TIDMEKF
RNS Number : 2950H
EKF Diagnostics Holdings PLC
24 March 2020
This announcement contains inside information
for the purposes of Article 7 of Regulation (EU) No 596/2014
(MAR)
EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Detailed trading review including COVID-19 update
Net cash levels of GBP14.3m at 20 March 2020
Current trading and cash generation continue to be robust
Significant opportunity for growth with COVID-19 manufacturing
contract
EKF Diagnostics Holdings plc (AIM: EKF), the AIM quoted
point-of-care business, provides shareholders with an update on
current trading in light of the COVID-19 pandemic, including the
strong cash position of the Group, and its continuing solid
positive cash flow. The Company also provides shareholders with a
detailed review of trading for the year ended 31 December 2019.
Due to the unprecedented practical challenges that corporate
reporters and their auditors are facing during the ongoing
Coronavirus crisis, the FCA has strongly requested that all listed
companies observe a temporary moratorium on the publication of
preliminary financial statements. As an AIM quoted company EKF is
not formally covered by this request, however the Company will be
observing this moratorium following advice from its auditors,
PricewaterhouseCoopers LLP. Whilst the detailed trading review
below provides a comprehensive review of the Company's trading
position, the statements are unaudited. Full audited Financial
Statements for the year ended 31 December 2019 will be provided as
soon as reasonably practicable.
COVID-19 update - key points
-- Contract manufacturing opportunity with Longhorn Vaccines and
Diagnostics, USA, for specimen collection tubes for COVID-19
testing - initial orders c. $1m and expected to grow
significantly
-- Robust plan in place to mitigate the effect of the disruption on the business
-- Substantial net cash balances of GBP14.3m as at close of
business on 20 March 2020 with continuing strong free cashflow
-- Demand for diabetes and haemoglobin tests remains, with
patients using these tests being in the higher risk category for
COVID-19
-- German state approval received to keep Barleben manufacturing
facility open in event of a lockdown
-- Current beneficial exchange rates as a US Dollar / Euro
denominated business, with a natural currency hedge across
operations in the UK, US and Europe
Financial Highlights for the year ended 31 December 2019
(unaudited data)
-- Revenue up 6% to GBP44.9m (2018: GBP42.5m)
-- Gross profit up 4% to GBP23.7m (2018: GBP22.7m)
-- Adjusted EBITDA* up 12% to GBP12.0m (2018: GBP10.7m)
-- Profit before tax GBP5.5m (2018: GBP12.2m; GBP5.8m excluding
exceptional gain from Renalytix AI plc spin-out)
-- Basic Earnings per share of 0.81p (2018: 2.21p), underlying
Basic Earnings per share* of 1.20p (2018: 1.01p)
-- Cash generated from operations of GBP6.1m (2018: GBP9.9m)
-- Cash at 31 December 2019 of GBP12.1m (2018: GBP10.3m), net cash of GBP11.4m (2018: GBP9.4m)
-- Maiden dividend preserved and payable to shareholders on 1 December 2020
* Excluding exceptional items and share based payments
Operational Highlights for the year ended 31 December 2019
-- McKesson OEM of DiaSpect Tm successfully launched with positive first six months of business
-- Successful completion of early stage development batches of a
bulk dietary ingredient for Ixcela, Inc.
-- Mount Sinai agreement provides EKF with advanced access to
innovative commercial opportunities
Christopher Mills, Non-Executive Chairman of EKF, commented:
"With good cash resources and a business which is growing
strongly, EKF has moved into a phase where we are confident that we
can provide an income for shareholders and the prospect of
significant upside from our relationships with MSIP and others.
Trading in 2020 to date has been satisfactory and in line with
management expectations.
"Despite these difficult times, EKF is in a very strong
position. We have a substantial net cash balance, continuing solid
positive cash flow and the business remains robust. We see
significant opportunities globally, particularly within the USA.
