Source - LSE Regulatory
RNS Number : 6343L
EKF Diagnostics Holdings PLC
14 September 2021
 

EKF Diagnostics Holdings plc

("EKF", the "Company" or the "Group")

 

Half-year Report

Further upgrade to current year trading

 

EKF Diagnostics Holdings plc (AIM: EKF), the AIM listed point-of-care business, announces its unaudited interim results for the six months ended 30 June 2021, as well as a further upgrade to current year trading.

 

The strong trading from the beginning of the year continued into the second quarter of 2021. This continues to reflect improving trading in the core business and ongoing strong demand for EKF's contract manufacturing services for COVID-19 sample collection devices and associated kits. The Board is now very confident that trading for the full year will be comfortably ahead of already materially upgraded management expectations.

 

Financial Highlights

·    Revenue up 46.5% to £38.56m (H1 2020: £26.33m)

·    Adjusted EBITDA* up 42.9% to £12.76m (H1 2020: £8.93m)

·    Net profit after tax up 122% to £9.19m (H1 2020: £4.14m)

·    Net cash generated from operations of £1.13m (H1 2020: £6.94m)

·    Net cash of £20.38m (30 June 2020: £16.28m) (31 December 2020: £21.41m)

·    Dividend of 1.1p per ordinary share to be paid on 1 December 2021 (record date: 5 November 2021)


* Earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments

 

Operational Highlights

·    Core business revenues up £1.21m (6%) in first six months of 2021

·    Life Sciences revenues including contract manufacturing for PrimeStore MTM and PBS up 142%
to £18.50m

·    Signed multi-million dollar global supply contract for phosphate-buffered saline (PBS) with
global private sector partner, whilst also broadening customer base and reducing reliance on this single customer

·    Opened new PrimeStore MTM and PBS manufacturing facilities in Cardiff and Boerne to meet wider customer demand in UK and USA

·    Trellus Health admitted to AIM on 28 May 2021

 

Christopher Mills, Non-Executive Chairman of EKF, commented:

"The Board is very confident that trading for the year ending 31 December 2021 will be comfortably ahead of already upgraded management expectations.

 

"The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years."

 

A copy of the investor presentation is available here: https://www.ekfdiagnostics.com/documents-reports.html

 

EKF Diagnostics will be hosting a live online presentation open to all investors on Wednesday 15 September 2021 at 5.15 pm (BST), via video conference call. If you would like to register, please contact Walbrook PR on 020 7933 8780 or email ekf@walbrookpr.com. 

 

EKF Diagnostics Holdings plc

www.ekfdiagnostics.com

Christopher Mills, Non-executive Chairman

Tel: +44 (0) 29 2071 0570

Julian Baines, CEO


Richard Evans, FD & COO




Singer Capital Markets

Tel: +44 (0)20 7496 3000

Aubrey Powell / George Tzimas (Corporate Finance)
Tom Salvesen (Corporate Broking)




Investec Bank plc (Joint Broker)

Tel: +44 (0)20 7597 4000

Gary Clarence / Daniel Adams




Walbrook PR Limited

Tel: +44 (0) 20 7933 8780 or ekf@walbrookpr.com 

Paul McManus / Lianne Cawthorne

Mob: +44 (0) 7980 541 893 / +44 (0) 7584 391 303 

 



BUSINESS REVIEW

 

The strong trading from 2020 and the beginning of the year continued into the second quarter of 2021. This continues to reflect improving trading in the core business and ongoing strong demand for our contract manufacturing services for COVID-19 sample collection devices and associated kits. The Board is now very confident that trading for the full year will be comfortably ahead of already materially upgraded management expectations.

 

Revenues for the six months ended 30 June 2021 were £38.56m (H1 2020: £26.33m), an increase of 46.5%. Adjusted EBITDA was up by 42.9% at £12.76m (H1 2020: £8.93m). Earnings per share have increased by 126%.

 

Strategy

 

Our aim over the next four years is to use our internally generated resources to:

 

1.    invest in the existing core business to maximise the value of our distribution network and drive aggressive organic growth (including investment in the existing contract fermentation business);

2.    continue to maximise value for EKF shareholders from our agreement with Mount Sinai Innovation Partners ("MSIP"), which allows us advanced access to innovative commercial opportunities and where we can build on the ongoing successes of Renalytix plc, Verici Dx plc and the further success that we are confident Trellus Health plc will see;

3.    seek out complementary and targeted earnings-enhancing acquisitions with key strategic value to the core business;

4.    deliver against these aims and allow us to continue to follow a progressive dividend policy and to generate enhanced shareholder returns; and

5.    continue to maximise the opportunity to assist clients to control the impact of COVID-19, and to evolve our new contract manufacturing capabilities in this area to a broader range of diagnostic and other healthcare settings.

 

We have made good progress against these objectives, as set out below. Discussions are progressing as planned for a number of earnings enhancing acquisitions, and we have identified a number of potential products to expand our existing core business.

