TIDMEKF
RNS Number : 4709H
EKF Diagnostics Holdings PLC
16 March 2015
16 March 2015
EKF DIAGNOSTICS HOLDINGS PLC
("EKF", the "Company" or the "Group")
Final results
EKF Diagnostics Holdings plc (AIM: EKF), the AIM listed
point-of-care, central laboratory and molecular diagnostics
business, announces its audited final results for the year ended 31
December 2014. EKF has an installed base of over 80,000 analysers
globally and manufactures over 56 million tests annually.
Financial Highlights
-- Revenues up 26% to GBP40.1m (2013: GBP31.8m)
-- Organic growth of 6% with acquisitions contributing
GBP6.5m
-- Strong second half growth of 38% year-on-year
-- GBP2.6m negative effect of exchange rates
-- Gross profit up 22% to GBP19.9m (2013: GBP16.3m)
-- Adjusted EBITDA* up 31% to GBP6.3m (2013: GBP4.8m)
-- Cash at 31 December 2014 of GBP8.3m (2013: GBP2.6m); Net cash of GBP2.1m (2013: GBP0.1m)
* Excluding exceptional items and share based payments
Operational Highlights
Point-of-Care
-- Over 18,000 analysers sold during the year taking installed based to over 80,000
-- Quo-Lab instrument sales up more than 30%; Biosen instrument sales up more than 8%
-- Significant tender wins for HemoControl in Mexico and Latin America
Central laboratory
-- Overall sales down 14%, with <BETA>-HB reagent sales up 9%
Molecular Diagnostics
-- Major US collaboration to use PrecisionPath(TM) to improve colon cancer treatment
-- Multiple third party evaluations commissioned for PointMan(TM)
David Evans, Executive Chairman of EKF, said:
"Our ambitions remain to achieve double digit growth and to be
able to exploit the opportunities in front of us. We are under no
illusion that we must deliver on expectations and that as we
continue to seek to grow we must do this in a non-dilutory fashion.
I am buoyed by the opportunities in front of us and in particular
the opportunities presented by PrecisionPath."
EKF Diagnostics Holdings plc Tel: 029 2071 0570
David Evans, Executive Chairman Mob: 07740 084 452
Julian Baines, CEO Mob: 07788 420 859
Paul Foulger, CFO Mob: 07710 989 255
Panmure Gordon (UK) Limited
Robert Naylor (Corporate Finance) Tel: 020 7886 2714
Maisie Atkinson (Corporate Tel: 020 7886 2905
Broking)
Michael Seabrook (Sales) Tel: 020 7886 2704
Walbrook PR Limited Tel: 020 7933 8780 or ekf@walbrookpr.com
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391 303
Chairman's Statement
Dear Fellow Shareholder
The year past has been a curate's egg of a year for the Company.
There have been many positive factors as we have continued to grow
both organically and by acquisition but they have been offset by
certain events largely beyond our control.
Strategy
From a strategic perspective we believe we needed to achieve
three key objectives in 2014.
The first was to underpin our current point of care offering
particularly in hemoglobin testing where our existing hemoglobin
technology, widely regarded as the Rolls-Royce of instruments, was
being threatened by newer technologies. It was against that
background that we acquired DiaSpect Medical AB last April for an
upfront cash and equity consideration of GBP16m with an earnout of
up to GBP4.75m, which was subsequently settled by a cash payment of
GBP1.425m in January 2015.
We believe that the DiaSpect product suite allows us to compete
more effectively against our principal competitor. I believe the
benefit of this acquisition will be more fully evidenced during
2015.
Secondly, we recognised that we needed to embolden our presence
in molecular diagnostics. In an ideal world this would have been in
Point-of-Care, but given the plethora of technologies in
development together with some launched products, not only would we
have been playing catch-up with a me-too offering, but the scale of
investment was not within our investment capacity.
It was the Board's view that a different approach was necessary
and one which sought to build upon the Company's toe-hold in
molecular diagnostics through its previous acquisition of 360
Genomics Ltd and the PointMan(TM) technology.
We sought to do this through the acquisition of Selah Genomics
Inc primarily for two reasons; one tactical and the other
strategic.
Tactically the DME (Drug Metabolising Enzymes) testing was
growing and set to grow further and we believed that it would help
underpin our short to medium term growth ambitions. Strategically,
we believed, and still do more than ever, that the true value will
be evidenced by the work being undertaken at our facility in
Greenville which we believe is at the forefront of molecular
diagnostic testing in the field of personalised medicine via
next-generation sequencing (NGS) testing using both internally
developed tests and leveraging externally developed tests.
It was unfortunate that within a very short period of time after
the acquisition the local US Medicare Administrative Contractor
(MAC) withdrew reimbursement for the DME panel. We have sought
during 2014 to resolve this issue. We have explored a number of
avenues and the effort that has been expended has been at the
expense of other opportunities. We have come to the conclusion this
month that the opportunity cost to us in pursuing DME revenues
through the current channels and without the support of the MAC is
too high when compared to the more significant and credible upside
from PrecisionPath, which provides a panel of clinically validated
biomarkers that can be used to design specific personalised
treatment plans for cancer patients.
It is beholden upon me to address the key issue of reimbursement
at point of acquisition. Whilst the risk to reimbursement was
recognised in due diligence, neither ourselves nor the incumbent
management perceived the threat to be an immediate one. Given the
nature of reimbursement in the USA had we been located in another
state such as New Hampshire or Connecticut then the ability to have
continued in the execution of our plan would have gone ahead
unfettered. However, feeling sorry for oneself is likely to elicit
zero sympathy and we believe a more realistic way forward is to
work with the MAC in South Carolina to provide to their standard
the necessary clinical evidence to support the use of a DME panel
in anticipation of reimbursement becoming available again at some
stage in the future.
Thirdly, whilst not based on our experience with DME it is
clearly evident to those in the industry that health payers
worldwide cannot continue to pay for the ever burgeoning number of
new diagnostic tests and therapeutics unless clear health economic
benefits can be demonstrated not in subjective terms, but in hard
cash terms. It was against that strategic backdrop that we have
taken a minority position in the Toronto based DxEconomix whose
prime objective is to obtain value based pricing for IVD products
for its clients. Progress has been slower than I had originally
anticipated in that whilst many organisations recognise the need
they are not yet fully prepared to pay for it.
Results overview
The Group has seen strong growth during the year with revenue of
GBP40.1m (2013: GBP31.8m), an increase of 26%. This is despite the
impact of a weak dollar and the well-publicised issues in Russia,
which include a very significant currency deterioration. Revenues
would have been higher by GBP2.6m had they been translated at 2013
rates. Within this, organic growth was 6%.
Adjusted earnings before interest, tax, depreciation, and
amortisation (AEBITDA), which excludes share-based payments and
exceptional items, is our preferred measurement of income, and is
up 31% to GBP6.3m (2013: GBP4.8m).
Board
During the year Gordon Hall retired as a Director having been on
the EKF Board since 2005. Having known Gordon for over twenty years
I would like to thank him for his support both for the Company and
for me personally and I wish him well for the future.
