EKF Diagnostics Holdings plc
("EKF", the "Company" or the "Group")
Half-year Report
EKF Diagnostics Holdings plc (AIM: EKF), the AIM-listed global diagnostics business, announces its unaudited interim results for the six months ended 30 June 2023, a period of continued growth in Point-of-Care and good progress in the Life Sciences fermentation capacity expansion.
Trading in the first half of 2023 ("H1 2023") was in line with Board expectations, and revised guidance for the full year performance was provided in the 12 September 2023 Trading Update.
Financial highlights (from continuing operations)
· Revenue from continuing operations of £26.9m (H1 2022: £37.5m)
- Revenue growth in continuing operations, excluding largely COVID-related activities in Contract Manufacturing and Laboratory Testing including the effect in 2022 of the US inventory payment, of 6.8%
· Adjusted EBITDA* of £4.4m (H1 2022: £9.7m)
· Gross profit of £11.8m (H1 2022: £17.7m) with GM% marginally improved to 44.0% (H1 2022: 43.3%)
· Loss before tax of £0.03m (H1 2022: profit of £4.1m)
· Net cash generated from operations of £2.5m (H1 2022: £8.4m)
· Cash and cash equivalents of £9.2m (30 June 2022: £19.1m) (31 December 2022: £11.6m)
- reflecting investment in South Bend enzyme fermentation facility
- of which £2.4m (30 June 2022: £2.6m, 31 Dec 2022: £2.4m) is held by EKF's Russian subsidiary and subject to regulatory restrictions.
* Earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments
Operational highlights
· Business division revenues:
- Point-of-Care: up 10.2% to £16.6m (H1 2022: £15.1m)
- Life Sciences: excluding COVID-revenues up 14.5% to £7.5m (H1 2022: £6.5m)
- Other: £1.3m (H1 2022: £5.0m, which include £3.5m relating to cash received for US inventory)
· Quality Management Audits completed at new fermentation facility in South Bend, with all fermenting units on site
· First customer order received for new South Bend facility, with official site opening planned for 25 October 2023
· Additional cost reduction and operational efficiency measures to further benefit FY 2024 performance
· Board changes: Julian Baines, Executive Chair, remaining in role on a longer-term basis and Steve Young appointed as CFO in September 2023 after an orderly handover
Julian Baines, Executive Chair of EKF, commented: "Looking forward our core business is in a very strong position with continued growth momentum seen in our Point-of-Care division and in sales of β-HB. With the capacity expansion at our South Bend facility nearing completion, and having already received our first purchase order we look forward to delivering strong growth in enzyme fermentation revenues in 2024."
Copies of the interim results and associated investor presentation are available here:
https://www.ekfdiagnostics.com/documents-reports.html
EKF Diagnostics will be hosting a live online presentation open to all existing and potential investors on Tuesday 26 September at 5.30pm (BST), via the Investor Meet Company platform. Investors can sign up to Investor Meet Company for free and add to meet EKF Diagnostics via:
https://www.investormeetcompany.com/ekf-diagnostics-holdings-plc/register-investor
Investors who already follow EKF on the Investor Meet Company platform will automatically be invited.
A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform afterwards.
| EKF Diagnostics Holdings plc | ||
| Julian Baines, Executive Chair / Stephen Young, CFO | via Walbrook PR | |
| | | |
| Singer Capital Markets (Nominated Adviser & Broker) | Tel: +44 (0)20 7496 3000 | |
| Aubrey Powell / Oliver Platts | | |
| | | |
| Walbrook PR (Media & Investor Relations) | Tel: +44 (0)20 7933 8780 or ekf@walbrookpr.com | |
| Paul McManus / Lianne Applegarth | Mob: +44 (0)7980 541 893 / +44 (0)7584 391 303 | |
The persons responsible for arranging the release of this announcement
on behalf of the Company are Julian Baines, Executive Chair, and Stephen Young, CFO.
About EKF Diagnostics Holdings plc (www.ekfdiagnostics.com)
EKF is an AIM-listed global diagnostics business focussed on:
· Point-of-Care analysers in the key areas of Hematology and Diabetes, as well as Central Laboratory products including clinical chemistry reagents, analysers and centrifuges
· Life Sciences services provide specialist manufacture of enzymes and custom products for use in diagnostic, food and industrial applications, as well as other higher value Contract Manufacturing services
EKF has headquarters in Penarth (near Cardiff) and operates five manufacturing sites across the US and Germany, selling into over 120 countries world-wide.
BUSINESS REVIEW
Despite 2023 remaining a transitional year for EKF, we are very pleased with the strong performance delivered by our core established business in the first half of the year. In particular, our Point-of-Care division has delivered double digit organic growth with growth recorded across our Diabetes and Hematology ranges. Our Life Sciences business has also benefitted from a 27% year-on-year increase in sales of Beta-Hydroxybutyrate (β-HB) and remains an opportunity for significant growth once new fermentation capacity comes online.
Revenues for the six months ended 30 June 2023 were £26.9m (H1 2022: £37.5m) and adjusted EBITDA was £4.4m (H1 2022: £9.7m). However, growth in our continuing operations, excluding largely COVID-related activities in Contract Manufacturing and Laboratory Testing, was 6.8% to £24.9m (H1 2022: £23.3m).
OPERATIONAL OVERVIEW
The strong first half performance from both Point-of-Care ("POC") and the Life Sciences division can be seen below once the impact on the prior year comparison of historical COVID-related revenues is separated out.
| Divisional revenues £ millions | H1 2023
| H1 2022
| +/- % |
| Point-of-Care (POC) | 16.6 | 15.1 | +9.9% |
| Life Sciences | 8.5 | 15.3 | -44.4% |
| Life Sciences: β-HB and Fermentation sales | 7.5 | 6.6 | +13.6% |
| Life Sciences: other COVID-related revenues | 1.0 | 8.7 | - 88.5% |
| Other* | 1.8 | 7.1† | -74.6% |
| Total Group Revenues | 26.9 | 37.5 | -28.3% |
| Total Group Revenues (excluding all COVID-related revenues) | 24.9 | 23.3 | +6.8% |
* Other revenue relating to US inventory payment, shipping and handling recharges, repairs and other sundries
† Includes £3.5m relating to US inventory receipt
Point-of-Care
| Point-of-Care (POC) | Providing a portfolio of Point-of-Care analysers and consumables, particularly for use in the area of Hematology and Diabetes, for use in hospital and research laboratories, doctors' offices, blood banks and for in-field anaemia screening programmes. EKF has an estimated 80,000 hemoglobin, hematocrit, HbA1c, glucose and lactate analysers in regular use across more than 100 countries. Also includes Central Laboratory products including clinical chemistry reagents, analysers and centrifuges.
|
We are delighted that the Point-of-Care division continues to deliver steady growth and sales growth of just over 10% reflecting an increase in product sales across our Diabetes and Hematology ranges to £16.6m (H1 2022: £15.1m). Revenues from this division contributed 63.1% of total revenues and continues to offer EKF a solid foundation with the majority of sales representing steady recurring revenue from high margin consumables.
Our POC hematology product portfolio demonstrated good growth in the first half recording sales of £7.21m, an increase of 11.4% year-on-year (H1 2022: £5.68m). We have continued to benefit from the growth in anaemia screening programmes post-pandemic and our stand-out performer in the first half was the DiaSpect Tm, a hand-held hemoglobin analyzer, which saw H1 sales increase by 44% to £3.21m (H1 2022: £2.23m). Sales in Hemocontrol, our point-of-care hemoglobin analyser, were £2.90m (H1 2022: £3.10m) after showing a significant uplift from H1 2021 (£2.13m sales) and sales for other hematology products such as HemataSTAT and Ultracrit remained broadly flat.
Our diabetes product range delivered sales growth of 6.9% to £6.07m (H1 2022: £5.68m). The biggest contributor to sales in this range is our Biosen series of glucose analyzers, a familiar name in laboratories and diabetes clinics round the world. In H1 2022 we recorded sales of £2.70m (H1 2022: £2.85m). Revenues from our HbA1c analyzer product lines grew during the period: Quo-Lab sales were up 15.7% to £1.92m (H1 2022: £1.66m), and sales of Quo-Test were up 24.0% to £1.45m (H1 2022: £1.16m).
