INDEX
1 Strategic Review
Financial and Operational Highlights
At a Glance
Chairman’s Statement
Chief Executive’s Review
Finance Director’s Review
Board of Directors
2-14
2
3
8
9
11
13
2 Corporate Governance
15-27
Strategic Report
Report of the Directors
Corporate Governance Statement
Report of the Remuneration Committee
Independent Auditors’ Report
3 Financial Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated and Company’s Statements of Financial Position
Consolidated and Company’s Statements of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Notes to the Financial Statements
4 Additional Information
Notice of Annual General Meeting
Company Information
15
18
20
22
23
28-64
28
29
30
31
32
33
34
65-68
65
68
Financial and Operational Highlights
3
Financial Highlights
• Revenue up 2% to £42.5m (2017: £41.6m)
• Gross profit broadly flat at £22.7m (2017: £22.9m)
• Adjusted EBITDA* up 15% to £10.7m (2017: £9.3m)
• Profit before tax £12.2m (2017: £4.3m), over 2.8 times higher
• Basic Earnings per share of 2.21p (2017: 0.59p), underlying basic earnings (excluding exceptional items and share
based payments) of 1.01p (2017: 0.58p)
• Cash generated from operations of £9.9m (2017: £10.1m)
• Cash at 31 December 2018 of £10.3m (31 Dec 2017: £8.2m), net cash of £9.4m (31 Dec 2017: £7.0m)
* Excluding exceptional items and share based payments
Operational Highlights
• Successful flotation of Renalytix AI plc creating significant shareholder value
• Achieved US FDA 510(k) clearance for point-of-care and CLIA waiver for the DiaSpect Tm
• Major private label distribution agreement with McKesson for the Tm
• US FDA 510(k) clearance for Quo-Test in clinical laboratory setting
• Upgrade to Elkhart (Indiana, USA) enzyme facility and contract to supply enzymes to US biopharma Oragenics
for use in their pharmaceutical products
2018 Revenue
2018
2017
+/-
Revenue (£m)
£42.5
£41.6
+2%
Net cash (£m)
£9.4
£7.0
+34%
Adjusted
EBITDA (£m)
£10.7
£9.3
+15%
£42.5
2018
£38.6
2017
£41.6
£37.1
2016
2014
2013
£31.8
2015*
£30.0
2%Increase in revenues
year on year
2012
£26.1
HEMOGLOBIN
REVENUES
DIABETES
REVENUES
*Restated
Annual revenues
£m
CENTRAL
LABORATORY
REVENUES
FY 2018
£13,728 (£k)
FY 2018
£10,964 (£k)
FY 2018
£13,289 (£k)
+ 6%
- 5%
+ 5%
FY 2017
£12,911 (£k)
FY 2017
£11,547 (£k)
FY 2017
£12,597 (£k)
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1
4
At a Glance
Background
EKF Diagnostics is a global medical diagnostics business with a long history in point-of-care testing and manufacturing
reagents for use in central laboratories.
Our point-of-care (POC) products, most of which are designed and manufactured in Germany, have a hard earned
reputation for ease of use, reliability and accuracy from professionals working in diabetes, blood banking and
sports medicine.
The POC business is built around a large installed base of analysers each of which generates a regular demand for tests,
often for the entire life cycle of the analyser. In 2018 we sold an estimated 76 million tests. This approach – sometimes
known as the ‘razor/razorblade’ model – permits a percentage of organic growth each year.
The EKF Central Laboratory range includes clinical reagents and centrifuges which are manufactured at premises near San
Antonio, Texas. Clinical chemistry reagents are sold for use on open channel systems or on EKF’s own brand of analysers.
EKF Life Sciences, based in Elkhart, Indiana, manufactures diagnostic enzymes and contracted custom products for use in
medical diagnostics, pharmaceuticals and industry.
2018 Sales
ANALYSERS sold
TESTS sold
2018
14,087
-3%
2017
14,556
2018
76,241,694
+9%
2017
70,217,529
Geographical Performance
Elkhart, IN
Leipzig, DE
Magdeburg, DE
APAC (£k)
FY 2018 £4,867
Moscow, RU
EMEA (£k)
FY 2018 £15,498
Shanghai, CN
San Antonio, TX
Americas (£k)
FY 2018 £22,178
Revenue
FY 2018
FY 2017
+/- (£k)
APAC
EMEA
4,867
4,210
657
15,498
17,005
(1,507)
AMERICAS
22,178
20,369
1,809
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 Point-of-Care: Hemoglobin Analysers
5
Product Portfolio
The hemoglobin product range within EKF Diagnostics is the largest in terms of revenues and the number of users.
A number of OEM arrangements with distribution partners has provided EKF with access to significant geographic
markets and industry sectors that complement a strong and loyal customer base.
Hemo ControlTM
DiaSpect Tm
DiaSpect Hemoglobin T Low
• Uses ‘gold standard’
methodology (reagent filled
microcuvettes)
• Data management capability;
provides a hematocrit
calculation
• Proven, robust analyser sold
worldwide
• Handheld analyser utilising
reagent-free cuvette technology
• One second time to result
and an extended shelf-life of
microcuvettes
• Connectivity to a mobile phone
application available
• Tests serum, plasma, aqueous
solutions or stored erythrocytes
• Estimates the degree of
hemolysis
• Results in less than two seconds
• Reagent-free microcuvettes
UltraCritTM
HemataStat IITM
• Hematocrit analyser which uses
unique ultrasound technology
• Strong presence in US blood
banking sector
• Laboratory hematocrit
centrifuge and analyser
• Processes multiple samples
Strategy
The EKF Diagnostics portfolio of hemoglobin and hematocrit analysers is unique within the Point of Care diagnostics sector.
Sales are primarily focused around two markets – public health initiatives such as anaemia screening programmes, and
private practices where the cost of testing is paid for by an insurance company or the patient.
To approach these markets EKF has two distinct strategies: Firstly, OEM partnerships with international distributor/
manufacturers such as Fresenius Kabi; and secondly, agreements with smaller distributors who are focused on the public
health opportunities within their own countries.
Sports medicine and veterinary medicine provide two additional niche sources of customer for EKF distributors.
EKF believes that this portfolio can provide it with a competitive advantage to grow its market share.
In 2018 EKF sold more than 25 million tests for the DiaSpect Tm range, and 22 million tests for Hemo Control and
HemoPoint® H2.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1
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Point-of-Care: Diabetes Analysers
Product Portfolio
EKF’s Diabetes Care range aims to provide affordable, easy-to-use technology that reduces the costs of long-term
healthcare of the diabetic and pre-diabetic population.
Diabetes has been at the core of EKF’s strategy for over a decade starting with the early models of the Biosen glucose
analysers. Later, Quo-Test and Quo-Lab were launched to address the diabetes screening market.
Although they do not strictly belong within a point-of-care framework, clinical chemistry reagents such as Glycated
Albumin, Glycated Serum Protein and Beta- Hydroxybutyrate add further provenance to EKF’s claim to be a significant
contributor to diabetes care worldwide.
BiosenTM
Quo-Lab® A1c
Quo-Test® A1c
• HbA1c testing (Glycated
Hemoglobin)
• Results in four minutes using a
unique methodology
• Semi-automated analyser aimed
at cost-sensitive markets
• HbA1c testing (Glycated
Hemoglobin)
• Same methodology as Quo-Lab
but fully automated
• Simple operation requires
minimal training
• Glucose and/or lactate
measurement
• Two models, each aimed at
different settings
• Strong presence in Eastern
Europe and China in diabetes
clinics and research
• Used by professional and
amateur sports clubs to test
lactate thresholds
Strategy
Although glucose testing is the most commonly used method of determining glycaemic control within diabetics, HbA1c
is the accepted long-term barometer of patient wellbeing and their compliance with treatment regimes.
The growth in acceptance of HbA1c measurement has seen an increasing number of entrants to the point-of-care HbA1c
market focused on GP surgeries and diabetes clinics.
Since transferring manufacturing from the UK to Germany EKF has engaged in programmes to automate the production
of cartridges to increase capacity and improve quality. In addition, these changes have allowed EKF Diagnostics to
make significant operational savings through the centralisation of manufacturing, warehousing and logistics, and
customer service.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1
Point-of-Care: Women’s Health & Sports Performance
7
Product Portfolio
The Women’s Health product range focuses on specialist diagnostics used to address conditions and complications
associated with pregnancy and child birth.
Products include the Creamatocrit centrifuge but also the use of our hemoglobin meters that are used in Women and
Infant Clinics, pregnancy test kits and HbA1c analysers used to diagnose gestational diabetes in pregnant women.
Sports Performance range is primarily comprised of Lactate Scout 4, a handheld blood analyser used ‘in the field’ by
sports scientists.
Creamatocrit PlusTM
Pregnancy Testing
Lactate Scout 4
• Small lab centrifuge used in
Women and Infant Clinics
• Measures the lipid
concentration and caloric
density of breast milk
• Allows professionals to guide
mothers with underweight
infants
Strategy
• Cassette rapid tests
• Marketed for use in hospital
settings
• Handheld lactate analyser
• Results in 10 seconds
• Developed for use in sports
medicine
• New model launched in
November 2018
Lactate Scout has been sold into sports medicine for over a decade. It has been a popular tool with athletes in endurance
activities such as cross-country skiing, cycling and rowing. This market also contributes significantly to Biosen revenues
in which the lactate testing function is used in the preparation of elite squads of athletes such as Premier League and
Bundesliga football teams and Olympians.
Lactate Scout 4 was introduced in November 2018 with new functionality and a specific focus on sports medicine.
Today, EKF is developing new applications for Lactate Scout 4 in other markets including veterinary medicine.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1
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Central Laboratory
Product Portfolio
EKF, through its wholly owned subsidiary Stanbio Laboratory, has had a presence within central laboratory dating back
over 50 years. During this time it has built a global customer base for its clinical chemistry reagents that can be used on
most open-channel analyser platforms.
The Central Laboratory business also includes the manufacture of enzymes, produced at EKF Life Sciences in
Elkhart, Indiana.
From this facility EKF Life Sciences sells enzymes used in Stanbio’s clinical chemistry portfolio as well as providing
contract manufacturing services for enzymes and proteins used in industrial applications. These are then sold in bulk or
used in the production of in-vitro diagnostic devices (IVDs).
EKF Life Sciences received a significant investment in plant in 2018 to allow it to grow the services and products
it provides.
AltairTM240
Beta-Hydroxybutyrate
• Automated bench-top analyser
• Runs up to 400 tests per hour
and can handle up
to 43 different reagents
• Calibrated to run the Stanbio
Chemistry range of reagents
• Liquid reagent for the early
detection of ketosis
• Primarily sold in USA through
national distribution networks
Procalcitonin
Lucica Glycated Albumin-L
• Liquid reagent for the detection
of sepsis
• Targeted at certain European
markets
• Confirms changes in blood
glucose 1-2 weeks treatment
• EKF is the exclusive distributor
in the USA
Strategy
The central laboratory market continues to experience relatively low levels of growth. This is in part because sales of
chemistry reagents are often linked to the provision of the analysers on which the tests are performed. EKF Diagnostics’
approach to the clinical chemistry market changed in late 2015 with the launch of the Altair 240, a benchtop analyser
calibrated to run the Stanbio Chemistry range of reagents.
Further opportunities continue to exist in niche markets. Sales of Beta-Hydroxybutyrate Liquicolor reagent continue to
be healthy with a strong performance from US distributors who have developed a market capitalising on the withdrawal
of a previous method of testing for ketosis. More than 1,000 US hospitals now use EKF’s Beta-Hydroxybutyrate reagent.
In 2019 EKF will launch its new, exclusive Glycated Albumin test which has been developed in partnership with Japan’s
Asahi Kasei Pharma Corporation.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1
Chairman’s Statement
9
Results overview
The Chief Executive’s and Finance
Director’s statements contain a review of
the year and an overview of the financial
performance of the Group.
Board and Corporate Governance
The make-up of the Board has once again
remained
stable. The Non-executive
Directors have again waived their salary
but received an appropriate bonus to
recognise the very significant contribution
they make to the success of the Group
over and above their duties as directors.
The London Stock Exchange now requires
AIM listed companies such as EKF to
adopt a recognised corporate governance
code and we have chosen that issued by
the Quoted Companies Alliance. Further
details of compliance can be found in
the Corporate Governance Statement on
pages 20-21, once published, and on the
Company’s website in accordance with
AIM Rule 26.
Outlook
This has been a very successful year,
which has allowed us to provide significant
rewards for shareholders. We are confident
that we will continue to make progress in
2019. Trading in the first quarter to date has
been satisfactory, in line with management
expectations.
Christopher Mills
Non-executive Chairman
13 March 2019
It is a pleasure to report to shareholders
on another successful year for EKF, with
record revenue, earnings, and profits.
Strategy
Since I joined the business in April 2016,
the Group has followed a consistent
strategy of concentrating on its point-of-
care diagnostics and central laboratory
reagents business. While the task of
simplification of the business was largely
completed in 2017, we continue to actively
seek cost saving opportunities through
improved efficiency and targeted action
plans, while seeking to position the
business for further growth.
Renalytix AI plc
In January 2018 we announced our intention
to create value from our sTNFR biomarker
technology. In short order this process
led to the development, founding, and
successful flotation on AIM of an exciting
developer of artificial intelligence-enabled
diagnostics for kidney disease, including
the raising of £22.25m for working capital.
Of this, £3.1m was provided by EKF. As at
the date of this statement, Renalytix AI plc
(“Renalytix”) is valued at over £75m in its
own right, and is making good progress
towards its goals.
shares
ordinary
EKF’s shareholding in Renalytix comprising
20,964,295
was
distributed to relevant EKF shareholders in
October 2018. The market value of those
shares at the date of this statement, post
admission to AIM, is circa £29.3m. As a
requirement of Renalytix’s flotation, these
shares are being held in escrow and share
certificates will be sent to the underlying
shareholders once the lock-in ends on
22 April 2019.
This process has been extremely successful
and has provided a very significant
benefit to EKF shareholders. I would like
to thank the EKF directors and staff who
put an enormous amount of work into
its achievement.
We remain very excited about the future
prospects for Renalytix and are confident
that it will deliver further significant value
to shareholders over the longer term.
Share buy back
The Group has continued to acquire its
own shares in the market. During the year
the Group has acquired and cancelled
3,461,409 shares representing 0.76% of
the Ordinary shares in issue as at 1 January
2018, at a total cost of £940,000. Subject
to continuing shareholder approval, the
Group intends to continue to acquire shares
for cancellation when it is appropriate
to do so.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 10
Chief Executive’s Review
In 2018 we have been highly successful
in achieving the operational goals we set
ourselves at the beginning of the year. I
am pleased to announce that we delivered
6.3% year on year organic growth
excluding the effect of the completion
of the Saudi Arabian Quo-Test contract
which had contributed circa £1.6m more
to revenues in 2017 than in 2018. The
delivery of replacement revenues through
new contract wins and additional organic
sales growth has not only mitigated the
impact of this source of revenue ending,
but has allowed us to maintain overall
revenue growth.
DiaSpect Tm in point-of-care and CLIA
waiver settings, we anticipate that future
growth will be maintained globally.
Once we had clearance, we signed a
private label distribution agreement with
McKesson Medical-Surgical Inc., an affiliate
of McKesson Corporation, one of the
largest companies in the US by revenue,
and one of the largest distributors of
medical supplies, who will sell the Tm as
the McKesson Consult® Hb analyser. Whilst
this partnership is in its infancy we have
already opened over 25 new accounts
in the US.
Operations
Diabetes
In 2018 we promised to deliver in five main
areas to ensure we maintain sustainable
organic growth for the foreseeable future,
which were:
1. DiaSpect Tm FDA 510(k) CLIA Waiver.
2. Delivery of a major contract alongside
this clearance - the McKesson OEM
contract in the US.
3. Upgrade of our Elkhart (Indiana, USA)
enzyme facility.
4. Deliver a major contract alongside the
upgrade - the Oragenics contract.
5. FDA 510(k) clearance of Quo-Test.
Sales of diabetes products are down by
5% this year from £11.5m to £11.0m, due to
the end of the Quo-Test contract in Saudi
Arabia. Sales of Quo-Lab are up by 20%,
and sales of Quo-Test excluding Saudi
Arabia are up by 6%.
We were pleased to announce that the
Quo-Test analyser has received US Food
and Drug Administration 510(k) clearance
for professional use in a clinical laboratory
setting. This will allow us to enter the US
market with this product.
Lactate Scout
I am proud to say that we have delivered
on all the above, although the Quo-Test
510(k) clearance crept into 2019. The OEM
contract with McKesson in the US for the
DiaSpect Tm gives us an opportunity to
quickly expand our haemoglobin Point-of-
Care franchise in the US where we already
have a strong foothold.
The Oragenics contract in Elkhart has
enabled us to broaden our offering in
pharmaceutical enzymes. The additional
investment has
to a significant
led
upgrade of the facility and we are now
in a position to attract other partners
alongside Oragenics.
Our new Lactate Scout 4 hand-held
lactate analyser for fast and accurate
sports performance monitoring was
launched at the Medica 2018 show. Lactate
Scout 4 is designed for use in the field as
a training companion for individuals or
sports teams. We are working to adapt
our existing lactate technology for use in
clinical settings. Having taken professional
guidance, and consultations with interest
groups including potential end users, we
are determined to deliver the right solution
for this market, which will involve adapting
the base product to ensure good usability
in this market, and subsequently carrying
out some limited clinical trials.
Point-of-Care
Central Laboratory
involves
One of the two main strands of EKF’s
the development,
business
manufacture, and sale of
instruments
and related consumables for use in the
diagnosis of conditions in situations which
are near-patient. They have the advantage
of giving rapid results which can be
communicated and acted on immediately,
yet offer equivalent accuracy to laboratory
based analysers.
Hematology
In 2018, sales of haematology products
have risen by 6% to £13.7m (2017: £12.9m).
For many years our Hemo Control analyser
range (sold in the USA as the HemoPoint
H2) has been our best seller in this area.
Following FDA 510(k) clearance for the
The second main strand of EKF’s business
is the supply of reagents for use on central
laboratory analysers. As an adjunct
to this, we also sell our own range of
laboratory standard analysers. In 2018,
Central Laboratory sales were £13.3m, an
increase of 5%.
During the year we signed a distribution
agreement for Asahi Kasei’s Glycated
Albumin products. This has now been
launched in the US and the first orders
have been received.
