Company Announcements

Final Results - REPLACEMENT

Source: RNS
RNS Number : 4768Y
Inspiration Healthcare Group PLC
31 July 2024
 

 

 

 

The following replaces the 'Final Results' announcement released on 26 June 2024 at 7.00 a.m. under RNS No 8631T.

The Final Results announcement was Inspiration Healthcare Group plc's preliminary unaudited results for the year ended 31 January 2024.  Following completion of the audit of the accounts, £287,000 has been credited to the share based payment charge in the income statement and debited against the share based payment reserve.  This is a non-underlying, non-cash item and has the effect of reducing the share based payment charge and therefore reduces the reported loss before and after tax by the equivalent amount for the year ended 31 January 2024. 

In addition, £197,000 of US treasury bills, treated as cash and cash equivalents when acquired with Airon Corporation have been re-classified as short term investments.

The consequential changes of the above adjustments are as follows:

·      Basic loss per share reduced to 8.85 pence in the consolidated income statement and note 5

·      Consolidated statement of financial position:

New category of short term investments created within current assets with balance of £197,000

Cash and cash equivalents reduced by £197,000

Retained earnings increased to £19,124,000

Share based payments reserve reduced to £280,000

No change in overall net assets or total equity

 

All other details remain unchanged.

The full amended text is shown below.

 

31 July 2024

 

Inspiration Healthcare Group plc

("Inspiration Healthcare", the "Group" or the "Company")

 

Audited Results for the year ended 31 January 2024

 

 

Inspiration Healthcare Group plc (AIM: IHC), the global medical technology company, pioneering, specialist neonatal intensive care medical devices, announces its audited results for the year ended 31 January 2024 ("FY2024").

 

Financial Highlights

·      Group revenue of £37.6m (FY2023: £41.2m)

·      Gross profit reduced by 1.1% to £17.9m (FY2023: £18.1m) as gross margin improved to 47.5% (FY2023: 43.9%)

·      Adjusted EBITDA1 of £2.0m (FY2023: £4.0m)

·      Adjusted operating loss2 before non-recurring items of £(0.4)m (FY2023: profit of £1.6m)

·      Operating loss of £4.9m (FY2023: profit of £0.4m)

·      Operating cash inflow of £2.0m (FY23: outflow of £3.5m)

·      Net debt3 (excluding IFRS16 lease liabilities) increased to £6.0m (FY2023: £3.8m)

 

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

2Earnings before interest, tax, impairment, share-based payments and non-recurring items

3Cash and cash equivalents, short term investments, less revolving credit facility and invoice finance borrowings

 

Operational Highlights

·      Launch of SLE1500 for non-invasive ventilation of neonatal patients

·      Launch of SLE6000N a non-invasive version of our flagship product expanding market opportunities

·      Acquisition of Airon Corporation provides established platform to advance North America growth strategy

·      MDSAP Certification achieved, accessing Canadian market, registrations now underway ahead of planned H2 FY2025 launch

 

Post year-end

·      Launched new infusion pump as a distributed product from partner Micrel Medical Devices SA

·      Neil Campbell stepped down as CEO and became a Non-executive Director

·      Roy Davis, Non-executive Chair appointed Executive Chair and Interim CEO

·      Planned closure of Hailsham site from end July 2024, further rationalising the Group's operating sites and expected to realise annualised savings of approximately £0.5m

 

 Equity raise

·      Equity raise of £2.5m (gross), with an additional retail offer of £0.5m 

 

Roy Davis, Executive Chairman and Interim CEO of Inspiration Healthcare, said: "Inspiration Healthcare has a solid portfolio of best-in-class, life-saving neonatal technologies and infusion products that are addressing a critical need. Over the course of the year, we have seen underlying growth in our core neonatal and infusion businesses due to increased demand. The acquisition of Airon in January 2024 provides us with an established platform to advance our commercial strategy in North America, which will be a key medium-term growth driver. Despite challenging market conditions, the Group has a number of significant market opportunities and is well placed to deliver long-term sustainable growth.

 

"The equity raise will provide us with additional working capital, a strengthened balance sheet and provide us with liquidity headroom. On behalf of the whole team, I would like to thank our shareholders for their continued support, and we look forward to updating the market further in due course."

 

 

For further information, please contact:

 

Inspiration Healthcare Group plc

Tel: +44 (0)330 175 0000

Roy Davis, Executive Chairman

Alan Olby, Chief Financial Officer




Liberum (Nominated Adviser & Broker)

Tel: +44 (0)20 3100 2000

Richard Lindley

Will King


 


Walbrook PR Ltd (Media and Investor Relations)

Tel: +44 (0)20 7933 8780 or inspirationhealthcare@walbrookpr.com

Anna Dunphy

Mob: +44 (0) 7876 741 001

Stephanie Cuthbert

Mob: +44 (0) 7796 794 663

Louis Ashe-Jepson

Mob: +44 (0) 7747 515 393

 

About Inspiration Healthcare

 

Inspiration Healthcare (AIM: IHC) designs, manufactures and markets pioneering medical technology. Based in the UK, the Company specialises in neonatal intensive care medical devices, which are addressing a critical need to help to save the lives and improve the outcomes of patients, starting with the very first breaths of life.

 

The Company has a broad portfolio of its own products and complementary distributed products, for use in neonatal intensive care designed to support even the most premature babies throughout their hospital stay. Its own branded products range from highly sophisticated capital equipment such as ventilators for life support through to single-use disposables.

 

The Company sells its products directly to hospitals and healthcare providers in the UK and Ireland, where it also distributes a range of advanced medical technologies for infusion therapy.  In the rest of the world the Company has an established network of distribution partners around the world giving access to more than 75 countries.

