TIDMSUN
RNS Number : 4914H
Surgical Innovations Group PLC
13 March 2018
Surgical Innovations Group plc
("SI", "the Company" or the "Group")
Final results for the year ended 31 December 2017
Surgical Innovations Group plc (AIM: SUN), the designer,
manufacturer and distributor of innovative medical technology for
minimally invasive surgery, reports strong financial results for
the year ended 31 December 2017. The integration of Elemental
Healthcare Limited ("Elemental Healthcare"), acquired on 1 August
2017, is now completed, and the Group reports good progress in
product range development, and in new and extended distribution
relationships.
Financial Highlights:
-- Revenues up by 44% to GBP8.75m (2016: GBP6.09m)
-- Revenues from SI branded products increases by 15% to GBP5.35m (2016: GBP4.66m)
-- Underlying organic sales growth at constant currency rates of 8%
-- Gross margin improvement to 42.5% (2016: 33.8%)
-- Adjusted* operating margin up to 13.0% (2017 reported 6.8%, 2016: 8.1%)
-- Adjusted* PBT of GBP1.10m (2017 reported: GBP0.54m, 2016: GBP0.28m)
-- Adjusted* EPS of 0.19 pence (2017 reported: 0.10 pence, 2016: 0.15 pence)
-- Closing net debt of GBP0.73m (2016: net cash of GBP0.72m)
* Adjusted operating margin, PBT & EPS stated before
deduction of exceptional costs (GBP0.22m) & amortisation
relating to acquisition (GBP0.32m) and share based payment costs
(GBP0.02m).
Operational Highlights:
-- Transformational acquisition of Elemental Healthcare completed on 1 August 2017 for GBP9.4m
-- Expanded board with new commercial leadership
-- Integration programme now fully implemented
-- Overseas distribution relationships strengthened
-- YelloPort Elite launched and roll out progressing well
-- Managed transition to new UK Notified Body
-- UK distribution agreements extended and supplemented by new lines
Post Period Highlights:
-- Elemental Healthcare signed three year distribution agreement with Bariatric Solutions GmbH
-- Elemental Healthcare signed an additional three year
exclusive UK distribution agreement with Microline Surgical Inc,
Boston USA. Expected to generate revenue of an estimated GBP7m
Executive Chairman, of Surgical Innovations, Nigel Rogers,
said:
"I am pleased to report that Surgical Innovations Group plc has
again delivered strong financial results. The integration of
Elemental Healthcare into the Group has now been fully implemented,
with all commercial and marketing activity coming under the new
operation.
"Through the acquisition of Elemental Healthcare, the Group has
the exclusive UK distribution rights to a range of premium medical
devices which further complement the laparoscopic range of ports
and instrumentation within the Surgical Innovations Branded
portfolio. These products offer a wider field of use including
bariatric and metabolic surgery, breast and abdominal wall
reconstruction and abdominal hernia repair.
"The acquisition has been well received by third party
manufacturers served by Elemental Healthcare, and looking ahead
there are further opportunities to enhance the scope of our UK
distribution business.
"Total revenue for the current year to date is well ahead of the
corresponding period last year as expected. On a like-for-like
basis (adjusting for the effect of acquisition) revenue has been
adversely affected by constraints experienced in NHS hospitals in
the UK, however there are now clear signs of a return to more a
normal level of activity.
"Meanwhile, we have completed extensions to agreements with key
vendors to our UK distribution business, and our international
business has started the year on a more positive note. Accordingly,
we remain optimistic that the prospects for the year as a whole
remain consistent with our earlier expectations.
"Looking to the future, we continue to anticipate numerous
opportunities to enhance the depth and range of products we offer
through our internal development programme, and through further
corporate activity."
