TIDMSUN
RNS Number : 5232S
Surgical Innovations Group PLC
12 March 2019
Surgical Innovations Group plc
("SI" or the "Group")
Final Results
Audited results for the year ended 31 December 2018
Second half recovery delivered
Surgical Innovations Group plc (AIM: SUN), the designer,
manufacturer and distributor of innovative medical technology for
minimally invasive surgery, reports a strong second half and
financial results for the year ended 31 December 2018 in line with
market expectations.
First half results had been constrained by reduced activity
levels in NHS surgery and by the temporary loss of CE mark on a key
supplier's product. However, the strong rebound expected in the
second half has been delivered. The Group now looks forward to
further progress in 2019 under the leadership of newly appointed
CEO, David Marsh.
Financial Highlights:
-- Revenues up 25% to GBP10.97m (2017: GBP8.75m)
-- Underlying organic sales growth (excluding 2017 Elemental acquisition) of 12%
-- Gross margin steady at 42.6% (2017: 42.5%)
-- Adjusted* EBITDA up 6% to GBP2.36m, (2017: GBP2.22m)
-- Adjusted* operating margin up to 13.9% (2017: 13.0%)
-- Adjusted* PBT up 30% to GBP1.43m (2017: GBP1.10m), reported
PBT up 40.5% to GBP0.52m (2017: GBP0.37m)
-- Adjusted* Basic EPS up 10.5% to 0.21 pence (2017: 0.19
pence), reported EPS of 0.09 pence (2017: 0.08 pence)
-- Cash generated from operations of GBP1.65m (2017: GBP1.61m)
-- Closing net cash of GBP0.38m (2017: net debt of GBP0.73m)
* Adjusted for exceptional costs, amortisation relating to
acquisition, and share based payment costs.
Chairman, Nigel Rogers, said: "I am pleased to report that the
anticipated sharp recovery in performance in the second half of the
year has been achieved, and the Group delivered strong results for
the year. The market share momentum we achieved in the second half
of the year has carried on into 2019, and we are confident about
the outlook for the full year.
"The integration of Elemental Healthcare into the Group has been
completed, paving the way for a new management structure with
additional capacity to take the Group's business to the next
level.
"We have made contingency arrangements in the event that the UK
exits the EU on 29 March 2019 without reaching an appropriate
withdrawal agreement, although we remain hopeful that these
precautions will be rendered unnecessary."
For further information please contact:
Surgical Innovations Group plc www.sigroupplc.com
Nigel Rogers, Chairman Tel: 0113 230 7597
David Marsh, CEO
Melanie Ross, CFO
N+1 Singer (NOMAD & Broker) Tel: 020 7496 3000
Richard Lindley
Rachel Hayes
Walbrook PR (Financial PR & Investor Tel: 020 7933 8780 or si@walbrookpr.com
Relations)
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391303
Notes for editors:
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. We 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 and management
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.
The integration of Elemental Healthcare (acquired by the Group
on 1 August 2017) is now complete. David Marsh, a founder director
of Elemental, was appointed CEO in March 2019, and is supported by
Melanie Ross (CFO) and Adam Power (Group Development Director).
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
Chairman's Statement
I am pleased to report that the anticipated sharp recovery in
performance in the second half of the year has been achieved, and
the Group delivered strong results for the year. The integration of
Elemental Healthcare into the Group has been completed, paving the
way for a new management structure with additional capacity to take
the Group's business to the next level.
Financial Overview
Revenue for the year increased by 25% to GBP10.97m (2017:
GBP8.75m). Underlying revenue growth of 12%, which is a like for
like comparison of revenue removing the effect of revenue from the
acquisition of GBP3.4m (2017: GBP2.0m), was ahead of the industry
average.
Revenue from SI Brand products accounted for a major part of the
increase in revenue, when taking into consideration the full year
effect of the acquisition of Elemental Healthcare in August 2017.
There was a slow start to the year in the UK NHS, and a hiatus in
the supply of a key distribution product, Cellis, for much of the
year, which has now been resolved. There were also headwinds from
pricing pressure from customers in some product areas, which were
countered by competitive pricing, resulting in higher sales volume
without sacrificing gross margin.
