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Surgical Innovations Group Plc LSE:SUN London Ordinary Share GB0004016704 ORD 1P
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Surgical Innovations Group PLC Final Results

25/03/2021 7:00am

UK Regulatory (RNS & others)


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RNS Number : 4155T

Surgical Innovations Group PLC

25 March 2021

Surgical Innovations Group plc

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

Final Results

Audited results for the year ended 31 December 2020

Surgical Innovations Group plc (AIM: SUN), the designer, manufacturer and distributor of innovative medical technology for minimally invasive surgery, reports its audited financial results for the year ended 31 December 2020.

Trading in the second half of the year recovered sharply, demonstrating the resilience of the underlying business. The immediate outlook continues to be affected by the ongoing wave of the Covid-19 pandemic in many territories. Looking further ahead, the increasing focus on sustainable healthcare and the reduction of plastic waste in a surgical environment present exciting growth prospects in the second half of 2021, especially in the light of pent-up demand for elective surgery.

Operational highlights:

   --    Protected core skills and capabilities throughout pandemic 
   --    Streamlined and improved operational and regulatory processes 
   --    Reinforced international distribution partnerships 
   --    Broad international engagement provides diversification of risk effects 
   --    Environmentally sustainable product ranges gaining market share in UK and overseas 
   --    Successful UK launch of Cellis Breast Pocket range in Q4 

Financial highlights:

   --    Revenues reduced by 41% to GBP6.33m (2019: GBP10.73m) with low point passed in May 2020 
   --    Second half revenue up 44% over first half at GBP3.74m (H1: GBP2.59m) 
   --    Underlying gross margin (before net manufacturing cost) up 110bps at 44.4% (2019: 43.3%) 
   --    Adjusted EBITDA(1) loss of GBP0.66m, (2019: GBP1.45m profit) 
   --    Adjusted operating loss before tax(1)  of GBP1.61m (2020: GBP0.38m profit) 
   --    Adjusted loss per share of 0.19p (2019: earnings of 0.05p) 
   --    Raised GBP2.05m of equity (net of costs) to bolster cash resources 
   --    Cash generated from operations GBP1.07m (2019: GBP0.67m) 

-- Net cash(2) at end of period of GBP3.10m (2019: GBP0.47mIncreased financial headroom(3) to GBP5.78m (2019: GBP1.78m)

1 Adjusted EBITDA and adjusted operating (loss)/ profit are stated before deducting non-recurring exceptional costs of GBP0.11m

(2019: GBP0.18m), amortisation and impairment of intangibles (including acquisition costs) of GBP1.47m (2019: GBP0.98m) and share based payment costs of GBP0.12m (2019: GBP0.19m).

   2        Net cash equals cash less bank debt excluding IFRS16 lease obligations 
   3        Cash plus available headroom under revolving credit facility 

Post period highlights:

   --    Group revenue in first two months is 11% ahead of comparable period in the prior year 
   --    Dexter robot obtained CE mark to facilitate UK distribution in 2021 
   --    Launch of the Green Surgery Challenge by the Centre for Sustainable Healthcare in the UK 

-- Signed new agreements to expand product ranges and routes into US market, with Adler and Microline

-- Company well positioned to benefit from increased backlog in elective surgery cases across all markets

Chairman of SI, Nigel Rogers, said:

" Trading in the first two months of the current year continues to be constrained by the effects of the Covid-19 pandemic. Despite this, group revenue is 11% ahead of the corresponding period last year; a period in which our key markets were largely unaffected. This indicates the continuing resilience of the business, however, given the continued uncertainty of the global pandemic, we will look to reinstate guidance at a later date when there is greater clarity on the timing of the expected recovery in elective surgery from our partners and customers.

"Whilst the UK market is unsurprisingly down by almost a third compared with last year, key international markets are showing strong growth, especially in the US and Japan. European demand is more muted, and likely to remain so at least through the first half of the year. Encouragingly, whilst demand in the UK has been suppressed, we are beginning to see early-stage signs that the UK market is recovering and expect this to sharply improve in the second quarter, with momentum building through the year as the backlog of elective surgery cases is tackled. We also expect to outperform the UK market due to new business wins during the downturn.

"Since the beginning of 2021, we have completed several key partnership agreements to expand our reach in the US market and secure a broader range of products for UK distribution. We have also made continued progress in developing the sustainability message, and in product development, where we expect to extend the SI branded range through the launch of a number of new products in the second half of the year.

"Accordingly, having demonstrated strength and resilience throughout 2020, the Group is now ideally positioned to build exciting growth as markets continue to recover."

For further information please contact:

 
 Surgical Innovations Group plc                                     www.sigroupplc.com 
 David Marsh, CEO                                             Tel: +44 (0)113 230 7597 
 Charmaine Day, Co Sec & GFC 
 
 Walbrook PR (Financial PR & Investor    Tel: +44 (0)20 7933 8780 or si@walbrookpr.com 
  Relations) 
 Paul McManus / Lianne Cawthorne                Mob: +44 (0)7980 541 893 / +44 (0)7584 
                                                                               391 303 
 
 N+1 Singer (NOMAD &Broker)                                        +44 (0)20 7496 3000 
 Aubrey Powell / Rachel Hayes 
 

About Surgical Innovations Group plc

Strategy

The Group specialises in the design, manufacture, sale and distribution of innovative, high quality medical products, primarily for use in minimally invasive surgery. Our product and business development is guided and supported by a key group of nationally and internationally renowned surgeons across the spectrum of minimally invasive surgical activity.

We design and manufacture and source our branded port access systems, surgical instruments and retraction devices which are sold directly in the UK home market through our subsidiary, Elemental Healthcare, and exported widely through a global network of trusted distribution partners. Many of our products in this field are based on a "resposable" concept, in which the products are part re-usable, part disposable, offering a high quality and environmentally responsible solution at a cost that is competitive against fully disposable alternatives.

Elemental also has exclusive UK distribution for a select group of specialist products employed in laparoscopy, bariatric and metabolic surgery, hernia repair and breast reconstruction.

In addition, we design and develop medical devices for carefully selected OEM partners, and have also collaborated with a major UK industrial partner to provide precision engineering solutions to complex problems outside the medical arena.

We aim for our brands to be recognised and respected by healthcare professionals in all major geographical markets in which we operate. We provide by development, partnership or acquisition a broad portfolio of cost effective, procedure specific surgical instruments and implantable devices that offer reliable solutions to genuine clinical needs in the operating theatre environment.

Operations

The Group currently employs approximately 100 people across two sites in the UK. Product design, engineering and manufacturing are carried out at the SI site in Yorkshire. Commercial activities including marketing, UK distribution and international sales and marketing are based at Elemental Healthcare, a wholly owned subsidiary based in Berkshire.

Further information

Further details of the Group's businesses are available on websites:

www.sigroupplc.com

www.surginno.com , and

www.elementalhealthcare.co.uk

Investors and others can register to receive regular updates by email at si@walbrookpr.com

Surgical Innovations Group plc

Chairman's Statement

For the year ended 31 December 2020

I am pleased to report that the Company has withstood the immensely testing pressures presented by the global Covid-19 pandemic, and will soon emerge from this most difficult period ready to recover quickly. This will be driven by the need for our customers and global distribution partners to meet the backlog of surgical treatment that has accumulated.

Financial Overview

Revenue for the year was 41% lower than in the prior year at GBP6.33m (2019: GBP10.73m) as a consequence of the effects of the Covid-19 pandemic, which had an adverse impact on the level of elective surgery carried out in all major markets and across all product areas. These effects were evident from early in the year and reached a low point in May, recovering strongly in the third quarter until the resurgence of a second wave of infections at the end of the year.

Revenue for the second half of the year was 44% higher than the first half at GBP3.74m (H1: GBP2.59m), although still approximately one third below the level achieved in the second half of 2019 at GBP5.63m. Market conditions in the UK reflected the obvious pressures on the NHS, and waiting lists for elective surgery continued to increase to unprecedented levels, leading to a reduction in revenues of over 40% in the second half of the year. Similar effects were experienced in European markets and the US. On a more positive note, sales in Asia Pacific increased by almost 50% in the second half of the year, primarily arising from additional market share gained in Japan where healthcare workloads were especially well managed. Revenue in other territories, where our business is mostly driven by healthcare tender activity, was also sharply reduced.

Underlying gross profit margin (before net manufacturing costs) for the year increased by 110 basis points to reach 44.4% (2019: 43.3%), however there was a significant reduction in factory activity levels due to the pandemic, leading to an under-recovery of overheads. This resulted in a reported gross margin of 20.1% against a prior year figure of 40.3%.

Operating expenses, excluding depreciation and amortisation, impairment of intangibles, exceptional costs and share based payments, reduced by GBP0.34m to GBP2.55m (2019: GBP2.89m), and the Group benefited from UK Government Coronavirus Job Retention Scheme relief of GBP0.59m included in other income. As a result, Adjusted EBITDA amounted to a loss of GBP0.66m (2019 profit of GBP1.45m), and the adjusted Loss Before Taxation(1) was GBP1.61m (2019: profit of GBP0.38m). These results were also much improved in the second half of the year over the first, however, with adjusted EBITDA(1) of GBP0.2m (H1: loss of GBP0.46m) and adjusted Loss Before Taxation(1) of GBP0.68m (H1: loss of GBP0.93m).

