TIDMCSRT
RNS Number : 0364C
Consort Medical PLC
13 June 2019
Consort Medical plc
13 June 2019
Full Year results
Consort Medical reports a solid performance and announces new
contract awards
Consort Medical plc (LSE: CSRT) ("Consort", "Consort Medical" or
the "Group"), a leading, global, single source drug and delivery
device company, today announces its audited results for the year
ended 30 April 2019.
Financial Highlights
12 months ended FY2019 FY2018 <DELTA> <DELTA>
% %
GBPm 30 Apr 30 Apr Reported CER(2)
19 18
-------- ------- --------- --------
Underlying(1)
Revenue 305.1 311.1 (1.9%) (1.7%)
EBIT(3) 41.3 42.7 (3.3%) (3.1%)
PBT(3) 38.2 38.2 0.0%
Adjusted Basic EPS(3) 63.4p 64.5p (1.7%)
Statutory
Profit before tax (PBT) 12.5 17.3 (27.7%)
Basic EPS 21.3p 32.9p (35.3%)
(1) Underlying amounts are Alternative Performance Measures
(APMs) and these are defined in the APM section below. (2) CER - at
constant exchange rates; FY2018 actuals retranslated at the FY2019
actual average rates. (3) Before special items of GBP25.7m (FY2018:
GBP20.9m) that include amortisation of acquired intangibles,
reorganisation costs, impairment of assets and a one-off pension
charge.
-- A solid financial performance, with underlying PBT in line
with the prior year at GBP38.2m despite the impact of the previous
delay in approval of Mylan's Wixela(R) programme, offset by a lower
pension charge and favourable foreign exchange movements
-- Bespak continued to deliver a sector-leading EBIT margin at
20.3% after investing in R&D on a number of new development
opportunities, despite revenue being marginally lower than the
prior year
-- Aesica maintained its EBIT margin despite lower revenue and
the initial impact of streamlining API activities
-- Net debt at GBP97.4m was in line with expectations (30 April
2018: GBP95.5m) and the balance sheet remains strong with net debt
to EBITDA at 1.8x
-- Recommended final dividend of 13.8p, resulting in a 1.9%
increase in the total dividend to 21.4p (FY2018: 21.0p)
Operational Highlights
-- A new contract win utilising our Syrina(R)/ Vapoursoft(R)
auto-injector technology with a confidential leading
biopharmaceutical customer
-- Record metered-dose inhaler (MDI) valve volumes achieved
across a broad range of customers with plans to further increase
capacity to support growth of this core activity
-- Bespak was also recently awarded a new development services
agreement with an existing customer which is expected to lead to a
significant commercial opportunity
-- Modest revenue growth expected in the near-term from Mylan's
Wixela(R) (generic Advair(R)) successfully gaining FDA approval in
January 2019 as their pre-launch inventories unwind
-- Good progress made on our cross-divisional commercial
agreement signed with Opiant Pharmaceuticals, Inc. combining Aesica
and Bespak expertise to manufacture and fill the nasal delivery
device, Unidose(R) Xtra
-- Encouraging growth in Aesica's pipeline which is expected to
convert into future revenue. This is supported by strategic
investments in Aesica's liquid filling, packaging and serialisation
capabilities
Jonathan Glenn, Chief Executive Officer of Consort Medical,
commented:
"Consort has delivered a solid financial performance and has
been awarded new contracts that will support the Group's
medium-term growth prospects. There is a new Syrina(R)/
Vapoursoft(R) injectable opportunity which further validates this
technology. We have also entered into a new development agreement
with an existing key customer which is expected to translate into a
significant commercial opportunity.
We have a clear growth strategy focussing on organic
opportunities that will benefit from these recent contract awards
and the joint commercial agreement with Opiant on the Unidose(R)
Xtra nasal device announced earlier in the year. We continue to
invest in our research and development capabilities expanding our
intellectual property and building on our exciting pipeline at both
Bespak and Aesica to support our strong long-term growth
prospects.
The Board is confident of Consort's future prospects which are
further supported by the addition of two new significant contracts.
The near-term outlook will reflect the commercial success of
Mylan's Wixela(R) (generic Advair(R)) and the progression of the
development pipeline.
We also continue to assess acquisition opportunities that have
the potential to deliver additional growth and a broader offering
through access to new geographic markets and complementary
technologies and capabilities."
Enquiries:
Consort Medical Tel: +44 (0) 1442 867920
Jonathan Glenn - Chief Executive Officer
Paul Hayes - Chief Financial Officer
FTI Consulting Tel: +44 (0) 20 3727
1000
Ben Atwell / Simon Conway
Notes:
1. Foreign Exchange Rates
a. Year-end exchange rates 30 April 2019: GBP1=EUR1.16; GBP1=$1.30
b. Average exchange rates 1 May 2018 to 30 April 2019: GBP1=EUR1.13; GBP1=$1.30
c. Year-end exchange rates 30 April 2018: GBP1=EUR1.14; GBP1=$1.38
d. Average exchange rates 1 May 2017 to 30 April 2018: GBP1=EUR1.13; GBP1=$1.34
Consort Medical plc is a leading one-stop developer and
manufacturer of drugs and premium drug delivery devices. We partner
with pharmaceutical businesses in providing innovative life
improving treatments to patients across the world through two
integrated activities:
The design, development and manufacture of high performance
medical devices for inhaled, injectable, nasal and ocular drug
delivery, as well as point-of-care diagnostics products.
The development, formulation and manufacture of active
pharmaceutical ingredients (APIs) and finished dose drugs to the
highest quality standards.
We employ over 2,000 people globally and are committed to
investing in patient, clinician and customer driven innovation to
create new treatments.
Consort Medical is a public company quoted on the premium list
of the London Stock Exchange (LSE: CSRT) and is organised in two
divisions: Bespak and Aesica. www.consortmedical.com
Forward looking statements
This document may contain certain forward looking statements
with respect to Consort Medical's financial condition, performance,
position, strategy, results and plans based on management's current
expectations or beliefs as well as assumptions about future events.
These forward looking statements are not guarantees of future
performance. Undue reliance should not be placed on forward looking
statements because, by their very nature, they are subject to known
and unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and Consort Medical's
plans and objectives, to differ materially from those expressed or
implied in the forward looking statements. Consort Medical
undertakes no obligation to update any of the forward looking
statements contained in this document or any other forward looking
statements it may make. Past performance is not an indicator of
future results and the results of Consort Medical in this document
may not be indicative of, and are not an estimate, forecast or
projection of, Consort Medical's future results.
Alternative Performance Measures
In addition to statutory measures, a number of Alternative
Performance Measures (APMs) are included in this announcement to
assist investors in gaining a clearer understanding and balanced
view of the Group's underlying performance and in comparison with
performance across the industry. These measures are consistent with
how business performance is measured internally.
The APMs used include operating profit (EBIT), profit before tax
(PBT) and earnings per share, adjusted to eliminate special items,
being the amortisation of acquired intangibles and other
significant one-off items not linked to the underlying performance
of the business, and free cash flow after special items. Further,
underlying constant exchange rate measures are given which
eliminate the impact of currency movements by comparing the current
measure against the comparative restated at this year's actual
average exchange rates. Where APMs are given, these are compared to
the equivalent measures in the prior year.
The APM of EBITDA includes the add-back of interest, tax,
depreciation, amortisation, and any profit or loss on disposal of
property, plant and equipment to EBIT.
Chief Executive's Review
Summary
Consort has delivered a solid financial performance and made
great progress in expanding its development pipeline that presents
long-term growth prospects. Bespak has maintained its
sector-leading margin with continued growth of its core respiratory
products, despite the delay in launch of Mylan's Wixela(R)
programme. Aesica revenues are lower than the prior year with a
stronger performance in Germany being offset by lower UK revenue
due to lower customer demand on some mature products and
commencement of the API plant closure in Queenborough. Underlying
PBT is in line with the prior year at GBP38.2m after incurring
lower finance charges during the year.
The Group has made exciting progress in its development pipeline
at both Bespak and Aesica. This includes particular success with
our injectables franchise with a new development contract signed
utilising our own proprietary Syrina(R)/Vapoursoft(R) auto-injector
technology. Good progress has been made on our cross-divisional
agreement entered into earlier in the financial year to produce a
pre-filled, nasal delivery device, Unidose(R) Xtra. Bespak has also
been awarded a new development services agreement with an existing
customer. We have invested in further automation and sterilisation
capabilities at our European operations to support future growth
opportunities in Aesica. We continue to work on a number of
promising new opportunities with current and potential new
customers.
Summary of Financial Performance
Group revenue declined by 1.9% to GBP305.1m (FY2018: GBP311.1m)
and by 1.7% at constant exchange rates. As a result EBIT before
special items decreased by 3.3% to GBP41.3m (FY2018: GBP42.7m) and
by 3.1% at constant exchange rates.
