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Vindon HealthcarePlc (VDN)

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Tuesday 27 March, 2012

Vindon HealthcarePlc

Preliminary Results

RNS Number : 0802A
Vindon Healthcare Plc
27 March 2012
 



VINDON HEALTHCARE PLC

 

("Vindon" or the "Company" and, together with its subsidiaries, the "Group")

 

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

 

Vindon, (AIM:VDN), provides controlled environment services and products to the pharmaceutical, life sciences and heritage sectors in the UK, Ireland, Europe and North America.

 

Revenue and profit growth achieved despite adverse market conditions:

 


            2011

               2010

Change

Turnover

£6.83m

£5.93m

+15%

Gross profit

£3.69m

£3.36m

+10%

Profit before tax

£1.10m

£1.00m

+10%

  Earnings per share (fully diluted)

0.96p

0.87p

+10%

Dividend per Share

0.182p

0.165p

+10%

 

Key business highlights

 

·     Strong rise in revenues from equipment sales

 

·     Revenues from North American operations more than doubled to £781,000

 

·     Net debt reduced by £375,000 to £1.58m driven by strong cash generation

 

·     Further substantial expansion of storage facilities  

 

·     Contracted future income of £4.5m at record levels (2010: £3.9m)

 

·     Dividend raised by 10% reflecting the improving performance of the business

 

Liam Ferguson, Chairman, commented: "The benefits are starting to flow from actions taken in the last two years to invest in our facilities and strengthen our team. The successful completion of the largest equipment order in our history, a continuing strong performance in Ireland and improving results in the USA demonstrate that we are moving in the right direction. We plan to add new revenue streams and capitalise on our strengths to drive continued profit growth."

 

Enquiries:

 

Vindon Healthcare PLC

Liam Ferguson  (Chairman)

Jon Scopes (Finance Director)

01706 716710

WH Ireland Limited

Dan Bate (Nominated Adviser)

Jessica Metcalf (Corporate Broking)

0161 832 2174

Zeus Capital Limited

Andrew Jones (Financial Adviser)

0161 831 1512

Newgate Threadneedle

Guy McDougall/ Josh Royston (Financial PR)

020 7653 9842

 

 

Chairman's Statement

 

On behalf of the Board of Vindon, I am pleased to present the results for the year ended 31 December 2011, a period which saw a return to profit growth for the Group. During 2011, significantly increased turnover delivered a 10% growth in profit before tax.

 

Demand for storage services remained stable in the UK, but grew strongly in Ireland. Our new storage facility in Atlanta, which opened in late 2010, contributed revenue to the Group this year. We saw strong growth in order intake from the second quarter onwards and during the second half of 2011 we completed the largest equipment order in the Company's history, with a value of £665, 000. Price competition continued to be a significant factor and put pressure on margins but this is mitigated by the broader base of our operations which gives us more opportunity to win business.

 

Results and dividend

 

Group revenue increased 15.1% to £6,831,000 (2010: £5,933,000) reflecting strong sales growth in manufactured equipment sales in the UK and USA and increased storage revenues in Ireland. Our cost base grew to service the extra demand. Overall, Group profit before tax increased by 10% to £1,096,000 (2010: £998,000).  Fully diluted earnings per share for 2011 were 0.96p (2009: 0.87p).

 

The Board is pleased to announce Vindon's intention to pay a dividend of 0.182p, which represents a 10% rise. This increase is in line with our renewed profit growth and reflects the financial strength of the business and its ability to generate substantial cash flow.

 

Strategy

 

Our core strategy remains making maximum use of our Kingsway base and growing the number and profitability of satellite storage operations in Europe, the USA and in due course, Asia. Our storage facility at Kingsway and our overseas sites are key revenue generators. They also provide an excellent showcase for our manufacturing capability, which helps to drive sales of our environmentally controlled cabinets and rooms. This model is working well and we expect it to deliver further profitable growth.

 

The retrenchment in the pharmaceutical industry in recent years has impacted on our business. Consequently we have taken action to increase our competitiveness by smarter manufacturing and component sourcing and to diversify our revenue streams by product development. We will seek to add products and services from internal development and also through suitable acquisitions or distributorship agreements.

  

Ireland

 

The Tramore site continues to demonstrate the benefits of offering storage facilities in overseas markets. During the year we trebled our storage capacity at the facility, in response to heavy demand from the pharmaceutical industry in Ireland.

 

Total revenues were £791,000 (2010:£606,000) and the operation contributed £373,000 to Group profit before tax (2010: £298,000). Tramore now contributes £1.1m contracted future income, 24% of the Group total.

 

North America

 

The Atlanta operation follows a similar model to the Irish facility. Storage contracts have been secured with 11 clients during the year.

 

We have developed an effective team in the USA and are starting to see the benefits in the orders secured for manufactured equipment and related services. Total revenues in the USA more than doubled in 2011 to £781,000 (2010: £355,000). It is expected that the Atlanta operation will move into profit in 2012.

 

As the Vindon name is now established in North America, the business changed its name to Vindon Scientific (USA) Inc. on 7 September 2011.

 

Business Development

 

Our commitment to new products and technologies has previously prompted moves into artefact storage, and the cryogenic storage of stem cells. With the establishment of a dedicated product development team our innovation process is accelerating.

 

During late 2011 we designed, built, installed and validated three large stability rooms, incorporating an innovative LED lighting system. This was an urgent requirement for a major pharmaceutical client undertaking a specialist trial. Our ability to deliver this facility through new technology in a considerably shorter time than was previously possible illustrates how we are adapting to create and develop new opportunities.