Exceptional items relate to employee termination payments, listing fees and costs associated with accessing the Coronavirus Business Interruption Loan Scheme (CBILS) totalling GBP0.11m (2019 GBP0.18m). In addition to these exceptional costs, there were further non-cash, non-recurring costs totalling GBP0.2m (2019: GBPnil) arising from events directly attributable to the Covid pandemic. These comprised (i) GBP0.12m of additional inventory provisions following a re-assessment of the commercial viability of certain elements of the product portfolio, which were discontinued prematurely to generate efficiency and regulatory cost savings, and (ii) holiday pay accrued amounting to GBP0.08m arising whilst employees were furloughed during year, and hence were unable to take holidays on the normal cycle. It is anticipated that these holidays will be taken in 2021, rather than being settled in cash.

1 Reconciliation of adjusted KPI measures included in the Operating and Financial Review

Following an impairment review of the goodwill arising on the acquisition of Elemental Healthcare, an impairment charge of GBP1.44m was recognised in June 2020 as a result on the initial impact on the pandemic; in the second half of the year the trading forecast has improved resulting in a reversal of GBP0.31m giving a total impairment of GBP1.13m at the year-end (2019: GBP1.63m). The trading environment continues to be impacted in the current year and therefore the Directors have adopted a cautious approach to forecasting future net inflows for this cash generating unit.

Development expenditure was tested for impairment. Management have reviewed the initial costs for the Illuminno project (which were previously recognised as an Investment in an associated company). The development changes implemented and the direction of the portfolio mean that the nature of these costs now provide no future economic benefit, and an impairment of GBP0.18m has therefore been recognised.

The Group recorded a corporation tax credit of GBPnil (2019: credit of GBP0.001m) and a deferred tax credit of GBP0.03m (2019: charge GBP0.02m). The tax charge on Elemental Healthcare has been relieved through Group losses. Overall, the Group continues to hold substantial tax losses on which it holds a cautious view, and consequently the Group has chosen not to recognise those losses fully. During the year, the Group submitted an enhanced Research and Development claim in respect of 2019 amounting to GBP0.13m. This claim has been paid in the current year and therefore will not be recognised in 2020.

Adjusted net earnings per share amounted to a loss of 0.19p (2019: 0.05p). The net total comprehensive income for the year amounted to a loss of GBP3.28m (2019: loss of GBP2.60m).

The Company has taken sensible precautions to protect the availability of cash resources and generated GBP1.04m of cash from operations despite market conditions (2019: GBP0.59m). The Company also negotiated an agreement to reschedule the repayment terms and financial covenants on existing term loan facilities and drew down an additional GBP1.5m under the CBILS in March 2020. These facilities are repayable in May 2022. In September 2020, the Company also successfully raised GBP2.05m of additional equity (net of costs of GBP0.15m) in a share placing with new and existing holders.

At 31 December 2020, the Group had available cash balances of GBP5.28m (2019: GBP1.28m), net cash resources (taking into account bank loans outstanding) of GBP3.10m (2019: GBP0.47m), and financial headroom (comprising net cash plus undrawn facilities) of GBP5.78m (2019: GBP1.78m). Financial covenants have been complied with in full and will continue to be tested on a quarterly basis. The Board is satisfied that these resources provide the appropriate platform from which to benefit from the anticipated recovery in demand in coming months, and accordingly, the directors conclude that it continues to be appropriate to prepare the Annual Report and Accounts on a going concern basis.

Operational and Regulatory activity

The pandemic has presented numerous disruptions to the business, both revenue and operationally, however the Company has effectively utilised this period to bring significant improvements to a number of key operating functions. A detailed internal review of products processes and regulatory compliance procedure was conducted to enable the Company to simplify and streamline in a number of key areas, promote more efficient working practices now activity is rebuilding and accelerate the introduction of new product going forward.

The Company has highlighted on a number of occasions the investment made in QA/RA to ensure that the demands of moving to Medical Devices Regulatory (MDR) and the new UKCA mark are satisfied. This investment has proved invaluable as an exhaustive programme of audits during lockdown and beyond has been managed effectively, resulting in the renewal of CE and Medical Device Single Audit Program (MDSAP) certification. In addition, the team has supported Advanced Medical Solutions plc as the Fix8 device progresses to approval for use in the US market. Crucial work on planning for the transition to MDR framework is on track and the streamlining of our Quality Management System will allow for faster delivery of new products. Under normal circumstances, implementing the upgrading of facilities can pose significant challenges, however the pause in normal activity allowed completion of the assembly room refurbishment and the on-going complex upgrade to the Clean Room facility.

Furthermore, the hiatus allowed the Company to bring forward plans to make of a number of end of life SKU's obsolete, to focus sales and marketing activity on the introduction of new products and line extensions. The coming year will see the introduction of a number of new products that will enhance selling opportunities in key markets.

Our "sustainability in surgery" messaging continues to resonate in key markets post Covid-19, none more so than the UK with the NHS and governing medical bodies endorsing the drive for a more sustainable healthcare system. During the break in elective surgery, the Elemental team has been working closely with a number of large NHS Trusts to plan product evaluations based on the reduction of plastic waste. The evaluation process recommenced in August 2020, following the first lockdown, and has continued to be rolled out to a number of hospitals in at least five large NHS Trusts. Clearly the second wave has impacted the speed of the evaluations, but to date the outlook remains promising. Assuming these evaluations conclude positively, transition to the relevant product ranges is expected to take place during the first half of 2021. The Green Surgery Challenge, an initiative between the Company, Centre for Sustainable Healthcare ('CSH'), and the Royal Colleges of Surgeons in both England and Scotland was launched in early 2021, providing a unique platform for our portfolio of resposable devices to deliver their sustainability credentials. Additional sustainability-driven evaluations are ongoing with three major US general procurement organisations (GPOs), and the messaging is reaching an ever receptive audience around the globe.

Since the end of the period, in the UK we have experienced a return to growth in the number of surgeries, initially for cancer and life-threatening conditions. More recently, the UK is managing the gradual return to elective surgery both in the NHS and the co-opted private sector, evidenced by the increasing sales of our procedure kits for Laparoscopic Cholecystectomy (Gallbladder removal) and Hernia Repair.

The expected growth in elective surgery since the year end has clearly been impacted by the second wave, however the NHS has maintained a higher level of non COVID activity, especially compared to the initial wave in March/April last year. We anticipate a rapid return to normal activity over the coming year, especially as it appears that the second wave is now in decline in the UK and the effects of the vaccine programme are beginning to become apparent.

In April 2020, Meccellis was awarded CE certification for its new Cellis Breast Pocket matrix, an innovative porcine collagen matrix used in breast reconstruction and distributed exclusively in the UK by Elemental Healthcare. The initial evaluations at three UK hospitals took place in the summer and went well, with the surgeons commenting positively on the handling and cosmetic results. The full UK market launch of Cellis Breast Pocket commenced in Q4, and although the number of cases remains lower than anticipated as a consequence of the second wave, the product has been very well accepted by surgeons.

Internationally our key partners are reporting a similar picture to the UK, seeing a managed resumption in elective surgery during the final quarter. It seems that healthcare systems around the globe are adapting to the emerging spikes of Covid-19 by providing designated treatment pathways to manage patients suffering from Coronavirus within a hospital, such that elective procedures can continue elsewhere in safety.

In addition to the resumption of growth driven by the sustainability credentials of our products and third-party products such as the Cellis Breast Pocket described above, we have also identified a number of new product development opportunities for internal work-up. Each of these represents a response to customer needs which have been shared with us, or to distributor or OEM feedback. In each case, plans have been developed to enable Surgical Innovations to meet a broader range of product needs for its customers' and partners'.

Robotics continues to be an area of surgery that is generating much innovation and is providing an opportunity for Elemental to leverage its strong relationships with UK key opinion leaders to introduce the Dexter robot, manufactured by Swiss Company, DistalMotion. The Dexter received CE certification in December 2020 and provides a business model that overcomes the budgetary obstacles of capital expenditure in the NHS.

Additionally, the Company's expertise in the development of laparoscopic instrumentation is further highlighted by the partnerships in the field of Surgical Robotics, where it is aiding key players in this market to find solutions for accessing the abdominal cavity. Our industry partners have recognised the expertise we bring to the relationship and we are currently working with a number of key players in the sector.

Business development and our international network

During the year we have worked closely with our international distribution partners to maintain timely supply of our products to healthcare providers despite the difficulties experienced in anticipating demand levels. This process has cemented our relationships, which will provide mutual benefits as trading begins to normalise this year.

The APAC region showed strong growth throughout the pandemic and this has continued into the current year. Japan, in particular, has continued to show strong growth and we remain confident that the planned line extensions will offer further opportunity in this market.

We have also carried out a root and branch review of our routes to market in the United States, the world's largest market for healthcare products. In December 2020, we announced a new nationwide distribution agreement with Adler Instrument Company Inc. for our full range of handheld surgical instruments. The agreement has five years duration commencing on 1 February 2021 and brings a significant increase in the number of surgical territory managers promoting SI-branded products across the US.

Following the year end in February 2021, we announced the signature of a new five-year distribution agreement with Microline Surgical Inc. to introduce our YelloPort+Plus and YelloPort Elite Access Devices to the US market following FDA approval gained in late 2019. These ranges are highly complementary to those of Microline Surgical Inc. which are distributed exclusively in the UK though a longstanding relationship with Elemental Healthcare, which has recently been extended for a further three years.

Brexit

Detailed preparations were made in advance of the expiry of the transitional period on 31 December 2020, securing the necessary registrations and documentation required to provide the best assurance possible to avoid disruption. This has been kept to a minimum, although the demands of additional paperwork and possible supply and delivery delays will continue to be a factor in the early part of the current year.

