Annual Report
Point-
of-care
2022 1.0 Strategic Review and
Corporate Governance
Financial and Operational Highlights
At a Glance
Executive Chairman’s Statement
Chief Financial Officer’s Review
Board of Directors
Strategic Report
Report of the Directors
Corporate Governance Statement
Report of the Remuneration Committee
4-31
4
5
12
17
21
23
27
29
31
2.0 Financial Statements
32-80
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
3.0 Additional Information
Notice of Annual General Meeting
Notes
Company Information
32
38
39
40
41
42
43
44
81-85
81
83
85
X
E
D
N
I
Annual Report 2022 | EKF Diagnostics Holdings plc3 44
Financial and Operational Highlights
2022 - Key points
Financial Highlights
•
•
•
•
•
•
•
Revenues of £66.6m2 in-line with market expectations (2021: £81.8m)
– 17% year-on-year growth in revenues, excluding all COVID-related activities
Gross profit before exceptionals of £30.8m (2021: £39.4m)
Adjusted EBITDA3 of £14.9m (2021: £26.5m)
– 24% up from pre-pandemic levels (2019: £12.0m)
Loss before tax of £8.9m (2021: £21.4m profit) after exceptional transition and restructuring costs of £17.5m
Cash generated from operations of £12.7m (2021: £14.2m)
Group cash, net of borrowings (excluding IFRS 16 liabilities), as at 31 December 2022 of £11.4m (31 December
2021: £19.6m), primarily reflecting cash generated from operations less £4.4m capital expenditure, £2.9m
investments, £3.9m share buyback and £5.5m dividend payment
Cash dividend paid to shareholders, equivalent to 1.2p per ordinary share (2021: 1.1p per share),
plus dividend in specie of Verici Dx shares valued at £2.0m
1 Core established business includes Point-of-Care and Central Laboratory
2 Includes £3.5m relating to US inventory receipt
3 Earnings before interest, tax, depreciation and amortisation, excluding exceptional items and share based payments
Operational Highlights
•
•
•
•
•
•
13% year-on-year growth in core established business revenues to £45.3m (2021: £40.1m)
– Point-of-Care up 14% to £30.8m (2021: £27.0m)
– Central Laboratory up 11% to £14.5m (2021: £13.1m)
60% year-on-year growth in Life Sciences to £3.2m (2021: £2.0m)
Investment to increase fermentation capacity and capability to deliver significant revenue growth with final
larger-scale fermenter installation to complete in Q3 2023
Cost reduction, restructuring and operational efficiency measures implemented to benefit 2023 performance
and beyond
Exit from underperforming Laboratory Testing and Contract Manufacturing businesses, including sale of
ADL Health
Board changes: Julian Baines assumed Executive Chair role on a short-term basis and Mike Salter to concentrate
on delivering growth in Life Sciences, effective from 7 February 2023
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
5
At a Glance
Commentary
EKF Diagnostics Holdings plc (“EKF”) is a leading global medical diagnostics company that specialises in the development,
production, and distribution of innovative diagnostic tools and technologies. Helping patients and healthcare professionals
around the world by enabling access to high-quality diagnostic solutions that deliver faster and more accurate diagnosis
and monitoring of a wide range of medical conditions.
At EKF Diagnostics, we are dedicated to improving patient outcomes and making a positive impact on global healthcare.
Our products, services, and technologies are designed to help identify, monitor, and support a range of healthcare areas
including haematology, diabetes, women’s health, sports performance, pathology, and clinical research.
EKF specialises in point-of-care testing, central laboratory reagents and analyzers, enzyme manufacturing, and contract
manufacturing services for the healthcare industry. Our solutions are used in a variety of settings, including clinics,
hospitals, laboratories, and research facilities.
In response to the challenges posed by the COVID-19 pandemic, EKF Diagnostics was at the forefront of the global effort
to combat the disease. Tests developed by EKF have helped to identify and monitor COVID-19 cases around the world, and
have played an important role in the fight against the pandemic. During this time we remained committed to our mission
and continued to deliver on our promises, and we are proud of the resilience and adaptability demonstrated by our team
during that time. EKF Diagnostics is using its experience in this global challenge to further develop and enhance our core
business offering away from our pandemic response.
At EKF, we recognize that timely and accurate diagnosis is crucial to improving patient outcomes and reducing healthcare
costs. However, traditional laboratory-based testing methods can be slow, expensive, and require specialised equipment
and personnel. Our products and services offer a solution to these challenges, enabling healthcare professionals to perform
diagnostic tests quickly and easily at the point of care, without compromising accuracy or reliability.
As a leading global medical diagnostics company that specializes in the development, production, and distribution of
diagnostic tools and technologies, EKF Diagnostics believes that every patient has the right to access accurate and timely
diagnostic information, and this is what drives us to develop new technologies and solutions.
Looking ahead, EKF is committed to continuing to innovate and expand our product portfolio, with a focus on developing
cutting-edge diagnostic technologies for a wide range of medical conditions and unmet medical needs. We will continue
to seek out new opportunities to improve patient outcomes and support healthcare professionals. We will also continue
to expand our global reach through strategic partnerships, commercialisation opportunities, and distribution agreements.
We believe that by staying at the forefront of medical diagnostics, we can make a meaningful difference in the lives of
patients around the world.
We remain confident in our ability to deliver value to our shareholders, customers, and patients, and we look forward to
continued success in the years to come.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
66
2022 Summary
2022
2021
+/-
Revenue (£m)
£66.6
£81.8
(18.6%)
Net cash* (£m)
£11.4
£19.6
(41.8%)
Adjusted
EBITDA (£m)
£14.9
£26.5
(43.8%)
2016
2017
2018
£44.9
2019
*Group cash net of borrowings, excluding IFRS 16 Liabilities
£38.6
£41.6
£42.5
18.6%
Decrease in revenues
year on year
£81.8
£65.3
2021
£66.6
2020
2022
Annual revenues
£m
POINT OF CARE
REVENUES
CLINICAL
CHEMISTRY
REVENUES
CONTRACT
MANUFACTURING
REVENUES
FY 2022
£30,786 (£k)
+ 14%
FY 2021
£27,003 (£k)
FY 2022
£14,516 (£k)
+11%
FY 2021
£13,055 (£k)
FY 2022
£9,514 (£k)
- 74%
FY 2021
£36,308 (£k)
LAB SERVICES
REVENUES
LIFE SCIENCES
REVENUES
FY 2022
£2,630 (£k)
FY 2022
£3,235 (£k)
+155%
FY 2021
£1,030 (£k)
+ 60%
FY 2021
£2,019 (£k)
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 7
2022 Sales
Year
2016
2017
2018
2019
2020
2021
2022
Annual Revenue
Revenue
FY2022 (£k)
FY2021 (£k)
£38.6m
Point-of-care
30,786
£41.6m
Central Laboratory
£42.5m
Life Sciences
£44.9m
£65.3m
Contract
Manufacturing
Laboratory Testing
£81.8m
Other
£66.6m
14,516
3,235
9,514
2,630
5,954
27,003
13,055
2,019
36,308
1,030
2,421
+/-
14.0%
11.2%
60.2%
(73.8%)
155.3%
145.9%
ANALYSERS SOLD (Point-of-Care)
2022
16,680
2021
16,111
Revenue
(£000s)
APAC
EMEA
AMERICAS
+3.5%
FY2022
FY2021
+/- (£k)
Sales
FY 2022
Analysers (PoC)
5,117
26,451
35,067
4,295
42,711
34,770
19.1
APAC
(38.1)
EMEA
0.9
AMERICAS
3,887
7,596
5,197
EKF Locations
Elkhart/South Bend,
USA
Leipzig, Germany
Barleben, Germany
Cardiff, UK
Moscow, Russia
Boerne, USA
Shanghai, China
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 88
2022 Market and Product Highlights
Strategic partnership agreement with Yourgene Health plc (Jan 2022)
EKF Diagnostics Holdings plc, signed a strategic partnership agreement with Yourgene Health plc, a leading international
molecular diagnostics group, whereby EKF will offer a non-invasive prenatal test service to the US market based on
Yourgene’s proprietary Flex technology, using EKF’s accredited US laboratory to process returned test samples. Over
time, EKF and Yourgene intend to provide further tests including in oncology, for which Yourgene has additional tests.
The agreement is for an initial 5-year period.
EKF launches middleware connectivity solution for PoC analyzers and data management (May 2022)
EKF Diagnostics announced the launch of its new EKF Link digital connectivity solution for the secure management
of point-of-care (PoC) analyzers and associated data on one centralized platform. An open, flexible solution, EKF Link
middleware can be interfaced to all vendors’ POC analyzers, including EKF’s own portfolio, to enable real-time remote
management of data, such as patient test results, QC results, operator management and analyzer configuration.
EKF highlights specific glycemic control marker at AACC 2022 (Jun 2022)
EKF Diagnostics was at the 2022 AACC Clinical Lab Expo in Chicago, exhibiting its range of laboratory and point-of-
care diagnostics products. This included the FDA cleared Lucica® Glycated Albumin-L test kit, manufactured by Asahi
Kasei Pharma Corporation and sold exclusively in the U.S. by EKF. A specific, quantitative test for glycated albumin, it
is one of the most widely published methods worldwide used for the intermediate-term monitoring of glycemic control
in diabetes patients.
EKF introduces hand-held hemoglobin analyzer with secure POC connectivity (Oct 2022)
The hand-held DiaSpect Tm hemoglobin analyzer connects securely to EKF Link, the company’s own point-of-care
(POC) middleware, enabling additional features including a calculated hematocrit value and data management.
Available globally, the DiaSpect Tm has received an IVD CE-mark, FDA clearance and is registered in many more
countries across all continents.
EKF launches handheld veterinary lactate analyzer (Dec 2022)
EKF Diagnostics, announced the launch of a new version of its Lactate Scout analyzer, designed specifically for use in
veterinary settings. Lactate Scout Vet uses the same proven technology that was initially developed to provide elite
sports coaches and athletes with a precise and easy-to-use handheld lactate test. The new Lactate Scout Vet features
species selection for dogs, horses, pigs and cattle, making it ideal for use in both small and large animal practices.
For further information and product details visit ekfdiagnostics.com/rns.html and ekfdiagnostics.com/news.html
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 Portfolio
9
EKF Diagnostics offers a range of point-of-care (PoC) solutions to enable rapid, accurate and reliable medical diagnostic
results. Here are five key points about EKF Diagnostics’ PoC offering:
1. Comprehensive range: EKF Diagnostics’ PoC solutions cover a broad range of clinical applications, including
diabetes, hemoglobin testing, lactate testing, and more.
2. Portable and user-friendly: Many of EKF Diagnostics’ PoC devices are compact, lightweight, and easy to use,
making them well-suited for use in a variety of settings, from hospitals to clinics to remote locations.
3. Rapid results: With EKF Diagnostics’ PoC solutions, healthcare professionals can obtain accurate and reliable
test results within minutes, allowing for timely diagnosis and treatment of medical conditions.
4. Quality and compliance: EKF Diagnostics’ PoC solutions are manufactured to the highest quality standards and
comply with regulatory requirements such as CE marking and FDA clearance.
5. Cost-effective: By providing accurate and reliable results at the point of care, EKF Diagnostics’ PoC solutions
can help to reduce healthcare costs associated with laboratory-based testing and improve patient outcomes.
For further information and product details visit ekfdiagnostics.com/point-of-care
EKF Diagnostics offers a range of central laboratory solutions for clinical chemistry and immunoassay testing. Here are
five key points about EKF Diagnostics’ central laboratory offering:
1. Wide range of analyzers: EKF Diagnostics’ central laboratory offering includes a wide range of analyzers for
clinical chemistry and immunoassay testing, ranging from small benchtop models to high-throughput automation
systems.
2. Flexible testing options: EKF Diagnostics’ analyzers offer flexible testing options, including open reagent
systems and pre-packaged assay kits, allowing laboratories to choose the best approach for their needs.
3. High-quality results: EKF Diagnostics’ analyzers provide accurate and reliable results for a variety of clinical
applications, including diabetes, kidney function, liver function, and more.
4. User-friendly software: EKF Diagnostics’ analyzers are supported by user-friendly software that simplifies assay
setup, calibration, and quality control procedures.
5. Comprehensive service and support: EKF Diagnostics provides comprehensive service and support for its
central laboratory analyzers, including training, technical support, and maintenance services, to ensure optimal
performance and uptime.
For further information and product details visit ekfdiagnostics.com/central-laboratory
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
1010
EKF Diagnostics offers a range of life sciences solutions, including enzymes, antibodies, and other reagents for use
in research and development, as well as diagnostic kits for veterinary and food testing applications. Here are five key
points about EKF Diagnostics’ life sciences offering:
1. Extensive product portfolio: EKF Diagnostics’ life sciences product portfolio includes a broad range of enzymes,
antibodies, and other reagents for use in research and development applications, as well as diagnostic kits for
veterinary and food testing.
2. Custom development: EKF Diagnostics offers custom development services for customers with specific needs,
including the development of antibodies, enzyme, and other reagents to customer specifications.
3. High quality: EKF Diagnostics’ life sciences products are manufactured to the highest quality standards and are
supported by comprehensive quality control procedures.
4. Expert technical support: EKF Diagnostics’ life sciences team includes expert technical support staff who can
provide guidance on product selection, assay development, and other issues.
5. Flexibility and scalability: EKF Diagnostics’ life sciences products are designed to be flexible and scalable,
allowing researchers and developers to choose the best approach for their specific needs and to easily scale up
as their requirements grow.
For further information and product details visit ekfdiagnostics.com/life-sciences
Lab Services:
EKF Diagnostics lab services are provided by ADL Health, a healthcare services company acquired in 2021 that offers
a range of services and solutions out of a CLIA-certified facility to support patients and healthcare providers. ADL was
divested in March 2023.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
11
EKF Diagnostics offers contract manufacturing services for customers looking to outsource the production of their
diagnostic or life sciences products. Here are five key points about EKF Diagnostics’ contract manufacturing offering:
1. Comprehensive capabilities: EKF Diagnostics’ contract manufacturing capabilities include product development,
manufacturing, packaging, and logistics for a wide range of diagnostic and life sciences products.
2. Quality and compliance: EKF Diagnostics’ contract manufacturing services are conducted in accordance with
cGMP and ISO 13485 quality standards, ensuring that products are manufactured to the highest quality and
compliance standards.
3. Flexibility and scalability: EKF Diagnostics’ contract manufacturing services are flexible and scalable, allowing
customers to choose the best approach for their needs and easily scale up production as demand grows.
4. Expert technical support: EKF Diagnostics’ contract manufacturing team includes expert technical support
staff who can provide guidance on product development, regulatory compliance, and other issues.
5. Confidentiality and IP protection: EKF Diagnostics places a high priority on maintaining confidentiality and
protecting customers’ intellectual property throughout the contract manufacturing process.
For further information and product details visit ekfdiagnostics.com/contract-manufacture
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
1212
Executive Chairman’s Statement
We are pleased to announce a solid set of
results for 2022 which saw EKF deliver full
year revenues of £66.6m, reflecting both
attractive growth from core established
the expected
revenues streams and
significant drop-off in COVID revenues
during the year.
We have previously set out our aim to
return the core established business to
pre-pandemic 2019 levels and position
ourselves for future sustainable growth
outside of short-term COVID-related
revenues, and we believe we have made
excellent progress.
We are particularly pleased with the strong
performance of the core established
business, comprising of Point-of-Care and
Central Laboratory, which has delivered
organic growth of 13% year-on-year. In
2022 those two divisions contributed
£45.3m,
representing 68% of Group
revenues, a 12% improvement on pre-
pandemic levels, and by itself now more
than total Group revenues for 2019, when
no COVID related activities were recorded.
Not only have we successfully grown these
core divisions to above their respective
pre-pandemic levels, we have delivered
respectable double-digit organic growth
across 2022 and expect this momentum to
continue into 2023.
A further major contributor to establishing
ourselves for future sustainable growth
has been our Life Sciences division,
which has already seen significant year-
on-year growth of 60% in 2022 to £3.2m
(2021: £2.0m), even before the capacity
expansion plans at our US enzyme
fermentation
fully
implemented. We are confident in the
commercial potential and payback of this
growth opportunity and expect to realise
the full impact on revenue growth in 2024.
facility have been
these
strong
Alongside
positive
developments, there has been some ‘drag’
on performance in 2022, namely from
the longer than anticipated transition to
non-COVID revenues in both Contract
Manufacturing and Laboratory Testing.
Whilst progress has been made in this
regard, in 2023 there is a significant focus
on cost reduction and restructuring within
these divisions, as well as more general
operational efficiency measures being
introduced across the Group. This has
resulted in the decision to close down the
Contract Manufacturing operations in the
UK and the disposal of the Laboratory
Testing subsidiary, Advanced Diagnostic
Laboratory LLC (“ADL Health”) in the US.
The Group now has a clear focus on the
Point-of-Care, Central Laboratory and Life
Sciences divisions.
Adjusted EBITDA for the year was £14.9m
(2021: £26.5m) which, while lower than
originally anticipated,
reflects a 24%
improvement on pre-pandemic levels (2019:
£12.0m). Adjusted EBITDA was reduced
as a result of the underperformance in
Contract Manufacturing and Laboratory
Testing. As confirmed above, action has
been taken to ensure this is non-recurring.