We have continued
performance
Hydroxybutyrate
from
to see strong
sales of Beta-
Liquicolor
(β-HB)
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Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1
Chief Executive’s Review (continuation)
11
participated in the fundraising. A company
as at the date of this statement valued at
circa £75m, post admission to AIM, has
been created, which the Directors believe
has the potential to be a game changer in
the diagnosis and treatment of ESRD.
Outlook
2018 has been a year in which we have
achieved all our major milestones,
including setting up a number of platforms
for growth in 2019 and beyond. We are
continuing to build a solid and reliable
business with opportunities for significant
growth, while ensuring excellent financial
results.
Julian Baines
Chief Executive Officer
13 March 2019
and
capacity
reagent, which are up 10% in GBP terms.
As mentioned earlier, our project to
significantly
increase
upgrade our main wet chemistry site in
Elkhart, Indiana has continued, and is
expected to complete in 2019. The work
we have done there has enabled us to
sign an exclusive, multi-million dollar
agreement with Oragenics, Inc., a Florida-
based biopharmaceutical company, for the
manufacturing of Oragenics’ lantibiotic
bulk drug substances in the United States.
Under the collaboration agreement, EKF
Diagnostics will manufacture compounds
intended for preclinical and early stage
clinical trials.
Regulatory update
Our major successes in 2018 have been the
achievement of FDA 510(k) clearances for
the DiaSpect Tm and Quo-Test. In addition,
we have received regulatory approval for
β-HB in both Mexico and Colombia, as well
as registration of DiaSpect Tm in India. In
China, we have had some successes but
continue to work on the complex process
in place. We
of getting registrations
continue to work using our own resources
and with our partners to extend the span
of our registrations.
sTNFR Project – Renalytix AI plc
There has been a longstanding unmet
need in the field of End Stage Renal
Disease (“ESRD”). Kidney disease costs
the US Healthcare system over $40bn
per annum in dialysis alone. In 2017 we
started looking for ways to maximise the
value of our sTNFR biomarker technology
based around this unmet need. It soon
became clear that there was a significant
opportunity to use this as the springboard
for a unique business with the ultimate
aim being to develop and sell artificial
intelligence enabled diagnostics for ESRD.
It was also clear that it was best that this
should be progressed entirely outside
EKF. A team was put in place to take
the new business forward, led by James
McCullough. This team rapidly assembled
a set of partners including the world -
leading centre in the care of kidney disease,
the Icahn School of Medicine at Mount
Sinai (“ISMMS”). In early November 2018,
£22.5m was raised with ISMMS becoming a
major shareholder. The funds are primarily
being used for the acquisition of licences
from ISMMS, to develop the company’s
products and technology, for corporate
purposes, and for general working capital.
The Renalytix AI shares which EKF had
received in return for its past investment
and technology have been distributed
to EKF shareholders, and the company
has been floated separately on AIM. EKF
retains an interest in the business having
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 12
Finance Director’s Review
Revenue
Revenue for 2018 was £42.5m (2017:
£41.6m), which is an increase of 2%. At
constant exchange rates, revenue for the
year would have been 1% higher, so organic
growth is over 3%, despite the ending of
the large Saudi Arabia contract.
Revenue by disease state, which
is
presented for illustrative purposes only, is
as follows:
FY 2018
£’000
FY 2017
£’000
+/- %
Hematology
13,728
12,911
+6%
Diabetes Care
10,964
11,547
(5%)
Central Laboratory
13,289
12,597
+5%
Other
Total
4,562
4,529
+1%
42,543 41,584
+2%
Gross profit
Gross profit is broadly flat at £22.7m
(2017: £22.9m), while the gross margin
percentage on sales is 53.3% (2017: 55.0%).
In 2017 there were releases of inventory
provisions set in previous years; this did
not recur in 2018.
Administration costs and research
and development
the
have
Administration
fallen
costs
substantially, to £10.6m (2017: £18.2m),
reflecting
focus on operational
improvements. The biggest factor was
the effect of exceptional items, which
are again strongly positive in the year.
The most important exceptional item
this year is the substantial gain made
on the Group’s shares in Renalytix AI
plc as a result of its successful separate
flotation. The gain recognised in EKF’s
books is discounted to take account of
the restrictions on the shares which were
distributed to EKF’s shareholders prior
to the flotation. In addition to Renalytix,
there was an exceptional gain following
the satisfactory conclusion to a loan
agreement with a
former employee,
offset by business restructuring costs.
Excluding the effect of exceptional items,
administration costs reduced from £19.7m
in 2017, to £17.0m in 2018.
Research and development costs included
in administration expenses were £1.6m
(2017: £2.2m). A further £0.6m was
capitalised as an intangible asset, bringing
gross R&D expenditure for the year to
£2.2m, a reduction from the expenditure
in 2017 of £2.9m, largely caused by the
completion of expenditure last year on the
DiaSpect Tm FDA clearance process.
The charge for depreciation of fixed assets
intangible assets
and amortisation of
reduced to £4.0m (2017: £4.6m). 2017
included an impairment charge relating
to the closure of our Polish operations in
that year.
Operating profit and adjusted
earnings before interest, tax,
depreciation and amortisation
The Group made an operating profit of
£12.2m (2017: £4.7m). This again reflects
the
significant exceptional gain on
Renalytix and other items, without which
operating profit would have been £5.8m,
still an increase of 23.4%. We continue
to consider
that adjusted earnings
before
interest, tax, depreciation and
amortisation, share-based payments and
exceptional items (adjusted EBITDA) is a
better measure of the Group’s progress
because the Board believes it gives clearer
comparability of operating performance
between periods. In 2018 we achieved
adjusted EBITDA of £10.7m (2017: £9.3m),
an increase of 14.7%. The calculation of
this non-GAAP measure is shown on the
face of the income statement. It excludes
the effect of non-cash share-based
payment charges of £0.9m (2017: £1.5m),
and exceptional profits of £6.5m (2017:
£1.6m). The increase in adjusted EBITDA of
£1.4m would be higher by £0.2m without
the effect of exchange rates, with £1.6m
therefore being attributable to improved
underlying performance.
Finance costs
Net finance costs have reduced to £0.03m
(2017: £0.42m). While interest costs on
borrowings have continued to reduce, the
main effect is a result of a lower charge
associated with the change in fair value of
deferred consideration.
Tax
There is an income tax charge of £1.9m, an
increase from the 2017 charge of £1.4m.
The charge is lower than would have been
expected because of the utilisation of past
tax losses.
Balance sheet
Property plant and equipment
Additions to fixed assets were £1.2m (2017:
£1.4m). The major programme has been
the continuing work on the upgrading
and refurbishment of the Group’s facility
in Elkhart, USA, where many of the
Group’s central laboratory products are
manufactured,
those being
including
supplied to Oragenics.
Intangible assets
The carrying value of intangible assets has
continued to fall, from £43.6m in 2017 to
£41.8m as at 31 December 2018.
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Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 Finance Director’s Review (continuation)
13
This is largely the result of the annual
amortisation charge. There was a £0.6m
disposal of capitalised development costs
which were sold to Renalytix AI plc.
Investments
As part of the fund raising for the Renalytix
project, EKF agreed to invest the sum of
£3.1m for 4.79% of Renalytix’s enlarged
(post IPO) share capital.
Deferred consideration
The remaining deferred consideration
relates to a share-based payment to the
former owner of EKF-Diagnostic GmbH,
payment of which is subject to an offsetting
warranty related claim, the value of which
is held in receivables. Conclusion of the
position has taken longer than anticipated
but is expected during this year.
Cash and working capital
Despite the £3.1m investment in Renalytix
and share buy-backs totalling £0.9m, net
cash has increased from £7.0m to £9.4m.
Gross cash has increased to £10.3m (2017:
£8.2m). Borrowings, which were mainly
used to fund a new building at our plant in
Barleben, Germany, are reducing over the
loan period to 2023, while the remaining
balance of a loan from a former employee
of EKF Molecular was written back.
Inventory has
increased slightly from
£5.6m to £6.1m due to a number of
strategic decisions to increase raw material
holdings to ensure continuity of supply.
Trade and other receivables have dipped
slightly, largely for non-trading reasons.
Trade payables have increased, chiefly
because of the effect of the increased
liability relating to the cash settled share-
based payments.
Richard Evans
Finance Director and Chief Operating
Officer
13 March 2019
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 14
Board of Directors
Executive Directors
Julian Baines MBE
Chief Executive Officer (aged 54)
Julian was Group CEO of BBI where he undertook a management buyout in 2000, a
flotation on AIM in 2004 and was responsible for selling the business to Alere Inc. (now
part of Abbott Laboratories) in 2008 for circa £85 million. In December 2009 Julian
became CEO of the Group and has subsequently successfully completed a number of
fund raisings and the acquisition and subsequent integration of eight businesses in seven
countries. In 2016 he was awarded an MBE for services to the life sciences industry. Julian
is also Chairman of Renalytix AI plc.
Richard Evans
Chief Operating Officer and Finance Director (aged 61)
Richard qualified as a Chartered Management Accountant in 1983 and holds a Bachelor
of Commerce in Business Studies and Law from Edinburgh University and an MBA from
INSEAD. Before joining EKF, Richard was Finance Director, General Manager and finally
Global Account Director at Hitachi Data Systems GmbH. He has also held positions at
Fisher Scientific, TRW Seat Belt Systems, Maxtor Corporation, United Technologies
Carrier and Abbott Diagnostics GmbH in Germany. Richard is also a non-executive
director of Renalytix AI plc.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 Board of Directors
Non-Executive Directors
15
Christopher Mills
Non-Executive Chairman (aged 66)
Christopher founded Harwood Capital Management in 2011, a successor to its former
parent company J.O. Hambro Capital Management, which he co-founded in 1993. He is
Chief Executive and Investment Manager of North Atlantic Smaller Companies Investment
Trust plc and Chief Investment Officer of Harwood Capital LLP. He is a Non-Executive
Director of a number of companies including Renalytix AI plc. Christopher was a Director
of Invesco MIM, where he was Head of North American Investments and Venture Capital,
and of Samuel Montagu International. Christopher is a member of the Audit Committee
and the Remuneration Committee.
Adam Reynolds
Non-Executive Director (aged 56)
Adam is a former stockbroker specialising in corporate finance. He has built, rescued and
re-financed a number of public companies. He is currently Chairman of Autoclenz Group
Limited and Yourgene Health plc, and a director of several listed and private companies.
Adam chairs the Audit Committee and Remuneration Committee.
Carl Contadini
Non-Executive Director (aged 70)
Carl has been a director of numerous companies throughout his career, predominately
focusing on the healthcare and electronics sectors. He is currently an Operational
Adviser to Harwood Capital LLP, where he assists in sourcing, evaluating and monitoring
investments. Carl also holds the position of Executive Chairman at Utitec Holdings Inc.
and is a board member of Prospect Medical Waterbury Hospital. Carl has, in the past, also
been a director of Bionostics Limited and Celsis Group Limited. He holds an Associate of
Science degree in Business Administration and Marketing from Tunix Community College,
Connecticut and a Batchelor of General Studies degree specialising in Human Resources
from University of Connecticut.
Annual Report 2018 | EKF Diagnostics Holdings plcStrategic Review1 16
Strategic Report
for the year ended 31 December 2018
The Directors present their Strategic Report for the
year to 31 December 2018.
Review of the business
the operations and the revenue of the Group. In particular
the Group has significant revenue from customers
in Russia which are ultimately largely funded by the
Russian government.
A review of the business is contained in the Chairman’s
Statement on page 8, in the Chief Executive’s Review on
pages 9 and 10, and the Finance Director’s Review on
pages 11 and 12.
The Group spreads the risk through seeking a portfolio
of diversified
revenue streams geographically with
a mixture of distribution partners in developing and
developed countries.
Risk Management
We recognise that effective risk management is essential
to the successful delivery of the Group’s strategy. As we
continue to grow our business we believe it is important
to develop and enhance our risk management processes
and control environment on an ongoing basis and ensure
it remains fit for purpose. We continue to mature our
approach to identifying and managing risks across the
Group in a consistent and robust manner.
Below we describe our risk management approach, the
principal risks and uncertainties faced by the Group and
the controls in place to manage them.
Overview of risk management approach
Each business area is responsible for identifying, assessing
and managing the risks in their respective area. Risks are
identified and assessed by all business areas on a periodic
basis, and are measured against a defined set of criteria,
considering likelihood of occurrence, and potential impact.
The Executive Board members also conduct a strategic
risk identification and assessment exercise to identify
risks, including those that could impact the business
model, future performance, solvency or liquidity. This risk
information is combined with a consolidated view of the
business area risks. The most significant risks identified are
included in our Group Risk Profile, which is reported to the
Executive Board for review and challenge, ahead of it being
submitted to the Group Board for final review, challenge
and approval. The Board has the overall accountability for
ensuring that risk is effectively managed across the Group
and therefore ensuring that it is comfortable with the
nature and extent of the principal risks faced in achieving
its strategic objectives.
Principal risks and uncertainties
Set out below are the principal risks which we believe
could materially affect the Group’s ability to achieve its
financial and operating objectives and control or mitigating
activities adopted to manage them. The risks are not listed
in order of significance.
Key employees
Lack of retention of key employees affects the continuity
and effectiveness of on-going relationships with key
customers and suppliers.
This risk is minimised by ensuring that a minimum of two
individuals manage every relationship with key customers
and suppliers. In addition, in retaining the key employees,
incentivisation packages are offered through a mixture of
sales commission, and profit related bonuses. Main Board
Directors are incentivised as detailed in the Directors’
Remuneration Report.
Political risk
A significant proportion of the Group’s revenues are
accounted for by agreements in developing countries.
Any instability in these countries could significantly affect
the European Union
Following
(EU) membership
referendum in 2016, the UK Government has commenced
the process of withdrawal from the EU. Although at present
the Group does not anticipate significant issues, the Group
has employees, facilities, customers, and suppliers in both
the United Kingdom and the EU, and therefore withdrawal
may affect the Group’s operational abilities and costs. The
Group seeks to manage this risk by monitoring events and
taking mitigating actions if necessary.
Supply chain continuity
The Group relies on third party manufacturers for the
supply of the majority of raw materials. Problems with
obsolescence and manufacturer facilities may lead to delay
and disruptions in the supply chain which could have a
significant negative impact on the Group.
The Group maintains a close dialogue with key suppliers
and closely monitors its inventory status and customer
demand to ensure that any problems with the supply
chain can be managed, and back up sources of supply are
maintained where possible.
Regulatory risk
There can be no guarantee that any of the Group’s
products will be able to obtain or maintain the necessary
regulatory approvals in any or all of the territories in
respect of which applications for such approvals are made.
Where regulatory approvals are obtained, there can be no
guarantee that the conditions attached to such approvals
will not be considered too onerous by the Group or its
distribution partners in order to be able to market its
products effectively.
The Group seeks to reduce this risk by manufacturing
the products to recognised standards, by keeping
appraised with changes in the standards geographically,
by seeking advice from regulatory advisers, consultations
with regulatory approval bodies and by working with
experienced distribution partners.
Competition risk
Due to the Group’s current and future potential competitors,
such as major multinational pharmaceutical and healthcare
companies, having substantially greater resources than
those of the Group, the competitors may develop systems
and products that are more effective or economic than any
of those developed by the Group, rendering the Group’s
products obsolete or otherwise non- competitive.
confidentiality
The Group seeks to mitigate this risk by securing patent
registration protection for its products where appropriate,
maintaining
regarding
the Group’s know-how and technology, monitoring
technological developments and by selecting leading
businesses in their respective fields as distribution partners
capable of addressing significant competition, should
it arise.
agreements
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 Strategic Report (continuation)
for the year ended 31 December 2018
17
Intellectual property risk
Cyber security risk
The commercial success of the Group and its ability to
compete effectively with other companies depends,
amongst other things, on its ability to obtain and maintain
patents sufficiently broad in scope to provide protection
for the Group’s intellectual property rights against third
parties and to exploit its products. The absence of any such
patents may have a material adverse effect on the Group’s
ability to develop its business.
The Group mitigates this risk by developing products where
legal advice indicates patent protection would be available,
seeking patent protection for the Group’s products,
maintaining confidentiality agreements regarding Group
know-how and technology and monitoring technological
developments and the registration of patents by other
parties. The commercial success of the Group also depends
upon not infringing patents granted, now or in the future,
to third parties who may have filed applications or who
have obtained, or may obtain, patents relating to business
processes which might inhibit the Group’s ability to develop
and exploit its own products.
Foreign exchange risk
The Group has transactional currency exposures as the
majority of revenues and expenditure and certain borrowings
are denominated in foreign currencies. Fluctuations in
exchange rates between the Group’s functional currency
of Sterling and the currency of the overseas operations
could adversely impact the financial results. In most cases
the Group matches the currency receipts and expenditure
of the overseas operations. The Group also endeavours to
match the foreign currency assets of the foreign operations
by funding through borrowings and loans denominated in
the currency of the overseas operations, and to negotiate
currency protection in major contracts.
Reimbursement levels
There is no guarantee that the Group may be able to sell its
products or services profitably if the reimbursement level
from third party payers, including government and private
health insurers, is unavailable or limited. Third party payers
are increasingly attempting to contain health care costs
through measures that could impact the Group including
challenging the prices charged for health care products
and services, limiting both coverage and the amount of
reimbursement for new diagnostics products and services,
and denying or limiting coverage for products that are
approved by the regulatory agencies but are considered
experimental by third party payers.
The Group uses computers extensively in its operations and
has an online presence but does not trade online. It is at
risk of attack through hacking or other methods. This risk
is mitigated by the use of robust security measures, staff
training, and back-up systems. The Group also has specific
insurance cover.
Review of strategy and business model
The Board of Directors judge the Company’s financial
performance by reference to the internal budget which it
establishes at the beginning of each financial year.
EKF’s strategy is to create a world class IVD business
through organic growth. IVD has a wide spectrum, and
within this spectrum we have chosen to concentrate on
point-of-care, and our existing central laboratory business.
We have identified and acquired businesses in these areas
with strong product lines and distribution networks which
can benefit from better, more professional management,
greater resources, and from the synergistic benefits of
being part of a larger group.
We sell worldwide to over 100 countries. In many
territories we sell through local distributors, however
where appropriate we sell direct to end users which include
hospitals, laboratories, and government agencies. Our
distributors are supported by a network of regional sales
managers and by product managers who are specialists
in our product range. We manufacture the majority of the
products we sell ourselves, but also distribute a number
of carefully chosen products on behalf of others. We have
product support centres in the USA and Germany.
