TIDMSUN
RNS Number : 5376U
Surgical Innovations Group PLC
29 March 2023
Surgical Innovations Group plc
("Surgical Innovations", the "Company" or the "Group")
Final Results
Audited results for the year ended 31 December 2022
Surgical Innovations Group plc (AIM: SUN), the designer,
manufacturer and distributor of innovative technology for minimally
invasive surgery, reports its audited financial results for the
year ended 31 December 2022. During the year, the business achieved
a strong recovery with sales up 24.3% year-on-year exceeding
pre-pandemic levels. The return to profitability positions the
Group well to deliver robust organic growth in 2023 and beyond.
Financial highlights:
-- Revenues increased by 24.3% in 2022 to GBP11.34m (2021:
GBP9.13m) and 6% ahead of the comparable pre-pandemic period in
2019 (GBP10.73m)(1)
-- Underlying gross margin (before net manufacturing cost)
slightly higher and within target range at 42.5% (2021: 42.3%)
-- Adjusted EBITDA(2) profit of GBP0.70m (2021: GBP0.50m)
-- Adjusted operating profit before tax(2) of GBP0.01m (2021: loss of GBP0.33m)
-- Adjusted EPS(2) amounted to a profit of 0.036p per share (2021: loss of 0.022p)
-- Net cash generated from operations GBP0.48m (2021: net cash used in operations GBP0.43m)
-- Increased investment activities GBP1.24m (2021: GBP0.66m) and
higher inventory holdings reflecting ongoing supply chain
issues
-- Net cash(3) at end of period of GBP0.99m (as at 31 Dec 2021:
GBP1.76m) with additional undrawn headroom of a GBP1.0m invoice
discounting facility
Commercial and operational highlights:
-- Strong sales in UK, Japan and key EU markets
-- Investment in sales and marketing team driving commercial opportunity
-- Geographical expansion into India and Germany gaining traction
-- Ongoing capex investments driving efficiencies and cost reductions through manufacturing
-- Regulatory investment in people and processes position the
Company for early MDR transition in 2023
-- Continued investment into new product development, with
launch of YelloPort Elite(TM) 5mm and a new Optical trocar
Current trading and outlook:
-- Revenues in the current year to date for SI brand and
Distribution sales are 9.2% ahead of the corresponding period last
year
-- The forward order book is strong, notwithstanding some
deferral of Q1 revenue into Q2 due to longer lead times in sourcing
certain OEM components
-- The Group is expected to continue to trade profitably at the
level of adjusted EBITDA supported by the continual investment in
operations during 2023
1. Comparative information is shown for the year ended 31
December 2021, except where otherwise stated. Further comparative
information for the year ended 31 December 2019 has been included
to provide a pre-pandemic benchmark for trading.
2. Adjusted EBITDA, adjusted operating profit/(loss) before tax
and Adjusted EPS are stated before deducting non-recurring/
exceptional costs of GBP0.03m (2021: GBP0.08m), impairment of
intangible costs of GBPnil (2021: GBP0.15m) and share based payment
costs of GBP0.04m (2021: GBP0.03m).
3. Net cash equals cash less bank debt only.
Chairman of Surgical Innovations, Nigel Rogers said: "Whilst the
backlog of patients requiring treatment in the UK continues to
increase, standing at 7.2m in December 2022, sales remain strong.
Revenue in the current year to date for SI brand and Distribution
sales are 9.2% ahead of corresponding period last year and the
future order book is looking positive going into Q2. There is a
similar picture globally however the unique selling proposition of
our product portfolio, which are high performing, sustainable and
cost-effective solutions, leave us well placed to address this
pent-up demand and make a positive impact on the environment.
"New geographical markets are providing some significant
prospects for the forthcoming year. In India, where registration
was obtained earlier this year, evaluations with key surgeons in a
group of Delhi based hospitals are progressing well. A new partner
in Germany has seen the conversion of a new account with further
evaluations scheduled. In the US the partnership with Microline is
seeing progress with a number of hospital conversions and again
further evaluations are underway. The Company continues to work
with key partners to strengthen the overall growth
opportunities.
" Given the multiple factors driving improved prospects for
growth, the Board has increased confidence in not only the outlook
for 2023 but also the longer-term growth trajectory for the Group .
"
For further information please contact:
Surgical Innovations Group plc www sigroupplc com
David Marsh, CEO Tel: 0113 230 7597
Charmaine Day, CFO
Singer Capital Markets (Nominated Tel: 020 7496 3000
Adviser & Broker)
Aubrey Powell / Oliver Platts
Walbrook PR (Financial PR & Investor Tel: 020 7933 8780 or si@walbrookpr.com
Relations)
Paul McManus / Lianne Applegarth Mob: 07980 541 893 / 07584 391
303
About Surgical Innovations Group plc
Strategy
The Group specialises in the design, manufacture, sale and
distribution of innovative, high quality medical products,
primarily for use in minimally invasive surgery. Our product and
business development is guided and supported by a key group of
nationally and internationally renowned surgeons across the
spectrum of minimally invasive surgical activity.
We design and manufacture and source our branded port access
systems, surgical instruments and retraction devices which are sold
directly in the UK home market through our subsidiary, Elemental
Healthcare, and exported widely through a global network of trusted
distribution partners. Many of our products in this field are based
on a "resposable" concept, in which the products are part reusable,
part disposable, offering a high quality and environmentally
responsible solution at a cost that is competitive against fully
disposable alternatives.
Elemental also has exclusive UK distribution for a select group
of specialist products employed in laparoscopy, bariatric and
metabolic surgery, hernia repair and breast reconstruction.
In addition, we design and develop medical devices for carefully
selected OEM partners and have also collaborated with a major UK
industrial partner to provide precision engineering solutions to
complex problems outside the medical arena.
We aim for our brands to be recognised and respected by
healthcare professionals in all major geographical markets in which
we operate and provide by development, partnership or acquisition a
broad portfolio of cost effective, procedure specific surgical
instruments and implantable devices that offer reliable solutions
to genuine clinical needs in the operating theatre environment.
Further information
Further details of the Group's businesses and products are
available on the following websites:
www.sigroupplc.com
www.surginno.com
www.elementalhealthcare.co.uk
To receive regular updates by email, please contact
si@walbrookpr.com
Surgical Innovations Group plc
Chairman's Statement
For the year ended 31 December 2022
I am pleased to report that the Group has achieved a strong
recovery during 2022, delivering sales which exceeded pre-pandemic
levels and are slightly ahead of market expectations, providing a
return to profitability in the second half of the year.
Opportunities have been created to win new business despite the
challenges of recent events, particularly as the sustainability
benefits of our products are becoming more widely recognised. The
improving market environment is gathering pace as healthcare
providers around the world are returning to normalised levels of
activity and planning to address backlogs in surgery, and we are
well positioned to deliver robust organic growth in 2023 and
beyond.
