TIDMERGO
RNS Number : 3137G
Ergomed plc
29 March 2022
PRESS RELEASE
Audited Full Year Results for the year ended 31 December
2021
Excellent financial results delivered through strategic
execution
Strategic positioning across global markets creates strengthened
platform for growth
-- Revenue GBP118.6 million up 37.3%
-- Adjusted EBITDA GBP25.4 million up 31.2%
-- Forward visibility underpinned by strong order book of GBP239.7 million up 24.2%
-- Further strengthening of US strategic presence with US revenues up 59.5%
-- Year-end net cash balance of GBP31.2 million up 64.5%
Guildford, UK - 29 March 2022: Ergomed plc (LSE: ERGO)
('Ergomed' or the 'Company' or the 'Group'), a company focused on
providing specialised services to the pharmaceutical industry,
today announces its audited Full Year Results for the year ended 31
December 2021.
Selected Financial Highlights
Figures in GBP millions, unless Full Full % change
otherwise stated Year Year
2021 2020
Total Revenue 118.6 86.4 37.3
Service Fee Revenue 100.0 78.4 27.6
Like-for-like Service Fee Revenue
(Note 1) 87.3 77.8 12.2
Gross Profit 48.4 39.7 22.0
-5.1
Gross Margin (%) 40.8% 45.9% ppts
Adjusted EBITDA (Note 2) 25.4 19.4 31.2
Net cash at 31 December 31.2 19.0 64.5
Order book at 31 December 239.7 193.0 24.2
Basic adjusted earnings per
share (pence) (Note 3) 41.1p 25.8p 59.3
------------------------------------ ------- ------ ---------
Notes :
(1) Like-for-like Service Fee revenue excludes 2021 revenues of
GBP12.7 million and 2020 revenues of GBP0.6 million in MS Clinical
Services, LLC and its subsidiaries ('MedSource') acquired on 11
December 2020.
(2) Adjusted EBITDA is defined as operating profit for the
period plus depreciation and amortisation, share-based payment
charge, acquisition related consideration and costs, less in 2020
only one-off receipts comprising a prior year R&D tax credit
and Serbian employment growth grants (Note 9 to the financial
statements).
(3) Basic adjusted earnings per share is defined as earnings per
share after adjustment for items referred to in Note 8 to the
financial statements.
Dr Miroslav Reljanović, Executive Chairman of Ergomed, said: "We
have delivered another outstanding year operationally and
financially, with results ahead of market expectations. The
strength of our position in key markets was demonstrated by further
significant organic growth and augmented by our latest successfully
integrated acquisitions, particularly in the US. Our robust order
book, track record of delivery, and the clear demand for our
offering in a growing market create a strong platform for organic
growth and for geographic and service expansion through M&A. We
remain extremely confident in Ergomed's future as a leading global
provider of specialised pharmaceutical services."
Key Financial Highlights
-- Revenue of GBP118.6 million (2020: GBP86.4 million) increased
by 37.3% (up 44.3% in constant currency)
-- Revenue growth in pharmacovigilance (PV) up 9.9% (up 14.2% in
constant currency) to GBP60.5 million (2020: GBP55.1 million)
-- Revenue growth in Clinical Research Services (CRO) up 85.5%
(up 97.3% in constant currency) to GBP58.1million (2020: GBP31.3
million) and up 26.2% (up 33.2% in constant currency) to GBP38.1
million on a like-for-like basis excluding the acquisition of
MedSource
-- Gross profit up 22.0% to GBP48.4 million (2020: GBP39.7 million)
-- Adjusted EBITDA up 31.2% to GBP25.4 million (2020: GBP19.4 million)
-- Basic adjusted EPS up 59.3% to 41.1 p (2020: 25.8p)
-- Cash and cash equivalents up 64.5% to GBP31.2 million at 31
December 2021 (31 December 2020: GBP19.0 million) with operating
cash flow of GBP22.3 million, equivalent to 87.8% of adjusted
EBITDA
-- Order book of GBP239.7 million future contracted revenue up
24.2% at 31 December 2021 (31 December 2020: GBP193.0 million)
Key Operational & Strategic Highlights
-- New subsidiaries opened in a number of European countries and Japan
-- US revenue growth of 59.5% over prior year (71.0% in constant
currency) and significant new senior hires, strengthening platform
for further growth in a key strategic market
-- Continued expansion in emerging markets, with Asia revenue growth up 79.5% over prior year
-- Successfully integrated, ahead of schedule, MS Clinical
Services, LLC and its subsidiaries ('MedSource'), acquired in
December 2020
-- Continued to demonstrate resilience during COVID-19, now
emerging strongly from the pandemic
Post-Period End Highlights
-- In February 2022, acquired ADAMAS, a leading global
regulatory compliance provider, immediately accretive to earnings
and adding a complementary offering to the Group
-- In March 2022, appointed John Dawson CBE to the Board as
independent Non-Executive Director and Chair of the Audit
Committee
Conference call for analysts:
A conference call for analysts will be held at 9:30am BST on 29
March 2022.
Conference call details:
Conference call registration:
https://cossprereg.btci.com/prereg/key.process?key=PQWCQV766
Webcast link:
https://www.lsegissuerservices.com/spark/Ergomed/events/2439d37e-026f-48ef-ae6f-94d9ac2cc89f
Enquiries:
Ergomed plc Tel: +44 (0) 1483 402 975
Miroslav Reljanović (Executive
Chairman)
Richard Barfield (Chief Financial Officer)
Keith Byrne (Senior Vice President,
Capital Markets & Strategy)
Numis Tel: +44 (0) 20 7260 1000
Freddie Barnfield / Euan Brown (Nominated
Adviser)
James Black (Broker)
Peel Hunt (Joint Broker) Tel: +44 (0) 20 7418 8852
James Steel / Dr. Christopher Golden
Consilium Strategic Communications Tel: +44 (0) 20 3709 5700
Chris Gardner / Angela Gray ergomed@consilium-comms.com
Matthew Neal
About Ergomed plc
Ergomed provides specialist services to the pharmaceutical
industry spanning all phases of clinical development, post-approval
pharmacovigilance and medical information. Ergomed's fast-growing
services business includes an industry-leading suite of specialist
pharmacovigilance (PV) solutions, integrated under the
PrimeVigilance brand, a full range of high-quality clinical
research and trial management services under the Ergomed brand
(CRO) and mission-critical regulatory compliance and consulting
services under the ADAMAS brand. For further information, visit:
http://ergomedplc.com .
