Preliminary Results

RNS Number : 4476X

Inspiration Healthcare Group PLC

30 April 2019

 

30 April 2019

Inspiration Healthcare Group plc

("Inspiration Healthcare" or the "Group")

Preliminary Results for the year ended 31 January 2019

Inspiration Healthcare Group plc (AIM: IHC), the global medical device company, today announces its preliminary results for the twelve months ended 31 January 2019 ("FY2019").

Financial highlights:

·      EBITDA¹ up 13% to £1.65m (FY2018: £1.45m)

·      Revenue stable at £15.5m (FY2018: £15.5m), constrained by well publicised industry wide regulatory delays

·      Operating Profit of £1.2m in line with expectations (FY2018: £1.2M)

·      Record International sales up 12% to £5.4m (FY2018: £4.8m), with the strongest growth coming from the USA with sales up 71%

·      New products launched generated revenues of £1.4m in FY2019, showcasing the Group's well-established product development pipeline

·      Cash remains strong, ending the year at £2.5m (2018: £2.1m)

¹ Earnings before interest, taxation, depreciation, amortisation and share based payments ("EBITDA")

See Operating and Financial Review for reconciliation

Operational highlights:

·      Launched the Alphacore⁵ Patient Warming System, which provides safe and controlled warming to assist in the maintenance of normothermia

·      The Group received its largest ever order for a Patient Warming System, with 500 Alphacore⁵ systems being shipped to over 200 hospitals for treating newborn babies throughout Poland

·      Strong product pipeline with a Licence Agreement signed with a major US university to allow us to develop a novel respiratory device ("Project Wave")

·      Received certification to Medical Device Single Audit Programme in 4 countries (USA, Canada, Japan and Australia) and ISO 13485:2016, which reduces the need for external audits, positioning the Company well to increase sales in these territories

·      Strengthened senior management team with Head of Operations appointment

·      Won a Queens's Award for Enterprise

Neil Campbell, Chief Executive Officer, said today: "I am pleased that we have achieved our profit expectations for a year in which the regulatory issues that consume our industry provided us with many challenges and constrained our revenue growth.  The investment we have made in key areas of our business has started to pay off with 9% of revenues coming from new products, including the recently launched Patient Warming System, and 12% growth in international revenues.  We have strengthened our management team and passed two new major Quality Management System audits which will allow us to capitalise on recent international growth.  With a strong order book at the beginning of the new year, I am confident that we are well placed to achieve our expectations for the year ahead."

Enquiries:

Inspiration Healthcare Group plc Neil Campbell, Chief Executive Officer Mike Briant, Chief Financial Officer	Tel: [phone]
Nominated Adviser & Broker Cenkos Securities plc Mark Connelly Cameron MacRitchie	Tel: [phone]
Cadogan PR                                                                                          Alex Walters	Tel: [phone]

About Inspiration Healthcare

Inspiration Healthcare (AIM: IHC) is a global supplier of medical technology for critical care, operating theatre and other medical applications. The Company provides high quality innovative products to patients and caregivers around the world that help to improve patient outcomes and efficiencies of healthcare organisations with patient focused customer service and technical support.

The Company's own brand of critical care solutions span non-invasive respiratory management, thermoregulation and diagnostics, and patient warming for newborns through to adults in intensive care and the operating theatre, whilst the distribution business supplies solutions to support specialised surgical procedures and infusion therapies.

Present in over 50 countries worldwide, Inspiration Healthcare's success has been built on continuous innovation, excellent customer service and an inherent commitment to improving the quality of life of patients, working in close collaboration with key opinion leaders and stakeholders in the clinical and medical community across the globe.

Further information on Inspiration Healthcare can be seen at www.inspiration-healthcare.com.

Chairman's Report

The Group is one full of energy and positivity and a desire to make a genuine difference to the outcome of some of the most fragile patients and therefore I am pleased to write to you again on another year of progress at Inspiration Healthcare Group plc. 

For the year ended 31 January 2019 ("FY2019"), we met our operating profit expectations at £1.2 million (FY2018: £1.2 million) with EBITDA¹ improving by 13% from £1.45 million to £1.65 million.  This was achieved through increasing gross margin from 44% in FY2018 to 45% in FY2019, prudent management of overheads and the timing of investment - trying to balance the impact on profits with the benefit for long term growth. Underlying diluted Earnings per Share ("EPS")² declined by 0.06 pence per share, due to a slightly higher tax charge.