Being a medical device company focussing on tests monitoring
diabetes and haemoglobin, both conditions putting patients in
higher risk categories should they contract COVID-19, EKF is well
positioned to assist the medical and scientific community. "
EKF Diagnostics Holdings plc www.ekfdiagnostics.com
Christopher Mills, Non-executive Chairman Tel: +44 (0) 29 2071 0570
Julian Baines, CEO
Richard Evans, FD & COO
N+1 Singer Tel: 020 7496 3000
Aubrey Powell / George Tzimas (Corporate
Finance)
Tom Salvesen (Corporate Broking)
Walbrook PR Limited Tel: +44 (0) 20 7933 8780 or ekf@walbrookpr.com
Paul McManus / Lianne Cawthorne Mob: +44 (0) 7980 541 893 / +44 (0) 7584
391 303
About EKF Diagnostics Holdings plc ( www.ekfdiagnostics.com
)
EKF is a leading point-of-care diagnostics and central
laboratory assay manufacturer with an estimated 80,000 hemoglobin,
hematocrit, HbA1c, glucose and lactate analyzers in regular use
across more than 100 countries. EKF specializes in developing tests
for use in anemia and diabetes diagnosis and management, as well as
providing a portfolio of reagents for use in clinical chemistry
analyzers.
A presentation for investors is available to view here:
https://www.ekfdiagnostics.com/documents-reports.html
COVID-19 update
As can be seen in the detailed trading review the business
performed well in 2019. T rading in 2020 to date has been
satisfactory and in line with management expectations. We believe
the outlook for 2020 is positive for the following reasons:
1. EKF has substantial net cash balances (GBP14.3m as at 20 March 2020);
2. EKF has strong free cashflow;
3. The business remains robust due to the demand for diabetes
and haemoglobin tests, which we expect to be in part driven by the
fact that patients that need these tests are also in the at higher
risk category for contracting COVID-19; and
4. EKF benefits from the exchange rate as we are a dollar and
Euro denominated business. EKF is also able to manage currency
across its operations in the UK, US and Europe.
Production scale up for COVID-19 test component demand
EKF Diagnostics is rapidly scaling up production for the US and
globally to meet the demand of one of the core components in the
COVID-19 molecular testing supply chain, PrimeStore MTM. Sample
collection and transport is an essential part of COVID-19 testing
as PrimeStore MTM is the first and only US FDA Cleared Microbial
Nucleic Acid Storage and Transport Device and was designed for
viral pandemics. PrimeStore MTM deactivates the pathogens in the
sample, rendering them non-infectious, allowing for safe transport
and laboratory handling. Samples collected using this device can
also be maintained at ambient temperature for days, eliminating the
need for cold chain procedures, and handled at laboratories with a
lower biosafety containment rating than is otherwise required. This
has the benefit of significantly increasing the number and spread
of laboratories able to handle samples.
EKF Diagnostics is an existing contract manufacturing partner of
Longhorn Vaccines and Diagnostics LLC (LHNVD), the inventor and
owner of PrimeStore MTM. We have seen growing demand for the sample
collection device manufactured at our Boerne Texas site. Initial
purchase orders are nearing $1m and we expect that to continue to
grow significantly.
Operational mitigation
The recent COVID-19 pandemic has created uncertainty in the
market in the short term. Many countries are either closed or on
the verge of being shut down, and government action is having a
significant effect on economies across world. The eventual severity
and length of the economic disruption is impossible to forecast. We
believe we have a robust plan in place to mitigate the effect of
the disruption on the business including taking the following
actions (amongst others):
-- Organising for as many staff as possible to work from home
-- Improving our computer networking to facilitate remote working
-- Gaining designation as a company essential to basic medical
care which allows our premises to remain open even in a lockdown -
we have already gained approval from the German authorities to keep
the Barleben factory open in such circumstances
-- Improved social distancing by limiting physical meetings,
expanding flexible working, and altering production practices
-- Preparing requests for support from local authorities should we have to reduce working hours
-- Banning international travel and limiting domestic travel
-- Increasing supplier and customer contact so as to be able to
anticipate issues and react quickly
-- Increasing raw material stock holding
-- Increasing cleaning and disinfection cycles
We have insurance cover in place in case there is a loss of
business, although it cannot be guaranteed that cover will be
sufficient to protect against all eventualities.
At the date of this announcement we have seen limited disruption
to either our customer or supplier logistics (although we have
noticed some increases in the cost of airfreight). Revenue
generation from our core business has been very largely unaffected.
Indeed, we are now providing a key component into the COVID-19
testing supply chain. Nonetheless we have modelled a number of
scenarios covering different levels of significant reductions in
revenue without taking into account the benefits from any
mitigation strategies. As a result of our current strong cash
balances and robust business, we are confident that the business
can survive even catastrophic reductions in revenue for an extended
period.
Conclusion
Despite these difficult times, EKF is in a very strong position.
