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Consort Medical PLC  -  CSRT   

Interim Results

Released 07:00 06-Dec-2016

RNS Number : 0226R
Consort Medical PLC
06 December 2016
 

Consort Medical plc

6 December 2016

 

Interim results

 

Strong underlying1 performance with 13%2 increase in EPS3

 

Significant new pipeline contracts increase confidence in longer term outlook

 

Consort Medical plc (LSE: CSRT) ("Consort", "Consort Medical" or the "Group"), a leading, global, single source drug and delivery device company, today announces its interim results for the six months ended 31 October 2016.

 

Financial Highlights

 


H1 FY2017

Reported

Δ

H1 FY2016 @ CER2

H1 FY2016 Reported

GBPm                       6 months ended

31 Oct 2016


31 Oct 2015

31 Oct 2015






Revenue

144.9

2.0%

142.1

135.5

EBIT3

18.9

8.5%

17.4

16.5

EBT3

16.6

10.7%

15.0

14.1

Adjusted Basic EPS3

28.6p

13.0%

25.3p

23.5p






Statutory Measures





Profit before tax (PBT)

Basic EPS

10.2

20.1p

181.2%

66.2%


3.6

12.1p






1 Underlying - H1 FY2017 less H1 FY2016 at constant exchange rates.  2 CER - at constant exchange rates.  3 Before special items of £6.5m - special items relate to amortisation of acquired intangible assets (H1 FY2016: amortisation of acquired intangible assets £6.5m and integration costs £4.0m).

 

·      Group revenue increases to £144.9m from £135.5m - growth of 2.0% underlying1, 6.9% reported

Bespak underlying1 revenue growth 4.3% and EBIT growth of 5.7%

Aesica underlying1 revenue growth 0.5% and EBIT growth of 14.1%

·      Improvement in Aesica operational performance increases operating margin 160 bps to 7.8% - on course for double digit margins goal

·      13% growth in Adjusted basic EPS at constant exchange rates reflecting operational leverage and performance

·      Strong underlying1 cash generation partially offset by currency headwinds and special items cashflow

·      Interim Dividend increased 5% to 7.09p, reflecting the Board's confidence in the Group's prospects

 

Operational Highlights

 

·      Landmark deal for Bespak with first full development agreement for Syrina® / Vapoursoft® device application with a leading Global Biopharma. Development pipeline expands to 16

·      Launch of second Bespak injectable device with UCB Cimzia®

·      Rapidly expanding Bespak Innovation funnel, with 11 early stage development / feasibility programmes

·      Aesica an early provider in serialisation services, growing service offering to pharma clients

 

 

Jon Glenn, Chief Executive Officer of Consort Medical, commented:

 

"Consort has continued to deliver strong underlying1 growth in earnings whilst adding further important contract wins that build our pipeline momentum. In particular, the recent landmark master development agreement for Syrina® / VapourSoft® and the launch of UCB's Cimzia® autoinjector underpin our longer term growth prospects.

 

We continue to focus on the organic development of our business, and will continue to consider further inorganic opportunities - whether adding a competency or geographic opportunity - where they present a compelling case for enhancing sustainable shareholder value. With a robust financial position and a strong development pipeline, the Board remains highly confident of Consort's future prospects."

 

Enquiries: 

 

Consort Medical

Jonathan Glenn - Chief Executive Officer

Richard Cotton - Chief Financial Officer


FTI Consulting

Ben Atwell / Simon Conway

 

 

Notes:

1.   Foreign Exchange Rates

a.   Period end exchange rates 31 Oct 2016: EUR1.11: GBP1.0; USD1.22: GBP1.0.

b.   Average exchange rate 1 May 2016 to 31 Oct 2016:  EUR1.20: GBP1.0; USD1.34: GBP1.0.

 

c.   Period end exchange rates 31 Oct 2015: EUR1.40: GBP1.0; USD1.54: GBP1.0.

d.   Average exchange rate 1 May 2015 to 31 Oct 2015:  EUR1.39: GBP1.0; USD1.55: GBP1.0.

 

e.   Period end exchange rates 30 April 2016: EUR1.28: GBP1.0; USD1.46: GBP1.0.

f.    Average exchange rates 1 May 2015 to 30 April 2016: EUR1.36: GBP1.0; USD1.50: GBP1.0.

 

Consort Medical plc is a leading, global, single source pharma services drug and delivery device company. We are at the leading edge of innovation and we are committed to investing in patient, clinician and customer driven innovation to create new treatments, new markets and new opportunities.

 

Our businesses

 

Bespak is a global market leader in the manufacture of drug delivery devices for pharmaceutical partner companies, including respiratory, nasal, injectables and ocular products, and the manufacture of devices for the point of care diagnostics market. www.bespak.com.

 

Aesica is a leading provider of finished dose and active pharmaceutical ingredient (API) development and manufacturing services to pharmaceutical partners. www.aesica-pharma.com.

 

We employ c.2,000 people globally of which c.1,400 are located in the UK. We have UK facilities in King's Lynn, Cambridge, Nelson, Milton Keynes, Cramlington, Queenborough and Hemel Hempstead, German facilities in Monheim and Zwickau and a facility in Pianezza, Italy. Consort Medical is a public company quoted on the premium list of the London Stock Exchange (LSE: CSRT). www.consortmedical.com.

 

1 Underlying - H1 FY2017 less H1 FY2016 at constant exchange rates.

 

Consort Medical plc

 

Group Interim Results

 

During the first half Consort delivered a strong underlying1 performance from both businesses, in particular our further operational improvements in Aesica translated into an enhanced operating margin. In addition, a number of important business development milestones have added to the Group's future growth prospects, especially the landmark master development agreement for Syrina® / VapourSoft® and the launch of UCB's Cimzia® autoinjector.

 

Financial Performance

 

Revenue increased by £9.4m (6.9%) to £144.9m (H1 FY2016: £135.5m) with Bespak delivering sustained growth of 4.3% to £58.9m (H1 FY2016: £56.5m), and Aesica growing 8.8% to £86.0m (H1 FY2016: £79.1m) - an increase of 0.5% at constant exchange rates. Revenue strengthening attributable to the weakness of sterling against the Euro is £6.5m or 8.3%.

 

EBIT before special items increased by 14.7% to £18.9m (H1 FY2016: £16.5m). This included 5.7% growth from Bespak to £12.2m (H1 FY2016: £11.5m). Bespak EBIT margin increased by 30bps to 20.7%. Aesica EBIT increased 35.8% to £6.7m - an increase of 14.0% at constant exchange rates - with EBIT margin growing 160bps to 7.8% reflecting continuing improvements to operating performance.

 

Special items before taxation amounted to £6.5m in the year (H1 FY2016: £10.5m), comprising amortisation of acquired intangibles (H1 FY2016: amortisation of acquired intangible assets £6.5m and integration costs £4.0m).