Cash levels remain healthy, with net cash
after borrowings (excluding IFRS 16 lease
liabilities) of £11.4m (31 December 2021:
£19.6m) and cash and cash equivalents of
£11.6m (31 December 2021: £20.3m). This
position is after the significant investment
in increasing our enzyme fermentation
capacity, as well as the funding of our
share purchase programme, payment
of
shareholder dividend, and other
investments made during the year. Cash
held in our Russian subsidiary at year end
was £2.4m (31 December 2021: £1.3m) and
is discussed further in the Chief Financial
Officer’s statement.
Whilst 2022 has been a year of significant
transition, the Board is confident that
foundations
EKF has well-established
from which to execute its next phase of
sustainable growth.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
13
Executive Chairman’s Statement (continuation)
Operational overview
As already mentioned, the highlights of our 2022 results
have been the performance of the core established
business year-on-year, and in comparison to pre-pandemic
levels, as well as the strong growth coming from our Life
Sciences division using existing fermentation capacity
levels. The table below highlights this strong performance:
Division
revenues
£ millions
Core
established
business
2022
2021
+/- %
Yr-on-Yr
2019
(pre-
pandemic)
+/- %
2022 vs.
2019
45.3
40.1
13.1%
40.6
11.6%
Point-of-Care
30.8
27.0
14.0%
Central
Laboratory
Life Sciences
Contract
Manufacturing
Laboratory
Testing*
14.5
13.1
11.2%
3.2
9.5
2.0
60.2%
36.3
(73.8%)
2.6
1.0
155.3%
27.3
13.3
2.7
0.2
-
12.8%
9.0%
18.5%
4,650%
-
Other
6.0†
2.4
143.1%
1.4
328.6%
Total Group
Revenues
66.6
81.8
(18.6%)
44.9
48.3%
*contribution from 27 September 2021
†Includes £3.5m relating to US inventory receipt
Point-of-Care & Central Laboratory
Point-of-Care
Providing a portfolio of Point-of-Care
analysers and consumables, particularly for
use in the area of Hematology and Diabetes,
for use in hospital and research laboratories,
doctor’s offices, blood banks and for in-field
anaemia screening programmes. EKF has an
estimated 80,000 hemoglobin, hematocrit,
HbA1c, glucose and lactate analysers in
regular use across more than 100 countries.
Central Laboratory Clinical chemistry (manufacture and supply
of reagents and materials, as indicated
below), and laboratory equipment including
small lab analysers and centrifuges.
Beta-Hydroxybutyrate (β-HB) LiquiColor,
Glycated Albumin, Glycated Serum Protein,
Nitro-tab, Procalcitonin
Our core established business, a combination of our
Point-of-Care (POC) and Central Laboratory divisions,
performed well, growing revenues by 13% to £45.3m
(2021: £40.1m). We continue to focus on driving organic
growth from these stable and established businesses,
leveraging existing products and routes to markets, and
innovating and expanding into new territories. We expect
to see continued growth into 2023.
As well as showing strong year-on-year growth, Point-
of-Care sales in 2022 were some 13% above the level of
sales seen pre-pandemic in FY 2019. In 2022 we saw a
strong sales performance from our range of hematology
analysers and tests, and in particular from the continued
use of the consumables associated with them. Revenues
from our flagship hemoglobin analyzer, Hemo Control,
grew by 37% in the year, and is the largest contributor to
this division, now representing just short of a quarter of
POC revenues. Sales of our HemataStat product, a light
and efficient centrifuge for fast haematocrit sampling,
grew by 31%. DiaSpect Tm sales were slightly down year-
on-year, but did so on the back of strong growth in 2021,
and sales still remain over 30% above pre-pandemic levels.
The newly updated DiaSpect Tm, now powered by our
data management platform EKF Link and with additional
functionality, is expected to inject greater impetus for
sales of this palm-sized haemoglobin analyzer.
We have also seen growth across all our diabetes instrument
range, driven by high growth from our Quo-Lab HbA1c
analyzer (sales up by 23%) and a solid performance from
our second largest contributor to POC sales, Biosen, a lab
accurate glucose and lactate analyzer, which showed 15%
growth. Revenues from Lactate Scout, a handheld lactate
analyzer for sports performance monitoring, remained
broadly flat year-on-year. The launch of Lactate Scout Vet
in Q4 2022, will utilise our existing product technology to
open up new and attractive markets in animal health, with
considerably lower barriers to entry.
Central Laboratory also performed well in 2022 delivering
11% growth compared to 2021, and maintaining revenue
levels 9% ahead of pre-pandemic levels at £14.5m. The
vast majority of sales in this division are derived from our
β-HB (Beta-Hydroxybutyrate) reagent, which is used to
detect ketones to identify patients suffering from diabetic
ketoacidosis, amongst many other clinical applications.
In 2022 β-HB sales increased by 10% to around £12m,
as a result of increased demand generated from our US
distribution partners.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 1414
Executive Chairman’s Statement (continuation)
Life Sciences
Life Sciences
Enzyme fermentation, Custom products
and Bulk fermentation
Contract
Manufacturing
Bulk formulation, Sample collection kits,
Private labelling, Molecular and forensic
kits
Our Life Sciences division grew by 60% to £3.2m (2021:
£2.0m). We believe that this is a highly-scalable business
unit, where we can take advantage of a demand-driven
opportunity to produce research and diagnostic enzymes
in the molecular and clinical chemistry markets, and
in industrial and agricultural enzymes settings as well
as food grade fermentation digestive proteins. Our
production expansion is for customers that we have
established relationships with, and who are well advanced
in the process of transferring to our enzyme contract
manufacturing services delivered from our two US sites
in Indiana.
As we updated shareholders recently, we expect to have
our largest fermenter (14,500 litre) installed and validated
in Q3 2023. This means all our fermentation capacity and
capability investment in South Bend will be installed and
validated towards the end of Q3 2023.
As part of our $14.2m investment programme, we will
have installed 65L, 300L, 1,500L, 3,000L and 14,500L
units as well as key upstream and downstream process
capabilities, to complement the existing capacity provided
by our existing BioFlo 10L (x2), 125L and 1,600L units in
our established Elkhart facility. We have a strong pipeline
of opportunities to take up our enlarged capacity, and
current customer onboarding processes (internal audit,
validation and tech transfer) continue to progress well. We
remain confident that all of the planned fermenters will
be operational in Q3 2023, and we will deliver significant
revenue growth from this opportunity, with the full impact
seen in 2024 financial results and further growth beyond.
As we expect Life Sciences to become a larger contributor
to Group performance we have performed an internal
reorganisation to record higher value, non-COVID,
Contract Manufacturing activity performed by our US
operation in this division. This reinforces management’s
focus on the core business (i.e. all non-COVID related
products and services) and will increase visibility and
reduce complexity in our Group, becoming effective in
2023 reporting.
Laboratory Testing Laboratory testing services certified under
the Clinical Laboratory Improvement
Amendments (“CLIA”) for high complexity
testing.
Contract Manufacturing & Laboratory Testing
The key focus for both Contract Manufacturing &
Laboratory Testing has been
these
businesses into non-COVID activities and build revenues
by broadening our high-value services offering.
transition
to
In Contract Manufacturing this process has taken longer
than originally expected and as already described to
shareholders in our recent trading update, EKF is now
focussed on taking out significant costs from this division,
using pre-pandemic levels as a benchmark. Furthermore,
the Company is extending its reorganisation programme
and efficiency drives as discussed in the Half-Yearly results.
Our UK Contracting Manufacturing operation, which
was set up in 2020 to meet COVID related demand, has
been closed in Q1 2023, and its existing business is being
transferred to other EKF locations where commercially
viable. This division was loss making and so the Board has
taken decisive action to adjust the cost base accordingly.
As discussed above, in 2023 all activity relating to the
high value non-COVID Contract Manufacturing services
performed from the US will be recorded in Life Sciences.
Any residual COVID related Contract Manufacturing will
be captured in Other, which is not expected to be material.
As announced on 23 March 2023, Management has
determined that Laboratory Testing will no longer form
part of EKF’s core offering and, therefore, ADL Health was
disposed to Medical Management Partners, LLC, an entity
which is 100% controlled by Stan Crawford, a member of
the management team of ADL Health. The Disposal will
provide cost savings to EKF, allow Management time to
focus on growth initiatives in other areas, and also simplify
the reporting structure of the wider group.
The performance of these two divisions had a significant
impact on overall 2022 Group performance. However,
quick action to realign the cost base and to undertake
appropriate reorganisational steps will ensure that they
will no longer act as a drag on growth in gross margin and
adjusted EBITDA moving forward.
In addition to the above business divisions there was a
further £6.0m revenues recorded in Other, which mainly
related to shipping and handling recharges, repairs and
other sundries (2021: £2.4m). However, in 2022 £3.5m
of revenue in Other relates to the one-off US inventory
receipt received in May 2022 which is non-recurring.
In light of the operational changes mentioned above we
will present the EKF business going forward under two
simplified divisions:
Point-
of-Care
(Products)
Life
Sciences
(Services)
incorporating the core established businesses of
Point-of-Care & Central Laboratory
incorporating the Life Sciences division (enzyme
fermentation services) and the remaining high-
value contract manufacturing services offered to
customers looking to outsource the production of
their diagnostic or life sciences products
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 15
Executive Chairman’s Statement (continuation)
Transition and restructuring activities
In light of the significant macro changes during 2022,
the Board took swift action to transition and restructure
the business activities of the Group. This centred around
transitioning the structure and costs base associated
with COVID related activities as well as prioritising the
resources of the Group towards sustainable, high value
business with strong potential for growth.
This resulted in an exceptional charge of £17.5m being
recognised for 2022. The Board believes these actions
will provide a solid platform for the further development
of the business. Further actions have been taken in 2023,
including exiting underperforming business units, and it
is expected the process will be completed within the first
half of 2023.
The main transition and restructuring activities performed
in 2022 were:
- Impairment of the ADL Health business, which was
subsequently disposed of in March 2023
- Provisioning against excess COVID related and other
inventory throughout the Group in light of the decision
to transition away from these areas
- Exit from unprofitable commercial arrangements in
order to focus on the Group’s restructure
- Scaling back of property portfolio in light of current
and future requirements
- Reduction of Group personnel to align with demand for
products and services
- Corporate reorganisation to simplify Group structure
and mirror operational needs
In addition, the restructuring costs associated with the
announcement in February 2023 of the closure of the UK
Contract Manufacturing business will be recognised in the
2023 financial statements.
Whilst a number of decisions taken during the year have
been challenging, they reflect the change necessary
to simplify and refocus EKF and to support the robust
platform being built for growth.
Board changes
Post-period end, we announced a number of Board
changes in recognition of the critical success factors
around the delivery of expected growth in our Life
Sciences division. Mike Salter is now fully focussed on
these critical operational tasks in the US and does so
unencumbered by the additional duties he had as Chief
Executive Officer (CEO). Mike remains a key part of the
Management, reporting directly to the Board, and the
Board is very grateful to Mike both for his time as CEO and
his continued commitment to focus on delivering these
key operational aspects of our strategy.
For the time being, I have assumed the role of Executive
Chair, and previously announced that the Board would
begin the process of recruiting a new CEO. The Board
believes the recruitment focus should be on an experienced
operational leader given the stated focus on our core
established business and the Life Sciences expansion.
Christopher Mills stood down as Non-executive Chair but
remains on the Board as a Non-executive Director. We are
hugely grateful to Christopher for his stewardship as Non-
executive Chair and are very pleased to retain his counsel
and guidance in a non-executive capacity. Carl Contadini
retired from the Board in February 2022, and we wish him
well for the future.
The Board now comprises five members – two Executive
Directors and three Non-executive Directors:
• Julian Baines, Executive Chair
• Marc Davies, Chief Financial Officer
• Christian Rigg, Senior Independent Non-executive
Director
• Jenny Winter, Independent Non-executive Director
• Christopher Mills, Non-executive Director
Until the appointment of a new CEO, the Board believes
that any other revision to Board composition would
inappropriate. We have adopted the Corporate
be
issued by the Quoted Company
Governance Code
Alliance and our
independent Non-executive
two
Directors, Chris Rigg and Jenny Winter, continue to play
very important roles. Further details of compliance to our
adopted governance code can be found in the Corporate
Governance Statement of the Annual Report and on the
Company’s website.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
1616
Executive Chairman’s Statement (continuation)
Outlook
I am delighted that the core established business has
grown by 13% year-on-year and by 12% compared to
pre-pandemic levels, These financial results show the
strength and robustness of the business as a whole and
the potential that EKF offers to shareholders.
EKF has a well-established core business that offers a
stable “razor, razor blade” consumable model in Point-of-
Care, alongside an exciting upside opportunity within the
Life Sciences division for rapid scale up and significant
revenue growth. The business is operationally profitable
and is cash generative, has no long-term debt and
supports an attractive dividend policy.
Cost reduction, restructuring and efficiency measures will
further improve our performance in 2023 and onwards.
The work to deliver these measures has already begun
in earnest and the Board remains confident that the
performance of the business for the year remains in-
line with management expectations, with EKF now well
positioned for long-term sustainable growth.
Julian Baines
Executive Chairman
28 March 2023
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 Chief Financial Officer’s Review
Revenue
Revenue for 2022 was £66.6m (FY 2021:
£81.8m), a decrease of 19% on the prior
year, reflecting the anticipated reduction in
revenues from COVID-19 related products
and services. At constant 2021 exchange
rates, revenue for the year would have
been £62.7m. Revenue in 2022 included
£3.5m relating to a one-off US inventory
receipt.
Revenue by geographical segment based
on the legal entity locations from which
sales are made, is as follows:
2022
£’000
2021
£’000
+/- %
Germany
24,192
34,171
(29%)
USA
UK
Russia
Total
Germany
USA
UK
Russia
Total
36,822
36,056
2%
1,419
8,323
(83%)
4,202
3,286
28%
66,635
81,836
(19%)
Revenue
£’000
24,192
36,822
1,419
4,202
66,635
Adjusted
EBITDA*
£’000
8,089
8,309
(3,057)
1,563
14,904
* Adjusted EBITDA excludes exceptional
items and share-based payments.
Observations by geographical segment:
Germany – Significant reduction in revenue
primarily due to sample collection tubes
and kits contract manufacturing activity
following COVID drop off in Q1 2022.
USA – Strong core sales growth offsetting
reduction
in contract manufacturing
following COVID drop off in Q1 2022.
UK – Reduced contract manufacturing
activity following COVID drop off in the
first quarter of 2022. The UK contract
manufacturing facility was closed in Q1
2023.
Russia – Solid demand in Point-of-Care
portfolio and foreign exchange benefit.
EKF’s Russian entity is 60% owned by the
Group with 100% of its results consolidated,
with the non-controlling interest shown
separately in the income statement and
statement of financial position.
to
subsidiary,
Russia Update
During 2022 EKF continued to supply
its
essential medical products
60%-owned Russian
in
international
compliance with current
sanctions guidance and following regular
management
International
review.
sanctions mean that the Company remains
unable to distribute cash dividends from
this subsidiary and this situation is not
17
expected to change in 2023. As at 31
December 2022, cash held
in Russia
totalled £2.4m (31 December 2021: £1.3m).
Management continues to assess the
situation in Russia and are mindful of
the growing financial and operational
challenges.
Gross profit
Gross profit was £24.0m (2021: £39.4m),
which represents a gross margin of 36%
(2021: 48%). Before exceptional costs of
£6.8m (2021: £nil) the Gross Margin was
£30.8m, representing a gross margin
percentage of 46%. The decreased gross
profit was largely due to the lower sales
volumes following the COVID drop off. The
reduction in gross margin was primarily
caused by changes in the mix of products as
well as increased costs in the supply chain.
Administration costs and research
and development
Administration costs excluding exceptional
items have increased to £23.2m (2021:
£17.6m), largely as a result of higher
sales administration costs in the USA,
the full year effect of ADL Health and the
accounting treatment associated with the
one-off US inventory receipt.
To aid understanding, administrative
expenses in each period are made up as
follows:
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
Non-exceptional
administration
expenditure before
R & D capitalisation
Effect of share-
based payments
Less capitalised
R & D
Total
administrative
expenses
24,877
19,511
(308)
(1,238)
(1,392)
(659)
23,177
17,614
Research and development costs included
in administration expenses were £1.5m
(2021: £1.4m). A further £1.4m (2021:
£0.7m) 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 £2.9m (2021: £2.1m). The
charge for depreciation of fixed assets
and amortisation of
intangible assets
increased to £6.7m (2021: £5.9m). The
increase was mainly associated with the
capital programme in recent periods.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
1818
Chief Financial Officer’s Review (continuation)
Operating profit and adjusted earnings before
interest, tax, depreciation and amortisation
Balance sheet
The Group generated an operating loss of £9.0m (2021:
£21.7m profit). This was a result of the lower revenue levels
seen during the year and the significant exceptional 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 as the Board
believes it provides a clearer comparison of the underlying
operating performance between periods. In 2022 we
achieved adjusted EBITDA of £14.9m (2021: £26.5m),
a decrease of 44%. 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 £0.3m (2021: credit of £1.2m), and exceptional
costs of £17.5m (2021: £0.1m), the main element of which
in 2022 is the transition and restructuring of the business
to enhance future profitability including the impairment
of assets in relation to the ADL Health business. This is
outlined in more detail in note 19.