Forward-Looking Statements
Certain statements contained within the announcement are
forward-looking statements and are based on current expectations,
estimates and projections about the potential returns of Ergomed
plc (Ergomed) and the industry and markets in which Ergomed
operates, the Directors' beliefs and assumptions made by the
Directors. Words such as "expects", "anticipates", "should",
"intends", "plans", "believes", "seeks", "estimates", "projects",
"pipeline" and variations of such words and similar expressions are
intended to identify such forward-looking statements and
expectations. These statements are not guarantees of future
performance or the ability to identify and consummate investments
and involve certain risks, uncertainties, outcomes of negotiations
and due diligence and assumptions that are difficult to predict,
qualify or quantify. Therefore, actual outcomes and results may
differ materially from what is expressed in such forward-looking
statements or expectations. Among the factors that could cause
actual results to differ materially are: the general economic
climate, competition, interest rate levels, loss of key personnel,
the result of legal and commercial due diligence, the availability
of financing on acceptable terms and changes in the legal or
regulatory environment.
These forward-looking statements speak only as of the date of
this announcement. Ergomed expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in Ergomed's expectations with regard thereto, any new information
or any change in events, conditions or circumstances on which any
such statements are based, unless required to do so by law or any
appropriate regulatory authority.
Executive Chairman's Statement
ROBUST EXECUTION OF STRATEGY, DELIVERING EXCELLENT RESULTS
Ergomed delivered an outstanding year both operationally and
financially, with results ahead of market expectations.
Notwithstanding the pandemic, the Group delivered significant
organic growth demonstrating the strength of our positioning in our
key markets and this was augmented by the contribution of our
latest successfully integrated acquisitions, particularly in the
US.
In 2021, we delivered a year of robust operational execution,
achieving significant organic revenue growth whilst maintaining
tight cost controls. We also substantially increased our order book
with a strong sales performance in all parts of the business and
benefited significantly from our expanded geographic presence, with
new subsidiaries opened during the year in a number of European
countries and in Japan. The integration of the US businesses,
Ashfield Pharmacovigilance and MedSource, acquired in 2020, was
successfully completed ahead of schedule, enhancing our US platform
and related sales opportunities. We strengthened our Board and
leadership team with the appointments of acknowledged
pharmaceutical industry experts to key roles, augmenting the scale
and value of our service offering to our clients. Our employee base
increased all around the world, and the commitment and
professionalism of all our colleagues shone through as one of the
core strengths of our business.
Strong financial results from operational execution
Our exceptional operational execution throughout 2021 delivered
excellent financial results. Revenues for 2021 of GBP118.6 million
were up 37% over prior year (44% in constant currency), exceeding
market expectations despite continuing FX headwinds. The 31%
increase in adjusted EBITDA to GBP25.4m was also ahead of market
expectations, reflecting tight control of costs and the benefits of
successfully integrating the acquisitions made in 2020 ahead of
schedule. The Group remained debt free at the year end, with cash
and equivalent balances up 64% to GBP31.2 million (2020: GBP19.0
million) and unutilised bank facilities of GBP30.0 million.
Following a strong sales performance throughout 2021, we finished
the year with our order book of future contracted revenue at
GBP239.7 million, up 24.2% from the beginning of the year. This
robust trading performance, coupled with operational execution,
positions us strongly to achieve our strategic objectives in 2022
and beyond, and further strengthens our financial platform,
enabling us to leverage the accelerating recovery in our target
markets.
Strategic delivery
Ergomed continues to deliver on its core strategic objectives of
growing its sales and revenues in specialised pharmaceutical
services and geographic expansion. These goals are being achieved
organically through increasing sales to new and existing clients,
through excellent operational execution and through the opening of
new offices in several countries. Our strategic objectives are also
being achieved through the successful execution of our acquisition
strategy. With the rapid integration of acquisitions and focussed
commercial initiatives in our CRO and PV businesses, as well as
investment in business development and operational infrastructure,
we are delivering a growing order book of contracted long-term
future revenues as well as preparing for further organic and
M&A growth.
Revenues grew 37% in the year (44% in constant currency),
continuing the trend of a compound annual revenue growth rate
(CAGR) of over 25% since the Group's IPO in 2014. Revenues in the
key strategic market of the US grew 59% over the prior year on a
reported basis (71% on a constant currency basis).
We are also continuing our investments in infrastructure,
technology and digital transformation, with enhanced technology
solutions to achieve significant automation over the coming years
in our PV business and virtual trial capabilities in our CRO
business. These solutions are expected to build on Ergomed's
leadership position with specialised service offerings to our
international client base, as well as providing further potential
for profitability improvement.
Acquisition strategy
During the year, we continued to execute on our disciplined
M&A strategy. This is focussed on value-enhancing and strategic
acquisitions which strengthen our position as a premium
pharmaceutical services business, whilst further building our scale
in the strategically important US, Europe and APAC regions.
In 2021, we completed the integration of the two strategic
acquisitions closed in the prior year in the key US market:
Ashfield Pharmacovigilance, a long-established and highly respected
provider of pharmacovigilance services, and MedSource, a specialist
provider of oncology and rare disease CRO services. These two
acquisitions in the US have strengthened our strategic market
presence, significantly increased our headcount and expanded our
revenues in the region, which grew by 59% on a reported basis (71%
in constant currency).
In July 2021, following a successful first phase of the
integration focussed on business development and branding, we
agreed with the former MedSource owners to accelerate the earn-out
terms, enabling the full integration of all CRO activities in North
America under Ergomed management, and realising fully and ahead of
schedule the benefit of a wider CRO operational base in North
America. These acquisitions are expected to provide further growth
and development potential within the key CRO and PV sectors in the
US and globally.
In February 2022, we acquired ADAMAS Consulting Group Limited.
