Final Results

RNS Number : 1955K

Inspiration Healthcare Group PLC

04 May 2022

 

4 May 2022

Inspiration Healthcare Group plc

("Inspiration Healthcare" or the "Group")

Preliminary Results for the year ended 31 January 2022

Inspiration Healthcare Group plc (AIM: IHC), the global medical technology company, today announces its preliminary results for the twelve months ended 31 January 2022 ("FY2022").

2022 Financial highlights:

· Group Revenue up to £41.1 million (FY2021: £37.0 million)

· Adjusted EBITDA¹ up to £6.4 million (FY2021: £5.6 million)

· Adjusted Operating Profit² at £4.3 million (FY2021: £4.3 million)

· Net cash position³ as at 31 January 2022 of £9.3 million (FY2021: £10.7 million)

· Gross Margin up to 50.2% (FY2021: 48.7%)

· Proposed final dividend of 0.41p per share

¹ Earnings before interest, tax, depreciation, amortisation, impairment, share based payments and non-trading items

² Operating Profit before non-trading items

³ After significant investment in capital expenditure: Facilities, R&D and IT systems

2022 Strategic Highlights

· Export Growth and realising sales synergies within the enlarged Group

· Finalised integration of SLE and Viomedex into the Group

· Investment in new manufacturing and technology centre in the UK

· China/Japan key registrations approved for SLE6000 ventilator with major orders from distribution partners

· Project Wave Patient Recruitment / Patient range extension

2022 Operational Highlights 

· Strengthened and expanded Management

· Queen's Award for Enterprise and Innovation for SLE Ltd for its Oxygenie® software based algorithm

· Roll-out of the Group's ERP system into Viomedex and SLE

· Introduction of new and improved electronic quality management system throughout the Group

· Renewed long-term Distribution Agreement with Micrel

· Charitable giving initiative launched and implemented

· Introduction of new Group logos and unified branding

· Adopted a number of well-being initiatives for employees

Post-year end

· Launch for diagnosing antibiotic induced hearing loss in UK and Ireland in conjunction with genedrive plc

Neil Campbell, Chief Executive Officer, said today: "I am extremely pleased with the way we have integrated the three operating companies, extracting synergies and gaining growth whilst undertaking major investment in the business for the future.  The year has been difficult with Covid-19 and supply chain issues but our performance shows how resilient our business is.  I would like to thank our staff for their hard work delivering these excellent results."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

Enquiries:

Inspiration Healthcare Group plc Neil Campbell, Chief Executive Officer Jon Ballard, Chief Financial Officer	Tel: [phone]
Nominated Adviser & Broker Cenkos Securities plc Mark Connelly Stephen Keys Katy Birkin	Tel: [phone]
Cadogan PR  Alex Walters [e-mail]	Tel: [phone]

Chairman's Report

Welcome to this report where I have the pleasure of discussing the achievements of the enlarged Group despite the prevailing headwinds of Covid-19.  This year sees the first full year including the reporting of SLE, our transformational award-winning transaction completed in July 2020 and it is pleasing to see what progress has been made this year.

Last year, I reported on the achievements of the Group during a year that we had supplied over 500 ventilators for the NHS in its battle against Covid-19 from our overseas manufacturing partners, alongside helping in the Ventilator Challenge project that saw a further 13,000 ventilators manufactured, whilst maintaining growth and continuing the integration of SLE.  This year, we had no such one-off revenues from Covid-19 (FY2021: £7.3million), only our own on-going sales.  Therefore, what is extremely pleasing is that our revenues grew across the Group to £41.1million (FY2021: £37.0million), whilst improving overall gross margins given the lockdown conditions around the world during the last two years. Despite the issues caused by Covid-19 remaining throughout the year, our post tax profits were up to £3.6million (FY2021: £2.8million) and our cash generation remained strong with closing cash at the financial year end of £9.3million (FY2021: £10.7million).

This performance was underpinned by our expansive distribution network where the network from the acquisition of SLE has enhanced and enlarged the Group's capability around the world.  Our exports grew by 87%.  Some of this growth was due to cross selling opportunities that were identified when we acquired SLE, being able to sell disposables from other businesses in the Group has allowed us to win business where we would not previously have.  I would like to thank our distribution partners and end users around the world for their continued support of our products whilst battling their own local Covid-19 related conditions.  We look forward to bringing more products to them over the coming years through regulatory clearance and product development to bring greater success.  We should not forget that we have had challenges this year in visiting hospitals and supporting patients.  Essential visits only have been allowed, but with all the precautions needed to maintain the safety of our employees. 

Just over a year ago we decided to give increased focus to improving the performance of our Infusion Therapy team through additional investment in resources.  I am delighted to say that the results of these small changes have been truly remarkable and that in the UK, our sales of Infusion Therapy products have grown by 16%.  We are now looking at how we can continue to add to the momentum in this area in the UK and Ireland to achieve even greater growth next year.

