Inspiration Healthcare Group plc
("Inspiration", the "Company" or the "Group")
Audited Final Results
Inspiration Healthcare Group plc (AIM: IHC), the international suppliers of Neonatal Intensive Care and patient warming equipment, today reports its audited final results for the year ended 31 January 2016.
Highlights
● | Reverse acquisition completed successfully |
● | Underlying revenue growth of 15% on an unaudited proforma basis |
● | Strong balance sheet with £2.3 million cash at the year end |
● | Restructured sales team already showing benefits |
● | Critical Care international growth driven by own brand/IP products |
● | R&D programme prioritised and more resources committed |
Commenting on the outlook, Mark Abrahams, Chairman of Inspiration Healthcare Group plc, said:
"It is pleasing to see how much progress has been made in the enlarged group. The complementary product ranges and routes to market, together with a strong balance sheet, provide a solid foundation for the progress we expect to continue across the business this year."
Footnote:
The results reflect the reverse acquisition of Inditherm plc by Inspiration Healthcare Limited which completed on 24 June 2015. In accordance with the provisions of IFRS 3 (Revised) 'Business Combinations', the results are deemed to be a continuation of the "accounting parent" which in this case is Inspiration Healthcare Limited and incorporate the results of the business that was formally known as Inditherm plc from 24 June 2015. Further details are set out in the notes attached to this announcement.
In order to assist in the understanding of year on year trading performance of the enlarged group, an unaudited Proforma Consolidated Income Statement has been prepared for the 12 months ended 31 January 2016 along with comparatives for the previous year.
- Ends -
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Chairman's Statement
It gives me great pleasure to report the first annual results of the newly formed Inspiration Healthcare Group plc which came about following the reverse acquisition of Inditherm plc by Inspiration Healthcare Limited.
Transactions of this type are complex but I am pleased say that the teams from both sides did an excellent job and the transaction was completed in a professional and enjoyable way. I look forward to the merged business providing real value for shareholders in the future.
On 24 June 2015, when the transaction became unconditional, Inditherm plc acquired 100% of the share capital of Inspiration Healthcare Limited in a transaction which under IFRS 3 was deemed to be a reverse acquisition. The enlarged group has been renamed Inspiration Healthcare Group plc. The transaction has brought a strong management team with a proven track record of growth and profitability. The Group has a much broader range of innovative products which predominantly serve the medical markets specialising in Critical Care and the Operating Theatre.
The re-structured business will provide a strong platform for growth in important areas of the medical technology market with scale and additional resources.
Under the provisions of IFRS 3 the results are reported as a continuation of Inspiration Healthcare Limited with the results of the former Inditherm plc consolidated from the point that the transaction was completed and the shares of the enlarged entity admitted to AIM. Accordingly, the trading for the year to 31 January 2016 reflects twelve months of Inspiration Healthcare Limited and approximately thirty-two weeks from Inditherm plc as previously constituted.
The statutory results for the year ended 31 January 2016 show revenue of £12.3 million, operating profit of £1.3 million before impairment charges and exceptional items arising on the reverse acquisition of £1.2 million and an operating profit of £0.1 million. Reported revenue growth was 29% of which 15% was organic and the balance due to incorporating the Inditherm business.
To help shareholders to assess the Group, an unaudited Proforma Consolidated Income Statement has been produced, which reflects twelve months of trading from both entities. The Board believes that this statement represents the most appropriate basis for future comparison of operating performance.
Proforma Consolidated Income Statement (unaudited)
| | | 12 months ended 31 January | 12 months ended 31 January |
| | | 2016 £'000 | 2015 £'000 |
Revenue | | | 13,096 | 11,409 |
Cost of sales | | | (7,118) | (6,344) |
Gross profit | | | 5,978 | 5,065 |
Operating expenses | | | (6,553) | (4,806) |
Other income | | | 295 | - |
Operating (loss)/profit | | | (280) | 259 |
Analysed as: | | | | |
Operating profit before impairment of goodwill and intangible assets and exceptional items | | | 1,109 | 302 |
Impairment of goodwill and intangible assets | | | (517) | - |
Exceptional items | | | (872) | (43) |
Operating (loss)/profit | | | (280) | 259 |
Finance income | | | 3 | 6 |
(Loss)/profit on ordinary activities before taxation | | | (277) | 265 |
Income tax expense | | | (136) | (229) |
(Loss)/profit for the period attributable to owners of the parent company | | | (413) | 36 |
Earnings per share, before impairment of goodwill and intangible assets and exceptional items, attributable to owners of the parent company during the period - basic and diluted | | | 3.4p | 2.9p |
Adjusted earnings per share has been included as, in the opinion of the Directors, this will allow shareholders to gain an understanding of the underlying trading performance of the Group for the period.