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No.596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
For further information please contact:
Surgical Innovations Group plc www.sigroupplc.com
Nigel Rogers, Executive Chairman Tel: 0113 230 7597
Melanie Ross, COO & CFO
WH Ireland Limited (NOMAD & Broker) Tel: 0113 394 6600
Tim Feather
Alex Bond
Walbrook PR (Financial PR & Investor Tel: 020 7933 8780 or si@walbrookpr.com
Relations)
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391 303
Chairman's Statement
I am pleased to report on a year of positive progress for
Surgical Innovations Group plc, with strong financial results and
the transformational acquisition of Elemental Healthcare Limited
providing an exciting platform for the future.
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, manufacture and source our branded port access
systems, surgical instruments and retraction devices which are sold
directly in the UK home market through 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 solution at a cost that is
competitive against fully disposable alternatives, and
significantly reduces clinical waste.
Elemental Healthcare also has exclusive UK distribution rights
to 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 to provide a broad portfolio of products, which are
either developed in-house or through partnerships and further
acquisition activity.
Financial Overview
Revenue for the year increased by 44% to GBP8.75m (2016:
GBP6.09m). Underlying organic growth at constant rates of foreign
exchange was approximately 8%, with a modest gain arising on
foreign exchange contributing approximately 3%. Revenues from SI
branded products increased by 15% to GBP5.35m (2016: GBP4.66m),
aided by the move to direct sales in the UK following the
acquisition of Elemental Healthcare. Gross margins continued to
strengthen to 42.5% (2016: 33.8%) as a consequence of enhanced
end-to-end margin on home sales and operational gearing.
The Group delivered a 55% increase in Adjusted EBITDA (stated
before exceptional costs and amortisation relating to acquisition,
and share based payment costs) to GBP2.22m (2016: GBP1.43m). The
adjusted operating margin was 13.0% (2016: 8.1%), and adjusted
profit before taxation amounted to GBP1.10m (Reported PBT:
GBP0.54m, 2016: GBP0.28m).
The net profit and total comprehensive income for the year
amounted to GBP0.63m, (2016: GBP0.72m), resulting in net earnings
per share of 0.10p (2016: 0.15p). Adjusted basic earnings per share
(being Profit after tax stated before exceptional costs and
amortisation relating to acquisition, and share based payment costs
divided by weighted average number of shares) amounted to 0.19p, an
increase of 26.7% over the prior year.
At the end of the year, the Group had net borrowings (cash
balances net of loan and financing commitments) of GBP0.73m (2016:
net cash of GBP0.72m). The Group had aggregate available borrowing
facilities of GBP3.00m, of which GBP2.50m was drawn down in
consideration of the acquisition, and remains in compliance with
all financial covenants.
Acquisition of Elemental Healthcare Limited
On 1 August 2017, we completed the acquisition of Elemental
Healthcare, a leading distributor of innovative medical products to
the NHS and UK private hospitals from its two principals, Adam
Power and David Marsh. These products span a range of specialised
clinical disciplines covering laparoscopy (including SI branded
products), bariatric and metabolic surgery, hernia repair, and
breast and abdominal wall reconstruction.
In the most recent set of published financial statements for the
year ended 31 March 2017, Elemental Healthcare reported revenues of
GBP6.5m and an adjusted operating profit of GBP1.10m (stated before
exceptional non-recurring bad debt costs and directors
remuneration).
Consideration for the transaction amounted to a gross amount of
GBP9.38m including a payment to settle a liability of the vendors.
On a net basis consideration paid was GBP9.14m including the issue
of shares to the vendors of GBP1.88m at 3p per share. The remainder
of the consideration and costs associated with the deal were
financed by an institutional placing of GBP5.50m (before costs) at
a price of 3p per share, and a new GBP3m facility with Yorkshire
Bank of five years duration.
The integration of Elemental Healthcare into the Group has now
been fully implemented, with all commercial and marketing activity
coming under the new operation, led by David Marsh and Adam Power.
A programme of meetings and visits to all major overseas
distributors has been carried out, and plans for future growth
agreed.