The Group works mainly on the principle of selling value
priced instrumentation which generates long-term revenue
streams from the subsequent sale of consumables. The
Group has an existing portfolio of technologies which
produce revenues and will add technologies which are
strategically appropriate to this portfolio should they
become available and providing the additions make
economic sense.
Future outlook
The Chairman’s Statement on page 8 and the Chief
Executive’s Review on pages 9 and 10 give information on
the future outlook of the Group, including the main trends
and factors likely to affect its future development.
Key Performance Indicators (KPIs)
The Group understands that due to third party dependency
it is extremely difficult to eradicate this risk. However,
the Group manages this risk with constant dialogue and
educating the third party payers on the Group’s products
and also developing new technologies in order to seek
additional reimbursements.
The key performance indicators currently used by the
Group are revenue, gross margin, adjusted EBITDA and
cash resources. The Group is working to establish other key
performance indicators including non-financial measures.
KPIs are discussed in more detail in the Finance Director’s
review on pages 11 and 12.
Financial reporting and disclosure
Environment
Due to the nature of the Group there is a requirement to
report accurate financial information in compliance with
accounting standards and applicable legislation.
This risk is mitigated through the Group’s internal controls
over the financial information and reporting, overseen by
the local financial heads and then reviewed by the central
finance team, including the Finance Director. The annual
financial statements are also subject to audit by the Group’s
external auditors.
The Directors consider that the nature of the Group’s
activities is not inherently detrimental to the environment.
The Group is committed to minimising any effect on the
environment caused by its operations.
Employees
The Group places great value on the involvement of its
employees and they are regularly briefed on the Group’s
activities. The Group closely monitors staff attrition rates
which it seeks to keep at low levels and aims to structure
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 18
Strategic Report (continuation)
for the year ended 31 December 2018
staff compensation levels at competitive rates in order to
attract and retain high calibre personnel.
Disabled employees
Applications for employment by disabled persons are
always fully considered, bearing in mind the specific
aptitudes of the applicant involved. It is the policy of the
Group that the training, career development and promotion
of disabled persons, as far as possible, be identical with that
of other employees.
Social, community, and human rights
The Board recognises that the Group has a duty to be a
good corporate citizen and to respect the laws, and where
appropriate the customs and culture of the territories
in which it operates. The Group has donated product to
selected appropriate charities which operate within its area,
and encourages staff to take part in charitable activities
which are related to our business areas or customers. It
contributes as far as is practicable to the local communities
in which it operates and takes a responsible and positive
approach to employment practices. The Group’s Modern
Slavery Act statement is published on our website.
The Strategic Report was approved by the Board on 13
March 2019 and signed on its behalf by:
Richard Evans
Finance Director and Chief Operating Officer
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 Report of the Directors
for the year ended 31 December 2018
19
The Directors have pleasure in presenting this report
together with the audited consolidated financial statements
of EKF Diagnostics Holdings plc for the year ended 31
December 2018.
Corporate details
EKF Diagnostics Holdings public limited company is
domiciled, incorporated, and registered in England and
Wales with registration number 4347937. The registered
office is Avon House, 19 Stanwell Road, Penarth, Cardiff
CF64 2EZ.
Directors
The Directors who held office during the year and as at the
date of signing the financial statements were as follows:
• Christopher Mills
• Julian Baines
• Richard Evans
• Adam Reynolds
• Carl Contadini
The Company Secretary is Salim Hamir.
Principal activities
During the year the principal activities of the Group and
Company were the development, manufacture and supply
of products into the in-vitro diagnostics (IVD) market
place. Future developments and research and development
activities are discussed in the Chairman’s Statement on
page 8, the Chief Executive’s Review on pages 9 and 10,
and the Finance Director’s Review on pages 11 and 12.
Dividends and share buy back
On 24 October 2018 the Company declared and paid
a distribution in specie under which the Company’s
shareholding in Renalytix AI plc was distributed to Relevant
EKF shareholders at a rate of one Renalytix AI plc share for
each 21.825 EKF shares held.
The Company holds authorisation to acquire up to
approximately 15% of its Ordinary Shares in order to
reduce the number of shares in issue. During the year the
Company acquired a total of 3,461,409 shares, which were
subsequently cancelled. The Company intends to seek
renewal of the authorisation at the next AGM.
Going concern
The Directors have considered the applicability of the
going concern basis in the preparation of these financial
statements. This included the review of internal budgets
and financial results which show, taking into account
reasonably probable changes in financial performance, that
the Group should be able to operate within the level of its
current funding arrangements.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable
future. The Group therefore continues to adopt the
going concern basis of preparation for its consolidated
financial statements.
Financial risk management
Financial risk management is discussed in Note 3 of the
financial statements.
Employee policies
Directors’ interests
The interests in the share capital of the Company of those
Directors serving at 31 December 2018 and as at the date
of signing of these financial statements, all of which are
beneficial, were as follows:
On 31 December 2018
Ordinary Shares of
1p each
On 31 December 2017
Ordinary Shares of
1p each
Christopher Mills
135,963,591
137,000,000
Julian Baines
Richard Evans
Adam Reynolds
Carl Contadini
1,855,288
178,842
2,068,613
-
1,855,288
178,842
3,318,613
-
Mr Mills’ interest in the Company’s shares is held through
North Atlantic Smaller Companies Investment Trust PLC
(“NAIT”) and Oryx International Growth Fund Limited
(“Oryx”). Harwood Capital LLP (“Harwood”) is investment
manager and investment adviser to NAIT and Oryx
respectively. Christopher Mills is a partner and Chief
Investment Officer of Harwood. Christopher Mills is also a
director of Oryx and NAIT. He holds 2.16 per cent. of the
shares in Oryx in his own name as well as a further 46.44
per cent. of the shares in Oryx via his 25.06 per cent.
shareholding in NAIT. Oryx has sold Ordinary shares during
the year as follows: on 19 November 53,423 shares; on 20
November 491,493 shares; on 21 November 170,954 shares;
and on 7 December 320,539 shares. All of these shares
were purchased by the Company for cancellation.
Carl Contadini holds no shares personally, but acts
as an Operational Advisor to Harwood which acts as
investment manager and investment adviser to NAIT and
Oryx respectively.
On 9 November 2018, Adam Reynolds sold 1,250,000
Ordinary shares at 27.25p per share.
Substantial shareholdings
As at 13 March 2019, the following interests in 3% or more
of the issued Ordinary Share capital had been notified to
the Company:
Number of
shares
Percentage of
issued share
capital
Mr Christopher Mills
135,963,591
29.94%
Lombard Odier Asset
Management (Europe)
Schroders Investment
Management
Canaccord Genuity
Wealth Management
Mr William Pippin
Stock invest
43,975,206
9.68%
32,550,080
7.17%
24,152,899
16,189,675
13,669,000
5.32%
3.57%
3.01%
Statement of Directors’ responsibilities in respect of
the financial statements
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Employee policies are discussed in the Strategic Report on
pages 15 to 17.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 20
Report of the Directors (continuation)
for the year ended 31 December 2018
directors have prepared the group financial statements
International Financial Reporting
in accordance with
Standards (IFRSs) as adopted by the European Union and
parent company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as
adopted by the European Union. Under company law the
directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the
state of affairs of the group and parent company and of
the profit or loss of the group and parent company for that
period. In preparing the financial statements, the directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for
the group financial statements and IFRSs as
adopted by the European Union have been followed
for the company financial statements, subject to
any material departures disclosed and explained in
the financial statements;
of the development and performance of the
business and the position of the group and parent
company, together with a description of the
principal risks and uncertainties that it faces.
Directors’ liability insurance
The Company has entered into deeds of indemnity for
the benefit of each Director of the Company in respect
of liabilities to which they may become liable in their
capacity as Director of the Company and of any Company
in the Group. Those indemnities are qualifying third party
indemnity provisions for the purposes of Section 234 of the
Companies Act 2006 and have been in force during the
whole of the financial year and up to the date of approval
of the financial statements.
Independent auditors
PricewaterhouseCoopers LLP has expressed
their
willingness to continue in office as auditors and a resolution
to reappoint them will be proposed at the forthcoming
Annual General Meeting.
• make judgements and accounting estimates that are
Disclosure of information to the Auditors
The Directors who hold office at the date of approval of
this report confirm that so far as they are each aware, there
is no relevant audit information of which the Company’s
auditors are unaware, and each Director has taken all the
steps that they ought to have taken as a Director in order to
make themselves aware of any relevant audit information
and to establish that the Company’s auditors are aware of
that information.
Corporate governance
The Company’s statement of corporate governance can be
found in the Corporate Governance Statement on pages
20 to 21 of these financial statements. The Corporate
Governance Statement forms part of this Report of the
Directors and is incorporated into it by cross-reference.
Annual General Meeting
The resolutions to be proposed at the forthcoming Annual
General Meeting are set out in the formal notice of the
meeting, as set out on page 65 and 66.
Recommendation
The Board considers that the resolutions to be proposed
at the Annual General Meeting are in the best interests of
the Company and it is unanimously recommended that
shareholders support these proposals as the Board intends
to do in respect of their own holdings.
The Report of the Directors was approved by the Board on
13th March 2019 and signed on its behalf by:
Richard Evans
Finance Director and Chief Operating Officer
reasonable and prudent; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the group and parent company will continue in
business.
The directors are also responsible for safeguarding the
assets of the group and parent company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the group and parent company’s transactions and disclose
with reasonable accuracy at any time the financial position
of the group and parent company and enable them to
ensure that the financial statements comply with the
Companies Act 2006.
The directors are responsible for the maintenance and
integrity of the parent company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the group and parent company’s performance,
business model and strategy.
Each of the directors, whose names and functions are listed
in the Report of the Directors confirm that, to the best of
their knowledge:
• the parent company financial statements, which
have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and
loss of the company;
• the group financial statements, which have been
prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the
group; and
• the Chairman’s Statement, Chief Executive’s Review
and Finance Director’s Review include a fair review
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2
Corporate Governance Statement
for the year ended 31 December 2018
21
Compliance
The Company recognises the value of good corporate
governance in every part of its business. In September 2018
the Board adopted the corporate governance principles of
the 2018 Quoted Companies Governance Code. Details of
the Code can be obtained from the Quoted Companies
Alliance’s website (www.theqca.com).
The following statement describes how the Group as at 31
December 2018 sought to address the principles underlying
the Code.
Board composition and responsibility
The Board currently comprises two Executive Directors
and three Non-Executive Directors. Christopher Mills was
appointed as Non-Executive Chairman on 20 April 2016.
It is the Board’s opinion that the two directors, Adam
Reynolds and Carl Contadini, are independent in character
and judgment and that there are no relationships or
circumstances which could materially affect or interfere
with the exercise of their independent judgement. Both
Mr. Reynolds and Mr. Contadini have been appointed to
the Boards of numerous companies, with Mr. Reynolds
specialising in corporate finance matters and Mr. Contadini
specialising in operations in the healthcare and electronics
sectors. The Board is cognisant that Mr. Contadini serves
as an operational adviser to Harwood Private Equity, an
investment entity of which Christopher Mills is Managing
Partner. The three Board members (other than Mr.
Contadini and Mr. Mills) consider that Mr. Contadini’s
decision-making on the EKF Board is driven by his relevant
industry experience which underpins his independence.
There is a majority of Board members unconnected to Mr.
Mills such that it functions in a balanced manner.
All Directors are subject to election by Shareholders at
the first Annual General Meeting after their appointment,
and are subject to re-election at least every three years.
Non-Executive Directors are appointed for a specific
term of office which provides for their removal in certain
circumstances, including under section 168 of the Companies
Act 2006. The Board does not automatically re-nominate
Non-Executive Directors for election by Shareholders. The
terms of appointment of the Non-Executive Directors can
be obtained by request to the Company Secretary.
The Board’s primary objective is to focus on adding value
to the assets of the Group by identifying and assessing
business opportunities and ensuring that potential risks are
identified, monitored and controlled. Matters reserved for
Board decisions include strategic long-term objectives and
capital structure of major transactions. The implementation
of Board decisions and day to day operations of the Group
are delegated to Management.
There is a division of responsibilities between the Non-
Executive Chairman, who is responsible for the overall
strategy of the Group and running the Board, and the CEO,
who is responsible for implementing the strategy and day
to day running of the Group. He is assisted by the Finance
Director and Chief Operating Officer.
The Board’s primary objective is to focus on adding value
to the assets of the Group by identifying and assessing
business opportunities and ensuring that potential risks are
identified, monitored and controlled. Matters reserved for
Board decisions include strategic long-term objectives and
capital structure of major transactions.
The implementation of Board decisions and day to day
operations of the Group are delegated to Management.
Board meetings
10 Board meetings were held during the year. The Directors’
attendance record during the year is as follows:
Christopher Mills (Non-Executive Chairman)
Julian Baines (Chief Executive Officer)
Richard Evans
(Chief Operating Officer and Finance Director)
Adam Reynolds (Non-Executive Director)
Carl Contadini (Non-Executive Director)
9
10
10
10
6
The Executive Directors work full time for the Group. The
Non-executive Directors are expected to devote at least
two days per month to the business of the Group, plus
additional days for committee meetings.
During the year the board has performed an evaluation of
their performance and that of the Chairman, as well as the
effectiveness of the Board committees. The Board intends
to develop further its evaluation of the performance of the
Board and Committees on an annual basis. The evaluation
will include board composition, experience, dynamics and
the board´s role and responsibilities for strategy, risk review
and succession planning. The evaluations will involve a
detailed questionnaire and individual discussions between
the Non-executive Chairman and the Directors. Being a
small listed company, the Board considers it unnecessary
to have evaluations facilitated by an external consultant.
Independent Director Adam Reynolds will conduct an
evaluation of the Non-executive Chairman´s performance
in conjunction with the other independent Director, Carl
Contadini and input from the two Executive Directors. The
outcome from these evaluations will be discussed by the
Board at one of its Board meetings.
The board evaluation covers areas including the makeup
of the board, the way that it conducts discussions and
takes decisions, the quality of board papers, the inputs
from Executive and Non-executive Directors, and the
effectiveness of board committees. In each case the
evaluation found that performance was satisfactory,
although some improvement was required in certain areas.
More details on corporate governance
including a
compliance statement can be found on the Company’s
website at www.ekfdiagnostics.com/investors.html.
Audit Committee
This comprises two Non-Executive Directors, Adam
Reynolds
(Chairman) and Christopher Mills. Adam
Reynolds is the Senior Independent Director and has
recent and relevant finance experience. The committee has
responsibility over the following:
• Recommend the appointment, re-appointment and
removal of the external auditors
• Ensure the objectivity and independence of the
auditors including occasions when non-audit
services are provided
• Ensure appropriate ‘whistle-blowing’ arrangements
are in place
• The Non-Executive Directors may seek information
from any employee of the Group and obtain external
professional advice at the expense of the Company
if considered necessary. Due to the relatively low
number of personnel employed within the Group,
the nature of the business and the current control
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2
22
Corporate Governance Statement (continuation)
for the year ended 31 December 2018
and review systems in place, the Board has decided
not to establish a separate internal audit department.
substantially separate issue is the subject of a separate
resolution and all Shareholders have the opportunity to put
questions to the Board at the Annual General Meeting.
The committee met once formally during 2018. There were
no significant matters communicated to the Committee
by the Auditors and no interaction with the Financial
Reporting Council.
Remuneration Committee
The Company has established a formal and transparent
procedure for developing policy on executive remuneration
and for fixing the remuneration packages of individual
in deciding his
Directors. No Director
own remuneration.
involved
is
The Chair(s) of the Audit and Remuneration Committees
normally attend the Annual General Meeting and will
answer questions which may be relevant to their work.
The Chairman advises the meeting of the details of proxy
votes cast on each of the individual resolutions after they
have been voted on in the meeting. The Chairman and
the Non-Executive Directors intend to maintain a good
and continuing understanding of the objectives and views
of the Shareholders.
Shareholders may contact the Company as follows:
The remuneration committee
is made up of Adam
Reynolds (Chairman), and Christopher Mills. The committee
considers the employment and performance of individual
Executive Directors and determines their terms of service
and remuneration. It also has authority to grant options
under the Company’s Executive Share Option Scheme.
Tel: 029 2071 0570
Fax: 029 20 705715
Email: investors@ekfdiagnostics.com
Corporate social responsibility
The Board recognises that the Group has a duty to be a
good corporate citizen and is conscious that its business
processes minimise harm to the environment, that it
contributes as far as is practicable to the local communities
in which it operates and takes a responsible and positive
approach to employment practices.
With effect from the financial year to 31 December 2016, the
Group became subject to the requirements of the Modern
Slavery Act 2015. The Group has published the required
statement on its website.
The Corporate Governance Statement was approved by
the Board on 13th March 2019 and signed on its behalf by:
Richard Evans
Finance Director and Chief Operating Officer
The Committee met once during 2018.
Board appointments
There is no formal Nominations Committee, the appointment
of new Directors being considered by the full Board.
Internal control
The Directors are responsible for ensuring that the Group
maintains a system of internal control to provide them with
reasonable assurance regarding the reliability of financial
information used within the business and for publication
and that the assets are safeguarded. There are inherent
limitations in any system of internal control and accordingly
even the most effective system can provide only reasonable,
but not absolute, assurance with respect to the preparation
of financial reporting and the safeguarding of assets.
The Group, in administering its business, has put in place
strict authorisation, approval and control levels within
which senior management operates. These controls
reflect the Group’s organisational structure and business
objectives. The control system includes clear lines of
accountability and covers all areas of the organisation.
The Board operates procedures which
include an
appropriate control environment through the definition of
the above organisation structure and authority levels and
the identification of the major business risks. The Group
has commenced a project to enhance and formalise its
internal controls including the establishment of a Risk
Steering Committee.
Internal financial reporting
The Directors are responsible
for establishing and
maintaining the Group’s system of internal reporting and
as such have put in place a framework of controls to ensure
that on-going financial performance is measured in a timely
and correct manner and that risks are identified as early as
is practicably possible. There is a comprehensive budgeting
system and monthly management accounts are prepared
which compare actual results against both the budget
and the previous year. They are reviewed and approved
by the Board and revised forecasts are prepared on a
regular basis.
Relations with shareholders
The Company reports to Shareholders twice a year. The
Company dispatches the notice of its Annual General
Meeting, together with a description of the items of special
business, at least 21 clear days before the meeting. Each
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 Report of the Remuneration Committee
for the year ended 31 December 2018
23
Statement of compliance
This report does not constitute a Directors’ Remuneration Report in accordance with the Directors’ Remuneration
Regulations 2007 which do not apply to the Company as it is not fully listed. This report sets out the Group policy on
Directors’ remuneration, including emoluments, benefits and other share-based awards made to each Director.