The regulations in the industry continue to create a challenge to most companies as the European Union transitions from the Medical Devices Directive to the Medical Devices Regulation. As we are integrating three companies together each with their own quality management systems and regulatory approvals, we have decided to make an investment in a new electronic quality management system.  There has been good progress with this throughout the year as our team aligns processes and procedures to make us more efficient, effective and maintain our compliance.

As with most industries, our input costs in the UK, in terms of materials (especially 'silicon chips'), inbound freight and energy have been hit hard by inflationary pressure, and similarly our distributors have to also manage their costs (such as freight) and local market costs.  Managing these changing costs in a rapidly changing environment has been challenging and being able to improve our margins to 50.2% (FY2021: 48.7%) shows great resilience in our product portfolio and our ability to extract efficiencies across the Group.  We have taken advantage of being able to look at the resources across the Group and made some restructuring changes.  This has allowed us to focus resources where they are most needed for longer-term growth.

Looking at our longer-term growth and ambitions led us to review the suitability of our facilities in Croydon and after careful consideration we decided to invest in a new manufacturing and technology centre in the UK as our main centre for R&D and Manufacturing of our capital equipment, especially the SLE brand of ventilators. We have been working on our sustainability over the past few years, but planning a new facility allowed us to concentrate on creating something very special for our future.  Over the year many of our team, led by our Chief Operating Officer Brook Nolson, have spent time planning our move to a new state-of-the-art purpose designed facility.  The move includes a 'soft start' during May to validate all processes and systems whilst maintaining production at our old facilities along with the associated regulatory approvals.

Integration of the recently acquired companies into the Group has gone well, and we now have new logos and branding that will help our customers around the world identify companies within the Group.  Additionally, we have standardised across the Group with one Enterprise Resource Planning ("ERP") system.  This allows our teams across the Group to extract data more readily from all operating companies giving management information more quickly.

Our people underpin the business and finding a location within a short distance of the current premises was difficult but important.  It allows us to retain our loyal and dedicated team whilst being able to offer a modern, uplifting working environment.  We want to be an exemplar of British Medical Technology and the new facilities focus heavily on reducing our carbon footprint with passive ventilation and green spaces to reduce our heating, energy efficient lighting, charging points for electric cars, along with better well-being spaces for our employees.  We continue to invest in our people and look to develop the talented staff we have as we grow.

Unfortunately, social distancing and recommendations of working from home have meant that many of our colleagues have yet to meet one another in person and we hope this will change over the coming year.  We have carefully considered how we can integrate well-being for all our employees along with both aligning and improving our staff benefits.  Initiatives such as an electric car scheme and cycle to work, alongside salary sacrifice for employee pensions, have been combined with flexible working.  Having listened to what our employees wanted, along with recruiting new members of the team we have chosen to be progressive with the location of working for certain roles; allowing staff to work from home up to 40% of the time, or work from another location within the Group if it is more convenient.  Additionally, we have introduced a compressed working week, where staff can ask to work four long days and have an extended weekend and approximately one third of our staff have chosen this option.  This flexible approach has been appreciated by our team and coupled with being able to work at different sites we have become a modern flexible employer.

Last year, we detailed information about a charitable giving initiative we implemented.  In order to distribute monies from the Charities Aid Foundation to which a donation was made during FY2021, we now have a committee made up entirely of members of staff who review requests for donations from small medical based charities and determine whether they fit with our values.  A number of donations through this initiative have been approved and we look forward to being able to support more charities in the future.

Every year I thank our staff for their loyalty and hard work, this year perhaps these words are even more deserved, especially for those who, despite lockdowns and the worries over new variants of Covid-19, managed to have record months and a record year.

Outlook statement

The beginning of our new fiscal year started with promise, the Covid-19 pandemic was nearly over but the war in Ukraine quickly made the world outlook look very different.  Like many companies, although we are not dependent on oil and gas, we recognise that there will be increased inflationary pressures in all markets in the forthcoming months which will put additional pressure on suppliers and customers.  However, our Group has shown remarkable resilience over the past few years and been able to grow despite the macro-economic conditions.  In the current financial year our order book remains high and demand for our products remains strong.  We are agile in our approach to managing the challenges ahead and remain confident in our growth prospects.

Mark Abrahams

Chairman

3 May 2022

Going concern basis

The Group provides critical care equipment to the NHS, to NHS suppliers and to distributors who provide the equipment to other healthcare systems internationally. With a focus on neonatal intensive care the use of the Group's products is not something that can be reduced by election or choice and consequently demand for the Group's products is likely to continue or increase with the continuation of the Covid-19 pandemic.

Although the Group has no information to suggest such a scenario might occur the Group have modelled a significant downside scenario based on the main risks to the Group, including a significant downturn in revenue of 15% which would not result in a requirement to draw on the Revolving Credit Facility in the going concern period.

