TIDMEKF
RNS Number : 8217Y
EKF Diagnostics Holdings PLC
14 September 2020
EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Half-year Report
EKF Diagnostics Holdings plc (AIM: EKF), the AIM listed
point-of-care business, announces its unaudited interim results for
the six months ended 30 June 2020. During the year the Company has
issued a number of positive trading upgrades as a result of
improved performance from the core business than previously
expected and higher demand for the PrimeStore MTM collection device
for COVID-19 testing. Overall, the full year performance remains
likely to exceed previously revised management expectations.
Financial Highlights
-- Revenue up 23% to GBP26.33m (H1 2019: GBP21.44m)
-- Adjusted EBITDA* up 60% to GBP8.93m (H1 2019: GBP5.58m)
-- Net profit up 189% to GBP4.14m (H1 2019: GBP1.43m)
-- Net cash generated from operations of GBP6.94m (H1 2019: GBP4.34m)
-- Net cash of GBP16.28m (30 June 2019: GBP11.78m) (31 December 2019: GBP11.42m)
-- Maiden dividend of 1p per ordinary share to be paid on 1
December 2020 (record date: 5 November 2020)
* Earnings before interest, tax, depreciation and amortisation
adjusted for exceptional items and share-based payments
Operational Highlights
-- Core business revenues delivered a more robust performance in
the face of COVID-19 headwinds than management expected, with 8%
year-on-year decrease in core business sales (i.e. excluding
PrimeStore MTM sales), with signs that H2 recovery is underway
-- Diabetes sales down 2% to GBP9.42m (H1 2019: GBP9.61m) - with
<BETA>-HB sales up 5.7% to GBP5.07m, and Quo-Test sales down
GBP0.42m due to reduced demand in the Philippines following
substantial orders fulfilled last year
-- Hematology sales down 12% to GBP5.86m (H1 2019: GBP6.66m) -
Hemo Control / HemoPoint H2 sales were impacted by COVID-19
particularly in Peru, but strong Diaspect Tm sales (+8%) following
strong contributions from McKesson and Fresenius OEM agreements
offset these reductions
-- Central Lab & Life Sciences sales (excluding contract
manufacturing for PrimeStore MTM) were down 5.5% to GBP2.64m,
despite growth in Clinical Chemistry revenues.
- Including PrimeStore MTM sales, Central Lab & Lifesciences
sales totalled GBP9.10m (up from GBP2.96m in H1 2019)
-- Main growth driver derived from GBP6.46m of PrimeStore MTM
contract manufacturing revenues (up from GBP164k in H1 2019)
- Contract manufacturing agreement with Longhorn Vaccines and Diagnostics, signed in March 2020
- EKF appointed as distributor for non-US territories with UK contracts secured
- Rapid increase in production capacity across US sites (Texas,
and now Indiana), establishment of manufacturing lines in the UK
(Cardiff) and Europe (Barleben and Leipzig ).
Christopher Mills, Non-Executive Chairman of EKF, commented:
"We have delivered tremendous growth in the first half due to
strong sales of the PrimeStore MTM sample collection device and a
far more robust performance in the core business than we'd
originally anticipated given the likely impact of COVID-19. We are
seeing signs of improved performance in both Diabetes and
Hematology and the continued demand for PrimeStore MTM means that
we remain confident that, for the full year, we will exceed
previously revised management expectations."
A copy of the investor presentation is available here:
https://www.ekfdiagnostics.com/documents-reports.html
The Company will also host a live online presentation today at
4.30pm through the digital platform Investor Meet Company (register
here:
https://www.investormeetcompany.com/ekf-diagnostics-holdings-plc/register-investor
).
A recording of the presentation and responses to the Q&A
sessions will also be available here afterwards.
EKF Diagnostics Holdings plc www.ekfdiagnostics.com
Christopher Mills, Non-executive Chairman Tel: +44 (0) 29 2071 0570
Julian Baines, CEO
Richard Evans, FD & COO
N+1 Singer Tel: 020 7496 3000
Aubrey Powell / George Tzimas (Corporate
Finance)
Tom Salvesen (Corporate Broking)
Walbrook PR Limited Tel: +44 (0) 20 7933 8780 or ekf@walbrookpr.com
Paul McManus / Lianne Cawthorne Mob: +44 (0) 7980 541 893 / +44 (0) 7584
391 303
BUSINESS REVIEW
Despite the challenges that have been presented by the COVID-19
pandemic, we are delighted that our core business has held up so
well and that we have delivered strong double-digit growth across
the Group during the first half of the year.
Overall sales grew by 23% to GBP26.33m, adjusted EBITDA was up
60% to GBP8.93m and we generated GBP6.94m of net cash from
operations, taking our net cash position to GBP16.82m.
As investors will have seen from our recent trading updates and
the series of upgraded market expectations, our over-performance
has been largely due to the high demand for the PrimeStore MTM
device. This is used for safe COVID-19 sample collection and is
manufactured under contract by us in the United States, here in the
UK and by our sites in Germany. Of course, underpinning this growth
has been the robust performance of our core businesses and the
continued demand for our diabetes and haemoglobin tests during the
pandemic. Whilst overall sales within our core business (excluding
PrimeStore MTM sales) declined by 8%, the Board believes this was a
strong performance given current circumstances and also came in
above our own expectations. A number of areas within our core
business continued to see growth in sales and we are beginning to
see positive signs for a return to growth overall.
Operations
Diabetes
Sales in the diabetes segment were only marginally lower at
GBP9.4m, down 2% on H1 2019. Sales of <BETA>-HB
(Beta-Hydroxybutyrate) were up 5.7% year-on-year to GBP5.07m, and
sales of Quo-Lab and Biosen (our HbA1C point-of-care analyzer and
glucose analyzer respectively) were broadly flat against the same
period last year. The biggest impact was seen on our Quo-Test
revenues, with a drop in sales primarily associated with reduced
demand in the Philippines during national lockdown, combined with
the fact that H1 2019 sales were buoyed by large initial orders
placed in the region last year.
Hematology
Sales from our Hematology range of products held up well,
recording a total of GBP5.85m in revenues. However the 12%
year-on-year decline was mainly due to a short-term slowdown in
Hemo Control and HemoPoint H2 sales. Due to the impact of the
pandemic in the US Women, Infants and Children centres were closed
nationwide to reduce COVID-19 transmission to vulnerable people and
health workers. In addition, sales related to hemoglobin screening
in Peru were severely impacted by COVID-19.
On a more positive note, sales of the DiaSpect Tm hand-held
hematology analyser remained reasonably robust, with strong
performances from our OEM partners McKesson and Fresenius,
contributing to an 8% increase in DiaSpect Tm sales. Before the
onset of the COVID-19 pandemic, over 1,000 sites had started using
the McKesson Consult (R) Hb analyser version of the DiaSpect Tm.
This was growing at around 100 sites per month during the first
quarter.
Sales of Hemo Control and HemoPoint H2 have improved in July and
August and we are hopeful that this is an early indication of
recovery and will continue in the remainder of the second half.
Central Laboratory & Life Sciences (inc. PrimeStore MTM
contract manufacturing)
Our Central laboratory and Life Sciences sector combines
revenues derived from Clinical Chemistry, lab analysers, contract
fermentation and enzymes, but also includes sales from contract
manufacturing, namely PrimeStore MTM tubes and bulk liquid
reagents. As a result of the additional GBP6.46m PrimeStore MTM
sales in the half, this business segment more than tripled its
revenues from GBP2.96m in H1 2019 to GBP9.10m in H1 2020.
