TIDMSUN
RNS Number : 5254M
Surgical Innovations Group PLC
17 September 2019
Surgical Innovations Group plc
("SI" or the "Group")
Half-year Report
Interim results for the six months ended 30 June 2019
Surgical Innovations Group plc (AIM: SUN), the designer,
manufacturer and distributor of innovative medical technology for
minimally invasive surgery, reports its unaudited financial results
for the six-month period ended 30 June 2019.
Financial highlights:
-- Revenues of GBP5.10m (2018H1: GBP5.28m)
-- Gross margin up by 4.1% to 43.1% (2018H1: 39.0%)
-- Adjusted EBITDA* of GBP0.65m (2018H1: GBP0.93m)
-- Adjusted operating profit* of GBP0.22m (2018H1: GBP0.42m)
-- Adjusted earnings per share of 0.02p (2018H1: 0.05p)
-- Net cash at end of period of GBP0.34m (31 Dec 2018: GBP0.38m)
* Adjusted EBITDA and Adjusted operating profit are stated
before deducting non-recurring exceptional costs of GBP0.18m
(2018H1: GBPnil),
amortisation of intangible acquisition costs of GBP0.18m
(2018H1: GBP0.22m) and share based payment costs of GBP0.10m
(2018H1: GBP0.06m).
The results reflect a difficult trading environment, which has
been adversely affected by constraints in UK health spending and
widespread uncertainty. We have continued to invest in people and
product development, gained in market share, and ensured that the
business is well placed to benefit from an upturn.
As explained in the 7 June 2019 trading update, the year began
positively but this momentum was not carried into the second
quarter as orders in the UK and Europe were lower than expected.
Revenues in the US and key Asian markets continued to show expected
levels of growth, as did those to our major OEM partners. Overall,
the Group has made gains in market share and generated increased
gross margins, demonstrating that our product range offers
attractive benefits to end user customers.
Following David Marsh becoming Chief Executive in March, we have
further strengthened the executive team, including the recruitment
of senior managers with functional responsibility for Operations
and Compliance. The additional investment and overhead directed
towards new product development and quality assurance will continue
to strengthen our ability to navigate the complex regulatory
environment as we move towards MDR in coming months.
Our commitment to further expanding the product portfolio, and
our close association with the surgical community and partner
organisations worldwide, will continue to provide us with
opportunities for both organic growth and further M&A
activity.
The headwinds faced since the end of the first quarter of the
year are unlikely to abate in the short term, and we anticipate
that the UK and EU markets will continue to be challenging. We
expect to deliver continuing success in the US market, working
closely with our distribution partners to further increase market
share and with the launch of YelloPort Elite(R). The Board has
reassessed its outlook for the rest of the financial year based on
the continuing challenging market conditions and reduced revenue
expectations, anticipating relatively modest growth in the second
half of 2019 compared to the first half. These trading conditions
are primarily driven by what we believe are temporary factors, and
we are more optimistic beyond the present political uncertainty
that NHS funding and activity levels will rise in response to
growing pent up demand.
As a result of the reduced revenues, the Board also anticipates
that adjusted operating profits will show an increase in the second
half of the year, albeit significantly lower than previously
expected and the business will continue to be cash generative.
Chairman of SI, Nigel Rogers, said:
"We have continued to adapt to challenging circumstances, which
are both industry-wide and transitory in nature. Whilst trading
conditions in the short term are very disappointing, the investment
made in people and products position us well to take advantage of
market opportunities. Our executive team has been strengthened, and
has the drive, expertise and experience to achieve future
success."
For further information please contact:
Surgical Innovations Group Plc www.sigroupplc.com
David Marsh, CEO Tel: +44 (0)113 230 7597
Charmaine Day, Co Sec & GFC
Walbrook PR (Financial PR & Investor Tel: +44 (0)20 7933 8780 or si@walbrookpr.com
Relations)
Paul McManus / Lianne Cawthorne Mob: +44 (0)7980 541 893 / +44 (0)7584
391 303
N+1 Singer (NOMAD &Broker) +44 (0)20 7496 3000
Richard Lindley / Rachel Hayes
About Surgical Innovations Group plc
Strategy
The Group specialises in the design, manufacture, sale and
distribution of innovative, high quality medical products,
primarily for use in minimally invasive surgery. Our product and
business development is guided and supported by a key group of
nationally and internationally renowned surgeons across the
spectrum of minimally invasive surgical activity.
We design and manufacture and source our branded port access
systems, surgical instruments and retraction devices which are sold
directly in the UK home market through our subsidiary, Elemental
Healthcare, and exported widely through a global network of trusted
distribution partners. Many of our products in this field are based
on a "resposable" concept, in which the products are part
re-usable, part disposable, offering a high quality and
environmentally responsible solution at a cost that is competitive
against fully disposable alternatives.
Elemental also has exclusive UK distribution for a select group
of specialist products employed in laparoscopy, bariatric and
metabolic surgery, hernia repair and breast reconstruction.
In addition, we design and develop medical devices for carefully
selected OEM partners, and have also collaborated with a major UK
industrial partner to provide precision engineering solutions to
complex problems outside the medical arena.