Based on the above, available funds of £7.9 million and access to an undrawn £5 million Revolving Credit Facility as at 31 March 2022, plus the ability to implement some mitigating actions identified by the Board in response to a significant trading downturn, the Directors believe that the Group has sufficient liquidity to meet obligations as they fall due for at least twelve months from 3 May 2022 and, therefore, consider it appropriate to prepare the financial statements on the going concern basis. Further information on the Group's cash resources as at 31 January 2022 is given in note 7.

Operating and Financial Review

I am delighted to report that the Group performed ahead of expectations for the financial year ended 31 January 2022 ("FY2022").

REVENUE

Group revenue increased by 11% to £41.1 million (FY2021: £37.0 million).

Group domestic revenue increased by 3% to £17.6 million, excluding £7.3 million of one off Covid-19 specific revenue received during the prior year. This is reflective of the full year impact of the SLE acquisition, replacement of third party ventilator sales with SLE ventilators offset by the exclusion of £7.3 million of Covid-19 specific revenues in the prior year.

Internationally, Group revenue grew by 87% to £23.4 million benefiting from a full year's contribution from SLE Limited.

BRANDED PRODUCTS

Branded Product revenue grew 96% to £22.5 million in the year primarily benefiting from the acquisition of SLE Limited. Increased sales of the Group's AlphaCore⁵ Patient Warming System, Cosytherm² and LifeStart also contributed reflecting customers desire to adopt new practices.

DISTRIBUTED PRODUCTS

Distributed Product revenue decreased by 9% to £13.6 million in the year, excluding £7.3 million of Covid-19 revenue received during the prior year FY2021. This is reflective of the replacement of third party ventilator sales with SLE Branded Product ventilators offset in part by strong performance across Infusion Therapy.

TECHNOLOGY SUPPORT

Technology Support revenue including technical support increased by 52% to £4.6 million in the year, again benefiting from a full year's contribution from SLE Limited, a one off receipt of £0.2 million and further success in relation to the rental initiative of our AlphaCore⁵ patient warming system totalling £0.3 million.

GROSS PROFIT

Gross Profit of £20.6 million (FY2021: £18.0 million) increased by 14% due to both a year-on-year increase in revenue and an improved gross margin which increased from 48.7% to 50.2%. Gross margins primarily benefited from improved revenue mix towards Branded Product margins offset in part by increases in cost of goods.

OPERATING PROFIT

	2022	2021	Change
	£'000	£'000	£'000
Adjusted EBITDA	6,422	5,611	811
Depreciation	(1,069)	(606)	(463)
Amortisation of intangible assets	(837)	(622)	(215)
Impairment of intangible assets	-	(47)	47
Impairment of right of use asset	(122)	-	(122)
Share based payment	(139)	(78)	(61)
Adjusted Operating Profit	4,255	4,258	(3)
Non-trading items:
Acquisition related expenses	-	(579)	579
Final settlement of deferred consideration	-	(435)	435
Operating Profit	4,255	3,244	1,011

The Group reported Adjusted Operating Profit of £4.3 million (FY2021: £4.3 million).

Administrative expenses increased  by 11%. This increase included a full year of overheads associated with SLE, increased depreciation primarily as a result of IFRS 16 accounting treatment in relation to the lease on the new Croydon facility and continued investment in personnel to maintain revenue growth. 

There were no non- trading items in the year. Prior year non-trading items totalled £1.0 million of which £0.6 million related to expenses incurred in relation to the acquisition of SLE Limited and £0.4 million representing full and final settlement of the contingent consideration arrangements relating to the acquisition Vio Holdings Limited (the parent Company of Viomedex Limited).

The Group delivered Operating profit of £4.3 million, an increase of 31% on the prior year. The growth was due to the decrease in non-trading items offset in part by increased depreciation as a result of the IFRS 16 accounting treatment in relation to the lease on the new Croydon site.

Adjusted EBITDA amounted to £6.4 million, an increase of £0.8 million over the prior year mainly due to increased revenue and improved gross margin offset in part by increased administrative expenses.

Adjusted EBITDA margin improved from 15.2% to 15.6%.

Investment   in R&D including capitalised development costs amounted to 9% (FY2021: 4%) of revenue.

TAXATION

The Group has recorded a tax charge of £370,000 (FY2021: £318,000). The effective tax rat e in FY202 2 was 9% (FY2021: 10%). For more detail see note 3 .

EARNINGS PER SHARE

Basic EPS and diluted EPS were 5.28p and 5.22p per share respectively (FY2021: 5.10 and 5.07p).

Underlying diluted EPS¹ was 6.1p per share, down 19% on FY2021 of 7.6p. The year-on-year decrease attributable to the non-recurrence of the one off Covid 19 revenue of £7.3 million received during FY2021 and the full year impact of the shares issued to acquire SLE Limited, offset by the impact of a full year profit from the SLE acquisition. See note 4 for further information.

