Annual
Report
2021
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1 Strategic Review and
Corporate Governance
Financial and Operational Highlights
At a Glance
Chairman’s Statement
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Board of Directors
Strategic Report
Report of the Directors
Corporate Governance Statement
Report of the Remuneration Committee
2 Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated and Company’s Statement of Financial Position
Consolidated and Company’s Statement of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Notes to the Financial Statements
3 Additional Information
Notice of Annual General Meeting
Notes
Company Information
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Annual Report 2021 | EKF Diagnostics Holdings plc 22
Financial and Operational Highlights
2021 - Key points
Financial Highlights
•
•
•
•
•
•
•
•
•
•
Revenue up 25% to £81.8m (2020: £65.3m)
Core1 business revenues up 14% to £42.1m (2020: £37.1m)
Gross profit up 5% to £39.4m (2020: £37.4m)
Adjusted EBITDA2 up 4% to £26.5m (2020: £25.5m), reflecting the changes in the mix of Contract Manufacturing
related products as well as increased costs in the supply chain
Profit before tax of £21.4m (2020: £15.4m), including effect of share-based payments
Basic earnings per share of 3.47p (2020: 2.45p)
Cash generated by operating activities of £10.2m (2020: £13.8m)
Cash at 31 December 2021 of £20.3m (2020: £21.9m), net cash after borrowings of £19.6m (2020: £21.4m)
Value of investments in marketable securities at year end of £7.6m (2020: £6.5m)
Cash dividend of £5.1m paid to shareholders, equivalent to 1.1p per ordinary share (2020: 1.0p per share)
Operational Highlights
•
Focus on returning core business to pre-pandemic 2019 levels and positioned for future sustainable growth
outside of short-term contract manufacturing
New reporting of business division revenues:
•
− Point-of-Care – up 18% to £27.0m
− Central Laboratory – up 7% to £13.1m
− Life Sciences – up 3% to £2.0m
− Contract Manufacturing – up 38% to £36.3m, driven by COVID sample collection kits manufacture
− Laboratory Testing Services – ADL Health contributed £1.0m following acquisition in September 2021
•
•
Significant investment in South Bend, Indiana, facility to expand EKF Life Sciences’ fermentation capabilities
$10m acquisition of ADL Health, an earnings enhancing and cash generative CLIA certified testing laboratory
1 Core business includes Point of Care, Central Laboratory and Life Sciences
2 Earnings before interest, tax, depreciation and amortisation, share-based payments and exceptional items, as laid out
in the income statement
Annual Report 2021 | EKF Diagnostics Holdings plc1
2021 Revenues
2021
2020
+/-
Revenue (£m)
£81.8
£65.3
25%
Net cash (£m)
£19.6
£21.4
(8%)
Adjusted
EBITDA (£m)
£26.5
£25.5
4%
25%Increase in revenues
year on year
2017
2018
£41.6
£42.5
£44.9
2019
2016
£38.6
3
£81.8
£65.3
2021
2020
Annual revenues
£m
POINT OF CARE
REVENUES
CLINICAL
CHEMISTRY
REVENUES
CONTRACT
MANUFACTURING
REVENUES
FY 2021
£27,003 (£k)
+18%
FY 2020
£22,946 (£k)
FY 2021
£13,055 (£k)
+7%
FY 2020
£12,152 (£k)
FY 2021
£36,308 (£k)
+38%
FY 2020
£26,323 (£k)
LAB SERVICES
REVENUES
LIFE SCIENCES
REVENUES
FY 2021
£1,030 (£k)
ACQUIRED
IN 2021
FY 2021
£2,019 (£k)
+3%
FY 2020
£1,959 (£k)
Annual Report 2021 | EKF Diagnostics Holdings plc1 44
At a Glance
Commentary
EKF Diagnostics Holdings plc (“EKF Diagnostics” or just “EKF”) is a global medical diagnostics business with a long history
in point-of-care testing and manufacturing reagents for use in central laboratories. In 2020-21, in response to the COVID-19
pandemic, EKF grew its contract manufacturing business to provide sample collection kits and consumables for private
and public sector customers in the USA and Europe.
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. During 2020, prior to the release of COVID-19 vaccines and during the height
of the pandemic restrictions, demand for analysers and tests dropped. In 2021, as expected, this trend was reversed.
Sales of analysers increased by 44% and tests by 29% as customers around the world began to return to normal levels of
business. It is worth noting however that some business took longer to return than others. For example in some countries,
particularly India, anaemia screening programmes did not return to their pre-pandemic levels in 2021 due to the speed of
vaccine roll-out and the need to ensure outbreaks were contained.
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. During 2020-21 laboratories around the world were consumed with the testing demands of COVID-19. Business
has returned in this sector but at a lesser rate than that of Point of Care. The recovery in sales has also been impacted by
delays in the supply chain for plastics and chemicals used in some reagents.
EKF Life Sciences, based in Elkhart and South Bend, Indiana, manufactures diagnostic enzymes and contracted custom
products for use in medical diagnostics, pharmaceuticals and industry. Due to the demand for COVID-19 testing kits the
South Bend site was repurposed as a kitting facility. Similarly capacity for kitting and bulk formulation of PrimeStore® MTM
and PBS was added in Boerne, Texas whilst new contract manufacturing production facilities were put in place in Cardiff,
UK and Magdeburg, Germany.
The following pages describe our product portfolio, split broadly into groups by disease class.
2021 Sales
ANALYSERS SOLD (Point-of-Care)
TESTS SOLD (Point-of-Care)
2021
16,111
2020
11,167
+44%
Geographical Performance
+9%
+29%
2021
83,875,325
2020
65,014,470
South Bend
and Elkhart, IN
Cardiff, UK
Leipzig, DE
Magdeburg, DE
Moscow, RU
San Antonio, TX
Shanghai, CN
Revenue
FY 2021 FY 2020
+/- (£k)
APAC
EMEA
4,295
3,747
548
42,711
25,648
17,123
AMERICAS
34,770
35,865
(1,095)
Annual Report 2021 | EKF Diagnostics Holdings plc1
5
Point-of-Care: Hematology
Product Portfolio
The hemoglobin analysers product range within EKF Diagnostics is the largest in terms of revenues and the size of the
installed base.
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
Used in blood banks in the US
•
•
Laboratory hematocrit
centrifuge and analyser
Processes multiple samples
Annual Report 2021 | EKF Diagnostics Holdings plc1
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Point-of-Care: Diabetes
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.
BiosenTM
Quo-Lab® A1c
Quo-Test® A1c
•
•
•
•
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
•
•
•
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
Annual Report 2021 | EKF Diagnostics Holdings plc1
7
Point-of-Care: Other
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.
The EKF Sports Performance range is primarily comprised of Lactate Scout 4, a handheld blood analyser used ‘in the
field’ by sports scientists. There is also a growing market for Biosen analysers used in sports research in both academia
and professional sports organisations and clubs around the world.
Pregnancy Testing
Lactate Scout 4
Cassette rapid tests
•
• Marketed for use in hospital
settings
•
•
•
Handheld lactate analyser
Results in 10 seconds
Developed for use in sports
medicine
Annual Report 2021 | EKF Diagnostics Holdings plc1
88
Central Laboratory
Product Portfolio
EKF, through its wholly owned subsidiary Stanbio Laboratory, has had a presence within central laboratory dating back
over 60 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 portfolio includes reagents, controls and calibrators for a wide range of popular pathology tests.
Each one is manufactured at EKF’s facility in Boerne, Texas from where it is despatched to customers around the world.
AltairTM 240
•
•
•
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
β-Hydroxybutyrate LiquiColor &
STAT-Site WB
•
•
•
Liquid reagent for the early
detection of ketosis and
ketone analyser launched
Q1 2020
Primarily sold in USA through
national distribution networks
Small but growing markets in
China, Singapore and Australia
Lucica Glycated Albumin-L
•
•
•
Specific test for Glycated
Albumin
Very sensitive to glycation by
glucose and other sugars
Exclusive to EKF in the USA
Annual Report 2021 | EKF Diagnostics Holdings plc1
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Contract Manufacturing and Life Sciences
Product Portfolio
EKF Diagnostics worked with leading epidemiology organisations during 2020 and 2021 to develop a portfolio of
exceptionally high quality products that addressed the needs of the market and helped turn the tide in the battle against
COVID-19.
EKF’s existing relationship as a contract manufacturing partner for Longhorn Vaccines & Diagnostics developed
significantly during the pandemic. The escalating demand for PrimeStore® MTM in the US spread to Europe following a
successful evaluation of the product by Public Health England. As a result EKF opened production facilities in Germany
and the UK, as well as a second site in the US.
EKF Life Sciences has received a significant investment in plant to allow it to grow the services and products it provides
and agreed a lease to expand manufacturing capacity at South Bend in 2019. This facility will allow EKF Life Sciences to
fulfil larger bulk orders than was previously possible as well as provide additional bottling and warehouse space. Work
to get this facility operational was delayed by the demand for COVID-19 testing products but has recommenced in 2022.
Molecular transport media
Sample collection kits
Enzyme fermentation
•
•
For use at home or on-site
Includes a vial of viral transport
media and a flocked swab
Test for multiple virus’ from
•
one sample
•
•
•
$10m investment throughout
2021-22 in South Bend, Indiana
plant
Up to 14,500 litre capacity
fermenters
FDA registered. Certified ISO
13485: 2016 facility
• Molecular transport media that
preserves and stabilises DNA
and RNA
•
Allows viral samples to be safely
collected, transported and tested
•
•
Sold in vials and in bulk
FDA Class 2 and CE marked
Lab Services
ADL Health
EKF Diagnostics acquired San Antonio based lab services business ADL Health in 2021. ADL Health has been primarily
focused on COVID-19 testing services for private business and individuals since its inception in 2020.
ADL has experienced continued demand for COVID-19 testing services in 2022, particularly as a service provider for
large events. However, as the demand for COVID-19 testing declines ADL will focus on introducing new tests throughout
2022 including NIPT, Calprotectin, Drugs of Abuse, cannabinoid and a variety of oncology, pathogen and infectious
diseases utilising Next Generation Sequencing.
Annual Report 2021 | EKF Diagnostics Holdings plc1
1010
Chairman’s Statement
2021 has been another record-breaking
year for EKF, with revenue increasing
by 25% to £81.8m (2020: £65.3m), and
core business revenues returning to pre-
pandemic levels. We have delivered another
strong earnings performance with £26.5m
of adjusted EBITDA generated in the year
(2020: £25.5m) and basic earnings per
share having improved materially at 3.47p
per share (2020: 2.45p). Cash levels remain
strong with net cash after borrowings
of £19.6m
(2020: £21.4m), despite
considerable investment (£5.6m compared
with 2020: £2.1m) to drive the future
growth of the business and shareholder
value generation outside of COVID-related
contract manufacturing revenues.
laying
foundations
The story of 2021 has been one of expansion,
for
the
including
further growth: building on our successes
in 2020; building on the capabilities that
we developed in response to COVID and
readying them to be applied to new areas;
building new facilities and structures to
support a return to growth across our core
business; and building a new leadership
team to drive the business forward.
It is our current view that COVID-related
revenues from contract manufacturing will
materially reduce in 2022, given the rapid
step-back in testing requirements across
global markets. COVID-related revenues
were always going to be of indeterminate
duration and quantity, so our focus and
strategy have already turned to positioning
the business to deliver growth across all
core business areas, whilst redirecting
the capabilities developed for COVID
into other activities. We are delighted to
report that in 2021 every single product
group delivered year-on-year growth and
the expansion of contract development
and manufacture of diagnostic test kits,
along with the laboratory acquisition in
the United States, positions us well for
capturing further work in other healthcare
applications.
investing
The short-term benefits derived from our
COVID-related contract manufacturing
success has allowed the Group to fuel
growth by
in facilities and
equipment for the future, as well as the
acquisition of a new business in an area
which not only widens our offering but
also brings synergy potential by adding
to the relationships and abilities we
have gained over the last two years.
We remain confident in our strategy for
growth to 2024 and we believe that the
core business alone has the potential to
deliver significant revenue growth without
reliance on COVID in that timescale and we
are focussed on developing a sustainable
business that can deliver EBITDA growth
over the next three years.
.
Strategy
In May last year, we announced our strategy
for delivering growth to 2024 and beyond,
and continuing to deliver shareholder value.
The strategy for growth has been updated
and can be summarised as:
• continuing
services
innovation
in products
Point-of-Care,
in
and
Central Laboratory and Life Sciences
leveraging new and existing routes to
market and relationships;
• investment in expanded production
and kitting capabilities to offer a suite
of diagnostic Contract Manufacturing
solutions to third party businesses;
• expansion of CLIA Laboratories Testing
offering building on the acquired
capabilities in ADL Health; and
• identify complementary earnings-
enhancing acquisitions with
key
strategic value.
We also believe we can continue to generate
enhanced shareholder value through:
• a progressive dividend policy; and
• our agreement with Mount Sinai
(“MSIP”),
Partners
Innovation
which allows us advanced access to
innovative commercial opportunities
and where we can build on the ongoing
successes of Renalytix plc, Verici Dx
plc and Trellus Health.
The operational performance of our
business, and the COVID-related contract
manufacturing business, are outlined in the
Chief Executive Officer’s Review. This also
focusses on the progress we have made
in positioning the business for growth and
the execution of that strategy, including
our recent acquisition in the laboratory
testing space.
MSIP Preferred Partnership
Agreement and related activities
Our Preferred Partnership Agreement,
signed with MSIP in 2019, provides us with
advanced access to innovative commercial
opportunities arising from Mount Sinai Health
System owned technologies in the field of
healthcare technologies. This partnership
has already led to the development of three
new businesses, all of which are listed on
AIM, with Renalytix plc shares also trading
on Nasdaq as RNLX:
(AIM: RENX),
• Renalytix plc
the
developer of artificial
intelligence-
enabled diagnostics for kidney disease;
• Verici Dx plc (AIM: VRCI), a developer
of advanced clinical diagnostics for
organ transplant; and
• Trellus Health plc (AIM: TRLS), a
resilience-drive healthcare company
working to transform the way complex
Annual Report 2021 | EKF Diagnostics Holdings plc1
11
Chairman’s Statement (continuation)
chronic conditions are treated through whole-patient
care, with an initial focus on Inflammatory Bowel
Disease (IBD).
Trellus Health plc’s IPO was completed in May 2021,
with EKF’s retained voting rights being transferred to
shareholders. Based on the IPO issue price of 40p this
transfer represented a distribution of £11.2m to EKF
shareholders. The value of our remaining holding in
Renalytix plc (1.39%) was worth £6.2m at 31 December
2021 (2020: £4.9m).
Our initial holding in Verici Dx plc (“Verici”), which we
received by way of a dividend from Renalytix plc during
2020, was worth £1.4m (2020: £1.5m) at year end. On 7
March 2022, we announced that we had agreed to invest
a further £2.5m by participating in Verici’s secondary
fundraising. This additional funding round will accelerate
the progress Verici has already made to date towards
commercial launch of its two lead products, as well as
the development of its third product and expansion of
other capabilities. Following this funding exercise we
currently own 5.77% of Verici’s enlarged share capital. It
remains our stated intention to distribute this enlarged
holding to underlying shareholders as soon as reasonably
practicable and subject to appropriate arrangements to
maintain an orderly market in Verici’s shares following
such distribution.
We will continue to consider additional investment in
the existing stable of spin-outs and to explore other
opportunities with MSIP and will update shareholders
should any of these prospects become candidates with
the potential to deliver further value to our investors.
Dividend
In December 2021, the Company paid a cash dividend of
1.1p (2020: 1.0p) per share as a final dividend for 2020, a
total pay-out of £5.1m (2020: £4.6m). We are pleased to
confirm that, given the progress in EKF’s business and
its strong cash generation, we intend to make a further
dividend payment to shareholders of 1.2p per ordinary
share in respect of the performance of the business in 2021.
If approved by shareholders at the Company’s next Annual
General Meeting, payment will be on 1 December 2022.
Share capital
During the year to 31 December 2021, we did not utilise
the permission we obtained from shareholders to make on-
market purchases of shares for cancellation or otherwise.
The Board has subsequently today announced plans to
undertake a targeted exercise to buy back up to up to a
maximum of 9,000,000 shares (subject to a maximum
spend of approximately £4.0 million) and we believe this
is an appropriate use of our cash reserves and an effective
means of further
improving shareholder value (the
“Buyback”).
The purpose of the Buyback is to return cash to shareholders
and to reduce the share capital of the Company. The
Buyback will be funded from the Company’s existing surplus
cash resources and all ordinary shares of 1p each in the
capital of the Company (the “Ordinary Shares”), purchased
will be held in treasury. Any repurchases made following
the Company’s next AGM being held on 18 May 2022 will
be conditional upon a further shareholder approval of the
Company’s general buyback authority being obtained
at that meeting and subject to the limit of 69,589,585
Ordinary Shares, or such other number as would represent
approximately 15 per cent of the Company’s issued share
capital at the time of issue of notice of the 2022 AGM. The
Company currently intends to operate the Buyback from
the date of this announcement until the earlier of:- the date
on which purchase of 9,000,000 Ordinary Shares has been
completed; the date of the 2022 Annual General Meeting in
the event further shareholder approval is not obtained; or
31 December 2022.
Board changes
It has been a year of significant change at Board level in
EKF, we believe we have a newly focussed Executive team
with an excellent track record for delivering and managing
substantial growth in the Lifesciences and Healthcare
sector, as well an experienced and complementary
non-executive team to provide appropriate challenge
and support to them as they execute our growth strategy
into 2024.
Mike Salter, Chief Executive Officer
Mike Salter, who led our US operations since joining EKF in
October 2017 and has been instrumental in delivering much
of the growth we have seen in this region, became Chief
Executive Officer on 1 October 2021. Mike is an organic
Chemist by training, and based in San Antonio, Texas and
previously headed up our Americas business. Mike was
responsible for overseeing the growth of our Diabetes and
Haematology business in the US and, by leveraging his
business network, he secured licensing agreements, built
production capacity and signed orders for our COVID-19
sample collection kit business. Mike has been a passionate
leader of our US team and has been instrumental in securing
many of our largest US contracts and growth opportunities
and was selected as the ideal candidate to deliver our
strategy of accelerated organic growth.
Mike has over 35 years of experience in the Life Science
and Diagnostics Industry. He joined Amersham plc, the
UK’s largest Life Science company, in 1984 and spent
20 years in various Operational, Product Management
and Business Development roles. When Amersham was
acquired by GE in 2004 to become GE Healthcare, Mike
moved into senior commercial and business development
roles leading new strategic Diagnostic initiatives. In
2016, Mike became General Manager of the Global
Custom Genomics Business. Throughout his time at GE
Healthcare, Mike managed a successful multi-million dollar
business providing Biotech and Lifesciences companies
with products and services to support the development
and launch of their new products. At EKF in his role as
President, Americas, Mike was responsible for delivering
over $20m of new contract manufacturing revenues from
the US operations.