We aim for our brands to be recognised and respected by
healthcare professionals in all major geographical markets in which
we operate and provide by development, partnership or acquisition a
broad portfolio of cost effective, procedure specific surgical
instruments and implantable devices that offer reliable solutions
to genuine clinical needs in the operating theatre environment.
Operations
The Group currently employs approximately 100 people across two
sites in the UK. Product design, engineering and manufacturing are
carried out at the SI site in Yorkshire. Commercial activities
including marketing, UK distribution and international sales and
marketing are based at Elemental Healthcare in Berkshire.
Elemental Healthcare was acquired by the Group on 1 August 2017,
providing direct sales representation in the UK home market and a
range of distribution products.
Further information
Further details of the Group's businesses are available on
websites:
www.sigroupplc.com
www.surginno.com, and
www.elementalhealthcare.co.uk
Investors and others can register to receive regular updates by
email at si@walbrookpr.com
Surgical Innovations Group plc
Chairman's Statement
For the six-month period ended 30 June 2019
These results for the six months ended 30 June 2019 reflect a
robust response to a difficult trading environment, which has been
adversely affected by constraints in UK health spending and broader
political uncertainty. We have continued to invest in people and
product development, gained in market share, and ensured that the
business is well placed to benefit from an upturn.
Financial Overview
Revenues were marginally below the corresponding period last
year at GBP5.10m (2018H1: GBP5.28m). As explained in the 7 June
trading update, trading in the UK and European markets were
challenging, although this weakness was partially offset by growth
in the US and APAC regions.
Revenues from SI branded products were GBP2.61m (2018H1:
GBP2.81m), and UK distribution sales were GBP1.49m (2018H1:
GBP1.50m). The British Medical Association continue to report high
levels of cancellations of elective surgical procedures, and the
number of patients awaiting treatment has risen to near record
levels. This has been exacerbated by surgeons working restricted
hours due to the effect of capping tax relief on their pension
contribution, although individual NHS trusts and central government
have committed to find solutions to this issue. We continue to win
new business having converted a number of major key hospitals who
recognise both the environmental and cost benefits of our products.
This leads us to believe that our UK market share is increasing,
leaving us well positioned to benefit from a return to more normal
levels of activity.
Revenues in Europe were also slightly below the level achieved
last year at GBP0.65m (2018H1: GBP0.79m). Forward visibility of end
user demand has been somewhat obscured by the effects of inventory
management surrounding Brexit. Whilst the outcome and duration of
this uncertainty is ongoing, it is not expected to have any lasting
effect on prospects. A return to growth in European markets depends
to a greater extent on extending the product range to provide
direct alternatives to the single use plastic products which tend
to be in wider use. There are relevant products in the development
pipeline, and we are actively evaluating a broad range of
strategies to reduce the time to market of new products.
Revenues from the US in the first half increased to GBP0.85m
(2018H1: GBP0.79m) as a result of further market share gains with
surgical instruments. We anticipate that this will continue in the
second half of the year and beyond, and will be enhanced by the
launch of the YelloPort Elite(R) range of port access devices in
the fourth quarter.
The APAC region generated strong revenue growth based on the
close relationship with our key partners, especially in Japan, and
we expect this to continue in the second half of the year. The Rest
of the World (ROW) saw a reduction in revenue as a consequence of
the phasing of large tender orders and these are expected to be
secured in the next few months.
OEM revenues increased to GBP1.01m (2018H1: GBP0.98m). Within
this segment, revenues from the manufacture of Liquiband Fix-8
devices returned to growth following product design changes, and we
supplied further production units of test rigs for aero engines. We
continue to benefit from strong relationships with our key OEM
partners and anticipate continued success in this area.
Gross margins improved further to 43.1% of revenues (2018H1:
39.0%) due to manufacturing efficiencies. Other operating expenses
increased by GBP0.36m to GBP2.44m as additional resources were
deployed in operations and regulatory assurance. Adjusted operating
profit (before exceptional and acquisition related costs and share
based payment charges) for the period was GBP0.22m (2018H1:
GBP0.42m). The reported net loss before taxation amounted to
GBP0.33m against a net profit before taxation of GBP0.09m in the
corresponding period last year.
The Group reported a tax credit in the period of GBP0.03m
(2018H1: credit of GBP0.04m) which in the prior year related to
claims for enhanced Research and Development. The Group has
substantial corporation tax losses and continues to review the
extent to which a deferred tax asset should be recognized based on
the estimated future taxable profits of the Group.
Adjusted Net Earnings Per Share amounted to 0.02p (2018H1:
earnings of 0.05p). The net total comprehensive income for the
period amounted to a loss of GBP0.30m (2018H1: profit of
GBP0.13m).
Net investment in working capital increased slightly to GBP3.13m
(31 December 2018: GBP2.93m), mainly as a result of increased
inventories in relation to Brexit, and such contingency planning
remains in place. At the end of the period, the Group had available
cash at bank of GBP2.30m. Total net cash resources, taking into
account bank loans outstanding, amounted at GBP0.34m (31 December
2018: GBP0.38m).
