20
20
Inspiration Healthcare Group plc
Annual Report
and Financial Statements
OUR VALUES
As a Group we strive to meet all of these values:
Patient focused, Outcome changing, Pioneering, Research driven
FINANCIAL HIGHLIGHTS
Group Revenue1
£17.8 million
UP 15%
Cash position
£4.5 million
Operating Profit
before exceptional items
£1.5 million
UP 24%
Profit before tax
£1.1 million
EBITDA2
£2.1 million
UP 28%
Gross Margin up to
48.2%
1 On 24 September 2019 the Group acquired the entire issued share capital of Vio Holdings Limited, the holding company of Viomedex Limited (together “Viomedex”).
Viomedex designs, manufactures and supplies single-use respiratory products and sterile medical consumables, principally for the respiratory care market.
2 Earnings before interest, tax, depreciation, amortisation, share based payments and exceptional items, including the impact of Viomedex and on a basis consistent
with prior year which is before applying IFRS 16 - Leases (see page 94 for analysis of the impact of IFRS 16)
OPERATIONAL HIGHLIGHTS
New Markets
Large order for Hypothermia
workstations in Sri Lanka,
record order for Poland
Patient Warming Systems
shipped.
Product Development
Prototypes finalised for
Project Wave device and
undergoing final testing
prior to submission for
clinical trial.
Acquisition
First acquisition – Viomedex,
completed in September 2019.
Product Launch
Launched specialist neonatal patient
warming controller ‘CosyTherm2’.
Regulatory
CE marking of Inspiration
Healthcare products
extended to May 2024.
IP
Patents granted for
Project Wave3.
First Fundraising
Oversubscribed for our first
fundraise with additional
cash taken to support future
business development.
Award Winning
Received Queen's Award for
Enterprise: International Trade.
3 Project Wave Intellectual Property is used under license.
OUR PURPOSE
To improve health outcomes by providing
highly advanced medical technology
Throughout this Strategic Report all figures include the impact of Viomedex
where relevant unless stated otherwise. The impact of the Viomedex
acquisition on the results of the Group for the year are described in our
Operating and Financial Review on pages 26 to 30 and set out in more detail
in note 31 to the Consolidated Financial Statements.
Strategic Report
Chairman’s Report
Our Business Strategy
Our Business Model
Therapy Areas
Chief Executive Officer’s Review
Operating and Financial Review
Principal Risks and Uncertainties
4
6
15
16
20
26
31
Governance
Statement of Corporate Governance 37
Audit Committee Report
Board of Directors
Directors’ Report
Directors’ Remuneration Report
44
46
48
50
Financial Statements
Independent Auditors’ Report
to the Members of Inspiration Healthcare Group plc
54
Consolidated Income Statement
60
Consolidated Statement of
Comprehensive Income
Consolidated and Company
Statements of Financial Position
Consolidated and Company
Statement of Changes in
Shareholders’ Equity
60
61
62
Consolidated Cash Flow Statement
64
Notes forming part of the
Financial Statements
Shareholder Information
Other Shareholder Information
Advisers
65
96
97
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 CHAIRMAN’S REPORT
A KEY EVENT IN
THE YEAR WAS THE
SUCCESSFUL ACQUISITION
OF VIO HOLDINGS LTD
I am pleased to be introducing this
year’s annual report with record
revenue resulting in double-digit growth
Mark Abrahams
Chairman
4
I am pleased to be introducing this year’s annual report
which outlines the Group’s strong performance including
record revenue resulting in double-digit growth. This
result was better than our initial expectations, despite
the external challenges we had to overcome.
Group revenues for the year ended 31 January 2020
(“FY2020”) rose to record levels after a flat year previously
and totalled £17.8 million for the year, up from £15.5
million in FY2019. This included a first-time revenue
contribution of £0.4 million from the acquisition of Vio
Holdings Ltd (referred to as “Viomedex”). On a like-for-like
basis, the Inspiration Healthcare business grew by 12%
from the previous year which was a pleasing outcome
given the backdrop of Brexit uncertainty and the ongoing
regulatory challenges facing the global industry.
We comfortably exceeded our expectations this year by
achieving an operating profit before exceptional items of
£1.5 million for the Group in FY2020 compared to £1.2
million for FY2019. EBITDA1 grew by 28% to £2.1 million
for the year (FY2019: £1.65 million). This was achieved
through the growth in revenue and improving overall
gross margins from 45.5% to 48.2%. Underlying Diluted
Earnings per Share2 (“EPS”) increased from 3.4p to 3.6p.
A key event in the year was the successful acquisition of
Vio Holdings Ltd, a company that owned our key supplier
Viomedex Ltd and was of strategic importance for us to
develop our leading position in the Neonatal Intensive
Care sector. The consideration of £3.25 million3 was
funded through a share placement raising £4.25 million
and we thank our shareholders for supporting this. The
additional cash raised (£0.9 million net of costs) will
be used to strengthen the Company’s balance sheet to
support the continued growth of the business.
Viomedex already supplies key products to the
Group, allowing us to gain cost leadership and retain
manufacturing margins, they also have a number of
products for Neonatal Intensive Care that we can put
through our distribution network and drive revenue
growth in future years. For the part of the year they
were under our ownership, Viomedex performed in line
with expectations. Our teams are working well on the
integration to ensure that we achieve all the synergies
from the acquisition that we identified in our planning.
Our Research and Development team have been
mainly focused on progressing Project Wave, our novel
respiratory support device, which we believe can disrupt
the market in future years. During the year, we also
launched a range extension of our Patient Warming
System, a CosyTherm2 controller specifically designed
for neonatal intensive care and I’m pleased to report
that this was well received by existing customers and
has opened up new sales opportunities.
1 Earnings before interest, tax, depreciation, amortisation, share based payments and
exceptional items, including the impact of Viomedex and a basis consistent with prior year
which is before applying IFRS 16 - Leases (see page 94 for analysis of the impact of IFRS 16)
2 Underlying EPS –adjusted for exceptional items, deferred tax charge on intangible assets from
the acquisition of Vio Holdings Limited and significant prior year tax amendments - See table
in Operating and financial review on pages 26 to 30
3 Deferred Consideration Shares amounting to £750,000 originally anticipated to be part of the
consideration were not issued as the conditions as set out in the sale and purchase agreement
for the acquisition of Viomedex were, in the opinion of the Board having taken legal advice, not
met. See also note 31 to the Consolidated Financial Statements on Business Combinations
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT Our international markets continue to reward us. At the
beginning of the year we shipped our largest ever order
of Patient Warming Systems with our new AlphaCore5
product to Poland. We also won a large order from Sri
Lanka for our Hypothermia workstations opening up a
new market for us.
Every year I am proud of the way our employees
go about their business, the enthusiasm they show
towards the markets we serve and the dedication they
display towards the patients our products treat is truly
inspiring. Across the Group, whether it is one of our
per diem homecare nurses visiting a sick patient, or
the Quality Engineers ensuring the products we supply
conform to systems, processes and the quality we insist
upon, everyone plays an integral part to our success
and on behalf of the Board, I thank them yet again for
their hard work in delivering an outstanding year for
the Group.
OUTLOOK
Looking forward, our Inspiration Branded products will
create new opportunities for us on an international stage
against a background of ever-increasing new regulations
which will continue to present a challenge. At the same
time, we will explore all ways to maximise the success
of the products we have developed recently, as we look
to gain regulatory clearance for these products in further
target markets.
We remain confident that the new challenges that we
will face as a consequence of Brexit and the transition
to the Medical Device Regulation can be overcome
with minimum disruption and that we will build on our
successes. With one successful acquisition behind us,
we continue to identify further acquisition targets that
will support our growth ambitions in our targeted sector
of Neonatal Intensive Care.
While there is considerable uncertainty in the world over
the impact of Covid-19 on the economy as a whole,
most of the Group’s own branded products are sold to
neonatal intensive care units around the world and their
use is not something that can be reduced by election
or choice. Consequently, demand for the Group’s own
branded products is likely to continue during the period
of the Covid-19 virus outbreak and beyond.
The Group is engaged directly in the provision of critical
care equipment and services to the UK’s NHS, at this
time proactively sourcing ventilators to supply to the
NHS under our framework agreement with NHS Supply
Chain. In addition, we have been providing market
and sector expertise to the ‘Ventilator Challenge UK’
consortium one of the many consortia that took up
the Prime Minister’s challenge of trying to scale the
UK supply of ventilators. We also received a contract
through Cabinet Office to extend our own 24/7 helpline
to include any ‘UK Ventilator Challenge’ ventilators.
We continue to
invest in all three
strategic areas of our
business: organic
growth, disruptive
technologies and
future acquisitions
As a company with a proud tradition of generating
our own cash and being financially self-sufficient, we
have not had the need to utilise the UK Government’s
Coronavirus Job Retention Scheme. We have already
taken many mitigating actions both to support our
customers and employees, the majority of whom are
working from home with full access to the Group’s
systems. For our colleagues who work in production
and logistics roles, where home working is not practical,
we introduced revised shift patterns and strict safety,
hygiene and social distancing measures. With our strong
balance sheet, clear purpose, intensive care expertise
and the commitment, loyalty and determination of our
employees we believe the Group is well placed to not
only trade through this period of uncertainty but to make
a valuable contribution to the response to this pandemic.
As a result of all activities associated with the pandemic,
we expect that the incremental increase in revenues will
at least offset any short-term operational impacts.
We continue to invest in all three strategic areas of our
business: organic growth, disruptive technologies and
future acquisitions. Whilst we are subject to a number
of factors which are outside of our control, particularly
in the supply chain but also the indirect effects of the
wider economic impact of Covid-19, we have started
the current year well and despite the uncertainties we
expect to build on our success of last year and again
achieve strong revenue growth.
Mark Abrahams Chairman
24 April 2020
5
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OUR BUSINESS STRATEGY
WE WILL DELIVER OUR
STRATEGY IN LINE WITH
OUR CORE VALUES
To become a global leader in neonatal
intensive care equipment, targeting
£100 million revenue in the medium term
Organic
Growth
CONTINUED FROM EXISTING
PRODUCTS IN CORE BUSINESS
Disruptive
Technology
FURTHER INVESTMENT IN
TECHNOLOGY AND DEVELOPMENT
£
Inspiration Healthcare has been at the
forefront of neonatal respiratory therapy
providing the latest technology, customer
support and training. The current market
drivers are towards the least invasive
methods of patient care possible.
We announced Project Wave in 2019
- a completely disruptive technology
in the field of non-invasive respiratory
support. We are submitting for a clinical
trial in the UK which aims to mirror
work done by the inventors in the USA.
For more see pages 16 to 19
For more see pages 16 to 19
6
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT We are delighted
to report progress
on all three of the
major elements of
our strategy
7
Strategic
Acquisitions
OF SMALL TO MEDIUM SIZED
ASSETS AND OR TECHNOLOGIES
We are thrilled to have completed our
first acquisition. The Viomedex product
range complements our existing range and
fast tracks us to the next generation of
non-invasive respiratory support with the
FirstBreath nCPAP range.
For more see pages 16 to 19
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OUR BUSINESS STRATEGY CONTINUED
OUR BUSINESS
OUR TECHNOLOGY
At Inspiration Healthcare Group plc, we have always
differentiated ourselves on our ability to supply outcome
improving medical devices in the areas of neonatal
intensive care by understanding the patients’ needs and
identifying technology that will make a difference.
We define our business as being patient focused, slightly
different from customer focused, as we strive to find and
develop products that will make a difference to patient
outcomes. In our business model we encapsulate the
patient focused approach: we think of ourselves with a
well-defined cash generating core business that provides
state-of-the-art medical technology; and an element
of disruptive technologies that could bring about a
paradigm shift to the way patients are treated.
This approach is captured in Our Business Model
schematic on page 15. Where geographically we do not
have a direct sales operation, we choose distribution
partners who have a similar ethos to us, bringing
together their core values with ours.
Many of our staff are customer facing, in sales, marketing,
customer service or Technical Support. By heavily
focusing on our customers’ patients needs we are
instantly aligned with not only the current best practice
in the fields we operate in, but also their future needs.
This year, through the strategic acquisition of Viomedex,
we have started to bring the capability for manufacturing
in-house, helping to improve margins and compliance.
However, we remain committed to manufacturing
being outsourced for some technologies and thus we
can use our energies and resources to find the latest
technologies to develop into new products that will
become the norm of clinical practice in future years.
We see investment in R&D as the future of our business
and this has been steady over the past few years and
we now have a larger team in place to develop
technology that we can take to market worldwide.
Work on Project Wave has mainly been internal as
we have characterised, validated and verified the
design, – an update to Project Wave is provided in
the Chief Executive Officer’s Review on pages 20 to
25. We have concentrated our developments recently
in two key neonatal applications where our recently
launched Inspire rPAP and LifeStart focus on the first
few moments of life, this year adding the CosyTherm2;
the newest component of our Patient Warming System
that can heat up two accessories at one time. Over
the forthcoming years we will continue to invest in
our Neonatal range to improve outcomes of fragile
babies and complement this with enhancing features
of our patient warming offering. With the acquisition of
Viomedex we have increased the number of products
and projects in research and development.
Raising our profile within the research community has
always been something we have done. It often follows
that product ideas come from this extremely well-
informed group of physicians. We have increased our
expertise in this area by recruiting a clinical research
lead who can further move forward our relationship
with Key Opinion Leaders (“KOLs”) and look forward to
developing the clinical trial for Project Wave.
New technology with novel features allows us to
add to the value proposition of our products, helping
differentiate from our competitors and potentially disrupt
the market. We expect to see margin improvements
through new products and increased growth.
8
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT OUR PRODUCT PORTFOLIO
Inspiration Healthcare started in 2003 as a distributor of medical
technology in the UK and Ireland and built a great reputation for
customer service, offering 24/7 customer support with life-saving
technology. Over the years we have moved from being a pure
distributor to becoming a complete medical technology supplier.
In 2013 we took the strategic decision to commence investment
in our own product development1, which opens up significant
opportunities in international markets1 as well as increase the
longevity of the products in our portfolio, that are synergistically
used around the same call point in neonatology. The final piece
of the jigsaw is it will increase our margins1, which in turn will
allow further development and growth of the Group.
The majority of our Inspiration Branded products are used in
the first few days of life, in fact most will be used in the first
6 hours of life. It has been part of our strategy to focus on this
area of clinical need as it is here where the right technology can
have the greatest effect on the patient outcome. This has been
strengthened through the acquisition of Viomedex, adding their
products into our portfolio. It motivates our team to know we
can have a profoundly positive impact on a child’s future before
the first breath of life.
Currently our products can be viewed in distinct therapy areas.
These are set out in more detail on pages 16 to 19.
The majority of our products are single-use disposable
products used in respiratory care, providing life supporting air
and oxygen to the patient. In contrast our ‘thermo-regulating’
devices are all ‘capital equipment’. This has many benefits,
repeatable business combined with large sales and the ability to
leverage on-going support.
In addition to the neonatal products, we have our own brand
of patient warming system for the peri-operative space, the
AlphaCore5, that can be used in other parts of the hospital,
mainly in the operating theatre. There is a natural overlap in
the operating theatres for maternity, where pregnant mothers
can be kept warm, prior to and during a caesarean section on
our AlphaCore5 system. The baby can then be delivered onto
a LifeStart which can benefit from a heated mattress from the
same system controlled either using the AlphaCore5 or the
CosyTherm2.
Product Ownership
Percentage of Revenue
45%
Branded Products £8.1 million
43%
Distributed Products £7.6 million
11%
Technical Support £1.9 million
1 A strategic business objective which is measured in our Key Performance
Indictors (“KPI’s”) set out on page 24.
Excludes other revenue (1%), £0.2 million
9
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OUR BUSINESS STRATEGY CONTINUED
WE ARE PRIVILEGED TO WORK IN MARKETS
THAT INVOLVE TRYING TO SAVE THE LIVES
OF SOME OF THE MOST FRAGILE PATIENTS
Our product strategy continues to build upon that of
previous years; we will actively look for therapeutic
solutions with an element of capital equipment which
we can enhance with planned preventative maintenance
contracts, along with complementary consumable
medical devices. This year not only did we launch the
new CosyTherm2 (a neonatal focused controller for
our patient warming system), but we also acquired
Viomedex, increasing our range of products in the
area of neonatal respiratory care.
All of our products in the UK and Ireland are
supplemented by our Technical Support team.
Being able to offer a comprehensive Technical
Support programme is essential to underpinning our
value proposition of customer service and patient focus.
The wide range of products ensure that our Technical
Support team have all the skills required to support our
customers. This also gives us the flexibility of adding
new products into the portfolio quickly and efficiently.
For our overseas customers, we offer comprehensive
technical training either in country or in the UK to
ensure that the end-user customer experience of our
products is consistent anywhere in the world.
In our product portfolio, we have both Inspiration
Branded and Distributed Products and pages 16 to 19
show how the Inspiration Branded product offering in
different therapy areas complement each other. It is one
of our strategic objectives to increase the proportion of
revenue1 generated from Inspiration Branded products
and progress towards this can be seen in our Key
Performance Indicators (“KPIs”) set out on page 24.
However, it is important to remember there are a
number of benefits of maintaining a strong distribution
portfolio: cash generation, added value to customer
experience, and synergistic products help us compete
with larger players.
Inspiration Branded Products
Inspiration Branded products demonstrate our sector
expertise and allow us broader market access. All of
these products can be used in Neonatal applications,
with the Patient Warming System also being able to
be used more widely in the acute hospital setting.
Here we have a combination of:
Own Intellectual Property:
› Products where we control the intellectual property,
know-how, manufacturing rights and the design.
This gives us control of the product design, the
costs and the route to market.
And
Shared Intellectual Property:
› Products for which we have exclusive rights which
allow us to export the goods into key geographies
for our business and are manufactured under our
Inspiration brand. For these products the design,
IP and regulatory status is owned by a 3rd party
with whom we have a close partnership.
Distributed Products
These are products that do not carry the Inspiration
brand and for which we have an agreed relationship
with the manufacturer to sell their products in certain
territories, mainly UK and Ireland. These products
typically earn lower gross margins than our branded
products but need less capital and typically generate
revenue more quickly. Distributed Products complement
our Inspiration Branded Products in the area of
critical care and the operating theatre and add value
to our customer proposition as we can offer a more
comprehensive product range. We will continue to look
opportunistically to add more Distributed Products into
our product portfolio where they can add value to the
rest of the product range.
Additionally, we distribute a range of infusion technology
products and have been highly successful in the niche
area of parenteral feeding for homecare patients in our
Domestic market. This highly specialised and growing
area has allowed us to gain invaluable experience in a
different environment and we are looking to leverage the
other products in the range.
10
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT OUR MARKETS
Having developed our own products, we can now
tackle more international markets reducing our reliance
on the NHS in the UK and drive our margins higher.
Our product portfolio has allowed the Group to develop
from a domestic player to a global provider, from one
that relies on others (our principals) to one that is
in control of its own destiny. Our journey along this
line will continue without forgetting our roots as a
distributor that can add value by having a ‘best in class’
product portfolio.
Globally, over 15 million babies are born prematurely
every year (approximately 1 in 10 live births) and this
number is rising. Complications from preterm births are
the leading cause of deaths in children under 5 and
are estimated to cause over 1 million deaths in 2015
(Source: World Health Organisation). In the European
Union and USA, a combined 9 million babies are born
and approximately 1 in 10 need help breathing at birth
and approximately 1 in 9 are premature. Not all babies
who are premature need resuscitation and not all
babies who are resuscitated are premature.
Whilst Neonatal Intensive Care is our strategic
focus, it is important to invest in our Patient Warming
System that can be used in NICU and in other areas
of the hospital.
Maintaining normothermia is intrinsic in the treatment
of babies, but having other markets for this technology
allows us to continue to see attractive returns on
investment in further product development.
We believe that the markets remain attractive to a Group
of our size with good growth potential and a customer
base that is prepared to pay for products that will
reduce hospital stays and improve patient outcomes,
as well as the overall patient experience.
We sell directly into the UK and Ireland (“Domestic”)
and partner with established independent distributors in
the rest of the world.
Our product
portfolio has
allowed the
Group to develop
from a domestic
player to a global
provider
Our Domestic sales team can offer some of the
best technology in the world that complement and
supplement each other and our branded products.
A broad product portfolio that allows the sales team
to engage with both KOLs and customers on a regular
basis, is a key competitive advantage. Our products
in the UK and Ireland are supported by 24/7 Clinical
and Technical Support which gives our customers the
confidence to buy new technologies. Buying decisions
can often take more than a year and relationships need
to be built over time based on trust. Our team works
closely with all clinical staff to ensure that the products
we offer meet the needs of their patients.
11
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OUR BUSINESS STRATEGY CONTINUED
AS LOCAL REGULATIONS CHANGE IT IS
IMPORTANT THAT WE HAVE AN EXPERT
TEAM TO HELP WORK WITH DISTRIBUTORS
GLOBAL MARKET REVENUE
In international markets, our distribution partners sell
complementary products to ours following a similar
model to us in our Domestic market. As local regulations
change it is important that we have an expert team
to help work with distributors so that localisation of
products, be that translations of instructions, and other
labels, or any specific regulatory requirements are
met. This is an important blend of skills and expertise
between local distributors, to provide intimate market
knowledge, and our own sales, marketing and regulatory
team to ensure the products are fit for the market and
ensure local compliance.
Percentage of Revenue by Market
6%
66%
21%
4%
3%
Americas
Domestic
Europe
Middle East & Africa
Asia Pacific
12
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT MARKET SECTORS
Inspiration Healthcare has always been able to
identify products that will fulfil a customer need,
improve patient outcomes and bring them to market.
This has led us to be considered a leader in technology
for many of our customers.
Over the last few years we have focused our attention
on products which improve patient outcomes around
the first few days of life and which are able to help the
most fragile of patients; premature and sick babies.
We have also found technology that can cross
into different clinical areas, such as the Patient
Warming System that can be used with premature
babies, keeping them warm when they cannot truly
thermoregulate themselves; as well as in the Operating
Theatre, where the same technology can be used to
keep patients warm before, during and after surgery.
Inspiration Branded and Distributed Products are sold
in three market sectors as described below.
CRITICAL CARE
Our largest business area. The main source of revenue
comes from the Neonatal Intensive Care Units (“NICU”).
Products for premature and sick babies include our
Inspire range (non-invasive respiratory support),
Tecotherm (for thermo-regulation) and LifeStart (for
optimal cord clamping). Additionally, in the UK we
complement these with a range of Distributed Products
including ventilators, incubators and a range of
consumable products. In adult intensive care we have
helped pioneer extra-corporeal ventilation as well as
making available other more novel ventilation products.
OPERATING THEATRE
We have recently re-developed the patient warming
product range to bring it up-to-date and in line with
both the latest safety standards and for surgical
practices. We see this as an area with great potential.
We complement these products in the UK and Ireland
with jet ventilators, cardiac surgery perfusion products
and pain management systems.
HOME HEALTHCARE
This is an important area for our business and allows
us to gain different expertise working alongside the
companies that help support NHS patients in the
community. Our mainstay in this area is products for
parenteral feeding although we also supply products
that are used in other non-critical care areas of the
hospital.
The revenue of each of these sectors can be seen in the
diagram opposite and are discussed in the Operating
and Financial Review set out on pages 26 to 30.
Market Sector
Percentage of Revenue
64%
Critical Care £11.4 million
10%
Operating Theatre £1.7 million
26%
Home Healthcare £4.6 million
13
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OUR BUSINESS STRATEGY CONTINUED
REVENUE STREAMS
Our business model includes revenue streams from
the sale of capital items and consumables as well
as from Technical Support.
Both consumable and Technical Support are recurring
albeit not necessarily contractual. Each of our market
sectors described previously has an element of all three
different revenue streams. Due to 63% of our revenue
in FY2020 being recurring, our business was less
reliant on capital budgets in health systems around the
world which can come under increasing pressure during
economic downturns or uncertain times.
Our growth is enhanced by introducing new and
innovative capital products which in turn generate
further revenue from spares and after-market support.
In particular, our product range includes:
Our growth is
enhanced by
introducing new
and innovative
capital products
which in turn
generate further
revenue
CAPITAL EQUIPMENT
CONSUMABLE MEDICAL DEVICES
Typically, a piece of capital equipment will cost in
excess of £1,000 and used in a hospital for more than
2 years. It would be used on many patients during that
time with appropriate cleaning and disinfection between
use, as well as planned preventative maintenance. Our
capital range includes our own brand of the CosyTherm2
and AlphaCore5 Patient Warming Systems, Tecotherm,
Unique+ CFM and LifeStart. These products are
complemented in the UK and Ireland by a range of
Distributed Products including ventilators and infusion
pumps.
Consumable products are designed for single use by
one patient. Sometimes they can stay with a patient
for a few minutes, sometimes longer than a week,
but are never used from patient to patient and are not
reprocessed. Our own range of consumables is now
enhanced by products from the Viomedex acquisition,
supplementing the Inspire rPAP and the Inspire nCPAP,
with FirstBreath nCPAP, circuits as well as consumable
items that supplement capital brands mentioned above.
We distribute a range of other neonatal consumables
as well as disposables that link directly to our capital
range. This is most obvious in the Micrel parenteral
feeding range where a new consumable is needed every
time the patient uses the pump.
TECHNICAL SUPPORT
A range of service options from planned preventative
maintenance, to ad-hoc repairs along with the selling of
spare parts and training courses.
14
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT OUR BUSINESS MODEL
THROUGH OUR CORE BUSINESS WE HAVE
ALWAYS SELF-FUNDED OUR NEW GROWTH
AND INVESTMENT IN NOVEL IDEAS
OUR BUSINESS MODEL
Our business can be seen as two linked but discrete
parts: our core business activity that is profitable,
generates cash and sells value-added medical devices
in over 50 countries and our disruptive technology
activities that find and develop products we expect to
be state-of-the-art tomorrow and will change practice.
Through our core business we have always self-
funded our new growth and investment in novel ideas.
Maintaining this approach allows us to be entrepreneurial
towards early stage ideas. As and when the disruptive
technologies are turned into products, we launch these
through our well-developed route to market.