 

We are making good progress in the regenerative medicine market and are continuing to form partnerships with stem cell procurement and processing organisations. These arrangements will secure long-term storage income for Vindon. We currently store approximately 23,000 samples at Kingsway.

 

Vindon's people

 

To facilitate product development and technical improvement in our business we made some changes at senior level during 2011, recruiting Keith Parkes to head up manufacturing. This enabled Ian Gordon as Technical Director to focus on product development, major projects and technical support in the USA.

 

We have followed through the changes at senior level with changes to working practices throughout the business which have made us more responsive and flexible. Our team have reacted positively to these changes.

  

Changes to the Board

 

I am pleased to report that Keith Parkes has been appointed as Manufacturing Director with effect from today. Keith has many years' experience in advanced manufacturing techniques at director level.

 

Outlook

 

The first two months of 2012 have seen an upturn in enquiries for manufactured equipment and storage, compared with the corresponding period in the previous two years.

 

The initiatives we are pursuing on new product development will deliver additional revenues towards the end of 2012. This will include the introduction of product modifications and specification changes to enable us to compete more effectively in price sensitive markets.

 

The storage facility at Tramore now has three times the storage capacity that it had a year ago. We expect demand in Ireland to ease back in 2012 but we can confidently expect another good year from our Irish business.

 

Prospects for storage revenue in Atlanta are improving and we are currently investigating possible sites for an additional facility within pharmaceutical clusters.

 

Contractual commitments made by customers on storage and service contracts in the UK, Ireland and USA considerably enhance the Group's prospects. As at 31 December 2011 this contracted future income amounted to £4.5m (2010:£3.9m), a record for the Group. Potential threats to the global economy remain. However, the Group is well placed to build on the profit growth set in 2011.

 

 

Liam Ferguson

Chairman

 

 

 

 

 

Financial Review 2011

 

 

Results summary

 

Sales for the year ended 31 December 2011 were £6,831,000 (2010: £5,933,000), an increase of 15.1%, largely driven by buoyant equipment sales. International sales grew by 63.6% and now represent 23.0% of Group turnover (2010:16.2%).

 

Consequently, expenditure on travel and subsistence directly related to the achievement of international sales has grown significantly. To reflect this, these costs are now being included in cost of sales rather than administrative costs as previously. As a result the consolidated statement of comprehensive income for 2010 has been re-presented to give a like for like comparison. This has no impact on operating profits. However, gross margins are reduced from levels previously reported.

 

Gross margin reduced to 54.1% for 2011 compared with 56.6% in 2010. However, the impact of the substantial increase in sales volumes compensated for this and gross profit rose to £3,693,000 in 2011, a 10.0% improvement (2010:£3,356,000).

 

Administrative costs were £2,084,000 in 2011 up 8.7% (2010: £1,917,000 adjusted following the re-presentation of direct travel costs). The key drivers for this increase were additional facility running costs and greater investment in sales and marketing activities.  There was a significant rise in the depreciation charge, which rose to £476,000 (2010:£400,000). This included a full year's depreciation on the new storage facility in Atlanta, which only came on stream late in 2010 and substantially increased depreciation in Ireland following the trebling of the storage capacity early in the year.

 

Despite these increases in costs, operating profit rose by £94,000 to £1,133,000 (2010: £1,039,000). Operating profit margin reduced to 16.6% (2010:17.5%).  

 

Dividend

 

The Board is pleased to announce Vindon's intention to pay a dividend of 0.182p per share at a cost of £158,067. Subject to shareholder approval at the forthcoming Annual General Meeting, the dividend will be paid on 29 June 2012 to those shareholders on the register at the close of business on 8 June 2012.  The ex-dividend date will be 6 June 2012.

 

Earnings per share

 

Basic earnings per share were 0.98p, an increase of 10.1% on the prior year.

 

Cash flow and capital investment

 

Cash flow from operating activities increased by £156,000 to £1,610,000.  Cash generated from all aspects of the Group's operations totalled £1,813,000 (2010: £1,402,000). This enabled us to continue with our programme to substantially increase storage capacity without recourse to additional external funding.

 

Total capital investment in the year was £989,000 (2010: £719,000) of which £493,000 was spent in Ireland to treble the volume of the stability storage facility. A further £215,000 was invested on enhancements to stability storage facilities at Kingsway.  In addition to making very significant capital investments the Company reduced gearing during 2011, with net debt dropping to £1,576,000 at the yearend (2010: £1,951,000).

 

The Company's former premises and associated land at Kiln Green, Diggle (carrying value £310,000) is not currently in operational use within the business. The property was classified as held for sale in the 2010 consolidated balance sheet, as a potential buyer for the site had been identified. This buyer withdrew their interest during 2011 and the property has been reclassified within property, plant and equipment as a non-current asset. The property continues to be actively marketed for sale.

 

 

Banking facilities

 

The Group has two term loans from Co-operative Bank plc, the principal terms of which are as follows:

·    a ten year loan at 1.34375% over base rate taken out in May 2008 with £1,481,000 outstanding at the year end; and

·    a ten year loan at 1.34375% over base rate taken out in February 2005 with £221,000 outstanding at the year end.

 

The loans are subject to an interest cover covenant of three times and a pre goodwill net assets test of £2,500,000. The Group operated comfortably within its facilities during the year and the directors believe that the Group will continue to do so during the coming year.

 

 

Financial risk management objectives and policies

 

The Group's operations expose it to a variety of financial risks that include the effects of changes in credit risk, liquidity risk, interest rate risk and foreign exchange risk.  The Group has a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and the related finance costs. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made.  The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually. The Group maintains a mixture of long and short-term debt finance that is designed to ensure it has sufficient available funds for operations and planned expansions. Foreign exchange risk is managed by matching assets and liabilities and converting into sterling on a regular basis.