The acquisition has been well received by third party
manufacturers served in the UK by Elemental Healthcare. One
distribution agreement was terminated in accordance with its terms
during the final quarter of the year following the acquisition of
Novadaq Technologies, Inc by Stryker Corporation. Following
termination, Elemental Healthcare has received payment in lieu of
notice which is sufficient to compensate for the effect of any
profit foregone to the end of 2018. Since the end of the year, a
new three year agreement has been signed with Bariatric Solutions
GmbH for the exclusive UK distribution of devices for the the
treatment of obesity, and a three year extension has been signed
with Microline Surgical Inc. for the exclusive UK distribution of a
complementary range of instruments for minimally invasive
surgery.
Current trading and outlook
Total revenue for the current year to date is well ahead of the
corresponding period last year as expected, although on a
like-for-like basis (adjusting for the effect of acquisition)
revenue has been affected by constraints experienced in NHS
hospitals in the UK. It was widely reported during January that
winter illnesses caused most UK hospitals to reach abnormally high
capacity levels, resulting in the cancellation of many elective
surgical procedures. There are now clear signs of a return to a
more normal level of activity, however we have experienced some
modest headwinds in the first quarter.
Meanwhile, there are further opportunities to enhance the scope
of our UK distribution business, and our international business has
started the year on a more positive note. Accordingly, we remain
optimistic that the prospects for the year as a whole remain
consistent with our earlier expectations.
Looking to the future, we continue to anticipate numerous
opportunities to enhance the depth and range of products we offer
through our internal development programme, and through further
corporate activity.
Nigel Rogers
Executive Chairman
12 March 2018
Operating and Financial Review
Overview
Following the acquisition of Elemental Healthcare on 1 August
2017, Group sales grew 44% to GBP8.75m (2016: GBP6.09m) and
adjusted EBITDA increased 55% to GBP2.22m (2016: GBP1.43m) with
GBP1.73m of that being on a like-for-like basis.
Profit before tax, amortisation of intangible assets created on
the acquisition of Elemental Healthcare, exceptional items and
share based payments ("adjusted profit before tax") increased 266%
to GBP1.10m (2016: GBP0.30m). On the same basis, diluted EPS
increased 26.7% to 0.19p (2016: 0.15p).
The acquisition of Elemental Healthcare was partly financed
through a new GBP2.5m term loan of which GBP2.42m remained
outstanding at the year end and the Company had available cash
resources of GBP1.71m (2016: GBP0.78m). Leverage at 31 December
2017 was comfortably below the bank covenant of two times adjusted
EBITDA at 1.11.
Revenue
Revenue increased 44% to GBP8.75m (2016: GBP6.09m). The
acquisition of Elemental Healthcare delivered GBP2.49m of sales
representing 23% of the total group turnover (after intercompany
sales elimination) with the remaining portfolio of SI Branded
product and OEM sales performing strongly and delivering a sales
increase of 11% to GBP6.73m (2016: GBP6.09m). Through the new board
appointments, the Group has restructured its commercial activities
to best utilise the commercial skills of the new directors.
GBPm 2017 2016 % change
============== ==== ==== ========
SI Brand 5.35 4.66 +15%
============== ==== ==== ========
Distribution 1.80 - -
============== ==== ==== ========
OEM* 1.60 1.43 12%
============== ==== ==== ========
Total 8.75 6.09 +44%
============== ==== ==== ========
*PE has been incorporated into OEM
Surgical Innovations branded sales performed strongly in the
year with like-for-like growth of 10%. The strongest area of growth
was in the UK home market with sales up 39% to GBP1.16m (2016:
GBP0.84m). Europe also performed strongly and the US achieved
growth of 6% in the year.
Through the acquisition of Elemental Healthcare, the Group now
also has the exclusive distribution rights to a range of premium
medical devices which further complement the laparoscopic range of
ports and instrumentation within the Surgical Innovations Branded
portfolio. These products offer a wider field of use including
bariatric and metabolic surgery, breast and abdominal wall
reconstruction and abdominal hernia repair.
