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EKF Diagnostics Holdings PLC Final Results

30/03/2021 7:01am

UK Regulatory (RNS & others)


Ekf Diagnostics (LSE:EKF)
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TIDMEKF

RNS Number : 8834T

EKF Diagnostics Holdings PLC

30 March 2021

This announcement contains inside information

for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK law

by virtue of the European Union (Withdrawal) Act 2018 ("MAR")

EKF Diagnostics Holdings plc

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

Final results

EKF Diagnostics Holdings plc (AIM: EKF), the AIM quoted point-of-care business, announces its final results for the year ended 31 December 2020.

Financial Highlights

   --       Revenue up 45% to GBP65.3m (2019: GBP44.9m) 
   --       Gross profit up 58% to GBP37.4m (2019: GBP23.7m) 
   --       Adjusted EBITDA(1) up 113% to GBP25.5m (2019: GBP12.0m) 
   --       Profit before tax GBP15.4m (2019: GBP5.5m) 
   --       Basic Earnings per share of 2.45p (2019: 0.81p) 
   --       Cash generated from operations of GBP13.8m (2019: GBP5.1m) 

-- Cash at 31 December 2020 of GBP21.9m (2019: GBP12.1m), net cash after borrowings of GBP21.4m (2019: GBP11.4m)

-- Value of investments in marketable securities at year end of GBP6.5m, after sale of Renalytix shares raised GBP7.7m (2019: GBP9.7m)

   --       Maiden cash dividend of GBP4.5m paid to shareholders, equivalent to 1p per ordinary share 

Operational Highlights

-- Significant improvements in revenue and profits, resulting from successful COVID-19 related contract manufacturing business

-- Core business held up well in light of the global pandemic: revenues were down GBP6.5m YoY (-14%), however there were strong performances and signs of a steady recovery are apparent:

- DiaSpect Tm up GBP548k (+15%), due to strong performance from OEM partners McKesson and Fresenius Kabi

- Quo-Lab up GBP210k (+9%) due to improved sales in EMEA and improved shelf-life of reagent cartridges

- HemoControl and HemoPointH2 sales down GBP2.6m (-36%) as anaemia screening programmes were paused or cancelled, particularly Peru (-GBP1.1m), and reduced demand from Women & Infants Clinics in US

   -    b-HB down GBP847k (-9%) due in part to the fulfilment of large orders from Cardinal in Q4 2019 
   -    Reduced demand for diabetes testing, especially in China and Southeast Asia 

- COVID-19 restrictions in laboratories, universities and organized sport impacted research use market for lactate and clinical chemistry product

   --     Post period end, recovery of core business underway in Q1 2021: 
   -    Fresenius Kabi up +20% YoY following tender wins in Asia and the Middle East 
   -    Tender win in Rwanda c. 200k tests; screening programmes in Uganda, Ghana, Kenya and Egypt 
   -    First shipment of 1,000 DiaSpect Tm analysers to South Africa following tender win 

- CBER(2) approval of DiaSpect Tm allows EKF to start selling into US blood banks from March 2021

   -    Won South Carolina WIC tender, displacing HemoCue; other WIC tender opportunities expected 
   -    New pregnancy testing accounts won following exit of major competitor from the US market 

- Won Jharkhand (India) tender (3 million DiaSpect Tm cuvettes); additional tenders in the pipeline

(1) Earnings before interest, tax, depreciation and amortisation, share-based payments and exceptional items, as laid out in the income statement

(2) Centre for Biologics Evaluation and Research, part of the US FDA, which (amongst other things) regulates medical devices involved in the testing of licensed blood, blood components and cellular products

(3) Women, Infants and Children

Trading update & Significant expansion of COVID-19 sample collection kit supply agreement

This morning EKF also announced the signing of a new multi-million dollar global supply contract with its partner from the private sector. The new multiyear global supply contract will support its partner's world-wide staff testing initiative, with orders to be fulfilled from EKF's production sites in the UK, Germany and the United States.

This expanded global contract is expected to make a considerable contribution throughout the current financial year. The Board is confident that trading for the year ending 31 December 2021 will be significantly ahead of already upgraded management expectations.

Christopher Mills, Non-Executive Chairman of EKF, commented:

" EKF has come through 2020 in an extremely strong position. The Group has been able to make a real contribution to the fight against the COVID-19 pandemic, which sadly has been very costly for many in lives and income. In doing so, EKF has delivered on every level and our core business has held up well.

"The improvement in trading in our core business and the strong demand for COVID-19 sample collection devices has continued into the new financial year. Whilst necessarily maintaining a conservative approach to forecasting for our core business, we have already announced that our performance for the first quarter of 2021 will be materially ahead of expectations and the same quarter last year. This morning's news that we have expanded a key supply agreement to become a multi-million dollar global supply contract, means that we are confident that trading for the year ending 31 December 2021 will be significantly ahead of already upgraded expectations."

 
     EKF Diagnostics Holdings plc                                              www.ekfdiagnostics.com 
     Christopher Mills, Non-executive Chairman                               Tel: +44 (0)29 2071 0570 
     Julian Baines, CEO 
     Richard Evans, FD & COO 
 
     N+1 Singer                                                              Tel: +44 (0)20 7496 3000 
     Aubrey Powell / George Tzimas / Tom 
      Salvesen / 
 
     Walbrook PR Limited                               Tel: +44 (0)20 7933 8780 or ekf@walbrookpr.com 
     Paul McManus / Lianne Cawthorne                       Mob: +44 (0)7980 541 893 / +44 (0)7584 391 
                                                                                                  303 
 
 

About EKF Diagnostics Holdings plc ( www.ekfdiagnostics.com )

EKF specialises in the development, production and worldwide distribution of point-of-care analyzers and clinical chemistry reagents for use across more than 100 countries in hospital and research laboratories, doctor's offices, blood banks and for in-field anaemia screening programmes. EKF is also a bulk manufacturer of enzymes and has custom manufacturing facilities in the USA for a variety of life science products.

In 2020, EKF developed a range of COVID-19 testing products including PrimeStore MTM, an FDA-approved and CE marked sample containment device that allows the safe handling, transportation and analysis of test swabs and samples, which it manufactures under licence, and COVID-SeroKlir, a leading ELISA-based antibody test from Kantaro Biosciences that provides a precise measurement of COVID-19 IgG antibodies.

A presentation for investors is available to view here: https://www.ekfdiagnostics.com/documents-reports.html . A further announcement will be made when the annual report and accounts for the year ended 31 December 2020 (incorporating the notice of Annual General Meeting) has been made available online at the same web address; hard copies will be sent to shareholders who have opted to receive materials in this format at the same time.

Chairman's Statement

2020 has been an unusual but highly successful year for EKF and I must first extend my thanks to the Executive team for their achievements over the last year, which by any standards have been outstanding and have contributed to a significant increase in shareholder value.

I am delighted that across our business, our teams responded very quickly to the challenges that faced our core business due to the impact of the global COVID pandemic. To their credit, we have simultaneously and rapidly adjusted the business to assist our partners in the USA and Europe in their COVID response.

Consequently, we have had by far our most successful year to date, with record turnover and profits. Revenues across the Group are up 45% to over GBP65m (2019: GBP44.9m) and adjusted EBITDA increased by 113% to GBP25.5m (2019: GBP12.0m). This strong performance has continued into the first quarter of 2021 and in January we announced that Q1 2021 performance would be materially ahead of current management expectations and that of the first quarter of 2020.

Strategy

It is important to note that we continue to focus heavily on our core business, which we define as all operations outside our COVID-19 related product range. Our major strategy aims are:

1. to continue to build our installed base of point-of-care analysers which generate an ongoing stream of revenue through the sale of proprietary consumables;

2. to supply a range of clinical chemistry reagents for use on our own and third party analysers;

   3.    to grow our contract and partnership enzyme manufacturing business; and 

4. to continue to exploit our Preferred Partnership Agreement ("PPA") with Mount Sinai Innovation Partners ("MSIP"), which allows us advanced access to innovative commercial opportunities arising from certain technologies managed by MSIP.