 

 

Jon Scopes

Finance Director

 

 

 

VINDON HEALTHCARE PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2011






Note

2011

 

2010

(Re-presented- see Note 24)



£'000

£'000


£'000

£'000








Revenue

1


6,831



5,933








Cost of sales



(3,138)



(2,577)















Gross profit



3,693



3,356








Administrative expenses


(2,084)



(1,917)


Depreciation and amortisation expense


(476)



(400)





(2,560)



(2,317)













Operating profit

3


1,133



1,039








Financial income

5

1



1


Financial expenses

6

(38)



(42)









Net financing costs



(37)



(41)















Profit before tax



1,096



998








Income tax expense

7


(246)



(225)















Profit for the year attributable to owners of the parent



850



773






















Other comprehensive income







Exchange differences on translating foreign operations



(4)



(28)

Income tax relating to components of other recognised income and expense



-



-

Other recognised income and expense for the year, net of tax



(4)



(28)








Total comprehensive income attributable to owners of the parent



846



745















Earnings per share

8













Basic



0.98p



0.89p








Diluted



0.96p



0.87p


VINDON HEALTHCARE PLC

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2011








Note


2011


2010




£'000


£'000

Non-current assets






Property, plant and equipment

9


6,152


5,457

Intangible assets

10


2,760


2,760

Deferred tax assets

16


310


216

Total non-current assets



9,222


8,433







Current assets






Inventories

11


479


211

Trade and other receivables

12


2,788


1,905

Cash and cash equivalents



126


38




3,393


2,154

Assets classified as held for sale

9


-


313

Total current assets



3,393


2,467













Total assets



12,615


10,900







Current liabilities






Interest bearing loans and borrowings

13


(290)


(288)

Trade and other payables

15


(992)


(574)

Current tax liabilities



(145)


(225)

Accruals and deferred income



(1,518)


(593)

Obligations under finance leases

13


-


(7)

Other liabilities



(25)


(14)

Total current liabilities



(2,970)


(1,701)







Non-current liabilities






Interest bearing loans and borrowings

13


(1,412)


(1,694)

Deferred tax liabilities

16


(243)


(218)

Total non-current liabilities



(1,655)


(1,912)







Total liabilities



(4,625)


(3,613)







Net assets



7,990


7,287







Equity






Share capital

17


889


889

Treasury shares



-


-

Translation reserve



(49)


(45)

Share premium



1,950


1,950

Retained earnings



5,200


4,493

Total equity attributable to equity shareholders



7,990


7,287

 

 

 


VINDON HEALTHCARE PLC

CONSOLIDATED CASHFLOW STATEMENT

YEAR ENDED 31 DECEMBER 2011












2011


2010





£'000


£'000

Cash flows from operating activities







Profit attributable to equity shareholders



850


773

Adjustments for:







Depreciation




476


400

Financial income




(1)


(1)

Financial expense




38


42

Loss on sale of property, plant and equipment




1


15

Taxation




246


225

Operating profit before changes in working capital provisions


1,610


1,454








(Increase) / Decrease in trade and other receivables




(883)


2

(Increase) / Decrease in inventories




(268)


17

Increase / (Decrease) in trade and other payables




1,354


(71)

Cash generated from operations




1,813


1,402








Tax paid




(395)


(288)








Net cash inflow from operating activities




1,418


1,114








Cash flows from investing activities







Interest received




1


1

Acquisition of property, plant and equipment




(989)


(719)

Proceeds from disposal of property, plant and equipment




130


11

Acquisition of subsidiary undertaking




-


(110)

Net cash outflow from investing activities




(858)


(817)








Cash flows from financing activities







Dividends paid




(143)


(143)

Interest paid




(38)


(42)

Repayment of loans




(280)


(273)

Repayment of finance lease liabilities




(7)


(36)

Net cash outflow from financing activities




(468)


(494)








Net increase/(decrease) in cash and cash equivalents




 

92


 

(197)

Opening cash and cash equivalents




38


263

Effect of foreign exchange rate changes




(4)


(28)

Closing cash and cash equivalents




126


38








 

 


VINDON HEALTHCARE PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2011








Year ended 31 December 2011

Share capital

Share premium

Treasury shares

Translation

Retained earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000








Balance at 1 January 2011

889

1,950

-

(45)

4,493

7,287

Profit for the year

-

-

-

-

850

            850

Other comprehensive income for the year

-

-

-

(4)

-

(4)

Total comprehensive income for the year

-

-

-

(4)

850

846

Dividends paid (see note 21)

-

-

-

-

(143)

(143)








Balance at 31 December 2011

889

1,950

-

(49)

5,200

7,990








 

Year ended 31 December 2010

Share capital

Share premium

Treasury shares

Translation

Retained earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000








Balance at 1 January 2010

889

1,950

-

(17)

3,863

6,685

Profit for the year

-

-

-

-

773

773

Other comprehensive income for the year

-

-

-

(28)

-

(28)

Total comprehensive income for the year

-

-

-

(28)

773

745

Dividends paid  (see note 21)

-

-

-

-

(143)

(143)








Balance at 31 December 2010

889

1,950

-

(45)

4,493

7,287








 

Share premium

The share premium reserve represents the consideration that has been received in excess of the nominal value of shares on issue of new ordinary share capital less permitted expenses.

 

Treasury shares

The treasury shares reserve represents the Company's own shares which were bought back from the market and that are held by the Company's Employee Benefit Trust.  The Employee Benefit Trust holds these shares for the purpose of satisfying the share options that have been granted under the Group's share option schemes.  At £488 the reserve is not noted above.

 

Translation reserve

The translation reserve represents the retranslation of overseas foreign subsidiaries.