OEM (including Precision Engineering) grew strongly in the year
to GBP1.60m (2016: GBP1.43m), particularly with our partners in the
US for whom we manufacture device components, typically valves or
instrumentation. Sales of the Fix8 device for Advanced Medical
Solutions Group plc continued to grow year on year, despite end
user sales being restricted due to product enhancing design
modifications currently being made to the existing product. The
Group undertook two further Precision Engineering projects in the
period with the second project expected to complete in HY1
2018.
Group sales were enhanced by approximately GBP0.15m due to
movements in foreign exchange in the year, predominantly US dollar,
although the effect on operating profit was largely offset by the
effect of some purchases denominated in both Euros and US dollars.
The exposure to foreign exchange movements has altered following
acquisition due to Elemental Healthcare making purchases in both US
Dollars and Euros, as well as sterling. It is expected that a
natural hedge will occur for US Dollar sales and purchases and the
Group has made steps to move European distributors of SI branded
products to Euro price lists in Q2 2018 to offset the Euro mismatch
risk.
Adjusted EBITDA
The adjusted EBITDA is a key performance measure of the
business. The Group uses this as a proxy for understanding the
underlying performance of the Group. This measure also excludes the
items that distorts comparability.
Adjusted EBITDA increased 55% to GBP2.22m (2016: GBP1.43m) as
the impact of 44% revenue growth and a 8.7% uplift in gross margin
was partially offset by increases in operating costs. Operating
profit increased to GBP0.58m (2016: GBP0.47m), increasing adjusted
operating margin (before deduction of exceptionals and amortisation
relating to acquisition and share based payments) to 13.0% (2016:
8.1%)
Gross margin improved to 42.5% in the year as like-for-like
business continued to show improvements on the prior year,
primarily through increased manufacturing recoveries. Following the
acquisition, the addition of the Elemental Healthcare sales for the
latter five months of the year also improved the overall
margin.
Excluding exceptional items in the year, operating expenses
increased to GBP2.62m with the inclusion of the sales and
administration costs associated with Elemental Healthcare. On a
like-for-like basis, operating costs would have been GBP1.91m
(2016: GBP1.59m), resulting from a decrease in capitalised R&D
expense (as more time was allocated to regulatory compliance in the
year), an increased amortisation charge as a full year of costs
associated with Yelloport Elite were included and headcount
additions in R&D and Quality.
Following several months of preparation and review the Group
successfully completed its transition over to a new regulatory
notified body in March 2018.
Capitalised development costs at 31 December 2017 had decreased
to GBP1.45m (2016: GBP1.60m). Research and development expenditure
continues to be incurred, and a portion has been capitalised in
respect of specifically identifiable products amounting to GBP0.38m
(2016: GBP0.44m). These products are due for launch in the current
year.
Capital expenditure on tangible assets continued to reflect a
policy of required replacement only during the year at GBP0.25m
(2016: GBP0.26m) and there are no major capex plans currently under
consideration.
Interest on bank and finance lease obligations for 2017 resulted
in interest payable of GBP0.04m (2016: GBP0.19m). As the
acquisition of Elemental Healthcare was partly debt funded, it is
expected that finance costs will increase in 2018, partially offset
by interest on positive cash balances.
There were GBP1.29m of intangible assets created on the
acquisition of Elemental Healthcare relating to the supplier base,
which will be fully amortised by 2020 with the charges in the year
being:
Year GBP000's
----- ---------
2017 GBP327
----- ---------
2018 GBP446
----- ---------
2019 GBP351
----- ---------
2020 GBP163
----- ---------
Goodwill of GBP8.59m has been recognised in the accounts which
will be subject to an impairment review annually.