Finance costs
Net finance costs are £0.03m (2021: £0.3m). The benefit
of interest received on cash balances, mainly those held in
Russia, is offset by charges relating to leases accounted
for in accordance with IFRS 16. Although the Group holds
net cash, achievable financial returns on this remain very
low because of low interest rates around the world.
Tax
There is an income tax charge of £0.6m, a decrease from
the prior year charge (2021: £5.3m). Deferred tax of
£(1.5m), associated with the decrease in the market value
of listed investments, has been credited direct to Other
Comprehensive Income.
Dividend
A cash dividend of 1.2p per ordinary share was paid in
December 2022, in respect of the final dividend for 2021. In
addition, the majority of the Group’s investment in Verici Dx
plc was transferred to shareholders by way of a dividend in
specie in June 2022, at a value of £2.0m. We are pleased to
confirm that 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 2022. If approved
by shareholders at the Company’s next Annual General
Meeting, payment of the dividend will be made on Friday
1 December 2023. The associated record date for this
dividend is Friday 3 November 2023, and the ex-dividend
date would be Thursday 2 November 2023.
Property plant and equipment and right-of-use assets
Additions to fixed assets were £7.0m (2021: £5.7m). Major
programmes include the continuing work on the fit out
of the new factory building in South Bend, Indiana and
upgrading and refurbishment of the Group’s manufacturing
facility in Elkhart, Indiana; new equipment at ADL Health,
and the capitalisation of new and replacement leases under
IFRS 16 including replacement leases on properties in the
USA and Germany. These leases are generally for short
terms or have break clauses that limit our commitment.
Intangible assets
The carrying value of intangible assets has decreased, from
£41.9m at the end of 2021 to £33.8m as at 31 December
2022. This is largely due to the impairment of goodwill
and intangible assets associated with ADL Health.
Investments
During the year the Company invested an additional
£0.4m in Renalytix plc, a developer of artificial intelligence
enabled acute kidney injury products. At year-end,
the Company held approximately 1.53% of the issued
share capital of Renalytix plc. In addition, the Company
invested £2.5m in Verici Dx plc, a developer of advanced
clinical diagnostics for organ transplant. Subsequently,
the majority of the Company’s holding in Verici Dx was
transferred to its shareholders by way of a dividend
in specie. The fair value reduction of the Company’s
investments was £7.6m during the year.
Due to the stated strategic focus on the core established
business and Life Sciences we do not expect to make any
further external investments in 2023.
Deferred consideration
The Group made a payment of £0.4m in respect of
deferred consideration relating to the acquisition of ADL
Health. The remaining deferred consideration which
is contingent on the performance of ADL Health over a
three year period commencing at the date of acquisition
in September 2021, has been written back. No deferred
consideration was payable for the period to September
2022. Post year end, ADL Health has been disposed
and hence there are no further deferred consideration
obligations.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
19
Chief Financial Officer’s Review (continuation)
Cash and working capital
Group cash net of borrowings (which excludes marketable
securities and lease creditors assessed in relation to IFRS
16 assets) has decreased to £11.4m from £19.6m. Excluding
cash held in Russia the cash balance net of borrowings
is £9.0m (2021: £18.3m). Gross cash has fallen to £11.6m
(2021: £20.3m). Existing Borrowings reduced in line with
repayments to £0.1m (2021: £0.7m), this included the
repayment of borrowings taken on at the acquisition of
ADL Health. Cash generated by operations is £12.7m (2021:
£14.2m). Investment has been made in the acquisition
of fixed assets (£4.4m excluding IFRS 16 leases), and in
support of existing investments in AIM listed businesses.
The dividend paid in December 2022 totalled £5.5m.
The Company has agreed a funding line with North Atlantic
Smaller Companies Investment Trust PLC. Christopher
Mills, Non-executive Director of the Company, sits on the
Board as Chief Executive Officer of North Atlantic Smaller
Companies Investment Trust PLC and is a substantial
shareholder of both the Company and the lender. This is
a committed facility for a maximum value of £3.0m which,
as at the date of this statement, is not drawn down. The
terms of the facility are substantially similar to those
considered to be commercially available to the Company.
This facility partially sets off the exposure currently faced
by the Group given the inability to access cash reserves
held in Russia. The Board believes it is a prudent measure
to have access to additional cash if needed and further
that the facility demonstrates the continued support from
its largest shareholder, Christopher Mills. The direct and
indirect shareholdings of Mr. Mills in the Company include
those of the North Atlantic Smaller Companies Investment
Trust PLC.
The lending facility is available for three years from the
date of this announcement and any amounts drawn down
carry interest at 2.5% above the Bank of England base
rate from time to time, payable quarterly in arrears. Any
loan under the facility is required to be fully repaid at the
end of the facility term. The Company may repay any
such loan early, in part or in full, but may not re-borrow
such amounts.
As a Substantial Shareholder (as defined in the AIM Rules),
the arrangement of a debt facility with North Atlantic
Smaller Companies Investment Trust PLC represents a
related party transaction pursuant to AIM Rule 13. The
independent Directors of EKF (being the Directors of the
Company other than Christopher Mills), having consulted
with Singer Capital Markets as the Company’s nominated
adviser, consider that the terms of the agreement
governing the debt facility from North Atlantic Smaller
Companies Investment Trust PLC are fair and reasonable
in so far as shareholders are concerned.
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, even taking into account
severe but plausible changes in financial performance,
that the Group will be able to operate as outlined below.
Following the year of transition away from Covid related
activities in 2022, the business continues to grow its core
base under both Point-of-care and Central Laboratory,
funding the investment into Life Sciences at the new facility
in South Bend. The Directors have modelled a range of
sensitivities from the base internal Budget including lower
revenues, and continued restrictions in Russia in relation
to accessing cash. In addition, the Group has taken actions
including cost reductions through the closure of the UK
manufacturing operations and the divestment of ADL
Health, and securing the committed £3m of funding from
North Atlantic Smaller Companies Investment Trust to be
drawn down should the worst-case scenario materialise.
Considering the range of sensitivities which account
for a severe downturn versus expectation in 2023, plus
the range of mitigation options available the business
demonstrates sufficient headroom giving the Directors
confidence that the business can continue to meet its
obligations as they fall due, even under the 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.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 2020
Chief Financial Officer’s Review (continuation)
Share capital
During the year the Company acquired 9m of its own
ordinary shares at a cost of £3.9m, paying an average
price of 43.3p per share. These shares were subsequently
cancelled.
Post Balance Sheet Events
In February 2023 the Group’s UK manufacturing
operations were closed down. This resulted in a small
number of redundancies.
The transition of the Laboratory Testing business towards
generating non-COVID revenues has presented certain
challenges following the rapid drop in demand for COVID
testing worldwide since Q1 2022. ADL Health contributed
a loss in 2022, which has led to EKF’s management team
(“Management”) reviewing the business and its rationale
in the context of the group’s wider strategy.
the
Following
in early 2023,
review undertaken
Management determined that Laboratory Testing will no
longer form part of EKF’s core offering and, therefore,
disposed of ADL Health to Medical Management Partners,
LLC, an entity which is 100% controlled by Stan Crawford,
a member of the management team of ADL Health.
The disposal will provide cost savings to EKF, allow
Management time to focus on growth initiatives in other
areas, and also simplify the reporting structure of the wider
group. In the year ending 31 December 2022, ADL Health
generated revenue of £2.6 million and loss before tax of
approximately £1.0 million, with net assets of £0.1 million
as at 31 December 2022. The disposal was classified as a
related party transaction under the AIM Rules by virtue
of Stan Crawford being a director of a subsidiary of the
Company. Further details of this transaction and related
regulatory disclosures are contained in the announcement
made on 23 March 2023.
The consideration will primarily comprise of 1,200,000
EKF shares of ordinary shares of 1p each in the capital of
the Company (“Ordinary Shares”) to be held, initially, in
treasury.
Marc Davies
Chief Financial Officer
28 March 2023
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 Board of Directors
Executive Directors
21
Julian Baines MBE (Non-executive Director until 7 February 2023)
Executive Chair
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 until 2021, during which time he 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 served as Non-executive Deputy Chair from 2021 before
returning to an executive position with the Group on a short term basis in January 2023.
Julian is also Chair of Verici Dx plc.
Marc Davies (appointed 1 January 2022)
Chief Financial Officer
Marc joined EKF on 1 January 2022 from medical device business 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.
Michael Salter (resigned 6 February 2023)
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 for
leading the Group’s COVID-19 response.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 2222
Annual Report 2022 | EKF Diagnostics Holdings plc
Board of Directors
Non-Executive Directors
Christopher Mills
Non-executive Chairman (Non-Executive Director from 7 February 2023)
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 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.
Christian Rigg
Senior Independent Non-Executive Director
Chris Rigg is a chartered accountant who has significant executive experience at both
public and private companies. He was formerly the Chief Executive Officer of Project
Galaxy UK Topco Limited (the holding company of Mandata Holdings Limited) and
formerly 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 chair of the Audit Committee and a member of the Remuneration Committee.
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, 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.
Jenny is chair of the Remuneration Committee and 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.
1.0
1.0 Strategic Report
for the year ended 31 December 2022
The Directors present their Strategic Report for the
year to 31 December 2022.
Review of the business
A review of the business is contained in the Executive
Chairman’s Statement on pages 12 to 16 and the Chief
Financial Officer’s Review on pages 17 to 20.
We recognise that effective risk management is essential
to the successful delivery of the Group’s strategy. As we
continue to develop our business we believe it is important
to expand 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 key employees,
incentivisation packages are offered through a mixture of
sales commission, and profit related bonuses. Main Board
Directors are incentivised as detailed in the Directors’
Remuneration Report. 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 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
23
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.
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.
The Group’s operations are covered by the In Vitro
Diagnostic Regulation (IVDR) which affects all our products
produced or sold in the EU. We have adapted to the
significant changes the IVDR brings such that we are ready
to meet the immediate requirements, and have a defined
plan for the amended transitional provisions. A number of
the dates by which full compliance is required have been
postponed. There has been no change in the level of this
risk in the last 12 months.
to
the Group’s current and
Competition risk
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
technology,
regarding
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
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
2424
Strategic Report
for the year ended 31 December 2022 (continuation)
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.
in
Foreign exchange risk
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 level of this risk has increased
in the last 12 months.
Pandemic risk
The recent COVID-19 pandemic created uncertainty
in the market in the short term. The effect of this
is reducing as the world moves to treating the
COVID-19 virus as endemic rather than pandemic. However
this shift resulted in a very rapid reduction in the market
for COVID related products which has led to a requirement
for a reorganisation of the Group’s operations which in turn
have led to the requirement for significant restructuring
provisions.
The level of this risk has increased 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. Equally the response to
climate change may lead to new, but not yet identified,
opportunities for the Group. 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 26. 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. The level of this risk
has not changed in the last 12 months.
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
contract manufacturing, while investing heavily in our
identified and acquired
enzyme business. We have
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 Executive Chairman’s Statement on pages 12 to 16
gives information on the future outlook of the Group,
including the main trends and factors likely to affect its
future development.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 25
Strategic Report
for the year ended 31 December 2022 (continuation)
Key Performance Indicators (KPIs)
The key performance indicators currently used across the
Group are revenue, gross profit, adjusted EBITDA and cash
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 17 to 20.
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’s response is developing
in line with, and where appropriate ahead of government
requirements and is led by an assigned senior manager. 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 this process will have on our own response,
risk profile, and on the value of our income streams and
assets. 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.
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 have
voluntarily extended reporting to cover the remainder of
the Group, on the same basis as the UK reporting. It is our
intention to improve our climate change reporting over
time, however this is the start of our climate change journey
and our response will continue to evolve.
We have appointed a senior employee to champion our
climate change response as part of a wider ESG portfolio,
who is working to produce a road map of our actions and
our reporting upon them. The need to respond quickly
and rigorously is being driven by our customers, suppliers
and other stakeholders. Our ESG lead is working with the
Group’s executive management, Finance staff and other
senior management to formulate and action our climate
change response and other ESG matters.
The tables below represent the energy use and associated
greenhouse gas (GHG) emissions from electricity and fuel
use in the UK and for the Group for the year ended 31
December 2022. For the Group, this is the first year that
we are voluntarily reporting on emissions, and we have
therefore, reported comparative numbers for 2021 for the
UK only. Comparative numbers for the remainder of the
Group will be included in future years.
The Company has sought to improve its energy efficiency by
reducing electricity usage through wastage, and by promoting
the use of video conferencing rather than international travel.
Energy usage has decreased because of lower activity levels.
UK
Energy consumption used
to calculate emissions:
2022
2021
Electricity usage
61,321 KwH
68,468 KwH
Transport
3,044 KwH
2,017 KwH
Conversion factors used
to calculate emissions:
Electricity usage (scope 2)
Transport (scope 1)
2022
0.19121
0.2781
2021
0.21016
0.27698
The 2022 emission conversion factors are based on the
UK Government GHG Conversion Factors for Company
Reporting 2022.
Calculated emissions
Electricity usage
2022
Tonnes of CO2
12
2021
Tonnes of CO2
14
Transport
Total
1
13
1
15
The rate of emissions per £m of turnover is 0.19 (2021:
0.18) tonnes of CO2.
Group
Energy consumption used to calculate
emissions:
Electricity usage
Gas usage
Transport
Conversion factors used
to calculate emissions:
Electricity usage (scope 2)
Gas usage (scope 2)
Transport (scope 1)
2022
1,526,111 KwH
122,758 KwH
84,496 KwH
2022
0.19121
0.20227
0.2557
The emission conversion factors are based on the UK
Government GHG Conversion Factors for Company
Reporting 2022.
Calculated emissions
Electricity usage
Gas usage
Transport
Total
2022
Tonnes of CO2
291,808
24,830
21,351
337,989
The rate of emissions per £m of turnover is
5.07 tonnes of CO2.
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 2626
Strategic Report
for the year ended 31 December 2022 (continuation)
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
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.
The Executive 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 12 to 20. The Board considers
that its response to changes In the market over the last
three years has been measured and has allowed it to grasp
opportunities as they have arrived.
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. Recently an Employee
Engagement Survey has been run across the Group to
test that the Group’s culture is in line with its strategic
objectives, and is reflecting on the results.
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.
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 to 30.
The Strategic Report was approved by the Board on 28
March 2023 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 27
Report of the Directors
for the year ended 31 December 2022
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 2022.
Corporate details
EKF Diagnostics Holdings PLC 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
• Marc Davies (appointed 1 January 2022)
• Christian Rigg
• Jennifer Winter (appointed 1 February 2022)
• Michael Salter (resigned 6 February 2023)
• Carl Contadini (resigned 1 February 2022)
• Richard Evans (resigned 1 January 2022)
On 7 February 2023 Julian Baines, formerly Non-Executive
Director, was appointed Executive Chair. At the same
time Christopher Mills stepped down as Non-Executive
Chairman but remained a Non-Executive Director.
Richard Evans resigned as a director on 1 January 2022.
The Company Secretary is One Advisory Limited.
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 Executive Chairman’s Statement
on pages 12 to 16, the Chief Financial Officer’s Review on
pages 17 to 20, and the Strategic Report on pages 23 to 26.
Dividends and share buy back
In December 2022 the Company paid a final dividend for
2021 of 1.2p (2020: 1.1p) per share. The Board has noted that
it intends to follow an active 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 2023 to shareholders on the register at close of
business on 3 November 2023.
The Company holds authorisation to acquire up to
approximately 15% of its Ordinary Shares in order to reduce
the number of shares in issue. 9,000,000 shares (2021:
no shares) were acquired under this authorisation during
the year. 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, even taking into account
severe but plausible changes in financial performance,
that the Group will be able to operate as outlined below.
Following the year of transition away from Covid related
activities in 2022, the business continues to grow its
core base under both PoC and Central Lab, funding
the investment into Life Sciences at the new facility in
South Bend. The Directors have modelled a range of
sensitivities from the base internal Budget including
lower revenues, and continued restrictions in Russia in
relation to accessing cash. In addition the Group has taken
actions including cost reductions through the closure of
the UK manufacturing operations and the divestment of
ADL, and securing a committed £3m of funding from the
North Atlantic Smaller Companies Investment Trust to be
drawn down should the worst-case scenario materialise.
Considering the range of sensitivities which account for a
severe downturn versus expectation in 2023, plus the range
of mitigation options available the business demonstrates
sufficient headroom giving the Directors confidence that
the business can continue to meet its obligations as they
fall due, even under the 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 23 to 26.
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 23 to 26.
Streamlined Energy and Carbon
Reporting (SECR)
SECR reporting is included in the Strategic Report on page 25.
Post Balance sheet events
Post Balance sheet events are discussed in the Chief
Financial Officer’s Statement on pages 17 to 20.
Directors’ interests
The interests in the share capital of the Company of
those Directors serving at 31 December 2022, all of
which are beneficial, are set out below. There were no
changes to the Directors’ interests in the share capital
of the Company between 31 December 2022 and
the date of the signing of these financial statements.