In March 2020, we signed a contract manufacturing agreement with
Longhorn Vaccines and Diagnostics LLC in the US for their
FDA-approved PrimeStore MTM sample collection device, which
deactivates viruses, bacteria, fungi and mycobacterium tuberculosis
allowing for safe sample handling and transport, greatly reducing
risk of infection. The PrimeStore(R) MTM product is the only
FDA-cleared microbial nucleic acid storage and stabilisation device
available and was designed specifically for use during viral
pandemics. In the case of COVID-19, PrimeStore MTM deactivates the
sample, rendering it non-infectious and allowing safe
transportation and testing in laboratories with a lower biosafety
containment classification, thereby increasing the number of
laboratories which can undertake testing for COVID-19.
As reflected in our announcements during the year, we have been
rapidly scaling up our production capacity to meet the significant
increase in demand for these sample collection kits from Longhorn
in the US, but also from outside the US where EKF has been
appointed a distributor for non-US territories. We quickly doubled
our production capacity at our manufacturing site in Boerne, Texas,
and have subsequently created a second US production line at our
facility in South Bend, Indiana. Three production lines are now up
and running from our head office site in Penarth, South Wales, and
we have now established manufacturing at both our Barleben and
Leipzig sites in Germany.
In the first half of 2020, sales of PrimeStore MTM sample
collection kits totalled GBP6.46m. Further US orders worth $14.1m
have been received for delivery in H2 2020 and in August 2020 we
received an order worth GBP3m from a partner from the private
sector to supply PrimeStore MTM sample collection kits be used in a
COVID-19 testing programme for their UK staff. The kits include a
PrimeStore MTM filled tube packaged with a swab and a collection
device.
Beyond Longhorn related opportunities, we have seen the
successful completion of early stage development batches of a bulk
dietary ingredient for Ixcela, Inc. which is used in food
supplements to improve gut microbiome and general health, and the
commencement of manufacture of an evaluation batch prior to the
planned commencement of full scale production. Significant progress
has been made to introduce Lucica Glycated Albumin to national and
regional lab chains in the US, although both sales negotiations and
roll-out have been delayed by COVID-19 lockdown measures.
We are about to start contract manufacturing for a number of new
products in our US facilities including molecular and RNA kits for
five potential new customers, in addition to the continuing work
with Oragenics on enzymes for use in research, and iGenomX for a
molecular enzyme. Finally, sales of the Altair analyser and related
chemistry reagents were up 36%.
Other
This category includes sales of a number of products including
our Lactate Scout sports medicine product and other diagnostic
tests, the most important of which is for pregnancy. The shutdown
of professional sports in Europe has led to a reduction in Lactate
Scout sales, however these are expected to resume when organised
sport gets onto a more regular footing.
PartnerShip with Mount Sinai - Renalytix AI PLC / Trellus Health
LTD
In 2019, we announced our Preferred Partnership Agreement (PPA)
with Mount Sinai Innovation Partners (MSIP). This provides EKF with
advanced access to innovative commercial opportunities arising from
Mount Sinai Health System owned technologies managed by MSIP in the
field of healthcare technologies. It builds on the collaborative
relationship with MSIP which led to our successful spin-out of
Renalytix AI plc (LSE: RENX; NASDAQ: RNLX) ("RenalytixAI"). Our
residual holding in RenalytixAI is valued at GBP14.2m (as at 30
June), against our original purchase price of GBP3.2m. The
in-specie distribution shares in RenalytixAI which were transferred
to EKF shareholders in November 2018 are, as at 30 June 2020, worth
GBP111.1m, or equivalent to 24.4p per EKF share.
In addition to this, Verici Dx Limited ("Verici Dx") has been
spun out from RenalytixAI, having been set up as a separate entity
to enable the accelerated development of and the achievement of
commercial milestones for the portfolio of transplant diagnostic
and prognostic products originally licensed by RenalytixAI from
Mount Sinai. An IPO of Verici Dx is being evaluated which, if
successful, will provide additional benefits to those EKF
shareholders who retained their distributed RenalytixAI shares and
received Verici 'A' shares in July this year.
Last month we announced our first collaboration under our PPA
with MSIP, being a $5m investment in Trellus Health Limited
("Trellus Health"), a company developing a resilience-driven
digital health solution for complex chronic conditions with an
initial focus on Inflammatory Bowel Disease (IBD), including
Crohn's disease and ulcerative colitis. Trellus Health has agreed a
multi-year licence with Mount Sinai Health System to commercialise
their GRITT-IBD resilience assessment and personalised treatment
methodology. 90% of the US's $3.3 trillion annual health care
expenditure is for chronic diseases, with patients suffering from
both chronic medical and mental health conditions costing twice as
much according to the Centers for Disease Control & Prevention
(CDC).
As we did with RenalytixAI, our aim is to distribute EKF's
shareholding in Trellus Health to our shareholders by way of a
distribution in specie later this year, with a potential admission
to trading on AIM for Trellus Health in 2021.
Financial review
Revenue
Revenue for the period was GBP26.33m (H1 2019: GBP21.44m), an
increase of 22.8%.
Unaudited Unaudited +/- %
6 months ended 6 months ended
30 June 2020 30 June 2019
GBP'000 GBP'000
Hematology 5,853 6,664 (12.2%)
Diabetes (including <BETA>H
B) 9,419 9,612 (2.0%)
Central Laboratory 9,098 2,956 207.8%
Other 1,959 2,204 (11.1%)
Total revenue 26,329 21,436 22.8%
-------------------- --------------------
Within the Central Laboratory segment, sales relating to
contract manufacturing, including those of products stemming from
our relationship with Longhorn, amounted to GBP6.46m (H1 2019:
GBP0.16m).
Gross profit
Gross profit is GBP14.91m (H1 2019: GBP11.53m). The gross profit
margin is 57% (H1 2019: 54%). The gross margin percentage has
improved largely as a result of increased sales volumes and a
better mix.
Administrative expenses
In H1 2020, administrative expenses have reduced to GBP8.25m (H1
2019: GBP9.12m), representing 31.3% of revenue for the period (H1
2019: 42.5%). The reduction is largely caused by lower share-based
payments. Administrative expenses include research and development
(R & D) costs of GBP0.63m (H1 2019: GBP0.78m). In addition,
further R & D costs of GBP0.31m (H1 2019: GBP0.18m) have been
capitalised. Non- exceptional administrative costs are slightly
higher than in H1 2019 mainly due to increased sales volumes and
additional expenditure on quality assurance and regulatory costs as
result of the increased regulatory burden in Europe and other
regions. Included within administrative expenses is a performance
related payment to two executive directors totalling GBP0.45m,
which reduces the amount payable under the cash-settled share-based
payment incentive scheme.
To aid understanding, administrative expenses in each period are
made up as follows:
Unaudited Unaudited Audited Year
6 months ended 6 months ended ended 31 December
30 June 2020 30 June 2019 2019
Non-exceptional administration
expenditure before R &
D capitalisation 8,668 8,394 17,027
Effect of share-based payments 300 1,135 2,118
Less capitalised R & D (308) (183) (527)
Effect of exceptional items (408) (229) (338)
-------------------- -------------------- -----------------------
Total administrative expenses 8,252 9,117 18,280
-------------------- -------------------- -----------------------
The charge for depreciation of fixed assets and for the
amortisation of intangibles is GBP2.32m (H1 2019: GBP2.24m).