Special items before tax were GBP25.7m in the year (FY2018:
GBP20.9m). This includes: GBP10.8m of amortisation of acquired
intangibles; GBP9.8m relating to the closure and decommissioning of
the Aesica API plant at Queenborough; GBP4.4m relating to the
impairment of API plant assets and inventory; and a one-off GBP0.5m
pension charge in respect of the equalisation of male and female
Guaranteed Minimum Pension (GMP) entitlement. The API restructuring
programme is described in more detail in section 2 of the strategy
section below.
Net finance costs at GBP3.1m were lower than the prior year
(FY2018: GBP4.5m) due to the effects of a lower pension finance
charge and foreign exchange movements. Group underlying profit
before tax and special items of GBP38.2m was in line with the prior
year (FY2018: GBP38.2m). Adjusted basic EPS decreased by 1.7% to
63.4p (FY2018: 64.5p) reflecting a higher tax rate. Basic EPS
decreased by 35.3% to 21.3p (FY2018: 32.9p), driven by costs
associated with the API restructuring programme.
Cash generated from operations was GBP39.9m (FY2018: GBP37.1m).
EBITDA before special items decreased by GBP1.2m to GBP55.2m
(FY2018: GBP56.4m) which was offset by capital investments of
GBP23.6m (FY2018: GBP22.2m) and increased working capital driven by
higher inventory levels after supporting customers on their Brexit
contingency plans and a GBP4.4m one-off settlement of a
long-standing payable. The cash effect of the special items paid in
the year was GBP4.9m (FY2018: GBP2.0m).
The Group balance sheet remains strong with a net debt position
of GBP97.4m (30 April 2018: GBP95.5m), representing gearing of 1.8x
Net debt: EBITDA. The Group agreed a new five year GBP200m
committed multi-currency banking facility during the year with an
GBP80m accordion.
The Board is proposing an increased final dividend of 13.8p
(FY2018: 13.6p), resulting in a total dividend for the year of
21.4p (FY2018: 21.0p).
Progress on the Group's strategy
Consort Medical has a well-established strategy, which has four
key elements:
1. Driving sustainable organic revenue growth
Consort is driving revenue growth through leveraging its strong
relationships with existing customers, developing opportunities
with new customers and broadening its product offering.
We have deep, long-term contractual relationships with many
leading pharmaceutical companies in both Bespak and Aesica,
supplying customers with high quality products from our highly
regulated facilities. There is a broad range of existing production
programmes where we work closely with customers to support their
growth strategies. We supplement this with development
opportunities by providing innovative solutions utilising our
market-leading expertise.
In Bespak, we made good progress in the year with our marketed
respiratory portfolio, continuing to grow revenues of our core
respiratory metered dose inhaler (MDI) valves and dry powder
inhaler (DPI) devices. We have had significant success with
expanding our development pipeline of device opportunities
including our innovative proprietary gas-powered auto-injector
technology and nasal products described in more detail below. We
provide a summary of the more significant drug delivery device
opportunities in the table in the Business Review section
below.
In Aesica, there is a significant amount of activity on finished
dose development where we continue to quote for a number of new
opportunities. We remain excited about these opportunities but as
this information is commercially sensitive we can only provide a
broad overview of these opportunities.
2. Delivering margin improvement
In addition to delivering further organic growth we continue to
focus on improving our operational efficiency and underlying EBIT
margin. Bespak performed well in the year, preserving its sector
leading margin at 20.3%. Aesica's margin was maintained at 8.8%,
despite lower revenue. Since the acquisition of Aesica, we have
made good progress, having increased its margin from 5.2% at
acquisition to 8.8% during this year.
The majority of Aesica's activities are finished dose
formulation and the production and packaging of tablets, capsules
and liquids. Aesica also manufactures active pharmaceutical
ingredients (APIs) mainly in its Cramlington plant and also in a
smaller facility within the large multi-activity Queenborough
site.
In December 2018, we announced that we would commence a process
of withdrawing from API activities at our Queenborough site to
focus on its core competency of finished dose formulation and
manufacturing. Following the announcement, we have consulted with
our employees and customers and have agreed last production runs
with them. We are developing our plans to fully decommission the
plant which includes demolishing parts of the site and remediating
historic environmental issues. We have commenced decommissioning
some of the plant and anticipate that we will complete production
in the coming months.
We have booked a GBP9.8m charge during the period which includes
GBP3.3m of cash costs incurred to date and our estimate of the
one-off costs to exit the API activities. This exit process is
underway and we will provide updates on progress in due course. We
have also incurred non-cash impairment charges of GBP4.4m which
includes the GBP3.5m impairment of fixed assets that was recognised
in the first half of the year and a GBP0.9m impairment of
inventory.
3. Innovating and developing new devices and formulation technologies
We utilise our core expertise and strong relationships to
partner with pharmaceutical businesses in developing and providing
innovative life improving treatments. Since 2010, Consort has
consistently invested in innovation and expanded from a
predominantly respiratory products business to growing positions in
a number of attractive markets. We have well established
development programmes in both divisions, including our one-stop
capability to develop and manufacture both a drug and its delivery
device, which is a key differentiator to our competitors.
A good example of this is the development agreement with Opiant
Pharmaceuticals, Inc. which involves both Bespak and Aesica in
jointly developing a ready-to-use nasal delivered version of
nalmefene to treat opioid overdoses.
The Group has continued to broaden its capabilities including
growing its medical device business by adding highly innovative
proprietary injectable delivery technologies to its well
established respiratory franchise.
Our injectables activities include an innovative gas powered
auto-injector technology designed to support the safe operation of
single-use syringes capable of injecting higher viscosity liquids.
There is a growing demand for products serving this technically
challenging area, particularly with the growth of large molecule
biological drugs which are often highly viscous. We are developing
specific products using our proprietary technology, including
promising opportunities with a number of leading global
biopharmaceutical customers, with another recently signing a new
development agreement.
We offer sterile liquid filling manufacturing as part of our
broad range of finished dose capabilities within Aesica and have
continued to invest in expanding this offering during the year.
This is supported by our finished dose development team. Our
strategy is to further differentiate our capabilities by investing
in pre-filled syringe capacity. This will enable the Group to
provide a complete range of pre-filled syringe solutions to our
customers including our unique auto-injector device technology.
Consort believes that each of the auto-injector business and the
nasal franchise have the potential to be at least the size of the
respiratory franchise in the medium to long-term.
4. Making selective acquisitions and investments
Consort generates strong operating cash flow that supports
investment in organic growth and has allowed us to increase the
dividend in recent years. Our strategy is to supplement this with
appropriate strategic investments.
Our non-organic growth strategy is to make selective
acquisitions or investments in new geographical markets and
complementary technologies/capabilities that have the potential to
broaden our geographic footprint and customer offering.
We will continue to review appropriate opportunities that
present attractive long-term shareholder value.
Business Review
Bespak (Drug Delivery Devices)
Operations
FY2019(1) FY2018(1) <DELTA>% Reported <DELTA>% CER(2)
Revenue GBP126.2m GBP126.9m (0.6%) (0.6%)
---------- ---------- ------------------ ----------------
EBITDA(3) GBP31.5m GBP32.7m (3.7%) (3.7%)
---------- ---------- ------------------ ----------------
EBITDA margin
% 25.0% 25.8%
---------- ---------- ------------------ ----------------
EBIT(3) GBP25.6m GBP26.5m (3.4%) (3.4%)
---------- ---------- ------------------ ----------------
EBIT margin
% 20.3 % 20.9%
--------------- ---------- ---------- ------------------ ----------------
(1) Underlying amounts presented above are defined by our
Alternative Performance Measures (APM) methodology. (2) CER - at
constant exchange rates; FY2018 actuals retranslated at the FY2019
actual average rates. (3) Before special items of GBP1.5m (FY2018:
GBP6.4m) comprising the amortisation of acquired intangibles and a
one-off pension charge.
Bespak has a well-established and diverse business of designing,
developing and manufacturing high performance medical delivery
devices. This business has a strong pipeline of innovative products
including: respiratory, injectable, nasal and ocular drug delivery,
as well as point-of-care diagnostics.
Revenue was broadly in line with the prior year at GBP126.2m
(FY2018: GBP126.9m) despite the delay in the Mylan Wixela(R)
product launch, which received FDA approval in January 2019. Bespak
has continued strong demand for its broad range of leading advanced
medical delivery devices with another record year of MDI valve
production. This growth was with established customers while
continuing to invest in and make good progress on existing and new
development programmes.
