ERGO.L Regulatory News (ERGO)

PRESS RELEASE

Interim results for the six months ended 30 June 2023

Strong, resilient H1 performance: solid growth and positive outlook as announced in the trading update on 25 July 2023

· Revenue £76.7 million, up 10% over H1 2022

· Adjusted EBITDA £15.7 million, up 14% over H1 2022

· Strong order book of £310 million with growth of 9% year over year (11% adjusting for foreign exchange) providing excellent visibility into H2 2023 and beyond

· New business pipeline growth of 30% over H1 2022, reflecting the benefits of commercial investments

· Cash balance of £26.0 million, and debt free with available facilities of up to £80.0 million

· Shareholders are referred to the announcement on 4th September 2023 of a recommended cash offer of 1,350p per Ergomed share by Eden AcquisitionCo Limited, a newly incorporated company controlled and owned by funds advised by Permira Advisers LLP

Guildford, UK - 22 September 2023: Ergomed plc (LSE: ERGO) ("Ergomed"' or the "Company" or the "Group"), a Company focused on providing specialised services to the pharmaceutical industry, today announces its interim results for the six months ended 30 June 2023.

Financial Summary

Notes:

(1) Adjusted EBITDA is defined as operating profit for the period plus depreciation and amortisation, share-based payment charge, acquisition related consideration and costs (Note 7 to the financial statements).

(2) Basic adjusted earnings per share is defined as basic earnings per share after adjustment for items referred to in Note 3 to the financial statements.

Dr Miroslav Reljanović, Executive Chairman of Ergomed, said:

"As announced in the trading update on 25 July 2023, Ergomed has made a very solid start to the year demonstrating continued growth and reflecting the global appeal of our offering to our clients, the strength of our business model and the resilience of the markets we address. We have continued to execute on our strategy to transform the business by investing in technology and our commercial infrastructure and believe the potential of these investments is reflected in the robust year over year growth of our new business pipeline. In addition, we have maintained our focus on prudent cost management, and executing our disciplined approach to M&A. We expect to deliver on our expectations for financial results for 2023, and we look forward with confidence to the rest of this year and beyond."

Key Highlights

· Revenue of £76.7 million (H1 2022: £69.9 million) increased by 10% (up 7% in constant currency)

· Clinical Research Services (CRO) division delivered strong growth with revenue up 11% (up 8% in constant currency) to £38.0 million (H1 2022: £34.3 million)

· Pharmacovigilance (PV) division delivered strong growth with revenue up 9% (up 6% in constant currency) to £38.7 million (H1 2022: £35.6 million)

· Gross profit up 9% to £31.6 million (H1 2022: £28.9 million)

· Adjusted EBITDA up 14% to £15.7 million (H1 2022: £13.8 million)

· Basic adjusted EPS up 8% to 21.9p (H2 2022: 20.4p)

· Cash and cash equivalents of £26.0 million (31 December 2022: £19.1 million)

· Order book of £310 million, up 5% in H1 2023 (31 December 2022: £295 million) and up 9% over H1 2022 (11% adjusting for foreign exchange)

· New business pipeline growth of 30% over H1 2022 reflecting the benefits of commercial investments

· Available debt facilities of up to £80.0 million

· Revenue and adjusted EBITDA for full year 2023 anticipated to be in line with market expectations

Enquiries:

About Ergomed plc

Ergomed provides specialist services to the pharmaceutical industry spanning all phases of clinical development, post-approval pharmacovigilance and medical information. Ergomed's fast-growing services business includes an industry-leading suite of specialist pharmacovigilance (PV) solutions, integrated under the PrimeVigilance brand, a full range of high-quality clinical research and trial management services under the Ergomed brand (CRO) and mission-critical regulatory compliance and consulting services under the ADAMAS brand. For further information, visit: http://ergomedplc.com

Forward-looking Statements

Certain statements contained within the announcement are forward-looking statements and are based on current expectations, estimates and projections about the potential results of Ergomed plc ("Ergomed") and the industry and markets in which Ergomed operates, the Directors' beliefs and assumptions made by the Directors. Words such as "expects", "anticipates", "should", "intends", "plans", "believes", "seeks", "estimates", "projects", "pipeline" and variations of such words and similar expressions are intended to identify such forward-looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties, outcomes of negotiations and due diligence and assumptions that are difficult to predict, qualify or quantify. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements or expectations. Among the factors that could cause actual results to differ materially are: the general economic climate, competition, interest rate levels, loss of key personnel, the result of legal and commercial due diligence, the availability of financing on acceptable terms and changes in the legal or regulatory environment.

These forward-looking statements speak only as of the date of this announcement. Ergomed expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Ergomed's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.

INTERIM MANAGEMENT REPORT

OPERATIONAL REVIEW

Introduction

Ergomed operates in growing end markets, benefiting from tailwinds of increasing complexity, regulatory requirements and outsourcing rates across the rare disease, oncology, pharmacovigilance, and GXP audit markets. The global regulatory environment also continues to evolve, with increasing legislation that creates complexity and drives the need for specialised outsourcing.