The resultant growth of Adjusted EBITDA to GBP2.36m (2017:
GBP2.22m), an increase of 6.3%, was in line with the Board's
expectations, and Adjusted Profit Before Taxation at GBP1.43m
(2017: GBP1.10m) is ahead as a consequence of a reduced charge
relating to the amortisation of capitalised development costs.
Cash generation was once again robust, leading to the closing
balance sheet showing net cash of GBP0.38m after eliminating the
net debt position of GBP0.73m incurred on the acquisition of
Elemental Healthcare last year. This leaves the Group ideally
placed to invest in further business and product improvements, and
to seek further acquisition opportunities.
Management
It has been more than three years since my appointment as
Executive Chairman in October 2015. At that time, Surgical
Innovations (SI) was very early in its recovery from a challenging
turnaround led by Melanie Ross, and in need of new direction.
The addition of Elemental Healthcare (Elemental), and its former
owners, David Marsh and Adam Power, to the combined Group in August
2017 was an essential first step to building a significantly larger
entity. The combination brought together the design and
manufacturing pedigree of SI and the progressive commercial ideas
and contacts of Elemental.
The time is now appropriate to build on the executive talent in
the business, and enable a positive change of grip at the helm. As
previously announced, at Group Board level, David Marsh has been
appointed CEO, supported by Melanie Ross as CFO, and Adam Power as
Group Development Director. I look forward to working closely with
David and the team as Non-Executive Chairman. Melanie will lead the
Group's acquisition activity in addition to her responsibilities
for Group finance and investor relations.
The SI site at Leeds will be led by a newly appointed Operations
Director, Alex Hogg who will also report to David, following a
suitable handover period from Melanie.
Brexit Planning
The Board continues to follow progress in Brexit negotiations,
and we have made contingency arrangements in the event that the UK
exits the EU on 29 March 2019 without reaching an appropriate
withdrawal agreement.
In addition to the measures taken previously, we have recently
announced that all of the Company's product certifications have
been successfully reassigned from BSI Notified Body 0086 (UK) to
BSI Netherlands Notified Body 2797. We have received assurances
that this will facilitate uninterrupted regulatory clearance both
in the EU and in the UK as a third country if required. In
addition, we have appointed an EU representative to give access to
simplified customs arrangements and expect to receive confirmation
of Approved Economic Operator Status before 29 March 2019.
Finally, we have implemented contingency plans to carry
additional inventories of components, sub-assemblies and
distribution products in our UK facilities, whilst shipping buffer
stock to our EU distributors. Whilst there can be no guarantee of a
complete success, we are satisfied that we have taken the necessary
precautions to ensure business continuity. We anticipate that the
additional working capital investment incurred in inventory will be
unwound prior to reporting our interim results for the six months
to 30 June 2019.
We remain hopeful that these precautions are rendered
unnecessary and that, as a minimum, trade with EU entities will be
unaffected for the duration of a transitional period.
Acquisition activity
We have evaluated a number of potential acquisition targets
during the year, and have taken a select few that appear to meet
our strict criteria forward for more detailed consideration.
Ultimately, none of these have progressed to an advanced stage for
a variety of sound reasons. We continue to seek businesses which
offer complementary opportunities to accelerate the rate of growth
of the Group's activities, either through new products and/or
geographies. Indeed, the recent changes to our management structure
are partly designed to increase potential deal flow and offer
greater flexibility in future integration of one or more suitable
targets, should they arise.
Current trading and outlook
Revenue for the current year to date is well ahead of the
corresponding period last year. The benefits of the market share
momentum we achieved in the second half of the year have carried on
into 2019, both from SI Brand products and those of our OEM
partners and we are confident about the outlook for the full year.
Furthermore, we have recently entered into UK distribution
agreements for new product lines, including the Dexter robot by
DistalMotion, due for launch later this year.
Looking to the future, there are also a number of exciting
projects in the development pipeline. These comprise not only
further line extensions to the Elite range, but also a range of
innovative new devices offering unique benefits to surgeons which
we hope to begin launching by the end of the year.
Accordingly, we look to the future with confidence and keen
enthusiasm.