REVENUE
GENERATING CORE BUSINESS
PRE-REVENUE
DISRUPTIVE TECHNOLOGY
KEY ACTIVITIES
KEY SECTORS
Sales and Marketing
Critical Care
Product Development
Operating Theatre
Operations
Home Healthcare
KEY ACTIVITIES
KEY SECTORS
Identifying innovative
product opportunities
Research & Development
Investing in Clinical Research
Critical Care
REVENUE GENERATED FROM
INVESTMENT EXAMPLES
Inspiration
Branded
Products
(Globally)
Distributed
Products
(Limited Geographies)
Technical
Support
To become a
global leader
in neonatal
intensive
care
Inspire rPAP
(recently launched)
Facilitating Optimal
Cord Clamping/
bedside resuscitation
(recently launched)
Project Wave
(in development)
LifeStartTM
OUTPUTS
Cash generation
Profit
Product enhancements
& range extension
Market development
OUTPUTS
Potentially significant returns on investment
Groundbreaking products
Competitive advantage
Differentiated product portfolio
15
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information THERAPY AREAS
INSPIRATION HEALTHCARE HAS BEEN AT THE
FOREFRONT OF NEONATAL RESPIRATORY
THERAPY PROVIDING THE LATEST TECHNOLOGY
16
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT RESPIRATORY
Market Size* 2019-2027 US$1.4bn - $2.2bn
ORGANIC
Revenue growth
DISRUPTIVE
Investment
ACQUISITION
Strategic growth
KEY PRODUCTS
Inspire rPAP
Inspire nCPAP
KEY PRODUCTS
Project Wave
KEY PRODUCTS**
FirstBreath nCPAP
Breathing Circuits
Accessories
Inspire rPAP patent licenced
to Inspiration Healthcare
Wave patent granted and licenced
to Inspiration Healthcare
FirstBreath nCPAP
patent granted
* Credance Research June 2019 ** Acquisition of Viomedex
ORGANIC GROWTH
DISRUPTIVE - Project Wave
Inspiration Healthcare has been at the forefront of
neonatal respiratory therapy providing the latest
technology, customer support and training. The current
market drivers are towards the least invasive methods
of patient care possible. Inspiration Healthcare has
pioneered products that target these patient benefits
with unique products such as the Inspire rPAP that
delivers pre-term infants the most advanced respiratory
therapy available. A multi-national study, CORSAD
(Comparison of Respiratory Support After Delivery
on infants born before 28 weeks gestational age)
aims to show the reduced frequency of delivery room
intubations with Inspire rPAP technology. Intubation of
pre-term babies leads to admission into Intensive Care
whereas non-invasive respiratory support may result in
admission into High Dependency Units - a considerable
cost saving and reduce likelihood to incur laryngeal
injury and other serious complications.
We announced Project Wave in 2019 - a completely
disruptive technology in the field of non-invasive
respiratory support. We are submitting for a clinical
trial in the UK which aims to mirror work done by
the inventors in the USA. A small pilot study of
approx 20 babies should be concluded early in 2021
ready for CE marking the device. The first indication
will be around supporting the infant suffering from
Apnoea or Prematurity/Intermittent Hypoxia - when
breathing stops, even for a short while, the oxygen
going to the brain is reduced and can lead to poor
neurodevelopmental outcomes.
ACQUISITION - Viomedex
We are thrilled to have completed our first acquisition.
The Viomedex product range complements our existing
range and fast tracks us to the next generation of
non-invasive respiratory support with the FirstBreath
nCPAP range. This novel concept builds on existing
proven technology but cleverly reduces the bulk of the
tubing and allows easier fixation to the fragile premature
baby. With a range of breathing circuits and other
accessories, the Viomedex range complements and
supplements the existing Inspiration range allowing us
to provide a more complete package to our customers.
17
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information THERAPY AREAS
PRODUCT DEVELOPMENT IN
CORE AREAS OF NEONATAL AND
THERMOREGULATION
18
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT THERMOREGULATION
Market Size* 2019-2026 US$2.6bn - $4.2bn
ORGANIC
Revenue growth
DISRUPTIVE
Investment
ACQUISITION
Strategic growth
KEY PRODUCTS
AlphaCore5
CosyTherm2
Tecotherm Neo
KEY PRODUCTS
LifeStartTM
KEY PRODUCTS
Research
opportunities
AlphaCore5/CosyTherm2
use in-house patented technology
Further development underway
to help disrupt
Targets identified
* Grand View Research June 2019
ORGANIC GROWTH - COSYTHERM2
Inspiration Healthcare has continued product development
in core areas of neonatal and Thermoregulation through
the launch of CosyTherm2 controller in October 2019, to
supplement a range of mattresses for different size cots
for keeping babies warm. The CosyTherm2 system works
with the patented, flexible conductive polymer technology
generating warmth over a large area by a special layer of
fabric made of soft material. The CosyTherm2 allows for
two heating mattresses to be controlled at the same time.
We expect to see further growth in both the CosyTherm2
in the Neonatal sector and the AlphaCore5 in the
operating theatre sector.
Operating Room Thermoregulation
The AlphaCore5 has had a very successful year growing
sales and opportunities in the UK and International
markets. In particular Poland placed a large order for over
500 AlphaCore5 patient warming systems with paediatric
mattresses, for hospitals all over Poland. The Great
Orchestra of Christmas Charity raises funds for medical
equipment with a particular focus on children. This large
installed base provides a solid platform from which to
grow as we expand the customer base with additional
products.
DISRUPTIVE - LIFESTART TM
Cutting the umbilical cord immediately after the birth has
been routine practice for 50+ years but more recently
research is showing that may not be optimal for every baby.
Following the birth of the baby the umbilical cord continues
to pulsate and transfer blood, oxygen and stem cells until
the baby has transitioned to life outside the uterus and
becomes stable. By cutting the cord quickly the baby may
miss out on a large amount of blood. This has led to recent
changes in guidelines and practice towards delaying clamping.
Waiting until the cord has stopped pulsating and becomes
white is becoming increasingly normal practice in births
where there is not medical reason to speed things up. NICE
guidelines recommend that cord clamping is delayed for at
least 1-5 minutes in all babies unless other clinical factors
suggest otherwise. Delayed clamping of the cord provides for
increased iron levels even up to six months old which helps
growth and in both physical and emotional development,
plus benefits to the immune system. Over the past 12 months
Inspiration Healthcare has seen a significant increase and
focus in this practice which is where LifeStart provides the
optimal platform for the baby providing a warming mattress
with CosyTherm2, bedside resuscitation with Inspire rPAP
when needed, with facilities for mounting other medical
devices as required by clinicians.
ACQUISITION
The Group remains vigilant in its approach to
acquisitions in this sector and will continue to monitor
and discuss opportunities that will add shareholder
value to the Group.
19
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information CHIEF EXECUTIVE OFFICER’S REVIEW
DURING FY2020 SEVERAL OF OUR KEY
PERFORMANCE MEASURES SHOWED
IMPROVEMENTS AND EVIDENCED MOVEMENT
TOWARDS ADVANCING OUR STRATEGIC OBJECTIVES
FY2020 has been a very successful year during which
we not only achieved record revenue growth of 15%
(12% on a like-for-like basis), but also completed our
first acquisition of Vio Holdings Ltd (“Viomedex”) a key
strategic supplier. We also launched a new own brand
neonatal controller in our Patient Warming System and
continued to invest in Project Wave.
Our continuing track record of successfully growing
our international sales was recognised this year by
being awarded the highly prestigious Queen’s Award
for Enterprise: International Trade. The award was
given to us for achieving outstanding growth over six
years and a fitting reward for the way the Company
has developed. We were honoured to have the award
presented to us by the Lord Lieutenant for West Sussex
in the Summer.
The acquisition of Viomedex in September 2019 is a
key step in our strategy to becoming a World Leader
in Neonatal Intensive Care. We already have a strong
platform of our own branded products that we sell
internationally and acquiring further products as well
as expanding our capability to drive out the cost of
goods in key areas is important for our growth. The
FirstBreathTM nCPAP range will be rolled out to our
distributors as registrations are completed in key
countries and we look forward to driving sales of this
important product line.
We now have the capability to manufacture and
assemble certain parts of our own product range
allowing us to retain manufacturing margins and
compete in markets where it can be challenging due
to lower prices. This will help us grow our brand and
support our distributors whilst we bring in new
products and add value to the customer. We will also
align our R&D processes with Viomedex manufacturing
processes to be able to bring new products to market
more quickly.
Viomedex have been left in an unusual situation from
a regulatory perspective. Prior to our acquisition,
Viomedex’s notified body, LRQA, had unexpectedly
informed the company (like it had many others)
that they would no longer be a notified body for medical
devices. This effectively meant Viomedex
were ‘orphaned’ and, as such, their regulatory
compliance came under the control of the MHRA
(Medicines and Healthcare related products
Regulatory Agency).
Our record of successfully growing our
international sales was recognised by
being awarded the Queen’s Award for
Enterprise: International Trade
Neil Campbell
Chief Executive
20
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT Prior to the acquisition, Viomedex management had
chosen a path to transfer the LRQA certificates to a
new notified body, ECM (of Italy). The process was
expected to be completed before the 31st January and
in any case before the industry transferred to the new
Medical Device Regulations (originally scheduled for
26 May 2020). Viomedex certificates are supported by
the MHRA until September 2020 (subject to conditions
being satisfied) which gives us breathing room due
to the postponement of the introduction of the MDR
caused by Covid-19. Our team are working diligently
to transfer the certificates as quickly as possible using
video conferencing and remote working with ECM. We
hope that there are no further delays to getting the
certificates transferred.
As well as the strategic fit, the acquisition of Viomedex
also brings an additional competence to the Group, that
of assembly of single use medical devices. This is an
important new capability as we grow and gives us the
in-house assembly of new devices that are in our current
R&D portfolio, which will help us to maintain margins and
deliver the projects more quickly from R&D into production.
Brexit has been an interesting sub-plot to our year.
We were well engaged with plans from the Department
of Health and Social Care (“DHSC”) to best ensure
supply lines at the borders for medical equipment would
not be affected. Additionally, we, like so many other
medical technology companies at the DHSC’s request,
built up stock levels for the twice impending cliff-edge
‘No Deal’ scenario to ensure that UK hospitals would
still have access to our technology. This put pressure on
our supply chain but did not cause undue stress on our
balance sheet. Since a deal was struck we have partially
unwound our contingency stock position.
We are glad that there is now some clarity on Brexit
and we look forward to understanding the changes that
will come out of the negotiations with the EU.
World trade was also affected by the US – China
‘trade war’ where increases on tariffs were exchanged.
Whilst this did not affect us directly in terms of product
lines, it clearly affected the confidence in the world
economy as a whole, and just when things started to
improve, problems associated with Covid-19 have now
started to appear. We have set out in a new section of
our Risks and Uncertainties (on pages 31 to 36) the
potential impacts of Covid-19 and the mitigating actions
that we have taken.
We have launched
the CosyTherm2
during the year,
a range extension
to our patient
warming system
Despite these uncertainties during the year, we were
pleased to be able to raise funds for the acquisition
of Viomedex in August, with the added backdrop of
investment concerns in the micro-cap sector on AIM due
to the fall-out of the Woodford fund being suspended.
In the event, we were substantially oversubscribed and
as a result the Board agreed to strengthen the cash on
our balance sheet to be able to plan for investment and
further growth in the Group.
R&D
Project Wave, our disruptive technology respiratory
device, saw much development work being done in the
background, preparing submission for a clinical trial
this year. We now have in place a Clinical Risk and
Research Lead who has been leading the compliance
area for the clinical trial of this new device. This area
of regulation will become increasingly more important
in medical devices going forward and we are now well
positioned to build on these skills. The trial will be
conducted in the UK and we expect to have to enrol
approximately 20 babies. It aims to show the device
we have developed performs in a similar way to the
original device from the inventors in California in terms
of patient outcome. Many months have been spent
characterising components and testing prototypes
for the submission to the Medicines and Healthcare
products Regulatory Agency (“MHRA”) in the UK. We
expect the first patient to be recruited to the trial later
in the summer of 2020 and hopefully the last patient
recruited by the end of the year.
21
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
It is also noteworthy that the US Patent Office have
granted the patent for intellectual property that we are
using under licence to develop Project Wave.
We have also launched the CosyTherm2 during the
year, a range extension to our patient warming system,
and are developing further mattresses and pads for the
system for launch later in 2020.
QUALITY AND REGULATORY
We often talk about the changes in Quality Assurance
and Regulatory Affairs in the medical technology
industry. In 2020 we were due to see the end of the
Medical Device Directive (“MDD”) on May 25 and
from that day, all new medical devices and significant
changes to existing devices would have had to comply
to the Medical Device Regulations (“MDR”). At the end
of March, there were only 12 notified bodies who have
the accreditation to certify medical devices under the
new regulation and it is re-assuring to know that TÜV
Süd, the notified body of Inspiration Healthcare Ltd, has
this accreditation. Due to Covid-19 the implementation
of the MDR has been postponed for 12 months and will
now be applicable from 26 May 2021.
As part of our strategy to prepare for the MDR
Inspiration Healthcare Limited has extended its CE
certificates until 2024 under the MDD. Our team are
now working through the needs of each of our key
products to ensure they are certified by the time our
certificates expire in 2024. Although this is not urgent,
we will need to plan investment and work with our
notified body to ensure certification is in line with our
business needs. We are also investigating how best to
get products into new markets. There are subtle but
significant differences between compliance requirements
in different areas of the world.
SALES AND MARKETING
Our Sales and Marketing structure has been reviewed
with changes being made to align our product
management team with clinical applications to deliver
the added value of training throughout the sales team
and the end users in hospitals. We have invested in
a remote learning system, an online tool that allows
remote training, ideal for our distributors and customers,
and ensures compliance under the new MDR. We plan
to further invest in sales and marketing during the
year to maintain our growth going forward especially
around the international aspect of our business. Health
economics is becoming increasingly more important and
we are engaging with groups to see whether it would
be beneficial to undertake this work to aid our product
value proposition.
It was pleasing to ship the large order for patient
warming devices to Poland at the beginning of the year.
It was also good to ship a large order of Tecotherm and
Unique+ CFM, combining them into an easy to use
workstation for the treatment of perinatal asphyxia,
to Sri Lanka towards the end of the year, opening up
a new market for us. Not only is this an exciting new
territory for us which shows the growing reach of our
products, but also Sri Lanka has never had a national
programme for treating this potentially devastating
condition and it is gratifying to see our contribution to
the development of neonatal intensive care medicine
in developing economies. Opening new markets is
always difficult, understanding the culture, the training
needs, the regulatory compliance and of course the risks
around getting paid for a large order. We were therefore
delighted to be able to make this happen in Sri Lanka
and look forward to building upon this success in the
future.
In our Domestic market the majority of our revenue
comes from Distributed Products. Our strategy has
always been to have a robust and varied product
portfolio without the reliance on any one principal or
market segment. This year our strategy proved to be
highly effective – we saw unprecedented demand for the
range of parenteral feeding products from Micrel. One
of the largest UK homecare providers, who look after
patients who need parenteral feeding, had a problem in
supplying the ‘food’ to patients due to regulatory issues
at one of their factories. The anxiety for patients worried
about maintaining their nutritional intake was widely
reported in the UK national media. Our team worked
with the DHSC, along with Micrel, to find a solution
that allowed patients to get the nutrition they needed.
Conversely, products from another of our principals
suffered due to regulatory issues and although we
built a healthy order book, delivery to customers was
down on previous years. These factors combined led
to a much higher revenue being reported in our Home
Healthcare sector offsetting a constraint on revenue
growth in the Critical Care sector.
22
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT Our Technical Support team was busy as well, with
revenues up again this year. We have seen an upturn
in training requirements for our overseas distribution
partners especially for the Tecotherm. Product
maintenance and calibration is becoming much more
high profile for customers especially under the MDR
and we were busy training customers from Europe as
well as Sri Lanka, Pakistan, Saudi Arabia and Mexico to
name a few.
LOGISTICS AND OPERATIONS
Our logistics and operations team have continued to
deliver an exceptional performance from our facility in
Earl Shilton, Leicestershire. The efficiencies made over
the last 18 months in scheduling stock and turning
around a variety of capital and consumable goods whilst
being able to support our 24/7 customer service has
been remarkable. We continue to drive this aspect of our
business as we look to complete a review of our future
supply chain needs.
ACQUISITIONS
The Board have previously stated its strategic ambition
to acquire synergistic companies to expand the Group
further and we were delighted to successfully complete
our first acquisition – Viomedex in September 2019.
A number of other targets were investigated at differing
levels of interest throughout the year. We will continue
to monitor the situation with these targets along with
others on our horizon and strive to expand the Group
through acquisition within the next 12 to 18 months.
NEUROPROTEXEON LTD (NPXe)
In December, NPXe filed for protection against its
creditors in the USA (‘Chapter 11’) whilst it embarked
on a sale of the company or its assets. Inspiration
Healthcare Group plc owns 8.6% of the company on
a fully diluted basis which was previously valued at
£111,000 on our balance sheet. The outcome of any
sale will be reported by NPXe and Inspiration Healthcare
Group plc will keep its shareholders informed once
the outcome is known. Given the circumstances, the
Group has fully provided against this investment during
the year.
The Board have
previously stated its
strategic ambition to
acquire synergistic
companies to
expand the Group
DIVIDEND
The Board understand the need to balance the funding
required to achieve outstanding levels of growth with the
desires of shareholders to receive a dividend. Therefore,
the Board will propose a dividend policy during the year.
SHARESAVE SCHEME
We are pleased to have implemented the Inspiration
Healthcare Group plc ShareSave Scheme from March
2020 and that 49% of eligible employees have joined
in the first year. The scheme, administered through
Yorkshire Building Society, allows employees to have
the option of buying shares in the Company after saving
over a three-year period, giving them the opportunity to
benefit from the contribution they make to the Group’s
growth. We are extremely pleased to be able to offer this
initiative to our staff. A total of 150,529 options have
been issued as a result of the take up of the scheme.
The Options are exercisable after three years at an
exercise price of 55 pence, being a 20% discount to the
closing price on 3 March 2020.
23
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
GROWTH KEY PERFORMANCE INDICATORS (“KPIS”)
During FY2020 several of our key performance measures (set out below) showed improvements and evidenced
movement towards advancing our strategic objectives. It is pleasing to report that Inspiration Branded revenue grew by
12% over the previous year. Additionally, we were delighted that newly launched products 5 contributed 15% of total
revenues (FY2019: 9%). The percentage of revenue generated from Inspiration Branded products3 reduced from 46% to
45% largely as a result of the strong performance from the distributed Micrel product range, resulting in the percentage
of Distributed Products increasing from 41% to 43%.
Gross margins increased year-on-year from 45.5% to 48.2% in line with our objective, including the benefit of the
acquisition of Viomedex. Together with tight management of cash-based overheads this benefit has flowed through to
EBITDA8 margin which improved from 11% in FY2019 to 12%.
The KPIs below have been chosen by the Directors as those that measure the key elements of the Group’s performance
towards the achievement of the Group’s strategy. See Our Business Strategy section on pages 6 to 14 for more information.
Revenue growth %1
Proportion of revenue from international markets %2
Revenue from Inspiration Branded products %3
Growth in revenue from Inspiration Branded products %4
Revenue generated from products developed %5
Gross margin %6
R&D % of Revenue7
EBITDA margin %8
Operating margin %9
Underlying diluted EPS10
FY2020
FY2019
15%
34%
45%
12%
15%
48%
4%
12%
9%
3.6p
0%
35%
46%
3%
9%
46%
4%
11%
8%
3.4p
Definitions
1 Year-on-year growth in reported revenue as per Consolidated Income Statement
2 The proportion of total revenue generated from international markets, which excludes Ireland as we class Ireland as a domestic market. Our aim is to increase
revenue generated from international markets, however this year the domestic market performed very well with the benefit of strong Micrel product revenues as
reported in the Operational and Financial Review on pages 26 to 30
3 The proportion of total revenue generated from Inspiration Branded products. This includes products where we own the intellectual property or we have exclusive
worldwide rights to sell and are manufactured under the Inspiration or the Viomedex brands. Our aim is to increase the proportion of revenue generated from such
products
4 Year-on-year growth in Inspiration Branded products. From the date of acquisition in FY2020, this also includes revenues generated from Viomedex branded
products
5 The proportion of total revenue from products that we have developed and released to market in the last three financial years. Our aim is to increase the proportion
of such revenue
6 Gross profit expressed as a percentage of total revenue. As a result of increasing the revenue measures above, as well as the benefit of the Viomedex acquisition,
we expect to increase gross margin
7 Total spend on research and development, whether capitalised under development costs or expensed to the Consolidated Income Statement, as a percentage of
total revenue. This measure is an indicator of the cash committed to research and development which is an important aspect of our strategy
8 Earnings before interest, tax, depreciation, amortisation, share based payments and exceptional items as a percentage of total revenue. Reported figures above
for both financial years are stated before the impact of IFRS 16 - Leases, which was adopted in the year-ended 31 January 2020 for the first time. Including
the impact of IFRS 16 would increase EBITDA margin to 13% for this year. EBITDA is considered by the Board to be a useful, alternative performance measure,
reflecting the operational profitability of the business. For investors it is especially useful for comparing companies with different capital investment, debt and
tax profiles. Our aim is to increase EBITDA margin over time. See Operating and Financial Review on pages 26 to 30 for a reconciliation of IFRS Operating Profit
to EBITDA
9 Operating profit before exceptional items as a percentage of total revenue. Our aim is to increase operating margin over time
10 Underlying diluted EPS is measured before exceptional items, tax charge on intangible assets from the acquisition of Vio Holdings Limited and significant prior year
tax amendments. See note 8 to the Consolidated Financial Statements for more information. This measure is used as part of the determination of whether share
options issued under the EMI scheme can vest. See the Directors’ Remuneration Report (on pages 50 to 53) for more information
24
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT
GOING CONCERN
The Group provides critical care equipment to the
NHS, to NHS suppliers and to distributors who
provide the equipment to other healthcare systems
internationally. With a focus on neonatal intensive care
the use of the Group’s products is not something that
can be reduced by election or choice and consequently
demand for the Group’s products is likely to continue or
increase in a situation like the Covid-19 virus outbreak.
Although the Group has no information to suggest such
a scenario might occur the Group have modelled a
significant downside scenario based on the main risks
to the Group associated with Covid-19 – as identified
in the Risks and Uncertainties on pages 31 to 36 of
this Annual Report.
Based on the above, available funds of £4.5 million
at 31 March 2020 and the ability to implement some
mitigating actions identified by the Board in response
to a significant Covid-19 trading downturn, the Board
believes that the Group has sufficient liquidity to
meet obligations as they fall due for at least 12 months
from 24 April 2020. Consequently, the Consolidated
Financial Statements have been prepared on a going
concern basis.
FINALLY
I would like to add my welcome to our new colleagues
from Viomedex and to thank all my colleagues across
the Group for making this another record-breaking year.
I would also like to thank our distribution partners and
suppliers for their continued support as we build a
world-leading company in partnership with them.
I am confident that our approach in developing novel
technology such as Project Wave, acquiring small to
medium size businesses and the strong organic growth
of our core business will continue to add value to our
Group over the coming years.
Neil Campbell Chief Executive Officer
24 April 2020
Gross margins
increased year-on-
year from 45.5%
to 48.2% in line
with our objective,
including the benefit
of the acquisition of
Viomedex
25
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OPERATING AND FINANCIAL REVIEW
£17.8 MILLION GROUP
REVENUE EXCEEDED OUR
ORIGINAL FORECAST
On a like-for-like basis Group
revenue grew by 12%
Mike Briant
Chief Financial Officer
26
Group revenue for the year-ended 31 January 2020
(“FY2020”) increased 15% to £17.8 million (FY2019:
£15.5 million) with the inclusion of Viomedex Limited,
the subsidiary of Vio Holdings Limited which the Group
acquired on 24 September 2019. On a like-for-like basis
excluding Viomedex, Group revenue grew by 12%.
EBITDA1 increased by 28% to £2.1 million (FY2019:
£1.65 million). Operating profit and operating margin,
before exceptional items, were £1.5 million (FY2019:
£1.2 million) and 8.6% (FY2019: 7.8%), respectively.
In this review both EBITDA1 and operating profit are
stated before the impact of adopting IFRS 16 – Leases,
which has been adopted for the first time in FY2020,
for greater ease of comparison to prior year (see section
on IFRS 16 opposite).
Profit after tax was £0.7 million, lower than FY2019
(£1.1 million) due principally to exceptional items of
£0.4 million and an increased deferred tax charge.
Diluted EPS was 2.2p per share (FY2019: 3.6p).
Underlying diluted EPS2 increased by 6% to 3.6p per
share (FY2019: 3.4p).
ACQUISITION OF VIO HOLDINGS LIMITED
The acquisition of Vio Holdings Limited and its
subsidiary Viomedex Limited (together “Viomedex”)
was completed on 24 September 2019. The acquired
entities have been consolidated into the Group
Financial Statements from the date of acquisition to
the year-ended 31 January 2020 the impact of which
is deemed immaterial to the Group. See note 31 of
the Consolidated Financial Statements for further
information.
The consideration was £3.25 million, split between
£3.0 million cash and £0.25 million in shares issued
to the vendors. The acquisition was funded through a
share placement raising £4.25 million. After costs the
net additional cash raised of £0.9 million will be
used to strengthen the Company’s balance sheet to
support the continued growth of the Group’s business.
Deferred Consideration Shares amounting to £750,000
originally anticipated to be part of the consideration
were not issued as the conditions as set out in the
sale and purchase agreement were, in the opinion of
the Board having taken legal advice, not met. See also
note 31 of the Consolidated Financial Statements on
Business Combinations.
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT IMPACT OF IFRS 16
IFRS 16 – Leases has been adopted for the first
time this financial year. The new standard has been
implemented using the modified retrospective approach
which does not require restatement of comparative
figures. The adoption impacts operating profit, profit
attributable to owners of the parent company, EBITDA1,
non-current assets and both current and non-current
liabilities. EBITDA and Operating Profit (before
exceptional items) after adoption of IFRS 16 were
£2.3 million and £1.5 million, respectively. See the
table in this review for a reconciliation of these figures
pre and post adoption of IFRS 16. See also note 32
of the Consolidated Financial Statements for further
information.