On 31 December
20221
Ordinary Shares
of 1p each
On 31 December
20212
Ordinary Shares
of 1p each
Christopher Mills
132,150,000
130,875,000
Julian Baines
Michael Salter
Christian Rigg
Marc Davies
Jennifer Winter
1,616,288
125,000
1,605,288
125,000
-
-
-
-
-
-
1 or date of resignation if earlier
2 or date of appointment if later
On 20 June 2022 Mr Baines acquired 11,000 shares at a
price of 32.596 pence per share. On 28 April 2022, funds
connected with Mr Mills purchased 1,275,000 shares at
a price of 35p per share. 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 (“NASCIT”) and Oryx International Growth
Annual Report 2022 | EKF Diagnostics Holdings plc1.0
2828
Report of the Directors
for the year ended 31 December 2022 (continuation)
Fund Limited (“Oryx”). Harwood Capital LLP (“Harwood”)
is investment manager and investment adviser to NASCIT
and Oryx respectively. Christopher Mills is a partner and
Chief Investment Officer of Harwood. Christopher Mills is
also a director of Oryx and NASCIT. He holds 2.50 per cent.
of the shares in Oryx in his own name as well as a further
52.68 per cent. of the shares in Oryx via his 27.74 per cent.
shareholding in NASCIT.
Substantial shareholdings
As at 27 March 2023, the following interests in 3% or more
of the issued Ordinary Share capital had been notified to
the Company:
Mr Christopher Mills
132,150,000
29.05%
Number of
shares
Percentage of
issued share
capital
LionTrust Asset
Management
Schroder Investment
Management
Canaccord Genuity
Wealth Management
45,784,310
10.06%
24,241,709
5.33%
22,868,222
5.03%
4.58%
4.08%
Gresham House
20,815,254
Stockinvest Limited
18,555,500
The interests disclosed above are those as at 31 December
2022, updated for any substantial shareholding notifications
received up to 24 March 2023.
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
in accordance with UK-adopted
financial statements
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:
•
•
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.
•
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 to 81.
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
28 March 2023 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 29
Corporate Governance Statement
for the year ended 31 December 2022
Compliance
Board meetings
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 2022 sought to address the principles underlying
the Code.
Board composition and responsibility
A number of changes to the Board took place on 7 February
2023. Christopher Mills stepped down as Non-Executive
Chairman but remains a Non-Executive Director; Julian
Baines was appointed Executive Chairman; and Michael
Salter resigned as Chief Executive. As a result the Board
currently comprises two Executive Directors and three Non-
Executive Directors. Earlier, Marc Davies was appointed as
an Executive Director on 1 January 2022, Richard Evans
resigning on the same day. Jennifer Winter was appointed
a Non-Executive Director on 1 February 2022, and Carl
Contadini resigned as a Director on the same day.
It is the Board’s opinion that the two directors, Christian
Rigg and Jennifer Winter (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. More details of the Group’s
objectives, strategy, and business model, and the Board’s
assessment of the state of the Group’s culture are given in
the Strategic Report on pages 23 to 26.
On a short-term basis the Executive Chairman will be
responsible for the overall strategy of the Group and
running the Board including corporate governance, as well
as being responsible for implementing the strategy and day
to day running of the Group. He is assisted by the Chief
Financial Officer.
10 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 Chair)
Julian Baines (Non-Executive Deputy Chair)
Michael Salter (Chief Executive)
Marc Davies (Chief Financial Officer)
Chris Rigg (Non-Executive Director)
Jennifer Winter (Non-Executive Director)
Carl Contadini (Non-Executive Director)
9 (9)
9 (9)
9 (10)
10 (10)
10 (10)
9 (9)
1 (1)
Mr Davies works full time for the Group. Mr Baines is
working for the Group on a part-time basis for two days per
week. 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.
Board evaluation
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. Given the Group’s size, the Board currently
considers it unnecessary to have evaluations facilitated by
an external consultant, but will keep this under review.
The Board performed a further evaluation of its performance
in late-2022, with the results being presented to the Board
in January 2023. The evaluation focussed on board role,
composition and dynamics. The evaluation confirmed that
many of the processes and procedures in place to support
the Board remain effective; the Board will use the findings
to help to shape the focal areas for the Board and Board
Committees across 2023. The evaluation did not lead to
any recommendations.
As the Senior
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.
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 Winter. 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 Winter.
The committee has responsibility over the following:
• Recommend the appointment, re-appointment and
removal of the external auditors. The external audit
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
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 3030
Corporate Governance Statement
for the year ended 31 December 2022 (continuation)
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.
• 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 twice formally during 2022. All eligible
members attended all meetings. 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 37.
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 once during 2022. All eligible members
attended all meetings.
Board appointments
There is no formal Nominations Committee, the appointment
of new Directors being considered by the full Board.
Internal control
The Directors are responsible for ensuring that the Group
maintains a system of internal control to provide them
with reasonable assurance regarding the reliability of
financial information used within the business and for
publication and that the assets are safeguarded. There
are inherent limitations in any system of internal control
and accordingly even the most effective system can
provide only reasonable, but not absolute, assurance with
respect to the preparation of financial reporting and the
safeguarding of assets.
The Group, in administering its business, has put in place
strict authorisation, approval and control levels within
which senior management operates. These controls
reflect the Group’s organisational structure and business
objectives. The control system includes clear lines of
accountability and covers all areas of the organisation.
The Board operates procedures which include
an appropriate control environment through the
definition of the above organisation structure and authority
levels and the identification of the major business risks. The
Group has commenced a project to enhance and formalise
its internal controls including the establishment of a Risk
Steering Committee, which will commence its work in 2023.
Internal financial reporting
responsible
The Directors are
for establishing and
maintaining the Group’s system of internal reporting and as
such have put in place a framework of controls to ensure
that on-going financial performance is measured in a timely
and correct manner and that risks are identified as early as
is practicably possible. There is a comprehensive budgeting
system and monthly management accounts are prepared
which compare actual results against both the budget and
the previous year. They are reviewed and approved by the
Board and revised forecasts are prepared on a regular basis.
Relations with shareholders
The Company reports to Shareholders twice a year. The
Company dispatches the notice of its Annual General
Meeting, together with a description of the items of special
business, at least 21 clear days before the meeting. Each
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
Corporate social responsibility
The Board recognises that the Group has a duty to be a
good corporate citizen and is conscious that its business
processes minimise harm to the environment, that it
contributes as far as is practicable to the local communities
in which it operates and takes a responsible and positive
approach to employment practices.
With effect from the financial year to 31 December 2016, the
Group became subject to the requirements of the Modern
Slavery Act 2015. The Group has published the required
statement on its website
The Corporate Governance Statement was approved by
the Board on 28 March 2023 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 31
Report of the Remuneration Committee
for the year ended 31 December 2022
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. Increases
in salaries and bonus levels for Executive Directors are determined by the Remuneration Committee, and those for the
Non-Executive Directors by the full Board. No Director is involved in deciding their own remuneration. Mr Davies’s salary
was determined based on his skills and experience and market conditions. Mr Salter’s bonus which was only approved and
paid in 2022, relates to performance in 2021. Mr Davies’ bonus, which is discretionary, relates to his performance in 2022.
As at the date of this report, no new remuneration arrangements had been made for the Directors in 2023.
Directors’ remuneration - Audited
The remuneration of the Directors for the years ended 31 December 2022 and 31 December 2021 are shown in the table below:
Executive Directors
Michael Salter
Marc Davies
Richard Evans
Non-Executive Directors
Christopher Mills
Julian Baines
Carl Contadini
Christian Rigg
Jennifer Winter
Adam Reynolds
Total fees and emoluments
Salary and
fees
£’000
Benefits in
kind
£’000
Bonus
£’000
Pension
£’000
2022
£’000
2021
£’000
282
230
-
512
50
75
8
50
46
-
229
741
10
14
-
24
-
5
-
-
-
-
5
29
114
50
-
164
-
-
-
-
-
-
-
164
-
11
-
11
-
4
-
-
-
-
4
15
406
305
-
711
50
84
8
50
46
-
238
949
67
-
2,797
2,864
50
2,797
50
25
-
52
2,974
5,838
Mr Salter resigned as a director on 6 February 2023. His 2021 remuneration is for the period from his appointment on 1
October 2021. Mr Evans resigned from the Board on 1 January 2022. Mr Baines remuneration for 2021 covers his service
as both an Executive and as a Non-Executive Director. Of his total remuneration, £25,000 related to his service as a Non-
Executive Director. Mr Contadini’s remuneration in 2022 covers his service as a director up until his resignation, as well
as payments made in lieu of notice. Mr Rigg’s 2021 Remuneration is from the date of his appointment on 1 July 2021. Ms
Winter’s remuneration covers the period from her appointment on 1 February 2022. Mr Reynolds remuneration in 2021
covers the period to his resignation on 19 May 2021.
Payment in Lieu of notice
Mr Contadini received £30,000 as payment in lieu of notice.
Directors’ share options and Long-Term Incentive Plan
No director holds options under any share option plan.
In September 2021 Mr Salter was granted a cash settled share based incentive award. The award vests if a controlling
interest in the Company is acquired by a third party at any time while the holder remains as Chief Executive Officer. There
is a minimum price level below which no amount is payable, with the amount payable being 2.5% of the excess sale price
above 70p per share. The Board estimates that it is more probable than not that no award will be made under the scheme
in the foreseeable future, and the fair value of the award has therefore been calculated at £nil (2021: £3,296,000). The 2021
value was calculated using a modified form of a Black Scholes model. The liability at 31 December 2021 of £298,000 has
been credited to profit and loss. On Mr Salter’s resignation as Chief Executive Officer on 6 February 2023 the award lapsed.
Directors’ interests in the share capital of the Company are disclosed in the Directors’ Report on pages 27 and 28.
Approved by the Board on 27 March 2023 and signed on its behalf by:
Marc Davies
Chief Financial Officer
Annual Report 2022 | EKF Diagnostics Holdings plc1.0 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 2022 and of the
group’s loss 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 as applied in
accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and
Company’s Statement of Financial Position as at 31 December 2022; the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated 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 the Parent Company, EKF Diagnostics Holdings plc, in the UK.
• Our audit procedures covered entities contributing 89% of the Group’s revenues and 90% of adjusted EBITDA for
the year ended 31 December 2022.
• We engaged component auditors for the audit of the Germany in-scope subsidiaries and we engaged a third party
audit firm for specified procedures reporting on the Cash and cash equivalents balance reported by the Russian
subsidiary. 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)
• Valuation of inventory (group and parent)
• Classification of exceptional items (group)
Materiality
• Overall group materiality: £413,700 (2021: £1,014,000) based on 5% of Adjusted profit before tax (adjusted to
exclude share-based payments and exceptional items).
• Overall company materiality: £350,000 (2021: £574,000) based on 1% of total assets.
• Performance materiality: £310,275 (2021: £760,000) (group) and £262,500 (2021: £430,000) (company).
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
Annual Report 2022 | EKF Diagnostics Holdings plc2.0
Annual Report 2022 | EKF Diagnostics Holdings plc
33
33
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
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.
Valuation of inventory and Presentation and disclosure of exceptional items are new key audit matters this year. Acquisition
accounting, including the identification and valuation of intangible assets and goodwill, which was a key audit matter last
year, is no longer included because of the transaction being specific to the comparative period. 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 2022, the Consolidated Statement of Financial
Position includes £33.8m (2021: £41.9m) of intangible assets, of
which £25.1m is goodwill (2021: £27.4m), and £8.7m is amortised
intangible assets (2021: £14.5m).The investments in subsidiaries
included in the Company Statement of Financial Position as at 31
December 2022 is £30.8m (2021: £38.4m). 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 in order to obtain a Value
In Use calculation. The impairment reviews therefore include
significant estimates and judgements in respect of future growth
rates, cash flows and discount rates. In addition the Group also
undertook a review of the ADL Heath CGU on a Fair Value Less
Cost to Sell basis, using the sale process that commenced and
completed subsequent to the year end as a reasonable estimate
for the valuation as at 31 December 2022. This has resulted in an
impairment charge of £8.5m to goodwill and intangible assets
in the Consolidated Income Statement and an impairment of
£7.6m against the investment carrying value in the Company
Balance Sheet. The sensitivity of these key assumptions are
detailed in note 19, Intangible assets and note 20, Investments
in subsidiaries.
Valuation of inventory
(group and parent)
The Group’s accounting policy is to state inventories at the lower
of cost and net realizable value. As at 31 December 2022, the
Consolidated Statement of Financial Position includes gross
unimpaired inventories of £17.2m (2021: £16.7m), with total
provisions of £7.8m (2021: £3.5m) reducing this balance to the
net realizable value of £9.4m (2021: £13.2m). The Company
Statement of Financial Position as at 31 December 2022 includes
gross unimpaired inventories of £0.4m (2021: £0.5m), with
total provisions of £0.3m (2021: £nil) reducing this balance to
the net realizable value of £0.1m (2021: £0.5m). The significant
increase in the level of provisions in the year is attributable to
excess COVID-19 and other inventory throughout the Group as
a result of the Group’s decision to transition away from these
markets. There is inherent uncertainty involved in estimating the
net realizable value of inventory, and therefore this has been an
area of significant audit effort in the current year. See note 24 for
further disclosures relating to inventories.
Classification of exceptional items (group)
The Group’s accounting policy is to report items outside of
income and expense as exceptional items where they are of an
unusual or non-recurring nature. Exceptional items of £17.5m
have been disclosed on the face of the Consolidated Income
Statement. These primarily relate to business reorganisation
and impairment costs associated with the restructure of certain
operations in the US, UK and Germany primarily driven by the
sudden reduction in COVID-19 related revenues from Q1 2022
and the decision of the Group to transition away from this area
of sales. We focused on this area because exceptional items are
material to the Consolidated Income Statement and because
there is a degree of judgement in their classification.
We obtained the cash flow forecasts supporting its assessment for
each CGU and performed the following procedures: 1) Assessed
the methodology used by management in accordance with IAS
36 ‘Impairment of assets’ and tested the mathematical accuracy
of the model; 2) 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 liaised with our internal valuation experts
to consider key inputs such as the discount rate; 3) Performed
sensitivity analysis including the effect of reasonably possible
changes in forecast cash flows and other assumptions to
evaluate the impact on the carrying value of the goodwill and
investment in subsidiaries; 4) We obtained the signed Equity
Purchase and Exchange Agreement in relation to the sale of
ADL Health and audited the calculation prepared to identify the
impairment required at a Group and Company on the estimated
consideration and associated legal costs of the transaction in
order to identify the Fair Value Less Cost to Sell amount. We
also satisfied ourselves that the letter of intent, signed post
year end, was appropriate to reflect a fair value less cost to sell
assessment as at 31 December 2022 . We also considered the
impact of climate change in performing our audit procedures in
this area, particularly in relation to the Group’s expectation that
net zero initiatives will be placed upon them by Government
bodies, who are ultimately the “ultimate customer” of the Group.
At present, the Group is at an early stage in responding to
these requirements and so there are no commitments that are
directly impacting the financial reporting. Lastly, we 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 assessments to changes in key
assumptions used in the model. We concur with management’s
assessment that an impairment charge is required in relation to
the ADL Health CGU and company investment.
We tested the valuation of inventory by reviewing management’s
assumptions in assessing the carrying value of the remaining
COVID-19 and other inventory that the Group is transitioning away
from, including through review of consumption/sales throughout
H2 2022 and Q1 2023 and consideration of future orders or plans
in relation to these assets. We also performed sample checks
over the accuracy of management’s general provisions based on
ageing and/or expiry of products. We confirmed that inventory
was held at the lower of cost and net realizable value by tracing
a sample of items to recent purchase invoices, and subsequently
to the latest sales invoice. Based on the evidence obtained, we
concurred with management’s judgements in assessing the
valuation of inventory.
We tested the classification of exceptional items by examining
supporting information such as third-party contracts and the
supporting information for impairments as referenced above.
From the evidence obtained, we concurred with management’s
assessment to classify and disclose these costs as separately
reported exceptional items, in line with the disclosed accounting
policy.
2.0
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 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 and 2022, with external revenues
earned from 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 89% of the group’s 2022 revenues and 90% of adjusted EBITDA. Due to the significant increase in
the cash balance held by the Russian subsidiary in 2022 (£2.4m), we have also engaged a third party auditor in Russia to
perform specified procedures reporting over the cash balance. Where component or third party auditors were engaged,
we adopted procedures to ensure we were sufficiently involved in their audits. These included discussions with overseas
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.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk
on the group’s and company’s financial statements, and we remained alert when performing our audit procedures for any
indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on
the group’s and company’s financial statements.
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
£413,700 (2021: £1,014,000).
£350,000 (2021: £574,000).
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
revenues were generated, and the Com-
pany's Statement of Financial Position
was included in the Annual Report. While
external revenues have been earned by
the company in 2021 and 2022, the rev-
enue stream significantly declined after
Q1 2022 and the UK sales will cease in
2023. Therefore an asset-based measure
remains appropriate. The rationale is con-
sistent 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 £250,000 to £380,000. 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% (2021: 75%) of overall materiality, amounting
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 35
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
to £310,275 (2021: £760,000) for the group financial statements and £262,500 (2021: £430,000) 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 in the middle 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 £20,685 (group audit) (2021: £50,000) and £17,500 (company audit) (2021: £28,000) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
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 and assumptions to supporting third party information, where available.