 

Finance costs were £2.3m (H1 FY2016: £2.4m), with Earnings before tax and special items increasing by 18.0% to £16.6m (H1 FY2016: £14.1m) - an increase of 10.7% at constant exchange rates. Adjusted basic EPS increased by 21.7% to 28.6p per share (H1 FY2016: 23.5p) - an increase of 13.0% at constant exchange rates. Basic EPS increased by 66.2% to 20.1p per share (H1 FY2016: 12.1p).

 

Cash generated from operations decreased by £9.2m to £10.1m (H1 FY2016: £19.3m). EBITDA before special items grew £3.6m (16.9%) to £25.2m (H1 FY2016: £21.5m). Bespak EBITDA grew 7.8% to £15.2m, with Aesica's EBITDA growing 34.1% to £10.0m - an increase of 21.5% at constant exchange rates. Trade working capital increased £3.9m to £55.7m (H1 FY2016: £51.8m) including the impact of sterling depreciation against the euro, which represents 19.5% of sales (H1 FY2016: 19.4% of proforma sales). Capital expenditure reduced £2.1m to £6.2m (H1 FY2016: £8.3m).

 

The Group balance sheet closed with a net debt position of £106.8m (FY2016: £97.0m), representing gearing of 1.91x Net Debt: EBITDA, comfortably within the banking facility covenant (maximum 3.0x). Interest cover was 15.79x against a covenant minimum of 3.0x. The Group has comfortable cash resource availability, with total committed facilities of £171.2m, of which £124.1m was drawn at 31 October 2016.

 

The Board is declaring an increased interim dividend per share of 7.09p (H1 FY2016: 6.75p), an increase of 5%. Payment will be on 17 February 2017 to holders on the register on the record date of 20 January 2017.

 

Further commentary on the financial results is contained in the Bespak and Aesica business reviews below.

 

1 Underlying - H1 FY2017 less H1 FY2016 at constant exchange rates.

 

 

Bespak Business Review

 

Operations

 


H1 FY2017

Underlying1

Δ%

Currency

Δ%

H1 FY2016

Revenue

£58.9m

£2.4m

4.3%

-

-

£56.5m

EBITDA2

£15.2m

£1.1m

7.8%

-

-

£14.1m

EBITDA margin %2

25.7%





24.9%

EBIT2

£12.2m

£0.7m

5.7%

-

-

£11.5m

EBIT margin %2

20.7%





20.4%

 

1 Underlying - H1 FY2017 less H1 FY2016 at constant exchange rates.  2 Before special items

 

Bespak has a well-established and diverse core business of products in volume manufacturing and a strong pipeline of innovative products entailing respiratory, nasal, ocular and injectable drug delivery, as well as point of care diagnostics. Once again, the business has performed strongly in the first half with increased demand for its core products as well as winning new development opportunities and contracts.

 

Revenue grew 4.3% to £58.9m. The Non-respiratory sales have now grown to over 25% of Bespak's turnover - Injectables sales were particularly strong again in both product sales and service revenue. Across the business service revenue continues to be strong, reflecting the extent of and additions to the Development and Innovation pipelines.

 

The strong revenue performance translated to EBIT growth, which increased 5.7% to £12.2m, as EBIT margin increased 30bps to 20.7%.

 

In October 2016, Bespak exhibited alongside Aesica at the CPHI exhibition in Barcelona. This was the second time both companies have shared a major industry exhibition platform, and the event drew increased interest in the joint services offering of device and drug.

 

Product Development

 

In line with our strategy we have assembled a full and broad product development pipeline of organic growth opportunities, which will add to the strength of the core business going forwards. Successful conversion of these opportunities will provide progressive revenue and profit growth, in both contract manufacturing and products with our own proprietary IP and across a range of therapeutic areas, including commercial drug handling.

 

Our published development portfolio provides an update on the key business development projects in the business. We guide that for inclusion in the published portfolio, projects must have a reasonable expectation of success, though timescales are difficult to predict, and be expected to produce peak annual sales of at least £3m per annum.

 

In the period, UCB received regulatory approval from the EMA for INJ 570, an autoinjector for UCB's Cimzia®, and the drug has been successfully launched in the UK market. Further launches are planned in the near term.

 

We also added two new projects to our development and manufacturing portfolio. These include one respiratory project and one injectable:

 

·      SYR075 is a significant new master development agreement for our proprietary Vapoursoft® Syrina® autoinjector technology with a leading global biopharmaceutical company. Initially there is a single drug / device combination, but the agreement allows for the addition of others, and contains outline terms for commercial supply.

·      VAL100 is a significant new commercial supply agreement for Bespak's proprietary respiratory devices with AstraZeneca AB. This is a multi-year agreement for the scale-up and supply of Bespak's proprietary pressurised metered dose inhaler (pMDI) valves and actuators.  These will subsequently be assembled with AstraZeneca's Bevespi Aerosphere® (glycopyrrolate and formoterol fumarate) inhalation aerosol indicated for the long-term, maintenance treatment of airflow obstruction in patients with chronic obstructive pulmonary disease (COPD), including chronic bronchitis and/or emphysema. AstraZeneca announced that its device was approved by the US Food and Drug Administration on 25 April 2016.

 

With the addition of these two new programmes, the portfolio has grown to 16 live programmes. The status of the major programmes currently in our development pipeline is listed below.

 

Project

Description

Customer

Status

VAL310

Easifill primeless valve

US Pharma

Awaiting regulatory approval

INJ570

Auto-injector

UCB

EMA approval received. Launched Oct 2016 in UK

VAL020

MDI valve

Global Pharma

Stability trials complete; customer progressing towards approval and launch

DEV200

Nicotine delivery

Nicovations

Ongoing progress. We continue to work with BAT towards launch

POC010

POC Test Cartridge

Atlas Genetics

CE marking granted for Chlamydia; Combined Chlamydia / Gonorrhoea test cartridge development progressing

NAS020

Nasal device

Global Generic

Formulation change; brief under review

DEV610

DPI

Mylan

Potential GDUFA date 28 March 2017

NAS030

Nasal device

Pharma Co.

Early stage programme

INJ600

PatchPump® infusion system for Treprostinel

SteadyMed Therapeutics Inc.

Good progress made. NDA submission planned H1 2017

INJ650

ASI® Auto-injector

Global Generic

Continuing progress; early stage

INJ700

Lila MixTM Injector

Pharma Co.

Development programme on track

IDC300

Oral IDC

Pharma Co.

Launch now expected H2 FY2018

VAL050

MDI valve / actuator

Aeropharm

Development contract ongoing

OCU050

Ocular device / formulation / filling

Oxular

Early stage programme

VAL100

MDI valve / actuator

Astra Zeneca

Product approved, awaiting launch

SYR075

Syrina® / Vapoursoft®

Global Biopharma

Newly completed master development agreement

 

DPI = Dry Powder Inhaler, MDI = Metered Dose Inhaler, POC = Point of Care, IDC = Integrated Dose Counter

 

Innovation

 

The Innovation team continues to be highly active on a number of fronts. The team has now grown to 32 people (21 as at H1 FY2016) at its own dedicated facilities in Cambridge, and we plan to grow this further during the current financial year.

