Last checked at 16 Apr 2015 07:00
Inditherm plc
("Inditherm" or "the Company")
Final Results
Inditherm plc (AIM: IDM), the provider of innovative specialised heating solutions, today reports its unaudited final results for the 12 months ended 31 December 2014.
Highlights
· | Turnover fell by 10% to £1,847k (2013: £2,062k) with an improved performance from export activities offset by challenging circumstances in the NHS, where we are still experiencing delays to projects due to slow decision making.
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· | Operating loss before exceptional costs increased from £99k to £356k.
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· | Operating loss after exceptional costs increased from £99k to £399k.
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· | Cash outflow for the year £470k (2013: inflow £57k). Year-end cash and cash equivalents stood at £1,165k (2013: £1,635k).
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· | The business invested further in support of other export territories and towards the end of the year commenced direct engagement with customers in the USA.
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· | Process of reviewing strategic options has been thorough and has identified a small number of potentially suitable ways forward, which we are actively pursuing. |
Commenting on the outlook, Mark Abrahams, Chairman of Inditherm, said:
"We expect to see sales growth in 2015, although it is likely that the uneven order pattern will continue. We anticipate that the highest growth potential will come from some recovery of lost momentum in the UK and possibly some additional revenues from the USA, both markets which have produced higher than average margins. We are predicting more modest growth in the other export territories. We have invested significant effort in evaluating strategic options available to us. The process has been thorough and has identified a small number of potentially suitable ways forward, which we are actively pursuing."
For further information, please contact:
Inditherm plc | |
Nick Bettles, Chief Executive nbettles@indithermplc.com | Tel: +44 (0) 1709 761000 |
Ian Smith, Finance Director ismith@indithermplc.com | www.inditherm.com |
W H Ireland (Nominated Adviser and Broker) | |
Tim Feather Liam Gribben | Tel: +44 (0) 113 394 6600 |
Strategic Report and Operating & Financial Review
Overview
In line with the market conditions indicated in our Interim Report, the year showed an improved performance from export activities offset by challenging circumstances in the NHS and in our Industrial business. We continue to see interest in our products, however we still are experiencing delays to projects. Nevertheless as the imperative for cost reduction in the UK health service continues, and the importance of savings offered by Inditherm are recognised, we expect to return to growth in the UK.
We saw progress with the distributorship of the ATOM neonatal product range during the year, which has helped balance some of the shortfall in sales of our own products. Order intake in the first quarter of 2015 has shown a similar healthy start to the year as in 2014.
In the standard products sector of our Industrial business we saw steady performance in the first half of the year. Resource constraints prevented us sustaining that into the second half, but a positive contribution was still derived.
Reduced turnover for the business, combined with the increased overheads put in place to target export growth, resulted in significantly increased losses.
Results
Turnover for the year fell by 10% to £1,847k (2013: £2,062k). Gross profit fell 14% to £1,004k (2013: £1,163k) in line with turnover and reflecting the shift towards export business which has lower operating margins.
During the year we commenced direct engagement with customers in the USA, invested further to support our other export territories and retained consultants to identify strategic options for the business. Accordingly, overheads increased by £141k during the year, to £1,403k (2013: £1,262k). This resulted in an increased operating loss of £399k (2013 £99k), but an underlying operating loss before one-off costs of £356k (2013: £99k), and post-tax loss of £375k (2013: £77k).
The year-end cash and cash equivalents balance was £1,165k (2013: £1,635k), representing an outflow of £470k (2013: inflow £57k), reflecting trading performance.
Sales and Marketing
Overall Medical revenue in 2014 fell by 9%, with the sizeable NHS orders placed in 2013 not repeated. Industrial revenue also fell by 22% due to the elimination of industrial process activities, resource constraints and our strategic decision not to let this sector distract us from our core Medical activities.
In common with the reported experiences of other medical equipment suppliers, our UK Medical business suffered from slow decision making in the NHS. Whilst NHS Trusts have been pursuing other and perhaps larger cost-saving projects, we do not see any underlying lack of interest in our offering, just an apparent delay in progressing projects to a conclusion. This situation is much as stated in our Interim Report, with sales characterised by smaller orders for the operating theatre sector and reduced sales of neonatal products due to pressures on capital budgets. We continue to see interest in the Managed Service offering, but this has not accelerated uptake as we had hoped.
