TIDMSUN
RNS Number : 6710F
Surgical Innovations Group PLC
23 March 2022
Surgical Innovations Group plc
("Surgical Innovations", or the "Group")
Final Results
Audited results for the year ended 31 December 2021
Surgical Innovations Group plc (AIM: SUN), the designer,
manufacturer and distributor of innovative technology for minimally
invasive surgery, reports its audited financial results for the
year ended 31 December 2021.
The Group has continued to show resilience despite the ongoing
effects of the global pandemic, with periods of strong recovery
between each successive wave of Covid. Annual revenues were well
ahead of the prior year, and matched pre-pandemic levels by the
final quarter. This has been sustained into the current year. We
anticipate further progress from the adoption of our innovative
Resposable (TM) technology which is demonstrated to reduce waste
and costs in elective surgery.
Commercial and operational highlights:
-- Major markets rebounding from global pandemic
-- Increasing levels of hospital evaluations and conversion to Resposable (TM) products
-- Leveraging strong relationships with major commercial
partners for greater product penetration and access to innovative
developments such as robotic surgery
-- Investment in sales & marketing teams to take advantage of pent-up demand
-- Capex on equipment to build and enhance manufacturing capabilities
-- Regulatory progress on track towards Medical Device
Regulation (MDR) certification by May 2023
Financial highlights:
-- Revenues increased by 44% in 2021 to GBP9.13m (2020:
GBP6.33m) and amounted to 85% of the comparable pre-pandemic period
in 2019 (GBP10.73m)(1)
-- Underlying gross margin (before net manufacturing cost)
slightly lower but remained within target range at 42.3% (2020:
44.4%)
-- Adjusted EBITDA(2) profit of GBP0.50m (2020: loss of GBP0.66m, 2019: GBP 1.45m(1) )
-- Adjusted Operating loss before tax(2) of GBP0.33m (2020: loss
of GBP1.61m, 2019: GBP0.38m(1) )
-- Adjusted EPS amounted to a loss(2) of 0.022p per share (2020:
loss of 0.19p; 2019: earnings of 0.05p) per share(1)
-- Inventory levels optimised due to supply chain issues; net
cash used in operations managed at GBP0.43m (2020: net cash
generated of GBP1.04m)
-- Net cash(3) at end of period of GBP1.76m (as at 31 Dec 2020: GBP3.10m)
Current trading and outlook:
-- Impact of Omicron Covid-19 variant less severe than
anticipated despite healthcare staff shortages in some markets
-- Revenue for the first two months of the current year is
approximately 40% higher than the corresponding periods of 2021 and
slightly ahead of pre-pandemic levels of 2019
-- The Group continues to trade profitably at the level of
adjusted EBITDA, supported by further growth in new product
development and sales and marketing investment
-- Debt refinancing completed March 2022 to provide additional
headroom and flexibility for future investment
1. Comparative information is shown for the year ended 31
December 2020, except where otherwise stated. Further comparative
information for the year ended 31 December 2019 has been included
to provide a pre-pandemic benchmark for trading.
2. Adjusted EBITDA, adjusted operating (loss)/ profit tax and
Adjusted EPS are stated before deducting non-recurring exceptional
costs of GBP0.08m (2020:GBP0.11m, 2019:GBP0.18m), impairment of
intangible costs of GBP0.15m (2020:GBP0.18m,2019:GBP0.63m),
amortisation of intangible acquisition costs GBPnil (2020:GBP0.16m,
2019:GBP0.35m), goodwill impairment of GBPnil (2020:GBP1.13m,
2019:GBP1.63m) and share based payment costs of GBP0.03m
(2020:GBP0.12m,2019:GBP0.19m).
3. Net cash equals cash less bank debt only.
Chairman of Surgical Innovations, Nigel Rogers said:
"Trading in the first two months of the current year is
approximately 40% higher than the corresponding periods of 2021 and
slightly ahead of pre-pandemic levels of 2019. This would indicate
a more normalised level of trading for the rest of the year with
the return of elective surgery.
"Despite the Omicron Covid-19 variant causing healthcare staff
shortages in some markets, the impact has been less severe than
anticipated. The UK market continues to be strong and is trending
ahead of pre-pandemic levels and, as patient waiting lists continue
to rise, it is likely that this momentum will continue. Demand in
the European and the Rest of the World markets is steadily
increasing but remains more muted. However, both the US and APAC
markets continue to grow significantly ahead of pre-pandemic
levels.
"In addition, we are committed to enhancing and expanding our
product portfolio through new product launches, investing in sales
and marketing to drive our sustainability messaging, and developing
key partnerships, all of which will further support the expansion
of revenue in 2022 and beyond. "
For further information please contact:
Surgical Innovations Group plc www sigroupplc com
David Marsh, CEO Tel: 0113 230 7597
Charmaine Day, CFO
Singer Capital Markets (Nominated Tel: 020 7496 3000
Adviser & Broker)
Aubrey Powell / Rachel Hayes
Walbrook PR (Financial PR & Investor Tel: 020 7933 8780 or si@walbrookpr.com
Relations)
Paul McManus / Lianne Applegarth Mob: 07980 541 893 / 07584 391
303
About Surgical Innovations Group plc
Strategy
The Group specialises in the design, manufacture, sale and
distribution of innovative, high quality medical products,
primarily for use in minimally invasive surgery. Our product and
business development is guided and supported by a key group of
nationally and internationally renowned surgeons across the
spectrum of minimally invasive surgical activity.
We design and manufacture and source our branded port access
systems, surgical instruments and retraction devices which are sold
directly in the UK home market through our subsidiary, Elemental
Healthcare, and exported widely through a global network of trusted
distribution partners. Many of our products in this field are based
on a "resposable" concept, in which the products are part reusable,
part disposable, offering a high quality and environmentally
responsible solution at a cost that is competitive against fully
disposable alternatives.
Elemental also has exclusive UK distribution for a select group
of specialist products employed in laparoscopy, bariatric and
metabolic surgery, hernia repair and breast reconstruction.
In addition, we design and develop medical devices for carefully
selected OEM partners and have also collaborated with a major UK
industrial partner to provide precision engineering solutions to
complex problems outside the medical arena.
We aim for our brands to be recognised and respected by
healthcare professionals in all major geographical markets in which
we operate and provide by development, partnership or acquisition a
broad portfolio of cost effective, procedure specific surgical
instruments and implantable devices that offer reliable solutions
to genuine clinical needs in the operating theatre environment.
Further information
Further details of the Group's businesses and products are
available on the following websites:
www.sigroupplc.com
www.surginno.com
www.elementalhealthcare.co.uk
To receive regular updates by email, please contact
si@walbrookpr.com
Surgical Innovations Group plc
Chairman's Statement
For the year ended 31 December 2021
I am pleased to report that the Group has demonstrated
resilience in another challenging year, and is well positioned to
benefit strongly from the recovery expected in 2022.
Market Overview
Global healthcare provision suffered from the continuing effects
of the coronavirus pandemic, with consequent delays in diagnosis
and treatment of many conditions, especially those requiring
elective surgery. Following a steady reduction in global case
numbers from a peak in the early part of the year, the Delta
variant emerged in May 2021 and by November it had spread to more
than 179 countries. Its effects were most pronounced in the UK
healthcare market over the early summer period, before becoming
dominant in Europe by July, with the US and Japanese markets
affected a few weeks later.
Markets were generally beginning to normalise into the autumn
period, only to be hit once more by the emergence of the Omicron
variant in November spreading very rapidly and causing further
disruption. By the end of 2021, there were approximately six
million patients on the NHS waiting list for consultant-led
elective care, an increase of almost 50% during the pandemic. This
statistic is widely believed to underestimate the backlog, as it
does not capture the large number of potential patients awaiting
diagnosis or referral.