 

The commercial and innovation teams continue to generate very strong interest in our new technology platforms on a range of opportunities. The Innovation funnel has progressed broadly during the period across a number of therapeutic areas and technologies. These development and feasibility programmes cover a range of therapeutic areas and are all in partnership with biotech and pharmaceutical companies that complement our current customer portfolio in our core business - this is again indicative of the strength and success of our innovation drive and strategy to broaden and diversify our product and customer base.

 

Syrina®, Lila® & Lapas® Update

 

Vapoursoft® powered Syrina® auto-injectors, Vapoursoft® powered Lapas® auto-injectors, and our Lila MixTM and DuoTM technologies have continued to generate widespread interest as innovative and novel drug delivery systems and devices, with several biotech and pharmaceutical companies initiating feasibility and development programmes for their injectable drug portfolios.

 

This rapidly expanding Innovation funnel currently has an active schedule of five early stage development programmes, six feasibility programmes, and a further five programmes awaiting initiation.

 

Launch of Bespak's Syrina® AR 2.25 Auto-injector

 

In October 2016 Bespak unveiled its Syrina® AR 2.25 auto‑injector. This innovative auto-injector is the latest addition to the VapourSoft® -powered Syrina® range and is suitable for delivering volumes of up to 2.0ml using a standard 2.25ml pre-filled syringe. The Syrina® AR 2.25 provides patients with a fully-automatic two-step, compact device for the self-administration of viscous drug formulations.

 

Using Bespak's proven proprietary VapourSoft® compact energy source, Syrina® AR 2.25 is able to deliver 2.0 ml of viscous drug solutions smoothly and safely in less than 15 seconds. Designed with a hidden needle, Syrina® AR 2.25 offers automatic needle insertion and retraction, as well as drug delivery with a single push-on-skin operation. Syrina® AR 2.25 has been tailored specifically for higher viscosities while still enabling the safe use of glass syringes.

 

Using VapourSoft® at its core allows a compact design and, with quiet operation, provides a discrete solution for patients.  Syrina® AR 2.25 is clinical trial ready, enabling a fast track implementation process once paired with a specific drug formulation.

 

Aesica Business Review

 

Operations

 


H1 FY2017

Underlying1

Δ%

Currency

Δ%

H1 FY2016

Revenue

£86.0m

£0.4m

0.5%

£6.5m

8.3%

£79.1m

EBITDA2

£10.0m

£1.6m

21.4%

£1.0m

12.8%

£7.4m

EBITDA margin %2

11.6%





9.4%

EBIT2

£6.7m

£0.7m

14.1%

£1.1m

21.8%

£4.9m

EBIT margin %2

7.8%





6.2%

 

1 Underlying - H1 FY2017 less H1 FY2016 at constant exchange rates.  2 Before special items

 

Aesica revenue grew 0.5% to £86.0m, at constant exchange rates. EBIT grew strongly, by 14.1% to £6.7m at constant exchange rates, reflecting the continued improvement in its operating performance, with operating margin increasing 160bps to 7.8%.

 

We are now routinely supplying commercial product using the first semi-continuous processing line and technology installed at the Queenborough site and are in discussion with a range of pharma customers looking to access the equipment for development activities.

 

Aesica has moved from validation to routine commercial supply of S+flurbiprofen to a leading Japanese pharmaceutical company to provide the active ingredient for an anti-inflammatory formulation.

 

Business Development and Innovation

 

A changing regulatory requirement within the pharmaceutical industry is for product to be uniquely identified to the individual pack level. This process is known in the industry as serialisation. Aesica has been a very early provider of serialisation services to the industry for countries such as China and Latin America and is well advanced in developing the service to take on customers for the next wave of countries adopting serialisation including the EU.

 

The business has identified a number of attractive business development opportunities with pharma companies looking to outsource oral products and has seen growth in demand for its liquid formulation services at the Pianezza site. One continued growth area is around the manufacture and supply of anaesthetic product for both human and veterinary use.

 

The Aesica commercial team is focused on a growing number of formulation development and manufacturing opportunities, including a number of early leads for drug formulation and device combinations, as well as packaging opportunities.

 

Other Financial

 

Special Items

Special items are those items which the Group considers to be non-repetitive or are not a part of the underlying performance of the business, and often where a material income statement cost or credit is incurred in one year to deliver a future benefit. In H1 FY2017 special items amounted to £6.5m comprising amortisation of acquired intangible assets (H1 FY2016: amortisation of acquired intangible assets £6.5m and integration costs £4.0m).

 

Pensions

The IAS 19 pension valuation at 31 October 2016 was a total deficit of £43.3m (30 April 2016: £27.2m). The bulk of the increase in the deficit arises primarily from the significant decline in bond yields following the EU referendum which has increased the liabilities, in particular of the Bespak scheme. Deficit recovery contributions of £1.5m per annum are being made to the Bespak scheme. The next triennial actuarial valuation will take place at 30 April 2017.

 

Tax

The effective tax rate on EBT before special items is 16.1% (H1 2016: 18.9%). The reduction in the rate from last year follows the approval and launch of UCB's Cimzia® autoinjector (INJ570), where historic development losses in the Medical House (ASI) Ltd. have now been recognised as a tax asset.

 

Principal risks and uncertainties

The principal risks and uncertainties deemed relevant for the remainder of the financial year are considered in note 14 to the financial statements.

 

People

As announced in August, Richard Cotton (CFO) is leaving the Group following these results to join Dechra Pharmaceuticals plc as CFO. As announced on 25 November 2016, the Board has appointed Paul Hayes to succeed Richard. Paul is currently CFO of The Vitec Group plc, and is serving his notice there until the end of April 2017 when he will join Consort. In the meantime, the Group has appointed David Tilston to act as Interim CFO until Paul joins. David is a seasoned Interim CFO, with experience in both public and private companies.

 

The Board would like to thank Richard for his contribution, commitment and hard work during a time of significant change and growth at the Group, and to wish him well as he embarks on the next stage of his career.

 

Outlook

 

Consort has continued to deliver strong underlying1 growth in earnings whilst adding further important contract wins that build our pipeline momentum.

 

In particular, the recent landmark master development agreement for Syrina® / VapourSoft® and the launch of UCB's Cimzia® autoinjector further evidence our longer term growth prospects.

 

We continue to focus on the organic development of our business, and will continue to consider further inorganic opportunities - whether adding a competency or geographic opportunity - where they present a compelling case for enhancing sustainable shareholder value. With a robust financial position and a strong development pipeline, the Board remains highly confident of Consort's future prospects.