The Company has a substantial net cash balance, continuing solid
positive cash flow, and the business remains robust. The Company
has significant opportunities globally, particularly within the
USA. Being a medical device company focussing on tests monitoring
diabetes and haemoglobin (patients with these conditions are in a
higher risk category regarding COVID-19), EKF is well positioned to
assist the medical and scientific community.
Detailed Trading Review for the year ended 31 DECember 2019
Chairman's Statement
It gives me great pleasure to be able to report that EKF
continues to perform strongly, with excellent growth in revenues
and earnings. The core business has grown revenue at a steady rate
and adjusted earnings before interest, depreciation and
amortisation (AEBITDA) at a much faster rate.
Strategy
The core strategy of the business remains unchanged. It is
threefold:
1) to continue to build our installed base of point-of-care
analysers which then generate an ongoing stream of revenue through
the sale of proprietary consumables;
2) to supply a range of clinical chemistry reagents for use on
our own and third party analysers; and
3) to grow our contract and partnership enzyme manufacturing business.
To this core, we have added our Preferred Partnership Agreement
("PPA") with Mount Sinai Innovation Partners ("MSIP") which allows
us advanced access to innovative commercial opportunities a rising
from certain technologies managed by MSIP.
MSIP Preferred Partnership Agreement
MSIP is responsible for driving the real-world application and
commercialisation of discoveries and inventions made within the
Mount Sinai Health System ("MSHS"), New York's largest integrated
healthcare delivery system.
EKF has established a longstanding and close working
relationship with MSIP, through the highly successful spin-off of
Renalytix AI plc, the developer of artificial intelligence-enabled
diagnostics for kidney disease, made in close collaboration with
the Icahn School of Medicine at Mount Sinai ("Mount Sinai"), the
medical school of MSHS. This collaboration has already delivered
considerable value to EKF shareholders. This new agreement with
MSIP provides a framework to explore other commercial opportunities
together and to select and support pioneering medical approaches
that could make a major difference to people's lives around the
world, as well as much-needed improvements in healthcare
economics
The PPA, which is non-exclusive, provides EKF with access to
opportunities which benefit from a clinician and demand-focused
approach to developing commercially relevant healthcare products
and services, and access to deep domain expertise in clinical
disciplines and academia, commercial healthcare enterprises and
other key stakeholders in the US healthcare market.
In connection with the PPA, the Company has signed a non-binding
term sheet with MSIP, which will allow the Company to explore the
opportunity to support the licensing of technology originating from
Mount Sinai to establish a novel digital health platform for
earlier intervention in and better management of the care pathway
for patients with Inflammatory Bowel Disease ("IBD"). Better
evaluation and personalised management of IBD patients, including
the implementation of appropriate care delivery pathways in a more
timely manner than current practice allows, is expected to deliver
better healthcare outcomes (including quality of life) and on a
more cost-effective basis than current approaches.
Work on bringing this opportunity to fruition is ongoing, and we
will update shareholders with progress in the future. We anticipate
that other opportunities will flow from the PPA in due course.
Renalytix AI plc ("RenalytixAI")
In November 2018 RenalytixAI, a spin-out from EKF, was
separately floated on AIM, with 20,964,295 RenalytixAI shares
having been distributed by EKF to shareholders just prior to the
float. At 31 December 2019 the RenalytixAI share price was GBP3.64
per share or an equivalent market value of the dividend to EKF
shareholders at that date of GBP76.3m, which represents
approximately 16.8p of incremental value received per EKF
share.
In April 2019 we purchased a further 100,074 RenalytixAI shares
at a price of just under GBP1.236 pence per share, to add to the
holding acquired in the initial public offering, bringing our total
holding to 2,677,981 shares. At 31 December 2019 these were held at
a fair value of GBP9.75m. The unrealised gain of GBP6.50m on these
shares has been taken to Other Comprehensive income. While global
events since year end have reduced the RenalytixAI share price, the
company continues to make significant progress against its
objectives, which have been and continue to be delivered at a far
greater pace than that thought possible at the time of its IPO in
November 2018. The Board considers there to be very substantial
further value accretion to come from EKF's continuing investment in
RenalytixAI.
Share capital
During the year to 31 December 2019 we have not utilised the
permission we hold from shareholders to acquire shares for
cancellation. It remains our intention to do so when
appropriate.
We have continued the process of simplifying our share capital
through the cancellation of 250,000 share options at the election
of the holder, in return for a small payment.