During the period we also derived our first revenues from our EKF Link product, a digital connectivity solution for the secure management of POC analysers and associated data on one centralised platform. Integrated with hospital and laboratory IT systems, EKF Link enables real-time remote management of data, such as patient test results, allowing physicians and other healthcare professionals to easily evaluate patients' data securely and accurately from a remote setting.
H1 2023 has seen the best revenue performance to date from our Point-of-Care Division and we are delighted to see that this strong performance has continued into the third quarter, as the high-level of demand for reagent-free hemoglobin and HbA1c analyzers continues.
This division is also expected to benefit from a number of initiatives that will improve productivity, margins and our competitive advantage. The automation process for the manufacture of disposable cuvettes for the DiaSpect Tm is being consolidated into our own manufacturing site in Barleben, Germany, from a third-party producer. In addition, the manufacturing automation of our Hemocontrol single-pack cuvette at Barleben will be completed and online by the end of the year. Not only will this have a positive impact on margins, but also positions EKF as the only company offering single-pack cuvettes, giving us an advantage in emerging markets where wastage is a problem.
The regulatory team at EKF continues to work towards meeting the additional requirements under the new In Vitro Diagnostic Regulation (IVDR) and other legislation.
Life Sciences
| Life Sciences | Providing specialist manufacture of enzymes and custom products for use in diagnostic, food and industrial applications, as well as other higher value Contract Manufacturing services. Also included the production of β-HB, a reagent used to identify patients suffering from diabetic ketoacidosis.
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Our Life Sciences division delivered revenues of £8.5m, contributing 31.6% of total revenues. The year-on-year comparative for 2022 (H1 2022: £15.3m) includes £8.7m of COVID-related revenues from Contract Manufacturing, however focussing solely on the on-going β-HB and enzyme fermentation sales, Life Sciences produced 14.5% organic growth, driven by strong β-HB sales.
We remain one of the clear market leaders for the supply of β-HB, a reagent used to detect ketones for patients suffering from diabetic ketoacidosis, as well as many other clinical applications. β-HB sales for H1 2023 were up 27.3% to £6.31m (H1 2022: £4.96m).
Our specialist enzyme fermentation business recorded revenues of £1.23m (H1 2022: £1.63m) from our existing site in Elkhart, with continued demand from our large corporate customers to create and deliver high quality enzymes and biomolecules for use in a variety of industrial applications.
As outlined in our recent Trading Update, good progress is being made to complete the increased fermentation capacity at the South Bend facility in Indiana. All of the new fermenting units are on site and in the process of installation, validation and verification. We have successfully completed ISO 9001:2015 and ISO 13485:2016 Quality Management Audits at our sites and we expect to see a steady build-up of revenues from this new capacity during FY 2024. We expect to host a ribbon cutting ceremony for the official opening of the new site on 25 October 2023.
We are very pleased to announce receipt of our first purchase order for enzyme manufacturing services for our new facility and this will contribute limited revenues in Q4 FY 2023 and, as these scale-up, will cornerstone the substantial revenue growth we expect to see next year from this new capacity.
Operational efficiencies and continued cost control
We continue to expect that improvements in adjusted EBITDA margin will be seen in the second half. We also recognise that there are further cost savings and efficiency measures that can be implemented, and these will benefit FY 2024. We expect to see FY 2024 margins benefit further from the ramp-up in higher margin enzyme fermentation revenues within Life Sciences as utilisation of our additional capacity builds.
Russia and Ukraine
EKF owns 60% of O.O.O. EKF Diagnostika, a distribution subsidiary located in Moscow which sells EKF POC products and other third-party products into Russia and neighbouring states. We continue to provide essential medical supplies to the region, and whilst sales have continued in the first half of the year, the number of products that we can supply into the region has reduced in line with current sanctions.
Cash held in Russia totalled £2.39m at the period end. Restrictions remain in place regarding the payment of foreign dividends in Russia and so this cash remains partly inaccessible. We have been able to arrange for limited dividends to be paid over in July and August, however there can be no assurance that this will be able to continue. The Board continues to explore options available to realise the value tied up in Russia.
Board Changes
Post-period end we announced the appointment of Steve Young as CFO, who has been working as a consultant over the summer to ensure an orderly handover from his predecessor. Steve is an experienced FD and CFO with a strong working knowledge of how AIM companies operate. I worked closely with Steve at BBI Holdings plc for a number of years and am delighted to have him on board at EKF.
I have also confirmed to the Board my increased commitment as Executive Chairman and I have a singular focus to ensure we are on track to meet or exceed revised guidance and to deliver the significant long-term growth prospects that I am confident our Life Sciences division offers to shareholders.
Outlook
In our recent guidance update we confirmed that for the full year ending 31 December 2023 we expect to deliver revenues of around £53m and adjusted EBITDA in the region of £10m.
Looking forward our core business is in a very strong position, with continued growth momentum seen in our Point-of-Care division and in sales of β-HB. With the capacity expansion at our South Bend facility nearing completion, and already having received our first purchase order and we look forward to delivering strong growth in enzyme fermentation revenues in 2024.
Increased utilisation of our additional capacity at South Bend is key to our future growth. My colleagues and I are determined to ensure we succeed in delivering this and the Board thanks the wider team for its diligent commitment to our expansion plans. With strong engagement from current and prospective customers to underpin increasing utilisation over time, our confidence in the longer-term, significant growth prospects for EKF remains high.
Julian Baines
Executive Chair
26 September 2023
Financial review
In March 2023, all of the share capital of Advanced Diagnostic Laboratory LLC was sold to certain members of its management for a consideration consisting of 1,200,000 EKF ordinary shares which were returned to EKF. These shares were valued at £343,800 and are held in treasury. Costs of the transaction were £107,000. In February 2023, the UK manufacturing operations, which had largely serviced UK COVID-related customers were closed down, resulting in a small number of redundancies.
Revenue
Revenue for the period was £26.8m (H1 2022: £37.5m).
Revenue by Business Unit:
| |
Unaudited 6 months ended 30 June 2023 £'000 | |
Unaudited 6 months ended 30 June 2022 £'000 | |
+/- % |
|
|
| | | | |
| Point-of-Care | 16,627 | | 15,093 | | 10.2% |
| Life Sciences | 8,511 | | 15,244 | | (44.2%) |
| Other* | 1,734 | | 7,134 | | (78.2%) |
| Total revenue | 26,872 | | 37,471 | | (28.3%) |
Considering our core established business units, which excludes largely COVID-related revenue including that from Contract Manufacturing and Laboratory Services totalling £2.0m in 2023 (H1 2022: £14.7m), the Group delivered growth of 6.8% compared with the equivalent period in 2022.
* Other revenue relating to US inventory payment, shipping and handling recharges, repairs and other sundries
Revenue by Geographical Segment:
| |
Unaudited 6 months ended 30 June 2023 £'000 | |
Unaudited 6 months ended 30 June 2022 £'000 | |
+/- % |
| Continuing business |
| | | | |
| Germany | 11,014 | | 13,583 | | (18.9%) |
| USA | 13,376 | | 20,925 | | (36.1%) |
| Russia | 1,690 | | 2,037 | | (17.0%) |
| UK | 792 | | 926 | | (14.5%) |
| Total revenue | 26,872 | | 37,471 | | (28.3%) |
|
|
| | | | |
Geographic regions showing a decline is primarily due to the reduction in COVID-related Contracted Manufacturing activity. The 2022 amount for USA includes the £3.5m inventory payment. The Group's Russian subsidiary, which is 60% owned by the Group, is consolidated in full in accordance with accounting standards. The interest of the minority shareholders is included as a separate item in the Consolidated Income statement.
Gross profit
Gross profit was £11.8m (H1 2022: £17.7m). The gross profit margin was 44.0% (H1 2022: 43.3%). The gross profit has increased marginally mainly as a result of the mix of products and services.