 

Retained earnings

The retained earnings reserve represents profits and losses retained in previous and the current periods.

 

 

 


 

1.   REVENUE



2011

2010




£'000

£'000






Sale of goods



3,455

2,671

Rendering of services



3,376

3,262

Total revenue



6,831

5,933

 

The revenues reported represent revenue generated from external customers.

 

2.    SEGMENT REPORTING

 

IFRS 8 requires consideration of the Chief Operating Decision Maker ("CODM") within the Group. In line with Group's internal reporting framework and management structure, the key strategic and operating decisions are made by the Board of Directors, who review internal monthly management reports, budget and forecast information as part of this. Accordingly, the Board of Directors is deemed to be the CODM.

 

The Group's only class of business activity is the manufacture of environmental control products for the pharmaceutical industry, life sciences, heritage and food sectors together with the provision of related services. 

 

The board does not review assets and liabilities on a segmental basis given the similar nature of each segment as defined under the aggregation criteria of IFRS 8. The operating segments exhibit similar long-term financial performance because they have similar economic characteristics. This is highlighted by applying IFRS 8 criteria in respect of the following points:

 

·     The nature of the products and services are similar, being for environmental control purposes;

·     The nature of the production process is the same for each product;

·     The type or class of customer for each product and service are similar; and

·     The methods used to distribute the products or provide the services are similar.

    

In the opinion of the directors the Group's activities meet the aggregation criteria of IFRS 8 and therefore the Group only has one reportable segment.

 

The Group's key operating segments are geographical, and are located in the United Kingdom, Ireland and the USA. These geographical regions are the basis on which the Group reports its segment information.

 

A geographical segment is engaged in providing products or services within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments.  A geographical analysis of turnover and the related non-current assets is given below:

Net sales by point of origin:



2011

2010




£'000

£'000






United Kingdom



5,259

4,972

Ireland



791

606

USA



781

355

 

 



6,831

5,933

 

2.   SEGMENT REPORTING /Continued…

 

Non-current assets:



2011

2010




£'000

£'000






United Kingdom



7,846

7,546

Ireland



589

185

USA



477

486

Deferred tax



310

216




9,222

8,433

 

Information about revenues from external customers for each product and service is provided in note 1.

 

Included within revenues of £6,831,000 (2010: £5,933,000) are revenues of £1,563,000 (2010: £250,000) which arose from sales to the Group's two largest customers who individually contributed more than 10% of the Group's revenues. No single customer contributed 10% or more of the Group's revenues for 2010.

 

 



 

3.   OPERATING PROFIT

           





2011

2010

Operating profit is stated after charging:



£'000

£'000







Depreciation of tangible fixed assets






- Owned assets




474

388

- Leased assets




2

12

Loss on disposal of tangible fixed assets




1

15

Foreign exchange losses




8

3

Directors' remuneration




294

263

Auditors' remuneration






- Fees payable to the Company's auditor for the




5

5

  audit of the Company's annual accounts




- Fees payable to the Company's auditor and its






  associates for other services:






     The audit of the Company's subsidiaries, pursuant to legislation

19

14

     Tax services




3

3

     Other services




5

-

 

 

 

4.   INFORMATION REGARDING DIRECTORS AND EMPLOYEES

 

a.  Directors' remuneration

           


Salary/

Benefits


Total

Total


Fees

in Kind

Pension

2011

2010


£

£

£

£

£

Non Executive Directors






R I Hughes

19,996

-

-

19,996

19,992

M H Burrill

15,375

-

-

15,375

11,895







Executive Directors






M L Ferguson

22,000

-

-

22,000

22,000

M H Burrill

-

-

-

-

6,855

J E Scopes

66,963

-

-

66,963

36,774

T P Jackson

92,500

15,543

-

108,043

106,773

I Gordon

77,425

14,490

-

91,915

88,659


294,259

30,033

-

324,292

292,948

 

The amounts received by the directors under long-term incentive schemes in 2011 were £nil (2010: £nil).

 

 



 

b.  Information regarding employees

 

           



2011

2010




The average number of employees (including directors) was:

No.

No.






Service, validation and manufacturing



34

32

Selling and distribution



6

8

Administration



21

21




61

61






Staff costs incurred in respect of these employees were:

£'000

£'000






Wages and salaries



1,776

1,761

Social security costs



221

210




1,997

1,971

 

The Group's equity-settled share-based payments comprise the Unapproved Share Option Scheme and the Enterprise Management Incentive Scheme.  The amount of shares held by the Employee Share Option Plans and details of shares and share options subject to equity-settled share based payments are set out in note 18.

 

 

5.   FINANCIAL INCOME

 





2011

2010





£'000

£'000







Other interest receivable



1

1





1

1

 



 

6.   FINANCIAL EXPENSES

 

 




2011

2010





£'000

£'000







Bank loan interest




34

39

Interest payable on finance obligations


-

2

Other interest payable




4

1





38

42

 

7.   INCOME TAX

 

Analysis of Tax Charge on Ordinary Activities


2011

2010




£'000

£'000






Current income tax expense:





UK Corporation tax charge for the year



273

274

Overseas tax



42

51




 




315

325






Deferred income tax expense:





Origination and reversal of timing differences

(note 16)





Credit for the current year



(69)

(100)






Total income tax expense in statement of comprehensive income



246

225











Reconciliation of income tax charge to accounting profit

 







2011

2010




£'000

£'000






Profit on ordinary activities before tax



1,096

998

 

Profit on ordinary activities by the effective rate of tax of 26.5% (2010: 28%)



290

279






Effects of:





Marginal corporation tax relief



7

(4)

Different tax rates of subsidiaries operating in other jurisdictions



(56)