Market Overview
Global healthcare markets are gradually returning to
pre-pandemic levels of elective surgery, and are now striving to
reduce the increasing backlog of patients requiring treatment by
increasing capacity. In the UK market, the process of recovery has
been hampered by staff shortages, industrial action and
difficulties discharging patients due to restricted social care
provision. Despite the combined effect of these factors SI brand
and Distribution products have achieved revenue growth over the
prior year of 30%. This highlights our success in gaining market
share through new hospital conversions based on the quality and
sustainability benefits our products deliver to customers.
The rates of recovery in the volume of patients treated across
our international markets have been variable, but we enter 2023 in
more normalised market conditions in all of our key markets.
Supply chain challenges have continued to impact the Company's
ability to deliver some key products on time. Whilst this has had
only minimal impact on ongoing business, in some new markets the
launch of key products was delayed, slowing overall growth as a
consequence. This has also affected input costs, and it has been
necessary to pass an equitable proportion of these on in selling
prices. Order backlogs were largely cleared by the end of the
financial year, as a result of robust actions to address component
shortages including elevated levels of safety stock. Sporadic
issues continue to arise, however, and vigilance coupled with
contingency planning continue to be important in mitigating the
impacts of these issues.
Financial Overview
Revenues for the year exceeded market expectations at GBP11.34m,
an increase of more than 20% versus the prior year (2021: GBP9.13m)
and 6% ahead of the pre-pandemic reference year (2019: GBP10.73m).
Sales continued to strengthen in the second half of the year, being
10% higher than the first half (2022 H1: GBP5.41m).
Underlying trading margins(1) were within target range at 42.5%
(2021: 42.3%) of revenues, despite inflationary cost pressures.
Mitigating these costs and passing them on where possible has been
a key focus throughout the year. Supply chain disruption continued
to present challenges in the second half of the year and across the
industry, but these were overcome by maintaining adequate buffer
inventories, and consequently customer back orders were managed
down to normal levels by the end of the year. Inventories remain
above normalised levels to provide ongoing protection, although it
is anticipated that supply chain pressures will abate and
reductions in inventory will be achievable during 2023.
Operating expenses were kept under control, but intentionally
increased to GBP3.88m (2021: GBP3.61m) predominantly due to the
increased investment into high-calibre sales and marketing and
regulatory headcount. Overall, the Group delivered a positive
adjusted EBITDA(1) of approximately GBP0.70m in line with market
expectations (2021: GBP0.50m), and a return to overall
profitability in the second half of the year. This resulted in a
modest adjusted profit before tax(1) for the full year of GBP0.01m
compared with a loss of GBP0.33m in 2021. Adjusted Earnings Per
Share(1) amounted to 0.036 pence (2021: loss of 0.022 pence).
The Group generated cash from operations for the full year
which, in addition to targeted recruitment also supported further
capital expenditure investment of GBP0.66m (2021: GBP0.21m).
Product innovation continues to be an essential strategic pillar,
total investment in research expenses during the year was 10.3% of
revenue. The closing net cash(1) balances of the Group stood at
GBP0.99m at 31 December 2022 (31 December 2021: GBP1.76m), with
available gross cash resources at 31 December 2022 of GBP3.20m (31
December 2021: GBP4.06m) including an undrawn invoice discounting
facility of GBP1.0m.
1. Reconciliation to adjusted KPI measures included in the Operating and Financial Review
Strategy and Development
The Group specialises in the design, manufacture, sale and
distribution of innovative, high quality medical products,
primarily for use in minimally invasive surgery. We design and
manufacture and source our branded port access systems, surgical
instruments and retraction devices which are sold directly in the
UK home market through our subsidiary, Elemental Healthcare, and
exported widely through a global network of trusted distribution
partners. Many of our products in this field are based on a
"resposable" concept, in which the products are part re-usable,
part disposable, offering a high quality and environmentally
responsible solution at a cost that is competitive against fully
disposable alternatives.
Elemental also has exclusive UK distribution for a select group
of specialist products employed in laparoscopy, bariatric and
metabolic surgery, hernia repair and breast reconstruction. In
addition, we design and develop medical devices for carefully
selected OEM partners and have also collaborated with a major UK
industrial partner to provide precision engineering solutions to
complex problems outside the medical arena.
We aim for our brands to be recognised and respected by
healthcare professionals in all major geographical markets in which
we operate. Through internal development, partnership or
acquisition, we provide a broad portfolio of cost-effective,
procedure-specific surgical instruments and implantable devices
that offer reliable solutions to genuine clinical needs in the
operating theatre environment.
The senior leadership team has carried out activities to clarify
and focus our understanding of our vision, mission and strategic
pillars in order to achieve our objectives. This strengthens the
attainment of long-term sustainable growth and promotes the
delivery of value to all stakeholders. Cultural values are
important in propagating shared goals and behaviours of the
business and as we move into 2023 there will be further updates on
progress in this regard.
Regulatory and new product development
The Company has made significant advances to obtaining MDR
approval with one of the three product categories already receiving
certification along with the key Quality Management System (QMS),
with another product group to be imminently approved. The QMS
approval was vital to allow the Company to continue new product
development and plans to launch a range of instruments to
complement the Logi(TM) Resposable(R) portfolio are in place for Q4
2023. The decision by the EU to extend the transition time for MDR
is only applicable for companies who are on the pathway for MDR and
this further raises the barrier to entry for not only new entrants
but also many existing medtech competitors.
In addition to the extension of the Logi(TM) Resposable (TM)
portfolio there are a number of projects focused on improving both
manufacturing efficiencies, expanding overall capacity and reducing
costs. This initiative has been enabled by the ongoing investment
programme in plant and tooling. Further investment in manufacturing
and regulatory is planned for the coming year, providing
opportunities to further support the growth, improve the
efficiencies, and overall enhance the profitability of the
business.
Current trading and outlook
Whilst the backlog of patients requiring treatment in the UK
continues to increase, standing at 7.2m in December 2022, sales
remain strong. Revenue in the current year to date for SI brand and
Distribution sales are 9.2% ahead of corresponding period last year
and the future order book is looking positive going into Q2. There
is a similar picture globally however the unique selling
proposition of our product portfolio, which are high performing,
sustainable and cost-effective solutions, leave us well placed to
address this pent-up demand and make a positive impact on the
environment.
The launch of the new YelloPort Elite(TM) 5mm in Q2 2022,
designed in a collaboration with CMR Medical, alongside the
introduction of the Optical trocar provides increased opportunity
in USA, Japan and India where there is a significant requirement
for an Optical 5mm trocar. The planned launch of the additions to
the Logi(TM) range were delayed as a consequence of the MDR process
and will now be launched later in the year. In addition, a number
of cost down R&D projects will provide the opportunity for
margin improvement throughout 2023 and into next year.
New geographical markets are providing some significant
prospects for the forthcoming year. In India, where registration
was obtained earlier this year, evaluations with key surgeons in a
group of Delhi based hospitals are progressing well. A new partner
in Germany has seen the conversion of a new account with further
evaluations scheduled. In the US the partnership with Microline is
seeing progress with a number of hospital conversions and again
further evaluations are underway. The Company continues to work
with key partners to strengthen the overall growth
opportunities.
Given the multiple factors driving improved prospects for
growth, the Board has increased confidence in not only the outlook
for 2023 but also the longer-term growth trajectory for the
Group.