Dividend
We are pleased to confirm that, given the progress in EKF's
business and its strong cash generation, it remains our intention
to make an inaugural dividend payment to shareholders of 1p per
ordinary share, as previously indicated. If approved by
shareholders at the Company's next annual general meeting, payment
will be on 1 December 2020 to shareholders on the register on 17
November 2020.
Cash-settled share-based incentive
The Company operates a cash-settled, share based incentive for
the Executive Directors, which is designed to pay out in the event
that the Company is acquired by a third party (an "Exit"). Since
the date of implementation of the Incentive in June 2016, the EKF
share price had nearly trebled by late 2019 and the Company has
moved from being loss making into EBITDA profitability and from
being cash consumptive to strongly cash generative. In addition,
EKF shareholders have benefitted from the additional material value
deriving from the establishment and spin-out of RenalytixAI.
Reflecting this delivery of value to shareholders by the
Executive Directors, EKF's Remuneration Committee determined that,
in the absence of any other performance-related pay mechanism, it
was appropriate to distribute, as performance-related pay, a
portion of the amount that would otherwise be payable under the
Incentive on an Exit. The determination followed consultation with
a majority of shareholders representing over 60% of the total
voting rights in the Company, who were in support of the proposed
action.
The Executive Directors each received an equal payment of
approximately GBP1.345 million in November 2019, comprising a
baseline payment for value creation up to a 20 pence share price,
plus a variable amount calculated as to 5% of the excess value over
20 pence per share, calculated using a reference share price of 27
pence.
Any future amounts payable to the Executive Directors under the
Incentive in the event of an Exit shall be reduced by all
previously paid amounts, including the payment of GBP200,000 to
each of the Executive Directors in 2017. Accordingly, the aggregate
amount payable to them under the Incentive is unchanged by the
payments described above and the total value available to
Shareholders on an Exit will be unaffected. The Remuneration
Committee considers that the remaining unpaid amounts under the
incentive continue to provide strong motivation to the Executive
Directors, who will receive a further potential variable reward in
the event of an Exit, equal to 5% of the excess value obtained over
27 pence per share.
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
All Board members have served throughout the year. The Board
continues to believe that the current make-up of the Board is
appropriate.
We have adopted the corporate governance code issued by the
Quoted Company Alliance. Further details of compliance are found in
the Corporate Governance Statement and on the Company's
website.
Outlook
With good cash resources and a business which is growing
strongly, EKF has moved into a phase where we are confident that we
can provide an income for shareholders and the prospect of
significant upside from our relationships with MSIP and others.
Trading in 2020 to date has been satisfactory and in line with
management expectations.
I would also like to remind everyone that despite these
difficult times EKF is in a very strong position. We have a
substantial net cash balance, continuing solid positive cash flow,
and the business remains robust. We see significant opportunities
globally, particularly within the USA. Being a medical device
company focussing on tests monitoring diabetes and haemoglobin,
both conditions putting patients in higher risk categories for
contracting COVID-19, EKF is well positioned to assist the medical
and scientific community.
We have taken stringent steps to protect our supply chain, build
inventory, and most importantly we have received German state
approval to keep our Barleben manufacturing facility open in event
of a lockdown.
Christopher Mills
Non-executive Chairman
24 March 2020
Chief Executive's Review
Review of 2019
2019 has seen the Company continue its momentum by delivering on
its strategic goals and, as mentioned above, the Board is confident
that this progress will continue in 2020 and beyond. F urther
upside is expected from the OEM contract with McKesson-Surgical
Inc. for the distribution of DiaSpect Tm in the US, the enzyme
manufacturing business with Oragenics, Inc. and increased
manufacture of the Longhorn PrimeStore MTM sample collection
device.
We are excited by the possibilities being opened to us through
our non-exclusive Preferred Partnership Agreement with Mount Sinai
Innovation Partners, details of which are described in the
Chairman's Statement.
Operations
Point-of-care
i. Haematology
Haematology sales have risen very slightly over 2018. Hemo
Control sales fell due to the completion of Pakistan, Saudi and
Tanzanian anaemia screening tenders in 2018.
This was offset however by growth through EKF's private label
distribution agreement with McKesson for DiaSpect Tm. It is sold in
the US by McKesson under its own branded line, as the McKesson
Consult(R) Hb analyser. The agreement follows US Food and Drug
Administration 510(k) clearance and CLIA waiver for the DiaSpect Tm
in April 2018. The full launch of the McKesson Consult(R) Hb
analyser took place in April 2019. Initial sales have been
encouraging. We have also seen significant haematology sales in
Peru and Egypt.
ii. Diabetes
From 2019 we are reporting sales of <BETA>-HB products
under diabetes rather than Central Laboratory as we consider
<BETA>-HB to be part of our diabetes portfolio.
