Creo Medical Group PLC Half-year Report

RNS Number : 2983G

Creo Medical Group PLC

30 September 2024

 

 

THIS ANNOUNCEMENT WAS DEEMED BY THE COMPANY TO CONTAIN INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATIONS (EU) NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). WITH THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN

 

Creo Medical Group plc

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

 

Unaudited results for the six months ended 30 June 2024

Further core technology growth with stable operating costs

Speedboat UltraSlim fuels continued increase in treated patients, trained doctors and users

 

Creo Medical Group plc (AIM: CREO), the medical device company focused on the emerging field of minimally invasive surgical endoscopy, announces its unaudited results for the six-month period ended 30 June 2024.

 

Operational and commercial highlights:

 

·    Growth in adoption of Creo's core technology underpinning increase in core revenues and continued roll-out progress

·    Key product and patient milestones reached:

o  Increased global reach with Speedboat UltraSlim cases focusing on roll-out to existing users in H1

o  World's first robotically guided microwave ablation with the Ion robot from Intuitive Surgical at the Royal Brompton Hospital in February 2024

·    Agreement amendment with Intuitive to increase the number of Microblate Flex sites alongside Ion by Intuitive

·    NHS Supply Chain value-based procurement data announced in April 2024, demonstrating significant cost and operational savings when undertaking Speedboat Submucosal Dissection ("SSD") procedures

·    Collaboration agreement signed in February 2024 with Khalifa University of Science & Technology, Abu Dhabi

·    Ongoing discussions with third parties on potential new, and expansion of existing, Kamaptive licensing opportunities

 

Post-period end

 

·    First SpydrBlade cases for peroral endoscopic myotomy ("POEMs") procedures under a controlled market release

·    The King's Award for Enterprise in Innovation received in July 2024 in recognition of Speedboat

·    Kevin Crofton and Brent Boucher joined as non-executive directors from 1 July 2024, with Kevin Crofton serving as Chair

·   Sale of 51% shareholding in Creo Medical Europe to Micro-Tech and strategic partnership between both companies, announced on 18 September 2024, conditional on certain regulatory approvals and anticipated to close in Q1-2025. Cash proceeds of approximately €30 million at closing, structured on cash-free, debt-free basis

·    Alongside H1-2024 results, Creo announced a proposed conditional placing to raise a minimum of £12m plus a retail offer (the "Fundraising") as a mitigation against the Sale completion risk at a time of heightened geo-political risks. See the separate Fundraising announcement for more details on the Fundraising and the respective terms and conditions.

 

Financial Summary

 

·    Growth in Creo core technology, which increased by 78% to £1.6m compared to £0.9m in H1-2023

·   Kamaptive revenue was minimal in the period, reporting £0.1m (H1-2023: £0.5m) due to timing of contract and milestone payments

o  Reflects the amendment to the Intuitive Ion agreement, announced in July 2024, pausing the Phase 3 funded programme and accelerating the commercial development phase, with Intuitive-led site enrolment expected to commence in H2-2024

·    Consumable sales reduced by 6% to £13.5m (H1-2023: £14.3m), due to FY-2023 sales being H1 weighted. The Company is on track to exceed total consumable revenues in 2023 of £26.8m for FY-2024 and the division is trading in line with management expectations for FY-24

·    Total revenue of £15.2m (H1-2023: £15.7m)

·    Underlying EBITDA loss increased to £10.5m from £9.2m in H1-2023, driven by

o  reduced R&D tax credits (£0.6m) due to legislature changes

o  lower margin with no Kamaptive milestone payments in the period

o  slightly lower consumable sales for the period which is expected to recover in H2-24

·    Strict cost control remains in the business, with opex flat to H2-2023, and further reductions in underlying costs in H2 expected

·    Loss per share of 3p (H1-2023: 4p)

·    Cash and deposits of £9.8m (FY-2023: £18.5m)

 

Craig Gulliford, Chief Executive Officer of Creo, said: "The launch of Speedboat UltraSlim in late 2023, our smallest device to date, was a significant milestone and helped us to achieve record core product sales for H1-2024, with growing users, utilisation and a strong pipeline of clinicians waiting to be trained. During the period we doubled our number of training centres, offering multi-national and bespoke regional models, which supported the treatment of more patients than ever before with Creo's core technology improving lives in EMEA, USA and APAC regions. Our focus in H1 was to roll-out Speedboat UltraSlim to existing customers with our second half focus shifting to the new user pipeline.

 

"Furthermore, our technology continues to demonstrate advantages in the world of robotic surgery. It was terrific to announce the first ever robotically controlled lung ablation procedure with our MicroBlate Flex alongside the Ion robot from Intuitive. This is a significant step forward in the programme with Intuitive as the team will now work alongside them in the field to roll out to more sites as part of the amendment to our agreement. We have seen continued advancement in the period with our Kamaptive partners and are also working hard to deliver our SpydrBlade technology into this exciting arena. Our excitement about the size of the opportunities in our chosen markets continues to grow. Lower than expected Kamaptive revenue reflects the amendment to the Intuitive Ion agreement, announced in July 2024, pausing the Phase 3 funded programme and accelerating the commercial development phase, with Intuitive-led site enrolment expected to commence in H2-2024.

 

"The recent announcement of an agreement for the sale of 51% of Creo Medical Europe represents an excellent strategic partnership opportunity for Creo. The partnership will support our continued commercial growth through Creo Europe with access to the wider Micro-Tech product portfolio secured under the Creo Brand. This product range will also be available to Creo's core sales teams globally to complement our advanced energy portfolio. Additionally, we have the potential to secure product registration and co-branding in China with our advanced energy products which will help our APAC growth in the future.