 

Operations

 

Diabetes

 

Sales in the diabetes segment have seen good growth in the period, reaching £10.18m, an increase of 8%, with improvements coming across the majority of the diabetes portfolio as our distribution partners saw growth returning. In particular, sales of β-HB (Beta-Hydroxybutyrate) were up 14% year-on-year, including a contribution from an OEM agreement with a leading distributor. Sales of Quo-Test and Quo-Lab are up 24% and 18% respectively, however sales of the STAT-Site product line have reduced following the discontinuation of STAT-Site β-HB due to obsolescence of components.

 

Hematology

 

Overall, revenues from our hematology portfolio have been flat. Within this we have seen 12% growth of our DiaSpect Tm product, primarily driven by our OEM agreements with Fresenius and McKesson. Meanwhile, global hematology screening programmes have continued to be affected by the COVID-19 pandemic, although we have seen signs of programmes beginning to come online again in the latter part of the year, and in particular our major customer in Peru has started to significantly increase their orders as the territory opens up and much needed screening programmes are coming back online.

 

Contract Manufacturing

 

Infectious disease test kits

 

We have continued to see strong demand for our contract manufacturing product lines across our manufacturing sites in the US, Germany, and the UK. Due to our direct relationships with major end users, we have switched towards end user customers and away from sales direct to Longhorn to the mutual benefit of Longhorn and EKF. At the same time, we have seen a change in the mix of products we are being requested to manufacture, with emphasis moving from PrimeStore MTM filled tubes towards tubes filled with Phosphate Buffered Saline (PBS) which we have introduced as a low-cost alternative to MTM. However, we continue the production of PrimeStore MTM tubes for public health systems customers in the UK and Ireland, as well as the manufacture and collation of home testing kits that are distributed through the two largest high street pharmacy chains in the UK, and a new contract for supply of PrimeStore MTM to testing labs based at major UK airports.

 

In addition, we continue to manufacture kits for employee testing purposes as well as home testing kits including PBS and swab for distribution in US and Europe via our major industrial partner.

 

This business is servicing customers in the US, the UK, and Europe, including public health authorities in the UK and Ireland, universities, and private laboratories, as well as our major industrial partner. Whilst this major industrial partner represented less than half of our contract manufacturing revenues for PrimeStore MTM and PBS for the first half of the year, we have already seen a shift to a wider mix of revenues from a broader customer base. We expect to see the share of revenue contribution from other customers continue to rise as we move through the year.

 

In addition, with the expectation that sales of these products will continue for the foreseeable future, we are adding two further factory units to our existing site in Cardiff which was opened in January, and have added off-site manufacturing space in Boerne.

 

It is a measure of our success in creating and servicing this business, which we started from scratch last year, that we are now discussing the supply of products for non-COVID-19 indications, driven by demand from our customers. These products include areas such as in molecular diagnostics for which work has already started in the US. We see this as a significant growth opportunity for EKF.

 

Central Laboratory & Life Sciences

 

Our Central laboratory and Life Sciences sector combines revenues derived from Clinical Chemistry, lab analysers, contract fermentation and enzymes. Central Laboratory sales continue to be affected by the pandemic, mainly in the USA.

 

We continue to see a strong pipeline of opportunities to supply contract manufacturing services from our Elkhart and South Bend sites, and have committed resources to add capacity. The construction of new fermenters is in progress, work having commenced on a new fermentation facility with a total investment of $9.3m, of which $3.4m has already been paid on deposit, and the aim of delivering significant revenues by 2024. These opportunities are arising in the research and molecular enzyme areas as well as food grade fermentation digestive proteins.

 

Other

 

This category includes sales of a number of products including our Lactate Scout sports medicine product and other diagnostic tests, the most important of which is for pregnancy. With an end to the shutdown of professional sports in Europe we have seen an improvement in Lactate Scout sales which have grown by 40% year on year.

 

PartnerShip with Mount Sinai

 

Our Preferred Partnership Agreement (PPA) with Mount Sinai Innovation Partners (MSIP) provides us with advanced access to innovative commercial opportunities arising from Mount Sinai Health System owned technologies, managed by MSIP, in the field of healthcare technologies. This relationship had already lead to the successful spin-out of Renalytix plc ("Renalytix") and their subsequent spin-out of Verici Dx plc ("Verici"). Our residual holding in Renalytix is valued at £10.8m (as at 30 June), and our holding in Verici, received as a dividend from Renalytix, is valued at 30 June at £1.8m.

 

In May 2021, Trellus Health plc, which was formed by MSIP, EKF, and its management in 2020, successfully floated on AIM. EKF's investment in Trellus was transferred to relevant EKF shareholders in 2020.

 

Following the completion of his tenure as CEO of the Group, Julian Baines will take responsibility for the management of our relationship with MSIP. A pipeline of new opportunities has been identified.

 

Financial review

 

Revenue

 

Revenue for the period was £38.56m (H1 2020: £26.33m), an increase of 46.5%.

 


Unaudited

6 months ended 30 June 2021

£'000


Unaudited

6 months ended 30 June 2020

£'000


+/- %







Hematology

5,856


5,853


0.1%

Diabetes (including βHB)

10,183


9,419


8.1%

Central Laboratory

2,372


2,639


(10.1%)

Contract Manufacturing

17,469


6,459


170.5%

Other

2,679


1,959


36.8%

Total revenue

38,559


26,329


46.5%







 

Gross profit

 

Gross profit is £18.54m (H1 2020: £14.91m). The gross profit margin is 48% (H1 2020: 57%). The gross margin percentage has reduced mainly as a result of the product mix.

