TIDMERGO
RNS Number : 5412N
Ergomed plc
25 September 2019
PRESS RELEASE
Interim results for the six months ended 30 June 2019
-- Revenue GBP35.2m (up 36.8%)
-- Adjusted EBITDA GBP6.5m vs GBP0.0m in H1 2018
-- Backlog GBP118.3m (up 26.9%)
Guildford, UK - 25 September 2019: Ergomed plc, (LSE: ERGO)
('Ergomed' or the 'Company'), a company focused on providing
specialised services to the global pharmaceutical industry,
announces its unaudited interim results for the six months ended 30
June 2019.
Financial Summary
First First % change
Half Half 2018
Unaudited 2019
Figures in GBP millions, unless
otherwise stated
(Note
1)
---------------------------------- ------ ----------- ---------
Total Revenue 35.2 25.7 +36.8
Gross Profit 14.5 9.0 +61.4
Gross Margin (%) 41.2% 34.9% -
EBITDA (adjusted) (Note 2) 6.5 (0.0) -
Cash at 30 June 8.1 7.4 +9.7
Backlog at 30 June 118.3 93.2 +26.9
Basic earnings per share (pence) 7.8p (5.7)p -
---------------------------------- ------ ----------- ---------
Notes:
(1) First half 2018 originally reported under IAS 18 has been
restated following the adoption of IFRS15 for the 2018 full year
results.
(2) EBITDA (adjusted) is defined as profit before tax for the
period plus finance costs, depreciation and amortization,
share-based payment charge, acquisition related contingent
consideration, change in fair value of contingent consideration,
acquisition costs and exceptional items (Note 10 to the financial
statements).
Dr Miroslav Reljanović, Executive Chairman of Ergomed, said:
"During the first half of 2019 Ergomed has taken further
significant steps to fully focus on its services business model,
execute its strategy to become a leading specialised CRO services
business, and fulfil its future growth potential.
"We have strengthened the executive team and Board and further
developed our differentiated offering in the clinical services
marketplace both through the integration of previous acquisitions
and through commercial integration. With an improved financial
performance over the first half of 2019 and a strong backlog and H1
sales, Ergomed is now positioned for success through continued
growth."
Key Financial Highlights
-- Revenue of GBP35.2 million, up 36.8% on a comparable IFRS 15
basis (H1 2018: GBP25.7 million)
-- EBITDA (adjusted) of GBP6.5 million (H1 2018: break-even GBP0.0 million)
-- Basic EPS profit of 7.8 p (H1 2018: (5.7)p loss)
-- Cash and cash equivalents of GBP8.1 million at 30 June 2019 (30 June 2018: GBP7.4 million)
-- Backlog of future contracted revenue GBP118.3 million, up
26.9% (30 June 2018: GBP93.2 million)
Operational Highlights (including post-period end)
Strengthening of the executive team and Board changes:
-- Richard Barfield, former CFO of Chiltern International, to
the Board as Chief Financial Officer
-- Roy Ovel, formerly at ICON, Worldwide Clinical Trials and TFS, as Chief Commercial Officer
-- Dr Jim Esinhart, former CEO of Chiltern International, Rolf
Soderstrom, former CFO of BTG plc and Ian Johnson, former Chairman
of Bioquell plc, as Non-Executive Directors
-- Dr Jan Petracek has stepped down as Ergomed's Chief Operating
Officer and Board Director, as well as CEO of PrimeVigilance;
Jonathan West, previously Chief Business Officer of PrimeVigilance,
takes on role of President of PrimeVigilance
-- Peter George to step down as Non-Executive Director (see separate announcement)
Meeting and conference call for analysts:
A briefing for analysts will be held at 11am BST on 25 September
2019 at the offices of Numis Securities Limited, 10 Paternoster
Square, London, EC4M 7LT. Photo ID will be required for entry.
There will be a simultaneous live conference call with Q&A.
Conference call details:
Participant dial-in: 0800 376 7922
International dial-in: +44 (0) 2071 928 000
Participant code: 1035098
Enquiries:
Ergomed plc Tel: +44 (0) 1483 402
975
Miroslav Reljanović (Executive Chairman)
Richard Barfield (Chief Financial Officer)
Numis Securities Limited Tel: +44 (0) 20 7260 1000
Freddie Barnfield / Huw Jeremy (Nominated
Adviser)
James Black (Broker)
Consilium Strategic Communications - for Tel: +44 (0) 20 3709 5700
UK enquiries
Chris Gardner / Sue Stuart ergomed@consilium-comms.com
Matthew Neal / Olivia Manser
MC Services - for Continental European Tel: +49 211 5292 5222
enquiries
Anne Hennecke
About Ergomed plc
Ergomed provides specialist services to the pharmaceutical
industry spanning all phases of clinical trials, post-approval
pharmacovigilance and medical information. Ergomed's fast-growing,
profitable services business includes a full range of high-quality
contract research and clinical trial management (CRO) services
under the Ergomed brand together with an industry-leading suite of
specialist pharmacovigilance (PV) solutions, integrated under the
PrimeVigilance brand, and an internationally recognized specialist
expertise in orphan drug development, under the PSR brand. For
further information, visit: http://ergomedplc.com.