Management
During the period, we have strengthened the management team and
structure. David Marsh became Chief Executive in March 2019,
supported by Adam Power (Group Development Director) and a newly
recruited Operations Director at our Leeds site, Alex Hogg. In June
2019, Charmaine Day took over full responsibility for group finance
matters on the departure of Melanie Ross.
We have recently appointed a new Compliance Director at Leeds,
Steve Seed, who will take the lead on all regulatory and quality
assurance matters reporting to David Marsh.
With this strong executive team in position, we have the right
platform of drive, expertise and experience to achieve future
success.
Regulatory activity
In May 2019, Surgical Innovations Limited underwent a
comprehensive regulatory audit resulting in recertification for
ISO13485: 2016 and ISO9001: 2015, and new certification for the
Medical Device Single Audit Program (MDSAP) streamlining access to
markets in the US, Canada, Australia, Japan and Brazil. In
addition, FDA approval was granted for the core products in the
YelloPort Elite(R) range, with further accessory products
anticipated shortly, facilitating a market launch in the final
quarter of this year.
Preparations are ongoing to transition from the European
Commission Medical Device Directive (MDD) to new Medical Device
Regulations (MDR) which has necessitated the further strengthening
of our QA/RA team, however, the additional demands on the
regulatory process resulting from the transition to MDR will
increase the barriers to entry for many of the low-cost
manufacturers, providing opportunity for those able to comply.
New products
We continue to invest in new product development. In the final
quarter of the year, we will roll out the first products in a range
of fully disposable trocars that will enable SI to compete in key
EU countries and have a broader offering for the UK private sector.
This extension of the Elite(R) range is part of an ongoing strategy
to complete the product portfolio.
Within our UK distribution business, we continue to build on our
strong reputation for quality, range and service. Cellis continues
to be a key product and during the last quarter we have regained
almost all of the previous users. Whilst the reduced number of
Abdominal Wall Reconstruction procedures has slowed sales growth,
we are well positioned to take advantage when the NHS returns to
more normal levels of activity. Cellis Breast Pocket has performed
well in the early trials and minor changes to the Acellular Dermal
Matrix will allow for launch in late Q4 2019.
We continue to work closely with Distalmotion, a Swiss-based
medical device company, towards a U.K. launch of Dexter, currently
scheduled to take place in 2020. Dexter is a surgical robot aimed
at combining the affordability of laparoscopy with the benefits of
robotic solutions for minimally invasive surgical care.
Distalmotion recently announced the successful completion of an
extensive cadaver study, receiving an enthusiastic response from
more than 40 surgeons, and gaining valuable feedback on next steps
towards commercialisation.
We have also recently launched a range of complementary products
for minimally invasive surgery, with an emphasis on gynaecology,
under an exclusive distribution agreement with The OR Company.
Headquartered in Australia and the US, The OR Company develops,
supplies and markets high quality, innovative surgical devices from
niche consumables to proprietary surgical instruments for minimally
invasive and open surgery.
The current regulatory environment provides a challenging
backdrop to the development and launch of innovative new products;
however, we have the requisite expertise and experience and are
fully committed to new product innovation as a key driver of future
growth. Whilst these regulatory constraints continue to challenge,
they do provide a barrier to entry for low-cost manufacturers who
may be unable to comply.
Brexit
Detailed preparations were made for Brexit earlier in the year,
prior to the initial March deadline, including the necessary
registrations and documentation required to provide the best
assurance possible of business continuity in the event of
disruption.
These contingency plans remain in place, as we face further
uncertainty regarding the 31 October 2019 deadline currently
envisaged.
Outlook
The headwinds faced since the end of the first quarter of the
year are unlikely to abate in the short term, and we anticipate
that the UK and EU markets will continue to be challenging. We
expect to deliver continuing success in the US market, working
closely with our distribution partners to further increase market
share and with the launch of YelloPort Elite(R). The Board has
reassessed its outlook for the rest of the financial year based on
the continuing challenging market conditions and reduced revenue
expectations, anticipating relatively modest growth in the second
half of 2019 compared to the first half. These trading conditions
are primarily driven by what we believe are temporary factors, and
we are more optimistic beyond the present political uncertainty
that NHS funding and activity levels will rise in response to
growing pent up demand.
As a result of the reduced revenues, the Board also anticipates
that adjusted operating profits will show an increase in the second
half of the year, albeit lower than previously expected and the
business will continue to be cash generative.
We have continued to adapt to challenging circumstances, which
are both industry-wide and transitory in nature. The investment
made in people and products position us well to take advantage of
market opportunities. Our executive team has been strengthened, and
has the drive, expertise and experience to achieve future
success.
