TIDMEKF
RNS Number : 6648S
EKF Diagnostics Holdings PLC
13 March 2019
EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Final results
EKF Diagnostics Holdings plc (AIM: EKF), the AIM listed
point-of-care business, announces its final results for the year
ended 31 December 2018.
Financial highlights
-- Revenue up 2% to GBP42.5m (2017: GBP41.6m)
-- Gross profit broadly flat at GBP22.7m (2017: GBP22.9m)
-- Adjusted EBITDA* up 15% to GBP10.7m (2017: GBP9.3m)
-- Profit before tax GBP12.2m (2017: GBP4.3m), over 2.8 times higher
-- Basic Earnings per share of 2.21p (2017: 0.59p), underlying
basic earnings (excluding exceptional items and share based
payments) of 1.01p (2017: 0.58p)
-- Cash generated from operations of GBP9.9m (2017: GBP10.1m)
-- Cash at 31 December 2018 of GBP10.3m (31 Dec 2017: GBP8.2m),
net cash of GBP9.4m (31 Dec 2017: GBP7.0m)
* Excluding exceptional items and share based payments
Operational Highlights
-- Successful flotation of Renalytix AI plc creating significant shareholder value
-- Achieved US FDA 510(k) clearance for point-of-care and CLIA waiver for the DiaSpect Tm
-- Major private label distribution agreement with McKesson for the Tm
-- US FDA 510(k) clearance for Quo-Test in clinical laboratory setting
-- Upgrade to Elkhart (Indiana, USA) enzyme facility and
contract to supply enzymes to US biopharma Oragenics for use in
their pharmaceutical products
Christopher Mills, Non-executive Chairman of EKF, said:
"This has been a very successful year, which has allowed us to
provide significant rewards for shareholders. We are confident that
we will continue to make progress in 2019. Trading in the first
quarter to date has been satisfactory, in line with management
expectation."
EKF Diagnostics Holdings plc Tel: 029 2071 0570
Christopher Mills, Non-executive Chairman
Julian Baines, CEO
Richard Evans, FD & COO
N + 1 Singer Tel: 020 7496 3000
Aubrey Powell / Lauren Kettle / George Tzimas
(Corporate Finance)
Tom Salvesen (Corporate Broking)
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
It is a pleasure to report to shareholders on another successful
year for EKF, with record revenue, earnings, and profits.
Strategy
Since I joined the business in April 2016, the Group has
followed a consistent strategy of concentrating on its
point-of-care diagnostics and central laboratory reagents business.
While the task of simplification of the business was largely
completed in 2017, we continue to actively seek cost saving
opportunities through improved efficiency and targeted action
plans, while seeking to position the business for further
growth.
Renalytix AI plc
In January 2018 we announced our intention to create value from
our sTNFR biomarker technology. In short order this process led to
the development, founding, and successful flotation on AIM of an
exciting developer of artificial intelligence-enabled diagnostics
for kidney disease, including the raising of GBP22.25m for working
capital. Of this, GBP3.1m was provided by EKF. As at the date of
this statement, Renalytix AI plc ("Renalytix") is valued at over
GBP75m in its own right, and is making good progress towards its
goals.
EKF's shareholding in Renalytix comprising 20,964,295 ordinary
shares was distributed to relevant EKF shareholders in October
2018. The market value of those shares at the date of this
statement, post admission to AIM, is circa GBP29.3m. As a
requirement of Renalytix's flotation, these shares are being held
in escrow and share certificates will be sent to the underlying
shareholders once the lock-in ends on 22 April 2019.
This process has been extremely successful and has provided a
very significant benefit to EKF shareholders. I would like to thank
the EKF directors and staff who put an enormous amount of work into
its achievement.
We remain very excited about the future prospects for Renalytix
and are confident that it will deliver further significant value to
shareholders over the longer term.
Share buy back
The Group has continued to acquire its own shares in the market.
During the year the Group has acquired and cancelled 3,461,409
shares representing 0.76% of the Ordinary shares in issue as at 1
January 2018, at a total cost of GBP940,000. Subject to continuing
shareholder approval, the Group intends to continue to acquire
shares for cancellation when it is appropriate to do so.
Results overview
The Chief Executive's and Finance Director's statements contain
a review of the year and an overview of the financial performance
of the Group.
Board and Corporate Governance
The make-up of the Board has once again remained stable. The
Non-executive Directors have again waived their salary but received
an appropriate bonus to recognise the very significant contribution
they make to the success of the Group over and above their duties
as directors.