The group recorded a corporation tax charge of GBP0.08m (2016:
credit of GBP0.44m) and a deferred tax credit of GBP0.12m (2016:
GBPnil) The tax charge represents tax on Elemental Healthcare
activities relating to post integration trading but overall the
group continues to hold substantial tax losses on which it holds a
cautious view. The Group have chosen not to recognise those losses
fully. During the year the Group submitted enhanced Research and
Development claims in respect of 2016, electing to exchange tax
losses for cash refunds. This claim had not been settled by year
end and so no refund was recognised in the accounts. This claim is
expected to be significantly less that the claims recognised in
2016 of GBP0.44m which related to 2014 and 2015 due to the
difference is available losses to exchange in the comparative
periods.
The buildup of trade payables and trade receivables in 2017 were
as a result of the acquisition of Elemental Healthcare. Trade
receivables increased to GBP1.61m (2016: 1.10m) and payables to
GBP1.58m (2016: GBP0.34m). Inventory increased to GBP2.47m (2016:
GBP1.50m) in part due to the additional inventory relating to the
acquisition but also as a strategic stock build of new products to
satisfy ongoing demand. This mainly related to the Yelloport Elite
range of products.
The Group generated cash from operations of GBP1.61m (2016:
GBP2.40m) primarily as a result of the working capital movements
described above. Cash used in investment was GBP8.34m (2016:
GBP0.78m) resulting in a cash outflow before financing of GBP6.73m
(2016: inflow of GBP2.00m).
The consideration for Elemental Healthcare was a gross amount of
GBP9.38m including an amount payable to settle a liability of the
vendors. The net consideration was. GBP9.14m. This was funded by
proceeds from the issues of new ordinary shares of GBP5m, new term
loans of GBP2.5m and the issue of GBP1.88m of shares in the company
to the vendors.
Principal risks and uncertainties
All principal risks and uncertainties are on page 10 in the
Director's report
Key performance indicators
The group uses several financial measures as key performance
indicators of which Adjusted EBITDA is considered to be the key
measure as discussed above.
Melanie Ross
Chief Finance Officer
12 March 2018
Consolidated statement of comprehensive income
for the year ended 31 December 2017
2017 2016
Notes GBP'000 GBP'000
----------------------------------------------- ----- --------------- -----------------
Revenue 2 8,752 6,089
Cost of sales (5,033) (4,029)
=============================================== ===== =============== =================
Gross profit 3,719 2,060
Other operating expenses (3,163) (1,591)
Other Income 25 -
Adjusted EBITDA 2,221 1,431
Amortisation of intangible assets (850) (429)
Depreciation of tangible assets (556) (510)
Exceptional items (216) -
Share based payments (18) (23)
----------------------------------------------- ----- --------------- -----------------
Operating profit 581 469
Finance costs (39) (192)
Finance income - 1
=============================================== ===== =============== =================
Profit before taxation 542 278
Taxation credit 84 438
=============================================== ===== =============== =================
Profit and total comprehensive income 626 716
=============================================== ===== =============== =================
Earnings per share, total and continuing
Basic 3 0.10p 0.15p
Diluted 3 0.10p 0.15p
The Consolidated statement of comprehensive income above relates to
continuing operations.
Adjusted EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, share based payments and
exceptional items.