Nigel Rogers
Non-Executive Chairman
28 March 2023
Operating and Financial Review
Operational overview
People
In the first half of the year there were challenges in retaining
key skilled manufacturing personnel, with employee turnover at its
highest level for a number of years, combined with the well
publicised challenges of attracting new staff. To address these
issues, the Company introduced a number of initiatives, with the
trial implementation of a four-day working week which started at
the beginning of August, being the most significant. The trial is
supported by the UK pilot programme and has been carefully managed
to ensure five-day continuity of service and support. The scheme is
set to benefit from improved productivity levels from improved
employee wellbeing. Efficiency initiatives are also being rolled
out to ensure that the trial remains operationally effective. In
addition, financial packages were increased to be comparable with
market rates which have been exacerbated by the current
inflationary pressures. Since the trial has started, there have
been successful hires and employee turnover has lowered. The trial
has been extended for a further two months and will be continually
reviewed.
Supply chain
Supply chain disruptions continued throughout 2022 but have
started to ease; lead times on materials and parts needed for new
machinery have been lengthier than historical norms. As a
consequence, this has impacted manufacturing efficiencies and
delayed sales orders. Inventory holdings have remained at higher
levels to alleviate the pressure. Investment in new skilled labour
and plant and machinery have allowed some of the manufacturing
processes to be brought back in house which will improve both
efficiency and capacity. The supply chain and people challenges
remain but are under better control and it is anticipated that
these obstacles will gradually recede through 2023.
Regulatory
The regulatory pathway continues to be on track with the EU
Medical Device Regulation (MDR), and additional resource towards
the end of the year has been brought in to support the process. In
August, the Company successfully completed a quality management
system (QMS) audit. The regulatory environment continues to be
fluid, including a recent change to the deadlines for most of the
Company's competitors to achieve certification under MDR from 2024
until 2028. The Company has, however, been quicker to adapt to the
changing landscape and remains well placed to achieve MDR during
2023.
Financial overview
Revenue
The board reviews the revenue in terms of year-on-year growth
and with to reference to the 2019 financial year as a pre-pandemic
comparative period, which provides a measure of the revenue
recovery since the effects of Covid-19 on the Company's operating
markets.
The Group recorded strong revenue growth in 2022, increasing by
24.3% to GBP11.34m. This compares with the full year revenues of
GBP9.1m in 2021, GBP6.3m in 2020 and GBP10.7m in 2019 as a
pre-pandemic comparative.
Revenues from the sale of Surgical Innovations Brand (SI Brand)
products increased by 15.6% to GBP5.56m (2021: GBP4.81m) and
recovered to 95.2% of pre-pandemic levels (2019: GBP5.84m).
Distribution sales represent third party products that
complement the portfolio of manufactured products. This segment
represents 37.2% of the revenue for 2022 (2021: 34.1%, 2019:
28.9%). This represents growth of 30.2% compared to 2019.
The UK distribution sales had a strong finish to the year
GBP4.04m (2021: GBP3.12m) with sales up 13.1% in the second half of
the year (2022H1: GBP1.90m, 2022H2: GBP2.15m).
The robust revenue growth in the second half of the year was
predominantly UK led. New hospital conversions were underpinned by
the Company's sustainability strategy and led to annual sales for
the UK (excluding OEM) which at GBP5.72m were up 30% (2021:
GBP4.42m) and 20% above pre-pandemic levels (2019: GBP4.72m).
The more pronounced level of sales growth seen in the second
half has continued into the current year, with new business wins
contributing to year-on-year growth.
OEM sales grew overall to GBP1.73m, up 45% (2021: GBP1.20m) and
are now very close to pre-pandemic levels (2019: GBP1.79m). The
underlying drivers of growth have been an expansion of both new and
existing relationships.
SI brand revenues for Europe were up 28% to GBP1.38m (2021:
GBP1.08m) and were 7.4% ahead of those achieved in 2019. Investment
in supporting the dealer network has improved distributor relations
helping them to grow their territories.
Revenues from the US (excluding OEM) are slightly down
year-on-year to GBP1.24m (2021: GBP1.33m) and are not yet back to
the level seen in 2019 (GBP1.85m). Restricted hospital access
affected evaluations at the beginning of the year with increases in
US activity in the second half of the year.
Further investment into supporting the dealer network through
additional sales training, and the new product launches will
improve the revenue growth in 2023.
The APAC region continues to generate strong revenue growth to
GBP0.93m, a 24.6% increase on 2022 (2021 GBP0.74m) and surpassing
levels seen in 2019 (2019: GBP0.46m). We continue to work closely
with our Japanese distributor as they gain market share. The focus
on sustainability continues to gain traction here also, initial
stocking orders have been placed for launching the Logic reusable
instrument range.
Margins
Commercial or underlying margins remained within target range at
42.5%, a reduction from the reported numbers in the first half of
the year (2022H1: 45.3%). A review was undertaken to analyse the
overhead absorption rate. As operating expenses have increased with
inflationary pressures the overhead rate has been uplifted
reflecting this cost pressure. In addition, pressures from material
suppliers continue and both are mitigated and passed on where
possible.
The reported gross margin of 34.6% (2021: 34.3%) which includes
the net cost of manufacturing, reflects the operational challenges
the business has experienced over the course of the year, shortage
of skilled labour and extended supply chain lead times on both
material and new plant and equipment have hampered manufacturing
productivity and therefore costs were under-recovered.
Analysis of gross
margin
The Group has
disaggregated margins
in the following
table:
2022 2021
GBP'000 GBP'000
------------------------------ --------- ----------------
Revenue 11,340 9,126
Cost of Sales (6,525) (5,268)
Underlying Gross
Margin 4,815 3,858
Underlying Gross
Margin % 42.5% 42.3%
Net Cost of Manufacturing(2) (893) (727)
------------------------------- --------- ----------------
Contribution Margin 3,922 3,131
------------------------------- --------- ----------------
Contribution Margin
% 34.6% 34.3%
2.Underlying net cost of manufacturing with the Government
support of the CJRS scheme of GBP2,000 in 2021 allocated in other
income added back to adjust the net costs of Manufacturing to
GBP725,000 results in an underlying contribution margin of
34.33%.
Use of adjusted measures
Adjusted KPIs are used by the Board to understand underlying
performance and exclude items which distort comparability, as well
as being consistent with broker forecasts and measures. The method
of adjustments are consistently applied but are not defined in
International Financial Reporting Standards (IFRS) and, therefore,
are considered to be non-GAAP (Generally Accepted Accounting
Principles) measures. Accordingly, the relevant IFRS measures are
also presented where appropriate.
Adjusted EBITDA
Adjusted EBITDA is a measure of the business performance. The
Group uses this as a proxy for understanding the underlying
performance of the Group. This measure also excludes the items that
distort comparability including the charge for share-based payments
as this is a non-cash expense normally excluded from market
forecasts.
Adjusted EBITDA increased in 2022 to GBP0.70m due to the
increased sales activity and was in line with expectations (2021:
GBP0.50m).