These pressures have temporarily suppressed the demand for many
of the products the company supplies to UK hospitals and via
overseas distribution. On each occasion that Covid caseloads have
diminished, there has been a rapid recovery in demand with a
consequent uplift in revenues, with associated challenges in
managing inventory and manufacturing planning. As the effects of
the Omicron wave recede, and with almost two thirds of the world's
population having received at least one dose of approved vaccine,
we anticipate a strong recovery in healthcare provision in 2022 in
all major markets and a return to a new normality.
Despite these abnormal market fluctuations, there has been a
positive underlying trend in new business wins, mostly as a
consequence of the demonstrable sustainability advantages of our
Resposable(TM) product ranges. Sustainability continues to be a key
growth driver and this has continued in 2022 with successful
evaluations with some major accounts, this is against a backdrop
where hospital evaluations understandably have taken longer to
complete due to the stop/start nature of elective surgery.
Financial Overview
Revenues recovered to 85% of the level achieved in 2019
(hereinafter "pre-pandemic levels") at GBP9.13m, an increase of 44%
compared with the prior year (2020: GBP6.33m). There was marked
improvement in the second half of the year, and especially in the
final quarter where sales were at pre-pandemic levels.
Underlying trading margins were within target range of 40-45% of
revenues, although the under-recovery of factory overheads at
reduced activity levels reduced the reported gross margin to 34.3%,
much improved on the 2020 level of 20.1%. As revenues and factory
activity levels normalise, it continues to be a realistic goal to
fully recover factory overheads without diluting reported
margins.
Operating expenses were kept under control, such that the Group
delivered a positive Adjusted EBITDA(1) of GBP0.50m compared with a
loss of GBP0.33m in 2020 and an Adjusted EBITDA(1) of GBP1.45m
pre-pandemic. The Adjusted Loss Before Taxation(1) amounted to
GBP0.33m compared with GBP1.61m in 2020 and a profit of GBP0.38m
pre-pandemic. Adjusted Earnings Per Share(1) amounted to a loss of
0.022 pence (2020: 0.19p; 2019: earnings of 0.05p).
The strong recovery in revenues towards the end of the year
prompted a managed reflation of working capital with an increase in
trade receivables and inventory of GBP1.24m in the year (with
GBP0.81m in the second half of the year) to GBP1.40m and GBP2.97m
respectively. These end-of-year amounts are comparable with
pre-pandemic levels (2019: GBP1.95m and GBP2.93m respectively) and
are considered sufficient to support the ongoing needs of the
business into 2022. Net cash at the end of the year amounted to
GBP1.76m (as at 31 December 2020: GBP3.10m).
Since the end of the year, the Group has agreed re-arranged
borrowing facilities with its principal bankers, replacing the
existing facility of GBP2.3m with a combined invoice discounting
and CBIL loan facility of GBP2.5m. Financial headroom as at 31
December 2021 was GBP4.06m, compared with GBP5.78m at 31 December
2020. The directors are satisfied that this reduced headroom is
appropriate given the significantly lower risk environment and the
increased level of working capital available in the ordinary course
of business.
1. Reconciliation to adjusted KPI measures included in the Operating and Financial Review
Board and management structure
The Board was pleased to announce the appointment of Charmaine
Day FCCA as Chief Financial Officer in November 2021, following two
years during which she had taken responsibility for all financial
aspects of the management of the Group, and four years as Company
Secretary.
At around this time, the directors undertook a review to
determine the appropriate board structure to fulfill the future
strategic and governance needs of the business. The review
concluded that the board should be reduced to five directors,
comprising three non-executive directors (including an independent
chair and senior independent director), and two executive
directors, being the Chief Executive Officer (CEO) and the CFO. As
part of this planned process, Adam Power stepped down from the
Board on 31 December 2021, and I take this opportunity to express
our sincere thanks for his major contribution to the Company's
performance in recent years.
Alistair Taylor had also signaled his intention to step down
from the board at the same time, but regretfully, Alistair passed
away on 12 December 2021. The directors are grateful for his
involvement since joining the board in 2016, and were saddened to
hear of his passing. The composition of the non-executive
complement of the Board remains under review, and further evolution
is anticipated by the end of 2022.
Of equal importance to the future of the Group was to continue
building a strong executive management team comprising the CEO, CFO
and senior heads of operations, sales and regulatory affairs. This
complement is now complete, and the Board has every confidence that
our leadership team has the skills, experience and capacity to lead
the business to the next level of success.
Strategy and Development
The Group specialises in the design, manufacture, sale and
distribution of innovative, high quality medical products,
primarily for use in minimally invasive surgery. We design and
manufacture and source our branded port access systems, surgical
instruments and retraction devices which are sold directly in the
UK home market through our subsidiary, Elemental Healthcare, and
exported widely through a global network of trusted distribution
partners. Many of our products in this field are based on a
"resposable" concept, in which the products are part re-usable,
part disposable, offering a high quality and environmentally
responsible solution at a cost that is competitive against fully
disposable alternatives.
Elemental also has exclusive UK distribution for a select group
of specialist products employed in laparoscopy, bariatric and
metabolic surgery, hernia repair and breast reconstruction. In
addition, we design and develop medical devices for carefully
selected OEM partners, and have also collaborated with a major UK
industrial partner to provide precision engineering solutions to
complex problems outside the medical arena.
We aim for our brands to be recognised and respected by
healthcare professionals in all major geographical markets in which
we operate. We provide by development, partnership or acquisition a
broad portfolio of cost-effective, procedure-specific surgical
instruments and implantable devices that offer reliable solutions
to genuine clinical needs in the operating theatre environment.
New Product Development
New product development has been a key focus for the business
during 2021 and the first new product, YelloPort(TM)Elite 5mm
('access device'), was launched in February 2022 and the Optical
Trocar for this device will be available in Q2. The access device
was successfully developed in collaboration with CMR Surgical
(CMR), the first partnership with them. The device is designed to
function effectively with robotic instrumentation and will provide
opportunities as the utilisation of robotics continues to grow. The
access device also dovetails with specific market requirements in
the USA and Japan.
The project with CMR provides an opportunity to develop greater
partnerships in robotic surgery and utilise our existing expertise
in access devices, instrumentation and flex technology.
In addition, a range of LogiGrasp and Dissect are anticipated to
be launched in Q3 which will enhance the Logi Range of
instrumentation.
Third Party Relationships
Our growing relationship with CMR has obviously impacted the
strategic partnership with DistalMotion and we are supporting them
as they move to a direct sales model in the UK. The recent
acquisition of Venclose by Beckton Dickerson and the uncertainty
around the future direction of this product has allowed us to
direct our resources in more productive product areas.
Our existing 3rd Party partnerships with Microline and Peters
Surgical have been fortified by reciprocal agreements in the USA
and India respectively.
Current trading and outlook
Trading in the first two months of the current year is
approximately 40% higher than the corresponding periods of 2021 and
slightly ahead of pre-pandemic levels of 2019. This would indicate
a more normalised level of trading for the rest of the year with
the return of elective surgery.
Despite the Omicron Covid-19 variant causing healthcare staff
shortages in some markets, the impact has been less severe than
anticipated. The UK market continues to be strong and is trending
ahead of pre-pandemic levels and, as patient waiting lists continue
to rise, it is likely that this momentum will continue. Demand in
the European and the Rest of the World markets is steadily
increasing but remains more muted. However, both the US and APAC
markets continue to grow significantly ahead of pre-pandemic
levels.
In addition, we are committed to enhancing and expanding our
product portfolio through the new product launches, investing in
sales and marketing to drive our sustainability messaging, and
developing key partnerships, all of which will support the further
expansion of revenue in 2022 and beyond.
Nigel Rogers
Chairman
23 March 2022
Operating and Financial Review
Operational overview
Regulatory
Transition to Medical Device Regulation (EU) 2017/745 (MDR)
remains the key priority for the business and the Group continues
to be on track for completion in March 2023. The MDR process has
required significant investment in people and process impacting all
areas of the business. However, whilst it is clear that these
regulatory requirements will continue to be part of the medical
device landscape, it will raise the bar to market entry providing
an opportunity to those with the regulatory expertise to navigate
MDR. The controlled progress on MDR and regulatory approvals
validates the investment in people made in QA/RA during 2019 and
2020 and we have continued to invest in the current year.