(18)

Utilisation of losses brought forward in overseas subsidiary



-

(37)

Expenses not deductible for tax purposes



5

5




246

225

 

 

 

 

 

 

 

 

 

8.  EARNINGS PER SHARE

 

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

 


                

          2011

         £'000

               

         2010

         £'000

Earnings for the purposes of basic earnings per share being net profit attributable to owners of the Company

850

773

 

Effect of dilutive potential ordinary shares

 

-

 

-

Earnings for the purposes of diluted earnings per share

850

773

 


                                 2011

                         2010

Number of shares

Weighted average number of ordinary shares for the purposes of basic earnings per share being issued share capital less 2,000,000 ordinary shares held in Employee Benefit Trust

86,850,000

86,850,000




Effect of dilutive potential ordinary shares: Share options

 

2,000,000

 

2,000,000




Weighted average number of ordinary shares for the purposes of diluted earnings per share

88,850,000

88,850,000




 

The calculation of basic earnings per share is based upon the profit after taxation of £850,000 (2010: £773,000) divided by the weighted average number of ordinary shares in issue during the year of 86,850,000 (2010: 86,850,000). In accordance with IAS33 "Earnings Per Share" the shares held by the Employee Benefit Trust (EBT) have not been included within the basic earnings per share calculation.

 

The diluted earnings per share takes the weighted average number of ordinary shares in issue during the year, and adjusts this for dilutive share options existing at the year end.  The diluted weighted average number of shares in the year ended 31 December 2011 was 88,850,000 (2010: 88,850,000).  In accordance with IAS 33 "Earnings per share" the effects of anti dilutive potential ordinary shares are ignored when calculating diluted earnings per share.


9.  PROPERTY, PLANT AND EQUIPMENT


 

Freehold

Property

                  Fixtures &      Fittings

 

Plant &

Machinery

 

Motor

Vehicles

 

 

Equipment

 

 

Total


£'000

£'000

£'000

£'000

£'000

£'000

Cost







At 1 January 2010

3,158

780

2,263

312

178

6,691

Additions

-

177

480

39

23

719

Acquired on acquisition of a subsidiary

 

-

 

-

 

9

 

-

 

6

 

15

Transfers

-

1

(7)

-

6

-

Reclassified as held for sale

(375)

-

-

-

-

(375)

Disposals

-

-

-

(72)

(5)

(77)

At 1 January 2011

2,783

958

2,745

279

208

6,973

Additions

-

72

717

145

55

989

Reclassified from held for sale

375

-

-

-

-

375

Disposals

-

-

(206)

(68)

-

(274)

At 31 December 2011

3,158

1,030

3,256

356

263

8,063








Depreciation







At 1 January 2010

119

48

813

182

67

1,229

Charge for the year

51

39

250

34

26

400

Reclassified as held for sale

(62)

-

-

-

-

(62)

On disposals

-

-

-

(51)

-

(51)

At 1 January 2011

108

87

1,063

165

93

1,516

Charge for the  year

49

45

305

43

34

476

Reclassified from held for sale

62

-

-

-

-

62

On disposals

-

-

(98)

(45)

-

(143)

At 31 December 2011

219

132

1,270

163

127

1,911








Carrying value














At 31 December 2011

2,939

898

1,986

193

136

6,152








At 31 December 2010

2,675

871

1,682

114

115

5,457

 

Finance lease agreements

 

Included within the carrying value of £6,152,000 is £nil (2010: £35,000) relating to motor vehicles held under finance lease arrangements. The depreciation charged to the financial statements in the year in respect of such assets amounted to £2,000 (2010: £12,000).

 

Exchange differences arising from the plant and equipment held by the foreign subsidiary are immaterial.

 



9. PROPERTY, PLANT AND EQUIPMENT / Continued …

 

 

Assets classified as held for sale



2011

2010




£'000

£'000

Freehold property held for sale





-

313

 

In the prior year the Group was in negotiations for the disposal of a freehold property it no longer utilises, however the sale has not been completed. Accordingly the property has been transferred back to non-current assets. No impairment loss was recognised on reclassification of the property.

 

 

10.  INTANGIBLE ASSETS

 

 

Goodwill



 

2011

 

2010




£'000

£'000

Cost and carrying value





At 1 January



2,760

2,361

Additions (see note 22)



-

399

 

At 31 December



 

2,760

 

2,760

 

Goodwill relates to the acquisition of Vindon Scientific Limited and Vindon Scientific (USA) Inc. and is tested for impairment at the balance sheet date.  The recoverable amount of goodwill at 31 December 2011 was assessed on the basis of value in use.  As this exceeded carrying value by £3.2m no impairment loss was recognised.

 

The key assumptions in the calculation to assess value in use are the future revenues and the ability to generate future cash flows. The most recent financial results and initial budgets approved by management for the next year were used and forecasts for three further years, followed by an extrapolation of expected cash flows at a constant growth rate of 0% (2010: 0%).  The projected results were discounted at a rate of 8% which is a prudent evaluation of the post-tax rate that reflects current market assessments of the time value of money and the risks specific to the cash generating units.

 

A sensitivity analysis was also performed to assess the impact of downside risk on the key assumptions underpinning projected results, which confirmed that no impairment loss should be recognised. Management believes that any reasonably possible change in these key assumptions would not cause the carrying amount of goodwill to exceed its recoverable amount.

 

11. INVENTORIES

 

 




2011

2010




£'000

£'000






Raw materials and consumables



394

198

Work in progress



85

13




479

211

 

The cost of inventories recognised as an expense during the year in respect of continuing operations was £1,132,000 (2010: £1,140,000).