Nigel Rogers
Chairman
17 September 2019
Unaudited consolidated income statement
for the six months ended 30 June 2019
Unaudited Unaudited Audited
six months six months Year
ended ended Ended
30 June 30 June 31 December
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
------------------------------------------- ------ ----------- ----------- ------------
Revenue 2 5,103 5,284 10,969
Cost of sales (2,904) (3,217) (6,297)
------------------------------------------- ------ ----------- ----------- ------------
Gross profit 2,199 2,067 4,672
Other operating expenses (2,434) (2,079) (4,327)
Other income - 150 275
------------------------------------------- ------ ----------- ----------- ------------
Adjusted EBITDA * 649 938 2,364
Amortisation and impairment of intangible
R&D costs (130) (269) (355)
Amortisation of intangible acquisition
costs (176) (224) (788)
Amortisation of Right of Use assets 1 (87) - -
Depreciation of tangible assets (214) (247) (481)
Exceptional items 5 (184) - -
Share based payments (93) (60) (120)
Operating (loss)/profit (235) 138 620
Finance costs 1 (91) (44) (105)
Finance income - - -
------------------------------------------- ------ ----------- ----------- ------------
(Loss)/profit before taxation (326) 94 515
Taxation credit 3 31 36 210
------------------------------------------- ------ ----------- ----------- ------------
(Loss)/profit and total comprehensive
income (295) 130 725
------------------------------------------- ------ ----------- ----------- ------------
Earnings per share
Basic 4 (0.04p) 0.02p 0.09p
Diluted 4 (0.04p) 0.02p 0.09p
------------------------------------------- ------ ----------- ----------- ------------
* EBITDA is earnings before interest, depreciation, amortisation
and exceptional items.
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2019
Share Share Capital Merger Retained
Notes capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ -------- -------- -------- -------- --------- --------
Balance as at 1 January 2019 7,826 5,831 329 1,250 (813) 14,423
Recognition of right of use
assets and lease liabilities
on adoption of IFRS16 1 - - - - (63) (63)
Issue of share capital 80 46 - - - 126
Employee share-based payment
charge - - - - 93 93
-------------------------------- ------ -------- -------- -------- -------- --------- --------
Total - Transaction with
owners 7,906 5,877 329 1,250 (783) 14,579
-------------------------------- ------ -------- -------- -------- -------- --------- --------
Profit and total comprehensive
income for the period - - - - (295) (295)
-------------------------------- ------ -------- -------- -------- -------- --------- --------
Unaudited balance as at 30
June 2019 7,906 5,877 329 1,250 (1,078) 14,284
-------------------------------- ------ -------- -------- -------- -------- --------- --------
Unaudited consolidated balance sheet
as at 30 June 2019
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
--------------------------------------- ------ ---------- ---------- ------------
Assets
Non-current assets
Property, plant and equipment 814 1,139 934
Right of Use Assets 1 1,263 - -
Intangible assets 10,045 10,717 10,191
Deferred tax asset 91 62 91
12,213 11,918 11,216
--------------------------------------- ------ ---------- ---------- ------------
Current assets
Inventories 2,661 1,969 2,083
Trade and other receivables 2,454 2,132 2,961
Amount due from associate 146 - 79
Cash at bank and in hand 2,301 2,300 2,491
--------------------------------------- ------ ---------- ---------- ------------
7,562 6,401 7,614
--------------------------------------- ------ ---------- ---------- ------------
Total assets 19,775 18,319 18,830
--------------------------------------- ------ ---------- ---------- ------------
Equity and liabilities
Equity attributable to equity holders
of the parent company
Share capital 7,906 7,826 7,826
Share premium account 5,877 5,831 5,831
Capital reserve 329 329 329
Merger reserve 1,250 1,250 1,250
Retained earnings (1,078) (1,330) (813)
--------------------------------------- ------ ---------- ---------- ------------
Total equity 14,284 13,906 14,423
--------------------------------------- ------ ---------- ---------- ------------
Non-current liabilities
Borrowings 1,676 1,975 1,820
Deferred tax liabilities 65 141 98
Dilapidation provision 165 165 165
Right of Use lease liability 1 1,183 - -
--------------------------------------- ------ ---------- ---------- ------------
3,089 2,281 2,083
--------------------------------------- ------ ---------- ---------- ------------
Current liabilities
Trade and other payables 1,435 1,132 1,556
Obligations under finance leases - 3 -
Accruals 524 697 481
Right of Use lease liability 1 155 - -
Borrowings 288 300 287
--------------------------------------- ------ ---------- ---------- ------------
2,402 2,132 2,324
--------------------------------------- ------ ---------- ---------- ------------
Total liabilities 5,491 4,413 4,407
--------------------------------------- ------ ---------- ---------- ------------
Total equity and liabilities 19,775 18,319 18,830
--------------------------------------- ------ ---------- ---------- ------------
Unaudited consolidated cash flow statement
for the six months ended 30 June 2019
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
Notes 2019 2018 2018
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------ ----------- ----------- ----------------
Cash flows from operating activities
Profit after tax for the year (295) 130 725
Adjustments for:
Taxation (31) (36) (210)
Finance Costs 1 91 44 89
Depreciation of property, plant and
equipment 214 247 481
Amortisation and impairment of intangible
assets 305 493 1,143
Amortisation of right of use assets 1 87 - -
Share-based payment charge 93 60 120
Other Income - 300 -
Loss on disposal of fixed assets - 1 6
Foreign Exchange 24 6 48
(Increase) /decrease in inventories (578) 505 384
Decrease/(increase) in current receivables 444 (167) (1,027)
(Decrease)/increase in trade and other
payables (84) (555) 48
---------------------------------------------- ------ ----------- ----------- ----------------
Cash generated from operations 270 1,028 1,807