Nigel Rogers
Non-Executive Chairman
12 March 2019
Operating and Financial Review
The Group considers the key performance indicators of the
business to be:
2018 2017 Target Measure
Underlying Revenue Adjusted for the
Growth effect of acquisition 12% 8% >8%
------------------------ --------- ----------- ---------------
Gross profit /
Gross Profit Margin revenue 42.6% 42.5% >40%
------------------------ --------- ----------- ---------------
Adjusted Operating Adjusted operating
Margin profit / revenue 13.9% 13.0% >12%
------------------------ --------- ----------- ---------------
Cash generated
from operations
/ adjusted operating
Cash conversion profit 118% 167% >85%
------------------------ --------- ----------- ---------------
Net Cash/(Net Debt) Cash less debt GBP0.38m (GBP0.73m) N/A
------------------------ --------- ----------- ---------------
Reconciliation of adjusted KPI measures;
EBITDA* Operating Profit Profit before
taxation
As reported GBP2.24m GBP0.62m GBP0.52m
--------- ----------------- --------------
Amortisation of intangible - GBP0.79m GBP0.79m
acquisition costs
--------- ----------------- --------------
Share based payments GBP0.12m GBP0.12m GBP0.12m
--------- ----------------- --------------
Adjusted Measure GBP2.36m GBP1.53m GBP1.43m
--------- ----------------- --------------
*EBITDA is defined as earnings before interest, taxation,
depreciation and amortisation. EBITDA is calculated as operating
profit of GBP0.62m adding back depreciation GBP0.48m and
amortisation GBP1.14m.
EPS
Basic EPS 0.09p
---------
Profit attributable to shareholders GBP0.73m
---------
Add: Share based payments GBP0.12m
---------
Add: Amortisation of intangible GBP0.79m
acquisition costs
---------
Adjusted profit attributable GBP1.64m
to shareholders
---------
Adjusted EPS 0.21p
---------
Adjusted KPIs are used by the Group to understand underlying
performance and exclude items which distort comparability, as well
as being consistent with broker forecasts and measures. The method
of adjustments is consistently applied but may not be comparable
with those used by other companies.
Revenue and margins
Revenues increased by 25% to GBP10.97m (2017: GBP8.75m). The
increase in underlying revenue, adjusted for the effect of the
acquisition of Elemental Healthcare in August 2017, was
approximately 12%. Gross margins increased by 0.1% to 42.6% of
revenue (2017: 42.5%).
GBPm 2018 2017 % change
SI Brand 6.09 5.35 +14%
====== ====== ==========================
Distribution 3.04 1.80 +69%
====== ====== ==========================
OEM 1.84 1.60 +15%
====== ====== ==========================
Total 10.97 8.75 +25%
====== ====== ==========================
Revenues from the sale of Surgical Innovations Brand products
increased by 14% during the year, including the effect of a full
year of direct sales in the UK market. Sales in Continental Europe
showed a 12% reduction in the year, resulting from increased
competition in certain product categories from low cost imports.
Measures have been taken to combat these pressures through the
development of lower cost alternatives, and we expect to recover
ground in the current year.
Sales in the US were flat overall, however the 25% reduction
reported in the first half of the year was countered by a 31%
increase in the second half. As in Europe, this was mainly a result
of competitive pressure, and the actions taken in response were
successful. We expect further progress in the coming year.
SI Brand revenues from the Rest of the World was up by 64%, with
the simplification of our sales structure in Asia and the launch of
new products driving strong growth.
OEM revenues grew strongly in the year to GBP1.84m (2017:
GBP1.60m), with particularly strong sales in the precision
engineering (non-medical) arena where the initial production orders
under the contract started in 2017 completed in the early part of
the year. Further sales of the device were delivered during the
second half, and this is expected to continue into the first half
2019, with no current visibility of longer term requirements.
OEM medical revenues were lower than the prior year due to the
impact of a product redesign for a major customer. As expected,
sales were stronger in the second half of the year following
relaunch of the new version. We expect to experience further growth
in the coming year.
Distribution sales grew 69% year on year which reflected a full
year of revenue in the current year, following the acquisition of
Elemental in August 2017. Underlying sales of distributed products
saw a reduction of approximately 19% (comparing the same five month
periods) as a consequence of temporary disruption of supply of key
products throughout the year, as previously announced.