 

1 Underlying - H1 FY2017 less H1 FY2016 at constant exchange rates.

 

Statement of directors' responsibilities

 

The directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

·      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

 

The directors of Consort Medical plc are listed in the Consort Medical plc Annual Report for the year ended 30 April 2016. A list of current directors is maintained on the Consort Medical plc website: www.consortmedical.com.

 

By order of the Board

 

 

Richard Cotton

Chief Financial Officer

5 December 2016

 

 

Independent review report to Consort Medical plc

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2016 which comprises the consolidated Income Statement, consolidated Statement of Comprehensive Income, consolidated Balance Sheet, consolidated Statement of Changes in Shareholders' Equity, consolidated Cash Flow Statement and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

 

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

 

 

Lynton Richmond

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London E14 5GL

5 December 2016

 

 

 

Condensed Consolidated Income Statement

 

For the half year ended 31 October 2016






 



Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016


Note

£000

£000

£000

Revenue

2

144,933

135,548

276,910

Operating expenses before special items


(126,042)

(119,080)

(239,935)

Operating profit before special items


18,891

16,468

36,975

Special items

3

(6,478)

(10,493)

(21,018)

Operating profit


12,413

5,975

15,957

Finance income


72

14

11

Finance costs

4

(1,587)

(1,719)

(3,328)

Other finance costs

4

(732)

(655)

(1,399)

Profit before tax and special items


16,644

14,108

 32,259

Special items

3

(6,478)

(10,493)

(21,018)

Profit before tax


10,166

3,615

11,241

Tax on profit before special items

5

(2,672)

(2,664)

(4,181)

Special items - tax

3

2,333

4,985

8,908

Tax (charge) / credit

5

(339)

2,321

4,727

Profit for the financial period from continuing operations

9,827

5,936

15,968

Loss for the financial period from discontinued operations

15

-

(48)

(999)

Profit for the financial period

9,827

5,888

14,969








 

Earnings per share, attributable to the ordinary equity holders of the parent




From continuing operations:








Basic earnings per ordinary share



6

20.1p

12.2p


32.7p

Diluted earnings per ordinary share



6

19.9p

12.0p


32.3p










From continuing and discontinued operations:








Basic earnings per ordinary share



6

20.1p

12.1p


30.7p

Diluted earnings per ordinary share



6

19.9p

11.9p


30.3p










Non-GAAP measures




 

 




From continuing operations:




£000

£000


£000

  Profit before tax before special items




16,644

14,108


32,259

  Profit after tax before special items




13,972

11,444


28,078









  Adjusted basic earnings per ordinary share 



6

28.6p

23.5p


57.6p

  Adjusted diluted earnings per ordinary share



6

28.2p

23.2p


56.8p









 

 

Condensed Consolidated Statement of Comprehensive Income

For the half year ended 31 October 2016



























Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016






£000

£000

£000

Profit for the period from continuing operations


9,827

5,936

15,968

Loss for the period from discontinued operations


-

(48)

(999)

Profit for the financial period


9,827

5,888

14,969






Other comprehensive income





Items that may be reclassified subsequently to profit and loss:





Net gain on hedge of a net investment


(4,758)

243

(2,699)

Exchange movements on translation of foreign subsidiaries


17,878

(119)

10,381

Current tax on exchange movements


-

8

(11)






Items that will not be reclassified subsequently to profit and loss:





Actuarial losses on defined benefit pension scheme


(15,895)

(319)

(5,376)

Deferred tax on actuarial losses


2,889

89

1,055

Impact of change in tax rates


(439)

457

(588)

Other comprehensive (loss) / income for the period


(325)

359

2,762






Total comprehensive income for the period


9,502

6,247

17,731






Attributable to equity holders of the parent





From continuing operations


9,502

6,295

18,730

From discontinued operations


-

(48)

(999)

 

 

Condensed Consolidated Balance Sheet




at 31 October 2016






 

Unaudited

31 October 2016

Restated*

Unaudited

31 October

2015

 

Audited

30 April

2016


Note

£000

£000

£000

Assets





Non-current assets





Property, plant and equipment


139,050

130,366

136,673

Goodwill


131,101

117,673

122,634

Other intangible assets


66,269

70,088

67,304

Investments

9

8,250

6,266

8,250

Trade and other receivables


8

-

-



344,678

324,393

334,861

Current assets





Inventories


34,977

31,767

30,725

Trade and other receivables


62,471

57,901

54,632

Current tax asset


6,245

3,079

9,284

Cash and cash equivalents

10

16,216

11,580

16,258



119,909

104,327

110,899

Total assets


464,587

428,720

445,760

Liabilities





Current liabilities





Borrowings

10

 (122,977)

(106,868)

(113,209)

Trade and other payables


(56,306)

(73,884)

(61,705)

Derivative financial instruments

9

(250)

(30)

(256)

Provisions for other liabilities


(4,446)

(8,222)

(3,610)



(183,979)

(189,004)

(178,780)

Net current liabilities


 (64,070)

(84,677)

(67,881)






Non-current liabilities





Trade and other payables


(9,453)

-

(9,475)

Deferred tax liabilities


(16,529)

(19,273)

(18,571)

Defined benefit pension scheme deficit

12

(43,294)

(20,980)

(27,157)

Provisions for other liabilities


(361)

-

(2,626)



(69,637)

(40,253)

(57,829)

Total liabilities


(253,616)

(229,257)

(236,609)

Net assets


210,971

 199,463

209,151






Shareholders' equity





Share capital

16

4,921

4,913

4,913

Share premium


137,911

137,422

137,422

Retained earnings


55,636

65,218

67,367

Other reserves


12,503

(8,090)

(551)

Total equity


210,971

199,463

209,151





 

*Restated (see note 17)

 

 

Condensed Consolidated Statement of Changes in Shareholders' Equity

For the half year ended 31 October 2016







Share capital

Share premium

Retained earnings

Translation reserve

Total


£000

£000

£000

£000

£000

Balance at 1 May 2015 (audited)

 4,907

137,087

66,721

(8,222)

200,493

Profit for the financial period

-

-

5,888

-

5,888

Exchange movements on translation of foreign subsidiaries

-

-

-

124

124

Actuarial gains on defined benefit scheme

-

-

319

-

319

Tax on amounts taken directly to equity

-

-

(546)

8

 (538)

Total comprehensive income

-

-

5,661

132

5,793

Recognition of share-based payments

-

-

853

-

853

Movement on tax arising on share-based payments

-

-

(211)

-

(211)

Proceeds from exercise of employee options

6

335

-

-

341

Consideration paid for purchase of own shares (held in trust)

-

-

(2,084)

-

(2,084)

Equity dividends

-

-

(5,722)

-

(5,722)


6

335

(7,164)

-

(6,823)

Balance at 31 October 2015 (unaudited)

4,913

137,422

65,218

(8,090)

199,463







Balance at 1 May 2015 (audited)