People

The challenges presented by the Covid-19 pandemic are not only economic, as these extend to critical issues of health, safety and well-being of our people. Their spirit, determination and professionalism have been exemplary, and have facilitated business continuity and high levels of customer service through some difficult times. On behalf of the Board and shareholders, I once again express our sincere thanks and hope that a return to more normal times is not too far away. The Company would also like to recognise the efforts and sacrifices of all the NHS and Key Workers for their contribution in caring for us all during the pandemic.

Current trading and outlook

Trading in the first two months of the current year continues to be constrained by the effects of the Covid-19 pandemic. Despite this, group revenue is 11% ahead of the corresponding period last year; a period in which our key markets were largely unaffected. This indicates the continuing resilience of the business, however, given the continued uncertainty of the global pandemic, we will look to reinstate guidance at a later date when there is greater clarity on the timing of the expected recovery in elective surgery from our partners and customers.

Whilst the UK market is unsurprisingly down by almost a third compared with last year, key international markets are showing strong growth, especially in the US and Japan. European demand is more muted, and likely to remain so at least through the first half of the year. Encouragingly, whilst demand in the UK has been suppressed we are beginning to see early-stage signs that the UK market is recovering and expect this to sharply improve in the second quarter, with momentum building through the year as the backlog of elective surgery cases is tackled. We also expect to outperform the UK market due to a number of new business wins during the downturn.

Since the beginning of 2021, we have completed several key partnership agreements to expand our reach in the US market and secure a broader range of products for UK distribution. We have also made continued progress in developing the sustainability message, and in product development, where we expect to extend the SI branded range through the launch of a number of new products in the second half of the year.

Accordingly, having demonstrated strength and resilience throughout 2020, the Group is now ideally positioned to build exciting growth as markets continue to recover.

Nigel Rogers

Chairman

24 March 2021

Operating and Financial Review

Key Performance Indicators ("KPIs")

The Group considers the key performance indicators of the business to be:

 
                                                  2020       2019       Target Measure 
                        Gross profit (before 
 Underlying Gross        net manufacturing 
  Profit Margin          cost)/ revenue            44.4%      43.3%          >40% 
                       ------------------------  ---------  ---------  --------------- 
 Direct Gross Profit 
  Margin                Gross profit / revenue     20.1%      40.4%          >40% 
                       ------------------------  ---------  ---------  --------------- 
 Net Cash)(1) /(Net     Cash less debt            GBP3.10m   GBP0.47m        N/A 
  Debt) 
                       ------------------------  ---------  ---------  --------------- 
 

1 Net debt comprised of bank borrowings (GBP2.18m), excluding leases under the adoption of IFRS16.

Reconciliation of adjusted KPI / measures;

 
                              EBITDA        Loss before 
                               (2)           taxation 
 As stated                     GBP(0.89)m    GBP(3.31)m 
                             ------------  ------------ 
 Amortisation of intangible             -      GBP0.16m 
  acquisition costs 
                             ------------  ------------ 
 Impairment of product                  -      GBP0.18m 
  development intangibles 
                             ------------  ------------ 
 Impairment of Goodwill                 -      GBP1.13m 
                             ------------  ------------ 
 Share based payments            GBP0.12m      GBP0.12m 
                             ------------  ------------ 
 Exceptional items               GBP0.11m      GBP0.11m 
                             ------------  ------------ 
 Adjusted Measure             GBP (0.66)m   GBP (1.61)m 
                             ------------  ------------ 
 
 
 Earnings per share                        EPS 
 Basic EPS                                 (0.39)p 
                                          ----------- 
 Loss attributable to shareholders         (GBP3.28)m 
                                          ----------- 
 Add: Share based payments                 GBP0.12m 
                                          ----------- 
 Add: Amortisation of intangible           GBP0.16m 
  acquisition costs 
                                          ----------- 
 Add: Exceptionals                         GBP0.11m 
                                          ----------- 
 Add: Impairment of product development    GBP0.18m 
  intangibles 
                                          ----------- 
 Add: Impairment of Goodwill               GBP1.13m 
                                          ----------- 
 Adjusted profit attributable to           GBP(1.58)m 
  shareholders 
                                          ----------- 
 Adjusted EPS                              (0.19)p 
                                          ----------- 
 

2 EBITDA is defined as earnings before interest, taxation, depreciation and amortisation (including impairment). EBITDA is calculated as operating loss of GBP(3.17)m adding back depreciation GBP0.56m, amortisation GBP0.41m and impairment GBP1.31m.

Use of adjusted measures

Adjusted KPIs are used by the Group to understand underlying performance and exclude items which distort comparability, as well as being consistent with broker forecasts and measures. The method of adjustments is consistently applied but may not be comparable with those used by other companies.

Revenue and margins

Revenues reduced by 41% in 2020 to GBP6.33m (2019: GBP10.73m). Despite revenues reaching a low point in May during the first wave, the second half of the year recovered in line with management expectations increasing by 44% from the first half of the year, which was 66% of sales in the same prior year comparative period (2019: HY2:5.63m). Direct gross margins (before net manufacturing) remained within target range at 44.4% (2019: 43.3%) with the reportable gross margin at 20.1% (2019:40.4%) attributable to reduced factory activity during the majority of the year with full production recommencing in October.

Sales by product type

 
 
 
  GBPm           2020    2019    % change 
SI Brand        3.41    5.84     - 42% 
               ======  ======  ========== 
Distribution    2.31    3.10      -25% 
               ======  ======  ========== 
OEM             0.61    1.79     - 66% 
               ======  ======  ========== 
Total           6.33   10.73     - 41% 
               ======  ======  ========== 
 

Sales by geography and product type

 
 
 
  GBPm                HY1 2020    HY2 2020    % change 
SI Brand: 
                    ==========  ==========  ========== 
UK                     0.41        0.48        17% 
                    ==========  ==========  ========== 
US                     0.29        0.59        103% 
                    ==========  ==========  ========== 
EUR                    0.30        0.43        43% 
                    ==========  ==========  ========== 
APAC                   0.32        0.36        13% 
                    ==========  ==========  ========== 
ROW                    0.12        0.11        -1% 
                    ==========  ==========  ========== 
Total                  1.44        1.97        37% 
                    ==========  ==========  ========== 
 
Distribution (UK)      0.84        1.47        75% 
                    ==========  ==========  ========== 
 
OEM Brand: 
                    ==========  ==========  ========== 
UK                     0.26        0.20        -23% 
                    ==========  ==========  ========== 
US                     0.05        0.10        100% 
                    ==========  ==========  ========== 
                       0.31        0.30        -3% 
                    ==========  ==========  ========== 
 
Total revenue          2.59        3.74        44% 
                    ==========  ==========  ========== 
 

Revenues from the sale of Surgical Innovations Brand products reduced by 42% during the year overall, however revenues for the second half year increased by 37% from the first half of the year. Whilst the UK market has been impacted by the COVID-19 pandemic the NHS has shown resilience and the impact on revenue has been less severe than the initial wave. The NHS's fulfilment of the 'Net-Zero' obligations on sustainability will align well with our Resposable(R) SI branded range. Sales in Continental Europe were slower to recover, however towards the end of the year order values increased by 43% from the first half of the year and continued to be consistent.

SI Brand sales in the US despite the pandemic suffered a reduction of 52% overall, however US sales have remained strong, increasing to 103% from the first half of the year. The agreement with Adler Instruments brings a significant increase in the number of surgical territory managers which will promote the SI branded scissor sales providing a route to market. In addition, the distribution agreement with Microline for the Resposable trocar range will provide a significant opportunity for growth.

SI Brand revenues from the APAC region showed a strong increase of 49%, mostly led by Japan. Further growth is still anticipated in the current year. SI brand sales in the Rest of the World was down by 63%; typically made up of tender based business this market has been impeded by the pandemic.

OEM revenues overall reduced by 66%, predominantly affected by the UK market with both precision engineering (non-medical in the travel industry) and medical both impacted by the pandemic. We anticipate a slower return to growth in medical OEM sales in the current year, but at this early stage have no visibility of further precision engineering revenues.

Distribution sales lowered by 25% year on year despite a continuation of constrained activity levels in the NHS, especially for elective procedures. The revenue increased by 75% in the second half of the year compared to the first and continues to be at similar levels in the current year, showing improved pathways for treating patients. As the Covid vaccination program is rolled out across the UK we anticipate growth in this market.

Adjusted EBITDA

Adjusted EBITDA is a measure of the business performance. The Group uses this as a proxy for understanding the underlying performance of the Group. This measure also excludes the items that distort comparability including the charge for share based payments as this is a non-cash expense normally excluded from market forecasts.

Adjusted EBITDA significantly decreased in 2020 to a loss of (GBP0.66m) (2019: GBP1.45m), mainly as a result of the pandemic. The Group took immediate precautions to preserve the cash in the business, which meant that the majority of the employees were placed on furlough, with a gradual phased return as operations came back online whilst maintaining a small team to support key product lines and customers, and the benefit of this scheme are reported in Other Income amounting to GBP0.59m (2019: GBPNil). In addition, the Company implemented short-term salary reductions for all personnel above the furlough threshold, up to an upper limit of 50% for Non-Exec Board directors, resulting in a further reduction in operating costs of approximately GBP0.16m (2019: GBPNil). The group does not intend to use the furlough scheme for further support to the same level in the current year.

Exceptional items relate to employee termination payments, listing fees and costs associated with accessing the Coronavirus Business Interruption Loan Scheme (CBILS) totalling GBP0.11m (2019 GBP0.18m). In addition to these exceptional costs, there were further non-cash, non-recurring costs totalling GBP0.2m (2019: GBPnil) arising from events directly attributable to the Covid pandemic. These comprised (i) GBP0.12m of additional inventory provisions following a re-assessment of the commercial viability of certain elements of the product portfolio, which were discontinued prematurely to generate efficiency and regulatory cost savings, and (ii) holiday pay accrued amounting to GBP0.08m arising whilst employees were furloughed during the year, and hence were unable to take holidays on the normal cycle.

