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INSPIRATION HEALTHCARE GROUP PLC
Earnings Release • Apr 27, 2021
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Earnings Release
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RNS Number : 6478W
Inspiration Healthcare Group PLC
27 April 2021
27 April 2021
Inspiration Healthcare Group plc
("Inspiration Healthcare" or the "Group")
Unaudited Preliminary Results for the year ended 31 January 2021
Inspiration Healthcare Group plc (AIM: IHC), the global medical technology company, today announces its preliminary results (unaudited) for the twelve months ended 31 January 2021 ("FY2021").
Financial highlights:
· Group Revenue up to £37.0 million (FY2020: £17.8 million) including 'one time' Covid-19 related orders and contribution from SLE Limited1
· Adjusted EBITDA2 up to £5.6 million (FY2020: £2.3 million)
· Adjusted Operating Profit3 up to £4.3 million (FY2020: £1.5 million)
· Net cash position up to £10.7 million (FY2020: £4.5 million)
· Gross Margin up to 48.7% (FY2020: 48.2%)
· Proposed final dividend of 0.4p
1 On 7 July 2020 the Group acquired the entire issued share capital of SLE Limited "SLE". SLE is a leader in the design and manufacture of ventilators and capital equipment for neonatal intensive care, treating premature and sick babies.
2 Earnings before interest, tax, depreciation, amortisation share based payments and non-trading items.
3 Operating Profit before non-trading items.
2021 Strategic Highlights
· Acquisition of leading Neo-natal ventilator manufacturer, SLE Ltd, transforming scale, profitability and geographic reach of the Group
· Assisted NHS response to Covid-19 by sourcing ventilators, providing technical advice to the Ventilator UK Challenge consortium and providing a 24/7 support line
· Integration of Viomedex and SLE acquisitions including plans to relocate manufacturing to modern, purpose-designed factories offices and R&D facility
· Strong investor support for share placing to finance acquisition of SLE
· Projects for investment in software systems to deliver growth across the Group commenced
2021 Operational Highlights
· Maintained and invested in core skills and staff throughout the pandemic
· Strengthened management team with appointment of new Chief Operating Officer, Vice President -Clinical, Innovation and Compliance, and strengthened second tier management.
· Significant one-time revenues of £7.3m relating to Covid-19 response
· Agreed to establish a Charity focused on Neonatal Research
· Brexit import and export issues managed with limited business disruption
· Increased net cash position enabling further investments to drive growth
• Patents granted for FirstBreath nCPAP / Project Wave
• Project Wave trial approved - anticipated first patient end of April 2021
Post year end 2021:
§ New corporate website (www.inspirationhealthcaregroup.plc.uk)
§ Re-branding of Group companies
§ Approval in China and Japan for SLE6000 inc. OxyGenie
Neil Campbell, Chief Executive Officer, said today: "In a very challenging year, there have been remarkable achievements by our team to have made so much progress in so many areas. As an enlarged group with a stronger product portfolio and greater market reach we are well positioned for significant long-term growth."
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Enquiries:
| Inspiration Healthcare Group plc Neil Campbell, Chief Executive Officer Jon Ballard, Chief Financial Officer |
Tel: 01455 840555 |
| Nominated Adviser & Broker Cenkos Securities plc Mark Connelly Stephen Keys |
Tel: 0207 397 8900 |
| Cadogan PR Alex Walters [email protected] |
Tel: 07771 713608 |
Chairman's Report
In a year which saw the world and so many people devastated by Covid-19, I could not be more proud of the role that the organisation and so many of our staff played in supporting our nation's response to this most challenging time. Our team selflessly served our healthcare customers around the world through immense difficulties to deliver much needed equipment and support. This ensured that the babies our innovative products help treat, had the best available care. In the case of Covid-19, we were honoured to be asked to take a significant role in the UK Ventilator Challenge for the UK Government. There are many of my colleagues to whom I owe a great debt of gratitude for the actions they took to overcome so many challenges.
The financial year ended 31 January 2021 ("FY2021") was a transformational year for the Group with many stand-out moments worthy of note.
The most significant moment for the Group, that will have a long-term impact, was the successful acquisition of SLE Ltd, the UK based neonatal ventilator manufacturer. SLE has an enviable reputation for its technology around the world and its aligned ethos with our vision to become a world leader in neonatology made it the ideal acquisition. From its long-standing base in Croydon, just South of London, its life support ventilators help keep premature babies alive in over 75 countries around the world and have been leading the way in lung protective ventilation in the newborn for many years.
As a Group, with the acquisition of SLE, we have almost doubled in size by many metrics, with staff numbers rising to around 200 from just under 100, revenue increasing from a run rate of £1.6m per month to over £3m per month in the second half of our financial year compared to the previous year. The complementary nature of the companies has meant we have already made good progress in extracting operational efficiencies.
The changes in the Group allowed us to review the needs for the business and we were delighted when Brook Nolson moved from a non-executive position to join the Executive team by taking the position of Chief Operating Officer. This allowed us to look for a new Non-executive Director and we were pleased to be able to appoint Liz Shanahan to the Board, bringing new skills to the Board combining healthcare communications, entrepreneurial experience as well as experience in listed companies. She is rapidly becoming a valuable team member.
Toby Foster stepped off the main Board to lead our subsidiary company, that he co-founded, as Managing Director of Inspiration Healthcare Ltd. I would like to thank both Brook and Toby for their contribution to the Board and we look forward to them continuing to excel in their new roles within the Group. Finally, Mike Briant retired from the Group leaving his post as Chief Financial Officer. This gave us the opportunity to promote Jon Ballard from Group Financial Controller to CFO and again I would like to thank Mike for his work and wish Jon continued success in his new role.
As with every business Covid-19 had an effect on the Group. Along with the challenges, our skills enabled us to contribute in a material way. In March 2020 we were asked whether we could help with the Prime Minister's call to industry to manufacture ventilators. Our team were delighted to help and worked with a group that eventually became the Ventilator Challenge UK ("VCUK") consortium expertly led by Dick Elsy CBE. It was incredibly humbling to hear of the sacrifice of thousands of people working literally around the clock to deliver over 13,000 ventilators to the NHS and knowing our team played some part in this, made our entire company proud of what British manufacturing industry can achieve at times of need.
Of course, our efforts for Covid-19 were not just in the VCUK consortium, or indeed supporting the four or five other consortia that sought our help with the verification and validation of potential designs. The Group as a whole imported over 500 state-of-the-art CE marked ventilators for the NHS using our contacts around the world to secure the scarce supply of ventilators and associated accessories. In addition, we were honoured to receive a contract from the Government to offer 24/7 support to frontline NHS staff on the use of the VCUK challenge ventilators. Although it was little used due to the way the pandemic evolved in the UK, I was immensely proud that our team stood up and were ready to help the nurses and doctors in the most trying conditions.