Subsequent to Gordon's departure we strengthened the Board's
Non-Executive contingent through the appointment of Doris-Ann
Williams and David Toohey, both of whom have immense industry
knowledge and experience. Their contribution to the Board since
joining has been invaluable.
The Board's Executive contingent was strengthened through
firstly the appointment of Paul Foulger as Chief Financial Officer
- Paul has been with us from the start and it was a natural
progression for Paul to make. Secondly, Tito Bacarese-Hamilton was
appointed Chief Technology Officer. In the coming year a
considerable burden rests on Tito's shoulders as we seek to launch
a number of new products.
Regarding the passing of my baton, that will be done when the
time is right, we must absolutely deliver on our expectations this
year and restore the confidence in our shareholders for the team of
which I am part. The pursuit of a significantly more expansionist
strategy under different chairmanship cannot be contemplated until
that confidence is restored and the share price responds
accordingly.
Restructuring
During the year we moved our Quo-Test and Quo-Lab manufacturing
to Barleben and closed our Dublin facility.
In 2015 we have refined our existing divisional structure of
Point-of-Care and Molecular.
Julian Baines, whilst retaining overall Group CEO
responsibilities, has been tasked with the day-to-day running of
the Molecular Division with a primary focus of providing diagnostic
tests directed at therapeutic intervention and monitoring.
Richard Evans will assume day-to-day responsibility for the
whole of our Point of Care Division with that division being split
into four main Business Units of Hemoglobin, Diabetes, Women's
Health, and Central Laboratory.
These units will be led by highly respected Business Unit
Managers and underpinned by a strengthened Quality and Regulatory
function.
We believe this focus will bring benefits during 2015 and that
the latent value in our molecular diagnostics offering will be
realised.
Outlook
As we move into 2015 the overall outlook is positive despite
some headwinds; Russia where revenues this year are likely to be no
more than 30% of last year's due to the continued impact of
sanctions; and, the continued downward pressure on reimbursement
globally.
Despite the above and an industry which is experiencing overall
growth rates of 5% our ambitions remain to achieve double digit
growth and to be able to exploit the opportunities in front of
us.
We are under no illusion that we must deliver on sensible
expectations and that as we continue to seek to grow we must do
this in a non-dilutory fashion. As with all my years with the
Company the results are back-end weighted and 2015 appears to be no
exception to this.
We will continue to review the frequent approaches from private
equity groups as to whether this is to the benefit of Shareholders
but thus far none of the approaches represent anything more than
opportunism.
The key deliverables for 2015 are set out below
Point-of-Care
-- Further develop the hemoglobin business across the whole
spectrum of hemoglobin applications and markets using connected
solutions to open new markets in monitoring
-- Use EKF's expertise to establish lactate measurement in
peri-natal settings as a marker of maternal and neonatal
well-being
-- Continue to build on EKF's experience in very accurate
glucose measurement by introducing the Biosen instrument to new
markets, particularly in Asia and Latin America
-- Incorporate connectivity and data management in all our major
revenue-generating product lines
-- Development of the first ever POC monitoring system for patients with Phenylkenonuria (PKU)
Molecular
-- CE Marking for PointMan(TM) T790M assay
-- Reimbursement for PrecisionPath
-- Complete the development of PrecisionPath Discovery
-- Launching the initial tests for the Oncomine programme through Precision Path Discovery
-- Launch the Ferrer Incode products into Private Payer and Corporate Wellness markets
-- Transfer the manufacture of PointMan(TM) into Selah
-- Achieve ISO 13485 in the Selah facility
-- Progress the Colon cancer programme with Becton Dickinson,
DecisionQ and Greenville Health System
-- Deliver more Pharma partnerships
I am buoyed by the opportunities in front of us and in
particular the opportunities presented by PrecisionPath.
David Evans
Executive Chairman
Chief Executive's Review
During 2014 we made progress as we saw the organic growth of the
core business continue to be above the global industry average.
Additionally, we made three strategic acquisitions and although at
times challenging, these acquisitions have been quickly integrated
and have given us significant growth opportunities over the next
three years. Year-on-year we have seen continuous improvement in
both revenue and AEBITDA despite the decrease in health care
spending worldwide, reduction in re-imbursement, tighter regulatory
controls and the instability in Russia and the Middle East.
We now have a firm footing in the global Point of Care market
with over 80,000 instruments installed globally. We have seen a
large increase in the sales of our Quo-Lab and HemoControl
instruments. We are also making progress with our Molecular
Diagnostics division with the signing of contracts with
Massachusetts General Hospital, Gilupi and Angle, supporting our
belief that our PointMan(TM) product will become key to some major
new technologies, especially in the detection of circulating tumour
cells in whole blood. In addition Selah has given us a valuable
platform and relationships that will enable us to deliver
significant opportunities in the United States and beyond in
2015.
EKF Group has a lot to deliver in 2015 but those deliverables
are clear and defined as we have laid the base foundations in key
areas to deliver growth above the industry average.
Operations
Structural change
During the year we have continued to initiate a number of
significant structural changes to the business with the aim of
improving efficiency, reducing cost, and driving revenue. With
minimal disruption we successfully transferred the manufacture of
the Quo-Test and Quo-Lab product lines, including both instruments
and cartridges, into our main European production base in Barleben,
in Germany. This involved the commissioning of a new Quo-Lab
cartridge production line which was designed and built by EKF's in
house production engineering team and which has reduced the cost of
manufacture significantly. Having the ability to transfer
production and build our own automated production lines is very
rare and valuable to EKF.
Our facility in Ireland has been closed following the
termination of the building lease. While a small core project
management team will remain in place, the majority of development
projects, and the manufacture of the biomarker products have been
transferred to the Walton-on-Thames site.
With the successful transfer of production of Quo-Test and
Quo-Lab instruments and reagents cartridges to the Barleben
manufacturing site and the closure of the Dublin site, the Company
expects to benefit from operational savings in the region of
GBP0.75m annually. In addition, work has now begun on expanding the
Barleben site which will provide increased production capacity. As
production levels rise the Company expects this to have an
additional positive impact on product margins, as well as creating
further overhead efficiency opportunities. The Company will also
continue to integrate the acquisitions made in 2014 and to exploit
cross-selling initiatives and cost efficiency opportunities.
We have recently enhanced and expanded our regional structure,
including in China where we are about to open a representative
office in Shanghai. At the same time we have improved our
distributor support, introducing a Premier Partner Programme, held
our first international distributor meeting, and intend to employ a
dedicated distribution chain manager.
The strengthening of the Sales and Marketing Infrastructure by
bringing in experienced Business Unit Directors from major
diagnostic organisations demonstrates that EKF is developing a
global presence in the diagnostic industry and investment in this
area will be key to continued growth.
Acquisitions
The three acquisitions made in the first half of the year have
expanded our product line capabilities in hemotology and molecular
diagnostics.
Separation Technology, Inc. (STI) brings a successful line of
centrifugal separation products all of which are FDA 510(k)
approved. Additionally, it brings Ultracrit, an ultrasound based
hematology analyser which is being used in a number of major US
blood banks. STI has been successfully integrated and has shown
continued growth in the US market through the expanded sales
coverage via our US sales team.