Adjusted EBITDA
Adjusted EBITDA is a measure of the business performance. The
Group uses this as a proxy for understanding the underlying
performance of the Group. This measure also excludes the items that
distort comparability including the charge for share based payments
as this is a non-cash expense normally excluded from market
forecasts.
Adjusted EBITDA increased 6% to GBP2.36m (2017: GBP2.22m),
mainly as a result of improved gross margin. Operating profit
increased to GBP0.62m (2017 restated: GBP0.41m), increasing
adjusted operating margin (before deduction of exceptional costs
and amortisation relating to acquisition and share based payments)
to 13.9% (2017: 13%).
Excluding acquisition related amortisation costs in the year,
operating expenses increased to GBP3.54m which was mainly
attributable to the full year impact of Elemental overheads, the
full year impact of increasing the regulatory and quality headcount
and an increase in the charge of share based payments.
Capitalised development costs at 31 December 2018 had increased
to GBP1.27m (2017: GBP1.23m). Research and development expenditure
continues to be incurred on both the development of new products
launched in the year and to be launched in the coming year, and in
projects to underpin the existing product portfolio.
Capital expenditure on tangible assets continued to reflect a
policy of required replacement only during the year at GBP0.09m
(2017: GBP0.25m). Whilst there are no major capex plans currently
in place, there are plans to make several improvements to the
manufacturing facilities in Leeds in 2019, as well as review the
suitability of the manufacturing assets for the Group's future
strategic plans and this may result in modest increases in
expenditure in the year.
Interest on bank and finance lease obligations for 2018 resulted
in interest payable of GBP0.1m (2017: GBP0.04m) reflecting the
expected increase of the debt finance undertaken for the
acquisition of Elemental Healthcare in 2017. All finance lease
obligations ended in the year, but as these were minimal, costs are
expected to be broadly the same in 2019.
Following a further review of the intangible asset arising on
the acquisition of Elemental Healthcare, which related to the
supplier base, an adjustment was made which affected the
amortisation charges in both the current and financial year 2017.
The intangible asset will still be fully amortised by 2020 with the
charges in each year being:
Original Restated
Year GBP000's GBP000's
--------- ---------
2017 GBP327 GBP498
--------- ---------
2018 GBP446 GBP788
--------- ---------
2019 GBP351 GBP351
--------- ---------
2020 GBP163 GBP163
--------- ---------
Due to the change in the value of the intangible asset, goodwill
was revised to GBP8.18m (previously GBP8.59m). This has been
subject to an impairment review and the Directors are satisfied
that no impairment charge should be recorded.
The Group recorded a corporation tax credit of GBP0.03m (2017:
charge of GBP0.04m) and a deferred tax credit of GBP0.18m (2017:
GBP0.16m). The tax credit represents an enhanced Research and
Development claim in respect of 2016, electing to exchange tax
losses for cash refunds. The tax charge on Elemental Healthcare has
been relieved through Group losses. Overall the Group continues to
hold substantial tax losses on which it holds a cautious view. The
Group have chosen not to recognise those losses fully. During the
year the Group submitted an enhanced Research and Development claim
in respect of 2017. This claim had not been settled by the year end
and so no refund was recognised in the accounts. This claim is
expected to be significantly less than the claims recognised in
2017 due to the difference in available losses to exchange in the
comparative period.
Trade receivables were higher at the year end than 2017 which
reflected the strong sales in the final months of the year. This is
due to be collected in line with Group commercial arrangements in
the first quarter of 2019. This was further evidenced by the
decrease in stock by the end of the year to GBP2.08m (2017:
GBP2.47m). Due to increased sales demand, stock holdings are
expected to increase from this level in 2019 to ensure safety
stocks support incremental customer requirements. Trade creditors
increased only slightly over the same period, which reflected the
Group's continued approach towards strong cost control.
The Group generated cash from operations of GBP1.65m (2017:
GBP1.61m) at a conversion rate of operating profit at 118% (2017:
167%) primarily as a result of the working capital movements
described above. The Group closed the year with net cash balances
of GBP0.38m compared with opening net debt of GBP0.73m.