Operating profit and adjusted earnings before interest tax and
depreciation
The Group generated an operating profit of GBP6.72m (H1 2019:
GBP2.44m). We consider a more meaningful measure of underlying
performance is obtained by examining adjusted EBITDA, which for H1
2020 was GBP8.92m (H1 2019: GBP5.58m). This excludes the effects of
share-based payments of GBP0.3m (H1 2019: GBP1.14m) and exceptional
profits of GBP0.41m (H1 2019: GBP0.23m). The increase in operating
profit and adjusted EBITDA is caused by the substantial increase in
volumes associated with sales of Longhorn products.
Finance costs
Finance costs are GBP0.47m (H1 2019: GBP0.25m). The main charge,
and the increase, result from an increase in the fair value of
deferred consideration, the size of which is determined by the
increase in EKF's share price.
Tax
There is a tax charge of GBP2.11m (H1 2019: GBP0.79m). The
increase partly reflects the increase in profit, but also an
increased deferred tax charge as a result in the change in the UK's
substantively enacted tax rate for 2020/21 to 19%, and unutilised
tax losses in the UK.
Balance sheet
Fixed assets
We have capitalised GBP1.19m (H1 2019: GBP0.71m) of property
plant and equipment. The expenditure includes continuing work on
improvements to the facility in Elkhart in the US, as well as
expenditure relating to the set-up of manufacturing in Penarth.
Further expenditure in Elkhart is planned for the second half of
the year.
Intangible assets
The value of intangible fixed assets is GBP39.35m (31 December
2019: GBP37.77m). The increase is mainly the result of exchange
rate movements which have been partly offset by amortisation. An
amount of GBP0.39m has been capitalised.
Investments
This largely consists of our investment in Renalytix AI plc. The
investment is held at fair value which has been calculated based on
the market value of the shares which at 30 June 2020 was GBP5.30
per share. The resulting unrealised gain during H1 2020 of GBP4.44m
is shown in Other comprehensive income.
Deferred consideration
The remaining deferred consideration relates to the share-based
payment to the former owner of EKF-Diagnostic GmbH. Finalisation of
the position is expected to conclude shortly.
Cash and working capital
The gross cash position at 30 June 2020 was GBP16.90m (31 Dec
2019: GBP12.07m), and the Group had cash net of bank borrowings of
GBP16.28m (31 Dec 2019: GBP11.42m).
Cash generated from operations in H1 2020 is GBP6.94m (H1 2019:
GBP4.34m). Inventory levels have increased partially because of the
increase in order volume but also to ensure security of supply
during the global pandemic. Trade debtors and payables have both
increased as a result of increased trading activity. We have seen
very little evidence to date of collection difficulties as a result
of COVID-19.
Capital structure
We have not made any share buy backs during the period. Our
authorisation to make further share buy backs remains in place and
we will make further purchases if considered appropriate.
Following exercise of a share option, 500,000 new shares have
been issued at an exercise price of 20p per share.
Dividend
At the Annual General Meeting in June 2020 shareholders approved
the payment of a dividend of 1p per ordinary share, to be paid on 1
December 2020 to shareholders on the register at close of business
on 5 November 2020. As this declaration is irrevocable, the value
of GBP4.55m is shown as a liability with the debit shown in the
statement of changes in equity.
Outlook
It has been both a difficult and an exhilarating start to 2020.
Whilst it is difficult to forecast what the future levels of
revenue from the Longhorn products might be, the Board expects
continued and strong overall growth from the business throughout
2020, particularly in the US. So far, Q3 2020 trading performance
is in line with management expectations, and remains significantly
above our internal budget. We are seeing continued benefit due to
the demand for PrimeStore MTM tubes and bulk liquid, including the
recently awarded contract with a large UK customer and we are
investigating and commencing supply of additional products.
Meanwhile we look forward to McKesson returning to pre-pandemic
sales expectations, as well as business generally improving in the
second half of 2020. As a result of these signs of improved
performance in both Diabetes and Hematology, and the continued
demand for PrimeStore MTM, we remain confident that, for the full
year, we will exceed previously revised management
expectations.
From a regulatory viewpoint, we expect to see the completion of
Quo-Test cartridge registration in China which is expected before
the end of Q1 2021, and negotiations are under way with potential
distributors to sell both analysers and tests in 2021.
Christopher Mills
Non-Executive Chairman
14 September 2020
CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTHSED 30 JUNE 2020
Unaudited
Unaudited 6 months Audited
6 months ended Year ended
ended 30 30 June 31 December
June 2020 2019 2019
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 3 26,329 21,436 44,917
Cost of sales (11,417) (9,904) (21,190)
--------------- -------------- -----------------
Gross profit 14,912 11,532 23,727
Administrative expenses (8,252) (9,117) (18,280)
Other income 57 24 337
--------------- -------------- -----------------
Operating profit 6,717 2,439 5,784
------------------------------------- ----------
Depreciation and amortisation (2,316) (2,239) (4,441)
Share-based payments (300) (1,135) (2,118)
Exceptional items 4 408 229 338
EBITDA before exceptional
items and share-based payments 8,925 5,584 12,005
------------------------------------- ---------- --------------- -------------- -----------------
Finance income 29 34 73
Finance costs (497) (247) (339)
--------------- -------------- -----------------
Profit before income tax 6,249 2,226 5,518
Income tax charge 5 (2,108) (792) (1,586)
--------------- -------------- -----------------
Profit for the period 4,141 1,434 3,932
--------------- -------------- -----------------
Profit attributable to:
Owners of the parent 4,011 1,326 3,678
Non-controlling interest 130 108 254
4,141 1,434 3,932
--------------- -------------- -----------------
Earnings per ordinary share
attributable to the owners
of the parent during the
period 6
Pence Pence Pence
Basic 0.88 0.29 0.81
Diluted 0.87 0.29 0.80
---------- ---------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE 6 MONTHSED 30
JUNE 2020
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBP'000 GBP'000 GBP'000
Profit for the period 4,141 1,434 3,932
Other comprehensive income/(expense):
Changes in fair value of equity
instruments at fair value
through other comprehensive
income 4,445 1,369 6,505
Currency translation differences 3,951 251 (3,097)
Other comprehensive gain for
the period 8,396 1,620 3,408
--------------- --------------- -----------------
Total comprehensive profit
for the period 12,537 3,054 7,340
--------------- --------------- -----------------
Attributable to:
Owners of the parent 12,456 2,906 7,056
Non-controlling interests 81 148 284
--------------- --------------- -----------------
Total comprehensive profit
for the period 12,537 3,054 7,340
--------------- --------------- -----------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE
2020
Unaudited Unaudited Audited as
as at 30 as at 30 at 31 December
June 2020 June 2019 2019
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current
assets
Property, plant
and equipment 13,331 12,376 12,179
Right-of-use
assets 941 817 1,002
Intangible
assets 7 39,347 40,759 37,767
Investments 14,345 4,764 9,900
Deferred tax
assets 21 33 34
Total
non-current
assets 67,985 58,749 60,882
------------------- --------------- -------------------
Current Assets
Inventories 8,144 7,220 6,073
Trade and other
receivables 10,545 7,775 8,097
Cash and cash
equivalents 16,895 12,749 12,074
Total current
assets 35,584 27,744 26,244
------------------- --------------- -------------------
Total assets 103,569 86,493 87,126
=================== =============== ===================
Equity
attributable to
owners of the
parent
Share capital 4,546 4,541 4,541
Share premium 95 - -
Other reserve 11,093 143 6,648
Foreign currency
reserves 7,210 6,517 3,183
Retained
earnings 55,637 55,218 56,199
------------------- --------------- -------------------
78,581 66,419 70,571
Non-controlling
interest 472 463 601