Marc Davies, Chief Financial Officer
Marc Davies, joined as Chief Financial Officer on 1 January
2022, having moved on from his role as Group Finance and
Operations Director at Flexicare Medical (“Flexicare”), a
medical device designer, manufacturer and supplier. At
Flexicare Marc was responsible for overseeing a period
of substantial revenue growth, driven by both organic
performance and acquisition. During his five years at
Annual Report 2021 | EKF Diagnostics Holdings plc1
1212
Chairman’s Statement (continuation)
Flexicare, Marc led several corporate finance transactions
including post-transaction integration.
Cash-settled share-based incentive
Previously, Marc was a Corporate Finance Director at
PwC, providing mid-market private business and private
equity focused corporate finance advice as Head of the
PwC West and Wales Corporate Finance Team. Before
joining PwC in February 2013, Marc was an AIM focussed
Corporate Finance Adviser for over five years, during which
he spent four years at WH Ireland, including work within
its Nominated Adviser function. Marc began his career in
finance as part of the PwC Corporate Recovery team. Marc
is a Fellow Chartered Accountant (FCA) and an Oxford
graduate with an MSc in Mathematical Modelling and
Scientific Computation and an MA in Mathematical Science.
Mike and Marc replaced Julian Baines, MBE, co-founder of
EKF in its present form, and Richard Evans respectively.
We cannot thank Julian enough for his leadership and hard
work on behalf of EKF’s shareholders over the previous 12
years. He remains on the Board as Non-Executive Deputy
Chair. Our thanks also go to Richard for the guidance he
has given the Board and the Group over the significant
time he has spent with us.
We also welcomed two new Non-executive Directors:
Christian (Chris) Rigg, a chartered accountant with
experience in listed businesses at Chief Executive Officer,
Chief Financial Officer and Non-executive Director level,
and Jenny Winter, currently Chief Executive of Animalcare
Group plc, an AIM listed animal healthcare group.
Our thanks also go to the Non-executive Directors who have
retired through the year. Adam Reynolds was a Director
of the business in its previous guise as a sports products
company, and has provided sage advice over the long term
since the EKF business reversed into International Brands
plc as it was then known. Carl Contadini has served on
the Board since 2016 and offered invaluable input to the
operations of the business throughout that time. We thank
them both for their valued contributions.
The Board now comprises six members – two Executive
Directors and four Non-executive Directors:
• Mike Salter, Chief Executive Officer
• Marc Davies, Chief Financial Officer
• Christopher Mills, Non-executive Chairman
• Julian Baines, Deputy Non-executive Deputy Chairman
Christian Rigg, Senior Independent Non-executive
•
Director
• Jenny Winter, Independent Non-executive Director
We believe that Executive and Non-executive Directors
have the right mix of skills and expertise to lead our
excellent team around the World to attain our objectives
for continuing success.
The Board believes that the revised make-up of the
Board is appropriate. We have adopted the Corporate
Governance Code issued by the Quoted Company Alliance.
Further details of compliance are found in the Corporate
Governance Statement and on the Company’s website.
The Company has for some years operated a cash-settled,
share price based incentive for its executive directors
(the “Incentive”), designed to pay out in the event that
the Company was acquired by a third party (an “Exit”).
During the present year EKF shareholders have benefited
from very strong increases in value through the improved
performance of the Group and the investment opportunities
that we have followed. Reflecting this continued delivery
of value to shareholders by the Executive Directors, EKF’s
Remuneration Committee determined that, in the absence
of any other performance related pay mechanism, it was
appropriate to distribute, as performance-related pay, a
portion of the amount that would otherwise be payable
under the Incentive on an Exit. The Executive Directors
each received an equal payment of £0.5m million in
January 2021, followed by a final equal payment of £2.0m
each in July 2021. After these payments, the original
scheme was terminated, as was the similar scheme for Mr
Salter, from which no payments were made. As a result of
the terminations, the fair value amount accrued but unpaid
relating to the schemes totalling £1.9m was written back
through the income statement.
In September 2021 Mr Salter was granted a replacement
cash settled share-based incentive award. The new award
vests if a controlling interest in the Company is acquired by
a third party at any time. In these circumstances an award
is payable to Mr Salter, which increases by reference to the
sale price achieved. It is anticipated that this scheme will
be extended to include Mr Davies in due course.
Outlook
2021 was a year that delivered record revenue and
adjusted EBITDA performance. Our key focus remains on
implementing our strategy to position our core business
for sustainable future growth, utilising cash generated
from short-term contract manufacturing activities. At the
end of 2019 and pre-pandemic we had a core business that
generated revenues of £43.3m and an adjusted EBITDA of
£12.0m. The results for 2021 show that our core business
revenues were broadly in-line with these levels and we
have already implemented our investment plans to support
growth in our core business in 2022.
We are particularly excited about the prospect of our
recent acquisition in the laboratory testing space. Not only
is this earning enhancing and cash generative, but also
an excellent strategic fit within our existing diagnostics
offering that will strengthen our offering to our customer
base. The investment in additional fermentation will
also drive organic growth as our larger volume enzyme
production capacity comes on-line this year.
Current trading is strong and we expect to deliver a
solid first quarter performance in line with that of 2021.
However, we are adopting a pragmatic view that there will
be a significant reduction in pandemic-related contract
manufacturing activity for the remainder of the year. The
new management team is keenly focused on delivering the
growth plan through to 2024 which assumes no benefit
from further COVID-related manufacturing, but instead
is targeting sustainable revenue growth in our expanded
core operations.
Christopher Mills
Non-executive Chairman
29 March 2022
Annual Report 2021 | EKF Diagnostics Holdings plc1
Chief Executive Officer’s Review
I am delighted that we have delivered
record results for 2021, with significant
year-on-year revenue growth (up 25%
from £65.3m in 2020 to £81.8m).
I am also proud that the team was again
able to rapidly react and support the
growing need
for sample collection
devices, kits and sample media to support
the testing needs triggered by the global
pandemic.
A significant proportion of EKF’s top line
growth in 2021 has come from COVID-
related contract manufacturing, which is an
area of the business that we anticipate will
reduce in prominence as the world begins
to ‘live with COVID’ and governments
significantly reduce their ongoing testing
requirements. However, we have now
positioned ourselves as a leading provider
of products and services to support any
future testing demand whether COVID
related or other public health requirement.
More significant for the outlook for the
business is the fact that, during 2021,
revenues from our core business increased
14% to £42.1m (2020: £37.1m) with growth
across all key product verticals. These
business revenue levels also see us broadly
in-line with pre-pandemic revenue levels
as seen in 2019 and the core business
represents a compelling platform in its own
right. Having focussed on recovering the
existing core business to previous levels,
we believe this progress, coupled with
investments already made, and additional
future investments, will fuel sustainable
growth across our business.
13
Operational overview
As a new management team, we have
taken the opportunity to recalibrate how
we report revenues going forward to more
closely align with our product groups and
the way in which business divisions report
into senior management. These are shown
below:
Key products/services
Point-of-Care
Providing a portfolio
of analyser and
consumables,
particularly for use
in Hematology and
Diabetes
Clinical chemistry
Clinical chemistry,
Small lab analysers,
Centrifuges
Life Sciences
Hematology:
Hemo Control,
DiaSpect Tm,
HemataStat II,
Ultracrit
Diabetes:
Biosen C-Line, Quo-
Lab A1c, Quo-Test
A1c, STAT-Site WB)
Other:
Creamatocrit Plus,
Pregnancy Tests,
Lactate Scout,
Uri-Trak
Beta-
Hydroxybutyrate
LiquiColor, Glycated
Albumin, Glycated
Serum Protein, Nitro-
tab, Procalcitonin
Enzyme
fermentation, custom
products and bulk
fermentation
Contract Manufacturing Bulk formulation,
Sample collection
kits, private labelling,
molecular and
forensic kits
Laboratory Services
Following the
acquisition of
Advanced Diagnostic
Laboratory LLC
(“ADL Health”) CLIA
certified facility
Division
£ millions
Point-of-Care
Central Laboratory
Life Sciences
Contract
Manufacturing
Laboratory
Services*
2021
Revenue
2020
Revenue
27.0
13.1
2.0
36.3
1.0
22.9
12.2
2.0
26.3
-
*contribution from 27 September 2021
Annual Report 2021 | EKF Diagnostics Holdings plc1 1414
Chief Executive Officer’s Review (continuation)
Point-of-Care
forward and are working hard to bring these to fruition.
Sales of our hemoglobin analyzers Hemo Control and
DiaSpect Tm showed strong growth as blood banks
and anaemia programmes came back online. Our
HemataStat product, meanwhile, showed significant
growth of 29% as we see a return to normality. We have
also seen growth across all our diabetes instrument
ranges, with
13%,
driven by high growth from our Quo-Test product line.
revenues overall
increasing by
Professional sports medicine has been
returning
to normal as shown by a 27% increase in Lactate
Scout
revenues. We have continued development
work for our clinically focussed Response product.
For 2022, we are looking forward to healthcare and
customer development programmes returning to normal.
Central Laboratory
β-HB LiquiColor sales remain strong and increased by 8%
contributing the majority of growth in this area, with sales
of other chemistry products broadly flat, due to customers
concentrating on COVID-related business revenues. We
now expect these to come back on stream during the
course of 2022.
Life Sciences
Across contract fermentation and other non-COVID related
contract manufacturing, sales remained flat at £2.0m.
We continue to see a strong pipeline of opportunities to
supply contract manufacturing services from our Elkhart
and South Bend sites, in Indiana, and have committed
resources to add capacity.
To take advantage of a demand-driven opportunity
in the research and molecular enzyme areas, as well as
food grade fermentation digestive proteins area, we are
investing around $10m in the construction and installation
of new 1,500L, 3,000L and 14,500L fermenters by third
party, specialist turn-key contractors. We expect this to
support significant revenues growth in this area by 2024.
Contract Manufacturing
Once again, the majority of our contract manufacturing
revenues related to supporting testing requirements in
relation to the Global Pandemic. The market dynamics
for COVID test collection kits changed during 2021 and to
meet demand our focus switched from sales of reagents
for molecular transport media, which had characterised
our activities in 2020, to the manufacture of filled tubes
and sample collection kits. While the revenues from these
product lines increased significantly, the nature of these
products meant that the gross margin percentages were
lower. As governments across the world changed their
responses to COVID, often at very short notice, we and
our customers were required to be extremely flexible to
vary activity levels in response to demand which often
changed overnight.
Our sample collection related revenues at the beginning
of the current year have held up well, however we expect
to see this specific revenue line significantly decrease
over the year as the demand for testing drops. We have
continued to use temporary workers and to add facilities
on short term bases where possible to limit our risk. We
have developed excellent transferable and scalable skills
as a result of our pandemic response, and we are looking
forward to applying these skills to new areas. We have
identified a number of potential opportunities through
partners which we believe have great potential going
Upon review of COVID related stock at year end we have
increased our overall inventory provision by a further
£384k. We believe this is prudent given the anticipated
decrease in COVID related activities.
Laboratory Services
On 27 September 2021, we acquired ADL Health, a San
Antonio based CLIA certified testing laboratory focussed
on high complexity testing and covering the fields of
clinical, forensic and microbiological tests. Using its
expertise in Polymerase Chain Reaction (PCR) testing,
ADL Health also provides COVID testing needs for dozens
of Fortune 500 companies and government agencies.
ADL Health is expanding its range of testing capabilities
across a broader suite of healthcare applications.
The cost of acquisition of ADL was an initial $10m largely
funded through the issue of ordinary EKF shares after
a working capital true-up payable in cash, with the
consideration shares subject to a phased lock-in and
orderly market agreement, plus contingent consideration
based on the achievement of certain earnings targets
over the following three years. The ADL Health business
is cash generative and is expected to have a strong first
quarter significantly exceeding revenues recorded in the
final quarter of 2021.
The EKF Board believes that ADL Health’s wider testing
offer, including current and planned capabilities, provides
an attractive platform to both complement and broaden
the Group’s existing diagnostics offering. Having CLIA
lab capacity in-house also provides us with a means to
strengthen our customer relationships by providing wider
testing services, and allows us to build synergistically
on the relationships with industry leaders that we have
developed over the last two years.
Since the acquisition, we have already secured a strategic
partnership with our existing customer, Yourgene Health
plc, whereby ADL Health will offer a non-invasive pre-
natal testing (NIPT) service to the US market, utilising
Yourgene’s proprietary technology and ADL Health’s
accredited US laboratory to process returned samples.
ADL Health contributed £1.0m to 2021 revenues, following
its acquisition on 27 September 2021.
In addition to the above business divisions there was a
further £2.4m revenues related to shipping and handling
recharges, repairs and other sundries (2020: £1.9m).
Regulatory update
Our regulatory team is fully committed to meet the new
requirements of the In Vitro Diagnostic Regulation (IVDR)
which affects all our products in the EU. We have adapted
to the significant changes the IVDR bring such that we are
ready to meet the immediate requirements in May 2022,
and have a defined plan for the amended transitional
provisions as published in January. For the UK, to meet
the requirements of the MHRA we have established the UK
Responsible Person for our non-UK operating entities, and
are set to meet UKCA marking requirements.
Russia and Ukraine
EKF owns 60% of O.O.O. EKF Diagnostika, a distribution
subsidiary located in Moscow which sells EKF Point-of-
Care products and other third-party products into Russia
and neighbouring states. As a supplier of medical products
Annual Report 2021 | EKF Diagnostics Holdings plc1 Chief Executive Officer’s Review (continuation)
15
with no dual use it would not be appropriate to end supplies
to the region, but we are seeing some disruption caused
by the Western sanctions relating to foreign exchange
controls. We are working with the staff and management
of this business to keep it as stable as possible, but we
have already discounted sales from this region from our
growth forecasts as a precaution. Financial details of
our business in Russia, which represents less than 5% of
Group revenue and Adjusted EBITDA at the consolidated
level, are shown in the segmental analysis in Note 3.
We also have a distributor in Ukraine with whom we have
worked for some years, we wish that all our friends in
Ukraine stay safe and well. We also have a distributor in
Belarus. Neither represent a significant part of our business.
Summary
We are absolutely delighted with the performance of our
core business over the last twelve months and the cash
generated from contract manufacturing has allowed us to
invest in future growth opportunities – both organically,
particularly in the area of enzyme production, but also
through acquisition with the addition of ADL to the Group
and the exciting prospects that adding a laboratory
testing capacity to our overall offering opens up for us.
When I became CEO in October 2021, we had set
out ambitious growth plans for EKF that would see
the core business positioned to deliver substantial
growth in both revenues and adjusted EBITDA. We
can already see the signs of this strategy coming to
fruition and I am confident that the investment put in
place will see further progress in 2022 and beyond.
As a Board we remain confident in delivering on our
strategy for growth into 2024 and I welcome the support
from my colleagues and investors alike, as we continue
to focus on execution of our plans to generate value for
shareholders.
Mike Salter
Chief Executive Officer
29 March 2022
Annual Report 2021 | EKF Diagnostics Holdings plc1 1616
Chief Financial Officer’s Review
Revenue
Revenue for 2021 was £81.8m (2020:
£65.3m), an increase of 25% on the prior
year. At constant 2020 exchange rates,
revenue for the year excluding ADL would
have been £85.5m, an organic growth rate
of 29%.
Revenue by geographical segment based
on the legal entity locations from which
sales are made, is as follows:
caused by changes in the mix of Contract
Manufacturing related products as well
as increased costs in the supply chain.
Administration costs and research
and development
Administration costs have decreased to
£17.7m (2020: £20.7m).
2021
£’000
2020
£’000
+/- %
To aid understanding, administrative
expenses in each period are made up as
follows:
Germany
34,171
20,286
+68%
36,056
37,692
(4%)
8,323
4,378
+90%
3,286
2,904
+13%
81,836
65,260
+25%
Non-exceptional
administration
expenditure before
R & D capitalisation
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
19,511
17,234
EBITDA*
£’000
Effect of share-
based payments
(1,238)
5,292
USA
UK
Russia
Total
Germany
USA
UK
Russia
Total
Revenue
£’000
34,171
36,056
8,323
3,286
11,480
12,735
1,293
981
81,836
26,489
* Adjusted EBITDA excludes exceptional
items and share-based payments.
Germany – Significant revenue increase
primarily due to sample collection tubes
and kits contract manufacturing activity
USA – Contract manufacture of bulk
molecular transport media and PBS for
public health and private sector customers
tailed off during H2
UK – Increased demand and full year
effect of sample collection tubes and kits
contract manufacturing activity
Russia – Increased demand in Point-of-
Care portfolio. EKF’s Russian entity is 60%
owned by the Group but 100% of its results
are consolidated, with the non-controlling
interest shown separately in the income
statement and statement of financial
position.
As referred to in the Chief Executive Officer
Review, we have taken the opportunity
to recalibrate how we report revenues
going forward to more closely align with
our product groups and the way in which
business divisions
into senior
management.
report
Gross profit
represents
Gross profit is £39.4m (2020: £37.4m),
which
a gross margin
percentage of 48% (2020: 58%). The
increased gross profit was largely due
to the higher volumes. The reduction in
gross margin percentage was primarily
Less capitalised
R & D
Effect of
exceptional items
Total
administrative
expenses
(659)
(586)
95
(1,282)
17,709
20,658
The reduction is largely caused by the
effect of the closure of the cash settled
share-based payment schemes, which,
after payments made out during the year,
allowed a write-back of the remaining
accrued balance of £1.9m.
Research and development costs included
in administration expenses were £1.4m
(2020: £1.4m). A further £0.7m (2020:
£0.6m) was capitalised as an intangible
asset, resulting from our development
work to broaden and improve our product
portfolio, bringing gross R&D expenditure
for the year to £2.1m (2020: £2.0m). The
charge for depreciation of fixed assets and
amortisation of intangible assets increased
to £5.9m (2020: £4.6m). The increase was
mainly associated with higher amortisation
of development projects, and increased
depreciation on
right of use assets
capitalised in accordance with IFRS 16.
Operating profit and adjusted earnings
before interest, tax, depreciation and
amortisation
The Group generated an operating profit of
£21.7m (2020: £16.9m). This was a result of
the higher revenue levels seen during the
year and the lower administration costs.
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
Annual Report 2021 | EKF Diagnostics Holdings plc1
Chief Financial Officer’s Review (continuation)
17
to the investment, the Company holds 5.8% of Verici DX
plc. EKF intends that its holding in Verici will be distributed
to its own underlying shareholders as soon as reasonably
practicable and subject to appropriate arrangements to
maintain an orderly market in Verici’s shares following
such distribution.
Deferred consideration
The deferred consideration of £2.9m at the start of last
year has been written back, along with its associated
warranty claim debtor, following settlement of the
dispute. A small payment has been made to the former
owner of EKF’s German operations. The new balance
of £0.6m (2020: £2.9m) is for deferred and contingent
consideration relating to ADL, which has been estimated
at its fair value.
Cash and working capital
Net cash (which excludes marketable securities and
lease creditors assessed in relation to IFRS 16 assets) has
decreased to £19.6m from £21.4m. Gross cash has fallen
to £20.3m (2020: £21.9m). Existing Borrowings reduced
in line with repayments to £0.3m (2020: £0.5m), while
borrowings overall rose as a result of borrowings held by
ADL on acquisition of £0.4m, which have been settled
post year end. Cash generated by operations is £14.2m
(2020: £20.8m) mainly influenced by the effect of share-
based payments.