• Evaluating and assessing the severe but plausible downside scenarios modelled.
•
Reviewing and challenging the basis of preparation disclosure presented by the directors in the financial
statements.
•
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 2022 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.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 3636
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
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.
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
impairment assessment and inventory provisioning; and
•
Identifying and testing the validity of journal entries based on our assessment of risk.
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.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 37
Independent auditors’ report to the members of EKF Diagnostics Holdings plc
Report on the audit of the financial statements (continued)
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
28 March 2023
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 3838
Consolidated Income Statement
for the year ended 31 December 2022
Continuing operations
Revenue
Cost of sales
Exceptional items – other charged to cost of sales
Gross profit
Administrative expenses
Exceptional items – impairment of assets
Exceptional items – other
Other income
Operating (loss)/profit
Depreciation and amortisation
Share-based payments
Exceptional items
EBITDA before exceptional items and share-based payments
Finance income
Finance costs
(Loss)/profit before income tax
Income tax charge
(Loss)/profit for the year
(Loss)/profit attributable to:
Owners of the parent
Non-controlling interest
(Loss)/earnings per Ordinary Share attributable to the owners of the parent during the
year
Basic
Diluted
The notes on pages 44 to 78 are an integral part of these consolidated financial statements.
Notes
5
6
8
6
8
8
7
6
8
5
13
13
14
15
15
2022
£’000
66,635
(35,823)
(6,774)
24,038
(23,177)
(10,384)
(367)
919
(8,971)
(6,658)
308
(17,525)
14,904
131
(102)
(8,942)
(634)
(9,576)
(10,101)
525
(9,576)
2021
£’000
81,836
(42,470)
-
39,366
(17,614)
-
(95)
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
(2.21)
(2.21)
3.47
3.44
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 39
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
(Loss)/profit for the year
Other comprehensive (loss)/income:
Note
2022
£’000
(9,576)
2021
£’000
16,158
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
(6,096)
(321)
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Other comprehensive income/(loss) (net of tax)
Total comprehensive (loss)/income for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive (loss)/income for the year
6,811
715
(8,861)
(9,420)
559
(8,861)
(1,226)
(1,547)
14,611
14,315
296
14,611
Items stated above are disclosed net of tax. The income tax relating to each component of other comprehensive
income/(loss) is disclosed in note 14.
The notes on pages 44 to 78 are an integral part of these consolidated financial statements.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 4040
Consolidated and Company’s Statement of Financial Position
As at 31 December 2022
Assets
Non-current assets
Property, plant and equipment
Investment property
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 (including restricted cash of £2,366,000 (2021: £nil)
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
17
17
18
19
20
22
23
29
24
23
25
30
30
32
18
27
28
29
26
18
28
27
Group
2022
£’000
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
20,435
15,991
-
1,279
33,772
-
1,119
-
925
-
1,875
41,894
231
1,232
136
883
1,609
-
367
598
-
30,831
38,446
7,789
1,119
-
15
-
-
7,789
1,860
-
57,530
67,564
34,432
50,669
9,434
10,739
10
11,578
31,761
89,291
4,549
7,375
(629)
9,590
52,461
73,346
1,177
13,238
13,428
548
20,341
47,555
115,119
4,639
7,375
5,033
2,813
74,264
94,124
618
68
2,332
-
653
3,053
37,485
4,549
7,375
(670)
-
11,380
22,634
-
475
1,417
-
4,879
6,771
57,440
4,639
7,375
4,992
-
32,646
49,652
-
74,523
94,742
22,634
49,652
537
1,095
40
-
-
2,493
3,030
431
170
5,031
6,727
-
-
-
40
207
-
170
1,502
1,879
8,288
9,078
14,644
4,780
873
-
2,440
137
11,738
14,768
89,291
838
465
3,004
265
13,650
20,377
115,119
167
-
-
-
14,811
14,851
184
465
480
-
5,909
7,788
37,485
57,440
The notes on pages 44 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 loss for the Parent Company for the year was £9,565,000 (2021: profit of £5,768,000).
The financial statements were approved and authorised for issue by the Board on 28 March 2023 and signed on its behalf by:
Julian Baines
Executive Chair
EKF Diagnostics Holdings plc
Registered no: 4347937
Marc Davies
Chief Financial Officer
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 Consolidated and Company’s Statement of Cash Flows
for the year ended 31 December 2022
41
Cash flow from operating activities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
Cash flow from investing activities
Payment for investments
Payment for property, plant and equipment (PPE)
Payment for intangibles
Payment for acquisition of subsidiaries, net of cash acquired
Proceeds from sale of PPE
Interest received
Net cash used in investing activities
Cash flow from financing activities
Payment for shares bought back
Dividends paid to company shareholders
Repayments of borrowings
Principal elements of lease payments
Dividend payment to non-controlling interest
Net cash used in financing activities
Net decrease cash and cash equivalents
Notes
Group
2022
£’000
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
35
12,655
14,208
9,470
1,048
85
(46)
45
(81)
(3,006)
(3,934)
9,688
10,238
10
-
(539)
8,941
(2,930)
(4,434)
(1,394)
(403)
229
-
-
(2,930)
(4,335)
(1,314)
84
43
45
(102)
(371)
(403)
-
-
35
34
-
(22)
1,060
-
(259)
(521)
(208)
-
-
(8,932)
(5,477)
(3,806)
(988)
30
(3,896)
-
(5,459)
(5,103)
(613)
(1,071)
-
(11,039)
(10,283)
20,341
1,520
11,578
(178)
(643)
(231)
(6,155)
(1,394)
21,913
(178)
20,341
(3,896)
(5,459)
-
(191)
-
(9,546)
(4,411)
4,879
185
653
-
(5,103)
-
(107)
-
(5,210)
(5,138)
10,045
(28)
4,879
Cash and cash equivalents at beginning of year
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of year
25
Cash and cash equivalents totalling £2,366,000 (2021: £1,344,000) are held by the Group’s 60% owned subsidiary company in Russia. As
a result of action by the Russian Government following international sanctions being imposed on Russia, access to this cash is currently
restricted.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 4242
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Notes
Share
capital
£’000
4,550
Share
premium
account
£’000
Other
reserves
£’000
Foreign
currency
reserve
£’000
Retained
earnings
£’000
Total
£’000
Non-
controlling
interest
£’000
Total
equity
£’000
200
5,354
4,028
63,516
77,648
552
78,200
Dividends to owners
16
Total distributions to owners
89
7,175
4,639
7,375
5,033
2,813
74,264
94,124
618
94,742
Consolidated
At 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
consideration for a business
combination, net of transaction
costs
Dividends to non-controlling
interest
At 31 December 2021
and 1 January 2022
Comprehensive (expense)/income
(Loss)/profit for the year
Other comprehensive (expense)/
income
Changes in fair value of equity
instruments at fair value through
other comprehensive expense
Deferred tax on the above
Currency translation differences
Total comprehensive
(expense)/income
Transactions with owners
Cancellation of ordinary shares
Reserve transfer
Dividends to owners
16
Total distributions to owners
-
-
-
-
-
-
-
-
89
7,175
-
-
-
-
-
-
-
-
-
(90)
-
-
(90)
-
-
-
-
-
-
-
-
-
-
(321)
-
-
-
(1,215)
15,851
15,851
307
16,158
-
-
(321)
-
(321)
(1,215)
(11)
(1,226)
(321)
(1,215)
15,851
14,315
296
14,611
-
-
-
-
-
-
-
-
-
-
7,264
-
7,264
-
(230)
(230)
(5,103)
(5,103)
-
(5,103)
(5,103)
2,161
(230)
1,931
(10,101)
(10,101)
525
(9,576)
-
(7,598)
1,502
-
-
-
-
-
(7,598)
1,502
-
-
(7,598)
1,502
6,810
-
6,777
(1)
6,776
34
(6,096)
6,777
(10,102)
(9,421)
559
(8,862)
90
344
-
434
-
-
-
-
(3,896)
(3,896)
(344)
-
(7,461)
(7,461)
(11,701)
(11,357)
-
-
-
-
(3,896)
-
(7,461)
(11,357)
At 31 December 2022
4,549
7,375
(629)
9,590
52,461
73,346
1,177
74,523
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 Company Statement of Changes in Equity
For the year ended 31 December 2022
43
Company
At 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 income/(expense)
Total comprehensive income
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 and 1 January 2022
4,639
Comprehensive expense
Loss for the year
Changes in fair value of equity instruments at fair value
through other comprehensive income/(expense)
Deferred tax on the above
Total comprehensive expense
Transactions with owners
-
-
-
-
Cancellation of ordinary shares
(90)
Reserve transfer
Dividends to owners
Total contributions by and distributions to owners
At 31 December 2022
-
-
(90)
4,549
Share
capital
£’000
4,550
Share
premium
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
200
5,313
31,981
42,044
-
-
-
89
-
89
-
-
-
7,175
-
7,175
7,375
-
-
-
-
-
-
-
-
7,375
-
5,768
5,768
(321)
-
(321)
(321)
5,768
5,447
-
-
-
4,992
-
7,264
(5,103)
(5,103)
32,646
(5,103)
2,161
49,652
-
(9,565)
(9,565)
(7,598)
1,502
-
-
(7,598)
1,502
(6,096)
(9,565)
(15,661)
90
344
-
434
(670)
(3,896)
(3,896)
(344)
(7,461)
-
(7,461)
(11,701)
(11,357)
11,380
22,634
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 4444
Notes to the Financial Statements
for the year ended 31 December 2022
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 Alternative Investment 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, and Russia, 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 20.
The registered number of the Company is 4347937.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
The policies have been consistently applied throughout all years presented, unless otherwise stated.
Basis of preparation
The 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 2022:
• Property, plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16; and
• References to the Conceptual Framework for Financial Reporting – Amendments to IFRS 3
• Onerous Contracts, Cost of Fulfilling a Contract – Amendments to IAS 37
• Annual Improvements to IFRS Standards 2018-2020—Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41
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 2022 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 that, even taking into account severe but
plausible changes in financial performance, the Group will be able to operate as outlined below.
Following the year of transition away from Covid related activities in 2022, the business continues to grow its core base
under both Point-of-care and Central Laboratory, funding the investment into Life Sciences at the new facility in South
Bend. The Directors have modelled a range of sensitivities from the base internal Budget including lower revenues, and
continued restrictions in Russia in relation to accessing cash. In addition, the Group has taken actions including cost
reductions through the closure of the UK manufacturing operations and the divestment of ADL Health, and securing a
committed £3m of funding from the North Atlantic Smaller Companies Investment Trust to be drawn down should the
worst-case scenario materialise.
Considering the range of sensitivities which account for a severe downturn versus expectation in 2023, plus the
range of mitigation options available the business demonstrates sufficient headroom giving the Directors confidence
that the business can continue to meet its obligations as they fall due, even under the worst-case scenarios, for at
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 45
Notes to the Financial Statements
for the year ended 31 December 2022
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.
Inter-Company transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The consolidated financial statements are
presented in British Pounds Sterling, which is the Company’s functional and presentational currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement within ‘administrative expenses’.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper- inflationary economy) that
have a functional currency different from the presentational currency are translated into the presentational currency as follows:
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
income and expenses for each income statement are translated at average exchange rates; and
•
• all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken
to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were
recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Executive Directors who make strategic decisions. The information
used to assess performance is by geography as income statements by product are not available.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 4646
Notes to the Financial Statements
for the year ended 31 December 2022
Government grants
Government grants receivable in connection with expenditure on property, plant and equipment are recognised at their
fair value where there is reasonable assurance that the grant will be received and the Group will comply with all attached
conditions. They 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 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.
Investment property
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.
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 2022 | EKF Diagnostics Holdings plc2.0
47
Notes to the Financial Statements
for the year ended 31 December 2022
(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 2022 | EKF Diagnostics Holdings plc2.0
4848
Notes to the Financial Statements
for the year ended 31 December 2022
(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 a weighted
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.
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 2022 | EKF Diagnostics Holdings plc2.0 49
Notes to the Financial Statements
for the year ended 31 December 2022
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.
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
Annual Report 2022 | EKF Diagnostics Holdings plc2.0
5050
Notes to the Financial Statements
for the year ended 31 December 2022
in the income statement, with a corresponding adjustment to equity for equity-settled schemes. Fair values are measured
using appropriate valuation models, taking into account the terms and conditions of the awards.
When the share-based payment awards are exercised, the Company issues new shares. The proceeds received net of any
directly attributable transaction costs are credited to share capital (nominal value) and share premium.
The Group operates a cash-settled compensation plan for certain senior employees. Cash-settled share-based payments
are measured at fair value at each reporting date and are expensed over the expected vesting period. The fair value
amount is recognised in liabilities. Sensitivities relating to the valuation of the scheme are discussed in Note 31.
(c) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are
expected to be settled wholly within 12 months after the end of the period in which the employees render the related
service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled. The liabilities are presented as current liabilities in the balance
sheet.
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.
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
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 51
Notes to the Financial Statements
for the year ended 31 December 2022
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
Rate compared to GBP
Euro
Russian Rouble
US Dollar
Average
rate
2022
1.172
86.966
1.242
Average
rate
2021
1.162
101.558
1.374
Year end
rate
2022
1.128
88.98
1.210
Year end
rate
2021
1.190
101.549
1.354
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.
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
£76,000 (2021: £125,000), £89,000 (2021: £117,000), and £15,000 (2021: £9,000) respectively. The Company’s results are
not sensitive to changes in exchange rates.
(iii) Cash flow and fair value interest rate risk
The Group has interest-bearing assets in the form of cash and cash equivalents and interest-bearing liabilities which relate
to borrowings and finance lease obligations mainly in the Group’s German subsidiary. Interest rates on cash and cash
equivalents are floating whilst interest rates on certain borrowings have been fixed and therefore expose the Group to fair
value interest rate risk. The Group and Company do not speculate on future changes in interest rates.
Where overseas acquisitions are made, it is the Group’s policy to arrange any borrowings required in local currency.
It is the Group and Company’s policy not to trade in financial instruments. The Group and Company do not use interest
rate swaps.
(b) Credit risk
Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary
and operating business unit is responsible for managing and analysing the credit risk for each of their new clients before
standard payment and delivery terms and conditions are offered. It is the Group and Company policy to obtain deposits
or require payment in advance from customers where possible, particularly overseas customers. In addition if possible
the Group will seek confirmed letters of credit for the balances due. Credit risk is managed at the operating business
unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent rating, local
management assesses the credit quality of the customer, taking into account its financial position, past experience and
other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board.
The utilisation of credit limits is regularly monitored. Where extended credit is granted, this is agreed by the 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
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5252
Notes to the Financial Statements
for the year ended 31 December 2022
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 2022:
Borrowings
Lease liabilities
Deferred consideration
Trade and other payables
At 31 December 2021:
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
137
896
-
8,132
265
891
465
8,910
-
432
-
-
208
679
101
-
-
115
-
-
223
427
69
-
-
-
-
-
-
-
-
-
Total
£’000
137
1,443
-
8,132
696
1,997
635
8,910
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 cash/(debt)
divided by total capital. Net cash/(debt) is calculated as total borrowings (including “current and non-current borrowings”
as shown in the consolidated balance sheet) and lease creditors less cash and cash equivalents. Total capital is the sum of
net debt or net cash plus equity.
Net cash
Total capital
Dividends on ordinary shares
Group and Company
Final dividend for the year ended 31 December 2021 of 1.2p per ordinary share
Dividend in specie of shares in Verici Dx plc at fair value
2022
£’000
10,031
85,964
2022
£’000
5,459
2,002
2021
£’000
17,712
114,387
2021
£’000
5,103
-
In addition, since the year end the directors have recommended the payment of a final dividend of 1.2p per ordinary
share (2021: 1.2p). The aggregate amount of the proposed dividend expected to be paid on 1 December 2023 out of
retained earnings at 31 December 2022 but not recognised as a liability at year end is £5,459,000 (2021: £5,459,000)
based on the shares in issue at 31 December 2022.
(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.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 Notes to the Financial Statements
for the year ended 31 December 2022
Group and Company
AIM listed ordinary shares – Renalytix plc
AIM listed ordinary shares – Verici Dx plc
53
2022
£’000
827
90
2021
£’000
6,218
1,419
The investments in the unlisted equity securities of Llusern and Epinex are classified as Level 3 in the fair value hierarchy.
Their fair value is assessed annually based on inputs from the senior management of the investee companies, including the
result where appropriate of further funding rounds, as well as the Group’s assessment of their progress. No changes to the
fair value have been made during this or the prior year. There have been no movements between levels in 2022 or 2021.
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.
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 or fair value less costs to sell. These calculations require the use
of estimates as set out in note 19 where we also detail the sensitivity of changes in the key assumptions.
Russia
The Directors have used judgement in determining that the Group retains control of its subsidiary company in Russia and
that it remains appropriate for it to still be consolidated in these results.