------------------- --------------- -------------------
Total equity 79,053 66,882 71,172
------------------- --------------- -------------------
Liabilities
Non-current
liabilities
Borrowings 422 832 480
Lease
liabilities 721 540 -
Deferred tax
liability 2,940 2,913 2,619
------------------- --------------- -------------------
Total
non-current
liabilities 4,083 4,285 3,099
------------------- --------------- -------------------
Current
liabilities
Trade and other
payables 14,211 11,052 7,470
Lease
liabilities 248 277 1,002
Deferred
consideration 1,840 1,341 1,385
Current income
tax liabilities 3,946 2,513 2,823
Borrowings 188 139 175
------------------- --------------- -------------------
Total current
liabilities 20,433 15,326 12,855
------------------- --------------- -------------------
Total
liabilities 24,516 19,611 15,954
------------------- --------------- -------------------
Total equity and
liabilities 103,569 86,493 87,126
=================== =============== ===================
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 6 MONTHSED 30 JUNE 2020
Unaudited
Unaudited 6 months Audited Year
6 months ended ended 30 to 31 December
30 June 2020 June 2019 2019
GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Profit before income tax 6,249 2,788 5,518
Adjustments for
- Warranty claim (455) (234) (367)
- Depreciation 872 794 1,512
- Amortisation and
impairment charges 1,444 1,445 2,929
- Deferred consideration (FV
adjust) 455 237 281
- Foreign Exchange - (70) 86
- Profit/(loss) on disposal
of assets 14 - 14
- Share-based payments 300 573 2,118
- Net finance costs 13 (3) (15)
Changes in working capital
- Inventories (2,056) (1,052) 37
- Trade and other
receivables (1,974) (54) (327)
- Trade and other payables 2,075 (86) (5,479)
------------------- --------------- ---------------------------
Cash generated by operations 6,937 4,338 6,519
Interest paid (29) (7) (21)
Income tax paid (849) (757) (1,398)
------------------- --------------- ---------------------------
Net cash generated by
operating
activities 6,059 3,574 5,100
Cash flow from investing
activities
Purchase of
available-for-sale financial
assets - -
Purchase of investments - (124) (124)
Purchase of property, plant
and
equipment (PPE) (1,187) (710) (1,418)
Purchase of intangibles (393) (380) (957)
Proceeds from sale of PPE 27 1 30
Interest received 29 10 73
------------------- --------------- ---------------------------
Net cash used in investing
activities (1,524) (1,203) (2,396)
------------------- --------------- ---------------------------
Cash flow from financing
activities
Proceeds from issue of
ordinary
shares 100 - -
Share option buy back - (16) (15)
Repayment of borrowings (126) 94 (180)
Principal lease payments (166) - (381)
Dividends paid to
non-controlling
interests (210) (60) (58)
------------------- --------------- ---------------------------
Net cash used in financing
activities (402) 18 (634)
------------------- --------------- ---------------------------
Net increase in cash and
cash equivalents 4,133 2,389 2,070
Cash and cash equivalents at
beginning
of period 12,074 10,282 10,282
Exchange gains on cash and
cash
equivalents 688 78 (278)
------------------- --------------- ---------------------------
Cash and cash equivalents at
end
of period 16,895 12,749 12,074
=================== =============== ===========================
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
FOR THE 6 MONTHSED 30 JUNE
2020
Share Share Other Foreign Retained Total Non-controlling Total
Capital Premium Reserve Currency earnings interest equity
Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2019 4,541 - 143 6,309 52,536 63,529 375 63,904
Comprehensive
income
Profit for the
period - - - - 1,326 1,326 108 1,434
Other
comprehensive
income
Changes in fair
value of equity
instruments at
fair
value through
other
comprehensive
income - - - - 1,369 1,369 - 1,369
Currency
translation
differences - - - 208 3 211 40 251
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Total
comprehensive
income - - - 208 2,698 2,906 148 3,054
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Transactions
with
owners
Dividends to
non-controlling
interest - - - - - - (60) (60)
Share option
cancellation - - - - (16) (16) - (16)
Total
contributions
by and
distributions
to owners - - - - (16) (16) (60) (76)
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
At 30 June 2019 4,541 - 143 6,517 55,218 66,419 463 66,882
Comprehensive
income
Profit for the
period - - - - 2,352 2,352 146 2,498
Other
comprehensive
income
Changes in fair
value of equity
instruments at
fair
value through
other
comprehensive
income - - 6,505 - (1,369) 5,136 - 5,136
Currency
translation
differences - - - (3,334) (3) (3,337) (10) (3,347)
Total
comprehensive
income - - 6.505 (3,334) 2,349 4,151 136 4,287
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Transactions
with
owners
Share
Cancellation - - - - 1 1 - 1
Dividends to
non-controlling
interest - - - - - - 2 2
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Total
contributions
by and
distributions
to owners - - - - 1 1 2 3
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
At 31 December
2019 4,541 - 6,648 3,183 56,199 70,571 601 71,172
Comprehensive
income
Profit for the
period - - - - 4,011 4,011 130 4,141
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Other
comprehensive
income
Changes in fair
value of equity
instruments at
fair
value through
other
comprehensive
income - - 4,445 - - 4,445 - 4,445
Currency
translation
differences - - - 4,027 (27) 4,000 (49) 3,951
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Total
comprehensive
income - - 4,445 4,027 3,984 12,456 81 12,537
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
Transactions
with
owners
Dividends to
non-controlling
interest - - - - - - (210) (210)
Dividend
declared
but not paid - - - - (4,546) (4,546) - (4,456)
Issue of
ordinary
shares 5 95 - - - 100 - 100
Total
contributions
by and
distributions
to owners 5 95 - - (4,546) (4,446) (210) (4,656)
------------- ------------- ------------ ------------- ------------- ------------ -------------------- ------------
At 30 June 2020 4,546 95 11,093 7,210 55,637 78,581 472 79,053
============= ============= ============ ============= ============= ============ ==================== ============
NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
1. General information and basis of presentation
EKF Diagnostics Holdings plc is a public limited company
incorporated in the United Kingdom (Registration Number 04347937).
The address of the registered office is Avon House, 19 Stanwell
Road, Penarth, CF64 2EZ.
The Group's principal activity is the development, manufacture,
and supply of products into the in-vitro diagnostics (IVD) market
place. Within this area, the Group has a growing business in
contract manufacturing.
The financial information in these interim results is that of
the holding company and all of its subsidiaries. It has been
prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards as
adopted for use in the EU (IFRSs), IFRS IC interpretations, and the
Companies Act 2006 applicable to companies reporting under IFRS.
The accounting policies applied by the Group in this financial
information are the same as those applied by the Group in its
financial statements for the year ended 31 December 2019 and which
will form the basis of the 2020 financial statements except for a
number of new and amended standards which have become effective
since the beginning of the previous financial year. These new and
amended standards are not expected to materially affect the
Group.
Certain statements in this announcement constitute
forward-looking statements. Any statement in this announcement that
is not a statement of historical fact including, without
limitation, those regarding the Company's future expectations,
operations, financial performance, financial condition and business
is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. These risks and uncertainties include, amongst
other factors, changing economic, financial, business or other
market conditions. These and other factors could adversely affect
the outcome and financial effects of the plans and events described
in this announcement and the Company undertakes no obligation to
update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this
announcement should be construed as a profit forecast.