 

Administrative expenses

 

In H1 2021, administrative expenses have reduced to £7.02m (H1 2020: £8.25m), representing 18.2% of revenue for the period (H1 2020: 31.3%). The reduction is largely caused by a credit for share-based payments following the ending of the cash-settled share-based payment incentive scheme for two Directors. The scheme for a senior employee remained in place at the period end. Administrative expenses include research and development (R & D) costs of £0.61m (H1 2020: £0.63m). In addition, further R & D costs of £0.32m (H1 2020: £0.31m) have been capitalised. Non-exceptional administrative costs have increased by 3.4% compared to H1 2020 mainly due to increased sales volumes, as well as further expenditure on quality assurance and regulatory costs as a result of the increased regulatory burden in Europe.

 

To aid understanding, administrative expenses in each period are made up as follows:

 


Unaudited 6 months ended 30 June 2021


Unaudited 6 months ended 30 June 2020


Audited Year ended 31 December 2020

Non-exceptional administration expenditure before R & D capitalisation

8,960


8,668


17,234

Effect of share-based payments

(1,392)


300


5,292

Less capitalised R & D

(317)


(308)


(586)

Effect of exceptional items

(234)


(408)


(1,282)

Total administrative expenses

7,017


8,252


20,658

 

The charge for depreciation of fixed assets and for the amortisation of intangibles is £2.83m (H1 2020: £2.32m).

                                      

 

Operating profit and adjusted earnings before interest tax and depreciation

 

The Group generated an operating profit of £11.56m (H1 2020: £6.72m). We consider a more meaningful measure of underlying performance is obtained by examining adjusted EBITDA, which for H1 2021 was £12.76m (H1 2020: £8.92m). This excludes the effects of a credit for share-based payments of £1.39m (H1 2020: charge of £0.30m) and exceptional profits of £0.23m (H1 2020: £0.41m). The increase in operating profit and adjusted EBITDA is caused by the substantial increase in volumes associated with sales of contract manufacturing products.

 

Finance costs

 

Finance costs are £0.16m (H1 2020: £0.47m). The main charge results from an increase in the fair value of deferred consideration, the size of which is determined by the increase in EKF's share price.

 

Tax

 

There is a tax charge of £2.24m (H1 2020: £2.11m). The increase partly reflects the increase in profit, but also that expenses relating to the cash-settled share-based payment incentive scheme, accrued in previous years, are now deductible for tax purposes as a result of payments having been made.

 

Earnings per share

 

Basic earnings per share has increased to 1.99p (H1 2020: 0.88p), an increase of 126%. Diluted earnings per share are 1.98p (H1 2020: 0.87p)

 

Balance sheet

 

Fixed assets

 

We have capitalised £1.47m (H1 2020: £1.19m) of property plant and equipment. The expenditure includes continuing work on improvements to the facilities in South Bend and Elkhart in the US, further automation in Germany, and the cost of fitting out the first stage of the new manufacturing facility in Cardiff. Further expenditure in South Bend and Elkhart, in Germany, and for the second stage of the Cardiff facility is planned for the second half of the year.  

 

Intangible assets

 

The value of intangible fixed assets is £35.13m (31 December 2020: £37.05m). The decrease is mainly the result of amortisation plus exchange rate movements. An amount of £0.62m has been capitalised.

 

Investments

 

Investments includes our holdings in Renalytix plc and Verici Dx plc. The investments are held at fair value which has been calculated based on the market value of the shares which at 30 June 2021 was £10.80 (31 December 2020: £4.875) per share for Renalytix and £0.685 (31 December 2020: £0.585) per share for Verici. The resulting unrealised gain during H1 2021 of £6.21m is shown as a movement in Other comprehensive income.

 

Deferred consideration

 

The remaining deferred consideration relates to the share-based payment to the former owner of EKF-Diagnostic GmbH. Finalisation of the position is expected to conclude shortly.

 

Cash and working capital

 

The gross cash position at 30 June 2021 was £20.78m (31 Dec 2020: £16.90m), and the Group had cash net of bank borrowings of £20.38m (31 Dec 2020: £16.28m).

 

Cash generated from operations in H1 2020 is £1.13m (H1 2020: £6.94m). Inventory levels have increased as a result of the increase in order volume but also to ensure security of component supply. Trade debtors have increased as a result of increased trading activity and because of extended terms granted to certain commercial partners. We have continued to see very little evidence to date of collection difficulties as a result of COVID-19. Payables have reduced because of payments made in relation to the cash-settled share-based payment incentive scheme.

 

Capital structure

 

We have not made any share buy backs during the period. Our authorisation to make further share buy backs remains in place and we will make further purchases if considered appropriate.

 

Dividend

 

At the Annual General Meeting in May 2021 shareholders approved the payment of a dividend of 1.1p per ordinary share, to be paid on 1 December 2021 to shareholders on the register at close of business on 5 November 2021. As this declaration is irrevocable, the value of £5.005m is shown as a liability with the debit shown in the statement of changes in equity.