Policy on Executive Directors’ remuneration
Remuneration packages are designed to motivate and retain Executive Directors to ensure the continued development of
the Group and to reward them for enhancing value to shareholders. The main elements of the remuneration package for
Executive Directors are basic salary or fees, performance-related bonuses, benefits and share based incentives.
Directors’ remuneration - Audited
The remuneration of the Directors for the year ended 31 December 2018 is shown below:
Executive Directors
Julian Baines
Richard Evans
Non-Executive Directors
Christopher Mills
Carl Contadini
Adam Reynolds
Total fees and emoluments
Salary and
fees
£’000
Pension
£’000
Benefits in
kind
£’000
Bonus
£’000
2018
£’000
260
219
479
-
-
-
-
479
13
6
19
-
-
-
-
19
13
18
31
-
-
5
5
36
60
40
100
25
25
25
75
175
346
283
629
25
25
30
80
709
2017
£’000
832
727
1,559
50
101
54
205
1,764
Directors’ share options and Long-Term Incentive Plan
No director holds options under any share option plan.
On 2 June 2016 two Directors were granted a cash settled share-based incentive award. During 2017 both the maximum
and minimum amounts payable to each Director were reduced by £0.2m. The awards vest if a controlling interest in the
Company is acquired by a third party prior to a revised date of 30 June 2020. In these circumstances a minimum amount
of £0.3m is payable to each Director, which increases by reference to the sale price achieved. The fair value of this award
has been calculated at £3,464,000 using a modified form of a Black Scholes model. The fair value has been spread over
the assumed vesting period, with a charge of £775,000 (2017:£969,000) recognised in 2018. The key assumptions used
in the model are disclosed in Note 30.
Directors’ interests in the share capital of the Company are disclosed in the Directors’ Report on pages 18 and 19.
Approved by the Board on 13 March 2019 and signed on its behalf by:
Richard Evans
Finance Director and Chief Operating Officer
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 24
Report on the audit of the financial statements
for the year ended 31 December 2018
Opinion
In our opinion, EKF Diagnostics Holdings plc’s group financial statements and parent company financial statements (the
“financial statements”):
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018
and of the group’s profit and the group’s and the parent company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the parent company’s financial statements, as applied in accordance with
the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and
Company’s Statements of Financial Position as at 31 December 2018; the Consolidated Income Statement and Consolidated
Statement of Comprehensive Income, the Consolidated and Company’s Statements of Cash Flows, and the Consolidated
and Company’s Statements of Changes in Equity for the year then ended; and the notes to the financial statements, which
include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
• Overall group materiality: £425,000 (2017: £415,000), based on 1% of group revenues
for the year.
• Overall parent company materiality: £403,000 (2017: £394,000), based on a
component allocation of group materiality.
• We performed full-scope audit procedures in respect of the group’s largest trading
subsidiaries in the USA and in Germany, as well as EKF Diagnostics Holdings plc
in the UK.
• Our audit scope also included specified audit procedures in respect of Separation
Technologies Inc. in the USA.
• Our audit procedures covered entities contributing 90% of the group’s revenues for
the year ended 31 December 2018.
• Goodwill and intangible asset impairment assessments. (Group and parent).
• Share-based payment transactions. (Group and parent).
• Transactions associated with Renalytix AI Plc. (Group and parent).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in
all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there
was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2
Report on the audit of the financial statements (continuation)
for the year ended 31 December 2018
25
Key audit matter
How our audit addressed the key audit matter
Goodwill and intangible asset impairment assessments
(Group and parent)
At 31 December 2018, the Consolidated Statement of Financial
Position includes £41.8m of intangible assets (2017: £43.6m).
In accordance with the requirements of IFRS, management has
performed impairment reviews in relation to the goodwill held in
the group’s cash generating units (CGUs). The book values of the
intangible assets and goodwill are supported by multiple-year
profitability projections based on the budget for 2019.
Whilst sufficient headroom exists in respect of the impairment
reviews conducted,
is
particularly sensitive to changes in the forecast growth rate
assumptions, which are inherently uncertain.
the DiaSpect
impairment
review
The impairment reviews include significant estimates and
judgements in respect of future growth rates and cash flows, the
discount rate employed and profitability.
Share-based payment transactions
(Group and parent)
During 2016, two directors were awarded a cash-settled share-
based incentive, which will see a payment made if the Company
is acquired by a third party before 30 June 2020. The amount
payable under the award varies depending on the acquisition
price, subject to a minimum amount payable.
A senior employee has also been granted a cash settled share
based incentive award, which vests if a controlling interest in
the Company is acquired by a third party at any time while the
holder remains an employee.
The awards have been accounted for in accordance with IFRS
2 as cash-settled share based payments and the value of the
liability recognised as at 31 December 2018 is £2.55m (2017:
£1.72m). Management engaged an independent expert to value
the share-based awards and the movement in the fair value of
the year-end liability has been recognised in the Consolidated
Income Statement within the charge for share-based payments.
A number of assumptions have been made in valuing the awards,
including the expected date of an acquisition, share-price
volatility and the premium expected to be paid for acquiring
the Company’s shares. Disclosure in respect of these awards is
included in Note 30.
Transactions associated with Renalytix AI Plc
(Group and parent)
During October 2018, the Group disposed of intangible assets
with a carrying value of £0.6m to Renalytix AI Plc (“Renalytix”),
a Company the Group held an investment in as an asset held for
sale. The disposal was in exchange for 15.4m Renalytix shares.
Management used an independent expert to value these shares,
along with 5.5m shares in Renalytix that the group already held at
the time of the intangible asset sale. The valuation of the shares
reflected a number of associated risk factors and represented
a discount to the subsequent IPO price. A gain of £6.4m has
been recognised in respect of these items and is shown on the
Consolidated Income Statement as an exceptional item.
20.9m Renalytix shares were distributed to EKF shareholders in
October 2018 at a ratio of one Renalytix share for each 21.825
EKF shares held. This has been shown as a distribution in specie
within the Statements of Changes in Equity and, using the
same valuation approach, the distribution in specie has been
valued at £7.0m.
Renalytix listed on AIM in November 2018 and EKF acquired
4.79% of Renalytix’s share capital for £3.1m. This is shown in
investments at 31 December 2018.
We obtained the group’s cash flow forecasts supporting
its assessments and evaluated the appropriateness of key
assumptions, with a focus on DiaSpect, given the sensitivity to
changes in future growth rates. We assessed the methodology
used by management in performing the assessments and
evaluated key inputs including:
• the projected growth rates used, both over the short-
term to 2023 and over the longer-term;
• the discount rate used;
• other key inputs, including the applicable tax rate,
forecast capital expenditure and forecast margins.
We also considered 2018 financial performance vs. budget
and the performance in the first part of 2019. We performed a
range of sensitivity analyses to assess the impact of alternative
assumptions to those used by management.
We concur with management’s assertion that no impairment
charge is required in respect of goodwill and intangible assets
but identified that if management is unable achieve planned
results, this could reasonably be expected to give rise to an
impairment in the future. Management has disclosed the results
of sensitivity analyses in Note 17.
We obtained the valuation of the share-based
incentive
awards and evaluated the independence and objectivity of
management’s expert. We gained an understanding of and
evaluated the assumptions and methods that are significant
to the management’s expert’s work for their relevance
and reasonableness.
We challenged management in respect of the assumptions
made, including the expected exit date and expected share-
price volatility, and concluded that the assumptions made by
management are reasonable.
We concluded that the work of management’s expert is
appropriate and concur with management’s accounting for the
awards. We have also evaluated the explanatory disclosures
made in Note 30 to the Financial Statements.
We obtained the valuation of the Renalytix shares, which was
carried out by an independent valuations expert. We evaluated
the independence and objectivity of management’s expert.
We gained an understanding of and evaluated the inputs and
methods that are significant to the management’s expert’s work
for their relevance and reasonableness.
We have recalculated the exceptional gain recognised and
challenged the disclosures that management has made in
respect of the transactions in Note 29 to the financial statements
and within the critical accounting estimates and judgements
discussed in Note 4.
The valuation applied to the shares is inherently judgemental and
the adoption of alternative assumptions would result in changes
to values attributed to the exceptional gain and distribution
in specie.
We have tested the investment made by EKF in Renalytix upon
IPO to supporting documentation.
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2
26
Report on the audit of the financial statements (continuation)
for the year ended 31 December 2018
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group and the parent company, the accounting processes
and controls, and the industry in which they operate.
The group has two main manufacturing centres in Germany and the USA, in addition to the Head Office function based in
the United Kingdom (UK). The central finance and accounting team is located in the UK and is responsible for the financial
reporting of EKF Diagnostics Holdings plc.
Stanbio Laboratory (“Stanbio”) and EKF-diagnostic GmbH (“EKF Germany”) are assessed as financially significant
components of the group, given the significant revenue earned by the group in these entities. An audit of these entities’
financial information has been carried out. The audit of Stanbio was conducted by the group engagement team and
component auditors were engaged to audit EKF Germany. Full-scope audit procedures were performed for DiaSpect
Medical GmbH by the component audit team and the group audit team performed full-scope audit procedures for EKF
Diagnostics Holdings plc. The parent company audit was scoped in accordance with our parent company materiality.
Our audit scope also included specified audit procedures in respect of Separation Technologies Inc. (STI) in the USA, where
we designed audit procedures to gain coverage over certain financial statement line items. This work was performed by
the group engagement team. Our audit addressed components making up 90% of the Group’s 2018 revenues.
Where component auditors were engaged, we adopted procedures to ensure we were sufficiently involved in their audits.
This included discussions with component audit teams during the planning, fieldwork and reporting phases, the issuance
of comprehensive audit instructions and a review of key working papers.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
Group financial statements
Parent company financial statements
£425,000 (2017: £415,000).
£403,000 (2017: £394,000).
1% of group revenues.
Given the restructuring and refocusing
of the business on its core point-of-care
markets in recent years, growth is being
delivered organically, meaning revenues
remain a key focus for management and
the directors.
Limited to component allocation of group
materiality.
Since the materiality we would have
employed to this entity on a standalone
basis was in excess of the component
allocation, materiality was capped at the
component materiality allocation.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
The range of materiality allocated across components was between £100,000 and £403,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£21,000 (Group audit) (2017: £21,000) and £20,000 (Parent company audit) (2017: £19,000) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 Report on the audit of the financial statements (continuation)
for the year ended 31 December 2018
27
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s and parent company’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s
and parent company’s ability to continue as a going concern. For example, the terms on which the United Kingdom may
withdraw from the European Union, which is currently due to occur on 29 March 2019, are not clear, and it is difficult to
evaluate all of the potential implications on the group’s trade, customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures required by
the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also
to report certain opinions and matters as described below.
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Report of the Directors for the year ended 31 December 2018 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and parent company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic Report and Report of the Directors.
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2
28
Report on the audit of the financial statements (continuation)
for the year ended 31 December 2018
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the financial statements set out on
page 18, the directors are responsible for the preparation of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal
control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Jason Clarke (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Cardiff
13 March 2019
Annual Report 2018 | EKF Diagnostics Holdings plcCorporate Governance2 Consolidated Income Statement
for the year ended 31 December 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Other income
Operating profit
Depreciation and amortisation
Share-based payments
Exceptional items
EBITDA before exceptional items and share-based payments
Finance income
Finance costs
Profit before income tax
Income tax charge
Profit for the year
Profit attributable to:
Owners of the parent
Non-controlling interest
29
2017
£’000
41,584
(18,721)
22,863
(18,186)
52
4,729
(4,623)
(1,514)
1,562
9,304
53
(475)
4,307
(1,367)
2,940
2,715
225
2,940
Pence
0.59
0.58
2018
£’000
42,543
(19,847)
22,696
(10,586)
89
12,199
(3,991)
(939)
6,454
10,675
43
(77)
12,165
(1,866)
10,299
10,110
189
10,299
Pence
2.21
2.19
Notes
5
6
6
5
7
5
12
12
13
14
14
Earnings per Ordinary Share attributable to the owners of the parent during the year
From continuing operations
Basic
Diluted
The notes on pages 34 to 64 are an integral part of these consolidated financial statements.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 30
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2018
Profit for the year
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Other comprehensive gain/(loss) for the year
Total comprehensive gain for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive gain for the year
2018
£’000
10,299
1,383
1,383
11,682
11,526
156
11,682
2017
£’000
2,940
(622)
(622)
2,318
2,096
222
2,318
Items stated above are disclosed net of tax. The income tax relating to each component of other comprehensive income
is disclosed in note 13.
The notes on pages 34 to 64 are an integral part of these consolidated financial statements.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Consolidated and Company’s Statements of Financial Position
for the year ended 31 December 2018
31
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments
Trade and other receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity attributable to owners of the parent
Share capital
Other reserve
Foreign currency reserves
Retained earnings
Non-controlling interest
Total equity
Liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Deferred consideration
Current income tax liabilities
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
Group
2018
£’000
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
16
17
18
20
21
27
22
21
23
28
31
25
27
24
26
25
12,469
41,773
-
3,271
-
36
12,121
43,600
-
152
-
47
1,411
334
30,521
3,271
18,099
23
1,460
538
30,521
152
20,894
34
57,549
55,920
53,659
53,599
6,115
7,434
10,282
23,831
81,380
4,541
143
6,309
52,536
63,529
375
5,638
7,396
8,203
21,237
77,157
4,576
108
4,892
50,394
59,970
528
-
229
3,721
3,950
-
2,569
710
3,279
57,609
56,878
4,541
4,576
102
-
43,579
48,222
-
67
-
45,403
50,046
-
63,904
60,498
48,222
50,046
695
3,179
3,874
10,094
1,104
2,219
185
13,602
17,476
81,380
872
3,490
4,362
9,429
1,062
1,473
333
12,297
16,659
77,157
-
-
-
7,713
1,104
570
-
9,387
9,387
-
-
-
5,770
1,062
-
-
6,832
6,832
57,609
56,878
The notes on pages 34 to 64 are an integral part of these financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent
Company income statement. The profit for the Parent Company for the year was £6,143,000 (2017: loss of £1,741,000).
The financial statements were approved and authorised for issue by the Board on 13 March 2019 and signed on
its behalf by:
Julian Baines
Richard Evans
Chief Executive Officer
EKF Diagnostics Holdings plc
Registered no: 04347937
Finance Director and Chief Operating Officer
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 32
Consolidated and Company’s Statements of Cash Flows
for the year ended 31 December 2018
Cash flow from operating activities
Cash generated by operations
Interest paid
Income tax paid
Net cash generated by operating activities
Cash flow from investing activities
Purchase of investments
Purchase of property, plant and equipment (PPE)
Purchase of intangibles
Proceeds from sale of PPE
Interest received
Net cash used in investing activities
Cash flow from financing activities
Share based payments
Share buy back
Repayments on borrowings
Dividend payment to non-controlling interest
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gains/(losses) on cash and cash equivalents
Notes
34
34
Group
2018
£’000
9,861
(35)
(1,503)
8,323
(3,119)
(1,220)
(632)
-
43
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
7,048
4,270
10,118
(106)
(959)
9,053
-
(23)
7,025
-
(3,119)
(1,361)
(852)
128
53
(12)
-
-
17
(4,928)
(2,032)
(3,114)
(80)
-
(1,505)
-
(1,505)
(241)
(940)
(940)
(242)
(309)
1,904
8,203
175
(1,491)
(6,419)
(4,458)
(215)
602
7,874
(273)
8,203
-
-
(940)
2,971
710
40
3,721
(48)
(19)
4,203
-
(15)
(65)
-
-
(241)
(4,141)
-
(5,887)
(1,764)
2,567
(93)
710
Cash and cash equivalents at end of year
23
10,282
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Consolidated Statement of Changes in Equity
33
Share
capital
£’000
Share
premium
account
£’000
Other
reserves
£’000
Foreign
currency
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Total
£’000
Total
equity
£’000
4,643
95,393
41
5,609
(45,236)
60,450
521
60,971
Consolidated
At 1 January 2017
Comprehensive income
Profit for the year
Other comprehensive income
Currency translation differences
Total comprehensive (expense)/income
-
-
-
-
-
-
-
-
-
-
67
-
-
-
-
2,715
2,715
225
2,940
(717)
(717)
98
(619)
2,813
2,096
(3)
222
(622)
2,318
-
-
-
-
-
(3,121)
(3,121)
95,393
-
545
-
-
545
-
-
(215)
-
(3,121)
-
(215)
545
92,817
(2,576)
(215)
(2,791)
Transactions with owners
Proceeds from shares issued
(67)
Capital reconstruction
Dividends to non-controlling interest
Share-based payments
-
-
-
(95,393)
-
-
Total distributions to owners
(67)
(95,393)
67
At 31 December 2017 and
1 January 2018
4,576
Comprehensive income
Profit for the year
Other comprehensive income
Currency translation differences
Total comprehensive income
Transactions with owners
Share cancellation
Dividends to non-controlling interest
Distribution in specie
Total distributions to owners
At 31 December 2018
-
-
-
(35)
-
-
(35)
4,541
-
-
-
-
-
-
-
-
-
108
4,892
50,394
59,970
528
60,498
-
-
-
35
-
-
35
143
-
10,110
10,110
189
10,299
1,417
(1)
1,416
1,417
10,109
11,526
(33)
156
1,383
11,682
-
-
-
-
(940)
(940)
-
-
-
(309)
(940)
(309)
(7,027)
(7,027)
-
(7,027)
(7,967)
(7,967)
(309)
(8,276)
6,309
52,536
63,529
375
63,904
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 34
Company Statement of Changes in Equity
Company
At 1 January 2017
Comprehensive income
Loss for the year
Total comprehensive income/(expense)
Transactions with owners
Proceeds from shares issued
Capital reconstruction
Share-based payments
Share
capital
4,643
Share
premium
£’000
95,393
-
-
(67)
-
-
-
-
-
(95,393)
-
Total contributions by and distributions to owners
(67)
(95,393)
At 31 December 2017 and 1 January 2018
Comprehensive income
Profit for the year
Total comprehensive income
Transactions with owners
Share cancellation
Distribution in specie
Total contributions by and distributions to owners
At 31 December 2018
4,576
-
-
(35)
-
(35)
4,541
-
-
-
-
-
-
-
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
-
-
-
67
-
-
67
67
-
-
35
-
35
(45,673)
54,363
(1,741)
(1,741)
(1,741)
(1,741)
(3,121)
95,393
545
92,817
45,403
6,143
6,143
(940)
(7,027)
(7,967)
(3,121)
-
545
(2,576)
50,046
6,143
6,143
(940)
(7,027)
(7,967)
102
43,579
48,222
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements
for the year ended 31 December 2018
35
1. General information
EKF Diagnostics Holdings Plc is a company incorporated and domiciled in the United Kingdom. The Company is a public
limited company, which is listed on the AIM market of the London Stock Exchange. The address of the registered office is
Avon House, 19 Stanwell Road, Penarth, Cardiff CF64 2EZ.