 4,907

137,087

66,721

(8,222)

200,493

Profit for the financial period

-

-

14,969

-

14,969

Exchange movements on translation of foreign subsidiaries

-

-

-

7,682

7,682

Actuarial losses on defined benefit scheme

-

-

(5,376)

-

(5,376)

Tax on amounts taken directly to equity

-

-

467

(11)

456

Total comprehensive loss

-

-

10,060

7,671

17,731

Recognition of share-based payments

-

-

1,792

-

1,792

Movement on tax arising on share-based payments

-

-

2

-

2

Proceeds from exercise of employee options

6

335

-

-

341

Consideration paid for purchase of own shares (held in trust)

-

-

(2,209)

-

(2,209)

Equity dividends

-

-

(8,999)

-

(8,999)


6

335

(9,414)

-

(9,073)

Balance at 1 May 2016 (audited)

4,913

137,422

67,367

(551)

209,151

Profit for the financial period

-

-

9,827

-

9,827

Exchange movements on translation of foreign subsidiaries

-

-

-

13,054

13,054

Actuarial losses on defined benefit scheme

-

-

(15,895)

-

(15,895)

Tax on amounts taken directly to equity

-

-

2,450

-

2,450

Total comprehensive income

-

-

(3,618)

13,054

9,436

Recognition of share-based payments

-

-

979

-

979

Movement on tax arising on share-based payments

-

-

(51)

-

(51)

Proceeds from exercise of employee options

8

489

-

-

497

Consideration paid for purchase of own shares (held in trust)

-

-

(2,899)

-

(2,899)

Equity dividends

-

-

(6,142)

-

(6,142)


8

489

(8,113)

-

(7,616)

Balance at 31 October 2016 (unaudited)

4,921

137,911

55,636

12,503

210,971

 

 

Condensed Consolidated Cash Flow Statement

For the half year ended 31 October 2016







Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016

 






Note

 £000

£000

£000

 

Cash flows from operating activities





 

Profit before taxation from continuing operations


10,166

3,615

11,241

 

Loss before taxation from discontinued operations


-

(48)

(999)

 

Finance income


(72)

(14)

(11)

 

Finance costs

4

1,587

1,719

3,328

 

Other finance costs

4

732

655

1,399

 

Operating profit


12,413

5,927

14,958

 

Depreciation




6,058

4,888

10,306

 

Amortisation




6,677

6,624

13,473

 

Profit on disposal of property, plant and equipment


2

10

696

 

Share-based payments


979

853

1,792

 

Change in fair value of contingent consideration


 -

48

999

 

Pension charge in excess of cash contributions


45

(183)

412

 

(Increase) / decrease in inventories



 (2,539)

(450)

1,503

 

(Increase) / decrease in trade and other receivables


(5,392)

1,643

5,388

 

(Decrease) / increase in trade and other payables


 (8,156)

(2,246)

(3,057)

 

(Decrease) / increase in provisions


 (22)

2,291

143

 

(Increase) / decrease in financial instruments


(6)

(87)

139

 

Cash generated from operations


10,059

19,318

46,752

 

Interest paid




(1,996)

(1,497)

(2,791)

 

Tax paid





1,769

(1,331)

(6,548)

 

Net cash inflow from operating activities


9,832

16,490

37,413

 











Cash flows from investing activities






Purchases of property, plant and equipment



(6,212)

(8,311)

(21,126)

Purchases of intangible assets



-

-

(357)

Proceeds from sale of property, plant and equipment



-

1,979

1,979

Net proceeds on disposal of businesses



-

1,549

1,548

Interest received





72

8

11

Purchase of equity investment





-

-

(1,984)

Net cash outflow from investing activities



(6,140)

(4,775)

(19,929)











Cash flows from financing activities






Proceeds from issues of ordinary share capital



498

334

341

Purchase of own shares



(2,899)

(2,120)

(2,209)

Equity dividends paid to shareholders



(6,142)

(5,722)

(8,999)

Defined benefit scheme



(796)

-

(712)

Proceeds from new bank  funding



10,834

5,100

14,021

Repayment  of amounts borrowed



 (6,021)

(42,601)

(48,316)

Net cash used in financing activities



(4,526)

(45,009)

(45,874)











Net decrease in cash and cash equivalents



(834)

(33,294)

(28,390)

Effects of exchange rate changes



792

(327)

(553)

Cash and cash equivalents at start of period

10


16,258

45,201

45,201

Cash and cash equivalents at end of period

10


16,216

11,580

16,258

 

 

Notes to the accounts

 

1.   Basis of preparation

 

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Breakspear Park, Breakspear Way, Hemel Hempstead, Herts HP2 4TZ.  The Company is listed on the London Stock Exchange.

 

This condensed consolidated interim financial information was approved for issue on 5 December 2016.

 

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 April 2016 were approved by the Board of directors on 15 June 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

This condensed consolidated interim financial information has been reviewed by the Group's auditor, not audited - see Independent Review Report.

 

This condensed consolidated interim financial information for the six months ended 31 October 2016 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, 'Interim financial reporting', as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30 April 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

Accounting policies

 

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 April 2016, as described in those annual financial statements except where disclosed otherwise in this note.  Taxes on income in the interim periods are accrued using the estimated tax rate that would be applicable to expected total annual earnings. The Balance Sheet as at 31 October 2015 has been retrospectively restated - see note 17 for further details.

 

Critical accounting estimates and judgments

 

The preparation of interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this condensed consolidated interim financial information, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 April 2016, with the exception of changes in estimates required in determining the provision for income taxes.

 

Going concern

 

The directors have, at the time of approving the interim financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future as the Group has net debt of £106.8m at 31 October 2016 (H1 FY2016: £95.3m) and total banking facilities (using period end exchange rates) of £171.2m of which £47.1m is undrawn at 31 October 2016 and available up to September 2019.  Thus they continue to adopt the going concern basis of accounting in preparing the interim financial statements.

 

Non-GAAP performance measures

 

The directors believe that the 'adjusted' profit and earnings per share measures provide additional useful information for shareholders on the underlying performance of the business. These measures are consistent with how business performance is measured internally. The adjusted profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with 'adjusted' profit measures used by other companies.

 

Notes to the accounts (continued)

 

1.   Basis of preparation (continued)

 

Further details on the special items can be found in note 3.