 

The Company operates in the UK from its world-class Manufacturing and Technology Centre in Croydon, South London and from its facility in Hailsham, East Sussex, and in the USA from its facility in Melbourne, Florida.

 

Further information on Inspiration Healthcare can be found at www.inspirationhealthcaregroup.com

 



 

Executive Chair and Interim CEO Report

 

Welcome to my first review as Executive Chairman and Interim CEO of Inspiration Healthcare Group plc.  It is a privilege to take on this role at this time. Despite the challenges of the past couple of years I believe we have a number of significant opportunities ahead of us in both the UK and International markets, including North America, which is a significant strategic market and future growth opportunity for the Group.

Overall however, the year was disappointing with revenues down 8.7% to £37.6m (FY2023: £41.2m) which consequently meant that Adjusted EBITDA was reduced to £2.0m (FY2023: £4.0m).  Cash was impacted as was working capital with net debt increasing to £(6.0)m (excluding IFRS16 lease liabilities). Despite recent challenging market conditions, the Company has invested in the business to expand its manufacturing capabilities and product portfolio, building the foundations to deliver long-term sustainable growth.

 

My initial focus as Chairman has been to examine the key factors impacting the business and identify a constructive path forward. The last couple of years have been difficult for the medical device sector, which has added pressure on the internal resources within the Group.

The Group operates within a single business segment, providing essentially medical technology. Within this segment, the Group sells products and services into two main market areas: 'Neonatal' and 'Infusion Therapies'.

Neonatal focuses on intensive care equipment for premature and sick babies.  We design, manufacture and sell our equipment around the world to over 75 countries and we also distribute complementary products in the UK and Ireland.

Infusion Therapies focuses on infusion pumps and associated consumables in the UK and Ireland where we are an active distributor of these technologies into various therapy areas.

Neonatal

Neonatal revenues were lower than last year at £28.9m (FY2023: £32.1m), this was impacted by delays in receiving a large Middle Eastern order and a key distributed product not receiving its CE marking under the new European Medical Device Regulations ('MDR'). We also saw increased competition in the neonatal ventilator market, due to the saturation of the adult ventilator market following increased purchasing during the Covid-19 pandemic and those manufacturers seeking new markets for their products. We expect the markets to normalise over the next 12-18 months, particularly with the withdrawal of Medtronic from the adult ventilator market.

During the year, supply chain issues continued to require attention. The limited availability of certain components has required the company to devise new solutions, taking up valuable R&D resources and requiring us to acquire parts at elevated prices impacting both gross margin and working capital as we held more stock.  Although these solutions are not ideal, it does give us the security of being able to manufacture our products.

The changes to the European regulatory landscape, with the implementation of the EU Medical Device Regulation has also resulted in the early discontinuation of some of our products. Our commitment to our customers means that we have to maintain the supply of spare parts for seven years, which has increased working capital in some areas.  Additionally, we have invested time and resources to ensure our products remain compliant within both the EU and the UK under the new legislation despite the EU extending the deadline for compliance to MDR to 2027.

During the year we also launched several new products.

·      SLE1500 - A compact respiratory support system that provides non-invasive ventilation ("NIV") modes, which is considered the gold standard of care for preterm infants with respiratory distress syndrome ('RDS') and is gradually becoming the first choice for respiratory support.  The SLE1500 gives respiratory support to babies that have a breathing reflex by providing nasal continuous positive airway pressure ('CPAP') and High Flow Oxygen therapy.  We have also included our Oxygenie patented automatic Oxygen control algorithm.

·      SLE6000N - A non-invasive version of our leading specialist neonatal ventilator, which facilitates precise, controlled ventilation for critically ill infants and can also feature Oxygenie. This has allowed us to enter slightly different markets. This also led to a re-branding of other variants of the SLE6000 to differentiate the entire portfolio and we now have three variants across critical care, high dependency care and non-invasive respiratory support. The SLE6000N is CE marked and available where CE marking allows products to be registered.

·      LifeStart - having received feedback from US customers we launched a new version of LifeStart, our specialist unit that can be used as a stabilisation platform for babies that have experienced a difficult birth. The new version is more aligned with US user requirements, allowing US manufactured accessories to be added to the platform.

China continues to be an important market for us and remains challenging due to local legislation favouring locally manufactured goods.  To address this, we have instigated a project for assembly of the SLE6000 ventilator range in China.  This will allow us to protect our current market position and opens up a larger part of the market that we have not been able to enter previously.

There is also significant growth potential in our consumables business, and we are looking to expand our portfolio of disposable products.  We have undertaken a thorough review of our consumables for Neonatal Intensive Care and have identified a number of overlapping products along with gaps in the portfolio.  This will lead to us improving our product offerings, whilst streamlining the number of products and working closely with existing suppliers.

Our technical support offering for maintenance programmes and spare parts represents another opportunity for growth. We have been running a project entitled 'service as a product' to challenge the way we approach technical service, which has identified many areas in which we can grow our technical service revenues, and with greater consumables and a better focus on technical support, we expect to drive growth in recurring revenue streams over FY2025 and beyond.

Infusion Therapies

The Infusion Therapies products delivered revenues of £8.5m in the year (FY 2023: £9.1m), the decline was primarily due to a one-off de-stocking of a major customer during H1. This de-stocking, which meant sales for the year were below our initial expectations, was over by the end of the first half when order patterns returned to traditional levels. Revenues in H2 saw a strong recovery in line with the prior year, albeit from a lower base at the end of H1.