Administrative expenses
In H1 2023, administration expenses (excluding exceptionals) reduced to £10.9m (H1 2022: £12.8m), representing 40.7% of revenue for the period (H1 2022: 34.1%, FY 2022: 34.8%). The increase is largely due to the reduced revenue. The Boards expects that cost savings and efficiency measures will be implemented in the second half which will benefit FY 2024.
The charge for depreciation of fixed assets and for the amortisation of intangibles is £3.3m (H1 2022: £3.4m).
Operating profit and adjusted earnings before interest tax and depreciation
The Group generated an operating loss of £0.07m (H1 2022: profit of £4.1m). We continue to consider that adjusted EBITDA gives a more meaningful measure of performance which for H1 2023 was £4.4m (H1 2022: £9.7m).
In H1 2023 adjusted EBITDA excludes a charge for share-based payments of £nil (H1 2022: charge of £0.5m) and exceptional charges of £1.2m (H1 2022: charge of £1.7m). The exceptional charge relates mainly to transition and restructure costs of certain operations in the US and Germany including provisions against inventory and the impairment of certain lease assets where the property is no longer required. The reduction in operating profit and adjusted EBITDA, in particular in the US and German regions relates to lower revenues associated with the end of the COVID-19 pandemic, and increased cost inflation.
Finance income
Net finance income is £0.04m (H1 2022: £0.01m). The income has increased because of higher interest income on funds held in Russia.
Tax
There is a tax charge of £0.1m (H1 2022: £1.7m). The decrease largely reflects the decrease in profit.
Earnings per share
Basic earnings per share from continuing operations has decreased to nil (H1 2022: 0.48p). There is no dilutive effect from the remaining share options, which have now lapsed.
Balance sheet
Fixed assets
We have capitalised £3.4m (H1 2022: £2.3m) of property, plant and equipment. The expenditure includes continuing work on adding capacity for Life Sciences in the US. Further expenditure in Life Sciences to complete the new facility in South Bend is planned for the second half of the year.
Intangible assets
The value of intangible fixed assets is £31.2m (31 December 2022: £33.8m). The decrease is mainly the result of exchange rate movements. An amount of £0.1m (H1 2022: £0.8m) has been capitalised during the first half.
Investments
Investments are held at fair value which has been calculated based on the market value of the shares which at 30 June 2023 was £1.1125 (31 December 2022: £0.725) per share for Renalytix and £0.1175 (31 December 2022: £0.125) per share for Verici Dx. The majority of the Group's shares in Verici were transferred to EKF shareholders in 2022 through a dividend in specie. In July 2023 the remaining Renalytix shares were sold for a consideration of £1.33m.
Deferred consideration
The deferred consideration at 30 June 2022 related to the acquisition of Advanced Diagnostic Laboratory LLC. (ADL). The remaining deferred consideration was cancelled as part of the disposal of ADL earlier this year.
Cash and working capital
The gross cash position at 30 June 2023 was £9.2m (31 Dec 2022: £11.6m), and the Group had cash net of bank borrowings of £9.1m (31 Dec 2022: £11.4m).
Cash generated from operations in H1 2023 is £2.5m (H1 2022: £8.4m). Trade debtors have increased as a result of timing effects in the run-up to period end.
Cash and cash equivalents held by the Russian subsidiary at 30 June 2023 totalled £2.4m (31 Dec 2022: £2.4m). These deposits are subject to regulatory restrictions, and therefore may not be available for general use by the other entities within the Group.
In July 2023, we disposed of our remaining shareholding in Renalytix plc for a consideration of £1.33m.
In March 2023 the Company agreed a loan facility of £3.0m. At 30 June 2023 this facility had not been utilised.. In addition the Group expects to finalise a further £3m undrawn facility from HSBC from late September 2023. The strength of the Group's balance sheet and the cash and loan resources available to it, aligned to the continuing performance of the business gives the Directors confidence that the business can continue to meet its obligations as they fall due, even under our worst-case scenarios, for at least the next 12 months.
Capital structure
1,200,000 ordinary shares were returned to the Company in April 2023 by the acquirer of ADL, at a value of £348,000. These shares are currently held in treasury. We have maintained shareholder authority to buy back shares, however we currently have no plans to make any further purchases.
Dividend
At the Annual General Meeting in May 2023, shareholders approved the payment of a dividend of 1.2p per ordinary share, to be paid on 1 December 2023 to shareholders on the register at close of business on 3 November 2023. As this declaration is irrevocable, the value of £5.445m is shown as a liability with the debit shown in the statement of changes in equity.
Stephen Young
Chief Financial Officer
26 September 2023
| CONSOLIDATED INCOME STATEMENT | | | | | | | |
| FOR THE 6 MONTHS ENDED 30 JUNE 2023 | | | Unaudited 6 months ended 30 June 2022 | | | ||
|
|
|
| Unaudited 6 months ended 30 June 2023 |
|
| Audited Year ended 31 December 2022 | |
|
| Notes |
| £'000 |
| £'000 |
| £'000 |
| Continuing operations |
|
|
|
| |
|
|
| Revenue | 3 | | 26,872 | | 37,471 | | 66,635 |
| Cost of sales |
| | (14,855) | | (19,727) | | (35,823) |
| Exceptional items - other charged to cost of sales |
| | (196) | | (1,499) | | (6,774) |
| Gross profit |
| | 11,821 | | 16,245 | | 24,038 |
| Administrative expenses |
| | (10,939) | | (12,791) | | (23,177) |
| Exceptional items - impairment of assets |
| | (671) | | (183) | | (10,384) |
| Exceptional items - other |
| | (341) | | - | | (367) |
| Other income |
| | 63 | | 880 | | 919 |
| Operating (loss)/profit |
| | (67) | | 4,151 | | (8,971) |
| Depreciation and amortisation |
| | (3,274) | | (3,361) | | (6,658) |
| Share-based payments |
| | - | | (517) | | 308 |
| Exceptional items | 4 | | (1,209) | | (1,682) | | (17,525) |
| EBITDA before exceptional items and share-based payments |
| | 4,416 | | 9,711 | | 14,904 |
| Finance income |
| | 59 | | 57 | | 131 |
| Finance costs |
| | (18) | | (68) | | (102) |
| (Loss)/profit before income tax |
| | (26) | | 4,140 | | (8,942) |
| Income tax charge | 5 | | (144) | | (1,717) | | (634) |
| (Loss)/profit for the period |
| | (170) | | 2,423 | | (9,576) |
| |
|
|
|
| | | |
| |
|
|
|
| | | |
| (Loss)/profit is attributable to: |
|
|
|
| | | |
| Owners of the parent |
| | (358) | | 2,213 | | (10,101) |
| Non-controlling interest |
| | 188 | | 210 | | 525 |
| |
| | (170) | | 2,423 | | (9,576) |
| (Loss)/earnings per ordinary share attributable to the owners of the parent during the period |
6
|
|
|
|
|
|
|
|
|
| | Pence |
| Pence |
| Pence |
|
|
| |
| | | | |
| Basic |
| | (0.08) | | 0.48 | | (2.21) |
|
|
| |
| | | | |
| Diluted |
| | (0.08) | | 0.48 | | (2.21) |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | | | | |||
| FOR THE 6 MONTHS ENDED 30 JUNE 2023 | | | | | | | |
|
| | | | | | | |
|
|
|
| Unaudited |
| Unaudited |
| Audited |
|
|
|
| 6 months ended 30 June 2023 |
| 6 months ended 30 June 2022 |
| Year ended 31 December 2022 |
|
|
|
| £'000 |
| £'000 |
| £'000 |
| | | |
| | |
|
|
| (Loss)/profit for the period |
|
| (170) | | 2,423 | | (9,576) |
|
|
|
|
| | | | |
| Other comprehensive income/(expense): |
|
|
| | | | |
| Items that will not be reclassified to profit or loss Changes in fair value of equity instruments at fair value through other comprehensive income (net of tax) |
|
| 437 | | (5,307) | | (6,096) |
| Items that may be subsequently reclassified to profit or loss Currency translation differences |