The financial information presented herein does not constitute
full statutory accounts under Section 434 of the Companies Act 2006
and was not subject to a formal review by the auditors. The
financial information in respect of the year ended 31 December 2019
has been extracted from the statutory accounts which have been
delivered to the Registrar of Companies. The Group's Independent
Auditor's report on those accounts was unqualified, did not include
references 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 498(3) of the Companies Act
2006. The financial information for the half years ended 30 June
2020 and 30 June 2019 is unaudited and the twelve months to 31
December 2019 is audited.
These interim accounts have not been prepared in accordance with
IAS 34.
2. Significant accounting policies
Going concern
The Group meets its day-to-day working capital requirements
through the use of cash reserves and existing bank facilities.
The Directors have considered the applicability of the going
concern basis in the preparation of these financial statements.
This included the review of internal budgets and financial results
which show, taking into account reasonably probable changes in
financial performance, that the Group should be able to operate
within the level of its current funding arrangements. We have seen
some disruption to our core business as a result of the COVID-19
pandemic however current trading suggests that our forecasts are
still applicable. It remains difficult to assess reliably whether
there will be any material disruption in the future. We have
modelled a number of scenarios covering reductions in revenue of
10% and 50%, without taking into account the potential benefits of
any mitigation strategies such as potential cost savings or
insurance claims. We have also modelled out 100% reductions in
revenue with cost savings within our control. While the eventual
severity and length of the economic disruption stemming from the
pandemic is impossible to forecast these models give the Directors
reasonable confidence that the business can survive even
catastrophic reductions in revenue for at least the next 12
months.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
For this reason the Group continues to adopt the going concern
basis in the preparation of the financial statements.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in
British Pounds Sterling, which is the Company's functional and
presentational currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions where items are re-measured. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in
the income statement within 'administrative expenses'.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentational
currency are translated into the presentational currency as
follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
-- income and expenses for each income statement are translated at average exchange rates; and
-- all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations are taken
to other comprehensive income. When a foreign operation is
partially disposed of or sold, exchange differences that were
recorded in equity are recognised in the income statement as part
of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Government grants
Government grants receivable in connection with expenditure on
property, plant and equipment are accounted for as deferred income,
which is credited to the income statement over the expected useful
economic life of the related assets, on a basis consistent with the
depreciation policy. Revenue grants for the reimbursement of costs
charged to the income statement are credited to the Income
Statement in the year in which the costs are incurred.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any provision for impairment.
Historical cost includes expenditure that is directly attributable
to the acquisition of the asset and bringing the asset to its
working condition for its intended use.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only where it is
probable that future economic benefits associated with the asset
will flow to the Group and the cost of the asset can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Any borrowing costs associated with qualifying property plant and
equipment are capitalised and depreciated at the rate applicable to
that asset category.
Land is not depreciated. Depreciation on other assets is
calculated using the straight-line method or reducing balances
method to allocate their cost to its residual values over their
estimated useful lives, as follows:
Buildings 2%-2.5%
Fixtures and fittings 20%-25%
Plant and machinery 20%-33.3%
Motor vehicles 25%
The assets' residual values and useful economic lives are
reviewed regularly, and adjusted if appropriate, at the end of each
reporting period.
An asset's carrying value is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by
comparing the proceeds with the carrying amount and are recognised
in administration expenses in the income statement.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of the acquisition.
Goodwill on acquisitions of subsidiaries is included in 'intangible
assets'. Goodwill has an infinite useful life and is tested
annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose, identified according to operating segment.
(b) Trademarks, trade names and licences
Separately acquired trademarks and licences are shown at
historical cost. Trademarks and licences acquired in a business
combination are recognised at fair value at the acquisition date.
Trademarks and licences have a finite useful life and are carried
at cost less accumulated amortisation. Amortisation is calculated
using the straight-line method to allocate the cost of trademarks
and licences over their estimated useful lives of between 8 and 12
years and is charged to administrative expenses in the income
statement.
(c) Customer relationships
Contractual customer relationships acquired in a business
combination are recognised at fair value at the acquisition date.
The contractual customer relationships have a finite useful life
and are carried at cost less accumulated amortisation. Amortisation
is calculated using the straight-line method over the expected life
of the customer relationship of between 5 and 15 years and is
charged to administrative expenses in the income statement.
(d) Trade secrets
Trade secrets, including technical know-how, operating
procedures, methods and processes, acquired in a business
combination are recognised at fair value at the acquisition date.
Trade secrets have a finite useful life and are carried at cost
less accumulated amortisation. Amortisation is calculated using the
straight-line method to allocate the cost of trade secrets over
their estimated useful lives of between 6 and 15 years and is
charged to administrative expenses in the income statement.
(e) Development costs
Development costs acquired in a business combination are
recognised at fair value at the acquisition date. Development costs
have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line
method over their estimated useful lives of 15 years and is charged
to administrative expenses in the income statement.
Expenditure incurred on the development of new or substantially
improved products or processes is capitalised, provided that the
related project satisfies the criteria for capitalisation,
including the project's technical feasibility and likely commercial
benefit. All other research and development costs are expensed as
incurred.
Development costs are amortised over the estimated useful life
of the products with which they are associated, currently 4 to 10
years. Amortisation commences when a new product is in commercial
production. The amortisation is charged to administrative expenses
in the income statement. The estimated remaining useful lives of
development costs are reviewed at least on an annual basis.
The carrying value of capitalised development costs is reviewed
for potential impairment at least annually and if a product becomes
unviable and an impairment is identified the deferred development
costs are immediately charged to the income statement.
Impairment of non-financial assets
Assets that have an indefinite life such as goodwill are not
subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the carrying amount exceeds its
recoverable amount.
The recoverable amount is the higher of an asset's fair value
less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of the money and the risks specific
to the asset for which the estimates of future cash flows have not
been adjusted.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows. Impairment losses recognised for cash-generating units, to
which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is
charged pro rata to the other assets in the cash-generating
unit.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in the prior period. A
reversal of an impairment loss is recognised in the income
statement immediately. If goodwill is impaired however, no reversal
of the impairment is recognised in the financial statements.
Investments
Investments where the Group does not have a controlling interest
are initially recognised at cost. The carrying value is tested
annually for impairment and an impairment loss is recognised for
the amount by which the carrying amount exceeds its recoverable
amount.
Investments and other financial assets
Classification
The group classifies its financial assets in the following
measurement categories:
-- those to be measured at amortised cost; and
-- those to be measured subsequently at fair value (either
through OCI or through profit or loss);
(a) Financial assets at amortised cost
Assets that are held for collection of contractual cash flows,
where those cash flows represent solely payments of principal and
interest, are measured at amortised cost. Interest income from
these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and
presented in other gains/(losses) together with foreign exchange
gains and losses. Impairment losses are presented as a separate
line item in the statement of profit or loss.
(b) Financial assets at fair value through profit or loss
The Group classifies the following financial assets at fair
value through profit or loss (FVPL):
-- debt investments that do not qualify for measurement at
either amortised cost or fair value through Other Comprehensive
Income
-- equity investments that are held for trading, and
-- equity investments for which the entity has not elected to
recognise fair value gains and losses through Other Comprehensive
Income.
(c) Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income comprise equity securities that are not held for trading and
which the Group has irrevocably elected at initial recognition to
recognise in this category. The Group considers this category to be
more relevant for assets of this type.