We have continued to invest in sales and marketing in this area of our business and have introduced new products into the range in new therapy areas, which are starting to gain traction. This diversification is a key part of our growth strategy for this business, and we are working to develop the market by further expanding our product portfolio through distribution agreements and looking at new therapy areas for the existing portfolio.

We were delighted to be able to launch a key new pump from our partner Micrel.  With the UK NHS increasingly looking to treat patients out of hospital, it is important that new devices have the capability of being able to be monitored remotely.  The new pump from Micrel will allow for this making it an attractive option for our existing customer base and allowing for future growth.

North America Strategy

North America accounts for approximately 50% of the world market for neonatal intensive care products and is a significant strategic market and key focus for our long-term growth. In January 2024, we acquired Airon Corporation ('Airon') in Melbourne, Florida, providing an established platform to support and de-risk the Company's US commercial operations. The acquisition was the first step in advancing our US/North American strategy, which aims to reduce the Group's reliance on markets dominated by large tenders. The Company is looking to expand its product portfolio in the US through the regulatory approval of existing technologies and is also evaluating complementary acquisition and licensing opportunities.  

Airon is a leading manufacturer of pneumatic ventilators, which can be used in transport and MRI for babies through to adults. It has established sales channels, through national distributor(s), and provides a good platform to launch Inspiration Healthcare's existing products into the USA. It also allows the export of Airon products through the Group's international distribution network. The acquisition is in line with our long-term strategy to acquire companies with both complementary technologies and sales reach to expand the Group's global footprint, add scale and accelerate growth. It is expected to be earnings accretive in the second full year of ownership.

 

We are excited to be working with our new colleagues as we welcome them into the Group and execute our North America strategy together.  Although it is a small business, it is already showing signs of growth and potential through its national distributor.

In the summer of 2023, we submitted an initial application to the FDA for clearance of the SLE6000 ventilator, albeit with some features removed.  In light of recently amended FDA guidelines, particularly pertaining to cyber security, we have opted to reassess the most effective employment of our resources to comply with these new regulations. As a result, we have withdrawn our preliminary application for the SLE6000. Anticipation remains for a resubmission of our application after we have had further clarification from a meeting with the FDA, planned for the summer of 2024.

In January 2024, the Company received Medical Device Single Audit Program ("MDSAP") certification, confirming its Quality Management System processes comply with the requirements of the EU, USA, Japan, Australia and Canada. MDSAP is compulsory for Canada and following certification, we have initiated the registration process of our product range in Canada, which is expected to be commercially available during FY2025.

The Board continues to evaluate the focus of the Group, including the market and products along with the resources and structure of the Group. This has led to the appointment of a new Chief Commercial Officer reporting directly to me as Interim CEO. This new pivotal role will bring together all our commercial activities and will help drive our business forward.

In June 2024, we announced that we would close our Hailsham facility at the end of July. Activities undertaken at Hailsham are either being outsourced to a long-standing supplier or moved to the Group's Croydon site. This impacts 12 employees with several expected to transfer to Croydon. This further rationalises the Group's operations into a single site and is anticipated to realise annualised savings of approximately £0.5m (savings are already included in market guidance for the full year).

With the advancement of our North American strategy, a restructure of the commercial team and the addition of new products, I am confident that we are taking the right steps to deliver the longer-term growth ambitions of the Company.

The Group also strengthened the Board during the year with the appointments of Alan Olby as Chief Financial Officer and Marlou Janssen as Non-executive Director. Both bring significant commercial expertise in the medical device space and their experience will be instrumental as the Group continues to execute on its growth strategy.

Post year end there were two additional changes to the Board, Mark Abrahams retired as Chairman in March 2024 and Neil Campbell stepped down as CEO in May 2024 to become a Non-executive Director of the Group.  On behalf of the Company and the shareholders, I would like to thank both Mark and Neil for their service and commitment to the Company over the past nine years and look forward to continuing to work with Neil as a Non-Executive Director and in his capacity as a Global Advocate supporting key relationships and business development opportunities.

Outlook

While there have been challenges beyond our control presented by volatility in the international markets we serve, we continue to be robustly positioned in a stable global long term growth sector with a best-in-class product portfolio.

We are actively executing our growth strategy to increase our presence in more stable markets, most notably North America, where our recent acquisition of Airon provides a suite of complementary products and a ready-made platform to grow. This strategic move not only aims to mitigate the impact of short-term market volatility, but also will be a future growth driver for the Group.

While revenues are expected to be second half weighted in FY25, current trading is in line with management's expectations. We are grateful to our shareholders for their continuing support, and we look forward to a successful FY25 and beyond.

I would like to thank our dedicated team around the world for all of their hard work and our customers for their continued use of our products, we are proud to support clinicians around the world in the life saving work that they do.

I would like to summarise by re-iterating my excitement for and confidence in the Group's ability to capitalise on the opportunities ahead. I believe our Group has a solid portfolio of best-in-class, life-saving neonatal technologies and infusion products that are addressing a critical need and is well placed to deliver significant long-term sustainable growth. 

Roy Davis

Executive Chairman and Interim CEO

 

Financial Review

 

REVENUE

Group revenue decreased 8.7% to £37.6m (FY2023: £41.2m). This includes £0.2m revenue from Airon Corporation in the period following completion of the acquisition on 3 January 2024. Going forwards, Airon revenue will be included within Neonatal product revenues.

 

Neonatal

Neonatal products achieved revenues of £29.1m for FY2024, a decline of 9.3% from the £32.1m in FY2023. There were several factors in this performance:

·      Loss of revenue from a distributed product of £1.0m, resulting from the loss of regulatory approval for the product

·      The Group has chosen to discontinue a number of products due to the increasing cost of parts and costs associated with maintaining CE marking making these uneconomic to continue with. Revenue from these products declining by £1.3m in FY24, with a similar decline predicted in FY25.