 

Outlook

 

The Board is very confident that trading for the year ending 31 December 2021 will be comfortably ahead of already materially upgraded management expectations.

 

The Group remains confident that its growth strategy, as outlined to shareholders at the Annual General Meeting in May, and set out above, will create a business which, aside from any COVID-19 related revenues, is capable of generating significant double-digit growth in adjusted EBITDA over the next three to four years.

 

 

Christopher Mills

Non-Executive Chairman

 

14 September 2021

 



 

CONSOLIDATED INCOME STATEMENT







FOR THE 6 MONTHS ENDED 30 JUNE 2021



Unaudited 6 months ended 30 June 2020






Unaudited 6 months ended 30 June 2021



Audited Year ended 31 December 2020


Notes


£'000


£'000


£'000

Continuing operations








Revenue

3


38,559


26,329


65,260

Cost of sales



(20,019)


(11,417)


(27,840)

Gross profit



18,540


14,912


37,450

Administrative expenses



(7,017)


(8,252)


(20,658)

Other income



34


57


133

Operating profit



11,557


6,717


16,895

Depreciation and amortisation



(2,830)


(2,316)


(4,611)

Share-based payments



1,392


(300)


(5,292)

Exceptional items

4


234


408


1,282

EBITDA before exceptional items and share-based payments



12,761


 

8,925


25,516

Finance income



22


29


53

Finance costs



(155)


(497)


(1,592)

Profit before income tax



11,424


6,249


15,356

Income tax charge

5


(2,237)


(2,108)


(3,971)

Profit for the period



9,187


4,141


11,385









Profit attributable to:








Owners of the parent



9,069


4,011


11,114

Non-controlling interest



118


130


271




9,187


4,141


11,385

 

Earnings per ordinary share attributable to the owners of the parent during the period

 

 

6

 










Pence


Pence


Pence









Basic



1.99


0.88


2.45









Diluted



1.98


0.87


2.42

 



 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME





FOR THE 6 MONTHS ENDED 30 JUNE 2021



















Unaudited


Unaudited


Audited




6 months ended 30 June 2021


6 months ended 30 June 2020


Year ended 31 December 2020




£'000


£'000


£'000









Profit for the period



9,187


4,141


11,385









Other comprehensive income/(expense):








Changes in fair value of equity instruments at fair value through other comprehensive income (net of tax)



4,040


4,445


3,276

Currency translation differences



(1,334)


3,951


734

Other comprehensive income (net of tax)



2,706


8,396


4,010

Total comprehensive income for the period



11,893


12,537


15,395









Attributable to:








Owners of the parent



11,779


12,456


15,235

Non-controlling interests



114


81


160

Total comprehensive income for the period



11,893


12,537


15,395

 



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION




 

AS AT 30 JUNE 2021







 



Unaudited as at 30 June 2021


Unaudited as at 30 June 2020


Audited as at 31 December 2020

 


Notes

£'000


£'000


£'000

 

Assets







 

Non-current assets







 

Property, plant and equipment


12,957


13,331


12,620

 

Right-of-use assets


890


941


1,019

 

Intangible assets

7

35,134


39,347


37,051

 

Investments


12,818


14,345


6,608

 

Deferred tax assets


14


21


14

 

Total non-current assets


61,813


67,985


57,312

 








 

Current Assets







 

Inventories


9,766


8,144


8,487

 

Trade and other receivables


16,107


10,545


13,182

 

Corporation tax receivable


-


-


371

 

Cash and cash equivalents


20,784


16,895


21,913

 

Total current assets


46,657


35,584


43,953

 

Total assets


108,470


103,569


101,265

 








 

Equity attributable to owners of the parent







 

Share capital


4,550


4,546


4,550

 

Share premium


200


95


200

 

Other reserve


9,394


11,093


5,354

 

Foreign currency reserves


2,698


7,210


4,028

 

Retained earnings


67,580


55,637


63,516

 



84,422


78,581


77,648

 

Non-controlling interest


435


472


552

 

Total equity


84,857


79,053


78,200

 








 

Liabilities







 

Non-current liabilities







 

Borrowings


310


422


323

 

Lease liabilities


475


721


690

 

Deferred tax liability


4,586


2,940


2,636

 

Total non-current liabilities


5,371


4,083


3,649

 








 

Current liabilities







 

Trade and other payables


13,152


14,211


14,435

 

Lease liabilities


456


248


380

 

Deferred consideration


3,033


1,840


2,901

 

Current income tax liabilities


1,512


3,946


1,515

 

Borrowings


89


188


185

 

Total current liabilities


18,242


20,433


19,416

 

Total liabilities


23,613


24,516


23,065

 

Total equity and liabilities


108,470


103,569


101,265

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS





 

FOR THE 6 MONTHS ENDED 30 JUNE 2021





 


Unaudited 6 months ended 30 June 2021


Unaudited 6 months ended 30 June 2020


 Audited Year to 31 December 2020


£'000


£'000


£'000

Cash flow from operating activities






Profit before income tax

11,424


6,249


15,356

Adjustments for






- Warranty claim

(251)


(455)


(1,414)

- Depreciation

919


872


1,844

- Amortisation and impairment charges

1,911


1,444


2,767

- Deferred consideration (FV adjust)