Operating expenses increased to GBP3.88m (2021: GBP3.61m)
predominately due to the increased investment into sales and
marketing to drive the sales activity and regulatory heads to
undertake the challenges with the MDR (Medical Device Regulation)
transition. Inflationary pressures and the ability to attract and
retain key employees also affected the incremental overheads
throughout 2022 as the Group aligned with market rates and
compensation packages were reviewed accordingly.
Other expensed/non-recurring items relate to employee
termination payments amounting to GBP32,000 (inclusive of NI and
legal fees).
CAPEX Investment
Capital expenditure on tangible assets increased with the
investment into improving the manufacturing facilities GBP0.12m as
well as the capacity and capabilities, with a new Laser Welder, a
financed Citizen L32 Lathe and an Injection Moulder, totaling
GBP0.55m. Property, plant and equipment additions were GBP0.66m
(2021: GBP0.21m) set against a depreciation charge of GBP0.17m
excluding Right of use assets (2021: GBP0.26m).
In addition, there is continual investment into new tooling of
GBP0.08m (included in additions above) with a further committed
spend of GBP0.07m which will improve efficiencies in 2023.
The Group continues to review CAPEX plans and will continue to
strengthen its investment plans in 2023, expected to be around
GBP0.5m which is anticipated to include GBP0.08m of committed spend
on deposits for larger items of plant and machinery due to be
delivered in 2024 circa GBP0.5m for a replacement Grinder and an
additional Lathe.
Investment into new product development has continued as part of
the strategy and the Group successfully launched the YelloPort(TM)
5mm Elite and Optical Trocar during the year. Cash into development
expenditure was GBP0.42m (2021: GBP0.45m). Development expenditure
was tested for impairment, it was decided that the current projects
all continue to provide economic benefit and therefore no
impairment was recognised (2021: GBP0.15m).
In addition to the product launches the research and development
team have played a pivotal role in the work undertaken for MDR
which impacts the amount of time spent on capitalised projects and
increases the cost of research expenses.
A review of the goodwill arising on the acquisition of Elemental
Healthcare was tested for further impairment. The trading
environment in the UK market was significantly impacted by the
pandemic throughout 2020 and this continued into 2021, which
impacted the cumulative impairment by GBP2.76m. In the second half
of 2021 the UK market showed strong signs of recovery, and this has
continued into 2022. With greater visibility on the outlook the
Directors anticipate improved forecasting of future net inflows on
this cash generating unit (CGU) and on this basis, the recoverable
amount of the CGU exceeds its carrying value by GBP4.5m.
Inventory holdings remain at higher levels, increasing
throughout the year by GBP0.20m to GBP3.16m (2021: GBP2.97m).
Continued disruption in supply chain with extended lead times have
compounded the need to retain higher Inventory levels. This level
of holding will be frequently reviewed throughout 2023.
Trade receivables were higher at the year-end GBP1.76m (2021:
GBP1.4m), affected by the increased revenue, with negligible bad
debts or overdue balances. Trade creditors increased over the same
period, which reflected the Group's optimisation of working capital
(2022: GBP1.42m, 2021: GBP1.09m).
Net cash generated from operations was GBP0.49m (2021 used in:
GBP0.43m) reflecting the improvement in the profitability of the
business. The Group closed the year with net cash balances of
GBP0.99m (excluding leases) compared with opening net cash of
GBP1.76m. The movement being impacted by a combination of the
increased investment activities GBP1.08m (2021: GBP0.66m) and
refinancing of the bank borrowings GBP0.96m (2021: GBP0.53m).
In March 2022 the Board refinanced the existing debt including
the additional undrawn revolving credit facility of GBP0.5m and
replaced it with an invoice discounting facility of GBP1.00m and in
addition extended the CBILS loan of GBP1.5m to May 2026. The
refinance provides greater flexibility than the existing debt and
continues to provide ample headroom for the Group. Total bank
borrowings as of 31 December 2022 were GBP1.21m, in addition
GBP0.1m was used to purchase a new Lathe on a finance lease in
early 2022. The Group continues to have access to the GBP1m invoice
discounting facility which remains undrawn at the date of this
announcement.
The Group recorded a corporation tax credit of GBP0.32m relating
to an enhanced Research and Development claim in respect of 2020
and 2021 (2021: credit of GBP0.13 relating to 2019 ) and a deferred
tax credit of GBPnil (2021: GBPnil). The tax charge on Elemental
Healthcare this year has been relieved through Group losses.
Overall, the Group continues to hold substantial tax losses on
which it holds a cautious view, and consequently the Group has
chosen not to recognise those losses fully.
Key Performance Indicators ("KPIs")
The Group considers the key performance indicators of the
business to be:
2022 2021 Target Measure
Gross profit (before
Underlying Gross net manufacturing
Profit Margin cost)/ revenue 42.5% 42.3% >40%
------------------------ --------- --------- ---------------
Direct Gross Profit
Margin Gross profit / revenue 34.6% 34.3% >40%
------------------------ --------- --------- ---------------
Net Cash/(Net Debt)(1) Cash less debt GBP0.99m GBP1.76m N/A
------------------------ --------- --------- ---------------
1. Net debt comprised of bank borrowings GBP1.21m (2021:
GBP1.8m), excluding leases under the adoption of IFRS16.
Reconciliation of adjusted KPI / measures;
EBITDA(2) Profit before
taxation
As stated GBP0.63m GBP(0.06)m
---------- --------------
Share based payments GBP0.04m GBP0.04m
---------- --------------
Other expense/non-recurring GBP0.03m GBP0.03m
items
---------- --------------
Adjusted Measure GBP 0.70m GBP 0.01m
---------- --------------
2. EBITDA is defined as earnings before interest, taxation,
depreciation and amortisation (including impairment). EBITDA is
calculated as operating profit of GBP0.04m adding back depreciation
GBP0.36m, amortisation GBP0.23m and impairment GBPnil.
Earnings per share EPS
Basic EPS 0.028p
----------
Profit attributable to shareholders GBP0.26m
----------
Add: Share based payments GBP0.04m
----------
Add: other expense/non-recurring items GBP0.03m
----------
Adjusted profit attributable to shareholders GBP0.33m
----------
Adjusted EPS 0.036p
----------
Principal risks and uncertainties
The management of the business and the nature of the Group's
strategy are subject to a number of risks which the Directors seek
to mitigate wherever possible. The principal risks are set out
below.
Issue Change Risk and description Mitigating actions
vs.
prior
year
Funding At same The Group currently has Liquidity and covenant compliance
risk level a mixture of borrowings is monitored carefully across
comprising a balance of varying time horizons to facilitate
GBP1.20m CBILS arrangement, short term management and also
a small finance lease strategic planning. This monitoring
of GBP0.1m to fund capex enables the management team to
along with additional consider and to take appropriate
headroom of an undrawn actions within suitable time
GBP1.0m invoice discounting frames.
facility. The Group remains
dependent upon the support
of these funders and there In March 2022 the Board refinanced
is a risk that failure the existing debt including the
in particular to meet additional undrawn revolving
covenants attaching to credit facility of GBP0.5m and
the CBILS could have financial replaced it with an invoice discounting
consequences for the Group. facility of GBP1m and in addition
extended the CBILS loan to May
2026. The refinance provides
greater flexibility than the
existing debt and continues to
provide ample headroom for the
Group. In aggregate total borrowing
at 31 December 2022 was GBP1.31m
(2021: GBP1.88m). The invoice
discounting facility remains
undrawn to date.