Capital expenditure on tangible assets remained significantly low due to cash preservation, with only GBP0.04m in additions (2019: GBP0.20m) set against a depreciation charge of GBP0.35m excluding Right of use assets (2019: GBP0.42m). Capex plans are currently being reviewed intended to improve the manufacturing facilities as a continuation of the improvements that were started in 2019.

Interest on bank and finance lease obligations for 2020 resulted in net interest payable of GBP0.14m (2019: GBP0.16m). In May 2020 the Company agreed with its bankers to suspend normal capital repayments totalling GBP0.15m to be repaid at the end of the term, which is now 31 May 2022. In addition the bank waivered the March covenant and provided less restrictive covenants until July 2021. The flexibility of the existing GBP0.50m revolving credit facility was maintained and in addition, the Company has agreed a new facility of GBP1.50m under the Coronavirus Business Interruption Loan Scheme (CBILS). The CBILS arrangement is interest free until May 2021 and repayable at the end of the term in May 2022, which is in line with the existing loan facilities. In aggregate total borrowing at the 31 December 2020 stood at GBP2.18m (2019: GBP0.81m).

Following an impairment review of the goodwill arising on the acquisition of Elemental Healthcare, an impairment charge of GBP1.44m was recognised in June 2020 as a result on the initial impact on the pandemic; in the second half of the year the trading forecast have improved resulting in a reversal of GBP0.31m giving a total impairment of GBP1.13m at the year end (2019: GBP1.63m). The trading environment continues to be impacted in the current year and therefore the Directors have adopted a cautious approach to forecasting future net inflows for this cash generating unit.

Development expenditure was tested for impairment. Management have reviewed the initial costs for the Illuminno project (transferred from Investment in associate), and given the development changes implemented and the direction of the portfolio it was decided that the nature of these costs provide no future economic benefit, an impairment of GBP0.18m has been recognised.

The Group recorded a corporation tax credit of GBPnil (2019: credit of GBP0.001m) and a deferred tax credit of GBP0.03m (2019: charge GBP0.02m). The tax charge on Elemental Healthcare has been relieved through Group losses. Overall, the Group continues to hold substantial tax losses on which it holds a cautious view, and consequently the Group has chosen not to recognise those losses fully. During the year, the Group submitted an enhanced Research and Development claim in respect of 2019 amounting to GBP0.13m. This claim has been paid in the current year and therefore will not be recognised in 2020.

Trade receivables were significantly lower at the year-end GBP0.96m (2019: GBP1.95), affected by the impact on revenue, with negligible bad debts or overdue balances. Inventories were notably lower at GBP2.05m compared to GBP2.93m in 2019.

Stock holdings were driven down throughout the year with minimal inventory build required until production recommenced in October. Safety stock levels continue to be monitored in the current year in order to support incremental customer requirements. During the year the Group's management re-evaluated the product portfolio, with a view to streamlining the current product range to allow both efficiency and regulatory cost savings. In addition, a slow-moving inventory provision specifically caused by the pandemic has also been recognised, subsequently resulting in an impairment of inventory of GBP0.12m charged to cost of sales as a non-recurring item.

Trade creditors decreased over the same period, which reflected the Group's continued approach towards managing working capital. The Group took advantage of the ability to defer payments during the pandemic. Alternative payment arrangements were agreed with major creditors mainly in relation to PAYE, VAT and rent, some of which has been paid back during the year.

Deferred creditors balance at the year end totalled GBP0.24m (2019: nil); this balance will be cleared in the current year.

The Group generated net cash from operations of GBP1.04m (2019: GBP0.59m) primarily as a result of the working capital movements described above. In September 2020, the Group raised equity of GBP2.05m (net of associated costs) to provide investment capital and additional financial headroom. The Group closed the year with net cash balances of GBP3.10m, compared with opening net cash of GBP0.47m.

Principal risks and uncertainties

The management of the business and the nature of the Group's strategy are subject to a number of risks which the Directors seek to mitigate wherever possible. The principal risks are set out below.

 
Issue                   Indication     Risk and description               Mitigating actions 
                         of risk 
                         on prior 
                         year 
Funding risk            Risk has        The Group currently has             Liquidity and covenant compliance 
                         reduced         a mixture of borrowings             is monitored carefully across varying 
                         from prior      comprising a GBP0.68m               time horizons to facilitate short 
                         year            loan, GBP0.5m rolling               term management and also strategic 
                                         credit facility and GBP1.5m         planning. This monitoring enables 
                                         CBILS arrangement. The              the management team to consider 
                                         Group remains dependent             and to take appropriate actions 
                                         upon the support of these           within suitable time frames. 
                                         funders and there is a 
                                         risk that failure in particular     In May 2020, the Company agreed 
                                         to meet covenants attaching         with its bankers to suspend normal 
                                         to the rolling credit               capital repayments totaling GBP0.15m 
                                         facility could have financial       to be repaid at the end of the 
                                         consequences for the Group.         term which is now 31 May 2022, 
                                                                             in addition the bank provided less 
                                                                             restrictive covenants until July 
                                                                             2021. The flexibility of the existing 
                                                                             GBP0.50m revolving credit facility 
                                                                             was maintained and in addition, 
                                                                             the Company has agreed a new facility 
                                                                             of GBP1.50m under the Coronavirus 
                                                                             Business Interruption Loan Scheme 
                                                                             (CBILS). The CBILS arrangement 
                                                                             is interest free until May 2021 
                                                                             repayable at the end of the term 
                                                                             in May 2022, which is in line with 
                                                                             the existing loan facilities. 
 
                                                                             In aggregate total borrowing at 
                                                                             31 December 2020 was GBP2.18m (2019: 
                                                                             GBP0.81m). Financial covenants 
                                                                             will continue to be tested on a 
                                                                             quarterly basis. 
 
                                                                             In addition, during September 2020 
                                                                             the Company raised equity of GBP2.05m 
                                                                             (net of associated costs) to provide 
                                                                             investment capital and additional 
                                                                             financial headroom. 
 
                                                                             The bank continue to be a supportive 
                                                                             stakeholder. 
                        =============  =================================  =========================================== 
Covid-19 and            Risk has        The escalation in the               All government guidance has been 
 business interruption   reduced         spread of Covid-19 in               monitored closely and followed 
                         from prior      the UK poses a threat               immediately by advisory notices 
                         year            to the continuation of              to all employees, and provision 
                                         business operations if              of the appropriate guidance and 
                                         there is a widespread               cleaning materials to minimise 
                                         infection in any of our             any effect. 
                                         facilities or amongst 
                                         the workforce.                      Where staff members or their close 
                                                                             contacts have presented with symptoms, 
                                                                             they have been asked to self-isolate 
                                                                             away from company premises and 
                                                                             inform us quickly of any contact 
                                                                             with other employees which may 
                                                                             be cause for concern. 
 
                                                                             The government continues to be 
                                                                             supportive and schemes provided 
                                                                             could be used to relieve a substantial 
                                                                             portion of the wage costs of any 
                                                                             staff members on sick leave, in 
                                                                             self-isolation, or furloughed due 
                                                                             to a diminution in their current 
                                                                             workload as a consequence of Covid-19. 
 
                                                                             There is also a risk of further 
                                                                             delay of elective surgery whilst 
                                                                             the waves in the pandemic continue. 
                                                                             Management continue to monitor 
                                                                             closely the rapidly changing environment 
                                                                             and have devised a series of mitigating 
                                                                             actions, designed to preserve cash 
                                                                             resources and maintain delivery 
                                                                             of essential products to our customers 
                                                                             and distributors. The majority 
                                                                             of the workforce that can work 
                                                                             from home continue to do so until 
                                                                             further notice to safeguard other 
                                                                             employees. 
                        =============  =================================  =========================================== 
Customer concentration  Existing        The Group exports to over           The majority of distributors, including 
                         risk remains    thirty countries and                the mostly significant, are well 
                         at the          distributors around the             established and their relationship 
                         same level      world, but certain distributors     with the Group spans many years. 
                         from prior      are material to the financial       Credit levels and cash collection 
                         year            performance and position            is closely monitored by management, 
                                         of the Group. As disclosed          and issues are quickly elevated 
                                         in note 2 to the financial          both within the Group and with 
                                         statements, one customer            the distributor. 
                                         accounted for 11.2% of 
                                         revenue in 2020 and the 
                                         loss, failure or actions 
                                         of this customer could 
                                         have a severe impact on 
                                         the Group. 
                        =============  =================================  =========================================== 
 