The principal activity of the Group is the development, manufacture and supply of products and services into the in-vitro
diagnostic (IVD) market place. The Group has presence in the UK, USA, Germany, Russia, and China, and sells throughout
the world including Europe, the Middle East, the Americas, Asia, and Africa.
The financial statements are presented in British Pounds Sterling, the currency of the primary economic environment in
which the Company’s headquarters is operated. The Group comprises EKF Diagnostics Holdings plc and its subsidiary
Companies as set out in note 18.
The registered number of the Company is 04347937.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
The policies have been consistently applied throughout all years presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements of EKF Diagnostics Holdings plc have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRSs), IFRS IC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRS. Practice is continuing to evolve on the application and
interpretations of IFRS.
The consolidated financial statements have been prepared under the historical cost convention, as modified by the
revaluation of certain financial liabilities at fair value through profit and loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in note 4.
(a) New standards, amendments and interpretations adopted by the Group.
The following standards have been adopted by the Group for the first time for the financial year beginning on or after
1 January 2018. They do not materially impact on the Group results, and therefore no changes have been made to
comparative results:
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
•
•
• Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2
• Annual Improvements 2014-2016 cycle
• Transfers to Investment Property – Amendments to IAS 40
•
Interpretation 22 Foreign Currency Transactions and Advance Consideration
(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January
2018, and not early adopted.
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning
on or after 1 January 2018, and have not been applied in preparing these financial statements. None of these is expected to
have a significant effect on the financial statements of the group or parent company, except the following, set out below:
IFRS 16, ‘Leases’, addresses the definition of a lease, recognition and measurement of leases, and it establishes
•
principles for reporting useful information to users of financial statements about the leasing activities of both
lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on
balance sheet for lessees. The standard replaces IAS 17, ‘Leases’, and related interpretations. The standard
is effective for annual periods beginning on or after 1 January 2019, and earlier application is permitted, subject to
EU endorsement and the entity adopting IFRS 15, ‘Revenue from contracts with customers’, at the same time. Based
on existing operating leases under IAS 17, the directors estimate that, if IFRS 16 were implemented on 1 January
2018, additional land and buildings of £0.5m (1 January 2017: £0.5m), and vehicles and machinery of £0.2m (1
January 2017: £0.1m) would be recognised, together with an additional lease liability of £0.7m (1 January 2017:
£0.6m). In future periods, the operating lease charge would be replaced by a depreciation charge that, whilst
lower over the life of the lease than the current operating lease charge, is not expected to make a material
difference to profit, although adjusted EBITDA would have been higher in 2018 by £0.3m.
Going concern
The Group meets its day-to-day working capital requirements through the use of cash reserves and existing bank facilities.
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.
This included the review of internal budgets and financial results which show, taking into account reasonably probable
changes in financial performance, that the Group should be able to operate within the level of its current funding
arrangements.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3
36
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
The Directors believe that the Company and the Group have adequate resources to continue in operation for the foreseeable
future. For this reason they have adopted the going concern basis in the preparation of the financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings.
Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally
accompanying a shareholding of more than fifty per cent of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair
value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition
date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the
case of a bargain purchase, the difference is recognised directly in the income statement. Investments in subsidiaries are
accounted for at cost less impairment.
Inter-Company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The consolidated financial statements are
presented in British Pounds Sterling, which is the Company’s functional and presentational currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement within ‘administrative expenses’.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper- inflationary economy)
that have a functional currency different from the presentational currency are translated into the presentational currency
as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
income and expenses for each income statement are translated at average exchange rates; and
•
• all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken
to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were
recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Executive Directors who make strategic decisions. The information
used to assess performance is by geography as income statements by product are not available.
Government grants
Government grants receivable in connection with expenditure on property, plant and equipment are accounted for as
deferred income, which is credited to the income statement over the expected useful economic life of the related assets,
on a basis consistent with the depreciation policy. Revenue grants for the reimbursement of costs charged to the income
statement are credited to the Income Statement in the year in which the costs are incurred.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
37
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its
working condition for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only where
it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can
be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are
charged to the income statement during the financial period in which they are incurred. Any borrowing costs associated
with qualifying property plant and equipment are capitalised and depreciated at the rate applicable to that asset category.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method or reducing balances
method to allocate their cost to its residual values over their estimated useful lives, as follows
Buildings
Fixtures and fittings
Plant and machinery
Motor vehicles
2%–2.5%
20%–25%
20%–33.3%
25%
The assets’ residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each
reporting period.
An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are
recognised in administration expenses in the income statement.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary at the date of the acquisition. Goodwill on acquisitions of subsidiaries is included
in ‘intangible assets’. Goodwill has an infinite useful life and is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which
the goodwill arose, identified according to operating segment.
(b) Trademarks, trade names and licences
Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business
combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the
cost of trademarks and licences over their estimated useful lives of between 8 and 12 years and is charged to administrative
expenses in the income statement.
(c) Customer relationships
Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date.
The contractual customer relationships have a finite useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method over the expected life of the customer relationship of between 6
and 15 years and is charged to administrative expenses in the income statement.
(d) Trade secrets
Trade secrets, including technical know-how, operating procedures, methods and processes, acquired in a business
combination are recognised at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at
cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trade
secrets over their estimated useful lives of between 6 and 15 years and is charged to administrative expenses in the income
statement.
(e) Development costs
Development costs acquired in a business combination are recognised at fair value at the acquisition date. Development
costs have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the
straight-line method over their estimated useful lives of 15 years and is charged to administrative expenses in the income
statement.
Expenditure incurred on the development of new or substantially improved products or processes is capitalised, provided
that the related project satisfies the criteria for capitalisation, including the project’s technical feasibility and likely
commercial benefit. All other research and development costs are expensed as incurred.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 38
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
Development costs are amortised over the estimated useful life of the products with which they are associated, currently
4 to 5 years. Amortisation commences when a new product is in commercial production. The amortisation is charged to
administrative expenses in the income statement. The estimated remaining useful lives of development costs are reviewed
at least on an annual basis.
The carrying value of capitalised development costs is reviewed for potential impairment at least annually and if a product
becomes unviable and an impairment is identified the deferred development costs are immediately charged to the
income statement.
Impairment of non-financial assets
Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying
amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited
initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the
cash-generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit)
in the prior period. A reversal of an impairment loss is recognised in the income statement immediately. If goodwill is
impaired however, no reversal of the impairment is recognised in the financial statements.
Investments
Investments where the Group does not have a controlling interest are initially recognised at cost. The carrying value
is tested annually for impairment and an impairment loss is recognised for the amount by which the carrying amount
exceeds its recoverable amount.
Financial assets
Classification
The Company classifies its financial assets in the following categories: loans and receivables and financial assets at fair
value through profit or loss. The classification depends on the purpose for which the financial assets were acquired and
management determines the classification of its financial assets at initial recognition.
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for maturities greater than 12 months after the balance
sheet date. These are classified as non-current assets. The Company’s loans and receivables comprise ‘trade and other
receivables’ and cash and cash equivalents in the balance sheet.
(b) Financial assets at fair value through profit or loss
The Group classifies the following financial assets at fair value through profit or loss (FVPL):
• debt investments that do not qualify for measurement at either amortised cost or fair value through Other
Comprehensive Income
• equity investments that are held for trading, and
• equity investments for which the entity has not elected to recognise fair value gains and losses through Other
Comprehensive Income.
(c) Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income comprise equity securities that are not held for trading
and which the Group has irrevocably elected at initial recognition to recognise in this category. The Group considers this
category to be more relevant for assets of this type.
Inventories
Inventories and work in progress are stated at the lower of cost and net realisable value. Cost is calculated on a first in
and first out basis and includes raw materials, direct labour, other direct costs and attributable production overheads,
where appropriate. Net realisable value represents the estimated selling price less all estimated costs of completion
and applicable selling costs. Where necessary, provision is made for slow-moving and obsolete inventory. Inventory on
consignment and their related obligations are recognised in current assets and payables respectively.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
39
Trade and other receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. Other than in the case of certain intercompany receivables, they are generally due for settlement within 30
days and therefore are all classified as current. Trade receivables are initially recognised at fair value, being the original
invoice amount, and subsequently measured at amortised cost less provision for impairment. The group applies the IFRS
9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables. Trade receivables that are less than three months past due are not considered impaired unless there are
specific financial or commercial reasons that lead management to conclude that the customer will default. Older debts
are considered to be impaired unless there is sufficient evidence to the contrary that they will be settled. The amount
of the provision is the difference between the asset’s carrying value and the present value of the estimated future cash
flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the
loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it is
written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against
administrative expenses in the income statement.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short- term deposits with an
original maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other
cash balances.
For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term
deposits as defined above net of outstanding bank overdrafts where there is a right of offset.
Share capital
Ordinary Shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share
premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary
Shares or options are deducted from the share premium account.
Where Ordinary Shares are acquired for cash and then cancelled, the nominal value of shares is deducted from the value
of equity and credited to the Capital Redemption reserve. The amount paid is debited to reserves.
Financial liabilities
Debt is measured at fair value, being net proceeds after deduction of directly attributable issue costs, with subsequent
measurement at amortised cost with the exception of deferred equity consideration which is categorised as a financial
liability at fair value through profit and loss. Debt issue costs are recognised in the income statement over the expected
term of such instruments at a constant rate on the carrying amount.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business
from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the
normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are
recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings are recognised initially at the fair value of proceeds received, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least 12 months after the balance sheet date.
Borrowing costs are expensed in the consolidated Group income statement under the heading ‘finance costs’.
Arrangement and facility fees together with bank charges are charged to the income statement under the heading
‘administrative expenses’.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent
that it relates to items recognised in other comprehensive income where the associated tax is also recognised in other
comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income.
Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred tax is recognised, using the liability method, on all temporary differences at the balance sheet date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are
recognised in respect of all temporary differences except where the deferred tax liability arises from the initial recognition
of goodwill in business combinations.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax
losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of
available evidence, there will be sufficient taxable profits against which the future reversal of the underlying temporary
differences can be deducted.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 40
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance
sheet date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the
same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.
Provisions
Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of a
past event and it is probable that an outflow of resources will be required to settle the obligation and the amount can be
reliably measured.
Leases
Leases which transfer substantially all the risks and rewards of ownership of an asset are treated as a finance lease. Assets
held under finance leases are capitalised at their fair value at the inception of the lease and depreciated over the estimated
useful economic life of the asset or lease term if shorter. The finance charges are allocated to the income statement in
proportion to the capital amount outstanding.
All other leases are classified as operating leases. Operating lease rentals are charged to the income statement in equal
annual amounts over the lease term.
Deferred consideration
Deferred consideration is recognised at fair value. Where the value of deferred consideration is based on a future event,
management estimate the likelihood of the consideration becoming payable. Deferred consideration is discounted to take
account of the time value of money at rates based on those used for the valuation of related intangible assets.
Employee benefits
(a) Pension obligations
Group companies operate various pension schemes all of which are defined contribution plans. A defined contribution plan
is a pension plan under which the Group pays fixed contributions into a separate entity with the pension cost charged to
the income statement as incurred. The Group has no further obligations once the contributions have been paid.
(b) Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans, under which the Group receives services
from employees and others as consideration for equity instruments of the Group. Equity-settled share-based payments are
measured at fair value at the date of grant and are expensed over the vesting period based on the number of instruments
that are expected to vest. For plans where vesting conditions are based on share price targets, the fair value at the date of
grant reflects these conditions. Where applicable the Group recognises the impact of revisions to original estimates in the
income statement, with a corresponding adjustment to equity for equity- settled schemes. Fair values are measured using
appropriate valuation models, taking into account the terms and conditions of the awards.
When the share-based payment awards are exercised, the Company issues new shares. The proceeds received net of any
directly attributable transaction costs are credited to share capital (nominal value) and share premium.
The Group operates a cash-settled compensation plan for certain senior employees. Cash-settled share-based payments
are measured at fair value at each reporting date and are expensed over the expected vesting period. The fair value
amount is recognised in liabilities.
National insurance on share options
To the extent that the share price at the balance sheet date is greater than the exercise price on options granted under
unapproved share-based payment compensation schemes, provision for any National Insurance Contributions has been
based on the prevailing rate of National Insurance. The provision is accrued over the performance period attaching
to the award.
Revenue recognition
Revenue is accounted for in accordance with the principles of IFRS 15, which has been applied as follows:
(a) Sale of goods
Revenue for the sale of medical diagnostic instruments and reagents is measured at the fair value of the consideration
received or receivable and represents the invoiced value for the sale of the goods net of sales taxes, rebates and discounts.
Revenue from the sale of goods is recognised when control of the products has transferred which is when a Group
Company has delivered products to the customer, the customer has accepted delivery of the products and collectability
of the related receivables is reasonably assured. A receivable is recognised when the goods are delivered as this is the
point in time that the consideration is unconditional because only the passage of time is required before the payment is
due. Where contracts contain multiple deliverables, and the volume of each deliverable can be determined with reasonable
certainty, then the transaction price will be allocated to each performance obligation based on the expected cost
of each item.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
41
(b) Sale of services
Revenue for the sale of services is measured at the fair value of the consideration received or receivable and represents
the invoiced value for the sale of the services net of sales taxes, rebates and discounts. Revenue from the sale of services is
recognised when a Group Company has completed the services and collectability of the related receivables is reasonably
assured.
(c) Royalty and licence income
Royalty and licence income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to that asset’s net carrying amount.
Dividend distribution
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the
period in which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
Distributions in specie are recognised at the fair value of the assets distributed.
Other income
Other income includes grant income and R & D tax credits passed through income where this is permitted by the relevant
jurisdiction.
Exceptional items
These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one off
items relating to business combinations, such as acquisition expenses.
3. Financial risk management
Financial risk factors
The Group and Company’s activities expose it to a variety of financial risks: market risk (foreign exchange risk and cash
flow interest rate risk), credit risk, liquidity risk, capital risk and fair value risk. The Group and Company’s overall risk
management programme focuses on the unpredictability of the financial markets and seeks to minimise the potential
adverse effects on the Group and Company’s financial performance. The Group and Company do not use derivative
financial instruments to hedge risk exposures.
Risk management is carried out by the head office finance team. It evaluates and mitigates financial risks in close co-
operation with the Group’s operating units. The Board provides principles for overall risk management whilst the head
office finance team provides specific policy guidance for the operating units in terms of managing foreign exchange risk,
credit risk and cash and liquidity management.
(a) Market risk
(i) Foreign exchange – cash flow risk
The Group and Company’s presentational currency is sterling although the Group operates internationally and is exposed
to foreign exchange risk arising from various currency exposures, primarily between GBP, USD, the Euro, and Rouble, such
that the Group’s cash flows are affected by fluctuations in the rate of exchange between GBP and the aforementioned
foreign currencies.
This exposure is managed by a natural currency hedge as the Group’s operating subsidiaries cost base is also denominated
in USDs, Euros, and Roubles, as the Group has subsidiary businesses located in the USA, Germany, and Russia.
Management do not use derivative financial instruments to mitigate the impact of any residual foreign currency exposure
not mitigated by the natural hedge within the business model. The Group and Company do not speculate in foreign
currencies and no operating Company is permitted to take unmatched positions in any foreign currency.
(ii) Foreign exchange – Fair value risk
Translation exposures that arise on converting the results of overseas subsidiaries are not hedged. Net assets held in
foreign currencies are hedged wherever practical by matching borrowings in the same currency. The principal exchange
rates used by the Group and Company in translating overseas profits and net assets into GBP are set out in the table below.
Rate compared to GBP
Euro
Russian Rouble
US Dollar
Average rate
2018
Average rate
2017
Year end rate
2018
Year end rate
2017
1.129
83.197
1.332
1.145
75.689
1.295
1.114
88.514
1.276
1.125
77.963
1.350
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 42
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
As a guide to the sensitivity of the Group’s results to movements in foreign currency exchange rates, a one cent movement
in the Euro and US Dollars to Sterling rate would impact annual earnings by approximately £55,000 (2017: £45,000) and
£73,000 (2017: £73,000) respectively. The Company’s results are not sensitive to changes in exchange rates.
(iii) Cash flow and fair value interest rate risk
The Group has interest-bearing assets in the form of cash and cash equivalents and interest- bearing liabilities which relate
to borrowings and finance lease obligations mainly in the Group’s German subsidiary. Interest rates on cash and cash
equivalents are floating whilst interest rates on certain borrowings have been fixed and therefore expose the Group to fair
value interest rate risk. The Group and Company do not speculate on future changes in interest rates.
Where overseas acquisitions are made, it is the Group’s policy to arrange any borrowings required in local currency.
It is the Group and Company’s policy not to trade in financial instruments. The Group and Company do not use interest
rate swaps.
(b) Credit risk
Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary
and operating business unit is responsible for managing and analysing the credit risk for each of their new clients before
standard payment and delivery terms and conditions are offered. It is the Group and Company policy to obtain deposits
or require payment in advance from customers where possible, particularly overseas customers. In addition if possible
the Group will seek confirmed letters of credit for the balances due. Credit risk is managed at the operating business
unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent rating, local
management assesses the credit quality of the customer, taking into account its financial position, past experience and
other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board.
The utilisation of credit limits is regularly monitored. Where extended credit is granted, this is agreed by the Finance
Director. Credit insurance is taken out where appropriate and cost effective.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers.
(c) Liquidity risk
Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance.
Group finance monitors cash and cash flow forecasts and it is the Group and Company’s liquidity risk management policy
to maintain sufficient cash and available funding through an adequate amount of cash and cash equivalents and committed
credit facilities from its bankers. Due to the dynamic nature of the underlying businesses, the head office finance team aims
to maintain flexibility in funding by keeping sufficient cash and cash equivalents available to fund the requirements of the
Group and Company.