The London Stock Exchange now requires AIM listed companies such
as EKF to adopt a recognised corporate governance code and we have
chosen that issued by the Quoted Companies Alliance. Further
details of compliance can be found in the Corporate Governance
Statement in the Annual Report, once published, and on the
Company's website in accordance with AIM Rule 26.
Outlook
This has been a very successful year, which has allowed us to
provide significant rewards for shareholders. We are confident that
we will continue to make progress in 2019. Trading in the first
quarter to date has been satisfactory, in line with management
expectations.
Christopher Mills
Non-executive Chairman
13 March 2019
Chief Executive's Review
In 2018 we have been highly successful in achieving the
operational goals we set ourselves at the beginning of the year. I
am pleased to announce that we delivered 6.3% year on year organic
growth excluding the effect of the completion of the Saudi Arabian
Quo-Test contract which had contributed circa GBP1.6m more to
revenues in 2017 than in 2018. The delivery of replacement revenues
through new contract wins and additional organic sales growth has
not only mitigated the impact of this source of revenue ending, but
has allowed us to maintain overall revenue growth.
Operations
In 2018 we promised to deliver in five main areas to ensure we
maintain sustainable organic growth for the foreseeable future,
which were: -
1. DiaSpect Tm FDA 510(k) CLIA Waiver.
2. Delivery of a major contract alongside this clearance - the McKesson OEM contract in the US.
3. Upgrade of our Elkhart (Indiana, USA) enzyme facility.
4. Deliver a major contract alongside the upgrade - the Oragenics contract.
5. FDA 510(k) clearance of Quo-Test.
I am proud to say that we have delivered on all the above,
although the Quo-Test 510(k) clearance crept into 2019. The OEM
contract with McKesson in the US for the DiaSpect Tm gives us an
opportunity to quickly expand our haemoglobin Point-of-Care
franchise in the US where we already have a strong foothold.
The Oragenics contract in Elkhart has enabled us to broaden our
offering in pharmaceutical enzymes. The additional investment has
led to a significant upgrade of the facility and we are now in a
position to attract other partners alongside Oragenics.
Point-of-Care
One of the two main strands of EKF's business involves the
development, manufacture, and sale of instruments and related
consumables for use in the diagnosis of conditions in situations
which are near-patient. They have the advantage of giving rapid
results which can be communicated and acted on immediately, yet
offer equivalent accuracy to laboratory based analysers.
Hematology
In 2018, sales of haematology products have risen by 6% to
GBP13.7m (2017: GBP12.9m).
For many years our Hemo Control analyser range (sold in the USA
as the HemoPoint H2) has been our best seller in this area.
Following FDA 510(k) clearance for the DiaSpect Tm in point-of-care
and CLIA waiver settings, we anticipate that future growth will be
maintained globally.
Once we had clearance, we signed a private label distribution
agreement with McKesson Medical-Surgical Inc., an affiliate of
McKesson Corporation, one of the largest companies in the US by
revenue, and one of the largest distributors of medical supplies,
who will sell the Tm as the McKesson Consult(R) Hb analyser. Whilst
this partnership is in its infancy we have already opened over 25
new accounts in the US.
Diabetes
Sales of diabetes products are down by 5% this year from
GBP11.5m to GBP11.0m, due to the end of the Quo-Test contract in
Saudi Arabia. Sales of Quo-Lab are up by 20%, and sales of Quo-Test
excluding Saudi Arabia are up by 6%.
We were pleased to announce that the Quo-Test analyser has
received US Food and Drug Administration 510(k) clearance for
professional use in a clinical laboratory setting. This will allow
us to enter the US market with this product.
Lactate Scout
Our new Lactate Scout 4 hand-held lactate analyser for fast and
accurate sports performance monitoring was launched at the Medica
2018 show. Lactate Scout 4 is designed for use in the field as a
training companion for individuals or sports teams. We are working
to adapt our existing lactate technology for use in clinical
settings. Having taken professional guidance, and consultations
with interest groups including potential end users, we are
determined to deliver the right solution for this market, which
will involve adapting the base product to ensure good usability in
this market, and subsequently carrying out some limited clinical
trials.
Central Laboratory
The second main strand of EKF's business is the supply of
reagents for use on central laboratory analysers. As an adjunct to
this, we also sell our own range of laboratory standard analysers.
In 2018, Central Laboratory sales were GBP13.3m, an increase of
5%.