 

"Over the next six to 12 months, we expect to see the continued growth rate of our core sales, driven by Speedboat UltraSlim, but with developing progress in our other product groups. I thank shareholders for their continued support during the period and look forward to providing further updates."

 

Enquiries:

 

Creo Medical Group plc	www.creomedical.com
Richard Rees (CFO) Richard Craven (Company Secretary)	Via Walbrook PR
Cavendish Capital Markets Limited	[phone]
Stephen Keys / Camilla Hume (NOMAD)
Michael Johnson (Sales)
Deutsche Numis (Joint Broker) Freddie Barnfield / Duncan Monteith / Euan Brown	[phone]
Walbrook PR Ltd	Tel: [phone] or [e-mail]
Paul McManus / Sam Allen / Phillip Marriage	Mob: [phone]

 

About Creo Medical

 

Creo Medical is a company specialising in the development and commercialisation of minimally invasive electrosurgical devices, aiming to advance endoscopic procedures with cutting-edge energy solutions.

 

The Company's mission is to enhance patient outcomes through a portfolio of electrosurgical devices, all powered by its proprietary CROMA platform, which is driven by Kamaptive technology. CROMA, equipped with full-spectrum adaptive technology, optimises surgical performance and patient results. Kamaptive integrates multiple energy sources in a seamless, intuitive manner, allowing the technology to adapt dynamically to patient tissue during procedures such as tissue resection, dissection, coagulation, and ablation. This technology offers clinicians enhanced precision, flexibility, and control.

 

CROMA currently delivers bipolar radiofrequency (RF) energy for precise cutting, along with focused high-frequency microwave (MW) energy for controlled coagulation and ablation, all through a single accessory port. When combined with Creo Medical's range of patented electrosurgical devices, this technology provides clinicians with accurate, adaptable, and controlled surgical solutions. The Company's Directors believe that their innovative approach could transform the fields of surgery and endoscopy, offering safer, less invasive, and more cost-effective options for medical procedures.

 

For more information, please refer to the website www.creomedical.com

 

 

Interim results for six months ended 30 June 2024

 

Chief Executive Review

 

Commercial and Operations

 

I am pleased to report continued progress for the first half of 2024. The launch of a Speedboat UltraSlim in late 2023, our smallest device to-date, was a significant milestone and helped us to achieve record sales for Creo Core products in H1-2024 as well as a strong orderbook going into the second half of the year.

 

Highlights during the first six months of 2024 include:

 

·    Creo's core technology generating £1.6m in revenue in H1-24, representing 74% of core revenues for the entirety of FY-2023;

·    Stable revenue streams in our Creo endotherapy consumable products;

·    Advancement with Kamaptive partners, although no milestone payments were made in the period (H2-2023: two milestones) due to the short term loss of upfront product development revenue as progress with Ion continues ahead of plan by moving into commercial development phase; and

·    Continued cost control, with a reduction in cost of goods sold and operational efficiencies being driven through the organisation.

 

Speedboat UltraSlim allows us to deliver widely adopted laparoscopic technology into user environments where no other company has been able to do so before. The Speedboat UltraSlim clearance and launch is a significant event for Creo as it opens up access to all major commercially used endoscopes on the market, allowing Creo's technology to treat more patients, collaborate with more doctors and provide better patient outcomes - our core aim. It is really reassuring to me that our core technology brands, which leverage our technology developed over the past decade, are all respectively starting to generate traction commercially.

 

Creo's products are distributed via direct and indirect sales channels. Creo has offices across Europe, the USA and APAC with access to other jurisdictions through the support of distribution partners (predominantly in the EMEA and APAC regions, but more recently in Latin America). The nature of Creo's sales and distribution channels, coupled with our enhanced and flexible Pioneer Clinical Education Programme, allows the implementation of commercialisation models to reflect the markets in which we are operating (indirect vs. direct). The increase in revenue from Creo's core products has been driven by an increase in new and high-volume users, global cases, and Creo's products being introduced into new territories.  The sale of 51% of Creo Medical Europe represents an excellent strategic partnership for us and will support our continued commercial growth in the APAC region through product registration and co-branding in China as well as a strategic development partner for the EMEA market.

 

Looking forward, the pipeline of users for Creo's core technology continues to grow. Multi-national and bespoke regional training and mentoring events, held during H1-2024, have resulted in 200 users at the end of the period, an increase of 14% over the 175 users as at 31 December 2023.  Management is confident this growth will continue through the remainder of 2024 and beyond.

 

Over the year we significantly enhanced our Pioneer Clinical Education Programme, doubling the number of training centres and offering multi-national and bespoke regional models. Most importantly, we supported the treatment of more patients than ever before.

 

The validation of Creo's technology has gathered further momentum following the selection of Speedboat Inject by the National Institute for Health and Care Excellence ("NICE") to be scoped and routed for guidance. We have been working in collaboration with the NHS Supply Chain Value Based Procurement team who, in April 2024, published early data collected from over 130 patients to demonstrate that Creo's Speedboat technology had saved East Kent Hospitals University NHS Trust 59%, or over £5,000 per procedure undertaken, reduced bed stays by 87%, reduced critical care costs by 99% and had provided a 91% reduction in accommodation costs per patient.

 

During 2024 we continued to launch some of our endotherapy accessories in the USA, which sit alongside the core Creo products. We have now taken these products into LATAM for the first time and aim to replicate this in APAC during H2-2024, building on the successes of our European model and growing the Creo brand.

 

In 2024 our core technology has improved lives in EMEA, USA and APAC. The vision of placing laparoscopic surgical capability into the hands of interventional flexible endoscopists and surgeons is a reality, and in the next couple of years we aim to build significant revenues across our brand portfolio, both through our core technology sales channels as well as through our Kamaptive partnerships.