DiaSpect Medical has designed a hematology instrument which is
available in both desktop and handheld formats. Both formats use
DiaSpect's patented reagentless cuvette technology, which allows
cheaper manufacture, longer shelf life and results in under two
seconds, which is particularly useful in blood banks where time to
result is critical. The DiaSpect range is sold into blood banks via
our partnership with Fresenius, the world's leading supplier of
blood bank products. We announced on 5 January 2015 that the
Company agreed to make a cash payment of GBP1.425m as final
settlement for the total deferred cash consideration due. The
original maximum deferred consideration totalled GBP4.75m.
Selah Genomics, Inc. is a US CLIA certified supplier of panels
of molecular diagnostic tests to patients who are referred by
general practitioners or by corporate health teams in the USA.
Funding is usually either through Medicare or private health
insurers. The company provides EKF with significant opportunities
through their relationships with major partners (Becton Dickenson,
Greenville Health System, DecisionQ) as well as a high quality
product range (PrecisionPath, PrecisionPath Discovery and the
Ferrer InCode products). Delivery will be the main focus for the
molecular diagnostics business in 2015.
Point-of-Care
During 2014 we focussed on improving our distribution channels
into major markets. Whilst we still have some way to go we have had
success in introducing Human, Arkray, Fresenius, Alere Japan, and
Multiclone as distributors and therefore strengthening our global
sales capabilities. The current year will be focussed on delivery.
We have a strong mix of mature and new products and with the
strengthening of the commercial team we will aim to continue to
grow at a higher rate than the industry average.
The Point-of-Care business continues to perform well, with
growth being seen across most products. In particular, QuoLab
instrument sales are up more than 30% on the previous year with the
product now registered in more countries than ever, including
Japan, which offers EKF a significant growth opportunity. QuoLab is
a glycated hemoglobin analyser used in diabetes monitoring.
Biosen instrument sales are showing an increase of more than 8%
on the previous year, mainly due to strong growth in Asia where we
have signed a multi-million Euro contract with a new partner based
in northern China. We do have significant challenges in Russia
where Biosen is the major product line; we would expect to see a
70% drop in revenues in Russia due to the reduction in healthcare
spending and the impact of the rouble. A large contract win in
China will go some way to mitigate this. Biosen is a range of
analysers which measure glucose and lactate quickly and precisely
in clinics, laboratories and sports medicine facilities.
HemoControl continues to perform well especially in Mexico and
Latin America where we have continued to win significant tenders.
The performance by Alere in the US market has been disappointing as
the growth has not been as expected but we have continued to
increase market share. The new sales infrastructure will enable us
to support Alere in continuing to grow the US market. HemoControl
is a point of care device that provides immediate, lab-quality
results for both hemoglobin and hematocrit from one simple
test.
Central Laboratory
The main product in the Central Laboratory Division,
<BETA>-HB, grew by 9%. Conversely the Central Laboratory
market is very competitive and we saw a decline overall. In 2014 we
took steps to mitigate this and in 2015 we will launch a
Procalcitonin marker for sepsis diagnosis as a new product and also
a new desktop Clinical Chemistry analyser. The Business Unit
Director will also be responsible for expanding the Clinical
Chemistry Business outside the US.
Molecular Diagnostics
Selah Genomics had a major setback in May 2014 with the
announcement that the re-imbursement for the DME panel testing was
to be significantly reduced. This led to the announcement that
revenues for 2014 would be materially lower. Whilst DME testing
continues, it will not be the focus of the management in 2015.
Alongside PointMan(TM), Selah offers a significant opportunity for
EKF over the next 3 years. In 2015 we will have a number of
deliverables as set out in the Chairman's statement above.
To deliver these we will be bringing all molecular products and
services under one corporate identity as well as introducing US and
UK industry experts to drive the molecular business which has real
potential.
In 2014 Selah contributed GBP3.0m to full year revenues. Whilst
we still face some choppy waters in the short term the change of
focus has led to increased commercial opportunities and the
potential for further significant partnerships. For example, as
mentioned earlier, we have announced a collaboration with the
Greenville Health System's ITOR facility, DecisionQ, and BD
Technologies which will use PrecisionPath as the basis of a system
that supports improved clinical decisions in the treatment of colon
cancer patients. This is one of a number of opportunities for Selah
in 2015.
The initial Selah purchase agreement was drafted to accommodate
the risk of reduced reimbursement payments via a reduction in
deferred consideration payments if certain performance targets were
not met; the lower than anticipated sales from Selah is likely to
result in the year one earn-out payment of $17.5m not being
payable. We still believe that Selah represents a significant value
opportunity to shareholders over the short to medium term if we
deliver on the above.
During 2014 the value of PointMan to the molecular industry has
become clear. PointMan significantly enhances the sensitivity of
any molecular platform, as well as working on a number of sample
types such as biopsy or liquid biopsy (whole blood), and can be
utilised in the latest technologies such as circulating tumour
cells and circulating free DNA. Additionally this has led to MGH,
Gilupi and Angle evaluating PointMan on their differing
technologies and we look forward to reporting on results in the
near future.
Our collaboration with The Institute of Life Sciences in Swansea
has shown that PointMan is effective in isolating and
characterising certain low-level DNA mutations in blood, paving the
way for the development of a simple cancer screening and diagnostic
test based on a blood sample rather than a biopsy. The data
highlighted the utility of a blood-based test and critically
demonstrated that PointMan was highly sensitive and can detect just
three mutant cells in a background of 10,000 wild type cells.
The unification of the molecular business and the progress being
made with PrecisionPath and the continued development of the
commercial offering of PointMan provides the Company with
confidence that 2015 will be a very significant year for
establishing the credentials of the EKF Molecular Diagnostics
division and a considerable generator of shareholder value.
New products
During 2014 we have introduced or entered late-stage development
of a number of new or improved product lines. These include:-
-- Senspoint, a POC lactate measuring system designed for use in peri-natal settings.
-- Enhancements to major revenue-generating product lines to
equip our customers with data-management and connectivity
capability.
-- Procalcitonin - this is a Central Laboratory Test for measuring sepsis.
-- sTNFR1/2 biomarkers that will predict fast progressors to
Chronic Kidney Disease (CKD) in both Type 1 and 2 diabetics. If
untreated CKD can lead to End Stage Renal Disease which is one of
the costliest conditions for healthcare payers. sTNFR1 has been
exclusively licenced from Joslin Diabetes Centre in Boston and is a
significant development project for EKF. EKF is working very
closely with major pharmaceutical and dialysis companies to
incorporate sTNFR1/2 as complementary diagnostics with their
therapies.
-- Inborn Errors of Metabolism - EKF is developing a POC system
for monitoring Phenyalanine levels in PKU (a rare genetic condition
that is present from birth). The company is working very closely
with a major pharmaceutical company with PKU therapies on the
market and significantly improved drugs in late development. In
PKU, Phenylalanine (an amino acid) builds up and if untreated can
lead to mental retardation, behavioural disorders, seizures and
other serious medical problems.
Results
Revenue
Revenue for the year was GBP40.1m (2013: GBP31.8m), an increase
of 26%. Overall, acquisitions contributed GBP6.5m to revenues.