During the year we signed a distribution agreement for Asahi
Kasei's Glycated Albumin products. This has now been launched in
the US and the first orders have been received.
We have continued to see strong performance from sales of
Beta-Hydroxybutyrate (<BETA>-HB) Liquicolor reagent, which
are up 10% in GBP terms. As mentioned earlier, our project to
increase capacity and significantly upgrade our main wet chemistry
site in Elkhart, Indiana has continued, and is expected to complete
in 2019. The work we have done there has enabled us to sign an
exclusive, multi-million dollar agreement with Oragenics, Inc., a
Florida-based biopharmaceutical company, for the manufacturing of
Oragenics' lantibiotic bulk drug substances in the United States.
Under the collaboration agreement, EKF Diagnostics will manufacture
compounds intended for preclinical and early stage clinical
trials.
Regulatory update
Our major successes in 2018 have been the achievement of FDA
510(k) clearances for the DiaSpect Tm and Quo-Test. In addition, we
have received regulatory approval for <BETA>-HB in both
Mexico and Colombia, as well as registration of DiaSpect Tm in
India. In China, we have had some successes but continue to work on
the complex process of getting registrations in place. We continue
to work using our own resources and with our partners to extend the
span of our registrations.
sTNFR Project - Renalytix AI plc
There has been a longstanding unmet need in the field of End
Stage Renal Disease ("ESRD"). Kidney disease costs the US
Healthcare system over $40bn per annum in dialysis alone. In 2017
we started looking for ways to maximise the value of our sTNFR
biomarker technology based around this unmet need. It soon became
clear that there was a significant opportunity to use this as the
springboard for a unique business with the ultimate aim being to
develop and sell artificial intelligence enabled diagnostics for
ESRD. It was also clear that it was best that this should be
progressed entirely outside EKF. A team was put in place to take
the new business forward, led by James McCullough. This team
rapidly assembled a set of partners including the world - leading
centre in the care of kidney disease, the Icahn School of Medicine
at Mount Sinai ("ISMMS"). In early November 2018, GBP22.5m was
raised with ISMMS becoming a major shareholder. The funds are
primarily being used for the acquisition of licences from ISMMS, to
develop the company's products and technology, for corporate
purposes, and for general working capital. The Renalytix AI shares
which EKF had received in return for its past investment and
technology have been distributed to EKF shareholders, and the
company has been floated separately on AIM. EKF retains an interest
in the business having participated in the fundraising. A company
as at the date of this statement valued at circa GBP75m, post
admission to AIM, has been created, which the Directors believe has
the potential to be a game changer in the diagnosis and treatment
of ESRD.
Outlook
2018 has been a year in which we have achieved all our major
milestones, including setting up a number of platforms for growth
in 2019 and beyond. We are continuing to build a solid and reliable
business with opportunities for significant growth, while ensuring
excellent financial results.
Julian Baines
Chief Executive Officer
13 March 2019
FINANCE DIRECTOR's Review
Revenue
Revenue for 2018 was GBP42.5m (2017: GBP41.6m), which is an
increase of 2%. At constant exchange rates, revenue for the year
would have been 1% higher, so organic growth is over 3%, despite
the ending of the large Saudi Arabia contract.
Revenue by disease state, which is presented for illustrative
purposes only, is as follows:
2018 2017
GBP'000 GBP'000 +/- %
Hematology 13,728 12,911 +6%
---------- --------- ------
Diabetes Care 10,964 11,547 (5%)
---------- --------- ------
Central Laboratory 13,289 12,597 +5%
---------- --------- ------
Other 4,562 4,529 +1%
---------- --------- ------
Total 42,543 41,584 +2%
---------- --------- ------
Gross profit
Gross profit is broadly flat at GBP22.7m (2017: GBP22.9m), while
the gross margin percentage on sales is 53.3% (2017: 55.0%). In
2017 there were releases of inventory provisions set in previous
years; this did not recur in 2018.
Administration costs and research and development
Administration costs have fallen substantially, to GBP10.6m
(2017: GBP18.2m), reflecting the focus on operational improvements.
The biggest factor was the effect of exceptional items, which are
again strongly positive in the year. The most important exceptional
item this year is the substantial gain made on the Group's shares
in Renalytix AI plc as a result of its successful separate
flotation. The gain recognised in EKF's books is discounted to take
account of the restrictions on the shares which were distributed to
EKF's shareholders prior to the flotation. In addition to
Renalytix, there was an exceptional gain following the satisfactory
conclusion to a loan agreement with a former employee, offset by
business restructuring costs. Excluding the effect of exceptional
items, administration costs reduced from GBP19.7m in 2017, to
GBP17.0m in 2018.