Impact of COVID-19

As a global supplier of diagnostic and clinical chemistry products, we have experienced disruption in nearly every market we serve, and despite this we have still delivered what we consider to be a robust performance in our core business. The core business delivered revenues of over GBP38m, and whilst this is a reduction of 14% versus previous year revenues, this was a better performance than our own expectations. The second half showed signs of improved performance in both Diabetes and Hematology, and this recovery has continued into the new financial year.

Our sales and operations teams have worked extremely hard in often trying circumstances - in many cases working from home and being unable to travel - to limit the effect on our business, and I believe they have been very successful. Equally, we have showed the best strengths of our business in the way that we have reacted to the opportunity which arose for viral transport medium related products.

Having done some preparatory work in 2019, long before the world had heard of COVID, in March 2020 we signed a contract manufacturing agreement with Longhorn Vaccines and Diagnostics LLC in the US for their FDA-approved PrimeStore MTM sample collection device. It is designed to de-activate pathogens rapidly and stabilise test samples for up to four weeks with no requirement for cold storage. This approach also allows samples to be tested by a greater number of laboratories, as the handling risks for the deactivated virus are reduced.

The sudden demand for this product meant that from a standing start at our facility in Boerne, Texas, we had to create a supply chain, a reagent production line and a tube filling line for a regulated product, along with all of the associated peripheral activities. We quickly realised that there would also be a demand for this product in Europe. In the UK, a project team was formed which created a fully manned and trained production facility from scratch using space that had been set aside for development activities, and was up and running in less than 8 weeks. In Germany, a further production line was also started.

It has taken enormous flexibility, dedication, skill, and teamwork, especially from the project teams set up to create and run these facilities, but also from everyone else in the organisation and on behalf of the Board I would like to extend my thanks to all of them. Their work is not over; as the pandemic evolves, so do the needs of our customers, whose programmes are continuing into 2021.

MSIP Preferred Partnership Agreement

MSIP is responsible for driving the real-world application and commercialisation of discoveries and inventions made within the Mount Sinai Health System ("MSHS"), New York's largest integrated healthcare delivery system. EKF has established a longstanding and close working relationship with MSIP, and in 2019 signed a non-exclusive partnership agreement. The agreement provided EKF and MSIP with a framework to explore commercial opportunities together and to select and support pioneering medical approaches that could make improvements to people's lives and to healthcare economics. EKF has access to opportunities which benefit from a clinician and demand focused approach to developing commercially relevant healthcare products and services. This partnership has now led to the development of three new businesses which between them are worth over $1bn: Renalytix AI plc, the developer of artificial intelligence-enabled diagnostics for kidney disease; Verici Dx plc, a developer of advanced clinical diagnostics for organ transplant; and Trellus Health Limited, a company working to transform the way chronic conditions are treated, with an initial focus on Inflammatory Bowel Disease (IBD), including Crohn's disease and ulcerative colitis.

During 2020, EKF sold just under 63% of its holding in Renalytix, raising GBP7.7m. The remaining holding was worth GBP4.9m at year end. Just prior to this sale, the Group benefited from the receipt of shares in Verici when it was spun out of Renalytix by way of a dividend in specie. At 31 December this holding was worth GBP1.6m.

In August, EKF invested $5.0m in Trellus in return for a 31.1% holding, alongside Mount Sinai and others. In December, the Company transferred this shareholding to its then shareholders by way of a dividend in specie. It is expected that Trellus will complete an IPO in 2021.

The Group continues to work with MSIP to develop further opportunities.

Share capital

During the year to 31 December 2020 we have again not utilised the permission we hold from shareholders to acquire shares for cancellation. It remains our intention to do so when appropriate.

The process of simplifying our share capital has continued through the exercise of 900,000 options for a total value of GBP209,000 and the cancellation of 25,000 share options at the election of the holder, in return for a small payment.

Dividend

In December 2020, the Company paid its inaugural cash dividend of 1p per share as a final dividend for 2019, a total of GBP4.6m. We are pleased to confirm that, given the progress in EKF's business and its strong cash generation, it is our intention to make a further dividend payment to shareholders of 1.1p per ordinary share, as previously indicated. If approved by shareholders at the Company's next Annual General Meeting, payment will be on 1 December 2021 to shareholders on the register on 4 November 2021.

Cash-settled share-based incentive

The Company operates a cash-settled, share based incentive for the Executive Directors, which is designed to pay out in the event that the Company is acquired by a third party (an "Exit"). During the present year EKF shareholders have benefited from very strong increases in value through the improved performance of the Group and the investment opportunities that we have followed. Reflecting this delivery of value to shareholders by the Executive Directors, EKF's Remuneration Committee determined that, in the absence of any other performance related pay mechanism, it was appropriate to distribute, as performance-related pay, a portion of the amount that would otherwise be payable under the Incentive on an Exit. The Executive Directors each received an equal payment of approximately GBP0.23 million in July 2020, comprising a variable amount calculated as to 5% of the excess value over 27 pence per share, calculated using a reference share price of 29 pence. Any future amounts payable to the Executive Directors under the Incentive in the event of an Exit shall be reduced by all previously paid amounts. Accordingly, the aggregate amount payable to them under the Incentive is unchanged by the payments described above and the total value available to Shareholders on an Exit will be unaffected. The Remuneration Committee considers that the remaining unpaid amounts under the incentive continue to provide strong motivation to the Executive Directors, who will receive a further potential variable reward in the event of an Exit, equal to 5% of the excess value obtained over 29 pence per share. In January 2021, the Executive Directors received a further payment under the scheme of GBP0.5m each, in recognition of the further significant value creation for shareholders. As a result, the new base line will be 33.4p.

Results overview

The Chief Executive's and Finance Director's statements contain a review of the year and an overview of the financial performance of the Group.

COVID-19

The recent COVID-19 pandemic has created uncertainty in the market in the short term. Many countries remain closed, and government action continues to have a significant effect on economies across the world. The eventual severity and length of the economic disruption is impossible to forecast. We believe we have a robust plan in place to mitigate the effect of the disruption on the business including taking the following actions (amongst others):

-- Ensuring the safety of our employees by organising for as many staff as possible to work from home and making appropriate adjustments in the workplace

   --    Improving our computer networking to facilitate remote working 

-- Gaining designation as a company essential to basic medical care which allows our premises to remain open even in a lockdown

-- Improved social distancing by limiting physical meetings, expanding flexible working, and altering production practices

   --    Banning international travel and limiting domestic travel 

-- Increasing supplier and customer contact so as to be able to anticipate issues and react quickly

   --    Increasing raw material stock holding 
   --    Increasing cleaning and disinfection cycles 

We have insurance cover in place in case there is a loss of business, although it cannot be guaranteed that cover will be sufficient to protect against all eventualities.

While we have seen some disruption to our core business as a result of the COVID-19 pandemic, current trading suggests that our base case forecasts are still applicable. In addition, our range of COVID related products has been highly successful, bringing significant benefits to the Group, including higher revenue, profits, and cash balances. We believe the Group is in a strong position, however, it is difficult to assess reliably whether there will be any material disruption in the future, and for how long our COVID range will remain relevant. We have modelled a number of scenarios covering reductions in revenue of 10% and 50%, without taking into account the potential benefits of any mitigation strategies such as potential cost savings or insurance claims. While the eventual severity and length of the economic disruption stemming from the pandemic is impossible to forecast these models give the Directors reasonable confidence that the business can survive our worst-case scenarios for reductions in revenue for at least the next 12 months.

Board and Corporate Governance

All Board members have served throughout the year. The Board continues to believe that the current make-up of the Board is appropriate. We have adopted the corporate governance code issued by the Quoted Company Alliance. Further details of compliance are found in the Corporate Governance Statement and on the Company's website.

Outlook

EKF has come through 2020 in an extremely strong position. The Group has been able to make a real contribution to the fight against the COVID-19 pandemic, which sadly has been very costly for many in lives and income. In doing so, EKF has delivered on every level and our core business has held up well.