¹ EPS Reconciliation from Diluted EPS

	2022 pence	2021 pence
Diluted earnings per share	5.22	5.07
Adjusted for
Non-trading items	-	1.82
Amortisation of intangible assets acquired through business combinations	0.88	0.68
Underlying diluted earnings per share	6.10	7.57

CASH FLOW

Cash and cash equivalents as at 31 January 2022 amounted to £9.3 million, an decrease of £1.4 million over the prior financial year-end reflecting the increased investment in both research and development and infrastructure. Net cash generated from operating activities was £3.6 million, £1.2 million lower than in FY2021. Cash outflow on investing activities totalled £4.0 million (FY2021: £14.1 million), of which £2.2 million related to capitalised development expenditure and £1.8 million relating to purchase of software and property, plant and equipment as the Group continues to integrate key systems across the business and investment in state of the art facilities.

The Group has a £5 million Revolving Credit Facility ("RCF") in place which was not utilised during the year and remained undrawn at the year end.

NET ASSETS

The value of non-current assets as at 31 January 2022 totalled £26.4 million (FY2021: £19.2 million).

The year-on-year increase of £7.2 million relates to both an increase in capitalised product development of £2.2 million and an increase in right of use assets primarily relating to the new Croydon site.

Inventory decreased to £6.5 million (FY2021: £8.2 million) due to improved working capital management and manufacturing process.

Trade and other receivables increased by £4.2 million to £9.3 million (FY2021: £5.2 million) due to sales growth and phasing.  Trade and other payables decreased by £0.3 million to £6.6 million (FY2021: £6.8 million).

Net Assets increased by £3.3 million or 11% to £34.9 million as at 31 January 2022.

DIVIDENDS

The interim dividend of 0.205p per share (FY2021: 0.2p) was paid on 29 December 2021. The Board is recommending a final dividend of 0.41p per share (FY2021: 0.4p) to make a total dividend for the year of 0.615p per share (FY2021: 0.6p). If approved by shareholders, the final dividend will be paid on 29 July 2022 to shareholders on the register on 1 July 2022.

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.

SHARE PRICE DURING THE YEAR

The range of market prices during the year from 1 February 2021 to 31 January 2022 was £0.885 to £1.500 and the mid-market price of the Company's shares at 31 January 2022 was £1.025.

Jon Ballard

Chief Financial Officer

3 May 2022

Consolidated Income Statement

for the year ended 31 January 2022

			2022	2021
		Note	£'000	£'000
	Revenue	2	41,050	36,980
	Cost of sales		(20,458)	(18,958)
	Gross profit		20,592	18,022
	Administrative expenses		(16,337)	(14,778)
	Operating profit		4,255	3,244
	Finance income		9	3
	Finance expense		(301)	(114)
	Profit before tax		3,963	3,133
	Income tax	3	(370)	(318)
	Profit for the year attributable to
	owners of the parent company		3,593	2,815
	Earnings per share, attributable to owners of the
	parent company
	Basic expressed in pence per share	4	5.28p	5.10p
	Diluted expressed in pence per share	4	5.22p	5.07p

Consolidated Statement of Comprehensive Income

for the year ended 31 January 2022

			2022	2021
		Note	£'000	£'000
	Profit for the year		3,593	2,815
	Other comprehensive income
	Items that may be reclassified to profit or loss
	Cash flow hedges		9	31
	Total other comprehensive income for the year		9	31
	Total comprehensive income for the year		3,602	2,846

Consolidated and Company Statements of Financial Position

as at 31 January 2022

(Registered Number: 03587944)		Group		Company
		2022	2021	2022	2021
	Note	£'000	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets	6	16,782	15,206	-	-
Property, plant and equipment		1,798	919	-	-
Right of use assets		7,383	3,102	-	3
Investments		-	-	32,881	32,881
Deferred tax asset	8	470	-	63	25
		26,433	19,227	32,944	32,909
Current assets
Inventories		6,449	8,190	-	-
Trade and other receivables		9,314	5,163	1,433	1,434
Cash and cash equivalents	7	9,253	10,653	310	586
		25,016	24,006	1,743	2,020
Total assets		51,449	43,233	34,687	34,929
Liabilities
Current liabilities
Trade and other payables		(6,552)	(6,809)	(7,973)	(5,996)
Lease liabilities		(647)	(369)	-	(3)
Financial derivative		-	(9)	-	-
Contract liabilities		(524)	(533)	-	-
		(7,723)	(7,720)	(7,973)	(5,999)
Non-current liabilities
Lease liabilities		(6,896)	(2,796)	-	-
Deferred tax liability	8	(1,925)	(1,141)	-	-
		(8,821)	(3,937)	-	-
Total liabilities		(16,544)	(11,657)	(7,973)	(5,999)
Net assets		34,905	31,576	26,714	28,930
Shareholders' equity
Called up share capital		6,812	6,812	6,812	6,812
Share premium account		18,838	18,838	18,838	18,838
Reverse acquisition reserve		(16,164)	(16,164)	-	-
Share based payment reserve		278	139	433	294
Other reserves		-	(9)	-	-
Retained earnings		25,141	21,960	631	2,986
Total equity		34,905	31,576	26, 714	28,930