 

Our SpydrBlade technology delivers laparoscopic cut and coagulate functionality through an endoscopic device. This provides clinicians with significant surgical performance from a tiny instrument at the end of an endoscope. A number of initial cases using our SpydrBlade device have now taken place, and we expect to launch this device later this year via our core sales channels. We are also developing the same technology for potential use with robotic partners. Our technology continues to demonstrate advantages in the world of robotic surgery, as it can provide the laparoscopic advanced energy and device performance beyond the complex wrist of a surgical robot. Our partners recognise this, and we are working hard to deliver SpydrBlade technology into this exciting arena where the opportunities are vast.

 

Our MicroBlate technology is focused on treatments for lung, pancreatic, liver, kidney and bladder cancers. We previously announced early MicroBlate Fine cases. The clinical programme has now been extended to MicroBlate Flex where we successfully delivered first cases for the treatment of lung cancer as part of a clinical study with the Royal Brompton Hospital in London. This study looks at the treatment of lung cancer using bronchoscopic microwave ablation. This has included first cases where the device has been used in combination with Intuitive's Ion platform, which has traditionally been utilised as a diagnostic tool to detect cancer in a patient. By using Creo's technology in combination with Ion, clinicians can diagnose and treat tumours during the same procedure. This is an excellent outcome for the patient and rewarding for the clinical teams, providing a platform for commercial traction going forward. As with any business, our achievements are not without challenges, but we are well positioned for the remainder of 2024 and into 2025.

Strategic Partnership & 51% subsidiary cash sale

We announced on 18 September 2024 that Creo has entered into a binding agreement with Micro-Tech (NL) International B.V., a wholly owned subsidiary of Micro-Tech (Nanjing) ("Micro-Tech") for the sale of 51% of the issued share capital of Creo Medical S.L.U. ("Creo Medical Europe"), a wholly owned subsidiary of Creo, at an equity value of €72m (the "Sale") on a cash-free, debt-free basis.

The net proceeds payable to Creo from the Sale (the "Proceeds") will strengthen the Group's balance sheet, enabling us to continue to invest in our core Creo and Kamaptive business and deliver on our commercial and operational objectives. The Proceeds are expected to be approximately €30m, which will be payable in cash on completion. Ongoing shareholder terms have also been agreed which include a future exit framework for Creo.

Along with other customary conditions, completion of the Sale is contingent on Micro-Tech obtaining Outbound Direct Investment clearance in China along with Foreign Direct Investment clearances in Spain, France, Belgium and Germany. Whilst there is no certainty as to receipt or timing of receipt of the necessary approvals to enable completion, it is expected that completion will take place during Q1 2025 dependent on these relevant clearances being obtained.

 

The strategic transaction with Micro-Tech:

 

·    Strengthens Creo's commercial platform;

·    Expands Creo's endoscopic therapy product range in all markets;

·    Gives Creo Europe access to Micro-Tech's specialised global distribution and manufacturing expertise; and

·    Enables Creo to continue to fund the ongoing strategic development of its core technology business.

Proposed Fundraise

Alongside our H1-2024 results, we have announced a proposed conditional placing to raise a minimum £12m plus a retail offer (the "Fundraise"). The Fundraise is being undertaken to provide balance sheet strength and mitigate against the risk that the completion of the Sale is delayed, or does not happen, either due to the necessary approvals not being forthcoming or from other geo-political risks. It also addresses the funding requirement identified within the Company's FY23 results in May 2024. On completion of the Fundraise and upon receipt of the Proceeds from the Sale, Creo will have cash resources in excess of £40m to take Creo to profitability. See the separate Fundraise announcement for more details on the Fundraise and the respective terms and conditions.

Board Changes

As announced on 13 May 2024, and further to the 2023 AGM Statement & Succession Planning announcement, which set out the Company's plan to evolve its Board of Directors as it enters a new phase of commercial growth, Kevin Crofton and Brent Boucher were appointed as independent Non-Executive Directors from 1 July 2024, with Kevin succeeding Charles Spicer as Chair. Both Kevin and Brent have brought with them a wealth of experience and it has been a pleasure to welcome them to the team.

I would also like to take this opportunity to again extend my thanks to Charles for his enormous contribution to Creo during his eight years as Chair and his invaluable guidance during what was a period of huge growth and evolution for the business.

 

Management and Employees

 

Creo continues to attract and retain talented and experienced individuals across all business functions. As at 30 June 2024, Creo employed 278 people (30 June 2023: 279): 245 in EMEA, 27 in the USA, and 6 in APAC. Approximately 144 employees are involved in R&D and Operations, 94 are focused on Sales and Marketing and 40 employees are within G&A.

 

In line with Creo's overall objective to improve lives, we have always recognised our wider ESG responsibilities. Our immediate priority is the communities that we serve, most obviously our patients and their families along with the clinicians that treat and care for them. This also includes our staff, their families, and the local communities in which we employ them. We continue to assess our responsibilities under the ESG framework and actively take steps to ensure that we meet our obligations as well as being prepared for the future. We will report on the actions we have taken during 2024 in our Annual Report.

 

Summary and outlook

 

As the Group continues to execute against its strategy and deliver against operational milestones, the Board's confidence in the Company's future is strengthened by the Group's ability to:

 

·    Put our CROMA platform and our suite of devices in the hands of more clinicians to allow more patients to be treated in an increasing number of locations around the world;

·    Convert clinicians trained via our Pioneer Training Programme into users in addition to continuing to provide simultaneous multi-jurisdictional training courses on current and future devices; and

·    Engage with third parties to license our Kamaptive technology.