Ergomed delivered a period of robust operational and financial performance in the first half of 2023, achieving significant strategic progress, in part driven by investments in commercial infrastructure and technology.

Ergomed continues to demonstrate its resilience and competitive strength, as shown by a strong first half of 2023. Ergomed's order book grew to £310 million at the end of H1 2023, providing excellent visibility of revenue for the second half of 2023 and beyond, and is supported by robust new business pipeline growth of 30% over H1 2022.

Shareholders are referred to the announcement on 4th September 2023 of a recommended cash offer for the entire issued and to be issued share capital of Ergomed plc by Eden AcquisitionCo Limited, a newly incorporated company controlled and indirectly wholly owned by the Permira funds advised by Permira Advisors LLP.

Financial summary

Ergomed reported a strong financial performance in the first half of 2023 with total revenues of £76.7 million (H1 2022: £69.9 million), an increase of 10% (7% in constant currency).

Adjusted EBITDA in H1 2023 was 20.4% of revenues in the first half of 2023 and was up 14% to £15.7 million compared to £13.7 million in H1 2022.

Cash at 30 June 2023 was £26.0 million (H1 2022: £12.0 million), with good underlying operating cash flow generation during the period. The Company remains in a robust financial position, debt free, with a strong balance sheet, and unutilised facilities of up to £80.0 million to support continued expansion both organically and through acquisitions.

Clinical Research Services (CRO)

Ergomed's CRO business saw total revenue increase to £38.0 million in H1 2023 from £34.3 million in H1 2022, up by 11% (8% in constant currency). Reported gross profit increased by 27.2% to £12.3 million (H1 2022: £10.6 million) and gross margin improved to 32.2% (H1 2022: 31.0%).

The CRO business has seen another period of strong growth during the first half of 2023. The continued success of Ergomed's unique and innovative site support model, which focuses on patient advocacy whilst simultaneously reducing the burden on trial physicians, along with our specialist expertise across the rare disease and oncology therapeutic areas, continues to drive the strong growth in our CRO business.

PrimeVigilance

Ergomed's pharmacovigilance (PV) business saw total revenue increase to £38.7 million in H1 2023 from £35.6 million in H1 2022, up by 9% (6% in constant currency). Reported gross profit increased from £18.3 million to £19.4 million, up 9%, whilst gross margin remained robust at 50.0% (H1 2022: 51.3%).

PrimeVigilance's continued growth has been delivered by employees in over 20 countries with capabilities across 150 countries, delivering a high-quality specialised service to both new and repeat customers. Continued investment and the deployment of proprietary automation technology has further enhanced PrimeVigilance's capabilities, while enhancing efficiencies and productivity enabling the delivery of differentiated and high-quality solutions to meet the increasingly complex global pharmacovigilance regulations.

Current trading and outlook

Revenue and adjusted EBITDA for the full year 2023 are anticipated to be in line with market expectations1, demonstrating the Company's resilience and ability to maintain its strong financial performance despite the continued challenging macro-economic environment.

Dr Miroslav Reljanović

Executive Chairman

Notes:

1. This guidance in this announcement constitutes an ordinary course profit forecast for the purposes of Rule 28.1 of the City Code on Takeovers and Mergers (the "Code") and the Company will provide the requisite directors' confirmation statement pursuant to Rule 28.1(c)(i) in the Scheme Document (when published).

Rule 26.1

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available on the Company's website at www.ergomedplc.com by no later than 12 noon (London time) on the business day following the date of this announcement.

FINANCIAL REVIEW

The primary financial statements of Ergomed plc for the six months ended 30 June 2023 are presented later in this announcement along with the key accounting policies and notes to the financial statements.

Key performance indicators

The Directors consider the principal financial performance indicators of the Group to be:

Consolidated income statement

Total revenue on a reported basis for the six months ended 30 June 2023 was £76.7 million (H1 2022: £69.9 million), an increase of 10% (7% on a constant currency basis), driven by growth in the PV division (up 9%) and the CRO division (up 11%).

Gross profit was £31.6 million and gross margin was 41.2% (H1 2022: gross profit £28.9 million and gross margin 41.4%), the slightly lower gross margin percentage being a result of unfavourable foreign exchange rates. Selling, general and administration expenses including acquisition related costs were £22.0 million (H1 2022: £19.9 million). Research and development costs expensed in the period were £0.1 million (H1 2022: £0.1 million).

Adjusted EBITDA increased by 14% to £15.7 million in H1 2023 from £13.8 million in H1 2022, with profit after tax up 0.5% at £7.3 million (H1 2022: £7.3 million). Basic adjusted earnings per share was up 7.7% to 21.9p (H1 2022: 20.4p).