We have continued to grow revenues of our market leading
metered-dose inhaler (MDI) valves and devices which now cover over
one hundred commercial products. Our broad range of products and
programmes has grown over many years and we continue to supplement
it with new products, with promising developments coming through
for our nasal and injectables franchises. Revenue was also impacted
by our planned exit from the sale of low margin, non-core anodised
aluminium components to external customers at our Nelson facility
in order to concentrate on internal valve production.
As anticipated, service revenue decreased slightly during the
year to GBP8.1m (FY2018: GBP8.4m). This is due to a number of
successful development programmes having been converted to
commercial product revenue following approval and launch and
reduced programme activities.
Bespak realised a 3.4% decrease in underlying EBIT to GBP25.6m
driven by the mix of valves and lower service revenue. Bespak
continued to deliver a sector-leading EBIT margin at 20.3%,
slightly down on the prior year's 20.9%.
Product Development
Bespak has a wide range of commercial programmes, supported by a
broad product development pipeline that present further growth
opportunities. This development pipeline is across a range of
therapeutic areas, including both contract manufacturing and
products with our own proprietary intellectual property (IP).
To provide visibility of Bespak's strong position, we have set
out in the table below a summary of our more significant
development opportunities recognising that timescales are difficult
to predict. For inclusion in the table, projects must have a
reasonable expectation of success and are forecast to produce peak
annual revenues of at least GBP3m per annum.
In January we had the positive news of Mylan receiving US Food
and Drug Administration (FDA) approval for their Wixela(R)
programme (DEV610). Mylan, supported by Consort Medical, now has
the first to market generic Advair(R) product. As we have
previously highlighted, Mylan had been building inventory ahead of
the Wixela(R) launch and as such our sales of products to Mylan
will reflect the product's success in the market and Mylan's
inventory profile. We anticipate modest revenue growth in the
near-term as pre-launch inventories are utilised and the product
gains market share.
Our Syrina(R)/ Vapoursoft(R) auto-injector offering continues to
generate significant interest and we have recently signed a new
development contract with a leading global pharmaceutical customer.
This contract involves Consort's innovative Vapoursoft(R) driven
auto-injector technology and is an adaptation of the Syrina(R)
platform, designed to deliver formulations with very high
viscosities.
We have recently entered into a new development services
agreement with an existing global pharmaceutical company. Under the
agreement, Consort will support the development of a novel drug
delivery device for the customer and this is expected to be
followed by a commercial manufacturing and supply agreement. The
proposed drug delivery device, in late stage design, is a new
format for a product that is already registered and marketed by the
customer. The product is in a significant and growing market
segment where the delivery method for the drug formulation has high
commercial value as a differentiator.
During the year we received notice that a customer, Amphastar
Pharmaceuticals, Inc. has been granted FDA approval for the only
asthma inhaler available without prescription in the United States
(Primatene(R) MIST). The product will be delivered using Bespak's
MDI valve and actuator offering. We commenced production in the
latter half of FY2019.
Further programmes include additional respiratory product
opportunities and continued progress on point-of-care, nasal and
ocular programmes. The current status of the major programmes in
our development pipeline is listed below:
Project Description Customer Status
VAL020 MDI valve Global Pharma Programme under review by
customer
------------------------------------- ------------------------ ----------------------------------
POC010 POC test cartridge Binx Health (previously CE marking obtained and FDA
Atlas Genetics) filing submitted
------------------------------------- ------------------------ ----------------------------------
DEV610 DPI Mylan Approved by FDA
------------------------------------- ------------------------ ----------------------------------
NAS030 Nasal device Pharma Co. Early stage programme
------------------------------------- ------------------------ ----------------------------------
NAS040 Nasal device Opiant Pharmaceuticals Early stage programme progressing
to plan
------------------------------------- ------------------------ ----------------------------------
INJ650 ASI(R) Auto-injector Global Generic Programme not expected to
progress
------------------------------------- ------------------------ ----------------------------------
INJ700 Lila(R) Mix Injector Pharma Co. Programme under review
------------------------------------- ------------------------ ----------------------------------
IDC300 Oral IDC Pharma Co. Awaiting FDA approval
------------------------------------- ------------------------ ----------------------------------
VAL050 MDI valve / actuator Aeropharm Development contract ongoing
------------------------------------- ------------------------ ----------------------------------
OCU050 Ocular device/ formulation / filling Oxular Early stage programme
------------------------------------- ------------------------ ----------------------------------
SYR075 Syrina(R) / Vapoursoft(R) Global Biopharma Programme under review
------------------------------------- ------------------------ ----------------------------------
INJ750 Injectable device Existing Customer Development services agreement
signed
------------------------------------- ------------------------ ----------------------------------
SYR080 Syrina(R) / Vapoursoft(R) Global Biopharma Development agreement signed
------------------------------------- ------------------------ ----------------------------------
DPI = Dry Powder Inhaler, MDI = Metered Dose Inhaler, POC =
Point-of-Care, IDC = Integrated Dose Counter
Innovation
Bespak has an innovation team of 30 at its dedicated facility in
Cambridge and is busy working on a growing number of opportunities.
We continue to invest in and expense the majority of this
significant investment in developing our new technology platforms
with our proprietary technology.
We have seen the number of opportunities continue to grow,
particularly in the injectables franchise from biotech and
pharmaceutical companies including the new programmes that we have
recently added to our development pipeline.
The team is also supporting the Group's proprietary nasal
programmes which include unique IP protected technology that
accurately delivers a single precise dose of a pharmaceutical
product to a patient. This Unidose(R) Xtra product in conjunction
with the proposed Aesica sterile fill capability has the potential
to provide significant growth opportunities for the Group.
One such opportunity of the Unidose(R) Xtra product is a
significant joint development agreement with Aesica to manufacture
and fill the device for a US customer to treat opioid overdose.
Opioid overdose is the leading cause of death in the US for adults
under the age of 50.
Aesica (Development and Manufacture of API & Finished
Dose)
Operations
FY2019(1) FY2018(1) <DELTA>% Reported <DELTA>% CER(2)
Revenue GBP178.9m GBP184.2m (2.9%) (2.6%)
---------- ---------- ------------------ ----------------
EBITDA(3) GBP22.4m GBP23.6m (5.1%) (4.7%)
---------- ---------- ------------------ ----------------
EBITDA margin
% 12.5% 12.8%
---------- ---------- ------------------ ----------------
EBIT(3) GBP15.7m GBP16.2m (3.1%) (2.5%)
---------- ---------- ------------------ ----------------
EBIT margin
% 8.8% 8.8%
--------------- ---------- ---------- ------------------ ----------------
(1) Underlying amounts presented above are defined by our
Alternative Performance Measures (APM) methodology. (2) CER - at
constant exchange rates; FY2018 actuals retranslated at the FY2019
actual average rates; (3) Before special items of GBP24.2m (FY2018:
GBP14.5m) comprising amortisation of acquired intangibles,
reorganisation costs and impairment of assets.
Aesica develops, formulates and manufactures APIs and finished
dose drugs to the highest quality standards. It has strong and
well-established relationships with many of the world's leading
pharmaceutical companies and works closely with them to support
their growth strategies. Aesica has regulatory approved facilities
in the UK, Germany and Italy.
Aesica's reported revenue decreased by 2.9% to GBP178.9m
(FY2018: GBP184.2m). This includes continued growth from the German
business offset by lower volumes of more mature products in the UK
business and the near-term impact from the closure of the API plant
at Queenborough.
Despite slightly lower revenue, Aesica has maintained its EBIT
margin of 8.8% in line with the prior year. EBIT declined 3.1%
(2.5% at constant currency) to GBP15.7m (FY2018: GBP16.2m). The
business has significantly improved its margin since acquisition in
2014 when it was making 5.2%.
We continue to invest in the business with the expansion of the
packaging facility in Germany, a new liquid filling production line
in Italy and further API capabilities in Cramlington. The German
business continues to perform well with increased demand and price
increases from the established customer base supplemented by
opportunities with new customers.
In the prior year, we commenced the manufacture of a new
innovative API product at our Cramlington facility. Good progress
has been made on this complicated multi-stage process in the
current financial year, on which we expect to continue to build
upon into FY2020.
Business Development and Innovation
Aesica has deep, long-term relationships with a strong,
blue-chip customer base. These relationships are supported by
contracts that typically range between three and ten years
generating recurring revenues, the majority of which are renewed at
the end of their term. Our technological and regulatory expertise
supports Aesica in providing a broad variety of high quality
products to many markets. These long-term relationships from our
approved sites enable us to provide additional products and
services in partnership with these valued customers.
The Aesica commercial team is focused on a growing number of
formulation development and manufacturing opportunities. These
include businesses looking for support on new products and
pharmaceutical companies seeking to either out-source an activity
or change suppliers. Aesica's business development team has a
regional structure to ensure that we can effectively support our
customers from our manufacturing facilities in the UK, Germany and
Italy.