ADAMAS is a well-established, leading provider of mission-critical
regulatory compliance and consulting services to the global
pharmaceutical industry offering a full range of independent
quality assurance services and specialising in the auditing of
pharmaceutical manufacturing processes, as well as auditing
clinical trials and pharmacovigilance systems. ADAMAS has over 100
currently active clients and has worked with over 700
pharmaceutical companies including 40 of the 50 largest global
pharma and biotech companies.
This acquisition adds a new complementary offering, strengthens
Ergomed's premium consulting services and bolsters our position as
a specialised pharmaceutical services provider. It will further
enhance Ergomed's global reach in the US, Europe and APAC, and is
expected to be immediately accretive to Ergomed's future earnings,
with further growth synergies and strategic benefits expected in
future years.
These recent acquisitions align with Ergomed's strategy to
secure M&A transactions that further enhance the Group's global
presence and broaden our service offering to clients. The Board
continues to actively consider further acquisition opportunities
that will complement and strengthen the existing CRO and PV service
offerings and provide access to new customers and geographies.
Board changes
During the year, we made significant new additions to Ergomed's
Board of Directors, further strengthening our platform to develop
the business internationally in the broader pharmaceutical services
market.
Dr Llew Keltner joined the Board in April 2021 as an independent
Non-Executive Director. Dr Keltner has an outstanding track record
in the global life sciences industry and brings over 30 years of
experience, having held senior positions both in industry and
academia with a particular focus on oncology and rare diseases.
Mark Enyedy joined the Board in June 2021 as an independent
Non-Executive Director. Mr Enyedy is currently President and Chief
Executive Officer and a Director of ImmunoGen, Inc., a
NASDAQ-listed biotechnology company. Mr Enyedy has extensive
corporate development experience in the US, UK and globally and is
a member of the Board of Directors of the Biotechnology Innovation
Organization (BIO), the world's largest advocacy organisation
representing the biotechnology industry in the US and globally.
The appointments of Dr Keltner and Mr Enyedy are fully aligned
with our strategy to develop our commercial and corporate presence
in the USA as we continue to build our global specialist leadership
position.
Post-period end, we announced that John Dawson, CBE has joined
the Ergomed Board as an independent Non-Executive Director and
Chair of the Audit Committee. Mr Dawson is a highly experienced and
globally respected figure in the healthcare sector and was most
recently Chief Executive Officer of Oxford Biomedica plc, widely
recognised for the successful delivery at unprecedented speed of
the Oxford/AstraZeneca COVID-19 vaccine. Mr Dawson's wealth of
international experience in the healthcare industry and expert
knowledge of the life sciences sector will be invaluable as the
Group continues to grow.
Ian Johnson left the Board in April 2021, followed by Rolf
Soderstrom in September 2021, to pursue other business interests.
We thank them both for their service to Ergomed and we wish them
well in all their future endeavours.
Leadership and staff
In 2021, we continued to execute our strategy to further
strengthen the leadership team across all sections of the business
as Ergomed continued to establish its status as an employer of
choice for leaders in the pharmaceutical services sector. We were
pleased to welcome to Ergomed and PrimeVigilance a number of senior
executives with significant prior experience in the CRO, PV and
pharma services sectors across a range of disciplines and
specialisms, including our therapeutic focus areas of oncology and
rare disease; global project management; strategy and drug
development; medical affairs; and quality assurance. We have
continued to make key new senior appointments in the current year,
further augmenting our leadership and expertise. Alongside our
existing strong team, these new hires will enhance the quality,
speed and professionalism of our service delivery to our clients,
as the scale and complexity of our global services continue to
expand.
There has been continued strong growth in the number of
colleagues working for Ergomed businesses around the world. During
the year, the number of employees grew by 225 from 1,146 to 1,371,
an increase of 20%. Following the year end, this growth in
employment has continued, both on an organic basis and because of
the acquisition of ADAMAS Consulting Group Limited.
We are delighted to welcome all our new colleagues to the
Ergomed Group. These additions to our global team reflect the
growing strength and ambition of our business, adding to our
high-quality professional experience and bolstering Ergomed's
growth potential.
Summary
Our successful operational execution in 2021 and the resulting
strong financial performance reflect the dedication and commitment
of all our colleagues as well as the robustness of our business
model, as we continued to deliver growth through a period impacted
by the pandemic. I would like to express my sincere gratitude to
all Ergomed colleagues around the globe for their outstanding
contribution during 2021, and I would like to thank our investors
for their continued support.
Our robust order book, track record of delivery and the clear
demand for our offering in a growing market creates an
exceptionally strong platform for organic growth and continued
geographic and service expansion through M&A during 2022. We
remain extremely confident in Ergomed's future as a leading global
provider of pharmaceutical services.
Miroslav Reljanović
Executive Chairman
29 March 2022
Operational Review
Despite the ongoing challenges of the COVID-19 pandemic, Ergomed
demonstrated resilience and maintained its momentum in 2021. The
Group has begun 2022 from a position of strength, with a robust
financial platform and a proven growth strategy, ensuring that we
are well-positioned to achieve the longer-term strategic priorities
of the business.
PHARMACOVIGILANCE
Regulatory context
The increasing global requirement for pharmacovigilance ("PV")
services coupled with a perpetual drive to improve drug safety
through regulation continue to drive the transition towards
specialist outsourced PV providers and general market growth.
In Europe, the implementation of Good Pharmacovigilance Practice
(GVP) in 2012 and subsequent mandatory compliance has led to an
increased demand for outsourced PV services and has been a
consistent driver for Ergomed's growth. In the US, the existing
stringent PV regulatory regime continues to be regularly
strengthened on an ongoing basis. Similarly, PV regulation
continues to be rolled out in China and South East Asia, providing
further growth opportunities for PrimeVigilance, Ergomed's PV
business.
Financial performance
Organic growth in PrimeVigilance saw revenues increase by GBP5.4
million from GBP55.1 million in 2020 to GBP60.5 million in 2021
(9.9% increase, 14.2% on a constant currency basis). Gross margins
continued to be strong for the PV business at 50.9% in 2021.