|
| (3,502) | | 6,520 | | 6,811 |
| Other comprehensive (loss)/income (net of tax) |
|
| (3,065) | | 1,213 | | 715 |
| Total comprehensive (loss)/income for the period |
|
| (3,235) | | 3,636 | | (8,861) |
|
|
|
|
| | | | |
| Attributable to: |
|
|
| | | | |
| Owners of the parent |
|
| (3,139) | | 3,024 | | (9,420) |
| Non-controlling interests |
|
| (96) | | 612 | | 559 |
| Total comprehensive (loss)/income for the period |
|
| (3,235) | | 3,636 | | (8,861) |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | | | |
| |||||||||||||
| AS AT 30 JUNE 2023 | | | | | | |
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|
|
| Unaudited as at 30 June 2023 |
| Unaudited as at 30 June 2022 |
| Audited as at 31 December 2022 |
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| Notes | £'000 |
| £'000 |
| £'000 |
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| Assets |
|
| | | | |
| ||||||||||
| Non-current assets | | | | | | |
| ||||||||||
| Property, plant and equipment | 7 | 21,576 | | 18,170 | | 20,435 |
| ||||||||||
| Right-of-use assets | 7 | 507 | | 1,495 | | 1,279 |
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| Intangible assets | 8 | 31,163 | | 43,387 | | 33,772 |
| ||||||||||
| Investments |
| 1,556 | | 1,566 | | 1,119 |
| ||||||||||
| Deferred tax assets |
| 878 | | 23 | | 925 |
| ||||||||||
| Total non-current assets | | 55,680 | | 64,641 | | 57,530 |
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| | | | |
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| Current Assets | |
| | | | |
| ||||||||||
| Inventories | | 9,414 | | 12,969 | | 9,434 |
| ||||||||||
| Trade and other receivables | | 7,979 | | 12,236 | | 10,739 |
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| Corporation tax receivable | | 13 | | 408 | | 10 |
| ||||||||||
| Cash and cash equivalents |
| 9,165 | | 19,138 | | 11,578 |
| ||||||||||
| Total current assets |
| 26,571 | | 44,751 | | 31,761 |
| ||||||||||
| Total assets | | 82,251 | | 109,392 | | 89,291 |
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| |
| | | | |
| ||||||||||
| Equity attributable to owners of the parent | |
| | | | |
| ||||||||||
| Share capital | | 4,537 | | 4,549 | | 4,549 |
| ||||||||||
| Share premium | | 7,375 | | 7,375 | | 7,375 |
| ||||||||||
| Other reserve | | (182) | | (184) | | (629) |
| ||||||||||
| Foreign currency reserves | | 6,129 | | 8,931 | | 9,590 |
| ||||||||||
| Retained earnings |
| 46,326 | | 64,775 | | 52,461 |
| ||||||||||
|
| | 64,185 |
| 85,446 |
| 73,346 |
| ||||||||||
| Non-controlling interest | | 1,081 |
| 1,230 |
| 1,177 |
| ||||||||||
| Total equity | | 65,266 |
| 86,676 |
| 74,523 |
| ||||||||||
|
| |
| | | | |
| ||||||||||
| Liabilities | |
| | | | |
| ||||||||||
| Non-current liabilities | |
| | | | |
| ||||||||||
| Borrowings | | - | | 44 | | - |
| ||||||||||
| Lease liabilities | | 223 | | 793 | | 537 |
| ||||||||||
| Deferred consideration | | - | | 173 | | - |
| ||||||||||
| Deferred tax liability | | 2,140 | | 3,795 | | 2,493 |
| ||||||||||
| Total non-current liabilities | | 2,363 | | 4,805 | | 3,030 |
| ||||||||||
|
| |
| | | | |
| ||||||||||
| Current liabilities | |
| | | | |
| ||||||||||
| Trade and other payables | | 11,702 | | 14,148 | | 8,288 |
| ||||||||||
| Lease liabilities | | 400 | | 902 | | 873 |
| ||||||||||
| Deferred consideration | | - | | 72 | | - |
| ||||||||||
| Current income tax liabilities | | 2,476 | | 2,611 | | 2,440 |
| ||||||||||
| Borrowings | | 44 | | 178 | | 137 |
| ||||||||||
| Total current liabilities | | 14,622 | | 17,911 | | 11,738 |
| ||||||||||
| Total liabilities | | 16,985 | | 22,716 | | 14,768 |
| ||||||||||
| Total equity and liabilities | | 82,251 | | 109,392 |
| 89,291 |
| ||||||||||
|
CONSOLIDATED STATEMENT OF CASH FLOWS | | | | |
| ||||||||||||
| FOR THE 6 MONTHS ENDED 30 JUNE 2023 | | | | |
| ||||||||||||
|
| Unaudited 6 months ended 30 June 2023 |
| Unaudited 6 months ended 30 June 2022 |
| Audited Year to 31 December 2022 | ||||||||||||
| | £'000 |
| £'000 |
| £'000 | ||||||||||||
| Cash flow from operating activities | | | | | | ||||||||||||
| (Loss)/profit before income tax | (26) | | 4,140 | | (8,942) | ||||||||||||
| Adjustments for |
| | | | | ||||||||||||
| - Depreciation | 1,590 | | 1,505 | | 3,098 | ||||||||||||
| - Amortisation and impairment charges | 1,684 | | 1,856 | | 3,560 | ||||||||||||
| - Exceptional items | 1,209 | | 1,682 | | 17,525 | ||||||||||||
| - (Profit)/loss on disposal of assets | 5 | | 19 | | 28 | ||||||||||||
| - Share-based payments | - | | 517 | | (308) | ||||||||||||
| - Cash outflows relating to exceptional items | (157) | | - | | (617) | ||||||||||||
| - Foreign Exchange | - | | - | | (71) | ||||||||||||
| - Bad debt written down | 174 | | - | | 127 | ||||||||||||
| - Net finance costs | (41) | | 11 | | (29) | ||||||||||||
| Changes in working capital |
| | | | | ||||||||||||
| - Inventories | (445) | | (693) | | (815) | ||||||||||||
| - Trade and other receivables | 1,708 | | 1,698 | | 1,276 | ||||||||||||
| - Trade and other payables | (2,862) | | (323) | | (2,177) | ||||||||||||
| Cash generated from operations | 2,839 | | 10,412 | |
12,655 | ||||||||||||
| Interest received | 59 | | 57 | | 85 | ||||||||||||
| Interest paid | (3) | | (39) | | (46) | ||||||||||||
| Income tax paid | (389) | | (1,945) | | (3,006) | ||||||||||||
| Net cash generated from operating activities | 2,506 | | 8,428 | | 9,688 | ||||||||||||
| Cash flow from investing activities |
| | | | | ||||||||||||
| Payment for investments | - | | (2,930) | | (2,930) | ||||||||||||
| Payment for property, plant and equipment (PPE) | (3,345) | | (2,167) | | (4,434) | ||||||||||||
| Payment for intangibles | (138) | | (819) | | (1,394) | ||||||||||||
| Payment for acquisition of subsidiaries, net of cash acquired | - | | (403) | | (403) | ||||||||||||
| Proceeds from sale of PPE | 59 | | 6 | | 229 | ||||||||||||
| Net cash used in investing activities | (3,424) | | (6,256) | | (8,932) | ||||||||||||
| Cash flow from financing activities |
| | | | | ||||||||||||
| Dividend paid to company shareholders | - | | - | | (5,459) | ||||||||||||
| Payment for shares bought back | - | | (3,896) | | (3,896) | ||||||||||||
| Repayments of borrowings | (93) | | (525) | | (613) | ||||||||||||
| Principal elements of lease payments | (507) | | (551) | | (1,071) | ||||||||||||
| Dividends payment to non-controlling interests | - | | - | | - | ||||||||||||
| Net cash used in financing activities | (600) | | (4,972) | | (11,039) | ||||||||||||
| Net decrease in cash and cash equivalents | (1,518) | | (2,800) | | (10,283) | ||||||||||||
| Cash and cash equivalents at beginning of period | 11,578 | | 20,341 | | 20,341 | ||||||||||||
| Exchange gains on cash and cash equivalents | (895) | | 1,597 | | 1,520 | ||||||||||||
| Cash and cash equivalents at end of period | 9,165 | | 19,138 | | 11,578 | ||||||||||||
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | | | | | | | ||
| FOR THE 6 MONTHS ENDED 30 JUNE 2023 | | | | | | | ||
| | Share Capital | Share Premium | Other Reserve | Foreign Currency Reserve | Retained earnings | Total | Non-controlling interest | Total equity |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
|
|
| At 1 January 2022 | 4,639 | 7,375 | 5,033 | 2,813 | 74,264 | 94,124 | 618 | 94,742 |
| Comprehensive income/(expense) |
| | | | |
| |
|
| Profit for the period | - | - | - | - | 2,213 | 2,213 | 210 | 2,423 |
| Other comprehensive income/(expense) |
| | | | |
| |
|
| Changes in fair value of equity instruments at fair value through other comprehensive income/(expense) | - | - | (5,307) | - | - | (5,307) | - | (5,307) |
| Currency translation differences | - | - | - | 6,118 | - | 6,118 | 402 | 6,520 |
| Total comprehensive income/(expense) | - | - | (5,307) | 6,118 | 2,213 | 3,024 | 612 | 3,636 |