 

New standards, amendments and interpretations

 

The following accounting standards and amendments are effective for the year commencing 1 May 2016 but are not expected to have a material impact on the Group:

 

·      Amendments to IFRS 10, IFRS 12 and IAS 28

·      Amendments to IFRS 11, IFRS 14, IAS 1, IAS 16 and IAS 38, IAS 16 and IAS 41, IAS 27

·      Amendments to IFRS 5, IFRS 7, IAS 19, IAS 34 - Annual Improvements

 

The following accounting standards relevant to the Group have not been early adopted as the Group carries out an assessment of their potential impact:

 

·      IFRS 9 Financial Instruments

·      IFRS15 Revenue from Contracts with Customers

·      IAS 7 - Disclosure Initiative

·      IAS 12 - Recognition of Deferred Tax Assets for Unrealised losses

·      IFRS 2 - Classification and Measurement of Share Based Payment Transactions

·      Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4

·      IFRS 16 - Leases

 

2.   Segmental information

 

The Group's operating segments are determined with reference to the information which is supplied to the Executive Committee in order for it to allocate the Group's resources and to monitor the performance of the Group. Following the acquisition of Aesica Holdco Limited ("Aesica") on 12 November 2014, that information analyses the Group between two divisions, Bespak and Aesica. Prior to this acquisition, the Group only had one operating segment. The Executive Committee assesses the performance of the operating segments based on a measure of adjusted operating profit which excludes the impact of special items from the operating segments. Special items are analysed in note 3.

 

Consequently, the segment information provided to the Executive Committee for both of these reportable segments for the period ended 31 October 2016 is as follows:

 


Bespak

Aesica

Unallocated

For the six months ended 31 October 2016

£000

£000

£000

£000

Revenue from products and services

58,913

86,020


144,933

Revenue by business segment

 58,913

 86,020


 144,933

Segment operating profit before special items

12,198

6,693

-

Amortisation of acquired intangible assets

(414)

(6,064)


 (6,478)

Segment operating profit

11,784

629


12,413

Finance income




Finance costs




Other finance costs




(732)

Profit before tax




Taxation




(339)

Profit for the financial year




9,827

Segmental balance sheet




Total assets

117,263

316,418

30,906

Total liabilities

(64,126)

(73,365)

(116,125)

(253,616)

Net assets

53,137

243,053

(85,219)

210,971







 

Notes to the accounts (continued)

 

2.   Segmental information (continued)

 

The Group's operating locations are based in the United Kingdom and Europe, with the Group also making sales in the USA and the rest of the world.

 

Revenue by destination from continuing operations



Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016




 £000

 £000

£000

United Kingdom



20,794

19,861

30,426

United States of America



12,364

12,431

41,078

Europe



100,722

84,890

171,010

Rest of the world



11,053

18,366

34,396

Revenue from continuing operations



144,933

135,548

276,910

 

 

3.   Special items



Unaudited

1 May to 31

October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016

 




 £000

 £000

£000

 

Acquisition-related expenses



-

-

(1,344)

 

Integration costs


-

(4,020)

(6,534)

 

Amortisation of acquisition-related intangible assets


(6,478)

(6,473)

(13,140)

 



(6,478)

(10,493)

(21,018)


Special items before taxation from continuing operations



(6,478)

(10,493)

(21,018)

 

Special tax item - recognition of capital losses

-

1,078

1,078


Special tax item - recognition of capital allowances

-

-

955


Special tax item - other prior year and lookback period adjustments

-

-

534


Special tax item - deferred tax credit as a result of the corporate rate change

525

1,132

1,137


Tax on special items



1,808

2,774

5,204

 

Special items after taxation from continuing operations



(4,145)

(5,508)

(12,110)

 







 

 

·      Acquisition-related expenses in the prior year to 30 April 2016 include advisory costs in respect of the Bespak pension scheme and in evaluation of potential transactions.  

 

·      Integration costs in the prior year are in relation to restructuring activity following the completion of the integration programme at Aesica; mainly employee and property or move related in nature.

 

·      Amortisation of acquired intangible assets represents the charge for other intangible assets within Aesica (acquired in 2014) of £6.1m and £0.4m in relation to The Medical House acquired in 2009.

 

·      A special tax item of £1.1m was recognised in the prior year as a result of the recognition of deferred tax on capital losses.

 

·      A special tax item of £1.0m was recognised in the prior year as a capital allowance review was carried out in the year which resulted in assets being reclassified from non-qualifying to qualifying.

 

 

Notes to the accounts (continued)

 

3.   Special items (continued)

 

·      A special tax item of £0.5m was recognised in the prior year as the impact of a number of prior year adjustments made.

 

·      A special tax item of £0.5m also arises in the current period (H1 FY2016: £1.1m, FY2016: £1.1m) in respect of a significant tax credit as the Group's deferred tax assets and liabilities were revalued using the lower rate of UK Corporate Tax of 17% from 1 April 2020 (reduced from 18%).

 

Special items from discontinued operations are described in note 15.

 

4.  Finance costs









Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016




 £000

 £000

£000

Interest on bank overdrafts and loans including amortised fees



(1,587)

(1,719)

(3,328)

Total finance costs



(1,587)

(1,719)

(3,328)













Other finance costs






Net interest cost on defined benefit scheme



(427)

(342)

(667)

Foreign exchange losses


(305)

(313)

(732)

Total other finance costs



(732)

(655)

(1,399)

 

 

5.   Taxation









Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016




 £000

 £000

£000

Current income tax from continuing operations 






UK corporation tax



909

1,175

975

Adjustments in respect of prior periods



(206)

-

(1,953)

Foreign tax



1,448

653

1,130

Deferred taxation



(1,812)

(4,149)

(4,879)

Income tax expense / (credit) reported in the consolidated income statement 


339

(2,321)

(4,727)

The tax charge from continuing operations is analysed between:





Tax on profit before special items



2,672

2,664

   4,181

Special tax item - recognition of capital losses

-

(1,078)

(1,078)

Special tax item - recognition of capital allowances

-

-

(955)

Special tax item - other prior year adjustments

-

-

(534)

Special tax item - deferred tax credit as a result of the corporate rate change

(525)

(1,133)

(1,137)

Tax on special items



(1,808)

(2,774)

(5,204)

Income tax expense / (credit) reported in the consolidated income statement 


339

(2,321)

(4,727)

 

Special tax items above are described further in note 3.

 

 

Notes to the accounts (continued)

 

6.   Earnings per share









Unaudited

1 May to 31 October

2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016




 £000

 £000

£000

The calculation of earnings per ordinary share is

based on the following:









Continuing operations (basic and diluted)






Profit for the period - attributable to ordinary shareholders

9,827

5,936

15,968

Add back: Special items after taxation



4,145

5,508

12,110

Adjusted earnings



13,972

11,444

28,078







Discontinued operations (basic and diluted)






Loss / (Profit) for the period - attributable to ordinary shareholders

-

(48)

(999)

Add back: Special items after taxation



-

48

999

Adjusted earnings



-

-

-







Total (basic and diluted)






Profit for the period - attributable to ordinary shareholders

9,827

5,888

14,969

Add back: Special items after  taxation



4,145

5,556

13,109

Adjusted earnings



13,972

11,444

28,078

 

Number of shares




Weighted average number of ordinary shares in issue for basic earnings

49,154,593

49,090,720

49,110,569

Weighted average number of shares owned by Employee Share Ownership Trust

(300,759)

(374,130)

(338,024)