As a company we have always been at the forefront of research and putting the patient first. When we reviewed our year in light of the pandemic and the resultant one-off revenue received, we quickly determined that it was the right time to be able to put something back into medical research. To this end, we decided that an appropriate course of action was to set up a charity that supports smaller scale, but important neonatal research projects. We are pleased to have already made a donation and we look forward to being able to share the full remit of the charity in due course. We believe this funding of research in neonatal intensive care will save lives and improve outcomes.
As to the 'normal' business in what was really was an abnormal year, underlying growth in our operations was over 14% and although the product and customer mix were not what we expected at the beginning of the year, it demonstrates the resilience of our product portfolio that we can meet our customers' needs even in the most difficult of times.
In such an extraordinary year the issues related to Brexit diminished. We did, however, still have a plan to be able to move goods to and from the EU post the transition period. I am delighted to report that through thorough planning and coming together across the operating companies within the Group, we had a robust approach and apart from the inevitable extra paperwork, experienced few, if any, issues.
It has been gratifying to see the results we achieved under such difficult circumstances, record revenue of £37.0m (FY2020: £17.8 million), with record Adjusted EBITDA1 of £5.6 million (FY2020: £2.3 million) and record cash at year end of £10.7 million (FY2020: £4.5 million).
With this excellent set of results, we have been able to review the future needs of the business with relation to the present property and operational infra-structure and are taking steps to improve this. Our Executive team have found two sites to relocate our main manufacturing businesses to, both within three miles of their current location. At our Hailsham site, we will move production into a new building with a state-of-the-art clean room for our single use medical disposables. Our facility in Croydon will also move into a purpose designed factory and offices with new technical support facilities and a purpose-built R&D centre for developing new technology. The move to these properties is expected to occur in the current financial year.
This year we have declared a maiden dividend of 0.2p per share at the interim stage. We are proposing a final dividend of 0.4p per share making the total dividend this financial year of 0.6p.
No review of the year should forget our staff and I am not sure there are enough words to say thank you for everything they achieved last year. To keep our factories and warehouses open and supplying equipment around the world, to ensure that our technical support and clinical teams had PPE to be able to visit hospitals to help maintain and train staff on Life Support equipment, through to the unheralded back office staff who kept orders processed, accounts paid, systems and products compliant and new products being developed, everyone played a part in a truly transformational year and I think I am right in saying not only on behalf of the Board but also the shareholders and customers, thank you for working so diligently under such difficult circumstances.
Outlook
Our current financial year has started well and in line with our expectations with a strong order book across the Group. However, this year will not be without bumps in the road as we expect there will be issues with Covid-19 in the world economy for a while. We will continue to invest in new product development along with getting further international sales growth through our regulatory clearances and synergies within the enlarged Group. At this early stage in our financial year, with the vast majority of our products serving a critical area we remain confident that we will continue with our plans for significant future growth and our expectations remain unchanged.
Mark Abrahams
Chairman
27 April 2021
1 Earnings before interest, tax, depreciation, amortisation share based payments and non-trading items.
Going concern basis
The Group provides critical care equipment to the NHS, to private healthcare providers and to distributors who provide the equipment to other healthcare systems internationally. With a focus on neonatal intensive care the use of the Group's products is not something that can be reduced by election or choice and consequently demand for the Group's products is likely to continue or increase in a situation like the Covid-19 virus outbreak. The Group benefited from an additional £7.3 million "one off" revenue in relation to the Covid-19 response.
Although the Group has no information to suggest such a scenario might occur the Group have modelled a significant downside scenario based on the main risks to the Group, including a significant downturn in revenue of 20%.
Based on the above, available funds of £11.1 million and access to an undrawn £5 million Revolving Credit Facility ("RCF") as at 31 March 2021, plus the ability to implement some mitigating actions identified by the Board in response to a significant trading downturn, the Directors believe that the Group has sufficient liquidity to meet obligations as they fall due for at least twelve months from 27 April 2021 and, therefore, consider it appropriate to prepare the financial statements on the going concern basis.
Operating and Financial Review
I am delighted to report that the Group performed ahead of expectations for the financial year ended 31 January 2021 ("FY2021") despite current Covid-19 related challenges.
REVENUE
Group revenue increased by 108% to £37.0 million (FY2020: £17.8 million).
Underlying revenue increased by 14% to £20.3 million (FY2020: £17.8 million) excluding contributions from both SLE Limited ("SLE"), acquired on 7 July 2020, of £9.4 million and "one off" Covid-19 UK NHS ventilator and ancillary product orders of £7.3 million.
Group domestic revenue (excluding revenue relating to the 'one time' Covid-19 related orders) increased by 46% to £17.1 million resulting from a strong order book coming into the financial year, continued increased demand of our distributed product range of parenteral feeding products from Micrel and a greater installed base of products requiring consumables. The Group also benefited from a full year contribution from Viomedex and 30 weeks from SLE.
Internationally, Group revenue grew by 108% to £12.5 million benefiting primarily from the acquisition of SLE. Excluding SLE, international revenue decreased by 24% to £4.6m due to a change of buying patterns of overseas critical care providers focusing resources on Covid-19 and not changing practice. SLE manufacture ventilators for premature and sick babies and in previous years have derived approximately 90% of revenue from exports. Their export business proved robust during the pandemic.
Branded Products
Branded Product revenue grew 113% to £11.5 million in the year benefiting from the acquisition of SLE. Excluding SLE, Branded Product revenue decreased by 13% to £4.7 million in the year reflective of both the healthcare sector concentrating on Covid-19 in the short term and the deferral of operating procedures. The novel nature of the Inspiration Healthcare products such as the Inspire rPAP and LifeStart, coupled with limited access to customers as a result of Covid-19 restrictions, resulted in an inability to change customer buying habits. Customers therefore continued to purchase known products rather than looking to adopt new practices.
Distributed Products
Distributed Product revenue grew by 117% to £22.2 million in the year inclusive of the £7.3 million 'one off' UK NHS ventilator and ancillary product orders. Excluding both 'one off' revenue and the contribution from SLE, Distributed Product revenue grew by 31% to £13.4 million as a result of both an unwinding of back orders in relation to products that could not be shipped during the prior year and continued strong performance of the Micrel parenteral feeding products.
Technology Support
Technology Support revenue including technical support increased by 54% to £3.0 million in the year, again benefiting from the acquisition of SLE. Excluding SLE, Technology Support Revenue remained broadly in line with the prior year, decreasing by 3% year-on-year. This is reflective of the increased difficulty in accessing customers during the year as a result of Covid-19.