·      Revenue from the remaining Neonatal products declined by 5.0% in the year with order and delivery patterns significantly impacting reported revenues. The Group shipped 247 ventilators in January 2023, boosting FY23 revenues, while only 47 ventilators were shipped in FY24, partly due to production being diverted for the anticipated Middle East order. Ignoring the final month of the year, unit sales of ventilators, which make up 55% of the neonatal product revenues, increased by 10% in the period from February to December 2023 compared to the same period in the prior year, and in revenue terms increased by 21%. This demonstrates that underlying demand for one of the Group's key products remains strong, despite the decline in reported revenue for the year.

 

Infusion

Revenues for the Infusion products were £8.5m in the year, representing a decline of 6.6% from the £9.1m reported for FY2023. This followed a challenging first half of the year during which our leading customer was de-stocking, resulting in a 14% fall in first half revenue. The second half of the year showed a marked improvement as this customer returned to normal ordering patterns and revenues were in-line with the same period in FY2023. With a new pump launched in April 2024, combined with a focus on growth opportunities outside the homecare sector, we are optimistic of a return to growth for the Infusion products in FY2025.

 

GROSS PROFIT

Gross profit of £17.9m was 3.6% lower than the prior year (FY2023: £18.1m) and represents a gross margin of 47.5% for FY2024, increased from the 43.9% achieved in FY2023. The margin improvement was driven by an improving sales mix of neonatal products, and increased absorption of manufacturing overheads into finished goods.

 

OPERATING LOSS

The Group reported an Operating loss of £4.9m for the year (FY2023: profit of £0.4m). This included non-recurring items of £4.5m (FY2023: £1.2m) and amortisation of acquired intangible assets of £0.6m (FY2023: £0.6m) leading to an Adjusted Operating Loss (before non-recurring items) of £(0.4)m (FY2023: profit of £1.6m).

 

Administrative expenses increased year-on-year by 12.7% to £18.6m (FY2023: £16.5m), partly reflecting the high inflationary macro-economic environment. Employment costs which represent approximately 60% of administrative expenses increased by 8% in the year because of a 7% pay increase for the year and a small increase in headcount. Other increases were in marketing expenses and travel as activity continued to recover from covid related restrictions in previous years. There were also increases in insurance premiums, foreign exchange variances and amortisation charges.

 

There were £4.5m of non-recurring items in the year (FY2023: £1.2m), comprising a £4.1m impairment of capitalised development costs, £0.1m of acquisition costs relating to the Airon acquisition and £0.3m of restructuring and other professional fees (see note 4).

 

Adjusted EBITDA reduced to £2.0m (FY2023: £4.0m) because of the lower gross profit and the increase in administrative expenses outlined above. A reconciliation of operating loss to adjusted EBITDA is set out below:

 


2024

2023

 

£'000

£'000

Operating (loss)/profit

(4,927)

431

Non-recurring items

4,527

1,158

Adjusted Operating (loss)/profit

(400)

1,589

Depreciation

1,293

1,354

Amortisation of intangible assets

1,144

931

Share based payments

(52)

132

Adjusted EBITDA

1,985

4,006

 

Finance expenses increased to £0.8m (FY2023: £0.4m) reflecting the increased level of net debt, combined with the increase in effective interest rates seen through the year.

 

The Group recorded a tax charge of £0.4m for the year (FY2023: credit of £0.2m) which is mainly a deferred tax charge resulting from a resulting from a write off of previously recognised deferred tax assets.

 

LOSS Per Share ("LPS")

Basic and diluted LPS were 8.85p per share for FY2024 as a result of the loss for the year (FY2023: EPS 0.40p and 0.39p).

 

Cash Flow

The Group generated net cash flow from operations of £2.0m in the year, significantly better than the operating cash outflow of £3.5m in FY2023. This was a combination of EBITDA profit and a reduction in working capital.

 

Cash outflow on investing activities was significantly reduced at £2.5m compared with £8.3m in FY2023. This included £1.1m outflow relating to the acquisition of Airon. Capitalised development costs reduced to £1.1m in the year (FY2023: £2.0m) and capital expenditure reduced significantly to £0.4m (FY2023: £6.2m) following completion of the new Manufacturing and Technology Centre in 2023.

 

Net debt (excluding IFRS16 lease liabilities) increased to £6.0m at 31 January 2024, compared with £3.8m last year, an increase of £2.2m.

 

In February 2024, the Group renewed and increased its Revolving Credit Facility ('RCF') with a £10m RCF now in place, expiring in February 2027, with an option to extend for a further year. The Group also continues to have access to its invoice discounting facility of up to £5.0m. As at 31 January 2024, £5.0m of the RCF and £1.7m of the invoice discounting facility were utilised.

 

The Group has received waivers from its bank in relation to the covenant tests due at 31 January and 30 April 2024 caused as a result of the delay to the anticipated large Middle East order. Following these waivers, revised covenants have been put in place for the period until 31 January 2025 and bank consent is required for further drawings on the RCF.

 

Subsequently, the bank has removed restrictions on access to the RCF following the Company undertaking the equity raise.

 

Net Assets

The value of non-current assets as at 31 January 2024 totalled £26.0m (FY2023: £30.8m). The net £4.8m year-on-year decrease mostly relates to the amortisation and impairment of capitalised development costs, net of goodwill arising on the acquisition of Airon.