The improvement in trading in our core business and the strong demand for COVID-19 sample collection devices has continued into the new financial year. Whilst necessarily maintaining a conservative approach to forecasting for our core business, we have already announced that our performance for the first quarter of 2021 will be materially ahead of expectations and the same quarter last year. This morning's news that we have expanded a key supply agreement to become a multi-million dollar global supply contract, means that we are confident that trading for the year ending 31 December 2021 will be significantly ahead of already upgraded expectations.

Christopher Mills

Non-executive Chairman

30 March 2021

Chief Executive's Review

In what has been a year like no other I have been astounded at how my colleagues at EKF have been able to adapt to the pandemic, support a solid core business performance and introduce a new manufacturing capability from zero to a business that is now manufacturing hundreds of thousands of COVID-19 sample collection kits per annum. All the credit for this past 12 months has to go to the incredible employees at EKF in Wales, Germany and the US.

It has been a turbulent year as the timing of lockdowns globally have differed across the globe, but it has been an incredible effort from the team to maintain our core business globally.

As a result, we have come through 2020 with our core customer base intact and have developed new relationships, both directly and indirectly, with healthcare systems and a major corporate partner, and we're now seeing signs of recovery that bodes well for the future performance of our core business. We also expect to benefit further from those programmes suspended during 2020 coming back on-line this year.

Operations

The principal activity of the Group is the design, development, manufacture and sale of diagnostic instruments, reagents and certain ancillary products, as well as central laboratory reagents, which the Board considers to be a single segment. The Board considers the business primarily from a geographic perspective, but for interest describes below the performance of each major product group.

Point-of-Care

Hematology

Hematology delivered a respectable GBP11.0m in revenues, albeit a 20% reduction on the previous year (2019: GBP13.8m). DiaSpect Tm sales bucked the trend and were up by 15% as the OEM versions we produce, including those for McKesson and Fresenius, gained some traction, with Fresenius winning new business in Asia and the Middle East.

Sales of our Hemo Control product line were down by 36% as anemia screening programmes were either cancelled or postponed. We saw this particularly in Peru, which has been very badly affected by the pandemic and is a major user of our hemoglobin analyzer. Blood banks and WIC (Women, Infants, Children) centres in the US have seen closures and reduced volumes of patients since COVID struck.

It is incredibly encouraging to see sales in Peru and US-based WIC sales recovering in Q1 2021 and this recovery was supported by the recent WIC tender win in South Carolina. In addition, this WIC tender win was the first to include our newly launched EKF Link connectivity platform. EKF Link will enable us to enter all tenders moving forward that require connectivity which is a significant boost for the Company's commercial appeal.

For 2021 we are looking forward to anemia programmes returning to normal, to McKesson's Consult OEM version of DiaSpect Tm making continued progress, and the opportunity to start selling DiaSpect Tm into blood banks in the US.

Diabetes

Our Diabetes product sales held up very well against strong headwinds delivering over GBP19m of revenues compared to GBP20.6m of sales in 2019. The main product that demonstrated growth during the year was our HbA1c point-of-care analyzer, Quo-Lab, which increased by 9%, driven by increased reagent sales in EMEA; and Stat-Site, which measures <BETA>-HB and glucose in whole blood, following the launch of the Stat-Site WB meter which provides results in less than 10 seconds. Other product groups were affected by COVID-related decreases in testing volumes as diabetic clinics globally were closed or had limited opening hours. The reduction in <BETA>-HB Liquicolor reagent sales of 9% was more due to Cardinal placing a large initial order for their OEM branded product in Q4 2019 than a genuine reduction in demand. Overall, taking this into account our sales have been in line with expectations despite the pandemic.

Central Laboratory

Clinical chemistry and Life sciences

There has been a reduced demand in 2020 for chemistries, including enzymes, analysers and rapid tests, and many of the development projects we have been working on, including that with Oragenics, have been paused as a result of COVID-19. As a result, sales are down by 21%. We expect those projects to come back on stream in 2021, albeit a year behind our original expectations, with work on Oragenics and Ixcela due to recommence in Q3 2021. As a result of the delays, we have slowed the capital programme at our South Bend site, and repurposed It to work on our own COVID products.

Contract manufacturing

While we have always had an interest in contract manufacturing, this area has seen a huge increase in revenue in 2020, rising from GBP0.18m to GBP26.3m with this continuing, so far, into 2021. Starting from the manufacture of the Primestore MTM reagent and filling tubes for Longhorn in the US, activities have expanded to encompass manufacturing in two sites in the US, two in the UK, and one in Germany. This includes a product portfolio of additional reagents, filled tubes in multiple sizes, testing kits, and now full retail packs with boxed contents including our testing kits and other materials. Our customer base has expanded beyond Longhorn to include Public Health England, clinics, universities, testing companies, and a large industrial partner (which we are unable to name for confidentiality reasons), with sales made to 13 countries in the Americas, Europe and Africa.

These activities are all associated with viral testing, and while much of the activity is driven by COVID, we believe that there will be an ongoing need for testing for this and other coronaviruses for the foreseeable future. However, in light of the uncertainty about how long this will stay at current levels, we have mitigated our forward risk by taking premises on short term leases with appropriate break clauses and using temporary labour where possible.

In addition to our COVID related contract manufacturing success, we have secured rights to Kantaro's COVID antibody ELISA test, SeroKlir, which was developed at Mount Sinai. We believe there are exciting opportunities for this test.

Other

This category includes sales of a number of products including our Lactate Scout sports medicine product and other diagnostic tests, the most important of which is for pregnancy. Professional sports medicine has been badly affected by the various lockdowns throughout our most important markets.

Regulatory update

Our most important new approvals came in the USA, where the DiaSpect Tm gained clearance from CBER for use in blood banks, and Hemo Control gained FDA clearance for additional data management functionality. We continue to work hard to succeed.

We are continuing to work towards the new requirements of the In Vitro Diagnostic Regulation (IVDR) in Europe which must be in place by May 2022.

Summary

It has been a difficult year for many people across the world, and I am proud that against this background EKF has not only survived but flourished. Our partners have grown to be dependent on the flexibility and high levels of customer service they are experiencing from EKF, and our shareholders are benefiting through income and capital accretion. We have protected our core business through one of the most difficult periods for business in recent history, and created millions of pounds of revenue and profits from new business. Whether this new source of income continues at the same level or not, I am confident that the skills we have learnt and the relationships we

have developed will be of benefit to the business for years to come.

Julian Baines

Chief Executive Officer

30 March 2021

Finance Director's Review

Revenue

Revenue for 2020 was GBP65.3m (2019: GBP44.9m), which is an increase of 45%. At constant exchange rates, revenue for the year would have been 1% higher, so organic growth is 46%.

Revenue by disease state, which is presented for illustrative purposes only, is as follows:

 
                                FY 2020        FY 2019 
                                GBP'000        GBP'000         +/- % 
========================  =============  =============  ============ 
     Hematology                  11,037         13,808        (20%) 
     Diabetes Care               19,056         20,607        (8%) 
     Central Laboratory          30,995          6,135        +405% 
     Other                        4,172          4,367        (4%) 
========================  =============  =============  ============ 
     Total                       65,260         44,917        +45% 
========================  =============  =============  ============ 
 

Central Laboratory sales in 2020 include sales of contract manufacturing services relating to PrimeStore and other viral transport medium products of GBP26,799,000 (2019: GBP44,000).

Revenue by geographical segment based on the locations from which sales are made, is as follows:

 
                     FY 2020        FY 2019 
                     GBP'000        GBP'000         +/- % 
=============  =============  =============  ============ 
     Germany          20,286         16,418          +24% 
     USA              37,692         25,434          +48% 
     Russia            2,904          3,065          (5%) 
     Other             4,378              -             - 
=============  =============  =============  ============ 
     Total            65,260         44,917          +45% 
=============  =============  =============  ============ 
 

Gross profit

Gross profit is GBP37.4m (2019: GBP23.7m), which represents a gross margin percentage of 57.5% (2019: 52.8%). The increased gross margin was largely due to the higher volumes.

Administration costs and research and development

Administration costs have increased to GBP20.7m (2019: GBP18.3m).