GROSS PROFIT
Gross Profit of £18.0 million (FY2020: £8.6 million) increased by 110% due to both a year-on-year increase in revenue and an improved gross margin which increased from 48.2% to 48.7%. Gross margins primarily benefited from improved Branded Product margins, contribution from SLE and the consolidation of manufacturer margins on a number of Group products resulting from the acquisition of Viomedex.
OPERATING PROFIT
| £000 | 2021 | 2020 | Change |
| Adjusted EBITDA | 5,611 | 2,272 | 3,339 |
| Depreciation | (606) | (322) | (284) |
| Amortisation of intangible assets | (622) | (295) | (327) |
| Impairment of intangible assets | (47) | (72) | 25 |
| Share Based Payment | (78) | (62) | (16) |
| Adjusted Operating Profit | 4,258 | 1,521 | 2,737 |
| Non-trading items: | |||
| - Impairment of investments | - | (111) | 111 |
| - Acquisition related expenses | (579) | (272) | (307) |
| - Final settlement of contingent consideration | (435) | - | (435) |
| Operating Profit | 3,244 | 1,138 | 2,106 |
The Group reported Adjusted Operating profit of £4.3 million, an increase of 180% on prior year (FY2020: £1.5 million). The year-on-year increase is primarily due to the increase in underlying revenue plus contributions from Viomedex, SLE and the 'one off' Covid-19 related revenue; offset in part by increased administrative expenses.
Administrative expenses pre non-trading items increased by 95%. This increase included a full year of overheads associated with Viomedex, 30 weeks of SLE and additional one-time Covid-19 related expenses, along with the Group's planned continued investment in personnel to maintain revenue growth. The Company also donated £250,000 to charity during the year, please see Chairman's report for further detail. Investment in R&D amounted to 4.3% (2020: 3.7%) of revenue.
The Group delivered Operating profit of £3.2 million, an increase of 185% on the prior year. The growth was due to the improved Adjusted Operating profit as described above off-set in part by increased non-trading items.
Amortisation of intangible assets was £0.6 million, £0.3 million higher than the prior year. This is due to increased amortisation of acquired intangible assets in relation to both a full year of Viomedex and the acquisition of SLE.
Non trading items totalled £1.0 million, a £0.6 million increase on prior year, of which £0.4 million related to the issue of 671,296 new ordinary shares in the Company to the vendors of Vio Holdings Limited (the parent company of Viomedex) in full and final settlement of the contingent consideration arrangements relating to the acquisition. The remaining £0.6 million represents expenses incurred in relation to the acquisition of SLE.
Adjusted EBITDA amounted to £5.6 million, an increase of £3.3 million over the prior year mainly due to increased revenue offset in part by increased administrative expenses as detailed in the table and described above. Adjusted EBITDA margin improved from 12.8% to 15.2% due to the impact of the "one off" Covid-19 related revenue.
TAXATION
The Group has recorded a tax charge of £318,000 (FY2020: £393,000). The effective tax rate in FY2021 was 10% (FY2020: 35%). For more detail see note 3 of the Consolidated Financial Statements.
EARNINGS PER SHARE
Basic EPS and diluted EPS (allowing for the weighted average of shares issued in relation to the acquisition of SLE and share options outstanding) was 5.1p per share (FY2020: 2.2p).
Underlying diluted EPS1 was 6.9p per share, up 90% on FY2020 of 3.6p. The year-on-year increase is due mainly to the improved growth in operating profit as set out above.
1EPS Reconciliation from Diluted EPS
| 2021 | 2020 | |
| pence | pence | |
| Diluted earnings per share | 5.07 | 2.15 |
| Adjusted for: | ||
| Non trading items | 1.82 | 1.13 |
| Tax charge on intangible assets acquired from the acquisition of investments | - | 0.34 |
| Underlying diluted earnings per share | 6.89 | 3.62 |
CASH FLOW
Cash and cash equivalents as at 31 January 2021 amounted to £10.7 million, an increase of £6.2 million over the prior financial year end. Net cash generated from operating activities was £4.7 million, £3.3 million higher than in FY2020. Cash outflow on investing activities totalled £14.1 million (FY2020: £3.4 million), of which £13.2 million related to the acquisition of SLE; £19.5 million cash consideration offset by £6.3 million of cash acquired within the business, see note 9 for further information. The remaining £0.9 million consisted of capitalised development expenditure and the purchase of property, plant and equipment. Investing activities are offset by financing activities of £15.5 million (FY2020: £3.8 million), net of direct share issue costs, relating mainly to the proceeds obtained from the Group's fund raise in relation to the acquisition of SLE. The Group also utilised £1.5m of the £5m Revolving Credit Facility ("RCF") as part of the acquisition of SLE which has been repaid in full during in the year. The £5 million RCF remains undrawn and in place and is available for further utilisation should the Group require.
NET ASSETS
The value of non-current assets as at 31 January 2021 totalled £19.2 million (FY2020: £4.7 million). The year-on-year increase of £14.5 million relates mainly to: a £11.6 million addition of goodwill and acquired intangible assets plus the addition of a £2.8 million right of use asset on the acquisition of SLE.
Inventory increased to £8.2 million (FY2020: £3.1 million) mainly as a result of the acquisition of SLE.
Trade and other receivables increased by £1.0 million to £5.2 million (FY2020: £4.2 million) primarily due to an increase in trade receivables driven by increased revenue and the acquisition of SLE offset by improved collections. Trade and other payables increased by £2.1 million to £6.8 million (FY2020: £4.7 million) reflecting primarily a £1.0 million increase in accrued expenses as a result of the acquisition of SLE and increased commission and bonus accruals, plus a £0.5m provision included within the fair value balance sheet of SLE.
Net Assets increased by £21.0 million or 199% to £31.6 million as at 31 January 2021.
DIVIDENDS
The interim dividend of 0.2p per share (FY2020: £nil) was paid on 29th December 2020. The Board is recommending a final dividend of 0.4p per share (FY2020: £nil) to make a total dividend for the year of 0.6p per share (FY2020: £nil). If approved by shareholders, the final dividend will be paid on 30th July 2021 to shareholders on the register on 2nd July 2021.
ACQUISITION OF SLE LIMITED
On 7 July 2020 the Group acquired the entire share capital of SLE Limited, a well-known UK based manufacturer and supplier of Neonatal ventilators, for £16.2 million cash and £1.8 million shares. The Group paid £4.5 million to the vendors upon the agreement of the Completion Accounts relating to the acquisition.
The acquisition was funded through an oversubscribed share placement raising £17.0 million, £16.0 million after costs, and a £1.5 million utilisation against the £5 million RCF which has subsequently been repaid.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
On a Group basis the business review and future prospects are set out in the Chairman's Report above. The Board believes that overall the statement is fair, balanced and understandable.