 

Inventory increased by £3.8m in the year to £13.7m (FY2023: £9.9m) through a combination of weaker revenues and ongoing supply chain disruptions requiring the Group to secure increased holding of various components to ensure continuity of supply for customers, the anticipated Middle East order; as well as inventory of £0.4m acquired as part of the Airon acquisition. Trade and other receivables decreased by £3.1m to £8.8m (FY2023 £11.9m) largely because of weaker revenues in the final quarter of the year compared with last year.

 

Overall net assets at 31 January 2024 were £29.0m (FY2023: £35.5m).

 

Dividends

An interim dividend of 0.205p per share (FY2023: 0.205p) was paid on 29 December 2023. As a result of the performance of the business, the Board is not recommending payment of a final dividend (FY2023: 0.41p) making a total dividend for the year of 0.205p per share (FY2023: 0.615p). Going forward, the Board has decided to suspend payments of dividends until further notice and will keep the dividend policy under review.

 

Alan Olby

Chief Financial Officer  

Consolidated Income Statement

for the year ended 31 January 2024




2024

2024

2024

2023




Note

 

 

Adjusted

£'000

Non-recurring items

£'000

Total

£'000

Total

£'000





 

 





Revenue

2

37,630

-

37,630

41,233



Cost of sales


(19,743) 


(19,743) 

(23,140)






- 





Gross profit


17,887 

- 

17,887 

18,093



Administrative expenses

3

(18,287) 

(4,527) 

(22,814) 

(17,662)











Operating (loss)/profit


(400) 

(4,527) 

(4,927) 

431











Finance income


61 

- 

61 

40



Finance expense


(810) 

- 

(810) 

(395)











(Loss)/Profit before tax


(1,149) 

(4,527) 

(5,676) 

76



 








Income tax

4

(358)

- 

(358) 

196











(Loss)/Profit for the year attributable to








owners of the parent company


(1,507) 

(4,527) 

(6,034) 

272





 

 





(Loss)/Earnings per share


 

 





Basic (pence per share)

5

 

 

(8.85)p

0.40p



Diluted (pence per share)

5

 

 

n/a

0.39p


 

Consolidated Statement of Comprehensive Income

for the year ended 31 January 2024

 




 

 

2024

2023





 

 

Total

£'000

Total

  £'000











(Loss)/Profit for the year


 

 

(6,034) 

272



Other comprehensive income








Items that may be reclassified to profit or loss

 

 

- 

- 



Total other comprehensive income for the year

 

 

- 

- 











Total comprehensive income for the year




(6,034) 

272










 



 

 Consolidated Statement of Financial Position

as at 31 January 2024

(Registered Number: 03587944)


 

 



 

2024

2023


Note

 

£'000

£'000






Assets





Non-current assets





Intangible assets

7

 

13,278

17,004

Property, plant and equipment

8

 

7,137

7,497

Right of use assets


 

5,578

5,970

Deferred tax asset


 

-

324



 

25,993

30,795






Current assets





Inventories

9

 

13,743 

9,935

Trade and other receivables

10

 

8,669 

11,888

Short-term investments


 

197

-

Cash and cash equivalents


 

412

2,276



 

23,021 

24,099






Total assets


 

49,014

54,894

Liabilities





Current liabilities





Trade and other payables

11

 

(6,591) 

(5,812)

Lease liabilities


 

(697) 

(822)

Borrowings

12

 

(1,654) 

(2,079)

Contract liabilities


 

(625) 

(531)



 

(9,567) 

(9,244)






Non-current liabilities





Lease liabilities


 

(5,477)

(6,176)

Borrowings

12

 

(5,002)

(4,000)



 

(10,479)

(10,176)

Total liabilities


 

(20,046)

(19,420)






Net assets


 

28,968

35,474

Shareholders' equity





Called up share capital


 

6,823 

6,813

Share premium


 

18,905 

18,842

Reverse acquisition reserve


 

(16,164) 

(16,164)

Share based payment reserve


 

280 

405

Retained earnings


 

19,124 

25,578

Total equity


 

28,968

35,474

 

 



 

Consolidated Statement of Changes in Equity

 


Issued

share

capital

 

Share

premium

Reverse

acquisition

reserve

Share based

payment

reserve

 

Retained

earnings


Total 

 


£'000

£'000

£'000

£'000

£'000

£'000 

 

 

At 1 February 2022

6,812

18,838

(16,164)

278

25,725

35,489


Profit for the year

-

-

-

-

272

272



Total comprehensive income for the year

-

-

-

-

272

272

 









 

Transactions with owners in their capacity as owners





 

Issue of ordinary shares, net of transaction costs and tax

1

4

-

(5)

-

-


 

Dividends

-

-

-

-

(419)

(419)


 

Employee share scheme expense

-

-

-

132

-

132


 

Total transactions with owners

1

4

-

127

(419)

(287)











 

At 31 January 2023

6,813

18,842

(16,164)

405

25,578

35,474


Loss for the year

-

-

-

-

(6,034) 

(6,034) 


 

Total comprehensive income for the year

-

-

-

-

(6,034) 

(6,034) 


 









 

Transactions with owners in their capacity as owners





 

Issue of ordinary shares, net of transaction costs and tax

10

63

-

(73)

-

-


 

Dividends

-

-

-

-

(420)

(420)


 

Employee share scheme credit

-

-

-

(52)

-

(52)


 

Total transactions with owners

10

63

-

(125)

(420)

(472)











 

At 31 January 2024

6,823

18,905

(16,164)

280

19,124

28,968 


 

 



 