132


455


1,516

- Foreign Exchange

(40)


-


26

- Bad debt written down

-


-


45

- Profit/(loss) on disposal of assets

(9)


14


(22)

- Loss on disposal of intangible assets

-


-


8

- Share-based payments

(1,392)


300


4,775

- Dividend received

-


-


(31)

- Net finance costs

1


13


23

Changes in working capital






- Inventories

(1,450)


(2,056)


(2,557)

- Trade and other receivables

(2,960)


(1,974)


(3,426)

- Trade and other payables

(5,126)


2,075


1,888

Cash generated by operations

3,159


6,937


20,798

Interest paid

(11)


(29)


(47)

Income tax paid

(2,019)


(849)


(6,942)

Net cash generated by operating activities

1,129


6,059


13,809

Cash flow from investing activities






Purchase of investments

-


-


(3,810)

Purchase of property, plant and equipment (PPE)

(1,342)


(1,187)


(1,631)

Purchase of intangibles

(623)


(393)


(1,014)

Proceeds from sale of PPE

14


27


68

Proceeds from sale of investments

-


-


7,670

Interest received

22


29


53

Net cash used in investing activities

(1,929)


(1,524)


1,336

Cash flow from financing activities






Proceeds from issue of ordinary shares

-


100


209

Dividend

-


-


(4,550)

Share option buy back

-


-


(7)

Repayment of borrowings

(89)


(126)


(183)

Principal lease payments

(257)


(166)


(469)

Dividends paid to non-controlling interests

(231)


(210)


(209)

Net cash used in financing activities

(577)


(402)


(5,209)

Net increase in cash and cash equivalents

(1,377)


4,133


9,936

Cash and cash equivalents at beginning of period

21,913


12,074


12,074

Exchange gains on cash and cash equivalents

248


688


(97)

Cash and cash equivalents at end of period

20,784


16,895


21,913

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY







FOR THE 6 MONTHS ENDED 30 JUNE 2021








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 2020

4,541

-

6,648

3,183

56,199

70,571

601

71,172

Comprehensive income









Profit for the period

-

-

-

-

4,011

4,011

130

4,141

Other comprehensive income









Changes in fair value of equity instruments at fair value through other comprehensive income

-

-

4,445

-

-

4,445

-

4,445

Currency translation differences

-

-

-

4,027

(27)

4,000

(49)

3,951

Total comprehensive income

-

-

4,445

4,027

3,984

12,456

81

12,537

Transactions with owners

           








Dividends to non-controlling interest

-

-

-

-

-

-

(210)

(210)

Dividend declared but not paid

-

-

-

-

(4,546)

(4,546)

-

(4,546)

Issue of ordinary shares

5

95

-

-

-

100

-

100

Total contributions by and distributions to owners

5

95

-

-

(4,546)

(4,446)

(210)

(4,656)

At 30 June 2020

4,546

95

11,093

7,210

55,637

78,581

472

79,053

Comprehensive income









Profit for the period

-

-

-

-

7,103

7,103

141

7,244

Other comprehensive income









Changes in fair value of equity instruments at fair value through other comprehensive income

-

-

(97)

-

-

(97)

-

(97)

 

Transfer of gain on disposal of

equity investments at fair value

through other comprehensive

income to retained earnings

-

-

(5,642)


5,642

-

-

-

 

Taxation on profit on disposal

of equity instruments at fair

value

-

-

-

-

(1,072)

(1,072)

-

(1,072)

 

Currency translation differences

-

-

-

(3,182)

            27

(3,155)

(62)

(3,217)

Total comprehensive income

-

-

(5,739)

(3,182)

11,700

2,779

79

2,858

Transactions with owners









Share cancellation

-

-

-

-

(7)

(7)

-

(7)

Proceeds from share issue

4

105

-

-

-

109

-

109

Dividend to owners

-

-

-

-

(3,814)

(3,814)

-

(3,814)

Dividends to non-controlling interest

-

-

-

-

-

-

1

1

Total contributions by and distributions to owners

4

105

-

-

(3,821)

(3,712)

1

(3,711)

At 31 December 2020

4,550

200

5,354

4,028

63,516

77,648

552

78,200

Comprehensive income









Profit for the period

-

-

-

-

9,069

9,069

118

9,187

Other comprehensive income









Changes in fair value of equity instruments at fair value through other comprehensive income

-

-

4,040

-

-

4,040

-

4,040

Currency translation differences

-

-

-

(1,330)

-

(1,330)

(4)

(1,334)

Total comprehensive income

-

-

4,040

(1,330)

9,069

11,779

114

11,893

Transactions with owners









Dividends to owners

-

-

-

-

(5,005)

(5,005)

-

(5,005)

Dividends to non-controlling interest

-

-

-

-

-

-

(231)

(231)

Total contributions by and distributions to owners

-

-

-

-

(5,005)

(5,005)

(231)

(5,236)

At 30 June 2021

4,550

200

9,394

2,698

67,580

84,422

435

84,857


NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS

 

1.              General information and basis of presentation

 

EKF Diagnostics Holdings plc is a public limited company incorporated in the United Kingdom (Registration Number 04347937). The address of the registered office is Avon House, 19 Stanwell Road, Penarth, CF64 2EZ.