 

Over the next six to 12 months, we expect to see a continued rate of commercial progress with the Speedboat UltraSlim device following the limited market release in late 2023 and growth during the first half of 2024. We will also see further cases for SpydrBlade and its full launch, and MicroBlate Fine will be reintroduced into the market following product enhancements.

 

We continue to develop our relationship with our Kamaptive partners, such as the Khalifa Strategic Partnership, to help utilise our IP and ensure future development continues through funded projects including integration of the SpydrBlade into robotic laparoscopic tools. Discussions with third parties on potential new, and expansion of existing, Kamaptive licensing opportunities continue.  Management continues to believe that Kampative licensing provides significant, high margin upside to the Company.  The Board also recognises the significant revenue potential available through Kamaptive, including through the ability to access commercial revenues more quickly following the amendment to the Intuitive Ion agreement, but is taking a prudent view and is assuming no revenue from Kamaptive licensing in the current year and minimal revenue in FY25.

 

The most challenging period for any company is the transition from development to commercial profitability. The strides we have made during the year keep us on the right path. We look forward to another period of strong growth in our core technology from both existing and new users, helping drive us towards our goal of self-sustaining cashflows. Following the Sale and deconsolidation of Creo Europe and based on current core Creo sales growth only, being a prudent forecast, we now expect EBITDA breakeven to be in 2028.

 

It is testament to the dedication and tenacity of the Creo team, many of whom have been here since IPO, that we have been able to achieve such significant milestones. I am proud that we have created a terrific team who know what we need to achieve in each sector to succeed.  I thank all current and past employees who have made Creo what it is today.

 

Our goal is to build Creo into a company that can compete with well established, multi-billion-pound medtech giants, both in terms of the quality of technology and the quality of the service it facilitates.  During the past 12-18 months, I feel we have progressed towards this goal. From the NHS Supply Chain data, to first cases in the lung with Intuitive Surgical, we are seeing the realisation of our R&D and its growing impact across the medical devices market and the benefit it can bring to improve lives. We know that going into the second half of 2024 we will see more cases, more data and more partnership progress and I believe that we are in the best global company when it comes to tackling unmet needs for patients.

 

Our job is clear: to deliver on what we have clear sight of over the coming months and years as we become a premier, cash generative, global, medical device and tech licensing business, transforming and improving the lives of many thousands as we do so.  On behalf of the Board, I thank Creo's shareholders for their continued support, feedback, and encouragement along with all members of the Creo team, our clinicians and their patients, our customers, suppliers, and other partners for all their hard work, support, and positive contributions during the period.

 

 

Craig Gulliford

Chief Executive Officer

 

 

30 September 2024

 

 

Financial Review

 

Total sales for the period were £15.2m across all revenue streams. Creo Core Technology revenues, which comprise the Creo Core products including the Speedboat UltraSlim and CROMA platform, were £1.6m for the period, an increase of 78% from H1-2023 (£0.9m) and a 14% increase from H2-2023 (£1.4m). The lower increase against H2-23 compared to H1-23 is due to the catch-up in backlog which had been built up in H1-2023 leading to higher H2-2023 revenues.

 

Kamaptive revenues were £0.1m for the period reflecting a delay in timing of milestones and payments under our ongoing collaboration (H1-2023: £0.5m, H2-2023 £1.2m).

 

Creo's endotherapy consumable sales were 6% below H1-2023 due to sales being particularly strong in the first half of FY-2023 compared to the second half. We are however on track to exceed total consumable revenues in 2023 of £26.8m by end of year, and the division is trading in line with management expectations for FY24.

 

	6 months to	6 months to	12 months to
(All figures £m)	30-Jun-24 Unaudited	30-Jun-23 Unaudited	31- December-23 Audited
Creo Consumables	13.5	14.3	26.8
Creo Core	1.6	0.9	2.3
Kamaptive	0.1	0.5	1.7
Total Creo Core Technology (including Kampative)	1.7	1.4	4.0
Total Revenue	15.2	15.7	30.8

 

Total gross profit for the period decreased to £7.2m (H1-2023: £7.5m) whilst the gross margin percentage marginally decreased by 0.2% to 47.6% (H2-2023: 47.8%) due to no milestone payments in the six-month period to date compared to two milestone payments in H2-2023.

 

Underlying EBITDA loss (EBITDA with R&D tax credits and other accounting adjustments added back) of £10.5m, representing a 14% increase compared to the first six months of 2023 (£9.2m). This increase comprises £0.3m of lower margin, £0.6m in loss of R&D tax credits due to changes in legislation and £0.4m increase in expense due to accelerated projects as described below.

 

Underlying administrative expenses (administrative expenses less SIP charge, share based payments, earnout, depreciation, amortisation and settlements) increased in the period to £18.4m against the six-month period to 31 December 2023 (£17.9m) reflecting the accelerated work on the SpydrBlade project, development of a reusable interface cable and increased patent costs associated with protecting these developments. We expect to see first sales of the SpydrBlade device in H2-24 and increased margins on core sales due to reduction in interface cable costs in H2-24. Strict cost controls have remained during the period particularly around headcount, travel and general overheads with further savings expected during H2-24. 