The bank continue to be a supportive
stakeholder.
========= ================================= =========================================
Shortage Increased In the early part of the The Board reviewed the compensation
of skilled year the Group has struggled and other benefits throughout
labour to attract and retain the year to ensure salaries were
key skilled personnel. competitive to market rates.
In addition, the Company joined
the 4-day week UK trial in August
2022 for a period of 6- months.
The Group has continued to extend
this trial further in 2023.
Overall, the additional package
and benefits have allowed the
business to attract key staff
and continues to retain employees,
with staff turnover rates decreasing.
========= ================================= =========================================
Customer At The Group exports to The majority of distributors,
concentration same over thirty countries including the most significant,
level and distributors around are well established and their
the world, but certain relationship with the Group spans
distributors are material many years. Credit levels and
to the financial performance cash collection is closely monitored
and position of the Group. by management, and issues are
As disclosed in note 2 quickly elevated both within
to the financial statements, the Group and with the distributor.
one customer accounted
for 8.2% of revenue in
2022 and the loss, failure
or actions of this customer
could have a severe impact
on the Group.
========= ================================= =========================================
Foreign At same The Group's functional The Group monitors currency exposures
exchange level currency is UK Sterling; on an on-
risk however, it makes significant going basis and enters into forward
purchases in Euros and currency arrangements where considered
US Dollars. appropriate to mitigate the risk
of material adverse movements
The US Dollars and Euros in exchange rates impacting upon
are generally mitigated the business. Euro and US Dollar
by US Dollar sales by cash balances are monitored regularly
creating a natural hedge. and spot rate sales into sterling
are conducted when significant
currency deposits have accumulated.
The accounting policy for foreign
exchange is disclosed in accounting
policy 1d in the Annual Report.
========= ================================= =========================================
Regulatory At same As an international business The Group has a dedicated Compliance
approval level a significant proportion department which assists product
of the Group's products development teams with support
require registration from as required to minimise the risk
national or federal regulatory of regulatory approval not being
bodies prior to being obtained on new products and
offered for sale. The ensures that the Group operates
majority of our major processes and procedures necessary
product lines have FDA to maintain relevant regulatory
approval in the US and approvals.
we are therefore subject
to their audit and inspection Whilst there is no guarantee
of our manufacturing facilities. that this will be sufficient,
the Group has invested in people
with the appropriate experience
There is no guarantee and skills in this area which
that any product developed mitigates this risk significantly.
by the Group will obtain
and maintain national We have increased resource into
registration or that the the regulatory team and continued
Group will always pass throughout 2022 to ensure internal
regulatory audit of its deadlines are met.
manufacturing processes.
Failure to do so could MDR transitions are well underway,
have severe consequences and we are actively working with
upon the Group's ability our Notified Body regarding the
to sell products in the extension to current MDD certificates
relevant country. recently approved by the EU.
The Group has untill March
2023 to transition the
current product portfolio
to fall under the Medical
Device Regulations (MDR),
currently held under Medical
Device Directive (MDD).
Time constraints of BSI
the notified body are
out of our control.
========= ================================= =========================================
Economic Increased Current wider economic As part of the recruitment and
factors factors are impacting retention strategy the Group
inflationary rates. The reviewed the market rates and
cost of living across compensated employees accordingly
the UK during 2022 has during 2022. Additional benefits
increased sharply. The have also been implemented; this
annual inflation reached will be continually reviewed
11.1% in October 2022, throughout 2023.
a 41 year high, before
easing in subsequent months Energy bill have been less affected
to 9.2% in February 2023. due to a fixed rate deal; however,
this will come to end in July
The pressures on employment 2023. The Group are constantly
costs, energy and raw reviewing the current tariffs.
materials have impacted Energy rates are reducing but
the business and continue will be expected to be at least
to do so in 2023. double the rate of the existing
tariff.
Supply chain delays in
raw materials, finished Raw material purchases are reviewed,
goods and plant and equipment and economies of scale are applied.
have impacted the business Supply chain increases are passed
during 2022, this has on where possible to the customer.
eased in the second half Margins are reviewed on a continual
of the year but has continued basis.
to impact the business
albeit to a lesser extent Inventory levels remain high
in 2023. to mitigate the supply chain
delays.
========= ================================= =========================================
Going concern
The Directors have prepared forecasts for the period to March
2024 based on an evaluation of financial forecasts, sensitised to
reflect a rational judgement of the level of inherent risk.
In March 2022 the Group refinanced the existing debt, this
included the additional undrawn revolving credit facility of
GBP0.5m. The debt was replaced with an invoice discounting facility
of GBP1.0m and an extension of the CBILS loan of GBP1.5m repayable
over four years till May 2026. The refinancing provides greater
flexibility for further investment in terms of covenant testing
than the prior debt and continues to provide ample headroom for the
Group. (Covenant information is provided at disclosure note 13 to
the financial statements in the Annual Report). Financial headroom
as at 31 December 2022 was GBP3.2m with the invoice discounting
facility remaining undrawn.
The Group continues investment in capital expenditure
predominantly on plant and machinery circa GBP0.35m in the next
twelve months. Decisions to take additional finance in the form of
hire purchase or use of the existing debt to finance the projects
will impact both the cash and the covenant testing and the
decisions to utilise such funding will very much depend on the
performance of the business.
The Board is satisfied that there is ample headroom including
testing any sensitivities under reasonably possible scenarios, and
the Directors conclude that it continues to be appropriate to
prepare the Annual Report and Accounts on a going concern
basis.
Con solidated statem ent of comprehensi ve income
fo r the y ear en ded 31 Dece m ber 2 0 22
20 22 2021
GBP '0 00 GBP '0 00
---------------------------------------- ------------------ -------------------
Rev enue 2 11,340 9,126
Cost of s a les 2 (7,418) (5,995)
========================================= ================== ===================
G ross profit 3,922 3,131
O ther ope r ati ng e x pens
es 2 (3,881) (3,611)
Other Income - 25
O perating profit / (loss) 41 (455)
Fina n ce c o sts (98) (130)
Fina n ce in c o me - -
========================================= ================== ===================
Loss b efore ta xation (57) (585)
T a x a tion credit 321 129
========================================= ================== ===================
Profit/(Loss) a nd total comprehensive
Income 264 (456)
========================================= ================== ===================
Profit/(loss) per share, total
and continuing
Bas ic 0.03p (0.05p)
Diluted 3 0.03p (0.05p)
The Consolidated statement of comprehensive income above relates
to continuing operations.
Profit/(Loss) and total comprehensive income relate wholly to
the owners of the parent Company.