| Transactions with owners |
| | | | |
| |
|
| Acquisition of own shares | (90) | - | 90 | - | (3,896) | (3,896) | - | (3,896) |
| Dividends to owners | - | - | - | - | (7,806) | (7,806) | - | (7,806) |
| Dividends to non-controlling interest | - | - | - | - | - | - | - | - |
| Total contributions by and distributions to owners | (90) | - | 90 | - | (11,702) | (11,702) | - | (11,702) |
| At 30 June 2022 | 4,549 | 7,375 | (184) | 8,931 | 64,775 | 85,446 | 1,230 | 86,676 |
| Comprehensive income/(expense) | | | | | | | | |
| Profit for the period | - | - | - | - | (12,314) | (12,314) | 315 | (11,999) |
| Other comprehensive income/(expense) | | | | | |
| |
|
| Changes in fair value of equity instruments at fair value through other comprehensive income/(expense) | - | - | (445) | - | - | (445) | - | (445) |
| Acquisition of own shares | - | - | (344) | - | - | (344) | - | (344) |
|
Currency translation differences | - | - | - | 659 | (1) | 658 | (368) | 290 |
| Total comprehensive income/(expense) | - | - | (789) | 659 | (12,315) | (12,445) | (53) | (12,498) |
| Transactions with owners | | | | | |
| |
|
| Reserve transfer | - | - | 344 | - | 1 | 345 | - | 345 |
| Total contributions by and distributions to owners | - | - | 344 | - | 1 | 345 | - | 345 |
| At 31 December 2022 | 4,549 | 7,375 | (629) | 9,590 | 52,461 | 73,346 | 1,177 | 74,523 |
| Comprehensive income |
| | | | | | | |
| Profit for the period | - | - | - | - | (358) | (358) | 188 | (170) |
| Other comprehensive income/(expense) |
| | | | |
| |
|
| Changes in fair value of equity instruments at fair value through other comprehensive income/(expense) | - | - | 437 | - | - | 437 | - | 437 |
| Currency translation differences | - | - | (2) | (3,461) | 12 | (3,451) | (284) | (3,735) |
| Total comprehensive income/(expense) | - | - | 435 | (3,461) | (346) | (3,372) | (96) | (3,468) |
| Transactions with owners |
| | | | |
| |
|
| Acquisition of own shares | (12) | - | 12 | - | (344) | (344) | - | (344) |
| Dividends to owners | - | - | - | - | (5,445) | (5,445) | - | (5,445) |
| Total contributions by and distributions to owners | (12) | - | 12 | - | (5,789) | (5,789) | - | (5,789) |
| At 30 June 2023 | 4,537 | 7,375 | (182) | 6,129 | 46,326 | 64,185 | 1,081 | 65,266 |
NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS
1. General information and basis of presentation
EKF Diagnostics Holdings Plc is a company incorporated and domiciled in the United Kingdom. The Company is a public limited company, which is listed on the Alternative Investment Market of the London Stock Exchange. The address of the registered office is Avon House, 19 Stanwell Road, Penarth, Cardiff CF64 2EZ.
The principal activity of the Group is the development, manufacture, and supply of products and services into the in-vitro diagnostic (IVD) market place. The Group has presence in the UK, USA, Germany, and Russia, and sells throughout the world including Europe, the Middle East, the Americas, Asia, and Africa.
The financial statements are presented in British Pounds Sterling, the currency of the primary economic environment in which the Company's headquarters is operated. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial liabilities at fair value through profit and loss and certain financial assets measured at fair value through other comprehensive income.
The financial information in these interim results is that of the holding company and all of its subsidiaries as at 30 June 2023. It has been prepared in accordance with UK-adopted International Accounting Standards and the Companies Act 2006 as applicable to companies reporting under those standards. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2022 and which will form the basis of the 2023 financial statements except for a number of new and amended standards which have become effective since the beginning of the previous financial year. These new and amended standards are not expected to materially affect the Group. The preparation of financial statements 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.
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.
The financial information presented herein does not constitute full statutory accounts under Section 434 of the Companies Act 2006 and was not subject to a formal review by the auditors. The financial information in respect of the year ended 31 December 2022 has been extracted from the statutory accounts which have been delivered to the Registrar of Companies. The Group's Independent Auditor's report on those accounts was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial information for the half years ended 30 June 2023 and 30 June 2022 is unaudited and the twelve months to 31 December 2022 is audited.
2. Significant accounting policies
Going concern
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably plausible changes in financial performance, that the Group will be able to operate within the level of its current funding arrangements.
Following the end of the COVID-19 pandemic, the Group's core established business has now returned to normal. The business has seen a significant reduction in pandemic-related contract manufacturing and testing activities and as a result has closed its UK manufacturing operations and disposed of its US laboratory testing business, ADL Health.
The Group has revenues from customers in Russia which are serviced by our entity based in Moscow. As a result of the continuing sanctions imposed on Russia by the EU, the USA and other countries, there are enhanced risks in respect of our Russian entity, including regulatory restrictions and credit risk to cash balances, its ability to collect debtors, and EKF's ability to import products into Russia. In addition, action by the Russian Government is currently restricting the Russian entity's ability to pay dividends to its shareholders. In preparing a downside going concern forecast we have discounted future sales and cash from this region entirely.
The strength of the Group's balance sheet aligned to the continuing performance of the business gives the Directors confidence that the business can continue to meet its obligations as they fall due, even under our worst-case scenarios, for at least the next 12 months. In addition, the Group has secured a committed £3m of funding from the North Atlantic Smaller Companies Investment Trust, to be drawn down if necessary. Accordingly, the Directors are satisfied they can prepare the accounts on a going concern basis.
3. Segmental reporting
Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources.
The principal activity of the Group is the design, development, manufacture and sale of diagnostic instruments, reagents and certain ancillary products, as well as central laboratory reagents, primarily into the in-vitro diagnostic (IVD) market. This activity takes place across various countries, such as the USA, Germany, Russia, and the United Kingdom, and as such the Board considers the business primarily from a geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management has concluded that all segments should be maintained and reported. In addition, the COMD considers the segmental revenue performance of business segments.
The reportable segments derive their revenue primarily from the manufacture and sale of medical diagnostic equipment and reagents. Other services include the servicing and distribution of third party company products under separate distribution agreements. Transactions between segments consist of the sale of products for resale. The basis of accounting for these transactions is the same as for external revenue.
Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, adjusted for exceptional items and share-based payments).