The Group’s policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained
in each of its territory subsidiaries to support short and medium-term operational plans. Where necessary, short-term
funding is provided by the holding company. In the UK, the management of liquid funds in excess of operational needs
are controlled centrally. Typically excess funds are placed as short-term deposits, to provide a balance between interest
earnings and flexibility, where the benefit outweighs the administrative cost.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Rate compared to GBP
At 31 December 2018:
Borrowings (inc. finance leases)
Deferred consideration
Trade and other payables
At 31 December 2017:
Borrowings (inc. finance leases)
Deferred consideration
Trade and other payables
Less than
one year
£’000
Between 1 and
2 years
£’000
Between 2 and
5 years
£’000
More than
5 years
£’000
185
1,104
8,591
188
1,062
9,792
185
-
-
193
-
-
510
-
-
599
-
-
-
-
-
154
-
-
Total
£’000
880
1,104
8,591
1,134
1,062
9,792
The maturity of the Company’s non-derivative financial liabilities is all less than one year.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
43
(d) Capital risk management
The Group and Company’s objectives when managing capital are to safeguard the ability to continue as a going concern in
order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
The Group and Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by
total capital. Net debt is calculated as total borrowings (including “current and non- current borrowings” as shown in the
consolidated balance sheet) less cash and cash equivalents. Total capital is the sum of net debt plus equity.
(e) Fair value estimation
The Group and Company have no Level 1, 2 or 3 classified financial assets as at 31 December 2018 (2017: none).
4. Critical accounting estimates and judgements
In the process of applying the Group’s accounting policies, management has made accounting judgements in the
determination of the carrying value of certain assets and liabilities. Due to the inherent uncertainty involved in making
assumptions and estimates, actual outcomes will differ from those assumptions and estimates. The following judgements
have the most significant effect on the amounts recognised in the financial statements.
(a) Legal disputes
A dispute has arisen between EKF-diagnostic GmbH and a distributor involving disputed invoices from the distributor,
relating mainly to the period prior to the acquisition of the company by the Group. The dispute is not covered by any
outstanding warranty from the former owner. Earlier litigation in the UK has been settled in EKF’s favour, however litigation
in Germany is continuing. Having taken legal advice the Directors believe that no settlement provision is required in
relation to this dispute, however an accrual for legal costs has been set.
A dispute with a customer in the USA is likely to go to arbitration. The Group has taken a provision against the outstanding
debtor, and an accrual for legal costs, however the Directors do not believe any additional settlement provision is required.
(b) Impairment of goodwill and intangible assets
The Group tests annually whether goodwill and other intangible assets have suffered any impairment, in accordance with
the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of estimates as set out in note 17.
(c) Share-based payments
A number of accounting estimates and judgements are incorporated within the calculation of the charge to the income
statement in respect of share-based payments. These are described in more detail in note 30.
(d) Renalytix AI plc
The Group has calculated a fair value for the Renalytix AI plc shares distributed to Relevant EKF shareholders. The fair
value of the shares was calculated based on the proposed flotation price, less a discount to account for the restrictions
placed on the shares. The discount, which is an estimate, was calculated taking into account, amongst other factors, the
180 day lock up period, sector volatility, and that the shares were issued pre-admission.. An external valuer was used.
Further details are provided in note 29.
5. Segmental reporting
Management has determined the Group’s operating segments based on the monthly management reports presented to
the Chief Operating Decision Maker (‘CODM’). The CODM is the Executive Directors and the monthly management reports
are used by the Group to make strategic decisions and allocate resources.
The principal activity of the Group is the design, development, manufacture and sale of diagnostic instruments, reagents
and certain ancillary products, as well as central laboratory reagents. This activity takes place across various countries,
such as the USA, Germany, Russia, and the United Kingdom, and as such the Board considers the business primarily from a
geographic perspective. Although not all the segments meet the quantitative thresholds required by IFRS 8, management
has concluded that all segments should be maintained and reported.
The reportable segments derive their revenue primarily from the manufacture and sale of medical diagnostic equipment
and reagents. Other services include the servicing and distribution of third party company products under separate
distribution agreements.
Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 44
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
5. Segmental reporting continued
The segment information provided to the Board for the reportable segments for the year ended 31 December 2018 is as
follows:
Germany
£’000
USA
£’000
Russia
£’000
Other
£’000
Total
£’000
2018
Income statement
Revenue
Inter-segment
External revenue
Adjusted EBITDA*
Exceptional items (Note 7)
Share-based payments (Note 30)
EBITDA
Depreciation
Amortisation
Operating profit
Net finance costs
Income tax
Retained profit
Segment assets
Operating assets
Inter-segment assets
External operating assets
Cash
Total assets
Segment liabilities
Operating liabilities
Inter-segment liabilities
External operating liabilities
Borrowings
Total liabilities
Other segmental information
Non-current assets – PPE
Non-current assets – Intangibles
PPE – additions
Intangible assets – additions
23,478
-
23,478
2,687
-
2,687
5
-
5
7,824
762
(4,202)
21,937
(5,564)
16,373
6,291
(580)
-
5,711
(847)
(2,137)
2,727
(24)
(327)
2,376
38,933
(99)
38,834
2,980
41,814
97
-
7,921
(271)
(1,096)
6,554
-
(1,064)
5,490
25,849
-
25,849
2,749
28,598
10,167
17,008
(5,000)
(12,093)
5,167
880
6,047
6,204
27,026
501
506
4,915
-
4,915
4,779
13,638
659
126
48,107
(5,564)
42,543
10,675
6,454
(939)
16,190
(1,158)
(2,833)
12,199
(34)
(1,866)
10,299
6,937
(939)
1,796
(16)
413
2,193
(25)
(305)
1,863
35,101
100,346
(29,149)
(29,248)
5,952
3,855
9,807
18,540
(12,155)
6,385
-
6,385
1,413
1,018
13
-
71,098
10,282
81,380
45,844
(29,248)
16,596
880
17,476
12,469
41,773
1,220
632
-
-
762
(24)
(13)
725
15
(170)
570
463
-
463
698
1,161
129
-
129
-
129
73
91
47
-
* Adjusted EBITDA excludes exceptional items and share-based payments.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
5. Segmental reporting (continued)
45
Germany
£’000
USA
£’000
Russia
£’000
Other
£’000
Total
£’000
2017
Income statement
Revenue
Inter-segment
External revenue
Adjusted EBITDA*
Exceptional items (Note 7)
Share-based payments (Note 30)
EBITDA
Depreciation
Amortisation
Operating profit
Net finance costs
Income tax
Retained profit
Segment assets
Operating assets
Inter-segment assets
External operating assets
Cash
Total assets
Segment liabilities
Operating liabilities
Inter-segment liabilities
External operating liabilities
Borrowings
Total liabilities
Other segmental information
Non-current assets – PPE
Non-current assets – Intangibles
PPE – additions
Intangible assets – additions
22,856
-
22,856
2,742
-
2,742
4
-
4
7,730
686
(4,995)
21,006
(5,024)
15,982
5,883
(207)
-
5,676
(808)
(2,673)
2,195
(48)
476
2,623
19
-
7,749
(300)
(1,036)
6,413
14
(1,322)
5,105
40,959
24,219
(168)
40,791
3,118
43,909
-
24,219
3,376
27,595
13,543
20,467
(8,294)
(14,990)
5,249
1,056
6,305
6,443
28,461
1,033
293
5,477
-
5,477
4,164
13,638
290
484
46,608
(5,024)
41,584
9,304
1,562
(1,514)
9,352
(1,160)
(3,463)
4,729
(422)
(1,367)
2,940
1,750
(1,514)
(4,759)
(22)
274
(4,507)
(425)
(344)
(5,276)
26,363
92,114
(22,992)
(23,160)
3,371
715
4,086
4,472
124
4,596
149
4,745
1,461
1,382
15
75
68,954
8,203
77,157
38,614
(23,160)
15,454
1,205
16,659
12,121
43,600
1,361
852
-
-
686
(30)
(28)
628
37
(177)
488
573
-
573
994
1,567
132
-
132
-
132
53
119
23
-
* Adjusted EBITDA excludes exceptional items and share-based payments.
‘Other’ primarily relates to the holding company and head office costs. Poland is included in Germany as a result of the
closure of the Polish operations during the year.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 46
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
5. Segmental reporting (continued)
Disclosure of Group revenues by geographic location of customer is as follows:
Americas
United States of America
Rest of Americas
Europe, Middle East and Africa (EMEA)
Germany
United Kingdom
Rest of Europe
Russia
Middle East
Africa
Asia and Rest of World
China
Rest of Asia
New Zealand/Australia
Total revenue
2018
£’000
18,253
3,925
6,208
324
3,583
2,687
1,467
1,229
994
3,751
122
42,543
No single external customer represented more than 10% of revenues in either 2018 or 2017.
6. Expenses – analysis by nature
Disclosure of Group revenues by geographic location of customer is as follows:
Inventories consumed in cost of sales
Employee benefit expense (note 10)
Employee costs capitalised as intangible assets
Depreciation and amortisation
Exceptional items (note 7)
Research and development expenses
Foreign exchange
Operating lease payments
Other expenses
Total cost of sales and administrative expenses
Included within the above expenses are exceptional items as set out in note 7.
2018
£’000
9,484
16,457
(359)
3,991
(6,454)
1,644
(83)
487
5,266
30,433
2017
£’000
17,174
3,195
6,016
300
3,423
2,743
2,912
1,611
915
3,168
127
41,584
2017
£’000
7,848
17,005
(364)
4,623
(1,562)
2,203
239
480
6,435
36,907
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
7. Exceptional items
Included within administrative expenses are exceptional items as shown below:
– Warranty claim
– Business reorganisation costs
– Cancellation of shares
– A Webb loan
– Net receipt from legal action
– Renalytix
Exceptional items
47
Note
a
b
c
d
e
f
2018
£’000
31
(120)
-
90
97
6,356
6,454
2017
£’000
339
(183)
1,406
-
-
-
1,562
a. Estimated warranty claim in relation to the acquisition of EKF-diagnostic GmbH increased because of higher
share price.
b. Restructuring costs, mainly redundancy and notice costs, associated in 2018 with the closure of EKF’s Polish
facility and other restructuring activities.
c. Fair value of shares released to EKF by former shareholders of Selah Genomics Inc. which had been issued as part
of the consideration for the acquisition of Selah, but held in escrow. These shares were subsequently
been cancelled.
d. Following settlement with Mr A Webb, the balance of the loan made by him in relation to the molecular diagnostic
business has been written back.
e. Receipt from legal action against a customer net of legal costs.
f. The net profit made by the Group in relation to the Renalytix transaction. Full details are given in note 29.
8. Auditor remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor
and its associates:
Fees payable to Company’s auditor and its associates for the audit of the parent Company and
consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
– The audit of Company’s subsidiaries
– Other services
– Tax compliance services
9. Directors’ emoluments
2018
£’000
32
70
36
12
150
2017
£’000
28
69
23
11
131
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor
and its associates:
Aggregate emoluments
Share based payments
Contribution to defined contribution pension scheme
2018
£’000
690
775
19
1,484
2017
£’000
1,745
969
19
2,733
Retirement benefits are accruing to 2 (2017: 2) current directors under a defined contribution scheme. See further
disclosures within the Remuneration Report on page 23. The highest paid director received aggregate emoluments,
including the effect of the share based payments charge, of £734,000 (2017: £1,317,000).
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3
48
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
10. Employee benefit expense
Wages and salaries
Social security costs
Share based payments granted to Directors and senior
management (Note 30)
Other pension costs (Note 32)
Group
2018
£’000
13,332
1,979
939
207
Group
2017
£’000
13,304
2,019
1,514
168
Company
2018
£’000
Company
2017
£’000
1,919
149
939
45
2,177
240
1,514
45
3,976
Employee costs of £0.4m (2017: £0.4m) have been capitalised as part of development costs in the Group.
11. Monthly average number of people employed
16,457
17,005
3,052
Monthly average number of people (including Executive Directors)
employed was:
Administration
Research and development
Sales and marketing
Manufacturing, production and after sales
Group
2018
£’000
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
54
18
60
159
291
54
17
61
160
292
10
3
6
1
20
10
4
3
-
17
The total number of employees (FTEs) in the Group at 31 December 2018 was 300 (2017: 296), and in the Company
was 20 (2017: 17).
12. Finance income and costs
Finance costs:
– Bank borrowings
– Other interest
– Financial liabilities at fair value through profit or loss
Finance costs
Finance income
– Interest income on cash and short-term deposits
– Other interest
Finance income
Net finance costs
2018
£’000
2017
£’000
25
10
42
77
9
34
43
34
83
23
369
475
14
39
53
422
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
49
13. Income tax
Group
Current tax:
Current tax on profit/ the year
Adjustments for prior periods
Total current tax
Deferred tax (note 27):
Origination and reversal of temporary differences
Total deferred tax
Income tax charge
2018
£’000
2,248
5
2,253
(387)
(387)
1,866
2017
£’000
2,045
(100)
1,945
(578)
(578)
1,367
The Finance Act 2015 which was substantively enacted in 2015 included legislation to reduce the main rate of UK
corporation tax to 19% from 1 April 2017 and the Finance Act 2016 which was substantively enacted in 2016 included
legislation to reduce the main rate of UK corporation tax to 17% from 1 April 2020.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the standard tax rate
applicable to the profits of the consolidated entities as follows:
Profit before tax
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19% (2017: 19.25%)
Tax effects of:
– Expenses not deductible for tax purposes
– Remeasurement of deferred tax – change in future tax rate
– Income not subject to tax
– Utilisation of losses
– Adjustment in respect of prior years
– Impact of different tax rates in other jurisdictions
– Other movements
Tax charge
There are no tax effects on the items in the statement of other comprehensive income.
2018
£’000
12,165
2,311
297
(19)
(238)
(1,069)
106
277
201
1,866
2017
£’000
4,307
829
31
(360)
267
(178)
(100)
634
244
1,367
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 50
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
14. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average
number of Ordinary Shares in issue during the year.
Profit attributable to owners of the parent
Weighted average number of Ordinary Shares in issue
Basic profit per share
(b) Diluted
2018
£’000
10,110
2017
£’000
2,715
457,207,272
463,098,526
2.21 pence
0.59 pence
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding
assuming conversion of all dilutive potential Ordinary Shares. The Company has one category of dilutive potential
ordinary shares being share options.
Profit attributable to owners of the parent
Weighted average number of Ordinary Shares in issue
2018
£’000
10,110
2017
£’000
2,715
461,489,617
469,343,547
Diluted profit per share
2.19 pence
0.58 pence
Weighted average number of Ordinary Shares in issue
Adjustment for:
– Assumed conversion of share awards
– Assumed payment of equity deferred consideration
2018
2017
457,207,272
463,098,526
238,405
2,201,081
4,043,940
4,043,940
Weighted average number of Ordinary Shares including potentially dilutive shares
461,489,617
469,343,547
15. Dividends
On 24th October 2018 the Company made a distribution in specie whereby the Company’s shareholding in Renalytix AI
plc, a developer of artificial intelligence enabled diagnostics for kidney disease, which has been floated separately from
the Group, was distributed to ordinary shareholders of the Company. The rate was one Renalytix AI plc share for each
21.825 shares held in the company at a total value of £7,027,000 (2017: nil). The fair value per EKF share is 1.5357p, which
has been calculated based on the market value of the Renalytix shares prior to the completion of the fundraising and their
flotation on the AIM market, less a discount to account for the restrictions placed on the shares.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
16. Property, plant and equipment
51
Group
Cost
At 1 January 2017
Additions
Exchange differences
Disposals
At 31 December 2017
Accumulated depreciation
At 1 January 2017
Charge for the year
Exchange differences
Disposals
At 31 December 2017
Net book value at 31 December 2017
Cost
At 1 January 2018
Additions
Exchange differences
Disposals
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Charge for the year
Exchange differences
Disposals
At 31 December 2018
Net book value at 31 December 2018
Land and
buildings
£’000
Fixtures &
fittings
£’000
Plant and
machinery
£’000
Motor
vehicles
£’000
9,829
197
(265)
(106)
9,655
1,107
278
(54)
(61)
1,270
8,385
9,655
50
285
-
9,990
1,270
275
51
-
1,596
8,394
1,140
136
(39)
(19)
1,218
783
181
(17)
(19)
928
290
1,218
125
34
(4)
1,373
928
155
24
(4)
1,103
270
8,688
1,006
243
(267)
9,670
5,710
672
117
(226)
6,273
3,397
9,670
998
166
(55)
10,779
6,273
706
107
(42)
7,044
3,735
142
22
(2)
(23)
139
75
29
-
(14)
90
49
139
47
(16)
-
170
90
22
(12)
-
100
70
Total
£’000
19,799
1,361
(63)
(415)
20,682
7,675
1,160
46
(320)
8,561
12,121
20,682
1,220
469
(59)
22,312
8,561
1,158
170
(46)
9,843
12,469
Depreciation expense of £768,000 (2017: £733,000) has been charged to cost of sales and £390,000 (2017: £427,000)
has been charged to administrative expenses.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 52
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
16. Property, plant and equipment (continued)
Company
Cost
At 1 January 2017
Additions
At 31 December 2017
Accumulated depreciation
At 1 January 2017
Charge for the year
At 31 December 2017
Land and
buildings
£’000
Fixtures &
fittings
£’000
1,673
-
1,673
203
40
243
115
15
130
75
25
100
Total
£’000
1,788
15
1,803
278
65
343
Net book value at 31 December 2017
1,430
30
1,460
Cost
At 1 January 2018
Additions
At 31 December 2018
Accumulated depreciation
At 1 January 2018
Charge for the year
At 31 December 2018
1,673
-
1,673
243
40
283
130
12
142
100
21
121
1,803
12
1,815
343
61
404
Net book value at 31 December 2018
1,390
21
1,411
The Company’s freehold property is in Germany and occupied by its subsidiary undertaking, EKF- diagnostic GmbH. EKF-
diagnostic GmbH is paying rental income of €13,900 (£12,480) per month to the parent Company. €167,000 (£149,760)
(2017: €167,000 (£148,400)) was paid to the parent Company for the year.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
53
17. Intangible assets
Group
Cost
At 1 January 2017
Additions
Elimination
Exchange differences
At 31 December 2017
Accumulated amortisation
At 1 January 2017
Exchange differences
Charge for the year
Elimination
Impairment
At 31 December 2017
Net book value at 31 December 2017
Cost
At 1 January 2018
Additions
Disposals
Exchange differences
At 31 December 2018
Accumulated amortisation
At 1 January 2018
Exchange differences
Charge for the year
At 31 December 2018
Net book value at 31 December 2018
Non-
compete
agreements
£’000
Goodwill
£’000
Trademarks,
trade name
and
licences
£’000
Customer
relationships
£’000
Trade
secrets
£’000
Development
costs
£’000
Total
£’000
70
-
(70)
-
-
70
-
-
(70)
-
-
-
-
-
-
-
-
-
-
-
-
-
27,037
3,052
16,376
18,625
8,785
73,945
-
-
(38)
135
-
(18)
26,999
3,169
2,228
1,897
42
-
-
333
2,603
4
273
-
-
-
-
(655)
15,721
6,817
(246)
1,310
-
-
-
-
362
717
(434)
142
852
(504)
(207)
18,987
9,210
74,086
10,594
5,836
27,442
161
917
-
-
124
356
(434)
274
85
2,856
(504)
607
2,174
7,881
11,672
6,156
30,486
24,396
995
7,840
7,315
3,054
43,600
26,999
3,169
15,721
18,987
-
-
544
73
-
15
-
-
573
-
-
172
9,210
559
(646)
239
74,086
632
(646)
1,543
27,543
3,257
16,294
19,159
9,362
75,615
2,603
28
-
2,174
(18)
340
7,881
262
1,346
11,672
6,156
30,486
91
928
160
219
523
2,833
2,631
2,496
9,489
12,691
6,535
33,842
24,912
761
6,805
6,468
2,827
41,773
Amortisation charge of £63,000 (2017: £49,000) has been charged to cost of sales and £2,770,000 (2017: £2,807,000)
has been charged to administrative expenses in the income statement (net of the profit on the sale of intangible assets)
Goodwill is allocated to the Group’s cash–generating units (CGU’s) identified according to geographic operating segment.