Con solidated statem ent of changes in equ i ty
fo r the y ear en ded 31 Dece m ber 2 0 22
Share Share Capital Merger Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ----------------- ------- ------- -------- -------
Balance as at 1 January 2021 9,328 6,587 329 1,250 (6,404) 11,090
Share based payment - - - - 30 30
Total - transactions with owners - - - - 30 30
Loss and total comprehensive
income for the period - - - - (456) (456)
---------------------------------- ------------ ----------------- ------- ------- -------- -------
Balance as at 31 December
2021 9,328 6,587 329 1,250 (6,830) 10,664
Share based payment - - - - 35 35
Total - transactions with owners - - - - 35 35
Profit and total comprehensive
income for the period - - - - 264 264
---------------------------------- ------------ ----------------- ------- ------- -------- -------
Balance as at 31 December
2022 9,328 6,587 329 1,250 (6,531) 10,963
---------------------------------- ------------ ----------------- ------- ------- -------- -------
Con solidated balance sheet
a t 31 Dece m b er 20 22
2022 2021
GBP GBP '0
'0 00 00
============================================= ============ ==============
A sse ts
Non-current a ssets
Property, p l ant and eq u ip m ent 858 366
Right of use assets 918 832
Intan g ib le a ss ets 4 6,403 6,216
8,179 7,414
============================================= ============ ==============
Curr ent asse ts
In v entori es 3,162 2,965
T rade and other rec e i v abl es 2,055 1,695
Cash at b a nk a nd in h and 2,199 3,644
============================================= ============ ==============
7,416 8,304
============================================= ============ ==============
Total a ssets 15,595 15,718
============================================= ============ ==============
Equity and liabiliti es
Equity attributable to equity holders of the
p arent compa ny
Share cap ital 7 9,328 9,328
Share p r em i um a c co u nt 6,587 6,587
Capital re s erve 329 329
Merger reserve 1,250 1,250
Retain ed e arni n gs (6,531) (6,830)
============================================= ============ ==============
Total e qui ty 10,963 10,664
============================================= ============ ==============
Non-current l i abiliti es
Borro w ings 5 825 -
Dilapidation provision 165 165
Lease liability 722 750
============================================= ============ ==============
1,712 915
============================================= ============ ==============
Curr ent liabi lities
T rade and other pa y ab l es 6 1,886 1,614
Accru als 420 488
Borrowings 382 1,880
Lease liability 232 157
============================================= ============ ==============
2,920 4,139
============================================= ============ ==============
Total li abiliti es 4,632 5,054
============================================= ============ ==============
Total e qui ty and liabili ties 15,595 15,718
--------------------------------------------- ------------ --------------
Con solidated cash f l ow statement
fo r the y ear en ded 31 Dece m ber 2 0 22
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ------------ -------
Cash flo ws from operating a ctivities
Profit/(Loss) after tax for the year 264 (456)
Adju stm e nts for:
Taxation (321) (129)
Finance income - -
Finance costs 98 130
Other Income-CBILS interest grant - (23)
Depre c iati on of pro perty, p l ant and e qu i
pm e nt 167 258
Amorti sa t ion and impairment of i nta n gi b le
a s s ets 4 232 402
Depreciation Right of Use assets 188 187
Share-b a s ed pa ym ent cha r ge 35 30
Foreign exchange (82) 12
Increase in i n v entories (197) (802)
Increase in trade and other rec e i v abl es (360) (412)
Increase in pa y a bles 6 204 276
-------------------------------------------------- ------------ -------
Cash generat ed/ (used in) from operations 228 (527)
T a x a tion received 321 129
Intere st p aid (63) (35)
-------------------------------------------------- ------------ -------
Net cash g enerated/ (used in) from ope r ating
activities 486 (433)
-------------------------------------------------- ------------ -------
Cash flo ws from inv esting a ctivities
Pa y men ts to ac q uire pro p erty, plant and eq
u i p ment (659) (212)
Acqu i si t ion of i n t a n gi b le a s s e ts (419) (445)
Net cash used in investing activities (1,078) (657)
-------------------------------------------------- ------------ -------
Repayment of bank loan (375) (300)
Repayment of CBILS 5 (294) -
Repayment of lease liabilities (266) (232)
Net cash used in fin anc ing a ctivities (935) (532)
-------------------------------------------------- ------------ -------
Net decrease in cash and cash equivalents (1,527) (1,622)
Cash a nd ca sh e q ui v al e nts at begi n ni ng
of y ear 3,644 5,278
Effective exchange rate fluctuations on cash held 82 (12)
-------------------------------------------------- ------------ -------
Cash and cash equivalents at end of year 2,199 3,644
================================================== ============ =======
Notes to the consolidat ed f inancial statem ents
1 . Group a c counting policies under IFRS
(a) Basis of prep aration
Surgical Innovations Group PLC (the "Company") is a public AIM
listed company incorporated, domiciled and registered in England in
the UK. The registered number is 02298163 and the registered
address is Clayton Wood House, 6 Clayton Wood Bank, Leeds, LS16
6QZ.
The consolidated financial statements have been prepared in
accordance with the requirements of the Companies Act 2006 and
UK-adopted international accounting standards. The preparation of
financial statements in conformity with IFRS requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group's
accounting policies. The financial statements have been prepared
under the historical cost convention, are presented in Sterling and
are rounded to the nearest thousand.
Going concern
The Directors have considered the available cash resources of
the Group and its current forecasts and have a reasonable
expectation that the Group has adequate cash resources and support
to continue in operational existence for the foreseeable future,
considered to be at least 12 months for the date of approval from
the financial statements. Further details of the Directors'
assessment are provided in the Chairman's Statement, the Operating
and Financial Review and Directors' report and disclosed in note
1.(p) of the financial statements in the Annual Report.
2. Segmental reporting
Information reported to the Board, as Chief Operating Decision
Makers, and for the purpose of assessing performance and making
investment decisions is organised into three operating segments.
The Group's operating segments under IFRS 8 are as follows:
SI Brand - the research, development, manufacture and distribution
of SI branded minimally invasive devices
OEM - the research, development, manufacture and distribution
of minimally invasive devices for third party
medical device companies through either own label or
co-branding. As well as Precision Engineering, this
includes the research, development, manufacture and
sale of minimally invasive technology products for
precision engineering applications
Distribution - Distribution of specialist medical products sold through
Elemental Healthcare Ltd
The measure of profit or loss for each reportable segment is
gross margin less amortisation of product development costs. Assets
and working capital are monitored on a Group basis, with no
separate disclosure of asset by segment made in the management
accounts, and hence no separate asset disclosure is provided here.
The following segmental analysis has been produced to provide a
reconciliation between the information used by the chief operating
decision maker within the business and the information as it is
presented under IFRS.