The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Company profit and loss account. The Company's loss for the year ended 31 January 2022 is £1,943,000 (2021: loss £1,782,000)

Consolidated and Company Statements of Changes in

Shareholders' Equity

Group						Share
		Issued	Share	Reverse			based
		share	premium	acquisition			payment	Other			Retained
		capital	account	reserve			reserve	Reserves			earnings		Total
		£'000	£'000	£'000			£'000	£'000			£'000		£'000
	At 1 February 2020	3,838	3,475		(16,164)	153				(34)	19,281	10,549
Profit for the year		-	-		-		-		-		2,815			2,815
Cash flow hedges: Income recognised on hedging instruments		-	-		-		-		31		-			31
Total comprehensive income
	for the year	-	-		-	-				31	2,815	2,846
Transactions with owners in
their capacity as owners
Dividends		-	-		-		-		-		(136)			(136)
Employee share scheme expense		-	-		-		78		-		-			78
Issue of ordinary shares, net of transaction costs and tax		2,974	15,363		-		(92)		-		-			18,245
Deferred tax - Note 8		-	-		-		-		(6)		-			(6)
Total transactions with owners		2,974	15,363		-		(14)		(6)		(136)			18,181
	At 31 January 2021	6,812	18,838		(16,164)	139				(9)	21,960	31,576
Profit for the year		-	-		-		-		-		3,593			3,593
Cash flow hedges: Income recognised on hedging instruments		-	-		-		-		9		-			9
Total comprehensive income		-	-		-		-		9		3,593			3,602
for the year
Transactions with owners in
their capacity as owners
Dividends		-	-		-		-		-		(412)			(412)
Employee share scheme expense		-	-		-		139		-		-			139
Total transactions with owners		-	-		-		139		-		(412)			(273)
At 31 January 2022		6,812	18,838		(16,164)		278		-		25,141			34,905

Consolidated Cash Flow Statement

for the year ended 31 January 2022

		2022	2021
	Note	£'000	£'000
Cash flows from operating activities
Profit for the year		3,593	2,815
Adjustments for:
Depreciation and amortisation		1,906	1,228
Remeasurement of right of use assets		(46)	-
Impairment of right of use assets		122	-
Impairment of intangible assets	6	-	47
Employee share scheme expense		139	78
Contingent consideration share issue		-	435
Loss on disposal of tangible assets		192	14
Loss on disposal of intangible assets	6	133	65
Revenue from leased rentals		(304)	-
Finance income		(9)	(3)
Finance expense		301	114
Income tax expense	3(a)	370	318
		6,397	5,111
Decrease/(increase) in inventories		1,741	(573)
(Increase)/decrease in trade and other receivables		(3,733)	4,009
Decrease in trade and other payables		(266)	(3,597)
Decrease in contract liabilities		(9)	(6)
Cash flows generated from operations		4,130	4,944
Taxation paid	3(b)	(554)	(209)
Net cash generated from operating activities		3,576	4,735
Cash flows from investing activities
Payment for acquisition of subsidiary		-	(19,457)
Cash acquired through business combinations		-	6,314
Bank interest received		1	3
Interest received on leased rentals		8	-
Purchase of property, plant and equipment		(1,425)	(257)
Purchase of intangible assets	6	(338)	(49)
Capitalised development costs	6	(2,208)	(614)
Net cash used in investing activities		(3,962)	(14,060)
Cash flows from financing activities
Proceeds from issues of shares		-	16,967
Share issue costs		-	(957)
Principal elements of lease payments		(382)	(262)
Principle elements of lease receipts		74	-
Interest paid on lease liabilities		(244)	(87)
Interest paid on loans and borrowings		(50)	(27)
Dividends paid to the holders of the parent		(412)	(136)
Proceeds from loans and borrowings		-	1,500
Repayments from loans and borrowings		-	(1,500)
Net cash (used in)/generated from financing activities		(1,014)	15,498
Net (decrease)/increase in cash and cash equivalents		(1,400)	6,173
Cash and cash equivalents at the beginning of the year		10,653	4,480
Cash and cash equivalents at the end of the year	7	9,253	10,653

Notes forming part of the Financial Statements

1  Accounting Policies

Inspiration Healthcare Group plc ("Company") is a public limited company incorporated in England and Wales 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.

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.

Going concern basis

The Group provides critical care equipment to the NHS, to NHS suppliers and to distributors who provide the equipment to other healthcare systems internationally. With a focus on neonatal intensive care the use of the Group's products is not something that can be reduced by election or choice and consequently demand for the Group's products is likely to continue or increase with the continuation of the Covid-19 pandemic.