An operating segment-level summary of the goodwill allocation is presented below.
Germany
Russia
USA
Total
2018
£’000
17,742
88
7,082
24,912
2017
£’000
17,602
100
6,694
24,396
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 54
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
Germany includes EKF-Diagnostic, Senslab, and DiaSpect, while the USA includes Stanbio and STI.
Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2018
was assessed on the basis of value in use. The assessed value exceeded the carrying value and no impairment loss
was recognised.
The key assumptions in the calculation to assess value in use are future revenues and the ability to generate future
cash flows. The most recent financial results and initial budgets approved by the Board for the next year were used and
forecasts for a further four years, followed by an extrapolation of expected cash flows at a constant growth rate for each
unit and the calculation of a terminal value based upon the longer term growth rates set out below. The projected results
were discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the cash-generating units. The discount rates applied reflect a risk-adjusted
weighted average cost of capital.
The key assumptions used in 2018 for the value in use calculations of cash generating units with significant goodwill
are as follows:
Longer-term growth rate
Discount rate
EKF
Germany
%
3
10
DiaSpect
%
Stanbio
%
2
10
3
10
STI
%
3
10
The discount rate used is based on a common risk profile across the Group.
The impairment assessments for EKF Germany, Russia, Stanbio, and STI showed assessed values that exceeded the
carrying values with significant headroom.
For DiaSpect, the impairment assessment has been carried out over a 5 year period with a terminal value based on the
long-term growth rate. The Directors estimate that growth rates in the 5 year period from the DiaSpect products will be
high because they are relatively new products that will bring market benefits, which have recently received approval for
sale in the USA.
In Year 1 a growth rate of 24% has been used, reflecting the imminent launch of the product in the USA, followed by 17%
in years 2-3, and 16% in years 4-5, reflecting a combination of continuing instrumentation sales and increasing consumable
volumes as the established instrument base increases in the market. The forecast growth rates then fall to 2% thereafter.
The Directors believe that market benefits will allow the product to be sold at a margin in excess of other products sold
by the Group. A 4% increase in the discount rate or a reduction in forecast revenue growth rates in year 2-5 to 8% would
result in an impairment.
The remaining average useful lives of the intangibles are as follows:
Trade name
Customer relations
Trade secrets
Development costs
1–5 years
2–10 years
3–10 years
3-10 years
The Company holds capitalised development costs with a cost and net value of £1,876,000 (2017: £1,876,000) and £334,000
(2017: £538,000) respectively. These are amortised over their useful life and an amortisation charge of £204,000 (2017:
65,000) has been recognised in the income statement in 2018.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
18. Investments in subsidiaries
Company Shares in Group undertakings
At 1 January and 31 December 2018
55
2018
£’000
30,521
2017
£’000
30,521
Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid, less
any impairment.
The subsidiaries of EKF Diagnostics Holdings plc as at 31 December 2018 are as follows:
Name of Company
Note
Proportion Held
EKF Diagnostics Limited (UK)*
Quotient Diagnostics Limited*
360 Genomics Limited*
EKF Molecular Diagnostics Limited*
DiaSpect Medical AB
DiaSpect Medical GmbH
EKF-diagnostic GmbH
Senslab GmbH
EKF Diagnostyka Sp.z.o.o.
000 EKF Diagnostika
EKF Diagnostics Inc
Stanbio Laboratory LP
Separation Technology, Inc
1261 N Main LP
Stanlab Management LLC
1261 N Main Management LLC
EKF POC, LLC
Argutus Intellectual Property Limited
EKF Diagnostics Limited (Ireland)
EKF Diagnostics (Shanghai) Co. Ltd
Notes
1
1
1
1
2
3
3
3
4
5
6
6
6
6
6
6
6
7
7
8
Class of
Shareholding
Ordinary
Ordinary
Ordinary
Ordinary
Nature of Business
Head Office
Sale of diagnostic equipment
Sale of diagnostic equipment
Manufacture and sale of
diagnostic equipment
Ordinary
Head office and IP licencing
100%
100%
100% (indirect)
100%
100%
100% (Indirect)
Ordinary
100%
Ordinary
100% (indirect)
Ordinary
100% (indirect)
Ordinary
Manufacture and sale of diagnostic
equipment and consumables
Manufacture and sale of diagnostic
equipment and consumables
Manufacture and sale of diagnostic
equipment and consumables
Manufacture and sale of diagnostic
equipment and consumables
60% (indirect)
100%
Ordinary
Ordinary
Sale of diagnostic equipment
Intermediate holding company
100% (indirect)
Partnership
100% (indirect)
Ordinary
100% (indirect)
Partnership
100% (indirect)
100% (indirect)
100% (indirect)
100% (indirect)
100%
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Manufacture and sale of diagnostic
equipment and consumables
Manufacture and sale of diagnostic
equipment and consumables
Dormant
Dormant
Dormant
Dormant
Dormant
Manufacture and sale of
diagnostic equipment
Dormant
1. Incorporated, registered and having its principal place of business in the United Kingdom, with its registered office being Avon
House, 19 Stanwell Road, Penarth Vale of Glamorgan, CF64 2EZ.
2. Incorporated in Sweden. The principal place of business is in Germany. The registered address is Lytta Gard, 75593 Uppsala,
Sweden.
3. Incorporated, registered, and having its principal place of business in Germany at Ebendorfer Chaussee 3, 39179 Barleben,
Germany.
4. Incorporated, registered, and having its principal place of business in Poland at ul. Kazimierza Wielkiego 58, 32-400 Myślenice,
Poland.
5. Incorporated, registered, and having its principal place of business in Russia at 117648, Moscow, PO Box: 30, District Severnoe
Chertanovo, House 2, building 207.
6. Incorporated and registered, or formed, and having its principal place of business in the United States of America at 1261 North
Main Street, Boerne, Texas, USA 78006.
7. Incorporated and registered in Ireland c/o Mazars, Harcourt Centre, Block 3, Harcourt Road, Dublin 2. Its principal place of
business is in the United Kingdom.
8. Incorporated and registered in China, Suite 1202, Jin Hong Qiao International Center Building I, No. 523 Loushan-guan Road,
Changning District, Shanghai, P.R.C.200051
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3
56
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
All subsidiaries are included in the consolidation. The proportions of voting shares held by the parent Company do not
differ from the proportion of Ordinary Shares held.
* All UK subsidiaries are exempt from the requirement to file audited financial statements by virtue of section 479A of the Companies Act
2006. As part of this process, the Company has provided statutory guarantees to these subsidiaries.
19. Financial instruments by category
(a) Assets
31 December
Assets as per balance sheet
Financial assets at fair value through other comprehensive income
Trade and other receivables excluding prepayments
and corporation tax
Cash and cash equivalents
Total
Group
2018
£’000
3,271
7,138
10,282
20,691
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
152
7,120
8,203
15,475
3,271
152
18,187
23,325
3,721
25,179
710
24,187
Receivables in the analysis above are all categorised as ‘loans and receivables’ for the Group and Company.
(b) Liabilities
31 December
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)
Trade and other payables
Deferred consideration
Total
Group
2018
£’000
880
8,833
1,104
10,817
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
1,205
9,320
1,062
11,587
-
7,713
1,104
8,817
-
5,718
1,062
6,780
Liabilities in the analysis above are all categorised as ‘other financial liabilities at amortised cost’ for the Group and
Company, with the exception of deferred equity consideration totalling £1,104,000 (2017: £1,062,000) that is categorised
as a financial liability at fair value through profit and loss.
(c) Credit quality of financial assets
The Group is exposed to credit risk from its operating activities (primarily for trade receivables and other receivables) and
from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and
other financial instruments.
The Group’s maximum exposure to credit risk, due to the failure of counterparties to perform their obligations as at 31
December 2018 and 31 December 2017, in relation to each class of recognised financial assets, is the carrying amount of
those assets as indicated in the accompanying balance sheets.
Trade receivables
The credit quality of trade receivables that are neither past due nor impaired have been assessed based on historical
information about the counterparty default rate. The Group does not hold any other receivable balances with customers,
whose past default has resulted in the recovery of the receivables balances.
Cash at bank
The credit quality of cash has been assessed by reference to external credit ratings, based on reputable credit agencies’
long-term issuer ratings:
AA-
Ratings lower than AA- or unrated
Total
2018
£’000
4,053
6,229
10,282
2017
£’000
1,997
6,206
8,203
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
20. Investments
Group and Company
1 January
Additions
31 December
57
2018
£’000
152
3,119
3,271
2017
£’000
152
-
152
The investment consists of a 0.66% (2017: 0.66%) holding in Epinex Diagnostics Inc., a US based privately held company
operating in the medical diagnostics industry; and a 19.90% holding in DX Economix, Inc., a Canadian based privately
held company operating in the healthcare consultancy industry, the value of which has been 100% impaired, and a 4.79%
holding in Renalytix AI plc an AIM listed developer of artificial intelligence enabled diagnostics for kidney disease.
These equity securities are not held for trading. They are held as financial assets at fair value through other
comprehensive income.
21. Trade and other receivables
Non-current
Amounts owed by subsidiary undertakings
-
-
18,099
20,894
Group
2018
£’000
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
Current
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments
Amounts owed by subsidiary undertakings
Corporation tax receivable
Other receivables
6,146
(487)
5,659
296
-
-
1,479
7,434
5,476
(285)
5,191
272
-
4
1,929
7,396
-
-
-
140
-
-
89
229
-
-
-
137
2,374
-
58
2,569
Due to their short term nature, the Directors consider that the carrying amount of trade and other receivables approximates
to their fair value.
As of 31 December 2018, trade receivables of £3,833,000 (2017: £1,286,000) were past due but not impaired. These relate
to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade
receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
Group
2018
£’000
3,659
78
96
Group
2017
£’000
761
525
-
3,833
1,286
Company
2018
£’000
Company
2017
£’000
-
-
-
-
-
-
-
-
As of 31 December 2018, trade receivables of £487,000 (2017: £285,000) were impaired and provided for. The ageing of
these impaired receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
Total
Group
2018
£’000
3
51
433
487
Group
2017
£’000
-
-
285
285
Company
2018
£’000
Company
2017
£’000
-
-
-
-
-
-
-
-
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3
58
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
Movements on the provision for impairment of trade receivables are as follows:
At 1 January
Provision for receivables impairment
Receivables written off during the year as uncollectible
Unused amounts reversed
Exchange differences
At 31 December
Group
2018
£’000
285
183
(1)
14
6
487
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
69
221
(4)
-
(1)
285
-
-
-
-
-
-
-
-
-
-
-
-
The other classes within trade and other receivables do not contain impaired assets.
The carrying amounts of the Group’s trade and other receivables denominated in foreign currencies were as follows:
UK Sterling
Euros
US dollar
Russian rouble
Polish zloty
22. Inventories
Raw materials
Work in progress
Finished goods
Group
2018
£’000
229
3,394
3,761
40
10
Group
2017
£’000
195
3,763
3,259
72
107
Company
2018
£’000
229
5,744
Company
2017
£’000
195
8,304
12,355
14,963
-
-
-
-
7,434
7,396
18,328
23,462
Group
2018
£’000
4,440
590
1,085
6,115
Group
2017
£’000
3,763
582
1,293
5,638
Company
2018
£’000
Company
2017
£’000
–
–
–
–
–
–
–
–
The Directors are of the opinion that the replacement values of inventories are not materially different to the carrying
values stated above. The carrying values above are stated net of impairment provisions of £2,024,000 (2017: £2,162,000).
The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to £9,484,000 (2017: £7,848,000).
The Company held no inventories at 31 December 2018 or at 31 December 2017.
23. Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents (excluding bank overdrafts)
Group
2018
£’000
10,282
10,282
Group
2017
£’000
8,203
8,203
Company
2018
£’000
3,721
3,721
Company
2017
£’000
710
710
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
59
24. Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Social security
Other payables
Accrued expenses and deferred income
25. Borrowings
Non-current
Bank borrowings
Current
Bank borrowings
Convertible loan
The maturity profile of borrowings was as follows:
Amounts falling due
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Total borrowings
(a) Bank borrowings
Group
2018
£’000
1,226
-
114
2,758
5,996
10,094
Group
2017
£’000
1,492
-
109
1,926
5,902
9,429
Company
2018
£’000
Company
2017
£’000
156
3,728
53
2,547
1,229
7,713
123
3,060
52
1,722
813
5,770
Group
2018
£’000
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
695
695
185
-
185
Group
2018
£’000
185
185
510
-
880
872
872
184
149
333
Group
2017
£’000
333
184
550
138
1,205
-
-
-
-
-
-
–
-
-
-
Company
2018
£’000
Company
2017
£’000
-
-
-
-
-
-
-
-
-
-
Bank borrowings mature in 2023 and bear an average fixed coupon of 2.5% annually (2017: 2.5%).
Bank borrowings are secured against certain assets of the Group. The Parent Company has also provided guarantees
against those bank borrowings which are denominated in foreign currencies.
The Euro denominated borrowings have covenants attached to them. The Group has been compliant with these covenants
throughout the year.
The bank borrowings are repayable by quarterly instalments.
The Group is not exposed to interest rate changes or contractual re-pricing dates at the end of the reporting period, as
the borrowings are fixed in nature.
The fair value of both current and non-current borrowings equals their carrying amount, as the impact of discounting is
not significant.
The carrying amounts of the group’s bank borrowings are all denominated in euros.
(b) Convertible loan
In 2013 Andrew Webb loaned £200,000 to EKF Molecular Diagnostics Limited in return for a convertible loan note
denominated in sterling. The note was redeemable on 31 December 2017 or convertible under certain circumstances on or
before 30 November 2017. On 10 August 2018 following the completion of payment of the £102,000, Mr Webb waived all
future rights, and the remaining balance of the loan was written back to income, as an exceptional item.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 60
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
26. Deferred consideration
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when deferred income tax assets and liabilities relate to income taxes levied by the same
taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis. The amounts concerned are as follows:
At 1 January
Fair value adjustment
At 31 December
Group
2018
£’000
1,062
42
1,104
Group
2017
£’000
693
369
1,062
Company
2018
£’000
Company
2017
£’000
1,062
42
1,104
693
369
1,062
The deferred consideration consists of 4,043,940 Ordinary Shares originally valued at £605,000 to be issued as part of
the consideration paid for the acquisition of EKF-diagnostic GmbH Germany. The value of the shares has been adjusted to
its fair value at 31 December 2018 of £1,104,000. Whilst agreement has been reached in principle to conclude the position,
the contract amendment has not yet been signed. All of the outstanding balance is current.
27. Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when deferred income tax assets and liabilities relate to income taxes levied by the same
taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis. The amounts concerned are as follows:
Group
Deferred tax assets
Deferred tax asset to be recovered within 12 months
Deferred tax asset to be recovered after more than 12 months
Deferred tax liabilities
Deferred tax liability to be recovered after more than 12 months
Deferred tax liability to be recovered within 12 months
Deferred tax liabilities – net
The gross movement on the deferred income tax account is as follows:
At 1 January
Exchange differences
Income statement movement (note 13)
At 31 December
2018
£’000
(13)
(23)
(36)
3,065
114
3,179
3,143
2018
£’000
3,443
87
(387)
3,143
2017
£’000
(13)
(34)
(47)
3,467
23
3,490
3,443
2017
£’000
4,105
(84)
(578)
3,443
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting
of balances within the same tax jurisdiction, is as follows:
Deferred tax liabilities
At 1 January 2017
Credited to the income statement
Exchange differences
At 31 December 2017
At 1 January 2018
Credited to the income statement
Exchange differences
At 31 December 2018
Accelerated tax
depreciation
£’000
4,489
(915)
(85)
3,489
3,489
(398)
88
3,179
Total
£’000
4,489
(915)
(85)
3,489
3,489
(398)
88
3,179
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
61
At 1 January 2017
Charged to the income statement
Exchange differences
At 31 December 2017
At 1 January 2018
Charged to the income statement
At 31 December 2018
Tax losses
£’000
(13)
-
-
(13)
(13)
-
(13)
Other
£’000
(371)
337
-
(34)
(34)
11
(23)
Total
£’000
(384)
337
-
(47)
(47)
11
(36)
Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit through future
taxable profits is probable. The Group did not recognise deferred income tax assets of £533,000 (2017: £1,173,000) mainly
in respect of tax losses amounting to £2,770,000 (2017: 6,092,000), primarily arising in the UK entities, that can be carried
forward against future taxable income, as the likely timing of recovery is considered too remote.
Company
Deferred tax assets
Deferred tax asset to be recovered after more than 12 months
Deferred tax
28. Share capital
Group and Company
At 1 January 2018
Cancellation of Ordinary shares
31 December 2018
During the year the company has acquired and cancelled the following ordinary shares:
19 November 2018
20 November 2018
21 November 2018
7 December 2018
29. Renalytix AI plc
2018
£’000
2017
£’000
23
23
34
34
Number of
Shares
Share capital
£’000
457,554,636
(3,461,409)
454,093,227
Number
178,423
4,576
(35)
4,541
Price
(p)
26.15p
1,641,493
27.4348p
570,954
1,070,539
3,461,409
27p
27p
During 2018, the Group founded Renalytix AI plc which, along with its subsidiary company Renalytix AI Inc., were floated
separately from the Group in November 2018. The investment in Renalytix was previously held as an asset available for
sale. Renalytix is a developer of artificial intelligence-enabled diagnostics for kidney disease.