Aesica's track record provides potential customers with an
established partner, able to provide a high level of service
supported by regulatory compliance. We have regular routine
compliance audits from regulatory bodies including the MHRA, FDA,
Russian HA and many other regional regulatory authorities. We share
our regulatory expertise across the wider Group.
Of significance, is the cross divisional commercial agreement
signed with Opiant Pharmaceuticals, Inc. combining Aesica and
Bespak expertise to manufacture and fill the Unidose(R) Xtra
medical device. This combined offering is a good example of
fulfilling an objective of the Aesica acquisition, with Consort
being a truly single source drug and delivery device company.
The business has identified a number of attractive business
development opportunities with pharmaceutical companies looking to
source oral product. This is supported by our investment in a new
liquid filling production line in Italy which became operational in
March 2019 and will significantly increase capacity.
We have also expanded our packaging capabilities in Germany
alongside continued strategic investments across the Group in
serialisation which facilitates the identification of products at
the individual pack level. We have supported our customers as they
implement serialisation across their product ranges utilising the
Group's expertise with this technology.
Consort's Brexit Preparations
The Group has considered the nature and extent of risks and
uncertainties arising from the result of the Brexit referendum and
the impact on the future performance and position of the business.
The main risks to the Group have been assessed as being,
-- Disruption to the supply chain: we have increased our
inventory holdings of raw materials that is anticipated to mitigate
any delays in importation, and
-- Lower sales activity: the Group has long-term agreements in place with large international pharmaceutical businesses that operate on a global basis. The Group's existing plants in Germany and Italy would be utilised to effectively manage any disruption to the supply chain.
The Board does not consider that a hard Brexit will have a
significant impact on the Group's operations and ability to service
its supply chain. As negotiations continue, the Board will monitor
outcomes, assess the impact on the regulatory environment in which
the Group operates, its customers, supply chain and employees and
will implement an appropriate response.
Board and Company Secretary Changes
We were pleased to announce the appointment of Chris Brinsmead
CBE as a non-executive director and Chairman designate. Chris
joined the Board on 7 February 2019, succeeding Dr. Peter Fellner
as Chairman on 24 April 2019 who stepped down from the Board on the
same date, having announced his intention to retire on 14 June
2018. We would like to thank Peter for his very significant
contribution to Consort Medical's success during his tenure.
Andrew Jackson was appointed as our General Counsel and Company
Secretary in August 2018, joining us from his previous role as
Group Counsel at KP Snacks Limited.
Outlook
Consort has delivered a solid financial performance and has been
awarded new contracts that will support the Group's medium-term
growth prospects. There is a new Syrina(R)/ Vapoursoft(R)
injectable opportunity which further validates this technology. We
have also entered into a new development agreement with an existing
key customer which is expected to translate into a significant
commercial opportunity.
We have a clear growth strategy focussing on organic
opportunities that will benefit from these recent contract awards
and the joint commercial agreement with Opiant on the Unidose(R)
Xtra nasal device announced earlier in the year. We continue to
invest in our research and development capabilities expanding our
intellectual property and building on our exciting pipeline at both
Bespak and Aesica to support our strong long-term growth
prospects.
The Board is confident of Consort's future prospects which are
further supported by the addition of two new significant contracts.
The near-term outlook will reflect the commercial success of
Mylan's Wixela(R) (generic Advair(R)) and the progression of the
development pipeline.
We also continue to assess acquisition opportunities that have
the potential to deliver additional growth and a broader offering
through access to new geographic markets and complementary
technologies and capabilities.
Financial Review
Consort has delivered a solid financial performance with revenue
down by 1.9% and EBIT slightly lower than the prior year. Despite
this, profit before tax remained unchanged from the prior year at
GBP38.2m and we continue to invest in the business to support
future growth opportunities. Statutory PBT for the year was
GBP12.5m (FY2018: GBP17.3m), reflecting the cost of the API plant
closure at Queenborough and a number of other one-off items
included in special items.
Revenue
Group revenue decreased by GBP6.0m (1.9%) to GBP305.1m with a
1.7% decrease in underlying revenue when taking into account
constant currency. Bespak revenue decreased marginally by GBP0.7m
(0.6%) with continued growth in valves offset by marginally lower
volumes in other products and services. Aesica was impacted by
lower volumes of mature products and the API plant closure at
Queenborough partially offset by growth in the German business. As
a result, Aesica's revenue was GBP5.3m (2.9%) lower than prior year
or by 2.6% at constant exchange rates.
EBIT
Group EBIT before special items decreased by 3.3% to GBP41.3m
with a 3.1% decrease in underlying EBIT at constant currency. The
lower EBIT reflected the drop through of lower revenue in both
divisions. Despite the lower EBIT, our continued focus on
operational efficiencies resulted in Bespak maintaining its sector
leading margin at 20.3% (FY2018: 20.9%), with Aesica achieving an
EBIT margin unchanged from the prior year at 8.8%. At the Group
level, underlying EBIT margin decreased 20bps to 13.5% (FY2018:
13.7%).
Finance costs and profit before tax
Net finance costs at GBP3.1m (FY2018: GBP4.5m) benefitted from a
lower pension finance charge as a result of a reduced pension
deficit obligation and foreign exchange.
Profit before tax and special items was in line with the prior
year at GBP38.2m with the benefit of lower finance costs offsetting
the reduced EBIT.
Special items
Special items are those items which the Group considers to be
non-recurring or are not part of the underlying performance of the
business. In FY2019 special items amounted to GBP25.7m (FY2018:
GBP20.9m), which includes GBP10.8m of amortisation of acquired
intangibles (FY2018: GBP12.1m); GBP9.8m relating to the closure and
decommissioning of the Aesica API plant at Queenborough; GBP4.4m
impairment of the API plant assets and inventory and a one-off
GBP0.5m pension charge in respect of the equalisation of male and
female Guaranteed Minimum Pension (GMP) entitlement.
Statutory profit before tax was GBP4.8m lower at GBP12.5m
(FY2018: GBP17.3m) as a result of these special items incurred.
Taxation
The effective tax rate (ETR) on profit before tax and special
items was in line with expectations at 18.6% (FY2018 17.3%) giving
rise to an underlying tax charge of GBP7.1m (FY2018: GBP6.6m). The
effective tax rate (ETR) reflects a combination of factors
including the continuing benefits of the Patent Box regime in the
Bespak business and the proportion of profits arising in our
European Aesica businesses in Germany and Italy where there are
higher jurisdictional tax rates.
The Group benefits from the Research and Development Expenditure
Credit (RDEC) and realised an R&D tax credit of GBP1.9m in the
year (FY2018: GBP2.2m) that is recognised in EBIT and benefits both
Bespak and Aesica.
Bespak continues to benefit from the progressive implementation
of the UK's Patent Box regime on earnings from its patented
products amounting to a benefit in the year of GBP1.5m in its cash
tax (FY2018: GBP1.9m).
A tax credit of GBP5.1m (FY2018: GBP5.4m) arose in respect of
special items. The total tax charge was GBP2.0m (FY2018:
GBP1.2m).
The outlook for the ETR for FY2020 is 20%, subject to the mix of
Bespak revenues (IP and non-IP protected), and the mix of Aesica
profits between UK, Germany and Italy.
The Group's tax strategy continues to follow the commercial
development of the business, whilst taking advantage of government
tax incentive policies. The Group continues to be rated low risk by
HMRC.
Earnings per share (EPS)
Earnings before special items decreased by GBP0.5m to GBP31.1m
(FY2018: GBP31.6m) as a result of the higher effective tax rate.
Adjusted basic EPS decreased by 1.7% to 63.4p per share (FY2018:
64.5p) accordingly.
Statutory earnings after tax decreased by GBP5.6m to GBP10.5m
(FY2018: GBP16.1m) with basic EPS at 21.3p (FY2018: 32.9p) as a
result of the higher level of special items.
Dividend
The Board has reviewed the dividend and is proposing an
increased final dividend of 13.8p (FY2018: 13.6p) making a total
dividend for the year of 21.4p (FY2018: 21.0p).
The dividend will be paid on 25 October 2019 to shareholders on
the register at 20 September 2019, if approved by shareholders at
the AGM on 11 September 2019. Dividend cover, based on underlying
EPS, was 3.0 times (FY2018: 3.1 times).
Cash flow & net debt
Cash generated from operations was GBP39.9m (FY2018: GBP37.1m)
with the Group maintaining a continued focus on working capital
management.
Inventories increased by GBP12.2m during the year (FY2018:
GBP0.7m increase) with a significant amount of this increase
relating to supporting key customers on their Brexit contingency
plans at both the Bespak and Aesica divisions. Payables also
increased by GBP0.3m (FY2018: GBP0.9m decrease) reflecting this
increase in inventory, offset by the one-off settlement of a
long-standing payable (GBP4.4m). Receivables remained well
controlled and current with a GBP0.3m decrease (FY2018: GBP16.7m
increase).