The Group's revenue was flat at £15.5 million and although this is disappointing, it is the first time after 15 years of successive revenue growth and needs to be seen in the context of the wide changes taking place within our industry and the current global trade tensions and uncertainties.   Despite these uncertainties it is notable that we increased our International revenue by 12%.  Changing our distributor in the USA has had a positive impact at the end of the year and we expect this new relationship to have long term benefits for other products that we will seek market authorisation for.

The year has also been difficult due to the continuing regulatory hurdles that are engulfing the industry.  It has been widely reported by many commentators that the regulations are changing rapidly and causing issues within the industry as a whole.  As at end of March 2019, the number of Notified Bodies for Medical Devices was 58, falling from 75 in 2013, putting unprecedented strain on those that remain.  It is therefore noteworthy that we have invested in our staff and systems and continue to do so.  This has put us in a strong position to ensure compliance to these new regulations and also to minimise the impact that Brexit will have on our medical devices being placed on the market in the UK and in the EU.

We could not have estimated the true impact of the regulatory delays caused by these changes, the knock-on effect of registering products, supplying customers, and building the supply chain.  Clearly these were greater than we first thought.  However, we have new products launched and registered in most key markets and have been making plans as to how to maximise revenues with our distribution partners to make these products a success.

Our investment in our management team has continued this year to create a strong platform for growth.  Our management team has been strengthened with the new position of Head of Operations, improving our efficiencies in this core area of our business as well as putting in place the building blocks for further expansion.  We welcome Nigel Weston to the company in this new role.

¹ Earnings before interest, taxation, depreciation, amortisation and share based payments

² EPS before significant prior year tax amendments

See Operating and Financial Review for reconciliation

As an international business importing and exporting around the world, Brexit took up substantial time for contingency planning regardless of the outcome.  As many others have noted, the continued lack of clarity on Brexit was unhelpful, stretching resources that could have been utilised elsewhere to the benefit of the business.  We naturally increased our stock holding and worked through issues with suppliers, principals and distributors alike, and of course we worked closely with the Department of Health and Social Care ensuring that regardless of the outcome we would be able to supply the NHS with life-saving medical devices.  We are confident that we have done everything we can to prepare the Group for any scenario and will continue to do so.

Last year we stated that we would continue to invest in R&D and we have continued to do so.  Although overall spend declined from 6.2% of revenue in FY2018 to 4.1% in FY2019 due to capital spend being lower because of timing of certain projects, I can report that we increased our investment in in-house R&D staff resources by 39% in FY2019.  Bringing more resources in house will mean we are more efficient in the future.

Employees

I am proud of the way our staff rose to the challenges during the year.  They tenaciously chased opportunities, worked hard to realise those that were achievable and acted thoroughly professionally throughout the difficult times. We will continue to invest in our staff as our most valuable asset and create an environment they can be proud to work in. On behalf of the Board I thank them sincerely for their endeavours.  

Outlook

We now have key new products registered in over 40 countries and our sales team are now working hard with our distributors to establish these products, further building on the current sales that have already achieved £1.4 million in the last financial year.

We will continue to implement our strategy to develop the Group into world leader in Neonatal Intensive Care through organic growth and acquisitions.  The Group continues to look for acquisitions both of technology / products and companies, although it is difficult to predict the exact timing of any of these opportunities. 

The opportunity from our recent licence agreement with a major US based university ("Project Wave") is extremely exciting. It reflects our approach to developing disruptive technologies in neonatal intensive care.

We have a strong R&D pipeline and with the strengthening of management and the accreditation to Medical Device Single Audit Program ("MDSAP") and ISO 13485:2016, we have positive times ahead.  We expect to benefit from the improvement in higher margins from our new products. The new year has started with a very healthy order book and we look forward to maintaining this momentum to deliver double digit revenue growth.

Mark Abrahams

Chairman

30th April 2019

Going Concern

The Group has prepared a budget for the year ended 31 January 2019 and financial projections for the following two years. Having due consideration of these projections and available cash at 31 January 2019 of £2.5 million, it is the opinion of the Board that the Group has adequate resources to continue to trade as a going concern.