 

The write down of inventories recognised as an expense amounted to £nil (2010: £ nil).

 



12. TRADE AND OTHER RECEIVABLES

 

 

 




2011

2010




£'000

£'000




 

Trade receivables



1,697

1,336

Amounts recoverable on long term contracts



943

308

Other receivables



148

261




2,788

1,905

 

 

 

       The average credit period given on sales of goods was 60 days (2010: 30 days).

 

       Management considers all current year balances to be recoverable and no provision for impairment is required. The ageing of trade receivables which are past due and not impaired is as follows:

           




2011

2010




£'000

£'000

Days outstanding:





31 - 60 days



610

315

61 - 90+ days



386

363









996

678

 

The other asset classes within trade and other receivables do not contain impaired assets.

                            

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.  The Group does not hold any collateral as security.

 

 

13. INTEREST BEARING LOANS AND BORROWINGS

 

 




2010

2010




£'000

£'000

Non-current





Bank loans



1,412

1,694




1,412

1,694






Current





Bank loans



290

288

Finance leases



-

7




290

295

 

The bank loans are secured by a debenture comprising fixed and floating charges over all the assets and undertakings of the Group. The debenture includes a legal charge over the property at Ceramyl Works, Kiln Green, Diggle and the property at John Boyd Dunlop Drive, Kingsway Business Park, Rochdale.

 

Obligations under finance leases are secured on the related leased assets.

 

 

 

 

13. INTEREST BEARING LOANS AND BORROWINGS / Continued …

 

       Obligations under finance leases

 


Minimum Lease payments


2011

2010


£'000

£'000

Amounts payable under finance leases:

Within one year

 

 

-

 

 

7


-

7

Less: future finance charges

-

-

Present value of lease obligations

-

7

 

 


Present value of minimum lease payments


2011

£'000

Amounts payable under finance leases:

Within one year

 

 

-

 

 

7

 

Present value of lease obligations

-

7

Analysed as:

Amounts due for settlement within one year (shown under current liabilities)

 

 

 

-

 

 

 

7

 


-

7

 

It is the Group's policy to lease certain of its fixtures and equipment under finance leases.  The average remaining lease term is 0 months.  For the year ended 31 December 2011, the average effective borrowing rate was 0% (2010: 7.0%).  Interest rates are fixed at the contract date.  All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

 

All lease obligations are denominated in sterling.

 

The Group's obligations under finance leases are secured by the lessors' rights over the leased assets disclosed in note 9. 

 

 

 

 

 

14. FINANCIAL INSTRUMENTS

 

       The Group has the following categories of financial instruments at the balance sheet date:

               




2011

2010




£'000

£'000

Financial assets





Loans and receivables





-Trade and other receivables



2,788

1,905

-Cash and cash equivalents



126

38




2,914

1,943






Financial liabilities





Financial liabilities measured at amortised cost





-Interest bearing loans and borrowings



1,702

1,982

-Obligations under finance leases



-

7

-Trade and other payables



992

574




2,694

2,563

 

The Group has two term loans from the Co-operative Bank PLC, the principal terms of which are as follows. A ten year loan at 1.34375% over base rate taken out in May 2008 with £1,481,000 outstanding at the year end and a ten year loan at 1.34375% over base rate taken out in February 2005 with £221,000 outstanding at the year end.

 

The bank loans are secured by a debenture comprising fixed and floating charges over all the assets and undertakings of the Group.  The debenture includes a legal charge over the property at Ceramyl Works, Kiln Green, Diggle & the property at John Boyd Dunlop Drive, Kingsway Business Park, Rochdale.  These assets have a carrying value of £3,837,000.

 

The loans are subject to an interest cover covenant of three times and a pre goodwill net assets test of £2,500,000. 

 

There is no difference between the fair value of the Group's financial assets and liabilities at the year-end and their book values.

 

Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.

 

Interest-bearing loans and borrowings

 

Fair value is calculated based on discounted expected future cash flows.

 

Trade and other receivables / payables

 

For receivables / payables with a remaining life of less than one year, the nominal amount is deemed to reflect the fair value.

 

Capital risk management

The Board maintains a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Board monitors return on capital and the level of dividends paid to ordinary shareholders and seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by lower levels of gearing.

 

Total capital is calculated as 'equity' as shown in the consolidated balance sheet plus net debt.

14. FINANCIAL INSTRUMENTS / Continued …

 

Risk management objectives

The board is charged with the overall responsibility of establishing and monitoring the Company's risk management policies and processes. The Company's risk management processes and policies are determined in order to identify, analyse and monitor the risks that are faced by the Company.

 

The Group's treasury activities are designed to provide suitable, flexible funding arrangements to satisfy the Group's requirements.  The Group uses financial instruments comprising borrowings, cash, liquid resources and items such as trade receivables and payables that arise directly from its operations.  The main risks arising from the Group financial instruments are currency, interest rate, liquidity and credit risks.

 

Currency risk management

The Group operates in a global industry and is exposed to foreign exchange risk arising from various currency exposures. Transactions with overseas customers are conducted in the presentational currency, consequently no exchange rate risk arises in this respect. Exchange rate differences with regard to the Company's Irish subsidiary, Vindon Scientific (Ireland) Limited and American subsidiary, Vindon Scientific (USA) Inc. arise only through the translation of balances for the purpose of year end consolidation of accounts. Consequently the only risk arising through such translation would be one of impairment in value due to significant decline in the functional currency of the subsidiary relative to the presentational currency. No such impairment currently exists.

 

The Group therefore considers its exposure to foreign exchange risk to be insignificant and therefore sensitivity analysis has not been performed as any impact is considered to be immaterial.