SHARE PRICE DURING THE YEAR
The range of market prices during the year 1 February 2020 to 31 January 2021 was 58.0p to 89.0p and the mid-market price of the Company's shares at 31 January 2021 was 89.0p.
Jon Ballard
Chief Financial Officer
27 April 2021
Consolidated Income Statement
for the year ended 31 January 2021
| 2021 | 2020 | ||||
| Note | £'000 | £'000 | |||
| Revenue | 2 | 36,980 | 17,775 | ||
| Cost of sales | (18,958) | (9,203) | |||
| Gross profit | 18,022 | 8,572 | |||
| Administrative expenses | (14,778) | (7,434) | |||
| Operating profit | 3,244 | 1,138 | |||
| Finance income | 3 | 9 | |||
| Finance expense | (114) | (21) | |||
| Profit before tax | 3,133 | 1,126 | |||
| Income tax | 3 | (318) | (393) | ||
| Profit for the year attributable to | |||||
| owners of the parent company | 2,815 | 733 | |||
| Earnings per share, attributable to owners of the | |||||
| parent company | |||||
| Basic expressed in pence per share | 4 | 5.10p | 2.19p | ||
| Diluted expressed in pence per share | 4 | 5.07p | 2.15p | ||
Consolidated Statement of Comprehensive Income
for the year ended 31 January 2021
| 2021 | 2020 | ||||
| Note | £'000 | £'000 | |||
| Profit for the year | 2,815 | 733 | |||
| Other comprehensive expense | |||||
| Items that may be reclassified to profit or loss | |||||
| Cash flow hedges | 31 | (31) | |||
| Total other comprehensive income/(expense) for the year | 31 | (31) | |||
| Total comprehensive income for the year | 2,846 | 702 | |||
Consolidated and Company Statements of Financial Position
as at 31 January 2021
| (Registered Number: 03587944) | Group | Company | |||
| 2021 | 2020 | 2021 | 2020 | ||
| Note | £'000 | £'000 | £'000 | £'000 | |
| Assets | |||||
| Non-current assets | |||||
| Intangible assets | 6 | 15,206 | 3,655 | - | - |
| Property, plant and equipment | 919 | 496 | - | - | |
| Right of use assets | 3,102 | 553 | 3 | 8 | |
| Investments | - | - | 32,881 | 10,406 | |
| Deferred tax asset | 8 | - | - | 25 | 31 |
| 19,227 | 4,704 | 32,909 | 10,445 | ||
| Current assets | |||||
| Inventories | 8,190 | 3,091 | - | - | |
| Trade and other receivables | 5,163 | 4,205 | 1,434 | 1,339 | |
| Cash and cash equivalents | 7 | 10,653 | 4,480 | 586 | 1,775 |
| 24,006 | 11,776 | 2,020 | 3,114 | ||
| Total assets | 43,233 | 16,480 | 34,929 | 13,559 | |
| Liabilities | |||||
| Current liabilities | |||||
| Trade and other payables | (6,809) | (3,988) | (5,996) | (1,020) | |
| Lease liabilities | (369) | (132) | (3) | (6) | |
| Financial derivative | (9) | (40) | - | - | |
| Contract liabilities | (533) | (376) | - | - | |
| (7,720) | (4,536) | (5,999) | (1,026) | ||
| Non-current liabilities | |||||
| Trade and other payables | - | (742) | - | - | |
| Lease liabilities | (2,796) | (426) | - | (2) | |
| Deferred tax liability | 8 | (1,141) | (227) | - | - |
| (3,937) | (1,395) | - | (2) | ||
| Total liabilities | (11,657) | (5,931) | (5,999) | (1,028) | |
| Net assets | 31,576 | 10,549 | 28,930 | 12,531 | |
| Shareholders' equity | |||||
| Called up share capital | 6,812 | 3,838 | 6,812 | 3,838 | |
| Share premium account | 18,838 | 3,475 | 18,838 | 3,475 | |
| Reverse acquisition reserve | (16,164) | (16,164) | - | - | |
| Share based payment reserve | 139 | 153 | 294 | 308 | |
| Other reserves | (9) | (34) | - | 6 | |
| Retained earnings | 21,960 | 19,281 | 2,986 | 4,904 | |
| Total equity | 31,576 | 10,549 | 28,930 | 12,531 | |
The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Company profit and loss account. The Company's loss for the year ended 31 January 2021 is £1,784,000 (2020: profit £465,000)
Consolidated and Company Statements of Changes in
Shareholders' Equity
| Group | Share | |||||||||||||||
| Issued | Share | Reverse | based | |||||||||||||
| share | premium | acquisition | payment | Other | Retained | |||||||||||
| capital | account | reserve | reserve | Reserves | earnings | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| At 1 February 2019 | 3,067 | - | (16,164) | 91 | (9) | 18,548 | 5,533 | |||||||||
| Profit for the year | - | - | - | - | - | 733 | 733 | |||||||||
| Cash flow hedges: Loss recognised on hedging instruments |
- | - | - | - | (31) | - | (31) | |||||||||
| Total comprehensive income/ | ||||||||||||||||
| (expense) for the year | - | - | - | - | (31) | 733 | 702 | |||||||||
| Transactions with owners in | ||||||||||||||||
| their capacity as owners | ||||||||||||||||
| Employee share scheme expense | - | - | - | 62 | - | - | 62 | |||||||||
| Issue of ordinary shares, net of transaction costs and tax | 771 | 3,475 | - | - | - | - | 4,246 | |||||||||
| Deferred tax - Note 8 | - | - | - | - | 6 | - | 6 | |||||||||
| Total transactions with owners | 771 | 3,475 | - | 62 | 6 | - | 4,314 | |||||||||
| At 31 January 2020 | 3,838 | 3,475 | (16,164) | 153 | (34) | 19,281 | 10,549 | |||||||||
| Profit for the year | - | - | - | - | - | 2,815 | 2,815 | |||||||||
| Cash flow hedges: Income recognised on hedging instruments |
- | - | - | - | 31 | - | 31 | |||||||||
| Total comprehensive income | - | - | - | - | 31 | 2,815 | 2,846 | |||||||||
| for the year | ||||||||||||||||
| Transactions with owners in | ||||||||||||||||
| their capacity as owners | ||||||||||||||||
| Dividends | - | - | - | - | - | (136) | (136) | |||||||||
| Employee share scheme expense | - | - | - | 78 | - | - | 78 | |||||||||
| Issue of ordinary shares, net of transaction costs and tax | 2,974 | 15,363 | - | (92) | - | - | 18,245 | |||||||||
| Deferred tax - Note 8 | - | - | - | - | (6) | - | (6) | |||||||||
| Total transactions with owners | 2,974 | 15,363 | - | (14) | (6) | (136) | 18,181 | |||||||||
| At 31 January 2021 | 6,812 | 18,838 | (16,164) | 139 | (9) | 21,960 | 31,576 | |||||||||
Consolidated Cash Flow Statement
for the year ended 31 January 2021
| 2021 | 2020 | |||||||
| Note | £'000 | £'000 | ||||||
| Cash flows from operating activities | ||||||||
| Profit for the year | 2,815 | 733 | ||||||
| Adjustments for: | ||||||||
| Depreciation and amortisation | 1,228 | 617 | ||||||
| Impairment of investment | - | 111 | ||||||
| Impairment of intangible assets | 6 | 47 | 72 | |||||
| Employee share scheme expense | 78 | 62 | ||||||
| Contingent consideration share issue | 9 | 435 | - | |||||
| Loss on disposal of tangible asset | 14 | 3 | ||||||
| Loss on disposal of intangible asset | 6 | 65 | - | |||||
| Finance income | (3) | (9) | ||||||
| Finance expense | 114 | 21 | ||||||