 

The underlying operating loss for the period is £10.0m (six months to 30 June 2023: £8.6m) representing a 16% increase in underlying operating loss for the first six months of 2024 compared to the first six months of 2023.This is a non-statutory measure which adjusts the operating loss as follows:

 

Financial Review
		6 months to	6 months to	12 months to
(All figures £'m)		30 June 2024 Unaudited	30 June 2023 Unaudited	31 December 2023 Audited
Revenue		15.2	15.7	30.8
Cost of Sales		(8.0)	(8.2)	(15.5)
Gross Profit		7.2	7.5	15.3
		47.6%	47.8%	49.6%
Other Operating Income		0.0	0.0	0.4
Administrative Expenses		(20.9)	(20.9)	(40.5)
Operating Loss		(13.7)	(13.4)	(24.8)
SIP Charge		0.1	0.1	0.2
PPE & Other Settlement		0.0	0.2	0.3
Earnout		0.1	0.4	0.5
Depreciation & Amortisation		1.8	1.7	3.4
R&D expenditure recovered via tax credit scheme		1.2	1.8	2.8
Underlying EBITDA (non statutory measure)		(10.5)	(9.2)	(17.6)
Share based payments (inc. JSOP)		0.5	0.6	1.2
Underlying operating loss (non-statutory measure)		(10.0)	(8.6)	(16.4)

 

 

* figures showing '-' are where there is no balance for the period, figures showing '0.0' is where there is a balance but it is below £0.05m.

 

Non-statutory measures

 

Whilst underlying EBITDA and underlying operating loss are not statutory measures, the Board believes they are helpful metrics to provide a meaningful understanding of the financial information as these measures provide an approximation of the ongoing cash requirements of the business as it continues to pursue its future development and ongoing commercialisation of its approved products. The underlying EBITDA excludes SIP charges and Earnout charges (contingent and deferred payments on previous acquisitions), individual items outside of business control, expenses which are non-cash and incorporates the recovery of research and development expenditure which the Group is able to benefit from through R&D tax credit schemes. The underlying operating loss position is EBITDA excluding share-based payment expenses which are non-cash.

 

Tax

 

The Company has not recognised any additional deferred tax assets in respect of trading losses arising in the current financial period. The Company recognises tax assets in respect of claims under the UK research and development Small or Medium-sized Enterprise ("SME") scheme, accrued in line with costs with any adjustments being made on submission of a claim. We received £2.6m cash from R&D tax credits in August 2024.

 

Earnings per share

 

Loss per share was 3 pence for the period (six-months to 30 June 2023: 4 pence).

 

Cash flow and Balance Sheet

 

Net cash used in operating activities was £13.7m for the six months to 30 June 2024 (six months to 30 June 2023: £15.2m) with an increase in operational expenses offset by a decrease in working capital movements compared to H1-2023. Cash received from investing activities was £15.1m (six months to 30 June 2023: £17.1m outflow) due to £15.5m of treasury deposits maturing during the period and £0.1m of bank interest received offset by £0.6m spent on development of intangibles and investment in infrastructure.

 

Net cash generated from financing activities was £5.5m (six months to 30 June 2023: £30.6m) reflecting £6.2m of new loans acquired in Europe during the period offset by £0.7m of loan and lease repayments during the period. 

 

Total assets at 30 June 2024 decreased to £69.3m (30 June 2023: £88.7m). Cash and cash equivalents and cash on deposit at 30 June 2024 were £9.8m (30 June 2023: £11.5m). Net assets were £47.4m (30 June 2023: £69.0m).

 

At 30 June 2024, the debtor position in relation to R&D Tax Credits was £3.9m including the £2.6m debtor from 2023. Inventory as at 30 June 2023 increased to £8.5m (30 June 2023: £8.0m), representing the increase in stock holding to facilitate current and expected future orders of core Creo products

 

Interest bearing liabilities as at 30 June 2024 increased to £14.2m (30 June 2023: £9.2) due to the European loans received in the first part of the year.

 

2024 Outlook

 

Trading in core Creo Products (excluding Kamaptive) in the first half of 2024 met management's expectations and remains on the trajectory to meet management's aims for the Company, including a notable increase in the number of regular users of Creo's Speedboat device. We anticipate continued revenue growth and expect to maintain a strong gross margin across our product range during H2-2024. Active cost control will support a stable cost base, driving efficiencies through the business.

 

Richard Rees

Chief Financial Officer

 

30 September 2024

 

Consolidated statement of profit and loss and other comprehensive income

  

			6 months to	6 months to	12 months to
(All figures £m)	Note		30 June 2024 Unaudited	30 June 2023 Unaudited	31 December 2023 Audited
Revenue	2		15.2	15.7	30.8
Cost of sales			(8.0)	(8.2)	(15.5)
Gross Profit			7.2	7.5	15.3
Other operating income			0.0	-	0.4
Administrative expenses			(20.9)	(20.9)	(40.5)
Operating loss			(13.7)	(13.4)	(24.8)
Finance expenses			(0.3)	(0.1)	(0.4)
Finance income			0.2	0.3	0.7
Loss before tax			(13.8)	(13.2)	(24.5)
Taxation			1.5	1.6	2.8
Loss for the year			(12.3)	(11.6)	(21.7)
Exchange gain/(loss) on foreign subsidiary			(0.7)	(1.0)	(0.6)
Changes to the fair value of equity investments at fair value through other comprehensive income			-	-	-
Total other comprehensive income			(0.7)	(1.0)	(0.6)
Total comprehensive loss for the year			(13.0)	(12.6)	(22.3)
Loss per Share
Basic and diluted (£)	3		(0.03)	(0.04)	(0.07)

 

* figures showing '-' are where there is no balance for the period, figures showing '0.0' is where there is a balance but it is below £0.05m.