The segment information provided to the Board for the reportable geographic segments is as follows:
Period ended 30 June 2023 unaudited
| | Germany | USA | Russia | UK | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 |
| Income statement | | | | | |
| Revenue | 13,419 | 13,376 | 1,690 | 792 | 29,277 |
| Inter-segment | (2,405) | - | - | - | (2,405) |
| External revenue | 11,014 | 13,376 | 1,690 | 792 | 26,872 |
| Adjusted EBITDA* | 2,765 | 3,059 | 546 | (1,954) | 4,416 |
| Share-based payment | - | - | - | - | - |
| Exceptional items | 37 | (719) | - | (527) | (1,209) |
| EBITDA | 2,802 | 2,340 | 546 | (2,481) | 3,207 |
| Depreciation | (418) | (967) | (25) | (180) | (1,590) |
| Amortisation | (880) | (125) | - | (679) | (1,684) |
| Operating profit/(loss) | 1,504 | 1,248 | 521 | (3,340) | (67) |
| Net finance costs | (1) | - | 57 | (15) | 41 |
| Income tax | (321) | 163 | (109) | 123 | (144) |
| Profit/(loss) for the period | 1,182 | 1,411 | 469 | (3,232) | (170) |
| Segment assets | | | | | |
| Operating assets | 32,860 | 74,876 | 578 | (21,265) | 87,049 |
| Inter-segment assets | 254 | (18,662) | - | 4,445 | (13,963) |
| External operating assets | 33,114 | 56,214 | 578 | (16,820) | 73,086 |
| Cash and cash equivalents | 2,592 | 4,100 | 2,388 | 85 | 9,165 |
| Total assets | 35,706 | 60,314 | 2,966 | (16,735) | 82,251 |
| Segment liabilities | | | | | |
| Operating liabilities | (3,824) | 21,217 | 324 | 13,187 | 30,904 |
| Inter-segment liabilities | 9,494 | (17,775) | - | (5,682) | (13,963) |
| External operating liabilities | 5,670 | 3,442 | 324 | 7,505 | 16,941 |
| Borrowings | 44 | - | - | - | 44 |
| Total liabilities | 5,714 | 3,442 | 324 | 7,505 | 16,985 |
| Other segmental information | | | | | |
| Non-current assets - PPE | 6,043 | 14,143 | 95 | 1,295 | 21,576 |
| Non-current assets - Right-of-use assets | 197 | 288 | 2 | 20 | 507 |
| Non-current assets - Intangibles | 18,554 | 8,292 | 68 | 4,249 | 31,163 |
| Intangible assets -additions | 112 | 26 | - | - | 138 |
| PPE - additions | 428 | 2,910 | - | 7 | 3,345 |
| Right-of-use assets - additions | 52 | - | - | - | 52 |
Year ended December 2022 audited
| | Germany | USA | Russia | UK | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| Income statement | | | | | |
| Revenue | 30,384 | 37,220 | 4,202 | 1,427 | 73,233 |
| Inter-segment | (6,192) | (398) | - | (8) | (6,598) |
| External revenue | 24,192 | 36,822 | 4,202 | 1,419 | 66,635 |
|
Adjusted EBITDA* |
8,089 |
8,309 |
1,563 |
(3,057) |
14,904 |
| Exceptional items - impairments | (32) | (10,324) | - | (28) | (10,384) |
| Exceptional items - other | (1,857) | (4,909) | - | (375) | (7,141) |
| Share-based payments | - | - | - | 308 | 308 |
|
EBITDA |
6,200 |
(6,924) |
1,563 |
(3,152) |
(2,313) |
| Depreciation | (744) | (1,925) | (21) | (408) | (3,098) |
| Amortisation | (1,667) | (1,835) | - | (58) | (3,560) |
|
Operating profit |
3,789 |
(10,684) |
1,542 |
(3,618) |
(8,971) |
| Finance income | 1 | 1 | 118 | 11 | 131 |
| Finance cost | (33) | (4) | - | (65) | (102) |
| Income tax | (790) | 644 | (348) | (140) | (634) |
| Profit for the year | 2,967 | (10,043) | 1,312 | (3,812) | (9,576) |
|
Segment assets |
|
|
|
|
|
| Operating assets | 41,835 | 57,213 | 873 | 13,246 | 113,167 |
| Inter-segment assets | (10,608) | (22,634) | - | (2,212) | (35,454) |
| External operating assets | 31,227 | 34,579 | 873 | 11,034 | 77,713 |
| Cash and cash equivalents | 2,774 | 5,785 | 2,366 | 653 | 11,578 |
| Total assets | 34,001 | 40,364 | 3,239 | 11,687 | 89,291 |
|
Segment liabilities | | | | | |
| Operating liabilities | 7,211 | 27,125 | 207 | 15,542 | 50,085 |
| Inter-segment liabilities | (986) | (21,908) | - | (12,560) | (35,454) |
| External operating liabilities | 6,225 | 5,217 | 207 | 2,982 | 14,631 |
| Borrowings (excluding lease liabilities) | 137 | - | - | - | 137 |
| Total liabilities | 6,362 | 5,217 | 207 | 2,982 | 14,768 |
|
Other segmental information | | | | | |
| Non-current assets - PPE | 5,982 | 13,590 | 155 | 1,987 | 21,714 |
| Non-current assets - Intangibles | 18,606 | 8,822 | 87 | 6,257 | 33,772 |
| PPE - additions | 877 | 5,909 | 84 | 102 | 6,972 |
| Intangible assets - additions | 832 | 192 | - | 370 | 1,394 |
Period ended 30 June 2022 unaudited
| | Germany | USA | Russia | UK | Total |
|
| | £'000 | £'000 | £'000 | £'000 | £'000 |
|
| Income statement | | | | | |
|
| Revenue | 16,283 | 21,323 | 2,037 | 927 | 40,570 |
|
| Inter-segment | (2,701) | (398) | - | - | (3,099) |
|
| External revenue | 13,582 | 20,925 | 2,037 | 927 | 37,471 |
|
| Adjusted EBITDA* | 4,989 | 6,911 | 665 | (2,854) | 9,711 |
|
| Share-based payment | - | - | - | (517) | (517) |
|
| Exceptional items | (795) | (755) | - | (132) | (1,682) |
|
| EBITDA | 4,194 | 6,156 | 665 | (3,503) | 7,512 |
|
| Depreciation | (370) | (898) | (37) | (200) | (1,505) |
|
| Amortisation | (468) | (138) | - | (1,250) | (1,856) |
|
| Operating profit/(loss) | 3,356 | 5,120 | 628 | (4,953) | 4,151 |
|
| Net finance costs | (25) | (3) | 56 | (39) | (11) |
|
| Income tax | (493) | (996) | (158) | (70) | (1,717) |
|
| Profit/(loss) for the period | 2,838 | 4,121 | 526 | (5,062) | 2,423 |
|
| Segment assets | | | | | |
|
| Operating assets | 32,707 | 89,337 | 1,047 | (16,294) | 106,797 |
|
| Inter-segment assets | (47) | (16,699) | - | 203 | (16,543) |
|
| External operating assets | 32,660 | 72,638 | 1,047 | (16,091) | 90,254 |
|
| Cash and cash equivalents | 7,833 | 8,220 | 2,585 | 500 | 19,138 |
|
| Total assets | 40,493 | 80,858 | 3,632 | (15,591) | 109,392 |
|
| Segment liabilities | | | | | |
|
| Operating liabilities | 1,046 | 24,045 | 439 | 14,524 | 40,054 |
|
| Inter-segment liabilities | 4,986 | (19,199) | - | (3,347) | (17,560) |
|
| External operating liabilities | 6,032 | 4,846 | 439 | 11,177 | 22,494 |
|
| Borrowings | 222 | - | - | - | 222 |
|
| Total liabilities | 6,254 | 4,846 | 439 | 11,177 | 22,716 |
|
| Other segmental information | | | | | |
|
| Non-current assets - PPE | 6,087 | 10,445 | 101 | 1,537 | 18,170 |
|
| Non-current assets - Right-of-use assets | 139 | 1,072 | 4 | 280 | 1,495 |
|
| Non-current assets - Intangibles | 19,600 | 19,222 | 117 | 4,448 | 43,387 |
|
| Intangible assets -additions | 394 | 145 | - | 280 | 819 |
|
| PPE - additions | 357 | 1,769 | - | 41 | 2,167 |
|
| Right-of-use assets - additions | 78 | 72 | - | - | 150 |
|
| | | | | | | |
* Adjusted EBITDA represents earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments
Russian operations
In the context of an increased level of uncertainty, the Group has exercised critical judgements in applying its accounting policies in whether the Group should continue to consolidate its Russian business. The Group has applied judgement in regards to whether the Group continues to control its Russian subsidiary due to the restrictions imposed by the Russian government or any other authority. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The Russian government introduced various sanctions in recent months, including restrictions on the payment of dividends to "unfriendly states" that require consent from the Ministry of Finance of Russia. Since the Group continued to direct the operations and the Russian regulations currently do not prohibit the declaration and payment of dividends, the Group has taken the view that it has retained control through the six months ended 30 June 2023. Were the Group to conclude that it no longer retains control, the Russian operations would be treated as if they had been disposed of, with the associated assets and liabilities derecognised.