REVENUE
At £17.8 million (FY2019: £15.5 million), Group
revenue exceeded our original forecast, an increase
of 15% on prior year with the inclusion of Viomedex.
Organic revenue growth was 12% on a like-for-like
basis. As in prior years, revenues were weighted
towards the second half (“H2”) which accounted for
£9.3 million (FY2019: £8.1 million) or 54% of full year
revenues on a like-for-like basis.
Our international revenue grew by 12.3% to £6.0
million, with particularly strong growth in Europe (up
29%) due mainly to increased sales of our AlphaCore5
Patient Warming System, primarily into the neonatal
critical care market. Our continued track record
for international growth was recognised during the
year through being awarded the Queen’s Award for
Enterprise: International Trade.
Domestic revenue increased by 16%, largely due to an
increase in Home Healthcare products – see overleaf for
more information.
Revenue from Inspiration Branded products increased
12% year-on-year to £8.1m (FY2019: £7.2m) and
accounted for 45% of revenue (FY2019: 46%). Revenue
from new products launched in the last 3 years
accounted for 15% of revenue (FY2019: 9%). Revenue
from our Distributed Products was up by 19% to 7.6m
and accounted for 43% of revenue. The growth was
mainly as a result of strong performance in the Micrel
Distributed Product range.
Our international
revenue grew by
12.3% to £6.0
million, with
particularly strong
growth in Europe
(up 29%)
Percentage of revenue for year ending 2020 (2019)
45%
43%
11%
Inspiration Branded
Products
(46%)
Distributed
Products
(41%)
Technical
Support
(11%)
Excludes other revenue of 1%
Growth during 2020
Inspiration Branded Products
Distributed Products
Technical Support
12%
19%
15%
27
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information OPERATING AND FINANCIAL REVIEW CONTINUED
MARKET SECTORS
Critical Care £11.4 million, +7% year-on-year
Percentage of revenue for year ending 2020 (2019)
Our Critical Care sector increased by 7%, largely due
to the increased sales of our AlphaCore5 Patient
Warming System placed into the neonatal critical
care market as mentioned previously. Building on the
success of the Patient Warming System, the Cosytherm2
controller was launched which is specifically designed
for neonatal care.
Operating Theatre £1.7 million, +1% year-on-year
Revenue from operating theatre is in line with prior year.
Home Healthcare £4.6 million, +50% year-on-year
Growth in revenue of our Distributed Product range
of parenteral feeding products was particularly strong
during the year. We were able to capitalise on certain
opportunities in the market during the year which are
outlined below.
The Home Healthcare sector benefited from
unprecedented demand for parenteral feeding products
from Micrel. One of the largest UK homecare providers
who look after patients had a problem in supplying the
‘food’ due to regulatory issues. Working with Micrel
a solution was found that allowed patients to get the
nutrition they needed and led to a significant increase
in revenues in this sector. Conversely, products from
another of our principals suffered due to regulatory
issues and this limited growth in both our Critical Care
and Operating Theatre sectors.
GROSS PROFIT
Gross Profit of £8.6 million (FY2019: £7.0 million)
increased by 22% due to both a year-on-year increase
in revenue and an improved gross margin which
increased from 45.5% to 48.2%. Gross margins
primarily benefited from a combination of a year-on-
year increase in service revenue and £0.4 million from
the acquisition of Viomedex, eliminating manufacturer
margins on a number of Group products.
ADMINISTRATIVE EXPENSES
Administrative expenses including exceptional items
amounted to £7.4 million, £7.1 million excluding
exceptional items (FY2019: £5.8 million). The year-on-
year increase is primarily due a number of factors being:
the full year impact of the prior year investment in the
management team, increased investment in headcount
during the year, a year-on-year increase in both
commission and bonus expense related to the growth
in both revenue and operating profit, as well as £0.2
million from the inclusion of Viomedex.
28
64%
Critical
Care
10%
26%
Operating
Theatre
Home
Healthcare
Market Sector
Revenue £m
Growth %
Critical Care
Operating Theatre
Home Healthcare
11.4
1.7
4.6
7%
1%
50%
EXCEPTIONAL ITEMS
The Group presents certain items as exceptional items
that are non-recurring and significant. These relate
to items which, in the Board’s judgement, need to be
disclosed by virtue of their size and incidence in order to
obtain a more meaningful understanding of the financial
information.
The exceptional items reported for FY2020, rounding
to £0.3 million, primarily consist of £0.2 million
relating to the acquisition of Viomedex and £0.1 million
relating to the impairment of the Group’s investment
in Neuroprotexeon Limited. See notes 6 and 14 of
the Consolidated Financial Statements for further
information.
EBITDA1
EBITDA1 amounted to £2.1 million, an increase of £0.5
million over the prior year mainly due to increased
gross profit. EBITDA1 margin improved from 10.7% to
11.9%. EBITDA1 as stated is before the impact of IFRS
16 - Leases which has been adopted for the first time.
EBITDA amounted to £2.27 million including the impact
of IFRS 16 - Leases, see note 32 of the Consolidated
Financial Statements for further information on the
impact of IFRS 16 – Leases. The table opposite shows
a full reconciliation from reported operating profit to
EBITDA, pre and post the impact of IFRS 16.
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT 1EBITDA Reconciliation
Reconciliation from
operating profit
Operating profit per Income
Statement
Exclude exceptional items
Operating profit before
exceptional items
Add back:
FY2020
£000’s
FY2019
£000’s
1,138
1,213
383
–
1,521
1,213
Operating Profit
before exceptional
items increased
by £0.3 million to
£1.5 million
Depreciation and amortisation
463
364
Impairment of intangible assets
Share based payments
Less: IFRS 16 impact on
operating profit
EBITDA pre IFRS 16 -
Lease adjustments
IFRS 16 - Reclassification of
rental payments
IFRS 16 - Release of rent
provision
EBITDA post IFRS 16 -
Lease adjustments
72
62
5
–
71
–
2,113
1,648
148
11
–
–
2,272
1,648
OPERATING PROFIT
Operating profit before exceptional items increased by
£0.3 million to £1.5 million, with the higher year-on-
year increase in gross profit offsetting the increase in
operating expenses.
TAXATION
The Group has recorded a tax charge of £393,000
(FY2019: £116,000), including a deferred tax charge of
£117,000 relating to intangible assets recognised on the
acquisition of Viomedex in accordance with IAS12. The
effective tax rate in FY2020 was 35% due primarily to
deferred tax and impairments which are not deductible
from taxable profits. For more detail see note 8 of the
Consolidated Financial Statements.
PROFIT AFTER TAX
Profit after tax decreased by £0.4 million to £0.7 million
(FY2019: £1.1 million) for reasons mentioned above.
Since its acquisition Viomedex contributed £0.1 million
to the Group’s profit after tax, see note 31.
EARNINGS PER SHARE
Basic EPS and diluted EPS (allowing for the weighted
average of shares issued in relation to the acquisition
of Viomedex, plus share options outstanding) was 2.2p
per share (FY2019: 3.6p). Underlying diluted EPS2 was
3.6p per share, up 6% on FY2019 3.4p. The year-on-
year increase is due mainly to the improved growth in
operating profit as set out above.
2 EPS Reconciliation from Diluted EPS
FY2020
pence
FY2019
pence
Diluted Earnings per share
2.15
3.56
Adjust for:
Significant prior year tax
amendments
Exceptional items
Deferred tax charge on intangible
assets acquired from the
acquisition of Vio Holdings
Limited
–
1.13
0.34
(0.16)
–
–
Underlying diluted earnings
per share
3.62
3.40
29
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information
OPERATING AND FINANCIAL REVIEW CONTINUED
CASH FLOW
Cash and cash equivalents as at 31 January 2020
amounted to £4.5 million, an increase of £2.0 million
over the year. Net cash generated from operating activities
was £1.5 million, £0.6 million higher than in FY2019.
Investing activities totalled £3.4 million (FY2019: £0.4
million), of which £3 million related to the acquisition
of Viomedex. The remaining £0.4 million consisting of
capitalised development expenditure and the purchase
of property, plant and equipment. Investing activities
are offset by financing activities of £3.8 million (net of
direct share issue costs) relating mainly to the proceeds
obtained from the Group’s fund raise in relation to the
acquisition of Viomedex.
NET ASSETS
The value of non-current assets as 31 January 2020
totalled £4.7 million (FY2019: £1.8 million). The year-
on-year increase of £2.9 million relates mainly to: a £2.5
million addition of goodwill and intangible assets on the
acquisition of Viomedex; the addition of a £0.5 million
right of use asset on implementation of IFRS 16; and
the £(0.1) million impairment of the Group’s 8.6% fully
diluted holding in Neuroprotexeon Limited (“NPXe”).
For more information on the impairment in NPXe see
note 14 of the Consolidated Financial Statements.
Inventory increased to £3.1 million (FY2019: £0.7 million)
as a result of Brexit contingency planning, £0.7 million
acquired on the purchase of Viomedex and a one-time
£1.4 million purchase (approximately 24 months’ supply)
of the Group’s Tecotherm product delivered just before
year-end.
The Tecotherm product is manufactured by the Group’s
German developer and licensed to the Group. Rather than
bring the existing Tecotherm product in-line with the new
European regulations the developer has taken the decision
to focus its resources on the next generation device for
which the Group has first refusal to take the licence.
Given the switch in focus the Group decided to secure
supply of the existing product. Payment for the inventory
is spread over a period that is equivalent to what would
have been a normal buying pattern and should closely
match inventory utilisation.
Trade and other receivables increased to £4.2 million
(FY2019: £3.1 million) due primarily to a £0.8 million
increase in trade receivables driven by the increase in
revenue and £0.2 million acquired on the purchase of
Viomedex. Trade and other payables increased by £2.5
million to £4.7 million (FY2019: £2.2 million) reflecting
£1.4 million included within trade payables due to the
one-off purchase of Tecotherm inventory mentioned
above, £0.3 million acquired on the purchase of
Viomedex and increased commission and bonus accruals.
Net Assets increased by £5.2 million or 95% to £10.7
million inclusive of the cash raised from the share
placement on the acquisition of Viomedex.
REVIEW OF BUSINESS AND FUTURE
DEVELOPMENTS
On a Group basis the business review and future
prospects are set out in the Chairman’s Report on
pages 4 and 5 and the Chief Executive Officer’s
Review on pages 20 to 25. Key performance indicators
are discussed on page 24. The Board believes that
overall the Annual Report and Consolidated Financial
Statements are fair, balanced and understandable.
SHARE PRICE DURING THE YEAR
The range of market prices during the year 1 February
2019 to 31 January 2020 was 52.0p to 70.0p and
the mid-market price of the Company’s shares at
31 January 2020 was 64.5p.
Mike Briant Chief Financial Officer
24 April 2020
FINANCIAL HIGHLIGHTS
Group Revenue1
£17.8 million up 15%
Operating Profit before exceptional items
£1.5 million up 24%
EBITDA2
£2.1 million up 28%
Cash position
£4.5 million
Profit before tax
£1.1 million
Gross Margin up to
48.2%
1 On 24 September 2019 the Group acquired the entire issued share capital of Vio Holdings
Limited, the holding company of Viomedex Limited (together “Viomedex”). Viomedex designs,
manufactures and supplies single-use respiratory products and sterile medical consumables,
principally for the respiratory care market.
2 Earnings before interest, tax, depreciation, amortisation, share based payments and
exceptional items, including the impact of Viomedex and on a basis consistent with prior year
which is before applying IFRS 16 - Leases (see page 94 for analysis of the impact of IFRS 16)
30
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
THE GROUP’S PRINCIPAL
RISKS AND OUR ACTIONS
TO MITIGATE THOSE RISKS
The Group’s principal risks, our actions to mitigate those
risks, a directional indication of whether the risks have
increased, decreased or remained about the same,
together with further commentary are set out in the
table on the following pages.
RISK APPETITE
Risk appetite can be defined as ‘the amount and type
of risk’ that the Group is willing to take in order to meet
their strategic objectives. The Board have applied a
differentiated risk appetite to each major category of
risk, i.e. Strategic, Operational, Financial & Compliance.
Levels of risk were considered against the following
categories:
0. Avoid risk – zero tolerance
1. Minimal risk – as little as reasonably possible
2. Cautious – prepared to accept some limited loss
3. Open – prepared to consider balance between risk
and reward, invest for future return
4. Seek – prepare to be innovative in pursuit of
higher returns
5. Mature – confident of setting high levels of
risk appetite underpinned by rigorous processes
and controls
Our Strategic risks appetite is assessed as
level 4 (Seek) as we aim to be innovative in
our specialist areas.
For Operational risks we adopt level 2 (Cautious)
as our customer service is integral to our
business model.
Our risk appetite for Financial & Compliance
is level 1 (Minimal) as we work in a highly
regulated industry.
The potential impacts of Covid-19, that affects all
businesses, is a new risk that we have added to the
table this year. With a virtual worldwide lockdown for
an unknown period of time it is not easy to assess the
impact in detail, however as at the date of this report
our business operations continue in full, albeit via
remote working where possible.
We are a medical technology business supplying
lifesaving and essential medical equipment to the NHS,
other providers to the NHS and overseas distributors
providing the same to equivalent health systems around
the world. As such our products are in demand and,
in addition, we have received significant orders for
sourcing adult ventilators beyond our normal product
range focus.
Consequently, the Board believes that from a demand
perspective we are well placed to continue to receive
customer orders for a large range of our products.
However, there are risks to some of our employees from
the environment they may be required to work in, as
well as risks to the supply of products. These are the
primary risks that we outline in the following sections.
31
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risk
COVID-19
Mitigation
Movement in Year
Commentary
This is a new risk and overall our current assessment of the impact of Covid-19 on our underlying financial performance is that,
subject to the continuation of supply, it will have somewhere between a net neutral to positive impact.
As at the date of this report
we have not furloughed any
employees and the business
continues to operate at normal,
if not higher, levels of activity.
Employees
There is a health and safety risk
to our employees who may come
into contact with confirmed cases.
This is particularly the case for
those employees primarily involved
in Technical Support and onsite
product training who may have
to visit hospitals or other patient
environments to provide our
services.
Employees normally providing
services in hospital may be
restricted from working normally
due to health and safety restrictions
imposed in those locations. Other
employees are restricted from
travelling as they are required
to work from home, hence, for
instance, sales representatives are
not able to visit hospitals or travel
overseas to meet distributors.
Our sales order processing and
warehouse functions have to
continue to operate from our
facility in Leicestershire to process
the documentation and physical
movement of our goods and if they
are required to isolate at home, we
may not be able to fulfil orders.
We have initiated our Business
Continuity Plan and assembled
the relevant team which is
led by the senior executives.
Regular reviews of the
latest situation are held and
communications issued if
necessary.
Where employees can work
from home they have been
asked to do so and we have
provided the technology
to support this. We have
regularly reminded employees
of Government guidelines for
self-isolating, social distancing
and good hygiene. We have
also imposed a worldwide travel
ban. Where employees have
to work in the hospital or other
patient environments, we have
conducted risk assessments
and communicated these to
the relevant employees. These
include guidelines on the use of
personal protective equipment.
In our warehouse and sales
order processing functions, we
are operating a rota system for
our employees between the
warehouse and home working,
thus minimising contact within
the teams. Additionally, work
instructions documenting
detailed procedures are in
place and other employees are
on standby to step in should
individuals not be available.
There is a risk that our
manufacturing activity within
Viomedex will not be able to
continue as it is dependent on
employees being able to attend the
site and in sufficient numbers.
Our Viomedex facility is
operating an extended shift
system on alternative days
to reduce contact. A number
of activities take place in a
cleanroom environment.
We have implemented extra
hygiene and cleaning measures
at sites that continue to operate.
32
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT
Principal Risk
Mitigation
Movement in Year
Commentary
COVID-19 CONTINUED
Suppliers
We are dependent upon third party
manufacturers for the supply of our
products, both from the UK and
overseas. There is a risk that our
manufacturers may not be able to
manufacture the products or supply
spare parts or may be subject to
Government restrictions on the
export of medical goods.
We are regularly in contact
with our suppliers about our
and their supply chain status.
For certain key products and
components we have both
increased our inventory and our
supplier order pipeline.
We provide a wide range
of products which are
manufactured in a number
of different countries, thereby
providing varied sources
of supply unless there is a
catastrophic shutdown on a
worldwide scale. Alternative
suppliers exist for some of the
product range and we may
be able to source alternative
products.
There is a risk that freight and other
transport services will not be able to
continue to deliver goods from either
within the UK or overseas.
We maintain regular
communications with our
transport services companies
and our suppliers.
Future constraints on
healthcare spending
There is a risk that after the current
Covid-19 crisis ends, Governments
and healthcare systems constrain
spending on the type of medical
equipment that we provide.
STRATEGIC RISKS
New product development
The Group invests in R&D projects
in order to develop innovative new
products. Continued growth within
existing customers depends upon
the successful introduction of these
new products.
Risks are the late delivery of the
projects, the changing regulatory
landscape and competitive activity
in the market place which may
make projects redundant.
We have arrangements with a
large corporate for use of their
transportation services and
additional warehouse space
should these be needed.
Our primary focus is on
neonatal intensive care with
niche markets in the patient
warming and home healthcare
sectors. The treatment of
premature babies is not elective;
babies requiring the support of
our equipment will continue to
be born.
Regular review of projects at
Board level. Investment in
R&D and regulatory resources
to stay up to date with
technology developments and
regulatory requirements.
Project approval process with
approval steps.
Regular Project Steering Board
reviews.
Post implementation reviews.
To the date of this report, apart
from the ad-hoc delay of a few
shipments there has been no
disruption of note to transport
services.
We consider it extremely unlikely
that Governments or healthcare
systems, especially in the
developed world, are going to cut
back on the care of sick babies.
The product development cycle
varies by project and timing can
depend on the level of testing
required from both a regulatory
and clinical evidence perspective.
Whilst the new Medical Device
Regulation requires more testing
the investment we have made (in
regulatory and clinical risk research
resources) over recent years puts us
in a good position to manage these
requirements, hence no change to
the level of risk.
33
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal Risk
Mitigation
Movement in Year
Commentary
STRATEGIC RISKS CONTINUED
Acquisitions
Acquisitions are necessary to fulfil
the Group’s strategy and ambitions.
The Group may not be able to find
acquisition targets at acceptable
prices.
Capital market appetite for micro-
cap businesses to raise funds may
change or macro-economic or
political issues may impact on stock
markets and there is a risk that
the Group may not be able to fund
some of the acquisitions it wishes
to target.
There is also a risk that
management does not have
adequate time and resources to
identify, source, negotiate and
integrate new acquisitions.
International expansion
The strategy is to leverage value by
offering products to geographically
diverse markets, starting in Europe,
Middle East, USA and Far East,
working with distributors who can
offer a full-service model to support
the Group’s value proposition.
The risk is that we cannot identify
suitable partners for new markets or
that partners in existing markets fail
to meet expectations.
Meaningful development of the USA
market, the largest medical device
market in the world, may require
significant investment in resources
and may not generate the expected
returns or take longer to crystallise
those returns.
A list of potential targets is
reviewed quarterly with the
Board. A strong second tier of
management has been hired
to underpin the running of
the business and allow senior
executives to spend time on
acquisition activity. Acquisition
financing capability has been
discussed with the NOMAD and
discussions are ongoing with
our bank regarding some debt
financing.
Within the management team
we have extensive experience
in identifying distributors and
have extensive networks in
target markets. Distributor
performance is reviewed on a
regular basis.
Market research will be
undertaken to ensure full
understanding of the markets
for our products and potential
routes to market.
A measured approach to
investing in the USA market is
taken with input from the Board.
Our first acquisition, Viomedex,
was completed during the year
with a successful share placement.
Senior executives have continued
to engage with selected potential
targets and in some cases dialogue
is ongoing.
To support growth in the USA
market we need to obtain
regulatory clearance for more
of our products. To support
this market research will be
undertaken in 2020/21. We
assess that the level of this risk
has not changed over the year.
34
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT Principal Risk
Mitigation
Movement in Year
Commentary
OPERATIONAL RISKS
Brexit and other macro geopolitical
conditions
Any risk from Brexit continues to
relate to the UK not having a trade
deal in place with the EU at the end
of the transition period. If that arises
the shorter-term risks will primarily
be around disruption of the logistics
of import and export transactions
when the transition period ends.
Longer-term risks may be regulatory
diversity and potential loss of market
access.
Foreign currency volatility may
increase.
The cost of goods of products
sourced from certain countries may
increase (e.g. if component prices
become subject to tariffs between
countries).
Dependence on third party
principals
The Group’s business depends on
products and services provided
by third parties. If there is any
interruption to the supply of products
or services by third parties or if any
of those parties fail to renew their
EC certificates or there are problems
maintaining quality standards and
delivering product to specification, or
there are problems in upgrading such
products or services, the Group’s
business will be adversely affected.
The Group may not be able to find
adequate replacements in a timely
manner or at all.
A contingency plan for a no-
deal Brexit has been ready for
implementation at previous
potential EU exit dates. This
will be re-launched should the
UK exit without a trade deal at
the end of the transition period.
This includes a strategy for
compliance with the EU Medical
Device Regulation which will
also be adopted in the UK and
allow our products to be sold in
both jurisdictions under a single
regulatory regime. Tariffs are
unlikely on medical devices as
none currently exist worldwide.
The Group has a partial natural
hedge against the Euro and a
proportion of net exposures is
hedged using forward contracts
to provide some financial
certainty.
Our supply chain function
constantly reviews product
sourcing and costs. An increase
in individual product costs
should not have a material
impact on the Group due to our
large range of products which
has been expanded further with
the acquisition of Viomedex.
There is a clear focus within
the management structure on
maintaining and developing
strong, mutually beneficial
relationships with key strategic
principles.
We regularly review key
relationships and aim to secure
long-term contracts.
As an importer and exporter
of medical devices to non-EU
countries prior to Brexit we already
had processes for managing the
documentation for moving goods
across borders.
Less than 5% of our employees
are EU nationals based in the
UK and we have been in regular
communication regarding their
status in the UK.
We strive to maintain extremely
effective and constructive
relationships with our overseas
suppliers, with regular
communications and monitoring
of local changes.
Increasing trade tensions around
the world and the potential impact
on our supply chain is the reason
for concluding that this risk has
increased over the year.
Over the long term, reliance on
Distributed Products will reduce as
we develop our own manufactured
products which is one of our
strategic objectives outlined in
Our Business Strategy on pages
6 to 14. Progress towards this
objective is measured in our
key performance indicators on
page 24.
We are open to opportunities
to grow revenues with key
distribution partners and where
this is possible this helps
strengthen the relationship further.
35
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Principal Risk
Mitigation
Movement in Year
Commentary
OPERATIONAL RISKS CONTINUED
Changes in legislation & regulation
The medical devices industry is
highly regulated and each territory
in which the Group operates is
subject to its own stringent legal
and regulatory regime. Regulatory
approvals are required to market and
sell medical devices into both the
UK and export markets. The risk is
that new, stricter regulations prevent
product introductions or delay them
due to delays in approval. In the
EU the Medical Device Regulation
(“MDR”), which all new medical
devices must comply to, has been
delayed until May 2021.
IP, data integrity and security
The Group has intellectual property
that it needs to protect. This can
be in the form of innovative ideas,
marketing specifications, and
customer requirements. Our patents
and controls may not prevent
competitors from independently
developing or selling products
and services similar to ours, and
there can be no assurance that the
resources invested by us to protect
our IP will be effective, particularly
in new markets.
All companies are increasingly
exposed to threats to access and
steal data.
Reliance on key individuals
The success of the Group depends
crucially upon the expertise and
relationships of the Directors and
certain other senior employees.
The loss of any of the key individuals
could have an adverse effect on
the Group.
Competition
The Group operates in a highly
competitive market and may
face competition from products
designed, marketed and supplied
by companies with significantly
greater resources.
The Group has stringent internal
controls in order to comply with
the relevant legal and regulatory
conditions in the UK and in
its export markets. The Group
has a Regulatory Affairs and
Quality Assurance department
dedicated to liaising with the
regulatory authorities to monitor
any changes in conditions and
ensure continuing compliance
with the existing and new
conditions.
The Group has developed a
detailed product-by-product
plan for adoption of the MDR.
The Group maintains a register
of IP and reviews its patents and
controls on a regular basis. Key
strategic markets are prioritised
for protection.
The Group has deployed
a number of measures to
strengthen its protection against
cyber security. These include
systems access controls, staff
training, passwords, updating
policies and procedures.
The Group has a strong,
social purpose to save lives
and improve outcomes which
is motivating to employees.
Rewards are competitive.
A Long-Term Incentive Plan
(“LTIP”) exists for all senior
and key management roles.
Exceptional customer service
and short lead times provide
barriers to competition. We
have innovative products that
are niche in our field helping to
add value to our sales call and
improve engagement with key
decision makers. We work closely
with key opinion leaders in
neonatology. Our 24/7 customer
service is a differentiator which is
actively promoted.
Neil Campbell Chief Executive Officer
24 April 2020
36
As part of the Group’s preparation
for the new European Union
MDR, the Company obtained new
EC Certificates for its products
(excluding the recently acquired
Viomedex products) to extend their
CE marking under the existing
Medical Device Directive ("MDD")
allowing the products to remain
on the market until May 2024
under the MDD. The Company has
developed a strategy for transition
of its systems and products to be
compliant under the new MDR.
There is still a level of reliance on
adequate resources being available
within notified bodies which is
beyond our control.
The Group will be applying for
Cyber Essentials accreditation
during 2020/21.
The continuing development of
IT threats against businesses
in general leads us to view this
risk as having increased for all
companies.
A culture of engagement and
recognition exists and it is the
Group’s policy to maintain a safe
and pleasant work environment.
With a strengthened second tier
management this risk has reduced.
We have also recently introduced a
SAYE scheme which is available to
all employees.
No competitor provides products
across our entire range. There have
been no notable new entrants into
the neonatal intensive care market
during the year.