Consolidated Cash Flow Statement

 for the year ended 31 January 2024



 2024

2023


Note

 £'000

£'000

Cash flows from operating activities

 



(Loss)/Profit for the year


(6,034)

272

Adjustments for:




Depreciation and amortisation


2,437

2,285

Remeasurement of leases


(210)

(25)

Impairment of right of use assets

12

                     -  

                446

Impairment of intangible assets

10

              4,120

-

Employee share scheme (credit)/expense

24

(52)

132

Loss/(Profit) on disposal of tangible assets


108

(26)

Loss on disposal of intangible assets

10

                     -  

6

Finance income

6

(61)

(40)

Finance expense

6

810

395

Income tax

7(a)

358

(196)



1,476

3,249

Increase in inventories


(3,378)

(3,486)

Decrease/(increase) in trade and other receivables


3,000

(2,501)

Increase/(decrease) in trade and other payables


630

(740)

Increase in contract liabilities


94

7

Cash flows generated from/(used in) operations

 

1,822

(3,471)

Taxation received

7(b)

190

                        -  

Net cash generated from/(used in) operating activities


2,012

(3,471)

Cash flows from investing activities

 

 

 

Bank interest received

6

21

5

Interest received on leases

6

40

                   35

Acquisition of subsidiary, net of cash acquired

27

(1,114)

                     -  

Purchase of property, plant and equipment

11

(434)

(6,226)

Purchase of intangible assets

10

(63)

(140)

Capitalised development costs

10

(1,135)

(1,976)

Net cash used in investing activities


(2,685)

(8,302)

Cash flows from financing activities

 

 

 

Principal elements of lease payments

12

(829)

(697)

Principal elements of lease receipts

14

281

217

Interest paid on lease liabilities

6

(272)

(300)

Interest paid on loans and borrowings

6

(528)

(84)

Dividends paid to the holders of the parent

9

(420)

(419)

Proceeds from loans and borrowings

18

577

6,079

Net cash (used in)/generated from financing activities


(1,191)

4,796

Net decrease in cash and cash equivalents

(1,864)

(6,977)

Cash and cash equivalents at the beginning of the year


2,276

9,253

Cash and cash equivalents at the end of the year

15

412

2,276

 

Notes forming part of the Consolidated Financial Statements

 

1      Basis of the announcement

 

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 7/8, Commerce Park, Commerce Way, Croydon, CR0 4YL 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.

 

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

 

The financial information included in this preliminary announcement does not constitute the Company's statutory accounts for the year ended 31 January 2024 but is derived from those accounts. Statutory accounts for the year ended 31 January 2023 have been delivered to the registrar of companies. The auditor has reported on those accounts; their report was (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.

 

Going concern

The Group is reliant on borrowing facilities from external lenders to finance its ongoing operations. The Group has access to a revolving credit facility ('RCF') of £10.0million and an invoice finance facility of up to £5.0million. The RCF facility contains certain financial covenants relating to the Group.

 

As a result of ongoing delays in receiving a material export order, the Group sought and received waivers from its lender in relation to the covenant tests as at 31 January 2024 and 30 April 2024, and has agreed alternate covenants for the period to 30 April 2025, with further drawdown of the RCF subject to lender consent.

 

On 26 June 2024, the Company announced a placing, subscription and retail offer ("the Fundraising") to raise £2.8million, net of expenses, by the issue of 21,428,570 new Ordinary Shares in the Company. The Fundraising completed on 23 July 2024 following shareholder approval and admission of shares to trading on AIM. Conditional upon the placing completing as expected, the Group's lender has agreed to release any restriction on further drawdown of the RCF which will provide the Group with additional liquidity of £3.5million, subject only to continued compliance with the revised covenants. On 25 July 2024, the Company announced that it had signed the material export order, valued at $4.3 million, and expects to deliver the goods in the second half of the current financial year.

 

The Directors have considered financial projections for the next 18months covering several scenarios, these include a significant (10%) revenue downside versus the base case budget for the period. These projections demonstrate that the Group can operate within the revised headroom available following completion of the placing for the foreseeable future. The Directors, after taking into account the proceeds of the Fundraising, the material export order, and availability of the RCF, believe that they have a reasonable basis for concluding that the Group has adequate facilities to continue as a going concern and have therefore adopted the going concern basis in the preparation of these financial statements. The financial statements do not reflect any adjustments that would be required if they were prepared on a basis other than the going concern basis.



 

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 Financial Review for further information and reconciliations to the relevant GAAP measure.

·      Adjusted EBITDA

·      Adjusted Operating Profit

·      Net Debt excluding IFRS 16 lease liabilities

 

2      Revenue

 

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




2024

2023




£'000

£'000

Products:





Neonatal products



29,097

32,105

Infusion products



8,533

9,128

Total



37,630

41,233

Geography:





Domestic





- UK



17,680

19,340

- Ireland



1,001

547

International



 


- Europe



4,354

5,315

- Asia Pacific



8,436

9,458

- Middle East & Africa



4,206

5,386

- Americas



1,953

1,187

Total



37,630

41,233

 

3     Non-recurring Items

 

During the year, the Group recognised the following non-recurring items:



2024

2023



£'000

£'000

Impairment of capitalised development costs


4,120

-

Impairment (credit)/charge on leased properties


(86)

446

Acquisition costs


69

467

Restructuring


142

-

Other


282

245

Total Non-recurring items

 

4,527

1,158

 

An impairment charge of £4,120,000 has been recognised in relation to capitalised development costs, following the decision to cease work on a number of projects and to focus resources on a smaller number of strategic projects.