Research and development costs included in administration
expenses were GBP1.6m (2017: GBP2.2m). A further GBP0.6m was
capitalised as an intangible asset, bringing gross R&D
expenditure for the year to GBP2.2m, a reduction from the
expenditure in 2017 of GBP2.9m, largely caused by the completion of
expenditure last year on the DiaSpect Tm FDA clearance process.
The charge for depreciation of fixed assets and amortisation of
intangible assets reduced to GBP4.0m (2017: GBP4.6m). 2017 included
an impairment charge relating to the closure of our Polish
operations in that year.
Operating profit and adjusted earnings before interest, tax,
depreciation and amortisation
The Group made an operating profit of GBP12.2m (2017: GBP4.7m).
This again reflects the significant exceptional gain on Renalytix
and other items, without which operating profit would have been
GBP5.8m, still an increase of 23.4%. We continue to consider that
adjusted earnings before interest, tax, depreciation and
amortisation, share-based payments and exceptional items (adjusted
EBITDA) is a better measure of the Group's progress because the
Board believes it gives clearer comparability of operating
performance between periods. In 2018 we achieved adjusted EBITDA of
GBP10.7m (2017: GBP9.3m), an increase of 14.7%. The calculation of
this non-GAAP measure is shown on the face of the income statement.
It excludes the effect of non-cash share-based payment charges of
GBP0.9m (2017: GBP1.5m), and exceptional profits of GBP6.5m (2017:
GBP1.6m). The increase in adjusted EBITDA of GBP1.4m would be
higher by GBP0.2m without the effect of exchange rates, with
GBP1.6m therefore being attributable to improved underlying
performance.
Finance costs
Net finance costs have reduced to GBP0.03m (2017: GBP0.42m).
While interest costs on borrowings have continued to reduce, the
main effect is a result of a lower charge associated with the
change in fair value of deferred consideration.
Tax
There is an income tax charge of GBP1.9m, an increase from the
2017 charge of GBP1.4m. The charge is lower than would have been
expected because of the utilisation of past tax losses.
Balance sheet
Property plant and equipment
Additions to fixed assets were GBP1.2m (2017: GBP1.4m). The
major programme has been the continuing work on the upgrading and
refurbishment of the Group's facility in Elkhart, USA, where many
of the Group's central laboratory products are manufactured,
including those being supplied to Oragenics.
Intangible assets
The carrying value of intangible assets has continued to fall,
from GBP43.6m in 2017 to GBP41.8m as at 31 December 2018. This is
largely the result of the annual amortisation charge. There was a
GBP0.6m disposal of capitalised development costs which were sold
to Renalytix AI plc.
Investments
As part of the fund raising for the Renalytix project, EKF
agreed to invest the sum of GBP3.1m for 4.79% of Renalytix's
enlarged (post IPO) share capital.
Deferred consideration
The remaining deferred consideration relates to a share-based
payment to the former owner of EKF-Diagnostic GmbH, payment of
which is subject to an offsetting warranty related claim, the value
of which is held in receivables. Conclusion of the position has
taken longer than anticipated but is expected during this year.
Cash and working capital
Despite the GBP3.1m investment in Renalytix and share buy-backs
totalling GBP0.9m, net cash has increased from GBP7.0m to GBP9.4m.
Gross cash has increased to GBP10.3m (2017: GBP8.2m). Borrowings,
which were mainly used to fund a new building at our plant in
Barleben, Germany, are reducing over the loan period to 2023, while
the remaining balance of a loan from a former employee of EKF
Molecular was written back.
Inventory has increased slightly from GBP5.6m to GBP6.1m due to
a number of strategic decisions to increase raw material holdings
to ensure continuity of supply. Trade and other receivables have
dipped slightly, largely for non-trading reasons. Trade payables
have increased, chiefly because of the effect of the increased
liability relating to the cash settled share-based payments.