Although the Group has no information to suggest such a scenario might occur the Group have modelled a significant downside scenario based on the main risks to the Group, including a significant downturn in revenue of 15% which would not result in a requirement to draw on the Revolving Credit Facility in the going concern period.

Based on the above, available funds of £7,900,000 and access to an undrawn £5m Revolving Credit Facility as at 31 March 2022, plus the ability to implement some mitigating actions identified by the Board in response to a significant trading downturn, the Directors believe that the Group has sufficient liquidity to meet obligations as they fall due for at least twelve months from 3 May 2022 and, therefore, consider it appropriate to prepare the financial statements on the going concern basis. Further information on the Group's cash resources as at 31 January 2022 is given in note 7.

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.

The Group refers to the following alternative financial measures, please refer to the Operating and Financial Review for further information.

· Adjusted EBITDA

· Adjusted Operating Profit

· Underlying EPS

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:

			2022	2021
			£'000	£'000
Domestic
-  UK			17,078	23,446
-  Ireland			545	1,028
International
-  Europe			5,955	5,179
-  Asia Pacific			10,230	4,128
-  Middle East & Africa			5,456	1,852
-  Americas			1,786	1,347
Total			41,050	36,980

Significant categories of revenue
			2022	2021
			£'000	£'000
Revenue recognised at a Point in Time
-  Branded Products			22,524	11,465
-  Distributor Products			13,606	22,224
-  Technology Support *			304	-
-  Other			356	294
Revenue recognised Over Time
-  Technology Support			4,260	2,997
Total			41,050	36,980

* Technology Support relates to the revenue earned from the rental of our AlphaCore⁵ patient warming system.

3  Income tax

	(a)  Analysis of tax charge for the year
		2022	2021
		£'000	£'000
	Domestic current year tax *
	UK corporation tax
	Current year	-	428
	Prior year adjustment	56	(61)
	Total current tax expense	56	367
	Deferred tax (see note 8)
	Origination and reversal of temporary timing differences	290	(65)
	Prior year adjustment	24	(11)
	Effect of increased tax rate on opening balance	-	27
	Total deferred tax	314	(49)
	Tax expense on profit on ordinary activities	370	318

* All tax in both 2022 and 2021 arose in the UK.

	(b)  Analysis of current corporation tax assets and liabilities
		2022	2021
		£'000	£'000
	Net liability at 1 February	(313)	(123)
	Tax payments
	Final payments relating to prior year	554	115
	Payments on account relating to current year	-	94
	Total tax payments made during the year	554	209
	Current year UK corporation tax charge	-	(428)
	Prior year adjustment	(56)	61
	Acquired through business combinations	-	(32)
	Net asset/(liability) at 31 January	185	(313)

(c) Factors affecting tax charge for the year

The tax assessed for the year is lower (2021: lower) than the standard rate of corporation tax in the UK 19.00% (2021: 19.00%) as explained below:

			Effective Tax Rate
	2022	2021	2022	2021
	£'000	£'000	%	%
Profit on ordinary activities before taxation	3,963	3,133
Tax using the effective UK corporation tax rate of 19.00% (2021: 19.00%)	753	595	19.0	19.0
Effects of:
Non-deductible expenses	56	204	1.4	6.5
Additional deduction for research and development	(497)	(216)	(12.5)	(6.9)
Fixed asset differences	49	-	1.2	-
Other permanent differences	12	-	0.3	-
Adjustment in respect of prior periods	80	(61)	2.0	(1.9)
Amendments to deferred tax and timing	(83)	(204)	(2.1)	(6.5)
Total tax expense	370	318
Effective tax rate			9.3	10.2

The effective tax rate for FY2022 is lower than FY2021. The largest factors impacting the decreased effective tax rate is the value of R&D tax credits. The value of R&D tax credits depends upon the level of expenditure incurred in research and development on qualifying projects, which may vary from year to year.

Budget 2021 announced that the UK corporation tax rate was to increase from 19% to 25% with effect from 1 April 2023. A small profits rate of 19% applies for taxable profits of £50,000 or less and a tapered rate will apply to companies with taxable profits between £50,001 and £249,999. This provision was substantively enacted on 24 May 2021 and the deferred tax balances have been calculated at 25%.

(d)  Factors that may affect future tax charges

The Group has gross unused losses estimated at £14,563,893 (FY2021: £15,090,850), of which £7,370,932 (FY2021: £7,596,259) were transferred to the Group due to the reverse acquisition and £7,172,534 (FY2021: £7,490,062) relate to SLE. Brought forward losses transferred to the Group due to the reverse acquisition are potentially available for relief against future trading profits generated from the same trade. Losses relating to SLE are potentially available for relief against future trading profits generated by SLE. See note 8 Deferred Tax, for more information.