Capital expenditure of GBP23.6m was higher than the previous
year (FY2018: GBP22.2m) including investments across the business
to enhance facilities and expand manufacturing capacity and
serialisation capabilities.
The Group generated free cash flow after special items of
GBP14.1m (FY2018: GBP12.5m) which funded GBP10.4m of dividend
payments (FY2018: GBP10.1m) and GBP2.7m of contributions into the
pension plan (FY2018: GBP2.1m).
Net debt was GBP97.4m at year end (30 April 2018: GBP95.5m) or
1.8x EBITDA (30 April 2018: 1.7x).
Financing and liquidity
The Group entered into a new 5 year GBP200m revolving credit
facility on 9 October 2018 with options for two one-year
extensions. At 30 April 2019, the Group had drawn GBP110.9m of this
committed revolving credit facility (FY2018: GBP117.3m).
Margins over LIBOR are charged depending upon the ratio of Net
debt to EBITDA. A non-utilisation fee of the interest margin on the
undrawn balance applies.
The facility has two covenants: Net debt to EBITDA less than
3.0x and Interest Cover over EBITDA being greater than 3.0x. The
Group continues to operate within its covenants at 30 April 2019
with Net debt to EBITDA of 1.8x, and Interest Cover 18.8 times.
An additional GBP80m accordion facility allows further funding
to be made available by the participating banks to support
significant investment or acquisition opportunities which may
arise. The Group also has uncommitted overdraft facilities in the
UK of GBP4.5m and GBP1.1m which it utilises to manage its
requirements for short term operational funding.
Foreign Currency Exposure
The Group monitors its foreign currency exposures carefully and
seeks to mitigate all material transactional exposures. Bespak
currently has limited exposure to movements in the Euro and US
Dollar while Aesica has an exposure to the Euro. Where appropriate,
forward foreign currency is bought and/or sold to protect
transactional margin exposure.
As a result of the Group's German and Italian Euro denominated
operations, foreign currency translation sensitivity for the Euro
is such that a 10c strengthening/weakening in the Euro:GBP exchange
rate increases/decreases revenue by c.GBP8.4m and EBIT by
c.GBP1.3m.
Pensions
The IAS 19 pension valuation at 30 April 2019 showed a total
deficit of GBP19.2m (30 April 2018: GBP14.7m). The defined benefit
pension obligations of the Group comprise both Bespak and Aesica
schemes.
Bespak scheme
In 2002, the Bespak Retirement Benefits Scheme (a defined
benefit pension scheme) was closed to new members. Furthermore from
31 March 2016 the Scheme was closed to further accrual via a deed
of amendment between the Group and the Trust. Following the Scheme
closure, all former active members became deferred members and the
provision of pension benefits was migrated to a defined
contribution pension scheme which is also available to new
employees.
As at 30 April 2019, the Bespak IAS 19 deficit was GBP14.8m
compared with GBP10.4m as at 30 April 2018. The increase in the
liability is attributable to net changes in the discount rate and
inflation linked assumptions as well as a GBP0.5m one-off charge
for the equalisation of GMP entitlement following recent changes in
UK legislation.
The latest triennial actuarial valuation of the Bespak Pension
Scheme was performed by an independent actuary for the trustees of
the scheme and was carried out as at 30 April 2017. In April 2019,
the Group and the Trustees agreed this actuarial valuation, which
recorded a deficit of GBP37.3m. As part of the agreement, the Group
undertook to make deficit recovery contributions at the following
rates:
-- November 2017 - October 2019: GBP2.5m per annum
-- November 2019 - October 2021: GBP3.0m per annum
-- November 2021 - November 2029: GBP3.5m per annum
Aesica scheme
Aesica operates a number of different pension schemes, including
defined benefit schemes in Italy and Germany. These schemes are in
a total net IAS 19 deficit position of GBP4.4m at 30 April 2019 (30
April 2018: GBP4.3m).
Risk Management
The Group is exposed to a number of risks and considers
effective risk management to be a high priority. As such the Group
operates a detailed framework for assessing risk and implementing
processes and procedures to partly mitigate these risks which are
further described in the Annual Report & Accounts. This
includes the risks associated with Brexit as disclosed earlier in
this report.
Jonathan Glenn Paul Hayes
Chief Executive Chief Financial
Officer Officer
Consolidated Income Statement
For the year ended 30 April 2019
2019 2018
Note GBPm GBPm
---------------------------------------------- ----- -------- ------------- ----------
Revenue 2 305.1 311.1
Operating expenses before special
items (263.8) (268.4)
---------------------------------------------- ----- -------- ------------- ----------
Operating profit before special items 41.3 42.7
Special items 3 (25.7) (20.9)
---------------------------------------------- ----- -------- ------------- ----------
Operating profit 15.6 21.8
Finance income 0.4 0.2
Finance costs 4 (3.7) (3.2)
Other finance costs 4 0.2 (1.5)
---------------------------------------------- ----- -------- ------------- ----------
Profit before tax and special items 38.2 38.2
Special items 3 (25.7) (20.9)
---------------------------------------------- ----- -------- ------------- ----------
Profit before tax 12.5 17.3
---------------------------------------------- ----- -------- ------------- ----------
Tax on profit before special items 5 (7.1) (6.6)
Special items - tax 3 5.1 5.4
Tax charge 5 (2.0) (1.2)
---------------------------------------------- ----- -------- ------------- ----------
Profit for the financial year 10.5 16.1
----------------------------------------------------- -------- ------------- ----------
Earnings per share, attributable to the equity
holders of the parent
Basic earnings per ordinary
share 6 21.3p 32.9p
Diluted earnings per ordinary
share 6 21.2p 32.7p
Non-statutory measures
GBPm GBPm
Profit before tax and special
items 38.2 38.2
Profit after tax before special
items 31.1 31.6
Adjusted basic earnings per
ordinary share 63.4p 64.5p
Adjusted diluted earnings
per ordinary share 62.8p 63.9p
Consolidated Statement of Comprehensive Income
For the year ended 30 April
2019
2019 2018
GBPm GBPm
--------------- ----- ----- ----- -------------------------------- ---- ----------- -------------
Profit for the financial year 10.5 16.1
Other comprehensive (loss) / income
Items that may be reclassified subsequently
to profit and loss:
Net gain / (loss) on hedge of a net
investment 0.5 (1.3)
Exchange movements on translation of
foreign subsidiaries (2.7) 5.7
Items that will not be reclassified
subsequently to profit and loss:
Actuarial (loss) / gain on defined benefit
pension schemes (6.5) 29.2
Deferred tax on actuarial loss / (gain) 1.1 (5.6)
Impact of change in tax rates - 0.6
------------------------------------------------------------------ ------- ----------- -------------
Other comprehensive (loss) / income
for the year (7.6) 28.6
------------------------------------------------------------------ ------- ----------- -------------
Total comprehensive income for the year 2.9 44.7
------------------------------------------------------------------ ------- ----------- -------------
Attributable to the equity holders of
the parent 2.9 44.7
------------------------------------------------------------------ ------- ----------- -------------
Consolidated Balance Sheet
At 30 April 2019
2019 2018
Notes GBPm GBPm
---------------------------------------- ----- ------- -------
Assets
Non-current assets
Property, plant and equipment 152.5 147.7
Goodwill 128.4 129.6
Other intangible assets 37.3 47.6
Investments 11.6 11.4
Trade and other receivables 5.4 3.8
---------------------------------------- ----- ------- -------
335.2 340.1
---------------------------------------- ----- ------- -------
Current assets
Inventories 47.1 35.2
Trade and other receivables 67.9 68.8
Current tax assets 1.9 6.6
Cash and cash equivalents 9 13.5 21.4
---------------------------------------- ----- ------- -------
130.4 132.0
---------------------------------------- ----- ------- -------
Total assets 465.6 472.1
---------------------------------------- ----- ------- -------
Liabilities
Current liabilities
Borrowings 9 - (116.9)
Trade and other payables (73.4) (71.4)
Derivative financial instruments (0.2) (0.2)
Provisions and other liabilities (6.5) (3.4)
---------------------------------------- ----- ------- -------
(80.1) (191.9)
---------------------------------------- ----- ------- -------
Net current assets / (liabilities) 50.3 (59.9)
---------------------------------------- ----- ------- -------
Non-current liabilities
Borrowings 9 (110.9) -
Trade and other payables (1.7) (1.7)
Deferred tax liabilities (12.9) (16.2)
Defined benefit pension schemes deficit 10 (19.2) (14.7)
Provisions and other liabilities (2.6) (1.3)
---------------------------------------- ----- ------- -------
(147.3) (33.9)
---------------------------------------- ----- ------- -------
Total liabilities (227.4) (225.8)
---------------------------------------- ----- ------- -------
Net assets 238.2 246.3
---------------------------------------- ----- ------- -------
Shareholders' equity
Share capital 4.9 4.9
Share premium 139.2 138.5
Retained earnings 86.0 92.6
Other reserves 8.1 10.3
---------------------------------------- ----- ------- -------
Total equity 238.2 246.3
---------------------------------------- ----- ------- -------
Consolidated Cash Flow Statement
For the year ended 30 April 2019
2019 2018
GBPm GBPm
------------------------------------------------------- ------- ---------------------