The case studies generated in the last year and the NICE guidance and implementation support information continue to underpin our promotion into the UK operating theatre market. In the neonatal sector our reputation appears to remain strong and this is supported by a number of approaches from equipment producers to sell their products in the UK, which we are evaluating.
We continued to see a good order intake for the ATOM products, albeit from existing users which typifies this market sector. NHS hospitals will typically only consider changing incubator supplier infrequently, and even then may wish to stay with familiar products, so the number of new projects is limited, but often of high value when they materialise. We continue to build our market presence with these products through our existing sales channels, promoting on the back of our established reputation.
We saw good performance from a number of our distributors during the year, with an 18% overall increase in export orders (excluding the USA). We further strengthened our resource for export activities during the year in line with our declared intention to drive progress with our overseas distribution channels. We enjoyed particular success in the Japanese market, through a combination of our existing channels into the operating theatre market boosted by initial order intake from our OEM partners in both neonatal and theatre sectors, and saw continued growth in China. The start of 2015 has seen very encouraging performance in Mexico where we have instigated a rental programme to overcome capital constraints; this is also expected to secure an ongoing revenue stream.
Towards the end of 2014 we retained our own dedicated resource in the USA to manage the market and start to drive growth. We have already established a solid network of regional specialty distributors for our operating room products who have taken demonstration stock and are active in the market. There are positive signs that we are already seeing more interest and we are benefitting from having more direct feedback from customers. We are also seeking an agreement for national distribution of our neonatal range in the coming months. The US market has shown a growing interest in LifeStart and a number of key centres have applied for budget to acquire systems. This presents an exciting potential, although it is still a little early to know how far or fast the demand will grow; however any research that promotes Delayed Cord Clamping where LifeStart has been used should serve to support our marketing efforts.
We continue to pursue OEM opportunities in different sectors. Two in Japan are already taken to market and a third is only pending medical device approvals of the partner's product in which our technology is incorporated. One project has now been put on hold by the partner and others are progressing at modest rates, but outside our control. Overall we are starting to see benefits from some of these collaborations and will continue to support projects that we consider warrant the resource.
Product Development
We have continued to enhance our products during the year, expanding a number of our ranges and adding new features. We believe that these new additions will strengthen our product proposition and in some cases open new market opportunities. We will continue to develop new products, with a focus on those that use our core technology or that fit with our existing competencies and routes to market.
Operations
We have maintained a dedicated and adaptable production team that allows us to react to variations in product demand and meet our anticipated growth plans. We also invest as necessary in tooling and equipment to meet the needs of our manufacturing processes and the Medical Device regulations.
We have invested further in our sales and marketing team and believe this will have a positive impact on our results. Feedback from our customers and distributors remains positive, confirming that they consider the quality of Inditherm's products and the service and support provided to be excellent.
Dividends
As stated in previous years, the Board intends to devote the Company's financial resources to business development. This intention, which the Board believes is in the best interest of the shareholders, has continued during 2014 and the Board does not expect to declare a dividend during the Company's continuing development.
Employees
We continue to invest in our workforce to ensure we have the appropriate skills with which to grow the business. We have continued our policy of retaining our loyal staff through the short term peaks and troughs of demand. On behalf of the Board, we thank our staff most sincerely for their continued support.
Outlook
The impact of capital constraints in the NHS on our business during the year underlines for us the unpredictability of capital equipment sales in the UK Medical market. Our managed service proposition has been well received in principle as the stringent capital budget controls limit investment in many hospitals. This offering allows them to access revenue budgets. Provided this interest can be converted to orders, it will have the advantage of giving us an ongoing revenue stream. The strong arguments for Inditherm's cost saving potential in the operating theatre area, as supported by NICE guidance, remain valid.
The additional revenue from distribution of the ATOM product range in the UK & Ireland has continued to add a valuable contribution to our UK business. We have exclusive supply arrangements in the UK from one of the three principal manufacturers of incubators. Our presence on the NHS Supply Chain framework agreement, the product strengths and our good reputation in the neonatal market, makes us optimistic that we will make further progress with ATOM products this year.