Underlying organic revenues accounted for GBP33.6m of total
revenues which represented 6% organic growth year-on-year.
Gross profit
Gross profit has increased to GBP19.9m (2013: GBP16.3m), which
is an increase of 22%. Gross profit as a percentage of revenue is
49.8% (2013: 51.4%), largely as a result of the structurally lower
margins on the Selah business because of the arrangements made with
their billing and marketing partners.
Administration costs and research and development costs
Administrative expenses have increased by 59.6%. The increase
comes from the acquisitions, the additional amortisation associated
with the acquisitions, added investment in sales resources, and
from a number of exceptional items including the closure costs for
our Dublin facility, the costs of moving manufacture of the
Quo-Test and Quo-Lab products, and the costs of making the three
acquisitions in the year. In addition to the R & D costs
included in Administration costs of GBP1.3m, a further GBP1.5m of
expenditure has been capitalised.
The charge for depreciation of fixed assets and for the
amortisation of intangibles is GBP5.0m (2013: GBP3.6m).
Operating profit and adjusted earnings before interest tax and
depreciation
The Group has made an operating loss of GBP2.5m (2013: profit of
GBP2.4m) for the reasons outlined above. We consider a more
meaningful measure of underlying performance to be adjusted EBITDA
which for 2014 was GBP6.3m (2013: GBP4.8m). This excludes the
effects of share-based payments of GBP0.5m (2013: GBP0.7m) and
exceptional losses of GBP3.3m (2013: exceptional gains of
GBP1.8m).
Finance costs
Finance costs have decreased to GBP1.6m (2013:GBP 1.8m). The
decrease is largely a result of fair value adjustments associated
with the deferred shares withheld as part of the tax warranty
claim.
Tax
There is a tax charge of GBP1.4m (2013: GBP1.5m). The charge is
largely the result of the utilisation of a deferred tax asset
associated with the Quotient business, as well as unrelieved losses
made in certain jurisdictions. The effect of the potential tax
warranty claim has been reduced following negotiations between the
Group's German subsidiary, its tax advisers, and the German tax
authorities. We are hopeful this issue will be fully resolved early
in 2015. The reduced tax charge has an associated reduction of the
warranty claim, this amount has been included in exceptional
items.
Balance sheet
Property, plant and equipment
We have invested GBP1.0m (2013: GBP1.2m) in property plant and
equipment. Major projects include building work at Barleben and
additional equipment at Selah, both to increase capacity.
Intangible assets
Intangible assets have increased substantially following the
three acquisitions made in March and April, plus further
capitalisation of development costs. Following the closure of the
Group's Dublin facility, the associated goodwill and trade secret
assets, and the capitalised development cost associated with the
Renastat project of GBP1.2m, have been impaired in full.
Deferred consideration
The final payment of deferred consideration of GBP0.4m in
respect of the acquisition of Quotient Diagnostics Ltd was made
during the year. The small remaining provision has been credited to
exceptional items. The deferred consideration payable to the
vendors of DiaSpect Medical was renegotiated down to GBP1.4m and
this was paid in January 2015.
Cash and working capital
Cash used in operations in 2014 is GBP3.3m (2013: GBP3.1m
generated). Following the fund raising in April, the Group had cash
on hand at 31 December 2014 of GBP8.3m (2013: GBP2.5m), and a net
cash position of GBP2.1m (2013: GBP0.1m). Trade debtors at year end
are especially high as a result of sales to Mexico made during the
year and especially in December. Payment of some of these
outstanding amounts totalling GBP5.5m has been delayed because of
slow payments to the relevant distributors by the Mexican
Government.
Outlook
Whilst we acknowledge that 2014 was a challenging year where we
had setbacks we performed very creditably with a 26% overall growth
and we made very significant progress. It is clear what we have to
deliver in 2015 and we are very confident that this will be
achieved. In 2015 we will see a number of new products being
brought to market as well as improvements to some of our important
existing products.
The integration of Selah and EKF Molecular into one company will
reap short and medium term rewards and Selah's PrecisionPath
service, which provides a panel of clinically validated biomarkers
that can be used to design specific personalised treatment plans
for cancer patients, represents a huge opportunity for growth. This
has the potential to become a very high margin reimbursable testing
service and the Company will keep shareholders updated as this
progresses. Additionally it is clear how advantageous PointMan(TM)
will be in the next generation of molecular diagnostic testing.
We believe that this report provides shareholders with very
clear guidance on our deliverables for 2015. In addition to these
operational goals we are determined to deliver sensible financial
goals and as such have set as one of our key performance indicators
the challenge to deliver at least 10% annual organic growth
therefore outperforming our industry peers. We are convinced that
by taking a more measured approach we are putting in place all of
the factors required to become even more successful and to produce
long term sustainable double digit growth, and value for
shareholders.
Julian Baines
Chief Executive Officer
Consolidated Income Statement
2014 2013
Notes GBP'000 GBP'000
================================================ ===== ======== ========
Continuing operations
Revenue 2 40,062 31,804
Cost of sales (20,113) (15,459)
================================================ ===== ======== ========
Gross profit 19,949 16,345
Administrative expenses (22,793) (14,439)
Other income 371 495
================================================ ===== ======== ========
Operating (loss)/profit (2,473) 2,401
------------------------------------------------ ----- -------- --------
Depreciation and amortisation (4,950) (3,554)
Share-based payments (512) (709)
Exceptional items 3 (3,268) 1,840
EBITDA before exceptional items and share-based
payments 6,257 4,824
------------------------------------------------ ----- -------- --------
Finance income 4 18 5
Finance costs 4 (1,573) (1,799)
================================================ ===== ======== ========
(Loss)/profit before income tax (4,028) 607
Income tax expense 5 (1,440) (1,500)
================================================ ===== ======== ========
Loss for the year (5,468) (893)
Loss attributable to:
Owners of the parent (5,689) (1,126)
Non-controlling interest 221 233
================================================ ===== ======== ========
(5,468) (893)
------------------------------------------------ ----- -------- --------
Pence Pence
=================================================== ====== ======
Loss per Ordinary Share attributable to the owners
of the parent during the year
Basic
From continuing operations 6(1.50) (0.41)
Diluted
From continuing operations 6(1.50) (0.41)
--------------------------------------------------- ------ ------
Consolidated Statement of Comprehensive Income
2014 2013
Notes GBP'000 GBP'000
====================================== ====== ======== ========
Loss for the year (5,468) (893)
Other comprehensive income:
Movement on pension scheme 48 9
Currency translation differences 546 199
============================================== ======== ========
Other comprehensive gain for the year 594 208
============================================== ======== ========
Total comprehensive loss for the year (4,874) (685)
============================================== ======== ========
Attributable to:
Owners of the parent (4,890) (881)
Non-controlling interests 16 196
============================================== ======== ========
Total comprehensive loss for the year (4,874) (685)
============================================== ======== ========
Consolidated Statement of Financial Position
Group Group
2014 2013
GBP'000 GBP'000
============================================ ============== ========
Assets
Non-current assets
Property, plant and equipment 10,568 9,785
Intangible assets 93,522 34,725
Investments 1,152 250
Deferred tax assets 238 903
============================================= ============== ========
Total non-current assets 105,480 45,663
============================================= ============== ========
Current assets
Inventories 5,793 5,308
Trade and other receivables 16,115 7,155
Deferred tax assets 45 46
Cash and cash equivalents 8,346 2,551
============================================= ============== ========
Total current assets 30,299 15,060
============================================= ============== ========
Total assets 135,779 60,723