Cash flows from operating activities
Operating profit 15.6 21.8
Depreciation 13.3 13.1
Impairment 3.5 3.8
Amortisation 11.3 12.5
Loss on disposal of property, plant and equipment 0.1 0.2
Share-based payments 0.7 1.1
Pension charge in excess of cash contributions 0.6 0.1
Increase in inventories (12.2) (0.3)
Decrease / (increase) in trade and other receivables 0.3 (16.7)
Increase / (decrease) in trade and other payables 2.3 (1.2)
Increase in provisions 4.4 2.8
Increase in derivative financial instruments - (0.1)
-------------------------------------------------------- ------- ---------------------
Cash generated from operations 39.9 37.1
Interest paid (3.0) (2.9)
Defined benefit scheme contributions (2.7) (2.1)
Tax received 0.4 0.3
-------------------------------------------------------- ------- ---------------------
Net cash inflow from operating activities 34.6 32.4
-------------------------------------------------------- ------- ---------------------
Cash flows from investing activities
Purchases of property, plant and equipment (22.7) (20.9)
Purchases of intangible assets (0.9) (1.3)
Interest received 0.4 0.2
Purchase of equity investment (0.2) -
-------------------------------------------------------- ------- ---------------------
Net cash outflow from investing activities (23.4) (22.0)
-------------------------------------------------------- ------- ---------------------
Cash flows from financing activities
Proceeds from issues of ordinary share capital 0.7 0.5
Purchase of own shares (1.8) (2.2)
Equity dividends paid to shareholders (10.4) (10.1)
Proceeds from new bank funding 143.2 15.6
Repayment of amounts borrowed (149.1) (12.7)
Upfront loan facility fees (1.7) -
-------------------------------------------------------- ------- ---------------------
Net cash used in financing activities (19.1) (8.9)
-------------------------------------------------------- ------- ---------------------
Net (decrease) / increase in cash and cash equivalents (7.9) 1.5
Effects of exchange rate changes - 0.5
Cash and cash equivalents at start of year 21.4 19.4
-------------------------------------------------------- ------- ---------------------
Cash and cash equivalents at end of year 13.5 21.4
-------------------------------------------------------- ------- ---------------------
Consolidated Statement of Changes in Shareholders' Equity
Attributable to owners of the parent
-------------------------------------- --------------------------------------------------------
Share Retained Translation Total
capital Share premium earnings reserve equity
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- ------------- --------- ----------- -------
Balance at 1 May 2017 4.9 138.0 63.3 5.9 212.1
-------------------------------------- -------- ------------- --------- ----------- -------
Profit for the financial year - - 16.1 - 16.1
Other comprehensive income/(loss):
Net exchange movements on translation
of foreign subsidiaries - - - 4.4 4.4
Actuarial gain on defined benefit
pension scheme - - 29.2 - 29.2
Tax on amounts taken directly
to equity - - (5.0) - (5.0)
-------------------------------------- -------- ------------- --------- ----------- -------
Total comprehensive income - - 40.3 4.4 44.7
-------------------------------------- -------- ------------- --------- ----------- -------
Transactions with owners:
Recognition of share-based
payments - - 1.1 - 1.1
Movement in tax arising on
share-based payments - - 0.2 - 0.2
Proceeds from exercise of employee
options - 0.5 - - 0.5
Consideration paid for purchase
of own shares (held in trust) - - (2.2) - (2.2)
Equity dividends - - (10.1) - (10.1)
-------------------------------------- -------- ------------- --------- ----------- -------
- 0.5 (11.0) - (10.5)
-------------------------------------- -------- ------------- --------- ----------- -------
Balance at 30 April 2018 4.9 138.5 92.6 10.3 246.3
-------------------------------------- -------- ------------- --------- ----------- -------
Profit for the financial year - - 10.5 - 10.5
Other comprehensive income/(loss):
Net exchange movements on translation
of foreign subsidiaries - - - (2.2) (2.2)
Actuarial loss on defined benefit
pension scheme - - (6.5) - (6.5)
Tax on amounts taken directly
to equity - - 1.1 - 1.1
-------------------------------------- -------- ------------- --------- ----------- -------
Total comprehensive income - - 5.1 (2.2) 2.9
-------------------------------------- -------- ------------- --------- ----------- -------
Transactions with owners:
Recognition of share-based
payments - - 0.7 - 0.7
Movement in tax arising on
share-based payments - - (0.2) - (0.2)
Proceeds from exercise of employee
options - 0.7 - - 0.7
Consideration paid for purchase
of own shares (held in trust) - - (1.8) - (1.8)
Equity dividends - - (10.4) - (10.4)
-------------------------------------- -------- ------------- --------- ----------- -------
- 0.7 (11.7) - (11.0)
-------------------------------------- -------- ------------- --------- ----------- -------
Balance at 30 April 2019 4.9 139.2 86.0 8.1 238.2
-------------------------------------- -------- ------------- --------- ----------- -------
Notes to the consolidated financial statements
General Information
Consort Medical plc is a public limited company incorporated and
domiciled under the law of England and Wales, registered number
406711. The address of its registered office is Suite B, Breakspear
Park, Breakspear Way, Hemel Hempstead, HP2 4TZ. The Company is
listed on the London Stock Exchange.
1. Presentation of the financial statements
The financial information set out in this preliminary
announcement does not constitute Consort Medical plc's statutory
financial statements for the years ended 30 April 2019 and 30 April
2018, but is derived from those financial statements. Statutory
financial statements for the year ended 30 April 2019 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting. Statutory financial statements for the year
ended 30 April 2018 have been delivered to the Registrar of
Companies. The Auditor has reported on those financial statements;
their reports were unqualified; did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report; and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
This preliminary announcement has been prepared and approved by
the Directors in accordance with International Financial Reporting
Standards (IFRS) and its interpretations as adopted by the
International Accounting Standards Board (IASB) and by the EU
(Adopted IFRS).
Basis of preparation
The financial statements have been prepared in accordance with
the Companies Act 2006 applicable to those companies reporting
under IFRS, Article 4 of the IAS Regulation and International
Accounting Standards and International Financial Reporting
Standards (collectively referred to as IFRS) and related
interpretations, as adopted for use in the European Union in all
cases.
Accounting convention
The financial statements have been prepared using the historical
cost convention, as modified by certain financial assets and
financial liabilities (including derivative instruments) at fair
value. The specific accounting policies adopted, which have been
approved by the Board and which have been applied consistently in
all years presented except as detailed below, are as described in
the statutory financial statements for the year ended 30 April
2018.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group and the Company have adequate resources
to continue in operation for the foreseeable future and to meet
their obligations as they fall due. As at 30 April 2019 the Group
reported net debt of GBP97.4m (30 April 2018: GBP95.5m) comprising
GBP110.9m gross debt and GBP13.5m cash, which compared with
committed banking facilities of GBP200m, leaving GBP89.1m of
headroom undrawn. The Group's primary committed financing facility
is available to October 2023. Accordingly these financial
statements have been prepared on a going concern basis.
Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised, if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods.
Notes to the consolidated financial statements (continued)
Judgements made by management that have a significant effect on
the Group financial statements and estimates with a significant
risk of material adjustment in the next year are discussed in the
relevant notes included in the consolidated financial statements.
Management discusses with the Audit Committee the development,
selection, application and disclosure of the Group's critical
accounting policies and estimates.
Alternative Performance Measures and the treatment of special
items
In addition to statutory measures, a number of alternative
performance measures (APMs) are included in this preliminary
announcement to assist investors in gaining a clearer understanding
and balanced view of the Group's underlying performance and in the
comparison with performance across the industry. These measures are
consistent with how business performance is measured
internally.
The APMs used include operating profit (EBIT), profit before tax
(PBT) and earnings per share, adjusted to eliminate special items,
being the amortisation of acquired intangibles and other
significant one-off items not linked to the underlying performance
of the business, and free cash flow after special items. Further,
underlying constant exchange rate measures are given which
eliminate the impact of currency movements by comparing the current
year measure against the comparative restated at this year's actual
average exchange rates. Where APMs are given, these are compared to
the equivalent measures in the prior year.