Sales of our Diabetes products increased by 9%. Sales of
<BETA>-HB products improved by 18%, with the majority of
sales coming from the USA. Diabetes sales have also been driven by
increased sales of Quo-Test where we are gaining traction in the UK
and seeing continued growth in APAC. Quo-Lab sales were impacted by
a technical issue with reagents which has now been solved.
We are continuing development of the new Biosen R-Line range, a
research use only version of our successful analyser for use in
non-medical applications.
iii. Central Laboratory and Life Sciences
Sales in this market (which now exclude <BETA>-HB) have
increased by 15%.
Sales to Oragenics, Inc. (for the outsourced manufacture of the
enzyme for its Lantibiotic product) have been the main contributor
of growth in the year, with Life Sciences revenues up 20% as a
result. With our enzyme facility in Elkhart, USA, now operating at
full capacity we have commenced the work necessary to bring our new
South Bend facility into operation. We have also successfully
completed early stage development batches of a bulk dietary
ingredient for Ixcela, Inc.
Since the period end, we have released a new addition to our
Diabetes Care portfolio in the US. The STAT-Site WB is a handheld
dual-use whole blood <BETA>-ketone and glucose meter for
professional use in the management of diabetes. The new analyzer is
FDA CLIA-waived and can be used in point-of-care and Certificate of
Waiver settings, such as physicians' offices, clinics and other
non-traditional laboratory locations.
We have also launched our new Glycated Albumin liquid reagent
product in the USA. In addition, we have successfully supplied the
Jordanian Army with 26 Altair Clinical Chemistry analysers.
iv. Other
This category includes sales of a number of products including
our Lactate Scout sports medicine product and other diagnostic
tests, the most important of which is for pregnancy. Sales have
reduced because of higher shipping charges.
Regulatory Update
Regulatory pressures in diagnostics continue to grow and we are
therefore adding additional resources to our regulatory team to
address this. In particular, the new requirements of the In Vitro
Diagnostic Regulation (IVDR) in Europe place a significant
additional burden on all IVD manufacturers and must be in place by
May 2022.
Summary
We have not yet seen any material disruption to our business as
a result of the COVID-19 pandemic. At this stage, it is difficult
to assess reliably whether there will be any material disruption in
the future, however we continue to monitor the situation closely.
As mentioned in the Chairman's statement, we have comprehensive
plans in place and we are fortunate that EKF has significant cash
resources available. In addition, there will be an increased
reliance on diabetes and haemoglobin testing throughout this year,
as well as the PrimeStore MTM manufacturing opportunity which
together have the potential to ameliorate or even counteract the
possible effects of COVID-19 on other parts of our business.
Absent such matters which are outside our control, we have a
growing business built on a good quality product portfolio which
meets a broad range of medical needs in a significant number of
countries worldwide. We remain very confident in the Group's future
and its prospects for continued growth this year and beyond.
Julian Baines
Chief Executive Officer
24 March 2020
Finance Director's Review
Full Financial Statements for the year ended 31 December 2019
will be provided as soon as reasonably practicable, however the
information below provides further details of the financial
performance of the business over this period. Whilst the Board has
approved the statements below, investors should note that these do
not constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006.
Revenue
Revenue for 2019 was GBP44.9m (2018: GBP42.5m), which is an
increase of 6%. At constant exchange rates, revenue for the year
would have been 1% lower, so organic growth is over 5%.
Revenue by disease state, which is presented for illustrative
purposes only, is as follows:
2019 2018
GBP'000 GBP'000 +/- %
------------------------- ------------- ------------- ----------
Hematology 13,808 13,728 +1%
Diabetes Care 20,607 18,899 +9%
Central Laboratory 6,135 5,353 +15%
Other 4,367 4,563 (4%)
------------------------- ------------- ------------- ----------
Total 44,917 42,543 +6%
------------------------- ------------- ------------- ----------
In this presentation, sales of <BETA>-HB of GBP9.4m (2018:
GBP7.4m) have been reclassified from Central Laboratory to
Diabetes.
Gross profit
Gross profit is GBP23.7m (2018: GBP22.7m), which represents a
gross margin percentage of 52.8% (2018: 53.3%). The reduced gross
margin was largely due to higher than usual releases of inventory
provisions during 2018.