Forward-looking Statements
Certain statements contained within the announcement are
forward-looking statements and are based on current expectations,
estimates and projections about the potential results of Ergomed
plc ("Ergomed") and the industry and markets in which Ergomed
operates, the Directors' beliefs and assumptions made by the
Directors. Words such as "expects", "anticipates", "should",
"intends", "plans", "believes", "seeks", "estimates", "projects",
"pipeline" and variations of such words and similar expressions are
intended to identify such forward-looking statements and
expectations. These statements are not guarantees of future
performance or the ability to identify and consummate investments
and involve certain risks, uncertainties, outcomes of negotiations
and due diligence and assumptions that are difficult to predict,
qualify or quantify. Therefore, actual outcomes and results may
differ materially from what is expressed in such forward-looking
statements or expectations. Among the factors that could cause
actual results to differ materially are: the general economic
climate, competition, interest rate levels, loss of key personnel,
the result of legal and commercial due diligence, the availability
of financing on acceptable terms and changes in the legal or
regulatory environment.
These forward-looking statements speak only as of the date of
this announcement. Ergomed expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in Ergomed's expectations with regard thereto, any new information
or any change in events, conditions or circumstances on which any
such statements are based, unless required to do so by law or any
appropriate regulatory authority.
INTERIM MANAGEMENT REPORT
OPERATIONAL AND FINANCIAL REVIEW
Financial summary
During the first half of 2019, Ergomed delivered continued
strong top-line growth and financial performance across the
business. A strong backlog at the beginning of the year, combined
with new business won in H1 2019, helped drive revenue to GBP35.2
million with growth of 36.8% on a comparable basis under IFRS 15
(2018: GBP25.7 million).
EBITDA (adjusted) for the first half of 2019 was GBP6.5 million
(including GBP0.9 million positive impact of the new leasing
standard IFRS 16) compared with a restated EBITDA (adjusted)
break-even in H1 2018 (adjusted due to IFRS 15 implementation from
previously reported GBP(0.4) million loss in H1 2018).
Operational summary
The CRO business performed strongly over the first half of 2019.
Revenue increased by 39.9% to GBP19.0 million from GBP13.6 million
(restated to IFRS 15) in H1 2018. The backlog was GBP66.2 million
at 30 June 2019, an increase of 28.0% (30 June 2018: GBP51.7
million).
During the period, further substantial progress was made as a
standalone pharmaceutical services provider across all phases of
clinical development on a global basis. The significant increase in
revenues was driven by the ongoing implementation of studies from
the strong backlog with which we started 2019, as well as by
significant new contract wins in the period, whilst headcount in
the division remained flat. We made further progress in the
integration of PSR, the orphan drug specialist CRO acquired in
October 2017, and in the first half of 2019 around 45% of all
revenues and new awards were in the areas of orphan drugs and rare
diseases. We expect this integration process to be completed by 31
December 2019. At the same time, the CRO business also won sizeable
new awards during the period in other important therapeutic areas,
including haematology, oncology and diabetes.
Since the half year end, the momentum achieved in the first half
has been maintained. In September 2019 we were awarded a
substantial Phase III full service trial with 1,400 patients,
utilising innovative trial management technologies. This
three-year, GBP17 million revenue award with a leading European
clinical-stage specialty biotech company provides further
validation of Ergomed's ability to win global large-scale
trials.
The Pharmacovigilance (PV) business, under the PrimeVigilance
brand, also performed well over the first half of 2019. Revenue
increased 33.2% to GBP16.1 million in H1 2019 from GBP12.1 million
in H1 2018. Pharmacovigilance revenues are not impacted by IFRS 15.
The backlog was GBP52.1 million at 30 June 2019, an increase of
25.5% (30 June 2018: GBP41.5 million).
Revenue growth was driven both by new clients won in H1 2019 and
existing clients who awarded further contracts incrementally to our
existing work. New awards were won across the range of our services
including Pharmacovigilance, Medical Information and the QPPV
Network. Due in part to automation and business efficiency
improvements, our headcount in the division remained flat.
In H1 2019, PrimeVigilance established a new advanced safety
database as well as new consultation services in pharmacovigilance
automation, and grew its consultancy offering in
pharmacoepidemiology and risk minimisation services. The
integrations of both Harefield Pharmacovigilance, acquired in 2018,
and the pharmacoepidemiology business of Mesama Consulting,
transferred in 2018, were completed, significantly strengthening
our offerings. New awards in the period included a multi-million
pound contract with a large European pharmaceutical company for
pharmacovigilance services, and several successes were achieved in
cross-selling medical information and pharmacovigilance
services.
Since the half year end, the PV business has continued to gain
momentum, in particular by winning new contracts providing evidence
of success with the long-term automation strategy. In August 2019,
PV was awarded a new GBP4.8 million contract which includes
market-leading case intake automation, as well as post-marketing
consulting and GDPR compliance. This contract includes extensive
work in the Asia Pacific region. The PV business has also recently
won a number of smaller contracts with Asian-based pharma
companies.
During H1 2019, in line with our previously stated strategy to
develop Ergomed as a pharmaceutical services business and reduce
our commitment to co-development projects, no new co-development
partnerships were signed. We continue to seek a licensing or
financial partner (or partners) for the Haemostatix products
Peprostat and ReadyFlow, whilst seeking to minimize our ongoing
R&D expense and protect our intellectual property
interests.
Board and Senior Executive Changes
We have strengthened our management team and Board during 2019
with several key hires. Richard Barfield, former CFO of Chiltern
International, joined as CFO in June 2019 bringing with him more
than 25 years' international experience at CFO level. Roy Ovel,
formerly at ICON, Worldwide Clinical Trials and TFS, joined in
April 2019 as Chief Commercial Officer, with a remit to complete
the commercial integration of the business. Sally Amanuel, formerly
head of global regulatory at World Wide Clinical Trials, joined in
June 2019 as Head of Regulatory and Clinical Delivery.