Consolidated statement of changes in equity
for the year ended 31 December 2017
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 2016 4,863 1,641 329 - (2,903) 3,930
Employee share-based payment options - - - - 23 23
Issue of share capital 471 698 - - - 1,169
------- ------- -------- -------- -------
Total - transactions with owners 471 698 - - 23 1,192
Profit and total comprehensive income for the period - - - - 716 716
----------------------------------------------------- ------- ------- ------- -------- -------- -------
Balance as at 31 December 2016 5,334 2,339 329 - (2,164) 5,838
Employee share-based payment - - - - 18 18
Issue of share capital 2,492 3,717 - 1,250 - 7,459
Attributable costs for issue of Equity - (225) - - - (225)
----------------------------------------------------- ------- ------- ------- -------- -------- -------
Total - transactions with owners 2,492 3,492 - 1,250 18 7,252
Profit and total comprehensive income for the period - - - - 626 626
----------------------------------------------------- ------- ------- ------- -------- -------- -------
Balance as at 31 December 2017 7,826 5,831 329 1,250 (1,520) 13,716
----------------------------------------------------- ------- ------- ------- -------- -------- -------
Consolidated balance sheet
at 31 December 2017
2017 2016
GBP'000 GBP'000
==================================================== ============= =============
Assets
Non-current assets
Property, plant and equipment 1,328 1,579
Intangible assets 11,009 1,597
Deferred tax asset 62 -
12,399 3,176
==================================================== ============= =============
Current assets
Inventories 2,467 1,496
Trade receivables and other current assets 1,964 1,387
Cash at bank and in hand 1,709 775
==================================================== ============= =============
6,140 3,658
==================================================== ============= =============
Total assets 18,539 6,834
==================================================== ============= =============
Equity and liabilities
Equity attributable to equity holders of the parent
company
Share capital 7,826 5,334
Share premium account 5,831 2,339
Capital reserve 329 329
Merger reserve 1,250 -
Retained earnings (1,520) (2,164)
==================================================== ============= =============
Total equity 13,716 5,838
==================================================== ============= =============
Non-current liabilities
Borrowings 2,125 -
Obligations under finance leases - 8
Deferred tax liabilities 183 -
==================================================== ============= =============
2,308 8
==================================================== ============= =============
Current liabilities
Trade and other payables 1,580 337
Obligations under finance leases 16 45
Accruals 619 606
Borrowings 300 -
==================================================== ============= =============
2,515 988
==================================================== ============= =============
Total liabilities 4,823 996
==================================================== ============= =============
Total equity and liabilities 18,539 6,834
==================================================== ============= =============
Consolidated cash flow statement
for the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
--------------------------------------------------- -------------------- ---------------
Cash flows from operating activities
Profit after tax for the year 626 716
Adjustments for:
Taxation (84) (438)
Finance income - (1)
Finance costs 39 192
Non-cash exceptional items 8 -
Depreciation of property, plant and equipment 556 510
Amortisation and impairment of intangible assets 850 429
Share-based payment charge 18 23
Grant income - (10)
Foreign exchange 29 65
Equity share options issued (32) -
(Increase) / decrease in inventories (238) 797
Decrease in current receivables 263 178
Increase / (decrease) in payables (131) (61)
--------------------------------------------------- -------------------- ---------------
Cash generated from operations 1,904 2,400
Taxation (paid) / received (206) 531
Interest paid (90) (86)
--------------------------------------------------- -------------------- ---------------
Net cash generated from operating activities 1,608 2,845
--------------------------------------------------- -------------------- ---------------
Cash flows from investing activities
Payments to acquire property, plant and equipment (250) (161)
Acquisition of intangible assets (381) (440)
Consideration for Surgical Dynamics assets
and laparascopic business (144) (182)
Acquisition of Elemental Healthcare net of (7,135) -
cash acquired
Deal costs (431) -
--------------------------------------------------- -------------------- ---------------
Net cash used in investment activities (8,341) (783)
New bank borrowings 2,500 -
Repayment of bank loan (75) (2,000)
Net proceeds from issue of share capital 5,307 -
Repayment of obligations under finance leases (36) (198)
--------------------------------------------------- -------------------- ---------------
Net cash generated from/ (used in) financing
activities 7,696 (2,198)
--------------------------------------------------- -------------------- ---------------
Net increase / (decrease) in cash and cash
equivalents 963 (136)
Cash and cash equivalents at beginning of year 775 976
Effective exchange rate fluctuations on cash
held (29) (65)
--------------------------------------------------- -------------------- ---------------
Cash and cash equivalents at end of year 1,709 775
=================================================== ==================== ===============
Notes to the consolidated financial statements
1. Group accounting policies under IFRS
Basis of preparation
Surgical Innovations Group PLC (the "Company") is a public AIM
quoted company incorporated, domiciled and registered in England in
the UK. The registered number is 2298163 and the registered address
is Clayton wood house, 6 Clayton wood bank, Leeds, LS16 6QZ.