INSPIRATION-HEALTHCARE.COMSTRATEGIC REPORT STATEMENT OF CORPORATE GOVERNANCE
THE BOARD BELIEVES THAT
CORPORATE GOVERNANCE IS MORE
THAN JUST A SET OF GUIDELINES
As Chairman of the Board, it is my responsibility to
ensure that the Group has both an effective corporate
governance and Board leadership. In accordance with
the requirement of AIM, all listed companies have to
adopt a corporate code. The Group has adopted the
Quoted Companies Alliance Corporate Governance Code
(the “QCA Code”) and this report follows the structure of
these guidelines and explains how we have applied the
guidance. The Board considers that the Group complies
with the QCA Code in all respects.
The Board believes that corporate governance is
more than just a set of guidelines; rather it is a
framework which underpins the core values for running
the business in which we all believe, including a
commitment to open and transparent communications
with stakeholders. We believe that good corporate
governance improves performance while reducing or
mitigating risks.
QCA PRINCIPLES
DELIVER GROWTH
1. Establish a strategy and business model which
promote long-term value for shareholders
The Group’s purpose is to improve health outcomes
by providing highly advanced medical technology. Our
mission is to develop outcome-enhancing products for
intensive care patients and to promote these globally.
Our strategy is defined clearly in our Business Strategy
(on pages 6 to 14). Our business model is set out
clearly on page 15 and on our website. Our strategy
and business model are underpinned by a clear set of
values: patient focus, outcome changing, pioneering and
research driven, which reflect our long-term objective of
enhancing patient care and delivering business growth
and profitability.
Our Key Performance Indicators (“KPIs”), which are
set out in the Chief Executive Officer’s Review on
page 24 measure growth and profitability reflecting our
business model.
2. Seek to understand and meet shareholder needs
and expectations
Relationships with our shareholders are important to
us and we seek to provide effective communications
through our Interim and Annual Reports along with
Regulatory News Service announcements, including
RNS Reach. We also use the Group’s website, www.
inspiration-healthcare.com for both financial and general
news relevant to shareholders.
The Executive Directors meet shareholders and other
investors/potential investors at regular intervals during
the year. The Chief Executive Officer and the Chief
Financial Officer make presentations to institutional
shareholders and analysts each year immediately
following the release of interim and full year results.
They also attend retail shareholder events. The slides
used for such presentations are made available on the
Group’s website under the Annual Reports section.
The Group’s NOMAD and broker, Cenkos Securities plc,
is briefed regularly and updates the Board during the
year on shareholder expectations. The Group retains a
professional investor relations company, Cadogan PR,
to be the main contact point for our shareholders and
to assist us with communicating with and receiving
feedback from shareholders and financial analysts.
The Annual General Meeting (“AGM”) is regarded as an
opportunity to meet, listen and present to shareholders
and their participation is encouraged; all Directors
attend the AGM and are available to meet shareholders
individually or as a group. For each resolution the
number of proxy votes received for, against and withheld
is circulated to all attendees. The results for the AGM
are subsequently published on the Group’s corporate
website. All 2019 AGM resolutions were passed
comfortably.
The Non-executive Chairman, Mark Abrahams and
the Senior Independent Director, Bob Beveridge, are
available to meet major shareholders if required to
discuss issues of importance to them.
37
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information STATEMENT OF CORPORATE GOVERNANCE CONTINUED
3. Take into account wider stakeholder and social
responsibilities and their implications for long-term
success
4. Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
The Board recognises the need for a robust system of
internal controls and risk management. The assessment
of risks and the development of strategies for dealing
with these risks are achieved on an ongoing basis
through both a quarterly review of risks by the Board
and the way in which the Group is controlled and
managed internally. Risk management is integral to the
ability of the Group to deliver on its strategic objectives
and the Board’s appetite for risk is communicated to
shareholders in this Annual Report.
The system of internal control is structured around
an assessment of the various risks to the business
and is designed to address those risks that the Board
considers to be material, to safeguard assets against
unauthorised use or disposition and to maintain proper
accounting records which produce reliable financial and
management information. However, any such system
of internal control can provide only reasonable, but not
absolute, assurance against material misstatement or
loss. The Board considers that the internal controls in
place are appropriate for the size, complexity and risk
profile of the Group.
The Board is responsible for reviewing and approving
overall Group strategy, approving revenue and capital
budgets and plans, for determining the financial
structure of the Group including treasury, tax and
dividend policy. Monthly results and variances from
plans and forecasts are reported to the Board.
The Audit Committee assists the Board in discharging
its duties regarding the financial statements, accounting
policies and the maintenance of proper internal business
and operational and financial controls, including liaison
with the Group’s external auditors.
The Board considers that it has operated in full
regard of its responsibilities under section 172 of the
2016 Companies Act. The Group’s Purpose is widely
understood and drives the decision-making which aims
to optimise the long-term value of the business.
A. People. Our continued success is built on the
talented people who work here, and employee
engagement forms a major part of our strategy.
During the year, Brook Nolson (a Non-executive
Director) was given the additional role of representing
employees’ interests at the Board and to be
the Board level point of contact for the Group’s
whistleblowing policy.
Everyone at Inspiration Healthcare Group is a valued
member of the team, and our aim is to help every
individual achieve their full potential. We offer equal
opportunities regardless of race, sex, gender identity
or reassignment, age, disability, religion or belief,
marital status, pregnancy and maternity or sexual
orientation. We hold regular all-staff gatherings,
including an annual conference, to keep employees
updated on business progress and we also operate
an incentivised Improvement Ideas scheme. We
are a Living Wage employer. In FY2020 we have
introduced a new HR system, People HR, which
allows greater ease of access for employees to their
records as well as reduce our paper-based processes.
B. Stakeholders. A key element of our business
model is to work closely with key opinion leaders
in the healthcare system and to develop, evaluate
and enhance our propositions in full co-operation
with those partners. Our reputation for innovative,
outcome-enhancing products and excellent service
is key and we regularly seek feedback on the
performance of our products.
C. Suppliers. Our key strategic suppliers are long
term in nature and work with the Group on product
innovations. As a medical device company, we
regularly assess key supplier performance and
engage with them to discuss and agree objectives
and to enhance product capability and performance.
38
INSPIRATION-HEALTHCARE.COMGOVERNANCE The key features of the Group’s system of internal
control are as follows:
› an ongoing process of risk assessment to identify,
evaluate and manage business risks;
› management structure with clearly defined
responsibilities and authority limits;
› a comprehensive system of reporting financial results
to the Board;
› Quality Management Systems certified to ISO 13485
and MDSAP;
› appraisal and authorisation of major capital
expenditure, research & development projects; and
› dual signatories on all bank accounts.
Additionally, the Group operates a number of non-
financial controls including regulatory compliance,
our Business Management System, as well as Health
and Safety.
MAINTAINING A DYNAMIC MANAGEMENT
FRAMEWORK
5. Maintain the Board as a well-functioning, balanced
team led by the Chair
The Board is made of up three Executive Directors and
three independent Non-executive Directors, chaired by
Mark Abrahams. Meetings are open and constructive,
with every Director participating fully. Meetings alternate
between our Crawley head office and the Leicester
distribution centre, enabling the Board to meet the
senior teams.
The Chairman is responsible for the leadership of the
Board and ensuring its effectiveness in all aspects of its
role. He is also responsible for creating the right Board
dynamic and for ensuring that all important matters, in
particular strategic decisions, receive adequate time and
attention at Board meetings. The Executive Directors
are responsible for the day-to-day running of the
business and developing corporate strategy while the
Non-executive Directors are tasked with constructively
challenging the decisions of executive management and
satisfying themselves that the systems of business risk
management and internal financial controls are robust.
The Non-executive Directors give informal advice to the
Executives between meetings and devote sufficient time
to be effective in this regard.
The Board meets regularly during the year (12 times
in FY2020 including additional meetings to consider
the acquisition of Viomedex and the related share
placement); a calendar of meetings and principal
matters to be discussed is agreed at the beginning of
each year. Board papers are circulated at least one week
before meetings, allowing time for full consideration
and necessary clarifications before the meetings. Board
dinners are held from time to time on the evening before
meetings and allow broader discussion and development
of effective Board relations.
The Group has effective procedures in place to monitor
and deal with conflicts of interest. The Board is aware
of the other commitments and interests of its Directors.
Changes to these commitments and interests are
reported to and, where appropriate, agreed with the rest
of the Board.
The Chief Financial Officer is also the Company
Secretary and is responsible for ensuring that Board
procedures are followed and that the Group complies
with all applicable rules, regulations and obligations
governing its operation. If required, the Directors are
entitled to take independent legal advice and, if the
Board is informed in advance, the cost of such advice
will be reimbursed by the Group.
6. Ensure that between them the Directors have
the necessary up-to-date experience, skills and
capabilities
The Non-executive Directors have both a breadth and
depth of skills and experience to fulfil their roles. The
Chairman is a highly experienced quoted company
Director having formerly been Chief Executive Officer of
Fenner plc, which was a FTSE 250 constituent. Details
of the Directors’ experience and areas of expertise are
outlined in the Board of Directors section on pages 46
and 47. They typically meet each year without Executives
present and maintain ongoing communications with
Executives between formal meetings.
The Board is satisfied that, between the Directors,
it has an effective and appropriate balance of skills
and experience, needed at this stage of the Group’s
development, including in the areas of medical devices,
sales and marketing, product development, finance,
innovation, international trading, risk management,
corporate governance and M&A.
39
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information STATEMENT OF CORPORATE GOVERNANCE CONTINUED
The Audit Committee Chairman updates his technical
and financial experience by attending workshops held
by the major accounting firms.
The Chairman of the Remuneration Committee
obtains regular updates on best practice for executive
remuneration packages and initiates periodic
reviews, taking account of changes to the business.
Other Directors are regularly kept up-to-date via the
latest governance and business updates from major
accountancy or legal firms and via membership of
various professional bodies.
All Directors stand for re-election by shareholders
each year.
7. Evaluate Board performance based on clear
and relevant objectives, seeking continuous
improvement
Following the Board evaluation exercise last year the
Board has introduced changes to its working practices,
reducing the number of face-to-face meetings from
twelve to seven per year and improved agenda planning,
focusing two meetings per year on strategic matters
and scheduling specific dates for other key areas, e.g.
risk management, R&D reviews, financial forecasts,
employee engagement, and shareholder feedback. The
Board intends to introduce a 360-degree evaluation
process during 2020.
The Board considers succession planning for the
Executive Directors on an ad-hoc basis. With further
development the Board considers the Commercial
Director is a potential successor to the Chief Executive
Officer. On 26 February 2020, the Group announced
that our Chief Financial Officer, Mike Briant would be
retiring and that Jonathan Ballard, the Group’s Financial
Controller, who had previously been identified as Mike’s
successor, will become the Group’s Chief Financial
Officer from 1 July 2020. Mike has agreed to continue
to work with the Group during a handover period which
will end in November 2020. External recruitment
is currently the most likely source of immediate
replacements for any of the other Executive Directors.
8. Promote a corporate culture that is based on
ethical values and behaviours
The Group’s culture is understood and led by the
example set by the behaviours of the three Executive
Directors, two of who were founders of the original
business. Taking into account that the Group is relatively
small with less than 100 employees, this is considered
an effective means of conveying the Group’s approach
to ethical behaviour. The common culture is based upon
four core values:
› Patient focus
› Outcome changing
› Pioneering
› Research driven
By visiting sites during the year, the Board is able to talk
to staff and observe behaviours in order to satisfy itself
on the status of the culture.
The Group places the health and safety of its workforce
as its top priority with health and safety updates being
provided at every Board meeting and actions arising are
followed up by the Chief Executive Officer.
9. Maintain governance structures and processes
that are fit for purpose and support good decision-
making by the Board
The Board is committed to high standards of corporate
governance. It has joined the QCA and has chosen to
adopt the QCA Corporate Governance Code. We review
our corporate governance arrangements regularly and
expect to evolve these over time as the business grows.
There is a clear division of responsibilities between the
Chairman and the Chief Executive Officer. The Chairman
is responsible for leading the Board, setting its agenda
and monitoring its effectiveness. He meets regularly and
separately with the Chief Executive Officer and the other
Non-executive Directors.
40
INSPIRATION-HEALTHCARE.COMGOVERNANCE Matters reserved for Board decision include:
REMUNERATION COMMITTEE
The report of the Remuneration Committee is set out
on pages 50 to 53. The Remuneration Committee
has two members, Brook Nolson (Chairman) and Bob
Beveridge. The Committee is responsible for setting the
remuneration arrangements, including short term bonus
and long-term incentives, for Executive Directors as
well as approving the remuneration principles for senior
staff. The committee met three times during the year
with full attendance. Mark Abrahams attended twice by
invitation.
A more detailed terms of reference for the Remuneration
Committee can be found on the Group’s website.
NOMINATIONS COMMITTEE
The Nominations Committee has four members, Mark
Abrahams (Chairman), Bob Beveridge, Brook Nolson
and Neil Campbell. The Nominations Committee
considers succession planning, reviews the structure,
size and composition of the Board and nominates
candidates to fill Board vacancies. The committee met
once this year with full attendance.
A more detailed terms of reference for the Nominations
Committee can be found on the Group’s website.
› overall business strategy;
› review of key operational and commercial matters;
› review of key finance matters, including approval
of financial plans, changes to capital structure,
acquisitions and disposals of businesses, material
capital expenditure, treasury policy and dividends;
› governance, including the appointment and removal of
Board members, remuneration of Directors, set up and
delegation of matters to committees and the reviewing
of reporting back thereof;
› approval of financial statements; and
› stock exchange related issues including the approval
of communications.
All Directors receive regular and timely information on
the Group’s operational and financial performance which
is circulated to the Board in advance of meetings.
The Board delegates authority to three committees
to assist in meeting its business objectives while
ensuring a sound system of internal control and risk
management. The committees meet independently of
Board meetings.
AUDIT COMMITTEE
The Audit Committee has two members, Bob Beveridge
(Chairman) and Brook Nolson. The Chief Financial
Officer and external auditors attend meetings by
invitation. The Audit Committee’s responsibilities include
the review of the scope, results and effectiveness of
the external audit, the review of half-year and Annual
Financial Statements and the review of the Group’s
risk management and internal control systems. The
committee met three times during the year with full
attendance. A separate report of the Audit Committee
activities is on pages 44 to 45.
The terms of reference for the Audit Committee can be
found on the Group’s website.
41
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information STATEMENT OF CORPORATE GOVERNANCE CONTINUED
Membership of the Board committees is as follows:
Mark Abrahams
Brook Nolson
Neil Campbell
Bob Beveridge
Audit Committee (AC)
Remuneration Committee (RC)
Nominations Committee (NC)
n/a
n/a
Chair
Member
Chair
Member
n/a
n/a
Member
Chair
Member
Member
The following table sets out the member attendance at Board and Committee meetings during the year ended
31 January 2020:
Board Members
Number of meetings attended
Mark Abrahams, Chairman
Neil Campbell, Chief Executive Officer
Bob Beveridge, Senior Independent Non-executive Director
Mike Briant, Chief Financial Officer
Toby Foster, Commercial Director
Brook Nolson, Non-executive Director
Board*
12/12
12/12
11/12
12/12
12/12
12/12
AC
n/a
n/a
3/3
n/a
n/a
3/3
RC
n/a
n/a
3/3
n/a
n/a
3/3
NC
1/1
1/1
1/1
n/a
n/a
1/1
* includes additional meetings to consider the acquisition of Viomedex and the related share placement
Non-members are invited to attend committees as appropriate.
42
INSPIRATION-HEALTHCARE.COMGOVERNANCE The Group
engages a
professional
investor relations
company to be
the main contact
point for our
shareholders
BUILD TRUST
10. Communicate how the Company is governed and
is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Board believes that corporate governance is more
than just a set of guidelines; rather it is a framework
which underpins the core values for running the
business in which we all believe. The Board has formal
responsibilities and agendas and three sub-committees;
in addition, strong informal relations are maintained
between Executive and Non-executive Directors. Non-
executive Directors meet with other senior managers
and give advice and assistance between meetings.
Board dinners are held from time to time to provide
opportunities for broader discussions.
The Chief Executive Officer and Chief Financial
Officer regularly meet with investors after results
announcements have been made and at other
shareholder participant events. They also meet regularly
with the Group’s Nomad/broker and discuss any
shareholder feedback – the Board is briefed accordingly.
All Directors attend the Annual General Meeting and
engage both formally and informally with shareholders
during and after the meeting. The results of voting at the
AGM is communicated to shareholders via RNS and on
the Group’s website.
The Chief Executive Officer and the Chief Financial
Officer make presentations to institutional shareholders
and analysts each year immediately following the
release of interim and full year results. They also attend
retail shareholder events. The slides used for such
presentations are made available on the Group’s website
under the Annual Reports section.
The Group engages a professional investor relations
company to be the main contact point for our
shareholders and to assist us with communicating with
and receiving feedback from shareholders and financial
analysts.
Mark Abrahams Chairman
24 April 2020
43
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information AUDIT COMMITTEE REPORT
THE AUDIT COMMITTEE HAS AN
IMPORTANT ROLE TO PLAY IN EFFECTIVE
REPORTING TO OUR STAKEHOLDERS
The Audit Committee has an important role to play in
effective reporting to our stakeholders and ensuring high
standards of quality and effectiveness in the external
audit process. The Committee provides this separate
report on its activities focusing on matters relevant to
Inspiration Healthcare Group plc and the work of the
committee during the year.
MEMBERSHIP
The Audit Committee comprises of Bob Beveridge and
Brook Nolson and is chaired by Bob Beveridge, whom
the Board considers has both recent and relevant
financial experience. Bob is a Chartered Accountant,
portfolio Non-executive Director and a former plc
Finance Director.
MEETINGS
The committee met formally three times during the year.
The external auditors and Chief Financial Officer also
attended the meetings at the invitation of the Committee
Chairman. After each of its meetings, the committee
met with the external auditors without the presence of
Executive Directors or management. The committee met
informally on a frequent basis during the year to discuss
and review progress on systems, treasury and people
matters.
MAIN ACTIVITIES
The committee supports the Board in carrying out
its responsibilities in relation to financial reporting,
risk management and assessing internal controls.
The committee also oversees the relationship with
the external auditor including the effectiveness of the
external audit and the provision of non-audit services by
the external auditor.
FINANCIAL REPORTING
The committee has recently concluded that the Annual
Report and Financial Statements for year ended 31
January 2020, taken as a whole, are fair, balanced and
understandable and provide the information necessary
for shareholders to assess the Group’s business model,
strategy and performance. The committee reviewed the
process for preparing the Annual Report. This process
included the following key elements:
› Monitoring of the integrity of the financial statements
and other information provided to shareholders
to ensure they represented a clear and accurate
assessment of the Group’s financial performance and
position.
› Review of matters of accounting judgement and
the underlying rationale in each case including
specifically: capitalisation of product development
spend, deferred tax related to brought forward
historical losses, the valuation of intangible assets
and goodwill arising on the acquisition of Viomedex,
impairment review of capitalised development costs
and the investment in Neuroprotexeon Limited as well
as the treatment of certain expenses as exceptional.
Where appropriate the committee reviewed papers
prepared by management and agreed with the
accounting treatment.
› Review of significant accounting policies (including
changes required as a result of adopting IFRS 16)
› Review of a paper outlining a cash forecast as the
basis of the going concern assessment including the
impact of Covid-19
› The committee reviewed the full-year and half-year
results announcement, Annual Report and financial
statements and considered reports on the full-year
accounts from the external auditors identifying
the accounting or judgmental issues requiring its
attention.
The committee also reviewed the Strategic Report
and concluded that it presented a fair, balanced and
understandable addition to the Annual Report.
44
INSPIRATION-HEALTHCARE.COMGOVERNANCE › Internal audit function - given the small size of the
Group currently the committee does not require an
internal audit function to carry out its responsibilities.
The committee deemed these controls adequate and
will review them annually.
It was satisfied with the actions in place to manage
financial risks.
› Strong cash management – the Group maintains tight
cash management controls through, for example,
delegated authorities and dual signatories on all bank
accounts etc. The Board has approved a treasury
policy covering counterparty risk and foreign exchange
management and the committee reviews compliance
with the policy.
OVERVIEW
The committee considers that it has acted in accordance
with its responsibilities. The Chairman of the Audit
Committee will be available at the Annual General
Meeting to answer any questions about the work of
the committee. We would welcome feedback from
shareholders on this report.
Bob Beveridge Chairman – Audit Committee
24 April 2020
EXTERNAL AUDIT
The committee was satisfied with the quality of the
audit, the degree of challenge and review of the financial
statements and recommended the re-appointment
of PwC as auditor for an additional year. This will be
reviewed again in 2020.
RISK MANAGEMENT AND INTERNAL CONTROL
The committee reviewed a paper from the Chief
Financial Officer on the Group’s internal control system,
the purpose of which is to safeguard investment and
the Group’s assets, embracing material controls and
key financial risks. The control system is operated
as an integral part of the organisation of executive
responsibilities and accountabilities and is designed
to manage rather than eliminate the risk of failure to
achieve business objectives and to provide reasonable
assurance that assets are safeguarded against
unauthorised use or material loss, and to ensure that its
transactions are properly authorised and recorded.
Key control procedures are as follows:
› Management responsibility and authorisation
controls; an established management structure
operates throughout the Group with a single common
finance reporting process, clearly defined levels of
responsibility and delegation of authorities which are
built into the ERP systems.
› Corporate planning process – an annual plan and
three-year strategic plan is updated each year and
approved by the Board. The plan focuses on the
external environment, strategy and objectives, actions
to achieve them and implementation plans across the
organisation. Following approval of the annual budget
by the Board financial performance and variances
against budget are monitored monthly and challenged
centrally.
› Key performance indicators (“KPIs”) – a set of
operational, financial and non-financial KPIs is
reported each month to the Board.
45
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information BOARD OF DIRECTORS
THE BOARD IS SATISFIED THAT, BETWEEN THE
DIRECTORS, IT HAS AN EFFECTIVE AND APPROPRIATE
BALANCE OF SKILLS AND EXPERIENCE NEEDED AT
THIS STAGE OF THE GROUP’S DEVELOPMENT
Neil Campbell Chief Executive Officer
Mike Briant Chief Financial Officer
Toby Foster Commercial Director
In 2003, Neil became CEO and
founding partner of Inspiration
Healthcare Limited, leading them
through the reverse acquisition of
Inditherm plc and onto AIM in June
2015. Neil has spent 29 years in
the Medical Device industry. After
beginning his career in medical devices
at Portex (Smiths Medical), Neil held
several sales and marketing positions
at Eschmann (Smiths Medical) and
Electro Medical Equipment Limited.
Neil’s commitment to perinatology has
been recognised by him being invited to
be an industry and scientific committee
member at the Infant Centre in Ireland,
a position he has now held for several
years. Until 21 June 2018, Neil held
a Non-executive Director position
of Neuroprotexeon Limited, a drug-
discovery and biotechnology company,
in which the Group is a shareholder.
Mike joined the Board as CFO
on 19 September 2016. He is
an experienced Chief Financial
Officer with over twenty-five years’
track record of driving growth in
international businesses. A Chartered
Accountant, Mike spent over ten
years in senior financial roles within
Thorn plc and then joined Quadriga
Worldwide as Finance Director. In
2002 he moved to LMA International
NV (“LMA”), a global anaesthesia
company, which he helped to IPO
on the Singapore Stock Exchange
and double in size to an £80 million
company, completing a number of
acquisitions. Mike was CFO of LMA
until its acquisition by Teleflex Inc.
Mike is retiring from the Board in
June 2020.
Toby, one of the Founding partners of
Inspiration Healthcare in 2003, has over
25 years’ experience within the medical
industry where he is recognised as a
thought leader specialising in neonatal
and adult critical care. As Commercial
Director, he is responsible for driving
revenue, leading the Marketing &
Product Development, and developing
and delivering strategies that have grown
the domestic and international markets.
He continues to build a structure that
delivers revenue growth and maintains
the high standards in service for which
the Group is renowned. Previously
working at Electro Medical Equipment
Limited he led the launch of new
products including neonatal ventilators,
neonatal nCPAP, adult high frequency
oscillation and developmental care
domestically and internationally.
KEY AREAS OF EXPERTISE
KEY AREAS OF EXPERTISE
KEY AREAS OF EXPERTISE
Medical device market, market
development, product development,
regulatory affairs, strategic planning.
All aspects of financial management,
cost control, mergers & acquisitions,
public company reporting.
Medical device market, sales
management, market development,
international sales, product launch,
business development, people
management.
46
INSPIRATION-HEALTHCARE.COMGOVERNANCE
Mark Abrahams Non-executive Chairman
Bob Beveridge Non-executive Director
Brook Nolson Non-executive Director
Bob Beveridge FCA, Non-executive
Director and Senior Independent
Director, joined the Board on 3 August
2015 and is Chairman of the Audit
Committee. Bob has wide ranging
Non-executive Director and public
company experience; he is currently
Chairman of the Audit Committee
Finsbury Food Group plc and member
of the audit committee of the Health
Foundation. Previously he was Group
Finance Director of McBride plc,
Marlborough Stirling plc and Cable
and Wireless Communications plc.
Mark Abrahams became Chairman of
Inspiration Healthcare following the
reverse acquisition transaction in June
2015 and prior to that was Chairman
of Inditherm plc since 2001. Following
the acquisition by Michelin, Mark has
recently retired from the Board of Fenner
Plc, where he has been both Chairman
and Chief Executive Officer for 25 years,
during which time he led a strategy
of converting the group from a power
transmissions manufacturer to a world
leader in reinforced polymers. Mark was
Vice Chair of Leeds Teaching Hospitals
Trust and was Non-executive Chairman
of the Darby Group Plc. He is a
Chartered Accountant and a Companion
of the Institute of Management. He was
a member of the Economics Growth
Board of the CBI.
Brook joined the Board as Non-
executive Director on 23 June 2015
and is Chairman of the Remuneration
Committee and in 2019 was appointed
as Staff Representative to the Board.
With considerable experience in
developing and implementing strategic
business development plans, often
using technology and ERP systems-
based solutions, he has proven to be a
commercially astute strategic business
development executive designing,
leading, and executing business
transformation strategies. During
2019 Brook became a member of The
Cambridge Institute for Sustainability
Leadership (CISL) having completed his
studies in Sustainability Management
for the Corporate Environment with
Cambridge University, a move he hopes
will help him to guide organisations
to more sustainable growth. Previous
Group Directorships include: Birse Group
plc, Willmott Dixon Group and Morgan
Sindall plc, Brook is an advisor and
non-executive consultant to a number of
organisations across various industries.