Dr Jim Esinhart, former CEO of Chiltern and recognized as a
leading figure in the global contract research and pharmaceutical
industry, joined as Non-Executive Director in July, as did Rolf
Soderstrom, former CFO of BTG plc who will chair Ergomed's Audit
and Risk Committee. Ian Johnson, former Executive Chairman of
Bioquell plc, was appointed Non-Executive Director in August.
Dr Jan Petracek has stepped down as Ergomed's Chief Operating
Officer and Board Director, as well as CEO of PrimeVigilance.
Jonathan West, previously Chief Business Officer or PrimeVigilance,
has taken on the role of President of PrimeVigilance.
As announced today, Peter George will step down as a
Non-Executive Director with immediate effect to focus on his other
business activities.
Current trading and outlook
A strong first half performance and contracted backlog of
GBP118.3 million (30 June 2018: GBP93.2 million) underpin Ergomed's
ability to deliver its targets for 2019 and create a firm
foundation for continued growth. The second half of the year has
started well and the Company is trading in line with expectations
for the full year.
We have a highly differentiated platform in clinical services
and are well positioned to deliver further organic growth as we
continue to establish Ergomed as a leading integrated specialized
mid-tier pharmaceutical services company.
Dr Miroslav Reljanović
Financial review
Key performance indicators
The Directors consider the principal financial performance
indicators of the Group to be:
GBP million (unless stated otherwise) H1 2019 H1 2018
(re-stated)
--------------------------------------- ---- -------- -------------
Total Revenue 35.2 25.7
Gross profit 14.5 9.0
Gross margin % 41.2% 34.9%
EBITDA (adjusted) (Note 10) 6.5 (0.0)
Cash and cash equivalents 8.1 7.4
--------------------------------------------- -------- -------------
The Directors consider the principal non-financial performance
indicators of the Group to be the delivery of high quality services
that continue to meet the highest industry standards as evidenced
by internal and external quality audits and the development or
acquisition of new and/or the expansion of existing service
offerings. Non-financial performance indicators are routinely
reviewed by the Directors at Board meetings.
Adoption of IFRS 16 in 2019
From 1 January 2019 the Company has adopted IFRS 16 in relation
to leases, predominantly for office premises. IFRS 16 requires the
Company to recognise a lease liability and a corresponding right of
use asset on the balance sheet. The lease liability and associated
right of use asset at 30 June 2019 were GBP5.5 million and GBP5.4
million, respectively.
Additionally, under IFRS 16 the lease expense charged to the
Income Statement is replaced with depreciation and interest charges
relating to the right of use asset and lease liability,
respectively. The impact on Net Income is broadly neutral, however
these charges for depreciation and interest expense are excluded
from the calculation of EBITDA in the six months ended 30 June 2019
whilst the lease expense in prior periods was included in the
calculation of EBITDA. The adoption of IFRS 16 has, therefore, had
a GBP0.9 million positive impact on reported EBITDA in the six
months ended 30 June 2019 and is anticipated to have a GBP1.7
million positive impact on reported EBITDA for 2019 as a whole.
As prior years are not restated under the IFRS 16 methodology,
for comparison purposes reference is made, where appropriate, to
the financial results under the previous methodology to show the
effect of IFRS 16 adoption.
Condensed consolidated statement of comprehensive income
Total revenue for the six months ended 30 June 2019 was GBP35.2
million (H1 2018: GBP25.7 million), an increase of 36.8%, driven by
39.9% growth from CRO services together with 33.2% growth in
PV.
Gross profit was GBP14.5 million and gross margin was 41.2% (H1
2018: gross profit GBP9.0 million and gross margin 34.9%). Selling,
general and administration expenses, including exceptional items
and acquisition related costs were GBP9.2 million (H1 2018: GBP10.3
million). The potential risk of non-recoverability of certain trade
receivables has been assessed and a provision for net impairment
losses of GBP0.9million (H1 2018: GBPnil) has been made
accordingly. There were no acquisition costs or exceptional items
during the period. Research and development costs expensed in the
period were GBP0.3million (H1 2018: GBP0.9 million) mainly relating
to Peprostat and ReadyFlow.
EBITDA (adjusted) increased to GBP6.5 million in H1 2019 from
break-even in H1 2018, with profit after tax of GBP3.6 million (H1
2018: loss of GBP(2.5) million). Basic earnings per share were
7.8p, up from (5.7)p loss per share in H1 2018.
Condensed consolidated balance sheet
Total assets less total liabilities increased by GBP5.0 million
over the first half of 2019 and amounted to GBP33.4 million at 30
June 2019 (31 December 2018: GBP28.4 million) including cash and
cash equivalents of GBP8.1 million (31 December 2018: GBP5.2
million).
The principal movements in the Condensed consolidated balance
sheet in the first half of 2019 included an increase in property
plant and equipment of GBP5.4 million relating mainly to the
adoption of IFRS 16, an increase in cash and cash equivalents of
GBP2.9 million, a decrease in trade and other payables of GBP2.0
million and an increase in borrowings of GBP3.9 million relating to
the adoption of IFRS 16.