| Income tax expense | 3(a) | 318 | 393 | |||||
| 5,111 | 2,003 | |||||||
| Increase in inventories | (573) | (1,696) | ||||||
| Decrease/(increase) in trade and other receivables | 4,009 | (889) | ||||||
| (Decrease)/increase in trade and other payables | (3,597) | 2,141 | ||||||
| (Decrease)/increase in contract liabilities | (6) | 57 | ||||||
| Cash flows generated from operations | 4,944 | 1,616 | ||||||
| Taxation received | 3(b) | - | 104 | |||||
| Taxation paid | 3(b) | (209) | (235) | |||||
| Net cash generated from operating activities | 4,735 | 1,485 | ||||||
| Cash flows from investing activities | ||||||||
| Payment for acquisition of subsidiary | 9 | (19,457) | (3,000) | |||||
| Cash acquired through business combinations | 9 | 6,314 | - | |||||
| Interest received | 3 | 9 | ||||||
| Purchase of property, plant and equipment | (257) | (163) | ||||||
| Purchase of intangible assets | 6 | (49) | (24) | |||||
| Capitalised development costs | 6 | (614) | (192) | |||||
| Net cash used in investing activities | (14,060) | (3,370) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from issues of shares | 16,967 | 4,246 | ||||||
| Share issue costs | (957) | (250) | ||||||
| Principal elements of lease payments | (262) | (149) | ||||||
| Interest paid on lease liabilities | (87) | (21) | ||||||
| Interest paid on loans and borrowings | (27) | - | ||||||
| Dividends paid to the holders of the parent | (136) | - | ||||||
| Proceeds from loans and borrowings | 1,500 | - | ||||||
| Repayments from loans and borrowings | (1,500) | - | ||||||
| Net cash generated from financing activities | 15,498 | 3,826 | ||||||
| Net increase in cash and cash equivalents | 6,173 | 1,941 | ||||||
| Cash and cash equivalents at the beginning of the year | 4,480 | 2,539 | ||||||
| Cash and cash equivalents at the end of the year | 7 | 10,653 | 4,480 | |||||
Notes forming part of the Financial Statements
1 Accounting Policies
Inspiration Healthcare Group plc ("Company") is a public limited company incorporated in England and Wales and domiciled in England. The Company's registered address is Unit 2, Satellite Business Village, Crawley, West Sussex, RH10 9NE and the registered company number is 03587944. The Company's ordinary shares are traded on the AIM Market of the London Stock Exchange plc.
The principal activities of Inspiration Healthcare Group plc and its subsidiaries (together, the "Group") continue to be the sale, service and support of critical care equipment to the medical sector including hospitals.
Basis of preparation
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied unless otherwise stated.
There is no ultimate controlling party.
The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment in which it operates (the functional currency). The Group Financial Statements are presented in pounds sterling, which is the presentation currency of the Group.
Going concern basis
The Group provides critical care equipment to the NHS, to NHS suppliers and to distributors who provide the equipment to other healthcare systems internationally. With a focus on neonatal intensive care the use of the Group's products is not something that can be reduced by election or choice and consequently demand for the Group's products is likely to continue or increase in a situation like the Covid-19 virus outbreak. The Group benefited from an additional £7,337,000 "one off" revenue in relation to the Covid-19 response.
Although the Group has no information to suggest such a scenario might occur the Group have modelled a significant downside scenario based on the main risks to the Group, including a significant downturn in revenue of 20%.
Based on the above, available funds of £11,142,000 and access to an undrawn £5m Revolving Credit Facility as at 31 March 2021, plus the ability to implement some mitigating actions identified by the Board in response to a significant trading downturn, the Directors believe that the Group has sufficient liquidity to meet obligations as they fall due for at least twelve months from 27 April 2021 and, therefore, consider it appropriate to prepare the financial statements on the going concern basis. Further information on the Group's cash resources as at 31 January 2021 is given in note 7.
Significant changes in the current year
The financial position and performance of the group was particularly affected by the following events and transactions during the year:
· Group revenue includes £7,337,000 "one off" revenue relating to the Covid-19 response.
· The acquisition of SLE Limited on 7 July 2020 (see note 9), which resulted in an increase in property, plant and equipment and the recognition of goodwill, other intangible assets and net working capital.
Alternative financial measures
In the reporting of its financial performance, the Group uses certain measures that are not defined under IFRS, the Generally Accepted Accounting Principles (GAAP) under which the Group reports. The Directors believe that these non-GAAP measures assist with the understanding of the performance of the business. These non-GAAP measures are not a substitute for, or superior to, any IFRS measures of performance but they have been included as the Directors consider them to be an important means of comparing performance year-on-year and they include key measures used within the business for assessing performance.
The Group refers to the following alternative financial measures, please refer to the Operating and Financial Review for further information.
· Adjusted EBITDA
· Adjusted Operating Profit
2 Revenue
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following geographical split:
| 2021 | 2020 | |||
| £'000 | £'000 | |||
| Domestic | ||||
| - UK | 23,446 | 11,300 | ||
| - Ireland | 1,028 | 450 | ||
| International | ||||
| - Europe | 5,179 | 3,686 | ||
| - Asia Pacific | 4,128 | 579 | ||
| - Middle East & Africa | 1,852 | 648 | ||
| - Americas | 1,347 | 1,112 | ||
| Total | 36,980 | 17,775 | ||
| Significant categories of revenue | ||||
| 2021 | 2020 | |||
| £'000 | £'000 | |||
| Revenue recognised at a Point in Time | ||||
| - Branded Products | 11,465 | 5,390 | ||
| - Distributor Products | 22,224 | 10,236 | ||
| - Other | 294 | 201 | ||
| Revenue recognised Over Time | ||||
| - Technology Support | 2,997 | 1,948 | ||
| Total | 36,980 | 17,775 | ||
Both UK and Distributor Products include £7,337,000 of "one-off" revenue relating to the Covid-19 response.