Management and staff
The business continued to invest in its employees to support its
geographical expansion, with over 350 employees being promoted
during the year. PrimeVigilance employs around 60 physicians, 650
pharmacists and other life sciences professionals and 30 in-house
EU/ UK Qualified Persons for Pharmacovigilance ('QPPVs') covering
more than 60 countries. This constitutes one of the largest
qualified teams of PV specialist professionals in any independent
pharmaceutical services business globally and it continues to
grow.
The breadth and depth of staff and professionals supporting
PrimeVigilance is reflected in the quality of services provided.
Testament to this is PrimeVigilance's high customer renewal and
retention figures and the fact that PrimeVigilance participated in
over 180 regulatory inspections and audits, representing a more
than 53% increase compared to the previous year.
Technology investment
During the year, PrimeVigilance strengthened its partnerships
with its key technology vendors, upgrading its case management and
signal detection systems and deploying more regulatory
gateways.
New legal entity and regional office established in Japan
PrimeVigilance Japan KK is based in Tokyo and offers a
comprehensive range of pharmacovigilance services, including a
dedicated Japanese safety database. Full Japanese language Medical
Information services are also provided.
The office was established in response to increasing client
demand and provides existing and prospective international
PrimeVigilance clients the opportunity to extend their product
coverage into the strategically important Japanese pharmaceutical
market, the fourth largest globally after the US, the EU and China.
It also provides PrimeVigilance the opportunity to provide high
quality specialist services to domestic Japanese companies.
Constantly evolving regulations, geographic expansion,
investment in technology and people, combined with the strength of
the PrimeVigilance brand, mean that our pharmacovigilance business
is well placed to continue delivering its growth strategy into 2022
and beyond.
CLINICAL RESEARCH SERVICES (CRO)
The CRO market has experienced significant expansion with strong
annual growth in oncology and rare disease research expected to
continue over the coming years. This specific growth in Ergomed's
core focus areas is underpinned by broader market trends, including
increased investment in drug development by pharma-biotech
companies, a shift towards clinical trial outsourcing and strong
growth in the number of trials in markets such as Asia.
Financial performance
CRO total revenues, including MedSource, increased by GBP26.8
million from GBP31.3 million in 2020 to GBP58.1 million in 2021
(85.5% increase, 97.3% on a constant currency basis). Excluding
MedSource, the CRO divisional revenue increased by GBP7.9 million
from GBP30.2 million in 2020 to GBP38.1 million in 2021 (26.2%
increase, 33.2% on a constant currency basis).
Rare disease and oncology focus
Ergomed's CRO business works across all therapeutic areas, as a
specialist provider of clinical trial services with a particular
strength in patient recruitment in oncology and rare disease
trials.
Oncology trials are generally complex, although this varies with
the type of cancer, and studies are often confronted by challenges
including low patient enrolment, changing regulatory requirements,
increased research costs and trial protocols with increased
study-related procedures. This helps to explain why oncology trials
receive the highest levels of funding and makes the case for
outsourcing to CROs which are better positioned to address these
challenges. Ergomed's expertise and focus on oncology supports its
CRO growth strategy and is evidenced by the fact that over 90% of
new business wins in 2021 related to oncology and rare disease,
where similarly specialist expertise is also required.
Rare disease development is one of the fastest growing areas of
drug development, accounting for approximately 30% of compounds in
development. Ergomed has continued to strengthen relationships with
biopharmaceutical sponsor companies, patient advocacy groups,
technology innovators and service providers to accelerate rare
disease drug development.
Patient and clinician focus
Ergomed's focus on rare and orphan drug development is one of
its core strengths. Drug development for rare and orphan diseases
is challenging for many reasons, including complex biology, limited
knowledge of the history and progression of the disease and the
inherently small patient population available for clinical trials,
who are usually geographically dispersed. Ergomed's focus on
physician support teams helps ensure efficient patient recruitment,
patient retention and clinical trial management of complex
studies.
In addition, rare diseases are frequently misdiagnosed or
undiagnosed. Many rare diseases also impact infants and young
children and more than 50% of rare disease patients are children.
Ergomed adopts a patient-centric approach, working closely with
patient advocacy groups throughout development to fully understand
patient and caregiver needs. Greater patient engagement optimises
clinical study design, outcome measures and endpoint development
and Ergomed maintains a Patient Organisation Advisory Board,
comprising representatives of patient groups in the field of rare
diseases with a dedicated Patient Engagement Officer.
COVID-19
Although the pandemic continued to disrupt the CRO market during
2021, Ergomed's CRO business demonstrated continued robustness and
resilience. Clinical trials in rare disease and oncology, sectors
in which Ergomed specialises, are focused on critical unmet
clinical needs and were therefore among the therapeutic areas least
disrupted by COVID-19.
Restrictions on movement and patient access accelerated the
trend towards remote monitoring, an area which Ergomed was already
leading. During the pandemic, Ergomed successfully implemented
remote and risk-based monitoring techniques, allowing clinical
trial activities to continue even when physical access to sites was
not possible.
For early phase studies, where frequent and timely monitoring of
safety and tolerability is required, Ergomed implemented patient
profile software that provides a holistic view of each patient in
an interactive and real-time environment. In addition, study
physicians supported trial investigators in patient identification
and procedures resulting in consistent patient recruitment and
milestone achievement.
Business development and commercial integration
A strong business development performance in 2021 resulted in
net awards increasing by 40.3% to GBP165.3 million (2020: GBP117.8
million). Key to new contract wins in both CRO and PV services was
Ergomed's broader geographic footprint arising from expansion into
the USA and Asia. As a result, the order book increased to GBP239.7
million at the year end, up 24.2% over the course of 2021.
Outlook
Ergomed made excellent progress in delivering its strategy in
2021, despite the challenges of the COVID-19 pandemic. The
resilience and robustness of our global services business was
demonstrated by our continued strong organic growth in both our
pharmacovigilance and CRO businesses.
We have started 2022 in a strong position and post-year end
completed the acquisition of ADAMAS, an international specialist
consultancy offering a full range of independent quality assurance
services and specialising in the auditing of pharmacovigilance
systems. The acquisition broadens our service offering and supports
our vision to achieve global leadership in specialised
pharmaceutical services addressing unmet medical needs and patient
safety.