Sales and Marketing
The Executive team was further strengthened in July 2021 with
the appointment of Damian Donnelly as Group Sales and Marketing
Director. Damian joined the Company with excellent industry
experience and a very strong marketing pedigree. The Executive team
is well supported by the next layer of management who have
responded very positively to the challenges faced over the last
year.
As global markets reopen the Group has responded to the
opportunity this presents by further investment in sales and
marketing resources. The appointment of two International Sales
Managers will allow us to consolidate the 2021 initiatives in key
markets and provide the bandwidth to open strategic new markets.
The UK team has been strengthened by the appointment of a National
Accounts Manager to focus on the Private/NHS waiting list
initiative work, as well as improving communication with the NHS
Supply Chain. A new Marketing Manager and Marketing Communications
Assistant will further finesse our sustainability messaging for UK
and global markets.
Manufacturing and facility investment
Capital expenditure, highlighted in September, to improve
manufacturing efficiency and operational capacity is well underway
with the first CNC Lathe being installed and commissioned in
February 2022. Additional injection moulding capacity is being
built to allow us to bring more production in-house and manage the
anticipated increase in volumes of both YelloPort(TM) Elite and
YelloPort(TM) Elite 5mm.
Supply chain
Supply chain logistics remain a challenge for most organisations
and has necessitated the additional inventory at year end to ensure
that we were well placed to meet any increase in demand. I
nflationary pressures on the cost of raw materials and distribution
products have also been challenging, however mitigating action has
been taken to offset these effects through cost reduction activity
and increases in selling prices.
Financial overview
As global healthcare providers return to normal activity levels
following the Covid-19 pandemic and to understand the nature of
this impact, the board references the financial year ending 2019 as
a comparative period being the last pre-pandemic year as a measure
of recovery.
Revenue
Overall revenues increased by 44.2% in 2021 to GBP9.13m. This
compares with the full year revenues of GBP6.3m in 2020 and
GBP10.7m in 2019 as a pre-pandemic comparative. Sales of GBP4.91m
in the second half of the year were 16.4% higher than the first
half of the year in 2021 (2021 H1: GBP4.21m) and at 87.6% of
relatively normal levels in the second half of the year based on
the comparative 2019 period (2019 H2: GBP5.63m).
Revenues from the sale of Surgical Innovations Brand products
increased by 41.1% to GBP4.81m (2020: GBP3.41m) during the year and
compared to 2019 are at 82.4% of normal relative levels (2019:
GBP5.84m), however revenues for the second half year decreased by
5.7% from the first half of the year mainly from the US and APAC
regions.
At the start of the year, the UK market saw a number of NHS
trusts reduce or postpone elective surgery during the second wave
of the pandemic. In the second half of the year recovery was
stronger, increasing by 24% from the first half. With the continued
backlog of patients on waiting lists and the NHS's fulfilment of
the 'Net-Zero' obligations on sustainability, the SI Branded
Resposable(R) range is well positioned for further recovery and
future growth.
Revenues from the US in the first half continued to be strong
despite the pandemic, with substantial stocking orders in the first
quarter. Sales activity levels in hospitals continued to return to
normal as the US team made progress with significant general
procurement organisations ("GPOs") and healthcare providers as
operating rooms ("OR") become accessible. New evaluations continued
but there have been some states where access remains restricted as
a result of Covid challenges. Overall US SI branded sales increased
by 51.1% from 2020 which was at 71.9% of the comparative
pre-pandemic levels (2021: GBP1.33m; 2020: GBP0.88m; 2019:
GBP1.85m). The distribution agreements signed at the beginning of
the year have had a slower start than anticipated, but are set to
provide a significant opportunity for growth.
SI Brand revenues from the APAC region, similarly to the US,
showed a strong start to the year with substantial stocking orders
in the first quarter. APAC sales increased by 8.8% from 2020,
however this region has seen significant growth since 2019 (2021:
GBP0.74m, 2020: GBP0.68m, 2019: GBP0.46m). SI Brand sales in the
Rest of the World were up by 52.2% from 2020, but remained
relatively low at 54.7% of pre-pandemic levels; this region is
typically made up of tender-based business and this market has been
impeded by the pandemic (2021: GBP0.35m, 2020: GBP0.23m, 2019:
GBP0.64m).
Total OEM revenues nearly doubled from 2020 by 96.7% (2021:
GBP1.20m; 2020: GBP0.61m; 2019: GBP1.79m). With our key OEM
partners in the medical sector experiencing similar pressures to
those in our own portfolio, there was a slow start to the year, and
the significant orders for non-medical products delivered in 2018
and 2019 were not repeated this year. In the second half of the
year the recovery improved significantly against the first and saw
revenue levels at similar levels to the 2019 comparative period
(2021 HY2: GBP0.75m, 2019 HY2: GBP0.79m). This level of activity
has continued into early 2022 and is anticipated to grow further in
2023.
Distribution sales increased by 35.1% from 2020 and are now back
at 2019 levels (2021: GBP3.12m, 2020: GBP2.31m, 2019: GBP3.10m).
Despite the slower start to the UK distribution market, the revenue
levels have fully recovered as anticipated and this has continued
into early 2022 despite the concerns of the Omicron variant. The
product portfolio has a wider range which meets the increased
demands of other specialisms such as Bariatric surgery.
Margins
Underlying gross margins (before net manufacturing costs)
remained within target range at 42.3% (2020: 44.4%) with reportable
direct gross profit margin also improved but still below target at
34.3% (2020: 20.1%). The direct gross margin is still being
affected by the increased net manufacturing costs, driven by
overall reduced levels of factory output and, in particular, the
additional challenges with increasing costs of people and the
reduction of available skilled labour resource affecting overall
capacity.
Analysis of gross margin
The Group has disaggregated margins
in the following table:
2021 2020
GBP'000 GBP'000
-------------------------------------- --------- ----------------
Revenue 9,126 6,329
Cost of Sales (5,268) (3,519)
Underlying Gross Margin 3,858 2,810
Underlying Gross Margin % 42.28% 44.39%
Net Cost of Manufacturing(1) (727) (1,538)
---------------------------------------- --------- ----------------
Contribution Margin 3,131 1,272
---------------------------------------- --------- ----------------
Contribution Margin % 34.31% 20.10%
---------------------------------------- --------- ----------------
1. Underlying net cost of manufacturing with the government
support of the CJRS scheme of GBP2,000 (2020: GBP270,000) allocated
in other income added back to adjust the net costs of Manufacturing
to GBP725,000 (2020: GBP1,148,000) results in an underlying
contribution margin of 34.33% (2020: 26.26%).
Use of adjusted measures
Adjusted KPIs are used by the Board to understand underlying
performance and exclude items which distort comparability, as well
as being consistent with broker forecasts and measures. The method
of adjustments are consistently applied but are not defined in
International Financial Reporting Standards (IFRS) and, therefore,
are considered to be non-GAAP (Generally Accepted Accounting
Principles) measures. Accordingly, the relevant IFRS measures are
also presented where appropriate.
Key Performance Indicators ("KPIs")
The Group considers the key performance indicators of the
business to be:
2021 2020 Target Measure
Gross profit (before
Underlying Gross net manufacturing
Profit Margin cost)/ revenue 42.3% 44.4% >40%
------------------------ --------- --------- ---------------
Direct Gross Profit
Margin Gross profit / revenue 34.3% 20.1% >40%
------------------------ --------- --------- ---------------
Net Cash/(Net Debt)(1) Cash less debt GBP1.76m GBP3.10m N/A
------------------------ --------- --------- ---------------
1. Net debt comprised of bank borrowings (GBP1.8m), excluding
leases under the adoption of IFRS16.