 

The Group's principal activity is the development, manufacture, and supply of products into the in-vitro diagnostics (IVD) market place. Within this area, the Group has a growing business in contract manufacturing.

 

The financial information in these interim results is that of the holding company and all of its subsidiaries. It has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ("IFRS"). 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 2020 and which will form the basis of the 2021 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.

 

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 2020 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 2021 and 30 June 2020 is unaudited and the twelve months to 31 December 2020 is audited.

 

These interim accounts have not been prepared in accordance with the UK-adopted International Accounting Standard 34, "Interim Financial Reporting".

 

2.               Significant accounting policies

 

Going concern

 

The Group meets its day-to-day working capital requirements through the use of cash reserves and existing bank facilities.

 

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 probable changes in financial performance, that the Group should be able to operate within the level of its current funding arrangements. While we have seen some disruption to our core business as a result of the COVID-19 pandemic, current trading suggests that our base case forecasts are still applicable. In addition, our range of COVID related products has been highly successful, bringing significant benefits to the Group, including higher revenue, profits, and cash balances. We believe the Group is in a strong position, however it is difficult to assess reliably whether there will be any material disruption in the future, and for how long our COVID range will remain relevant. We have modelled a number of scenarios covering reductions in revenue of 10% and 50%, without taking into account the potential benefits of any mitigation strategies such as potential cost savings or insurance claims. While the eventual severity and length of the economic disruption stemming from the pandemic is impossible to forecast these models give the Directors reasonable confidence that the business can survive our worst case scenarios for reductions in revenue for at  least the next 12 months.

 

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason the Group continues to adopt the going concern basis in the preparation of the financial statements.

 

 

 

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 selling of diagnostic instruments, reagents and certain ancillary items. 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.

 

The reportable segments derive their revenue primarily from the manufacture and sale of medical diagnostic equipment. Other services include the servicing and distribution of third party company products under separate distribution agreements.

 

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 2021 unaudited

 


Germany

USA

Russia

Other

Total

 


£'000

£'000

£'000

£'000

£'000

 

Income statement






 

Revenue

              17,288

19,772

1,384

4,481

42,925

 

Inter-segment

              (2,746)

 (1,616)

-

(4)

(4,366)

 

External revenue

                14,542

18,156

1,384

4,477

38,559

 

Adjusted EBITDA*

               5,326

7,521

364

 (450)

12,761

 

Share-based payment

                      -

-

-

 1,392

1,392

 

Exceptional items

                  251

-

-

 (17)

234

 

EBITDA

               5,577

7,521

364

925

14,387

 

Depreciation

                 (342)

 (246)

(11)

 (320)

 (919)

 

Amortisation

                 (438)

 (61)

-

 (1,412)

 (1,911)

 

Operating profit/(loss)

               4,797

7,214

353

 (807)

11,557

 

Net finance costs

                    (8)

5

16

 (146)

 (133)

 

Income tax

                 (692)

 (1,464)

(75)

(6)

 (2,237)

 

Profit/(loss) for the period

               4,097

5,755

294

 (959)

9,187

 

Segment assets






 

Operating assets

              41,595

67,395

432

(618)

108,804

 

Inter-segment assets

                 (143)

(16,480)

-

 (4,495)

 (21,118)

 

External operating assets

              41,452

50,915

432

(5,113)

87,686

 

Cash and cash equivalents

                4,382

6,177

966

9,259

20,784

 

Total assets

             45,834

57,092

1,398

4,146

108,470

 

Segment liabilities






 

Operating liabilities

                5,714

21,240

230

17,148

44,332

 

Inter-segment liabilities

              (446)

 (17,794)

-

(2,878)

 (21,118)

 

External operating liabilities

                5,268

3,446

230

14,270

23,214

 

Borrowings

                  399

-

-

-

399

 

Total liabilities

               5,667

3,446

230

14,270

23,613

 

Other segmental information






 

Non-current assets - PPE

                5,796

5,014

82

2,065

12,957

 

Non-current assets - Right-of-use assets

                    78

585

2

225

890

 

Non-current assets - Intangibles

              24,376

10,416

77

265

35,134

 

Intangible assets -additions

                  366

120

-

137

623

 

PPE - additions

                  456

679

-

206

1,341

 

Right-of-use assets - additions

                    44

(35)

15

103

127

 








 

 

 

 

 

 

 

 

Year ended December 2020 audited


Germany

USA

Russia

Other

Total








£'000

£'000

£'000

£'000

£'000

Income statement






Revenue

25,637

39,459

2,904

4,432

72,432

Inter-segment

(5,351)

(1,767)

-

(54)

(7,172)

External revenue

20,286

   37,692

2,904

4,378

65,260

Adjusted EBITDA*

7,343

20,094

883

(2,754)

25,516

Share-based payment

-

-

-

(5,292)

(5,292)

Exceptional items

877

-

-

405

1,282

EBITDA

8,220

20,094

833

(7,641)

21,506

Depreciation

(787)

(511)

(24)

(522)

(1,844)

Amortisation

(1,646)

(1,120)

(1)

-

(2,767)

Operating profit/(loss)

5,787

18,463

808

(8,163)