To aid understanding, administrative expenses in each period are made up as follows:

 
                                                  Year ended         Year ended 
                                            31 December 2020        31 December 
                                                                           2019 
     Non-exceptional administration 
      expenditure before R & 
      D capitalisation                                17,234             17,027 
     Effect of share-based 
      payments                                         5,292              2,118 
     Less capitalised R & D                            (586)              (527) 
     Effect of exceptional 
      items                                          (1,282)              (338) 
                                      ----------------------  ----------------- 
     Total administrative expenses                    20,658             18,280 
                                      ----------------------  ----------------- 
 

The largest effect has been the increased share-based payment charge, with the increase mainly being a result of the Company's increased share price and a related increase in volatility.

Research and development costs included in administration expenses were GBP1.4m (2019: GBP2.3m). A further GBP0.6m was capitalised as an intangible asset, resulting from our development work to broaden and improve our product portfolio, bringing gross R&D expenditure for the year to GBP2.0m (2019: GBP2.8m). The reduction was largely a result of the emphasis required during the year on our COVID related products. The charge for depreciation of fixed assets and amortisation of intangible assets increased to GBP4.6m (2019: GBP4.4m).

Operating profit and adjusted earnings before interest, tax, depreciation and amortization

The Group generated an operating profit of GBP16.9m (2019: GBP5.8m). This was largely a result of the higher activity levels seen during the year. We continue to consider that adjusted earnings before interest, tax, depreciation and amortisation, share-based payments and exceptional items (adjusted EBITDA) is a better measure of the Group's progress as the Board believes it gives a clearer comparison of the operating performance between periods. In 2020 we achieved adjusted EBITDA of GBP25.5m (2019: GBP12.0m), an increase of 113%. The calculation of this non-GAAP measure is shown on the face of the income statement. It excludes the effect of non-cash share-based payment charges of GBP5.3m (2019: GBP2.1m), and exceptional profits of GBP1.3m (2019: GBP0.3m), the main element of which is the increase in fair value of the warranty claim provision which offsets the deferred consideration liability, both of which relate to an outstanding issue with the previous owner of EKF-Diagnostic.

Finance costs

Net finance costs have increased to GBP1.5m (2019: GBP0.3m). The main charge, and the increase, results from an increase in the fair value of deferred consideration which is valued using the Company's share price. Although the Group holds net cash, achievable returns on this are very low because of low interest rates around the world.

Tax

There is an income tax charge of GBP4.0m, an increase from the prior year charge (2019: GBP1.6m). The charge is higher than would have been expected largely because of the effect of losses in the UK entities for which a deferred tax asset has not been recognised as the likely timing of recovery is considered too remote, as well as the higher tax rates that apply in Germany and the USA. Tax of GBP1.1m has been charged direct to Other Comprehensive Income.

Dividend

A cash dividend of 1p per ordinary share was paid in December, in respect of the final dividend for 2019. In addition, a dividend in specie was completed which transferred the Group's holding in Trellus Health Limited to EKF shareholder at that time. Dividends are shown in the Statement of Changes in Equity, and not in the Income Statement.

Balance sheet

Property plant and equipment and right-of-use assets

Additions to fixed assets were GBP2.1m (2019: GBP1.4m). Major programmes include the continuing work on the upgrading and refurbishment of the Group's central laboratory product manufacturing facility in Elkhart, USA, the capitalization of new and replacement leases under IFRS 16 including the new production facility in the UK, and the building works associated with its set up.

Intangible assets

The carrying value of intangible assets has continued to fall, from GBP37.8m in 2019 to GBP37.1m as at 31 December 2020. This is largely the result of the annual amortisation charge.

Investments

During the year the Company sold around 63% of the shares it previously held in Renalytix AI plc ("Renalytix"). These shares were acquired at an average cost of GBP1.211 per share and were sold for GBP4.579 per share. The profit of GBP5.64m (less tax) is shown in Other Comprehensive Income. The Company continues to hold 1.39% of Renalytix, which itself completed a dividend in specie of its shareholding in Verici Dx plc ("Verici"), a developer of advanced clinical diagnostics for organ transplant. Like Renalytix, Verici has been brought to the public capital market by virtue of EKF's relationship with the Mount Sinai Hospital System. As a result of the distribution of Verici shares by Renalytix and following the successful IPO fundraising for Verici in November 2020, EKF now owns 1.89% of Verici.

Also during the year and again as a result of EKF's relationship with Mount Sinai, the Company invested $5.0m in August for 31.1% of Trellus Health Limited, a provider of connected digital health solutions for chronic conditions. The shareholding rights, except for voting rights, were transferred to EKF's shareholders via a dividend in specie in December.

Deferred consideration

The remaining deferred consideration of GBP2.9m (2019: GBP1.4m) relates to a share-based payment to the former owner of EKF-Diagnostic GmbH, payment of which is subject to an equal and offsetting warranty related claim, the value of which is held in receivables. Conclusion of the position has taken longer than anticipated but is expected during 2021.

Cash and working capital

Net cash which excludes marketable securities has increased to GBP21.4m from GBP11.4m. Gross cash has risen to GBP21.9m (2019: GBP12.1m) and Borrowings reduced in line with repayments to GBP0.5m (2019: GBP0.7m). Cash flow was boosted by the proceeds of the sale of Renalytix shares (GBP7.7m), while investments were made in Trellus and fixed and intangible assets - mainly R & D and an updated accounting system - totalling GBP7.0m, and GBP4.6m was paid out in cash dividends. Working capital needs increased by GBP4.2m, driven by the increases in volume and by action taken, to ensure supply lines during the COVID-19 pandemic.

Richard Evans

Finance Director and Chief Operating Officer

30 March 2021

 
     Consolidated Income Statement 
-----------------------------------------------------  ----------------------------------------- 
     for the year ended 31 December 2020 
 
 
                                                                            2020            2019 
                                                                         GBP'000         GBP'000 
=====================================================  =========================  ============== 
     Revenue                                                              65,260          44,917 
     Cost of sales                                                      (27,840)        (21,190) 
=====================================================  =========================  ============== 
     Gross profit                                                         37,420          23,727 
     Administrative expenses                                            (20,658)        (18,280) 
     Other income                                                            133             337 
=====================================================  =========================  ============== 
     Operating profit                                                     16,895           5,784 
=====================================================  =========================  ============== 
     Depreciation and amortisation                                       (4,611)         (4,441) 
     Share-based payments                                                (5,292)         (2,118) 
     Exceptional items                                                     1,282             338 
     EBITDA before exceptional items and share-based 
      payments                                                            25,516          12,005 
=====================================================  =========================  ============== 
     Finance income                                                           53              73 
     Finance costs                                                       (1,592)           (339) 
=====================================================  =========================  ============== 
     Profit before income tax                                             15,356           5,518 
     Income tax charge                                                   (3,971)         (1,586) 
=====================================================  =========================  ============== 
     Profit for the year                                                  11,385           3,932 
=====================================================  =========================  ============== 
     Profit attributable to: 
     Owners of the parent                                                 11,114           3,678 
     Non-controlling interest                                                271             254 
=====================================================  =========================  ============== 
                                                                          11,385           3,932 
=====================================================  =========================  ============== 
 
 
                                                                           Pence           Pence 
=====================================================  =========================  ============== 
     Earnings per Ordinary Share attributable to the 
      owners of the parent during the year 
     From continuing operations 
     Basic                                                                  2.45            0.81 
     Diluted                                                                2.42            0.80 
=====================================================  =========================  ============== 
 
 
     Consolidated Statement of Comprehensive 
      Income 
--------------------------------------------------   -------------------  ------------------------ 
     for the year ended 31 December 2020 
 