Condensed consolidated cash flow statement
The Group has no borrowings or long-term debt. At 30 June 2019,
the Group's cash balance was GBP8.1 million (30 June 2018: GBP7.4
million, 31 December 2018: GBP5.2 million). Cash generated from
operating activities increased to GBP3.3 million (H1 2018: GBP1.8
million) primarily due to the increased revenues and profitability
of the business.
Net outflows from investing activities reduced to GBP1.3 million
(H1 2018: GBP1.4 million) reflecting lower investment in office
equipment and computer hardware. Inflows from financing activities
for the period of GBP0.8 million mainly related to GBP0.9 million
from share issues arising from share option exercises less GBP0.1
million for finance lease interest paid. Operating lease interest
paid of GBP0.1 million related to the interest on the lease
liability arising under IFRS 16, for which there is no comparative
charge in H1 2018. The inflows from financing activities of GBP3.7
million for H1 2018 mainly related to a share placing in February
2018.
Going concern and medium-term viability
At 30 June 2019 the Group had GBP8.1 million in cash and cash
equivalents and a backlog of GBP118.3 million of signed contracts.
The Directors expect Ergomed's services businesses to be cash
generative and, taking into account existing cash resources and
after due consideration of cash flow forecasts, are of the view
that the Group will continue to have access to adequate resources
to allow it to continue trading on normal terms of business for no
less than 12 months from the date of signing of the financial
information for the six months ended 30 June 2019. The Directors
have therefore prepared the financial information on a going
concern basis.
The Board assesses the medium-term viability of the business
periodically. In this regard, forecasts extending three years are
considered appropriate because this matches the average contract
duration of the PV business and, whilst CRO contracts can extend
for longer periods, average duration is in line with that of the
business and becomes less certain beyond that time. The Directors
expect Ergomed's services business to continue to be cash
generative.
INTERIM MANAGEMENT REPORT
FINANCIAL STATEMENTS AND NOTES
Consolidated Income Statement
For the six months ended 30 June 2019
Note Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
(re-stated*) 2018
GBP000s GBP000s
GBP000s
REVENUE 2 35,179 25,724 54,112
Cost of sales (14,783) (13,208) (26,788)
Reimbursable expenses (5,907) (3,541) (8,070)
GROSS PROFIT 14,489 8,975 19,254
Selling, general and administrative
expenses (9,175) (10,288) (28,152)
------------------------------------ ---- ------------- ------------- ------------
Selling, general and administrative
expenses comprises:
Other selling, general and
administrative expenses (8,365) (8,745) (16,701)
Amortisation of intangible
assets arising from acquisitions (449) (677) (1,286)
Share-based payment charge (321) (359) (758)
Acquisition-related contingent
compensation (40) - (972)
Change in fair value of
contingent consideration
for acquisitions - - 233
Acquisition costs 8 - (66) (174)
Exceptional items 9 - (441) (8,494)
------------------------------------ ---- ------------- ------------- ------------
Research and development (306) (863) (1,578)
Net impairment losses on
financial contract assets (833) - (9)
Other operating income 19 16 39
OPERATING PROFIT/(LOSS) 4,194 (2,160) (10,446)
Investment income 3 4 23
Unrealised gains on equity
investments 73 - 277
Finance costs 4 (124) (303) (622)
PROFIT/(LOSS) BEFORE TAXATION 4,146 (2,459) (10,768)
Taxation 5 (537) (72) 1,788
PROFIT/(LOSS) FOR THE PERIOD 3,609 (2,531) (8,980)
EARNINGS/(LOSS) PER SHARE
Basic 3 7.8p (5.7)p (20.0)p
Diluted 3 7.5p (5.7)p (20.0)p
All activities in the current and prior period relate to
continuing operations.
* Re-statements are explained in note 11
FINANCIAL STATEMENTS AND NOTES
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
(re-stated) 2018
GBP000s GBP000s
GBP000s
Profit/(loss) for the period 3,609 (2,531) (8,980)
Items that may be classified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations 240 13 120
Other comprehensive income
for the period net of tax 240 13 120
Total comprehensive income
for the period 3,849 (2,518) (8,860)
FINANCIAL STATEMENTS AND NOTES
Consolidated Balance Sheet
At 30 June 2019
Unaudited Unaudited Audited
Note 30 June 2019 30 June 2018 31 December
2018
(re-stated*)
GBP000s GBP000s GBP000s
Non-current assets
Goodwill 13,659 15,223 13,659
Other intangible assets 3,140 19,471 3,740
Property, plant and equipment 1,206 1,161 1,344
Right-of-use assets 5,393 - -
Equity investments at
fair value through profit
and loss 2,697 1,214 2,065
Deferred tax asset 979 1,651 581
27,074 38,720 21,389
Current assets
Trade and other receivables 6 15,623 11,716 16,429
Other current assets - 168 -
Accrued income 2,699 2,400 3,857
Current asset investments - 90 -
Cash and cash equivalents 8,128 7,406 5,189
26,450 21,780 25,475
Total assets 53,524 60,500 46,864
Current liabilities
Borrowings including
finance lease liabilities (1,642) (11) (6)
Trade and other payables 7 (8,955) (8,085) (10,989)
Contingent and deferred
consideration (61) (1,969) (119)
Deferred revenue (3,105) (2,665) (5,651)
Current tax liability (1,080) (196) (422)
Total current liabilities (14,843) (12,926) (17,187)
Net current assets 11,607 8,854 8,288
Non-current liabilities
Borrowings including
finance lease liabilities (3,921) (1) -
Provisions (377) - (216)
Contingent and deferred
consideration (541) (10,094) (544)