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.

	2022	2021
	£'000	£'000
Profit
Profit attributable to equity holders of the company	3,593	2,815
Add back non trading items	-	1,014
Add back amortisation of intangible assets acquired through business combinations	605	380
Numerator for underlying earnings per share calculation	4,198	4,209

There were no non-trading items in the year.  Non-trading items in FY2021 represent acquisition related expenses of £579,000 and final settlement of contingent consideration in relation to the acquisition of Viomedex of £435,000. 

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

	2022	2021
Shares
Number of ordinary shares in issue at the beginning of the year	68 ,121,447	38,380,850
Weighted average number of shares issued during the year	-	16,855,015
Weighted average number of ordinary shares in issue during the year	68,121,447	55,235,865
for the purposes of basic earnings per share
Dilutive effect of potential ordinary shares:
Weighted average number of share options	672,175	309,342
Diluted weighted average number of shares in issue during the year
for the purposes of diluted earnings per share	68,793,622	55,545,207

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

	Basic	Diluted	Basic	Diluted
	2022	2022	2021	2021
	pence	pence	Pence	Pence
Earnings per share	5.28	5.22	5.10	5.07
Adjust for:
Non trading items	-	-	1.83	1.82
Add back amortisation of intangible assets acquired through business combinations	0.89	0.88	0.69	0.68
Underlying earnings per share	6.17	6.10	7.62	7.57

An underlying earnings per share and an 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  Dividends

The interim dividend for the year ended 31 January 2022 of 0.205p per share (2021: 0.2p per share) was paid on 29 December 2021. The proposed final dividend of 0.41p per share (2021: 0.4p per share) is subject to approval by shareholders at the AGM and has not been recognised as a liability as at 31 January 2022. If approved, the final dividend will be paid on 29 July 2022 to shareholders on the register on 1 July 2022.

6  Intangible assets

	Group		Intangible assets	Development	Intellectual	Software
		Goodwill	acquired	costs	property	costs	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Cost
	At 1 February 2020	2,021	492	1,486	276	396	4,671
	Capitalised in the year	-	-	614	-	49	663
	Acquisition of business	6,546	5,036	-	-	-	11,582
	Acquired in business combinations	-	-	-	-	40	40
	Disposals	-	-	(65)	-	-	(65)
	At 1 February 2021	8,567	5,528	2,035	276	485	16,891
	Capitalised in the year	-	-	2,208	-	338	2,546
	Disposals	-	-	(116)	-	(67)	(183)
	At 31 January 2022	8,567	5,528	4,127	276	756	19,254
	Accumulated Amortisation
	At 1 February 2020	-	43	392	276	305	1,016
	Charge in the year	-	380	186	-	56	622
	Impairment	-	-	47	-	-	47
	At 1 February 2021	-	423	625	276	361	1,685
	Charge in the year	-	605	155	-	77	837
	Disposals	-	-	-	-	(50)	(50)
	At 31 January 2022	-	1,028	780	276	388	2,472
	Net book value
	At 31 January 2022	8,567	4,500	3,347	-	368	16,782
	At 31 January 2021	8,567	5,105	1,410	-	124	15,206

There were no impairments of intangible assets in the year (2021: £47,000).

The Group tests goodwill for impairment on an annual basis, or more frequently if there are indications that the goodwill may be impaired. The recoverable amounts of the cash-generating unit is determined from value in use calculations. The key assumptions for the value in use calculations are the discount and growth rates used for future cash flows and the anticipated future changes in revenue and costs. The assumptions used reflect the past experience of management and future expectations.

The forecasts covering a five-year period are based on the detailed budget for the year ended 31 January 2023 approved by management. The cashflows beyond the budget are extrapolated for a further four-year period based on future expectations. This forecast is then extrapolated to perpetuity using a 2% (2021: nil) growth rate.

Annual growth rates for revenues for the five-year forecast period have been included between 10% and 15% year-on-year and costs between 5% and 10% year-on-year. A post-tax discount rate of 13% (2021: 13%) has been used in these calculations. The discount rate uses weighted average cost of capital which is reflective of a medical device Company operating both domestically and internationally. A discount rate of 15% (2021: 43%) would need to be applied for there to be zero headroom.

Sensitivity analyses performed on the carrying value of all remaining goodwill using post-tax discount rates up to 13%. Revenue growth would need to reduce to 8% year-on-year from FY2025 onwards with no change in cost growth assumptions for there to be zero headroom.

7  Cash and cash equivalents

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

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

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Pounds Sterling	7,799	9,754	307	583
Euro	963	452	-	-
US Dollars	468	424	3	3
Japanese Yen	3	3	-	-
Emirati Dirham	1	1	-	-
Swiss Franc	14	3	-	-
Australian Dollar	2	12	-	-
Singapore Dollar	3	4	-	-
Balances per statement of cash flows	9,253	10,653	310	586

The Group currently use four banks; Royal Bank of Scotland plc, HSBC Bank plc, Bank of Scotland plc and National Westminster Bank plc.  Moody's give long-term ratings of A1 for all four banks as at 31 January 2022.