 
                                                                    2020                      2019 
                                                                 GBP'000                   GBP'000 
==================================================   ===================  ======================== 
     Profit for the year                                          11,385                     3,932 
===================================================  ===================  ======================== 
     Other comprehensive income: 
     Items that will not be reclassified to 
      profit or loss 
      Changes in fair value of equity instruments 
      at fair value through other comprehensive 
      income (net of tax)                                          3,276                     6,505 
     Items that may be subsequently reclassified 
      to profit or loss 
     Currency translation differences                                734                   (3,096) 
===================================================  ===================  ======================== 
     Other comprehensive income (net of tax)                       4,010                     3,409 
===================================================  ===================  ======================== 
     Total comprehensive income for the year                      15,395                     7,341 
===================================================  ===================  ======================== 
     Attributable to: 
     Owners of the parent                                         15,235                     7,057 
     Non-controlling interests                                       160                       284 
===================================================  ===================  ======================== 
     Total comprehensive income for the year                      15,395                     7,341 
===================================================  ===================  ======================== 
 

Consolidated Statement of Financial Position

as at 31 December 2020

 
                                                   Group 2020                Group 
                                                      GBP'000                 2019 
                                                                           GBP'000 
=====================================   =====================  =================== 
     Assets 
     Non-current assets 
     Property, plant and equipment                     12,620               12,179 
     Right-of-use asset                                 1,019                1,002 
     Intangible assets                                 37,051               37,767 
     Investments                                        6,608                9,900 
     Deferred tax assets                                   14                   34 
======================================  =====================  =================== 
     Total non-current assets                          57,312               60,882 
======================================  =====================  =================== 
     Current assets 
     Inventories                                        8,487                6,073 
     Trade and other receivables                       13,182                8,097 
     Current income tax receivable                        371                    - 
     Cash and cash equivalents                         21,913               12,074 
======================================  =====================  =================== 
     Total current assets                              43,953               26,244 
======================================  =====================  =================== 
     Total assets                                     101,265               87,126 
======================================  =====================  =================== 
     Equity attributable to owners 
      of the parent 
     Share capital                                      4,550                4,541 
     Share Premium                                        200                    - 
     Other reserves                                     5,354                6,648 
     Foreign currency reserves                          4,028                3,183 
     Retained earnings                                 63,516               56,199 
======================================  =====================  =================== 
                                                       77,648               70,571 
     Non-controlling interest                             552                  601 
======================================  =====================  =================== 
     Total equity                                      78,200               71,172 
======================================  =====================  =================== 
     Liabilities 
     Non-current liabilities 
     Lease liabilities                                    690                  716 
     Borrowings                                           323                  480 
     Deferred tax liabilities                           2,636                2,619 
======================================  =====================  =================== 
     Total non-current liabilities                      3,649                3,815 
======================================  =====================  =================== 
     Current liabilities 
     Trade and other payables                          14,435                7,470 
      Lease liabilities                                   380                  286 
      Deferred consideration                            2,901                1,385 
      Current income tax liabilities                    1,515                2,823 
      Borrowings                                          185                  175 
======================================  =====================  =================== 
      Total current liabilities                        19,416               12,139 
======================================  =====================  =================== 
      Total liabilities                                23,065               15,954 
======================================  =====================  =================== 
      Total equity and liabilities                    101,265               87,126 
======================================  =====================  =================== 
 

Consolidated Statement of Cash Flows

for the year ended 31 December 2020

 
                                                        Group         Group 
                                                         2020          2019 
                                                      GBP'000       GBP'000 
============================================   ==============  ============ 
     Cash flow from operating activities 
      Cash generated by operations                     20,798         6,519 
     Interest paid                                       (47)          (21) 
     Income tax paid                                  (6,942)       (1,398) 
=============================================  ==============  ============ 
     Net cash generated by operating 
      activities                                       13,809         5,100 
=============================================  ==============  ============ 
     Cash flow from investing activities 
      Purchase of investments                         (3,810)         (124) 
     Purchase of property, plant and 
      equipment (PPE)                                 (1,631)       (1,418) 
     Purchase of intangibles                          (1,014)         (957) 
     Proceeds from sale of PPE                             68            30 
     Proceeds from sale of investments                  7,670             - 
     Interest received                                     53            73 
=============================================  ==============  ============ 
     Net cash generated by/(used in) 
      investing activities                              1,336       (2,396) 
=============================================  ==============  ============ 
     Cash flow from financing activities 
      Share option buy back                               (7)          (15) 
     Proceeds from issuance of Ordinary                   209             - 
      shares 
     Dividend                                         (4,550)             - 
     Repayments on borrowings                           (183)         (180) 
     Principal lease payments                           (469)         (381) 
     Dividend payment to non-controlling 
      interest                                          (209)          (58) 
=============================================  ==============  ============ 
     Net cash used in financing activities            (5,209)         (634) 
=============================================  ==============  ============ 
     Net increase in cash and cash 
      equivalents                                       9,936         2,070 
     Cash and cash equivalents at beginning 
      of year                                          12,074        10,282 
     Exchange losses on cash and cash 
      equivalents                                        (97)         (278) 
=============================================  ==============  ============ 
     Cash and cash equivalents at end 
      of year                                          21,913        12,074 
=============================================  ==============  ============ 
 

Consolidated Statement of Changes in Equity

 
                                              Share                                      Foreign 
                                Share       premium                                     currency         Retained                            Non-controlling             Total 
                              capital       account              Other reserves          reserve         earnings              Total                interest            equity 
                              GBP'000       GBP'000                     GBP'000          GBP'000          GBP'000            GBP'000                 GBP'000           GBP'000 
 
     At 1 January 2019          4,541             -                         143            6,309           52,536             63,529                     375            63,904 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Comprehensive 
     income 
     Profit for the 
      year                          -             -                           -                -            3,678              3,678                     254             3,932 
     Other 
     comprehensive 
     income/(expense) 
     Changes in fair 
      value 
      of equity 
      instruments 
      at fair value 
      through 
      other 
      comprehensive 
      income                        -             -                       6,505                -                -              6,505                       -             6,505 
     Currency 
      translation 
      differences                   -             -                           -          (3,126)                -            (3,126)                      30           (3,096) 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Total 
      comprehensive 
      income/(expense)              -             -                       6,505          (3,126)            3,678              7,057                     284             7,341 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Transactions with 
      owners 
     Share option 
      cancellation                  -             -                           -                -             (15)               (15)                       -              (15) 
     Dividends to 
      non-controlling 
      interest                      -             -                           -                -                -                  -                    (58)              (58) 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Total 
      distributions 
      to owners                     -             -                           -                -             (15)               (15)                    (58)              (73) 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     At 31 December 
      2019 
      and 1 January 
      2020                      4,541             -                       6,648            3,183           56,199             70,571                     601            71,172 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
 
     Comprehensive 
     income 
     Profit for the 
      year                          -             -                           -                -           11,114             11,114                     271            11,385 
     Other 
     comprehensive 
     income 
     Changes in fair 
      value 
      of equity 
      instruments 
      at fair value 
      through 
      other 
      comprehensive 
      income                        -             -                       4,348                -                -              4,348                       -             4,348 
     Transfer of gain 
      on disposal of 
      equity 
      investments at 
      fair 
      value through 
      other 
      comprehensive 
      income 
      to retained 
      earnings                      -             -                     (5,642)                -            5,642                  -                       -                 - 
     Taxation on profit 
      on disposal of 
      equity 
      instruments at 
      fair 
      value                         -             -                           -                -          (1,072)            (1,072)                       -           (1,072) 
     Currency 
      translation 
      differences                   -             -                           -              845                -                845                   (111)               734 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Total 
      comprehensive 
      income                        -             -                     (1,294)              845           15,684             15,235                     160            15,395 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Transactions with 
      owners 
     Proceeds from 
      share 
      issue                         9           200                           -                -                -                209                       -               209 
     Share option 
      cancellation                  -             -                           -                -              (7)                (7)                       -               (7) 
     Dividends to 
      non-controlling 
      interest                      -             -                           -                -                -                  -                   (209)             (209) 
     Dividends to 
      owners                                                                                              (8,360)            (8,360)                       -           (8,360) 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     Total 
      distributions 
      to owners                     9           200                           -                -          (8,367)            (8,158)                   (209)           (8,367) 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
     At 31 December 
      2020                      4,550           200                       5,354            4,028           63,516             77,648                     552            78,200 
-----------------------  ------------  ------------  --------------------------  ---------------  ---------------  -----------------  ----------------------  ---------------- 
 

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2020

1. General information and basis of presentation

EKF Diagnostics Holdings plc is a public limited company incorporated in the United Kingdom (Registration Number 04347937), which is listed on the AIM market of the London Stock Exchange. The address of the registered office is Avon House, 19 Stanwell Road, Penarth, CF64 2EZ.