In July 2023, the Group sought and gained permission for its Russian entity to commence limited dividend payments, totalling around €70,000 per month. There is no certainty how long these payments will be able to continue.
Disclosure of Group revenues by geographic location
| | | Unaudited 6 months ended 30 June 2023 |
| Unaudited 6 months ended 30 June 2022 |
| Audited Year ended 31 December 2022 |
| | | £000 |
| £000 |
| £000 |
| | | | | | | |
| Americas | | | | | | |
| United States of America | | 10,832 | | 17,620 | | 30,941 |
| Rest of Americas | | 1,689 | | 1,771 | | 4,126 |
| Europe, Middles East and Africa (EMEA) | | | | | | |
| Germany | | 4,248 | | 4,245 | | 8,001 |
| United Kingdom | | 374 | | 1,165 | | 1,886 |
| Ireland | | 1,006 | | 5,229 | | 5,253 |
| Rest of Europe | | 2,207 | | 1,641 | | 3,715 |
| Russia | | 1,690 | | 2,037 | | 4,202 |
| Middle East | | 859 | | 561 | | 1,449 |
| Africa | | 1,340 | | 656 | | 1,945 |
| Asia and Rest of World |
| |
| |
| |
| China | | 640 | | 538 | | 1,014 |
| Rest of Asia and Oceania | | 1,987 | | 2,008 | | 4,103 |
| Total Revenue |
| 26,872 |
| 37,471 |
| 66,635 |
Revenue by business segment, which is presented for illustrative purposes only, is as follows:
| | Unaudited 6 months ended 30 June 2023 £'000 | | Unaudited 6 months ended 30 June 2022 | |
+/- % |
| Continuing business |
| | | | |
| Point-of-Care | 16,627 | | 15,093 | | 10.2% |
| Life Sciences | 8,511 | | 15,244 | | (44.2%) |
| Other* | 1,734 | | 7,134 | | (78.2%) |
| Total revenue | 26,872 | | 37,471 | | (28.3%) |
4. Exceptional items
Included within administration expenses and cost of sales are exceptional items as shown below:
| | | Unaudited |
| Unaudited |
| Audited |
| | Note | £000 |
| £000 |
| £000 |
|
| | | | | | |
| Exceptional items include: | |
| | | | |
| - Deferred consideration and settlement of warranty claim | a | - | | - | | 2 |
| - Business reorganisation costs - other charged to cost of sales | b | (196) | | (1,499) | | (6,774) |
| - Business reorganisation costs - Impairment | c | (671) | | (183) | | (10,384) |
| - Business reorganisation costs - other charged to operating expenses | d | (342) | | - | | (369) |
| Exceptional items | | (1,209) | | (1,682) | | (17,525) |
a. Change in the value of deferred consideration relating to the acquisition of Advanced Diagnostic Laboratory LLC.
b. Costs associated with the transition and restructure of certain operations in the US, UK and Germany, which have been charged to cost of sales. The costs include provisions against certain COVID-19 related and other inventory and provisions for certain onerous contracts following the decision to focus on its other businesses.
c. Impairments associated with the transition and restructure of certain operations in the US, UK and Germany, which have been charged to operating expenses.
d. Costs associated with the transition and restructure of certain operations in the US, UK and Germany, which have been charged to operating expenses.
5. Income tax
| | | Unaudited 6 months ended 30 June 2023 |
| Unaudited 6 months ended 30 June 2022 |
| Audited Year ended 31 December 2022 |
| | | £000 |
| £000 |
| £000 |
| Current tax | | | | | | |
| Current tax on profit for the period | | 431 | | 1,692 | | 2,815 |
| Adjustments for prior periods |
| (9) |
| - |
| 62 |
| Total current tax |
| 422 |
| 1,692 |
| 2,877 |
|
|
|
|
| |
|
|
| Deferred tax |
|
|
| |
|
|
| Origination and reversal of temporary differences | | (278) | | 25 | | (2,243) |
| Total deferred tax | | (278) | | 25 | | (2,243) |
| Income tax charge | | 144 | | 1,717 | | 634 |
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the period.
Diluted profit 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 share, being share options. In August 2023 the remaining share options lapsed. The Company is holding 1,200,000 ordinary shares in treasury. These shares have therefore been excluded from the earnings per share calculation.
|
|
|
|
|
|
|
| Audited year ended 31 December 2022 |
|
| Unaudited | Unaudited 6 months ended 30 June 2022 | |||||
| |
|
| £'000 |
| £'000 |
| £'000 |
| (Loss)/profit attributable to owners of the parent |
|
| (358) | | 2,213 | | (10,101) |
| Weighted average number of ordinary shares | | | 454,492,995 | | 459,474,072 | | 457,180,086 |
| Assumed conversion of share awards | | | - | | 4,987 | | - |
| Assumed payment of equity deferred consideration | | | - | | 157,580 | | - |
| Weighted average number of ordinary shares - diluted | | | 454,492,995 | | 459,636,639 | | 457,180,186 |
| | | |
| | | | |
| | | | Pence |
| Pence |
| Pence |
| | | |
| | | | |
| Basic | | | (0.08) | | 0.48 | | (2.21) |
| | | |
| | | | |
| Diluted | | | (0.08) | | 0.48 | | (2.21) |
7. Property, plant and equipment
| Group
| Land and buildings |
Fixtures and fittings £'000 | Plant and machinery £'000 |
Motor vehicles £'000 | Assets under construct-ion £'000 |
Right-of-use assets £'000 |
|
Total £'000 |
| |
| Cost | | | | | | | | |
| |
| At 1 January 2022 | 10,711 | 2,012 | 13,188 | 160 | 2,470 | 3,010 |
| 31,551 | ||
| Additions | 304 | 101 | 683 | - | 1,079 | 150 | | 2,317 | ||
| Transfers | - | 215 | (215) | - | - | - | | - | ||
| Disposal | - | - | (213) | - | - | (207) | | (420) | ||
| Exchange differences | 694 | 72 | 951 | 79 | 255 | 192 | | 2,243 | ||
| At 30 June 2022 | 11,709 | 2,400 | 14,394 | 239 | 3,804 | 3,145 |
| 35,691 | ||
| Additions | 260 | 32 | 905 | 48 | 3,158 | 252 | | 4,655 | ||
| Transfers | 40 | (205) | 608 | - | (443) | - | | - | ||
| Disposals | (3) | (363) | (1,064) | (20) | (125) | (78) | | (1,653) | ||
| Exchange differences | 144 | 108 | 34 | (57) | 21 | 3 | | 253 | ||
| At 31 December 2022 | 12,150 | 1,972 | 14,877 | 210 | 6,415 | 3,322 |
| 38,946 | ||
| Additions | 1,033 | 23 | 1,432 | - | 857 | 52 | | 3,397 | ||
| Transfers | 88 | - | 636 | - | (724) | - | | - | ||
| Disposal | (5) | (403) | (1,676) | - | (8) | (960) | | (3,052) | ||