Compared to the statutory results, the unaudited proforma consolidated income statement basis includes an additional 20 weeks of Inditherm plc's results prior to the reverse acquisition which has the impact of increasing revenue by £0.8 million and reducing the operating profit before impairment charges and exceptional items by £0.2 million. On the proforma basis revenue increased by 15% and operating profit before goodwill and impairment charges and exceptional items increased by £0.8 million from £0.3 million to £1.1 million compared to the previous 12 months.
There is a great deal of synergy between the two groups' product ranges. The majority of the Inspiration product range focuses on the new born in Neonatal Intensive Care Units (NICU) as does the Inditherm infant warming range. Additionally in the UK, Inspiration sell a range of products into the Operating Theatre, to which adding the Inditherm patient warming mattresses gives scale to the sales team and will unlock more value from this sector.
Interest in the Inditherm products has also grown especially in the LifeStart range. We believe that this product has significant potential and it is gaining interest in both regular usage and also in the academic world where clinicians are looking at the benefits of deferred cord clamping. The interest in this topic is gaining momentum with ongoing clinical trials and we look forward to realising the full potential of the product in the forthcoming years.
Some of our R&D developed products were slower to gain regulatory clearance than we had hoped but our market research shows substantial interest in these products and we remain confident in the potential of our new product pipeline.
I would like to offer my sincere thanks to our staff who have worked diligently and tirelessly throughout the year to maintain the momentum required to grow our Group during the merger and integration process. Their endeavour is appreciated by the entire Board.
Forward looking statement
The Group is well positioned to realise its potential with a newly restructured sales team and a pipeline of products through a prioritised R&D programme. We believe the market is right for the products we have developed especially with our comprehensive neonatal offering where we can help affect the outcome of babies from before the first breath of life.
The market in the UK continues to be unpredictable for capital purchases by the NHS. However, our managed service offering helps to remove such barriers for the NHS to acquire our patient warming system for surgery. We also have strong recurring revenue through our disposable product and Technical Support contracts that reduce reliance on capital budgets.
We believe that our own branded products are well placed in our key export markets to drive growth in our business, whilst we will continue to look for products to distribute in the UK that would add value to our existing portfolio.
The new financial year has started well and on plan and we expect to continue our progress across the business this year.
MARK ABRAHAMS
Chairman
28 April 2016
Operating and Financial Review
Our underlying revenue grew during the year, embracing the challenges of merging the Inspiration and Inditherm businesses. The biggest thank you I can say is to all our staff who have helped complete the merger smoothly and have driven the Group forward. I am delighted with the response we have had from all our staff who have brought about the successful integration.
On a statutory basis reported operating profit was £0.1 million (2015: £1.0 million) with operating profit before impairment charges and exceptional items of £1.3 million (2015: £1.0 million). On a proforma basis, operating profit before impairment charges and exceptional items improved to £1.1 million (2015: £0.3 million). Profit after tax and earnings per share (EPS) were minimal, reflecting the impact of non-recurring impairment charges of £0.5 million and £0.7 million of exceptional costs. Underlying profit margin was 8.5% and adjusted EPS increased from 2.9p to 3.4p per share on a proforma basis (2.9p to 4.1p on a statutory basis).
Sales of the Inspiration Healthcare Limited business increased to £11.2 million from £9.5 million, with the balance of revenue generated by the former Inditherm business. Sales grew 21% in Critical Care to £8.8 million (2015: £7.3 million) and 39% in Home Healthcare to £2.1 million (2015: £1.5 million).
The overall performance of the Group was in line with our plans at £12.3 million of revenue (2015: £9.5 million). As expected, this represented a flat period for the Inditherm range, which was achieved with a lower cost base as the product range was integrated into the Inspiration offering. Looking forward, in the short to medium term, we expect to achieve growth as we develop more appropriate channels and products.
Critical Care (£8.8 million, +21% growth year on year)
Our Critical Care business grew strongly with UK sales up 17% and international sales up 27%. Whereas the UK market is particularly important to us in our distribution model, the real growth from our own products in the longer term will be attained internationally. During the financial year we have made reasonable progress in North America and we had our largest ever order shipped to Saudi Arabia (£0.7 million).
Our sales team has now been re-organised in the UK to give a focus on the different aspects of our business. We now have a dedicated Critical Care sales team, including a full time National Sales Manager. This approach will give more focus to the team and better reporting and visibility of opportunities.