 
Issue             Indication     Risk and description                     Mitigating actions 
                   of risk 
                   on prior 
                   year 
Foreign exchange  Existing        The Group's functional currency          The Group monitors currency 
 risk              risk remains    is UK Sterling; however, it              exposures on an on- 
                   at the          makes significant purchases              going basis and enters into 
                   same level      in Euros and US Dollars.                 forward currency arrangements 
                   from prior                                               where considered appropriate 
                   year            The US Dollars are mitigated             to mitigate the risk of material 
                                   by US Dollar sales by creating           adverse movements in exchange 
                                   a natural hedge. The Group               rates impacting upon the business. 
                                   transferred their Euro customers         Euro and US Dollar cash balances 
                                   onto a Euro based pricing                are monitored regularly and 
                                   structure in 2018 to mitigate            spot rate sales into sterling 
                                   risk by again, creating a                are conducted when significant 
                                   natural hedge.                           currency deposits have accumulated. 
                                                                            The accounting policy for 
                                                                            foreign exchange is disclosed 
                                                                            in accounting policy 1d. 
                  =============  =======================================  ===================================== 
Regulatory        Existing        As an international business             The Group has a dedicated 
 approval          risk remains    a significant proportion of              Compliance department which 
                   at the          the Group's products require             assists product development 
                   same level      registration from national               teams with support as required 
                   from prior      or federal regulatory bodies             to minimise the risk of regulatory 
                   year            prior to being offered for               approval not being obtained 
                                   sale. The majority of our                on new products and ensures 
                                   major product lines have FDA             that the Group operates processes 
                                   approval in the US and we                and procedures necessary to 
                                   are therefore subject to their           maintain relevant regulatory 
                                   audit and inspection of our              approvals. 
                                   manufacturing facilities. 
                                                                            Whilst there is no guarantee 
                                   There is no guarantee that               that this will be sufficient, 
                                   any product developed by the             the Group has invested in 
                                   Group will obtain and maintain           people with the appropriate 
                                   national registration or that            experience and skills in this 
                                   the Group will always pass               area which mitigates this 
                                   regulatory audit of its manufacturing    risk significantly. 
                                   processes. Failure to do so 
                                   could have severe consequences 
                                   upon the Group's ability to 
                                   sell products in the relevant 
                                   country. 
                  =============  =======================================  ===================================== 
Brexit            Existing        The Group exports to a number            The Group has successfully 
                   risk remains    of different countries with              reassigned all of the Company's 
                   at the          sales to Europe accounting               product certifications from 
                   same level      for 11.4% of 2020 revenue.               BSI Notified Body 0086 (UK) 
                   from prior      As well as exporting, the                to BSI Netherlands Notified 
                   year            Group imports goods both for             Body 2797, in order to mitigate 
                                   re-sale through Distribution             any risk to regulatory clearance 
                                   revenue, as well as some raw             both in the EU and in the 
                                   materials used in manufacturing.         UK. 
 
                                   The current trade rules transitioned     Any risk to a delay in supply 
                                   on 1 January 2021. Transitional          chain has also been mitigated 
                                   arrangements made between                by the successful application 
                                   the UK and EU have caused                of Approved Economic Operator 
                                   some delay to Customs clearances         Status, which we received 
                                   due to paperwork provided                in March 2019. 
                                   by the couriers. 
                                                                            In addition to the above 
                                                                            management will continue to 
                                                                            monitor closely and mitigate 
                                                                            where possible the impact 
                                                                            on the supply chain, and in 
                                                                            particular the exports. 
                  =============  =======================================  ===================================== 
 

Going concern

The Directors have prepared forecasts for the period to March 2022 based on an evaluation of financial forecasts, sensitised to reflect a rational judgement of the level of inherent risk.

As at the start of the period, the Group had access to banking facilities, which comprised a committed GBP0.50m revolving credit facility. The revolving credit facility of GBP0.50m may be used towards meeting the Group's general working capital and other commitments. It is subject to compliance with financial covenants disclosed in the financial statement note 13. In May 2020 the Company agreed with its bankers to suspend normal capital repayments totaling GBP0.15m to be repaid at the end of the term which is now 31 May 2022, in addition the bank provided less restrictive covenants until July 2021. The flexibility of the existing GBP0.50m revolving credit facility was maintained and in addition, the Company has agreed a new facility of GBP1.50m under the Coronavirus Business Interruption Loan Scheme (CBILS). The CBILS arrangement is interest free until May 2021 repayable at the end of the term in May 2022, which is in line with the existing loan facilities. Hire purchase agreements are utilised where required.

The Group generated cash from operations of GBP1.04m (2019: GBP0.59m) primarily as a result of the working capital movements described in the operating and financial review. In September 2020, the Group raised equity of GBP2.05m (net of associated costs) to provide investment capital and additional financial headroom.

At 31 December 2020, the Group had available cash balances (excluding the unused GBP0.5m revolving credit facility) of GBP5.28m (2019: GBP1.28m), net cash resources (taking into account bank loans outstanding) of GBP2.18m (2019: GBP0.47m), and financial headroom (comprising net cash plus undrawn facilities) of GBP5.78m (2019: GBP1.78m). Financial covenants have been complied with in full and will continue to be tested on a quarterly basis. The Board is satisfied that these resources provide the appropriate platform from which to benefit from the anticipated recovery in demand in coming months, and accordingly, the directors conclude that it continues to be appropriate to prepare the Annual Report and Accounts on a going concern basis.

Charmaine Day

Group Financial Controller

24 March 2021

Con solidated statem ent of comprehensi ve income

fo r the y ear en ded 31 Dece m ber 2 0 20

 
                                                          20 20                 2019 
                                                      GBP '0 00            GBP '0 00 
--------------------------------------       ------------------  ------------------- 
 Rev enue                                 2               6,329               10,733 
 
 Cost of s a les                          2             (5,057)              (6,400) 
---------------------------------------      ------------------  ------------------- 
 G ross profit                                            1,272                4,333 
 O ther ope r ati ng e x pens es          2             (5,063)              (6,772) 
 Other Income                             3                 621                    - 
 O perating loss                                        (3,170)              (2,439) 
 Fina n ce c o sts                                        (138)                (162) 
 Fina n ce in c o me                                          1                    5 
---------------------------------------      ------------------  ------------------- 
 Loss b efore ta xation                                 (3,307)              (2,596) 
 T a x a tion credit / (charge)                              31                 (23) 
---------------------------------------      ------------------  ------------------- 
 Loss a nd total comprehensive Income                   (3,276)              (2,619) 
---------------------------------------      ------------------  ------------------- 
 
 (Loss) / Earnings per share, total 
  and continuing 
 Bas ic                                   4             (0.39p)              (0.33p) 
 Diluted                                  4             (0.39p)              (0.33p) 
---------------------------------------      ------------------  ------------------- 
 
 

The Consolidated statement of comprehensive income above relates to continuing operations.

Loss and total comprehensive income relate wholly to the owners of the parent Company.

Con solidated statem ent of changes in equ i ty

fo r the y ear en ded 31 Dece m ber 2 0 20

 
                                       Share              Share  Capital   Merger  Retained 
                                     capital            premium  reserve  reserve  earnings    Total 
                                     GBP'000            GBP'000  GBP'000  GBP'000   GBP'000  GBP'000 
-----------------------------   ------------  -----------------  -------  -------  --------  ------- 
Balance as at 1 January 2019           7,826              5,831      329    1,250     (813)   14,423 
Employee share based payment               -                  -        -        -       188      188 
Issue of share capital                   127                 73        -        -         -      200 
Total - transactions with 
 owners                                  127                 73        -        -       188      388 
Loss and total comprehensive 
 income for the period                     -                  -        -        -   (2,619)  (2,619) 
-----------------------------   ------------  -----------------  -------  -------  --------  ------- 
Balance as at 31 December 
 2019                                  7,953              5,904      329    1,250   (3,244)   12,192 
Employee share based payment               -                  -        -        -       116      116 
Issue of share capital         8       1,375                825        -        -         -    2,200 
Equity based placing fees      8                          (142)                                (142) 
Total - transactions with 
 owners                                1,375                683        -        -       116    2,174 
Loss and total comprehensive 
 income for the period                     -                  -        -        -   (3,276)  (3,276) 
-----------------------------   ------------  -----------------  -------  -------  --------  ------- 
Balance as at 31 December 
 2020                                  9,328              6,587      329    1,250   (6,404)   11,090 
-----------------------------   ------------  -----------------  -------  -------  --------  ------- 
 
 
 
Con solidated balance sheet 
 a t 31 Dece m b er 20 20 
 
 
                                                                2020            2019 
 
                                                              GBP           GBP '0 
                                                               '0 00         00 
=====================================================   ============  ============== 
A sse ts 
Non-current a ssets 
Property, p l ant and eq u ip m ent                          412                 718 
Right of use assets                                        1,030               1,241 
Intan g ib le a ss ets                                 4    6 173              7,613 
                                                           7,615               9,572 
=====================================================   ============  ============== 
Curr ent asse ts 
In v entori es                                             2,167               2,925 
T rade and other rec e i v abl es                          1,283               2,359 
 Amount due from associate                             5          -              173 
Cash at b a nk a nd in h and                               5,278               1,282 
=====================================================   ============  ============== 
                                                           8,728               6,739 
=====================================================   ============  ============== 
Total a ssets                                            16,343               16,311 
=====================================================   ============  ============== 
Equity and liabiliti es 
Equity attributable to equity holders of the p arent 
 compa ny 
Share cap ital                                         8   9,328               7,953 
Share p r em i um a c co u nt                              6,587               5,904 
Capital re s erve                                             329                329 
Merger reserve                                             1,250               1,250 
Retain ed e arni n gs                                    (6,404)             (3,244) 
=====================================================   ============  ============== 
Total e qui ty                                           11,090               12,192 
=====================================================   ============  ============== 
Non-current l i abiliti es 
Borro w ings                                           6  1,879                  515 
Deferred tax liabi l iti es                                      -                31 
Dilapidation provision                                       165                 165 
 Lease liability                                             907               1,086 
=====================================================   ============  ============== 
                                                          2,951                1,797 
=====================================================   ============  ============== 
Curr ent liabi lities 
T rade and other pa y ab l es                          7  1,449                1,518 
Accru als                                                    369                 317 
 Borrowings                                                  298                 297 
 Lease liability                                             186                 190 
=====================================================   ============  ============== 
                                                          2,302                2,322 
=====================================================   ============  ============== 
Total li abiliti es                                       5,253                4,119 
=====================================================   ============  ============== 
Total e qui ty and liabili ties                          16,343               16,311 
-----------------------------------------------------   ------------  -------------- 
 