For and on behalf of the Board of Directors
Miroslav Reljanović
Executive Chairman
29 March 2022
Financial Review
Firmly positioned to trade strongly into improving markets
Ergomed delivered another strong financial performance in 2021,
exceeding market expectations. The Group's complementary CRO and PV
divisions have demonstrated considerable resilience throughout the
pandemic and are emerging in an even stronger position.
The Group ended the 2021 financial year in a robust financial
position, and this has continued into the beginning of 2022. With
continuing strong sales in the second half of 2021 building on the
new awards success achieved in the first half, the closing order
book was at a record high level at 31 December 2021, underpinning
visibility for the achievement of management's revenue growth
targets for 2022 and beyond. The rapid integration of MedSource,
which was completed ahead of schedule, substantially expanded and
accelerated our access to a larger client base with significantly
enhanced potential for cross-selling. The Group's strong balance
sheet comprises net assets of GBP67 million, up more than a quarter
on the prior year. Our strong cash conversion and working capital
base, with substantial unutilised bank facilities available,
provide support for organic investment and growth in future years,
as well as enabling us to continue our disciplined M&A
strategy.
Post-period end, the acquisition of ADAMAS Consulting Group
Limited is expected to be immediately accretive to Ergomed's future
earnings, with the potential for further growth synergies. Ergomed
is well positioned for further organic growth and strategic M&A
and expects to continue to trade strongly into growing global
pharmaceutical research and development markets.
KPIs and APMs
Key Performance Indicators (KPIs)
The table below summarises the KPIs that management uses to
measure the financial performance of the Group.
GBP millions (unless
otherwise stated) 2021 2020
-------------------------- ----- -----
Total revenue 118.6 86.4
-------------------------- ----- -----
CRO 58.1 31.3
PV 60.5 55.1
-------------------------- ----- -----
Gross profit 48.4 39.7
Gross margin 40.8% 45.9%
EBITDA 19.7 18.4
Adjusted EBITDA 25.4 19.4
Basic adjusted earnings
per share 41.1p 25.8p
Cash generated from
operations 22.3 19.0
Cash and cash equivalents 31.2 19.0
Order book 239.7 193.0
-------------------------- ----- -----
Alternative performance measures (APMs)
In measuring and reporting financial information, management
reviews Alternative Performance Measures (APMs), such as EBITDA,
adjusted EBITDA and basic adjusted earnings per share, which are
not defined measures under financial reporting standards.
Management believes that these measures, when considered in
conjunction with defined financial reporting measures, provide
management and stakeholders with a broader understanding of the
performance of the business.
Operating profit is the financial reporting measure under IFRS
most comparable to EBITDA and adjusted EBITDA. The Directors make
certain adjustments to EBITDA to derive adjusted EBITDA, which they
consider more reflective of the Group's underlying trading
performance, enabling comparisons to be made with prior periods.
Certain items, such as share-based payments and changes in fair
value of contingent consideration for acquisitions are non-cash
items and reflect adjustments to expected future consideration
payments.
In 2021, management also reviewed performance monthly on a
constant currency basis. Constant currency is calculated by
restating 2021 performance using 2020 exchange rates for the
relevant period. Constant currency allows management to review
underlying performance without the impact of foreign exchange.
Operating profit is reconciled to EBITDA and adjusted EBITDA as
follows:
2021 2020
GBP000's GBP000's
------------------------------------------------------------- --------- ---------
Operating profit 14,624 13,534
------------------------------------------------------------- --------- ---------
Adjusted for:
Depreciation and amortisation charges within 'Other selling,
general & administration expenses' 3,447 3.511
Amortisation of acquired fair valued intangible assets 1,599 1,332
------------------------------------------------------------- --------- ---------
EBITDA 19,670 18,377
Adjusted for:
Share-based payment charge 817 742
RDEC income (2017) - (527)
Employment creation grants - Serbia - (307)
Acquisition costs 1,776 853
Earn-out consideration 2,949
Pay in lieu and non-compete compensation 211 232
Adjusted EBITDA 25,423 19,370
------------------------------------------------------------- --------- ---------
Earn-out consideration relates to the cash component of deferred
consideration paid on an accelerated basis to the sellers of
MedSource, under the terms of the purchase agreement. These costs,
together with acquisition costs, pay in lieu and non-compete
compensation are cash costs but are not considered as normal
recurring trading items and therefore are not included in adjusted
EBITDA. 2017 RDEC income and grants received were not considered as
normal recurring income items and therefore were not included in
adjusted EBITDA.
Adjusted basic earnings per share is calculated on a similar
basis to basic earnings per share but uses a profit measure which,
like adjusted EBITDA, is adjusted for non-recurring trading items
(see note 9 of the financial statements).
Management has previously used order book, (referred to in prior
years as contracted order backlog) as an APM. Order book is the
contracted value of customer revenue relating to in-progress
performance obligations which are expected to be recognised in the
future. The use of order book by management is no longer considered
to be an APM as, from 1 January 2018, it is now a defined financial
measure under IFRS 15 and is therefore included in KPIs.
Growth
The strong trading performance seen in Ergomed's complementary
Clinical Research Services (CRO) and Pharmacovigilance (PV)
businesses during the first half of 2021 continued through to the
year end. This has resulted in a strong order book going into 2022,
providing significant visibility for the upcoming period.
Revenues for 2021 were GBP118.6 million on a reported basis, an
increase of 37.3% over prior year (2020: GBP86.4 million),
exceeding market expectations despite continuing FX headwinds. On a
constant currency basis revenues were GBP124.7 million, an increase
of 44.3% over 2020.
The CRO division, including MedSource acquired in December 2020,
saw total revenue increase by 85.5% from GBP31.3 million in 2020 to
GBP58.1 million in 2021 (up 9734% in constant currency). Excluding
MedSource, the CRO division revenue increased by 26.2% from GBP30.2
million in 2020 to GBP38.1 million in 2021 on a reported basis and
by 32.7% to GBP40.2 million on a constant currency basis.
The PV division saw revenues increase by 9.9% overall to GBP60.5
million (2020: GBP55.1 million) on a reported basis and by 14.2% to
GBP62.9 million on a constant currency basis.