Richard Evans
Finance Director and Chief Operating Officer
13 March 2019
Consolidated Income Statement
FOR THE YEARED 31 DECEMBER 2018
2018 2017
GBP'000 GBP'000
------------------------------------ ------------------ -------------------
Revenue 42,543 41,584
Cost of sales (19,847) (18,721)
------------------------------------- ------------------ -------------------
Gross profit 22,696 22,863
Administrative expenses (10,586) (18,186)
Other income 89 52
------------------------------------- ------------------ -------------------
Operating profit 12,199 4,729
===================================== ================== ===================
Depreciation and amortisation (3,991) (4,623)
Share-based payments (939) (1,514)
Exceptional items 6,454 1,562
EBITDA before exceptional items and
share-based payments 10,675 9,304
===================================== ================== ===================
Finance income 43 53
Finance costs (77) (475)
------------------------------------- ------------------ -------------------
Profit before income tax 12,165 4,307
Income tax charge (1,866) (1,367)
------------------------------------- ------------------ -------------------
Profit for the year 10,299 2,940
------------------------------------- ------------------ -------------------
Profit attributable to:
Owners of the parent 10,110 2,715
Non-controlling interest 189 225
------------------------------------- ------------------ -------------------
10,299 2,940
------------------------------------ ------------------ -------------------
Pence Pence
----------------------------------------- ------- -------
Earnings per Ordinary Share attributable to the owners
of the parent during the year
From continuing operations
Basic 2.21 0.59
Diluted 2.19 0.58
------------------------------------------ ------- -------
Consolidated Statement of Comprehensive Income
FOR THE YEARED 31 DECEMBER 2018
2018 2017
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Profit for the year 10,299 2,940
-------- --------
Other comprehensive income:
Items that may be subsequently reclassified to profit
or loss
Currency translation differences 1,383 (622)
======================================================= -------- --------
Other comprehensive gain for the year 1,383 (622)
======================================================= -------- --------
Total comprehensive gain for the year 11,682 2,318
======================================================= -------- --------
Attributable to:
Owners of the parent 11,526 2,096
Non-controlling interests 156 222
======================================================= -------- --------
Total comprehensive gain for the year 11,682 2,318
======================================================= -------- --------
Consolidated Statement of Financial Position
AS AT 31 December 2018
Group Group
2018 2017
GBP'000 GBP'000
-------------------------------------------- ------------- --------------
Assets
Non-current assets
Property, plant and equipment 12,469 12,121
Intangible assets 41,773 43,600
Investments 3,271 152
Deferred tax assets 36 47
--------------------------------------------- ------------- --------------
Total non-current assets 57,549 55,920
--------------------------------------------- ------------- --------------
Current assets
Inventories 6,115 5,638
Trade and other receivables 7,434 7,396
Cash and cash equivalents 10,282 8,203
--------------------------------------------- ------------- --------------
Total current assets 23,831 21,237
--------------------------------------------- ------------- --------------
Total assets 81,380 77,157
--------------------------------------------- ------------- --------------
Equity attributable to owners of the parent
Share capital 4,541 4,576
Other reserves 143 108
Foreign currency reserves 6,309 4,892
Retained earnings 52,536 50,394
--------------------------------------------- ------------- --------------
63,529 59,970
Non-controlling interest 375 528
--------------------------------------------- ------------- --------------
Total equity 63,904 60,498
--------------------------------------------- ------------- --------------
Liabilities
Non-current liabilities
Borrowings 695 872
Deferred tax liabilities 3,179 3,490
--------------------------------------------- ------------- --------------
Total non-current liabilities 3,874 4,362
--------------------------------------------- ------------- --------------
Current liabilities
Trade and other payables 10,094 9,429
Deferred consideration 1,104 1,062
Current income tax liabilities 2,219 1,473
Borrowings 185 333
--------------------------------------------- ------------- --------------
Total current liabilities 13,602 12,297
--------------------------------------------- ------------- --------------
Total liabilities 17,476 16,659
--------------------------------------------- ------------- --------------
Total equity and liabilities 81,380 77,157
--------------------------------------------- ------------- --------------
Consolidated Statement of Cash Flows
FOR THE YEARED 31 DECEMBER 2018
Group Group
2018 2017
GBP'000 GBP'000
--------------------------------------------- ----------- -------------
Cash flow from operating activities
Cash generated by operations 9,861 10,118
Interest paid (35) (106)
Income tax paid (1,503) (959)
---------------------------------------------- ----------- -------------
Net cash generated by operating activities 8,323 9,053
---------------------------------------------- ----------- -------------
Cash flow from investing activities
Purchase of investments (3,119) -
Purchase of property, plant and equipment
(PPE) (1,220) (1,361)
Purchase of intangibles (632) (852)
Proceeds from sale of PPE - 128