Administration costs and research and development
Administration costs have increased to GBP18.3m (2018:
GBP10.6m). The biggest factor was the effect of exceptional items,
which were strongly positive in 2018. The most significant
exceptional item in 2018 was the substantial gain made on the
Group's investment in Renalytix AI plc as a result of its
successful separate flotation. The revaluation of Renalytix shares
to their fair value in 2019 is recognised through other
comprehensive income. An additional factor was the revaluation of
the share-based payment liability in 2019 as a result of the higher
share price of EKF. Excluding the effect of exceptional items and
share based payments, administration costs increased from GBP16.1m
in 2018, to GBP16.5m in 2019.
Research and development costs included in administration
expenses were GBP2.3m (2018: GBP1.6m). A further GBP0.5m was
capitalised as an intangible asset, resulting from our development
work to broaden and improve our product portfolio, bringing gross
R&D expenditure for the year to GBP2.8m, an increase from the
expenditure in 2018 which was GBP2.2m.
The charge for depreciation of fixed assets and amortisation of
intangible assets increased to GBP4.4m (2018: GBP4.0m).
Operating profit and adjusted earnings before interest, tax,
depreciation and amortisation
The Group generated an operating profit of GBP5.8m (2018:
GBP12.2m). This again reflects the significant exceptional gain on
Renalytix and other items in 2018. 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 as the Board
believes it gives a clearer comparison of the operating performance
between periods. In 2019 we achieved adjusted EBITDA of GBP12.0m
(2018: GBP10.7m), an increase of 12.5%. 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
GBP2.1m (2018: GBP0.9m), and exceptional profits of GBP0.3m (2018:
GBP6.5m). IFRS 16 "Leases", which has been introduced in the Group
this year has the effect of moving GBP0.3m into adjusted EBITDA
while having no effect on unadjusted earnings. The increase in
adjusted EBITDA of GBP1.3m would be higher by GBP0.1m without the
effect of exchange rates, with GBP1.1m
therefore being attributable to improved underlying performance,
excluding the effect of the introduction of IFRS 16. This new
accounting standard has no effect on the reporting of cashflow.
Finance costs
Net finance costs have increased to GBP0.27m (2018: GBP0.03m).
While interest costs on borrowings have continued to reduce, the
main charge results from an increase in the fair value of deferred
consideration.
Tax
There is an income tax charge of GBP1.6m, a small decrease from
the prior year charge (2018: GBP1.9m). The charge is lower than
would have been expected largely because of tax savings in the USA
offset by losses in the UK for which a deferred tax asset has not
been recognised as the likely timing of recovery is considered too
remote.
Balance sheet
Property plant and equipment
Additions to fixed assets were GBP1.5m (2018: GBP1.2m). 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.
Right-of-use assets
As a result of the implementation of IFRS 16 "Leases" we
recognised GBP0.7m of right-of-use assets.
Intangible assets
The carrying value of intangible assets has continued to fall,
from GBP41.8m in 2018 to GBP37.8m as at 31 December 2019. This is
largely the result of the annual amortisation charge.
Investments
Although EKF's pre spin-out shareholding in Renalytix AI plc was
distributed to EKF shareholders in October 2018, EKF participated
in the Renalytix AI initial public offering fund raising acquiring
2,577,907 ordinary shares at a cost of GBP1.21 each. Subsequently
in April 2019, EKF acquired a further 100,074 ordinary shares in
the market at a cost of approximately GBP1.236 per share. The
resulting shareholding in Renalytix of 2,677,981 shares represents
4.51% of their share capital. As Renalytix is an AIM quoted
business, our shares are held at "fair value" being the quoted
middle market price, with any gain or loss being taken through
Other Comprehensive Income in accordance with IFRS 13. In the event
of an outright sale of this investment, a discount will apply.
Deferred consideration
The remaining deferred consideration of GBP1.4m (2018: GBP1.1m)
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 2020.
Cash and working capital
Despite the performance related bonuses paid to the directors of
the company of approximately GBP2.7m, net cash has increased from
GBP9.4m to GBP11.4m. Gross cash has increased to GBP12.1m (2018:
GBP10.3m). Borrowings, which were mainly used to fund a new
building at our plant in Barleben, Germany, are reducing over the
loan period to 2023.
Inventory has remained largely static at GBP6.1m in spite of
higher revenue.
Richard Evans
Finance Director and Chief Operating Officer
24 March 2020
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END
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