16,895

Net finance costs

(24)

13

39

(1,567)

(1,539)

Income tax

(820)

(3,497)

(171)

517

(3,971)

Profit/(loss) for the year

4,943

14,979

676

(9,213)

11,385

Segment assets






Operating assets

39,961

36,899

355

30,529

107,744

Inter-segment assets

(112)

(11,427)

-

(16,853)

(28,392)

External operating assets

39,849

25,472

355

13,676

79,352

Cash and cash equivalents

3,130

7,459

1,257

10,067

21,913

Total assets

42,979

32,931

1,612

23,743

101,265

Segment liabilities






Operating liabilities

7,135

17,836

158

25,820

50,949

Inter-segment liabilities

(1,332)

(14,915)

-

(12,145)

(28,392)

External operating liabilities

5,803

2,921

158

13,675

22,557

Borrowings

508

-

-

-

508

Total liabilities

6,311

2,921

158

13,675

23,065

Other segmental information






Non-current assets - PPE

5,912

4,632

93

1,983

12,620

Non-current assets - ROU assets

-

-

-

1,019

1,019

Non-current assets - Intangibles

24,039

10,979

77

1,956

37,051

Intangible assets -additions

679

335

-

-

1,014

ROU assets - additions

-

-

-

518

518

PPE - additions

779

575

54

223

1,631

 

 

 

 

 

 

 

 

 

 

 

 

 

Period ended 30 June 2020 unaudited


Germany

USA

Russia

Other

Total

 


£'000

£'000

£'000

£'000

£'000

 

Income statement






 

Revenue

              10,713

17,160

1,360

100

29,333

 

Inter-segment

              (2,981)

 (23)

-

-

 (3,004)

 

External revenue

                7,732

17,137

1,360

100

26,329

 

Adjusted EBITDA

               2,827

7,575

395

 (1,872)

8,925

 

Share-based payment

                      -

-

-

 (300)

 (300)

 

Exceptional items

                  451

-

-

 (43)

408

 

EBITDA

               3,278

7,575

395

 (2,215)

9,033

 

Depreciation

                 (452)

 (201)

(10)

 (209)

 (872)

 

Amortisation

                 (403)

 (52)

-

 (989)

 (1,444)

 

Operating profit/(loss)

               2,423

7,322

385

 (3,413)

6,717

 

Net finance costs

                    (7)

7

21

 (488)

 (467)

 

Income tax

                 (376)

 (1,563)

(80)

(90)

 (2,109)

 

Profit/(loss) for the period

               2,040

5,766

326

 (3,991)

4,141

 

Segment assets






 

Operating assets

              40,718

28,894

608

26,138

96,358

 

Inter-segment assets

                 (288)

-

-

 (9,396)

 (9,684)

 

External operating assets

              40,430

28,894

608

16,742

86,674

 

Cash and cash equivalents

                3,375

5,337

798

7,385

16,895

 

Total assets

             43,805

34,231

1,406

24,127

103,569

 

Segment liabilities






 

Operating liabilities

                8,062

14,026

137

11,366

33,591

 

Inter-segment liabilities

              (2,222)

 (7,463)

-

-

 (9,685)

 

External operating liabilities

                5,840

6,563

137

11,366

23,906

 

Borrowings

                  610

-

-

-

610

 

Total liabilities

               6,450

6,563

137

11,366

24,516

 

Other segmental information






 

Non-current assets - PPE

                6,370

5,425

111

1,425

13,331

 

Non-current assets - Right-of-use assets

                    93

634

-

214

941

 

Non-current assets - Intangibles

              26,700

12,431

88

128

39,347

 

Intangible assets -additions

                  343

50

-

-

393

 

PPE - additions

                  333

609

51

115

1,108

 

Right-of-use assets - additions

                    58

4

-

17

79

 








 

 

*      Adjusted EBITDA represents earnings before interest, tax, depreciation and amortisation adjusted for exceptional items and share-based payments

'Other' primarily relates to the holding company and head office costs.

 

 

 

 

Disclosure of Group revenues by geographic location



Unaudited

6 months

ended 30

June 2021


Unaudited

6 months

ended 30

June 2020


Audited

Year ended

31 December 2020



£000


£000


£000








Americas







United States of America


16,016


14,702


33,474

Rest of Americas


1,026


1,390


568

Europe, Middles East and Africa (EMEA)







Germany


4,286


2,984


5,873

United Kingdom


4,621


242


4,522

Ireland


4,384


2


5,408

Rest of Europe


2,920


1,621


3,127

Russia


1,384


1,360


2,904

Middle East


661


572


1,261

Africa


939


1,623


2,553

Rest of World







China


424


338


767

Rest of Asia


1,861


1,448


2,883

New Zealand/Australia


37


46


97

Total Revenue


38,559


26,328


65,260

 

Revenue by disease state, which is presented for illustrative purposes only, is as follows:

 


Unaudited

6 months ended 30 June 2021

£'000


Unaudited

6 months ended 30 June 2020

£'000


+/- %







Hematology

5,856


5,853


0.1%

Diabetes (including βHB)

10,183


9,419


8.1%

Central Laboratory

2,372


2,639


(10.1%)