The Group's principal activity continues to be that of a business focused within the In-Vitro Diagnostics devices ("IVD") market place.

The audited preliminary announcement has been prepared in accordance with the Group's accounting policies as disclosed in the financial statements for the year ended 31 December 2020 and international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS'), and the applicable legal requirements of the Companies Act 2006. This preliminary announcement was approved by the Board of Directors on 30 March 2021. The preliminary announcement does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year to 31 December 2019 have been delivered to the Registrar of Companies. The audit report for those accounts was unqualified and did not contain statements under 498 (2) or (3) of the Companies Act 2006 and did not contain any emphasis of matter.

Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRSs. The Company will publish its full financial statements for the year ended 31 December 2020 by 30 April 2021, which will be available on the Company's website at www.ekfdiagnostics.com and at the Company's registered office at Avon House, 19 Stanwell Road Penarth CF64 2EZ. The Annual General Meeting will be held on Wednesday 19 May 2021.

2. Significant accounting policies

Basis of preparation

The principal accounting policies applied in the preparation of this financial information has been applied consistently throughout the year and will be set out in the notes to the group's 2020 Annual Report.

The consolidated financial statements of EKF Diagnostics Holdings have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS'), and the applicable legal requirements of the Companies Act 2006.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial liabilities at fair value through profit and loss and certain financial assets measured at fair value through other comprehensive income.

(a) New standards, amendments and interpretations adopted by the Group.

The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2020:

-- Definition of Material - Amendments to IAS 1 and IAS 8;

-- Definition of a Business - Amendments to IFRS 3;

-- Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7; and

-- Revised Conceptual Framework for Financial Reporting.

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2020 and not early adopted.

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2021, and have not been applied in preparing these financial statements. The Group does not anticipate a material impact within its financial statements as a result of the applicable standards and interpretations.

Going concern

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance, that the Group should be able to operate within the level of its current funding arrangements. While we have seen some disruption to our core business as a result of the COVID-19 pandemic, current trading suggests that our base case forecasts are still applicable. In addition, our range of COVID related products has been highly successful, bringing significant benefits to the Group, including higher revenue, profits, and cash balances. We believe the Group is in a strong position, however, it is difficult to assess reliably whether there will be any material disruption in the future, and for how long our COVID range will remain relevant. We have modelled a number of scenarios covering reductions in revenue of 10% and 50%, without taking into account the potential benefits of any mitigation strategies such as potential cost savings or insurance claims. While the eventual severity and length of the economic disruption stemming from the pandemic is impossible to forecast these models give the Directors reasonable confidence that the business can survive our worst-case scenarios for reductions in revenue for at least the next 12 months.

The Company has net current liabilities, largely as a result of non-cash Items. The Group is profitable and cash generative and is able to provide funding for the Company if required, through loans or dividends.

After making enquiries, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. The Company and Group therefore continues to adopt the going concern basis of preparation for its consolidated financial statements.

3. Segmental reporting

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources.

The principal activity of the Group is the design, development, manufacture and sale of diagnostic instruments, reagents and certain ancillary products, as well as central laboratory reagents. This activity takes place across various countries, such as the USA, Germany, Russia, and the United Kingdom, and as such the Board considers the business primarily from a geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management has concluded that all segments should be maintained and reported.

The reportable segments derive their revenue primarily from the manufacture and sale of medical diagnostic equipment and reagents. Other services include the servicing and distribution of third-party company products under separate distribution agreements. Transactions between segments consist of the sale of products for resale. The basis of accounting for these transactions is the same as for external revenue.

Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA.

The segment information provided to the Board for the reportable segments for the year ended 31 December 2020 is as follows:

 
                                          Germany                          USA        Russia                      Other                         Total 
     2020                                 GBP'000                      GBP'000       GBP'000                    GBP'000                       GBP'000 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       Income 
       statement 
       Revenue                             25,637                       39,459         2,904                      4,432                        72,432 
     Inter-segment                        (5,351)                      (1,767)             -                       (54)                       (7,172) 
====================  ===========================  ===========================  ============  =========================  ============================ 
     External 
      revenue                              20,286                       37,692         2,904                      4,378                        65,260 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       Adjusted 
       EBITDA*                              7,343                       20,094           833                    (2,754)                        25,516 
     Exceptional 
      items                                   877                            -             -                        405                         1,282 
     Share-based 
      payments                                  -                            -             -                    (5,292)                       (5,292) 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       EBITDA                               8,220                       20,094           833                    (7,641)                        21,506 
     Depreciation                           (787)                        (511)          (24)                      (522)                       (1,844) 
     Amortisation                         (1,646)                      (1,120)           (1)                          -                       (2,767) 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       Operating 
       profit/(loss)                        5,787                       18,463           808                    (8,163)                        16,895 
     Finance income                             2                           13            39                        (1)                            53 
     Finance cost                            (26)                            -             -                    (1,566)                       (1,592) 
     Income tax                             (820)                      (3,497)         (171)                        517                       (3,971) 
====================  ===========================  ===========================  ============  =========================  ============================ 
     Retained 
      profit/(loss)                         4,943                       14,979           676                    (9,213)                        11,385 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       Segment 
       assets 
       Operating 
       assets                              39,961                       36,899           355                     30,529                       107,744 
     Inter-segment 
      assets                                (112)                     (11,427)             -                   (16,853)                      (28,392) 
====================  ===========================  ===========================  ============  =========================  ============================ 
     External 
      operating 
      assets                               39,849                       25,472           355                     13,676                        79,352 
     Cash                                   3,130                        7,459         1,257                     10,067                        21,913 
====================  ===========================  ===========================  ============  =========================  ============================ 
     Total assets                          42,979                       32,931         1,612                     23,743                       101,265 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       Segment 
       liabilities 
       Operating 
       liabilities                          7,135                       17,836           158                     25,820                        50,949 
     Inter-segment 
      liabilities                         (1,332)                     (14,915)             -                   (12,145)                      (28,392) 
====================  ===========================  ===========================  ============  =========================  ============================ 
     External 
      operating 
      liabilities                           5,803                        2,921           158                     13,675                       22,5578 
     Borrowings                               508                            -             -                          -                           508 
====================  ===========================  ===========================  ============  =========================  ============================ 
     Total 
      liabilities                           6,311                        2,921           158                     13,675                        23,065 
====================  ===========================  ===========================  ============  =========================  ============================ 
 
       Other 
       segmental 
       information 
       Non-current 
       assets - 
       PPE                                  5,912                        4,632            93                      3,002                        13,639 
     Non-current 
      assets - 
      Intangibles                          24,039                       10,979            77                      1,956                        37,051 
     PPE - additions                          779                          575            54                        741                         2,149 
     Intangible 
      assets - 
      additions                               679                          335             -                          -                         1,014 
====================  ===========================  ===========================  ============  =========================  ============================ 
 

* Adjusted EBITDA excludes exceptional items and share-based payments.