Investment has been made in the acquisition of fixed
assets (£4.3m excluding IFRS 16 leases). Working capital
grew by £6.7m during the period, particularly as a result
of additional inventory carried in the USA. Payments
during the year under the now closed previous exit bonus
scheme totalled £5.3m. The dividend paid in December
2021 totalled £5.1m.
Marc Davies
Chief Financial Officer
29 March 2022
as the Board believes it gives a clearer comparison of
the underlying operating performance between periods.
In 2021 we achieved adjusted EBITDA of £26.5m (2020:
£25.5m), an increase of 4%. The calculation of this non-
GAAP measure is shown on the face of the income
statement. It excludes the effect of a non-cash share-
based payment credit of £1.2m (2020: charge of £5.3m),
and exceptional losses of £0.1m (2020: profit of £1.3m),
the main elements of which are costs relating to the
acquisition of ADL.
Finance costs
Net finance costs are £0.3m (2020: £1.5m). The main
cost results from a decrease in the fair value of deferred
consideration which is valued using the Company’s share
price. Although the Group holds net cash, achievable
financial returns on this are very low because of low
interest rates around the world.
Tax
There is an income tax charge of £5.3m, an increase from
the prior year charge (2020: £4.0m), but a decrease
in the tax rate to 25% from 26%. Deferred tax of £1.5m,
calculated on the increase in the market value of listed
investments over cost, has been charged direct to Other
Comprehensive Income.
Dividend
A cash dividend of 1.1p per ordinary share was paid in
December 2021, in respect of the final dividend for 2020.
Dividends are shown in the Statement of Changes in
Equity, and not in the Income Statement.
Balance sheet
Property plant and equipment and right-of-use assets
Additions to fixed assets were £5.7m (2020: £2.1m),
and fixed assets rose by a further £0.9m recognised on
the acquisition of ADL. Major programmes include the
continuing work on the fit out of the new factory building
in nearby South Bend and upgrading and refurbishment
of the Group’s manufacturing facility in Elkhart, USA and
the; and the capitalisation of new and replacement leases
under IFRS 16 including new properties in the UK and USA.
These leases are either for three years or less, or have
break clauses that limit our commitment to a maximum
of three years.
Intangible assets
The carrying value of intangible assets has increased, from
£37.1m at the end of 2020 to £41.9m as at 31 December
2021. This is due to the intangible assets of £8.0m
recognised on the acquisition of ADL.
Investments
At year-end, the Company continues to hold 1.39% of
the issued share capital of Renalytix plc, a developer of
artificial intelligence enabled acute kidney injury products,
and 1.89% of Verici Dx plc, a developer of advanced
clinical diagnostics for organ transplant. The market
value of these investments increased by £1.1m during
the year. Post year end the Company invested a further
£2.5m in Verici alongside other existing and new investors
participating in a placing of new ordinary shares. Further
Annual Report 2021 | EKF Diagnostics Holdings plc1 1818
Board of Directors
Executive Directors
Michael Salter (appointed 1 October 2021)
Chief Executive Officer
Mike Salter joined EKF in 2017 as head of the Group’s American business where he was
responsible for all USA facilities including sales, operations and Regulatory Affairs, and
also had a particular focus on EKF Life Sciences in Elkhart, Indiana. Previously, Mike
worked at GE Healthcare where he was General Manager for the Custom Molecular
Reagent Business within GE Life Sciences. Mike has over 35 years of experience in the
Life Science and Diagnostics Industry, 33 of which were spent with GE and Amersham
in a variety of positions in the UK, Canada and USA. Since joining EKF, Mike has been
responsible for overseeing the growth of EKF’s Diabetes and Haematology business in
the US and, by leveraging his business network he has secured licensing agreements, built
production capacity and secured orders for the COVID-19 sample collection kit business.
Richard Evans
Chief Operating Officer and Finance Director
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 retired from the Board on 1
January 2022.
Marc Davies (appointed 1 January 2022)
Chief Financial Officer
Marc joined EKF on 1 January 2022 from medical device designer, manufacturer and
supplier Flexicare Medical, where he was Group Finance and Operations Director
from October 2017. Marc was responsible for overseeing substantial revenue growth
throughout his time with Flexicare, driven by both organic performance and acquisition.
Whilst at Flexicare Medical. Marc led several corporate finance transactions including
post-transaction integration.
Previously, Marc was a Corporate Finance Director at PricewaterhouseCoopers (PwC),
providing mid-market private business and private equity focused corporate finance
advice as Head of the PwC West and Wales Corporate Finance Team. Before joining PwC
in 2013, Marc was an AIM focussed Corporate Finance Advisor for over five years, during
which he spent four years at WH Ireland, including work within its Nominated Adviser
function. Marc began his career in finance as part of the PwC Corporate Recovery team.
Marc is a Fellow Chartered Accountant (FCA) and an Oxford graduate with an MSc
(Distinction) in Mathematical Modelling and Scientific Computation and an MA (First
Class) in Mathematical Science.
Annual Report 2021 | EKF Diagnostics Holdings plc1 Board of Directors
Non-Executive Directors
19
Christopher Mills
Non-executive Chairman
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 stood down from the audit committee
in March 2022.
Julian Baines MBE
Non-executive Deputy Chairman
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. Julian founded and was CEO
of the Group from its inception in 2009 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 Trellus Health plc and Verici Dx plc. On 1
October 2021 he stepped down as CEO of the Group but continued as a Non-executive
Director.
Adam Reynolds (resigned 19 May 2021)
Non-executive Director
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 Belluscura plc, Myhealthchecked plc and Yourgene Health plc, and a director of
several listed and private companies. Adam retired from the Board in May 2021.
Annual Report 2021 | EKF Diagnostics Holdings plc1 2020
Board of Directors
Non-Executive Directors
Christian Rigg (appointed 1 July 2021)
Non-executive Director
Chris Rigg is a chartered accountant who has significant executive experience at both
public and private companies. He is currently the Chief Executive Officer of Project
Galaxy UK Topco Limited (the holding company of Mandata Holdings Limited) and a
Non-executive Director of the main market listed Sportech plc. Chris previously held
the positions of Chief Financial Officer and latterly Chief Executive Officer at Quantum
Pharma plc, which, under his stewardship, was refinanced and implemented a new
strategy facilitating growth and leading to its acquisition by Clinigen Group plc for an
enterprise value of £160 million.
Chris is a member of the audit committee.
Carl Contadini (resigned 1 February 2022)
Non-executive Director
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 LLC, where he assists in sourcing, evaluating and monitoring
investments. Carl also holds the positions of Executive Chairman at Utitec Holdings
Inc. and of Chairman of the Harold Lever Cancer Cente. He is also a board member of
Waterbury Hospital which is part of the Prospect Medical Company. 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. Carl retired from the Board in February 2022.
Jennifer Winter (appointed 1 February 2022)
Non-executive Director
Jenny has over 20 years’ experience across a broad variety of healthcare organisations
ranging from small not-for-profit companies to large corporates. Jenny is currently
Chief Executive Officer of AIM listed Animalcare Group plc (AIM: ANCR) where she is
successfully executing on the business’s long-term growth strategy, as reflected in the
recently announced strong full year trading performance against a backdrop of very
challenging market conditions. Before joining Animalcare Group plc in October 2018,
Jenny was Vice President of Respiratory products - Global Supply Chain and Strategy
at AstraZeneca, a position she held from 2015. Jenny has a BSc in Physiology and
Pharmacology from the University of Southampton.
Annual Report 2021 | EKF Diagnostics Holdings plc1 21
Strategic Report
for the year ended 31 December 2021
The Directors present their Strategic Report for
the year to 31 December 2021.
Review of the business
A review of the business is contained in the Chairman’s
Statement on pages 10 to 12 and in the Chief Executive
Officer’s Review on pages 13 to 15, and the Chief Financial
Officer’s Review on pages 16 and 17.
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 and emerging 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
incentivisation packages are offered
key employees,
through a mixture of sales commission, and profit related
bonuses. Main Board Directors are incentivised as detailed
in the Directors’ Remuneration Report. There has been
no change in the level of this risk in the last 12 months.
Political risk
A significant proportion of the Group’s revenues are
accounted for by agreements in developing countries. Any
instability in these countries could meaningfully affect the
operations and the revenue of the Group. In particular the
Group has revenues from customers in Russia and an entity
based there. As a result of the sanctions recently imposed
on Russia by the EU, the USA and other countries, there are
enhanced risks in respect of our Russian entity, including
credit risk to cash balances, its ability to collect debtors,
and our ability to import products into Russia. The situation
in Russia is changing rapidly and mitigation of these risks
is difficult, however we maintain frequent communications
with our senior management in the country who have a good
knowledge of operating there in difficult circumstances. In
addition we have discounted sales from this region in our
growth forecasts.
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.
The UK has withdrawn from the EU. Although the Group
has not faced 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, including the movement of
certain activities between the UK and the EU.
The level of this risk has increased in the last 12 months.
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. There has been no change in
the level of this risk in the last 12 months.
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.
Annual Report 2021 | EKF Diagnostics Holdings plc1 2222
Strategic Report
for the year ended 31 December 2021 (continuation)
The Group’s operations are covered by In Vitro Diagnostic
Regulation (IVDR) which affects all our products in the
EU. We have adapted to the significant changes the IVDR
brings such that we are ready to meet the immediate
requirements in May 2022, and have a defined plan for the
amended transitional provisions. There has been no change
in the level of this risk in the last 12 months.
Competition risk
to
the Group’s current and
Due
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. The Group seeks to mitigate this risk by
securing patent registration protection for its products
where appropriate, maintaining confidentiality agreements
regarding
technology,
monitoring technological developments and by selecting
leading businesses in their respective fields as distribution
partners capable of addressing significant competition,
should it arise. There has been no change in the level of this
risk in the last 12 months.
the Group’s know-how and
Intellectual property 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. There has been no change in
the level of this risk in the last 12 months.
Foreign exchange risk
in
The Group has transactional currency exposures as
the majority of revenues and expenditure and certain
borrowings are denominated
foreign currencies.
Fluctuations in exchange rates between the Company’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 where appropriate 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. There has been no
change in the level of this risk in the last 12 months.
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 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. There has been no change in
the level of this risk in the last 12 months.
Financial reporting and disclosure
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 Chief Financial Officer. The
annual financial statements are also subject to audit by the
Group’s external auditors. There has been no change in the
level of this risk in the last 12 months.
Cyber security risk
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. Formal procedures
are in place where necessary. The Group also has specific
insurance cover. There has been no change in the level of
this risk in the last 12 months.
Pandemic risk
The recent COVID-19 pandemic has created uncertainty
in the market in the short term. Many countries continue
to manage their COVID risk through restrictions on travel
and activities, and government action continues to have
a significant effect on economies across the world. We
believe we have a robust plan in place to mitigate the
effect of the disruption on the business including taking the
following actions (amongst others):
•
•
Ensuring the safety of our employees by organising
for as many staff as possible to work from home,
making appropriate adjustments in the workplace, and
changing working practices
Improving our computer networking to facilitate
remote working
• Gaining designation as a company essential to basic
medical care which allows our premises to remain
open even in a lockdown
Increasing supplier and customer contact so as to be
able to anticipate issues and react quickly
Increasing raw material stock holding
•
•
Annual Report 2021 | EKF Diagnostics Holdings plc1
23
Strategic Report
for the year ended 31 December 2021 (continuation)
While we have continued to see some disruption to
our core business as a result of the COVID-19 pandemic,
we have protected our core business as far as possible
and core revenue has grown by 14% this year. It is clear
that healthcare activities are returning to normal and that
our base case forecasts for our core business are still
applicable. While the pandemic has sadly been very costly
for many in lives and income, EKF has been able to learn
new skills and develop a business model which offers great
possibilities in the post-pandemic world. However, we are
adopting a pragmatic view that there will be a reduction in
pandemic-related contract manufacturing activity for the
remainder of the year.
While any further economic disruption stemming from
the pandemic is impossible to forecast, the continuing
performance of the business gives the Directors confidence
that the business can survive our worst case scenarios for
business performance for at least the next 12 months. The
level of this risk has decreased in the last 12 months.
Climate change risk
Climate change means we may face physical risks such
as more frequent or severe weather events; transitional
risks such as increased regulatory requirements from our
customers or that a move towards a greener economy
could mean the Group might face reductions in asset values
or higher costs of doing business. While the potential
economic effect on the Group is uncertain, the Group
does not believe its operations are materially at risk. The
Group seeks to manage this risk by monitoring events and
taking mitigating actions if necessary. More information
on our response to climate change risks is shown in the
Environment section of this Report on page 23. The level of
this risk has increased in the last 12 months.
Plastic packaging tax
A new environmental tax on plastic packaging manufactured
in, or imported into the UK, that does not contain at least
30% recycled plastic is being introduced from 1 April 2022.
We have taken steps to increase our knowledge of this
new tax and introduced systems to measure its effect, so
as to mitigate any possible financial effect. This has been
introduced as a new risk this year.
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 global, world class, IVD business
through organic growth and strategic partnerships,
concentrating on point-of-care, central laboratory, and
building on our recent successes in contract manufacturing,
while investing heavily in our enzyme business and newly
acquired testing facility. 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 includes
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.
Within its point-of-care business the Group works mainly
on the principle of providing value priced instrumentation
which generates long-term revenue streams from the
subsequent delivery 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 pages 10 to 12, and the
Chief Executive Officer’s Review on pages 13 to 15 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 key performance indicators currently used across the
Group are revenue, gross profit, adjusted EBITDA and cash
resources and working capital. Local entities also use a
variety of non-financial measures for measuring their own
performance. The Group is working to establish other key
performance indicators including non-financial measures
across the Group. KPIs are discussed in more detail in the
Chief Financial Officer’s review on pages 16 and 17.
Environment
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.
Primary responsibility for governance of the Group’s
response to climate change lies with the Board, which sets
the strategy for managing associated risks in association
with the Group’s senior management. Senior management
are responsible for identifying, assessing, and managing
climate change risks and opportunities, and for determining
processes and actions that need to be taken to manage and
report on that risk. The Group is in the early stages of this
process, having recently assigned a senior manager to lead
the Group’s response. Part of this process will include an
analysis of the metrics, targets, and reporting requirements
that we are likely to face.
Physical risks
The Group operates in a number of geographical locations
throughout the world. None of these locations are in
environmentally sensitive areas, and the Group does not
believe that any locations are at material risk from severe
weather events or similar consequences of climate change.
We will monitor potential changes to our physical risk
profiles by monitoring events and assessing our response
to them.
Transitional risks
Many of our ultimate customers are government bodies or
national health systems which are funded by governments,
large charities, or similar bodies. It is likely that part of
their climate change management will involve trickling
down net zero or similar initiatives to their supply chain.
It is likely these requirements will increase over time. We
have commenced a process of seeking to understand
what effects if any that this process will have on our own
response and risk profile. Areas we have initially identified
include use of plastics and packaging. Our strategy is to
work together with our customers and our own supply
chain to ensure that we can operate successfully within
customer requirements while mitigating as far as possible
any additional costs.
Annual Report 2021 | EKF Diagnostics Holdings plc1
2424
Strategic Report
for the year ended 31 December 2021 (continuation)
UK energy use
The Group is required to report on energy use in the UK only,
as our overseas subsidiaries do not come within the scope
of the UK Government’s Streamlined Energy and Carbon
Reporting (SECR) requirements. We are considering the
best strategy for reporting energy use more widely in the
Group.
The table below represents the energy use and associated
greenhouse gas (GHG) emissions from electricity and fuel
use in the UK for the year ended 31 December 2021. This is
the first year we have exceeded the threshold of being a
“low energy user” and therefore the exemption no longer
applies.
Energy consumption used to
calculate emissions:
Electricity usage
Transport
Conversion factors used to calculate
emissions:
Electricity usage (scope 2)
Transport (scope 1)
2021
68,468 KwH
2,017 KwH
2021
0.21016
0.27698
The emission conversion factors are based on the UK
Government GHG Conversion Factors for Company
Reporting 2021.
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.
Section 172 Statement
The Directors are required by the Companies Act 2006 to
act in the way they consider, in good faith, would be most
likely to promote success of the Group for the benefit of
its shareholders as a whole and in doing so are required to
have regard for the following:
• the likely long term consequences of any decision;
• the interests of the Group’s employees;
• the need to foster the Group’s business relationships
with suppliers, customers and others;
• the impact of the Company’s operations on the
community and the environment;
• the desirability of the Company maintaining a
reputation for high standards of business conduct;
and the need to act fairly as between shareholders of
the Company.
The Group has adopted the Corporate Governance Code
for Small and Mid-Size Quoted Companies from The
Quoted Companies Alliance (the “QCA Code”). The QCA
Code is an appropriate code of conduct for the Group’s
size and stage of development. There is a discussion of
how the Group applies the ten principles of the QCA Code
in support of its growth on the Group’s website.
Calculated emissions
Electricity usage
Transport
Total
2021
Tonnes of CO2
14
1
15
The Chairman’s and Chief Executive Officer’s statements
describe the Group’s activities, strategy and future
prospects, including the considerations for long term
decision making, on pages 10 to 15. The Board considers
that its response to the COVID pandemic has been
measured and has allowed it to grasp opportunities as they
have arrived.
The rate of emissions per £m of turnover is 0.18 tonnes of
CO2.
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
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
The Board considers its major stakeholders to be its
employees, its suppliers, customers, and shareholders.
When making decisions, the interests of these stakeholders
is considered informally as part of the Board’s group
discussions.
The Board has a good relationship with the Group’s
employees. The Board maintains constructive dialogue with
employees through the Executive Directors. Appropriate
remuneration and incentive schemes including bonuses and
commissions are maintained to align employees’ objectives
with those of the Group. The Group regularly discusses
progress both locally and at group level with employees
in “town hall” style meetings, allowing opportunities to
exchange views and for employees to have a say. The
Group has an open, flexible, and entrepreneurial culture
which has allowed the Group to be flexible and responsive
to customer needs. The Board monitors, assesses,
and promotes the Group’s corporate culture through
discussions with management and employees and through
the use of appropriate measures.
The Board ensures that the Group endeavours to maintain
good relationships with its suppliers by contracting on
reasonable business terms and paying them promptly,
within agreed terms. We meet with our significant suppliers
regularly and where required audit their activities to ensure
that materials are delivered effectively in a timely and cost-
efficient manner. We frequently offer longer term contracts
to provide stability to their business in return for cost
savings. These principles ensure that the Group’s and our
significant suppliers’ interests are aligned.
Annual Report 2021 | EKF Diagnostics Holdings plc1
25
Strategic Report
for the year ended 31 December 2021 (continuation)
The Executive Directors meet major customers regularly
and encourage a dialogue with them and with the Regional
Sales Management team as appropriate. The Board receives
regular reports on progress with customer relationships to
ensure that their decision making takes into account the
needs of our customer base. Key Performance Indicators
are used internally to ensure we are responding to customer
needs.