============================================= ============== ========
Equity attributable to owners of the parent
Share capital 4,221 2,727
Share premium account 91,276 41,783
Other reserve 41 41
Foreign currency reserves 26 (725)
Retained earnings (8,541) (3,412)
============================================= ============== ========
87,023 40,414
============================================ ============== ========
Non-controlling interest 353 508
============================================= ============== ========
Total equity 87,376 40,922
============================================= ============== ========
Liabilities
Non-current liabilities
Borrowings 2,492 2,108
Deferred consideration 9,536 5,471
Deferred tax liabilities 13,258 3,442
Retirement benefit obligation - 103
============================================= ============== ========
Total non-current liabilities 25,286 11,124
============================================= ============== ========
Current liabilities
Trade and other payables 7,943 4,189
Deferred consideration 8,493 1,778
Current income tax liabilities 2,171 1,998
Deferred tax liabilities 756 380
Borrowings 3,754 332
============================================= ============== ========
Total current liabilities 23,117 8,677
============================================= ============== ========
Total liabilities 48,403 19,801
============================================= ============== ========
Total equity and liabilities 135,779 60,723
============================================= ============== ========
Consolidated Statement of Cash Flows
Group Group
2014 2013
Notes GBP'000 GBP'000
================================================ ===== ======== ========
Cash flow from operating activities
Cash (used in)/generated by operations 9 (3,262) 3,172
Interest paid (241) (152)
Income tax paid (1,241) (1,013)
================================================ ===== ======== ========
Net cash (used in)/generated by operating
activities (4,744) 2,007
================================================ ===== ======== ========
Cash flow from investing activities
Purchase of investments (902) -
Purchase of property, plant and equipment
(PPE) (1,038) (1,185)
Purchase of intangibles (1,595) (1,097)
Purchase of subsidiaries (net of cash acquired) (12,379) -
Proceeds from sale of PPE 22 61
Interest received 18 5
================================================ ===== ======== ========
Net cash used in investing activities (15,874) (2,216)
================================================ ===== ======== ========
Cash flow from financing activities
Proceeds from issuance of Ordinary Shares 25,007 -
New bank loans 3,764 477
Repayments on borrowings (1,855) (439)
Dividend payment to non-controlling interest (171) (169)
Payment of deferred consideration (355) (1,429)
================================================ ===== ======== ========
Net cash generated by/(used in) financing
activities 26,390 (1,560)
================================================ ===== ======== ========
Net increase/(decrease) in cash and cash
equivalents 5,772 (1,769)
Cash and cash equivalents at beginning
of year 2,551 4,331
Exchange gains/(losses) on cash and cash
equivalents 23 (11)
================================================ ===== ======== ========
Cash and cash equivalents at end of year 8,346 2,551
================================================ ===== ======== ========
Consolidated Statement of Changes in Equity
Share Foreign
Share premium Other currency Retained Non-controlling Total
capital account reserve reserve earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ======== ======== ======== ========= ========= ======== =============== ========
At 1 January 2013 2,671 40,240 - (961) (3,004) 38,946 481 39,427
============================= ======== ======== ======== ========= ========= ======== =============== ========
Comprehensive income
(Loss)/profit for the year - - - - (1,126) (1,126) 233 (893)
Other comprehensive income
Actuarial gain on pension - - - - 9 9 - 9
Currency translation
differences - - - 236 - 236 (37) 199
============================= ======== ======== ======== ========= ========= ======== =============== ========
Total comprehensive income - - - 236 (1,117) (881) 196 (685)
============================= ======== ======== ======== ========= ========= ======== =============== ========
Transactions with owners
Proceeds from shares issued 56 1,543 - - - 1,599 - 1,599
Issue of convertible loan
notes
in subsidiary - - 41 - - 41 - 41
Dividends to non-controlling
interest - - - - - - (169) (169)
Share-based payments - - - - 709 709 - 709
============================= ======== ======== ======== ========= ========= ======== =============== ========
Total contributions by and
distributions to owners 56 1,543 41 - 709 2,349 (169) 2,180
============================= ======== ======== ======== ========= ========= ======== =============== ========
At 1 January 2014 2,727 41,783 41 (725) (3,412) 40,414 508 40,922
============================= ======== ======== ======== ========= ========= ======== =============== ========
Comprehensive income
(Loss)/profit for the year - - - - (5,689) (5,689) 221 (5,468)
Other comprehensive income - - - -
Movement on pension - - - - 48 48 - 48
Currency translation
differences - - - 751 - 751 (205) 546
============================= ======== ======== ======== ========= ========= ======== =============== ========
Total comprehensive income - - - 751 (5,641) (4,890) 16 (4,874)
============================= ======== ======== ======== ========= ========= ======== =============== ========
Transactions with owners
Proceeds from shares issued 1,494 49,493 - - - 50,987 - 50,987
Dividends to non-controlling
interest - - - - - - (171) (171)
Share-based payments - - - - 512 512 - 512
============================= ======== ======== ======== ========= ========= ======== =============== ========
Total contributions by and
distributions to owners 1,494 49,493 - - 512 51,499 (171) 51,328
============================= ======== ======== ======== ========= ========= ======== =============== ========
At 31 December 2014 4,221 91,276 41 26 (8,541) 87,023 353 87,376
============================= ======== ======== ======== ========= ========= ======== =============== ========
Notes to the FinaL RESULTS
for the year ended 31 December 2014
1. Basis of presentation
EKF Diagnostics Holdings Plc is a company incorporated in the
United Kingdom. The Company is a public limited company, which is
listed on the AIM market of the London Stock Exchange.
This preliminary announcement is an extract from the
consolidated financial statements of the Company for the year ended
31 December 2014 and comprises the Company and its subsidiaries.
The consolidated financial statements were authorised for issuance
on 16 March 2015. The financial information set out does not
constitute the Company's statutory accounts for the years ended 31
December 2013 or 2014 within the meaning of Section 434 of the
Companies Act 2006, but is derived from those accounts. Statutory
accounts for 2013 have been delivered to the Registrar of Companies
and those for 2014 will be delivered following the company's Annual
General Meeting. The auditors' reports on the statutory accounts
for the years ended 31 December 2013 and 31 December 2014 were
unqualified and do not contain statements under s498(2) or (3)
Companies Act 2006.
This financial information has been prepared in accordance with
the Group's accounting policies as disclosed in the financial
statements for the year ended 31 December 2013 and International
Financial Reporting Standards ("IFRSs") and International Financial
Reporting Interpretations Committee (IFRIC) interpretations as
adopted by the European Union and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
Certain statements in this announcement constitute
forward-looking statements. Any statement in this announcement that
is not a statement of historical fact including, without
limitation, those regarding the Company's future expectations,
operations, financial performance, financial condition and business
is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. These risks and uncertainties include, amongst
other factors, changing economic, financial, business or other
market conditions. These and other factors could adversely affect
the outcome and financial effects of the plans and events described
in this announcement and the Company undertakes no obligation to
update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this
announcement should be construed as a profit forecast.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs. The Company will
publish its full financial statements for the year ended 31
December 2014 by 24 April 2015, which will be available on the
Company's website at www.ekfdiagnostics.com and at the Company's
registered office at Avon House, 19 Stanwell Road Penarth CF64 2EZ.