Inventories
Inventories and work in progress are stated at the lower of cost
and net realisable value. Cost is calculated on a first in and
first out basis and includes raw materials, direct labour, other
direct costs and attributable production overheads, where
appropriate. Net realisable value represents the estimated selling
price less all estimated costs of completion and applicable selling
costs. Where necessary, provision is made for slow-moving and
obsolete inventory. Inventory on consignment and their related
obligations are recognised in current assets and payables
respectively.
Trade and other receivables
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. Other
than in the case of certain intercompany receivables, they are
generally due for settlement within 30 days and therefore are all
classified as current. Trade receivables are initially recognised
at fair value, being the original invoice amount, and subsequently
measured at amortised cost less provision for impairment. The group
applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables. Trade receivables that are less than three months past
due are not considered impaired unless there are specific financial
or commercial reasons that lead management to conclude that the
customer will default. Older debts are considered to be impaired
unless there is sufficient evidence to the contrary that they will
be settled. The amount of the provision is the difference between
the asset's carrying value and the present value of the estimated
future cash flows. The carrying amount of the asset is reduced
through the use of an allowance account, and the amount of the loss
is recognised in the income statement within administrative
expenses. When a trade receivable is uncollectible it is written
off against the allowance account. Subsequent recoveries of amounts
previously written off are credited against administrative expenses
in the income statement.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash
at bank and in hand and short-term deposits with an original
maturity of less than three months, reduced by overdrafts to the
extent that there is a right of offset against other cash
balances.
For the purposes of the consolidated cash flow statement, cash
and cash equivalents consist of cash and short-term deposits as
defined above net of outstanding bank overdrafts where there is a
right of offset.
Share capital
Ordinary Shares are classified as equity. Proceeds in excess of
the nominal value of shares issued are allocated to the share
premium account and are also classified as equity. Incremental
costs directly attributable to the issue of new Ordinary Shares or
options are deducted from the share premium account.
Where Ordinary Shares are acquired for cash and then cancelled,
the nominal value of shares is deducted from the value of equity
and credited to the Capital Redemption reserve. The amount paid is
debited to reserves.
Financial liabilities
Debt is measured at fair value, being net proceeds after
deduction of directly attributable issue costs, with subsequent
measurement at amortised cost with the exception of deferred equity
consideration which is categorised as a financial liability at fair
value through profit and loss. Debt issue costs are recognised in
the income statement over the expected term of such instruments at
a constant rate on the carrying amount.
Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are
presented as non-current liabilities. Trade payables are recognised
initially at fair value and subsequently measured at amortised cost
using the effective interest method.
Borrowings
Borrowings are recognised initially at the fair value of
proceeds received, net of transaction costs incurred. Borrowings
are subsequently carried at amortised cost. Borrowings are
classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Borrowing costs are expensed in the consolidated Group income
statement under the heading 'finance costs'. Arrangement and
facility fees together with bank charges are charged to the income
statement under the heading 'administrative expenses'.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income where the
associated tax is also recognised in other comprehensive
income.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the balance sheet date
in the countries where the Company and its subsidiaries operate and
generate taxable income. Management evaluates positions taken in
tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and establishes provisions
where appropriate on the basis of amounts expected to be paid to
the tax authorities.
Deferred tax is recognised, using the liability method, on all
temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax liabilities are
recognised in respect of all temporary differences except where the
deferred tax liability arises from the initial recognition of
goodwill in business combinations.
Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and tax losses, to
the extent that they are regarded as recoverable. They are regarded
as recoverable where, on the basis of available evidence, there
will be sufficient taxable profits against which the future
reversal of the underlying temporary differences can be
deducted.
The carrying value of the amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all, or part, of the tax asset to be
utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on the tax rates (and
tax laws) that have been substantively enacted at the balance sheet
date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Provisions
Provisions for legal claims are recognised when the Group has a
present legal or constructive obligation as a result of a past
event and it is probable that an outflow of resources will be
required to settle the obligation and the amount can be reliably
measured.
Leases
Leases are recognised as a right-of-use asset and a
corresponding lease liability at the date on which the leased asset
is available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable
-- variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement
date
-- amounts expected to be payable by the group under residual value guarantees
-- the exercise price of a purchase option if the group is
reasonably certain to exercise that option, and
-- payments of penalties for terminating the lease, if the lease
term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit within the lease. If that rate cannot be readily
determined, the Group's incremental borrowing rate is used, being
the rate that the Group would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security, and conditions.
Where the Group is exposed to potential future increases in
variable lease payments based on an index or rate, amounts are not
included in the lease liability until they take effect. When
adjustments to lease payments based on an index or rate take
effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to the income statement over the lease
period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability
-- any lease payments made at or before the commencement date less any lease incentives received
-- any initial direct costs
-- restoration costs
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight line
basis. If the Group is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying
asset's useful life.
Deferred consideration
Deferred consideration is recognised at fair value. Where the
value of deferred consideration is based on a future event,
management estimate the likelihood of the consideration becoming
payable. Deferred consideration is discounted to take account of
the time value of money at rates based on those used for the
valuation of related intangible assets.
Employee benefits
(a) Pension obligations
Group companies operate various pension schemes all of which are
defined contribution plans. A defined contribution plan is a
pension plan under which the Group pays fixed contributions into a
separate entity with the pension cost charged to the income
statement as incurred. The Group has no further obligations once
the contributions have been paid.
The Group no longer has any defined benefit schemes.
(b) Share-based compensation
The Group operates a number of equity-settled, share-based
compensation plans, under which the Group receives services from
employees and others as consideration for equity instruments of the
Group. Equity-settled share-based payments are measured at fair
value at the date of grant and are expensed over the vesting period
based on the number of instruments that are expected to vest. For
plans where vesting conditions are based on share price targets,
the fair value at the date of grant reflects these conditions.
Where applicable the Group recognises the impact of revisions to
original estimates in the income statement, with a corresponding
adjustment to equity for equity-settled schemes. Fair values are
measured using appropriate valuation models, taking into account
the terms and conditions of the awards.
When the share-based payment awards are exercised, the Company
issues new shares. The proceeds received net of any directly
attributable transaction costs are credited to share capital
(nominal value) and share premium.
The Group operates a cash-settled compensation plan for certain
senior employees. Cash-settled share-based payments are measured at
fair value at the date of grant and are expensed over the expected
vesting period. The fair value amount is recognised in
liabilities.
National insurance on share options
To the extent that the share price at the balance sheet date is
greater than the exercise price on options granted under unapproved
share-based payment compensation schemes, provision for any
National Insurance Contributions has been based on the prevailing
rate of National Insurance. The provision is accrued over the
performance period attaching to the award.
Revenue recognition
Revenue is accounted for in accordance with the principles of
IFRS 15, which have been applied as follows:
(a) Sale of goods
Revenue for the sale of medical diagnostic instruments and
reagents is measured at the fair value of the consideration
received or receivable and represents the invoiced value for the
sale of the goods net of sales taxes, rebates and discounts.
Revenue from the sale of goods is recognised when a Group Company
has delivered products to the customer, the customer has accepted
delivery of the products and collectability of the related
receivables is reasonably assured.
(b) Sale of services
Revenue for the sale of services is measured at the fair value
of the consideration received or receivable and represents the
invoiced value for the sale of the services net of sales taxes,
rebates and discounts. Revenue from the sale of services is
recognised when a Group Company has completed the services and
collectability of the related receivables is reasonably
assured.
(c) Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
(d) Royalty and licence income
Royalty and licence income is recognised on an accruals basis in
accordance with the substance of the relevant agreements.