3 Income tax
| (a) Analysis of tax charge for the year | |||
| 2021 | 2020 | ||
| £'000 | £'000 | ||
| Domestic current year tax * | |||
| UK corporation tax | |||
| Current year | 428 | 275 | |
| Prior year adjustment | (61) | - | |
| Total current tax expense | 367 | 275 | |
| Deferred tax (see note 8) | |||
| Origination and reversal of temporary timing differences | (65) | 84 | |
| Prior year adjustment | (11) | 34 | |
| Effect of increased tax rate on opening balance | 27 | - | |
| Total deferred tax | (49) | 118 | |
| Tax expense on profit on ordinary activities | 318 | 393 | |
* All tax in both 2021 and 2020 arose in the UK.
| (b) Analysis of current corporation tax assets and liabilities | |||
| 2021 | 2020 | ||
| £'000 | £'000 | ||
| Net (liability)/asset at 1 February 2020 | (123) | 30 | |
| Tax payments | |||
| Final payments relating to prior year | 115 | 74 | |
| Payments on account relating to current year | 94 | 161 | |
| Total tax payments made during the year | 209 | 235 | |
| Tax receipts in relation to prior year | - | (104) | |
| Current year UK corporation tax charge | (428) | (275) | |
| Other | - | (9) | |
| Prior year adjustment | 61 | - | |
| Acquired through business combinations | (32) | - | |
| Net liability at 31 January 2021 | (313) | (123) | |
(c) Factors affecting tax charge for the year
The tax assessed for the year is lower (2020: higher) than the standard rate of corporation tax in the UK 19.00% (2020: 19.00%) as explained below:
| Effective Tax Rate | ||||
| 2021 | 2020 | 2021 | 2020 | |
| £'000 | £'000 | % | % | |
| Profit on ordinary activities before taxation | 3,133 | 1,126 | ||
| Tax using the effective UK corporation tax rate of 19.00% (2020: 19.00%) | 595 | 214 | 19.0 | 19.0 |
| Effects of: | ||||
| Non-deductible expenses | 204 | 86 | 6.5 | 7.6 |
| Additional deduction for research and development | (216) | (49) | (6.9) | (4.4) |
| Intangibles arising on business combinations | - | 117 | - | 10.4 |
| Adjustment in respect of prior periods | (61) | - | (1.9) | - |
| Amendments to deferred tax and timing | (204) | 25 | (6.5) | 2.3 |
| Total tax expense | 318 | 393 | ||
| Effective tax rate | 10.2 | 34.9 |
The effective tax rate for FY2021 is lower than FY2020. The largest factors impacting the decreased effective tax rate are the amendments of deferred tax, of which £(128,000) relates to the change in tax rate, and the value of R&D tax credits. The value of R&D tax credits depends upon the level of expenditure incurred in research and development on qualifying projects, which may vary from year to year.
Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2020 (on 17 March 2020), These include an increase in the rate of corporation tax to 19% from 1 April 2020 (Finance Act 2016, now superseded, planned a reduction in the rate of corporation tax to 17%). Deferred taxes at the balance sheet date have been measured using the enacted tax rates and reflected in these financial statements.
(d) Factors that may affect future tax charges
The Group has gross unused losses estimated at £15,090,850, of which £7,596,259 were transferred to the Group due to the reverse acquisition and £7,490,62 relate to SLE. Brought forward losses transferred to the Group due to the reverse acquisition are potentially available for relief against future trading profits generated from the same trade. Losses relating to SLE are potentially available for relief against future trading profits generated by SLE. See note 8 Deferred Tax, for more information.
4 Earnings per ordinary share
Basic earnings per share for the year is calculated by dividing the profit attributable to ordinary shareholders for the year after tax by the weighted average number of shares in issue.
Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares.
| 2021 | 2020 | |
| £'000 | £'000 | |
| Profit | ||
| Profit attributable to equity holders of the company | 2,815 | 733 |
| Add back non trading items | 1,014 | 383 |
| Add back deferred tax charge on intangible assets acquired from the acquisition of Vio Holdings Limited | - | 117 |
| Numerator for underlying earnings per share calculation | 3,829 | 1,233 |
Non-trading items represent acquisition related expenses of £579,000 (FY2020: £272,000) and final settlement of contingent consideration in relation to the acquisition of Viomedex of £435,000 (FY2020: £nil). FY2020 also included impairment of investments of £111,000.
The weighted average number of shares in issue and the diluted weighted average number of shares in issue were as follows:
| 2021 | 2020 | |
| Shares | ||
| Number of ordinary shares in issue at the beginning of the year | 38,380,850 | 30,667,548 |
| Weighted average number of shares issued during the year | 16,855,015 | 2,747,203 |
| Weighted average number of ordinary shares in issue during the year | 55,235,865 | 33,414,751 |
| for the purposes of basic earnings per share | ||
| Dilutive effect of potential ordinary shares: | ||
| Weighted average number of share options | 309,342 | 583,941 |
| Diluted weighted average number of shares in issue during the year | ||
| for the purposes of diluted earnings per share | 55,545,207 | 33,998,692 |
The basic and diluted earnings per share for the year are as follows:
| Basic | Diluted | Basic | Diluted | |
| 2021 | 2021 | 2020 | 2020 | |
| pence | pence | pence | Pence | |
| Earnings per share | 5.10 | 5.07 | 2.19 | 2.15 |
| Adjust for: | ||||
| Non trading items | 1.83 | 1.82 | 1.15 | 1.13 |
| Tax charge on intangible assets acquired from the acquisition of investments | - | - | 0.36 | 0.34 |
| Underlying earnings per share | 6.93 | 6.89 | 3.69 | 3.62 |
An underlying earnings per share and an underlying diluted earnings per share have also been calculated as in the opinion of the Directors this will allow shareholders to gain a clearer understanding of the trading performance of the Group.
5 Dividends
The interim dividend for the year ended 31 January 2021 of 0.2p per share (2020: nil per share) was paid on 29 December 2020. The proposed final dividend of 0.4p per share (2020: nil per share) is subject to approval by shareholders at the AGM and has not been recognised as a liability as at 31 January 2021. If approved, the final dividend will be paid on 30th July 2021 to shareholders on the register on 2nd July 2021.