Operating and Financial Review

Our revenue for the year ended 31 January 2019 ("FY2019") was £15.5 million, in line with FY2018 owing to the well-publicised regulatory delays for new products and their EC certification which have constrained revenue growth.

EBITDA¹ increased by 13% to £1.65 million (FY2018: £1.45 million). Operating profit was £1.2 million in line with FY2018 and our expectations. Operating margin for FY2019 was 7.8% (FY2018:7.8%). Profit after tax was £1.1 million, lower than FY2018 (£1.2 million) due to a higher year on year net taxation charge. Diluted EPS was 3.56p per share (FY2018: 3.98p). Underlying diluted EPS² decreased by 1.7% to 3.40p per share (FY2018: 3.46p).

Revenue

During the year our plans to launch new products were frustrated by significant delays experienced in obtaining an updated Quality Management System certificate and a CE Mark approval for our upgraded Patient Warming System, the AlphaCore⁵, which delayed product registrations. The AlphaCore⁵ patient warming system ("PWS") was consequently not launched until July meaning loss of momentum which hampered second half revenue growth. As in prior years, revenues were still weighted towards the second half ("H2") which accounted for £8.1 million (FY2018: £8.3 million) or 52% of full year revenues.

Our international revenue grew by 12.4% to £5.4 million, with particularly strong growth in North America (up 71%) due to increased sales of the Tecotherm product range. Domestic revenue declined by 5.6%, largely due to a reduction in capital sales of ventilators.

Products developed in-house and launched within the last 18 months include the Inspire rPAP driver, the PWS, the upgraded LifeStart and the Unique+ CFM. Revenues generated from these products in FY2019 amount to £1.4 million. These new products accounted for 9% of FY2019 revenue which, together with Tecotherm revenue growth, offset the decline in the variable capital element of our Distributed Products in Critical Care and the gradual decline of our older licenced products (including Inspire nCPAP).

Market Sectors

Critical Care £10.7 million, -5% year on year

Our Critical Care sector declined by 5%, largely due to the decline in capital sales of ventilators and Inspire nCPAP mentioned above. Domestically this is largely a replacement market, subject to capital budget constraints and can thus fluctuate significantly year-on-year.  New business expected to replace this was not forthcoming due to delays in new product certification.  The Inspire nCPAP is considered a generic product and hence subject to pricing pressures.

Operating Theatre £1.7 million, +4% year on year

Revenue in this sector came back to growth after two years of decline following our decision to upgrade the patient warming system, which can also be used to enhance the LifeStart. Even though we suffered significant delay in receiving the EC certification, revenue from the AlphaCore⁵ enabled this sector to achieve overall growth in H2.

Home Healthcare £3.1 million, +15% year on year

Our Distributed Product range of parenteral feeding products continues to grow strongly in line with our expectations.

Gross Profit

Gross Profit of £7.0 million (FY2018: £6.8 million) increased by 4% due to a year-on-year increase in gross margin from 43.9% to 45.5%. Revenue from Inspiration Branded products, which typically generate higher gross margins than our Distributed products, increased to 46% of revenue (FY2018: 45%) or £7.2 million, thus generating a higher gross margin blend.

Operating Expenses

Operating expenses amounted to £5.8 million (FY2018: £5.6 million) with year-on-year increases limited to 4.4%. We made additional investment in the management team, whilst sales commission and bonus expense reduced year-on-year as not all sales targets were achieved. Depreciation and amortisation have increased by £0.1 million with amortisation of capitalised product development costs having commenced from the date the products were released to market.

EBITDA¹

EBITDA¹ amounted to £1.65 million, an increase of £0.19 million over the prior year due to increased gross profit and cash-based overheads being kept broadly flat. EBITDA margin improved from 9.4% to 10.7%.

1 Earnings before interest, taxation, depreciation, amortisation and share based payments ("EBITDA")
Reconciliation from operating profit	FY2019	FY2018
	£000's	£000's
Operating Profit per Income Statement	1,213	1,204
Add back:
Depreciation and amortisation	364	230
Share based payments	71	20
EBITDA	1,648	1,454

Operating Profit

At £1.2 million, Operating Profit was in line with the prior year with increased gross profit offsetting slightly higher overheads.