Dividend distribution
Dividend distributions to the Company's shareholders are
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. Interim dividends are recognised when paid.
Other income
Other income includes grant income and R & D tax credits
passed through income where this is permitted by the relevant
jurisdiction.
Exceptional items
These are items of an unusual or non-recurring nature incurred
by the Group and include transactional costs and one-off items
relating to business combinations, such as acquisition
expenses.
3. Segmental reporting
Management has determined the Group's operating segments based
on the monthly management reports presented to the Chief Operating
Decision Maker ('CODM'). The CODM is the Executive Directors and
the monthly management reports are used by the Group to make
strategic decisions and allocate resources.
The principal activity of the Group is the design, development,
manufacture and selling of diagnostic instruments, reagents and
certain ancillary items. This activity takes place across various
countries, such as the USA, Germany, Russia, and the United
Kingdom, and as such the Board considers the business primarily
from a geographic perspective. Although not all the segments meet
the quantitative thresholds required by IFRS 8, management has
concluded that all segments should be maintained and reported.
The reportable segments derive their revenue primarily from the
manufacture and sale of medical diagnostic equipment. Other
services include the servicing and distribution of third party
company products under separate distribution agreements.
Currently the key operating performance measures used by the
CODM are Revenue and adjusted EBITDA (earnings before interest,
tax, depreciation and amortisation, adjusted for exceptional items
and share-based payments).
The segment information provided to the Board for the reportable
geographic segments is as follows:
Period ended 30 June 2020 unaudited
Germany USA Russia Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Income statement
Revenue 10,713 17,160 1,360 100 29,333
Inter segment (2,981) (23) - - (3,004)
External revenue 7,732 17,137 1,360 100 26,329
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Adjusted EBITDA 2,827 7,575 395 (1,872) 8,925
Share-based payment - - - (300) (300)
Exceptional items 451 - - (43) 408
---------------------------- --------------------------- ------------- ------------ ------------- -------------
EBITDA 3,278 7,575 395 (2,215) 9,033
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Depreciation (452) (201) (10) (209) (872)
Amortisation (403) (52) - (989) (1,444)
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Operating profit/(loss) 2,423 7,322 385 (3,413) 6,717
Net finance costs (7) 7 21 (488) (467)
Income tax (376) (1,563) (80) (90) (2,109)
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Profit/(loss) for the
period 2,040 5,766 326 (3,991) 4,141
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Segment assets
Operating assets 40,718 28,894 608 26,138 96,358
Inter segment assets (288) - - (9,396) (9,684)
---------------------------- --------------------------- ------------- ------------ ------------- -------------
External operating
assets 40,430 28,894 608 16,742 86,674
Cash and cash
equivalents 3,375 5,337 798 7,385 16,895
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Total assets 43,805 34,231 1,406 24,127 103,569
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Segment liabilities
Operating liabilities 8,062 14,026 137 11,366 33,591
Inter segment
liabilities (2,222) (7,463) - - (9,685)
---------------------------- --------------------------- ------------- ------------ ------------- -------------
External operating
liabilities 5,840 6,563 137 11,366 23,906
Borrowings 610 - - - 610
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Total liabilities 6,450 6,563 137 11,366 24,516
---------------------------- --------------------------- ------------- ------------ ------------- -------------
Other segmental
information
Non-current assets -
PPE 6,370 5,425 111 1,425 13,331
Non-current assets -
Right-of-use
assets 93 634 - 214 941
Non-current assets -
Intangibles 26,700 12,431 88 128 39,347
Intangible assets
-additions 343 50 - - 393
PPE - additions 333 609 51 115 1,108
Right-of-use assets -
additions 58 4 - 17 79
Year ended December 2019 audited
Germany USA Russia Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------ ------------- ------------ ------------- -------------
Income statement
Revenue 23,087 25,434 3,065 - 51,586
Inter segment (6,669) - - - (6,669)
--------------------------- ------------ ------------- ------------ ------------- -------------
External revenue 16,418 25,434 3,065 - 44,917
--------------------------- ------------ ------------- ------------ ------------- -------------
Adjusted EBITDA* 7,435 8,016 782 (4,229) 12,004
Share-based
payment - - - (2,118) (2,118)
Exceptional
items 356 - - (18) 338
EBITDA 7,791 8,016 782 (6,365) 10,224
Depreciation (739) (387) (19) (366) (1,511)
Amortisation (2,077) (1,161) (2) 311 (2,929)
--------------------------- ------------ ------------- ------------ ------------- -------------
Operating profit 4,975 6,468 761 (6,420) 5,784
Net finance
costs (11) 7 37 (299) (266)
Income tax (677) (449) (164) (296) (1,586)
Profit for
the year 4,287 6,026 634 (7,015) 3,932
--------------------------- ------------ ------------- ------------ ------------- -------------
Segment assets
Operating assets 36,327 24,630 589 39,709 101,255
Inter-segment
assets (400) - - (25,803) (26,203)
--------------------------- ------------ ------------- ------------ ------------- -------------
External operating
assets 33,927 24,630 589 13,906 75,052
Cash and cash
equivalents 3,298 5,480 1,159 2,137 12,074
--------------------------- ------------ ------------- ------------ ------------- -------------
Total assets 39,225 30,110 1,748 16,043 87,126
--------------------------- ------------ ------------- ------------ ------------- -------------
Segment liabilities
Operating liabilities 7,926 15,162 151 18,263 41,502
Inter-segment
liabilities (2,938) (11,777) - (11,488) (26,203)
--------------------------- ------------ ------------- ------------ ------------- -------------
External operating
liabilities 4,988 3,385 151 6,775 15,299
Borrowings 655 - - - 655
--------------------------- ------------ ------------- ------------ ------------- -------------
Total liabilities 5,643 3,385 151 6,775 15,954
--------------------------- ------------ ------------- ------------ ------------- -------------
Other segmental
information
Non-current
assets - PPE 6,006 4,679 75 2,421 13,181
Non-current
assets - Intangibles 24,172 12,115 95 1,385 37,767
Intangible
assets -additions 739 162 - 56 957
PPE - additions 872 455 17 74 1,418
Investments-
additions - - - 124 124
Period ended 30 June 2019 unaudited
Germany USA Russia Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------- ------------ ------------- -------------
Income statement
Revenue 11,777 11,722 1,305 - 24,804
Inter segment (3,368) - - - (3,368)
----------------------------- ------------ ------------- ------------ ------------- -------------
External revenue 8,402 11,722 1,305 - 21,436
----------------------------- ------------ ------------- ------------ ------------- -------------
Adjusted EBITDA* 3,495 3,676 321 (1,908) 5,584
Share-based
payment - - - (573) (573)
Exceptional
items 231 - - (2) 229
EBITDA 3,726 3,676 321 (2,483) 5,240
Depreciation (383) (209) (9) (193) (794)
Amortisation (414) - - (1,031) (1,445)
----------------------------- ------------ ------------- ------------ ------------- -------------
Operating profit/(loss) 2,929 3,467 312 (3,707) 3,001
Net finance
costs (10) - 14 (217) (213)
Income tax (299) (265) (66) (162) (792)
Profit/(loss)
for the period 2,620 3,202 260 (4,086) 1,996
----------------------------- ------------ ------------- ------------ ------------- -------------
Segment assets
Operating assets 40,258 25,941 583 22,448 89,230
Inter-segment
assets (108) - - (16,747) (16,855)
----------------------------- ------------ ------------- ------------ ------------- -------------
External operating
assets 40,150 25,941 583 5,701 72,375
Cash and cash
equivalents 4,193 3,798 872 3,886 12,749
----------------------------- ------------ ------------- ------------ ------------- -------------
Total assets 44,343 29,739 1,455 9,587 85,124
----------------------------- ------------ ------------- ------------ ------------- -------------
Segment liabilities
Operating liabilities 10,545 16,396 198 7,794 34,933
Inter-segment
liabilities (4,701) (12,154) - - (16,855)
----------------------------- ------------ ------------- ------------ ------------- -------------
External operating
liabilities 5,844 4,242 198 7,794 18,078
Borrowings 971 - - - 971
----------------------------- ------------ ------------- ------------ ------------- -------------
Total liabilities 6,815 4,242 198 7,794 19,049
----------------------------- ------------ ------------- ------------ ------------- -------------
Other segmental
information
Non-current
assets - PPE 6,522 4,444 64 1,769 12,376
Non-current
assets - Right-of-use
assets 134 315 6 362 817
Non-current
assets - Intangibles 27,184 13,212 99 264 40,759
Intangible
assets -additions 355 25 - - 380
PPE - additions 318 157 - 235 710
Right-of-use
assets - additions 134 315 6 362 817
* Adjusted EBITDA represents earnings before interest, tax,
depreciation and amortisation adjusted for exceptional items and
share-based payments
'Other' primarily relates to the holding company and head office
costs.