Reconciliation of adjusted KPI / measures
EBITDA Loss before taxation
(2)
As stated GBP0.39m GBP(0.59)m
---------- ---------------------
Impairment of product development - GBP0.15m
intangibles
---------- ---------------------
Share based payments GBP0.03m GBP0.03m
---------- ---------------------
Exceptional items GBP0.08m GBP0.08m
---------- ---------------------
Adjusted Measure GBP 0.50m GBP(0.33)m
---------- ---------------------
2. EBITDA is defined as earnings before interest, taxation,
depreciation and amortisation (including impairment). EBITDA is
calculated as operating loss of GBP(0.46)m adding back depreciation
GBP0.45m, amortisation GBP0.25m and impairment GBP0.15m.
Earnings per share EPS
Basic EPS (0.049)p
-----------
Loss attributable to shareholders GBP(0.46)m
-----------
Add: Share based payments GBP0.03m
-----------
Add: Exceptionals GBP0.08m
-----------
Add: Impairment of product development intangibles GBP0.15m
-----------
Adjusted profit attributable to shareholders GBP(0.20)m
-----------
Adjusted EPS (0.022)p
-----------
Adjusted EBITDA
Adjusted EBITDA is a measure of the business performance. The
Group uses this as a proxy for understanding the underlying
performance of the Group. This measure also excludes the items that
distort comparability including the charge for share-based payments
as this is a non-cash expense normally excluded from market
forecasts.
Adjusted EBITDA significantly increased in 2021 to a profit of
GBP0.50m in line with expectations (2020 loss of: GBP0.66m), mainly
as a result of the recovery from pandemic. Operating expenses were
lower in the first half of the year due to reduced sales and
marketing costs, this increased by 23.6% in the second half of the
year (2021HY: GBP1.62m, 2021HY2: GBP2.00m). With the focus to
gradually increase UK sales heads back to normal levels as revenue
recovers and increase headcount in regulatory with MDR (Medical
Device Regulation) certification due in May 2023.
Exceptional items relate to employee termination payments and
relocations costs amounting to GBP78,000 (inclusive of NI and legal
fees).
Capital expenditure on tangible assets increased with the
investment into new tooling for the new product launch set for
early 2022 (2021: GBP0.21m, 2020 GBP0.04m) set against a
depreciation charge of GBP0.26m excluding Right of use assets
(2020: GBP0.35m). Capex plans continued to be reviewed with the
intention to improve the manufacturing facilities as a continuation
of the improvements that were started in 2019. The Group has
committed to an additional GBP0.16m on a new CNC lathe due in
February 2022 with a new injection moulder to follow shortly
after.
Investment into new product development has increased
significantly as part of the strategy announced alongside the
fundraise in 2020. Cash into development expenditure was GBP0.45m
(2020: GBP0.13m). Capitalised development expenditure was tested
for impairment. Management has reviewed the remainder of costs for
the Illuminated devices and with the focus on advancing new
products under MDD (the Medical Device Directive) instead of MDR,
the project timeframe had been pushed out into 2024. This reflects
how the commercial market landscape has changed and may continue to
change. With the delayed timeframe for completion, it was decided
that the nature of these costs provide no future economic benefit,
and an impairment of GBP0.15m has therefore been recognised.
A review of the goodwill arising on the acquisition of Elemental
Healthcare was tested for further impairment. The trading
environment in the UK market was significantly impacted by the
pandemic throughout 2020 and this continued into 2021, which
impacted the cumulative impairment by GBP2.76m. In the second half
of 2021 the UK market showed strong signs of recovery, and this has
continued into early 2022. With greater visibility on the outlook,
the Directors anticipate improved forecasting of future net inflows
on this CGU and, on this basis, the recoverable amount of the
cash-generating unit would exceed its carrying value by
GBP2.94m.
Inventory holdings increased significantly throughout the year
by GBP0.80m to GBP2.96m (2020: GBP2.17m). Starting the year with
minimal inventory levels and a planned reflation (2021HY1:
GBP2.36m), moving into the second half of the year the Group was
impacted by UK and international supply chain issues. Inventory
levels were optimised in order to manage lead times, inflationary
pressures on minimum order quantities and increased activity.
Safety stock levels continue to be reviewed and monitored in the
current year in order to support customer requirements and generate
cash as the working capital cycle stabilises.
Trade receivables were higher at the year-end GBP1.4m (2020:
GBP0.96m), affected by the increased revenue, with negligible bad
debts or overdue balances. Trade creditors increased over the same
period, which reflected the Group's optimisation of working capital
(2021: GBP1.09m; 2020: GBP0.75m).
Net cash used in operations was GBP0.43m (2020 generated from:
GBP1.04m), primarily as a result of the increased optimisation of
working capital movements described above. The Group closed the
year with net cash balances of GBP1.76m (excluding leases) compared
with opening net cash of GBP3.10m.
Bank borrowings of GBP1.88m comprising of GBP1.50m Coronavirus
Business Interruption Loan Scheme (CBILS) and the existing loan
facilities GBP0.38m resulted in interest obligations of GBP0.07m
(2020: GBP0.07m). Both loans were due to be repaid in May 2022. In
March 2022 the board refinanced the existing debt including the
additional undrawn revolving credit facility of GBP0.5m and
replaced it with an invoice discounting facility of GBP1.00m and in
addition extended the CBILS loan to May 2026. At the time of audit
sign off on the approval of the accounts, the CBILS extension was
complete, and the invoice discounting agreement was credit approved
and progressing. The refinance provides greater flexibility than
the existing debt and continues to provide ample headroom for the
Group.
The Group recorded a corporation tax credit of GBP0.13m (2020:
credit of GBPnil) and a deferred tax credit of GBPnil (2020: credit
GBP0.03m). The tax charge on Elemental Healthcare has been relieved
through Group losses. Overall, the Group continues to hold
substantial tax losses on which it holds a cautious view, and
consequently the Group has chosen not to recognise those losses
fully. During the year, the Group submitted an enhanced Research
and Development claim in respect of 2020 amounting to GBP0.13m.
This claim has been paid in the current year and therefore has not
been recognised in the 2021 accounts.
Principal risks and uncertainties
The management of the business and the nature of the Group's
strategy are subject to a number of risks which the Directors seek
to mitigate wherever possible. The principal risks are set out
below.
Issue Change Risk and description Mitigating actions
vs. prior
year
Funding At same The Group currently has Liquidity and covenant compliance
risk level a mixture of borrowings is monitored carefully across
comprising a GBP0.38m varying time horizons to facilitate
loan, GBP0.5m rolling short term management and also
credit facility and GBP1.5m strategic planning. This monitoring
CBILS arrangement. The enables the management team
Group remains dependent to consider and to take appropriate
upon the support of these actions within suitable time
funders and there is frames.
a risk that failure in
particular to meet covenants In aggregate total borrowing
attaching to the rolling at 31 December 2021 was GBP1.88m
credit facility could (2020: GBP2.18m). Financial
have financial consequences covenants were amended to reflect
for the Group. the current trading in September
2021 to a GBP3m gross cash balance,
this will continue to be tested
on a monthly basis until the
term of the loan which at the
point of refinance.
In March 2022 the board refinanced
the existing debt including
the additional undrawn revolving
credit facility of GBP0.5m and
replaced it with an invoice
discounting facility of GBP1m
and in addition extended the
CBILS loan to May 2026. The
refinance provides greater flexibility
than the existing debt and continues
to provide ample headroom for
the Group. At the time of audit
sign off on the approval of
the accounts, the CBILS extension
was complete, and the invoice
discounting agreement was credit
approved and progressing.
The bank continue to be a supportive
stakeholder.
============ ================================ ========================================
Covid-19 Reduced The escalation in the All government guidance has
and business spread of Covid-19 and been monitored closely and followed
interruption various variants in the immediately by advisory notices
UK poses a threat to to all employees, and provision
the continuation of business of the appropriate guidance
operations if there is and cleaning materials to minimise
a widespread infection any effect.
in any of our facilities
or amongst the workforce. Where staff members have presented
symptoms and tested positive
either by lateral flow or PCR,
they have been asked to immediately
self-isolate and inform us quickly
of any contact with other employees
which may be cause for concern.