Taxation

The Group has recorded an income tax charge of £116,000 (FY2018: credit of £21,000). This is net of current tax credits for the previous year amounting to £104,000 (FY2018: £183,000) and a related additional deferred tax charge of £56,000 (FY2018: £nil) arising from revised computations for that year. The effective tax rate in FY2019, adjusted to exclude significant prior year amendments, was 13.5% (FY2018: 13.5%) For more detail see note 3 to this announcement.

Earnings Per Share

EPS (basic) was 3.6p per share (FY2018: 4.0p); diluted EPS (allowing for share options outstanding) was 3.6p per share (FY2018: 4.0p). Underlying diluted EPS² was 3.4p per share, down 2% on FY2018 (3.5p). The slight year on year declines were due to the higher net tax charge set out above.

² EPS (diluted) before significant prior year tax amendments

Reconciliation from Diluted EPS	FY2019	FY2018
	Pence	Pence
Diluted EPS as reported (see note 4)	3.56	3.98
Adjust for significant prior year tax amendments	(0.16)	(0.52)
Underlying Diluted EPS	3.40	3.46

Cash flow

Cash and cash equivalents as at 31 January 2019 amounted to £2.5 million, an increase of £0.45 million over the year. Net cash generated from operating activities was £0.8 million, £0.1 million lower than in FY2018. Before tax paid/recovered, cash generated from operations of £1.0 million was £0.1 million higher than FY2018. In FY2018 we received a prior year tax recovery of £0.2 million which was not repeated in FY2019. Investing activities totalled £0.4 million (FY2018: £1.0 million), primarily consisting of capitalised development expenditure of £0.3 million to complete the PWS, but lower than the £0.7 million spent in FY2018 on the same project and completing the three products that we launched towards the end of that year.

Net Assets

The value of Non-Current Assets as 31 January 2019 at £1.8 million was in line with FY2018 as amortisation and depreciation offset capital spend in the year. Our investment in Neuroprotexeon Ltd ("NPXe"), the drug device technology company, which represents 9.6% of the current issued share capital (8.6% fully diluted), remains unchanged and valued at cost of £111,000.

Inventory increased by £0.2 million to £0.7 million, primarily as a result of a depletion of inventory levels at 31 January 2018. Trade and other receivables of £3.1 million were broadly similar to the prior year, with minimal loss allowance in either year. Trade and other payables decreased by £0.5 million to £2.2 million reflecting a changed mix of products sold in January 2019 and related payment terms of the relevant suppliers, together with reduced sales commission and bonus accruals.

Net Assets increased by £1.2 million or 27% to £5.5 million.

Review of Business and Future Developments

On a Group basis the business review and future prospects are set out in the Chairman's Report above. The Board believes that overall the Annual Report and Consolidated Financial Statements are fair, balanced and understandable.

Share Price during the Year

The range of market prices during the year 1 February 2018 to 31 January 2019 was 47.0p to 76.0p and the mid-market price of the Company's shares at 31 January 2019 was 58.0p.

Mike Briant

Chief Financial Officer

30th April 2019

Consolidated Income Statement

for the year ended 31 January 2019

			2019	2018
		Note	£'000	£'000
	Revenue	2	15,487	15,495
	Cost of sales		(8,445)	(8,709)
	Gross profit		7,042	6,786
	Operating expenses		(5,829)	(5,582)
	Operating profit		1,213	1,204
	Finance income		6	-
	Finance costs		-	(2)
	Profit before tax		1,219	1,202
	Income tax	3	(116)	21
	Profit for the year attributable to
	owners of the parent company		1,103	1,223
	Earnings per share, attributable to owners of the
	parent company
	Basic expressed in pence per share	4	3.60p	3.99p
	Diluted expressed in pence per share	4	3.56p	3.98p

Consolidated Statement of Comprehensive Income

for the year ended 31 January 2019

			2019	2018
		Note	£'000	£'000
	Profit for the year		1,103	1,223
	Other comprehensive expense
	Items that may be reclassified to profit or loss
	Cashflow hedges		(6)	(3)
	Total other comprehensive expense for the year		(6)	(3)
	Total comprehensive income for the year		1,097	1,220

The company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Company profit and loss account.