KEY AREAS OF EXPERTISE
KEY AREAS OF EXPERTISE
KEY AREAS OF EXPERTISE
Strategy, corporate governance,
international M&A, financial
management, operational management,
investor relations, international business
risk management.
Senior financial skills relating to M&A,
investor relations, risk management,
financing, audit committees and
corporate governance. Digital
technology and financial strategy.
Corporate Sustainability Leadership,
Strategic Growth, Restructuring,
Business Transformation, Product
Development, Sales Growth, Leadership
& Management Development.
47
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information
RESEARCH AND DEVELOPMENT
The Group continues to invest in research and
development, in order to extend its product offerings
and improve the effectiveness of its technology. During
the year, the Group incurred costs totalling £642,000
(FY2019: £630,000) including expenditure capitalised
in accordance with IAS38.
THE DIRECTORS OF THE COMPANY WHO
SERVED DURING THE YEAR AND UP TO
THE DATE OF SIGNING THE FINANCIAL
STATEMENTS WERE:
Director
Position
M S Abrahams Non-executive Chairman
N J Campbell Chief Executive Officer
M J Briant
Chief Financial Officer and
Company Secretary
T Foster
Commercial Director
B Nolson
Non-executive Director
R J Beveridge Non-executive Director
Further information relating to the Board is detailed on
pages 46 and 47.
DIRECTORS’ INTERESTS IN SHARES AND
CONTRACTS
Directors’ interests in shares of the Company at 31
January 2020 and 31 January 2019 and any changes
subsequent to 31 January 2020 are disclosed in the
Directors’ Remuneration Report on page 53.
Directors’ interests in contracts of significance to which
the Group was a party during the financial year are
disclosed in note 33 of the Consolidated Financial
Statements.
INDEMNIFICATION OF DIRECTORS
As permitted by the Articles of Association, the directors
have the benefit of an indemnity which is a qualifying
third party indemnity provision as defined by section
234 of the Companies Act 2006. The indemnity was in
force throughout the last financial year and is currently
in force.
DIRECTORS’ REPORT
The Directors present their report on the Group and
Company, together with the audited Consolidated
Financial Statements of the Group and Company for the
year ended 31 January 2020. Inspiration Healthcare
Group plc is incorporated under the laws of England and
Wales as a public limited company and its registered
office and principal place of business is 2 Satellite
Business Village, Crawley, West Sussex RH10 9NE.
The Company’s Ordinary Shares are admitted to and
traded on AIM (Alternative Investment Market), a market
operated by the London Stock Exchange.
CAUTIONARY STATEMENT
The review of the business and its future development
in the Strategic Report has been prepared solely to
provide additional information to shareholders to assess
the Group’s strategies and the potential for these
strategies to succeed. It should not be relied on by any
other party for any other purpose. The review contains
forward-looking statements which are made by the
Directors in good faith based on information available
to them up to the time of the approval of the reports
and should be treated with caution due to the inherent
uncertainties associated with these statements.
RESULTS AND DIVIDENDS
The results of the Group are set out in detail on
page 60. No dividend has been declared or paid in the
current year.
BUSINESS REVIEW AND FUTURE
DEVELOPMENTS
Details of the business activities during the year can be
found in the Strategic Report on pages 4 to 36.
POLITICAL DONATIONS
The Group made no political donations during the year
(FY2019: £nil).
FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT
Disclosures regarding financial instruments are provided
within the Principal Risks and Uncertainties on pages
31 to 36 and note 22 to the Consolidated Financial
Statements.
CAPITAL STRUCTURE
Details of the Company’s share capital, together with
details of the movements therein, are set out in note 25
to the Consolidated Financial Statements. The Company
has one class of Ordinary Shares which carry no right to
fixed income.
48
INSPIRATION-HEALTHCARE.COMGOVERNANCE SUBSTANTIAL INTERESTS
At 24 April 2020 the Company had been notified of the
following interests which amounted to 3% or more of
the issued capital of the Company.
Shareholder
Number of
shares
Percentage
holding
Premier Miton Group plc
N J Campbell
S G Motley
T Foster
BGF Investment
Management Ltd
M J Oxley
D G Steward
W G Walls
7,402,892
4,536,271
4,423,260
3,899,908
2,868,000
2,536,271
1,675,000
1,558,934
19.3%
11.8%
11.5%
10.2%
7.5%
6.6%
4.4%
4.1%
ANNUAL GENERAL MEETING
Details of the arrangements for the Annual General
Meeting (“AGM”) and the resolutions to be proposed will
be provided in a separate notice of the AGM that will be
sent to shareholders.
RE-APPOINTMENT OF INDEPENDENT
AUDITORS
PricewaterhouseCoopers LLP have expressed their
willingness to continue in office and a resolution to
re-appoint them is proposed for consideration at the
Annual General Meeting.
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 Financial Statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union
and Company Financial Statements in accordance
with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”,
and applicable law). Under company law the Directors
must not approve the Financial Statements unless they
are satisfied that they give a true and fair view of the
state of affairs of the Group and Company and of the
profit or loss of the Group and Company for that period.
In preparing the Financial Statements, the Directors are
required to:
› select suitable accounting policies and then apply
them consistently;
› state whether applicable IFRSs as adopted by the
European Union have been followed for the Group
Financial Statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed
for the Company Financial Statements, 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 also 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 responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group 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 of the ultimate parent company are
responsible for the maintenance and integrity of the
of the ultimate parent 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 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 and Company’s auditors are aware of that
information.
By order of the Board.
Mike Briant Company Secretary
24 April 2020
49
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information DIRECTORS’ REMUNERATION REPORT
This report covers the financial year ended 31 January
2020.
RESPONSIBILITIES
The Remuneration Committee has two members,
Brook Nolson (Chairman) and Bob Beveridge and
they have met formally three times but regularly have
informal discussions during the year. The Committee is
responsible for setting the remuneration packages for
Executive Directors as well as supporting, approving,
and aligning where appropriate, the remuneration of
senior staff to ensure that performance measures are
consistently in line with the strategic objectives. Any
incentive schemes for the Executive Directors are
aimed to align the interests of the shareholders and to
encourage the strategic development of the business.
DIRECTORS’ SERVICE CONTRACTS
The details of the service contracts in relation to
the Executive Directors and letters of appointment
in relation to the Chairman and Non-executive
Directors are:
Unexpired
term at
24 April
2020
Notice
period
M S Abrahams
Chairman
22 months
6 months
N J Campbell
M J Briant
T Foster
Chief Executive
Officer
Chief Financial
Officer
Commercial
Director
6 months
6 months
6 months
6 months
6 months
6 months
R J Beveridge
Non-executive
13 months
6 months
B Nolson
Non-executive
13 months
6 months
The Non-executive Directors, including the Chairman,
each have a letter of appointment for a three-year term.
Under the terms of these letters either party can serve 6
months written notice to terminate the arrangement and
the maximum compensation payable in the event that
appropriate notice is not given will be the equivalent of
6 months of the Director’s fees.
The Executive Directors, including the Chief Executive
Officer, each have a rolling 6-month contract. There
are no provisions in these contracts for compensation
if there is a change of control. The service contracts
do not contain any provision for compensation on early
termination other than the notice period. In the event
of any early termination, the Committee would seek to
mitigate cost to the Group whilst dealing fairly with each
individual case.
As announced on 26 February 2020 Mike Briant will
retire from his role as Chief Financial Officer, Director
and Company Secretary with effect from 30 June 2020.
Following the recommendation of the Nominations
Committee, the Board have confirmed Jonathan
Ballard, currently Group Financial Controller, as Mike’s
successor. Jonathan will take up the post on 1 July
2020, an appropriate package has been proposed and
agreed with the Committee. Mike has agreed to continue
to work with the Group during a handover period which
will end in November 2020.
EXECUTIVE REMUNERATION POLICY
The Committee endeavours to offer competitive
remuneration packages which are designed to
attract, retain and incentivise Executive Directors and
senior members of the management team with the
experience and necessary skills to operate and develop
the Group’s business to their maximum potential,
thereby delivering the highest level of return for the
shareholders. Consistent with this policy, the benefits
packages awarded to Executives are intended to be
competitive and comprise a mix of contractual and
performance related remuneration that is designed to
incentivise them; but not to detract from the goals of
corporate governance. The remuneration packages for
the Executive Directors were entered into on 24 June
2015; or the date of their appointment if later. The
composition of each Director’s remuneration is based
on a maximum payment under the terms of an annual
performance related bonus. Remuneration packages are
reviewed each year to ensure that they are in line with
the Group’s business objectives.
No Director participates in decisions about their own
remuneration package. The main components in
determining pay are as follows:
50
INSPIRATION-HEALTHCARE.COMGOVERNANCE
BASIC SALARY/FEES AND BENEFITS
The basic annual salary is subject to an annual review,
which takes into account the performance of the Group
and the individual as well as market factors. Benefits
comprise the provision of a vehicle allowance, private
healthcare insurance and a death in service insurance
scheme. The annual basic salaries of the Executive
Directors as at 31 January 2020 is as follows:
N J Campbell
£76,014
£14,760
2020
2019
T Foster
M J Briant
PENSIONS
£63,345
£63,345
£12,300
£12,300
£202,704
£39,360
N J Campbell
£152,028
£147,600
2020
2019
Executive Directors receive pension contributions of
5% of basic salary to a stakeholder or money purchase
scheme on a matched contribution basis.
T Foster
M J Briant
£126,690
£123,000
£126,690
£123,000
SHARE OPTIONS SCHEME
EXECUTIVE PAY RATIO REPORTING
Whilst the Group is not obliged to report on this matter
the Board wishes for the business to be as transparent
as possible on public and social issues. Therefore, as
part of a business wide review to consider Gender Pay
Gap issues the business also reviewed the Executive
Pay Ratio Reporting. The business was pleased that
there were no anomalies identified. Executive Pay Ratio
Reporting revealed that the highest paid executive
receives less than 4 times the average salary within the
business and 8 times the lowest package.
ANNUAL PERFORMANCE RELATED BONUS
Demanding annual performance targets, which are
consistent with both the short and long-term objectives
for the Group, are set for Executive Directors which must
be achieved before the bonus is payable. The Executive
Bonus scheme for FY2020 continued to be the same
as the previous year, with the bonus being a maximum
of 50% of salary. All bonus calculations are excluding
benefits in kind and pension contributions. Bonus
targets are linked to operational performance across a
number of measures including revenue, operating profit,
cash flow and health & safety. Against these criteria
the Remuneration Committee has awarded bonuses
to the Executives for the year ended 31 January 2020
equivalent to 50% (FY2019: 10%) of salary as below,
reflecting that all objectives under the scheme were
achieved.
Share options can be granted to Executive Directors
to encourage them to deliver sustained, long-term
growth. Except in exceptional circumstances, the value
of options granted in any year will not exceed one third
of basic salary. During FY2018, we implemented an
LTIP (Long term Incentive Plan) for Executives and
Senior Management, which is consistent with the Share
Scheme as described in the admission document 2015.
Nil cost options, which are subject to performance
conditions (unless noted), were issued to the Directors
as below. No options were issued to Directors in
FY2020.
N J Campbell
T Foster
M J Briant
2020
2019 Outstanding
As at 31
January
2020
–
–
–
–
65,385
57,692
86,014
65,385
57,692
221,352
209,091
344,429
135,338 options granted to Mr Briant in November
2017, which related to the three-year period ended 31
January 2020 and did not have performance conditions,
are scheduled to vest on 8 November 2020 which is the
third anniversary of the grant date. These options may
be exercised within 90 days of Mr Briant’s leaving date.
The 86,014 options granted to Mr Briant in November
2018 will lapse on his leaving date.
No Directors exercised share options during the current
or previous financial year.
51
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information DIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ DETAILED EMOLUMENTS (AUDITED)
The emoluments of the Directors of the parent Company for the year in accordance with the basis of preparation
were as follows:
M S Abrahams
N J Campbell
T Foster
R J Beveridge
B Nolson
M J Briant
Salary
£’000
Bonus
£’000
Pension
Contribution
£’000
Benefit
in kind
£’000
35
152
127
24
51
127
516
–
76
63
–
–
63
202
–
8
6
–
–
7
21
–
11
9
–
–
12
32
2020
Total
£’000
35
247
205
24
51
209
771
2019
Total
£’000
35
179
151
24
24
152
565
The year-on-year change in Mr Nolson’s remuneration reflects a significantly increased time commitment during the
year to support specific projects, see note 33.
SHARE SCHEME (AUDITED)
As part of its strategy for Executive and key employee
remuneration, the Group established on readmission
to AIM on 24 June 2015, a new Share Option Scheme
under which share options may be granted to officers
and employees or members of the Group. Under the
rules of the Share Option Scheme, the Company may
grant both options that qualify as enterprise management
incentives under schedule 5 of the Income Tax (Earnings
and Pensions) Act 2003 and unapproved options over
Ordinary Shares to any employee of the Group and any
of its subsidiaries (including Executive Directors), subject
to various scheme and individual limits.
No option may be granted under the Share Option
Scheme if, as a result, the aggregate nominal value of
ordinary shares in the capital of the Company issued or
issuable pursuant to options granted during the previous
ten years under the Share Option Scheme or any other
discretionary employees’ share scheme adopted by the
Company would exceed 5% of the ordinary share capital
of the Company in issue on that date. The Remuneration
Committee has the discretion to exceed this 5%, in
exceptional circumstances up to a maximum of 10%.
After an initial three-year qualification period options are
exercisable at any time up to the tenth anniversary of the
date of grant subject to a performance criterion (unless
otherwise noted). There are also provisions, which may
allow exercise of the Options in the event of a change of
control, subject to the agreement of the Remuneration
Committee.
In line with our commitment to recruit and retain the
very best people we launched an enterprise management
incentive options scheme to certain key employees in
FY2018. The options are exercisable at nil cost to the
employee and are subject to a performance condition,
to be measured over a three-year period ending on
31 January 2020. The first tranche of options were
issued to key employees in 2018, with the performance
conditions to be measured over the three year period
ended 31 January 2020. The performance conditions
are assessed when the results for the year ended 31
January 2020 are published.
52
INSPIRATION-HEALTHCARE.COMGOVERNANCE During the year the Remuneration Committee concluded
that, with hindsight, the performance measures used
for EMI were inconsistent with the Group’s strategic
objectives and reviewed what the performance measures
should be. In conclusion it was agreed that to use EPS
alone was not correct and that a business that was
driving growth should also be using ‘Revenue’ as a
combined measure. Therefore, it was agreed that the
performance measures would be based 50% on EPS
and 50% on revenue growth and these performance
measures would be applied retrospectively to the EMI in
place from FY2018.
DIRECTORS’ INTERESTS IN SHARES (AUDITED)
In consideration of the above, the Remuneration
Committee has concluded that 25% of the outstanding
100,000 options will be eligible to vest on 8 November
2020 which is the third anniversary of the grant of the
options and the earliest vesting date. Consequently
25,000 options will vest on that date, provided the
recipient is still employed by the company, and the
remaining 75,000 options will lapse.
As at 31 January 2020 there are, including Directors,
583,941 share options in existence.
The Directors’ interests in the 10p Ordinary Shares of the Company at the end of the period were:
M S Abrahams
N J Campbell
T Foster
B Nolson
M Briant
24 April 2020
Number
31 January 2020
Number
31 January 2019
Number
241,201
4,536,271
3,899,908
34,323
34,323
241,201
4,536,271
3,899,908
34,323
34,323
155,154
4,536,271
3,899,908
–
–
The only interests of Directors in share options as at all dates are set out in the Share Option Scheme section above.
More information can be found in the Directors’ Report on pages 48 and 49 setting out substantial interests in the Company.
Brook Nolson Chairman – Remuneration Committee
24 April 2020
53
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information INDEPENDENT AUDITORS’ REPORT
to the Members of Inspiration Healthcare Group plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
› Inspiration Healthcare Group 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 January 2020
and of the group’s profit and cash flows for the year then ended;
› the group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
› the company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law); and
› the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual
Report”), which comprise: the consolidated and company statements of financial position as at 31 January 2020;
the consolidated income statement and consolidated statement of comprehensive income, the consolidated cash flow
statement, and the consolidated and company statements of changes in equity for the year then ended; and the notes
to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Context
The context for our audit is set by Inspiration Healthcare Group plc’s major activities in the year, specifically the
acquisition of one of its key suppliers, Vio Holdings Limited (Viomedex).
Overview
Materiality
› Overall group materiality: £177,500 (2019: £155,000), based on 1% of total revenues.
› Overall company materiality: £135,000 (2019: £78,000), based on 1% of total assets.
Audit scope
› Full scope audit procedures have been performed over the company,
Inspiration Healthcare Limited, Vio Holdings Limited and Viomedex Limited.
Key audit
matters
› Valuation of acquisition of Viomedex (Intangible assets and fair value adjustments)
(Group and company)
› Going Concern and the Impact of COVID-19 (Group and company)
› Carrying value of capitalised development costs (Group)
› Recognition of deferred tax asset (Group)
› Classification of exceptional costs (Group and company)
54
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all
of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Valuation of acquisition of Viomedex (Intangibles
and Fair Value adjustments) (Group and company)
Refer to Note 31 (Business Combinations) and Note 1
(Accounting Policies).
The group has acquired the Viomedex entities during
the year for cash consideration of £3,000,000,
shares issued of £250,000 and with contingent
consideration of £750,000.
The accounting for acquisitions under IFRS 3 requires
significant management judgment in the identification
and valuation of separately identifiable intangible
assets.
Any errors or bias within the fair value assessment
could lead to the misstatement of the goodwill
balance recorded at 31 January 2020 and/or the
misstatement of the post-acquisition performance of
the acquired entities.
We have reviewed the associated legal documents relating
to the purchase of the entities to ascertain if there were
any clauses which could impact the recorded assets and
liabilities;
We have verified the consideration paid to supporting
documentation and bank statements;
We have reviewed the terms of the contingent consideration
included within the Share Purchase Agreement and
considered evidence to support management’s assessment
that the amount to be recognised is nil;
We have challenged the provisional fair values of the
net assets acquired to ensure they are aligned to the
group’s accounting policies and underlying management
information;
With support from Valuations Specialists, we have tested
the validity of the key assumptions underpinning the
valuation of the separately identifiable intangibles and that
the underlying methodology used in the models used are
appropriate; and
We have performed a sensitivity analysis where assumptions
were made by management to determine if any reasonable
changes in key assumptions could result in a material
change in recorded intangible assets.
From our work performed, we have concluded that
management’s assessment is appropriate and consistent
with the requirements of IFRS 3.
55
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information INDEPENDENT AUDITORS’ REPORT CONTINUED
to the Members of Inspiration Healthcare Group plc
Going Concern and Impact of COVID-19
(Group and company)
The COVID-19 (coronavirus) outbreak has caused
disruption to business and economic activity
worldwide and may ultimately impact Inspiration
Healthcare’s future performance.
Management do not anticipate any significant fall
in demand due to the nature of its own branded
products being used in neonatal intensive care units.
Management has also been approached by the NHS
in the UK to source ventilators which, if supply chains
stay resilient, may provide an additional revenue
stream in FY21 revenues.
Management believes the incremental increase in
revenues from the additional ventilator supply has the
potential to offset the short-term operational impacts
of COVID-19.
We have determined management’s consideration of
the potential impact of COVID-19 and the group’s and
company’s ability to continue as a going concern for a
period of at least 12 months from the date of approval
of these financial statements to be a key audit matter,
due to the significant potential impact of COVID-19 on
the group.
Carrying value of capitalised development
costs (Group)
Refer to Note 11 (Intangible Assets) and Note 1
(Accounting policies).
The group has capitalised £192,000 of development
costs during the financial year as it seeks to widen the
range of products on offer.
The criteria for recognising development costs is
set out by accounting standards (IAS 38). The
carrying value of these costs is an important
area of judgement, particularly in respect of the
appropriateness of capitalisation and the subsequent
impairment risk, and as such has been treated as a
key audit matter.
We obtained management’s latest cash flow forecasts which
support the Board’s conclusion on the group’s ability to
continue as a going concern;
We discussed with management the critical estimates and
judgements applied in its latest assessment to understand
and challenge the key assumptions and their sensitivities
applied as a result of COVID-19;
We noted the following factors were fundamental in
management’s consideration of the potential impact of
COVID-19 on the group:
› The group has a significant cash balance of £4.5 million
at 1 February 2020;
› Own branded products are used in neonatal intensive care
units and while there is the potential for some risk in the
supply chain, demand is unlikely to be impacted by an
economic downturn;
› Incremental revenues earned from the supply of
ventilators are expected to offset the operational impact of
COVID-19;
› The group is not anticipating to need to be reliant on any
government support measures through the pandemic.
We have also challenged the assumptions behind a significant
downside scenario that excludes the supply of these new
ventilators and illustrates that the group has adequate cash
resources to deal with significant falls in revenue; and
We considered the appropriateness of the disclosures made
by management and the board in respect of the potential
impact of COVID-19.
Based on our procedures, we consider management’s
assessment of the going concern status of the group to be
appropriate.
We have understood management’s process for monitoring
the progress of each of its development projects;
We tested a sample of development costs incurred in the
year to appropriate supporting documentation and that each
item met the criteria for being appropriately capitalised in
accordance with IAS38;
We have obtained management’s assessment of the
future plans of each project including forecast sales plans
and useful economic lives; and where new products had
already been launched, we compared sales forecasts
from the previous year to actual results to assess
management’s ability to forecast. Due to certain sales
falling behind expectations on management produced
impairment calculations, resulting in immaterial impairment
being recognised during the year. We have tested the
mathematical accuracy and methodology used by
management in their assessment.
Based on the results of our audit work, we have concluded
the carrying value of development costs is appropriate and
consistent with the requirements of IAS 38.
56
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS Recognition of deferred tax asset (Group)
Refer to note 24 (Deferred tax) and Note 1
(Accounting policies). The group has unrecognised
tax losses of £1,291,000 (Gross £7,596,000) arising
from the historical trading of Inditherm plc prior to the
reverse acquisition by Inspiration Healthcare in 2015.
Management has performed an exercise to stream
revenue and costs relating to the legacy trade of
Inditherm which constrains its ability to utilise these
losses.
The research and development activities performed by
the group also mean that qualifying tax credits have
been available to substantially reduce the level of
taxable profits in the year.
Accordingly, no taxable profits are forecast in at
least the next three years and management therefore
deems the level of uncertainty too high to be able to
recognise a deferred tax asset.
This has been deemed a key audit matter due to the
size of the potential asset and the level of judgement
required.
Classification of exceptional costs
(Group and company)
Refer to notes 1 (Accounting policies) and 6
(Exceptional items).
During the year exceptional costs of £383,000 were
recognised in respect of the acquisition of Viomedex
(£217,000), £111,000 relating to the impairment
of the investment in Neuroprotexeon and £55,000
related to other potential future acquisitions.
There is limited guidance within IFRS in respect
to the classification of income statement items as
exceptional and therefore this is an area where
significant management judgement is applied.
This has been deemed a key audit matter as there is
a risk costs could be inappropriately classified within
the financial statements.
How we tailored the audit scope
We have obtained and tested management’s assessment of
the use of historical losses against the streamed trade of the
group;
We have challenged the forecasts made by management
back to Board-approved plans and our knowledge of the
business;
We have considered the advice received by management
from its tax advisers regarding whether historical losses are
available to be carried forward against future profits; and
We have reviewed management’s plans for research and
development in line with those projects currently planned
and approved by the Board, and considered the impact any
tax credits might have in offsetting future profits.
Based on the results of our audit work, we have concluded
that management’s assessment is appropriate and
consistent with the requirements of IAS12.
We have agreed the costs incurred back to supporting
evidence on a targeted basis;
We have understood the rationale for including the items
within exceptional items;
We have understood the rationale for impairing the
investment in Neuroprotexeon and agreed it to supporting
documentation regarding the current financial position and
prospects of the investee; and
We have tested a sample of other items of income and
expenditure for other significant categories in the income
statement to ensure the completeness of the disclosure,
with no material items identified.
Based on the results of our work we have concluded the
treatment of such costs as exceptional is in line with the
requirements of IAS1.
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.
Inspiration Healthcare Group plc is a non trading holding company with two trading entities, Inspiration Healthcare
Limited and Viomedex Limited (indirectly held by the company through Vio Holdings Limited). Inspiration Healthcare
Limited and Viomedex Limited have separate finance teams who are overseen by a common Financial Controller and
Chief Financial Officer. All companies report their financial results and position using the group accounting policies.
Inspiration Healthcare Limited is financially significant to the group based on revenue generated and as such a full
scope audit has been performed over the entity. To ensure sufficient coverage over all group balances, a full scope audit
of Viomedex Limited has been performed for the period post acquisition. Full scope audits have also been completed
over Inspiration Healthcare Group plc and Vio Holdings Limited.
All audit work has been performed by a single team.
57
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information INDEPENDENT AUDITORS’ REPORT CONTINUED
to the Members of Inspiration Healthcare Group plc
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:
Group financial statements
Company financial statements
Overall materiality
£177,500 (2019: £155,000).
£135,000 (2019: £78,000).
How we determined it
1% of total revenues.
1% of total assets.
Rationale for benchmark
applied
Revenue is considered to be the primary
quantitative measure used by the
group’s key stakeholders in assessing
the performance of the group, and is a
generally accepted auditing benchmark.
Total assets is the primary measure used by
shareholders in assessing the performance
of the entity, and is a generally accepted
auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across components was between £22,500 and £168,000. Certain
components were audited to a local statutory audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£8,800 (group audit) (2019: £7,700) and £6,750 (company audit) (2019: £3,900) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report
to you where:
› the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
› the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s and company’s ability to continue to adopt the going concern basis of accounting
for a period of at least twelve months from the date when the financial statements are authorised
for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
group’s and company’s ability to continue as a going concern.
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 Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
58
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us
also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report
and Directors’ Report for the year ended 31 January 2020 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 Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities in respect of the financial statements set out on
page 49, 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.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions,
accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
› we have not received 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.