 

Interest rate risk management

The Group has exposure to interest rate risk arising principally on interest-bearing borrowings at variable rates of interest, obligations under finance leases at fixed rates of interest and on cash and cash equivalents amounts held, which are at variable rates of interest.  To manage interest rate risk, the Group ensures the proportion of fixed to variable rate borrowings issued and cash balances held are maintained to Board approved levels and monitors the levels of interest payable and receivable on a regular basis.

 

The Company's interest rate profile of its financial assets and liabilities as at the balance sheet date is as follows:




2011

2010




Total at year end

Weighted average rate at year end

Total at year end

Weighted average rate at year end




£'000

%

£'000

%

Current assets





Interest free

2,914

-

1,943

-


2,914

-

1,943

-

Current and non-current liabilities





Floating rate

1,702

1.84

1,982

1.84

Fixed interest

-

-

7

6.95

Interest free

992

-

574

-




2,694

1.15

2,563

1.44

 

 

 

 

 







 

 

14. FINANCIAL INSTRUMENTS / Continued …

 

 

The Group and Company has used a sensitivity analysis technique that measures the estimated change to the statement of comprehensive income and equity of a 0.5% increase in base rate, with all other variables remaining constant. The sensitivity analysis is based on the assumptions that changes in market interest rates affect the interest income or expense of variable interest rate financial instruments.

 

Under the assumptions, a 0.5% increase in base rate would have decreased profits before tax by £9,000 (2010: £11,000) and equity would have decreased by £7,000 (2010: £8,000).

 

Liquidity risk management

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. To counter this risk, the Company operates with a high level of interest cover and at low levels of net debt relative to its market capitalisation.

 

The following table provides an analysis of the contractual and undiscounted maturity for financial liabilities.

 




1 year

1-2 years

2-5 years

>5 years

Total




£'000

£'000

£'000

£'000

£'000

2011








Bank loans and borrowings

290

288

783

341

1,702

Other liabilities

25

-

-

-

25




315

288

783

341

1,727









2010








Bank loans and borrowings

288

286

844

564

1,982

Finance lease liabilities

7

-

-

-

7

Other liabilities

14

-

-

-

14




309

286

844

564

2,003









 

Credit risk management

Credit risk is the risk that a counter-party will cause a financial loss to the Company by failing to discharge its obligation to the Company.

 

The Group and Company manage their exposure to this risk by applying board approved limits to the amount of credit exposure to any one counter-party and employ strict minimum credit worthiness criteria as to the choice of counterparty, thereby ensuring that there are no significant concentrations of credit risk.

 

The maximum exposure to credit risk for trade and other receivables and other financial assets is represented by their carrying amount.

 

 

 

 

 

15. TRADE AND OTHER PAYABLES

 




2011

2010




£'000

£'000






Trade payables



707

448

Other payables and accrued expenses



285

126




992

574

 

Trade payables and accrued expenses mainly comprise of amounts owed for trading purchases and associated costs.

 

 

 

16. DEFERRED TAX

 

 

 




2011

2010

Deferred tax liabilities



£'000

£'000






Balance at 1 January



218

209

Charged directly to the statement of comprehensive income



25

9

Balance at 31 December



243

218






Deferred tax assets





Balance as at 1 January



216

107

Credited directly to the statement of comprehensive income



94

109

Balance at 31 December



310

216






 

Analysis of Deferred Tax










Capital allowances in excess of depreciation



243

218

Share options



(107)

(107)

Available tax losses



(203)

(109)




(67)

2






At the balance sheet date, the Group has unused US tax losses of £581,000 (2010: £323,000) available for offset against future profits.  A deferred tax asset has been recognised in respect of such losses.

 

 

17. CALLED UP SHARE CAPITAL

 

 

 




2011

2010




£'000

£'000






Authorised:





120,000,000 Ordinary shares of £0.01 each



1,200

1,200






Allotted, issued and fully paid:





88,850,000 Ordinary shares of £0.01 each (2010: 88,850,000)

889

889

 

 

 

 

17. CALLED UP SHARE CAPITAL / Continued …

 

 

The Company has one class of ordinary share that carries no right to fixed income. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

 

As at 31 December 2011, options over 1,230,770 and 769,230 ordinary shares were outstanding under Unapproved Share Option Plans and Enterprise Management Incentive Schemes respectively.  Details of outstanding share options awarded to employees including executive and non-executive directors are set out below:

 

           

Date of grant

At 1 Jan 2011

 

At 31 Dec 2011

Exercise share price

Exercise period






8 December 2005

2,000,000

2,000,000

0.05p

2008-2015

 

 

18. EQUITY-SETTLED SHARE BASED PAYMENTS

 

 

 

The Unapproved Share Option Plan and Enterprise Management Incentive Schemes were introduced in December 2005.  Under these plans the trustees of the Employee Benefit trust (EBT) can grant options over shares in the Company to employees of the Group.  Options are granted with a fixed exercise price.  Options may be exercised no earlier than the third anniversary of the date of the grant and no later than the tenth anniversary of the date of the grant. Awards under the schemes are generally reserved for employees at senior management level and above and one employee is currently participating. 