The Annual General Meeting will be held on Tuesday 19 May 2015.
2. Segmental reporting
Management has determined the Group's operating segments based
on the monthly management reports presented to the Chief Operating
Decision Maker ('CODM'). The CODM is the Executive Directors and
the monthly management reports are used by the Group to make
strategic decisions and allocate resources.
The principal activity of the Group is the design, development,
manufacture and selling of diagnostic instruments, reagents and
certain ancillary products. This activity takes place across
various countries, such as the USA, Germany, Poland, Russia, United
Kingdom and Ireland, and as such the Board considers the business
primarily from a geographic perspective. Although not all the
segments meet the quantitative thresholds required by IFRS 8,
management has concluded that all segments should be maintained and
reported, given potential future growth of the segments. In 2015 a
new matrix structure for revenue based partly on disease states
will be introduced and this structure will be reflected in the
segmental analysis in future years.
The reportable segments derive their revenue primarily from the
manufacture and sale of medical diagnostic equipment. Other
services include the servicing and distribution of third party
company products under separate distribution agreements, and the
supply of molecular diagnostic testing services.
Currently the key operating performance measures used by the
CODM are Revenue and adjusted EBITDA.
2. Segmental reporting continued
The segment information provided to the Board for the reportable
segments for the year ended 31 December 2014 is as follows:
Germany UK USA Ireland Poland Russia Other Total
2014 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== ========= ======== ========= ======== ======== ======== ======== =========
Income statement
Revenue 15,520 2,539 24,499 373 1,770 3,162 1,738 49,601
Inter-segment (7,297) (1,848) (29) - (22) - (343) (9,539)
========================== ========= ======== ========= ======== ======== ======== ======== =========
External revenue 8,223 691 24,470 373 1,748 3,162 1,395 40,062
========================== ========= ======== ========= ======== ======== ======== ======== =========
Adjusted EBITDA* 4,460 4,746 4,579 (42) 1,079 717 (9,282) 6,257
Exceptional costs (481) (663) - (170) - - (792) (2,106)
Share-based payment - - - - - - (512) (512)
========================== ========= ======== ========= ======== ======== ======== ======== =========
EBITDA 3,979 4,083 4,579 (212) 1,079 717 (10,586) 3,639
Depreciation (609) (117) (458) (11) (35) (23) (115) (1,368)
Exceptional impairment - - - (1,162) - - - (1,162)
Amortisation (603) (624) (1,465) (229) (108) (24) (529) (3,582)
========================== ========= ======== ========= ======== ======== ======== ======== =========
Operating profit/(loss) 2,767 3,342 2,656 (1,614) 936 670 (11,230) (2,473)
Net finance costs (21) (694) (231) - 5 - (614) (1,555)
Income tax (58) (714) (687) 141 (189) (131) 198 (1,440)
========================== ========= ======== ========= ======== ======== ======== ======== =========
Profit/(loss) for the
year 2,688 1,934 1,738 (1,473) 752 539 (11,646) (5,468)
========================== ========= ======== ========= ======== ======== ======== ======== =========
Segment assets
Operating assets 26,655 21,147 92,578 1,667 956 623 20,086 163,712
Inter-segment assets (1,703) (5,469) - - - - (29,107) (36,279)
========================== ========= ======== ========= ======== ======== ======== ======== =========
External operating
assets 24,952 15,678 92,578 1,667 956 623 (9,021) 127,433
Cash and cash equivalents 1,586 378 240 86 1,037 553 4,466 8,346
========================== ========= ======== ========= ======== ======== ======== ======== =========
Total assets 26,538 16,056 92,818 1,753 1,993 1,176 (4,555) 135,779
========================== ========= ======== ========= ======== ======== ======== ======== =========
Segment liabilities
Operating liabilities 15,164 11,093 24,845 655 157 119 26,887 78,920
Inter-segment liabilities (10,665) (7,165) (18,985) - 52 - - (36,763)
========================== ========= ======== ========= ======== ======== ======== ======== =========
External operating
liabilities 4,499 3,928 5,860 655 209 119 26,887 42,157
Borrowings 441 174 2,591 - - - 3,040 6,246
========================== ========= ======== ========= ======== ======== ======== ======== =========
Total liabilities 4,940 4,102 8,451 655 209 119 29,927 48,403
-------------------------- --------- -------- --------- -------- -------- -------- -------- ---------
Other segmental information
Non-current assets
- PPE 3,685 135 4,753 14 167 59 1,755 10,568
Non-current assets
- Intangibles 13,130 11,141 55,502 759 478 173 12,339 93,522
Non-current assets
- additions 927 718 418 480 13 23 957 3,536
========================== ========= ======== ========= ======== ======== ======== ======== =========
* Adjusted EBITDA excludes exceptional items and share-based
payments.
2. Segmental reporting continued
Germany UK US Ireland Poland Russia Other Total
2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== ======== ======== ======== ======== ======== ======== ======== ========
Income statement
Revenue 13,091 3,143 17,338 389 1,241 3,900 - 39,102
Inter-segment (6,191) (1,099) - - (8) - - (7,298)
========================== ======== ======== ======== ======== ======== ======== ======== ========
External revenue 6,900 2,044 17,338 389 1,233 3,900 - 31,804
========================== ======== ======== ======== ======== ======== ======== ======== ========
Adjusted EBITDA* 3,492 (1,341) 4,576 237 418 746 (3,304) 4,824
Exceptional costs 1,575 757 258 - - - - 2,590
Share-based payment - - - - - - (709) (709)
========================== ======== ======== ======== ======== ======== ======== ======== ========
EBITDA 5,067 (584) 4,834 237 418 746 (4,013) 6,705
Depreciation (662) (180) (299) (45) (38) (15) (65) (1,304)
Exceptional impairment - - - (750) - - - (750)
Amortisation (650) (495) (728) (218) (118) (41) - (2,250)
========================== ======== ======== ======== ======== ======== ======== ======== ========
Operating profit/(loss) 3,755 (1,259) 3,807 (776) 262 690 (4,078) 2,401
Net finance costs (247) (488) (256) - (1) - (802) (1,794)
Income tax (1,115) 179 (540) 131 (36) (131) 12 (1,500)
========================== ======== ======== ======== ======== ======== ======== ======== ========
Profit/(loss) for the
year 2,393 (1,568) 3,011 (645) 225 559 (4,868) (893)
========================== ======== ======== ======== ======== ======== ======== ======== ========
Segment assets
Operating assets 16,858 14,147 21,101 2,347 1,136 1,052 26,325 82,966
Inter-segment assets (314) (43) - - - - (24,437) (24,794)
========================== ======== ======== ======== ======== ======== ======== ======== ========
External operating
assets 16,544 14,104 21,101 2,347 1,136 1,052 1,888 58,172
Cash and cash equivalents 1,123 244 42 - 256 727 159 2,551
========================== ======== ======== ======== ======== ======== ======== ======== ========
Total assets 17,667 14,348 21,143 2,347 1,392 1,779 2,047 60,723
========================== ======== ======== ======== ======== ======== ======== ======== ========
Segment liabilities
Operating liabilities 7,335 9,891 13,525 402 (126) 179 6,962 38,168
Inter-segment liabilities (4,663) (6,350) (9,981) - 187 - - (20,807)
========================== ======== ======== ======== ======== ======== ======== ======== ========
External operating
liabilities 2,672 3,541 3,544 402 61 179 6,962 17,361
Borrowings 481 166 1,789 - 4 - - 2,440
========================== ======== ======== ======== ======== ======== ======== ======== ========
Total liabilities 3,153 3,707 5,333 402 65 179 6,962 19,801
-------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Other segmental information
Non-current assets
- PPE 3,386 688 3,769 23 206 87 1,626 9,785
Non-current assets
- Intangibles 9,188 11,068 11,758 1,738 642 331 - 34,725
Non-current assets
- additions 1,034 5,851 78 394 19 77 27 7,480
========================== ======== ======== ======== ======== ======== ======== ======== ========
* Adjusted EBITDA excludes exceptional items and share-based
payments.