6 Intangible assets
| Group | Intangible assets | Development | Intellectual | Software | ||||
| Goodwill | acquired | costs | property | costs | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Cost | ||||||||
| At 1 February 2019 | - | - | 1,294 | 276 | 372 | 1,942 | ||
| Capitalised in the year | - | - | 192 | - | 24 | 216 | ||
| Acquisition of business (note 9) | 2,021 | 492 | - | - | - | 2,513 | ||
| At 1 February 2020 | 2,021 | 492 | 1,486 | 276 | 396 | 4,671 | ||
| Capitalised in the year | - | - | 614 | - | 49 | 663 | ||
| Acquisition of business (note 9) | 6,546 | 5,036 | - | - | - | 11,582 | ||
| Acquired in business combinations (note 9) | - | - | - | - | 40 | 40 | ||
| Disposal | - | - | (65) | - | - | (65) | ||
| At 31 January 2021 | 8,567 | 5,528 | 2,035 | 276 | 485 | 16,891 | ||
| Accumulated Amortisation | ||||||||
| At 1 February 2019 | - | - | 139 | 276 | 234 | 649 | ||
| Charge in the year | - | 43 | 181 | - | 71 | 295 | ||
| Impairment | - | - | 72 | - | - | 72 | ||
| At 1 February 2020 | - | 43 | 392 | 276 | 305 | 1,016 | ||
| Charge in the year | - | 380 | 186 | - | 56 | 622 | ||
| Impairment | - | - | 47 | - | - | 47 | ||
| At 31 January 2021 | - | 423 | 625 | 276 | 361 | 1,685 | ||
| Net book value | ||||||||
| At 31 January 2021 | 8,567 | 5,105 | 1,410 | - | 124 | 15,206 | ||
| At 31 January 2020 | 2,021 | 449 | 1,094 | - | 91 | 3,655 | ||
All intangible assets have finite useful lives except goodwill.
Intangible assets are amortised on a straight-line basis and the amortisation is included within administrative expenses within the Group's Consolidated Income Statement.
Software costs relating to the ERP system are held at cost £332,000 (2020: £328,000), net book value £33,000 (2020: £57,000) and have a remaining economic life of 2.3 years.
Intangible assets acquired within the year are held at cost and relate to the following:
- Customer contacts/relationships - cost £2,632,000 (2020: £360,000), net book value £2,480,000 (£324,000) and have a remaining economic life of 9.4 years (2020: 4.6 years).
- Trade name - cost £1,294,000 (2020: £58,000), net book value £1,240,000 (£55,000) and have a remaining economic life of 13.4 years (2020: 6.6 years).
- Technology - cost £1,110,000 (2020: 74,000), net book value £1,018,000 (2020: £70,000) and have a remaining economic life of 6.4 years (2020: 6.6 years).
The carrying value of development costs have been reduced to the recoverable amount through recognition of an impairment charge which is included in administrative expenses in the Group's Consolidated Income Statement. The recoverable amount is arrived at by comparing the year end net book value to the expected future discounted cashflows of each development project.
The impairment for the year of £47,000 (2020: £72,000) relates to one project for which the year-end net book value exceeded the expected future discounted cashflows.
7 Cash and cash equivalents
Cash and cash equivalents comprise solely of cash at bank and cash in held by the Group.
The carrying amounts of the Group's cash and cash equivalents are denominated in the following currencies:
| Group | Company | |||
| 2021 | 2020 | 2021 | 2020 | |
| £'000 | £'000 | £'000 | £'000 | |
| Pounds Sterling | 9,754 | 4,293 | 583 | 1,775 |
| Euro | 452 | 128 | - | - |
| US Dollars | 424 | 58 | 3 | - |
| Japanese Yen | 3 | 1 | - | - |
| Emirati Dirham | 1 | - | - | - |
| Swiss Franc | 3 | - | - | - |
| Australian Dollar | 12 | - | - | - |
| Singapore Dollar | 4 | - | - | - |
| Balances per statement of cash flows | 10,653 | 4,480 | 586 | 1,775 |
The Group currently use four banks; Royal Bank of Scotland plc, HSBC Bank plc, Bank of Scotland plc and National Westminster Bank plc. Moody's give long-term ratings of A2 for both Royal Bank of Scotland plc and National Westminster Bank plc and A1 for both HSBC Bank plc and Bank of Scotland plc as at 31 January 2021.
| Group | Company | |||
| 2021 | 2020 | 2021 | 2020 | |
| £'000 | £'000 | £'000 | £'000 | |
| Royal Bank of Scotland plc | 2,508 | 2,275 | - | - |
| HSBC Bank plc | 586 | 1,775 | 586 | 1,775 |
| Bank of Scotland plc | 811 | 430 | - | - |
| National Westminster Bank plc | 6,747 | - | - | - |
| Cash | 1 | - | - | - |
| Balances per statement of cash flows | 10,653 | 4,480 | 586 | 1,775 |
8 Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting year.
Note that the effective future tax rate is 19% (2020: 19%).
| Group | Company | ||||||
| 2021 | 2020 | 2021 | 2020 | ||||
| £'000 | £'000 | £'000 | £'000 | ||||
| Net (liability)/asset at beginning of year | (227) | (105) | 31 | 11 | |||
| Credit/(charge) to the Income Statement for the year | 49 | (118) | - | 14 | |||
| Included directly in equity | (6) | 6 | (6) | 6 | |||
| Included on business combinations (note 9) | (957) | - | - | - | |||
| Other | - | (10) | - | - | |||
| Net (liability)/asset at end of year | (1,141) | (227) | 25 | 31 | |||
| The elements of deferred taxation provided for are as follows: | |||||||
| 2021 | 2020 | 2021 | 2020 | ||||
| £'000 | £'000 | £'000 | £'000 | ||||
| Accelerated capital allowances | (197) | (229) | - | (1) | |||
| Intangibles arising on business combinations | (976) | (105) | - | - | |||
| Short term timing differences | 32 | 107 | 25 | 32 | |||
| Deferred tax (liability)/asset | (1,141) | (227) | 25 | 31 | |||
It is expected that £155,000 of the deferred tax liability as at the year end will be settled within 12 months of the year ended 31 January 2021 and the remaining £802,000 will be settled after 12 months following the year ended 31 January 2022.
At the year end date the Group had gross unused losses of £15,090,850 (2020: £7,596,259) potentially available to offset against future profits. Unused trading losses of £7,490,062 arose in SLE Limited prior to the acquisition by Inspiration Healthcare Group plc on 7 July 2020 and brought forward losses transferred to the Group due to the reverse acquisition of Inditherm plc amount to £7,596,259. The Group has received advice that these losses can be carried forward and utilised against future taxable profits of the same business from which they were generated. A streaming methodology has been devised to estimate profits from the business relating to Inditherm plc. This has been projected forwards and due to anticipated ongoing investment in development of the product range with consequent benefits of R&D tax credits it is estimated that taxable profits will not be generated for a number of years. Given a number of uncertainties inherent in the estimations, including revenue generated from recent product launches and the quantum of R&D tax credits, no deferred tax has been recognised in respect of these losses.
| The amounts of deferred tax not recognised are as follows: | ||
| 2021 | 2020 | |
| £'000 | £'000 | |
| Unused tax losses | 2,867 | 1,291 |
Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2020 (on 17 March 2020), These include an increase in the rate of corporation tax to 19% from 1 April 2020 (Finance Act 2016, now superseded, planned a reduction in the rate of corporation tax to 17%). Deferred taxes at the balance sheet date have been measured using the enacted tax rates and reflected in these financial statements.