Disclosure of Group revenues by geographic location
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBP000 GBP000 GBP000
Americas
United States of America 14,702 9,308 19,955
Rest of Americas 1,390 1,648 3,947
Europe, Middles East and Africa
(EMEA)
Germany 2,984 3,126 6,268
United Kingdom 242 231 435
Rest of Europe 1,623 1,810 3,484
Russia 1,360 1,305 3,066
Middle East 572 704 1,771
Africa 1,623 1,042 1,482
Rest of World
China 338 361 822
Rest of Asia 1,448 1,847 3,578
New Zealand/Australia 46 54 109
--------------- --------------- -----------------
Total Revenue 26,328 21,436 44,917
=============== =============== =================
4. Exceptional items
Included within administration expenses and cost of sales are
exceptional items as shown below:
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
Note GBP000 GBP000 GBP000
Exceptional items include:
- Business reorganisation
costs a (15) (8) (29)
- Warranty claim b 455 237 367
- Trellus c (32) - -
Exceptional items 408 229 338
-------------- -------------- -----------------
(a) Costs associated with the reorganisation of the business
(b) Warranty claim in relation to the acquisition of EKF-diagnostic GmbH
(c) Costs associated with the investment in Trellus Healthcare Limited
5. Income tax
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
GBP000 GBP000 GBP000
Current tax
Current tax on profit/loss
for the period (1,885) (782) (1,997)
Adjustments for prior periods (87) (274) (5)
--------------- --------------- -----------------
Total current tax (1,972) (1,056) (2,002)
--------------- --------------- -----------------
Deferred tax
Origination and reversal of
temporary differences (136) 264 416
Total deferred tax (136) 264 416
--------------- --------------- -----------------
Income tax (charge)/credit (2,108) (792) (1,586)
=============== =============== =================
6. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the period.
Diluted profit per share is calculated by adjusting the weighted
average number of ordinary shares outstanding assuming conversion
of all dilutive potential ordinary shares. The Company has one
category of dilutive potential ordinary share, being share
options.
Unaudited Unaudited
6 months 6 months Audited
ended 30 ended year ended
June 2020 30 June 31 December
2019 2019
GBP'000 GBP'000 GBP'000
Profit attributable to owners
of the parent 4,011 956 3,678
Weighted average number of
ordinary shares in issue 454,247,073 454,093,227 454,093,227
Effect of dilutive potential
ordinary shares 4,290,848 4,339,557 4,321,046
-----------------
Weighted average number of
ordinary shares - diluted 458,537,921 458,432,784 458,414,273
------------------ -----------------
Pence Pence Pence
From continuing operations
Basic 0.88 0.29 0.81
Diluted 0.87 0.29 0.80
7. Intangible Fixed Assets
Group
Trademarks
trade Software
names & Customer Trade Develop-ment
Goodwill licences relationships secrets costs GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ---------------- ------------------ ------------- ------------------ -------------- ------ -------------
Cost
At 1 January 2019 27,543 3,257 16,294 19,159 9,362 - 75,615
Additions - 197 - - 183 - 380
Elimination - - - - - - -
Exchange differences 21 (6) 82 (24) (15) - 58
At 30 June 2019 27,564 3,448 16,376 19,135 9,530 - 76,053
Additions - (26) - - 344 259 577
Transfer - (42) - - - 42 -
Elimination - - - - - - -
Disposals - - - - (462) - (462)
Exchange differences (1,193) (580) (796) (699) (352) (3) (3,623)
At 31 December 2019 26,371 2,800 15,580 18,436 9,060 298 72,545
Additions - 62 - - 308 23 393
Disposal (19) (1,419) (1,438)
Exchange differences 1,570 654 1,081 894 505 (10) 4,694
------------ ---------------- ------------------ ------------- ------------------ -------------- ------ ---------------
At 30 June 2020 27,941 3,497 16,661 19,330 8,454 311 76,194
------------ ---------------- ------------------ ------------- ------------------ -------------- ------ ---------------
Amortisation
At 1 January 2019 2,631 2,496 9,489 12,691 6,535 - 33,842
Exchange differences - (18) 58 (13) (20) - 7
Reclassification/transfer - - - - - - -
Charge for the period - 171 664 459 151 - 1,445
------------ ---------------- ------------------ ------------- ------------------ -------------- ------ ---------------
At 30 June 2019 2,631 2,649 10,211 13,137 6,666 - 35,294
Exchange differences (81) (357) (463) (412) (225) - (1,538)
Charge for the period - 96 610 417 361 - 1,484
Disposal - - - - (462) - (462)
At 31 December 2019 2,550 2,388 10,358 13,142 6,340 - 34,778
Exchange differences 87 373 700 592 311 - 2,063
Disposal (19) (1,419) - (1,438)
Charge for the period - 144 681 469 129 21 1,444
------------ ---------------- ------------------ ------------- ------------------ -------------- ------ ---------------
At 30 June 2019 2,637 2,886 11,739 14,203 5,361 21 36,847
------------ ---------------- ------------------ ------------- ------------------ -------------- ------ ---------------
Net book
value
30 June 2020 25,304 611 4,922 5,127 3,093 290 39,347
----------- -------- ---------- ---------- ---------- -------- -----------
31 December
2019 23,821 410 5,222 5,295 2,720 298 37,767
----------- -------- ---------- ---------- ---------- -------- -----------
30 June 2019 24,933 799 6,165 5,998 2,864 - 40,759
----------- -------- ---------- ---------- ---------- -------- -----------
8. Dividends
A dividend to shareholders of the holding company of 1p per
ordinary share has been provided during the period following
shareholder approval at the Annual General Meeting of the Company
in June 2020 (six months to 30 June 2019 and year to 31 December
2019: both GBPnil). It will be paid on 1 December 2020 to
shareholders on the register of members at the close of business on
5 November 2020.
9. Availability of this announcement
This announcement is available from the Company's website,
www.ekfdiagnostics.com . If you would like to receive a hard copy
of the interim report, please contact the EKF Diagnostics Holdings
plc offices on +44 (0) 29 2071 0570 to request a copy.
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END
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