Deferred tax liability (427) (3,257) (554)
Total liabilities (20,109) (26,278) (18,501)
Net assets 33,415 34,222 28,363
Equity
Share capital 467 449 452
Share premium account 25,252 24,326 24,384
Merger reserve 11,088 11,008 11,088
Share-based payment reserve 3,751 3,033 3,430
Translation reserve 1,122 775 882
Retained earnings (8,265) (5,369) (11,873)
Total equity 33,415 34,222 28,363
* Re-statements are explained in note 11
FINANCIAL STATEMENTS AND NOTES
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2018
Share Share Merger Share Translation Retained Total
capital premium reserve option reserve earnings
account reserve
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Balance at 31 December 2017 * 428 20,616 11,008 2,674 762 (645) 34,843
Cumulative effect of adopting IFRS 15
net of tax * - - - - - (2,232) (2,232)
Balance at 1 January 2018 * 428 20,616 11,008 2,674 762 (2,877) 32,611
Loss for the six month period ** - - - - - (2,531) (2,531)
Other comprehensive income for the period
** - - - - 13 - 13
Total comprehensive income for the period
** - - - - 13 (2,531) (2,518)
Share-issue during the period for cash
(net of expenses) ** 21 3,710 - - - - 3,731
Share-based payment charge for the period
** - - - 359 - - 359
Deferred tax credit taken directly to
equity ** - - - - - 39 39
Total transactions with shareholders in
their capacity as shareholders ** 21 3,710 - 359 - 39 4,129
Balance at 30 June 2018 ** 449 24,326 11,008 3,033 775 (5,369) 34,222
* Audited
** Unaudited
FINANCIAL STATEMENTS AND NOTES
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2019
Share Share Merger Share Translation Retained Total
capital premium reserve option reserve earnings
account reserve
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Balance at 31 December 2017 * 428 20,616 11,008 2,674 762 (645) 34,843
Cumulative effect of adopting IFRS 15
net of tax * - - - - - (2,232) (2,232)
Balance at 1 January 2018 * 428 20,616 11,008 2,674 762 (2,877) 32,611
Loss for the year * - - - - - (8,980) (8,980)
Other comprehensive income for the year
* - - - - 120 - 120
Total comprehensive income for the year
* - - - - 120 (8,980) (8,860)
Share-issue during the period for cash
(net of expenses) * 21 3,768 - - - - 3,789
Share-issues during the period for non-cash
consideration * 1 - 80 - - - 81
Contingent share-issues during the period
for non-cash consideration * 2 - - (2) - - -
Share-based payment charge for the year
* - - - 758 - - 758
Deferred tax credit taken directly to
equity * - - - - - (16) (16)
Total transactions with shareholders in
their capacity as shareholders * 24 3,768 80 756 - (16) 4,612
Balance at 31 December 2018 * 452 24,384 11,088 3,430 882 (11,873) 28,363
Profit for the period ** - - - - - 3,609 3,609
Other comprehensive income for the period
** - - - - 240 - 240
Total comprehensive income for the period
** - - - - 240 3,609 3,849
Share-issue during the period for cash
(net of expenses) * 15 868 - - - - 883
Share-based payment charge for the period
** - - - 321 - - 321
Deferred tax credit taken directly to
equity ** - - - - - (1) (1)
Total transactions with shareholders in
their capacity as shareholders ** 15 868 - 321 - (1) 1,203
Balance at 30 June 2019 ** 467 25,252 11,088 3,751 1,122 (8,265) 33,415
* Audited
** Unaudited
FINANCIAL STATEMENTS AND NOTES
Consolidated Cash Flow Statement
For the six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
(re-stated*) 2018
GBP000s GBP000s
GBP000s
Cash flows from operating activities
Profit/(loss) before taxation 4,146 (2,459) (10,768)
Adjustment for:
Amortisation and depreciation 1,926 1,248 2,534
Impairment of goodwill, intangibles
and other assets - - 18,222
Loss on disposal of fixed assets 2 5 33
Share-based payment charge 321 359 758
Equity investments in exchange
for services provided (567) (460) (1,054)
Change in fair value of contingent
consideration for acquisition - - (11,617)
Investment income (3) (4) (23)
Gains on fair-value of equity
investments (73) - (277)
Finance costs 124 303 622
Operating cash flow before changes
in working capital and provisions 5,876 (1,008) (1,570)
Decrease/(increase) in trade
and other receivables 1,831 3,989 (505)
Decrease/(increase) in other
current assets - 334 (248)
(Decrease)/increase in trade
and other payables (3,545) (2,011) 3,221
Lease payments (617) - -
Cash generated from operations 3,545 1,304 898
Taxation (paid)/received (269) 448 146
Net cash inflow from operating
activities 3,276 1,752 1,044
Investing activities
Investment income received 2 4 5
Acquisition of intangible assets (276) (302) (753)
Acquisition of property, plant
and equipment (143) (343) (834)
Receipts from sale of property,
plant and equipment 4 3 7
Acquisition of subsidiaries
net of cash acquired - - (410)
Acquisition related earn-out
paid (930) (751) (751)
Net cash outflow from investing
activities (1,343) (1,389) (2,736)
Financing activities
Issue of new shares 883 3,914 3,973
Expenses of fundraising - (183) (183)
Lease interest paid (123) - -
Finance costs paid (1) (2) (4)
Increase in borrowings 18 - -
Repayment of borrowings (4) (6) (12)
Net cash inflow from financing
activities 773 3,723 3,774
Net increase in cash and cash
equivalents 2,706 4,086 2,082
Effect of foreign currency on
cash balances 233 102 (111)
Cash and cash equivalents at
start of the period 5,189 3,218 3,218
Cash and cash equivalents at
end of period 8,128 7,406 5,189
* Re-statements are explained in note 11
FINANCIAL STATEMENTS AND NOTES
Notes
1. GENERAL INFORMATION
This consolidated interim financial information does not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006.