Our service department has contracts with NHS Trusts for planned preventative maintenance. Additionally we also carry out ad hoc repairs chargeable by the hour and supply spare parts. Technical service is a core part of our business, which adds value to distribution and helps differentiate us from competitors. Our service offering includes 24/7 emergency hire of life support equipment.
Operating Theatre (£1.3 million, +82% year on year)
Our Operating Theatre business includes the original Inditherm surgical warming products as well as some distributed products in the UK that can add value to customers in this area. Again, as with the Critical Care sales team, we have re-organised the sales team to deliver a more focused service to the customer when it comes to discussing surgical needs and patient requirements led by a National Sales Manager.
The sales growth reflects the impact of the acquisition, the Inditherm Alpha mattress system for warming patients during surgery had a challenging financial year, although we managed to win a substantial managed service contract in the UK. Further development of the managed service business is being undertaken to see how far we can progress with this offering as we believe it demonstrates savings to our customers more clearly.
Home Healthcare (£2.1 million, +39% year on year)
We have seen significant growth in our parenteral feeding product lines sharing experience with other infusion based products in the portfolio.
The industrial business of Inditherm is making a small but valuable contribution and following the transaction the focused resource is starting to show benefits with increased interest in this area.
Review of Business and Future Developments
Due to the change in the structure of the business following the reverse acquisition the Directors have included a 12 month Proforma Consolidated Income Statement (unaudited) within the Chairman's Statement. The Directors believe that this year on year comparison represents the most appropriate basis for future comparisons of financial performance and that overall the Annual Accounts and Consolidated Financial Statements are fair, balanced and understandable.
Taxation
The Group has recorded an income tax expense of £136,000 (2015: £229,000). Within this amount the Group has benefitted from a deferred tax credit on recognition of the future benefit of capital allowances (not previously claimed by Inditherm plc) as a deferred tax asset of £45,000 (2015: £nil). Further benefit is gained from Research and Development tax credits resulting in £115,000 (2015: £nil) of UK corporation tax recoverable at the year end. £80,000 of the amount recoverable relates to previous financial years.
Cashflow
The year-end cash and cash equivalents improved to £2.3 million from £0.3 million in 2015 due to cash generated from trading of £1.1 million (2015: decrease £0.2 million) and £0.9 million assumed from Inditherm plc when the reserve acquisition was completed. The Group has no borrowings (other than £33,000 (2015: £nil) of finance leases). The Directors believe that the currently planned growth in the business can be funded from ongoing operations.
Exceptional Items
The Group presents certain items as exceptional items that are non-recurring and significant. These relate to items which, in management's judgement, need to be disclosed by virtue of their size and incidence in order to obtain a more meaningful understanding of the financial information.
The exceptional items reported relate to reverse acquisition transaction and re-organisation costs of £0.7 million. The amount comprised two main categories of non-recurring items. Firstly, professional fees of £0.5 million including brokerage, legal fees, accounting and taxation advice, stamp duty and public relations fees in relation to the reverse acquisition. Secondly, non-recurring severance costs of £0.2 million including payments for loss of office and redundancy.
Impairment of Goodwill and Intangible Assets
The impairment of goodwill and intangible assets arising on reverse acquisition of £0.5 million comprise the impairment of intellectual property of £0.1 million and impairment of goodwill of £0.4 million both recognised following a review of the carrying value of the assets at the year-end.
NEIL CAMPBELL
Chief Executive Officer
28 April 2016
Consolidated Statement of Comprehensive Income (Audited) for the year ended 31 January 2016
| | | | 2016 £'000 | 2015 £'000 |
Revenue | | | | 12,279 | 9,538 |
Cost of sales | | | | (6,764) | (5,507) |
Gross profit | | | | 5,515 | 4,031 |
Operating expenses | | | | (5,664) | (3,053) |
Other operating income | | | | 295 | - |
Operating profit | | | | 146 | 978 |
Analysed as: | | | | | |
Operating profit before goodwill and impairment of intangible assets and exceptional items | | | | 1,305 | 978 |
| | | | | |
Impairment of goodwill and intangible assets | | | | (517) | - |
Exceptional items | | | | (642) | - |
Net finance income | | | | 2 | 2 |
Profit before tax | | | | 148 | 980 |
Income tax expense | | | | (136) | (229) |
Total comprehensive income for the year attributable to owners of the parent company | | | | 12 | 751 |
Earnings per share, attributable to owners of the parent company- basic and diluted | | | | 0.04p | 2.94p |