Interest received 43 53
---------------------------------------------- ----------- -------------
Net cash used in investing activities (4,928) (2,032)
---------------------------------------------- ----------- -------------
Cash flow from financing activities
Share based payments - (1,505)
Share buy back (940) (241)
Repayments on borrowings (242) (4,458)
Dividend payment to non-controlling interest (309) (215)
---------------------------------------------- ----------- -------------
Net cash used in financing activities (1,491) (6,419)
---------------------------------------------- ----------- -------------
Net increase in cash and cash equivalents 1,904 602
Cash and cash equivalents at beginning
of year 8,203 7,874
Exchange gains/(losses) on cash and cash
equivalents 175 (273)
---------------------------------------------- ----------- -------------
Cash and cash equivalents at end of year 10,282 8,203
---------------------------------------------- ----------- -------------
Consolidated Statement of Changes in Equity
Share Foreign
Share premium Other currency Retained Non-controlling Total
capital account reserves reserve earnings Total interest equity
Consolidated GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ======== ======== ========= ========= ========= ======== =============== ========
At 1 January 2017 4,643 95,393 41 5,609 (45,236) 60,450 521 60,971
============================ ======== ======== ========= ========= ========= ======== =============== ========
Comprehensive income
Profit for the year - - - - 2,715 2,715 225 2,940
Other comprehensive income
Currency translation
differences - - - (717) 98 (619) (3) (622)
============================ ======== ======== ========= ========= ========= ======== =============== ========
Total comprehensive
(expense)/income - - - (717) 2,813 2,096 222 2,318
============================ ======== ======== ========= ========= ========= ======== =============== ========
Transactions with owners
Proceeds from shares issued (67) - 67 - (3,121) (3,121) - (3,121)
Capital reconstruction - (95,393) - - 95,393 - - -
Dividends to non-controlling
interest - - - - - - (215) (215)
Share-based payments - - - - 545 545 - 545
============================ ======== ======== ========= ========= ========= ======== =============== ========
Total distributions to
owners (67) (95,393) 67 - 92,817 (2,576) (215) (2,791)
============================ ======== ======== ========= ========= ========= ======== =============== ========
At 31 December 2017 and
1 January 2018 4,576 - 108 4,892 50,394 59,970 528 60,498
============================ ======== ======== ========= ========= ========= ======== =============== ========
Comprehensive income
Profit for the year - - - - 10,110 10,110 189 10,299
Other comprehensive income
Currency translation
differences - - - 1,417 (1) 1,416 (33) 1,383
============================ ======== ======== ========= ========= ========= ======== =============== ========
Total comprehensive income - - - 1,417 10,109 11,526 156 11,682
============================ ======== ======== ========= ========= ========= ======== =============== ========
Transactions with owners
Share cancellation (35) - 35 - (940) (940) - (940)
Dividends to non-controlling
interest - - - - - - (309) (309)
Distribution in specie - - - - (7,027) (7,027) - (7,027)
============================ ======== ======== ========= ========= ========= ======== =============== ========
Total distributions to
owners (35) - 35 - (7,967) (7,967) (309) (8,276)
============================ ======== ======== ========= ========= ========= ======== =============== ========
At 31 December 2018 4,541 - 143 6,309 52,536 63,529 375 63,904
============================ ======== ======== ========= ========= ========= ======== =============== ========
Notes to the Financial Statements
for the year ended 31 December 2018
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.
The audited preliminary announcement has been prepared in
accordance with the Group's accounting policies as disclosed in the
financial statements for the year ended 31 December 2018 and
International Financial Reporting Standards ("IFRSs") and
International Financial Reporting Standards Interpretations
Committee (IFRS IC) interpretations as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. This preliminary announcement was
approved by the Board of Directors on 13 March 2019. The
preliminary announcement does not constitute statutory financial
statements within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year to 31 December 2017 have been
delivered to the Registrar of Companies. The audit report for those
accounts was unqualified and did not contain statements under 498
(2) or (3) of the Companies Act 2006 and did not contain any
emphasis of matter.
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 2018 by 9 April 2019, 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 Thursday 2 May 2019.
2. Geographic sales
Disclosure of Group revenues by geographic location of customer
is as follows:
2018 2017
GBP'000 GBP'000
====================================== -------- -------------
Americas
United States of America 18,253 17,174
Rest of Americas 3,925 3,195
Europe, Middle East and Africa (EMEA)
Germany 6,208 6,016
United Kingdom 324 300
Rest of Europe 3,583 3,423
Russia 2,687 2,743
Middle East 1,467 2,912
Africa 1,229 1,611
Asia and Rest of World
China 994 915
Rest of Asia 3,751 3,168
New Zealand/Australia 122 127
====================================== -------- -------------
Total revenue 42,543 41,584
====================================== -------- -------------
No single external customer represented more than 10% of
revenues in either 2018 or 2017.