Contract Manufacturing

17,469


6,459


170.5%

Other

2,679


1,959


36.8%

Total revenue

38,559


26,329


46.5%







 



 

4.              Exceptional items

 

Included within administration expenses and cost of sales are exceptional items as shown below:

 



Unaudited 6 months ended 30 June 2021


Unaudited 6 months ended 30 June 2020


Audited year ended 31 December 2020


Note

£000


£000


£000








Exceptional items include:







- Business reorganisation costs

a

(17)


(15)


(58)

- Warranty claim

b

251


455


1,414

- Trellus

c

-


(32)


(74)

Exceptional items


234


408


1,282

 

(a)             Costs associated with the restructuring of the business

(b)             Increase in the value of an estimated warranty claim in relation to the acquisition of EKF-diagnostic GmbH. The increase is a result of a higher share price.

(c)              Start-up costs associated with the set-up of Trellus Healthcare Limited

 

5.   Income tax

 



Unaudited

6 months

ended 30

June 2021


Unaudited

6 months

ended 30

June 2020


Audited

Year ended

31 December 2020



£000


£000


£000

Current tax







Current tax on profit for the period


(2,387)


(1,885)


(3,913)

Adjustments for prior periods


(4)


(87)


(89)

Total current tax


(2,391)


(1,972)


(4,002)








Deferred tax







Origination and reversal of temporary differences


154


(136)


31

Total deferred tax


154


(136)


31

Income tax charge


(2,237)


(2,108)


(3,971)

 

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.

 

 

 

 

 








Audited year ended 31 December 2020


Unaudited
 6 months ended 30 June 2021

Unaudited 6 months ended 30 June 2020




£'000


£'000


£'000

Profit attributable to owners of the parent



9,069


4,011


11,114

Weighted average number of ordinary shares in issue



454,993,227


 

454,247,073


454,524,101

Effect of dilutive potential ordinary shares



4,056,090


4,290,848


4,278,975

Weighted average number of ordinary shares - diluted



459,049,317


 

458,537,921


458,803,076












Pence


Pence


Pence

From continuing operations








Basic



1.99


0.88


2.45









Diluted



1.98


0.87


2.42

 



 

7.   Intangible Fixed Assets

Group

 

 

 

Goodwill
£'000

 

Trademarks trade names & licences

£'000

Customer relationships

£'000

 

Trade secrets

£'000

 

Develop-ment costs

£'000

 

 

Software

 

£'000

 

 

Total

£'000

 

Cost









 

At 1 January 2020

26,371

2,799

15,580

18,436

9,060

299


72,545

Disposal

-

(19)

-

-

(1,419)

-


(1,438)

Additions

-

62

-

-

308

23


393

Exchange differences

1,570

654

1,081

894

505

(10)


4,694

At 30 June 2020

27,941

3,496

16,661

19,330

8,454

312


76,194

Additions

-

84

-

-

278

259


621

Disposals

-

19

-

-

(4,063)

-


(4,044)

Exchange differences

(938)

(282)

(1,120)

(274)

(216)

22


(2,808)

At 31 December 2020

27,003

3,317

15,541

19,056

4,453

593


69,963

Additions

-

238

-

-

317

68


623

Disposal

-

(2)

-

-

-

-


(2)

Exchange differences

(718)

275

(338)

(498)

(116)

(14)

(1,409)

At 30 June 2021

26,285

3,828

15,203

18,558

4,654

647

69,175










 

Amortisation









 

At 1 January 2020

2,550

2,389

10,358

13,141

6,340

-


34,778

Exchange differences

87

373

700

592

311

-


2,063

Disposal

-

(19)

-

-

(1,419)

-


(1,438)

Reclassification/transfer

-

-

-

-

-

-


-

Charge for the period

-

144

681

469

129

21

1,444

At 30 June 2020

2,637

2,887

11,739

14,202

5,361

21


36,847

Exchange differences

(32)

(172)

(747)

(191)

(80)

-


(1,222)

Disposal

-

19

-

-

(4,055)

-


(4,036)

Charge for the period

-

213

564

450

117

(21)


1,323

At 31 December 2020

2,605

2,947

11,556

14,461

1,343

-


32,912

Exchange differences

(54)

(84)

(251)

(362)

(30)

-


(781)

Disposal

-

(1)

-

-

-

-


(1)

Impairment

-

-

-

-

(8)

-


(8)

Charge for the period

-

(52)

588

1,234

107

42

1,919

At 30 June 2021

2,551

2,810

11,893

15,333

1,412

42

34,041

 

 

Net book value









30 June 2021

23,734

1,018

3,310

3,225

3,242

605

35,134

 

31 December 2020

24,398

370

3,985

4,595

3,110

593

37,051

 

30 June 2020

25,304

611

4,922

5,127

3,093

290

39,347

 



 

8.            Dividends

 

A dividend to shareholders of the holding company of 1.1p per ordinary share has been provided during the period following shareholder approval at the Annual General Meeting of the Company in May 2021 (six months to 30 June 2020 and year to 31 December 2020: both 1p). It will be paid on 1 December 2021 to shareholders on the register of members at the close of business on 5 November 2021.

 

9.            Availability of this announcement

 

This announcement is 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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