There is also a risk of further
reduction in elective surgery
either by reduced levels of
surgery or being postponed.
Whilst the various variant waves
in the pandemic continue, management
continues to monitor closely
the rapidly changing environment
and has devised a series of
mitigating actions, designed
to maintain delivery of essential
products to our customers and
distributors. The majority of
the workforce can work from
home if necessary to safeguard
other employees.
============ ================================ ========================================
Customer At The Group exports to The majority of distributors,
concentration same over thirty countries including the most significant,
level and distributors around are well established and their
the world, but certain relationship with the Group
distributors are material spans many years. Credit levels
to the financial performance and cash collection is closely
and position of the Group. monitored by management, and
As disclosed in note issues are quickly elevated
2 to the financial statements, both within the Group and with
one customer accounted the distributor.
for 11.5% of revenue
in 2021 and the loss,
failure or actions of
this customer could have
a severe impact on the
Group.
============ ================================ ========================================
Issue Change Risk and description Mitigating actions
vs prior
year
Foreign At same The Group's functional The Group monitors currency exposures
exchange level currency is UK Sterling; on an on-
risk however, it makes significant going basis and enters into forward
purchases in Euros and currency arrangements where considered
US Dollars. appropriate to mitigate the risk
of material adverse movements
The US Dollars and Euros in exchange rates impacting upon
are generally mitigated the business. Euro and US Dollar
by US Dollar sales by cash balances are monitored regularly
creating a natural hedge. and spot rate sales into sterling
are conducted when significant
currency deposits have accumulated.
The accounting policy for foreign
exchange is disclosed in accounting
policy 1d.
========== ================================== ========================================
Regulatory Increased As an international The Group has a dedicated Compliance
approval business a significant department which assists product
proportion of the Group's development teams with support
products require registration as required to minimise the risk
from national or federal of regulatory approval not being
regulatory bodies prior obtained on new products and
to being offered for ensures that the Group operates
sale. The majority of processes and procedures necessary
our major product lines to maintain relevant regulatory
have FDA approval in approvals.
the US and we are therefore
subject to their audit Whilst there is no guarantee
and inspection of our that this will be sufficient,
manufacturing facilities. the Group has invested in people
with the appropriate experience
There is no guarantee and skills in this area which
that any product developed mitigates this risk significantly.
by the Group will obtain
and maintain national We have increased resource into
registration or that the regulatory team and continue
the Group will always to do in 2022 to ensure internal
pass regulatory audit deadlines are met.
of its manufacturing
processes. Failure to
do so could have severe
consequences upon the
Group's ability to sell
products in the relevant
country.
The Group has till May
2023 to transition the
current product portfolio
to fall under the Medical
Device Regulations (MDR),
currently held under
Medical Device Directive
(MDD). Time constraints
of BSI, the notified
body in the UK, are
outside of our control.
========== ================================== ========================================
Brexit At same The Group exports to The Group has successfully reassigned
level a number of different all of the Company's product
countries with sales certifications from BSI Notified
to Europe accounting Body 0086 (UK) to BSI Netherlands
for 11.7% of 2021 revenue. Notified Body 2797, in order
As well as exporting, to mitigate any risk to regulatory
the Group imports goods clearance both in the EU and
both for re-sale through in the UK.
Distribution revenue,
as well as some raw Any risk from a delay in supply
materials used in manufacturing. chain has also been mitigated
by the successful application
The current trade rules of Approved Economic Operator
transitioned on 1 January Status, which we received in
2021. Transitional arrangements March 2019.
made between the UK
and EU have caused some In addition to the above management
delay to Customs clearances will continue to monitor closely
due to paperwork provided and mitigate where possible the
by the couriers which impact on the supply chain.
has since been resolved.
The Group continues
to have delays in supply
chain and inflationary
pressures partly driven
by Brexit but also Covid.
========== ================================== ========================================
Going concern
The Directors have prepared forecasts for the period to March
2023 based on an evaluation of financial forecasts, sensitised to
reflect a rational judgement of the level of inherent risk.
At the 31 December 2021, bank borrowings for the Group were
GBP1.88m comprising of GBP1.50m Coronavirus Business Interruption
Loan Scheme (CBILS) and the existing loan facilities of GBP0.38m
which resulted in interest obligations of GBP0.07m. Financial
covenants have been complied with in full and have continued to be
tested on a monthly basis. Both loans were due to be repaid in May
2022. In addition, the Group had access to a committed undrawn
GBP0.50m revolving credit facility. Net Cash as at the 31 December
2021 was GBP1.76m, giving an overall headroom of GBP4.14m.
In March 2022 the Group refinanced the existing debt, including
the additional undrawn revolving credit facility of GBP0.5m. The
debt was replaced with an invoice discounting facility of GBP1.0m
and an extension of the CBILS loan of GBP1.5m just over four years
till May 2026. At the time of audit sign-off on the approval of the
accounts, the CBILS extension was complete, and the invoice
discounting agreement was credit approved and progressing. The
refinancing provides greater flexibility for further investment in
terms of covenant testing than the prior debt and continues to
provide ample headroom for the Group. Covenant information is
provided at note 6. Financial headroom as at 31 December 2021 was
GBP4.06m.
The Group has significant investment plans for capital
expenditure on plant and machinery circa GBP0.6m in the next twelve
months. Decisions to take additional finance in the form of hire
purchase or use of the existing debt to finance projects will
impact both the cash and the covenant testing and the decisions to
utilise such funding will very much depend on the performance of
the business.
The Board is satisfied that there is ample headroom including
testing any sensitivities under reasonably possible scenarios, and
the Directors conclude that it continues to be appropriate to
prepare the Annual Report and Accounts on a going concern
basis.
Con solidated statem ent of comprehensi ve income
fo r the y ear en ded 31 Dece m ber 2 0 21
20 21 2020
GBP '0 00 GBP '0 00
------------------------------- ------------------ -------------------
Rev enue 2 9,126 6,329
Cost of s a les 2 (5,995) (5,057)
-------------------------------- ------------------ -------------------
G ross profit 3,131 1,272
O ther ope r ati ng e x pens
es 2 (3,611) (5,063)
Other Income 3 25 621
O perating loss (455) (3,170)
Fina n ce c o sts (130) (138)
Fina n ce in c o me - 1
-------------------------------- ------------------ -------------------
Loss b efore ta xation (585) (3,307)
T a x a tion credit 129 31
-------------------------------- ------------------ -------------------
Loss a nd total comprehensive
Income (456) (3,276)
-------------------------------- ------------------ -------------------
(Loss) per share, total and
continuing
Bas ic 4 (0.05p) (0.33p)
Diluted 4 (0.05p) (0.33p)
-------------------------------- ------------------ -------------------
The Consolidated statement of comprehensive income above relates
to continuing operations.
Loss and total comprehensive income relate wholly to the owners
of the parent Company.