 

Consolidated statement of financial position

		As at	As at	12 months to
(All figures £m)	Note	30 June 2024 Unaudited	30 June 2023 Unaudited	31 December 2023 Audited
Assets
Non-current assets
Intangible assets		6.5	7.3	7.1
Goodwill		18.7	19.0	19.1
Investments		2.1	2.1	2.1
Property, plant and equipment		8.5	9.7	9.1
Deferred tax		1.2	1.4	1.1
Other assets		0.2	0.1	0.2
		37.2	39.6	38.7
Current assets
Inventories		8.5	8.0	8.1
Trade and other receivables		9.9	8.3	8.6
Tax receivable		3.9	6.3	2.7
Fixed term deposits		-	15.0	15.5
Cash and cash equivalents		9.8	11.5	3.0
		32.1	49.1	37.9
Total assets		69.3	88.7	76.6
Shareholder equity
Called up share capital	4	0.4	0.4	0.4
Share premium		180.9	180.9	180.9
Merger reserve		13.6	13.6	13.6
Share option reserve		11.1	10.0	10.5
Foreign exchange reserve		(2.5)	(2.2)	(1.8)
Financial Assets at fair value through other comprehensive income		0.6	0.6	0.6
Accumulated losses		(156.7)	(134.3)	(144.4)
Total equity		47.4	69.0	59.8
Liabilities
Non-current liabilities
Interest-bearing liabilities		10.7	5.6	5.2
Deferred tax liability		1.0	1.7	1.4
Provisions		0.3	0.5	0.3
		12.0	7.8	6.9
Current liabilities
Interest-bearing liabilities		3.5	3.6	3.1
Trade and other payables		5.4	7.5	5.7
Other liabilities		0.8	0.6	0.9
Provisions		0.2	0.2	0.2
		9.9	11.9	9.9
Total liabilities		21.9	19.7	16.8
Total equity and liabilities		69.3	88.7	76.6

 

* figures showing '-' are where there is no balance for the period, figures showing '0.0' is where there is a balance, but it is below £0.05m.

Consolidated statement of changes in equity

							Changes to the
							fair value of
							equity
							instruments
							at fair value
		Called up				Share	through other	Foreign
		share	Accumulated	Share	Merger	option	comprehensive	Exchange	Total
(All figures £m)	Note	capital	losses	premium	reserve	reserve	income	Reserve	equity
Balance at 1 January 2023		0.2	(122.7)	149.5	13.6	9.3	0.6	(1.2)	49.3
Total comprehensive loss for the period
Loss for the financial period		-	(11.6)	-	-	-	-	-	(11.6)
Other comprehensive loss/income		-	-	-	-	-	-	(1.0)	(1.0)
Total comprehensive loss		-	(11.6)	-	-	-	-	(1.0)	(12.6)
Transactions with owners, recorded directly in equity.
Issue of share capital	4	0.2	-	31.4	-	-	-	-	31.6
Equity settled share-based payment transactions		-	-	-	-	0.7	-	-	0.7
Balance at 30 June 2023		0.4	(134.3)	180.9	13.6	10.0	0.6	(2.2)	69.0
Total comprehensive loss for the period
Loss for the financial period		-	(10.1)	-	-	-	-	-	(10.1)
Other comprehensive loss/income		-	-	-	-	-	-	0.4	0.4
Total comprehensive loss		-	(10.1)	-	-	-	-	0.4	(9.7)
Transactions with owners, recorded directly in equity.
Issue of share capital	4	0.0	-	(0.0)	-	-	-	-	0.0
Equity settled share-based payment transactions		-	-	-	-	0.5	-	-	0.5
Balance at 31 December 2023		0.4	(144.4)	180.9	13.6	10.5	0.6	(1.8)	59.8
Total comprehensive loss for the period
Loss for the financial period		-	(12.3)	-	-	-	-	-	(12.3)
Other comprehensive loss/income		-	-	-	-	-	-	(0.7)	(0.7)
Total comprehensive loss		-	(12.3)	-	-	-	-	(0.7)	(13.0)
Transactions with owners, recorded directly in equity.
Issue of share capital	4	0.0	-	(0.0)	-	-	-	-	(0.0)
Equity settled share-based payment transactions		-	-	-	-	0.6	-	-	0.6
Balance at 30 June 2024		0.4	(156.7)	180.9	13.6	11.1	0.6	(2.5)	47.4

 

* figures showing '-' are where there is no balance for the period, figures showing '0.0' is where there is a balance but it is below £0.05m.

 

Consolidated statement of cash flows

		6 months to	6 months to	12 months to
(All figures £m)	Note	30 June 2024 Unaudited	30 June 2023 Unaudited	31 December 2023 Audited
Cash flows from operating activities
Loss for the year		(12.3)	(11.7)	(21.7)
Depreciation/amortisation charges		1.8	1.7	3.4
Equity settled share-based payment expenses		0.6	0.7	1.2
Finance expenses		0.3	0.1	0.4
Finance income		(0.2)	(0.3)	(0.7)
Taxation		(1.5)	(1.6)	(2.8)
		(11.3)	(11.1)	(20.2)
(Increase)/Decrease in inventories		(0.3)	1.0	(0.4)
Increase in trade and other receivables		(1.5)	(1.8)	(1.4)
Decrease in trade and other payables		(0.2)	(3.2)	(3.7)
		(2.0)	(4.0)	(5.5)
Interest paid		(0.3)	(0.1)	(0.4)
Tax paid		(0.1)	-	-
Tax received		-	-	4.5
Net cash used in operating activities		(13.7)	(15.2)	(21.6)
Cash flows from investing activities
Purchase of intangible fixed assets		(0.1)	(0.1)	(0.4)
Purchase of tangible fixed assets		(0.5)	(0.4)	(1.2)
Acquisition of subsidiary net of cash acquired		-	(1.9)	(2.4)
Fixed Term Deposits		15.5	(15.0)	(15.0)
Interest received		0.2	0.3	0.7
Net cash used in investing activities		15.1	(17.1)	(18.3)
Cash flows from financing activities
Capital repaid in respect of loans		6.2	(0.7)	(1.4)
Proceeds of new loan		(0.4)	0.1	0.2
Principal elements of lease repayments		(0.3)	(0.3)	(0.7)
Capital received in respect of long-term borrowings		-	-	31.7
Share issue		-	31.5	-
Net cash generated from financing activities		5.5	30.6	29.8
Increase/(Decrease) in cash and cash equivalents		6.9	(1.7)	(10.1)
Effect of exchange rates in cash held		(0.1)	0.1	(0.0)
Cash and cash equivalents at beginning of the year		3.0	13.1	13.1
Cash and cash equivalents at end of the year		9.8	11.5	3.0

 

* figures showing '-' are where there is no balance for the period, figures showing '0.0' is where there is a balance but it is below £0.05m.