The Board does not believe that the Group has a significant
impact on the communities and environments within which
it operates. 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,
and that it contributes as far as is practicable to the local
communities in which it operates.
The Board recognizes the importance of maintaining
high standards of business conduct. The Group operates
appropriate policies on business ethics and provides
mechanisms for whistle blowing and complaints. The
Board endeavours to maintain good relationships with
its shareholders and treat them equally. This is described
in more details in “Relations with shareholders” in the
Corporate Governance Report on pages 29 and 30.
The Strategic Report was approved by the Board on 29
March 2022 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2021 | EKF Diagnostics Holdings plc1 2626
Report of the Directors
for the year ended 31 December 2021
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 2021.
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
• Michael Salter (appointed 1 July 2021)
• Christian Rigg (appointed 1 July 2021)
• Marc Davies (appointed 1 January 2022)
• Jennifer Winter (appointed 1 February 2022)
• Richard Evans (resigned 1 January2022)
• Adam Reynolds (resigned 19 May 2021)
• Carl Contadini (resigned 1 February 2022)
The Company Secretary is Salim Hamir. In October 2021 Mr
Baines stepped down as Chief Executive of the group, but
remained a director.
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
pages 10 to 12, the Chief Executive Officer’s Review on pages
13 to 15, the Chief Financial Officer’s Review on pages 16 and
17, and the Strategic Report on pages 21 to 25.
Dividends and share buy back
In December 2021 the Company paid a final dividend for
2020 of 1.1p (2019: 1.0p) per share. The Board has noted
that it intends to follow a progressive dividend policy. If
approved by shareholders at the Company’s next annual
general meeting, payment of a dividend of 1.2p per share
will be on 1 December 2022 to shareholders on the register
on 3November 2022.
The Company holds authorisation to acquire up to
approximately 15% of its Ordinary Shares in order to
reduce the number of shares in issue. No shares (2020:
no shares) were acquired under this authorisation during
the year. The Company has announced that it intends to
buy up to a maximum of 9,000,000 shares for cancellation
during 2022.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
financial
performance, that the Group will be able to operate
within the level of its current funding arrangements.
reasonably plausible changes
in
While we have continued to see some disruption to our
core business as a result of the COVID-19 pandemic,
we have protected our core business as far as possible
and core revenue has grown by 14% this year. It is clear
that healthcare activities are returning to normal and
that our base case forecasts for our core business are
still applicable. While the pandemic has sadly been very
costly for many in lives and income, EKF has been able
to learn new skills and develop a business model which
offers great possibilities in the post-pandemic world.
However, we are adopting a pragmatic view that there will
be a significant reduction in pandemic-related contract
manufacturing activity for the remainder of the year.
The Group has revenues from customers in Russia and an
entity based there. As a result of the sanctions recently
imposed on Russia by the EU, the USA and other countries,
there are enhanced risks in respect of our Russian
entity, including credit risk to cash balances, it’s ability
to collect debtors, and our ability to import products
into Russia. In preparing a downside going concern
forecast we have discounted sales from this region.
While any further economic disruption stemming from
the pandemic is impossible to forecast, the strength
of the Group’s balance sheet aligned to the continuing
performance of the business gives the Directors confidence
that the business can continue to meet its obligations as they
fall due, even under our worst case scenarios, for at least
the next 12 months. Accordingly, the directors are satisfied
they can prepare the accounts on a going concern basis.
Financial risk management
Financial risk management is discussed in Note 3 of the
financial statements.
Employee policies and engagement
Employee policies are discussed in the Strategic Report on
pages 21 to 25.
Stakeholder engagement
A statement summarising how the directors have had regard
to the need to foster the Group’s business relationships
with other stakeholders is included in the Strategic Report
on pages 21 to 25.
Streamlined Energy and Carbon
Reporting (SECR)
SECR reporting is included in the Strategic Report on
pages 21 to 25.
Annual Report 2021 | EKF Diagnostics Holdings plc1 Report of the Directors
for the year ended 31 December 2021 (continuation)
27
Directors’ interests
The interests in the share capital of the Company of those
Directors serving at 31 December 2021 and as at the date
of signing of these financial statements, all of which are
beneficial, were as follows:
On 31 December 20211
Ordinary Shares of
1p each
On 31 December 20202
Ordinary Shares of
1p each
Christopher Mills
130,875,000
136,113,591
1,605,288
125,000
1,855,288
125,000
Julian Baines
Michael Salter
Christian Rigg
Marc Davies
Jennifer Winter
Richard Evans
Adam Reynolds
Carl Contadini
-
-
-
178,842
1,168,613
-
1 or date of resignation if earlier
2 or date of appointment if later
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.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the group and the company
financial statements
in accordance with UK-adopted
international accounting standards.
Under company law, 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
company and of the profit or loss of the group for that
period. In preparing the financial statements, the directors
are required to:
-
-
-
178,842
1,668,613
-
•
•
select suitable accounting policies and then apply
them consistently;
state whether applicable UK-adopted international
accounting standards have been followed, subject to
any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
•
reasonable and prudent; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
group and company will continue in business.
The directors are responsible for safeguarding the assets
of the group and company and hence for taking reasonable
steps for the prevention and detection of fraud and
other irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s and company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the group and 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 company’s website. Legislation in the United
Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
Directors’ confirmations
In the case of each director in office at the date the
directors’ report is approved:
•
so far as the director is aware, there is no relevant
audit information of which the group’s and company’s
auditors are unaware; and
they have taken all the steps that they ought to have
taken as a director in order to make themselves aware
of any relevant audit information and to establish
that the group’s and company’s auditors are aware of
that information.
Mr Mills holds 150,000 Ordinary shares in his own name.
Mr Mills’ other 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.
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.
Substantial shareholdings
As at 24 March 2022, 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
130,875,000
28.21%
LionTrust Asset
Management
Canaccord Genuity
Wealth Management
Schroder Investment
Management
38,719,763
8.35%
31,460,476
6.78%
20,049,475
Octopus Investments
18,916,000
Stockinvest Limited
18,555,500
4.32%
4.08%
4.00%
The interests disclosed above are those as at 31 December
2021, updated for any substantial shareholding notifications
received up to 24 March 2022.
Annual Report 2021 | EKF Diagnostics Holdings plc1
2828
Report of the Directors
for the year ended 31 December 2021 (continuation)
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.
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
29 and 30 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 pages 79 and 80.
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
29 March 2022 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2021 | EKF Diagnostics Holdings plc1 Corporate Governance Statement
for the year ended 31 December 2021
Compliance
Board meetings
29
7 (7)
7 (7)
7 (7)
5 (5)
1 (1)
4 (7)
6 (6)
The Company recognises the value of good corporate
governance in every part of its business. In 2018 the Board
adopted the corporate governance principles of the
Quoted Companies Alliance 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 2021 sought to address the principles underlying
the Code.
7 Board meetings were held during the year. The Directors’
attendance record during the year, along with the number of
meetings for which they were eligible to attend, is as follows:
Christopher Mills (Non-Executive Chairman)
Julian Baines (Chief Executive Officer)
Richard Evans (COO and Finance Director)
Michael Salter (CEO designate)
Adam Reynolds (Non-Executive Director)
Board composition and responsibility
Carl Contadini (Non-Executive Director)
The Board currently comprises two Executive Directors
and four Non-Executive Directors. Christopher Mills was
appointed as Non-Executive Chairman on 20 April 2016.
Julian Baines was appointed Non-executive Deputy
Chairman on stepping down as Chief Executive Officer
on 1 October 2021. Michael Salter was appointed as Chief
Executive on 1 October 2021. Richard Evans resigned as
Finance Director and was replaced by Marc Davies on 1
January 2022.
It is the Board’s opinion that the two directors, Christian Rigg
(replacing Adam Reynolds) and Jennifer Winters (replacing
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. Rigg and Ms. Winter have
been appointed to the Boards of numerous companies, with
Mr. Rigg specialising in finance and operational matters
and Ms. Winter specialising in commercial operations in the
healthcare sector. The Directors keep their skills up to date
through appropriate training and experience both within
and outside the organisation.
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 including
corporate governance, and the CEO, who is responsible for
implementing the strategy and day to day running of the
Group. He is assisted by the Chief Financial Officer.
Chris Rigg (Non-Executive Director)
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.
On March 11 2022 the Board performed an evaluation of
their performance and that of the Chairman, as well as the
effectiveness of the Board committees. The evaluation
found that the Board and the Chairman’s performance
were satisfactory. 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. Given the Group’s
size, the Board considers it unnecessary to have evaluations
facilitated by an external consultant. Independent Director
Chris Rigg will conduct an evaluation of the Non-executive
Chairman´s performance in conjunction with the other
independent Director, Jenny Winter 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: ekfdiagnostics.com/investors.html.
Audit Committee
This now comprises two Non-Executive Directors, Chris
Rigg (Chairman) and Jennifer Winters. Chris Rigg is the
Senior Independent Director and has recent and relevant
finance experience. Christopher Mills stood down from the
Audit Committee on 11 March 2022, and was replaced by Ms
Winters. The committee has responsibility over the following:
• Recommend the appointment, re-appointment and
removal of the external auditors. The external audit
Annual Report 2021 | EKF Diagnostics Holdings plc1 3030
Corporate Governance Statement
for the year ended 31 December 2021 (continuation)
process is assessed through discussion within the
committee and with management. If the committee
believes based on this assessment that the external
auditors should be replaced or the audit put out to
tender, this is determined by the full Board. The
Company rotates its auditor or performs a retender
in line with the needs of the business and legislation.
The current auditors have been in place since 2010,
and the audit was last retendered in 2015.There are no
current plans to seek a retender.
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.
• Ensure the objectivity and independence of the
auditors including occasions when non-audit services
are provided. From 2020 the external auditors do not
provide non-audit services.
• 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 and
review systems in place, the Board has decided not to
establish a separate internal audit department.
• The committee met once formally during 2021. Mr
Reynolds attended, prior to the appointment of Mr Rigg.
There were no significant matters communicated to the
Committee by the Auditors. Key matters of judgement
discussed with the Auditors are noted within the Audit
report on pages 32 to 36.
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
Directors. No Director is involved in deciding his own
remuneration.
The remuneration committee is now made up of Julian Baines
(Chairman), Chris Rigg, 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.
The Committee met twice during 2021. All eligible members
attended all meetings.
Board appointments
Internal financial reporting
responsible
for establishing and
The Directors are
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
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 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:
Tel: 029 2071 0570
Email: investors@ekfdiagnostics.com
There is no formal Nominations Committee, the appointment
of new Directors being considered by the full Board.
Corporate social responsibility
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
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 29 March 2022 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2021 | EKF Diagnostics Holdings plc1 31
Report of the Remuneration Committee
for the year ended 31 December 2021
Statement of compliance
This report does not constitute a Directors’ Remuneration Report in accordance with The Companies (Directors’
Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 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 years ended 31 December 2021 and 31 December 2020 are shown in the table below:
Executive Directors
Julian Baines
Michael Salter
Richard Evans
Non-Executive Directors
Christopher Mills
Carl Contadini
Christian Rigg
Adam Reynolds
Total fees and emoluments
248
65
249
562
25
25
25
25
100
662
Salary and
fees
£’000
Benefits in
kind
£’000
Bonus
£’000
Pension
£’000
12
2
18
32
-
-
-
2
2
2,525
-
2,523
5,048
25
25
-
25
75
12
-
7
19
-
-
-
-
-
2021
£’000
2,797
67
2,797
5,661
50
50
25
52
177
2020
£’000
556
-
508
1,064
50
50
-
50
150
34
5,048
19
5,838
1,214
Where relevant, remuneration is disclosed to or from the date of appointment as a director. Mr Baines’ remuneration
covers his service as both an executive and a Non-executive director during 2021.
Directors’ share options and Long-Term Incentive Plan
No director holds options under any share option plan.
In June 2016 Mr Baines and Mr Evans 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. In November 2019, a payment was
made to each Director of approximately £1.345m, and at the same time the terms of the scheme were updated. The terms
of the scheme were again updated in 2020 following payments to each director of approximately £0.23m in July 2020. In
2021 payments were made to each director of £0.5m in January and £2.0m. At this time the scheme was closed so that no
other payments under it are due. The remaining accrual of £1.9m was released.
In September 2021 Mr Salter was granted a cash settled share based incentive award, replacing his previous scheme. The
award vests if a controlling interest in the Company is acquired by a third party at any time. In these circumstances an
award is payable to Mr Salter, which increases by reference to the sale price achieved. The fair value of this award has been
calculated at £3,296,000 using a modified form of a Black Scholes model. The fair value has been spread over the assumed
vesting period, with a charge of £298,000 (2020: £nil) recognised in 2021. The key assumptions used in the model, and
details of the updated terms are disclosed in Note 31.
Directors’ interests in the share capital of the Company are disclosed in the Directors’ Report on pages 26 to 28.
Approved by the Board on 29 March 2022 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2021 | EKF Diagnostics Holdings plc1 3232
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements
Opinion
In our opinion, EKF Diagnostics Holdings plc’s group financial statements and company financial statements (the “financial
statements”):
• give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2021 and of the
group’s profit and the group’s and company’s cash flows for the year then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards; 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 Statement of Financial Position as at 31 December 2021; the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidate and Company’s Statement of Cash Flows, Consolidated Statement of
Changes in Equity and Company Statement 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 other listed entities of public
interest, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
We have provided no non-audit services to the company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
• 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 procedures covered entities contributing 91% of the group’s revenues and adjusted EBITDA for the year
ended 31 December 2021.
• We engaged with component auditors for the audit of the Germany in-scope subsidiaries. All other audit work was
performed by the group engagement team.
Key audit matters
• Recoverability of Group goodwill and the Company’s investment in subsidiaries (group and parent)
• Acquisition accounting, including the identification and valuation of intangible assets and goodwill (group)
Materiality
• Overall group materiality: £1,014,000 (2020: £968,000) based on 5% of Adjusted profit before tax (adjusted to
exclude share-based payments and exceptional items).
• Overall company materiality: £574,000 (2020: £580,000) based on 1% of total assets.
• Performance materiality: £760,000 (2020: £726,000) (group) and £430,000 (2020: £435,000) (company).
Annual Report 2021 | EKF Diagnostics Holdings plc2
33
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
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.
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.
Acquisition accounting, including the identification and valuation of intangible assets and goodwill is a new key audit
matter this year. Accounting for investment and divestments of Trellus Health Limited, Share-based payment transactions,
and COVID-19, which were key audit matters last year, are no longer included because of the transactions either being
specific to last year, or material judgements and estimates being no longer relevant to this year. The Group and Company
has continued to operate throughout the pandemic and Covid-19 is no longer considered a pervasive risk. Otherwise, the
key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Recoverability of Group goodwill and the Company’s
investment in subsidiaries
(Group and parent)
As at 31 December 2021, the Consolidated Statement of Financial
Position includes £42.2m of intangible assets, of which £27.6m
is goodwill (2020: £24.4m), and £14.6m amortised intangible
assets (2020: £12.6m).
The investments in subsidiaries included in the Company
Statement of Financial Position as at 31 December 2021 is £38.4m
(2020: £30.5m).
Goodwill in the Group and the Company’s investment in
subsidiaries are significant, and the estimated recoverable
amount of these balances is subjective due to the inherent
uncertainty involved in forecasting and discounting future cash
flows.
The impairment reviews therefore include significant estimates
and judgements in respect of future growth rates, cash flows
and discount rates. The sensitivity of these key assumptions are
detailed in note 18, Intangible assets and note 19, Investments in
subsidiaries.
Acquisition accounting, including the identification and
valuation of intangible assets and goodwill
(Group)
On 27 September 2021, EKF acquired 100% of the membership
interest of Advanced Diagnostic Laboratory LLC (“ADL”), a PCR-
focused testing laboratory based in San Antonio, Texas.
The cost of acquisition of ADL was initially $10m largely funded
through the issue of ordinary EKF shares, a working capital true-
up payable in cash, plus contingent consideration based on the
achievement of certain earnings targets over the next three years.
The net assets acquired are to be measured at fair value, including
identifiable intangible assets. There is inherent judgement
applied in identifying the intangible assets on acquisition, and
the valuation includes key assumptions in the forecast cash
flows, such as discount rates and profit margins. The amount
of goodwill recognised is dependent on the valuation of the
intangible assets. Refer to note 20, Business Combination.
The intangible assets recognised on acquisition have been
disclosed in note 18, Intangible assets.
We obtained the group’s cash flow forecasts supporting its
assessments and performed the following procedures;
• Assessed the methodology used by management in
accordance with IAS 36 ‘Impairment of assets’ and tested
the mathematical accuracy of the model;
• Agreed forecast cash flows to board approved budgets
and evaluated and challenged key assumptions within the
cashflows and validated to supporting documentation,
where appropriate. We worked with our internal valuation
experts to consider key inputs such as the discount rate;
and
• Performed sensitivity analysis including the effect of
reasonably possible reductions in forecast cash flows to
evaluate the impact on the carrying value of the goodwill
and investment in subsidiaries.
We have assessed the adequacy of the Group and Company’s
disclosures regarding the goodwill and investment in subsidiaries,
and the sensitivity of the outcome of the impairment assessment
to changes in key assumptions used in the model. . We also
considered the potential impact of climate change for the group.
We concur with management’s assessment that no impairment
charge is required in respect of goodwill and intangible assets.
We have worked alongside our internal valuation experts to
assess the appropriateness of the valuation analysis prepared by
the directors to calculate the fair value of the intangible assets
used in the business combination accounting. This included;
•
the appropriateness of
Assessed
the methodology
applied, and integrity of the discounted cash-flow used
to determine the fair value of the intangibles assets in
the business combination. We corroborated cash flows to
Board approved forecasts;
• Challenged the key assumptions made by management
in determining the fair values, in particular, the forecast
EBITDA and discount rates, including benchmarking of
discount rates, and the attrition rates; and
• Assessed the Group’s disclosures regarding the acquisition
and estimation assumptions and whether they had been
disclosed appropriately.
We concur that the approach adopted is in accordance with the
accounting standards.
Annual Report 2021 | EKF Diagnostics Holdings plc2 3434
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
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 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). Manufacturing activities also occurred in the UK during 2021, with external revenues earned
from the COVID-19 products. The central finance and accounting team is located in the UK and is responsible for the
financial reporting of EKF Diagnostics Holdings plc (the “Company”). 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. A full-scope audit of these entities’ financial information has been carried out.
The audit of Stanbio and the Company was conducted by the group engagement team and component auditors were
engaged to audit EKF Germany. The Company audit was scoped in accordance with our company materiality. Our audit
addressed components making up 91% of the group’s 2021 revenues and adjusted EBITDA. Where component auditors
were engaged, we adopted procedures to ensure we were sufficiently involved in their audits. These 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 in key risk areas.
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
£1,014,000 (2020: £968,000).
£574,000 (2020: £580,000).
Financial statements - group
Financial statements - company
How we determined it
Rationale for benchmark applied
5% of Adjusted profit before tax (adjusted
to exclude share-based payments and
exceptional items)
Based on the benchmarks used in the
Annual Report, a profit-based measure
has been used which is a primary measure
used by the shareholders in assessing the
performance of the group. We have used
profit before tax, adjusted for share-based
payments and exceptional items, which
are disclosed separately to aid the users of
the financial statements. The rationale is
consistent with the previous year.