Con solidated statem ent of changes in equ i ty
fo r the y ear en ded 31 Dece m ber 2 0 21
Share Share Capital Merger Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ----------------- ------- ------- -------- -------
Balance as at 1 January 2020 7,953 5,904 329 1,250 (3,244) 12,192
Share based payment - - - - 116 116
Issue of share capital 1,375 825 - - - 2,200
Equity based placing fees - (142) - - - (142)
Total - transactions with owners 1,375 683 - - 116 2,174
Loss and total comprehensive
income for the period - - - - (3,276) (3,276)
---------------------------------- ------------ ----------------- ------- ------- -------- -------
Balance as at 31 December 2020 9,328 6,587 329 1,250 (6,404) 11,090
Share based payment - - - - 30 30
Total - transactions with owners - - - - 30 30
Loss and total comprehensive
income for the period - - - - (456) (456)
---------------------------------- ------------ ----------------- ------- ------- -------- -------
Balance as at 31 December 2021 9,328 6,587 329 1,250 (6,830) 10,664
---------------------------------- ------------ ----------------- ------- ------- -------- -------
Con solidated balance sheet
a t 31 Dece m b er 20 21
2021 2020
GBP GBP '0
'0 00 00
============================================= ============ ===============
A sse ts
Non-current a ssets
Property, p l ant and eq u ip m ent 366 412
Right of use assets 832 1,030
Intan g ib le a ss ets 5 6,216 6,173
7,414 7,615
============================================= ============ ===============
Curr ent asse ts
In v entori es 2,965 2,167
T rade and other rec e i v abl es 1,695 1,283
Cash at b a nk a nd in h and 3,644 5,278
============================================= ============ ===============
8,304 8,728
============================================= ============ ===============
Total a ssets 15,718 16,343
============================================= ============ ===============
Equity and liabiliti es
Equity attributable to equity holders of the
p arent compa ny
Share cap ital 8 9,328 9,328
Share p r em i um a c co u nt 6,587 6,587
Capital re s erve 329 329
Merger reserve 1,250 1,250
Retain ed e arni n gs (6,830) (6,404)
============================================= ============ ===============
Total e qui ty 10,664 11,090
============================================= ============ ===============
Non-current l i abiliti es
Borro w ings 6 - 1,879
Deferred tax liabi l iti es - -
Dilapidation provision 165 165
Lease liability 750 907
============================================= ============ ===============
915 2,951
============================================= ============ ===============
Curr ent liabi lities
T rade and other pa y ab l es 7 1,614 1,449
Accru als 488 369
Borrowings 1,880 298
Lease liability 157 186
============================================= ============ ===============
4,139 2,302
============================================= ============ ===============
Total li abiliti es 5,054 5,253
============================================= ============ ===============
Total e qui ty and liabili ties 15,718 16,343
--------------------------------------------- ------------ ---------------
Con solidated cash f l ow statement
fo r the y ear en ded 31 Dece m ber 2 0 21
2021 2020
GBP'000 GBP'000
---------------------------------------------------------- ------------ ---------
Cash flo ws from operating a ctivities
Loss after tax for the year (456) (3,276)
Adju stm e nts for:
Taxation (129) (31)
Finance income - (1)
Finance costs 130 138
Other Income-CBILS interest grant 3 (23) (27)
Depre c iati on of pro perty, p l ant and e qu i
pm e nt 258 348
Amorti sa t ion and impairment of i nta n gi b le
a s s ets 5 402 1,726
Depreciation Right of Use assets 187 211
Share-b a s ed pa ym ent cha r ge 30 116
Foreign exchange 12 42
(Increase)/decrease in i n v entories (802) 758
(Increase)/decre a se in trade and other rec e i
v abl es (412) 1,076
Increase/(decre a se) in pa y a bles 7 276 (10)
---------------------------------------------------------- ------------ ---------
Cash (used in)/generat ed from operations (527) 1,070
T a x a tion received 129 -
Intere st p aid (35) (28)
---------------------------------------------------------- ------------ ---------
Net cash (used in)/g enerated from ope r ating activities (433) 1,042
---------------------------------------------------------- ------------ ---------
Cash flo ws from inv esting a ctivities
Pa y men ts to ac q uire pro p erty, plant and eq
u i p ment (212) (42)
Acqu i si t ion of i n t a n gi b le a s s e ts (445) (113)
Net cash used in investing activities (657) (155)
---------------------------------------------------------- ------------ ---------
Repayment of bank loan (300) (150)
Proceeds from CBILS 6 - 1,500
Net proceeds from issue of share capital 8 - 2,052
Repayment of lease liabilities (232) (251)
Net cash (used in)/generated from fin anc ing a
ctivities (532) 3,151
---------------------------------------------------------- ------------ ---------
Net (decrease)/increase in cash and cash equivalents (1,622) 4,038
Cash a nd ca sh e q ui v al e nts at begi n ni ng
of y ear 5,278 1,282
Effective exchange rate fluctuations on cash held (12) (42)
---------------------------------------------------------- ------------ ---------
Cash and cash equivalents at end of year 3,644 5,278
========================================================== ============ =========
Notes to the consolidat ed f inancial statem ents
1 . Group a c counting policies under IFRS
(a) Basis of prep aration
Surgical Innovations Group PLC (the "Company") is a public AIM
listed company incorporated, domiciled and registered in England in
the UK. The registered number is 02298163 and the registered
address is Clayton Wood House, 6 Clayton Wood Bank, Leeds, LS16
6QZ.
The consolidated financial statements have been prepared in
accordance with th e requirements of the Companies Act 2006' with
'UK-adopted international accounting standards The preparation of
financial statements in conformity with IFRS requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group's
accounting policies. The financial statements have been prepared
under the historical cost convention, are presented in Sterling and
are rounded to the nearest thousand.
Going concern
The Directors have considered the available cash resources of
the Group and its current forecasts and has a reasonable
expectation that the Group have adequate cash resources and support
to continue in operational existence for the foreseeable future,
considered to be at least 12 months for the date of approval from
the financial statements. Further details of the Directors'
assessment are provided in the Chairman's Statement, the Operating
and Financial Review and Directors' report and disclosed in note
(p) of the financial statements.
2. Segmental reporting
Information reported to the Board, as Chief Operating Decision
Makers, and for the purpose of assessing performance and making
investment decisions is organised into three operating segments.
The Group's operating segments under IFRS 8 are as follows:
SI Brand - the research, development, manufacture and distribution
of SI branded minimally invasive devices
OEM - the research, development, manufacture and distribution
of minimally invasive devices for third party
medical device companies through either own label or
co-branding. As well as Precision Engineering, this
includes the research, development, manufacture and
sale of minimally invasive technology products for
precision engineering applications
Distribution - Distribution of specialist medical products sold through
Elemental Healthcare Ltd
The measure of profit or loss for each reportable segment is
gross margin less amortisation of product development costs. Assets
and working capital are monitored on a Group basis, with no
separate disclosure of asset by segment made in the management
accounts, and hence no separate asset disclosure is provided here.
The following segmental analysis has been produced to provide a
reconciliation between the information used by the chief operating
decision maker within the business and the information as it is
presented under IFRS.
S I Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 20 21 Br a GBP'000 GBP ta l*
nd '0 00 GBP
GBP '0 00
'0 00
================================================ ========= ============ ====== =======
Rev enue 4,813 3,116 1,197 9,126
Expenses (3,770) (1,837) (790) (6,397)
------------------------------------------------ --------- ------------ ------ -------
Result
Segment re sult 1,043 1,279 407 2,729
Unall o ca t ed e x pens es (3,209)
Other Income 25
------------------------------------------------ --------- ------------ ------ -------
(Loss) from operations (455)
Fina n ce in c o me -
Fina n ce c o sts (130)
================================================ ========= ============ ====== =======
(Loss) b efore ta xation (585)
T a x credit 129
================================================ ========= ============ ====== =======
(Loss) for the y ear (456)
------------------------------------------------ --------- ------------ ------ -------
*There were no revenues transactions between
the segments during the year
Inc l uded w ithin t he s eg m ent/o perati ng
re s u lts are t he f o llo w i ng s ign ifi
c ant no n - c a sh i t e m s:
S I Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 20 21 Br a GBP GBP ta l
nd '0 00 '0 00 GBP
GBP '0 00
'0 00
================================================ ========= ============ ====== =======
Amorti sa t ion of i nta n gi b le a s s ets 257 - - 257
Impairment of i nta n gi b le a s s ets 145 - - 145
Unallocated expenses for 2021 include sales and marketing costs
(GBP246,000), research expenses (GBP973,000), central overheads
(GBP797,000), Direct (Elemental Healthcare) sales & marketing
overheads (GBP1,085,000), share based payments (GBP30,000),
exceptionals (GBP78,000) note 3.