Melanie Ross
Chief Financial Officer
12 March 2019
Consolidated statement of comprehensive income
for the year ended 31 December 2018
Restated*
2018 2017
Notes GBP'000 GBP'000
---------------------------------------------------------- ----------- --------------- ----------------
Revenue 2 10,969 8,752
Cost of sales (6,297) (5,033)
========================================================== =========== =============== ================
Gross profit 4,672 3,719
Other operating expenses (4,327) (3,334)
Other Income 275 25
----------- --------------- ----------------
Adjusted EBITDA 2,364 2,221
Amortisation and impairment of intangible assets (1,143) (1,021)
Depreciation of tangible assets (481) (556)
Exceptional items - (216)
Share based payments (120) (18)
---------------------------------------------------------- ----------- --------------- ----------------
Operating profit 620 410
Finance costs (105) (39)
Finance income - -
========================================================== =========== =============== ================
Profit before taxation 515 371
Taxation credit 210 117
========================================================== =========== =============== ================
Profit and total comprehensive Income 725 488
========================================================== =========== =============== ================
Earnings per share, total and continuing
Basic 3 0.09p 0.08p
Diluted 3 0.09p 0.07p
*Refer to note 5
The Consolidated statement of comprehensive income above
relates to continuing operations.
Adjusted EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, share based payments and
exceptional items.
Consolidated statement of changes in equity
for the year ended 31 December 2018
Share Share Capital Merger Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ----------------- ------- ------- ---------- ------------------
Balance as at 1 January 2017 5,334 2,339 329 - (2,164) 5,838
Employee share-based payment
options - - - - 18 18
Issue of share capital 2,492 3,717 - 1,250 - 7,459
Attributable costs for issue
of Equity - (225) - - - (225)
----------------- ------- ------- ---------- ------------------
Total - transactions with
owners 2,492 3,492 - 1,250 18 7,252
Profit and total comprehensive
income for the period restated* - - - - 488 488
--------------------------------- ------------ ----------------- ------- ------- ---------- ------------------
Balance as at 31 December
2017 restated 7,826 5,831 329 1,250 (1,658) 13,578
Employee share-based payment - - - - 120 120
Total - transactions with
owners - - - - 120 120
Profit and total comprehensive
income for the period - - - - 725 725
--------------------------------- ------------ ----------------- ------- ------- ---------- ------------------
Balance as at 31 December
2018 7,826 5,831 329 1,250 (813) 14,423
--------------------------------- ------------ ----------------- ------- ------- ---------- ------------------
*Refer to note 5
Consolidated balance sheet
at 31 December 2018
2018 Restated*
2017
GBP'000 GBP'000
==================================================== ============= ===================
Assets
Non-current assets
Property, plant and equipment 934 1,328
Intangible assets 10,191 10,936
Deferred tax asset 91 62
11,216 12,326
==================================================== ============= ===================
Current assets
Inventories 2,083 2,467
Trade and other receivables 2,961 1,964
Amount due from associate 79 -
Cash at bank and in hand 2,491 1,709
===================================================== ============= ===================
7,614 6,140
==================================================== ============= ===================
Total assets 18,830 18,466
===================================================== ============= ===================
Equity and liabilities
Equity attributable to equity holders of the parent
company
Share capital 7,826 7,826
Share premium account 5,831 5,831
Capital reserve 329 329
Merger reserve 1,250 1,250
Retained earnings (813) (1,658)
===================================================== ============= ===================
Total equity 14,423 13,578
===================================================== ============= ===================
Non-current liabilities
Borrowings 1,820 2,125
Deferred tax liabilities 98 248
Dilapidation provision 165 165
===================================================== ============= ===================
2,083 2,538
==================================================== ============= ===================
Current liabilities
Trade and other payables 1,556 1,580
Obligations under finance leases - 16
Accruals 481 454
Borrowings 287 300
===================================================== ============= ===================
2,324 2,350
==================================================== ============= ===================
Total liabilities 4,407 4,888
===================================================== ============= ===================
Total equity and liabilities 18,830 18,466
----------------------------------------------------- ------------- -------------------
*Refer to note 5
Consolidated cash flow statement
for the year ended 31 December 2018
Restated*
2018 2017
GBP'000 GBP'000
------------------------------------------------------------ ------- ------------
Cash flows from operating activities
Profit after tax for the year 725 488
Adjustments for:
Taxation (210) (117)
Finance income - -
Finance costs 89 39
Non-cash exceptional items - 8
Depreciation of property, plant and equipment 481 556
Amortisation and impairment of intangible assets 1,143 1,021
Share-based payment charge 120 18
Gain on disposal of fixed assets 6 -
Foreign exchange 48 29
Equity share options issued - (32)
Decrease/(increase) in inventories 384 (238)
(Increase)/decrease in current receivables (1,027) 263
Increase/(decrease) in payables 48 (131)
------------------------------------------------------------- ------- ------------
Cash generated from operations 1,807 1,904
Taxation paid (68) (206)
Interest paid (89) (90)
------------------------------------------------------------- ------- ------------
Net cash generated from operating activities 1,650 1,608
------------------------------------------------------------- ------- ------------
Cash flows from investing activities
Payments to acquire property, plant and equipment (88) (250)
Acquisition of intangible assets (398) (381)
Consideration for Surgical Dynamics assets and laparascopic
business - (144)
Acquisition of Elemental Healthcare net of cash
acquired - (7,135)
Deal costs - (431)
------------------------------------------------------------- ------- ------------
Net cash used in investment activities (486) (8,341)
------------------------------------------------------------- ------- ------------
New bank borrowings - 2,500
Repayment of bank loan (318) (75)
Net proceeds from issue of share capital - 5,307
Repayment of obligations under finance leases (16) (36)
------------------------------------------------------------- ------- ------------
Net cash (used in)/generated from financing activities (334) 7,696
------------------------------------------------------------- ------- ------------
Net increase in cash and cash equivalents 830 963
Cash and cash equivalents at beginning of year 1,709 775
Effective exchange rate fluctuations on cash held (48) (29)
------------------------------------------------------------- ------- ------------
Cash and cash equivalents at end of year 2,491 1,709
============================================================= ======= ============
Notes to the consolidated financial statements
1. Group accounting policies under IFRS
(a) Basis of preparation
Surgical Innovations Group PLC (the "Company") is a public AIM
listed company incorporated, domiciled and registered in England in
the UK. The registered number is 02298163 and the registered
address is Clayton Wood House, 6 Clayton Wood Bank, Leeds, LS16
6QZ.
These financial statements have been prepared on the basis of
the International Financial Reporting Standards (IFRS) accounting
policies set out below. The financial statements have been prepared
in accordance with IFRS as adopted for use by the European Union,
including IFRIC interpretations, and in line with those provisions
of the Companies Act 2006 applicable to companies reporting under
IFRS. The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process
of applying the Group's accounting policies. The financial
statements have been prepared under the historical cost convention,
are presented in Sterling and are rounded to the nearest
thousand.
The financial information set out in this preliminary
announcement does not constitute the Company's Consolidated
Financial Statements for the financial years ended 31 December 2018
or 31 December 2017 but are derived from those Financial
Statements. Statutory Financial Statements for 2017 have been
delivered to the Registrar of Companies and those for 2018 will be
delivered following the company's AGM. The auditors, BDO LLP, have
reported on those financial statements. Their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under Section 498(2) or (3) of the Companies Act 2006 in
respect of the financial statements for 2017 or 2018.
The Statutory accounts will be available on the Company's
website at www.siggroupplc.com with effect from 12 March 2019 and
will be posted to selected shareholders at the end of April.
Shareholders wishing to request a copy can contact the Company's
registered office.
The Directors have considered the available cash resources of
the Group and its current forecasts and are satisfied that the
Group has adequate resources to continue in operational existence
and that there are no material uncertainties casting doubt over the
going concern status of the Group. Accordingly, the financial
statements are prepared on a going concern basis.
New standards and amendments to standards adopted in the
year
During the year the Group adopted the following standards
effective from the 1 January 2018. The Group has applied these
standards in the preparation of the financial statements, and has
not adopted any new or amended standards early:
IFRS 15, 'Revenues from Contracts with Customers' is effective
for periods beginning on or after 1 January 2018.
IFRS 9 'Financial instruments' replaces IAS 39 'Financial
instruments: Recognition and Measurement'. The standard is
effective for accounting periods beginning on or after 1 January
2018.
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective and, in
some cases, have not yet been adopted by the EU. The Directors do
not expect that the adoption of these standards will have a
material impact on the financial statements of the Group in future
periods, except for IFRS 16.