Taxation received/(paid) 1 36 (68)
Interest paid (42) (44) (89)
---------------------------------------------- ------ ----------- ----------- ----------------
Net cash generated from operating activities 229 1,020 1,650
---------------------------------------------- ------ ----------- ----------- ----------------
Payments to acquire property, plant
and equipment (94) (60) (88)
Acquisition of intangible assets (160) (200) (398)
Net cash used in investment activities (254) (260) (486)
---------------------------------------------- ------ ----------- ----------- ----------------
Repayment of bank loan (150) (150) (318)
Net proceeds from issue of share capital 126 - -
Repayment of obligations under finance
leases - (13) (16)
Payments to Right of Use lease liabilities 1 (117) - -
---------------------------------------------- ------ ----------- ----------- ----------------
Net cash used in financing activities (141) (163) (334)
---------------------------------------------- ------ ----------- ----------- ----------------
Net increase in cash and cash equivalents (166) 597 830
Cash and cash equivalents at beginning
of period 2,491 1,709 1,709
Effective exchange rate fluctuations
on cash held (24) (6) (48)
---------------------------------------------- ------ ----------- ----------- ----------------
Net cash and cash equivalents at end
of period 2,301 2,300 2,491
---------------------------------------------- ------ ----------- ----------- ----------------
Analysis of net borrowings:
Cash at bank and in hand 2,301 2,300 2,491
Bank loan (1,964) (2,275) (2,107)
Obligations under finance leases - (3) -
Obligations under right of use lease
liabilities 1 (1,338) - -
Net cash/(debt) at end of period (1,001) 22 384
---------------------------------------------- ------ ----------- ----------- ----------------
Notes to the Interim Financial Information
1. Basis of preparation of interim financial information
The interim financial information was approved by the Board of
Directors on 18 September 2019. The financial information set out
in the interim report is unaudited.
The interim financial information has been prepared in
accordance with the AIM Rules for Companies and on a basis
consistent with the accounting policies and methods of computation
as published by the Group in its annual report for the year ended
31 December 2018, which is available on the Group's website.
The Group has chosen not to adopt IAS 34 Interim Financial
Statements in preparing these interim financial statements and
therefore the interim financial information is not in full
compliance with International Financial Reporting Standards as
adopted for use in the European Union.
The group has considered the new standard IFRS 16 'Leases'
effective from 01 January 2019 and is EU endorsed.
IFRS 16 'Leases' has been adopted by the Group for the financial
year starting on 1 January 2019. For leases previously classi ed as
operating leases, the Group did not recognise assets or
liabilities, and instead spread the lease payments on a
straight-line basis over the lease term, disclosing in its annual
nancial statements the total commitment. The impact of the new
standard has brought these operating lease arrangements onto the
balance sheet, with a right of use asset and corresponding
financial liability recognised on transition.
The Group has material operating lease commitment and therefore
the adoption of the standard has had a material impact on the
Financial Statements of the Group. The Board has applied the modi
ed retrospective approach and therefore at the date of initial
application an amount equal to the lease liability, using
appropriate incremental borrowing rates, has been recognised as a
right of use asset. The portfolio of leases mainly consists of
property along with vehicle leases and IT equipment. For low value
and short-term leases, the Group decided to apply the recognition
exemptions to short term leases of vehicles and low value IT
equipment. This ensures that there is no immediate impact to net
assets on that date.
The Group's lease commitments have remained at a similar level
to those at 31 December 2018 and the incremental borrowing rate is
6%, the e ect of adopting IFRS 16 has resulted in the recognition
of right-of-use assets and lease liabilities of approximately
GBP1.5 million at 1 January 2019.
Instead of recognising an operating expense for its operating
lease payments, the Group has instead recognised interest on its
lease liabilities and amortisation on its right-of-use assets. The
overall nancial results in the period ending 30 June 2019 has
adversely impacted by GBP75,000 due to the front-end loading of
interest compared to smooth operating lease rental expenses.
The financial impacts of IFRS 16 on H1 2019 are set out in the
table below.
Adjustments to the opening balance sheet:
Initial 30 June
recognition 2019
IFRS 16 IFRS 16
(GBP'000) (GBP'000)
--------------------------------- ------------ -----------
Right of use asset 1,350 1,263
--------------------------------- ------------ -----------
ROU lease liability-Non-Current (1,262) (1,183)
--------------------------------- ------------ -----------
ROU lease liability -Current (151) (155)
--------------------------------- ------------ -----------
Impact on Equity (63) (75)
--------------------------------- ------------ -----------
Impact on current year Income:
Impact of
IFRS 16
(GBP'000)
------------------------------ -----------
Operating lease rentals 117
------------------------------ -----------
Amortisation of ROU asset (87)
------------------------------ -----------
Underlying operating profit 30
------------------------------ -----------
Net finance costs (42)
------------------------------ -----------
Underlying profit before tax (12)
------------------------------ -----------
The financial information set out in this interim report does
not constitute statutory financial statements as defined in section
434 of the Companies Act 2006. The figures for the year ended 31
December 2018 have been extracted from the statutory financial
statements which have been filed with the Registrar of Companies.