S I Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 2020 Br a GBP'000 GBP ta l*
nd '0 00 GBP
GBP '0 00
'0 00
======================================= ======= ============ ====== =============
Rev enue 3,410 2,311 608 6,329
Expenses (3,681) (2,703) (399) (6,783)
--------------------------------------- ------- ------------ ------ -------------
Result
Segment re sult (271) (392) 209 (454)
Unall o ca t ed e x pens es (3,337)
Other income 621
======================================= ======= ============ ====== =============
(Loss) from operations (3,170)
Fina n ce in c o me 1
Fina n ce c o sts (138)
======================================= ======= ============ ====== =============
(Loss) b efore ta xation (3,307)
T a x charge 31
======================================= ======= ============ ====== =============
(Loss) for the y ear (3,276)
======================================= ======= ============ ====== =============
*There were no revenues transactions between the segments during
the year
Inc l uded w ithin t he s eg m ent re s u lts
are t he f o llo w i ng i t e m s:
S I Br Distribution OEM T o
Y e a r e n d ed 31 De ce m ber 2020 a nd GBP '0 GBP ta l
GBP '0 00 '0 00 GBP
00 '0 00
================================================ ========== ============ ====== ======
Amorti sa t ion of i nta n gi b le a s s ets 250 162 - 412
Impairment of i nta n gi b le a s s ets 182 1,132 - 1,314
Unallocated expenses for 2020 include sales and marketing costs
(GBP185,000), research expenses (GBP1,099,000), central overheads
(GBP790,000), Direct (Elemental Healthcare) sales & marketing
overheads (GBP1,039,000), share based payments (GBP116,000),
exceptionals (GBP108,000) Note 3.
Analysis of gross margin
The Group has disaggregated
margins in the following table:
2021 2020
GBP'000 GBP'000
---------------------------------- --------- ----------------
Revenue 9,126 6,329
Cost of Sales (5,268) (3,519)
Underlying Gross Margin 3,858 2,810
Underlying Gross Margin % 42.28% 44.39%
Net Cost of Manufacturing* (727) (1,538)
------------------------------------ --------- ----------------
Contribution Margin 3,131 1,272
------------------------------------ --------- ----------------
Contribution Margin % 34.31% 20.10%
------------------------------------ --------- ----------------
*Underlying net cost of manufacturing with the government
support of the CJRS scheme of GBP2,000 (2020: GBP270,000) allocated
in other income added back to adjust the net costs of Manufacturing
to GBP725,000 (2020: GBP1,148,000) results in an underlying
contribution margin of 34.33% (2020:26.26%).
Disaggregation of revenue
The Group has disaggregated revenues in the following table:
Y e a r e n d ed 31 De ce m ber 2021 S I Br Distribution OEM T o
a nd GBP '0 GBP ta l
GBP '0 00 '0 GBP
00 00 '0 00
===================================== ============= ============ ===== ======
United Kingdom 1,306 3,116 1,008 5,430
Europe 1,075 - - 1,075
US 1,333 - 189 1,522
APAC(1) 743 - - 743
Rest of World 356 - - 356
------------------------------------- ------------- ------------ ----- ------
4,813 3,116 1,197 9,126
===================================== ============= ============ ===== ======
Y e a r e n d ed 31 De ce m ber 20 20 S I Br Distribution OEM T o
a nd GBP '0 GBP ta l
GBP '0 00 '0 GBP
00 00 '0 00
====================================== ============ ============ ==== ======
United Kingdom 889 2,311 457 3,657
Europe 726 - - 726
US 882 - 151 1,033
APAC(1) 681 - - 681
Rest of World 232 - - 232
-------------------------------------- ------------ ------------ ---- ------
3,410 2,311 608 6,329
====================================== ============ ============ ==== ======
1. Asia-Pacific
Revenues are allocated geographically on the basis of where
revenues were received from and not from the ultimate final
destination of use. During 2021 GBP1,050,000 (11.5%) of the
Group's revenue depended on one distributor in the SI Brand segment
(2020: GBP708,000 (11.2%)).
Sales of goods were GBP9,062,000 (2020: GBP6,307,000) and sales
relating to services in the UK were GBP64,000 (2020:
GBP22,000).
3. Other Income comprised:
2021 2020
GBP'000 GBP'000
CJRS 2 594
CBILS-Interest free (12mths) 23 27
----------------------------- ------- ----------------
25 621
Other Income disclosed above relates to amounts received from
the Coronavirus Job Retention Scheme (CJRS). As part of the
response to the COVID-19 pandemic the government introduced the
CJRS. This allowed all employees on a PAYE scheme to designate some
or all employees as 'furloughed workers'. The Group accessed this
Government support in order to continue paying part of the
furloughed employees' salaries and at the same time protecting them
from potential redundancy.
The Group claimed GBP2,000 through CJRS during 2021 (2020:
GBP594,000).
4. Earnings per ordinary share
Basic earnings per ordinary share
The calculation of basic earnings per ordinary share for the
year ended 31 December 2021 was based upon the loss attributable to
ordinary shareholders of (GBP456,000) (2020:(GBP3,276,000)) and a
weighted average number of ordinary shares outstanding for the year
ended 31 December 2021 of 936,564,122 (2020: 834,762,898).
Diluted earnings per ordinary share
The calculation of diluted earnings per ordinary share for the
year ended 31 December 2021 was based upon the loss attributable to
ordinary shareholders of (GBP456,000) (2020: (GBP3,276,000)) and a
weighted average number of ordinary shares outstanding for the year
ended 31 December 2021 of 938,784,384 (2020: 836,824,355). The
anti-dilutive effect of unexercised shares options has not been
taken into account, and therefore the diluted earnings per share is
equal to the basic earnings per share.
Adjusted earnings per ordinary share
The calculation of adjusted earnings per ordinary share for the
year ended 31 December 2021 was based upon the adjusted
(loss)/profit attributable to ordinary shareholders (profit before
exceptional and amortisation and impairment costs relating to the
acquisition of Elemental Healthcare, impairment of capitalised
development costs and share based payments) of (GBP203,000) (2020:
GBP1,576,000) and a weighted average number of ordinary shares
outstanding for the year ended 31 December 2021 of 936,564,122
(2020: 834,762,898).
No. of sh a r es used in calc ulat i on of e ar
nings p er o r dina ry s h a re ('0 00 s)
20 21 2020
No. of No. of
Shares Shares
=================================================== ====================== ===========================
Bas ic ea r ni n gs p er s hare 936,564 834,763
Diluti ve eff e ct of une x erc i sed s hare o pti
o ns 2,220 2,061
=================================================== ====================== ===========================
Diluted ea r nin gs p er s hare 938,784 836,824
=================================================== ====================== ===========================
5. Intangible assets Capitalised Single Exclusive
development use product Goodwill Supplier Total
costs knowledge Agreements
transfer
GBP'000 GBP,000 GBP'000 GBP'000 GBP'000
Cost
At 1 J anuary 2 020 13,416 225 8,180 1,799 23,620
Additi ons 113 - - - 113
Reclassification of
investment
in associate* 173 - - - 173
At 1 J anuary 2 021 13,702 225 8,180 1,799 23,906
Additi ons 445 - - - 445
A t 31 December 2 0 21 14,147 225 8,180 1,799 24,351
========================= ====================== ================ ================ ================ =============
A cc umulated a mortis
ation
At 1 J anuary 2 020 (12,520) (225) (1,625) (1,637) (16,007)
Charge f or t he y ear (250) - - (162) (412)
Impairment provision (182) (225) (1,132) - (1,314)
At 1 J anuary 2 021 (12,952) (225) (2,757) (1,799) (17,733)
Charge f or t he y ear (257) - - - (257)
Imp a irm e nt p r o v is
i on* (145) - - - (145)
========================= ====================== ================ ================ ================ =============
A t 31 December 2 0 21 (13,354) (225) (2.757) (1,799) (18,135)
========================= ====================== ================ ================ ================ =============
Carr ying amount
A t 31 December 2 0 21 793 - 5,423 - 6,216
========================= ====================== ================ ================ ================ =============
At 31 De ce m ber 2 020 750 - 5,423 - 6,173
========================= ====================== ================ ================ ================ =============
At 1 January 2020 896 - 6,555 162 7,613
========================= ====================== ================ ================ ================ =============
Goodwill and intangibles are allocated to the cash generating
unit (CGU) that is expected to benefit from the use of the
asset.