Paul Norbury (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
East Midlands
24 April 2020
59
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic reportGovernanceFinancial statementsShareholder information CONSOLIDATED INCOME STATEMENT
for the year ended 31 January 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Analysed as:
Operating profit before exceptional items
Exceptional items
Finance income
Finance costs
Profit before tax
Income tax
Profit for the year attributable to owners of the parent company
Earnings per share, attributable to owners of the parent company
Basic expressed in pence per share
Diluted expressed in pence per share
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 January 2020
Profit for the year
Other comprehensive expense items that may be reclassified to profit or loss
Cash flow hedges
Total other comprehensive expense for the year
Total comprehensive income for the year
Note
3
4
6
7
7
8
9
9
Note
22
2020
£’000
17,775
(9,203)
8,572
(7,434)
2019
£’000
15,487
(8,445)
7,042
(5,829)
1,138
1,213
1,521
(383)
9
(21)
1,126
(393)
733
1,213
–
6
–
1,219
(116)
1,103
2.19p
2.15p
3.60p
3.56p
2020
£’000
733
(31)
(31)
2019
£’000
1,103
(6)
(6)
702
1,097
The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Company profit
and loss account.
The notes on pages 65 to 95 are an integral part of these Consolidated Financial Statements.
Neil Campbell
Director
Mike Briant
Director
60
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
as at 31 January 2020
(Registered Number: 03587944)
Group
Company
Note
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Investments
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Financial liability
Contract liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Deferred tax liability
Total liabilities
Net assets
Shareholders’ equity
Called up share capital
Share premium account
Reverse acquisition reserve
Share based payment reserve
Other reserves
Retained earnings
Total equity
11
12
13
14
24
15
16
17
19
20
22
23
19
20
24
25
25
25
25
25
3,655
496
553
–
–
4,704
3,091
4,205
4,480
11,776
16,480
1,293
408
–
111
–
–
–
8
10,406
31
1,812
10,445
718
3,107
2,539
6,364
8,176
–
1,339
1,775
3,114
–
–
–
7,156
11
7,167
–
37
675
712
13,559
7,879
(3,988)
(132)
(40)
(376)
(2,210)
–
(9)
(319)
(1,020)
(6)
–
–
(4,536)
(2,538)
(1,026)
(742)
(426)
(227)
(1,395)
–
–
(105)
(105)
–
(2)
–
(2)
(127)
–
–
–
(127)
–
–
–
–
(5,931)
(2,643)
(1,028)
(127)
10,549
5,533
12,531
7,752
3,838
3,475
(16,164)
153
(34)
19,281
3,067
–
(16,164)
91
(9)
18,548
3,838
3,475
–
308
6
4,904
10,549
5,533
12,531
3,067
–
–
246
–
4,439
7,752
The Company’s profit for the year ended 31 January 2020 is £465,000 (2019: £761,000).
The notes on pages 65 to 95 are an integral part of these Consolidated Financial Statements.
The Group Financial Statements on pages 60 to 95 were approved by the Board of Directors on 24 April 2020 and signed on its behalf by:
Neil Campbell
Director
Mike Briant
Director
61
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Group
At 1 February 2018
Profit for the year
Other comprehensive expense
Total comprehensive income/
(expense) for the year
Note
25
Transactions with owners in their
capacity as owners
Employee share scheme expense
28
Total transactions with owners
At 31 January 2019
Profit for the year
Other comprehensive expense
Total comprehensive income/
(expense) for the year
Transactions with owners in
their capacity as owners
Employee share scheme expense
Issue of ordinary shares as consideration
for a business combination, net of
transaction costs and tax
Proceeds from shares issued, net of
transaction costs and tax
Deferred tax
25
28
25
25
24
Issued
share
capital
£’000
3,067
–
–
–
–
–
3,067
–
–
–
–
771
–
–
–
–
–
–
–
–
–
–
–
–
Share
premium
account
£’000
Reverse
acquisition
reserve
£’000
Share
based
payment
reserve
£’000
Other
reserves
£’000
(3)
–
(6)
Retained
earnings
£’000
17,445
1,103
–
Total
£’000
4,365
1,103
(6)
(6)
1,103
1,097
–
–
–
–
71
71
(9)
18,548
5,533
–
(31)
733
–
733
(31)
(31)
733
702
(16,164)
20
–
–
–
–
–
(16,164)
–
–
–
–
–
–
71
71
91
–
–
–
–
62
–
–
–
–
–
–
–
–
62
153
–
–
6
6
–
–
–
–
–
62
771
3,475
6
4,314
(34)
19,281
10,549
–
–
3,475
–
Total transactions with owners
771
3,475
At 31 January 2020
3,838
3,475
(16,164)
For more information see note 25.
The notes on pages 65 to 95 are an integral part of these Consolidated Financial Statements.
62
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Company
At 1 February 2018
Profit for the year
Total comprehensive expense for the year
Transactions with owners in their capacity
as owners
Employee share scheme expense
28
Total transactions with owners
At 31 January 2019
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity
as owners
Employee share scheme expense
Issue of ordinary shares as consideration for a
business combination, net of transaction costs
and tax
Proceeds from shares issued, net of transaction
costs and tax
Deferred tax
Total transactions with owners
At 31 January 2020
For more information see note 25.
28
25
25
24
Note
Issued
share
capital
£’000
3,067
Share
premium
account
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,067
–
–
–
771
–
–
3,475
–
771
3,475
3,838
3,475
The notes on pages 65 to 95 are an integral part of the Company Financial Statements.
Share
based
payment
reserve
£’000
175
–
–
71
71
246
–
–
62
–
–
–
62
308
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
–
–
6
6
6
3,678
6,920
761
761
–
–
761
761
71
71
4,439
7,752
465
465
–
–
–
–
–
465
465
62
771
3,475
6
4,314
4,904
12,531
63
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 January 2020
Cash flows from operating activities
Cash generated from operations
Interest paid
Taxation received
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Payment for acquisition of subsidiary, net of cash acquired
Interest received
Purchase of property, plant and equipment
Purchase of intangible assets
Capitalised development costs
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of shares
Share issue costs
Principle elements of lease payments
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The notes on pages 65 to 95 are an integral part of these Consolidated Financial Statements.
Note
26
8(b)
8(b)
31
12
11
11
2020
£’000
1,616
(21)
104
(235)
1,464
(3,000)
9
(163)
(24)
(192)
(3,370)
4,246
(250)
(149)
3,847
1,941
2,539
4,480
2019
£’000
995
–
–
(147)
848
–
6
(101)
(24)
(276)
(395)
–
–
–
–
453
2,086
2,539
64
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
1 ACCOUNTING POLICIES
Inspiration Healthcare Group plc (“Company”) is a public limited company incorporated in England and Wales and domiciled
in England. The Company’s registered address is Unit 2, Satellite Business Village, Crawley, West Sussex, RH10 9NE and the
registered company number is 03587944. The Company’s ordinary shares are traded on the AIM Market of the London Stock
Exchange plc.
The principal activities of Inspiration Healthcare Group plc and its subsidiaries (together, the “Group”) continue to be the sale,
service and support of critical care equipment to the medical sector including hospitals.
Basis of preparation
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied unless otherwise stated.
There is no ultimate controlling party.
The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment
in which it operates (the functional currency). The Group Financial Statements are presented in pounds sterling, which is the
presentation currency of the Group.
Significant changes in the current year
The financial position and performance of the Group was particularly affected by the following events and transactions during
the year:
› The adoption of IFRS 16, Leases under the modified retrospective approach from 1 February 2019, see note 32.
› The acquisition of Vio Holdings Limited and its subsidiary, Viomedex Limited, on 24 September 2019 (see note 31),
which resulted in an increase in property, plant and equipment and the recognition of goodwill, other intangible assets
and net working capital.
Group
The Consolidated Financial Statements cover the year ended 31 January 2020.
The Consolidated Financial Statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards as adopted by the European Union (“Adopted IFRSs”), issued by the International Accounting
Standards Board (IASB), including interpretations by the International Financial Reporting Interpretations Committee (IFRIC), and
the Companies Act 2006 applicable to companies reporting under IFRS. The Consolidated Financial Statements are prepared under
the historical cost convention, as modified for any financial assets or liabilities which are stated at fair value through operating profit
or loss and for share based payments which are measured at fair value.
Company
The Company Financial Statements cover the year ended 31 January 2020.
The financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’
(“FRS 101”). The financial statements have been prepared under the historical cost convention and in accordance with the
Companies Act 2006 as applicable to companies using FRS 101.
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are
disclosed elsewhere in this note.
65
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
1 ACCOUNTING POLICIES continued
The following exemptions from the requirements of IFRS have been applied in the preparation of the Company Financial
Statements, in accordance with FRS 101:
› Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted-average exercise prices of
share options, and how the fair value of goods or services received was determined)
› IFRS 7, ‘Financial Instruments: Disclosures’
› Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities)
› Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information requirements in respect of:
– paragraph 79(a)(iv) of IAS 1
– paragraph 73(e) of IAS 16 Property, plant and equipment
› The following paragraphs of IAS 1, ‘Presentation of financial statements’:
– 10(d) (statement of cash flows)
– 10(f) (a statement of financial position as at the beginning of the preceding period when an entity applies an accounting
policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in
its financial statements)
– 16 (statement of compliance with all IFRS)
– 38A (requirement for minimum of two primary statements, including cash flow statements)
– 38B-D (additional comparative information)
– 40A-D (requirements for a third statement of financial position)
– 111 (cash flow statement information)
– 134-136 (capital management disclosures)
› IAS 7, ‘Statement of cash flows’
› Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the disclosure
of information when an entity has not applied a new IFRS that has been issued but is not yet effective)
› Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation)
› The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or more
wholly owned members of a group
The accounting policies of the Company are the same as for the Group.
BASIS OF CONSOLIDATION
The financial statements of the Group consolidate the financial statements of Inspiration Healthcare Group plc and its subsidiary
undertakings (together referred to as the “Group”) up to 31 January each year. All subsidiaries have a reporting date of 31 January.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights
that are currently exercisable or convertible are taken into account.
The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control
commences until the date that control ceases, in accordance with IFRS 10. Intra group transactions and balances, and any
unrealised gains or losses arising from intra group transactions, are eliminated in preparing the Consolidated Financial Statements.
Going concern basis
The Group provides critical care equipment to the NHS, to NHS suppliers and to distributors who provide the equipment to other
healthcare systems internationally. With a focus on neonatal intensive care the use of the Group’s products is not something that
can reduced by election or choice and consequently demand for the Group’s products is likely to continue or increase in a situation
like the Covid-19 virus outbreak. Although the Group has no information to suggest such a scenario might occur the Group have
modelled a significant downside scenario based on the main risks to the Group associated with Covid-19 – as identified in the Risks
and Uncertainties on page 32 to 36 of the Annual Report.
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INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
1 ACCOUNTING POLICIES continued
Based on the above, available funds of £4.5 million at 31 March 2020 and the ability to implement some mitigating actions
identified by the Board in response to a significant Covid-19 trading downturn, the Directors believe that the Group has sufficient
liquidity to meet obligations as they fall due for at least twelve months from 24 April 2020 and, therefore, consider it appropriate to
prepare the financial statements on the going concern basis. Further information on the Group’s cash resources as at 31 January
2020 is given in note 17.
Critical estimates and judgements
The presentation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual
results. Management also needs to exercise judgement in applying the Group’s accounting policies.
Judgements
The Group applies judgement in how it applies its accounting policies, which do not involve estimation, but could materially affect
the numbers disclosed in these financial statements. The key accounting judgements, without estimation, that have been applied in
these financial statements are as follows:
› Taxation Provision
In arriving at the tax provision required at the balance sheet date management make a judgement on the accuracy of preliminary
tax computations prior to their submission and acceptance by the tax authorities. As a significant investor in research and
development expenditure this includes judgement on the accuracy of the calculation of R&D tax credits included within
the preliminary computation. Although all endeavours are made to reflect the correct R&D tax credits in the preliminary tax
computation the final tax computation submitted to the relevant tax authorities may differ. See note 8(c) for the impact on the tax
provision as at 31 January 2020 of R&D tax credit claims made for the year.
› Investment In Neuroprotexeon Limited (“NPXe”)
The Group has previously held its investment in NPXe at cost, which amounted to £111,000. During the year NPXe filed a
voluntary petition to reorganise under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of
Delaware. As a result it is the Board’s judgement that the investment should be fully impaired. The impairment of £111,000 has
been included in exceptional items in the Consolidated Income Statement for the year.
› Capitalisation of development costs
In order to capitalise product development costs, there is a requirement for detailed analysis of the technical feasibility and
judgement on the commercial viability of the project. The Board regularly reviews this judgement in respect of relevant
development projects. Commercial viability is based on the future prospects for revenue generated through sales of the
products that are being developed and expected costs to complete the development, as well as costs to make the products.
These estimates are based on historical experience and other factors, including the achievement and timing of regulatory and
registration requirements as well other expectations of future events that are believed to be reasonable under the circumstances.
Actual results may not be in line with the estimates made. The value of product development costs capitalised during the year
was £192,000 (2019: £276,000). Note 11 provides more information on capitalised development costs.
› Acquisition-related intangible assets and goodwill arising on acquisition
Under the Acquisition Method of Accounting the Group identifies the assets acquired and liabilities assumed and measures them
at their fair value at the acquisition date. The Group applies judgements in recognising separately identifiable acquisition-related
intangible assets and their fair value. In arriving at the judgements the Group takes account of its knowledge of the acquired
business including due diligence it or its advisers have carried out, knowledge of the market place and assessment of business
relationships of the acquired business.
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NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
1 ACCOUNTING POLICIES continued
Accounting Estimates
The Group is required to make judgements based on estimates and assumptions concerning the future in order to fully comply with
Adopted IFRSs. These judgements and estimates are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Although these estimates are based on management’s
best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future periods affected.
The following are areas that are deemed to require the most complex judgements about matters that have potential material impacts
on the amounts recognised in the financial statements.
The key estimates applicable to the financial statements, which have a significant risk of resulting in a material adjustments in
future financial years are as follows:
Deferred taxation
Judgement is required on whether future profitability is likely in making the decision whether or not to recognise a deferred tax
asset. The Group has a potential deferred tax asset which has not been recognised due to the uncertainty of the timing of utilising
tax losses. Unused trading losses totalling £7,596,000 arose in Inditherm plc prior to the reverse acquisition by Inspiration
Healthcare Limited and change of name to Inspiration Healthcare Group plc in 2015. Following a hive-down exercise undertaken
with effect from 31 January 2017 the losses have been transferred to Inspiration Healthcare Ltd. There is no time limit on utilising
the brought forward losses, but they can only be set-off against profits generated from the same trading activities they were
generated from. Assessment of future taxable profit of relevant trading activities is based on estimates of future revenue streams,
costs, investment in research and development together with related assumptions on tax credits receivable on such expenditure,
amongst other things. Actual taxable profit and the timing of utilising the brought forward losses may vary from the estimates made.
The analysis and assessment of the likelihood of utilising the losses is reviewed on an annual basis. Should all losses be able to be
utilised in the future the amount of unrecognised deferred tax as at 31 January 2020 is £1,291,000 (2019: £1,291,000) which is
£7,596,000 at a deferred tax rate of 17% (2019: 17%). See also note 24 on Deferred Tax.
Impairment
– Carrying value of capitalised development costs
The fair value of capitalised development costs is determined by discounting estimated future net cash flows generated by the
asset where no active market for the asset exists. The net book value of capitalised development costs at as 31 January 2020 is
£1,094,000 (2019: £1,155,000). See note 11 for more information on capitalised development costs. Additionally, judgement is
required on the appropriate amortisation rates applied to the capitalised product development costs of completed developments,
which are based on estimates of useful lives of between 5 to 10 years and residual values of the assets involved. Actual product
lives may vary from estimates made. Amortisation of product development costs during the year was £181,000 (2019: £130,000).
For each year that the actual product life differs from the estimate made, if applied equally across all such developments, the
amortisation charge for the year would vary by £32,000 (2019: £22,000).
– Acquisition related intangible assets and goodwill arising on acquisition
The fair value of acquisition-related intangible assets is determined in accordance with the methods commonly applied under
IFRS3. These methods include discounting estimated future net cash flows generated by the asset, applying estimated commercial
royalty rates and estimating cost of replacement. The use of different assumptions for the expectations of future
cash flows and discount rates, estimated royalty rates or estimates costs of replacement could change the valuation of the
acquisition-related intangible asset. Goodwill arising on acquisition is not subject to amortisation and is tested annually for
impairment. The net book value of acquisition-related intangible assets and goodwill arising on acquisition as at 31 January 2020
are £449,000 and £2,021,000 respectively.
The use of different assumptions for the expectations of future cash flows and the discount rate could change the valuation of the
intangible asset. The discount rate takes account of the current market conditions and this has been applied as a pre-tax discount
factor to obtain current value.
Impairment testing is an area involving management’s judgement, requiring assessment as to whether the carrying value of
each asset can be supported by the net present value of estimated future cash flows derived from such asset using cash flow
projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain
assumptions are required to be made in respect of highly uncertain matters including management’s expectations of:
› the selection of discount rates to reflect the risks involved;
› future revenue and costs;
› long term growth rates.
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1 ACCOUNTING POLICIES continued
Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash
flow projections, could significantly affect the Group’s impairment evaluation and hence results.
Share based payments
The Group has issued share options to Executive Directors and other key employees. In arriving at the charge to the Income
Statement for Share Based Payments the Board have to apply judgement on the likelihood of the performance conditions of the
options being achieved. In doing so the Board takes account of a range of potential outcomes based on annual budgets, future
projections and other factors. The Share based payment charge for the year was £62,000 (2019: £71,000).
Property, plant and equipment
Items of property, plant and equipment are measured at historical cost less accumulated depreciation and any impairment. Costs
include expenditure that is directly attributable to the acquisition of the asset. Depreciation is provided to write off the cost, less
estimated residual value of property, plant and equipment by equal instalments over their estimated useful economic lives. The
assets residual values and useful economic lives are reviewed, and adjusted as appropriate, at each year-end date. When parts of
an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components)
of property, plant and equipment.
The following rates are applied:
Leasehold improvements
Over the term of the lease
Fixtures and fittings
10% - 25% per annum
Motor vehicles
25% per annum
Plant, machinery and office equipment
15% - 33% per annum
Repairs and maintenance are charged to the Consolidated Income Statement during the financial year in which they are incurred.
Leases
Until the 2019 financial year, leases of property, plant and equipment were classified as either finance leases or operating leases.
Payments made under operating leases, net of any incentives received from the lessor, were recognised in the Consolidated
Statement of Comprehensive Income on a straight-line basis over the term of the lease. Any leases where the Group assumed
substantially all of the risks and rewards of ownership are classified as finance leases. From 1 February 2019, leases are
recognised as a right of use asset and a corresponding lease liability at the date at which the leased asset is available for use
by the Group.
The Group assesses whether a contract is or contains a lease at inception of a contract. The Group recognises a right of use asset
and a corresponding lease liability with resect to all lease agreements in which it is the lessee, except for short-term leases (defined
as leases with a lease term of 12 months or less) and leases of low value assets.
The lease liability is initially measured at the net present value of the lease payments that are not paid at the commencement date,
discounted using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing
rate, being the rate 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. Lease payments are allocated
between principle and finance cost. The finance cost is charged to the Consolidated Income Statement over the lease period so as
to produce a consistent periodic rate of interest on the remaining balance of the liability for each period.
The right of use assets are measured at cost comprising the amount of the initial measurement of the lease liability. Right of use
assets are depreciated over the shorter period of the lease term and useful life of the underlying asset on a straight-line basis.
See note 32 for further information.
Intangible assets
Intangible assets are recognised if it is possible to demonstrate that there will be future economic benefits attributable to the asset,
the cost of the asset can be measured reliably, the asset is separately identifiable and there is control over the use of the asset. All
intangible assets recognised are considered to have finite lives (unless otherwise stated) and are amortised on a straight-line basis
over the period over which the Group expects to benefit from these assets, and included within operating expenses. Provision is
made for any impairment in the carrying amount of the intangible asset if applicable.
Intellectual property
Purchased intellectual property rights are capitalised and amortised over management’s estimate of their useful economic life or
term of the relevant contract up to a maximum of 10 years.
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Capitalised development costs
Where the criteria for capitalisation in IAS 38 ‘Intangible assets’ are met, costs incurred are capitalised and amortised over
their useful economic lives from the point the products are launched to market. The capitalised values are reviewed against the
discounted future economic value, and adjusted as appropriate, at each year-end date. Development expenditure on an individual
project is recognised as an intangible asset when the Group can demonstrate:
› the technical and commercial feasibility of completing the intangible asset so that the asset will be available for use or sale
› its intention to complete and its ability and intention to use or sell the developed asset
› its future economic benefits are probable
› the availability of adequate technical, financial and other resources to complete the asset
› the ability to measure reliably the expenditure attributable to the asset during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset
is available for use. It is amortised over the period of expected future benefit from the asset which varies between 5 and 10 years.
Amortisation is recorded in operating expenses. During the period of development, the asset is tested for impairment annually.
Research costs
Research expenditure is written off to the Consolidated Statement of Comprehensive Income in the year in which it is incurred.
Software costs
Where the criteria for capitalisation in IAS 38 ‘Intangible assets’ are met, software costs incurred are capitalised and amortised
over their useful economic lives from the point that the software is brought into service. Estimated useful life varies between
3 and 5 years.
Impairment
Intangible assets and goodwill are considered to be impaired if objective evidence suggests that one or more events have had a
negative effect on the estimated future cash flows of that asset. If any such indication exists, the asset’s recoverable amount is
estimated. For goodwill and intangible assets that have an indefinite useful life, the recoverable amount is estimated at each year
end date. Impairment losses are recognised in the Consolidated Statement of Comprehensive Income.
Calculation of recoverable amount
Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss would be recognised whenever the carrying amount
of an intangible asset or its cash generating unit exceeds its recoverable amount.
The recoverable amount is the greater of the asset’s fair value less costs to sell and its value in use. In assessing an asset’s 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.
Business combinations
The acquisition method of accounting is used to account for all business combinations.
Identifiable assets acquired and liabilities assumed in a business combination are, with limited exceptions, measured initially at
their fair values at the acquisition date. These are amortised over their useful lives which are individually assessed.
Intangibles assets acquired consist of customer contracts/relationships, tradename and technology for which the estimated useful
life varies between 5 and 7 years.
Acquisition related costs are expenses as incurred.
The excess of the consideration transferred over the fair value of the net identifiable assets and intangible assets acquired is
recorded as goodwill. Goodwill is not amortised but is tested annually for impairment, or more frequently when events or changes
in circumstances indicate that the carrying amount may be impaired. Goodwill is stated at fair value less any accumulated
impairment losses.
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1 ACCOUNTING POLICIES continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct material and, where applicable, direct
labour costs and those overheads that have been incurred in bringing inventories to their present location and condition on a first in
first out basis.
Net realisable value is based on estimated selling price less additional costs to completion or disposal. Allowance is made for
obsolete, defective and slow moving items based on estimated future usage.
Recognition and valuation of financial assets and liabilities
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, deposits held on call with banks, other short term highly liquid
investments with original maturities of three months or less, and bank overdrafts which are repayable on demand.
Investments
Investments held are stated at cost less provision for any impairment in value and are classified as financial asset at fair value
through profit or loss.
This classification depends on the Group’s business model for managing the financial assets.
Trade and other receivables
Trade and other receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. The
Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for
all trade receivables and contract assets. The recoverable amount is calculated as the present value of estimated future cash flows.
Estimated future cash flows are not discounted due to the relatively short period of time between recognition of trade receivables
and receipt of cash.
Trade and other payables
Trade payables are obligations to pay for goods and services. The value of trade payables is the value that would be payable to
settle the liability at the year end date.
Provisions
Provisions for liabilities are made where the timing or amount of settlement is uncertain. A provision is recognised when: the Group
has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required
to settle the obligation; and the amount can be reliably estimated. Provisions are not discounted on the grounds of materiality as
permitted under IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.
Foreign currency transactions and balances
Transactions in foreign currencies are translated to Sterling at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the year end date are retranslated to Sterling at the foreign
exchange rate ruling at that date. Any exchange differences arising on the settlement of monetary items or on translating
monetary items at rates different from those at which they were initially recorded are recognised in the Consolidated Statement of
Comprehensive Income in the year in which they arise.
Derivatives and hedging activities
The Group uses forward currency contracts to hedge its exposure to the financial risks of changes in foreign exchange rates, in
relation to Euro inventory purchases during the year. The hedging gains and losses are ultimately recognised in profit or loss
through cost of sales during the year. The Group does not use derivative financial instruments for speculative purposes.
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged
items including whether changes in the cash flows of the hedging instruments are expected to offset changes in cash flows of
hedged items. The Group documents its risk management objective and strategy for undertaking its hedge transactions.
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1 ACCOUNTING POLICIES continued
Forward currency contracts are fair valued at each balance sheet date. Changes in the fair value on the forward currency contracts
that are designated and effective as hedges of future cash flows are recognised directly in equity. Amounts deferred in equity are
recognised in the Consolidated Income Statement in the same year in which the hedged item affects the Consolidated Income
Statement.
The full fair value of a hedging derivative is classified as a current asset or liability when the remaining maturity of the hedged item
is less than 12 months. Trading derivatives are classified as a current asset or liability.
Employee benefits
Defined contribution pension plans
The costs of contributing to defined contribution stakeholder pension scheme and employees’ personal pension schemes are
charged to the Consolidated Income Statement in the year in which they relate. The Group has no further legal or constructive
obligations once the contributions have been paid.
Share-based incentives
The Group operates an equity settled share scheme for certain employees. The cost of equity settled share based payments is
measured at fair value at the date of grant, excluding the effect of non-market based vesting conditions. The cost is recognised
in the Consolidated Income Statement on a straight-line basis over the vesting period with the corresponding amount credited
to equity, based on an estimate of the number of shares that will eventually vest. The fair values are measured using the Black-
Scholes model. Please refer to note 28 for more information.
Grants
Revenue based grants are credited as other operating income to the Consolidated Income Statement against related expenditure
while grants of a capital nature are treated as deferred income and are transferred to the Consolidated Statement of Comprehensive
Income over the expected useful lives of the relevant assets.