Consolidated and Company Statement of Financial Position

as at 31 January 2019

(Registered Number: 03587944)		Group		Company
		2019	2018	2019	2018
	Note	£'000	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets		1,293	1,209	-	-
Property, plant and equipment		408	461	-	-
Investments		111	111	7,156	7,156
Deferred tax asset		-	-	11	-
		1,812	1,781	7,167	7,156
Current assets
Inventories		718	560	-	3
Trade and other receivables		3,107	3,066	37	52
Cash and cash equivalents	5	2,539	2,086	675	668
		6,364	5,712	712	723
Total assets		8,176	7,493	7,879	7,879
Liabilities
Current liabilities
Trade and other payables		(2,210)	(2,756)	(127)	(959)
Financial liability		(9)	(3)	-	-
Contract liabilities		(319)	(328)	-	-
		(2,538)	(3,087)	(127)	(959)
Non-current liabilities
Contract liabilities		-	(7)	-	-
Deferred tax liability		(105)	(34)	-	-
		(105)	(41)	-	-
Total liabilities		(2,643)	(3,128)	(127)	(959)
Net assets		5,533	4,365	7,752	6,920
Shareholders' equity
Called up share capital		3,067	3,067	3,067	3,067
Reverse acquisition reserve		(16,164)	(16,164)	-	-
Share based payment reserve		91	20	246	175
Other reserves		(9)	(3)	-	-
Retained earnings		18,548	17,445	4,439	3,678
Total equity		5,533	4,365	7,752	6,920

The Company's profit for the year ended 31 January 2019 is £761,000 (2018: loss £530,000).

Consolidated Statement of Changes in Shareholders' Equity

Group					Share
	Issued	Share		Reverse	based
	share	premium	Merger	acquisition	payment	Other	Retained
	capital	account	reserve	reserve	reserve	Reserves	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 February 2017	3,067	9,929	4,600	(16,164)	-	-	1,693	3,125
Profit for the year	-	-	-	-	-	-	1,223	1,223
Other comprehensive expense	-	-	-	-	-	(3)	-	(3)
Total comprehensive income/
(expense) for the year	-	-	-	-	-	(3)	1,223	1,220
Transactions with owners in
their capacity of owners
Employee share scheme expense	-	-	-	-	20	-	-	20
Capital reduction exercise:
- Issue of B Shares to Capitalise   Merger Reserve	4,600	-	(4,600)	-	-	-	-	-
- Cancellation of B Shares	(4,600)	-	-	-	-	-	4,600	-
- Cancellation of Share Premium Account	-	(9,929)	-	-	-	-	9,929	-
Total transactions with owners	-	(9,929)	(4,600)	-	20	-	14,529	20
At 31 January 2018	3,067	-	-	(16,164)	20	(3)	17,445	4,365
Profit for the year	-	-	-	-	-	-	1,103	1,103
Other comprehensive expense	-	-	-	-	-	(6)	-	(6)
Total comprehensive income/	-	-	-	-	-	(6)	1,103	1,097
(expense) for the year
Transactions with owners in
their capacity of owners
Employee share scheme expense	-	-	-	-	71	-	-	71
Total transactions with owners	-	-	-	-	71	-	-	71
At 31 January 2019	3,067	-	-	(16,164)	91	(9)	18,548	5,533

Consolidated Cash Flow Statement

for the year ended 31 January 2019

		2019	2018
	Note	£'000	£'000
Cash flows from operating activities
Cash generated from operations	6	995	919
Interest paid		-	(2)
Taxation received		-	161
Taxation paid		(147)	(126)
Net cash generated from operating activities		848	952
Cash flows from investing activities
Interest received		6	-
Purchase of property, plant and equipment		(101)	(254)
Purchase of intangible assets		(24)	(68)
Capitalised development costs		(276)	(688)
Acquisition of investment		-	(5)
Net cash used in investing activities		(395)	(1,015)
Cash flows from financing activities
Finance leases		-	(16)
Net cash used in financing activities		-	(16)
Net increase/(decrease) in cash and cash equivalents		453	(79)
Cash and cash equivalents at the beginning of the year		2,086	2,165
Cash and cash equivalents at the end of the year		2,539	2,086

1          Accounting Policies

Inspiration Healthcare Group plc (the Company) is a public limited company incorporated in England and Wales (registration number 03587944) and domiciled in England. The Company's registered address is Unit 2, Satellite Business Village, Crawley, West Sussex, RH10 9NE and the registered company number is 03587944. The Company's ordinary shares are traded on the AIM Market of the London Stock Exchange plc.