With additional resources in place we resumed growth in export orders for our Medical business in 2014. We focussed on the territories with greatest perceived potential with a number of notable successes ensuing. We have continued to strengthen our distribution in a number of areas and see this as an ongoing process. We aim to build on this.
During the year we identified an opportunity to take a more proactive approach to the USA market, albeit by making a significant investment. With disappointing performance in the market for many years, we have taken the opportunity to introduce dedicated control of distribution. The new arrangements were up and running towards the end of 2014 and we have already secured distribution channels covering many of the key states. Activity levels are already high and we are optimistic that we can deliver an improvement in performance in the year ahead. We are seeing early interest in LifeStart in the USA and if this translates into orders it could underpin our aspirations for this year and could deliver encouraging growth moving forward. It is still early days for this part of our business, so there has to be a level of uncertainty until such time as we start to convert initial projects to orders and establish a pattern of sales.
We expect some of the projects involving the use of Inditherm technology in third party products (OEM) to start to deliver sales revenues this year, albeit on a modest scale due to the early stage of products in the market. However these have the potential to accelerate in future years with little sales resource needed from Inditherm. We have other projects in development, however the uncertainty surrounding those requires us to be cautious in our outlook.
We anticipate that our Industrial standard product business will continue to deliver a small positive contribution. We do not wish to be distracted from the core medical business and feel our resources need to be carefully allocated, with the result that growth in this sector cannot be guaranteed.
We expect to see sales growth in 2015, although it is likely that the uneven order pattern will continue. We anticipate that the highest growth potential will come from some recovery of lost momentum in the UK and possibly some additional revenues from the USA, both markets which have produced higher than average margins. We are predicting more modest growth in the other export territories. We have invested significant effort in evaluating strategic options available to us. The process has been thorough and has identified a small number of potentially suitable ways forward, which we are actively pursuing.
Mark Abrahams | Nick Bettles |
Chairman | Chief Executive |
16 April 2015
Final unaudited results for the year ended 31 December 2014
Consolidated Statement of Comprehensive Income
Unaudited | ||||
2014 | 2013 | |||
Notes | £'000 | £'000 | ||
Revenue | 1,847 | 2,062 | ||
Cost of sales | (843) | (899) | ||
Gross profit | 1,004 | 1,163 | ||
Overheads | (1,403) | (1,262) | ||
Operating loss | (399) | (99) | ||
Analysed as: | ||||
Operating loss before exceptional costs | (356) | (99) | ||
Exceptional costs | 2 | (43) | - | |
Operating loss | (399) | (99) | ||
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Finance income | 4 | 6 | ||
Loss on ordinary activities before taxation | (395) | (93) | ||
Taxation credit from loss on ordinary activities | 20 | 16 | ||
Loss for the year attributable to owners of the parent company | (375) | (77) | ||
Loss per share from total Inditherm Group attributable to the owners of the parent company during the year - basic and diluted | 3 | (0.7p) | (0.2p) |
All recognised gains and losses are included in the unaudited Consolidated Statement of Comprehensive Income. As such there is no other comprehensive income.