'Other' primarily relates to the holding company and head office
costs, and to the operations of DiaSpect which is headquartered in
Sweden.
2. Segmental reporting continued
Disclosure of Group revenues by geographic location is as
follows:
2014 2013
GBP'000 GBP'000
====================================== ======== ========
Americas
United States of America 12,711 9,873
Mexico 7,560 3,434
Rest of Americas 2,440 1,755
Europe, Middle East and Africa (EMEA)
Germany 4,848 4,002
United Kingdom 287 251
Rest of Europe 2,791 2,702
Russia 3,174 3,905
Middle East 687 763
Africa 1,315 1,114
Rest of World
China 2,304 2,050
Asia 1,892 1,913
New Zealand/Australia 53 42
====================================== ======== ========
Total revenue 40,062 31,804
====================================== ======== ========
Revenues of approximately GBP6.0m (2013: GBP2.5m) are derived
from a single external customer located in Mexico.
3. Exceptional items
Included within Administrative expenses are exceptional items as
shown below:
2014 2013
Note GBP'000 GBP'000
========================================================= ===== ======== ========
* Warranty claim a (281) 1,241
* Exceptional release of provision a - 334
- Transaction costs relating to business combinations (809) (93)
* Impairment charges - goodwill b (254) (750)
* Impairment charges - other b (908) -
* Release of deferred consideration provisions c 79 1,108
* Cost of closure and transfer of Quotient
manufacturing to Germany d (925) -
* Cost of closure and transfer of EKF Ireland to UK e (170) -
========================================================= ===== ======== ========
Exceptional items - continuing (3,268) 1,840
================================================================ ======== ========
(a) Estimated warranty claim in relation to the acquisition of
EKF-diagnostic GmbH and the release of a previously held provision
associated with the tax claim.
(b) Impairment of goodwill and other intangible assets
associated with EKF Diagnostics Limited, Ireland.
(c) Release of deferred consideration provisions associated with Quotient Diagnostics Limited.
(d) Costs associated with the move of Quo-Test and Quo-Lab
production from the UK to Germany and the closure of the
manufacturing operation in the UK. Costs include severance pay of
GBP303,000, and asset write off of GBP155,000.
(e) Costs associated with the move of Irish biomarker products
to the UK and the closure of the majority of the operations in
Ireland.
4. Finance income and costs
2014 2013
GBP'000 GBP'000
============================================================= ======== ========
Finance costs:
* Bank borrowings 290 135
* Finance lease liabilities - 6
* IAS 19 interest expense - 4
* Other interest - 212
* Financial liabilities at fair value through profit or
loss - (gains)/losses (476) 750
* Deferred consideration-unwinding of discount 1,751 685
* Convertible debt 8 7
============================================================= ======== ========
Finance costs 1,573 1,799
============================================================= ======== ========
Finance income
* Interest income on cash and short-term deposits 18 2
* Other interest - 3
============================================================= ======== ========
Finance income 18 5
============================================================= ======== ========
Net finance costs 1,555 1,794
============================================================= ======== ========
5. Income tax
2014 2013
Group GBP'000 GBP'000
================================================== ======== ========
Current tax:
Current tax on loss for the year 1,677 1,602
Adjustments for prior periods (263) 1,022
================================================== ======== ========
Total current tax 1,414 2,624
================================================== ======== ========
Deferred tax:
Origination and reversal of temporary differences 26 (701)
Adjustment arising in previous period - -
Impact of deferred tax rate change - (423)
================================================== ======== ========
Total deferred tax 26 (1,124)
================================================== ======== ========
Income tax charge 1,440 1,500
================================================== ======== ========
On 21 March 2013 the UK Government announced a reduction in the
rate of corporation tax to 21% with effect from 1 April 2014, and
to 20% with effect from 1 April 2015.
The tax on the Group's loss before tax differs from the
theoretical amount that would arise using the standard tax rate
applicable to the profits of the consolidated entities as
follows:
2014 2013
GBP'000 GBP'000
=============================================================== ======== ========
(Loss)/profit before tax (4,028) 607
=============================================================== ======== ========
Tax calculated at domestic tax rates applicable to UK standard
rate of tax of 21.5% (2013: 23.25%) (866) 141
Tax effects of:
* Expenses not deductible for tax purposes 748 398
* Losses carried forward 696 531
* Adjustment in respect of prior years (263) 1,022
* Impact of different tax rates in other jurisdictions 163 467
* Utilisation of previously unrecognised tax losses - (173)
* Effect of reduction in tax rate - (423)
* Impact of utilisation of deferred tax asset 1,079 -
* Other movements (117) (463)
=============================================================== ======== ========
Tax charge 1,440 1,500
=============================================================== ======== ========
There are no tax effects on the items in the statement of other
comprehensive income.
6. Loss per share
(a) Basic
Basic loss per share is calculated by dividing the loss
attributable to owners of the parent by the weighted average number
of Ordinary Shares in issue during the year.
2014 2013
GBP'000 GBP'000
==================================================== ============ ============
Loss attributable to owners of the parent (5,689) (1,126)
Weighted average number of Ordinary Shares in issue 379,633,724 271,695,776
==================================================== ============ ============
Basic loss per share (1.50) pence (0.41) pence
---------------------------------------------------- ------------ ------------
(b) Diluted
Diluted loss per share is calculated by adjusting the weighted
average number of Ordinary Shares outstanding assuming conversion
of all dilutive potential Ordinary Shares. The Company has two
categories of dilutive potential ordinary share: equity-based
long-term incentive plans and share options. The potential shares
are not dilutive in either 2014 or 2013 as the Group has made a
loss per share.