 
 
 
Con solidated cash f l ow statement 
 fo r the y ear en ded 31 Dece m ber 2 0 20 
                                                                2020     2019 
                                                             GBP'000  GBP'000 
-----------------------------------------------------   ------------  ------- 
Cash flo ws from operating a ctivities 
Loss after tax for the year                                  (3,276)  (2,619) 
Adju stm e nts for: 
Taxation                                                        (31)       23 
Finance income                                                   (1)      (5) 
Finance costs                                                    138      162 
Other Income-CBILS interest grant                      3        (27)        - 
Depre c iati on of pro perty, p l ant and e qu i 
 pm e nt                                                         348      415 
Amorti sa t ion and impairment of i nta n gi b le 
 a s s ets                                             5       1,726    2,895 
Depreciation Right of Use assets                                 211      203 
Share-b a s ed pa ym ent cha r ge                                116      188 
Gain on disposal of fixed assets                                   -        1 
Foreign exchange                                                  42     (56) 
 Decrease/ (increase) in i n v entories                          758    (842) 
Decre a se in trade and other rec e i v abl es                 1,076      508 
Decre a se in pa y a bles                              7        (10)    (203) 
-----------------------------------------------------   ------------  ------- 
Cash generat ed from operations                                1,070      670 
T a x a tion paid                                                  -        1 
Interest received                                                  -        5 
Intere st p aid                                                 (28)     (82) 
-----------------------------------------------------   ------------  ------- 
Net cash g enerated from ope r ating activities                1,042      594 
-----------------------------------------------------   ------------  ------- 
 
  Cash flo ws from inv esting a ctivities 
Pa y men ts to ac q uire pro p erty, plant and eq 
 u i p ment                                                     (42)    (199) 
Acqu i si t ion of i n t a n gi b le a s s e ts                (113)    (317) 
Net cash used in investment activities                         (155)    (516) 
-----------------------------------------------------   ------------  ------- 
 
Repayment of bank loan                                         (150)  (1,300) 
Proceeds from CBILS                                    6       1,500        - 
Net proceeds from issue of share capital               8       2,052      201 
Repayment of lease liabilities                                 (251)    (244) 
Net cash generated from/(used in) fin anc ing a 
 ctivities                                                     3,151  (1,343) 
-----------------------------------------------------   ------------  ------- 
Net increase/(decrease) in cash and cash equivalents           4,038  (1,265) 
Cash a nd ca sh e q ui v al e nts at begi n ni ng 
 of y ear                                                      1,282    2,491 
Effective exchange rate fluctuations on cash held               (42)       56 
-----------------------------------------------------   ------------  ------- 
Cash and cash equivalents at end of year                       5,278    1,282 
=====================================================   ============  ======= 
 

Notes to the consolidat ed f inancial statem ents

1 . Group a c counting policies under IFRS

(a) Basis of prep aration

Surgical Innovations Group PLC (the "Company") is a public AIM listed company incorporated, domiciled and registered in England in the UK. The registered number is 02298163 and the registered address is Clayton Wood House, 6 Clayton Wood Bank, Leeds, LS16 6QZ.

These consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The financial statements have been prepared under the historical cost convention, are presented in Sterling and are rounded to the nearest thousand.

Going concern

The Directors have considered the available cash resources of the Group and its current forecasts and has a reasonable expectation that the Group have adequate cash resources and support to continue in operational existence for the foreseeable future, considered to be at least 12 months for the date of approval from the financial statements. Further details of the Directors' assessment are provided in the Chairman's Statement, the Operating and Financial Review and Directors' report and disclosed in note (p) of the financial statements.

New standards and amendments to standards adopted in the year

IFRS 16 COVID-19-Related Rent Concessions Amendment

As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. Such concessions might take a variety of forms, including payment holidays and deferral of lease payments. On 28 May 2020, the IASB published an amendment to IFRS 16 that provides an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs.

2 . Segm ental r eporting

Inform ati on re ported to the Bo ard, as Chief Operating Decision Makers, a nd for the purp o se of a s s es s ing perfo r ma n ce and m a k i ng in v e stm ent d e c is i o ns is organised into t hree ope r ati ng s eg m en t s. T he Group's ope r ati ng s e g m e nts u nder IFRS 8 a re as f o llo w s:

 
SI Brand           -       the re sea r ch, de v el o pm e nt, m anufa ctu re a nd d i 
                            stri buti on of SI bran d ed mi n im a lly in v a si ve de 
                            v ic es 
O E M              -       the re sea r ch, de v el o pm e nt, m anufa ctu re a nd d i 
                            stri buti on of min i m a lly in v a si ve de v i ces for third 
                            party 
                           med i c a l de v i ce co m pa n ies th r ough eith er o wn 
                            la b el or c o - b r andi ng. This now incorporates Precision 
                            Engineering, the re sea r c h, de v el o pm e nt, m anufa ctu 
                            re a nd s ale of m in i m al ly in v asi ve t ec h no l ogy 
                            pro d uc ts for precision engineering applications 
Distribution       -       Distribution of specialist medical products sold through Elemental 
                            Healthcare Ltd 
 
 
 
 

T h e me a sure of profit or l o ss f or e a ch re porta ble se g m e nt is gro ss m argin l e ss a m orti sati on of pro du ct de v e l o p ment c o sts. Asse ts a nd w orki ng c api t al a re mo n itored on a Group b a s i s, w ith no s e para te d i s c l o sure of as s et by s eg m ent ma de in the man a ge m ent a c cou nts, and h ence no se p arate a s set d i sc lo sure is pro v id ed he r e. T he f o l l o w ing se g me ntal anal ys is h as been prod u ced to p r o v ide a re c on c il i ation betw e en t he i nfo r mati on used by the chief operating d e c i si on m a k er w ithin t he b u si n e ss a nd t he info r mati on as it is pre se nted u nder IFRS.

 
                                                               S I     Distribution   OEM      T o 
  Y e a r e n d ed 31 De ce m ber 20 20                        Br a       GBP'000      GBP     ta l* 
                                                                nd                    '0 00     GBP 
                                                               GBP                             '0 00 
                                                              '0 00 
==========================================================  =========  ============  ======  ======== 
Rev enue                                                        3,410         2,311     608     6,329 
==========================================================  =========  ============  ======  ======== 
Result 
Segment re sult                                                 (271)         (392)     209     (454) 
Unall o ca t ed e x pens es                                                                   (3,337) 
Other Income                                                                                      621 
----------------------------------------------------------  ---------  ------------  ------  -------- 
(Loss) from operations                                                                        (3,170) 
Fina n ce in c o me                                                                                 1 
Fina n ce c o sts                                                                               (138) 
==========================================================  =========  ============  ======  ======== 
(Loss) b efore ta xation                                                                      (3,307) 
T a x credit                                                                                       31 
==========================================================  =========  ============  ======  ======== 
(Loss) for the y ear                                                                          (3,276) 
----------------------------------------------------------  ---------  ------------  ------  -------- 
*There were no revenues transactions between the segments 
 during the year 
 
 Inc l uded w ithin t he s eg m ent/o perati ng re 
 s u lts are t he f o llo w i ng s ign ifi c ant no 
 n - c a sh i t e m s: 
                                                               S I     Distribution   OEM      T o 
  Y e a r e n d ed 31 De ce m ber 20 20                        Br a       GBP '0       GBP     ta l 
                                                                nd          00        '0 00     GBP 
                                                               GBP                             '0 00 
                                                              '0 00 
==========================================================  =========  ============  ======  ======== 
Amorti sa t ion of i nta n gi b le a s s ets                      250      162         -       412 
Impairment of i nta n gi b le a s s ets                           182     1,132        -      1,314 
Additions to intangibles                                          113       -          -       113 
 

Unall o ca t ed e x pens es f or 2 0 20 i n clu de s a l es a nd m ark eti ng c os ts (GBP 185,0 0 0), r es e arch and de v elo p me nt c o s ts (GBP1,099,000), centr al o v e r hea ds (GBP790, 00 0), Direct (Elemental Healthcare) sales & marketing overheads (GBP1,039,000), share based payments (GBP116,000), exceptionals (GBP108,000) note 3.

 
                                         S I Br   Distribution   OEM      T o 
  Y e a r e n d ed 31 De ce m ber 2019     a nd      GBP'000      GBP     ta l* 
                                          GBP '0                 '0 00     GBP 
                                            00                            '0 00 
=======================================  =======  ============  ======  ======== 
Rev enue                                  5,840      3,101      1,792     10,733 
=======================================  =======  ============  ======  ======== 
Result 
Segment re sult                           1,510      (792)       720       1,438 
Unall o ca t ed e x pens es                                              (3,877) 
=======================================  =======  ============  ======  ======== 
(Loss) from operations                                                   (2,439) 
Fina n ce in c o me                                                            5 
Fina n ce c o sts                                                          (162) 
=======================================  =======  ============  ======  ======== 
(Loss) b efore ta xation                                                 (2,596) 
T a x charge                                                                (23) 
=======================================  =======  ============  ======  ======== 
(Loss) for the y ear                                                     (2,619) 
=======================================  =======  ============  ======  ======== 
 

* There were no revenues transactions between the segments during the year

 
 
  Inc l uded w ithin t he s eg m ent re s u lts are 
  t he f o llo w i ng i t e m s: 
                                                        S I Br    Distribution   OEM     T o 
  Y e a r e n d ed 31 De ce m ber 2019                   a nd        GBP '0       GBP    ta l 
                                                        GBP '0         00        '0 00    GBP 
                                                          00                             '0 00 
====================================================  ==========  ============  ======  ====== 
Amorti sa t ion of i nta n gi b le a s s ets                 291       351        -        642 
Impairment of i nta n gi b le a s s ets                      628     1,625        -      2,253 
Additions to intangibles                                     317          -        -       317 
 

Unall o ca t ed e x pens es f or 2 0 19 i n clu de s a l es a nd m ark eti ng c os ts (GBP 293,0 0 0), r es e arch and de v elo p me nt c o s ts (GBP922,000), centr al o v e r hea ds (GBP904, 00 0), Direct (Elemental Healthcare) sales & marketing overheads (GBP1,427,000), share based payments (GBP188,000), exceptionals (GBP184,000), less Right of Use (GBP41,000).