 

An impairment credit of £86,000 has been recognised in the year following the sub-lease of vacant properties that were impaired in the prior year. In 2023, following the move to our new Manufacturing and Technology Centre, the Group took the decision to consolidate its property portfolio and, as a result, there was an impairment of our right of use assets and leases of £446,000, relating to our Leicester, Crawley and former Croydon properties.

 

Acquisition costs in the year of £69,000 were incurred including legal and professional fees in relation to the acquisition of Airon Corporation. In the prior year, acquisition costs of £467,000 covered professional fees relating to an aborted acquisition.

 

Restructuring costs of £142,000 include redundancy and severance costs incurred as a result of consolidation of the Group's property portfolio and moving all roles to the Group's new premises in Croydon.

 

Other non-recurring charges include £133,000 relates to project consultancy costs incurred in the year. £149,000 were legal and professional fees relating to a contract dispute. 

 

4      Income tax

        Analysis of tax charge for the year is as follows:

 




2024

2023


£'000

£'000

UK corporation tax



Current year

-

14

Prior year adjustment

37

28

 

37

42

 

 


Deferred tax



    Origination and reversal of temporary timing differences

321

(306)

    Prior year adjustment

-

68


 


 

321

 (238)

 

 


Tax charge/(credit) on (loss)/profit on ordinary activities

358

(196)

 

The tax assessed for the year is higher (2023: lower) than the standard rate of corporation tax in the UK 24.0% (2023: 19.0%) as explained below:


2024

2023


£'000

£'000




(loss)/Profit on ordinary activities before taxation

(5,676)

76

Tax using the effective UK corporation tax rate of 24.0% (2022: 19.0%)

(1,362)

14

Effects of:

 


Non-deductible expenses

251

188

Additional deduction for research and development

-

(314)

Fixed asset differences

112

44

Adjustment in respect of prior periods

37

(137)

Tax losses not recognised

1,320

9

Total tax charge/(credit)

358

(196)

 

Budget 2021 announced that the UK corporation tax rate was to increase from 19% to 25% with effect from 1 April 2023. This provision was substantively enacted on 24 May 2021 and therefore deferred tax balances have been calculated at 25%.

 

 

5      Loss per ordinary share

 

Basic (loss)/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. Diluted (loss)/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. No diluted loss per share is presented for the year ended 31 January 2024 as the exercise of share options would have the effect of reducing loss per share and is therefore not dilutive

 


2024

2023




(Loss)/Profit attributable to equity holders of the company £'000

(6,036)

272


 


Weighted average number of shares in issue during the year

68,216,532

68,133,218

Dilutive effect of potential ordinary shares:

n/a

691,392

Diluted weighted average number of shares in issue during the year

n/a

68,824,610

 

Basic and diluted loss/earnings per share for the year are as follows:


Basic

Diluted

Basic

Diluted


2024

2024

2023

2023






(Loss)/Earnings per share (pence)

(8.85)

n/a

0.40

0.39

 

 

6      Dividends

 

The final dividend for the year ended 31 January 2023 of 0.41p per share was paid on 25 July 2023. The interim dividend for the year ended 31 January 2024 of 0.205p per share (2023: 0.2p per share) was paid on 29 December 2023. The Board are not proposing to pay a final dividend (2023: 0.41p per share).

 



 

 

7      Intangible assets


 

 

Intangible assets

Development

Intellectual

 





Goodwill

acquired

costs

property

Software

 



£'000

£'000

£'000

£'000

£'000

 











Cost









At 1 February 2022

7,610

5,528

4,127

276

756



Additions

-

-

1,976

-

140



Disposals

-

-

(6)

-

-












At 31 January 2023

7,610

5,528

6,097

276

896

20,407












Additions

-

12

1,135

-

63



Additions arising on business combinations

328

-

-

-

-



At 31 January 2024

7,938

5,540

7,232

276

959

21,945












Accumulated amortisation and impairment






 


At 1 February 2022

-

1,028

780

276

388



Charge for the year

-

605

157

-

169



At 31 January 2023

-

1,633

937

276

557

3,403












Charge for the year

-

605

338

-

201

1,144



Impairment

-

-

4,120

-

-

4,120












At 31 January 2024

-

2,238

5,395

276

758

8,667












 









Net book value









At 31 January 2024

7,938

3,302

1,837

-

201

13,278



At 31 January 2023

7,610

3,895

5,160

-

339

17,004


 

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 are 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 2025 approved by the Board. The cashflows beyond the budget period are extrapolated for a further four-years based on future expectations. This forecast is then extrapolated to perpetuity using a 2.0% (2023: 2.0%) growth rate.

 

Annual growth rates for revenues for the five-year forecast period have been included between 5% and 7.5% year-on-year and costs between 3% and 5% year-on-year. A post-tax discount rate of 12.5% (2023: 13.0%) 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 13.3% (2023: 19%) would need to be applied for there to be zero headroom.

 



 

 


Leasehold improvements

Fixtures and fittings

Plant, machinery, office equipment

Motor
vehicles

Total

 

£'000

£'000

£'000

£'000

£'000







Cost






At 1 February 2022

1,146

106

1,887

58

3,197

Additions

5,894

6

326

-             

6,226

Disposals

-

-

(6)

-                     

(6)

At 31 January 2023

7,040

112

2,207

58

9,417

Additions

168

11

255

                       -  

434

Disposals

(289)

(45)

(23)

(8)

(365)

At 31 January 2024

6,919

78

2,439

50

9,486

 





 

Accumulated Depreciation




At 1 February 2022

129

68

1,178

24

1,399

Charge for the year

241

8

257

17

523

Disposals

-                          

-                       

(2)

-                    

(2)

At 31 January 2023

370

76

1,433

41

1,920

Charge for the year

375

7

290

13

685

Disposals

(192)

(41)

(19)

(4)

(256)

At 31 January 2024

553

42

1,704

50

2,349

 





 

Net book value






At 31 January 2024

6,366

36

735

-

7,137

At 31 January 2023

6,670

36

774

17

7,497

8      Property, Plant and Equipment

 

Depreciation charged for the financial year is split between cost of sales £82,000 (2023: £60,000) and administrative expense £603,000 (2023: £463,000) in the Consolidated Income Statement.