Revenue recognition
The Group either recognises revenue from contracts with customers at a point in time or over time as outlined below.
Under IFRS 15 any one the 3 criteria below must be met in order for revenue to be categorised as “over time”. If none are met then
the transaction is deemed to be at a “point in time”.
› Customer receives benefits as performed/another would not need to re-perform
› Create/enhance an asset a customer controls
› Does not create an asset with alternative use and a right to payment for work to date
The Group recognises revenue at a point in time where there is a distinct obligation to transfer goods to the customer, none of the
above criteria are met and the transfer to the customer of control of the goods has taken place, which is no different to previous
policy. The Group exercises judgement on the point at which transfer of control has taken place, which is, dependent upon
individual contract shipment terms, typically assessed to be when risk in the goods has been assumed by the customer. The goods
supplied are primarily medical devices or parts used in medical devices.
The Group recognises revenue over time where there is an obligation to transfer a service to the customer. This applies to the
provision of technical support of products which are owned by the customer, under a service contract running for a contract period,
which provides for service visits as well as attendance for non-routine faults during the term of the contract. The Group recognises
the revenue evenly over the duration of the contract as the timing of the visits and provision of the service is not predetermined and
this, in the judgement of the Directors, is the most appropriate reflection of the service being provided.
The transaction price applied to recognise revenue is the price reflected in the sales invoice submitted to the customer, both for at
the point of sale and over time which are invoiced separately.
Revenue is shown net of value added tax, returns, rebates and discounts.
Provisions for costs are charged to the Consolidated Income Statement when incurred. No provision is made for future costs on
service and maintenance contracts. Provision is made in full for any losses as soon as they can be foreseen. Any provisions for
foreseeable losses in excess of contract balances are included in current liabilities.
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1 ACCOUNTING POLICIES continued
The performance of products is warranted against clearly defined performance specifications established by reference to the
technical and development testing carried out at the manufacturing facility. The estimated cost of the work to be performed under
warranty on items sold by the Group would be provided for if management were aware of any field issues that needed rectification.
At 31 January 2020 no provision is required (2019: £nil) and management are not aware of any material field issues that would
require a provision to be made for products supplied for distribution outside of the manufacturers’ warranties.
Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenue and expenses that relate to transactions with any of the Group’s other components. The Board of
Directors consider that it is appropriate to report results as one single business segment, i.e. Critical Care Medical Devices. This is
consistent with management accounting information reported regularly to the Board. The Group’s Chief Operating Decision Maker
is considered to be the Board. Following the acquisition of Vio Holdings Limited and its subsidiary this approach is still considered
appropriate as Vio Holdings Limited operates within the same business segment as the Group.
Exceptional items
Items that are considered significant by virtue of their size or their nature, or that are non-recurring, are disclosed on the face
of the Consolidated Statement of Comprehensive Income as exceptional items to enable a full understanding of the underlying
performance of the Group.
Taxation
Tax on the profit or loss for the year comprises the current and deferred tax. Tax is recognised in the Consolidated Statement
of Comprehensive Income except to the extent that it relates to items directly recognised in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
year end date and any adjustment in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:
› the initial recognition of goodwill
› the initial recognition of assets and liabilities that affect neither accounting nor taxable profit other than in a
business combination; and
› the differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the expected amount of realisation or settlement of the carrying amount of assets
and liabilities using tax rates enacted or substantively enacted at the year end date. A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised within a
reasonable future timescale.
New standards, amendments and interpretations
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing
1 February 2019:
› IFRS 16 - Leases
› Annual Improvements to IFRS Standards 2015 – 2017 Cycle
The Group had to change its accounting policies following the adoption of IFRS 16 modified retrospective approach. See Note 32.
The other 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.
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New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 January 2020 reporting
periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future transactions.
Alternative financial measures
In the reporting of its financial performance, the Group uses certain measures that are not defined under IFRS, the Generally
Accepted Accounting Principles (GAAP) under which the Group reports. The Directors believe that these non-GAAP measures assist
with the understanding of the performance of the business. These non-GAAP measures are not a substitute for, or superior to, any
IFRS measures of performance but they have been included as the Directors consider them to be an important means of
comparing performance year-on-year and they include key measures used within the business for assessing performance.
2 SEGMENTAL ANALYSIS
Inspiration Healthcare Group operates in a single business segment: Critical Care Medical Devices. Within this segment the Group’s
sales activities are split into three market sectors: Critical Care, Operating Theatre and Home Healthcare and these sectors are defined
and reported in Our Business Strategy and the Operating and Financial Review sections of the strategic report. There is no inter-sector
trading. Following the acquisition of Vio Holdings Limited and subsidiary companies this approach is still considered appropriate as Vio
Holdings Limited operates within the same market sectors as the Group.
The sectors are defined in the Our Business Strategy on pages 6 to 14.
3 REVENUE
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following geographical split:
2020
£’000
11,300
450
3,686
579
648
1,112
2019
£’000
9,772
351
2,853
320
782
1,409
17,775
15,487
2020
£’000
8,052
7,574
201
1,948
2019
£’000
7,180
6,341
272
1,694
17,775
15,487
Domestic
– UK
– Ireland
International
– Europe
– Asia Pacific
– Middle East & Africa
– Americas
Total
Significant categories of revenue
Revenue recognised at a Point in Time
– Own Branded Products
– Distributor Products
– Other
Revenue recognised Over Time
– Technical Support
Total
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INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS
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3 REVENUE continued
No single customer accounted for more than 10% of revenue.
All revenue reported by the Group and the Company is from contracts with customers.
The relationship between the timing of the satisfaction of the Group’s performance obligations and the typical timing of payments
from contracts with customers is as follows:
› For revenue recognised at a point in time a receivable is recognised when the goods are delivered, which completes our
performance obligation. At this point in time the consideration is unconditional because only the passage of time is required
before payment is due. Payment is typically due between 30 and 60 days following delivery of the goods.
› For revenue recognised over time, payment is typically received annually in advance of the service contract commencing.
The performance obligations are met over the duration of the contract. A Contract Liability is recognised and adjusted at each
reporting period to reflect unsatisfied performance obligations based on a straight-lined apportioned basis over the term of the
customer contract. Included in revenue for the year is £319,000 which had been included in Contract Liabilities at 1 February
2019 (2019: £328,000). See note 23 on Contract Liabilities for more information.
There have been no significant changes in contract assets or liabilities year-on-year.
The Group does not currently have any material value of contracts where the period between the transfer of the goods or services to
the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction
prices for the time value of money. Contract Liabilities are detailed in note 23.
The contracts from customers do not include any variable consideration. There are no obligations for returns or refunds other than
any required by law in the United Kingdom
Costs associated with the fulfilment of the contracts from customers are either, in the case of revenue recognised at a point in time,
recognised at the same time as the revenue is recognised, or, in the of case revenue recognised over time, as incurred. No costs of
obtaining contracts are capitalised.
4 EXPENSES BY NATURE
Inventories recognised as an expense
Other cost of sales
Employee benefit expense
Depreciation
– property, plant and equipment (note 12)
– right of use assets (note 13)
Amortisation (note 11)
– intangible fixed assets
– acquisition related intangible assets
Impairment of intangible fixed assets (note 14)
Trade receivables loss allowance
Loss on disposal of intangible and tangible assets
Foreign exchange (gains)/losses
Operating lease rentals
R&D expenditure
Exceptional Items (note 6)
Other expenses
Total cost of sales and operating expenses
The numbers above include:
Auditors’ remuneration
Audit fees payable to the Group’s auditor - Group
Audit fees payable to the Group’s auditor - Company
Total audit fees payable to the Group’s auditor
Non-audit services provided by the Group’s auditor
Total non-audit services provided by the Group’s auditor
2020
£’000
8,834
369
4,621
168
154
252
43
72
–
–
(25)
–
48
383
1,718
2019
£’000
8,024
421
3,749
151
–
213
–
–
7
5
6
168
17
–
1,513
16,637
14,274
67
26
93
8
8
32
26
58
1
1
Non-audit services provided were £8,000 for generic acquisition accounting training (2019: £1,000 for a subscription
to web-based accounting products and services).
75
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
5 EMPLOYEES
Aggregate employee costs are as follows:
Wages and salaries
Social security costs
Other pension costs
Share option charge
Total
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
3,956
457
146
62
4,621
3,205
366
107
71
3,749
105
6
–
62
173
90
9
–
71
170
Employee costs include the costs of the Executive Directors but not the Non-executive Directors, along with severance payments
of £nil (2019: £nil).
Company employment costs are recharged from a subsidiary company, Inspiration Healthcare Limited.
Monthly average number of persons employed (including Executive Directors and excluding agency staff) analysed by category:
Management and Administration
Sales
Development and Quality
Production
Total
No employees are directly employed by the Company.
Key management emoluments (including Executive Directors)
Aggregate emoluments:
Emoluments of the Directors and key management personnel
Contributions to defined contribution pension scheme on their behalf
Total
Emoluments of highest paid Director
Contributions to defined contribution pension scheme
Total
No emoluments were paid by the Company.
Group
2020
£’000
2019
£’000
32
32
16
8
88
26
30
11
–
67
Group
2020
£’000
2019
£’000
750
21
771
239
8
247
546
19
565
172
7
179
The number of Directors for whom retirement benefits are accruing under defined contribution pension schemes during the year
were 3 (2019: 3).
No Directors exercised share options during the year (2019: none).
This note should be read in conjunction with the Directors’ Remuneration Report on pages 50 to 53.
76
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
6 EXCEPTIONAL ITEMS
Expenses relating to the acquisition of Vio Holdings
Limited and subsidiary undertaking
Other acquisition expenses
Impairment of investment in Neuroprotexeon Limited
Total
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
217
55
111
383
–
–
–
–
192
55
–
247
–
–
–
–
The Group presents certain items as non-recurring and significant. These relate to items which, in management’s judgement, need
to be disclosed by virtue of their size and nature in order to obtain a more meaningful understanding of the financial information.
These are all included within administrative expenses in the Consolidated Income Statement.
Exceptional items relating to the acquisition of Vio Holdings Limited and subsidiary undertakings relate principally to legal fees of
£100,000, professional services of £40,000, stamp duty of £26,000 and dual running costs of £25,000.
Other acquisition exceptional items relate to the exploration of additional potential acquisitions during the year.
The investment in Neuroprotexeon Limited has been impaired in full due to Neuroprotexeon filing a voluntary petition to reorganise
under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, see note 14.
7 FINANCE INCOME AND COSTS
Finance income
Bank interest receivable
Finance costs
Other interest payable - Leases (note 32)
The Company initially applied IFRS 16 at 1 February 2019 using the modified retrospective approach.
8 INCOME TAX
(a) Analysis of tax charge for the year
Domestic current year tax *
UK corporation tax
Current year
Prior year adjustment
Total current tax expense
Deferred tax (see note 24)
Origination and reversal of temporary timing differences
Prior year adjustment
Total deferred tax
Tax expense on profit on ordinary activities
* All tax in both 2020 and 2019 arose in the UK.
2020
£’000
2019
£’000
9
(21)
6
–
2020
£’000
2019
£’000
275
–
275
84
34
118
393
149
(104)
45
15
56
71
116
77
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
8 INCOME TAX continued
(b) Analysis of current corporation tax assets and liabilities
Net asset/(liability) at 1 February 2019 (see note 18)
Tax payments
Final payments relating to prior year
Payments on account relating to current year
Total tax payments made during the year
Tax receipts in relation to prior year
Current year UK corporation tax charge
Other
Prior year adjustment
Net (liability)/asset at 31 January 2020 (see note 18)
2020
£’000
30
74
161
235
(104)
(275)
(9)
–
(123)
2019
£’000
(70)
70
77
147
–
(149)
(2)
104
30
(c) Factors affecting tax charge for the year
The tax assessed for the year is higher (2019: lower) than the standard rate of corporation tax in the UK 19.00% (2019: 19.00%)
as explained below:
Profit on ordinary activities before taxation
Tax using the effective UK corporation tax rate of 19.00%
(2019: 19.00%)
Effects of:
Non-deductible expenses
Additional deduction for research and development
Intangibles arising on business combinations
Amendments to deferred tax and timing
Total tax expense
Effective tax rate
Effective tax rate adjusted for significant prior year amendments
2020
£’000
1,126
2019
£’000
1,219
214
86
(49)
117
25
393
232
14
(63)
–
(67)
116
Effective Tax Rate
2020
%
2019
%
19.0
7.6
(4.4)
10.4
2.3
34.9
–
19.0
1.2
(5.1)
–
(5.6)
9.5
13.5
The effective tax rate for FY2020 is higher than FY2019. The largest factors impacting the increased effective tax rate are the
charge relating to intangibles arising on the acquisition of Vio Holdings Limited, the non-deductible impairment (see note 14)
and the value of R&D tax credits. The value of R&D tax credits depends upon the level of expenditure incurred in research and
development on qualifying projects, which may vary from year to year.
In the Spring Budget 2020, the Government announced that from 1 April 2020 the corporation tax rate would remain at 19%
(rather than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020. As the
proposal to keep the rate at 19% had not been substantively enacted at the balance sheet date, its effects are not included in
these financial statements. However, it is likely that the overall effect of the change, had it been substantively enacted by the
balance sheet date, would be to increase the tax expense by £27,000, to increase the deferred tax liability by £27,000.
(d) Factors that may affect future tax charges
The Group has gross unused losses estimated at £7,596,000. Brought forward losses transferred to the Group due to the reverse
acquisition amount to £7,596,000 and are potentially available for relief against future trading profits generated from the same
trade. See note 24 Deferred Tax, for more information.
78
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
9 EARNINGS PER ORDINARY SHARE
Basic earnings per share for the year is calculated by dividing the profit attributable to ordinary shareholders for the year after tax by the
weighted average number of shares in issue.
Basic diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume
conversion of all potential dilutive ordinary shares.
Profit
Profit attributable to equity holders of the company
Add back exceptional items
Add back deferred tax charge on intangible assets acquired from the acquisition of Vio Holdings Limited
Numerator for underlying earnings per share calculation
2020
£’000
2019
£’000
733
383
117
1,233
1,103
–
–
1,103
The weighted average number of shares in issue and the diluted weighted average number of shares in issue were as follows:
Shares
Number of ordinary shares in issue at the beginning of the year
Weighted average number shares issued during the year
Weighted average number of ordinary shares in issue during the year
for the purposes of basic earnings per share
Dilutive effect of potential ordinary shares:
Weighted average number of share options
Diluted weighted average number of shares in issue during the year
for the purposes of diluted earnings per share
2020
2019
30,667,548
2,747,203
30,667,548
–
33,414,751
30,667,548
583,941
316,520
33,998,692
30,984,068
£3.0 million of the £4.25 million proceeds from the 7,327,500 shares issued during the year was used to fund the acquisition of Vio
Holdings Limited and subsidiary Viomedex Limited, see note 31. These have been prorated for the time they have been in place.
See note 28 for further information regarding share options.
The basic and diluted earnings per share for the year are as follows:
Earnings per share
Adjust for:
Significant prior year tax amendments
Exceptional items
Tax charge on intangible assets acquired from the acquisition
of Vio Holdings Limited
Underlying earnings per share
Basic
2020
pence
2.19
–
1.15
0.36
3.69
Diluted
2020
pence
2.15
–
1.13
0.34
3.62
Basic
2019
pence
3.60
(0.16)
–
–
3.44
Diluted
2019
Pence
3.56
(0.16)
–
–
3.40
An underlying earnings per share and an underlying diluted earnings per share have also been calculated as in the opinion of the
Directors this will allow shareholders to gain a clearer understanding of the trading performance of the Group.
10 DIVIDENDS
No dividends were paid or declared in the current financial year.
79
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
11 INTANGIBLE ASSETS
Group
Cost
At 1 February 2018
Capitalised in the year
Disposals in the year
At 1 February 2019
Capitalised in the year
Acquisition of business (note 31)
At 31 January 2020
Accumulated Amortisation
At 1 February 2018
Charge in the year
Disposals in the year
At 1 February 2019
Charge in the year
Impairment
At 31 January 2020
Net book value
At 31 January 2020
At 31 January 2019
Company
Cost
At 31 January 2020 & 31 January 2019
Accumulated Amortisation
At 31 January 2020 & 31 January 2019
Net book value
At 31 January 2020 & 31 January 2019
Intangible
assets
acquired
£’000
Goodwill
£’000
Development
costs
£’000
Intellectual
property
£’000
Software
costs
£’000
Total
£’000
–
–
–
–
–
2,021
2,021
–
–
–
–
–
–
–
–
–
–
–
–
492
492
–
–
–
–
43
–
43
1,018
276
–
1,294
192
–
276
–
–
276
–
–
353
24
(5)
1,647
300
(5)
372
1,942
24
–
216
2,513
1,486
276
396
4,671
9
130
–
139
181
72
392
275
1
–
276
–
–
154
82
(2)
234
71
–
438
213
(2)
649
295
72
276
305
1,016
2,021
449
1,094
–
–
1,155
–
–
91
138
3,655
1,293
Intellectual
property
£’000
Total
£’000
136
136
136
136
–
–
All intangible assets have finite useful lives except goodwill.
Intangible assets are amortised on a straight line basis and the amortisation is included within Administrative expenses within the
Group’s Consolidated Income Statement on page 60.
Software costs relating to the ERP system are held at cost £328,000 (2019: £328,000), net book value £57,000 (2019: £112,000)
and have a remaining economic life of 1 year.
80
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
11 INTANGIBLE ASSETS continued
Intangible assets acquired within the year are held at cost and relate to the following:
- Customer contacts/relationships - cost £360,000 (2019: £nil), net book value £324,000 (2019: nil) and have a remaining
economic life of 4.6 years
- Tradename - cost £58,000 (2019: £nil), net book value £55,000 (2019: nil) and have a remaining economic life of 6.6 years
- Technology - cost £74,000 (2019: £nil), net book value £70,000 (2019: nil) and have a remaining economic life of 6.6 years.
The carrying value of development costs have been reduced to the recoverable amount through recognition of an impairment charge
which is included in administrative expenses in the Group’s Consolidated Income Statement. The recoverable amount is arrived at
by comparing the year-end net book value to the expected future discounted cashflows of each development project.
The impairment for the year of £72,000 (2019: nil) relates to one project for which the year-end net book value exceeded the
expected future discounted cashflows.
12 PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 February 2018
Additions in the year
Disposals in year
At 1 February 2019
Additions in the year
Acquired in business combinations (note 31)
Disposals in year
At 31 January 2020
Accumulated Depreciation
At 1 February 2018
Charge in the year
Disposals in year
At 1 February 2019
Charge in the year
Disposals in year
At 31 January 2020
Net book value
At 31 January 2020
At 31 January 2019
Leasehold
improvements
£’000
Fixtures
and
fittings
£’000
Plant,
machinery,
office
equipment
£’000
Motor
vehicles
£’000
267
7
–
274
–
–
–
59
3
–
62
2
–
–
864
91
(42)
913
149
96
(15)
274
64
1,143
35
28
–
63
27
–
90
184
211
46
3
–
49
3
–
52
12
13
676
114
(39)
751
130
(12)
869
274
162
Total
£’000
1,231
101
(52)
1,280
163
96
(15)
1,524
770
151
(49)
872
168
(12)
41
–
(10)
31
12
–
–
43
13
6
(10)
9
8
–
17
1,028
26
22
496
408
Depreciation charged for the financial year is split between cost of sales £15,000 (2019: £17,000) and administrative expenses
£153,000 (2019: £134,000) in the Consolidated Income Statement.
81
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
13 RIGHT OF USE ASSETS
The Statements of Financial Position show the following amounts relating to leases:
Right of use asset
Properties
Cars
Equipment
Total
2020
£’000
534
11
8
553
The Consolidated Income Statement includes the following amounts relating to leases:
Depreciation charge of right of use assets
Properties
Cars
Equipment
Total
Interest expense (included in finance cost)
The total cash outflow for leases during the year was £149,000 (2019: 168,000).
Group
Company
2019
£’000
2020
£’000
2019
£’000
–
–
–
–
Group
–
–
8
8
2020
£’000
95
53
6
154
21
–
–
–
–
2019
£’000
–
–
–
–
–
In the previous year, the Group only recognised operating leases under IAS 17, ‘Leases’. No lease assets or liabilities were recognised.
For adjustments recognised on adoption of IFRS 16 on 1 February 2019, refer to note 32.
14 INVESTMENTS
Group
Financial asset at fair value through profit or loss
Cost
At 31 January 2020 and 2019
Impairment
At 1 February 2019
Charge in the year
At 31 January 2020
Net book value
At 31 January 2020
At 31 January 2019
£’000
111
–
(111)
(111)
–
111
The Group is an investor in Neuroprotexeon Limited, a drug device technology company which is pioneering the use of the inert
gas, Xenon, as a neuro-protectant.
The Group has a holding of 8.6% on a fully diluted basis taking into account share options and loan conversion rights of other
investors at 31 January 2020.
Neuroprotexeon has filed a voluntary petition to reorganise under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Delaware. Neuroprotexeon has also filed a motion seeking authorisation to pursue an auction and sale
process under Section 363 of the U.S. Bankruptcy Code.
The Board has considered the value of the investment and concluded to fully impair. See Judgements section within note 1.
82
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
14 INVESTMENTS continued
Company
Cost
At 1 February 2019
Additions in year (note 31)
At 31 January 2020 and 2019
Net Book Value
At 31 January 2020
At 31 January 2019
£’000
7,156
3,250
10,406
10,406
7,156
Additions in the year relate to the acquisition of Vio Holdings Limited and subsidiary company.
Inspiration Healthcare Group plc has the following interests in wholly owned subsidiaries, joint ventures or associates registered
and operating in England and Wales.
Name
Nature of business
Inspiration Healthcare Limited
Inspiration Homecare Limited *
Inditherm Limited *
Inditherm (Medical) Limited *
Inditherm (UK) Limited *
Inditherm Construction Limited *
Vio Holdings Limited
Viomedex Limited
Sale of medical goods
Dormant
Dormant
Holding company for intellectual property rights
Dormant
Dormant
Holding Company
Sale and manufacture of medical goods
The registered office of the above companies is:
2 Satellite Business Village, Fleming Way, Crawley, England, RH10 9NE
Direct/
indirect
ownership
Direct
Indirect
Indirect
Direct
Direct
Direct
Direct
Indirect
% of total
issued
share
capital
100
100
100
100
100
100
100
100
Class of
share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Anaesthetic Services Systems Limited *
Dormant
Indirect
100
Ordinary
The registered office of the above company is:
C10 Strangford Park Ards Business Centre, Jubilee Road, Newtownards,
Co Down, BT23 4YH
Inspiration Healthcare Ireland Limited *
Dormant
Indirect
100
Ordinary
The registered office of the above company is:
The Black Church, St. Mary’s Place, Dublin, D07 P4AX
* Entities exempt from the requirement to have a statutory audit
15 INVENTORIES
Raw materials
Finished goods
Total
Group
Company
2020
£’000
574
2,517
3,091
2019
£’000
1
717
718
2020
£’000
2019
£’000
–
–
–
–
–
–
Inventories are presented net of provisions of £178,000 (2019: £165,000) to write down the values to management’s estimate of net
realisable value.
83
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
16 TRADE AND OTHER RECEIVABLES
Trade receivables
Loss allowance
Net trade receivables
Amounts receivable from subsidiary undertakings
UK Corporation tax receivable (note 18)
Other taxes and social security
Other debtors
Prepayments and accrued income
Total
Group
Company
2020
£’000
4,028
(19)
4,009
–
–
21
15
160
4,205
2019
£’000
2,994
(20)
2,974
–
30
8
13
82
3,107
2020
£’000
–
–
–
1,281
–
22
–
36
1,339
2019
£’000
–
–
–
–
–
8
–
29
37
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and are
generally due for settlement within 30-45 days. Other receivables are generally due for settlement within three to twelve months. Trade
and other receivables are therefore all classified as current. Trade and other receivables are non-interest bearing and receivable under
normal commercial terms. The Directors consider that the carrying value of trade and other receivables approximates their fair value.
Specific provisions are made against doubtful debts arising from contracts with customers taking the value based on the most likely
outcome. Using the simplified approach the historical default rate of 0.05% is also taken into account when assessing expected credit loss.
On that basis, the loss allowance as at 31 January 2020 and 31 January 2019 was determined as follows for trade receivables:
31 January 2020 - GBP 000’s
Expected loss rate
Gross carrying amount - Trade receivable
Loss allowance
31 January 2019 - GBP 000’s
Expected loss rate
Gross carrying amount - Trade receivable
Loss allowance
More than
30 days
past due
More than
60 days
past due
More than
120 days
past due
0.25%
455
1
0.60%
270
2
3.29%
62
2
More than
30 days
past due
More than
60 days
past due
More than
120 days
past due
0.22%
445
1
0.51%
152
1
0.91%
190
2
Current
0.05%
3,241
2
Current
0.06%
2,207
1
Additional
Total
12
4,028
19
Additional
Total
15
2,994
20
Amounts due from Group undertakings are non-interest bearing, unsecured and repayable on demand.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable shown above. The Group does
not insure receivables or hold any collateral as security.
The carrying amounts of the Group’s receivables are denominated in the following currencies:
Group
Company
2020
£’000
2,809
1,023
373
4,205
2019
£’000
1,978
700
429
3,107
2020
£’000
1,339
–
–
1,339
2019
£’000
37
–
–
37
Pounds Sterling
Euro
US Dollars
Total
84
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
17 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise solely of cash at bank and cash in hand held by the Group.
The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:
Pounds Sterling
Euro
US Dollars
Japanese Yen
Balances per statement of cash flows
Group
Company
2020
£’000
4,293
128
58
1
4,480
2019
£’000
1,946
328
259
6
2,539
2020
£’000
1,775
–
–
–
1,775
2019
£’000
664
6
5
–
675
The Group currently use three banks; Royal Bank of Scotland plc, HSBC Bank plc and Bank of Scotland plc. Moody’s give long term
ratings of A2 for Royal Bank of Scotland plc and Aa3 for both HSBC Bank plc and Bank of Scotland plc as at 31 January 2020.