Disaggregation of gross margin

 
 
 
  The Group has disaggregated margins 
  in the following table: 
                                               2020              2019 
                                            GBP'000           GBP'000 
--------------------------------------    ---------  ---------------- 
 Revenue                                      6,329            10,733 
 Cost of Sales                              (3,519)           (6,082) 
 Underlying Gross Margin                      2,810             4,651 
 Underlying Gross Margin %                   44.39%            43.33% 
 Net Cost of Manufacturing*                 (1,538)             (318) 
----------------------------------------  ---------  ---------------- 
 Contribution Margin                          1,272             4,333 
----------------------------------------  ---------  ---------------- 
 Contribution Margin %                       20.10%            40.37% 
----------------------------------------  ---------  ---------------- 
 

*Underlying net cost of manufacturing with the government support of the CJRS scheme of GBP270,000 allocated in other Income and non-recurring costs in note 3 of GBP120,000 added back to adjust the net costs of Manufacturing to GBP1,148,000 results in an underlying contribution margin of 26.26%.

Disaggregation of revenue

The Group has disaggregated revenues in the following table:

 
Y e a r e n d ed 31 De ce m ber 2020      S I Br     Distribution   OEM     T o 
                                           a nd         GBP '0       GBP    ta l 
                                          GBP '0          00        '0 00    GBP 
                                            00                              '0 00 
=====================================  ============  ============  ======  ====== 
United Kingdom                                 889      2,311       457     3,657 
Europe                                         726        -          -      726 
US                                             882        -           151  1,033 
APAC                                            681       -          -      681 
Rest of World                                   232       -          -      232 
-------------------------------------  ------------  ------------  ------  ------ 
                                              3,410     2,311       608    6,329 
=====================================  ============  ============  ======  ====== 
 
 
Y e a r e n d ed 31 De ce m ber 20 19      S I Br     Distribution   OEM      T o 
                                            a nd         GBP '0       GBP     ta l 
                                           GBP '0          00        '0 00     GBP 
                                             00                               '0 00 
======================================  ============  ============  ======  ======== 
United Kingdom                                 1,613     3,101      1,497      6,211 
Europe                                         1,283       -          -       1,283 
US                                             1,852       -           295    2,147 
APAC                                             456       -          -          456 
Rest of World                                    636       -          -         636 
--------------------------------------  ------------  ------------  ------  -------- 
                                               5,840     3,101      1,792    10,733 
======================================  ============  ============  ======  ======== 
 

Rev enues are a ll o ca t ed g eog r aph i ca l ly on t he b a s is of w here re v enu es w ere re c ei v ed f rom a nd not from the ul t i m ate f i n al

des t ina t io n of u se. During 2020 GBP708,0 00 (11.2%) of t he Group's re v e n ue d epe n ded on one

  distributor   in the SI Bra nd se g ment (2019: GBP1,226,000 (11.4%)). 

Sales of goods were GBP6,307,000 (2019: GBP10,374,000) and sales relating to services in the UK were GBP22,000 (2019: GBP359,000).

3. Other Income comprised:

 
 
                                  2020    2019 
                               GBP'000           GBP'000 
 
CJRS                               594                 - 
CBILS-Interest free (12mths)        27                 - 
-----------------------------  -------  ---------------- 
                                   621                 - 
 

Other Income disclosed above relates to amounts received from the Coronavirus Job Retention Scheme (CJRS). As part of the response to the COVID-19 pandemic the government introduced the CJRS . This allowed all employees on a PAYE scheme to designate some or all employees as 'furloughed workers'. The Group accessed this Government support during April to November 2020 in order to continue paying part of the furloughed employees' salaries and at the same time protecting them from potential redundancy.

The Group claimed GBP594,000 through CJRS during 2020, GBP270,000 of the GBP594,000 claimed related to manufacturing employees and the remainder of the GBP324,000 related to various departments in other operating expenses.

4. Earnin gs per ordina ry share

Basic e arnings per ordinary share

T h e ca l cul ati on of ba s ic earn i n gs p er o rd inary s hare for t he y ear e n ded 31 De ce m ber 20 20 w as based up on the loss att r i b utab le to ord inary s hare h ol d ers of ( GBP3,276,000 ) (2019:( GBP2,619 ,000)) a nd a w eig hted a v erage n u mb er of ordi n ary s hares outs t an d ing f or t

he  y ear e nd ed  31 De ce m ber 2 0 20   of 834,762,898 ( 20 19: 789,845,629). 

Diluted e arnings per ordi n a ry share

T h e ca l cul ati on of di l uted earni ngs per o r din ary sha re for t he y ear end ed 31 Dec e m ber 2 020 w as ba s ed u pon t he loss attri b uta b le to ord inary s hare h olde rs of ( GBP 3,276,000) (2019: ( GBP 2,619,000)) a n d a w eighted a v erage n u mber of ordin ary sha r es o utstan d ing f or the y ear end ed 31 De c em b er 2020 of 836,824,355 (2019: 891,313,476). The anti-dilutive effect of unexercised shares options has not been taken into account and therefore the diluted earnings per share is equal to the basic earnings per share.

Adjusted e arnings per ordi n a ry share

T h e ca l cul ati on of adjusted earni ngs per o r din ary sha re for t he y ear end ed 31 Dec e m ber 2 020 w as ba s ed u pon t he adjusted (loss)/profit attri b uta b le to ord inary s hare h olde rs (profit before exceptional and amortisation and impairment costs relating to the acquisition of Elemental Healthcare, impairment of capitalised development costs and share based payments) of ( GBP1,576,000) (2019: GBP355,000) a n d a w eighted a v erage n u mber of ordin ary sha r es o utstan d ing f or the y ear end ed 31 De c em b er 2020 of 834,762,898 (2019: 789,845,629).

 
 
  No. of sh a r es used in calc ulat i on of e ar nings 
  p er o r dina ry s h a re ('0 00 s) 
                                                                         20 20                        2019 
                                                                          No. of                       No. of 
                                                                          Shares                       Shares 
========================================================  ======================  =========================== 
Bas ic ea r ni n gs p er s hare                                      834,763                          789,846 
Diluti ve eff e ct of une x erc i sed s hare o pti 
 o ns                                                                 2,061               101,467 
========================================================  ======================  =========================== 
Diluted ea r nin gs p er s hare                                   836,824                 891,313 
========================================================  ======================  =========================== 
 
 
5. Intangible assets                    Capitalised            Single                         Exclusive 
                                        development       use product        Goodwill          Supplier          Total 
                                              costs         knowledge                        Agreements 
                                                             transfer 
                                            GBP'000           GBP,000         GBP'000           GBP'000        GBP'000 
Cost 
At 1 J anuary 2 019                          13,099               225           8,180             1,799         23,303 
Additi ons                                      317                 -               -                 -            317 
At 1 J anuary 2 020                          13,416               225           8,180             1,799         23,620 
Additi ons                                      113                 -               -                 -            113 
Reclassification of 
 investment 
 in associate*                                  173                 -               -                 -            173 
A t 31 December 2 0 20                       13,702               225           8,180             1,799         23,906 
===========================  ======================  ================  ==============  ================  ============= 
A cc umulated a mortis 
ation 
At 1 J anuary 2 019                        (11,826)                 -               -           (1,286)       (13,112) 
Charge f or t he y ear                        (291)                 -               -             (351)          (642) 
Impairment provision                          (403)             (225)         (1,625)                 -        (2,253) 
At 1 J anuary 2 020                        (12,520)             (225)         (1,625)           (1,637)       (16,007) 
Charge f or t he y ear                        (250)                 -               -             (162)          (412) 
Imp a irm e nt p r o v is i 
 on*                                          (182)                 -         (1,132)                 -        (1,314) 
===========================  ======================  ================  ==============  ================  ============= 
A t 31 December 2 0 20                     (12,952)             (225)         (2,757)           (1,799)       (17,733) 
===========================  ======================  ================  ==============  ================  ============= 
Carr ying amount 
A t 31 December 2 0 20                          750                 -           5,423                 -          6,173 
===========================  ======================  ================  ==============  ================  ============= 
At 31 De ce m ber 2 019                         896                 -           6,555               162          7,613 
===========================  ======================  ================  ==============  ================  ============= 
At 1 January 2019                             1,273               225           8,180               513         10,191 
===========================  ======================  ================  ==============  ================  ============= 
 

Goodwill and intangibles are allocated to the cash generating unit (CGU) that is expected to benefit from the use of the asset.

Capitalised development costs

Capitalised development costs represent expenditure incurred in developing new products that fulfil the requirements met for capitalisation as set out in paragraph 57 of IAS38. These costs are amortised over the future commercial life of the product, commencing on the sale of the first commercial item, up to a maximum product life cycle of ten years, and taking account of expected market conditions and penetration.