8  Deferred tax

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting year.

Note that the effective future tax rate is 25% (2021: 19%).

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Asset at beginning of year	-	-	25	31
Credit to the Income Statement for the year	470	-	38	-
Included directly in equity	-	-	-	(6)
Asset at end of year	470	-	63	25

		Group		Company
		2022	2021	2022	2021
		£'000	£'000	£'000	£'000
Liability at beginning of year		(1,141)	(227)	-	-
Charge to the Income Statement for the year		(784)	49	-	-
Included directly in equity		-	(6)	-	-
Included on business combinations		-	(957)	-	-
Liability at end of year		(1,925)	(1,141)	-	-
The elements of deferred taxation provided for are as follows:
		2022	2021	2022	2021
		£'000	£'000	£'000	£'000
Unused tax losses		470	-	-	-
Short term timing differences		-	-	63	25
Deferred tax asset		470	-	63	25
		2022	2021	2022	2021
		£'000	£'000	£'000	£'000
Accelerated capital allowances		(140)	(197)	-	-
Intangible assets		(751)	-	-	-
Intangibles arising on business combinations		(1,125)	(976)	-	-
Short term timing differences		91	32	-	-
Deferred tax liability		(1,925)	(1,141)	-	-

It is expected that £235,000 of the deferred tax liability and £157,000 of the deferred tax asset as at the year end will be settled within 12 months of the year ended 31 January 2022 and the remaining £1,690,000 of the deferred tax liability and £313,000 of the deferred tax asset will be settled after 12 months following the year ended 31 January 2023.

At the year end date the Group had gross unused losses of £14,563,466 (2021: £15,090,850) potentially available to offset against future profits. Unused trading losses of £7,172,534 (2021: £7,490,062) arose in SLE Limited prior to the acquisition by Inspiration Healthcare Group plc on 7 July 2020 and brought forward losses transferred to the Group due to the reverse acquisition of Inditherm plc amount to £7,370,932 (2021: £7,596,259). The Group has received advice that these losses can be carried forward and utilised against future taxable profits of the same business from which they were generated.  A streaming methodology has been devised to estimate profits from the business relating to Inditherm plc. This has been projected forwards and due to anticipated ongoing investment in development of the product range with consequent benefits of R&D tax credits it is estimated that taxable profits will not be generated for a number of years.  Given a number of uncertainties inherent in the estimations, including revenue generated from recent product launches and the quantum of R&D tax credits, no deferred tax has been recognised in respect of these losses.

The amounts of deferred tax not recognised are as follows:
	2022	2021
	£'000	£'000
Unused tax losses	3,170	2,867

9  Related party transactions

There is no ultimate controlling party.

Key management

Key management control 7% (2021: 12.9%) of the voting shares of the Company.

Key management comprise the Group's Executive and Non-executive Directors', Non-executive Directors' and prior year, the Managing Director of Inspiration Healthcare Limited.

	2022	2021
	£'000	£'000
Salaries and benefits	794	981
Contributions to defined contribution pension scheme	24	23
	818	1,004

Lease of Leicestershire Facility

The Leicestershire facility at Earl Shilton is rented on an arms length basis for £22,000 per annum (2021: £22,000) from a self-invested pension plan controlled by Neil Campbell, Toby Foster, Simon Motley and others. The lease was renewed on an arm's length basis during April 2018.

Statement of directors' responsibilities

In preparing this preliminary announcement and summary financial statements the directors have considered their statutory responsibilities in relation to the preparation and approval of the annual report and financial statements.  In preparing the summary financial statements, the directors have:

• selected suitable accounting policies and then apply them consistently;

• stated whether applicable IFRSs as adopted by the European Union have been followed for the Group summary financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the Company financial statements, subject to any material departures disclosed and explained in the summary financial statements;

• made judgements and accounting estimates that are reasonable and prudent; and

• prepared the summary financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

In the case of each director in office at the date the summary financial statements are approved:

• so far as the director is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and

• they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditors are aware of that information. 

Publication of non-statutory accounts

The financial information included in this preliminary announcement does not constitute the Company's statutory accounts for the year ended 31 January 2022 and for the year ended 31 January 2021 but is derived from those accounts. Statutory accounts for the year ended 31 January 2021 have been delivered to the registrar of companies, and those for year ended 31 January 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention to by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The consolidated financial statements of the Company have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with the UK adopted international accounting standards.

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 2022 Annual Report and Financial Statements are available on the Company's website ( www.inspirationhealthcaregroup.plc.uk ) and copies are sent to shareholders.

 

END

 

 

FR UOSKRURUVRAR