings-Current (352) (2,029) (1,880)
Bank borrowings-Non-current (1,031) - -
Obligations under HP leases-Current (41) - -
Obligations under HP leases-Non-Current (86) - -
Adjusted Net Cash 1,530 2,663 1,764
Right of Use Lease liabilities-Current (167) (156) (157)
Right of Use Lease liabilities Non-current (705) (833) (750)
Net Cash 658 1,674 857
In March 2022, the Group refinanced the existing debt with Yorkshire bank
consisting of the following:
· Extension to the CBILS of £1.5m repayable in May 2026, Interest rate
of 2.94% repayable monthly. Monthly installments are £0.029m.
· Covenants attached to the CBILS comprise of EBITDA to debt servicing
costs minimum 1.25x. First test 30 June 2022 (last 6 months), then September
22 (9 months), then rolling 12m afterwards.
· Additional headroom with an Invoice Discounting facility £1.0m
across the Group, to replace loan A and the RCF, 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.
9. Financial Instruments
The financial assets of the Group are categorised as follows:
At amortised cost Six month ended 30 June Six month ended 30 June 12 months ended 31 Dec
2022 2021 2021
£'000 £'000 £'000
Trade receivables 1,681 1,200 1,395
Cash and cash equivalents 3,040 4,692 3,644
4,721 5,892 5,039
The financial liabilities of the Group are categorised as follows:
At amortised cost Six month ended 30 June Six month ended 30 June 12 months ended 31 Dec
2022 2021 2021
£'000 £'000 £'000
Trade payables 1,427 1,000 1,090
Other payables 280 321 294
Deferred creditors - 20 -
Lease liabilities - Current 167 156 157
Lease liabilities - Non-current 705 833 750
Bank borrowings - Current 352 2,029 1,880
Bank borrowings - Non-current 1,032 - -
Obligations under finance leases-current 41 - -
Obligations under finance leases--Non-current 86 - -
4,090 4,359 4,171
Trade and other payables Six month ended 30 June Six month ended 30 June 12 months ended 31 Dec
2022 2021 2021
£'000 £'000 £'000
Trade payables 1,427 1,000 1,090
Other tax and social security 238 115 230
Corporation tax - - -
Other payables 280 321 294
Deferred creditors - 20 -
1,945 1,456 1,614
10. Interim Report
This interim report is available at www.sigroupplc.com
(http://www.sigroupplc.com) .
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