The auditor's report on those financial statements was unqualified
and did not contain a statement under sections 498(2) and 498(3) of
the Companies Act 2006.
2. Segmental reporting
Information reported to the Board, as Chief Operating Decision
Makers, and for the purpose of assessing performance and making
investment decisions is organised into three operating segments.
The Group's operating segments under IFRS 8 are as follows:
-- SI Brand - the research, development, manufacture and
distribution of SI branded minimally invasive devices.
-- OEM - the research, development, manufacture and distribution
of minimally invasive devices for third party medical device
companies through either own label or co-branding. This now
incorporates Precision Engineering, the research, development,
manufacture and sale of minimally invasive technology products for
precision engineering applications
-- Distribution -the distribution of specialist medical products
sold through Elemental Healthcare Ltd.
The measure of profit or loss for each reportable segment is
gross margin less attributable amortisation of product development
costs.
Assets and working capital are monitored on a Group basis, with
no separate disclosure of asset by segment made in the management
accounts, and hence no separate asset disclosure is provided here.
The following segmental analysis has been produced to provide
reconciliation between the information used by the chief operating
decision maker within the business and the information as it is
presented under IFRS.
Six months ended 30 June 2019 (unaudited) SI Brand Distribution OEM Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- ------------ ------- -------
Revenue 2,609 1,489 1,005 5,103
------------------------------------------ -------- ------------ ------- -------
Result
Segment result 1,115 367 358 1,840
Unallocated expenses (2,106)
------------------------------------------ -------- ------------ ------- -------
Profit from operations (266)
Finance costs (48)
Finance income -
------------------------------------------ -------- ------------ ------- -------
Profit before taxation (314)
Tax 31
------------------------------------------ -------- ------------ ------- -------
Profit for the period (283)
------------------------------------------ -------- ------------ ------- -------
Included within the segment/operating results are the following
significant non-cash items:
SI Brand Distribution OEM Total
Six months ended 30 June 2019 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- ------------ ------- -------
Amortisation of intangible assets 67 176 62 305
Additions to intangibles 160 - - 160
Additions to tangibles 86 8 - 94
------------------------------------------ -------- ------------ ------- -------
Six months ended 30 June 2018 (unaudited) SI Brand Distribution OEM Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- ------------ ------- -------
Revenue 2,805 1,504 975 5,284
------------------------------------------- -------- ------------ ------- -------
Result
Segment result 497 700 378 1,575
Unallocated expenses (1,437)
------------------------------------------- -------- ------------ ------- -------
Profit from operations 138
Finance costs (44)
Finance income -
------------------------------------------ -------- ------------ ------- -------
Profit before taxation 94
Tax 36
------------------------------------------- -------- ------------ ------- -------
Profit for the period 130
------------------------------------------- -------- ------------ ------- -------
Included within the segment/operating results are the following
significant non-cash items:
SI Brand Distribution OEM Total
Six months ended 30 June 2018 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- ------------ ------- -------
Amortisation of intangible assets 206 224 63 493
Additions to intangibles 200 - - 200
Additions to tangibles 54 6 - 60
------------------------------------------- -------- ------------ ------- -------
SI Brand Distribution OEM Total
Year ended 31 December 2018 (audited)
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ------------ ------------ -------------
Revenue 6,088 3,037 1,844 10,969
---------------------------------------- ------------ ------------ ------------ -------------
Result
Segment result 1,733 1,059 737 3,529
Unallocated expenses (2,909)
---------------------------------------- ------------ ------------ ------------ -------------
Profit from operations 620
Finance income -
Finance costs (105)
---------------------------------------- ------------ ------------ ------------ -------------
Profit before taxation 515
Tax credit 210
---------------------------------------- ------------ ------------ ------------ -------------
Profit for the period 725
---------------------------------------- ------------ ------------ ------------ -------------
Included within the segment/operating results are the following
significant non-cash items:
SI Brand Distribution OEM Total
Year ended 31 December 2018 (audited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ---------- ------------ ------- -------------
Amortisation and impairment of intangible
assets 230 788 125 1,143
Additions to intangibles 398 - - 398
Additions to tangibles 65 23 - 88
------------------------------------------ ---------- ------------ ------- -------------
Unallocated expenses include those costs that cannot be split
between segments and which are not separately analysed in the
management accounts including research and development costs, sales
and marketing, and head office overheads.