IFRS 16, 'Leases' The standard is effective for periods
beginning on or after 1 January 2019 and is EU endorsed.
The 2017 financial statements have been re-presented to include
the dilapidation provision as a non-current liability, which was
previously presented within accruals.
2. Segmental reporting
Disaggregation of revenue
The Group has disaggregated revenues in the following table:
Year ended 31 December 2018 SI Brand Distribution OEM Total
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
Rest of World 1,345 - - 1,345
---------------------------- ------------ ------------ -------- --------
6,088 3,037 1,844 10,969
============================ ============ ============ ======== ========
Year ended 31 December 2017 SI Brand Distribution OEM Total
GBP'000 GBP'000 GBP'000 GBP'000
============================ ======== ============ ======== ========
United Kingdom 1,384 1,802 1,151 4,337
Europe 1,527 - - 1,527
US 1,616 - 450 2,066
Rest of World 822 - - 822
---------------------------- -------- ------------ -------- --------
5,349 1,802 1,601 8,752
============================ ======== ============ ======== ========
Revenues are allocated geographically on the basis of where
revenues were received from and not from the ultimate final
destination of use. During 2018 GBP1,177,000 (10.7%) of the Group's
revenue depended on one distributor in the SI Brand segment (2017:
GBP1,238,000 (14.1%)).
Sales of goods were GBP10,325,000 (2017: GBP8,560,000) and sales
relating to services in the UK were GBP644,000, (2017:192,000).
3. Earnings per ordinary share
Basic earnings per ordinary share
The calculation of basic earnings per ordinary share for the
year ended 31 December 2018 was based upon the profit attributable
to ordinary shareholders of GBP725,000 (2017 restated: GBP488,000)
and a weighted average number of ordinary shares outstanding for
the year ended 31 December 2018 of 782,566,177 (2017:
637,570,475).
Diluted earnings per ordinary share
The calculation of diluted earnings per ordinary share for the
year ended 31 December 2018 was based upon the profit attributable
to ordinary shareholders of GBP725,000 (2017 restated: GBP488,000)
and a weighted average number of ordinary shares outstanding for
the year ended 31 December 2018 of 829,578,416 (2017:
662,157,725).
Adjusted earnings per ordinary share
The calculation of adjusted earnings per ordinary share for the
year ended 31 December 2018 was based upon the adjusted profit
attributable to ordinary shareholders (profit before exceptional
and amortisation costs relating to the acquisition of Elemental
Healthcare and share based payments) of GBP1,633,000 (2017:
GBP1,220,000) and a weighted average number of ordinary shares
outstanding for the year ended 31 December 2018 of 637,570,475
(2017: 637,570,475).
No. of shares used in calculation of earnings
per ordinary share ('000s)
2018 2017
No. of Shares No. of Shares
================================================ ================== =====================================
Basic earnings per share 782,566 637,570
Dilutive effect of unexercised share options 47,012 24,588
================================================ ================== =====================================
Diluted earnings per share 829,578 662,158
================================================ ================== =====================================
4. Net cash/borrowings
Restated*
2018 2017
GBP'000 GBP'000
---------------------------------- -------- ----------
Bank Loan 2,107 2,425
Obligations under finance leases - 16
Less: cash and cash equivalents (2,491) (1,709)
---------------------------------- -------- ----------
Net (cash)/debt (384) 732
Total equity 14,423 13,578
---------------------------------- -------- ----------
Total capital 14,039 14,310
---------------------------------- -------- ----------
*Refer to note 5
Bank loan
The sterling bank loan provided by Yorkshire Bank on 1 August
2017 for a five year term was split into two loan agreements A and
B. Loan A of GBP1.5m is subject to quarterly payments of GBP0.075m
commenced on 31 October 2017, totaling repayments GBP0.3m per annum
at an interest rate of LIBOR plus 3% per annum. Loan B of GBP1m is
interest only at a rate of LIBOR plus 3.5% per annum with a
repayment in full by the termination date of 31 July 2022. On 31
December 2018 the remaining balance of the term loans was
GBP2.2107m. The bank has made available a Revolving Credit Facility
(RCF) of up to GBP0.5m for working capital and other purposes.