Capitalised development costs
Capitalised development costs represent expenditure incurred in
developing new products that fulfil the requirements met for
capitalisation as set out in paragraph 57 of IAS38. These costs are
amortised over the future commercial life of the product,
commencing on the sale of the first commercial item, up to a
maximum product life cycle of ten years, and taking account of
expected market conditions and penetration.
Capitalised development expenditure was tested for impairment.
Management have reviewed further costs for the Illuminated devices
and with the focus on advancing new products through on MDD
(Medical Device Directive) instead of MDR, the project timeframe
had been pushed out into 2024. A consideration of how the market
landscape has changed and will continue to change with the delayed
timeframe for completion it was decided that the nature of these
costs provide no future economic benefit, an impairment of GBP0.15m
has been recognised.
Goodwill
The Group tests goodwill at each reporting date for impairment
and whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. The recoverable amount of a
cash generating unit (CGU) is determined based on value in use
calculations. These calculations use cash flow projections based on
five year financial budgets approved by management. Cash flows
beyond the five year period are extrapolated using estimated long
term growth rates.
An impairment review is carried out annually for goodwill.
Goodwill arose on the acquisition of Elemental Healthcare Limited
in 2017 and is related to both the Distribution and SI Brand
segments of the Group. Elemental Healthcare Limited is considered
to be a separate CGU of the Group whose recoverable amount has been
calculated on a value in use basis by reference to discounted
future cash flows over a five year period plus a terminal value.
Principal assumptions underlying this calculation are the growth
rate into perpetuity of 1.5% (2020:1.5%) and a pre-tax discount
rate of 13.2% (2020:15%) applied to anticipated cash flows. In
addition, the value in use calculation assumes a gross profit
margin of 39.5% (2020:40.6%) using past experience of sales made
and future sales that were expected at the reporting date based on
anticipated market conditions.
The trading environment in the UK market was significantly
impacted by the pandemic throughout 2020 and continued into 2021,
which impacted the cumulative impairment by GBP2.7m. In the second
half of 2021 the UK market showed strong signs of recovery and this
has continued into early 2022. With greater visibility on the
outlook the directors anticipate improved forecasting of future net
inflows on this CGU and o n this basis, the recoverable amount of
the cash-generating unit exceeds its carrying value by GBP2.9m.
20
6. Borrowings 2021 20
Bank Loan GBP'000 GBP
'000
======================== ======= ==========
Current liabilities 1,880 298
Non-current liabilities - 1,879
======================== ======= ==========
Lease liabilities
======================== ======= ==========
Current liabilities 157 186
Non-current liabilities 750 907
------------------------ ------- ----------
2,787 3,270
======================== ======= ==========
Bank loan
The bank loans provided by Yorkshire Bank consist of the
following as at 31 December 2021:
-- Loan A- GBP0.38m of the existing loan taken out over a 5 year
period dating back to August 2017. Interest rate is 3% plus fixed
margin (margin since October 2021, it was originally based on LIBOR
rates) and repayable on a quarterly basis at GBP0.075m.
-- RCF-A undrawn Revolving Credit Facility (RCF) of up to
GBP0.5m for working capital and other purposes. If the RCF is drawn
down the rate of interest applicable to each loan for its interest
period will be 2.8% per plus a fixed margin per annum (margin since
October 2021 it was originally based on LIBOR rates) and it will be
secured by a floating charge over the assets of the Group.
-- CBILS-GBP1.5m Coronavirus Business Interruption Loan Scheme
(CBILS) taken out in May 2020 on interest only payable monthly
which was interest free for the first twelve months at 2.28%
thereafter.
-- Covenants in respect of the borrowing facilities in place at
the reporting date, the group is required to comply with the
following financial covenants at each period end in respect of the
prior 12-month period:
EBITDA in respect of:
-- the 12 month period expiring on 31 March 2021 shall not
-- less than nil
-- the 12 month period expiring on 30 June 2021 shall not
-- be less than GBP200,000.
Gross cash:
-- Should not be less than GBP3.00m at the end of each month
from September 2021 to the end of March 2022 at the point of
refinance.
.
In March 2022, the Group refinanced the existing debt with
Yorkshire bank consisting of the following:
-- Invoice Discounting facility GBP1.0m across the Group, to
replace loan A and the RCF, 2.5% on margin with a maximum of
nominal administration fee of a maximum of GBP0.018m if not
utilised.( At the time of audit sign off on the approval of the
accounts, the CBILS extension was complete, and the invoice
discounting agreement was credit approved and progressing.)
-- Extension to the CBILS of GBP1.5m repayable in May 2026,
Interest rate of 2.94% repayable monthly. Monthly installments are
GBP0.029m.
-- Covenants attached to the CBILS comprise of EBITDA to debt
servicing costs minimum 1.25x. First test 30 June 2022 (last 6
months), then September 22 (9 months), then rolling 12m
afterwards.
Changes in liabilities arising from Non-current Current Obligations Total
financing activities loans and loans under
borrowings and borrowings finance
leases
At 1 January 2021 1,879 298 - 2,177
-------------------------- ---------------- ------------ ------
Cash flows - (350) - (350)
-------------------------- ---------------- ------------ ------
Transfer between non-current and current (1,879) 1,879 - -
-------------------------- ---------------- ------------ ------
Interest accruing in the period - 53 - 53
-------------------------- ---------------- ------------ ------
At 31 December 2021 - 1,880 - 1,880
-------------------------- ---------------- ------------ ------
7. Trade and 2021 2020
other GBP'000 GBP'000
payables
=============== ============================================================================================== ==========
T rade payables 1,090 749
Corporation tax - -
payable
Other tax and
social
security 230 164
Other payables 294 294
3
Deferred
creditors - 242
=============== ============================================================================================== ==========
1,614 1,449
=============== ============================================================================================== ==========
The Group and Company's financial liabilities have contractual
maturities (including interest payments where applicable) which are
summarised below.
Amounts Amounts Amounts
due in due in due in
============================ ========== ========= ========== ============
less than 2-5 years 5-10 years Total
As at 31 December 2021 1 year financial
GBP'000 GBP'000 GBP'000 liabilities
GBP'000
============================ ========== ========= ========== ============
T rade payables 1,090 - - 1,090
Other payables 294 - - 294
Bank borrowings-Current 1,904 - - 1,904
Bank borrowings-Non-current - - - -
============================ ========== ========= ========== ============
3,288 - - 3,288
============================ ========== ========= ========== ============
Amounts Amounts Amounts
due in due in due in
============================ ========== ========= ========== ============
less than 2-5 years 5-10 years Total
As at 31 December 2020 1 year financial
GBP'000 GBP'000 GBP'000 liabilities
GBP'000
============================ ========== ========= ========== ============
T rade payables 749 - - 749
Other payables 294 - - 294
Deferred creditors 242 - - 242
Bank borrowings-Current 354 - - 354
Bank borrowings-Non-current - 1,904 - 1,904
============================ ========== ========= ========== ============
1,639 1,904 - 3,543
============================ ========== ========= ========== ============
8. Share Capital
Shares in issue reconciliation (Authorised, allotted, called up
and fully paid)
2021 2020
Opening no of shares in issue 932,816,177 795,316,177
------------- -------------
Issued in satisfaction of share options exercised - -
------------- -------------
Issued in relation to fundraising* - 137,500,000
------------- -------------
Closing number of shares in issue 932,816,177 932,816,177
------------- -------------
*During September 2020 the Company raised equity of GBP2.05m
(net of associated costs) to provide investment capital and
additional financial headroom.
9. Capital commitments
At 31 December 2021 the Group had capital commitments totaling
GBP17,400 for a further down payment on tooling and GBP157,500 for
plant and machinery (2020: nil).
Additional plant and machinery was ordered in March 2022
approximately totaling GBP300,000.
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END
FR SEAFAEEESEFD
(END) Dow Jones Newswires
March 23, 2022 03:00 ET (07:00 GMT)
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