9 Business combinations
On 7 July 2020, the Group acquired 100% of the share capital of SLE Limited for £16,200,000 cash and £1,800,000 shares. The Group paid £4,475,000 to the vendors upon the agreement of the Completion Accounts relating to the acquisition. SLE Limited designs, manufacturers and supplies neonatal ventilators in the respiratory care market worldwide.
As a result of the acquisition, the group is expected to benefit from both revenue and cost synergies while the acquired manufacturing capability will allow the Group to improve gross margins.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
| Purchase consideration | £'000 |
| Cash consideration | 16,200 |
| Acquired cash distribution | 4,475 |
| Cash withheld related to asset transferred | (1,218) |
| Cash consideration | 19,457 |
| Ordinary shares issued | 1,800 |
| Asset transferred to former owner | 1,218 |
| Total purchase consideration | 22,475 |
The cash consideration was raised via the issue of new ordinary shares.
The fair value of the 2,769,231 ordinary shares issued as part of the consideration paid for SLE Limited was based on a share price of 65p per share representing a discount of 1.5% to the closing middle market price of 66p per existing ordinary share on 18 June 2020 being the last practicable date prior to the announcement of the acquisition and fundraising. Issue costs of £957,000 which were directly attributable to the issue of the shares have been netted off against share premium.
The assets and liabilities recognised as a result of the acquisition are as follows:
| Fair Value | |
| £'000 | |
| Intangible assets | 40 |
| Property, plant and equipment | 466 |
| Right of use asset | 2,781 |
| Inventories | 4,527 |
| Trade and other receivables | 4,967 |
| Intercompany due | 1,218 |
| Cash | 6,314 |
| Trade and other payables | (5,682) |
| Lease liabilities | (2,781) |
| Net identifiable assets acquired | 11,850 |
| Add: | |
| Goodwill - note 6 | 6,546 |
| Intangible Assets - note 6 | 5,036 |
| Deferred tax on identified intangible assets | (957) |
| Net assets acquired | 22,475 |
The goodwill is not deductible for tax purposes.
The fair value of trade and other receivables is £4,967,000 and includes trade receivables with a fair value of £3,355,000. The gross contractual amount for trade receivables due is £3,681,000.
The acquired business contributed revenues of £11,522,000 and profit after tax of £1,726,000 to the Group for the period from 7 July 2020 to 31 January 2021. If the acquisition had occurred on 1 February 2020, consolidated pro-forma revenue and profit for the year ended 31 January 2021 would have been £16,912,000 and £1,739,000 respectively. These amounts have been calculated using the entities' results and adjusting them for:
· differences in the accounting policies between the group and the subsidiary
· "one off" Covid-19 related sales and profit
Acquisition related costs of £579,000 have been charged to administrative expenses in the Consolidated Income Statement for the year-ended 31 January 2021.
Vio Holdings Limited and Viomedex Limited, it's subsidiary undertaking, were acquired in the year ended 31 January 2020 for an initial consideration of £3,250,000. Contingent Consideration Shares amounting to £750,000 were not issued as the conditions to be achieved per the sale and purchase agreement were, in the opinion of the Board having taken legal advice, not met. This was disputed by the previous shareholders and an agreement subsequently reached to issue Contingent Consideration Shares amounting to £435,000. The expense has been recognised within administrative expenses.
The assets and liabilities recognised as a result of the acquisition are as follows:
| Fair Value | |
| £'000 | |
| Property, plant and equipment | 96 |
| Right of use asset | 191 |
| Inventories | 678 |
| Trade and other receivables | 239 |
| Trade and other payables | (266) |
| Lease liabilities | (191) |
| Deferred tax liabilities | (10) |
| Net identifiable assets acquired | 737 |
| Add: | |
| Goodwill - note 6 | 2,021 |
| Intangible Assets - note 6 | 492 |
| Net assets acquired | 3,250 |
The goodwill is not deductible for tax purposes.
The fair value of trade and other receivables is £239,000 and includes trade receivables with a fair value of £181,000. The gross contractual amount for trade receivables due is £181,000.
The acquired business contributed revenues of £354,000 and profit after tax of £134,000 to the Group for the period from 24 September 2019 to 31 January 2020. If the acquisition had occurred on 1 February 2019, consolidated pro-forma revenue and profit for the year ended 31 January 2020 would have been £1,127,000 and £454,000 respectively. These amounts have been calculated using the entities' results and adjusting them for:
· differences in the accounting policies between the group and the subsidiary
Acquisition related costs of £217,000 have been charged to exceptional items in the Consolidated Income Statement for the year-ended 31 January 2020
10 Related party transactions
Key management
Key management control 12.9% (2020: 22.8%) of the voting shares of the Company.
Key management comprise the Group's Executive Directors', Non-executive Directors' and the Managing Director of Inspiration Healthcare Limited.
Lease of Leicestershire Facility
The Leicestershire facility at Earl Shilton is rented on an arms length basis for £22,000 per annum (2020: £22,000) from a self-invested pension plan controlled by Neil Campbell, Toby Foster, Simon Motley, Malcolm Oxley and Graham Walls. The lease was renewed on an arm's length basis during April 2018.
Statement of directors' responsibilities
In preparing this preliminary announcement and summary financial statements the directors have considered their statutory responsibilities in relation to the preparation and approval of the annual report and financial statements. In preparing the summary financial statements, the directors have:
• selected suitable accounting policies and then apply them consistently;
• stated whether applicable IFRSs as adopted by the European Union have been followed for the Group summary financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the summary financial statements;
• made judgements and accounting estimates that are reasonable and prudent; and
• prepared the summary financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.
In the case of each director in office at the date the summary financial statements are approved:
• so far as the director is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and
• they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditors are aware of that information.
Publication of non-statutory accounts
The financial information is unaudited and does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006. The audit is not yet complete, the related statutory accounts will be finalised on the basis of the financial information presented by the Directors in the preliminary statement and will be delivered to the Registrar of Companies. Statutory accounts for the year to 31 January 2020 have been delivered to the Registrar of Companies. The audit report for those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or (3) of the Companies Act 2006.
Forward looking statements
Certain statements contained in this document constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of Inspiration Healthcare Group plc to be materially different from any future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other factors include, among others: general economic conditions and business environment.
Annual Report
A further announcement will be made when the 2021 Annual Report and Financial Statements are available on the Company's website (www.inspirationhealthcaregroup.plc.uk) and copies are sent to shareholders.
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