Investment in associate

The reclassification of Amount due from associate represents development expenses incurred in collaboration with an associated Company Illuminno Ltd of which Surgical Innovations Group Plc holds 33% shareholding. The value of the investment is GBP33 and is not considered material to the Group. In 2020, an agreement, subject to contract, has allowed the costs in Illuminno Ltd to be transferred on the balance sheet as intangible product development costs.

During the year management did a further review and given the development changes implemented and the direction of the portfolio it was decided that the nature of these costs provide no future economic benefit, an impairment of GBP0.18m has been recognised, Additional expenditure for the Illuminno portfolio consisting of GBP0.15m has been capitalised and continues to be a viable development project.

Goodwill

The Group tests goodwill at each reporting date for impairment and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverable amount of a cash generating unit ( CGU) is determined based on value in use calculations. These calculations use cash flow projections based on five year financial budgets approved by management. Cash flows beyond the five year period are extrapolated using estimated long term growth rates.

An impairment review is carried out annually for goodwill. Goodwill arose on the acquisition of Elemental Healthcare Limited in 2017 and is related to both the Distribution and SI Brand segments of the Group. Elemental Healthcare Limited is considered to be a separate CGU of the Group whose recoverable amount has been calculated on a value in use basis by reference to discounted future cash flows over a five year period plus a terminal value. Principal assumptions underlying this calculation are the growth rate into perpetuity of 1.5% (2019:1.5%) and a pre-tax discount rate of 15% (2019:15%) applied to anticipated cash flows. In addition, the value in use calculation assumes a gross profit margin of 40.6% (2019:40.6%) using past experience of sales made and future sales that were expected at the reporting date based on anticipated market conditions

The trading environment in the UK market has been significantly impacted by the pandemic throughout 2020, continuing into 2021, Accordingly, the directors have adopted a cautious approach to forecasting future net inflows for this CGU.

On this basis, the recoverable amount of the cash-generating unit does not exceed its carrying value and in view of this excess, the Directors consider the impairment calculation to be unduly sensitive to changes to the above assumptions. In June 2020 a provision for impairment was recognised totaling GBP1.44m due the impact of the pandemic, but upon improvement in trading forecasts in the second half of the year the directors are of the opinion that a reversal of GBP0.31m is required, therefore the impact on impairment at the year end is GBP1.13m. (2019: GBP1.63m). If the pre-tax discount rate increased the impact on the impairment would be approximately a further GBP0.58m and if rate decreased the impairment would go down by GBP0.71m.

In the longer term, the directors remain confident that: (1) Elemental Healthcare has a robust role as a key vendor to the NHS for a range of elective procedures; (2) gains in market share are likely as a result of the environmental and cost advantages of key products; and (3) a growing backlog of elective procedures will be adequately funded and carried out once the current challenges in the NHS have been overcome. The directors continue to place significant value on the business and operations of Elemental as an integral part of the group strategy.

 
 
 
6. Borrowings                2020    20 19 
Bank Loan                 GBP'000       GBP 
                                         '000 
========================  =======  ========== 
Current liabilities           298         297 
Non-current liabilities     1,879         515 
========================  =======  ========== 
Lease liabilities 
========================  =======  ========== 
Current liabilities           186         190 
Non-current liabilities       907       1,086 
------------------------  -------  ---------- 
                            3,270       2,088 
========================  =======  ========== 
 

Bank loan

The sterling bank loan provided by Yorkshire Bank on 1 August 2017 for a five year term was split into two loan agreements A and B. Loan A of GBP1.5m is subject to quarterly payments of GBP0.075m which commenced on 31 October 2017, totaling repayments GBP0.3m per annum at an interest rate of LIBOR plus 3% per annum. Loan B of GBP1m is interest only at a rate of LIBOR plus 3.5% per annum with a repayment in full by the termination date of 31 July 2022. During 2019 the Board elected to repay GBP1.0m of term loan B in advance of the due date, from available cash resources. On 31 December 2020 the remaining balance of the term loans was GBP0.68m. The bank has made available a Revolving Credit Facility (RCF) of up to GBP0.5m for working capital and other purposes.

The RCF and loan agreements are subject to compliance with financial covenants which measure cash flow to debt service and EBITDA, interest cover and leverage. If the RCF is drawn down the rate of interest applicable to each loan for its interest period will be LIBOR plus 2.8% per annum and it will be secured by a floating charge over the assets of the Group. At 31 December 2020, no amount was drawn down (2019: GBPnil).

In May 2020 the Company agreed with its bankers to suspend normal capital repayments totaling GBP0.15m to be repaid at the end of the term which is now 31 May 2022, in addition the bank waived the March covenant and provided less restrictive covenants until July 2021. The flexibility of the existing GBP0.50m revolving credit facility was maintained and in addition, the Company has agreed a new facility of GBP1.50m under the Coronavirus Business Interruption Loan Scheme (CBILS). The CBILS arrangement is interest free until May 2021 repayable at the end of the term in May 2022, which is in line with the existing loan facilities.

In aggregate total borrowing at the 31 December 2020 was GBP2.18m (2019: GBP0.81m). Financial covenants will continue to be tested on a quarterly basis.

 
 Changes in liabilities arising from financing    Non-current       Current   Obligations   Total 
  activities                                        loans and     loans and         under 
                                                   borrowings    borrowings       finance 
                                                                                   leases 
 At 1 January 2020                                        515           297             -     812 
                                                 ------------  ------------  ------------  ------ 
 Cash flows                                             1,500         (150)             -   1,350 
                                                 ------------  ------------  ------------  ------ 
 Transfer between non-current and current               (150)           150             -       - 
                                                 ------------  ------------  ------------  ------ 
 Interest accruing in the period                           14             1             -      15 
                                                 ------------  ------------  ------------  ------ 
 At 31 December 2020                                    1,879           298             -   2,177 
                                                 ------------  ------------  ------------  ------ 
 

In respect of the borrowing facilities in place at the reporting date, the group is required to comply with the following financial covenants at each quarter end in respect of the prior 12-month period:

EBITDA in respect of:

(i) the 3 month period expiring on 30 June 2020 shall not exceed

a negative amount greater than -GBP775,000;

(ii) the 6 month period expiring on 30 September 2020 shall not

exceed a negative amount greater than -GBP1,379,000;

(iii) the 9 month period expiring on 31 December 2020 shall not

exceed a negative amount greater than -GBP1,379,000;

 
 
 7.Trade and                                                                                               2020        2019 
 other payables                                                                                         GBP'000     GBP'000 
===============  ==============================================================================================  ========== 
T rade payables                                                                                             749       1,026 
Corporation tax                                                                                               -           - 
payable 
Other tax and 
 social 
 security                                                                                                   164         173 
Other payables                                                                                              294         319 
                                                                                                              3 
Deferred 
 creditors                                                                                                  242           - 
===============  ==============================================================================================  ========== 
                                                                                                          1,449       1,518 
===============  ==============================================================================================  ========== 
 

Deferred creditors within 2020 relates to tax and social security (GBP88,000), VAT (GBP70,000), Rent and Rates (GBP58,000), Admin expenses (GBP26,000). All deferred creditors are payable within 12 months.

The Group and Company's financial liabilities have contractual maturities (including interest payments where applicable) which are summarised below.

 
                                    Amounts   Amounts    Amounts 
                                     due in    due in     due in 
===============================  ==========  =========  ==========  =============== 
                                  less than  2-5 years  5-10 years  Total financial 
  As at 31 December 2020             1 year                             liabilities 
                                    GBP'000    GBP'000     GBP'000          GBP'000 
===============================  ==========  =========  ==========  =============== 
T rade payables                         749          -           -              749 
Other payables                          294          -           -              294 
Deferred creditors                      242          -           -              242 
Lease liabilities-Current               235          -           -              235 
Lease liabilities -Non-current            -        725         371            1,096 
Bank borrowings-Current                 354          -           -              354 
Bank borrowings-Non-current               -      1,904           -            1,904 
===============================  ==========  =========  ==========  =============== 
                                      1,874      2,629         371            4,874 
===============================  ==========  =========  ==========  =============== 
 
 
                                    Amounts   Amounts    Amounts 
                                     due in    due in     due in 
===============================  ==========  =========  ==========  ============ 
                                  less than  2-5 years  5-10 years         Total 
  As at 31 December 2019             1 year                            financial 
                                    GBP'000    GBP'000     GBP'000   liabilities 
                                                                         GBP'000 
===============================  ==========  =========  ==========  ============ 
T rade payables                       1,026          -           -         1,026 
Other payables                          319          -           -           319 
Lease liabilities-Current               250          -           -           250 
Lease liabilities -Non-current            -        785         547         1,332 
Bank borrowings-Current                 328          -           -           328 
Bank borrowings-Non-current               -        546           -           546 
===============================  ==========  =========  ==========  ============ 
                                      1,923      1,331         547         3,801 
===============================  ==========  =========  ==========  ============ 
 

8. Share Capital

Shares in issue reconciliation (Authorised, allott ed, ca l led up a nd f ully p aid)

 
                                                        2020           2019 
  Opening no of shares in issue                         795,316,177    782,566,177 
                                                      -------------  ------------- 
  Issued in satisfaction of share options exercised     -              12,750,000 
                                                      -------------  ------------- 
  Issued in relation to fundraising*                    137,500,000 
                                                      -------------  ------------- 
  Closing number of shares in issue                     932,816,177    795,316,177 
                                                      -------------  ------------- 
 

*During September 2020 the Company raised equity of GBP2.05m (net of associated costs) to provide investment capital and additional financial headroom.

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