1% of total assets
Historically, an asset-based measure was
used for the company as no external rev-
enues were generated, and the Compa-
ny’s Statement of Financial Position was
included in the Annual Report. While ex-
ternal revenues have been earned by the
company in 2020 and 2021, the revenue
stream is considered temporary, based on
the longevity of the COVID-19 opportuni-
ties, and therefore an asset-based meas-
ure remains appropriate. The rationale is
consistent with the previous year.
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 £170,000 to £992,000. Certain components were audited to a
local statutory audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for
example in determining sample sizes. Our performance materiality was 75% (2020: 75%) of overall materiality, amounting
to £760,000 (2020: £726,000) for the group financial statements and £430,000 (2020: £435,000) for the company
financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our
normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit
above £50,000 (group audit) (2020: £48,000) and £28,000 (company audit) (2020: £29,000) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
Annual Report 2021 | EKF Diagnostics Holdings plc2 35
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going
concern basis of accounting included:
•
•
•
•
Verifying the integrity and mathematical accuracy of management’s model as well as agreeing underlying cash
flow projections to management approved forecasts.
Assessing management’s historic forecasting accuracy by obtaining management information for the financial
performance year to date.
Evaluating and challenging the reasonableness of the key assumptions in management’s model, and agreeing the
data to supporting information, where available.
Evaluating and assessing the severe but plausible downside scenarios modelled, including the consideration of
the impact of the current events in Ukraine.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
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 our work undertaken in the course of the audit, the Companies Act 2006 requires 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 2021 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 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.
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, 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 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 company or to cease operations, or have no
realistic alternative but to do so.
Annual Report 2021 | EKF Diagnostics Holdings plc2 3636
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with
laws and regulations related to patent protection, product safety (including but not limited to the US Food and Drug
Administration regulation) and employment legislation (including health & safety regulation), and we considered the extent
to which non-compliance might have a material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements such as tax legislation and the Companies Act 2006. We
evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including
the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal
entries to manipulate financial results and potential management bias in accounting estimates. The group engagement
team shared this risk assessment with the component auditors so that they could include appropriate audit procedures
in response to such risks in their work. Audit procedures performed by the group engagement team and/or component
auditors included:
•
Enquiry of group management and global head of quality and regulatory assurance around known or suspected
instances of non-compliance with laws and regulations and fraud;
•
Review of minutes of meetings of those charged with governance;
• Challenging assumptions made by management in its significant accounting estimates, in particular in relation to the
business combination accounting and impairment assessment; and
•
Identifying and testing the validity of journal entries, in particular any journal entries posted with unusual account
combinations and consolidation journals.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing
complete populations. We will often seek to target particular items for testing based on their size or risk characteristics.
In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample
is selected.
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 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 obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the 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 company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Stuart Couch (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Cardiff
29 March 2022
Annual Report 2021 | EKF Diagnostics Holdings plc2 Consolidated Income Statement
for the year ended 31 December 2021
Notes
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
Earnings per Ordinary Share attributable to the owners of the parent during the year
From continuing operations
Basic
Diluted
5
6
6
6
7
5
12
12
13
14
14
The notes on pages 43 to 78 are an integral part of these consolidated financial statements.
37
2020
£’000
65,260
(27,840)
37,420
(20,658)
133
16,895
(4,611)
(5,292)
1,282
25,516
53
(1,592)
15,356
(3,971)
11,385
11,114
271
11,385
2021
£’000
81,836
(42,470)
39,366
(17,709)
90
21,747
(5,885)
1,238
(95)
26,489
45
(357)
21,435
(5,277)
16,158
15,851
307
16,158
Pence
Pence
3.47
3.44
2.45
2.42
Annual Report 2021 | EKF Diagnostics Holdings plc2 3838
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
Profit for the year
Other comprehensive (loss)/income:
Items that will not be reclassified to profit or loss
Changes in fair value of equity instruments at fair value through other
comprehensive (loss)/income (net of tax)
32
Note
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Other comprehensive (loss)/income (net of tax)
Total comprehensive income for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income for the year
2021
£’000
16,158
(321)
(1,226)
(1,547)
14,611
14,315
296
14,611
2020
£’000
11,385
3,276
734
4,010
15,395
15,235
160
15,395
Items stated above are disclosed net of tax. The income tax relating to each component of other comprehensive
(loss)/income is disclosed in note 13.
The notes on pages 43 to 78 are an integral part of these consolidated financial statements.
Annual Report 2021 | EKF Diagnostics Holdings plc2 Consolidated and Company’s Statement of Financial Position
As at 31 December 2021
Assets
Non-current assets
Property, plant and equipment
Right-of-use asset
Intangible assets
Investments in subsidiaries
Investments
Trade and other receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current income tax receivable
Cash and cash equivalents
Total current assets
Total assets
Equity attributable to owners of the parent
Share capital
Share premium
Other reserves
Foreign currency reserves
Retained earnings
Non-controlling interest
Total equity
Liabilities
Non-current liabilities
Lease liabilities
Borrowings
Deferred consideration
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Lease liabilities
Deferred consideration
Current income tax liabilities
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
16
17
18
19
23
24
29
24
23
25
30
30
32
17
27
28
29
26
17
28
27
39
Company
2020
£’000
1,559
328
128
30,521
6,608
6,670
-
Group
2021
£’000
Group
2020
£’000
Company
2021
£’000
15,991
1,875
41,894
-
12,620
1,019
37,051
1,609
367
598
-
38,446
7,789
6,608
-
15
-
14
7,789
1,860
-
67,564
57,312
50,669
45,814
13,238
13,428
548
20,341
47,555
115,119
4,639
7,375
5,033
2,813
74264
94,124
618
8,487
13,182
371
21,913
43,953
101,265
4,550
200
5,354
4,028
63,516
77,648
552
475
1,417
-
4,879
6,771
57,440
4,639
7,375
4,992
-
32,646
49,652
-
631
1,476
-
10,045
12,152
57,966
4,550
200
5,313
-
31,981
42,044
-
94,742
78,200
49,652
42,044
1,095
431
170
5,031
6,727
690
323
-
2,636
3,649
207
-
170
1,502
1,879
9,078
14,435
4,780
838
465
3,004
265
13,650
20,377
115,119
380
2,901
1,515
185
19,416
23,065
101,265
184
465
480
-
5,909
7,788
57,440
221
-
-
-
221
12,162
158
2,901
480
-
15,701
15,922
57,966
The notes on pages 43 to 78 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 £5,768,000 (2020: loss of £4,139,000).
The financial statements were approved and authorised for issue by the Board on 29 March 2022 and signed on its behalf by:
Mike Salter
Chief Executive Officer
EKF Diagnostics Holdings plc
Registered no: 04347937
Marc Davies
Chief Financial Officer
Annual Report 2021 | EKF Diagnostics Holdings plc2 4040
Consolidated and Company’s Statement of Cash Flows
for the year ended 31 December 2021
Notes
Group
2021
£’000
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
Cash flow from operating activities
Cash generated by operations
Interest (paid)/received
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
Acquisition of subsidiaries, net of cash acquired
Proceeds from sale of PPE
Proceeds from sale of investments
Interest received
Cash flow from financing activities
Share option buy back
Proceeds from issuance of Ordinary shares
Dividend
Repayments on borrowings
Principal lease payments
Dividend payment to non-controlling interest
Net cash used in financing activities
Net(decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (losses)/gains on cash and cash equivalents
35
14,208
20,798
(36)
(47)
(3,934)
(6,942)
10,238
13,809
-
(4,335)
(1,314)
84
43
-
45
20
35
(3,810)
(1,631)
(1,014)
-
68
7,670
53
1,336
(7)
209
1,048
34
(22)
1,060
9,754
(21)
(911)
8,822
-
(3,810)
(259)
(521)
(208)
-
-
-
(222)
-
-
-
7,670
-
(988)
3,638
-
-
(7)
209
-
-
(178)
(643)
(231)
(6,155)
(1,394)
21,913
(178)
(5,103)
(4,550)
(5,103)
(4,550)
(183)
(469)
(209)
-
(107)
-
-
(109)
-
(5,209)
(5,210)
(4,457)
9,936
12,074
(97)
21,913
(5,138)
10,045
(28)
4,879
8,003
1,999
43
10,045
Cash and cash equivalents at end of year
25
20,341
Net cash (used in)/generated by investing activities
(5,477)
Annual Report 2021 | EKF Diagnostics Holdings plc2 Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
41
Consolidated
At 1 January 2020
Comprehensive income/
(expense)
Profit for the year
Other comprehensive income
/(expense)
Changes in fair value of
equity instruments at fair value
through other comprehensive
income/(expense)
Transfer of gain on disposal of equi-
ty investments at fair value through
other comprehensive income/(ex-
pense) to retained earnings
Taxation on profit on disposal of
equity instruments at fair value
Currency translation differences
Total comprehensive
income/(expense)
Transactions with owners
Proceeds from share issue
Share option cancellation
Dividends to non-controlling
interest
Dividends to owners
Total distributions to owners
At 31 December 2020 and
1 January 2021
Comprehensive income
Profit for the year
Other comprehensive expense
Changes in fair value of equity
instruments at fair value through
other comprehensive expense
Currency translation differences
Total comprehensive income
Transactions with owners
Issue of ordinary shares as consid-
eration for a business combination,
net of transaction costs
Dividends to non-controlling interest
Notes
Share
capital
£’000
4,541
-
-
-
-
-
-
9
-
-
-
9
Share
premium
account
£’000
Other
reserves
£’000
Foreign
currency
reserve
£’000
Retained
earnings
£’000
Total
£’000
Non-
controlling
interest
£’000
Total
equity
£’000
-
-
-
-
-
-
-
200
-
-
-
200
6,648
3,183
56,199
70,571
601
71,172
-
4,348
(5,642)
-
-
-
-
-
-
11,114
11,114
271
11,385
-
4,348
5,642
-
(1,072)
(1,072)
-
-
-
4,348
-
(1,072)
845
-
845
(111)
734
(1,294)
845
15,684
15,235
160
15,395
-
-
-
-
-
-
-
-
-
-
-
(7)
-
209
(7)
-
-
209
(7)
-
(209)
(209)
(8,360)
(8,360)
-
(8,360)
(8,367)
(8,158)
(209)
(8,367)
4,550
200
5,354
4,028
63,516
77,648
552
78,200
-
-
-
-
-
-
-
-
20
89
7,175
-
-
-
-
-
(321)
-
-
-
(1,215)
-
-
15,851
15,851
307
16,158
(321)
-
(321)
(321)
(1,215)
15,851
14,315
(1,215)
(11)
296
(1,226)
14,611
-
-
-
-
-
-
-
-
-
-
7,264
-
7,264
-
(230)
(230)
(5,103)
(5,103)
-
(5,103)
(5,103)
2,161
(230)
1,931
Dividends to owners
15
Total distributions to owners
89
7,175
At 31 December 2021
4,639
7,375
5,033
2,813
74,264
94,124
618
94,742
Annual Report 2021 | EKF Diagnostics Holdings plc2 4242
Company Statement of Changes in Equity
For the year ended 31 December 2021
Company
At 1 January 2020
Comprehensive income/(expense)
Loss for the year
Other comprehensive income/(expense)
Changes in fair value of equity instruments at fair
value through other comprehensive income/(expense)
Recycling of reserves in respect of disposal of equity instruments
at fair value
Taxation on profit on disposal of equity instruments at fair value
Total comprehensive (expense)/income
Transactions with owners
Proceeds from shares issued
Share option cancellation
Dividends to owners
Total contributions by and distributions to owners
Share
capital
£’000
4,541
-
-
-
9
-
-
9
At 31 December 2020 and 1 January 2021
4,550
Comprehensive income/(expense)
Profit for the year
Other comprehensive income/(expense)
Changes in fair value of equity instruments at fair value through
other comprehensive income/(expense)
Total comprehensive income/(expense)
Transactions with owners
Issue of ordinary shares as consideration for a business
combination, net of transaction costs
Dividends to owners
Total contributions by and distributions to owners
At 31 December 2021
-
-
-
89
-
89
4,639
Share
premium
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
-
-
-
6,607
39,917
51,065
-
(4,139)
(4,139)
4,348
-
4,348
(5,642)
5,642
-
-
(1,072)
(1,072)
-
(1,294)
431
(863)
200
-
-
200
200
-
-
-
7,175
-
7,175
7,375
-
(7)
209
(7)
-
-
(8,360)
(8,360)
(8,367)
(8,158)
5,313
31,981
42,044
-
5,768
5,768
(321)
-
(321)
(321)
5,768
5,447
-
-
-
-
7,264
(5,103)
(5,103)
(5,103)
2,161
4,992
32,646
49,652
Annual Report 2021 | EKF Diagnostics Holdings plc2 43
Notes to the Financial Statements
for the year ended 31 December 2021
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 19.
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
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-
adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement
Board. EKF Diagnostics Holdings transitioned to UK-adopted International Accounting Standards in its company financial
statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a result of the change in framework.
The financial statements of EKF Diagnostics Holdings have been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under
those standards.
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 and certain financial assets measured at fair
value through other comprehensive income..
The preparation of financial statements 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 group has applied the following standards and amendments for the first time for their annual reporting period
commencing 1 January 2021:
• Definition of Material – Amendments to IAS 1 and IAS 8; and
• Revised Conceptual Framework for Financial Reporting.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected
to significantly affect the current or future periods.
(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1
January 2021 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 2022, and have not been applied in preparing these financial statements. The Group does not
anticipate a material impact within its financial statements as a result of the applicable standards and interpretations.
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 plausible
changes in financial performance, that the Group will be able to operate within the level of its current funding arrangements.
While we have continued to see some disruption to our core business as a result of the COVID-19 pandemic, we have
protected our core business as far as possible and core revenue has grown by 14% this year. It is clear that healthcare
activities are returning to normal and that our base case forecasts for our core business are still applicable. While the
pandemic has sadly been very costly for many in lives and income, EKF has been able to learn new skills and develop a
business model which offers great possibilities in the post-pandemic world. However, we are adopting a pragmatic view
that there will be a significant reduction in pandemic-related contract manufacturing activity for the remainder of the year.
Annual Report 2021 | EKF Diagnostics Holdings plc2
4444
Notes to the Financial Statements
for the year ended 31 December 2021
The Group has revenues from customers in Russia and an entity based there. As a result of the sanctions recently imposed
on Russia by the EU, the USA and other countries, there are enhanced risks in respect of our Russian entity, including credit
risk to cash balances, its ability to collect debtors, and our ability to import products into Russia. In preparing a downside
going concern forecast we have discounted sales from this region.
While any further economic disruption stemming from the pandemic is impossible to forecast, the strength of the Group’s
balance sheet aligned to the continuing performance of the business gives the Directors confidence that the business
can continue to meet its obligations as they fall due, even under our worst case scenarios, for at least the next 12 months.
Accordingly, the directors are satisfied they can prepare the accounts on a going concern basis.
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.
Associates are all entities over which the group has significant influence but not control or joint control. At the beginning of the
period, the Group had retained the voting rights covering the 31.1% shareholding in Trellus Health plc which was transferred to
EKF shareholders by way of a dividend in specie. These voting rights vested in the shareholders of Trellus when an initial public
offer was completed by Trellus. In 2020 this remaining investment was treated as an Investment in an associate, at a nominal
value, and equity accounting was not applied as the impact of the equity accounting transactions were immaterial.
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.
Annual Report 2021 | EKF Diagnostics Holdings plc2 45
Notes to the Financial Statements
for the year ended 31 December 2021
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.
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
2%–2.5%
Buildings
Leasehold improvements 20% or over the life of the lease if under 5 years
Fixtures and fittings
Plant and machinery
Motor vehicles
16.7%–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 asset represents the value at acquisition of long term relationships with customers. 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 5 and 15 years and is charged to
administrative expenses in the income statement.
Annual Report 2021 | EKF Diagnostics Holdings plc2
4646
Notes to the Financial Statements
for the year ended 31 December 2021
(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. They represent
the value at acquisition of expenditure Incurred on the development of new or substantially improved products or
processes. 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.
Development costs are amortised over the estimated useful life of the products with which they are associated, currently
4 to 10 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.
(f) Software and website costs
Expenditure incurred on the development of new or substantially improved software is capitalised, provided that the
project satisfies the criteria for capitalisation, including technical feasibility and likely commercial benefit. All other software
costs are expensed as incurred.
Software costs are amortised over their estimated useful life, currently 6 – 10 years. Amortisation commences when
software is in commercial use. The amortisation is charged to administrative expenses in the income statement. The
estimated remaining useful life of software is reviewed at least on an annual basis.
The carrying value of capitalised software costs is reviewed for potential impairment at least annually and if an impairment
is identified the 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.
Financial assets
Classification
The group classifies its financial assets in the following measurement categories:
• those to be measured at amortised cost; and
• those to be measured subsequently at fair value (either through OCI or through profit or loss);
Annual Report 2021 | EKF Diagnostics Holdings plc2
47
Notes to the Financial Statements
for the year ended 31 December 2021
(a) Financial assets at amortised cost
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal
and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss
and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented
as a separate line item in the statement of profit or loss.
(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. Purchases and sales of these assets are valued at the date of trade.
Inventories
Inventories and work in progress are stated at the lower of cost and net realisable value. Cost is calculated on an average
cost 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.
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, and large corporate customers, 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. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the historical credit losses from past experience and are adjusted to reflect current
and forward-looking information on factors affecting the ability of the customers to settle the receivables, where applicable
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.
Annual Report 2021 | EKF Diagnostics Holdings plc2
4848
Notes to the Financial Statements
for the year ended 31 December 2021
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.
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
The Group and Company’s leasing policy is described in Note 17.
Deferred consideration
Deferred consideration is recognised at fair value. Where the value of deferred consideration is based on a future event,
the amounts of future payments are discounted to their present values at the date of completion. The discount rate used is
the entity’s incremental borrowing rate being the rate at which similar borrowing could be obtained from an independent
financier under comparable terms and conditions. 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.
Annual Report 2021 | EKF Diagnostics Holdings plc2 49
Notes to the Financial Statements
for the year ended 31 December 2021
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 an equity-settled, share-based compensation plan, 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. During the period the previous scheme
was closed and a new scheme put in place on broadly similar terms. 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. Sensitivities relating to the valuation of the scheme are discussed in Note 31.
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.
(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.
Annual Report 2021 | EKF Diagnostics Holdings plc2
5050
Notes to the Financial Statements
for the year ended 31 December 2021
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
mainly 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
2021
1.162
101.558
1.374
Average
rate
2020
1.127
94.889
1.293
Year end
rate
2021
1.190
101.549
1.354
Year end
rate
2020
1.117
101.139
1.366
As a guide to the sensitivity of the Group’s results to movements in foreign currency exchange rates, a one per cent
movement in the Euro, US Dollars and Russian Rouble to Sterling rate would impact annual earnings by approximately
£125,000 (2020: £60,000), £117,000 (2020: £202,000), and £9,000 (2020: £8,000) 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 and its recent acquisition in the USA.