Disaggregation of revenue
The Group has disaggregated revenues in SI Brand Distribution OEM Total
the following table:
Six months ended 30 June 2019 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ------------ ------------ ------- -------------
United Kingdom 754 1,489 923 3,166
Europe 648 - - 648
US 769 - 82 851
APAC 160 - - 160
Rest of World 278 - - 278
------------------------------------------ ------------ ------------ ------- -------------
2,609 1,489 1,005 5,103
------------------------------------------ ------------ ------------ ------- -------------
SI Brand Distribution OEM Total
Six months ended 30 June 2018 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ------------ ------------ ------- -------------
United Kingdom 825 1,504 767 3,096
Europe 731 - - 731
US 582 - 208 790
APAC 23 - - 23
Rest of World 644 - - 644
------------------------------------------ ------------ ------------ ------- -------------
2,805 1,504 975 5,284
------------------------------------------ ------------ ------------ ------- -------------
SI Brand Distribution OEM Total
Year ended 31 December 2018 (audited) GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------- --------------
United Kingdom 1,692 3,037 1,426 6,155
Europe 1,347 - - 1,347
US 1,704 - 418 2,122
APAC 317 - - 317
Rest of World 1,028 - - 1,028
-------------------------------------- ------------ ------------ ------- --------------
6,088 3,037 1,844 10,969
-------------------------------------- ------------ ------------ ------- --------------
Revenues are allocated geographically on the basis of where
revenues were received from and not from the ultimate final
destination of use.
3. Taxation
Current Tax
The Group reported a current tax credit in the period of GBPnil
(2018 FY: credit of GBP0.04m) which relates to claims for enhanced
Research and Development in respect of 2017.The Group are in the
process of preparing an enhanced Research and Development claim for
2018, this will depend on the amount of current year tax losses
that can be elected to exchange for cash, if any.
Deferred Tax
The Group reported a deferred tax asset in the period of
GBP0.03m in respect of the acquisition of the intangible. At the
balance sheet date, the Group has unused tax losses of GBP21.1
million (FY 2018: GBP21.1 million) available for offset against
certain future profits. This represents an unrecognized deferred
tax asset of GBP3.4m (2018: GBP3.4m). The timing differences has
given rise to a deferred tax liability of GBP127,000 (FY 2018 DTL:
GBP197,000).
4. Earnings per share
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
-------------------- ----------- ----------- ------------
Earnings per share
Basic (0.04p) 0.01p 0.09p
Diluted (0.04p) 0.01p 0.09p
Adjusted 0.02p 0.05p 0.21p
-------------------- ----------- ----------- ------------
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of shares in issue. Diluted earnings per share is calculated
by dividing the earnings attributable to ordinary shareholders by
the diluted weighted average number of shares in issue. Adjusted
Earnings per share is calculated by dividing the adjusted earnings
attributable to ordinary shareholders (profit before exceptional
and amortisation costs relating to the acquisition of Elemental
Healthcare and share based payments) by the weighted average number
of shares in issue.
The Group has one category of dilutive potential ordinary shares
being share options issued to Directors and employees. The impact
of dilutive potential ordinary shares on the calculation of
weighted average number of shares is set out below.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
'000s '000s '000s
-------------------------------------- ----------- ----------- ------------
Basic earnings per share 782,566 782,566 782,566
Dilutive effect of unexercised share
options 42,004 16,327 47,012
-------------------------------------- ----------- ----------- ------------
Diluted earnings per share 824,570 798,893 829,578
-------------------------------------- ----------- ----------- ------------
5. Exceptional Items
Exceptional items in the period ending 30 June 2019 related to
termination payments made to a former director of GBP162,000 and
abortive acquisition costs of GBP22,000.
6. Interim Report
This interim report is available at www.sigroupplc.com.
Surgical Innovations Group plc
Statement of compliance with QCA code on Corporate
Governance
Principle Extent of Commentary Further disclosure(s)
current compliance
Establish a strategy Fully compliant Group business strategy Go to www.sigroupplc.com
and business is summarised in the and follow About Us then
model which promote Mission Statement Our Business Activities
long term value approved by the board
for shareholders. in February 2018,
entitled "Inspired Strategic Report section
by surgeons for the of the Annual Report
benefit of patients".
Strategic issues,
and the appropriate
business model to
exploit opportunities
and mitigate risks,
are under continuous
review by the board,
and reported periodically.
Key risks and mitigating
actions are detailed
in the Principal risks
and uncertainties
section of the Annual
Report.
-------------------- ------------------------------- -------------------------------
Seek to understand Fully compliant Regular meetings are Go to www.sigroupplc.com
and meet shareholder held with institutional and follow Investor Centre
needs and expectations and private shareholders, then Meetings & Voting
during which structured
feedback is sought
and, where considered
appropriate, acted
upon.
Shareholder liaison
is principally undertaken
by the Non-Executive
Chairman and the Chief
Executive Officer.
-------------------- ------------------------------- -------------------------------
Take into account Fully compliant Directors and employees Go to www.sigroupplc.com
wider stakeholder adopt a broad view and follow About Us then
and social responsibilities during decision making Corporate Social
and their implications to take meaningful Responsibility
for long term account of the impact
success of our business on
all key stakeholder
groups.
The Board recognises
that the Company's
long-term success
is reliant on the
efforts of its employees,
customers and suppliers
and through maintaining
relationships with
its regulators.