The reported 37.3% revenue growth and effective cost management
delivered an increase in gross profit from GBP39.7 million in 2020
to GBP48.4 million in 2021. The Ergomed CRO business represented a
higher proportion of total revenues in 2022 than in 2021, whilst
its service fee gross margin at 46.1% on a constant currency basis
remained at the same level as in the prior year (2020: 46.3%)
despite FX headwinds. However, higher levels of pass-through
revenues across the CRO division arising from the rapid growth of
our US business caused gross margin on total CRO revenues to
decline overall. In PrimeVigilance, service fee gross margin in
2020 at 52.5% was lifted by increased case numbers due to COVID-19
and returned to normal levels in 2021 at 51.2%. As a result of
these factors, overall gross margin reduced from 45.9% in 2020 to
40.8% in 2021.
Effective cost management resulted in selling, general and
administration expense falling from 28.5% of revenue in 2020 at
GBP24.6 million in 2020 to 23.4% of revenue at GBP27.7m in
2020.
The strong revenue growth, continued focus on profitability and
effective cost control in 2021 resulted in adjusted EBITDA for 2021
of GBP25.4 million, an increase of 31.2% over the prior year (2020:
GBP19.4 million).
Financial strength
The growth in revenue and profitability achieved during 2021 led
to strong cash generation at an operating level. Cash generated
from operations was GBP22.3 million, an increase of GBP3.3 million
over the prior year (2020: GBP19.0 million).
The Group's balance sheet continued to strengthen. Cash and cash
equivalents increased by GBP12.2 million to GBP31.2 million (2020:
GBP19.0 million) and the Group was debt free at the year end. This
was after cash payments of GBP2.9 million in August 2021 relating
to the earn-out consideration payments for MedSource acquired in
December 2020, following its accelerated integration ahead of
schedule.
As a result of this and the generation of distributable
reserves, the consolidated retained earnings account of the Group
stood at GBP59.1million at the end of 2021 an increase of GBP13.7
million over the retained earnings of GBP45.4 million reported in
2020.
Ergomed plc has a strong balance sheet with net assets at 31
December 2021 of GBP67.2 million up 27.2% on prior year (2020:
GBP52.9 million) and total assets of GBP106.0 million (2020:
GBP92.3 million).
Outlook
With a robust business model and strong execution, Ergomed is
emerging strongly from the challenging environment of the COVID-19
pandemic. Trading in the current year is in line with the Board's
expectations. The Group is well positioned in the resilient and
fast-growing rare disease, oncology and pharmacovigilance sectors
and has a strong financial foundation through which it can grow in
these global markets.
Richard Barfield
Chief Financial Officer
29 March 2022
Consolidated income statement
For the year ended 31 December 2021
2021 2020
Notes GBP000s GBP000s
--------------------------------------------------- ----- -------- --------
2,
Revenue 3 118,581 86,391
Cost of sales (52,191) (38,686)
--------------------------------------------------- ----- -------- --------
Reimbursable expenses (18,028) (8,055)
--------------------------------------------------- ----- -------- --------
Gross profit 3 48,362 39,650
--------------------------------------------------- ----- -------- --------
Selling, general and administration expenses (34,877) (27,518)
--------------------------------------------------- ----- -------- --------
Selling, general and administration expenses
comprises:
--------------------------------------------------- --------
Other selling, general and administration expenses (27,736) (24,591)
--------------------------------------------------- ----- -------- --------
Amortisation of acquired fair valued intangible
assets (1,599) (1,332)
--------------------------------------------------- ----- -------- --------
Share-based payment charge (817) (742)
--------------------------------------------------- ----- -------- --------
Contingent consideration for acquisitions 4 (2,949) -
--------------------------------------------------- ----- -------- --------
Acquisition costs 5 (1,776) (853)
--------------------------------------------------- ----- -------- --------
Research and development expenses (130) (152)
Net impairment losses on trade receivables
and contract assets (324) (285)
--------------------------------------------------- ----- -------- --------
Other operating income 6 1,593 1,839
--------------------------------------------------- ----- -------- --------
Operating profit 14,624 13,534
Finance income 1 8
Change in fair value of equity investments - (511)
--------------------------------------------------- ----- -------- --------
Finance costs 7 (361) (403)
--------------------------------------------------- ----- -------- --------
Profit before taxation 14,264 12,628
--------------------------------------------------- ----- -------- --------
Income tax expense (1,590) (2,946)
--------------------------------------------------- ----- -------- --------
Profit for the year 12,674 9,682
--------------------------------------------------- ----- -------- --------
All activities in the current and prior period relate to
continuing operations.
The notes on pages 16 to 22 form an integral part of these
financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
2021 2020
Notes GBP000s GBP000s
----------------------------------------------- ------ -------- --------
Profit for the year 12,674 9,682
------------------------------------------------------- -------- --------
Items that may be classified subsequently to
profit or loss:
----------------------------------------------- ------ -------- --------
Exchange differences on translation of foreign
operations (682) (59)
------------------------------------------------------- -------- --------
Other comprehensive (expense) for the year
net of tax (682) (59)
------------------------------------------------------- -------- --------
Total comprehensive income for the year 11,992 9,623
------------------------------------------------------- -------- --------
2021 2020
pence pence
------------------------- ------ ------
Earnings Per Share (EPS) 8
Basic 26.1 20.0
Diluted 25.1 19.2
------------------------- ------ ------
Unaudited
2021 2020
GBP000's GBP000's
------------------------------------------------------- --------- ---------
ADJUSTED EBITDA
(Adjusted Earnings Before Interest, Tax, Depreciation
and Amortisation) 9 25,423 19,370
------------------------------------------------------- --------- ---------
2021 2020
pence pence
------------------------------------------------------- --------- ---------
Adjusted Earnings Per Share (Adjusted EPS) 8
Basic 41.1 25.8
Diluted 39.4 24.7
------------------------------------------------------- --------- ---------
Profit or loss and each component of other comprehensive income
are attributable to the owners of the Company.
The notes on pages 16 to 22 form an integral part of these
financial statements.