The RCF and loan agreements are subject to compliance with
financial covenants which measure cash flow to debt service and
EBITDA, interest cover and leverage. If the RCF is drawndown the
rate of interest applicable to each loan for its interest period
will be LIBOR plus 2.8% per annum and it will be secured by a
floating charge over the assets of the Group. At 31 December 2018,
no amount was drawn down (2017: GBPnil).
5. Acquisition
On 1 August 2017, the Group acquired 100% of the equity of
Elemental Healthcare Ltd for a total investment of GBP9,375,000.
The main reason for the acquisition was to add a direct route to
market in the UK, as well as a range of complementary devices and
instrumentation which Elemental have exclusive distribution rights
to. The acquisition was also earnings enhancing with the business
being profitable and cash generative.
Book values were not adjusted for fair value changes apart from
a separable intangible asset (Exclusive supplier contracts) and its
associated deferred tax being identified and valued. The Group have
revised and further identified an asset which has been included in
the Exclusive supplier contracts. Use of the identifiable assets
acquired, purchase consideration and goodwill of Elemental
Healthcare are as follows:
Assets acquired from Elemental Provisional Adjusted Fair Revised
Healthcare Ltd: Fair Value on value of further Fair Value on
acquisition identified acquisition
asset
GBP'000 GBP'000 GBP'000
-------------------------------- --------------- ------------------ ---------------
Exclusive supplier contracts* 1,287 512 1,799
Property, plant & Equipment 55 - 55
Inventory 544 - 544
Trade debtors 366 - 366
Other debtors, prepayments
and accrued income 95 - 95
Cash in hand 130 - 130
Trade creditors (758) - (758)
Corp tax (265) - (265)
Other creditors, taxes
& social security (387) - (387)
Accruals (41) - (41)
Deferred tax liability (245) (98) (343)
-------------------------------- --------------- ------------------ ---------------
FV identifiable assets 781 414 1,195
-------------------------------- --------------- ------------------ ---------------
Goodwill recognised 8,594 (414) 8,180
-------------------------------- --------------- ------------------ ---------------
Acquisition-date fair value
of the total consideration
transferred 9,375 9,375
Representing:
-------------------------------- --------------- ------------------ ---------------
Cash 7,500 7,500
Shares issued 1,875 1,875
-------------------------------- --------------- ------------------ ---------------
9,375 9,375
-------------------------------- --------------- ------------------ ---------------
Acquisition costs expensed
to profit or loss 216 216
-------------------------------- --------------- ------------------ ---------------
Acquisition costs expensed
to share premium attributable
to equity 225 225
-------------------------------- --------------- ------------------ ---------------
Total Acquisition costs 441 441
*As disclosed in last year's Annual Report, the value of the
identifiable net assets of Elemental Healthcare Limited had only
been determined on a provisional basis due to an independent
valuation being carried out on intangible assets not being
finalised when the 2017 financial statements were issued. Had the
valuation been finalised the 2017 financial statements would have
differed to those previously reported as follows: Exclusive
supplier contracts have been increased by GBP512,000 and an
additional deferred tax liability of GBP98,000 has been recognised.
As a result of this this has given rise to an additional
amortisation charge of GBP171,000 and a deferred tax credit of
GBP33,000 in 2017.
The goodwill represents substantial synergies and cross selling
opportunities for combining the business to the Group, as well as
the inherent value of the assembled workforce.
6. Taxation
Restated*
2018 2017
GBP'000 GBP'000
Current tax (credit)/charge: (36) 40
Prior year adjustment 5 -
----------------------------------------------------------- ----------- -------------
Total current tax (credit)/charge (31) 40
----------------------------------------------------------- ----------- -------------
Deferred tax (credit)/charge:
Origination and reversal of temporary timing differences (150) (95)
Changes in tax rates - -
Previously unrecognised deferred tax (29) (62)
----------------------------------------------------------- ----------- -------------
Deferred tax credit during the year (179) (157)
----------------------------------------------------------- ----------- -------------
Total tax credit (210) (117)
----------------------------------------------------------- ----------- -------------
* Refer to note 5
7. Annual report and accounts
In accordance with AIM Rule 20, the annual report and accounts
for the year ended 31 December 2018 will be available to view on
the Company's website at www.sigroupplc.com, and are expected to be
posted to shareholders by 30 April 2019.
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 SFLEFFFUSELD
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