Feedback from employees,
customer groups, suppliers
and others is actively
encouraged.
-------------------- ------------------------------- -------------------------------
Embed effective Fully compliant The group operates Principal Risks and
risk management, a system of internal Uncertainties
considering both controls designed section of Annual Report
opportunities (to the extent considered
and threats, appropriate) to safeguard
throughout the group assets and protect
organisation the business from
identified risks,
including risk to
reputation. Financial
risks, including adequacy
of funding and exposure
to foreign currencies,
are identified and
subject to examination
during the annual
external audit process.
-------------------- ------------------------------- -------------------------------
Maintain the Fully compliant The board comprises Board section of Annual
board as a well-functioning, six directors; three Report
balanced team non-executive directors,
led by the chair two full time executive
directors, and the
Non-Executive Chairman.
The Chairman and two
of the non-executive
directors are considered
to be fully independent
(Alistair Taylor and
Paul Hardy).
The board is supported
by appropriate board
committees which are
each chaired by one
of the independent
non-executive directors.
An annual record of
attendance at board
meetings will be included Corporate Governance section
in the Annual Report of Annual Report
at the conclusion
of each year.
The Non-Executive
Chairman's responsibilities
approximate to one
day per week, other
Executive Directors
are expected to work
full time. Non-executive
directors are expected
to commit sufficient
time to fulfill their
role - this approximates
to 2 days per month.
The attendance by
the members of the
Board at the meetings
is recorded and reviewed
annually.
-------------------- ------------------------------- -------------------------------
Ensure that between Fully compliant The board is satisfied Board section of Annual
them the directors that the current composition Report
have the necessary provides the required
up-to-date experience, degree of skills,
skills and capabilities experience, diversity
and capabilities appropriate
to the needs of the
business. Steps are
taken to challenge
the status quo, and
encourage proper consideration
of any dissenting
opinion. Board composition
and succession planning
are subject to continuous
review taking account
of the potential future
needs of the business.
The Board has not
taken any specific
external advice on
a specific matter,
other than in the
normal course of business
as an AIM quoted company.
The Directors rely
on the Company's advisory
team to keep their
skills up to date
and through attending
market updates and
other seminars provided
by the advisory team,
the London Stock Exchange
plc and other intermediaries.
-------------------- ------------------------------- -------------------------------
Evaluate board Partially Board evaluation has Management section of
performance based compliant not been carried out Chairman's Statement
on clear and as part of a formal
relevant objectives, process, although
seeking continuous the Chairman has actively
improvement encouraged self-evaluation
by all board members,
and feedback on the
conduct and content
of board meetings.
The board will consider
whether a more structured
approach is required
in future.
-------------------- ------------------------------- -------------------------------
Promote a corporate Fully compliant The board promotes Go to www.sigroupplc.com
culture that high ethical and moral and follow About Us then
is based on ethical standards which are Our Business Activities
values and behaviours set out in the Mission
Statement. The board
and all employees
expect to be judged
by, and accountable
for, their actions.
The business operates
in a highly regulated
environment, which
promotes the benefits
of high moral standards
and rewards good behaviour
over the long term.
-------------------- ------------------------------- -------------------------------
Maintain governance Fully compliant The board as a whole Board section of Annual
structures and share responsibility Report
processes that for sound governance
are fit for purpose practices. Corporate Governance Section
and support good The Chief Executive of Annual Report
decision-making Officer reports to
by the board the board. In addition
to his collective
responsibilities as
a director, he is
responsible for the
oversight of the strategic
and operating performance
of the group
The Group Financial
Controller/Company
Secretary reports
to the Chief Executive
Officer. In addition
to her collective
responsibilities as
a director to the
subsidiaries, she
is primarily responsible
for all aspects of
financial reporting
to the board and key
stakeholders, as well
as maintaining communication
with investors and
other key stakeholders.
Details of the audit,
remuneration and nomination
committees are set
out in the Corporate
Governance section
of the website. The
Non-Executive Directors
comprise the membership
of each of the committees.
-------------------- ------------------------------- -------------------------------
Communicate how Fully compliant The Board attaches Go to www.sigroupplc.com
the company is great importance to and follow Investor Centre
governed and providing shareholders then Meetings & Voting
is performing with clear and transparent
by maintaining information on the
a dialogue with Group's activities
shareholders and strategy. Details
and other relevant of all shareholder
stakeholders communications are
provided on the Company's
website, including
historical annual
reports and governance
related material together
with notices of all
general meetings for
the last five years.
The Company discloses
outcomes of all general
meeting votes.
The Company has appointed
a professional Financial
Public Relations firm
with an office in
London to advise on
its communications
strategy and to assist
in the drafting and
distribution of regular
news and regulatory
announcements. Regular
announcements are
made regarding the
Company's investment
portfolio as well
as other relevant
market and regional
news.
The Company lists
contact details on
its website and on
all announcements
released via RNS,
should shareholders
wish to communicate
with the Board.
-------------------- ------------------------------- -------------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DBGDCXGBBGCL
(END) Dow Jones Newswires
September 17, 2019 02:01 ET (06:01 GMT)
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