Consolidated balance sheet
As at 31 December 2021
2021 2020
Notes GBP000s GBP000s
------------------------------ ----- -------- --------
Non-current assets
Goodwill 10 23,903 24,605
Other intangible assets 11 7,653 9,618
Property, plant and equipment 1,966 1,742
Right-of-use assets 2,691 4,715
Equity investments - -
------------------------------ ----- -------- --------
Deferred tax asset 9,433 4,898
------------------------------ ----- -------- --------
45,646 45,578
------------------------------ ----- -------- --------
Current assets
Trade and other receivables 12 25,143 22,224
Accrued revenue 3,958 5,553
------------------------------ ----- -------- --------
Cash and cash equivalents 13 31,243 18,994
------------------------------ ----- -------- --------
60,344 46,771
------------------------------ ----- -------- --------
Total assets 105,990 92,349
------------------------------ ----- -------- --------
Current liabilities
Lease liabilities (1,249) (1,978)
Trade and other payables 14 (15,207) (15,702)
Deferred consideration 4 - (328)
Deferred revenue (17,752) (13,829)
Current tax liability (1,172) (1,775)
------------------------------ ----- -------- --------
(35,380) (33,612)
------------------------------ ----- -------- --------
Net current assets 24,964 13,159
------------------------------ ----- -------- --------
Non-current liabilities
Lease liabilities (1,432) (3,128)
Provisions (19) (317)
------------------------------ ----- -------- --------
Deferred tax liability (1,920) (2,426)
------------------------------ ----- -------- --------
(3,371) (5,871)
------------------------------ ----- -------- --------
Total liabilities (38,751) (39,483)
------------------------------ ----- -------- --------
Net assets 67,239 52,866
------------------------------ ----- -------- --------
Equity
Share capital 15 493 489
Share premium account 545 3
Merger reserve 1,349 1,349
Share-based payment reserve 5,859 5,042
Translation reserve (67) 615
Retained earnings 59,060 45,368
------------------------------ ----- -------- --------
Total equity 67,239 52,866
------------------------------ ----- -------- --------
The notes on pages 16 to 22 form an integral part of these
financial statements.
Approved by the Board of Directors and authorised for issue on
29 March 2022.
Richard Barfield
Chief Financial Officer
Company Registration No. 04081094
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share-
Share based
Share premium Merger payment Translation Retained Total
capital account reserve reserve reserve earnings equity
Notes GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Balance at 1 January 2020 473 25,790 11,088 4,300 674 (5,505) 36,820
Profit for the year - - - - - 9,682 9,682
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Other comprehensive income
for the year - - - (59) - (59)
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Total comprehensive income - - - - (59) 9,682 9,623
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Transactions with shareholders
Shares issued during the year
for cash 15 14 1,855 - - - - 1,869
Share-based payment charge
for the year - - - 742 - - 742
Deferred tax credit taken
directly to equity - - - - - 2,461 2,461
Shares issued for non-cash
consideration 2 - 1,349 - - - 1,351
Transactions with shareholders
- capital reduction
Capitalisation of Merger reserve
to B Ordinary Shares 11,088 - (11,088) - - - -
Cancellation of B Ordinary
Shares (11,088) - - - - 11,088 -
Cancellation of Share Premium - (27,642) - - - 27,642 -
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Total transactions with shareholders 16 (25,787) (9,739) 742 - 41,191 6,423
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Balance at 31 December 2020 489 3 1,349 5,042 615 45,368 52,866
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Profit for the year - - - - - 12,674 12,674
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Other comprehensive income
for the year - - - - (682) - (682)
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Total comprehensive income (682) 12,674 11,992
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Transactions with shareholders
Shares issued during the year
for cash 15 4 542 - - - - 546
Share-based payment charge
for the year - - - 817 - - 817
Deferred tax credit taken
directly to equity - 1,018 1,018
Total transactions with shareholders 4 542 - 817 - 1,018 2,381
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
Balance at 31 December 2021 493 545 1,349 5,859 (67) 59,060 67,239
------------------------------------- ----- -------- -------- -------- -------- ----------- --------- --------
The notes on pages 16 to 22 form an integral part of these
financial statements.
Consolidated cash flow statement
For the year ended 31 December 2021
2021 2020
Notes GBP000s GBP000s
-------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Profit before taxation 14,264 12,628
Adjustment for:
Amortisation and depreciation 5,046 4,843
(Profit) / Loss on disposal of non-current
assets (413) 16
Share-based payment charge 817 742
Change in the fair value of equity investments - 511
RDEC income 6 (956) (1,188)
Finance costs 7 361 403
Other non-cash movements (25) (8)
Exceptional Items (Earn-out on acquisitions) 4 2,949 -
-------------------------------------------------- ----- -------- --------
Operating cash inflow before changes in working
capital and provisions 22,043 17,947
Increase in trade, other receivables and accrued
revenue 367 (6,137)
Increase in trade, other payables and deferred
revenue 217 7,182
Decrease in provisions (298) (18)
-------------------------------------------------- ----- -------- --------
Cash generated from operating activities 22,329 18,974
-------------------------------------------------- ----- -------- --------
Taxation (paid) (3,646) (926)
-------------------------------------------------- ----- -------- --------
Net cash inflow from operating activities 18,683 18,048
-------------------------------------------------- ----- -------- --------
Investing activities
Finance income received 1 8
Acquisition of intangible assets 11 (30) (542)
Acquisition of property, plant and equipment (953) (432)
Proceeds from the sale of property, plant and
equipment 103 46
Proceeds on the disposal of equity investments - 175
Acquisition of subsidiaries, net of cash acquired - (12,031)
Acquisition related earn-out paid (3,267) -
-------------------------------------------------- ----- -------- --------
Net cash outflow from investing activities (4,146) (12,776)
-------------------------------------------------- ----- -------- --------
Financing activities
Proceeds from the issue of new ordinary shares 15 546 1,869
Finance costs paid (169) (157)
Proceeds from borrowings - 15,000
Repayment of borrowings - (15,000)
Payment of lease liabilities (2,490) (2,189)
-------------------------------------------------- ----- -------- --------
Net cash outflow from financing activities (2,113) (477)
-------------------------------------------------- ----- -------- --------
Net change in cash and cash equivalents 12,424 4,795
Effect of foreign currency on cash balances (175) (60)
-------------------------------------------------- ----- -------- --------
Cash and cash equivalents at start of year 18,994 14,259
-------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of year 13 31,243 18,994
-------------------------------------------------- ----- -------- --------
The notes on pages 16 to 22 form an integral part of these
financial statements.