The consolidated financial statements of the group have been
prepared on the basis of the International Financial Reporting
Standards (IFRS) accounting policies set out below. The financial
statements have been prepared in accordance with IFRS as adopted
for use by the European Union, including IFRIC interpretations, and
in line with those provisions of the Companies Act 2006 applicable
to companies reporting under IFRS. 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.
The financial information set out in this preliminary
announcement does not constitute the Company's Consolidated
Financial Statements for the financial years ended 31 December 2017
or 31 December 2016 but are derived from those Financial
Statements. Statutory Financial Statements for 2016 have been
delivered to the Registrar of Companies and those for 2017 will be
delivered following the company's AGM. The auditors, BDO LLP, have
reported on those financial statements. Their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under Section 498(2) or (3) of the Companies Act 2006 in
respect of the financial statements for 2016 or 2017.
The Statutory accounts will be available on the Company's
website at www.siggroupplc.com with effect from 14 March 2018 and
will be posted to selected shareholders at the end of April.
Shareholders wishing to request a copy can contact the Company's
registered office
The Directors have considered the available cash resources of
the Group and its current forecasts and are satisfied that the
Group has adequate resources to continue in operational existence
and that there are no material uncertainties casting doubt over the
going concern status of the Group. Accordingly, the financial
statements are prepared on a going concern basis.
2. Segmental Reporting
Geographical analysis of revenues
2017 2016
GBP'000 GBP'000
United Kingdom 4,337 1,920
Europe 1,527 1,287
US 2,066 1,876
Rest of World 822 1,006
----------------------------------- ------- --------------
8,752 6,089
----------------------------------- ------- --------------
Revenues are allocated geographically on the basis of where
revenues were received from and not from the ultimate final
destination of use. During 2017 GBP1,238,000 (14.1%) of the
Group's revenue depended on one distributor in the SI Brand segment
(2016: GBP1,235,000 (20.3%)).
UK revenue of GBP4,337,000 relates to SI Branded products of
GBP2,535,000 (58.5%) and Distribution of GBP1,802,000 (42.5%).
Sales of goods were GBP8,560,000 (2016: GBP5,863,000) and sales
relating to services in the UK were GBP192,000. (2016:
GBP206,000)
3. Earnings per ordinary share
Basic earnings per ordinary share
The calculation of basic earnings per ordinary share for the
year ended 31 December 2017 was based upon the profit attributable
to ordinary shareholders of GBP626,000 (2016: GBP716,000) and a
weighted average number of ordinary shares outstanding for the year
ended 31 December 2017 of 637,570,475 (2016: 487,924,227).
Diluted earnings per ordinary share
The calculation of diluted earnings per ordinary share for the
year ended 31 December 2017 was based upon the profit attributable
to ordinary shareholders of GBP626,000 (2016: GBP716,000) and a
weighted average number of ordinary shares outstanding for the year
ended 31 December 2017 of 662,157,725 (2016: 494,001,073).
Adjusted earnings per ordinary share
The calculation of adjusted earnings per ordinary share for the
year ended 31 December 2017 was based upon the adjusted profit
attributable to ordinary shareholders (profit before exceptional
and amortisation costs relating to the acquisition of Elemental
Healthcare and share based payments) of GBP1,187,000 (2016:
GBP739,000) and a weighted average number of ordinary shares
outstanding for the year ended 31 December 2017 of 637,570,475
(2016: 487,924,227).