2014 2013
GBP'000 GBP'000
=================================================== ============ ============
Loss attributable to owners of the parent (5,689) (1,126)
Weighted average diluted number of Ordinary Shares 393,511,556 286,302,764
=================================================== ============ ============
Diluted loss per share (1.50) pence (0.41) pence
--------------------------------------------------- ------------ ------------
2014 2013
GBP'000 GBP'000
============================================================ =========== ===========
Weighted average number of Ordinary Shares in issue 379,633,724 271,695,776
Adjustment for:
* Assumed conversion of share awards 9,833,892 10,563,048
* Assumed payment of equity deferred consideration 4,043,940 4,043,940
============================================================ =========== ===========
Weighted average number of Ordinary Shares for diluted loss
per share 393,511,556 286,302,764
============================================================ =========== ===========
7. Dividends
There were no dividends paid or proposed by the Company in
either year.
8. Business combinations
Acquisition of Separation Technology Inc.
On 11 March 2014 the Group acquired, through its subsidiary
company EKF Diagnostics Inc., 100% of the share capital of
Separation Technology Inc. (STI), a US based company which
manufactures and sells devices for the haematology testing
market.
The goodwill of GBP833,000 arising from the acquisition is
attributable to the expected future benefits arising from the
acquired business.
The following table summarises the provisional fair values of
the consideration paid for STI and the amounts of the assets
acquired and liabilities assumed recognised at the acquisition
date. Acquisition related costs of GBP50,000 have been written off
against income and disclosed as an exceptional item.
Provisional
fair values
GBP'000
Consideration
Cash 2,400
2,400
-------------
Recognised amounts of identifiable assets acquired and
liabilities assumed
Trade name - included within intangibles 228
Customer relationships -included in intangibles 1,074
Trade secrets - included in intangibles 210
Plant, property and equipment 177
Cash 72
Inventories 353
Trade and other debtors 310
Trade and other payables (267)
Deferred tax (590)
-------------
Total identifiable net assets 1,567
-------------
Goodwill 833
=============
The revenue included in the consolidated statement of
comprehensive income since 11 March 2014 contributed by STI was
GBP2.1m. STI also contributed a loss of GBP0.2m after tax and
management charges over the same period.
Had STI been consolidated from 1 January 2014 the consolidated
statement of income would show pro forma revenue of GBP40.5m and
loss of GBP5.2m.
Acquisition of DiaSpect Medical AB
On 17 April 2014 the Group acquired 100% of the share capital of
Diaspect Medical AB (DiaSpect), a group based in Sweden and Germany
which manufactures and sells point-of-care hemoglobin analysers and
their associated consumables.
The goodwill of GBP9,239,000 arising from the acquisition is
attributable to the expected future benefits arising from the
acquired business.
The following table summarises the provisional fair values of
the consideration paid for DiaSpect and the amounts of the assets
acquired and liabilities assumed recognised at the acquisition
date. Acquisition related costs are disclosed below.
Provisional
fair values
GBP'000
Consideration
Cash 10,248
Equity instruments 5,555
Deferred contingent consideration 1,288
-------------
17,091
-------------
Recognised amounts of identifiable assets acquired and
liabilities assumed
Trade name - included within intangibles 840
Customer relationships -included in intangibles 4,049
Trade secrets - included in intangibles 4,140
Development costs - included in intangibles 370
Plant, property and equipment 443
Cash 39
Inventories 841
Trade and other debtors 216
Trade and other payables (633)
Borrowings (186)
Deferred tax (2,267)
Total identifiable net assets 7,852
-------------
Goodwill 9,239
=============
A revision to the deferred consideration was agreed in December
2014. A single payment of GBP1,425,000 will be made in 2015. The
amount has been discounted to take account of the time value of
money.
The revenue included in the consolidated statement of
comprehensive income since 17 April 2014 contributed by DiaSpect
was GBP1.4m. DiaSpect also contributed GBPnil after tax and
management charges over the same period.
Had Diaspect been consolidated from 1 January 2014 the
consolidated statement of income would show pro forma revenue of
GBP40.7m and loss of GBP5.4m.
Acquisition of Selah Genomics Inc.
On 17 April 2014 the Group acquired 100% of the share capital of
Selah Genomics Inc. (Selah), a US company which develops molecular
diagnostics for personalised medicine.
The goodwill of GBP20,827,000 arising from the acquisition is
attributable to the expected future benefits arising from the
acquired business.
The following table summarises the provisional fair values of
the consideration paid for Selah and the amounts of the assets
acquired and liabilities assumed recognised at the acquisition
date. Costs relating to the acquisitions of both DiaSpect and Selah
of GBP759,000 have been written off against income and disclosed as
an exceptional item. Because the acquisitions of DiaSpect and Selah
were simultaneous it is not possible to split the costs.
Provisional
fair values
GBP'000
Consideration
Equity instruments 20,425
Deferred contingent consideration 8,497
-------------
28,922
-------------
Recognised amounts of identifiable assets acquired and
liabilities assumed
Trade name - included within intangibles 1,199
Customer relationships -included in intangibles 4,549
Trade secrets - included in intangibles 12,635
PPE 578
Cash 158
Inventories 149
Trade and other debtors 628
Trade and other payables (2,978)
Borrowings (1,286)
Deferred tax (7,537)
-------------
Total identifiable net assets 8,095
-------------
Goodwill 20,827
=============
The deferred contingent consideration is payable over a period
of up to two years, and is contingent upon the achievement of
certain revenue milestones. The maximum contingent consideration
payable is $35,000,000 however the Board's judgement based on
revenue forecasts is that the deferred consideration relating to
revenue in the first year after acquisition ($17,500,000) will not
be paid and this has not been provided. The amount has been
discounted at a rate of 13.2% to take account of the time value of
money.
The revenue included in the consolidated statement of
comprehensive income since 17 April 2014 contributed by Selah was
GBP3.0m. Selah also contributed a loss of GBP0.6m after tax and
management charges over the same period.
Had Selah been consolidated from 1 January 2014 the consolidated
statement of income would show pro forma revenue of GBP41.4m and
loss of GBP5.6m.
Had all three acquisitions been consolidated from 1 January 2014
the consolidated statement of income would show pro forma revenue
of GBP42.4m and loss of GBP5.3m.
9. Cash used in operations
Group Company
================== ==================
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
======================================================= ======== ======== ======== ========
(Loss)/profit before tax (4,028) 607 (3,003) (1,458)
Adjustments for:
* Depreciation 1,368 1,304 57 51
* Amortisation 3,582 2,250 - -
* Impairment 1,229 750 1,600 583
* Warranty claim 281 (1,241) - -
* Profit on disposal of fixed assets (6) (8) - -
* Profit on disposal of available-for-sale assets - - - -
* Share-based payments 512 709 512 709
* Release of deferred consideration (79) (1,108) (79) (850)
* Fair value adjustment (476) 750 - 750
* Release of provision - (334) - -
- Exchange movements on operating activities - - (678) -
* Net finance costs/(income) 2,031 1,044 (132) 55
Changes in working capital
* Inventories 728 (298) - -
* Trade and other receivables (8,467) (1,930) (9,829) (404)
* Trade and other payables 63 677 (459) 629
======================================================= ======== ======== ======== ========
Net cash (used in)/generated by operations (3,262) 3,172 (12,011) 65
------------------------------------------------------- -------- -------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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