3. Exceptional items
Included within administrative expenses are exceptional items as
shown below:
2018 2017
Note GBP'000 GBP'000
===================================== ===== ======== ========
* Warranty claim a 31 339
* Business reorganisation costs b (120) (183)
- Cancellation of shares c - 1,406
- A Webb loan d 90 -
- Net receipt from legal action e 97 -
* Renalytix f 6,356 -
Exceptional items 6,454 1,562
============================================ ======== ========
a. Estimated warranty claim in relation to the acquisition of
EKF-diagnostic GmbH increased because of higher share price.
b. Restructuring costs, mainly redundancy and notice costs,
associated in 2018 with the closure of EKF's Polish facility and
other restructuring activities.
c. Fair value of shares released to EKF by former shareholders
of Selah Genomics Inc. which had been issued as part of the
consideration for the acquisition of Selah, but held in escrow.
These shares were subsequently cancelled.
d. Following settlement with Mr A Webb, the balance of the loan
made by him in relation to the molecular diagnostic business has
been written back.
e. Receipt from legal action against a customer net of legal costs.
f. The net profit made by the Group in relation to the Renalytix
transaction. Full details are given in note 9.
4. Finance income and costs
2018 2017
GBP'000 GBP'000
============================================================= ======== ========
Finance costs:
* Bank borrowings 25 83
* Other interest 10 23
* Financial liabilities at fair value through profit or
loss 42 369
Finance costs 77 475
============================================================= ======== ========
Finance income
- Interest income on cash and short-term deposits 9 14
- Other interest 34 39
Finance income 43 53
============================================================= ======== ========
Net finance costs 34 422
============================================================= ======== ========
5. Income tax
2018 2017
Group GBP'000 GBP'000
================================================== ======== ========
Current tax:
Current tax on profit for the year 2,248 2,045
Adjustments for prior periods 5 (100)
================================================== -------- ========
Total current tax 2,253 1,945
================================================== -------- ========
Deferred tax:
Origination and reversal of temporary differences (387) (578)
--------
Total deferred tax (387) (578)
================================================== -------- ========
Income tax charge 1,866 1,367
================================================== -------- ========
The Finance Act 2015, which was substantively enacted in 2015,
included legislation to reduce the main rate of UK corporation tax
to 19% from 1 April 2017 and the Finance Act 2016, which was
substantively enacted in 2016, included legislation to reduce the
main rate of UK corporation tax to 17% from 1 April 2020.
The tax on the Group's profit 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:
2018 2017
GBP'000 GBP'000
=============================================================== ======== ========
Profit before tax 12,165 4,307
--------------------------------------------------------------- ======== ========
Tax calculated at domestic tax rates applicable to UK standard
rate of tax of 19% (2017: 19.25%) 2,311 829
Tax effects of:
* Expenses not deductible for tax purposes 297 31
* Remeasurement of deferred tax - change in future tax
rate (19) (360)
* Income not subject to tax (238) 267
* Utilisation of losses (1,069) (178)
* Adjustment in respect of prior years 106 (100)
* Impact of different tax rates in other jurisdictions 277 634
* Other movements 201 244
--------------------------------------------------------------- ======== ========
Tax charge 1,866 1,367
--------------------------------------------------------------- ======== ========
There are no tax effects on the items in the statement of other
comprehensive income.
6. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to owners of the parent by the weighted average number
of Ordinary Shares in issue during the year.
2018 2017
GBP'000 GBP'000
==================================================== =========== ===========
Profit attributable to owners of the parent 10,110 2,715
==================================================== =========== ===========
Weighted average number of Ordinary Shares in issue 457,207,272 463,098,526
==================================================== =========== ===========
Basic profit per share 2.21 pence 0.59 pence
---------------------------------------------------- ----------- -----------
(b) Diluted
Diluted earnings 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 one category of dilutive potential ordinary shares being share
options.