Other than as described below under "IFRS 16, Leases", the
interim financial statements have been prepared using accounting
policies and methods of computation consistent with those used in
the audited statutory financial statements for the year ended 31
December 2018 and International Reporting Standards (IFRSs) adopted
for use in the European Union. While the financial information
included in this interim statement has been compiled in accordance
with the recognition and measurement principles of IFRSs, this
announcement does not itself contain sufficient information to
comply with IFRSs and does not comply with IAS 34.
The information for the six month period ended 30 June 2019 is
unaudited, but reflects all normal adjustments which are, in the
opinion of the Board, necessary to provide a fair statement of
results and the Group's financial position for and as at the period
presented.
Statutory accounts for the year ended 31 December 2018 were
approved by the Board of Directors and have been delivered to the
Registrar of Companies. The audit report on those accounts was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain any statement under section 498(2) or
(3) of the Companies Act 2006.
At 30 June 2019 Ergomed had cash resources of GBP8.1 million (30
June 2018: GBP7.4 million; 31 December 2018: GBP5.2 million).
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group
was described in the Company's Annual Report which is located on
the Company website (www.ergomedplc.com) in the Investors section.
These risks include competition; cancellation or delay of clinical
studies by customers; foreign currency risk; dependency on
pharmaceutical industry; legislation and regulation of the
pharmaceutical and biotechnology industries; licenses, approvals
and compliance; United Kingdom's exit from the European Union
('Brexit'); customers, pricing and payment terms; and dependence on
a limited number of key clients. It is anticipated that the risk
profile will not significantly change for the remainder of the
year. Risk is an inherent part of doing business and the
profitability and strong cash position of the Group, along with the
growth profile of the business, leads the Directors to believe that
the Group is well placed to manage business risks successfully.
Going concern
The Directors have considered cash flow forecasts for the group,
detailing cash inflows and outflows for the period ending 31
December 2022. Based on their review of these forecasts and
consideration of the economic environment in which the group
operates, the Directors are satisfied that the Company has
sufficient resources to continue in operation for the foreseeable
future, being a period of not less than 12 months from the date of
this report. Accordingly, they continue to adopt the going concern
basis in preparing the financial information for the six months
ended 30 June 2019.
Business Combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration transferred on
acquisition is the fair value at the date of transaction for assets
and liabilities transferred. All acquisition related costs are
expensed as incurred.
Goodwill arises as the excess of acquisition cost over the fair
value of the assets transferred at the date of transaction.
Goodwill is reviewed for impairment annually and is carried at cost
less accumulated impairment losses. Impairment losses are not
reversed in subsequent periods.
Goodwill arising on the acquisition of a foreign operation,
including any fair value adjustments to the carrying amounts of
assets or liabilities on the acquisition, are treated as assets and
liabilities of that foreign operation in accordance with IAS 21 and
as such are translated at the relevant foreign exchange rate at the
date of financial reporting.
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
IFRS 16, Leases ("IFRS 16")
On 1 January 2019, the Group adopted International Financial
Reporting Standard ("IFRS") 16, Leases ("IFRS 16") using the
modified retrospective approach. Therefore, the comparative
financial information for the year ended 31 December 2018 has not
been restated for the effect of this guidance and is prepared in
accordance with the previous accounting guidance under IAS17.
At inception of a contract, the Group assess whether the
arrangement is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. For lease contracts, the Group recognises a
right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of a lease liability adjusted for any
lease payments made at or before the commencement date, plus any
initial direct costs incurred and any costs to restore the
underlying asset, less any incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value
of future lease payments, discounted using the interest rate
implicit in the lease or, if that rate cannot readily be
determined, the Group's incremental borrowing rate. Generally the
Group uses its incremental borrowing rate.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in the future lease payments. When the lease liability is
remeasured, a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in the profit or
loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents the right-of-use assets and the lease
liability separately on the balance sheet.
The Group has elected not to recognize right-of-use assets and
lease liabilities for short-term leases of equipment that have a
term of less than 12 months or less and leases of low-value assets.
The Group recognizes the lease payments associated with these
leases as an expense on a straight-line basis over the lease
term.
The adoption of IFRS 16 has the following impact on the
consolidated financial statements as at 30 June 2019:
-- A lease liability of approximately GBP6.1 million and
corresponding lease assets have been recorded upon adoption.
-- Under IAS 17, the costs in respect of operating leases were
charged to the income statement on a straight line basis over the
lease term as a lease expense. Under IFRS 16, the cost in respect
of leases are the depreciation of the right-of-use asset and an
imputed interest charge arising on the lease liability. This may
result in lease expenses being recognized sooner under IFRS 16 than
under IAS17, however the impact is not anticipated to be material
to the consolidated income statement.
-- Under IFRS 16, the lease expense is replaced by depreciation
and interest charges, which will be excluded from our key
performance metric, EBITDA. The impact of this is anticipated to be
an improvement in EBITDA of approximately GBP1.7 million in
2019.