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 2022 | EKF Diagnostics Holdings plc2.0 5454
Notes to the Financial Statements
for the year ended 31 December 2022
5. Segmental reporting (continued)
The segment information provided to the Board for the reportable segments for the year ended 31 December 2022 is as
follows:
2022
Income statement
Revenue
Inter-segment
External revenue
Germany
£’000
USA
£’000
^
Russia
£’000
UK
£’000
Total
£’000
30,384
(6,192)
24,192
37,220
(398)
36,822
4,202
-
4,202
1,427
(8)
1,419
73,233
(6,598)
66,635
Adjusted EBITDA*
8,089
8,309
1,563
(3,057)
14,904
Exceptional items - impairments (Note 7)
(32)
(10,324)
Exceptional items - other
Share-based payments (Note 31)
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 (excluding lease liabilities)
Total liabilities
Other segmental information
3,789
(10,684)
1,542
(3,618)
(8,971)
(1,857)
(4,909)
-
-
6,200
(744)
(1,667)
(6,924)
(1,925)
(1,835)
1
(33)
(790)
1
(4)
644
2,967
(10,043)
41,835
57,213
(10,608)
(22,634)
34,579
5,785
40,364
31,227
2,774
34,001
7,211
(986)
6,225
137
6,362
-
-
-
1,563
(21)
-
(28)
(375)
308
(3,152)
(408)
(58)
(10,384)
(7,141)
308
(2,313)
(3,098)
(3,560)
118
-
(348)
1,312
873
-
873
2,366
3,239
11
(65)
(140)
131
(102)
(634)
(3,812)
(9,576)
13,246
113,167
(2,212)
11,034
653
11,687
(35,454)
77,713
11,578
89,291
27,125
207
15,542
50,085
(21,908)
-
(12,560)
(35,454)
5,217
-
5,217
207
-
207
2,982
-
14,631
137
2,982
14,768
Non-current assets – PPE
5,982
13,590
155
1,987
21,714
Non-current assets – Intangibles
PPE – additions
Intangible assets – additions
18,606
877
832
8,822
5,909
192
87
84
-
6,257
33,772
102
370
6,972
1,394
* Adjusted EBITDA excludes exceptional items and share-based payments. The UK includes head office costs.
^ relates to a subsidiary with a non-controlling interest
Annual Report 2022 | EKF Diagnostics Holdings plc2.0
55
Notes to the Financial Statements
for the year ended 31 December 2022
5. Segmental reporting (continued)
2021
Income statement
Revenue
Inter-segment
External revenue
Adjusted EBITDA*
Exceptional items - other (Note 7)
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 including acquisitions
Germany
£’000
USA
£’000
^
Russia
£’000
UK
£’000
Total
£’000
39,665
(5,494)
34,171
11,480
(452)
-
11,028
(752)
(1,525)
8,751
-
(31)
38,974
(2,918)
36,056
12,735
-
-
12,735
(938)
(1,383)
10,414
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
-
3,286
981
-
-
981
(57)
-
924
38
-
(193)
769
431
-
431
1,344
1,775
167
-
167
-
167
80
76
17
-
8,514
(191)
8,323
1,293
357
1,238
2,888
(294)
(936)
1,658
-
(289)
124
1,493
90,439
(8,603)
81,836
26,489
(95)
1,238
27,632
(2,041)
(3,844)
21,747
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
3,867
9,478
1,610
521
17,866
41,894
5,686
9,386
* Adjusted EBITDA excludes exceptional items and share-based payments.
The UK includes head office costs
^ relates to a subsidiary with a non-controlling interest
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 5656
Notes to the Financial Statements
for the year ended 31 December 2022
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
2022
£’000
30,941
4,126
8,001
1,886
5,253
3,715
4,202
1,449
1,945
1,014
4,103
66,635
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
In 2022 no company represented more than 10% of revenues. In 2021 revenues of £14,225,000 (17.4%) were derived from
one external customer, all of whose revenues relate to Europe.
6. Expenses – analysis by nature
Inventories consumed in cost of sales
Employee benefit expense (note 11)
Employee costs capitalised as intangible assets
Depreciation and amortisation
Exceptional items (note 8)
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 8.
7. Other income
Receipt from a US customer
Other
Total
2022
£’000
24,612
22,176
(818)
6,658
17,525
1,518
(71)
4,925
76,525
2022
£’000
859
60
919
2021
£’000
18,364
17,941
(419)
5,885
95
1,378
61
16,874
60,179
2021
£’000
-
90
90
In May 2022 a US customer made a $5.5m payment for inventory relating to our COVID contract manufacturing services
and other matters. £0.9m of this receipt has been disclosed as Other income in accordance with the terms of the contract.
Included within the above expenses are exceptional items as set out in note 8.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 57
Notes to the Financial Statements
for the year ended 31 December 2022
8. Exceptional items
Included within cost of sales and administrative expenses are exceptional items as shown below:
– Warranty claim
– deferred consideration and settlement of warranty claim
– Business reorganisation costs - other charged to cost of sales
– Business reorganisation costs – Impairment
– Business reorganisation costs - other charged to operating expenses
– Acquisition costs
Exceptional items
Note
a
a
b
c
d
e
2022
£’000
-
2
(6,774)
(10,384)
(369)
-
(17,525)
2021
£’000
285
(179)
-
-
(37)
(164)
(95)
a. Change in the value of deferred consideration relating to the acquisition of Advanced Diagnostic Laboratory LLC.
The 2021 amount relates to the resolution of a warranty claim against the former owner of EKF-Diagnostic GmbH.
b. Costs associated with the transition and restructure of certain operations in the US, UK and Germany, which have
been charged to cost of sales. The costs include provisions against certain COVID-19 related and other inventory
and provisions for certain onerous contracts following the decision to focus on its other businesses.
c. Impairments associated with the transition and restructure of certain operations in the US, as well as ADL Health,
UK and Germany, which have been charged to operating expenses. These costs include the impairment of Plant,
Property and Equipment and intangible assets relating to ADL Health (£9.8m), as well as the impairment of a
number of development projects which have been terminated (£0.6m).
d. Costs associated with the transition and restructure of certain operations in the US, UK and Germany, including
redundancy costs (£0.4m) which have been charged to operating expenses. The amount has been partly offset by
the write back of the value of deferred consideration in respect of Advanced Diagnostic Laboratory LLC.(£0.3m)
e. Professional fees relating to the acquisition of Advanced Diagnostic Laboratory LLC in 2021
9. 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
10. Directors’ emoluments
Aggregate emoluments
Share-based payments
Contribution to defined contribution pension scheme
2022
£’000
52
155
207
2022
£’000
934
(308)
15
641
2021
£’000
46
123
169
2021
£’000
5,819
(1,022)
19
4,816
Retirement benefits are accruing to 2 (2021: 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 £305,000 (2021: £2,137,000). In addition to the above, Mr
Contadini received £30,000 as payment in lieu of notice.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 5858
Notes to the Financial Statements
for the year ended 31 December 2022
11. 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)
Capitalised as development costs
Group
2022
£’000
18,392
2,945
Group
2021
£’000
15,944
2,535
Company
2022
£’000
3,631
483
Company
2021
£’000
3,275
365
(308)
(1,238)
(308)
(1,238)
329
21,358
818
22,176
281
17,522
419
17,941
109
3,915
-
3,915
101
2,503
-
2,503
Employee costs of £0.8m (2021: £0.4m) have been capitalised as part of development costs in the Group.
12. 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
2022
Group
2021
Company
2022
Company
2021
61
26
67
218
372
54
32
59
230
375
10
11
8
16
45
9
13
8
9
39
The total number of employees (FTEs) in the Group at 31 December 2022 was 356 (2021: 386), and in the Company was 35
(2021: 41). In addition the average number of agency workers who were mainly utilised in manufacturing was 25 (2021: 88)
in the Group and 4 (2020: 32) in the Company. The cost of these workers was £1,113,000 (2021: £3,303,000) in the Group
and £78,000 (2021: £919,000) in the Company.
13. 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:
– Interest income on short term deposits
– Other interest
Finance income
Net finance costs
2022
£’000
2021
£’000
(10)
(46)
(46)
-
(102)
128
3
131
29
(35)
(1)
(32)
(289)
(357)
-
45
45
(312)
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 Notes to the Financial Statements
for the year ended 31 December 2022
14. 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
59
2022
£’000
2,815
62
2,877
(2,243)
(2,243)
634
2021
£’000
5,096
96
5,192
85
85
5,277
A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. 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% (2021: 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
- Effect of impairment of intangibles
– Losses carried forward
– Utilisation of losses
– Adjustment in respect of prior years
– Impact of different tax rates in other jurisdictions
– Other movements
Tax charge
2022
£’000
(8,942)
(1,699)
1,225
-
(58)
-
942
17
(182)
62
260
67
634
2021
£’000
21,435
4,072
552
630
(91)
(1,186)
-
-
(21)
96
1,024
201
5,277
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 a debit of £1,502,000 (2021: credit of £1,502,000).
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 6060
Notes to the Financial Statements
for the year ended 31 December 2022
15. 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.
(Loss)/profit attributable to owners of the parent
Weighted average number of Ordinary Shares in issue
2022
£’000
(10,101)
2021
£’000
15,851
457,180,086
457,001,067
Basic (loss)/profit per share
(2.21) pence
3.47 pence
(b) Diluted
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. The potential shares were not dilutive in 2022 as the Group made a loss.
(Loss)/profit attributable to owners of the parent
2022
£’000
(10,101)
2021
£’000
15,851
Weighted average number of Ordinary Shares including potentially dilutive shares
457,180,086
460,957,933
Diluted (loss)/profit per share
(2.21) pence
3.44 pence
Weighted average number of Ordinary Shares in issue
Adjustment for:
– Assumed conversion of share awards
– Assumed payment of equity deferred consideration
2022
2021
457,180,086
457,001,067
-
-
12,640
3,944,226
Weighted average number of Ordinary Shares including potentially dilutive shares
457,180,086
460,957,933
The remaining unapproved share options consist of 25,000 options which 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. All the outstanding options were exercisable at 31 December 2022. In August 2022 the
senior employee passed away. The options remain exercisable for 12 months following the date of the employee’s death.
16. Dividends
In December 2022, the Company paid a final dividend for 2021 of 1.2p (2021: 1.1p) per ordinary share, at a total value of
£5,459,000 (2021: £5,103,000). The Board intends to follow an active dividend policy. The Directors propose, subject to
approval at the Company’s next Annual General Meeting, the payment of a final dividend for 2022 of 1.2p per EKF Ordinary
share held on 2 November 2023. Payment will be made on 1 December 2023 to shareholders on the register at close of
business on 3 November 2023 as the date of record. The expected total value of the dividend for is £5,459,000.
In addition to the cash dividend described above, in June 2022 the Company made a distribution in specie whereby the
majority of the Company’s shareholding in Verici Dx plc was distributed to Ordinary shareholders of the Company at a
total value of £2,001,694. The fair value per EKF share was 0.440 pence.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 61
Notes to the Financial Statements
for the year ended 31 December 2022
17. Property, plant and equipment
Group
Cost
At 1 January 2021
Acquired with subsidiary
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
Cost
At 1 January 2022
Additions
Exchange differences
Transfers
Disposals
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Charge for the year
Exchange differences
Impairment
Disposals
At 31 December 2022
Net book value at 31 December 2022
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
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
10,711
2,012
564
838
40
(3)
12,150
133
180
10
(363)
1,972
2,595
1,249
525
226
1
(3)
3,344
8,806
308
150
-
(336)
1,371
601
818
740
(271)
339
(247)
13,188
8,214
786
(137)
-
(238)
8,625
4,563
13,188
1,588
985
393
(1,277)
14,877
8,625
1,249
611
1,129
(1,217)
10,397
4,480
201
-
17
(2)
-
(56)
160
108
24
(2)
-
(49)
81
79
160
48
22
-
(20)
210
81
-
10
-
(14)
77
133
735
-
2,455
(19)
(688)
(13)
2,470
-
-
-
-
-
-
1,600
25,944
111
933
1,351
5,686
12
-
(523)
-
(64)
(489)
3,010
31,551
581
613
5
-
(64)
1,135
12,305
2,041
(202)
-
(459)
13,685
2,470
1,875
17,866
2,470
4,237
276
(443)
(125)
6,415
3,010
31,551
402
195
-
6,972
2,496
-
(285)
(2,073)
3,322
38,946
-
-
-
-
-
-
1,135
1,016
52
111
13,685
3,098
1,049
1,241
(271)
(1,841)
2,043
17,232
6,415
1,279
21,714
Depreciation expense of £1,359,000 (2021: £855,000) has been charged to cost of sales and £1,739,000 (2021: £1,186,000)
has been charged to administrative expenses. The impairments, which largely relate to assets held by ADL Health, have
been charged to exceptional items within operating expenses. A balance totalling £235,000, representing the fair value
of the ADL Health sale proceeds less the costs of sale, has been retained. Further detail on the impairment of ADL Health
is provided in note 19.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 6262
Notes to the Financial Statements
for the year ended 31 December 2022
17. Property, plant and equipment (continued)
Land and
buildings
£’000
Investment
property
£’000
Fixtures &
fittings
£’000
Assets under
construction
£’000
Right-of-use
asset £’000
Total
£’000
Company
Cost
At 1 January 2021
Additions
Disposals
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
Net book value at 31 December 2021
1,271
Cost
At 1 January 2022
Additions
Transfer
Disposal
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Transfer
Charge for the year
Impairment
Disposal
At 31 December 2022
Net book value at 31 December 2022
1,673
-
(1,673)
-
-
402
(402)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,673
(3)
1,670
-
402
39
-
(3)
438
308
258
130
696
189
169
358
338
696
49
-
(161)
584
358
-
183
-
(135)
406
130
-
(130)
-
-
-
-
-
-
53
-
-
53
-
-
-
-
-
-
407
156
-
563
79
117
196
2,518
414
-
2,932
631
325
956
367
1,976
563
2,932
-
-
-
563
196
-
172
59
-
427
102
-
(164)
2,870
956
-
394
59
(138)
1,271
1,232
178
53
136
1,599
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 (£11,815) per month to the parent Company. ¤167,000 (£141,785)
(2021: ¤167,000 (£140,336)) 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 2022 | EKF Diagnostics Holdings plc2.0 63
Notes to the Financial Statements
for the year ended 31 December 2022
18. 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
2022
£’000
911
230
138
1,279
873
537
1,410
Group
2021
£’000
1,531
248
96
1,875
838
1,095
1,933
Company
2022
£’000
Company
2021
£’000
133
3
-
136
167
40
207
362
5
-
367
184
207
391
Additions to the right-of-use assets during the 2022 financial year were £402,000 (2021: £1,351,000) for the Group and
£nil (2021: £156,000) 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
2022
£’000
870
79
67
1,016
46
Group
2021
£’000
481
65
67
613
32
Company
2022
£’000
Company
2021
£’000
170
2
-
172
8
114
3
-
117
7
The total cash outflow for leases in 2022 was £1,071,000 (2021: £643,000) for the Group and £191,000 (2021: £107,000)
for the Company.
Right of use assets totalling £111,000 in the Group and £59,000 in the Company were fully impaired during the year. The
charge to income is included in Exceptional costs.
(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 2022 | EKF Diagnostics Holdings plc2.0 6464
Notes to the Financial Statements
for the year ended 31 December 2022
18. Leases (continued)
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 2022 | EKF Diagnostics Holdings plc2.0 Notes to the Financial Statements
for the year ended 31 December 2022
19. Intangible assets
65
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 2021
Acquisition of subsidiary
Additions
Transfer
Disposals
Exchange differences
At 31 December 2021
3,317
15,541
19,056
4,453
593
69,963
27,003
3,755
-
-
(1,407)
(793)
28,558
467
104
152
(19)
263
1,166
-
-
(749)
(252)
4,284
15,706
-
-
-
(1,073)
(655)
17,328
14,461
1,730
(1,073)
(454)
14,664
-
2,684
1,137
(152)
(288)
(127)
5,023
1,343
548
(288)
(24)
1,579
73
-
-
20
3,370
-
108
-
1
109
8,072
1,314
-
(3,536)
(1,544)
74,269
32,912
3,844
(3,536)
(845)
32,375
Accumulated amortisation and impairment
At 1 January 2021
Charge for the year
Disposals
Exchange differences
At 31 December 2021
2,605
2,947
-
(1,407)
(21)
1,177
237
(19)
(144)
3,021
11,556
1,221
(749)
(203)
11,825
Net book value at 31 December 2021
27,381
1,263
3,881
2,664
3,444
3,261
41,894
Cost
At 1 January 2022
28,558
4,284
15,706
17,328
Additions
Disposals
Exchange differences
At 31 December 2022
-
(1,177)
1,995
-
-
-
-
-
(3,950)
348
1,567
672
29,376
4,632
17,273
14,050
Accumulated amortisation and impairment
At 1 January 2022
Charge for the year
Disposal
Impairment
Exchange differences
At 31 December 2022
1,177
-
(1,177)
4,254
-
3,021
327
-
463
236
11,825
1,438
14,664
762
-
(3,950)
1,157
1,166
-
538
4,254
4,047
15,586
12,014
5,023
1,392
(598)
349
6,166
1,579
472
(598)
608
150
2,211
3,370
74,269
2
(25)
384
1,394
(5,750)
5,315
3,731
75,228
109
561
-
2,661
13
32,375
3,560
(5,725)
9.143
2,103
3,344
41,456
Net book value at 31 December 2022
25,122
585
1.687
2,036
3,955
387
33,772
Amortisation charge of £57,000 (2021: £55,000) has been charged to cost of sales and £3,503,000 (2021: £3,789,000)
has been charged to administrative expenses in the income statement (net of the profit on the sale of intangible assets).