2018 2017
GBP'000 GBP'000
=================================================== =========== ===========
Profit attributable to owners of the parent 10,110 2,715
Weighted average diluted number of Ordinary Shares 461,489,617 469,343,547
=================================================== =========== ===========
Diluted profit per share 2.19 pence 0.58 pence
--------------------------------------------------- ----------- -----------
2018 2017
======================================================== =========== ===========
Weighted average number of Ordinary Shares in issue 457,207,272 463,098,526
Adjustment for:
* Assumed conversion of share awards 238,405 2,201,081
* Assumed payment of equity deferred consideration 4,043,940 4,043,940
======================================================== =========== ===========
Weighted average number of Ordinary Shares including
potentially dilutive shares 461,489,617 469,343,547
======================================================== =========== ===========
7. Dividends
On 24(th) October 2018 the Company made a distribution in specie
whereby the Company's shareholding in Renalytix AI plc, a developer
of artificial intelligence enabled diagnostics for kidney disease,
which has been floated separately from the Group, was distributed
to ordinary shareholders of the Company. The rate was one Renalytix
AI plc share for each 21.825 shares held in the company at a total
value of GBP7,027,000 (2017: nil). The fair value per EKF share was
1.5357p, which has been calculated based on the market value of the
Renalytix shares prior to the completion of the fundraising and
their flotation on the AIM market, less a discount to account for
the restrictions placed on the shares.
8. Cash generated by operations
Group
===============================
2018 2017
GBP'000 GBP'000
================================================== =============== ==============
Profit before tax 12,165 4,307
Adjustments for:
* Depreciation 1,158 1,160
* Amortisation 2,833 3,463
* Warranty claim (31) (339)
* Loss/ (profit) on disposal of fixed assets 13 (33)
* Share-based payments 939 1,510
* Escrow cancellation - (1,371)
* Profit on sale of Renalytix (6,356) -
* Fair value adjustment 42 369
- Foreign exchange (83) 233
* Net finance (income)/ costs (8) 53
* Loan write back (90) -
Changes in working capital
* Inventories (461) 306
* Trade and other receivables 11 1,535
* Trade and other payables (271) (1,075)
================================================== =============== ==============
Net cash generated by operations 9,861 10,118
-------------------------------------------------- --------------- --------------
In the statement of cash flows, proceeds from the sale of
property, plant and equipment comprise:
2018 2017
Group GBP'000 GBP'000
============================================================ ======== ========
Net book value 13 95
(Loss)/ profit on disposal of property, plant and equipment (13) 33
============================================================ ======== ========
Proceeds from disposal of property, plant and equipment - 128
============================================================ ======== ========
Non-cash transactions
The principal non-cash transactions are: the creation of
Renalytix AI plc and the subsequent distribution in specie,
movements on deferred consideration provisions; the fair value
adjustment relating to the deferred equity consideration in respect
of EKF Germany, the warranty claim, and release of accruals no
longer required.
9. Renalytix AI plc
During 2018, the Group founded Renalytix AI plc which, along
with its subsidiary company Renalytix AI Inc., were floated
separately from the Group in November 2018. The investment in
Renalytix was previously held as an asset available for sale.
Renalytix is a developer of artificial intelligence-enabled
diagnostics for kidney disease.
As part of the creation of a separate business, intangible
assets with a net value of GBP646,000 were sold to Renalytix by the
Group, and the Group's wholly owned subsidiary Renalytix AI Inc.
was sold to Renalytix AI plc, in return for shares in Renalytix AI
plc. Following these transactions, EKF's shareholding in Renalytix
comprised 20,964,295 ordinary shares.
The EKF holding was then distributed in specie to Relevant EKF
shareholders, being those on the EKF register as at the date of
record for the distribution in October 2018 at a rate of one
Renalytix AI plc ordinary share (a "RENX share") for each 21.825
EKF ordinary shares held. The fair value of the shares distributed
to Relevant EKF shareholders was calculated based on the proposed
flotation price, less a discount to account for the restrictions
placed on the shares. The discount was calculated taking into
account, amongst other factors, the 180 day lock up period, sector
volatility, and that the shares were issued pre-admission. The
total fair value of the distributed shares was calculated as
GBP7,027,000 with the profit on disposal, which has been shown as
an exceptional profit, being calculated net of expenses of
GBP25,000 and the value of the intangible asset transferred of
GBP6,356,000. Subsequent to the distribution, EKF invested GBP3.1m
in the shares of Renalytix at the same price as other new investors
and, as at the date of this announcement, holds 2,577,907 RENX
shares.
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
FR SFWESEFUSELD
(END) Dow Jones Newswires
March 13, 2019 03:01 ET (07:01 GMT)
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