 
 
                                               Germany             USA          Russia           Other           Total 
       2019                                    GBP'000         GBP'000         GBP'000         GBP'000         GBP'000 
--------------------------------------  --------------  --------------  --------------  --------------  -------------- 
 
       Income statement 
     Revenue                                    23,087          25,434           3,065               -          51,586 
     Inter-segment                             (6,669)               -               -               -         (6,669) 
======================================  ==============  ==============  ==============  ==============  ============== 
     External revenue                           16,418          25,434           3,065               -          44,917 
======================================  ==============  ==============  ==============  ==============  ============== 
 
       Adjusted EBITDA*                          7,435           8,016             782         (4,228)          12,005 
     Exceptional items                             356               -               -            (18)             338 
     Share-based payments                            -               -               -         (2,118)         (2,118) 
======================================  ==============  ==============  ==============  ==============  ============== 
 
     EBITDA                                      7,791           8,016             782         (6,364)          10,225 
     Depreciation                                (739)           (387)            (19)           (367)         (1,512) 
     Amortisation                              (2,077)         (1,161)             (2)             311         (2,929) 
======================================  ==============  ==============  ==============  ==============  ============== 
 
       Operating profit                          4,975           6,468             761         (6,420)           5,784 
     Finance income                                 10               7              37              19              73 
     Finance cost                                 (21)               -               -           (318)           (339) 
     Income tax                                  (677)           (449)           (164)           (296)         (1,586) 
======================================  ==============  ==============  ==============  ==============  ============== 
     Retained profit                             4,287           6,026             634         (7,015)           3,932 
======================================  ==============  ==============  ==============  ==============  ============== 
 
       Segment assets 
     Operating assets                           36,327          24,630             589          39,709         101,255 
     Inter-segment assets                        (400)               -               -        (25,803)        (26,203) 
======================================  ==============  ==============  ==============  ==============  ============== 
     External operating assets                  35,927          24,630             589          13,906          75,052 
     Cash                                        3,298           5,480           1,159           2,137          12,074 
======================================  ==============  ==============  ==============  ==============  ============== 
     Total assets                               39,225          30,110           1,748          16,043          87,126 
======================================  ==============  ==============  ==============  ==============  ============== 
 
       Segment liabilities 
     Operating liabilities                       7,926          15,162             151          18,263          41,502 
     Inter-segment liabilities                 (2,938)        (11,777)               -        (11,488)        (26,203) 
======================================  ==============  ==============  ==============  ==============  ============== 
     External operating liabilities              4,988           3,385             151           6,775          15,299 
     Borrowings                                    655               -               -               -             655 
======================================  ==============  ==============  ==============  ==============  ============== 
     Total liabilities                           5,643           3,385             151           6,775          15,954 
======================================  ==============  ==============  ==============  ==============  ============== 
 
       Other segmental information 
     Non-current assets - PPE                    6,006           4,679              75           2,421          13,181 
     Non-current assets - Intangibles           24,172          12,115              95           1,385          37,767 
     PPE - additions                               872             455              17             721           2,065 
     Intangible assets - additions                 739             162               -              56             957 
======================================  ==============  ==============  ==============  ==============  ============== 
 

* Adjusted EBITDA excludes exceptional items and share-based payments. 'Other' primarily relates to the holding company and head office costs.

Disclosure of Group revenues by geographic location of customer is as follows:

 
 
                                                      2020           2019 
                                                   GBP'000        GBP'000 
===========================================  =============  ============= 
     Americas 
     United States of America                       33,474         19,955 
     Rest of Americas                                2,391          3,947 
     Europe, Middle East and Africa (EMEA) 
     Germany                                         5,873          6,268 
     United Kingdom                                  4,522            435 
     Rest of Europe                                  8,535          3,484 
     Russia                                          2,904          3,066 
     Middle East                                     1,261          1,771 
     Africa                                          2,553          1,482 
     Asia and Rest of World 
     China                                             767            822 
     Rest of Asia                                    2,883          3,578 
     New Zealand/Australia                              97            109 
===========================================  =============  ============= 
     Total revenue                                  65,260         44,917 
===========================================  =============  ============= 
 

Revenues of GBP16,960,000 (26.0%) were derived from one external customer. Sales to this customer all relate to the USA. In 2019 revenues of GBP5,122,000 (11.4%) were derived from a different customer, all of whose revenues relate to the USA.

Revenue by disease state, which is presented for illustrative purposes only, is as follows:

 
                                FY 2020        FY 2019 
                                GBP'000        GBP'000         +/- % 
========================  =============  =============  ============ 
     Hematology                  11,037         13,808        (20%) 
     Diabetes Care               19,056         20,607        (8%) 
     Central Laboratory          30,995          6,135        +405% 
     Other                        4,172          4,367        (4%) 
========================  =============  =============  ============ 
     Total                       65,260         44,917        +45% 
========================  =============  =============  ============ 
 

Central Laboratory sales in 2020 include sales of contract manufacturing services relating to PrimeStore and other viral transport medium products of GBP26,799,000 (2019: GBP44,000).

   4.   Exceptional Items 
 
     Included within administrative expenses are exceptional items as 
      shown below: 
                                                                 2020           2019 
                                               Note           GBP'000        GBP'000 
=====================================  ============  ================  ============= 
     - Warranty claim                             a             1,414            367 
     - Business reorganisation costs              b              (58)           (29) 
     - Cost of Trellus set-up                     c              (74)              - 
     Exceptional items                                          1,282            338 
===================================================  ================  ============= 
 

a. Increase in the value of an estimated warranty claim which offsets the remaining deferred consideration of GBP2.9m (2019: GBP1.4m) relating to a share-based payment to the former owner of EKF-Diagnostic GmbH. The increase is a result of the higher share price.

b. Restructuring costs, mainly closure costs, associated in 2020 and 2019 with the closure of EKF's Polish facility and other restructuring activities.

   c.     Start-up costs associated with the set-up of Trellus Health Limited. 

5. Income tax charge

 
 
                                                                   2020            2019 
       Group                                                    GBP'000         GBP'000 
=======================================================  ==============  ============== 
     Current tax: 
     Current tax on profit for the year                           3,913           2,096 
     Adjustments for prior periods                                 (89)            (94) 
=======================================================  ==============  ============== 
     Total current tax                                            4,002           2,002 
 
       Deferred tax: 
     Origination and reversal of temporary differences             (31)           (416) 
=======================================================  ==============  ============== 
     Total deferred tax                                            (31)           (416) 
=======================================================  ==============  ============== 
     Income tax charge                                            3,971           1,586 
=======================================================  ==============  ============== 
 

6. Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of Ordinary Shares in issue during the year.

 
                                                               2020                     2019 
                                                            GBP'000                  GBP'000 
================================================  =================  ======================= 
     Profit attributable to owners of the 
      parent                                                 11,114                    3,678 
     Weighted average number of Ordinary Shares 
      in issue                                          454,524,101              454,093,227 
================================================  =================  ======================= 
 
       Basic profit per share                            2.45 pence               0.81 pence 
================================================  =================  ======================= 
 

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding assuming conversion of all dilutive potential Ordinary Shares. The Company has one category of dilutive potential ordinary shares being share options.

 
                                                               2020               2019 
                                                            GBP'000            GBP'000 
================================================  =================  ================= 
     Profit attributable to owners of the 
      parent                                                 11,114              3,678 
     Weighted average number of Ordinary Shares 
      in issue                                          458,803,076        458,414,273 
================================================  =================  ================= 
 
       Diluted profit per share                          2.42 pence         0.80 pence 
================================================  =================  ================= 
 
                                                               2020               2019 
================================================  =================  ================= 
     Weighted average number of Ordinary Shares 
      in issue 
      Adjustment for:                                   454,524,101        454,093,227 
     - Assumed conversion of share awards                   235,035            277,106 
     - Assumed payment of equity deferred 
      consideration                                       4,043,940          4,043,940 
================================================  =================  ================= 
 
     Weighted average number of Ordinary Shares 
      including potentially dilutive shares             458,803,076        458,414,273 
================================================  =================  ================= 
 

7. Property, Plant and equipment

 
                                                                                                             Assets 
                                          Fixtures                                                            under 
                          Land and           &                   Plant and              Motor          Construction           Right-of-use 
                          buildings       fittings               machinery             vehicles          (restated)                  asset                 Total 
     Group                 GBP'000        GBP'000                 GBP'000              GBP'000              GBP'000                GBP'000                GBP'000 
===================  ==============  =============  ======================  ===================  ==================  =====================  ===================== 
 
       Cost 
     At 1 January 
      2019                    9,990          1,373                  10,551                  170                 228                    743                 23,055 
     Additions                   88            236                     252                   17                 825                    647                  2,065 
     Exchange 
      differences             (392)           (60)                   (566)                   11                (13)                   (16)                (1,036) 
     Transfers                   74             21                     321                    -               (416)                      -                      - 
     Disposals                    -           (18)                   (283)                 (20)                (10)                   (33)                  (364) 
===================  ==============  =============  ======================  ===================  ==================  =====================  ===================== 
     At 31 December 
      2019                    9,760          1,552                  10,275                  178                 614                  1,341                 23,720 
===================  ==============  =============  ======================  ===================  ==================  =====================  ===================== 
 