 

9              Inventory


2024

2023


£'000

£'000

Raw materials

7,623

7,749

Work in progress

1,897

563

Finished goods

4,223

1,623

Total

13,743

6,449

 

Inventories are presented net of provisions of £225,000 (2023: £337,000) to write down the values to management's estimate of net realisable value.

10   Trade and other receivables


2024

2023


£'000

£'000

Trade receivables

8,071

10,393

Loss allowance

(498)

(266)

Net trade receivables

7,573

10,127

UK corporation tax receivable

-  

143

Other taxes and social security

-  

304

Net investment in leases

489

616

Other receivables

245

183

Prepayments and accrued income

362

515

Total

8,669

11,888

 

 

11.  Trade and other payables



2024

2023



£'000

£'000

 

 



Trade payables


4,359

4,081

UK corporation tax


82

-  

Other taxes and social security


583

257

Other payables


606

434

Accrued expenses


961

1,040

Total

 

6,591

5,812

 

 

12.  Borrowings



2024

2023



£'000

£'000

Current liabilities




Invoice Financing


1,654

2,079

Non-current liabilities


 


Revolving Credit Facility


5,002

4,000

Total


6,656

6,079

 

Invoice Financing Facility

The Group continues to benefit from an invoice financing facility to borrow against notifiable trade receivables. The arrangement with the bank is such that the customers remit cash directly with the bank and invoices are settled against the facility. The Group continues to bear the credit risk relating to any defaulting customers and therefore the related trade receivables continue to be recognised on the Group's Statement of Financial Position. Availability under the facility is capped at £5.0m and borrowings bear interest at 2.05% over SONIA. There are no covenants relating to this facility.

 

Revolving Credit Facility ('RCF')

On 22 February 2024, the Group renewed and extended its £5.0m RCF facility. The new facility is for a committed amount of £10.0m and will expire in February 2027 with the option to extend for a further year and attracts interest at a 2.85% margin above SONIA. RCF covenants of EBITDA/finance charges and net debt/EBITDA are in place which tested quarterly. On 31 January 2024, the Company received a waiver in respect of the 31 January covenant tests because of the delay to a material Middle East order that was anticipated to be received before the year end.

 

The movement in the RCF facility during the year was as follows:



2024

2023



£'000

£'000

At 1 February


4,000  

-  

Proceeds from drawdown of loans


1,002

4,000

At 31 January

 

5,002

4,000

 

13   Business Combinations

 

On 3 January 2024, the Group purchased 100% of the share capital in Airon Corporation, a specialist respiratory device company based in Florida, USA.

Airon Corporation is recognised as a leading manufacturer of specialist pneumatic oxygen-powered life support ventilators. These devices have diverse applications, including use in Magnetic Resonance Imaging (MRI) machines and transportation for neonates to adults. The company also offers a range of continuous positive airway pressure (CPAP) devices, crucial in emergency medicine for supporting children and adult patients.

Details of the consideration paid, the provisional fair value of assets acquired and liabilities assumed, and goodwill arising are as follows:


 

Book value

 £'000

Adjustments

£'000

Fair value

 £'000

 

 




Non-current assets

 




Intangible assets


-

12

12

Right of use assets


-

50

50


 

-

62

62

Current assets

 




Inventories


430

-

430

Trade and other receivables


217

-

217

Short-term investments


197

-

197

Cash and cash equivalents


64

-

64



908

-

908

Total assets

 

908

62

970

 





Current liabilities

 




Trade and other payables


(67)

-

(67)

Lease liabilities


-

(50)

(50)


 

(67)

(50)

(117)

Non-current liabilities

 




Deferred tax liability


-

(2)

(2)


 

-

(2)

(2)

Total liabilities

 

(67)

(52)

(119)

Net assets

 

841

10

851

 





Goodwill




328

Total Consideration




1,179

 




 

Satisfied by Cash consideration




1,179

 

Net cash outflow arising on acquisition




 

Cash consideration




1,179

Cash acquired




(65)

 




1,114

In the period from acquisition to 31 January 2024, Airon contributed £181,000 of net revenue to the Group and £28,000 of operating profit.

Acquisition-related fees amounting to £69,000 have been excluded from consideration transferred and have been recognised as an expense in the Income Statement in the current period.

Goodwill arising on acquisition

Goodwill arose in the acquisition because the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, in particular associated with the ability to commercialise the Group's products in the USA. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

None of the goodwill is expected to be deductible for tax purposes.

Contingent consideration

Contingent consideration is due to the shareholders of Airon, based on revenue targets for the 12month period ending on 30 April 2025. The maximum amount payable is $1,000,000 if the highest revenue target is achieved. Any contingent consideration due is payable in June 2025. None of the contingent consideration has been provided for, either at the acquisition date or at 31 January 2024 as management forecasts prepared at that date indicated that the minimum threshold for the earn-out would not be met.

Airon revenues in the initial months post-acquisition have shown growth due to a number of factors that have arisen since the year end, that if maintained for the whole of the earn out period, would result in the maximum contingent consideration being paid.

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