 

Notes to the interim financial statements

 

1. Basis of preparation

 

The interim financial report for the period ended 30 June 2024 and similarly the period ended 30 June 2023 has been neither audited nor reviewed by the auditor. The interim financial report for the period ended 30 June 2024 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2023 has been based on information in the audited financial statements for that period. A copy of the statutory accounts for the year ended 31 December 2023 has been delivered to the Registrar of Companies, the accounts had an unqualified audit opinion and did not contain a statement under section 498(2) or (3) of the Companies Act 2006 but did include a reference to a material uncertainty that might cast significant doubt over the Group's ability to continue as a going concern, to which the auditor drew attention by way of emphasis.

 

This interim financial report for the six-month period ended 30 June 2024 (including comparatives for the six months ended 30 June 2023) was approved by the Board of Directors on 30 September 2024

 

Going Concern

 

Following the material uncertainty disclosed in the Company's FY23 results the Directors are aware that additional cash is required prior to the year end in order to meet the Company's liabilities. On 18 September 2024 we announced that we had entered into a binding agreement with Micro-Tech (NL) International B.V., a wholly owned subsidiary of Micro-Tech (Nanjing) ("Micro-Tech") for the sale of 51% of the issued share capital of Creo Medical S.L.U. ("Creo Medical Europe"), a wholly owned subsidiary of Creo, at an equity value of €72m (the "Sale") on a cash-free, debt-free basis. Along with other customary conditions, completion of the Sale is contingent on Micro-Tech obtaining Outbound Direct Investment clearance in China along with Foreign Direct Investment clearances in Spain, France, Belgium and Germany. Whilst there is no certainty as to receipt or timing of receipt of the necessary approvals to enable completion, it is expected that completion will take place during Q1 2025 dependent on these relevant clearances being obtained.

 

The Directors are aware that a risk to the Sale completion exists and have therefore announced, alongside, the interim results a proposed placing to raise a minimum of £12 million plus a Retail Offer.  Whilst completion of the Fundraising is subject to receiving shareholder approval, the Board is confident that such approval will be secured.

 

On the basis of the cash inflow as a result of the Sale and the Proposed Placing and Retail Offer, the Directors are satisfied that the Company will have adequate resources to continue in operational existence for a period of not less than 12 months from the date of signing this interim financial report. Thus, they continue to adopt the going concern basis of accounting in preparing the interim financial report.

 

Accounting policies

The accounting policies used in the preparation of the financial information for the six months ended 30 June 2024 are in accordance with the recognition and measurement criteria of UK adopted international accounting standards and are consistent with those which will be adopted in the annual financial statements for the year ending 31 December 2024. Whilst the financial information included has been prepared in accordance with the recognition and measurement criteria of international accounting standards, the financial information does not contain sufficient information to comply with international accounting standards. The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK AIM listed Groups, in the preparation of this interim financial report.

Changes in accounting policy and disclosures

New standards, amendments and interpretations

The following new standards, amendments and interpretations have been adopted by the Group for the first time for the financial year beginning on 1 January 2024:

 

·      Classification of Liabilities as Current or Non-current - Amendments to IAS 1 Non-current Liabilities with Covenants-Amendments to IAS 1

·      Lease Liability in a Sale and Leaseback - Amendments to IFRS 16

·      Supplier finance arrangements - Amendments to IAS 7 and IFRS 7

 

Principal risks and uncertainties

The principal risks and uncertainties impacting the Group are described in our 2023 Annual Report and remain unchanged at 30 June 2024. We continue to monitor the global inflationary and economic pressures along with other geopolitical macro issues.

 

Critical accounting judgments and key sources of estimation uncertainty

The Group is required to make estimates and assumptions concerning the future. These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. Accounting estimates and judgements have been required for the production of these Financial Statements.

 

Share-based payments

Equity-settled share options are granted to certain officers and employees. Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model, the Monte Carlo method, or a hybrid model where appropriate. Compensation expense is recognised over the tranche's vesting period based on the number of awards expected to vest, through an increase to equity. The number of awards expected to vest is reviewed over the vesting period, with any forfeitures recognised immediately.

 

Research and development costs

Capitalisation of development costs requires analysis of the technical feasibility and commercial viability of the project concerned. Capitalisation of the costs will only be made where there is evidence that an economic benefit will flow to the Company.

 

During the period we capitalised £30k of research and development costs in relation to our bipolar snare product which we are developing. No other development costs have been capitalized for the period.

 

Deferred tax assets

Management judgement is required on whether the Group should recognise any deferred tax assets for losses. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

 

Given the nature and stage of development of Creo Medical Limited there are significant losses accumulated to date. To determine whether a deferred tax asset should be recognised in relation to the future tax deduction that these losses represent, the Directors have considered the estimated profits over a medium to long-term forecast and the events required to achieve such forecasts. Creo Medical UK Limited (formally Albyn Medical Limited acquired in 2020) is forecast to make profits over the medium term and these profits would be available for Group relief. Therefore, we have recognised a tax asset in relation to the element of profit expected to be earned in that entity.