S I Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 20 22 Br a GBP'000 GBP ta l*
nd '0 00 GBP
GBP '0 00
'0 00
================================================ =========== ============ ======= =========
Rev enue 5,557 4,044 1,739 11,340
Expenses (4,223) (2,410) (1,017) (7,650)
------------------------------------------------ ----------- ------------ ------- ---------
Result
Segment re sult 1,334 1,634 722 3,690
Unall o ca t ed e x pens es (3,649)
Other Income -
------------------------------------------------ ----------- ------------ ------- ---------
Profit from operations 41
Fina n ce in c o me -
Fina n ce c o sts (98)
================================================ =========== ============ ======= =========
(Loss) b efore ta xation (57)
T a x credit 321
================================================ =========== ============ ======= =========
*There were no revenues transactions between
the segments during the year
Inc l uded w ithin t he s eg m ent/o perati ng
re s u lts are t he f o llo w i ng s ign ifi
c ant no n - c a sh i t e m s:
S I Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 20 22 Br a GBP GBP ta l
nd '0 00 '0 00 GBP
GBP '0 00
'0 00
================================================ =========== ============ ======= =========
Amorti sa t ion of i nta n gi b le a s s ets 232 - - 232
Impairment of i nta n gi b le a s s ets - - - -
------------------------------------------------ ----------- ------------ ------- ---------
Unallocated expenses for 2022 include sales and marketing costs
(GBP577,000), research and development costs (GBP1,164,000),
central overheads (GBP745,000), Direct (Elemental Healthcare) sales
& marketing overheads (GBP1,096,000), share based payments
(GBP35,000), Other expensed/Non recurring (GBP32,000) note 3 to the
financial statements in the Annual Report and Accounts.
S I Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 2021 Br a GBP'000 GBP ta l*
nd '0 00 GBP
GBP '0 00
'0 00
======================================= ======== ============ ====== =============
Rev enue 4,813 3,116 1,197 9,126
Expenses (3,770) (1,837) (790) (6,397)
--------------------------------------- -------- ------------ ------ -------------
Result
Segment re sult 1,043 1,279 407 2,729
Unall o ca t ed e x pens es (3,209)
Other income 25
======================================= ======== ============ ====== =============
(Loss) from operations (455)
Fina n ce in c o me -
Fina n ce c o sts (130)
======================================= ======== ============ ====== =============
(Loss) b efore ta xation (585)
T a x charge 129
(Loss) for the year (456)
======================================= ======== ============ ====== =============
*There were no revenues transactions between the segments during
the year
Inc l uded w ithin t he s eg m ent re s u lts
are t he f o llo w i ng i t e m s:
S I Br Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 2021 a nd GBP '0 GBP ta l
GBP '0 00 '0 00 GBP
00 '0 00
================================================ ========== ============ ====== ======
Amorti sa t ion of i nta n gi b le a s s ets 257 - - 257
Impairment of i nta n gi b le a s s ets 145 - - 145
------------------------------------------------ ---------- ------------ ------ ------
Unallocated expenses for 2021 include sales and marketing costs
(GBP246,000), research and development costs (GBP973,000), central
overheads (GBP797,000), Direct (Elemental Healthcare) sales &
marketing overheads (GBP1,085,000), share based payments
(GBP30,000), Other expenses/non-recurring (GBP78,000) are as set
out in Note 3 of the notes to the financial statements in the
Annual Report and Accounts.
Disaggregation of revenue
Y e a r e n d ed 31 De ce m ber 2022 S I Br Distribution OEM T o
a nd GBP '0 GBP ta l
GBP '0 00 '0 GBP
00 00 '0 00
===================================== ============== ============ ===== ======
United Kingdom 1,683 4,044 1,315 7,042
Europe 1,377 - - 1,377
US 1,240 - 424 1,664
APAC(1) 926 - - 926
Rest of World 331 - - 331
------------------------------------- -------------- ------------ ----- ------
5,557 4,044 1,739 11,340
===================================== ============== ============ ===== ======
Y e a r e n d ed 31 De ce m ber 20 21 S I Br Distribution OEM T o
a nd GBP '0 GBP ta l
GBP '0 00 '0 GBP
00 00 '0 00
====================================== ============== ============ ===== ======
United Kingdom 1,306 3,116 1,008 5,430
Europe 1,075 - - 1,075
US 1,333 - 189 1,522
APAC(1) 743 - - 743
Rest of World 356 - - 356
-------------------------------------- -------------- ------------ ----- ------
4,813 3,116 1,197 9,126
====================================== ============== ============ ===== ======
The Group has disaggregated revenues in the following table:
1. Asia-Pacific
Rev enues are a ll o ca t ed g eog r aph i ca l ly on t he b a s
is of w here re v enu es w ere re c ei v ed f rom a nd not from the
ul t i m ate f i n al
des t ina t io n of u se. During 2022 GBP933,000 (8.2%) of t he
Group's re v e n ue d epe n ded on one distributor in the OEM se g
ment (2021: GBP901,000 (9.9%), and GBP921,000 (8.1%) in the SI
Brand segment ( 2021: GBP1,050,000 (11.5%).
Sales of goods were GBP11,306,000 (2021: GBP9,062,000) and sales
relating to services in the UK were GBP34,000 (2021:
GBP64,000).
3. Earnings per ordinary share
Basic profit/(loss) per ordinary share
The calculation of basic earnings per ordinary share for the
year ended 31 December 2022 was based upon the profit attributable
to ordinary shareholders of GBP264,000 (2021: loss of GBP456,000)
and a weighted average number of ordinary shares outstanding for
the year ended 31 December 2022 of 932,816,177 (2021:
936,564,122).
Diluted profit/(loss) per ordinary share
The calculation of diluted earnings per ordinary share for the
year ended 31 December 2022 was based upon the profit attributable
to ordinary shareholders of GBP264,000 (2021: loss of GBP456,000)
and a weighted average number of ordinary shares outstanding for
the year ended 31 December 2022 of 935,945,943 (2021:
938,784,384).
Adjusted profit/(loss) per ordinary share
The calculation of adjusted earnings per ordinary share for the
year ended 31 December 2022 was based upon the adjusted profit
attributable to ordinary shareholders (profit before non-recurring
costs and amortisation and impairment costs relating to the
acquisition of Elemental Healthcare, impairment of capitalised
development costs and share based payments) of GBP331,000 (2021:
loss of GBP203,000) and a weighted average number of ordinary
shares outstanding for the year ended 31 December 2022 of
932,816,177 (2021: 936,564,122).