      Accumulated 
      depreciation 
     At 1 January 
      2019                    1,596          1,103                   7,044                  100                   -                      -                  9,843 
     Charge for the 
      year                      286            133                     737                   19                   -                    337                  1,512 
     Exchange 
      differences              (68)           (52)                   (415)                    4                   -                      2                  (529) 
     Disposals                    -           (18)                   (249)                 (20)                   -                      -                  (287) 
===================  ==============  =============  ======================  ===================  ==================  =====================  ===================== 
     At 31 December 
      2019                    1,814          1,166                   7,117                  103                   -                    339                 10,539 
===================  ==============  =============  ======================  ===================  ==================  =====================  ===================== 
     Net book value 
      at 31 
      December 
      2019                    7,946            386                   3,158                   75                 614                  1,002                 13,181 
===================  ==============  =============  ======================  ===================  ==================  =====================  ===================== 
 
       Cost 
     At 1 January 
      2020                    9,760          1,552                  10,275                  178                 614                  1,341                 23,720 
     Additions                   63            122                     340                   54               1,052                    518                  2,149 
     Exchange 
      differences                85             26                     412                 (30)                  18                   (14)                    497 
     Transfers                  302          (285)                     928                    -               (945)                      -                      - 
     Disposals                    -           (26)                   (146)                  (1)                 (4)                  (245)                  (422) 
-------------------  --------------  -------------  ----------------------  -------------------  ------------------  ---------------------  --------------------- 
     At 31 December 
      2020                   10,210          1,389                  11,809                  201                 735                  1,600                 25,944 
-------------------  --------------  -------------  ----------------------  -------------------  ------------------  ---------------------  --------------------- 
 
      Accumulated 
      depreciation 
     At 1 January 
      2020                    1,814          1,166                   7,117                  103                   -                    339                 10,539 
     Charge for the 
      year                      302            128                     902                   23                   -                    489                  1,844 
     Exchange 
      differences               (4)             22                     300                 (18)                   -                    (2)                    298 
     Transfers                  188          (188)                       -                    -                   -                      -                      - 
     Disposals                    -           (26)                   (105)                    -                   -                  (245)                  (376) 
-------------------  --------------  -------------  ----------------------  -------------------  ------------------  ---------------------  --------------------- 
     At 31 December 
      2020                    2,300          1,102                   8,214                  108                   -                    581                 12,305 
-------------------  --------------  -------------  ----------------------  -------------------  ------------------  ---------------------  --------------------- 
 
     Net book value 
      at 31 
      December 
      2020                    7,910            287                   3,595                   93                 735                  1,019                 13,639 
-------------------  --------------  -------------  ----------------------  -------------------  ------------------  ---------------------  --------------------- 
 

8. Intangible assets

 
                                         Trademarks, 
                                          trade name 
                                                 and            Customer         Trade       Development 
                          Goodwill          licences       relationships       secrets             costs       Software         Total 
     Group                 GBP'000           GBP'000             GBP'000       GBP'000           GBP'000        GBP'000       GBP'000 
===================  =============  ================  ==================  ============  ================  =============  ============ 
 
       Cost 
     At 1 January 
      2019                  27,543             3,257              16,294        19,159             9,362              -        75,615 
     Additions                   -               171                   -             -               527            259           957 
     Transfer                    -              (42)                   -             -                 -             42             - 
     Disposals                   -                 -                   -             -             (462)              -         (462) 
     Exchange 
      differences          (1,172)             (587)               (714)         (723)             (367)            (2)       (3,565) 
===================  =============  ================  ==================  ============  ================  =============  ============ 
     At 31 December 
      2019                  26,371             2,799              15,580        18,436             9,060            299        72,545 
===================  =============  ================  ==================  ============  ================  =============  ============ 
 
      Accumulated 
      amortisation 
     At 1 January 
      2019                   2,631             2,496               9,489        12,691             6,535              -        33,842 
     Disposals                   -                 -                   -             -             (462)              -         (462) 
     Exchange 
      differences             (81)             (374)               (405)         (426)             (245)              -       (1,531) 
     Charge for the 
      year                       -               267               1,274           876               512              -         2,929 
===================  =============  ================  ==================  ============  ================  =============  ============ 
     At 31 December 
      2019                   2,550             2,389              10,358        13,141             6,340              -        34,778 
===================  =============  ================  ==================  ============  ================  =============  ============ 
 
     Net book value 
      at 
      31 December 
      2019                  23,821               410               5,222         5,295             2,720            299        37,767 
===================  =============  ================  ==================  ============  ================  =============  ============ 
     Cost 
     At 1 January 
      2020                  26,371             2,799              15,580        18,436             9,060            299        72,545 
     Additions                   -               146                   -             -               586            282         1,014 
     Disposals                   -                 -                   -             -           (5,482)              -       (5,482) 
     Exchange 
      differences              632               372                (39)           620               289             12         1,886 
===================  =============  ================  ==================  ============  ================  =============  ============ 
     At 31 December 
      2020                  27,003             3,317              15,541        19,056             4,453            593        69,963 
===================  =============  ================  ==================  ============  ================  =============  ============ 
 
      Accumulated 
      amortisation 
     At 1 January 
      2020                   2,550             2,389              10,358        13,141             6,340              -        34,778 
     Disposals                   -                 -                   -             -           (5,474)              -       (5,474) 
     Exchange 
      differences               55               201                (47)           401               231              -           841 
     Charge for the 
      year                       -               357               1,245           919               246              -         2,767 
===================  =============  ================  ==================  ============  ================  =============  ============ 
     At 31 December 
      2020                   2,605             2,947              11,556        14,461             1,343              -        32,912 
===================  =============  ================  ==================  ============  ================  =============  ============ 
 
     Net book value 
      at 
      31 December 
      2020                  24,398               370               3,985         4,595             3,110            593        37,051 
===================  =============  ================  ==================  ============  ================  =============  ============ 
 

9. Dividends

In December 2020, the Company paid a final dividend for 2019 of 1p per ordinary share, at a total value of GBP4,550,000. Subject to continuing strong performance and the needs of the business, the Board intends to follow a progressive dividend policy. The Directors propose, subject to approval at the Company's next Annual General Meeting, the payment of a final dividend for 2020 of 1.1p per EKF Ordinary share held on 4 November 2021. Payment will be made on 1 December 2021. The expected total value is GBP5,005,000.

In addition to the cash dividend described above, in December 2020 the Company made a distribution in specie whereby, with the exception of a single "golden" share, the Company's shareholding in Trellus Health Limited was distributed to ordinary shareholders of the Company at a total value of GBP3,810,000. The fair value per EKF share was 0.8374p. Because the investment in Trellus was made on an arm's length basis within 6 months of the dividend, the Board judged the fair value of the dividend payment to be identical to the value of the investment.

10. Cash generated by operations

 
                                                Group          Group 
                                        =============  ============= 
                                                 2020           2019 
                                              GBP'000        GBP'000 
======================================  =============  ============= 
     Profit before tax                         15,356          5,518 
     Adjustments for: 
     - Depreciation                             1,844          1,512 
     - Amortisation                             2,767          2,929 
     - Warranty claim                         (1,414)          (367) 
     - (Profit)/loss on disposal 
      of fixed assets                            (22)             14 
     - Loss on disposal of intangible 
      assets                                        8              - 
     - Share-based payments                     4,775          2,118 
     - Dividend received                         (31)              - 
     - Fair value adjustment                    1,516            281 
     - Foreign exchange                            26             86 
     - Bad debt written down                       45            212 
     - Net finance (income)/cost                   23           (15) 
     Changes in working capital 
     - Inventories                            (2,557)             37 
     - Trade and other receivables            (3,426)          (327) 
     - Trade and other payables                 1,888        (5,479) 
======================================  =============  ============= 
     Net cash generated by operations          20,798          6,519 
======================================  =============  ============= 
 

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