The APM of EBITDA includes the add-back of interest, tax,
depreciation, amortisation and any profit or loss on disposal of
property, plant and equipment to operating profit before special
items (EBIT). Further detail on the special items in the year can
be found in note 3.
Reconciliation of statutory measures to Alternative Performance
Measures
2019 2018
GBPm GBPm
-------------------------------------------------- ------ ------
Profit before tax 12.5 17.3
Add back: net finance costs 3.1 4.5
-------------------------------------------------- ------ ------
Operating profit 15.6 21.8
Add back: Special items 25.7 20.9
-------------------------------------------------- ------ ------
Operating profit before special items (EBIT) 41.3 42.7
Depreciation 13.3 13.1
Amortisation 11.3 12.5
Less: Amortisation of acquired intangibles (10.8) (12.1)
Loss on disposal of property, plant and equipment 0.1 0.2
-------------------------------------------------- ------ ------
EBITDA before special items 55.2 56.4
-------------------------------------------------- ------ ------
Profit before tax 12.5 17.3
Add back: net finance costs 3.1 4.5
-------------------------------------------------- ------ ------
Operating profit 15.6 21.8
Add back: Special items 25.7 20.9
-------------------------------------------------- ------ ------
Operating profit before special items (EBIT) 41.3 42.7
Finance income 0.4 0.2
Finance costs (3.7) (3.2)
Other finance costs 0.2 (1.5)
-------------------------------------------------- ------ ------
Profit before tax and special items 38.2 38.2
-------------------------------------------------- ------ ------
Cash generated from operations 39.9 37.1
Net interest paid (2.6) (2.7)
Tax received 0.4 0.3
Capital expenditure (23.6) (22.2)
-------------------------------------------------- ------ ------
Free cash flow 14.1 12.5
-------------------------------------------------- ------ ------
Notes to the consolidated financial statements (continued)
At constant exchange rates (CER) - FY2018 restated at the FY2019
average rate:
Reported CER
2018 2018
GBPm GBPm
-------------------------------------- -------- -----
Revenue 311.1 310.5
Operating profit before special items 42.7 42.6
Adoption of new and revised standards
The following standards and amendments have been applied for the
first time during the year commencing 1 May 2018 but do not have a
material impact on the Group:
-- Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions
-- IFRIC 22 - Foreign Currency Transactions and Advance Consideration
-- Annual Improvements to IFRS standards (2014 - 2016 cycle) - Amendments to IFRS 1 and IAS 28
IFRS 16 - Leases was issued in January 2016 and will be adopted
by the Group effective 1 May 2019. The standard provides a single
lease accounting model, requiring lessees to recognise assets and
liabilities for all operating leases unless the term is 12 months
or less or the underlying asset has a low value. Going forward, a
straight-line depreciation expense will be recognised in relation
to the right-of-use assets and an amortising interest charge in
relation to the lease liabilities will be recognised in the
consolidated income statement. The interest charge will be higher
in the earlier periods of a lease as the interest element unwinds.
This will replace the operating lease expense currently recognised
in the income statement under IAS 17.
The Group performed a review of leases held at the reporting
date, and used the modified retrospective transition approach
detailed in the standard to understand and quantify how the new
accounting model may affect the Group's financial results. As a
result of this review, the Group expects to recognise lease
liabilities of approximately GBP7.0m on 1 May 2019, representing
total cash commitments under operating leases discounted to present
value and right-of-use assets of the equivalent value of
approximately GBP7.0m. No adjustment to equity is expected on
transition and comparative results will not require restatement.
The approach to lessor accounting is substantially unchanged from
the predecessor standard, IAS 17.
IFRS 9 - Financial Instruments is effective for accounting
periods beginning on or after 1 January 2018 and replaces existing
accounting standard IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 addresses the classification, measurement and
de-recognition of financial assets and financial liabilities and
introduces the new rules for hedge accounting, a new impairment
model for financial assets and early recognition of expected credit
losses. The Group adopted IFRS 9 on 1 May 2018 which had no
financial impact on either the current or comparative period.
The Group is not involved with complex financial instruments,
nor has any history of material credit losses. As such, the only
impact of adoption has been on disclosures. The Group has
determined that the application of IFRS 9 on 1 May 2018 has not had
a material effect on the financial statements for the year ended 30
April 2019 and has therefore not restated comparative information
for prior periods.
Notes to the consolidated financial statements (continued)
IFRS 15 - Revenue from Contracts with Customers was issued in
May 2014 and has been adopted by the Group effective 1 May 2018
using the cumulative effect approach. The standard provides a
single, principles-based approach to the recognition of revenue
from all contracts with customers.
Under IFRS 15 the Group recognises revenue as performance
obligations to deliver products or services are satisfied, and
revenue is recorded based on the amount of consideration expected
to be received in exchange for satisfying those performance
obligations. The Group does not have contracts whose payment terms
exceed one year, therefore no adjustment is required for contracts
containing a significant financing component.
The Group undertook a detailed impact assessment of the impact
of IFRS 15 on its revenues from products and services. The Group
has determined that the application of IFRS 15 on 1 May 2018 has
not had a material effect on the financial statements for the year
ended 30 April 2019 and has therefore not restated comparative
information for prior periods.
The following accounting standards relevant to the Group have
not been early adopted:
-- IFRS 16 - Leases
-- IFRIC 23 - Uncertainty over Income Tax Treatments
2. Segmental Information
The Group's operating segments are determined with reference to
the information which is supplied to the Executive Committee in
order for it to allocate the Group's resources and to monitor the
performance of the Group. This information analyses the Group
between its two divisions, Bespak and Aesica. The Executive
Committee assesses the performance of the operating segments based
on a measure of adjusted operating profit which excludes the impact
of special items from the operating segments. Special items are
analysed in note 3.
The segment information provided to the Executive Committee for
both of these reportable segments is as follows:
Bespak Aesica Unallocated Total
For the year ended 30 April 2019 GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------ ----------- -------
Revenue from products 118.2 161.1 - 279.3
Revenue from services 8.0 17.8 - 25.8
------------------------------------------- ------ ------ ----------- -------
Revenue by business segment 126.2 178.9 - 305.1
------------------------------------------- ------ ------ ----------- -------
Segment operating profit before special
items 25.6 15.7 - 41.3
Special items excluding amortisation of
acquired intangibles (note 3) (0.7) (14.2) - (14.9)
Amortisation of acquired intangibles (note
3) (0.8) (10.0) - (10.8)
------------------------------------------- ------ ------ ----------- -------
Segment operating profit / (loss) 24.1 (8.5) - 15.6
------------------------------------------- ------ ------ ----------- -------
Finance income 0.4
Finance costs (note 4) (3.7)
Other finance costs (note 4) 0.2
------------------------------------------- ------ ------ ----------- -------
Profit before tax 12.5
Taxation (note 5) (2.0)
------------------------------------------- ------ ------ ----------- -------
Profit for the financial year 10.5
------------------------------------------- ------ ------ ----------- -------
Segmental balance sheet
Total assets 143.6 302.4 19.6 465.6
Total liabilities (42.0) (71.4) (114.0) (227.4)
------------------------------------------- ------ ------ ----------- -------
Net assets 101.6 231.0 (94.4) 238.2
------------------------------------------- ------ ------ ----------- -------
Notes to the consolidated financial statements (continued)
Bespak Aesica Unallocated Total
For the year ended 30 April 2018 GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------ ----------- -------
Revenue from products 118.5 171.8 - 290.3
Revenue from services 8.4 12.4 - 20.8
------------------------------------------- ------ ------ ----------- -------
Revenue by business segment 126.9 184.2 - 311.1
------------------------------------------- ------ ------ ----------- -------
Segment operating profit before special
items 26.5 16.2 - 42.7
Special items excluding amortisation of
acquired intangibles (note 3) (5.6) (3.2) - (8.8)
Amortisation of acquired intangibles (note
3) (0.8) (11.3) - (12.1)
------------------------------------------- ------ ------ ----------- -------
Segment operating profit 20.1 1.7 - 21.8
------------------------------------------- ------ ------ ----------- -------
Finance income 0.2
Finance costs (note 4) (3.2)
Other finance costs (note 4) (1.5)
------------------------------------------- ------ ------ ----------- -------
Profit before tax 17.3
Taxation (note 5) (1.2)
------------------------------------------- ------ ------ ----------- -------
Profit for the financial year 16.1
------------------------------------------- ------ ------ ----------- -------
Segmental balance sheet
Total assets 147.4 300.6 24.1 472.1
Total liabilities (39.4) (64.9) (121.5) (225.8)
------------------------------------------- ------ ------ ----------- -------
Net assets 108.0 235.7 (97.4) 246.3
------------------------------------------- ------ ------ ----------- -------
The Group's operations are based in the United Kingdom and
Europe.