Average number of ordinary shares for in issue for basic earnings

48,853,834

48,716,590

48,772,545

Dilutive impact of share options outstanding

622,701

571,474

631,856

Diluted weighted average number of ordinary shares in issue  

49,476,535

49,288,064

49,404,401






Pence

Pence

Pence

Continuing operations




Adjusted basic earnings per share

28.6

23.5

57.6

Unadjusted basic earnings per share

20.1

12.2

32.7

Adjusted diluted earnings per share

28.2

23.2

56.8

Unadjusted diluted earnings per share

19.9

12.0

32.3





Continuing and discontinued operations




Unadjusted basic earnings per share

20.1

12.1

30.7

Unadjusted diluted earnings per share

19.9

11.9

30.3

 

 

Notes to the accounts (continued)

 

7.   Dividends






 

 

Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016



£000

£000

£000

Final dividend for the year ended 30 April 2016 of 12.56p per share (2016: final dividend for 2015 of 11.68p per share)

6,142

5,722

5,703

Interim dividend paid in 2016: 6.75p per share


-

-

3,296



6,142

5,722

8,999

 

The directors are proposing an interim dividend for the year ending 30 April 2017 of 7.09p per share which will absorb an estimated £3.5 million of shareholders' equity.  It will be paid on 17 February 2017 to shareholders who are on the register on 20 January 2017.

 

8.   Capital expenditure

 

In the period there were additions to property, plant and equipment of £5.7 million (H1 FY2016: £9.3 million). Capital commitments contracted for but not provided for by the Group amounted to £5.4 million (H1 FY2016: £6.5 million).

 

9.   Financial assets and liabilities

 

The following table sets out the classification of the Group's financial assets and liabilities. Receivables and payables have been included to the extent that they are classified as financial assets and liabilities in accordance with IAS 32, Financial Instruments: Presentation. Provisions have been included where there is a contractual obligation to settle in cash.

 




Unaudited

31 October 2016

Unaudited

31 October 2015

Audited

30 April
2016

Financial assets



£000

£000

£000

Cash and cash equivalents*

16,216

11,580

16,258

Trade receivables

46,765

45,665

45,186

Other receivables


8,688

7,130

3,659

Total loans and receivables *


55,453

52,795

48,845

Available for sale financial asset - contingent consideration


-

950

-

Equity investments             


8,250

6,266

8,250

Total available-for-sale financial assets


8,250

7,216

8,250

 

 



Unaudited

31 October 2016

Unaudited

31 October 2015

Audited  30 April
2016

Financial liabilities


£000

£000

£000

Trade payables


(26,017)

(25,641)

(27,225)

Other creditors and accruals


(21,101)

(28,309)

(26,978)

Interest bearing loans and borrowings


(124,118)

(108,401)

(114,547)

Total amortised cost *


(171,236)

(162,351)

(168,750)

Currency exchange contracts


(250)

(30)

(256)

Total fair value through profit and loss financial liabilities


(250)

(30)

(256)

 

* The directors consider that the carrying value of amounts of these financial assets and liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.

 

 

 

Notes to the accounts (continued)

 

9.   Financial assets and liabilities (continued)

 

All financial liabilities have a contractual maturity date that is less than 12 months from the balance sheet date. The equity investments in Atlas Genetics Limited and Precision Ocular Limited are unquoted investments and therefore held at cost, less any provision for impairment as their fair value cannot be measured reliably in the absence of an active market.

 

Interest bearing loans and borrowings includes a borrowing of £37.4m at 31 October 2016 (H1 FY2016: £27.3m) which has been designated as a hedge of the net investments in the two subsidiaries in Germany and Italy, Aesica Pharmaceuticals GmbH. and Aesica Pharmaceuticals S.r.l. This borrowing is being used to hedge the Group's exposure to the euro exchange risk on these investments. Gains or losses on the retranslation of this borrowing are transferred to OCI to offset any gains or losses on translation of the net investments in the subsidiaries.

 

Financial assets at fair value






Level 1

Level 2

Level 3

Total

  

£000

£000

£000

£000

At 31 October 2016





Available for sale financial asset - contingent consideration

-

-

-

-






At 31 October 2015





Available for sale financial asset - contingent consideration

-

-

950

950






At 30 April 2016





Available for sale financial asset - contingent consideration

-

-

-

-

 

Financial liabilities at fair value






Level 1

Level 2

Level 3

Total

  

£000

£000

£000

£000

At 31 October 2016





Currency exchange contracts

-

(250)

-

(250)






At 31 October 2015





Currency exchange contracts

-

(30)

-

(30)






At 30 April 2016





Currency exchange contracts

-

(256)

-

(256)

 

Under the terms of the disposal of King Systems, completed on 15 February 2013, the purchaser, Ambu A/S, was due to pay amounts of consideration contingent upon the performance of King following disposal.  The financial asset at 31 October 2015 related to the final payment for the sales of King Vision products for the year ending 30 April 2016. King Vision sales by Ambu in FY2016 were insufficient to trigger a further contingent consideration payment to Consort Medical, therefore the remaining contingent consideration was reduced to nil at 30 April 2016.

 

 

Notes to the accounts (continued)

 

10.   Analysis of net debt









Unaudited

31 October 2016

Unaudited

31 October 2015

Audited

30 April
2016




£000

£000

£000

Current assets:






Cash and cash equivalents



16,216

11,580

16,258



16,216

11,580

16,258

Group borrowings:





Interest-bearing loans and borrowings


(124,118)

(108,401)

(114,547)

Unamortised facility fees


1,141

1,533

1,338

Net borrowings



(122,977)

(106,868)

(113,209)

Net debt



(106,761)

(95,288)

(96,951)

 

In September 2014, the Group cancelled its $56m multicurrency revolving facility and £40m multicurrency revolving facility and signed a new £160m multicurrency revolving facility. The Group also has a £65m "accordion" facility by which further facilities may be made available by Barclays, Lloyds, RBS and Santander under the current terms to support significant investment or acquisition opportunities which may arise. The revolving credit facilities expire in September 2019. Whilst the multi-year revolving committed credit facility does not expire for nearly three years, the debt within this is disclosed as less than one year on the balance sheet, as it is drawn for one-month periods, and then redrawn as appropriate to minimise the amount of debt drawn relative to the Group's needs to minimise the interest payable. The undrawn facilities are unsecured. The bank loans and overdrafts are subject to cross-guarantees between Group undertakings.  Interest on the multicurrency revolving credit facility is charged at LIBOR plus a margin of between 1.65% and 1.90%, depending upon the ratio of net debt to EBITDA (earnings before interest, tax, depreciation and amortisation), and on UK overdrafts at 1.75% above UK base rate.