The impairments relate to the intangible assets recognised on the ADL Cash Generating Unit, which have been impaired
in full, and to certain development projects which have been terminated. These have been charged to exceptional items
within operating expenses. On 23 March 2023 ADL was sold for consideration fair valued at £235,000, and the impairment
of the asset was based on using this consideration as a fair value less cost to sell estimate as at 31 December.
During the year assets relating to EKF Molecular with a gross value of £5,127,000 and a net value of £nil have been written
off.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 6666
Notes to the Financial Statements
for the year ended 31 December 2022
19. Intangible assets (continued)
Company
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
Cost
At 1 January 2022
Additions
Impairment
At 31 December 2022
Accumulated amortisation
At 1 January 2022
Charge for the year
At 31 December 2022
Net book value at 31 December 2022
Development
costs
£’000
128
521
649
-
51
51
598
649
371
(28)
992
51
58
109
883
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
2022
£’000
7,613
9,952
88
6,321
1,148
-
25,122
2021
£’000
7,394
9,434
77
5,648
1,026
3,802
27,381
Germany includes EKF-Diagnostic and Senslab.
Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2022
was assessed on the basis of value in use, except in the case of ADL Health which was assessed on the basis of fair value
less cost to sell.
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 2022 | EKF Diagnostics Holdings plc2.0 67
Notes to the Financial Statements
for the year ended 31 December 2022
19. Intangible assets (continued)
The key assumptions used in 2022 for the value in use calculations of cash generating units with significant goodwill
are as follows:
Longer-term growth rate
Discount rate
ADL
%
3
9.45
EKF
Germany
%
3
7.79
DiaSpect
%
3
7.79
Stanbio
%
3
9.45
STI
%
3
9.45
The discount rate used is based on a common risk profile across the Group.
With the exception of ADL, 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 assessment for DiaSpect, including a
lower growth rate of 3% in early model periods, and a increase in discount rate of 1%. This leads to a reduction of headroom
of £1.22m but still no impairment was required using those assumptions. ADL’s intangible assets have been impaired
in full. Other units have significant headroom under the main assumptions used and no reasonably possible change in
assumptions would give rise to an impairment.
The remaining average useful lives of the intangibles are as follows:
Trade name
Customer relations
Trade secrets
Website and software
Development costs
1–9 years
2–9 years
1–9 years
6–9 years
3-9 years
During the year, intangible assets associated with EKF Molecular with a gross value of £5,127,000 and a net value of £nil
have been written off. Following an assessment of the carrying value of certain development projects, development costs
with a gross value of £598,000 and a net value of £564,000 have been impaired. The profit effect of the impairment has
been treated as an exceptional cost and charged to operating costs.
20. Investments in subsidiaries
Company Shares in Group undertakings
At 1 January
Acquisition of Advanced Diagnostic Laboratory LLC
Impairment of investment in Advanced Diagnostic Laboratory LLC
At 31 December
2022
£’000
38,446
-
(7,615)
30,831
2021
£’000
30,521
7,925
-
38,446
Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid, less any impairment.
The remaining investment in ADL Health is £235,000 and represents the expected value of the investment as a result of the
sale process as described in note 19.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 6868
Notes to the Financial Statements
for the year ended 31 December 2022
The subsidiaries of EKF Diagnostics Holdings plc as at 31 December 2022, 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
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.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 69
Notes to the Financial Statements
for the year ended 31 December 2022
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
2022
£’000
1,119
8,585
11,578
21,282
Group
2022
£’000
137
1,410
6,143
-
7,690
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
7,789
11,005
20,341
39,135
1,119
2,112
653
3,884
7,789
2,983
4,879
15,651
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
696
1,933
7,379
635
10,643
-
207
-
391
14,583
4,690
-
14,790
635
5,716
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 £nil (2021: £237,000) 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 2022 and 31 December 2021, 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
2022
£’000
5,814
49
22
772
4,921
11,578
2021
£’000
4,879
572
73
5,544
9,273
20,341
£2,366,000 (2021: £1,344,000) of the cash held in banks rated lower than AA- or unrated was held by the Group’s
Russian subsidiary.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 7070
Notes to the Financial Statements
for the year ended 31 December 2022
22. Investments
Group and Company
1 January
Additions
Change in fair value through other comprehensive income
Dividend in specie
31 December
2022
£’000
7,789
2,930
(7,598)
(2,002)
1,119
2021
£’000
6,608
-
1,181
-
7,789
During the year the Company acquired a further 137,930 shares in Renalytix plc, an AIM listed developer of artificial intelligence
enabled diagnostics for kidney disease at a cost of £380,000. Following this acquisition, the Company has a 1.53% holding
(2021 1.39%) in Renalytix plc, with a fair value at 31 December 2022 of £0.83m. The Company also acquired a further 7,142,857
shares in Verici DX plc, an AIM listed developer of advanced clinical diagnostics for organ transplant, of which Julian Baines
was then non-executive chair, at a cost of £2,500,000. The majority of the Group’s holding in Verici Dx plc was subsequently
transferred to the Company’s ordinary shareholders by way of a dividend in specie (see note 16). Following these transactions,
the Company has a 0.42% (2021 : 1.89%) holding in Verici Dx plc, with a fair value at 31 December 2022 of £0.09m. In each case
the fair value is calculated using the quoted mid price. In addition the Company acquired a 2% holding in Llusern Scientific
Limited, a UK based privately held company developing molecular point-of-care tests for the detection of bacterial and viral
infections at a cost of £50,000. The Company continues to have a 0.605% (2021: 0.66%) holding in Epinex Diagnostics Inc., a
US based privately held company operating in the medical diagnostics industry.
These equity securities are not held for trading. They are held as financial assets at fair value through other comprehensive
income.
£5,771,000 of the change in fair value relates to the Group’s holding in Renalytix plc, and £1,827,000 to the Group’s holding
in Verici Dx plc.
23. Trade and other receivables
Group
2022
£’000
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
Non-current
Amounts owed by subsidiary undertakings
-
-
Current
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments
Amounts owed by subsidiary undertakings
Other receivables
8,012
(149)
7,863
2,164
-
722
11,010
(148)
10,862
2,302
-
264
10,749
13,428
-
133
(5)
128
220
1,872
112
2,332
1,860
1,085
-
1,085
292
-
40
1,417
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 2022, in the Group trade receivables of £2,780,000 (2021: £2,208,000) were past due but not covered by
a loss allowance. In the Company, £71,000 (2021: £678,000) 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
2022
£’000
2,133
398
249
2,780
Group
2021
£’000
1,835
179
194
2,208
Company
2022
£’000
Company
2021
£’000
59
12
-
71
595
-
83
678
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 71
Notes to the Financial Statements
for the year ended 31 December 2022
As of 31 December 2022, in the Group trade receivables of £149,000 (2021: £148,000) were subject to a loss allowance. In
the Company trade receivables of £5,000 (2021: £nil) were subject to a loss allowance. The ageing of these receivables is as
follows:
Up to 3 months
3 to 6 months
Over 6 months
Total
Group
2022
£’000
80
19
50
149
Group
2021
£’000
71
57
20
148
Company
2022
£’000
Company
2021
£’000
5
-
-
5
-
-
-
-
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
Receivables written off as uncollectible
Exchange differences
At 31 December
Group
2022
£’000
148
313
-
(163)
(163)
14
149
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
87
81
8
(26)
-
(2)
148
-
5
-
-
-
-
5
-
-
-
-
-
-
-
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
2022
£’000
460
3,564
6,510
215
10,749
Group
2022
£’000
6,729
1,046
1,659
9,434
Group
2021
£’000
1,417
3,890
8,615
54
13,976
Group
2021
£’000
9,117
1,431
2,690
13,238
Company
2022
£’000
Company
2021
£’000
460
-
1,872
-
2,332
1,417
52
1,808
-
3,277
Company
2022
£’000
Company
2021
£’000
46
3
19
68
442
25
8
475
The Directors are of the opinion that the replacement values of inventories are not materially different to the carrying
values stated above. The Group carrying values above are stated net of impairment provisions of £7,815,000 (2021:
£3,455,000). The Company carrying values above are stated net of impairment provisions of £305,000 (2021: £nil) The
cost of inventories recognised as expense and included in ‘cost of sales’ amounted to £24,612,000 (2021: £18,364,000),
and in the Company £1,078,000 (2021: £2,331,000).
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 7272
Notes to the Financial Statements
for the year ended 31 December 2022
25. Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents (excluding bank overdrafts)
Group
2022
£’000
11,578
11,578
Group
2021
£’000
20,341
20,341
Company
2022
£’000
653
653
Company
2021
£’000
4,879
4,879
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. Cash net
of borrowings of £11,441,000 (2021: £19,645,000) is presented as gross cash of £11,578,000 (2021: £20,341,000) net of
borrowings of £137,000 (2021: £696,000) detailed in Note 27. This excludes lease liabilities as shown in Note 18. Cash
totalling £2,366,000 is held by the Group’s 60% owned Russian subsidiary. As a result of sanctions put in place by the USA,
the EU, and the UK, against Russia, the Russian Government has banned the payment of dividends by Russian companies
to parent companies in these jurisdictions. Until this ban is lifted, the Group is unable to access this cash.
26 Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Social security
Other payables
Accrued expenses and deferred income
Group
2022
£’000
1,505
-
156
1,170
5,457
8,288
Group
2021
£’000
4,435
-
168
840
3,635
9,078
Company
2022
£’000
82
14,026
61
1
474
Company
2021
£’000
206
3,532
89
505
448
14,644
4,780
Other payables consists mainly of VAT and US sales tax liabilities. 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 are 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
Group
2022
£’000
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
-
-
137
137
431
431
265
265
-
-
-
-
-
–
-
-
Group
2022
£’000
Group
2021
£’000
Company
2022
£’000
Company
2021
£’000
137
-
-
-
137
265
208
223
-
696
-
-
-
-
-
-
-
-
-
-
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 73
Notes to the Financial Statements
for the year ended 31 December 2022
Bank borrowings
Bank borrowings mature in 2023 and bear an average fixed coupon of 2.5% annually (2021: 3.76%).
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 denominated bank borrowings were repaid
in full during the year.
The Group is not exposed to interest rate changes or contractual re-pricing dates at the end of the reporting period, as
the borrowings are fixed in nature.
The fair value of both current and non-current borrowings equals their carrying amount, as the impact of discounting is
not significant.
The carrying amounts of the group’s bank borrowings are denominated as follows:
Euro
US Dollar
28. Deferred consideration
At 1 January
Fair value adjustment
Payment
Additions
Derecognised
Interest
Exchange differences
At 31 December
Group
2022
£’000
137
-
137
Group
2022
£’000
635
(2)
(403)
-
Group
2021
£’000
304
392
696
Group
2021
£’000
2,901
285
(179)
632
Company
2022
£’000
Company
2021
£’000
-
-
-
-
-
-
Company
2022
£’000
Company
2021
£’000
635
(2)
(403)
-
2,901
285
(179)
632
(248)
(3,007)
(248)
(3,007)
10
8
-
3
-
635
10
8
-
3
-
635
Deferred consideration is potentially payable to the former owners of ADL. The deferred contingent consideration 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. No deferred
contingent consideration was paid during the year. The cash payment completed during the year is an amount based on
a calculation of net working capital in ADL at completion.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 7474
Notes to the Financial Statements
for the year ended 31 December 2022
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
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
Movement through OCI
Income statement movement (note 14)
At 31 December
2022
£’000
(925)
-
(925)
1,788
705
2,493
1,568
2022
£’000
5,016
297
166
-
(1,502)
(2,409)
1,568
2021
£’000
(15)
-
(15)
4,286
745
5,031
5,016
2021
£’000
2,622
(96)
679
906
1,502
(597)
5,016
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 Notes to the Financial Statements
for the year ended 31 December 2022
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:
75
Deferred tax liabilities
At 1 January 2021
Charged/(credited) to the income statement
Rate change
Addition through subsidiary
Movement through OCI
Exchange differences
At 31 December 2021
At 1 January 2022
Charged/(credited) to the income statement
Rate change
Movement through OCI
Exchange differences
At 31 December 2022
Deferred tax assets
At 1 January 2021
Credited to the income statement
At 31 December 2021
At 1 January 2022
Credited to the income statement
Exchange differences
At 31 December 2022
Accelerated tax
depreciation
£’000
225
60
-
-
-
(14)
271
271
168
-
-
14
453
Tax losses
£’000
(14)
(1)
(15)
(15)
(908)
(2)
(925)
Other
£’000
2,411
(656)
679
906
1,502
(82)
4,760
4,760
(1,670)
166
(1,502)
286
2,040
Other
£’000
-
-
-
-
-
-
-
Total
£’000
2,636
(596)
679
906
1,502
(96)
5,031
5,031
(1,502)
166
(1,502)
300
2,493
Total
£’000
(14)
(1)
(15)
(15)
(908)
(2)
(925)
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 £3,081,000 (2021: £1,190,000) mainly in
respect of tax losses amounting to £13,109,000 (2021: £5,063,000), 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.
Company
Deferred tax liabilities
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax
30. Share capital
Group and Company
At 1 January 2021
Acquisition of Advanced Diagnostic Laboratory
At 31 December 2021 and at 1 January 2022
Ordinary shares purchased for cancellation and cancelled
At 31 December 2022
2022
£’000
-
-
2021
£’000
1,502
1,502
Number of
Ordinary Shares
Share capital
£’000
Share premium
£’000
454,993,227
8,937,337
463,930,564
(9,000,000)
454,930,564
4,550
89
4,639
(90)
4,549
200
7,175
7,375
-
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.
Information on outstanding share options including details of options issued, exercised and lapsed during the
financial year and options outstanding at the end of the reporting period is given in Note 31.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 7676
Notes to the Financial Statements
for the year ended 31 December 2022
The Company has acquired ordinary shares during this year as follows: (2021: nil).
Date
29/03/2022
30/03/2022
31/03/2022
01/04/2022
04/04/2022
05/04/2022
06/04/2022
07/04/2022
08/04/2022
Total
Number of Ordinary
Shares purchased
and cancelled
Price paid (£)
1,300,000
586,251
900,000
402,000
750,000
331,250
2,000,000
874,250
1,000,000
425,500
1,625,000
690,601
725,000
305,625
500,000
200,400
200,000
80,000
9,000,000
3,895,877
The buy-back and cancellation were approved by shareholders at last year’s annual general meeting. The shares were
acquired at an average price of 43.29 pence per share. The total cost of £3,895,877, was deducted from equity. A
transfer of £90,000 was made from retained earnings to the capital redemption reserve. Costs of £18,000 have been
charged to administration costs.
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
2022
2021
At 1 January
Cancelled
Exercised
At 31 December
Av. Exercise price
per share
(£)
0.37625
-
-
Options
(Number)
25,000
-
-
Av. Exercise price
per share
(£)
0.37625
-
-
Options
(Number)
25,000
-
-
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 (2021: 25,000) outstanding options 25,000 (2021: 25,000)
were exercisable at 31 December 2022. In August 2022 the senior employee passed away. The options remain exercisable
for 12 months following the date of the employee’s death.
There are no charges or credits to profit and loss in relation to this scheme in either 2021 or 2022.
Expiry Date
21.01.2024
2022
2021
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
In September 2021 a 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, with the amount payable being 2.5% of
the excess sale price above 70p per share. The Board estimates that it is more probable than not that no award will be
made under the scheme in the foreseeable future, and the fair value of the award has therefore been calculated at £nil
(2021: £3,296,000). The 2021 value was calculated using a modified form of a Black Scholes model. The liability at
31 December 2021 of £298,000 has been credited to profit and loss in the year. Following the resignation of the
director in February 2023, the scheme lapsed.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 77
Total
£’000
5,354
(321)
5,033
Notes to the Financial Statements
for the year ended 31 December 2022
32. Other reserves
The following table shows a breakdown of the balance sheet item “other reserves” and the movements in
reserves during the year. A description of the nature and purpose of each reserve is provided below the table.
Capital redemption
reserve
£’000
Financial assets
at FVOCI
£’000
Group
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
Changes in the fair value of equity instruments at fair value through Other
Comprehensive Income (net of tax)
Cancellation of Ordinary Shares
At 31 December 2022
Capital redemption reserve
On the buy-back and cancellation of ordinary shares, an amount equal to the par value was transferred from retained
earnings to the capital redemption reserve for capital maintenance purposes.
FVOCI reserve
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.
Capital redemption
reserve
£’000
Financial assets
at FVOCI
£’000
102
-
102
-
90
192
102
-
102
-
-
90
192
5,252
(321)
4,931
(5,752)
(5,752)
-
(821)
90
(629)
Total
£’000
5,313
(321)
4,992
5,211
(321)
4,890
(6,096)
(6,096)
344
-
(862)
344
90
(670)
Company
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
Changes in the fair value of equity instruments at fair value through Other
Comprehensive Income (net of tax)
Reserve transfer
Cancellation of Ordinary Shares
At 31 December 2022
Share-based payments
The share based payments reserve is used to recognise:
• The grant date fair value of options issued to employees but not exercised.