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
Annual Report 2021 | EKF Diagnostics Holdings plc2
51
Notes to the Financial Statements
for the year ended 31 December 2021
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 Chief Financial
Officer. 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 2021:
Borrowings
Lease liabilities
Deferred consideration
Trade and other payables
At 31 December 2020:
Borrowings
Lease liabilities
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
265
891
465
8,910
185
402
2,901
13,051
208
679
101
-
185
301
-
-
223
427
69
-
138
411
-
-
-
-
-
-
-
-
-
-
Total
£’000
696
1,997
635
8,910
508
1,114
2,901
13,051
The maturity of the Company’s non-derivative financial liabilities is all less than one year.
(d) Capital risk management
Capital risk
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. In order to maintain or adjust its capital structure, the Group might adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
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 or net cash plus equity.
Dividends on ordinary shares
Group and Company
Final dividend for the year ended 31 December 2020 of 1.1p per ordinary share
Dividend in specie of shares in Trellus Health plc at fair value
2021
£’000
5,103
-
2020
£’000
4,550
3,810
Annual Report 2021 | EKF Diagnostics Holdings plc2 5252
Notes to the Financial Statements
for the year ended 31 December 2021
In addition, since the year end the directors have recommended the payment of a final dividend of 1.2p per ordinary
share (2020: 1.1p). The aggregate amount of the proposed dividend expected to be paid on 1 December 2022 out of
retained earnings at 31 December 2021 but not recognised as a liability at year end is £5,567,000 (2020: £5,005,000)
based on the shares in issue at 31 December 2021. In addition the directors intend to transfer substantially all the shares
of the Group’s increased holding in Verici Dx plc to shareholders by way of a dividend in specie, and have announced
that the Company intends to acquire up to £4m of its Ordinary shares for cancellation.
(e) Fair value estimation
Fair value for the investments in Renalytix plc and Verici Dx plc were determined by reference to their published price
quotation in an active market (classified as level 1 in the fair value hierarchy). The Investments have been classified as
financial assets at fair value through Other comprehensive income.
Group and Company
AIM listed ordinary shares – Renalytix plc
AIM listed ordinary shares – Verici Dx plc
2021
£’000
6,218
1,419
2020
£’000
4,889
1,567
The Group and Company did not have any Level 2 or 3 classified financial assets as at 31 December 2021 (2020: 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 estimates
have the most significant effect on the amounts recognised in the financial statements.
(a) Impairment of goodwill and other intangible assets and recoverability of investment in subsidiaries
The recognition of goodwill and other intangible assets arising on acquisitions and the impairment assessments contain
significant accounting estimates. 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
18 where we also detail the sensitivity of changes in the key assumptions.
(b) Share-based payments
A number of accounting estimates 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 31 including the impact of possible changes
in the key assumptions.
(c) Acquisition accounting and valuation of identified intangible assets
Accounting for the acquisition of Advanced Diagnostic Laboratory LLC. (ADL) requires a number of accounting estimates.
In particular the amount of deferred contingent calculation requires the use of estimates of future earnings. In addition a
purchase price analysis has been carried out in order to identify and value Intangible Assets making up part of the assets
acquired. These calculations require assumptions regarding future revenues and earnings. The acquisition is described in
more detail in Note 20.
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. Transactions between segments consist of the sale of products for resale. The basis of accounting
for these transactions is the same as for external revenue. Currently the key operating performance measures used by the
CODM are Revenue and adjusted EBITDA.
Annual Report 2021 | EKF Diagnostics Holdings plc2 53
Notes to the Financial Statements
for the year ended 31 December 2021
5. Segmental reporting continued
The segment information provided to the Board for the reportable segments for the year ended 31 December 2021 is as
follows:
Germany
£’000
USA
£’000
Russia
£’000
UK
£’000
Total
£’000
2021
Income statement
Revenue
Inter-segment
External revenue
Adjusted EBITDA*
Exceptional items (Note 7)
Share-based payments (Note 30)
EBITDA
Depreciation
Amortisation
Operating profit
Finance income
Finance cost
Income tax
Profit for the year
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
39,665
(5,494)
34,171
11,480
(452)
-
11,028
(752)
(1,525)
38,974
(2,918)
36,056
12,735
-
-
12,735
(938)
(1,383)
8,751
10,414
-
(31)
7
(37)
(2,806)
(2,402)
5,914
7,982
29,672
59,803
(1,441)
28,231
8,384
36,615
6,387
(608)
5,779
303
6,082
5,628
15,429
693
694
(16,712)
43,091
5,734
48,825
24,796
(17,703)
7,093
393
7,486
8,291
16,911
3,366
8,171
3,286
-
8,514
(191)
3,286
8,323
90,439
(8,603)
81,836
26,489
(95)
1,238
27,632
(2,041)
(3,844)
1,293
357
1,238
2,888
(294)
(936)
1,658
21,747
-
(289)
124
1,493
45
(357)
(5,277)
16,158
29,860
119,766
(6,835)
(24,988)
23,025
4,879
27,904
94,778
20,341
115,119
13,319
44,669
(6,677)
(24,988)
6,642
-
19,681
696
6,642
20,377
1,992
9,478
1,610
521
15,991
41,894
5,686
9,386
981
-
-
981
(57)
-
924
38
-
(193)
769
431
-
431
1,344
1,775
167
-
167
-
167
80
76
17
-
* Adjusted EBITDA excludes exceptional items and share-based payments. The UK includes head office costs.
Annual Report 2021 | EKF Diagnostics Holdings plc2 5454
Notes to the Financial Statements
for the year ended 31 December 2021
5. Segmental reporting (continued)
2020
Income statement
Revenue
Inter-segment
External revenue
Germany
£’000
USA
£’000
Russia
£’000
UK^
£’000
Total
£’000
25,637
(5,351)
20,286
39,459
(1,767)
37,692
2,904
-
2,904
4,432
(54)
4,378
72,432
(7,172)
65,260
Adjusted EBITDA*
7,343
20,094
833
(2,754)
25,516
Exceptional items (Note 7)
877
-
Share-based payments (Note 31)
-
-
EBITDA
Depreciation
Amortisation
Operating profit/(loss)
Finance income
Finance cost
Income tax
Profit for the year
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
8,220
20,094
(787)
(1,646)
(511)
(1,120)
5,787
2
(26)
(820)
18,463
13
-
(3,497)
4,943
14,979
39,961
(112)
39,849
3,130
42,979
36,899
(11,427)
25,472
7,459
32,931
7,135
17,836
(1,332)
(14,915)
5,803
508
6,311
5,912
24,039
779
679
2,921
-
2,921
4,632
10,979
575
335
-
-
833
(24)
(1)
808
39
-
(171)
676
355
-
355
1,257
1,612
158
-
158
-
158
93
77
54
-
405
1,282
(5,292)
(5,292)
(7,641)
21,506
(522)
(1,844)
- (2,767)
(8,163)
16,895
(1)
(1,566)
517
53
(1,592)
(3,971)
(9,213)
11,385
30,529
107,744
(16,853)
(28,392)
13,676
79,352
10,067
21,913
23,743
101,265
25,820
50,949
(12,145)
(28,392)
13,675
22,557
-
508
13,675
23,065
3,002
1,956
741
-
13,639
37,051
2,149
1,014
* Adjusted EBITDA excludes exceptional items and share-based payments.
^ The UK segment was presented as “Other” in the 2020 financial information. There have been no changes to the numbers
presented.
The UK includes head office costs.
Annual Report 2021 | EKF Diagnostics Holdings plc2 Notes to the Financial Statements
for the year ended 31 December 2021
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
Ireland
Rest of Europe
Russia
Middle East
Africa
Asia and Rest of World
China
Rest of Asia and Oceania
Total revenue
55
2020
£’000
33,474
2,391
5,873
4,522
5,408
3,127
2,904
1,261
2,553
767
2,980
65,260
2021
£’000
31,522
3,248
7,942
8,848
14,292
4,616
3,286
1,464
2,323
985
3,310
81,836
Revenues of £14,225,000 (17.4%) were derived from one external customer. Sales to this customer all relate to Europe. In
2020 revenues of £16,960,000 (26.0%) were derived from a different customer, all of whose revenues relate to the USA.
6. Expenses – analysis by nature
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
Other expenses
Total cost of sales and administrative expenses
Included within the above expenses are exceptional items as set out in note 7.
2021
£’000
18,364
17,941
(419)
5,885
95
1,378
61
16,874
60,179
2020
£’000
12,502
23,744
(441)
4,611
(1,282)
1,440
(26)
7,950
48,498
Annual Report 2021 | EKF Diagnostics Holdings plc2 5656
Notes to the Financial Statements
for the year ended 31 December 2021
7. Exceptional items
Included within administrative expenses are exceptional items as shown below:
– Warranty claim
‘ – Settlement of warranty claim and deferred consideration
– Business reorganisation costs
‘- Acquisition costs
– Cost of Trellus set-up
Exceptional items
Note
a
a
b
c
d
2021
£’000
285
(179)
(37)
(164)
-
(95)
2020
£’000
1,414
-
(58)
-
(74)
1,282
a. Change in the value of an estimated warranty claim which offsets the deferred consideration of £3.2m (2020:
£2.9m) relating to a share-based payment to the former owner of EKF-Diagnostic GmbH. The dispute has now
been settled resulting in a payment in cash to the former owner of £179,000. The remaining warranty claim and
deferred consideration have both been written down and there is no further liability.
b. Restructuring costs, mainly closure costs, associated in 2020 with the closure of EKF’s Polish facility and other
restructuring activities, and in 2021 with EKF Ireland.
c. Professional fees relating to the acquisition of Advanced Diagnostic Laboratory LLC
d. Start-up costs in 2020 associated with the set-up of Trellus Health plc.
8. Auditor remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s
auditors and their 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
9. Directors’ emoluments
Aggregate emoluments
Share-based payments
Contribution to defined contribution pension scheme
2021
£’000
46
123
169
2021
£’000
5,819
(1,022)
19
4,816
2020
£’000
44
90
134
2020
£’000
1,193
4,998
21
6,212
Retirement benefits are accruing to 2 (2020: 2) current directors under a defined contribution scheme. See further
disclosures within the Remuneration Report on page 31. The highest paid director received aggregate emoluments,
including the effect of the share-based payments charge, of £2,137,000 (2020: £3,055,000).
Annual Report 2021 | EKF Diagnostics Holdings plc2 57
Notes to the Financial Statements
for the year ended 31 December 2021
10. Employee benefit expense
Wages and salaries
Social security costs
Share-based payments granted to Directors and senior
management (Note 31)
Other pension costs (Note 33)
Group
2021
£’000
15,944
2,535
(1,238)
281
17,522
Group
2020
£’000
15,971
2,219
5,292
262
23,744
Company
2021
£’000
Company
2020
£’000
3,275
365
(1,238)
101
2,503
2,705
277
568
71
3,621
Employee costs of £0.4m (2020: £0.4m) have been capitalised as part of development costs in the Group.
11. Monthly average number of people employed
Monthly average number of people (including Executive Directors)
employed was:
Administration
Research and development and regulatory
Sales and marketing
Manufacturing, production and after sales
Group
2021
£’000
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
54
32
59
230
375
53
22
56
173
304
9
13
8
9
39
9
10
9
1
29
The total number of employees (FTEs) in the Group at 31 December 2021 was 386 (2020: 310), and in the Company was 41
(2020: 20). In addition the average number of agency workers who were mainly utilised in manufacturing was 88 (2020:
34) in the Group and 32 (2020:17) in the Company. The cost of these workers was £3,303,000 (2020: £880,000) in the
Group and £919,000 (2020: £644,000) in the Company.
12. Finance income and costs
Finance costs:
– Bank borrowings
– Other interest
– IFRS 16 interest
– Financial liabilities at fair value through profit or loss
Finance costs
Finance income
– Other interest
Finance income
Net finance costs
2021
£’000
2020
£’000
(35)
(1)
(32)
(289)
(357)
45
45
312
(17)
(30)
(29)
(1,516)
(1,592)
53
53
(1,539)
Annual Report 2021 | EKF Diagnostics Holdings plc2 5858
Notes to the Financial Statements
for the year ended 31 December 2021
13. Income tax charge
Group
Current tax:
Current tax on profit for the year
Adjustments for prior periods
Total current tax
Deferred tax (note 29):
Origination and reversal of temporary differences
Total deferred tax
Income tax charge
2021
£’000
5,096
96
5,192
85
85
5,277
2020
£’000
3,913
89
4,002
(31)
(31)
3,971
A change to the main UK corporation tax rate was included in the Finance Bill 2021, which had its third reading on 24 May
2021, and is now considered substantively enacted. The rate applicable from 1 April 2020 to 31 March 2023 remains at
19% but the rate from 1 April 2023 will increase to 25%. Deferred taxes at the reporting date have been measured using
these enacted tax rates and reflected in these financial statements.
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% (2020: 19%)
Tax effects of:
– Expenses not deductible for tax purposes
– Remeasurement of deferred tax – change in future tax rate
– Income not subject to tax
- Effect of share based payments
– Utilisation of losses
– Adjustment in respect of prior years
– Impact of different tax rates in other jurisdictions
– Other movements
Tax charge
2021
£’000
21,435
4,072
552
630
(91)
(1,186)
(21)
96
1,024
201
5,277
2020
£’000
15,356
2,918
572
277
(35)
-
(725)
(89)
1,073
(20)
3,971
In the Group and the Company, Changes in fair value of equity at fair value through comprehensive income are shown
net of corporation tax of £1,502,000 (2020: £1,072,000).
Annual Report 2021 | EKF Diagnostics Holdings plc2 59
Notes to the Financial Statements
for the year ended 31 December 2021
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
2021
£’000
15,851
2020
£’000
11,114
457,001,067
454,524,101
3.47 pence
2.45 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
2021
£’000
15,851
2020
£’000
11,114
Weighted average number of Ordinary Shares including potentially dilutive shares
460,957,067
458,803,076
Diluted profit per share
3.44 pence
2.42 pence
Weighted average number of Ordinary Shares in issue
Adjustment for:
– Assumed conversion of share awards
– Assumed payment of equity deferred consideration
2021
2020
457,001,067
454,524,101
12,640
235,035
3,944,226
4,043,940
Weighted average number of Ordinary Shares including potentially dilutive shares
460,957,933
458,803,076
15. Dividends
In December 2021, the Company paid a final dividend for 2020 of 1.1p (2020: 1.0p) per ordinary share, at a total value
of £5,103,000 (2020: £4,550,000). Subject to continuing strong performance and the needs of the business, the Board
intends to follow a progressive dividend policy. The Directors propose, subject to approval at the Company’s next Annual
General Meeting, the payment of a final dividend for 2021 of 1.2p per EKF Ordinary share held on 3 November 2022.
Payment will be made on 1 December 2022. The expected total value is £5,567,000. In addition the Board has noted that
it intends to distribute the enlarged holding of Verici Dx to underlying shareholders as soon as reasonably practicable and
subject to appropriate arrangements to maintain an orderly market in Verici’s shares following such distribution.
Annual Report 2021 | EKF Diagnostics Holdings plc2 6060
Notes to the Financial Statements
for the year ended 31 December 2021
16. Property, plant and equipment
At 31 December 2020
10,210
Group
Cost
At 1 January 2020
Additions
Exchange differences
Transfers
Disposals
Accumulated depreciation
At 1 January 2020
Charge for the year
Exchange differences
Transfers
Disposals
At 31 December 2020
Net book value at 31 December 2020
Cost
At 1 January 2021
Acquired with subsidiary (Note 20)
Additions
Exchange differences
Transfers
Disposals
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Charge for the year
Exchange differences
Transfers
Disposals
At 31 December 2021
Net book value at 31 December 2021
Land and
buildings
£’000
Fixtures &
fittings
£’000
Plant and
machinery
£’000
Motor
vehicles
£’000
Assets under
construction
£’000
Right-of-use
asset
£’000
Total
£’000
9,760
1,552
10,275
63
85
302
-
122
26
(285)
(26)
1,389
1,814
1,166
302
(4)
188
-
2,300
7,910
128
22
(188)
(26)
1,102
287
340
412
928
(146)
11,809
7,117
902
300
-
(105)
8,214
3,595
10,210
1,389
11,809
4
480
(195)
219
(7)
10,711
2,300
328
(26)
-
(7)
2,595
8,116
-
643
(48)
130
(102)
2,012
1,102
290
(42)
-
(101)
1,249
763
818
740
(271)
339
(247)
13,188
8,214
786
(137)
-
(238)
8,625
4,563
178
54
(30)
-
(1)
201
103
23
(18)
-
-
108
93
201
-
17
(2)
-
(56)
160
108
24
(2)
-
(49)
81
79
614
1,052
18
(945)
(4)
735
-
-
-
-
-
-
1,341
23,720
518
(14)
-
2,149
497
-
(245)
(422)
1,600
25,944
339
489
(2)
-
10,539
1,844
298
-
(245)
(376)
581
12,305
735
1,019
13,639
735
-
2,455
(19)
(688)
(13)
1,600
25,944
111
1,351
12
-
933
5,686
(523)
-
(64)
(489)
2,470
3,010
31,551
-
-
-
-
-
-
581
613
5
-
12,305
2,041
(202)
-
(64)
(459)
1,135
13,685
2,470
1,875
17,866
Depreciation expense of £855,000 (2020: £918,000) has been charged to cost of sales and £1,186,000 (2020: £926,000)
has been charged to administrative expenses.
Annual Report 2021 | EKF Diagnostics Holdings plc2 61
Notes to the Financial Statements
for the year ended 31 December 2021
16. Property, plant and equipment (continued)
Company
Cost
At 1 January 2020
Additions
Disposals
At 31 December 2020
Accumulated depreciation
At 1 January 2020
Charge for the year
Disposals
At 31 December 2020
Land and
buildings
£’000
Fixtures &
fittings
£’000
Assets under
construction
£’000
Right-of-
use asset
£’000
Total
£’000
1,673
-
-
216
92
-
1,673
308
323
40
-
363
149
40
-
189
-
130
-
130
-
-
-
346
213
(152)
407
76
155
(152)
79
2,235
435
(152)
2,518
548
235
(152)
631
Net book value at 31 December 2020
1,310
119
130
328
1,887
Cost
At 1 January 2021
Additions
Transfers
At 31 December 2021
Accumulated depreciation
At 1 January 2021
Charge for the year
At 31 December 2021
1,673
-
-
1,673
363
39
402
308
258
130
696
189
169
358
Net book value at 31 December 2021
1,271
338
130
-
(130)
-
-
-
-
-
407
156
-
563
79
117
196
2,518
414
-
2,932
631
325
956
367
1,976
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 (£12,400) per month to the parent Company. €167,000 (£140,336)
(2020: €167,000 (£149,330)) was paid to the parent Company for the year. The Company adopts the cost model and
shows the investment property at cost less accumulated depreciation and any accumulated impairment losses. As the
property is occupied by a subsidiary, it does not meet the definition of an investment property for the Group.