The principal activities of Inspiration Healthcare Group plc and its subsidiaries (together, the "Group") continue to be the sale, service and support of critical care equipment to the medical sector including hospitals.

Basis of preparation

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied unless otherwise stated.

There is no ultimate controlling party.

The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment in which it operates (the functional currency). The Group financial statements are presented in pounds sterling, which is the presentation currency of the group.

The group had to change its accounting policies following the adoption of IFRS 9 and IFRS 15. No material impact to the accounts was noted.

Going concern basis

On the basis of current financial projections and available funds and facilities, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future and, therefore, consider it appropriate to prepare the financial statements on the going concern basis. Further information on the group's cash resources is given in note 5 to this announcement.

Alternative financial measures

In the reporting of its financial performance, the Group uses certain measures that are not defined under IFRS, the Generally Accepted Accounting Principles (GAAP) under which the Group reports. The Directors believe that these non-GAAP measures assist with the understanding of the performance of the business. These non-GAAP measures are not a substitute for, or superior to, any IFRS measures of performance but they have been included as the Directors consider them to be an important means of comparing performance year-on-year and they include key measures used within the business for assessing performance.

2          Revenue

The group derives revenue from the transfer of goods and services over time and at a point in time in the following geographical split:

Geographical analysis of revenue for the years ended 31 January 2019 and 31 January 2018 is as follows:

			2019	2018
			£'000	£'000
Domestic
-       UK			9,772	10,338
-       Ireland			351	384
International
-     Europe			2,853	2,759
-     Asia Pacific			320	352
-     Middle East & Africa			782	795
-     Americas			1,409	867
Total			15,487	15,495

Significant categories of revenue
			2019	2018
			£'000	£'000
Revenue recognised at a Point in Time
-       Own Branded Products			7,180	6,949
-       Distributor Products			6,341	6,500
-       Other			272	212
Revenue recognised Over Time
-       Technical Support			1,694	1,834
			15,487	15,495

No single customer accounted for more than 10% of revenue.

The Group recognises revenue at a point in time where there is a distinct obligation to transfer goods to the customer. The Group recognises revenue over time where there is an obligation to transfer a service to the customer.

3          Income tax

	(a)  Analysis of tax charge for the year
		2019	2018
		£'000	£'000
	Domestic current year tax *
	UK corporation tax -
	current year	150	145
	prior year adjustment	(104)	(187)
	Total current tax expense/(credit)	46	(42)
	Deferred tax
	origination and reversal of temporary timing differences	14	17
	prior year adjustment	56	4
	Total deferred tax	70	21
	Tax expense/(credit) on profit on ordinary activities	116	(21)

* All tax in both 2019 and 2018 arose in the UK. 

	(b)  Analysis of current tax assets and liabilities
		2019	2018
		£'000	£'000
	Net liability at the beginning of the year	(70)	(77)
	Tax payments
	Final payments relating to prior year	70	50
	Payments on account relating to current year	77	76
	Total tax payments made during the year	147	126
	Tax receipts in relation to prior year	-	(161)
	Current year UK corporation tax charge	(149)	(145)
	Other	(2)	-
	Prior year adjustment	104	187
	Net asset/(liability) at the end of the year	30	(70)

(c)  Factors affecting tax charge for the year

The tax assessed for the year is lower (2018: lower) than the standard rate of corporation tax in the UK 19.00% (2018: 19.16%) as explained below:

			Effective Tax Rate
	2019	2018	2019	2018
	£'000	£'000	%	%
Profit on ordinary activities before taxation	1,219	1,202
Tax using the effective UK corporation tax rate of 19.00% (2018: 19.16%)	232	230	19.0	19.2
Effects of:
Fixed asset differences	(5)	-	(0.4)	-
Non-deductible expenses	14	9	1.2	0.7
Timing differences	(14)	-	(1.2)	-
Additional deduction for research and development	(63)	(77)	(5.1)	(6.4)
Adjustments to tax charge in respect of prior years	(48)	(183)	(4.0)	(15.2)
Total tax expense/(credit)	116	(21)
Effective tax rate			9.52	(1.7)
Effective tax rate adjusted for significant prior year amendments			13.5	13.5

The effective tax rate excluding significant prior year amendments are similar for both FY2019 and FY2018. The largest factor impacting the adjusted effective tax rate is the value of R&D tax credits. This depends upon the level of expenditure incurred in research and development on qualifying projects, which may vary from year to year. Amendments in respect of prior years largely reflect the difference between the tax calculation for accounts purposes and the final tax returns. The main differences relate to claims for qualifying R&D tax credits.