• The grant date fair value of shares issued to employees.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in OCI, and accumulated in a
separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
Retained earnings
Movements in retained earnings were as follows:
At 1 January
(Loss)/profit for the year
Currency translation differences
Cancellation of ordinary shares
Reserve transfer
Dividends to owners
At 31 December 2022
Group
Company
2022
£’000
74,264
(10,101)
(1)
(3,896)
(344)
(7,461)
52,461
2021
£’000
63,516
15,851
-
-
-
(5,103)
74,264
2022
£’000
32,646
(9,565)
-
(3,896)
(344)
(7,461)
11,380
2021
£’000
31,981
5,768
-
-
-
(5,103)
32,646
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 7878
Notes to the Financial Statements
for the year ended 31 December 2022
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 £329,000 (2021: £281,000). The value of pension contributions owed to pension
providers at 31 December 2022 was £nil (2021: £nil).
34. Commitments
Capital commitments
The Group has contracted £1,447,000 (2021: £1,736,000) capital expenditure at the end of the reporting period that had
not yet been incurred.
The Group does not have any commitments to acquire any intangible assets.
35. Cash generated by/(used in) operations
Group
Company
(Loss)/profit before tax
Adjustments for:
– Depreciation
– Amortisation
– Exceptional items
– Loss/(profit) on disposal of fixed assets
– Share-based payments
- Provisions
– Fair value adjustment
– Cash outflows relating to exceptional items
– Foreign exchange
– Bad debt written down
– Net finance (income)/cost
Changes in working capital
– Inventories
– Trade and other receivables
– Trade and other payables
Net cash generated by operations
2022
£’000
(8,942)
3,098
3,560
17,525
28
(308)
(929)
-
(617)
(71)
127
(29)
(815)
1,276
(2,177)
12,655
2021
£’000
21,435
2,041
3,844
(285)
(13)
(6,586)
-
285
-
61
58
26
(4,601)
(3,274)
1,217
14,208
2022
£’000
(9,506)
394
58
8,097
-
(308)
-
26
(339)
(236)
5
149
101
940
10,089
9,470
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
2022
£’000
257
(28)
229
2021
£’000
5,790
326
51
-
-
(6,586)
-
(2,722)
-
75
36
(23)
156
4,914
(969)
1,048
2021
£’000
30
13
43
The principal non-cash transactions are: the revaluation of shares held in Renalytix plc and Verici Dx plc; movements on
deferred consideration provisions; release of accruals no longer required, and exceptional items consisting of provisions
and impairments.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 2021
£’000
4,879
-
(391)
4,488
Total
£’000
9,666
(5,150)
-
(28)
Notes to the Financial Statements
for the year ended 31 December 2022
This section sets out an analysis of net cash/(debt) and the movements in net cash/(debt) for each of the periods presented.
Group
Company
79
Cash and cash equivalents (Note 25)
Borrowings (Note 27)
Lease liabilities
Net cash
2022
£’000
11,578
(137)
(1,410)
10,031
Group
2021
£’000
20,341
(696)
(1,933)
17,712
2022
£’000
653
-
(207)
446
Company
Cash
£’000
Borrowings
£’000
Lease
liabilities
£’000
Total
£’000
Cash
£’000
Borrowings
£’000
Movements in Net cash
Net debt as at 1 January 2021
21,913
(508)
(1,070)
20,335
10,045
Financing cash flows
(1,507)
178
(740)
(2,069)
(5,138)
Acquired with subsidiary
113
(388)
(129)
(404)
-
Foreign exchange adjustments
(178)
22
6
(150)
(28)
Net cash at 31 December 2021
20,341
(696)
(1,933)
17,712
4,879
Financing cash flows
(10,283)
Foreign exchange adjustments
1,520
613
(54)
669
(9,001)
(4,411)
(146)
1,320
185
Net cash at 31 December 2022
11,578
(137)
(1,410)
10,031
653
-
-
-
-
-
-
-
-
Lease
liabilities
£’000
(379)
(12)
-
-
(391)
4,488
184
-
(4,227)
185
(207)
446
36. Related Party Disclosures
Directors
Christopher Mills is interested in 29.05 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 1.53% of Renalytix. The Group invested £0.4m in Renalytix in April 2022. Mr Mills is interested in the issued
share capital of the following related parties:
Company
Renalytix plc
Trellus Health plc
Verici Dx plc
Number of ordinary
shares
Percentage
held
10,072,500
18,209,219
29,769,111
10.7%
11.3%
17.5%
The Company has agreed a funding line with North Atlantic Smaller Companies Investment Trust PLC. Christopher Mills,
Non-executive Director of the Company, sits on the Board as Chief Executive Officer of North Atlantic Smaller Companies
Investment Trust PLC and is a substantial shareholder of both the Company and the lender. This is a committed facility
for a maximum value of £3.0m which, as at the date of this statement, is not drawn down. The terms of the facility are
substantially similar to those considered to be commercially available to the Company. This facility partially sets off the
exposure currently faced by the Group given the inability to access cash reserves held in Russia. The Board believes it is
a prudent measure to have access to additional cash if needed and further that the facility demonstrates the continued
support from its largest shareholder, Christopher Mills. The direct and indirect shareholdings of Mr. Mills in the Company
include those of the North Atlantic Smaller Companies Investment Trust PLC.
The lending facility is available for three years from the date of this announcement and any amounts drawn down carry
interest at 2.5% above the Bank of England base rate from time to time, payable quarterly in arrears. Any loan under the
facility is required to be fully repaid at the end of the facility term. The Company may repay any such loan early, in part or
in full, but may not re-borrow such amounts.
The Group was invoiced £6,000 (2021: £15,000) by J & K (Cardiff) Limited for property rent. Julian Baines is a
Director and 50% shareholder of J & K (Cardiff) Limited. Julian is also non-executive chair of Trellus and until
February 2023 of Verici Dx plc. The Company owns 0.42% of Verici Dx plc. Mr Baines is interested in 2,375,836
(1.5%) shares in Trellus and 1,351,713 (0.8%) shares in Verici.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 8080
Notes to the Financial Statements
for the year ended 31 December 2022
Carl Contadini acts as an Operational Advisor to Harwood which acts as investment manager and investment adviser to
NASCIT and Oryx respectively.
Michael Salter is a director of Trellus Health plc and is interested in 1,126,026 (0.7%) Trellus shares.
There are no outstanding balances at 31 December 2022, and during the year there were no sales or purchases, between
the Group and Trellus, Renalytix or Verici.
Directors’ emoluments are set out in the Remuneration Committee report and in note 10.
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 £719,000 (2021: £589,000) 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
2022
£’000
934
(298)
15
651
2021
£’000
5,869
(1,022)
19
4,866
Key management includes the Directors of the Company only. In addition to the above, Mr Contadini received £30,000 as
payment in lieu of notice.
The Company
The transactions outlined above with Renalytix were all undertaken by the Company.
During the year the Company invoiced management charges of £3,625,000 (2021: £3,279,000) to its subsidiary companies,
it also invoiced rental costs to EKF Germany of ¤167,000 (£138,000) (2021: ¤167,000 (£143,700)). It sold £23,000 (2021:
£nil) of goods and services to subsidiaries, and purchased goods and services from subsidiaries totalling £655,000 (2021:
£1,272,000). At 31 December 2022 the Company was owed £1,872,000 (2021: £1,860,000) by its subsidiaries and owed
£14,026,000 (2021: £3,532,000) to other subsidiaries.
37. Post Balance Sheet Events
In February 2023 the Group’s UK manufacturing operations were closed down. This resulted in a small number of
redundancies.
The transition of the Laboratory Testing business towards generating non-COVID revenues has presented certain
challenges following the rapid drop in demand for COVID testing worldwide since Q1 2022. ADL Health contributed a loss
in 2022, which has led to EKF’s management team (“Management”) reviewing the business and its rationale in the context
of the group’s wider strategy.
Following the review undertaken in early 2023, Management determined that Laboratory Testing will no longer form part of
EKF’s core offering and, therefore, disposed of ADL Health to Medical Management Partners, LLC, an entity which is 100%
controlled by Stan Crawford, a member of the management team of ADL Health. The disposal will provide cost savings to
EKF, allow Management time to focus on growth initiatives in other areas, and also simplify the reporting structure of the
wider group. In the year ending 31 December 2022, ADL Health generated revenue of £2.6 million and loss before tax of
approximately £1.0 million, with net assets of £0.1 million as at 31 December 2022. The disposal was classified as a related
party transaction under the AIM Rules by virtue of Stan Crawford being a director of a subsidiary of the Company. Further
details of this transaction and related regulatory disclosures are contained in the announcement made on 23 March 2023.
The consideration will primarily comprise of 1,200,000 EKF shares of ordinary shares of 1p each in the capital of the
Company (“Ordinary Shares”) to be held, initially, in treasury.
The Company has agreed a funding line with North Atlantic Smaller Companies Investment Trust PLC. Christopher Mills,
Non-executive Director of the Company, sits on the Board as Chief Executive Officer of North Atlantic Smaller Companies
Investment Trust PLC and is a substantial shareholder of both the Company and the lender. This is a committed facility
for a maximum value of £3.0m which, as at the date of this statement, is not drawn down. The terms of the facility are
substantially similar to those considered to be commercially available to the Company. This facility partially sets off the
exposure currently faced by the Group given the inability to access cash reserves held in Russia. The Board believes it is
a prudent measure to have access to additional cash if needed and further that the facility demonstrates the continued
support from its largest shareholder, Christopher Mills. The direct and indirect shareholdings of Mr. Mills in the Company
include those of the North Atlantic Smaller Companies Investment Trust PLC.
The lending facility is available for three years from the date of this announcement and any amounts drawn down
carry interest at 2.5% above the Bank of England base rate from time to time, payable quarterly in arrears. Any loan
under the facility is required to be fully repaid at the end of the facility term. The Company may repay any such
loan early, in part or in full, but may not re-borrow such amounts.
Annual Report 2022 | EKF Diagnostics Holdings plc2.0 Annual Report 2022 | EKF Diagnostics Holdings plc
81
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 17 May 2023 at 10.30 a.m. for the following
purposes:
Ordinary Resolutions
1. To receive and adopt the statement of accounts for the year ended 31 December 2022 together with the reports of
the Directors and the auditors thereon.
2. To declare a final dividend of 1.2 pence per ordinary share to be paid on 1 December 2023 to the holders of ordinary
shares on the register of members at the close of business on 2 November 2023.
3. To re-elect Julian Huw Baines as a Director of the Company
4. To re-appoint 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.
5. To authorise the Directors of the Company to determine the auditors’ remuneration.
6. That, in accordance with section 551 of the CA 2006, the Directors be generally and unconditionally authorised to
allot Relevant Securities (as defined below):
a. comprising equity securities (as defined in section 560 of the CA 2006) up to an aggregate nominal amount of
£1,516,435 in connection with an offer by way of a rights issue:
i. to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings; and
ii. to holders of other equity securities as required by the rights of those securities or as the Directors otherwise
consider necessary, but subject to such exclusions or other arrangements as the Directors may deem necessary
or expedient in relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or
under the laws of any territory or the requirements of any regulatory body or stock exchange; and
b. in any other case, up to an aggregate nominal amount of £1,516,435;
provided that this authority shall, unless renewed, varied or revoked by the Company, expire at the conclusion
of the next Annual General Meeting of the Company to be held in 2024, save that the Company may, before
such expiry, make offers or agreements which would or might require Relevant Securities to be allotted and
the Directors may allot Relevant Securities in pursuance of such offer or agreement notwithstanding that the
authority conferred by this resolution has expired.
This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot
Relevant Securities but without prejudice to any allotment of shares or grant of rights already made, offered or
agreed to be made pursuant to such authorities.
In this resolution, Relevant Securities means:
• shares in the Company, other than shares allotted pursuant to:
• an employees’ share scheme (as defined in section 1166 of the CA 2006);
• a right to subscribe for shares in the Company where the grant of the right itself constitutes a Relevant
Security;
• a right to convert securities into shares in the Company where the grant of the right itself constitutes a Relevant
Security; or
• anything done for the purposes of a compromise or arrangement sanctioned in accordance with Part 26A of
the CA 2006; and
• any right to subscribe for or to convert any security into shares in the Company other than rights to subscribe
for or convert any security into shares allotted pursuant to an employees’ share scheme (as defined in section
1166 of the CA 2006) or anything done for the purposes of a compromise or arrangement sanctioned in
accordance with Part 26A of the CA 2006. References to the allotment of Relevant Securities in this resolution
include the grant of such rights.
Special Resolutions
7. That, subject to the passing of Resolution 6 above, the Directors be authorised pursuant to section 570 of the
Companies Act 2006 (the Act) to allot equity securities (as defined in section 560 of the Act) for cash pursuant
to the authority given by resolution 6 and/or to sell equity securities held as treasury shares for cash pursuant
to section 727 of the Act, in each case as if section 561(1) of the Act did not apply to any such allotment or sale,
provided that this power shall be limited:
a. the allotment of equity securities in connection with an offer of equity securities (but, in the case of the authority
granted under paragraph a) of resolution 6, by way of a rights issue only):
(i) to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings;
and
(ii) to holders of other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
3.0
8282
NOTICE OF ANNUAL GENERAL MEETING
EKF Diagnostics Holdings PLC (Company)
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in
relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws
of any territory or the requirements of any regulatory body or stock exchange; and
b. to the allotment and/or sale (otherwise than pursuant to sub-paragraph (a) above) of equity securities to any
person up to an aggregate nominal value of £454,930, 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 2024, 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.
8. That, subject to the passing of resolution 6 above, the Directors be authorised in addition to any authority granted
under resolution 7 to allot equity securities (as defined in section 560 of the CA 2006) for cash under the authority
conferred by resolution 6 and/or to sell ordinary shares held by the Company as treasury shares as if section 561 of
the CA 2006 did not apply to any such allotment or sale, provided that such authority shall be:
a. limited to the allotment of equity securities or sale of treasury shares up to an aggregate nominal amount of
£454,930; and
b. used only for the purpose of financing (or refinancing, if the authority is to be used within 6 months after the
original transaction) a transaction which the Directors determine to be an acquisition or other capital investment
of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date of this Notice, 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 2024, 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.
9. 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:
a. the maximum aggregate number of Ordinary Shares authorised to be purchased is 68,194,091 (representing 14.99
per cent. of the Company’s issued ordinary share capital);
b. the minimum price (excluding expenses) which may be paid for such Ordinary Shares is £0.01 per share;
c. 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;
d. unless previously renewed, varied or revoked, the authority conferred shall expire at the conclusion of the
Company’s next annual general meeting; and
e. 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.
10. That a general meeting of the Company, other than an annual general meeting, may be called on not less than 14 clear
days’ notice.
Registered Office
Avon House
19 Stanwell Road
Penarth
CF64 2EZ
21 April 2023
BY ORDER OF THE BOARD
ONE Advisory Limited
Company Secretary
Annual Report 2022 | EKF Diagnostics Holdings plc3.0
83
Notes
1.
2.
3.
4.
The Company specifies that only those members registered on the Company’s register of members at close of business on 15 May
2023 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 10.30 a.m. on 15 May 2023.
Link Group, the company’s registrar, has launched a shareholder app: LinkVote+. It’s free to download and use and gives
shareholders the ability to access their shareholding record at any time and allows users to submit a proxy appointment quickly and
easily online rather than through the post. The app is available to download on both the Apple App Store and Google Play, or by
scanning the relevant QR code below.
Apple App Store
GooglePlay
5. Proxymity Voting
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which
has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.
proxymity.io. Your proxy must be lodged by 10.30am on 15 May 2023 in order to be considered valid or, if the meeting is adjourned, by
the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy via this process you will need to
have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them
and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the Proxymity platform may be
revoked completely by sending an authenticated message via the platform instructing the removal of your proxy vote.
6.
7.
8.
9.
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 0391. 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). 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.
10. 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 & International 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 10.30 a.m. on 15 May 2023]. 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.
Annual Report 2022 | EKF Diagnostics Holdings plc3.0
8484
11.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK &
International 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.
12. 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 6
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.
13. In order to revoke a proxy instruction you will need to inform the Company by contacting Link Group on 0371 664 0391. 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 10.30 a.m. on 15 May 2023. 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.
14. 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.
15. 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.
16. Voting on the resolution will be conducted by way of a poll vote.
17.
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 454,930,564 ordinary shares of nominal value 1 pence each. No 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 2022 | EKF Diagnostics Holdings plc3.0 Solicitors to the Company:
BDB Pitmans LLP
One Bartholemew Close
London EC1A 7BL
Berry Smith LLP
Haywood House Dumfries Place
Cardiff CF10 3GA
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:
Julian Baines MBE
(Executive Chairman)
Marc Davies
(appointed 1 January 2022)
(Chief Financial Officer)
Christopher Mills
(Non-Executive Director)
Christian Rigg
(Non-Executive Director)
Jennifer Winter
(appointed 1 February 2022)
(Non-Executive Director)
Michael Salter
(resigned 6 February 2023)
(Chief Executive Officer)
Carl Contadini
(resigned 1 February 2022)
(Non-Executive Director)
Company Secretary:
One Advisory Limited
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
EKF Diagnostics Holdings plc
Tel: +44 (0) 29 20 710570
Email: investors@ekfdiagnostics.com
Avon House, 19 Stanwell Road,
Penarth, Cardiff, CF64 2EZ
ekfdiagnostics.com
,