 

Forecasts for Creo Medical Limited continue to show tax losses for at least the medium term (to three years) as the Group continues to develop and commercialise its products. Given the extent of uncertainty with forecasting over a longer-term horizon, it is determined that there is not the level of convincing evidence that sufficient taxable profit will be available against which further tax losses or tax credits can be utilised. Thus, there is considered to be insufficient certainty over the timing and amount of loss recoverability for any further deferred tax asset to be recognised.

Segmental reporting

An entity is required to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. As the Group's global reach has expanded in the period, management have exercised significant judgement in determining whether presenting segment information on an alternative basis would better adhere to this core principle.

 

Whilst the operations in different geographical locations form a fundamental part of the Group's long-term strategy, they are in the early stages of development and the Group continues to focus on the development and commercialisation of its Core technology and the key range of unique endoscopic surgical devices and CROMA Advanced Energy Platform. In making their judgement, the directors considered the Group's activities and the internal reporting structures, and information regularly reviewed by the entity's chief operating decision-maker to make decisions about resources to be allocated and assessing performance.

 

After the assessment, the directors concluded that financial information at a consolidated Group level appropriately reflects the business activities in which the Group is currently engaged, and the economic environment in which it operates. As explained in the 2023 Annual Report, as the Group continues to grow it is expected that the internal reporting structure will evolve in order to meet the changing activities, goals and objectives of the business and therefore additional operating segments may be identified as appropriate in future reporting periods.

 

2. Revenue and other operating income

 

The revenue split for the Group at 30 June 2024 was as follows:

 

 

	6 months to	6 months to	12 months to
(All figures £m)	30-Jun-24 Unaudited	30-Jun-23 Unaudited	31-December-23 Audited
UK	7.1	4.9	9.5
Europe	7.6	10.4	20.7
RoW	0.5	0.4	0.6
Total	15.2	15.7	30.8

 

3. Earnings per share

 

				6 months to	6 months to		12 months to
				30 June 2024	30 June 2023		31 December 2023
(All figures £)				Unaudited	Unaudited		Audited
Loss
Loss attributable to equity holders of Company (basic)				(12,309,680)	(11,704,505)		(21,720,908)
Shares (number)
Weighted average number of ordinary shares in issue during the year				361,663,962	266,484,071		313,004,399
Loss per share
Basic and diluted				(0.03)	(0.04)		(0.07)

 

 

Earnings per share has been calculated in accordance with IAS 33 - Earnings Per Share using the loss for the period after tax, divided by the weighted average number of shares in issue.

 

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. The potential ordinary shares are considered to be antidilutive on the basis that they reduce the loss per share and are not included in the Company's EPS calculation, meaning that diluted EPS is the same as basic EPS.

 

4. Share capital

Balance at 30 June 2022 (£)		181,205
Issue of share capital
Number of shares		340,890
Price per share (£)		0.001
Share value (£)		341
Balance at 31 December 2022 (£)		181,546
Issue of share capital
Number of shares		169,345,387
Price per share (£)		0.001
Share value (£)		169,345
Balance at 30 June 2023 (£)		350,891
Number of shares		10,360,146
Price per share (£)		0.001
Share value (£)		10,360
Balance at 31 December 2023 (£)		361,251
Number of shares		225,024
Price per share (£)		0.001
Share value (£)		225
Balance at 30 June 2024 (£)		361,476

 

5. Post balance sheet events

 

Sale of Controlling Interest of Creo Medical SLU

 

As per notified in the RNS on 18 September 2024 Creo Medical Group plc entered into a binding agreement with Microtech (NL) International B.V., a wholly owned subsidiary of Microtech (Nanjing) Co. Ltd for the sale of 51% of the issued share capital of Creo Medical Spain S.L.U., a wholly owned subsidiary of Creo Medical Group plc, at an equity value of €72m (the "Sale") on a cash-free, debt-free basis.

Along with other customary conditions, completion of the Sale is contingent on Micro-Tech obtaining Outbound Direct Investment clearance in China along with Foreign Direct Investment clearances in Spain, France, Belgium and Germany. Whilst there is no certainty as to receipt or timing of receipt of the necessary approvals to enable completion, it is expected that completion will take place during Q1 2025 dependent on these relevant clearances being obtained.

The Sale generates a return on Creo's initial investment and will strengthen our balance sheet to invest in our core strategy.

The directors believe the Sale demonstrates the significant value Creo have created within the European business following its acquisition in 2020.

As at 30 June 2024 there was no commitment to a loss of control of the European subsidiaries. As such the assets were not classified as held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations at the balance sheet date.

 

Audit Tender

PwC were appointed as auditor at the last annual general meeting, in accordance with Section 489 of the Companies Act 2006. During July and August 2024, the Company undertook a competitive review and tender process for the auditing of its 2024 Annual Report. Following the conclusion of that process, and in accordance with its terms of reference, the Audit Committee of the Company recommended to the Board that RSM UK Audit LLP be appointed as auditors of the Group. RSM UK Audit LLP replaced PwC as auditors in August 2024.

 

Board Appointments

Further to the AGM Statement & Succession Planning announcement in June 2023, which set out the Company's plan to evolve its Board of Directors as it enters a new phase of commercial growth, Creo announces the appointment of Kevin Crofton and Brent Boucher as independent Non-Executive Directors. Both Kevin and Brent joined the Board with effect from 1 July 2024, with Kevin succeeding Charles Spicer as Chair.

 

Richard Rees

Chief Finance Officer

 

 

30 September 2024

 

 

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