2019 2018
Revenue by destination GBPm GBPm
------------------------- ------ ------
Europe 210.8 201.3
United States of America 31.1 48.0
United Kingdom 23.3 28.7
Rest of the World 39.9 33.1
------------------------- ------ ------
Total revenue 305.1 311.1
------------------------- ------ ------
The following table provide further information on the Group's
related contract assets and liabilities:
2019 2018
GBPm GBPm
--------------------- ---- ----
Contract assets 5.8 6.2
Contract liabilities 8.1 13.0
--------------------- ---- ----
Notes to the consolidated financial statements (continued)
3. Special items
To improve the understanding of the Group's financial
performance the following items, which do not reflect underlying
performance, are classified as special items:
2019 2018
GBPm GBPm
-------------------------------------------------------------- ------ ------
Amortisation of acquired intangibles (10.8) (12.1)
Reorganisation costs (10.0) (4.6)
Impairment of assets and inventory (4.4) (4.2)
Pension charges (0.5) -
Special items before taxation (25.7) (20.9)
-------------------------------------------------------------- ------ ------
Tax on special items 5.5 4.6
Special tax item - recognition of capital losses (0.4) -
Special tax item - deferred tax credit as a result of reduced
overseas tax rates - 0.8
Special items after taxation (20.6) (15.5)
-------------------------------------------------------------- ------ ------
-- Amortisation of acquired intangibles represents the charge in
relation to Aesica (acquired in 2014) of GBP10.0m (FY2018:
GBP11.3m) and GBP0.8m (FY2018: GBP0.8m) in relation to The Medical
House (acquired in 2009).
-- Reorganisation costs of GBP10.0m (FY2018 GBP4.6m) include costs associated with closure and decommissioning of the API plant at Queenborough.
-- Impairment of assets and inventory of GBP4.4m (FY2018:
GBP4.2m) relates to a write-down of the carrying values of assets
associated with the closure of the API plant at Queenborough.
-- Pension charges relate to the one-off true-up of the UK's
defined benefit pension liabilities as a result of the High Court
ruling handed down on 26 October 2018 requiring the equalisation of
male and female Guaranteed Minimum Pension (GMP) entitlement.
-- A special tax item of GBP0.4m (FY2018: GBPnil) was recognised
relating to a reduction in capital losses claimable in relation to
Aesica assets.
-- The prior year special tax item related to the recalculation
of the Group's deferred tax assets and liabilities using lower
overseas corporate tax rates.
4. Finance costs
2019 2018
GBPm GBPm
----------------------------------------------------- ----- -----
Interest on bank overdrafts and loans plus amortised
fees (3.7) (3.2)
----------------------------------------------------- ----- -----
Finance costs (3.7) (3.2)
----------------------------------------------------- ----- -----
Other finance costs
2019 2018
GBPm GBPm
--------------------------------------------------- ----- -----
Net interest cost on defined benefit schemes (note
10) (0.3) (1.1)
Foreign exchange gains / (losses) 0.5 (0.4)
--------------------------------------------------- ----- -----
Other finance costs 0.2 (1.5)
--------------------------------------------------- ----- -----
Notes to the consolidated financial statements (continued)
5. Taxation
The major components of the income tax charge are:
2019 2018
GBPm GBPm
------------------------------------------------------ ----- ------
UK corporation tax 0.5 0.9
Foreign tax 4.0 3.2
Deferred tax (2.5) (2.9)
Income tax charge reported in the consolidated income
statement 2.0 1.2
------------------------------------------------------ ----- ------
The tax charge is analysed between:
Tax on profit before special items 7.1 6.6
Tax on special items (5.5) (4.6)
Special tax item - recognition of capital losses 0.4 -
Special tax item - deferred tax credit as a result
of reduced overseas tax rates - (0.8)
------------------------------------------------------ ----- ------
Income tax charge reported in the consolidated income
statement 2.0 1.2
------------------------------------------------------ ----- ------
Special tax items above are described further in note 3.
6. Earnings per share
2019 2018
GBPm GBPm
------------------------------------------------------------ ----- -------
Earnings - basic and diluted:
Profit for the year - attributable to ordinary shareholders 10.5 16.1
Add back: Special items after taxation (note 3) 20.6 15.5
------------------------------------------------------------ ----- -------
Adjusted earnings 31.1 31.6
------------------------------------------------------------ ----- -------
2019 2018
Number Number
----------------------------------------------------- ---------- -----------
Number of shares
Weighted average number of ordinary shares in issue 49,336,016 49,257,383
Weighted average number of shares owned by Employee
Share Ownership Trust (290,695) (300,069)
----------------------------------------------------- ---------- -----------
Average number of ordinary shares in issue for basic
earnings 49,045,321 48,957,314
Dilutive impact of share options outstanding 402,356 390,802
----------------------------------------------------- ---------- -----------
Diluted weighted average number of ordinary shares
in issue 49,447,677 49,348,116
----------------------------------------------------- ---------- -----------
2019 2018
Pence Pence
------------------- ------- -------
Earnings per share
Basic:
Adjusted 63.4 64.5
Unadjusted 21.3 32.9
Diluted:
Adjusted 62.8 63.9
Unadjusted 21.2 32.7
------------------- ------- -------
No options over ordinary shares have been exercised since 30
April 2019 to the date of this announcement.
Notes to the consolidated financial statements (continued)
7. Dividends
Dividends declared and paid during the year:
2019 2018
GBPm GBPm
------------------------------------------------------- ----- -----
Final dividend for FY2018 of 13.56p per share (FY2018:
final dividend for FY2017 of 13.21p per share) 6.7 6.5
Interim dividend paid in FY2019 of 7.60p per share
(FY2018: 7.44p) 3.7 3.6
------------------------------------------------------- ----- -----
10.4 10.1
------------------------------------------------------- ----- -----
In addition, the directors are proposing a final dividend in
respect of the year ended 30 April 2019 of 13.8p per share, at an
estimated total cost of GBP6.8m. If approved by shareholders at the
Annual General Meeting to be held on 11 September 2019, the final
dividend will be paid on 25 October 2019 to shareholders on the
register on 20 September 2019.
8. Capital expenditure
In the year, there were additions to property, plant and
equipment of GBP23.1m (2018: GBP20.4m).
Capital commitments contracted for but not provided for by the
Group amounted to GBP8.4m (2018: GBP11.6m).
9. Net debt
2019 2018
GBPm GBPm
------------------------------------------ ---- ------- ------- -------
Current assets:
Cash and cash equivalents 13.5 21.4
--------------------------------------------------------- ------- -------
13.5 21.4
------- ------- -------
Borrowings:
Interest bearing loans and borrowings (110.9) (117.3)
Unamortised facility fees - 0.4
--------------------------------------------------------- ------- -------
Net borrowings (110.9) (116.9)
--------------------------------------------------------- ------- -------
Net debt (97.4) (95.5)
--------------------------------------------------------- ------- -------
On 9 October 2018 the Group entered into a GBP200m multicurrency
revolving credit facility with an GBP80m accordion feature. The
facility is for a 5 year period which matures in October 2023, with
options for two one-year extensions by mutual consent and is
subject to covenant testing at certain reporting periods. The Group
also has uncommitted overdraft facilities of GBP4.5m and GBP1.1m
which are in place until November 2019 and October 2023
respectively.
Interest on the revolving credit facility is charged at LIBOR
plus a margin depending upon the ratio of net debt to EBITDA and on
UK overdrafts at either a fixed margin above UK base rate or at the
prevailing rate per the revolving credit facility.
The undrawn facilities are unsecured. The bank loans and
overdrafts are subject to cross-guarantees between Group
undertakings.
Notes to the consolidated financial statements (continued)
Reconciliation of net cash flow to movement in net debt
2019 2018
GBPm GBPm
----------------------------------------------------- ------- -------
Net debt at the beginning of the year (95.5) (92.6)
Net decrease in cash and short-term borrowings (2.0) (1.3)
Effects of exchange rate changes 0.5 (1.1)
Amortisation of facility fees (0.4) (0.5)
Net debt at the end of the year (97.4) (95.5)
----------------------------------------------------- ------- -------
10. Defined benefit pension schemes deficit
2019 2018
GBPm GBPm
---------------------------------------------------- ----- ------
Pension deficit at start of the year 14.7 44.6
Past service cost 0.5 -
Current service cost 0.1 0.1
Interest income (3.0) (2.9)
Interest expense 3.3 4.0
Return on scheme assets (excluding amounts included
within interest) (6.3) 1.1
Effect of demographic adjustments 1.2 (9.2)
Loss / (gain) from change in financial assumptions 11.6 (12.3)
Effect of experience adjustments - (8.8)
Contributions (2.7) (2.1)
Effects of foreign exchange rates (0.2) 0.2
Pension deficit at end of the year 19.2 14.7
---------------------------------------------------- ----- ------
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END
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