Final unaudited results for the year ended 31 December 2014
Consolidated and Company Balance Sheet
Unaudited | ||||
2014 | 2013 | |||
£'000 | £'000 | |||
Assets | ||||
Non-current assets | ||||
Property, plant and equipment | 36 | 44 | ||
Intangible assets | 3 | 4 | ||
39 | 48 | |||
Current assets | ||||
Inventories | 189 | 219 | ||
Trade and other receivables | 284 | 349 | ||
Tax recoverable | 36 | 28 | ||
Cash and cash equivalents | 1,165 | 1,635 | ||
1,674 | 2,231 | |||
Liabilities | ||||
Current liabilities | ||||
Trade and other payables | (220) | (368) | ||
Deferred Income | (87) | (85) | ||
(307) | (453) | |||
Net current assets | 1,367 | 1,778 | ||
Non-current liabilities | ||||
Deferred Income | (124) | (176) | ||
Net assets | 1,282 | 1,650 | ||
Shareholders' equity | ||||
Called up share capital | 511 | 511 | ||
Share premium account | 9,929 | 9,929 | ||
Share based payment reserve | 155 | 148 | ||
Retained earnings | (9,313) | (8,938) | ||
Total equity | 1,282 | 1,650 |
Final unaudited results for the year ended 31 December 2014
Consolidated and Company Statement of Changes in Shareholder Equity
Share | Share based | ||||
Share | premium | payment | Retained | ||
capital | account | reserve | earnings | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 January 2013 | 511 | 9,929 | 141 | (8,861) | 1,720 |
Credit for share based payments | - | - | 7 | - | 7 |
Loss for the year and total comprehensive expense | - | - | (77) | (77) | |
At 31 December 2013 | 511 | 9,929 | 148 | (8,938) | 1,650 |
Credit for share based payments | - | - | 7 | - | 7 |
Loss for the year and total comprehensive expense | - | - | - | (375) | (375) |
At 31 December 2014 | 511 | 9,929 | 155 | (9,313) | 1,282 |
Final unaudited results for the year ended 31 December 2014
Consolidated and Company Cash Flow Statement
Unaudited | ||||
2014 | 2013 | |||
Notes | £'000 | £'000 | ||
Operating loss before exceptional costs | (356) | (99) | ||
Exceptional costs | 2 | (43) | - | |
Share based payments | 7 | 7 | ||
Depreciation and amortisation | 22 | 35 | ||
Decrease/ (increase) in inventories | 30 | (40) | ||
Decrease/ (increase) in trade and other receivables | 65 | (133) | ||
(Decrease)/ increase in trade and other payables | (148) | 109 | ||
(Decrease)/ increase in deferred income | (50) | 209 | ||
Interest received | 4 | 6 | ||
Tax refund | 12 | - | ||
Net cash (outflow)/ inflow from operating activities | (457) | 94 | ||
Cash flow from Investing activities | ||||
Purchase of property, plant and equipment | (10) | (37) | ||
Capitalised development costs | (3) | - | ||
Net cash used in investing activities | (13) | (37) | ||
Net (decrease)/ increase in cash and cash equivalents | (470) | 57 | ||
Cash and cash equivalents at the beginning of the period | 1,635 | 1,578 | ||
Cash and cash equivalents at the end of the period | 1,165 | 1,635 |
NOTES
1 | The final results have been prepared in accordance with International Financial Reporting Standards ("IFRSs") and IFRIC interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs. This announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. This announcement has been agreed with the Company's auditors for release.
This results announcement contains information extracted from the unaudited financial statements of the group for the year ended 31 December 2014. At this present time the directors are not aware of any matters that may give rise to a modification to these results. The final unaudited results were approved by the Board on 15 April 2015.
The Annual Report and Financial Statements for the year ended 31 December 2013, which have been delivered to the Registrar of Companies, included an audited report which was unqualified and which did not contain a statement under Section 498 of the Companies Act 2006. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | Exceptional items - Items that are material either because of their size or their nature, or that are non-recurring are considered as exceptional items and are presented within the line items to which they best relate. During the year, costs of £32,000 (2013: £nil), has been incurred relating to costs relating to reviewing strategic options and £11,000 (2013: £nil) relating the additional costs of external resources to ensure an orderly handover of the work in the technical department after the departure of Neil Hollingworth in January 2014. The exceptional items have been included in overheads in the income statement. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3
| The calculations of loss per ordinary share are based on a weighted average of 51,112,581 (2013: 51,112,581) ordinary shares in issue during the year. The share options are anti-dilutive due to the loss in the year, and have therefore been excluded.
The loss per share from total Inditherm Group attributable to owners of the parent company is based on the loss for the year attributable to owners of the parent company of £375k (2013: £77k loss).
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4 | Segmental analysis
Segmental information for the year ended 31 December 2014 and 2013 is as follows:
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Forward looking statements
Certain statements contained in this document constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of Inditherm plc to be materially different from any future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other factors include, among others: general economic conditions and the business environment.
Annual Report
A further announcement will be made when the 2014 Annual Report and Financial Statements is available on the Company's website and copies are sent to all shareholders.
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