The Research and Development Expenditure Credit (RDEC) scheme for large companies became compulsory from 1 April 2016. The RDEC provides relief against the corporation tax liability for the company of 11% on the amount of qualifying R&D expenditure.

Changes to the UK corporation tax rates were announced as part of the Chancellor's Budget on 16 March 2016. The change announced was to reduce the main rate of corporation tax to 17% from 1 April 2020.

As the change to 17% had been substantively enacted by the balance sheet date, deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements. 

(d)  Factors that may affect future tax charges

The group has gross unused losses estimated at £7,596,000. Brought forward losses transferred to the Group due to the reverse acquisition amount to £7,596,000 and are potentially available for relief against future trading profits generated from the same trade.

4          Earnings per ordinary share

Basic earnings per share for the year is calculated by dividing the profit attributable to ordinary shareholders for the year after tax by the weighted average number of shares in issue.

Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares.

	2019	2018
	£'000	£'000
Profit
Profit attributable to equity holders of the company	1,103	1,223
Numerator for adjusted earnings per share calculation	1,103	1,223

The weighted average number of shares in issue and the diluted weighted average number of shares in issue were as follows:

	2019	2018
Shares
Weighted average number of ordinary shares in issue during the year
for the purposes of basic earnings per share	30,667,548	30,667,548
Dilutive effect of potential Ordinary shares:
share options	316,520	66,449
Diluted weighted average number of shares in issue during the year
for the purposes of diluted earnings per share	30,984,068	30,733,997

The basic and diluted earnings per share for the year are as follows:

	Basic	Diluted	Basic	Diluted
	2019	2019	2018	2018
	pence	pence	pence	pence
Earnings per share	3.60	3.56	3.99	3.98
Adjust for:
Significant prior year tax recoveries	(0.16)	(0.16)	(0.52)	(0.52)
Underlying earnings per share	3.44	3.40	3.47	3.46

An underlying earnings per share and a underlying diluted earnings per share have also been calculated as in the opinion of the Directors this will allow shareholders to gain a clearer understanding of the trading performance of the Group.  

 

5          Cash and cash equivalents

Cash and cash equivalents comprise solely of cash at bank and cash in hand held by the Group.

The carrying amounts of the Group's cash and cash equivalents are denominated in the following currencies:

	Group		Company
	2019	2018	2019	2018
	£'000	£'000	£'000	£'000
Pounds sterling	1,946	1,567	664	659
Euro	328	280	6	5
US Dollars	259	236	5	4
JPY	6	3	-	-
Balances per statement of cashflows	2,539	2,086	675	668

6      Note to the Consolidated Statement of Cash Flows

	2019	2018
	£'000	£'000
Profit before taxation	1,219	1,202
Adjustments for:
Net finance (Income)/Expense	(6)	2
Depreciation and amortisation	364	230
Employee share scheme expense	71	20
Loss on disposal of tangible asset	3	10
Loss on disposal of intangible asset	3	-
(Increase)/Decrease in inventories	(158)	218
Increase in trade and other receivables	(11)	(575)
Decrease in trade and other payables	(474)	(130)
Decrease in deferred income	(16)	(58)
Cash generated from operations	995	919

7      Related party transactions

Neuroprotexeon Limited

At the year-end date the Group held 9.6% (2018: 10.0%) of the issued ordinary share capital of Neuroprotexeon Limited (8.6% fully diluted (2018: 8.6%)).

Neil Campbell resigned as a Non-Executive Director of Neuroprotexeon Limited on 21 June 2018.

Key management

Directors control 28% of the voting shares of the legal parent company. Key management comprise the Group's Executive and Non-executive Directors.

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 Inspiration Healthcare Group 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 business environment.

Annual Report

A further announcement will be made when the 2019 Annual Report and Financial Statements are available on the Company's website (www.inspiration-healthcare.com) and copies are sent to shareholders.

 

END

 

 

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