As part of the creation of a separate business, intangible assets with a net value of £646,000 were sold to Renalytix by
the Group, and the Group’s wholly owned subsidiary Renalytix AI Inc. was sold to Renalytix AI plc, in return for shares in
Renalytix AI plc. Following these transactions, EKF’s shareholding in Renalytix comprised 20,964,295 ordinary shares.
The EKF holding was then distributed in specie to Relevant EKF shareholders, being those on the EKF register as at the
date of record for the distribution in October 2018 at a rate of one Renalytix AI plc ordinary share (a “RENX share”) for
each 21.825 EKF ordinary shares held. The fair value of the shares distributed to Relevant EKF shareholders was calculated
based on the proposed flotation price, less a discount to account for the restrictions placed on the shares. The discount
was calculated taking into account, amongst other factors, the 180 day lock up period, sector volatility, and that the shares
were issued pre-admission. The total fair value of the distributed shares was calculated as £7,027,000 with the profit on
disposal, which has been shown as an exceptional profit, being calculated net of expenses of £25,000 and the value of the
intangible asset transferred of £6,356,000. Subsequent to the distribution, EKF invested £3.1m in the shares of Renalytix
at the same price as other new investors and, as at the date of this announcement, holds 2,577,907 RENX shares.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 62
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
30. Share options and share-based payments
The share options and share incentive schemes in existence in the Group and Company were as follows:
Unapproved share option scheme
At 1 January
Cancelled
Expired
At 31 December
2018
2017
Av. Exercise price
per share
(£)
0.252
0.376
-
0.247
Options
(Number)
1,250,000
(50,000)
-
1,200,000
Av. Exercise price
per share
(£)
0.197
0.179
0.349
0.252
Options
(Number)
13,510,000
(11,360,000)
(900,000)
1,250,000
The remaining unapproved share options include the following:
• 650,000 options were issued on 7 July 2013 to senior employees at an exercise price of 27.25p per share. These
options are exercisable from the third anniversary of grant with a maximum term of 10 years. These options have
vested.
• 50,000 options were issued on 21 January 2014 to senior employees at an exercise price of 37.625p per share.
These options are exercisable from the third anniversary of grant with a maximum term of 10 years. These options
have vested.
• 500,000 options were issued to a third party on 17 May 2015 at an exercise price of 20p. The maximum term is 10
years from grant. These options vested during the year
All share option awards are equity settled. Out of the 1,200,000 (2017: 1,250,000) outstanding options 1,200,000 (2017:
750,000) were exercisable at 31 December 2018.
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Expiry Date
07.07.2023
21.01.2024
06.04.2025
2018
2017
Av. Exercise price
per share
(£)
0.2725
0.37625
0.200
Av. Exercise price
per share
(£)
0.2725
0.37625
0.200
Options
(Number)
650,000
50,000
500,000
1,200,000
Options
(Number)
650,000
100,000
500,000
1,250,000
On 2 June 2016 two Directors were granted a cash settled share-based incentive award. The awards vest if a controlling
interest in the Company is acquired by a third party prior to 30 June 2020. In these circumstances a minimum amount of
£0.3m is payable to each Director, which increases by reference to any sale price achieved. The fair value of this award has
been calculated at £3,464,000 (2017: £3,351,000) using a modified form of a Black Scholes model. The key assumptions
in the model included expected volatility of 36% (2017: 39%), a risk free rate of 0.74% (2017: (0.39%)) and an assumed
acquisition premium and option life. The increase in the liability is largely due to the increase in share price over the period.
On 9 October 2017, a senior employee was granted a cash settled share based incentive award. The award vests if a
controlling interest in the Company is acquired by a third party at any time while the holder remains an employee. There is
a minimum price level below which no amount is payable, with the amount payable rising based on the sale price achieved,
up to a maximum of $700,000. The fair value of this award has been calculated at £90,000 (2017: nil), using a similar
model and assumptions as noted above.
£939,000 (2017: £969,000) has been recognised as an expense in administrative expenses in the current year, and
£2,547,000 (31 December 2017: £1,722,000) is shown as a liability on the balance sheet at 31 December 2018 within trade
and other payables.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
63
31. Other reserves
Group
At 1 January 2017
Shares cancelled
At 31 December 2017
At 1 January 2018
Shares cancelled
At 31 December 2018
32. Retirement benefit obligations
Pension benefits
Capital
redemption
reserve
£’000
Other
reserve
£’000
-
67
67
67
35
102
41
-
41
41
-
41
Total
£’000
41
67
108
108
35
143
The Company operates defined contribution pension schemes the assets of which are held separately from those of
the Company in independently administered funds. The pension cost for the year represents contributions made by the
Company to the funds and amounted to £207,000 (2017: £168,000). The value of pension contributions owed to pension
providers at 31 December 2018 was £9,000 (2017: £9,000).
33. Commitments
a) Capital commitments
The Group has contracted £70,500 (2017: £166,000) capital expenditure at the end of the reporting period that had not
yet been incurred.
b) Operating lease commitments
The Group leases various offices and manufacturing buildings under non-cancellable operating lease agreements. The
lease terms are between one and five years.
The Group also leases various office equipment and assets under non-cancellable operating lease agreements. The lease
terms are between one and five years.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Group
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
Total
Land and buildings
Other
2018
£’000
199
200
44
443
2017
£’000
180
278
58
516
2018
£’000
132
67
-
199
2017
£’000
79
54
-
133
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 64
Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
34. Cash generated by operations
Profit/(loss) before tax
Adjustments for:
– Depreciation
– Amortisation
– Warranty claim
– Loss/(profit) on disposal of fixed assets
– Share-based payments
– Escrow cancellation
– Profit on sale of Renalytix
– Fair value adjustment
– Foreign exchange
– Bad debt written (back)/ down
– Net finance (income)/costs
– Loan write back
Changes in working capital
– Inventories
– Trade and other receivables
– Trade and other payables
Net cash generated by operations
2018
£’000
12,165
1,158
2,833
(31)
13
939
-
(6,356)
42
(83)
-
(8)
(90)
(461)
11
(271)
9,861
2017
£’000
4,307
1,160
3,463
(339)
(33)
1,510
(1,371)
-
369
233
-
53
-
306
1,535
(1,075)
10,118
Group
Company
2018
£’000
6,747
61
204
-
-
939
-
(6,356)
42
(40)
(514)
2017
£’000
(1,385)
65
65
-
-
1,510
(1,371)
-
369
93
374
(1,000)
(1,031)
-
-
5,961
1,004
7,048
-
-
5,608
(27)
4,270
2017
£’000
95
33
128
In the statement of cash flows, proceeds from the sale of property, plant and equipment comprise:
Group
Net book value
(Loss)/profit on disposal of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Non-cash transactions
2018
£’000
13
(13)
-
The principal non-cash transactions are: the creation of Renalytix AI plc and the subsequent distribution in specie,
movements on deferred consideration provisions; the fair value adjustment relating to the deferred equity consideration
in respect of EKF Germany, the warranty claim, and release of accruals no longer required.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 Notes to the Financial Statements (continuation)
for the year ended 31 December 2018
65
35. Related Party Disclosures
Directors
Christopher Mills’ controls 29.94% of the Company’s share capital through North Atlantic Smaller Companies Investment
Trust PLC (“NAIT”) and Oryx International Growth Fund Limited (“Oryx”). Harwood Capital LLP (“Harwood”) is investment
manager and investment adviser to NAIT and Oryx respectively. Christopher Mills is a partner and Chief Investment Officer
of Harwood. Christopher Mills is also a director of Oryx and NAIT. He holds 2.16 per cent. of the shares in Oryx in his own
name as well as a further 46.44 per cent. of the shares in Oryx via his 25.06 per cent. shareholding in NAIT.
The Group was invoiced £18,000 (2017: £18,000) by J & K (Cardiff) Limited for property rent. Julian Baines is a Director
of J & K (Cardiff) Limited.
Carl Contadini acts as an Operational Advisor to Harwood which acts as investment manager and investment adviser to
NAIT and Oryx respectively.
Directors’ emoluments are set out in the Remuneration Committee report and in note 9.
Other related party transactions
Details of the Group’s transactions with Renalytix AI plc are described in note 29. In their positions as shareholders in the
Company, certain directors received shares in Renalytix through the distribution in specie.
Sergey Kots who is Chief Executive of OOO EKF Diagnostika (“EKF Russia”), owns 20% of the subsidiary’s share capital.
During the year EKF Russia invoiced £545,000 (2017: £594,000) to OOO Laboratory Diagnostic Systems, a company of
which Mr Kots’ brother is a director.
Key management compensation
Key management compensation for the year was as follows:
Salaries and other short-term employee benefits
Share-based payments
Employer contribution to pension scheme
2018
£’000
690
775
19
1,484
2017
£’000
1,745
969
19
2,733
Key management includes the Directors of the Company only.
The Company
During the year the Company invoiced management charges of £2,383,000 (2017: £3,141,000) and interest of £984,000
(2017: £1,079,000) to its subsidiary companies. It purchased goods and services from subsidiaries totalling £201,000
(2017: £169,000). At 31 December 2018 the Company was owed £18,099,000 (2017: £23,268,000) by its subsidiaries and
owed £3,728,000 (2017: £3,060,000) to other subsidiaries.
Annual Report 2018 | EKF Diagnostics Holdings plcFinancial Statements3 66
Annual Report 2018 | EKF Diagnostics Holdings plc
Annual Report 2018 | EKF Diagnostics Holdings plc
67
NOTICE OF ANNUAL GENERAL MEETING
EKF Diagnostics Holdings PLC (Company)
NOTICE IS HEREBY GIVEN that the Annual General Meeting (Meeting) of EKF Diagnostics Holdings plc (Company) will
be held at the offices of Harwood Capital LLP, 6 Stratton Street, Mayfair, London, W1J 8LD on 2 May 2019 at 11.00 a.m. for
the following purposes:
Ordinary Resolutions
1. To receive and adopt the statement of accounts for the year ended 31 December 2018 together with the reports
of the Directors and the auditors thereon.
2. To re-elect Christopher Mills, who retires by rotation, as a Director.
3. To re-elect Adam Reynolds, who retires by rotation, as a Director.
4. To re-appoint Messrs PricewaterhouseCoopers LLP as auditors to act as such until the conclusion of the next
General Meeting of the Company at which the requirements of section 437 of the Companies Act 2006 are
complied with and to authorise the Directors of the Company to fix their remuneration.
5. That in substitution for any existing such authority, the Directors be and are hereby generally and unconditionally
authorised pursuant to section 551 of the Companies Act 2006 (the “2006 Act”) to allot Relevant Securities of
the Company:
i.
up to a maximum nominal amount of £52,500 (in pursuance of the exercise of outstanding share options and
other potential shares granted by the Company but for no other purpose);
ii. up to an aggregate nominal amount of £454,093.23 (in addition to the authorities conferred in sub-paragraphs
(i) above) representing approximately 10% of the Company’s Issued Share Capital,
such authorities (unless previously renewed, revoked or varied) to expire at the conclusion of the next Annual General
Meeting of the Company to be held in 2020, save that the Company may, before such expiry, make an offer or
agreement which would or might require Relevant Securities to be allotted after such expiry and the directors may
allot Relevant Securities in pursuance of such an offer or agreement as if the authority conferred hereby had not
expired.
Special Resolutions
6. That, subject to the passing of the above Resolution the Directors be given the general power to allot equity
securities (as defined in section 560 of the 2006 Act) pursuant to the authority conferred by the Resolution
above as if section 561(1) of the 2006 Act did not apply to any such allotments provided that this power shall be
limited to:
i.
ii.
the allotment of equity securities on the exercise of the share options granted by the Company;
the allotment of equity securities (otherwise than pursuant to sub-paragraphs (i) above) for cash in connection
with any rights issue or pre-emptive offer in favour of holders of equity securities generally; and
iii. the allotment (otherwise than pursuant to sub-paragraphs (i) and (ii) above) of equity securities for cash up
to an aggregate nominal amount of £454,093.23 representing approximately 10% of the Company’s Issued
Share Capital;
provided that such power (unless previously renewed, revoked or varied) shall expire at the conclusion of the Annual
General Meeting of the Company to be held in 2020, save that the Company may, before such power expires, make
an offer or enter into an agreement which would or might require equity securities to be allotted after such power
expires and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding
that the power conferred by this resolution has expired.
7. That the Company be and is generally and unconditionally authorised for the purposes of section 701(1) of the
Companies Act 2006 (the “Act”) to make one or more market purchases (within the meaning of section 693(4) of
the Act) on the London Stock Exchange of ordinary shares of £0.01 each in the capital of the Company (“Ordinary
Shares”) provided that:
i.
the maximum aggregate number of Ordinary Shares authorised to be purchased is 68,113,984 (representing
approximately 15 per cent. of the Company’s issued ordinary share capital);
ii.
the minimum price (excluding expenses) which may be paid for such Ordinary Shares is £0.01 per share;
iii. the maximum price (excluding expenses) which may be paid for an Ordinary Share shall not be more than 5 per
cent. above the average of the middle market quotations for an Ordinary Share as derived from The
London Stock Exchange Daily Official List for the five business days immediately preceding the date on which
the Ordinary Share is purchased;
Additional Information4
66
Annual Report 2018 | EKF Diagnostics Holdings plc
Annual Report 2018 | EKF Diagnostics Holdings plc
67
NOTICE OF ANNUAL GENERAL MEETING (continuation)
EKF Diagnostics Holdings PLC (Company)
iv. unless previously renewed, varied or revoked, the authority conferred shall expire at the conclusion of the
Company’s next annual general meeting or 30 June 2020, if earlier; and
v.
the Company may make a contract or contracts to purchase Ordinary Shares under the authority conferred
prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such
authority and may make a purchase of Ordinary Shares in pursuance of any such contract or contracts.
8. That the draft articles of association produced to the meeting be adopted as the articles of association of the
Company in substitution for, and to the exclusion of, the Company’s existing articles of association.
Registered Office
Avon House
19 Stanwell Road
Penarth
CF64 2EZ
13 March 2019
BY ORDER OF THE BOARD
Salim Hamir
Company Secretary
Additional Information4
68
Notes
Annual Report 2018 | EKF Diagnostics Holdings plc
Annual Report 2018 | EKF Diagnostics Holdings plc
69
1. The Company specifies that only those members registered on the Company’s register of members at close of business on 30
April 2019 or if this general meeting is adjourned, at close of business on the day two days prior to the adjourned meeting shall be
entitled to attend and vote at the General Meeting.
2.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any
of your rights to attend, speak and vote at the General Meeting
3. A proxy does not need to be a member of the Company but must attend the General Meeting to represent you. If you wish your
proxy to speak on your behalf at the General Meeting you will need to appoint your own choice of proxy (not the chairman) and
give your instructions directly to them.
4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may
not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact
the Company’s registrars at the address set out in note 5.
5. You can vote either by logging on to www.signalshares.com and following the instructions; or you may request a hard copy
form of proxy directly from the registrars, Link Asset Services at enquiries@linkgroup.co.uk or on Tel: 0371 664 0300. Calls
cost 12p per minute plus your phone company’s access charge. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England
and Wales.
In the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures
set out below.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior).
6. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do
so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual
(available from www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members,
and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate action on their behalf.
7.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a ‘CREST
Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must
contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as
to be received by the issuer’s agent (ID RA10) by 11 a.m. on30 April 2019. For this purpose, the time of receipt will be taken to
mean the time (as determined by the timestamp applied to the message by the CREST application host) from which the
issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any
change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
8. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations
will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off
time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-
copy proxy form, please contact Link Asset Services at the address noted in note 5 above. If you submit more than one valid
proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
10. In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating
your intention to revoke your proxy appointment to Link Asset Services at PXS, 34 Beckenham Road, Kent, BR3 4TU. In the case
of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an
officer of the company or an attorney for the company. Any power of attorney or any other authority under which the
revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. The
revocation notice must be received by Link Asset Services no later than 11.00 a.m. on 30 April 2019. If you attempt to revoke your
proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your
proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the general meeting and voting in person. If you have appointed a
proxy and attend the general meeting in person, your proxy appointment will automatically be terminated.
11. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its
powers as a member provided that no more than one corporate representative exercises power over the same share.
12. Voting on all resolutions will be conducted by way of a poll rather than on a show of hands.
13. As at 5.00 p.m. on the day immediately prior to the date of posting of this notice, the Company’s issued share capital comprised
454,093,227 Ordinary Shares of 1p each. Each ordinary share carries the right to one vote at a general meeting of the Company
and, therefore, the total number of voting rights in the Company as at 5.00 p.m. on the day immediately prior to the date of
posting of this notice is 454,093,227.
Additional Information4
68
Annual Report 2018 | EKF Diagnostics Holdings plc
Annual Report 2018 | EKF Diagnostics Holdings plc
69
Company information
Directors:
Christopher Mills
(Non-Executive Chairman)
Julian Baines MBE
(Chief Executive Officer)
Richard Evans
(Chief Operating Officer and Finance Director)
Carl Contadini
(Non-Executive Director)
Adam Reynolds
(Non-Executive Director)
Company Secretary:
Salim Hamir
Registered office and Head office:
Avon House
19 Stanwell Road Penarth
Cardiff CF64 2EZ
Place of incorporation:
England and Wales (Company number – 4347937)
Independent Auditors:
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
One Kingsway
Cardiff CF10 3PW
Nominated Advisor and Broker:
N+1 Singer
1 Bartholomew Lane London EC2N 2AX
Solicitors to the Company:
Berry Smith LLP
Haywood House Dumfries Place Cardiff
CF10 3GA
Registrars:
Link Asset Services
The Registry
34 Beckenham Road Beckenham
Kent
BR3 4TU
If you have a query regarding your shareholding please
call (from inside the UK) 0871 664 0300 (calls cost 12p
per minute plus your phone company’s access charge), or
(from outside the UK) +44 371 664 0300
or e-mail shareholderenquiries@linkgroup.co.uk
Financial public relations:
Walbrook PR Limited
4 Lombard Street London
EC3V 9HD
Investor relations email:
investors@ekfdiagnostics.com