 

Exercise of an option is subject to continued employment, the only vesting condition.  Options were valued using the Black Scholes option pricing model.  The fair value per option granted and the assumptions used in the calculation were as follows:

 

 

Grant date



8 December 2005

Share price at grant date



£0.13

Exercise price



£0.0005

Number of employees



1

Shares under option - Unapproved Share Option Plan



1,230,770

Shares under option - Enterprise Management Incentive Scheme



769,230

Vesting period



3 years

Expected volatility



31.8%

Risk free rate



4.33%

Option life (years)



10 years

Expected life (years)



3 years

Expected dividends expressed as a dividend yield


0%

Fair value per option



£0.1296

 

 

 

 

 

18. EQUITY-SETTLED SHARE BASED PAYMENTS / Continued …

 


 

 

 

       Number

       of share

        options

         2011

  weighted

   average

   exercise

        price

         (in £)

 

 

 

  Number

of share

   options

          2010

   Weighted

      average

    exercise

          price

         (in £)

Outstanding at beginning of period

2,000,000

0.0005

2,500,000

0.04004

Forfeited during the period

-

-

(500,000)

0.20

Outstanding at the end of the period

2,000,000

0.0005

2,000,000

0.0005

Exercisable at the end of the period

2,000,000

0.0005

2,000,000

0.0005






The options outstanding at 31 December 2011 had a weighted average exercise price of £0.0005, and a remaining contractual life of 4 years.

The expected volatility is based on historical volatility from the date of flotation to the date of grant.  The expected life is the average expected period to exercise.  The total charge for the year relating to employee share based payment plans was £nil (2010: £nil), all of which related to equity settled share based payment transactions.

 

The Vindon Healthcare plc EBT Trust ("the trust") holds 2,000,000 ordinary shares with a total cost of £488.  In accordance with IAS32 "Financial Instruments Presentation", this shareholding has been shown as a deduction from shareholder funds.  These shares were acquired in November 2005 by the Trust.  The Trust used funds provided by Vindon Healthcare plc to meet the Group's obligations under the Share Option Scheme.  Share options are granted to employees at the discretion of Vindon Healthcare plc and shares are awarded to employees by the trust in accordance with the wishes of Vindon Healthcare plc.

 

All shares in the trust are held to satisfy the Group's obligation in respect of share options granted.

 

 

 

19.       CAPITAL COMMITMENTS

 

            Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:

 




2011

2010




£'000

£'000






Property, plant and equipment



-

-

 

 

  

 

20.  RELATED PARTY TRANSACTIONS

 

Zeus Capital Limited is a connected party by reason of R I Hughes's interest in both Zeus Capital Limited and Vindon Healthcare plc.

 

The Company has entered into a consultancy agreement with Zeus Capital Limited dated 14 February 2005 under which the Company has appointed Zeus Capital Limited to act as financial advisers.

 

During the period, fees totalling £15,000 (2010: £15,000) were paid to Zeus Capital Limited and the total amount owing to Zeus Capital Limited at 31 December 2011 was £Nil (2010: £Nil).

 

HQC Ltd was a connected party during the period by reason of M L Ferguson's interest in both HQC Ltd and Vindon.  Mr Ferguson's interest in HQC Ltd terminated on 28 February 2011. During the two months up to 28 February 2011 the Company placed orders, on an arm's length basis, totalling £14,780 (2010: £17,733) for goods from HQC Ltd to be used in the assembly of Vindon products. The total amount owing to HQC Ltd at 31 December 2011 was £nil (2010: £nil).

 

Carter Scopes is a connected party by reason of J E Scopes's interest in both Carter Scopes and Vindon. During the period the Company placed orders totalling £3,000 (2010: £nil) for training services from Carter Scopes. The total amount owing to Carter Scopes at 31 December 2011 was £nil (2010: £nil).

 

Key management personnel are considered to be executive and non-executive directors. Refer to note 4 for information about key management personnel compensation.

 

 

 

21.   DIVIDENDS

 

During the year a dividend of 0.165 pence per share, totalling £143,303 (2010: 0.165 pence per share, totalling £143,303) was paid to the shareholders.

 

The directors recommend that a final dividend of 0.182 pence per share (2010: 0.165 pence per share) be paid in accordance with a resolution to be proposed at the Annual General Meeting to be held on 25 May 2012. The final dividend amounts to £158,067 (2010: £143,303) and has not been included as a liability in these accounts.

 



22.  ACQUISITION OF WESTECH INSTRUMENTS INC

 

On 28 January 2010, Vindon Scientific Limited acquired, from Westech Instrument Services Limited, 100% of the voting equity of Westech Instruments Inc, a distributor of Vindon products in the USA, based in Atlanta, Georgia.  The company has since changed its name and now trades as Vindon Scientific (USA) Inc.  The following table provides an analysis of the assets and liabilities acquired and the related fair value adjustments.

 



Book value

Fair value adjustments

 

Fair value



£'000

£'000

£'000

Property, plant and equipment


13

2

15

Inventories


43

(18)

25

Trade and other receivables


239

(42)

197

Trade and other payables


(412)

(1)

(413)

Accruals and deferred income


(22)

(91)

(113)

Net liabilities acquired


(139)

(150)

(289)

Goodwill




399

Total cash consideration




110

 

            The above fair values have been re-measured in the 12 months subsequent to the acquisition and have not changed. Accordingly there has been no change to the goodwill value of £399,000.

 

 

 

23.       ULTIMATE CONTROLLING PARTY

 

The Group does not have an ultimate controlling party.

 

 

 

24.        RE-PRESENTATION OF COMPARITIVES

 

The directors have reviewed the presentation of travel expenses within the Statement of Comprehensive Income. Following this review they have decided to show travel costs which are directly attributable to sales within cost of sales. Accordingly the prior year comparatives have been re-presented to move £274,000 from administrative expenses to cost of sales.

 

 

25.        ACCOUNTS

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2011 or 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

 

The financial statements for the year ended 31 December 2011 will be despatched to shareholders on 24 April 2012. Copies will also be available to the public, free of charge, from the Company's registered office at John Boyd Dunlop Drive, Kingsway Business Park, Rochdale, OL16 4NG, or can be downloaded from the Company's website at www.vindonhealthcare.com

 

 

 


This information is provided by RNS
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