The impact of adopting IFRS 16 on the key financial statement
line items within the consolidated income statement for the six
months ended 30 June 2019 compared to amounts determined in
accordance with the previous guidance, IAS 17, is as follows:
Under
As reported Adjustments IAS 17
GBP000s GBP000s GBP000s
REVENUE 35,179 - 35,179
GROSS PROFIT 14,489 - 14,489
RENTAL CHARGES FOR RIGHT-OF-USE ASSETS - (867) (867)
AMORTISATION OF RIGHT-OF-USE ASSETS 803 803 -
OPERATING PROFIT 4,194 (64) 4,130
FINANCE COSTS (124) 123 (1)
PROFIT BEFORE TAXATION 4,146 59 4,205
PROFIT FOR THE PERIOD 3,609 59 3,668
EARNINGS PER SHARE
Basic 7.8p 7.9p
Diluted 7.5p 7.6p
The impact of adopting IFRS 16 on the key financial statement
line items within the balance sheet as at 1 January 2019 and 30
June 2019 is as follows:
As at 1 January 2019 As at 30 June 2019
As reported As reported
Under under under Under
IFRS 16 Adjustments IAS 17 IFRS 16 Adjustments IAS 17
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Non-current assets 27,508 (6,119) 21,389 27,074 (5,393) 21,681
Current liabilities (18,603) 1,416 (17,187) (14,843) 1,559 (13,284)
Non-current liabilities (6,017) 4,703 (1,314) (5,266) 3,905 (1,361)
Net assets 28,363 - 28,363 33,415 71 33,486
2. REVENUE
CRO services PV services Total
revenue
GBP000s GBP000s GBP000s
Six months ended 30 June 2019 ** 19,030 16,149 35,179
Six months ended 30 June 2018 (re-stated)
** 13,604 12,120 25,724
Year ended 31 December 2018 * 26,580 27,532 54,112
* Audited
** Unaudited
3. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is
based on the following data:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
(re-stated) 2018
GBP000s GBP000s
GBP000s
Earnings/(loss) for the purposes
of basic earnings per share
being net profit attributable
to owners of the Company 3,609 (2,531) (8,980)
Earnings/(loss) for the purposes
of diluted earnings per share 3,609 (2,531) (8,980)
No. No. No.
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 46,184,074 44,399,323 44,693,699
Effect of dilutive potential
ordinary shares
Share options 1,769,649 2,289,101 -
Shares to be issued in settlement
of contingent consideration 115,514 218,551 158,810
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 48,069,237 46,906,975 44,852,509
4. FINANCE COSTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
GBP000s GBP000s 2018
GBP000s
Lease interest payable 123 - -
Other interest payable 1 2 3
Changes in the fair value of
contingent consideration - 301 619
124 303 622
5. TAXATION
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
GBP000s GBP000s 2018
GBP000s
Current tax (1,065) (227) (28)
Deferred tax 528 155 1,816
(537) (72) 1,788
6. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30 June 2019 30 June 2018 31 December
GBP000s GBP000s 2018
GBP000s
Trade receivables 11,235 8,984 11,735
Other receivables 2,331 1,387 2,437
Prepayments 1,134 1,035 1,225
Corporation tax receivable 923 310 1,032
15,623 11,716 16,429
7. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
30 June 2019 30 June 2018 31 December
GBP000s GBP000s 2018
GBP000s
Trade creditors 2,933 3,855 4,379
Amounts payable to related parties
* 55 89 585
Social security and other taxes 414 564 724
Other payables 1,049 921 1,575
Customer advances 648 579 734
Accruals 3,856 2,077 2,992
8,955 8,085 10,989
* Amounts payable to related parties have credit terms of 30
days.
8. ACQUISITION COSTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2018 30 June 2018 31 December
2018
GBP000s GBP000s GBP000s
Acquisition of Harefield Pharmacovigilance - - 3
Acquisition of Pharmacovigilance
Services - - 7
Other M&A activities - 66 164
- 66 174
9. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
2018
GBP000s GBP000s GBP000s
Establishment of pharmacoepidemiology
business - 185 356
Cost reduction programme - - 760
Business reorganisation - 256 557
Impairment of Haemostatix goodwill - - 2,143
Impairment of Haemostatix in process
R&D - - 15,200
Impairment of Haemostatix other
assets - - 834
Revaluation of Haemostatix contingent
consideration - - (11,617)
Onerous contract provision - - 216
Impairment of investment - - 45
- 441 8,494
In line with the way the Board and chief operating decision
makers review the business, large one-off exceptional costs are
separately identified and shown as exceptional costs.
10. EBITDA and EBITDA (adjusted)
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 2019 30 June 2018 31 December
(re-stated) 2018
GBP000s GBP000s GBP000s
Operating profit/(loss) 4,194 (2,160) (10,446)
Adjust for:
Depreciation and amortisation
charges within Other selling,
general & administration expenses 1,477 571 1,248
Amortisation of acquired fair
valued intangible assets 449 677 1,286
EBITDA 6,120 (912) (7,912)
Share-based payment charge 321 359 758
Acquisition related contingent
compensation 40 - 972
Change in fair value of contingent
consideration for acquisitions - - (233)
Acquisition costs (note 8) - 66 174
Exceptional items (note 9) - 441 8,494
EBITDA (adjusted) 6,481 (46) 2,253
11. RE-STATEMENTS
The Balance Sheet as at 30 June 2018 and the Income Statement
and Cash Flow Statement for the six months ended 30 June 2018,
previously reported in accordance with IAS 18, are now re-stated in
accordance with IFRS 15. The impact of the restatement for adoption
of IFRS 15 on the Consolidated Balance Sheet as at 30 June 2018 and
the Income Statement and Cash Flow Statement for the six months
ended 30 June 2018 is set out below.