Annual Report 2021 | EKF Diagnostics Holdings plc2 6262
Notes to the Financial Statements
for the year ended 31 December 2021
17. Leases
(i) Amounts recognised in the statement of financial position
The balance sheet shows the following amounts relating to leases:
Right-of-use assets
Properties
Equipment
Motor vehicles
Total right-of-use
Lease liabilities
Current
Non-current
Total lease liabilities
Group
2021
£’000
1,531
248
96
1,875
838
1,095
1,933
Group
2020
£’000
859
65
95
1,019
380
690
1,070
Company
2021
£’000
Company
2020
£’000
362
5
-
367
184
207
391
321
7
-
328
158
221
379
Additions to the right-of-use assets during the 2021 financial year were £1,351,000 (2020: £518,000) for the Group and
£156,000 (2020: £213,000) for the Company.
(ii) Amounts recognised in the statement of Comprehensive income
The statement of profit or loss shows the following amounts relating to leases:
:
Depreciation charge right-of-use
assets
Properties
Equipment
Motor vehicles
Total right-of-use
Interest expense (included in
finance cost)
Group
2021
£’000
481
65
67
613
32
Group
2020
£’000
371
60
58
489
29
Company
2021
£’000
Company
2020
£’000
114
3
-
117
7
154
1
-
155
7
The total cash outflow for leases in 2021 was £643,000 (2020: £469,000) for the Group and £107,000 (2020: £109,000)
for the Company
(iii) The group’s leasing activities and how these are accounted for
The group leases various offices, factories, equipment and vehicles. Rental contracts for offices and factories are typically
made for fixed periods of between 1 and 5 years, and those for machinery and vehicles for 3 years, but may have extension
options as described below.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the
liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group uses recent third-party financing received, adjusted where
appropriate to reflect changes in financing conditions since third party financing was received.
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date on which the leased asset is
available for use by the Group.
Annual Report 2021 | EKF Diagnostics Holdings plc2 63
Notes to the Financial Statements
for the year ended 31 December 2021
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
•
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
• amounts expected to be payable by the group under residual value guarantees
• the exercise price of a purchase option if the group is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the
liability.
Where the Group is exposed to potential future increases in variable lease payments based on an index or rate, amounts
are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the income statement
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any lease incentives received
• any initial direct costs
• restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight
line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the
underlying asset’s useful life.
Annual Report 2021 | EKF Diagnostics Holdings plc2 6464
Notes to the Financial Statements
for the year ended 31 December 2021
18. Intangible assets
Trademarks,
trade name
and
licences
£’000
Goodwill
£’000
Customer
relationships
£’000
Trade
secrets
£’000
Development
costs
£’000
Software &
website
£’000
Total
£’000
Group
Cost
At 1 January 2020
26,371
2,799
15,580
18,436
9,060
Additions
Disposals
Exchange differences
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2020
Disposals
Exchange differences
Charge for the year
At 31 December 2020
-
-
632
146
-
372
-
-
-
-
586
(5,482)
(39)
620
289
299
282
-
12
72,545
1,014
(5,482)
1,886
27,003
3,317
15,541
19,056
4,453
593
69,963
2,550
2,389
10,358
13,141
6,340
-
55
-
-
201
357
-
(47)
1,245
-
401
919
(5,474)
231
246
2,605
2,947
11,556
14,461
1,343
-
-
-
-
-
34,778
(5,474)
841
2,767
32,912
Net book value at 31 December 2020
24,398
370
3,985
4,595
3,110
593
37,051
Cost
At 1 January 2021
Acquisition of subsidiary
Additions
Transfer
Disposals
Exchange differences
At 31 December 2021
27,003
3,755
-
-
(1,407)
(793)
3,317
467
104
152
(19)
263
15,541
1,166
-
-
(749)
(252)
28,558
4,284
15,706
Accumulated amortisation and impairment
At 1 January 2021
Disposals
Exchange differences
Charge for the year
At 31 December 2021
2,605
(1,407)
(21)
-
1,177
2,947
(19)
(144)
237
3,021
11,556
(749)
(203)
1,221
19,056
4,453
593
69,963
-
2,684
-
-
-
(1,073)
(655)
17,328
14,461
(1,073)
(454)
1,730
1,137
(152)
(288)
(127)
1,343
(288)
(24)
548
8,072
1,314
-
(3,536)
73
-
-
20
(1,544)
-
-
1
108
109
32,912
(3,536)
(845)
3,844
32,375
5,023
3,370
74,269
11,825
14,664
1,579
Net book value at 31 December 2021
27,381
1,263
3,881
2,664
3,444
3,261
41,894
Amortisation charge of £55,000 (2020: £20,000) has been charged to cost of sales and £3,789,000 (2020: £2,747,000)
has been charged to administrative expenses in the income statement (net of the profit on the sale of intangible assets).
Annual Report 2021 | EKF Diagnostics Holdings plc2 Notes to the Financial Statements
for the year ended 31 December 2021
Company
Cost
At 1 January 2020
Disposals
At 31 December 2020
Accumulated amortisation
At 1 January 2020
Disposals
At 31 December 2020
Net book value at 31 December 2020
Cost
At 1 January 2021
Additions
At 31 December 2021
Accumulated amortisation
At 1 January 2021
Charge for the year
At 31 December 2021
Net book value at 31 December 2021
65
Development
costs
£’000
1,470
(1,342)
128
1,341
(1,341)
-
128
128
521
649
-
51
51
598
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
DiaSpect
Russia
Stanbio
STI
ADL
Total
2021
£’000
7,394
9,434
77
5,648
1,026
3,802
27,381
2020
£’000
7,655
10,050
77
5,599
1,017
-
24,398
Germany includes EKF-Diagnostic, and Senslab.
Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2021
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 forecasts 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.
Annual Report 2021 | EKF Diagnostics Holdings plc2 6666
Notes to the Financial Statements
for the year ended 31 December 2021
The key assumptions used in 2021 for the value in use calculations of cash generating units with significant goodwill
are as follows:
Longer-term growth rate
Discount rate
ADL
%
3
10
EKF
Germany
%
3
10
DiaSpect
%
Stanbio
%
3
10
3
10
STI
%
3
10
The discount rate used is based on a common risk profile across the Group.
The impairment assessments for all units showed assessed values that exceeded the carrying values with significant
headroom. Sensitivity analysis has been carried out on the assessments for each unit. In the cases of EKF Germany, Russia,
Stanbio and STI, the assessment was recalculated using both a longer term growth rate of 0% and a discount rate of 15%.
No impairment was required using those assumptions.
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 for the DiaSpect products will be high
because they are relatively new products that will bring market benefits, which have recently received approval for sale to
blood banks in the USA. In Year 1 a growth rate of 0% has been used, reflecting the impact of the COVID pandemic on its
product sales, followed by 5% in year 2 - 4, marking a return to pre-COVID levels of sales plus the anticipated growth from
partners and from entering the US blood bank market. The forecast growth rates then fall to 3% thereafter. The Directors
believe the product will be sold at a margin equivalent to other products sold by the Group. A 7.2% increase in the discount
rate or a reduction in forecast revenue growth rates in year 2-5 to (3.5)% would result in an impairment.
The remaining average useful lives of the intangibles are as follows:
Trade name
Customer relations
Trade secrets
Website and software
Development costs
1–10 years
2–10 years
1–10 years
6–10 years
3-10 years
During the year, EKF Diagnostics Limited, the Group’s entity in Ireland, was put into shareholder’s voluntary liquidation,
completing the closure of the Group’s former Irish operations. As a result Intangible assets with a gross value of £2,284,000
and a net value of £nil have been written off. Following the liquidation of the Group’s business in Poland, Intangible assets
with a gross value of £964,000 and a net value of £nil have been written off.
On September 27 2021 the Group acquired Advanced Diagnostic Laboratory LLC (ADL), a Texas based testing laboratory,
for an initial consideration of $10m, payable largely through the issuance of the Company’s Ordinary shares. In addition the
Group agreed to pay an amount in cash representing the balance of net working capital in ADL at completion, as well as
further performance-based consideration payable over the following three years from completion. Further details of this
acquisition are given in Note 20.
On acquisition the Group identified the following Intangible Assets:
Trade name
Customer relationships
Website and software
Goodwill
Total
£’000
467
1,166
2,684
3,755
8,072
The useful life of these assets has been estimated at 10 years in each case. An Impairment review has been carried
out a 5 year period with a terminal value based on the long term growth rate. The Directors estimate a growth rate of
3%. The Directors believe that the business will continue to achieve a margin similar to that it made before acquisition.
Using a growth rate of 1% or an increased discount rate of 13% would result in an impairment.
Annual Report 2021 | EKF Diagnostics Holdings plc2 Notes to the Financial Statements
for the year ended 31 December 2021
19. Investments in subsidiaries
Company Shares in Group undertakings
At 1 January
Acquisition of Advanced Diagnostic Laboratory LLC
At 31 December
67
2021
£’000
30,521
7,925
2020
£’000
30,521
-
38,446
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 2021, which are held directly unless noted otherwise,
are as follows:
Name of Company
Note
Proportion Held
Class of
Shareholding
Nature of Business
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
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
Advanced Diagnostic Laboratory LLC
Argutus Intellectual Property Limited
EKF Diagnostics (Shanghai) Co. Ltd
Notes
1
1
1
1
2
3
3
3
4
5
5
5
5
5
5
5
6
7
8
100%
100%
100% (indirect)
100%
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100% (Indirect)
Ordinary
100%
Ordinary
100% (indirect)
Ordinary
Head Office
Sale of diagnostic equipment
Sale of diagnostic equipment
Manufacture and sale of
diagnostic equipment
Head office and IP licencing
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%
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
Consumer and corporate testing
Dormant
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 Russia at 117648, Moscow, PO Box: 30, District Severnoe
Chertanovo, House 2, building 207.
5. 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.
6. Incorporated and registered, or formed, and having its principal place of business in the United States of America at 1077 Central
Parkway S,. Suite 200, San Antonio, Texas, USA 78232
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 2021 | EKF Diagnostics Holdings plc2 6868
Notes to the Financial Statements
for the year ended 31 December 2021
In October 2021 the Group’s former company EKF Diagnostics Limited based in Ireland was liquidated.
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.
20. Business combination
Acquisition of Advanced Diagnostic Laboratory LLC
On 27 September 2021 the Group acquired 100% of the membership interest in Advanced Diagnostic Laboratory LLC,.
(ADL), a US company which provides PCR and other testing services.
The goodwill of £3,755,000 arising from the acquisition is attributable to the expected future benefits arising from the
acquired business.
The following table summarises the provisional fair values of the consideration paid for ADL and the amounts of the
assets acquired and liabilities assumed recognised at the acquisition date. Acquisition costs of £164,000 have been
written off against income, and disclosed as an exceptional item.
Provisional fair values
£’000
Consideration
Equity instruments
Cash
Deferred contingent consideration
Recognised amounts of identifiable assets acquired and liabilities assumed
Trade name – included within intangibles
Customer relationships – included in intangibles
Website and software – included in intangibles
Plant, property and equipment
Cash
Inventories
Trade and other debtors
Borrowings
Trade and other payables
Deferred tax
Total identifiable net assets
Goodwill
7,264
29
632
7,925
467
1,166
2,684
933
113
269
154
(388)
(322)
(906)
4,170
3,755
The amount of deferred contingent consideration has been discounted to take account of the time value of money.
The revenue included in the consolidated statement of comprehensive income since 27 September contributed by
ADL was £1.03m. ADL also contributed a profit of £0.05m after tax over the same period.
Had ADL been consolidated from 1 January 2021 the consolidated statement of income would show proforma revenue
of £87.5m and a profit of £18.0m.
Annual Report 2021 | EKF Diagnostics Holdings plc2 69
Notes to the Financial Statements
for the year ended 31 December 2021
21. 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
(b) Liabilities
31 December
Liabilities as per balance sheet
Borrowings
Lease liabilities
Trade and other payables (excluding deferred grants and deferred
income)
Deferred consideration
Total
Group
2021
£’000
7,789
11,005
20,341
39,135
Group
2021
£’000
696
1,933
7,379
635
10,643
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
6,608
12,312
21,913
40,833
7,789
2,983
4,879
15,651
6,608
7,987
10,045
24,640
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
508
1,070
-
391
-
328
13,051
4,690
12,097
2,901
17,530
635
5,716
2,901
15,326
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 contingent equity consideration totalling £237,000 (2020: £2,901,000) that is
categorised as a financial liability at fair value through profit and loss (see note 28). Borrowings have been included at fair
value which is not materially different to amortised cost.
(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 2021 and 31 December 2020, 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:
A+
AA-
A
A-
Ratings lower than AA- or unrated
Total
2021
£’000
4,879
572
73
5,544
9,273
20,341
2020
£’000
10,045
596
-
-
11,272
21,913
Annual Report 2021 | EKF Diagnostics Holdings plc2 7070
Notes to the Financial Statements
for the year ended 31 December 2021
22. Investments
Group and Company
1 January
Change in fair value through other comprehensive income
Disposal
31 December
2021
£’000
6,608
1,181
-
7,789
2020
£’000
9,900
4,348
(7,640)
6,608
The investments consist of a 0.66% holding in Epinex Diagnostics Inc., a US based privately held company operating in the
medical diagnostics industry; 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. The Group held a 1.39% holding (2020 1.39%)
in Renalytix plc, an AIM listed developer of artificial intelligence enabled diagnostics for kidney disease, with a fair value at 31
December 2021 of £6.22m and a 1.89% (2020 : 1.89%) holding in Verici Dx plc, an AIM listed developer of advanced clinical
diagnostics for organ transplant, with a fair value at 31 December of £1.42m. In each case the fair value is calculated using the
quoted mid price.
These equity securities are not held for trading. They are held as financial assets at fair value through other comprehensive income.
23. Trade and other receivables
Non-current
Amounts owed by subsidiary undertakings
-
-
1,860
6,670
Group
2021
£’000
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
Current
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments
Other receivables
11,010
(148)
10,862
2,302
812
13,976
9,181
(87)
9,094
870
3,589
13,553
1,085
-
1,085
292
40
1,417
1,231
-
1,231
158
87
1,476
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
Other than to certain corporate customers who are granted 60 day terms, they are generally due for settlement within 30
days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that
is unconditional. The group holds the trade receivables with the objective of collecting the contractual cash flows.
Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
As of 31 December 2021,in the Group trade receivables of £2,208,000 (2020: £2,062,000) were past due but not covered
by a loss allowance. In the Company, £678,000 (2020: £395,000) were past due but not covered by a loss allowance. 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
2021
£’000
1,835
179
194
Group
2020
£’000
2,000
8
54
2,208
2,062
Company
2021
£’000
Company
2020
£’000
595
-
83
678
394
1
-
395
As of 31 December 2021, trade receivables of £148,000 (2020: £87,000) were subject to a loss allowance. The Company does
not hold a loss allowance. The ageing of these receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
Total
Group
2021
£’000
71
57
20
148
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
34
39
14
87
-
-
-
-
-
-
-
-
Annual Report 2021 | EKF Diagnostics Holdings plc2 71
Notes to the Financial Statements
for the year ended 31 December 2021
Movements on the provision for impairment of trade receivables are as follows:
At 1 January
Provision for receivables impairment
Acquired with subsidiaries
Unused amounts reversed
Exchange differences
At 31 December
Group
2021
£’000
87
81
8
(26)
(2)
148
Group
2020
£’000
181
24
-
(118)
-
87
Company
2021
£’000
Company
2020
£’000
-
-
-
-
-
-
-
-
-
-
-
-
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
24. Inventories
Raw materials
Work in progress
Finished goods
Group
2021
£’000
1,417
3,890
8,615
54
13,976
Group
2021
£’000
9,117
1,431
2,690
13,238
Group
2020
£’000
1,476
6,340
5,702
35
13,553
Group
2020
£’000
5,854
931
1,702
8,487
Company
2021
£’000
Company
2020
£’000
1,417
52
1,808
-
3,277
1,477
2,083
4,586
-
8,146
Company
2021
£’000
Company
2020
£’000
442
25
8
475
513
–
118
631
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 £3,455,000 (2020: £2,810,000).
The Company does not hold any impairment provisions.
The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to £18,364,000 (2020: £12,502,000),
and in the Company £2,331,000 (2020: £1,359,000).
25. Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents (excluding bank overdrafts)
Group
2021
£’000
20,341
20,341
Group
2020
£’000
21,913
21,913
Company
2021
£’000
4,879
4,879
Company
2020
£’000
10,045
10,045
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. Net cash
of £19,645,000 (2020: £21,405,000) is presented as gross cash of £20,341,000 (2020: £21,913,000) net of borrowings of
£696,000 (2020: £508,000) detailed in Note 27. This excludes lease liabilities as shown in Note 17.
Annual Report 2021 | EKF Diagnostics Holdings plc2 7272
Notes to the Financial Statements
for the year ended 31 December 2021
26 Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Social security
Other payables
Accrued expenses and deferred income
Group
2021
£’000
4,435
-
168
840
3,635
9,078
Group
2020
£’000
2,408
-
148
6,733
5,146
14,435
Company
2021
£’000
Company
2020
£’000
206
3,532
89
505
448
4,780
189
3,766
64
6,535
1,608
12,162
Other payables consists mainly of VAT liabilities and an accrual relating to the cash settled share-based incentive scheme.
The carrying amounts of trade and other payables are considered to be the same as their fair values due to their short-term
nature. Trade payables are unsecured and are usually paid within 30 days of recognition. Amounts due by the Company
to its subsidiaries are interest free and repayable on demand.
27. Borrowings
Non-current
Bank borrowings
Current
Bank borrowings
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
Bank borrowings
Group
2021
£’000
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
431
431
265
265
323
323
185
185
-
-
-
-
-
–
-
-
Group
2021
£’000
Group
2020
£’000
Company
2021
£’000
Company
2020
£’000
265
208
223
-
696
185
185
138
-
508
-
-
-
-
-
-
-
-
-
-
Bank borrowings mature between 2022 and 2026 and bear an average fixed coupon of 3.76% annually (2020: 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 Euros.
The Euro denominated borrowings have covenants attached to them. The Group has been compliant with these covenants
throughout the year.
The Euro bank borrowings are repayable by quarterly instalments. The Dollar bank borrowings are repayable by monthly
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.
Annual Report 2021 | EKF Diagnostics Holdings plc2 73
Notes to the Financial Statements
for the year ended 31 December 2021
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 denominated as follows:
Euro
US Dollar
28. Deferred consideration
At 1 January
Fair value adjustment
Payment
Additions
Written down
Interest
At 31 December
Group
2021
£’000
304
392
696
Group
2021
£’000
2,901
285
(179)
632
(3,007)
3
635
Group
2020
£’000
508
-
508
Group
2020
£’000
1,385
1,516
-
-
-
-
2,901
Company
2021
£’000
Company
2020
£’000
-
-
-
-
-
-
Company
2021
£’000
2,901
285
(179)
632
3,007)
3
635
Company
2020
£’000
1,385
1,516
-
-
-
-
2,901
The deferred consideration at 1 January consisted 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 had been
adjusted to its fair value. In December 2021 a settlement was reached with the previous owner of EKF-diagnostic which
resulted in a cash payment to him of £179,000.