 

 

11.   Reconciliation of net cash flow to movement in net debt





Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April

2016




£000

£000

£000

Net debt at the beginning of the period



(96,951)

(99,213)

(99,213)

Net (increase) / decrease in cash and short-term borrowings


(5,069)

4,198

5,590

Effects of exchange rate changes



(4,536)

283

 (2,698)

Amortisation of facility fees



(197)

(198)

(393)

Other non-cash movements



(8)

(358)

(237)

Net debt at the end of the period



(106,761)

(95,288)

(96,951)

 

 

 

Notes to the accounts (continued)

 

12.   Defined benefit pension scheme deficit









Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016




 £000

 £000

£000

Pension deficit at start of the period



27,157

21,147

21,147

Current service cost



44

790

1,479

Interest income



(1,556)

(1,685)

(3,371)

Interest cost



1,985

2,026

4,038

Return on scheme assets excluding interest



(10,475)

4,768

5,728

Effect of demographic adjustments



-

-

(568)

Loss / (gain) from changes in financial assumptions



26,370

(5,087)

216

Employer contributions



(797)

(983)

(1,776)

Payments from plans



-

-

(6)

Foreign exchange



566

4

270

Pension deficit at end of the period



43,294

20,980

27,157

 

13. Related party transactions

 

The Group's significant related parties are its subsidiaries as disclosed in the Consort Medical plc annual report for the year ended 30 April 2016. There were no material related party transactions in the period.

 

14. Principal risks and uncertainties

 

The principal risks and uncertainties which could impact the Group's long-term performance remain those detailed on pages 26 to 28 of the Group's 2016 Annual Report & Accounts, a copy of which is available on the Group's website www.consortmedical.com.  The risks are summarised below:

 

·      Reliance upon key customers / products

·      Major operational incident

·      Growth risk

·      Acquisition risk

·      Legal risk

·      Political / Socio-economic risk

·      Development risk

·      Product quality failure

·      Corporate Social Responsibility

·      Regulatory risk

·      IT / Cyber risk

·      Human Resources risk

·      Financial risks including currency risk, interest rate risk, liquidity and leverage risk

·      Pension risk

 

In the period the Group has recognised two additional principal risks:

 

·      Impact of Brexit - The vote to leave the EU has resulted in some uncertainty, including currency volatility and a significant weakening of sterling. Whilst the weakening of sterling has had a beneficial translation impact on the Group's sterling results, it continues to monitor the impact of Brexit on its principal risks and any direct or indirect resultant complexities this may bring.

 

·      Distributable reserves - Following the Brexit vote and subsequent changes in UK monetary policy, corporate bond yields have fallen sharply, leading to substantial increases in the Bespak pension deficit. The Group continues to monitor the impact of this on its ability to pay dividends in future periods.

 

Notes to the accounts (continued)

 

15.   Discontinued operations

 

The results arising from King Systems are classified as discontinued operations and special items and have been included in the consolidated income statement as follows:

 




Unaudited

1 May to 31 October 2016

Unaudited

1 May to 31 October 2015

Audited

1 May to 30 April 2016




 £000

 £000

£000

Loss on disposal: movement in fair value of contingent consideration

-

(48)

(999)

Loss before tax on discontinued operations



-

(48)

(999)







Net loss on discontinued operations attributable to the owners of the Company



-

(48)

(999)

 

 

16. Share capital

 

Share capital as at 31 October 2016 amounted to £4.9 million (April 2016: £4.9 million). During the period, the Group issued 75,590 shares as part of exercises under the Consort Savings Related Share Option Scheme for total consideration of £0.5 million.

 

The Group purchases its own shares using an Employee Share Ownership Trust (ESOT) to satisfy entitlements under the Group's long-term incentive plan. The cost of the shares held by the ESOT is deducted from retained earnings. The Group purchased 276,244 shares for a consideration of £2.9 million during the period (H1 FY2016: £2.1 million, FY2016: £2.2 million). As at 31 October 2016, the ESOT held a total of 300,375 ordinary shares (30 April 2016: 301,521 shares) at a cost of £2.8 million (30 April 2016: £2.5 million) and market value of £2.3 million (30 April 2016: £2.3 million).

 

17. Acquisition of subsidiary

 

On 12 November 2014, the Group acquired 100 per cent of the issued share capital of Aesica Holdco Limited, obtaining control of Aesica Holdco Limited ('Aesica').  The goodwill balance as at 31 October 2016 in relation to Aesica is £115.3m (FY 2016: £106.8m).

 

During the year ended 30 April 2016, the Group completed the initial accounting for the acquisition as disclosed in the 2016 annual report and accounts. Therefore, as set out in the table below, the 31 October 2015 comparative information has been adjusted retrospectively to amend the provisional fair values of the identifiable assets acquired and liabilities assumed as at the date of acquisition. The financial statements for the year ended 30 April 2016 included the same restatement to its 30 April 2015 comparatives.

 

 

Notes to the accounts (continued)

 

17. Acquisition of subsidiary (continued)

 

The fair values of the identifiable assets acquired and liabilities assumed as at the date of acquisition were as set out in the table below:

 

 

Provisional fair values as previously reported

Restatement

Restated

Fair value recognised on acquisition

 

£000

£000

£000

Assets

 

 

 

Property, plant and equipment

71,312

(5,713)

65,599

Cash and cash equivalents

6,221

-

6,221

Trade receivables

33,307

(1,288)

32,019

Inventory

26,930

41

26,971

Identified intangible assets

82,299

-

82,299

Other intangible assets

410

-

410

Current tax

1,765

(1,578)

187

Other receivables

3,550

(38)

3,512

Total identified assets

225,794

(8,576)

217,218

 

 

 

 

Liabilities

 

 

 

Trade and other payables

(24,377)

-

(24,377)

Accruals, deferred income , provisions and other payables

 

(46,079)

 

(1,022)

 

(47,101)

Deferred tax liability

(29,812)

4,029

(25,783)

Total identified liabilities

(100,268)

3,007

(97,261)

 

 

 

 

Net identified assets

125,526

(5,569)

119,957

Goodwill

101,103

5,569

106,672

Total consideration

226,629

-

226,629

 

The significant adjustments made to fair values were as follows:

 

·      Property, plant and equipment - decrease of £5.7m as a result of concluding a detailed review and valuation exercise

·      Trade receivables - decrease of £1.3m to increase provisions against old debtor balances and credit notes

·      Accruals, deferred income, provisions and other payables - decrease of £1.0m mainly as a result of new information obtained which reflects circumstances in existence at the acquisition date

·      Current tax - decrease of £1.6m to record additional provisions

·      Deferred tax - increase of £2.1m on the non-tax related opening balance sheet adjustments above

·      Deferred tax - since 31 October 2015, a deferred tax asset of £1.9m has been recognised as the amount of spend treated as qualifying for capital allowances has been reduced by customer contributions in Aesica which were received pre-acquisition. The impact of this change has been to decrease goodwill by the same amount.

 

The directors have not restated the income statement for the year ended 30 April 2015 for the effect of this restatement as it was not material.


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