Royal Bank of Scotland plc
HSBC Bank plc
Bank of Scotland plc
Balances per statement of cash flows
18 CURRENT TAX
Group
Company
2020
£’000
2,275
1,775
430
4,480
2019
£’000
1,864
675
–
2,539
2020
£’000
–
1,775
–
1,775
2019
£’000
–
675
–
675
The following are the major current tax assets and liabilities recognised by the Group and movements thereon during the current
and prior reporting year.
UK corporation tax (payable)/receivable (notes 19, 16)
2020
£’000
(123)
2019
£’000
30
At the year end date the Group has not recognised a separate receivable in respect of potential research and development tax
claims (2019: £nil).
85
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
19 TRADE AND OTHER PAYABLES
Current
Trade payables
UK corporation tax payable (note 18)
Other taxes and social security
Amounts payable to subsidiary undertakings
Other payables
Accrued expenses
Provision for other liabilities and charges (note 21)
Total
Non-current
Trade Payables
Total
Group
Company
2020
£’000
2,299
123
596
–
–
970
–
3,988
742
742
2019
£’000
1,304
–
366
–
12
513
15
2,210
–
–
2020
£’000
2019
£’000
15
–
–
896
–
109
–
37
–
–
23
–
58
9
1,020
127
–
–
–
–
The fair value of trade and other payables approximates to book value at 31 January 2020. Trade payables are non-interest bearing
and the average credit period taken for trade purchases is 48 days (2019: 46 days). Accruals are normally settled monthly throughout
the financial year.
Amounts due to Group undertakings are non-interest bearing, unsecured and repayable on demand.
20 LEASE LIABILITIES
Current
Non-current
Total
Group
Company
2020
£’000
132
426
558
2019
£’000
2020
£’000
2019
£’000
–
–
–
6
2
8
–
–
–
In the previous year, the Group only recognised lease liabilities in relation to leases that were classified as ‘finance leases’ under IAS
17 for which there were none.
For adjustments recognised on adoption of IFRS 16 on 1 February 2019, refer to note 32.
21 PROVISION FOR OTHER LIABILITIES AND CHARGES
The provision for closure of facilities relates to the exceptional cost taken during 2017 and includes redundancy, dilapidations,
project management, obsolete inventory and dual running lease and similar costs. The provision has arisen due to expected timing
of cash outflows along with associated uncertainty regarding their final values and is now fully utilised.
At 31 January 2019
- Utilised during the year
At 31 January 2020
86
Group
Closure of
facilities
£’000
Company
Closure of
facilities
£’000
15
(15)
–
9
(9)
–
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
22 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Group’s principal financial instruments comprise trade and other receivables, cash and cash equivalents and trade and other
payables. The main purpose of these financial instruments is to finance the Group’s operations.
The policies to address the risks associated with the Group’s financial instruments are reviewed and approved by the Board. The
main risks arising from the Group’s financial instruments are liquidity risk and credit risk. A summary of the risks is set out below
and also referred to in the Principle Risks and Uncertainties report on pages 31 to 36.
The Group holds the following financial instruments:
Financial assets
Financial assets at amortised cost
Trade receivables
Other receivables
Financial assets at fair value through profit or loss (FVPL)
Cash and cash equivalents
Financial Liabilities
Liabilities at amortised cost
Trade and other payables
Derivative financial instruments used for hedging
Note
2020
£’000
2019
£’000
16
16
14
17
19
4,009
15
–
4,480
2,974
13
111
2,539
4,011
40
1,844
9
As at 31 January 2020 all the above are due or mature in under three months with the exception of derivatives which are due or
mature in under twelve months.
The Group has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because
their carrying amounts are a reasonable approximation of fair values.
22 (a) Derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. The Group’s accounting policy for its
cash flow hedges is set out in note 1.
The Group has the following financial instruments:
› Forward foreign exchange contracts
Forward foreign exchange contacts are fair value adjusted through other comprehensive income within reserves (note 25 (e))
using the rate which would have been achieved should the contracts have been instructed at the year end. All contracts are Level
2 financial instruments, not traded in an active market and determined using valuation techniques which maximise the use of
observable market data. All contracts held will be settled within 12 months after the reporting period.
Hedge effectiveness is determined at the inception of the hedge relationship to ensure that an economic relationship exists between
the hedged item and hedging instrument.
22 (b) Credit risk
Credit risk principally arises on cash deposits and trade receivables.
The Group monitors defaults of customers and other counterparties and incorporates this information into credit risk controls.
Ongoing credit evaluation is performed on the financial condition of accounts receivable taking into account independent ratings
(where available), its financial position, past experience and other factors.
Management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of
good credit quality, including those that are past due.
The carrying value of financial assets recorded in the financial statements, which is net of impairment losses, represents the
Group’s maximum exposure to credit risk as no collateral or other credit enhancements are held.
The credit risk for liquid funds and other short term financial assets relates to the banking institutions holding such funds and
assets on behalf of the Group and may therefore be higher in conditions of general banking uncertainty. The counterparties are
considered to be reputable banks with high quality external risk ratings. Please see note 17.
87
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
22 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS continued
22 (c) Liquidity risk
In the normal course of business the Group is exposed to liquidity risk. The Group’s objective is to ensure that sufficient resources
are available to fund short term working capital and longer term strategic requirements. This is achieved through the use of an
appropriate mix of short, medium and long term deposits and investments.
The Group manages its liquidity needs by monitoring cash outflows due in day-to-day business. Liquidity needs are monitored in
various time bands, on a day-to-day and week-to-week basis. Long term liquidity needs are monitored monthly.
The Group maintains cash and cash equivalents to meet its liquidity requirements for at least a 90 day period.
At 31 January 2020 and 31 January 2019, the Group’s liabilities had contractual maturities which are summarised as follows:
2020
Trade payables
Lease liabilities
2019
Trade payables
Carrying
amount
£’000
Total
£’000
1 year
or less
£’000
(3,041)
(558)
(3,041)
(558)
(2,299)
(132)
1 to 2
years
£’000
(742)
(100)
2 to 5
years
£’000
–
(141)
Over
5 years
£’000
–
(185)
(1,304)
(1,304)
(1,304)
–
–
–
The above contractual maturity of the Group’s financial liabilities reflects the gross cash flows, which may differ from the carrying
values of the liabilities at the year end date.
22 (d) Interest rate risk
The Group does not believe that its financial stability is threatened because of an exposure to interest rate risk and consequently
does not hedge against it. The Board keeps this risk under regular review.
22 (e) Foreign currency risk
The Group has entered into a number of forward foreign exchange contracts to mitigate an element of the Groups exposure to
foreign currency risk. The Board keeps this risk under regular review. There is a degree of natural hedge due to the balance of
imports and exports.
22 (f) Capital risk
The Group establishes credit limits for all financial instruments taking into account independent ratings, past experience and other
factors. The Group’s investment policy is to invest in fixed rate/low risk investments where the capital element is not at risk to
market changes. The capital risk of cash deposits is further reduced by spreading investment across more than one bank.
22 (g) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s 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 the capital structure, the Group may issue new shares, adjust the amount of dividends paid to
shareholders, return capital to shareholders or sell assets to reduce debt.
23 CONTRACT LIABILITIES
Contract Liabilities arise from unsatisfied performance obligations on rental, managed service, service or maintenance contracts
where revenue is recognised over time. The revenue recognition accounting policy is explained in note 1.
The profile of when this income will be recognised in the Consolidated Statement of Comprehensive Income is as follows:
Within 1
year
£’000
376
319
1 to 2
years
£’000
–
–
2 to 3
years
£’000
–
–
3 to 4
years
£’000
–
–
4 to 5
years
£’000
–
–
Total
£’000
376
319
31 January 2020
31 January 2019
88
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
24 DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current
and prior reporting year.
Note that the effective future tax rate is 17% (2019: 17%).
Group
Company
Net (liability)/asset at beginning of year
(Charge)/credit to the Income Statement for the year
Included directly in equity
Other
Net (liability)/asset at end of year
The elements of deferred taxation provided for are as follows:
Accelerated capital allowances
Intangibles arising on business combinations
Short term timing differences
Deferred tax (liability)/asset
2020
£’000
(105)
(118)
6
(10)
(227)
2020
£’000
(229)
(105)
107
(227)
2019
£’000
(34)
(71)
–
–
(105)
2019
£’000
(117)
–
12
(105)
2020
£’000
2019
£’000
11
14
6
–
31
2020
£’000
(1)
–
32
31
–
11
–
–
11
2019
£’000
–
–
11
11
The impact on deferred tax in relation to the adoption of IFRS 16 was to decrease the liability at the year end by £9,000.
It is expected that £206,000 of the deferred tax liability as at the year end will be settled within 12 months of the year ended
31 January 2020 and the remaining £21,000 will be settled after 12 months following the year ended 31 January 2020.
At the year end date the Group had gross unused losses of £7,596,000 (2019: £7,596,000) potentially available to offset against
future profits. Brought forward losses transferred to the Group due to the reverse acquisition amount to £7,596,000. The Group
has received advice that these losses can be carried forward and utilised against future taxable profits of the same business from
which they were generated. A streaming methodology has been devised to estimate profits from this business. This has been
projected forwards and due to anticipated ongoing investment in development of the product range with consequent benefits of
R&D tax credits it is estimated that taxable profits will not be generated for a number of years. Given a number of uncertainties
inherent in the estimations, including revenue generated from recent product launches and the quantum of R&D tax credits, no
deferred tax has been recognised in respect of these losses.
The amounts of deferred tax not recognised are as follows:
Unused tax losses
2020
£’000
1,291
2019
£’000
1,291
In the Spring Budget 2020, the Government announced that from 1 April 2020 the corporation tax rate would remain at 19%
(rather than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020. As the proposal
to keep the rate at 19% had not been substantively enacted at the balance sheet date, its effects are not included in these financial
statements. However, it is likely that the overall effect of the change, had it been substantively enacted by the balance sheet date,
would be to increase the tax expense by £27,000, to increase the deferred tax liability by £27,000.
89
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
25 SHAREHOLDERS’ EQUITY
25 (a) Called up share capital
Share Capital
At 1 February 2019
Issue of shares
At 31 January 2020
Number of
shares
(Allotted &
Issued)
30,667,548
7,713,302
38,380,850
Share
capital
£’000
3,067
771
3,838
Total
£’000
3,067
771
3,838
On 24 September 2019 the Company issued 7,327,500 shares for a cash consideration of £4,246,000. The Company issued
385,802 shares as part of the consideration for the acquisition of Vio Holdings Limited.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company. Ordinary shares have the same rights.
For the purpose of preparing the Consolidated Financial Statements of the Group, the Share Capital represents the nominal value of
the issued share capital of 10p per share.
25 (b) Share premium
The share premium reserve arose on the issuing of ordinary shares of 10p for the placement to raise funds for and to settle part of
the consideration for the acquisition of Vio Holdings Limited and subsidiary undertaking.
Share Premium
Proceeds from share placement
Value of initial consideration paid in shares
Less
Nominal value of shares issued
Share Issue costs
Share Premium
25 (c) Reverse acquisition reserve
2020
£’000
4,246
250
4,496
(771)
(250)
3,475
The reverse acquisition reserve of £(16,164,000) (2019: £(16,164,000)) arose on the reverse acquisition of Inditherm plc in 2015.
25 (d) Share based payment reserve
The share based payment reserve of £153,000 (2019: £91,000), Company £308,000 (2019: £246,000), represents the expense
recognised in the Consolidated Income Statement in relation to the Group Share Option Scheme. See note 28.
25 (e) Other reserves
Other reserves of £(34,000) (2019: £(9,000)) represents other comprehensive expense of £(40,000) (2019: £(9,000) arising on
the gains or losses on derivatives that are designated and qualify as cash flow hedges offset by deferred tax included directly in
equity of £6,000 (2019: £nil).
90
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
26 NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
Profit before taxation
Adjustments for:
Net finance expense/(Income)
Depreciation and amortisation
Impairment of investment
Impairment of intangible assets
Employee share scheme expense
Loss on disposal of tangible asset
Loss on disposal of intangible asset
Increase in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Increase in contract liabilities
Cash flows generated from operations
Cash and cash equivalents
Lease liabilities:
- Current
- Non-current
Cash generated from operations
27 COMMITMENTS
(a) Capital commitments
2020
£’000
1,126
12
617
111
72
62
3
–
(1,696)
(889)
2,141
57
1,616
2020
£’000
4,480
(132)
(426)
3,922
2019
£’000
1,219
(6)
364
–
–
71
3
3
(158)
(11)
(474)
(16)
995
2019
£’000
2,539
–
–
2,539
At 31 January 2020, the Company had capital expenditure commitments totalling £nil (2019: £nil).
(b) Operating leases
The Group has annual commitments under non-cancellable operating leases relating primarily to land and buildings, motor vehicles
and office equipment. Land and buildings have been considered separately for lease classification. Land and buildings amounts
relate to leasehold properties at Earl Shilton, Crawley and Newtownards. During 2019 £168,000 was recognised as an expense in
the Consolidated Income Statement in respect of operating leases.
Future aggregate minimum lease payments under non-cancellable operating leases as at 31 January 2019 were as follows:
Group
Within 1 year
In the second to fifth years inclusive
After five years
Total
Company
Within 1 year
In the second to fifth years inclusive
After five years
Total
Land and buildings
2019
£’000
82
310
105
497
The Group has adopted IFRS 16 - Leases under the modified retrospective approach from 1 February 2019, see note 32.
Other
2019
£’000
61
21
–
82
Other
2019
£’000
6
9
–
15
91
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
28 SHARE BASED PAYMENTS
The Group operates an employee share option scheme which is available to a number of employees and directors and is designed
to provide long-term incentives for senior managers and above to deliver long-term shareholder returns. Under the plan, participants
are granted options which only vest if certain performance standards are met. Participation in the plan is at the Board’s discretion
and no individual has a contractual right to participate in the plan or receive any guaranteed benefits.
The amount of options that will vest depends on performance measures based 50% on EPS and 50% on Revenue growth over a
performance period of three years or other measures determined by the Remuneration Committee. Once vested, the options remain
exercisable for a period of two years.
When exercisable, each option is convertible into one ordinary share of 10p each.
Details of the share options outstanding at 31 January 2020 and movements during the year by exercise price is shown below:
As at 1 February
Granted during the year
Forfeited during the year
As at 31 January
2020
2019
Average
exercise price
per share
option
£nil
£nil
£nil
£nil
Number of
options
583,941
–
–
583,941
Average
exercise price
per share
option
£nil
£nil
£nil
£nil
Number of
options
285,338
348,603
(50,000)
583,941
There were no options exercisable and no options expired during the year covered.
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant Date
8 November 2017
7 November 2018
Total
Expiry date
7 November 2027
6 November 2028
Share options
31 January
2020
Share
options
31 January
2019
Exercise
price
£nil
£nil
235,338
348,603
235,338
348,603
583,941
583,941
Weighted average remaining contractual life of options outstanding at the end of the year
8.4 years
9.4 years
The assessed fair value at grant date of options granted during the year ended 31 January 2020 was £nil as no options were
granted during the year (2019: £0.69 per option determined by the Black-Scholes pricing model).
The key model inputs for options granted during the year ended 31 January 2019 and 31 January 2018 included:
› Grant date: 7 November 2018 (2018: 8 November 2017)
› Share price at grant date: £0.73 (2018: £0.66)
› Exercise date: 7 November 2021 (2018: 8 November 2020)
› Exercise price: £nil (2018: £nil)
An amount of £62,000 (£2019: £71,000) has been recognised as a charge within administrative expenses in the Consolidated
Income Statement and a credit to retained earnings within equity.
There were no cash settled share-based payment transactions.
29 CONTINGENT LIABILITIES
During the normal course of business, the Group offers warranties on its products against clearly defined performance
specifications.
As at 31 January 2020 no warranty provision is required (2019: £nil) and management are not aware of any material field issues
that would require provision to be made for products supplied for distribution outside of manufacturers warranties.
92
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
30 PENSION SCHEMES
The Group made contributions in respect of defined contribution pension arrangements of Group £146,000 (2019: £107,000) and
Company £nil (2019: £nil). At the year end the amount of contributions payable to the schemes were Group £nil (2019: £nil) and
Company £nil (2019: £nil).
31 BUSINESS COMBINATIONS
On 24 September 2019, the Group acquired 100% of the share capital of Vio Holdings Limited and its subsidiary company
Viomedex Limited for £3.25 million on a cash and debt free basis. Viomedex Limited designs, manufacturers and supplies
disposable healthcare products in the respiratory care market worldwide.
As a result of the acquisition, the Group is expected to benefit from both revenue and cost synergies while the acquired
manufacturing capability will allow the Group to improve gross margins.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration
Cash paid
Ordinary shares issued
Total purchase consideration
£’000
3,000
250
3,250
The cash consideration was raised via the issue of new ordinary shares.
The fair value of the 385,802 ordinary shares issued as part of the consideration paid for Vio Holdings Limited was based on a
weighted average share price of 64.8p per share over the 30 days to 2 September 2019. Issue costs of £250,000 which were
directly attributable to the issue of the shares have been netted off against share premium, see note 25.
Deferred Consideration Shares amounting to £750,000 were not issued as the conditions to be achieved per the sale and purchase
agreement were, in the opinion of the Board having taken legal advice, not met. We have received notice from the previous
shareholders of Viomedex that the non-issue of the Deferred Consideration Shares is disputed. If the full Deferred Consideration
Shares had been issued then the total purchase consideration would have been £4 million.
The assets and liabilities recognised as a result of the acquisition are as follows:
Property, plant and equipment
Right of use asset
Inventories
Trade and other receivables
Trade and other payables
Lease liabilities
Deferred tax liabilities
Net identifiable assets acquired
Add:
Goodwill
Intangible Assets – note 11
Net assets acquired
Fair Value
£’000
96
191
678
239
(266)
(191)
(10)
737
2,021
492
3,250
The goodwill is not be deductible for tax purposes.
The fair value of trade and other receivables is £239,000 and includes trade receivables with a fair value of £181,000. The gross
contractual amount for trade receivables due is £181,000.
The acquired business contributed revenues of £354,000 and profit after tax of £134,000 to the Group for the period from
24 September 2019 to 31 January 2020. If the acquisition had occurred on 1 February 2019, consolidated pro-forma revenue and
profit for the year ended 31 January 2020 would have been £1,127,000 and £454,000 respectively. These amounts have been
calculated using the entities’ results and adjusting them for:
› differences in the accounting policies between the Group and the subsidiary
Acquisition related costs of £217,000 have been charged to exceptional items in the Consolidated Income Statement for the year
ended 31 January 2020.
There were no acquisitions in the year ended 31 January 2019.
93
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
32 CHANGES IN ACCOUNTING POLICIES
This note explains the impact of the adoption of IFRS 16 - Leases, on the Group’s Financial Statements.
The Group has adopted IFRS 16 under the modified retrospective approach from 1 February 2019 and has therefore not restated
comparatives for the prior reporting periods. The reclassification and the adjustments arising from the new leasing rules are
therefore recognised in the opening balance sheet on 1 February 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under IAS 17, ‘Leases’. These liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as at 1 February 2019 of between 3.50% to 3.75%.
The associated right of use assets were measured at the amount equal to the lease liability. There were no onerous lease contracts
that would have required an adjustment to the right of use asset at the date of initial application.
The tables below details the impact of IFRS 16 to both the Consolidated Income Statement and Consolidated Statement of
Financial Position:
Consolidated Income Statement
12 months ended 31 January 2020 - Pre IFRS 16 adjustment
IFRS 16 adjustments:
Depreciation
Reclassification of rental payments from operating expense to lease liabilities
Release of rent provision
Interest
Total IFRS 16 adjustments
EBITDA
£’000
2,113
–
148
11
–
159
Operating
profit
£’000
1,133
(154)
148
11
–
5
12 months ended 31 January 2020 - Post IFRS 16 adjustment
2,272
1,138
Consolidated Statement of Financial Position
12 months ended 31 January 2019 - Pre IFRS 16 adjustment
IFRS 16 adjustments:
Recognised right of use asset and lease liability at 1 February 2019
Additional right of use asset and lease liability acquired through the acquisition of Vio Holdings Limited
Depreciation
Reclassification of rental payments from operating expense to lease liabilities
Reclassification of rental payments from prepayments to lease liabilities
Interest
Total IFRS 16 adjustments
12 months ended 31 January 2020 - Post IFRS 16 adjustment
Profit
attributable
to the owners
of the parent
company
£’000
Interest
payable
£’000
–
749
–
–
–
(21)
(21)
(21)
Right of
use asset
£’000
–
516
191
(154)
–
–
–
553
553
(154)
148
11
(21)
(16)
733
Lease
liability
£’000
–
(516)
(191)
–
148
22
(21)
(558)
(558)
94
INSPIRATION-HEALTHCARE.COMFINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 31 January 2020
Reconciliation of opening lease commitments
Operating lease commitments disclosed as at 31 January 2019
Discounted using the Groups incremental borrowing rate of 3.75%
Less: short term leases not recognised as a liability
Add: adjustments as a result of a different treatment of extension and termination options
Lease liability recognised as at 1 February 2019
£’000
579
513
(1)
4
516
The total lease liability recognised as at 1 February 2019 of £516,000 was split between current lease liability of £124,000 and
non-current lease liability of £392,000.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
› The use of a single discount rate to a portfolio of leases with reasonably similar characteristics
› The accounting for operating leases with a remaining lease term of less than 12 months as at 1 February 2019 as
short term leases
› The exclusion of initial direct costs for the measurement of the right of use asset at the date of initial application
› The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease
The Group also elected not to apply IFRS 16 to contracts that were not identified as containing a lease under IAS 17 and IFRIC 4,
‘Determining whether an arrangement contains a Lease’.
33 RELATED PARTY TRANSACTIONS
Neuroprotexeon Limited
At the year end date the Group held 8.6% (2019: 8.7%) of the issued ordinary share capital of Neuroprotexeon Limited on a fully
diluted basis. Further information relating to the investment is disclosed in note 14.
Neil Campbell resigned as Non-executive Director of Neuroprotexeon Limited on 21 June 2018.
Key management
Directors control 22.8% (2019: 28%) of the voting shares of the Company. Directors interests in shares are disclosed in the
Remuneration Report on page 53.
Key management comprise the Group’s Executive and Non-executive Directors. Remuneration of Executive and Non-executive
Directors is set out in note 5 and the Directors’ Remuneration Report on page 52.
Lease of Leicestershire Facility
The Leicestershire facility at Earl Shilton is rented on an arms length basis for £22,000 per annum (2019: £22,000) from a self-
invested pension plan controlled by Neil Campbell, Toby Foster, Simon Motley, Malcolm Oxley and Graham Walls. The lease was
renewed on an arm’s length basis during April 2018.
Non-Executive Directors
Brook Nolson was paid £27,000 for additional days worked during the year.
95
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information OTHER SHAREHOLDER INFORMATION
LINK ASSET SERVICES
The Company’s registrars, Link Asset Services, provide a number of services that, as a shareholder, might be useful to you:
REGISTRAR’S ON-LINE SERVICE
By logging onto www.signalshares.com and following the prompts, shareholders can view and amend various details on their
account. You will need to register to use this service for which purpose you will require your unique investor code, which can be
found on your share certificate.
SHARE DEALING SERVICES
A simple service to buy and sell shares is provided by Link Asset Services. There is no need to pre-register and there are no
complicated application forms to fill in and by visiting www.linksharedeal.com you can also access a wealth of stock market news
and information free of charge.
For further information on this service, or to buy and sell shares visit www.linksharedeal.com or call 0371 664 0445. 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. Lines are open between 08:00 – 16:30, Monday to Friday excluding public holidays in England
and Wales).
This is not a recommendation to buy and sell shares and this service may not be suitable for all shareholders. The price of shares
can go down as well as up and you are not guaranteed to get back the amount you originally invested. Terms, conditions and risks
apply. Link Asset Services is a trading name of Link Market Services Trustees Limited which is authorised and regulated by the
Financial Conduct Authority. This service is only available to private shareholders resident in the European Economic Area, the
Channel Islands or the Isle of Man.
Link Asset Services is a trading name of Link Market Services Limited and Link Market Services Trustees Limited. Share registration
and associated services are provided by Link Market Services Limited (registered in England and Wales, No. 2605568). Regulated
services are provided by Link Market Services Trustees Limited (registered in England and Wales No. 2729260), which is
authorised and regulated by the Financial Conduct Authority.
The registered office of each of these companies is The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
www.linkassetservices.com.
DUPLICATE SHARE REGISTER ACCOUNTS
If you are receiving more than one copy of our report, it could be your shares are registered in two or more accounts on our register
of members. If that was not your intention, please contact Link Asset Services who will be pleased to merge your accounts.
GENERAL SHAREHOLDER ENQUIRIES SHOULD CONTACT:
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Tel: 0871 664 0300.
Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. We are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England
and Wales.
Email: shareholderenquiries@linkgroup.co.uk
96
INSPIRATION-HEALTHCARE.COMSHAREHOLDER INFORMATION ADVISERS
Company Secretary
and Registered Office
Mike Briant, Unit 2, Satellite Business Park,
Crawley, West Sussex RH10 9NE
Company number
03587944
Independent Auditors
Bankers
Nominated adviser
and broker
Legal advisers
PricewaterhouseCoopers LLP,
Chartered Accountants and Statutory Auditors,
Donington Court, Pegasus Business Park, Herald Way,
East Midlands DE74 2UZ
HSBC Bank plc, 1st Floor, First Point,
Buckingham Gate, London Gatwick Airport,
West Sussex RH6 0NT
Royal Bank of Scotland Group plc,
896 Woodborough Road, Mapperley,
Nottingham NG3 5QR
Cenkos Securities plc,
6,7,8 Tokenhouse Yard, London EC2R 7AS
Gordons LLP, Riverside West, Whitehall Road,
Leeds LS1 4AW
Field Fisher LLP, Riverbank House, 2 Swan Lane,
London EX4R 3TT
Registrars
Link Asset Services, 34 Beckenham Road, Beckenham,
Kent BR3 4TU
97
INSPIRATION HEALTHCARE GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2020Strategic ReportGovernanceFinancial StatementsShareholder Information
Headquarters and Registered Office:
Inspiration Healthcare Group plc
2 Satellite Business Village, Crawley,
West Sussex RH10 9NE, UK
inspiration-healthcare.com