The additions consist of consideration payable or potentially payable to the former owners of ADL, and are made up of
two elements. The first is a cash payment, the amount of which is based on a calculation of net working capital in ADL at
completion. The second is deferred contingent consideration which is payable either in a mixture of ordinary shares and
cash, or in just cash, based on the achievement of certain earnings target in each of the three years following completion.
The fair value amount has been estimated using a balance of probabilities method based on current and expected trading,
and then discounted to account for the time value of money. £465,000 of the balance is current and the remainder is
non-current.
29. 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
2021
£’000
2020
£’000
(15)
-
(15)
4,286
745
5,031
5,016
(14)
-
(14)
2,412
224
2,636
2,622
Annual Report 2021 | EKF Diagnostics Holdings plc2 7474
Notes to the Financial Statements
for the year ended 31 December 2021
The gross movement on the deferred income tax account is as follows:
At 1 January
Exchange differences
Rate change through income statement
Addition following acquisition (See note 20)
Movement through OCI
Income statement movement (note 13)
At 31 December
2021
£’000
2,622
(96)
679
906
1,502
(597)
5,016
2020
£’000
2,585
68
277
-
-
(308)
2,622
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 2020
Charged to the income statement
Rate change
Exchange differences
At 31 December 2020
At 1 January 2021
Credited to the income statement
Rate change
Addition through subsidiary (Note 20)
Movement through OCI
Exchange differences
At 31 December 2021
Deferred tax assets
At 1 January 2020
Charged to the income statement
Exchange differences
At 31 December 2020
At 1 January 2021
Charged to the income statement
At 31 December 2021
Accelerated tax
depreciation
£’000
151
63
-
11
225
225
60
-
-
-
(14)
271
Tax losses
£’000
(15)
1
(14)
(14)
(1)
(15)
Other
£’000
2,468
(389)
277
55
2,411
2,411
(656)
679
906
1,502
(82)
4,760
Other
£’000
(19)
17
2
-
-
-
-
Total
£’000
2,619
(326)
277
66
2,636
2,636
(596)
679
906
1,502
(96)
5,031
Total
£’000
(34)
18
2
(14)
(14)
(1)
(15)
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 £1,190,000 (2020: £964,000) mainly in
respect of tax losses amounting to £5,063,000 (2020: £4,880,000), primarily arising in the UK entities, that may be carried
forward against future taxable income, as the likely timing of recovery is considered too remote; and of £70,000 (2020:
£1,008,000) in respect of cash settled share based payment liabilities of £298,000 (2020: £6,458,000) for the same reason.
Company
Deferred tax liabilities
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax
2021
£’000
1,502
1,502
2020
£’000
-
-
Annual Report 2021 | EKF Diagnostics Holdings plc2 75
Notes to the Financial Statements
for the year ended 31 December 2021
30. Share capital
Group and Company
At 1 January 2021
Acquisition of Advanced Diagnostics Laboratory
At 31 December 2021
Number of
Shares
Share capital
£’000
Share premium
£’000
454,993,227
8,937,337
463,930,564
4,550
89
4,639
200
7,175
7,375
Ordinary shares have a par value of 1p and are all fully paid. They entitle the holder to participate in dividends and to share
in the proceeds of winding up the Company in proportion to the number and amounts paid on the shares held. On a show
of hands, every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote; and on a poll
each share is entitled to one vote. The Company does not have a limited amount of authorised capital.
On 11 October 2021, 8,937,337 Ordinary shares were issued as an element of the consideration for the acquisition of
Advanced Diagnostic Laboratory LLC. at a price of 81.28 pence per share.
The Company has not acquired any ordinary shares during this year (2020: nil).
31. 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
Exercised
At 31 December
2021
2020
Av. Exercise price
per share
(£)
0.37625
-
-
Options
(Number)
25,000
-
-
Av. Exercise price
per share
(£)
0.240
0.273
0.232
Options
(Number)
950,000
(25,000)
(900,000)
0.37625
25,000
0.37625
25,000
The remaining unapproved share options consist of the following:
• 25,000 options were issued on 21 January 2014 to a senior employee 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.
All share option awards are equity settled. Out of the 25,000 (2020: 25,000) outstanding options 25,000 (2020: 25,000)
were exercisable at 31 December 2021.
Expiry Date
21.01.2024
2021
2020
Av. Exercise price
per share
(£)
0.37625
Av. Exercise price
per share
(£)
0.37625
Options
(Number)
25,000
25,000
Options
(Number)
25,000
25,000
On 2 June 2016 two Directors were granted a cash settled share-based incentive award. The terms of the award were
varied on a number of occasions and various payments made in 2019, and again in 2020. Further payments were made
against the scheme of £1,000,000, in January 2021.and of £5,003,000 in July 2021. In addition, on 9 October 2017, a senior
employee was granted a cash settled share-based incentive award. No payments have been made against this scheme.
At 31 December 2020 £6,458,000 was shown as a liability in the balance sheet within trade and other payables in relation to
these two schemes. In September 2021 both schemes were closed and the remaining liability extinguished. The remaining
liability, totalling £1,903,000 (including National Insurance movements), was credited to administrative expenses during
the year.
Annual Report 2021 | EKF Diagnostics Holdings plc2
7676
Notes to the Financial Statements
for the year ended 31 December 2021
In September 2021 a new cash settled share-based incentive award scheme was granted to a director.
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, of per share with the amount payable being
2.5% of the excess sale price above 70p per share. The fair value of this award has been calculated at £3,296,000 (2020:
£nil), using a modified form of a Black Scholes model. The key assumptions in the model include expected volatility of
45%, a risk free rate of 0.69%, and an expected dividend yield of 1.1p per share. There is an assumed acquisition premium
and option life.
£298,000 has been recognised as an expense in administrative expenses in the current year, and the same amount is
shown as a liability on the balance sheet at 31 December 2021 within trade and other payables. If the assumption on
volatility had been 55%, then the liability would have increased by £50,000; if the exit date had been assumed to be 6
months earlier, then the liability would have increased by £35,000; and if the acquisition premium was reduced to 0% then
the liability would have decreased by £55,000.
32. Other reserves
Group
At 1 January 2020
Changes in the fair value of equity instruments at fair value through
Other Comprehensive Income
Recycling of reserves in respect of disposal of equity instruments at fair value
At 31 December 2020
At 1 January 2021
Changes in the fair value of equity instruments at fair value through
Other Comprehensive Income (net of tax)
At 31 December 2021
Capital
redemption
reserve
£’000
102
-
-
102
102
-
102
Other
reserve
£’000
6,546
4,348
Total
£’000
6,648
4,348
(5,642)
(5,642)
5,252
5,252
5,354
5,354
(321)
(321)
4,931
5,033
The Group has elected to recognise changes in the fair value of certain investments in equity securities in Other
Comprehensive Income, as explained in note 2. These changes are accumulated within the FVOCI reserve within equity
and disclosed as Other reserve. The Group transfers amounts from this reserve to retained earnings when the relevant
equity securities are derecognised.
33. Retirement benefit obligations
Pension benefits
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 £281,000 (2020: £262,000). The value of pension contributions owed to pension
providers at 31 December 2021 was £nil (2020: £11,000).
34. Commitments
Capital commitments
The Group has contracted £1,736,000 (2020: £41,000) capital expenditure at the end of the reporting period that had not
yet been incurred.
Annual Report 2021 | EKF Diagnostics Holdings plc2 Notes to the Financial Statements
for the year ended 31 December 2021
35. Cash generated by/(used in) operations
Group
Company
Profit/(loss) before tax
Adjustments for:
– Depreciation
– Amortisation
– Warranty claim
– (Profit)/loss on disposal of fixed assets
- Loss on disposal of intangible assets
– Share-based payments
– Dividend received
– Fair value adjustment
– Foreign exchange
– Bad debt written down
– Net finance cost/(income)
Changes in working capital
– Inventories
– Trade and other receivables
– Trade and other payables
Net cash generated by operations
2021
£’000
21,435
2,041
3,844
(285)
(13)
-
(6,586)
285
61
58
26
(4,601)
(3,274)
1,217
14,208
2020
£’000
15,356
1,844
2,767
(1,414)
(22)
8
4,775
(31)
1,516
26
45
23
(2,557)
(3,426)
1,888
20,798
2021
£’000
5,790
326
51
-
-
-
(6,586)
-
(2,722)
75
36
(23)
156
4,914
(969)
1,048
In the statement of cash flows, proceeds from the sale of property, plant and equipment comprise:
Group
Net book value
Profit on disposal of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Non-cash transactions
2021
£’000
30
13
43
77
2020
£’000
(4,693)
235
-
-
-
-
4,775
(31)
1,516
(12)
(106)
(815)
(631)
8,080
1,436
9,754
2020
£’000
46
22
68
The principal non-cash transactions are: the revaluation of shares held in Renalytix AI plc and Verici Dx plc; 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.
36. Related Party Disclosures
Directors
Christopher Mills is interested in 28.21 per cent. of the Company’s issued share capital which is held through North Atlantic
Smaller Companies Investment Trust PLC, Oryx International Growth Fund Limited, and in his own name. Harwood Capital
LLP is investment manager to North Atlantic Smaller Companies Investment Trust plc and investment adviser to Oryx
International Growth Fund Limited. Harwood Capital LLP, which is part of the Harwood Capital Management Group (of
which Christopher is sole shareholder) is a limited liability partnership of which Christopher Mills is Chief Investment Officer.
He is non-executive chair of Renalytix plc (“Renalytix”) and a non-executive director of Trellus Health plc (“Trellus”). The
Group owns 1.39% of Renalytix. The Group invested $5m in Trellus in August 2020, and in December 2020 transferred that
investment to relevant EKF shareholders through a dividend in specie. In May 2021 the Company disposed of one golden
share which held the voting rights in the transferred shares. for nil value There were no other transactions with Trellus.
Christopher Mills is interested in 26.3% of the share capital in, and is a director of Sourcebio International plc (“Source”).
The Group did not trade with Source during the year.
The Group was invoiced £15,000 (2020: £18,000) by J & K (Cardiff) Limited for property rent. Julian Baines is a Director
of J & K (Cardiff) Limited. Julian is also non-executive chair of Trellus and of Verici Dx plc. The Company owns 1.89% of
Verici Dx plc.
Carl Contadini acts as an Operational Advisor to Harwood which acts as investment manager and investment adviser to
NAIT and Oryx respectively.
Annual Report 2021 | EKF Diagnostics Holdings plc2 7878
Notes to the Financial Statements
for the year ended 31 December 2021
Michael Salter is a director of Trellus Health plc
Adam Reynolds is a non-executive director of Yourgene Health plc (“Yourgene”) and of Myhealthchecked plc (“Concepta”).
During the period the Group invoiced £785,219 to Yourgene for goods, and purchased goods and services from them of
£10,485 none of which was outstanding from or to Yourgene at year end. During the year the Group invoiced £2,125,092
for goods to a subsidiary of Concepta, of which £209,455 was outstanding at year end.
Directors’ emoluments are set out in the Remuneration Committee report and in note 9.
The performance related payment made to the Executive directors under the cash settled share based payment scheme
is set out in note 31.
Other related party transactions
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 £589000 (2020: £538,000) 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
2021
£’000
5,869
(1,022)
19
4,866
2020
£’000
1,193
4,998
21
6,212
Key management includes the Directors of the Company only.
The Company
The transactions outlined above with Renalytix, Trellus, Yourgene and Concepta were all undertaken by the Company.
During the year the Company invoiced management charges of £3,279,000 (2020: £3,773,000) and interest of £312,000
(2020: £836,000) to its subsidiary companies, it also invoiced rental costs to EKF Germany of €167,000 (£143,700)
(2020: €167,000 (£149,330)). It purchased goods and services from subsidiaries totalling £1,272,000 (2020: £2,644,000).
At 31 December 2021 the Company was owed £1,860,000 (2020: £6,670,000) by its subsidiaries and owed £3,532,000
(2020:£3,766,000) to other subsidiaries.
37. Investment in Associate
In August 2020 the Company invested $5,000,000 (£3,810,000) for a 31.1% shareholding in Trellus Health plc, a pioneer
in resilience-driven care for people with complex chronic conditions. In December 2020 the Company made a distribution
in specie whereby, with the exception of a single “golden” share, the Company’s shareholding in Trellus Health plc was
distributed to ordinary shareholders of the Company.
At 31 December 2020 the “golden” share retained all of the voting rights of the shares in Trellus previously held by the
Group. On the admission to AIM of Trellus in May 2021 the Golden Share the value of which at 31 December 2020 was
negligible, converted to an ordinary share, and the voting rights transferred to the distributed shares.
38. Post Balance Sheet Events
In February 2022 Russia invaded the neighbouring state of Ukraine. As a response to this, the UK, EU and the USA,
amongst other countries and organisations, imposed sanctions including financial sanctions, on Russia and Belarus.
The Group has a 60% owned subsidiary company in Russia, which sells the Group’s products in Russia itself as well as a
number of former CIS states, and in addition has distributors in Ukraine and Belarus. Our Russian subsidiary contributed
£3.3m of revenue and adjusted EBITDA of £1.0m in 2021, and had net assets of £1.5m.
It is too early to estimate the effect if any that this conflict will have on our business in Russia,
This is a non-adjusting event. No adjustments have been made to the 2021 financial statements.
On 7 March the Company invested £2.5m in Verici Dx plc, with the intention of transferring our holding to shareholders by
way of a distribution in specie in due course.
Annual Report 2021 | EKF Diagnostics Holdings plc2
79
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 Harwood Capital LLP, 6 Stratton Street Mayfair, London W1J 8LD on 18 May 2022 at 11 a.m. for the following
purposes:
Ordinary Resolutions
1. To receive and adopt the statement of accounts for the year ended 31 December 2021 together with the reports of
the Directors and the auditors thereon.
2. To re-elect Marc Peter Davies, who retires by rotation having been appointed since the last annual general meeting,
as a Director.
3. To re-elect Jennifer Ann Julia Winter, who retires by rotation having been appointed since the last annual general
meeting, as a Director.
4. To re-elect Christian Alexander Rigg, who retires by rotation having been appointed since the last annual general
meeting, as a Director.
5. To re-elect David Michael Salter, who retires by rotation having been appointed since the last annual general
meeting, as a Director.
6. To re-elect Christopher Harwood Bernard Mills, who retires by rotation, as a Director.
7. 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.
8. 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 £920,000* (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 £454,930.56 (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 2023, 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.
*this figure includes the potential earn out payment which may be made by way of consideration shares in
accordance with the SPA of the Advanced Diagnostic Laboratory LLC acquisition completed on 21 September
2021. See investor announcements for further information.
9. To declare a final dividend of 1.2 pence per ordinary share to be paid on 1 December 2022 to the holders of ordinary
shares on the register of members at the close of business on 3 November 2022.
10. That, upon the recommendation and conditional on the approval of the directors of the Company, a dividend in
specie be approved, being the transfer by the Company of 9,098,611 ordinary shares of $0.0001 each in VericiDx
plc to the holders of the ordinary shares of nominal value of £0.01 each on the register of members of the
Company at the close of business on a date to be determined by the directors of the Company.
Special Resolutions
11. 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 £454,930.56 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 2023, 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.
Annual Report 2021 | EKF Diagnostics Holdings plc3
8080
NOTICE OF ANNUAL GENERAL MEETING
EKF Diagnostics Holdings PLC (Company)
12. That the Company be and is generally and unconditionally authorised for the purposes of section 701(1) of the
2006 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 68,239,584 (representing 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;
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 2023, 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.
Registered Office
Avon House
19 Stanwell Road
Penarth
CF64 2EZ
25 April 2022
BY ORDER OF THE BOARD
Salim Hamir
Company Secretary
Annual Report 2021 | EKF Diagnostics Holdings plc3 81
Notes
1.
2.
3.
4.
5.
6.
7.
8.
9.
The Company specifies that only those members registered on the Company’s register of members at close of business on 16 May
2022 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.
If you are a Shareholder 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 meeting. You can only appoint a proxy using the procedures set out in these notes
and the notes to the proxy form.
You will not receive a hard copy form of proxy with this document. Instead, you will be able to vote electronically using the link www.
signalshares.com. You will need to log into your Signal Shares account, or register if you have not previously done so. To register you
will need your Investor Code, this is detailed on your share certificate or available from our Registrar, Link Group. Alternatively you
can vote by downloading the new shareholder app, LinkVote+, on Apple App Store or Google Play and following the instructions.
Votes submitted electronically must be submitted by no later than 11 a.m. on 16 May 2022.
You may request a hard copy form of proxy directly from the Registrars, Link Group at shareholderenquiries@linkgroup.co.uk or on
Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate. Line 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).
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.
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. on 16 May 2022. 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.
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.
10. 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 Group 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.
11.
In order to revoke a proxy instruction you will need to inform the Company by contacting Link Group on 0371 664 0300. Calls
are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Line are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and
Wales. 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 Group no later than 11 a.m. on 16 May 2022. 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.
12. 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.
13. 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.
14. Voting on the resolution will be conducted by way of a poll vote.
15. As at the close of business on the day immediately before the date of this notice of general meeting, the Company’s issued share
capital comprised 463,930,564 ordinary shares of nominal value 1 pence each of which 9,000,000 ordinary shares are held in the
Treasury. 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 close of business, on the day immediately before the date of this notice of general meeting
excluding the Treasury shares are 454,930,564.
Annual Report 2021 | EKF Diagnostics Holdings plc3 Solicitors to the Company:
Berry Smith LLP
Haywood House Dumfries Place Cardiff
CF10 3GA
BDB Pitmans LLP
One Bartholemew Close
London
EC1A 7BL
Registrars:
Link Group
Central Square
29 Wellington Street
Leeds LS1 4DL
If you have a query regarding your shareholding please call
the Link shareholder helpline on +44 (0)371 664 0300 (UK
calls are charged at the standard geographic rate and will
vary by provider)
or visit their website at https://www.linkgroup.eu/get-in-
touch/shareholders-in-uk-companies/
Financial public relations:
Walbrook PR Limited
4 Lombard Street
London
EC3V 9HD
Investor relations email:
investors@ekfdiagnostics.com
Company information
Directors:
Christopher Mills
(Non-Executive Chairman)
Julian Baines MBE
(To 30 September 2021 Chief Executive Officer,
From 1 October 2021 Non-executive Deputy Chairman)
Michael Salter
(Appointed 1 July 2021)
(Chief Executive Officer from 1 October 2021)
Richard Evans
(resigned 1 January 2022)
(Chief Operating Officer and Finance Director)
Marc Davies
(Appointed 1 January 2022)
(Chief Financial Officer from 1 January 2022)
Carl Contadini
(resigned 1 February 2022)
(Non-Executive Director)
Adam Reynolds
(resigned 19 May 2021)
(Non-Executive Director)
Christian Rigg
(Appointed 1 July 2021)
(Non-Executive Director)
Jennifer Winter
(appointed 1 February 2022)
(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:
Singer Capital Markets
1 Bartholomew Lane London EC2N 2AX
Joint Broker:
Investec Bank plc
30 Gresham Street London EC2V 7QN
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