No. of shares used in calculation of earnings 2017 2016
per ordinary share ('000s) No. of Shares No. of Shares
Basic earnings per share 637,570 487,924
Dilutive effect of unexercised share options 24,588 6,077
============================================== ====================== ===========================
Diluted earnings per share 662,158 494,001
============================================== ====================== ===========================
4. Net cash/borrowings
2017 2016
GBP'000 GBP'000
---------------------------------- -------- --------
Bank Loan 2,425 -
Obligations under finance leases 16 53
Less: cash and cash equivalents (1,709) (775)
---------------------------------- -------- --------
Net (cash)/debt 732 (722)
Total equity 13,716 5,838
---------------------------------- -------- --------
Total capital 14,448 5,116
---------------------------------- -------- --------
Bank loan
The sterling bank loan provided by Yorkshire Bank on 1 August
2017 for a five year term was split into two loan agreements A and
B. Loan A of GBP1.5m is subject to quarterly payments of GBP0.075m
commencing on 31 October 2017, totaling repayments GBP0.3m per
annum at an interest rate of LIBOR plus 3% per annum. Loan B of
GBP1m is interest only at a rate of LIBOR plus 3.5% per annum with
a repayment in full by the termination date of 31 July 2022. On the
31 December 2017 the remaining balance of the term loans was
GBP2.425m. The bank has made available a Revolving Credit Facility
(RCF) of up to GBP0.5m for working capital and other purposes.
The RCF and loan agreements are subject to compliance with
financial covenants which measure cash flow to debt service and
EBITDA, interest cover and leverage. If the RCF is drawdown the
rate of interest applicable to each loan for its interest period
will be LIBOR plus 2.8% per annum and it will be secured by a fixed
and floating charge over the assets of the Group. At the 31
December 2017, no amount was drawn down.
5. Acquisition
On the 1st August 2017, the Group acquired 100% of the equity of
Elemental Healthcare for a total investment of GBP9,375,000. The
main reason for the acquisition was to add a direct route to market
in the UK, as well as a range of complementary devices and
instrumentation which Elemental Healthcare have exclusive
distribution rights to. The acquisition was also earnings enhancing
with the business being profitable and cash generative.
Book values were not adjusted for fair value changes apart from
a separable intangible asset (Exclusive supplier contracts) and its
associated deferred tax being identified and valued. Details of the
fair value of the identifiable assets acquired, purchase
consideration and goodwill of Elemental Healthcare are as
follows:
Assets acquired from Elemental Healthcare: Provisional Fair
Value on acquisition
GBP'000
---------------------------------------------------------- ----------------------
Exclusive supplier contracts 1,287
Property, plant & Equipment 55
Inventory 544
Trade debtors 366
Other debtors, prepayments and accrued income 95
Cash in hand 130
Trade creditors (758)
Corp tax (29)
Other creditors, taxes & social security (387)
Accruals (41)
Deferred tax liability (245)
---------------------------------------------------------- ----------------------
FV identifiable assets 1,017
---------------------------------------------------------- ----------------------
Goodwill recognised 8,594
---------------------------------------------------------- ----------------------
Acquisition-date fair value of the total consideration
transferred 9,139
---------------------------------------------------------- ----------------------
Representing:
---------------------------------------------------------- ----------------------
Cash 7,264
Shares issued 1,875
---------------------------------------------------------- ----------------------
9,139
---------------------------------------------------------- ----------------------
Acquisition costs expensed to profit or loss 216
---------------------------------------------------------- ----------------------
Acquisition costs expensed to share premium attributable
to equity 225
---------------------------------------------------------- ----------------------
Total Acquisition costs 441
---------------------------------------------------------- ----------------------
Out of the GBP441,000, GBP431,000 was paid by the year ending 31
December 2017.
The acquired business contributed revenues of GBP2.49m and
profit after tax of GBP0.4m to the group for the year to 31
December 2017.
The goodwill represents substantial synergies and cross selling
opportunities for combining the business to the Group, as well as
the inherent value of the assembled workforce.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFFSEDFASEFD
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March 13, 2018 03:01 ET (07:01 GMT)
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