Re-statement of Consolidated Income Statement
For the six months ended 30 June 2018
Unaudited Unaudited
Six months Six months
ended ended
30 June 2018 Adjustment 30 June 2018
(re-stated)
GBP000s GBP000s GBP000s
Service revenue 21,797 3,927 25,724
Reimbursement revenue 3,541 (3,541) -
REVENUE 25,338 386 25,724
Cost of sales (13,208) - (13,208)
Reimbursable expenses (3,541) - (3,541)
GROSS PROFIT 8,589 386 8,975
Selling, general and administrative
expenses (10,288) - (10,288)
------------------------------------------ ------------- ------------ -------------
Selling, general and administrative
expenses comprises:
Other selling, general and administrative
expenses (8,745) - (8,745)
Amortisation of acquired fair
valued intangible assets (677) - (677)
Share-based payment charge (359) - (359)
Acquisition costs (66) - (66)
Exceptional items (441) - (441)
------------------------------------------ ------------- ------------ -------------
Research and development (863) - (863)
Other operating income 16 - 16
OPERATING LOSS (2,546) 386 (2,160)
Investment revenues 4 - 4
Finance costs (303) - (303)
LOSS BEFORE TAXATION (2,845) 386 (2,459)
Taxation (83) 11 (72)
LOSS FOR THE PERIOD (2,928) 397 (2,531)
LOSS PER SHARE
Basic (6.6)p (5.7)p
Diluted (6.6)p (5.7)p
Re-statement of Consolidated Balance Sheet
At 30 June 2018
Unaudited Unaudited
30 June 2018 Adjustment 30 June 2018
(re-stated)
GBP000s GBP000s GBP000s
Non-current assets
Goodwill 15,223 - 15,223
Other intangible assets 19,471 - 19,471
Property, plant and equipment 1,161 - 1,161
Investments 1,214 - 1,214
Deferred tax asset 1,651 - 1,651
38,720 - 38,720
Current assets
Trade and other receivables 11,716 - 11,716
Other current assets 168 - 168
Accrued revenue 2,782 (382) 2,400
Current asset investments 90 - 90
Cash and cash equivalents 7,406 - 7,406
22,162 (382) 21,780
Total assets 60,882 (382) 60,500
Current liabilities
Borrowings (11) - (11)
Trade and other payables (8,085) - (8,085)
Deferred consideration (1,969) - (1,969)
Deferred revenue (1,232) (1,433) (2,665)
Taxation (196) - (196)
Total current liabilities (11,493) (1,433) (12,926)
Net current assets 10,669 (1,815) 8,854
Non-current liabilities
Borrowings (1) - (1)
Deferred consideration (10,094) - (10,094)
Deferred tax liability (3,253) (4) (3,257)
Total liabilities (24,841) (1,437) (26,278)
Net assets 36,041 (1,819) 34,222
Equity
Share capital 449 - 449
Share premium account 24,326 - 24,326
Merger reserve 11,008 - 11,008
Share option reserve 3,033 - 3,033
Translation reserve 759 16 775
Retained earnings (3,534) (1,835) (5,369)
Total equity 36,041 (1,819) 34,222
Re-statement of Consolidated Cash Flow Statement
For the six months ended 30 June 2018
Unaudited Unaudited
Six months Six months
ended ended
30 June 2018 Adjustment 30 June 2018
(re-stated)
GBP000s GBP000s GBP000s
Cash flows from operating activities
Loss before taxation (2,845) 386 (2,459)
Adjustment for:
Amortisation and depreciation 1,248 - 1,248
Loss/(gain) on disposal of fixed
assets 5 - 5
Share-based payment charge 359 - 359
Equity investments in exchange
for services provided (460) - (460)
Investment income (4) - (4)
Finance costs 303 - 303
Operating cash flow before changes
in working capital and provisions (1,394) 386 (1,008)
Decrease/(increase) in trade
and other receivables 3,989 - 3,989
Decrease/(increase) in other
current assets 334 - 334
(Decrease)/increase in trade
and other payables (1,625) (386) (2,011)
Cash generated from/(utilised
in) operations 1,304 - 1,304
Taxation received/(paid) 448 - 448
Net cash inflow/(outflow) from
operating activities 1,752 - 1,752
Investing activities
Investment income received 4 - 4
Acquisition of intangible assets (302) - (302)
Acquisition of property, plant
and equipment (343) - (343)
Receipts from sale of property,
plant and equipment 3 - 3
Acquisition related earn-out
paid (751) - (751)
Net cash outflow from investing
activities (1,389) - (1,389)
Financing activities
Issue of new shares 3,914 - 3,914
Expenses of fundraising (183) - (183)
Finance costs paid (2) - (2)
Repayment of borrowings (6) - (6)
Net cash inflow/(outflow) from
financing activities 3,723 - 3,723
Net increase/(decrease) in cash
and cash equivalents 4,086 4,086
Effect of foreign currency on
cash balances 102 - 102
Cash and cash equivalents at
start of the period 3,218 - 3,218
Cash and cash equivalents at
end of period 7,406 - 7,406
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DGGDCDGDBGCS
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