Consolidated balance sheet

Net assets increased by £6.1 million during the first half of 2023 and amounted to £90.9 million at 30 June 2023 (31 December 2022: £84.8 million) including net cash and cash equivalents of £26.0 million (31 December 2022: £19.1 million).

Consolidated cash flow statement

At 30 June 2023, the Group's net cash balance was £26.0 million.

Cash generated from operating activities was £12.3 million (H1 2022: £12.0 million) before changes in working capital, representing 78.7% of adjusted EBITDA in H1 2023. Ergomed has no debt and has increased its multi-currency revolving credit facility (RCF) from £30.0 million to £80.0 million, comprising a £50.0 million facility and an additional £30.0 million accordion.

Net outflows from investing activities decreased to £1.0 million (H1 2022: £24.7 million) due to the £24.2 million net cash purchase of ADAMAS in 2022. Net outflows on financing activities for the period of £1.3 million were primarily related to lease costs and interest paid.

Jonathan Curtain

Chief Financial Officer

Condensed Consolidated Income Statement

For the six months ended 30 June 2023

All activities in the current and prior periods relate to continuing operations.

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2023

All activities in the current and prior periods relate to continuing operations.

Condensed Consolidated Balance Sheet

As at 30 June 2023

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2023

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2023

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2023

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the UK.

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 ("IAS 34") - Interim Financial Reporting, and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2022. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

The condensed consolidated financial statements have been prepared under the historical cost convention, except for the fair value of certain financial instruments which are further detailed in note 16.

The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2022.

These condensed consolidated financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. A copy of the Group's audited statutory accounts for the year ended 31 December 2022 were approved by the Board of Directors and have been delivered to the Registrar of Companies. The audit report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

Risks and uncertainties

An outline of the key risks and uncertainties faced by the Group was described in the Annual Report and Accounts 2022 which is available on the Company website (www.ergomedplc.com). The principle risks were: Cancellation or delay of clinical trials or projects by customers including as a result of a global pandemic; Lower contracted order book realisation or conversion of sales pipeline to contract; significant regional or national event (pandemic, natural disaster, conflict or terrorism); Quality and third party oversight ('TPO'); Cybersecurity; Information technology transformation; Access to and cost of capital; Retention of senior and key employees; Dependence on a limited number of key clients; Data privacy; Outsourcing trends in the pharmaceutical and biotechnology industries; Recoverability of the Group's long-term assets and Environmental, social and governance.

Critical accounting judgements and key sources of estimation uncertainty

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements and are summarised below.

Going concern

The interim financial statements have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue in operational existence for the foreseeable future, being a period of no less than 12 months from the date these interim financial statements are approved. The Directors have reviewed cash flow forecasts for the period through to 31 December 2024, which is derived from the 2023 Board approved budget and a medium-term cash flow forecast through to 31 December 2024, which is an extrapolation of the approved budget under multiple scenarios and growth rates. The 2023 budget and medium‑term forecast represents the Directors' best estimate of the Group's future performance and necessarily includes a number of assumptions, including the level of revenues. The 2023 budget and medium-term forecast demonstrate that the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for a period of at least 12 months from the date these interim financial statements are approved.

On the basis of the above factors and, having made appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements.

Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred on acquisition is the fair value at the date of transaction for assets and liabilities transferred. All acquisition related costs are expensed as incurred.

Goodwill arises as the excess of acquisition cost over the fair value of the assets transferred at the date of transaction. Goodwill is reviewed for impairment annually and is carried at cost less accumulated impairment losses. Impairment losses are not reversed in subsequent periods.

Goodwill arising on the acquisition of a foreign operation, including any fair value adjustments to the carrying amounts of assets or liabilities on the acquisition, are treated as assets and liabilities of that foreign operation in accordance with IAS 21 and as such are translated at the relevant foreign exchange rate at the statement of financial position date.

2. REVENUE AND OPERATING SEGMENTS

The Group's revenue is disaggregated by geographical market and major service lines:

30 June 2023 Geographical market and major service lines

30 June 2022 Geographical market and major service lines

31 December 2022 Geographical market and major service lines

Operating segments

Information reported to the Company's Board, which is the chief operating decision maker ('CODM'), for the purpose of resource allocation and assessment of segment performance, is focused on the Group operating as two business segments, being Clinical Research Services ('CRO') and Pharmacovigilance ('PV'). All revenues arise from direct sales to customers. The segment information reported below all relates to continuing operations. Following the acquisition of ADAMAS by the Group in February 2022, the associated revenues have been allocated between CRO and PV based on the nature of the revenues generated. 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the gross profit earned by each segment. Other amounts, including selling, general and administration expenses were not allocated to a segment. This was the measure reported to the CODM for the purpose of resource allocation and assessment of segment performance.

Segment net assets

3. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

* Includes £505,000 of employment tax expense incurred by the Group in relation to share options exercised in the year

4. FINANCE COSTS

5. OTHER OPERATING INCOME