| Discontinued operations | - | - | - | - | - | (176) | | (176) | ||
| Exchange differences | (435) | (48) | (516) | (44) | (296) | (127) | | (1,466) | ||
| At 30 June 2023 | 12,831 | 1,544 | 14,753 | 166 | 6,244 | 2,111 |
| 35,538 | ||
|
| | | | | | | | |
| |
| Depreciation | | | | | | | | |
| |
| At 1 January 2022 | 2,595 | 1,249 | 8,625 | 81 | - | 1,135 | | 13,685 | ||
| Exchange differences | 222 | 50 | 666 | 43 | - | 67 | | 1,048 | ||
| Disposal | - | - | (188) | - | - | (207) | | (395) | ||
| Impairment | - | - | 51 | - | - | 132 | | 183 | ||
| Transfers | - | 194 | (194) | - | - | - | | - | ||
| Charge for the period | 255 | 158 | 555 | 14 | - | 523 | | 1,505 | ||
| At 30 June 2022 | 3,072 | 1,651 | 9,515 | 138 | - | 1,650 |
| 16,026 | ||
| Exchange differences | 4 | 100 | (55) | (33) | - | (15) | | 1 | ||
| Disposal | (3) | (336) | (1,029) | (14) | - | (64) | | (1,466) | ||
| Impairment | 1 | - | 1,078 | - | - | (21) | | 1,058 | ||
| Transfers | - | (194) | 194 | - | - | - | | - | ||
| Charge for the period | 270 | 150 | 694 | (14) | - | 493 | | 1,593 | ||
| At 31 December 2022 | 3,344 | 1,371 | 10,397 | 77 | - | 2,043 |
| 17,232 | ||
| Exchange differences | (143) | (31) | (352) | (16) | - | (74) | | (616) | ||
| Disposal | (5) | (378) | (1,499) | - | - | (960) | | (2,842) | ||
| Impairment | - | - | - | - | - | 353 | | 353 | ||
| Transfers | 18 | - | (18) | - | - | - | | - | ||
| Charge for the period | 310 | 193 | 682 | 11 | - | 394 | | 1,590 | ||
| At 30 June 2023 | 3,524 | 1,155 | 9,211 | 72 | - | 1,604 |
| 15,566 | ||
| Net book value | | | | | | | |
| ||
| 30 June 2023 | 9,307 | 389 | 5,542 | 94 | 6,244 | 507 | 22,083 | |||
| 31 December 2022 | 8,806 | 601 | 4,480 | 133 | 6,415 | 1,279 | 21,714 | |||
| 30 June 2022 | 8,637 | 749 | 4,879 | 101 | 3,804 | 1,495 | 19,665 | |||
8. Intangible Fixed Assets
| Group
| Good-will |
Trademarks trade names & licences £'000 | Customer relationships £'000 |
Trade secrets £'000 |
Develop-ment costs £'000 |
Software £'000 |
|
Total £'000 |
| ||
| Cost | | | | | | | | |
| ||
| At 1 January 2022 | 28,558 | 4,284 | 15,706 | 17,328 | 5,023 | 3,370 | | 74,269 | |||
| Additions | - | 15 | - | - | 802 | 2 | | 819 | |||
| Disposal | - | - | - | - | - | - | | - | |||
| Impairment | (1,177) | - | - | (3,950) | (28) | - | | (5,155) | |||
| Exchange differences | 1,553 | 296 | 1,422 | 355 | 257 | 359 | | 4,242 | |||
| At 30 June 2022 | 28,934 | 4,595 | 17,128 | 13,733 | 6,054 | 3,731 |
| 74,175 | |||
| Additions | - | (15) | - | - | 590 | - | | 575 | |||
| Disposals | - | - | - | - | (570) | (25) | | (595) | |||
| Exchange differences | 442 | 52 | 145 | 317 | 92 | 25 | | 1,073 | |||
| At 31 December 2022 | 29,376 | 4,632 | 17,273 | 14,050 | 6,166 | 3,731 |
| 75,228 | |||
| Additions | - | 15 | - | - | 118 | 5 | | 138 | |||
| Disposal | (4,161) | (517) | (1,293) | - | (427) | (2,975) | | (9,373) | |||
| Transfer | - | 726 | - | (520) | (206) | - | | - | |||
| Exchange differences | (911) | (211) | (739) | (366) | (182) | (94) | | (2,503) | |||
| At 30 June 2023 | 24,304 | 4,645 | 15,241 | 13,164 | 5,469 | 667 |
| 63,490 | |||
|
| | | | | | | | |
| ||
| Amortisation | | | | | | | | |
| ||
| At 1 January 2022 | 1,177 | 3,021 | 11,825 | 14,664 | 1,579 | 109 | | 32,375 | |||
| Exchange differences | - | 205 | 1,066 | 292 | 126 | 23 | | 1,712 | |||
| Disposal | - | - | - | - | - | - | | - | |||
| Impairment | (1,177) | - | - | (3,950) | (28) | - | | (5,155) | |||
| Charge for the period | - | 110 | 705 | 494 | 228 | 319 | | 1,856 | |||
| At 30 June 2022 | - | 3,336 | 13,596 | 11,500 | 1,905 | 451 |
| 30,788 | |||
| Exchange differences | - | 31 | 100 | 246 | 24 | (10) | | 391 | |||
| Disposal | - | - | - | - | (598) | - | | (598) | |||
| Impairment | 4,254 | 463 | 1,157 | - | 636 | 2,661 | | 9,171 | |||
| Charge for the period | - | 217 | 733 | 268 | 244 | 242 | | 1,704 | |||
| At 31 December 2022 | 4,254 | 4,047 | 15,586 | 12,014 | 2,211 | 3,344 |
| 41,456 | |||
| Exchange differences | (93) | (154) | (668) | (323) | (129) | (78) | | (1,445) | |||
| Disposal | (4,161) | (517) | (1,293) | - | (423) | (2,975) | | (9,369) | |||
| Charge for the period | - | 208 | 620 | 191 | 584 | 81 | | 1,684 | |||
| At 30 June 2023 | - | 3,584 | 14,245 | 11,882 | 2,243 | 372 |
| 32,326 | |||
| Net book value | | | | | | | | |
| 30 June 2023 | 24,304 | 1,061 | 996 | 1,282 | 3,226 | 295 |
| 31,164 |
| 31 December 2022 | 25,122 | 585 | 1,687 | 2,036 | 3,955 | 387 |
| 33,772 |
| 30 June 2022 | 28,934 | 1,259 | 3,532 | 2,233 | 4,149 | 3,280 |
| 43,387 |
9. Disposal
In March 2023 Advanced Diagnostic Laboratory LLC, which traded as ADL Health, was sold to a company controlled by its Chief Executive.
The summary results from this business in the period from 1 January 2023 to disposal are as follows:
| | |
| Advanced Diagnostic Laboratory |
|
| | |
| £000 |
|
| | |
|
|
|
| Revenue | | | 475 | |
| Cost of sales | | | (505) | |
| Gross loss |
| | (30) | |
|
|
| | | |
| Administrative expenses |
| | (114) | |
|
|
| | | |
| Net loss for the period | | | (144) | |
|
| | | | |
| Depreciation included in administrative expenses | | | 55 | |
10. Dividends
A dividend to shareholders of the holding company of 1.2p per ordinary share has been provided during the period following shareholder approval at the Annual General Meeting of the Company in May 2023 (six months to 30 June 2022 and year to 31 December 2022: both 1.2p). It will be paid on Friday 1 December 2023 to shareholders on the register of members at the close of business on Friday 3 November 2023.
10. Availability of this announcement
This announcement and the Group's Interim Report for the six months ended 30 June 2023 are available from the Company's website, www.ekfdiagnostics.com. If you would like to receive a hard copy of the Interim Report, please contact the EKF Diagnostics Holdings plc offices on +44 (0)29 2071 0570 to request a copy.
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