No. of sh a r es used in calc ulat i on of e ar
nings p er o r dina ry s h a re ('0 00 s)
20 22 2021
No. of No. of
Shares Shares
=================================================== ====================== ===========================
Bas ic ea r ni n gs p er s hare 932,816 936,564
Diluti ve eff e ct of une x erc i sed s hare o pti
o ns 3,129 2,220
=================================================== ====================== ===========================
Diluted ea r nin gs p er s hare 935,945 938,784
=================================================== ====================== ===========================
4. Intangible assets Capitalised Single Exclusive
development use product Goodwill Supplier Total
costs knowledge Agreements
transfer
GBP'000 GBP,000 GBP'000 GBP'000 GBP'000
Cost
At 1 J anuary 2 021 13,702 225 8,180 1,799 23,906
Additi ons 445 - - - 445
At 1 J anuary 2 022 14,147 225 8,180 1,799 24,351
Additi ons 419 - - - 419
A t 31 December 2 0 22 14,566 225 8,180 1,799 24,770
=========================== ====================== ================ ============== ================ =============
A cc umulated a mortis
ation
At 1 J anuary 2 021 (12,952) (225) (2,757) (1,799) (17,733)
Charge f or t he y ear (257) - - - (257)
Impairment provision* (145) - - - (145)
At 1 J anuary 2 022 (13,354) (225) (2,757) (1,799) (18,135)
Charge f or t he y ear (232) - - - (232)
Imp a irm e nt p r o v is i - - - - -
on*
=========================== ====================== ================ ============== ================ =============
A t 31 December 2 0 22 (13,586) (225) (2,757) (1,799) (18,367)
=========================== ====================== ================ ============== ================ =============
Carr ying amount
A t 31 December 2 0 22 980 - 5,423 - 6,403
=========================== ====================== ================ ============== ================ =============
At 31 De ce m ber 2 021 793 - 5,423 - 6,216
=========================== ====================== ================ ============== ================ =============
At 1 January 2021 750 - 5,423 - 6,173
=========================== ====================== ================ ============== ================ =============
Goodwill and intangibles are allocated to the cash generating
unit (CGU) that is expected to benefit from the use of the
asset.
Capitalised development costs
Capitalised development costs represent expenditure incurred in
developing new products that fulfil the requirements met for
capitalisation as set out in paragraph 57 of IAS38. These costs are
amortised over the future commercial life of the product,
commencing on the sale of the first commercial item, up to a
maximum product life cycle of ten years, and taking account of
expected market conditions and penetration.
Capitalised development expenditure was tested for impairment,
it was decided that the current projects all continue to provide
future economic benefit and therefore no impairment was recognised
(2021: GBP0.15m).
Goodwill
The Group tests goodwill at each reporting date for impairment
and whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. The recoverable amount of a
cash generating unit (CGU) is determined based on value in use
calculations. These calculations use cash flow projections based on
five-year financial budgets approved by management. Cash flows
beyond the five-year period are extrapolated using estimated long
term growth rates.
An impairment review is carried out annually for goodwill.
Goodwill arose on the acquisition of Elemental Healthcare Limited
in 2017 and is related to both the Distribution and SI Brand
segments of the Group. Elemental Healthcare Limited is considered
to be a separate cash-generating unit (CGU) of the Group whose
recoverable amount has been calculated on a value in use basis by
reference to discounted future cash flows over a five-year period
plus a terminal value. Principal assumptions underlying this
calculation are the growth rate into perpetuity of 1.5% (2021:1.5%)
and a pre-tax discount rate of 15.7% (2021:13.2%) applied to
anticipated cash flows. In addition, the value in use calculation
assumes a gross profit margin of 43.3% (2021:39.5%) using past
experience of sales made and future sales that were expected at the
reporting date based on anticipated market conditions.
The trading environment in the UK market was significantly
impacted by the pandemic throughout 2020 and this continued into
2021, which impacted the cumulative impairment by GBP2.7m. In the
second half of 2021 the UK market showed strong signs of recovery
and this has continued into 2022. With greater visibility on the
outlook the directors anticipate improved forecasting of future net
inflows on this CGU and on this basis, the recoverable amount of
the CGU exceeds its carrying value by GBP4.5m.
5. Borrowings 2022 20 21
Bank Loan GBP'000 GBP '000
======================== ======= =============
Current liabilities 382 1,880
Non-current liabilities 825 -
======================== ======= =============
Lease liabilities
======================== ======= =============
Current liabilities 232 157
Non-current liabilities 722 750
------------------------ ------- -------------
2,161 2,787
======================== ======= =============
In March 2022, the Group refinanced its existing debt with
Yorkshire bank consisting of the following:
-- Extension to the CBILS of GBP1.5m repayable in May 2026,
interest is calculated at rate of 2.94% repayable monthly over the
Bank of England base rate. Monthly installments are GBP0.029m.
-- Covenants attached to the CBILS comprise of EBITDA to debt
servicing costs at a minimum of 1.25x. First test 30 June 2022
(last 6 months), then September 22 (9 months), then rolling
12-month basis afterwards.
-- Additional headroom with an Invoice Discounting facility of
GBP1.0m across the Group, which replaced loan A and the RCF; 2.5%
on margin with a maximum of nominal administration fee of a maximum
of GBP0.018m if not utilised. As at the date of this announcement
this facility remains undrawn.
Changes in liabilities arising from financing Non-current Current Total
activities loans and loans and
borrowings borrowings
At 1 January 2021 1,879 298 2,177
--------------------------- ------------------- -------
Cash flows - (350) (350)
--------------------------- ------------------- -------
Transfer between non-current and current (1,879) 1,879 -
--------------------------- ------------------- -------
Interest accruing in the period - 53 53
--------------------------- ------------------- -------
At 31 December 2021 - 1,880 1,880
--------------------------- ------------------- -------
Cash flows for repayment of bank loan - (304) (304)
--------------------------- ------------------- -------
Cash flows for refinance-CBILS (294) (294)
--------------------------- ------------------- -------
Transfer between non-current and current 825 (825) -
--------------------------- ------------------- -------
Interest paid in the period - (57) (57)
--------------------------- ------------------- -------
Interest accrued in the period (18) (18)
--------------------------- ------------------- -------
At 31 December 2022 825 382 1,207
--------------------------- ------------------- -------
6.Trade 2022 2021
and other GBP'000 GBP'000
payables
============ ============================================================================================== ==========
T rade
payables 1,420 1,090
Other tax
and social
security 172 230
Other
payables 294 294
1,886 1,614
============ ============================================================================================== ==========
The Group and Company's financial liabilities have contractual
maturities (including interest payments where applicable) which are
summarised below.
Amounts due Amounts Amounts
in due in due in
As at 31 December Less than 1 2-5 years 5-10 years Total financial
2022 year liabilities
GBP'000 GBP'000 GBP'000 GBP'000
T rade payables 1,420 - - 1,420
Other payables 294 - - 294
Bank borrowings-Current 382 - - 382
Bank borrowings-Non-current - 825 - 825
------------------------------ --- ------------ ---------- ----------- ----------------
2,096 825 - 2,921
---- ------------ ---------- ----------- ----------------
Amounts due Amounts Amounts
in due in due in
As at 31 December Less than 1 2-5 years 5-10 years Total financial
2021 year liabilities
GBP'000 GBP'000 GBP'000 GBP'000
T rade payables 1,090 - - 1,090
Other payables 294 - - 294
Bank borrowings-Current 1,904 - - 1,904
Bank borrowings-Non-current - - - -
------------------------------ --- ------------ ---------- ----------- ----------------
3,288 - - 3,288
---- ------------ ---------- ----------- ----------------
7. Share Capital
Shares in issue reconciliation (Authorised, allotted, called up
and fully paid)
2022 2021
Opening no of shares in issue 932,816,177 932,816,177
------------- -------------
Issued in satisfaction of share options - -
exercised
------------- -------------
Closing number of shares in issue 932,816,177 932,816,177
------------- -------------
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END
FR SESFAAEDSEED
(END) Dow Jones Newswires
March 29, 2023 02:00 ET (06:00 GMT)
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