Notes to the financial statements
For the year ended 31 December 2021
1. Basis of preparation
The consolidated financial statements of the Group have been
prepared on the going concern basis in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006, the IFRS Interpretations
Committee ('IFRS-IC') interpretations and those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The consolidated financial statements have been prepared on a
historical cost basis except that the following assets and
liabilities are stated at their fair value: certain financial
assets and financial liabilities measured at fair value, and
liabilities for cash-settled share--based payments.
The same accounting policies, presentation and methods of
computation have been followed in these condensed financial
statements as were applied in the preparation of the Group's
financial statements for the year ended 31 December 2021.
The financial statements for 2020 have been delivered to the
Registrar of Companies and the 2021 financial statements will be
delivered after the Annual General Meeting.
The Auditor has reported on both sets of accounts without
qualification, did not draw attention to any matters by way of
emphasis without qualifying their report, and did not issue a
statement under Section 498(2) or 498(3) of the Companies Act
2006.
Going concern
The financial statements have been prepared on the going concern
basis, which assumes that the Group and Company will have
sufficient funds to continue in operational existence for the
foreseeable future, being a period of no less than 12 months from
the date of signing of the financial statements. The Directors have
reviewed a cash flow forecast for the period to 31 December 2024,
which is derived from the 2022 Board approved budget and a
medium-term cash flow forecast through to 31 December 2024, which
is an extrapolation of the approved budget under multiple scenarios
and growth rates. The 2022 budget and medium--term forecast
represents the Directors' best estimate of the Group's future
performance and necessarily includes a number of assumptions,
including the level of revenues. The 2022 budget and medium-term
forecast demonstrate that the Directors have a reasonable
expectation that the Group will be able to meet its liabilities as
they fall due for a period of at least 12 months from the date of
approval of the financial statements.
Because of the above factors and, having made appropriate
enquiries, the Directors have a reasonable expectation that the
Company and Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing these
financial statements.
2. Revenue
The Group's revenue is disaggregated by geographical market and
major service lines:
Geographical market and major service lines
2021
Major service lines
--------------------------------------- ----------------------------
CRO PV Total
GBP000s GBP000s GBP000s
--------------------------------------- -------- -------- --------
Geographical market by client location
UK 5,415 8,785 14,200
Rest of Europe, Middle East and Africa 9,585 12,981 22,566
North America 38,388 36,028 74,416
Asia 4,687 2,532 7,219
--------------------------------------- -------- -------- --------
Australia 2 178 180
--------------------------------------- -------- -------- --------
58,077 60,504 118,581
--------------------------------------- -------- -------- --------
2020
Major service lines
--------------------------------------- ----------------------------
CRO PV Total
GBP000s GBP000s GBP000s
--------------------------------------- -------- -------- --------
Geographical market by client location
UK 3,589 8,590 12,179
Rest of Europe, Middle East and Africa 10,146 13,183 23,329
North America 15,828 30,836 46,664
Asia 1,753 2,269 4,022
--------------------------------------- -------- -------- --------
Australia - 197 197
--------------------------------------- -------- -------- --------
31,316 55,075 86,391
--------------------------------------- -------- -------- --------
3. Operating segments
Products and services from which reportable segments derive
their revenues
Information reported to the Company's Board, which is the chief
operating decision maker ('CODM'), for the purpose of resource
allocation and assessment of segment performance, is focused on the
Group operating as two business segments, being Clinical Research
Services ('CRO') and Pharmacovigilance ('PV'). All revenues arise
from direct sales to customers. The segment information reported
below all relates to continuing operations.
The accounting policies of the reportable segments are the same
as the Group's accounting policies. Segment profit represents the
gross profit earned by each segment. Other amounts, including
selling, general and administration expenses were not allocated to
a segment. This was the measure reported to the CODM for the
purpose of resource allocation and assessment of segment
performance.
2021
Consolidated
CRO PV total
GBP000s GBP000s GBP000s
------------------------------------------------ -------- -------- ------------
Segment revenues 58,077 60,504 118,581
Cost of sales (22,906) (29,285) (52,191)
------------------------------------------------ -------- -------- ------------
Reimbursable expenses (17,621) (407) (18,028)
------------------------------------------------ -------- -------- ------------
Segment gross profit 17,550 30,812 48,362
------------------------------------------------ -------- -------- ------------
Selling, general and administration expenses (34,877)
------------------------------------------------ -------- -------- ------------
Selling, general and administration expenses
comprises:
------------------------------------------------ ------------
Other selling, general and administration
expenses (27,736)
------------------------------------------------ ------------
Amortisation of acquired fair valued intangible
assets (1,599)
------------------------------------------------ ------------
Share-based payment charge (817)
------------------------------------------------ ------------
Contingent consideration for acquisitions (2,949)
------------------------------------------------ -------- -------- ------------
Acquisition costs (1,776)
------------------------------------------------ -------- -------- ------------
Exceptional items
------------------------------------------------ -------- -------- ------------
Research and development expenses (130)
Net impairment of trade receivables and
contract assets (324)
------------------------------------------------ -------- -------- ------------
Other operating income 1,593
------------------------------------------------ -------- -------- ------------
Operating profit 14,624
Finance income 1
Change in fair value of equity investments -
------------------------------------------------ -------- -------- ------------
Finance costs (361)
------------------------------------------------ -------- -------- ------------
Profit before tax 14,264
------------------------------------------------ -------- -------- ------------
2020
Consolidated
CRO PV total
GBP000s GBP000s GBP000s
------------------------------------------------ -------- -------- ------------
Segment revenues 31,316 55,075 86,391
Cost of sales (12,737) (25,949) (38,686)
------------------------------------------------ -------- -------- ------------
Reimbursable expenses (7,584) (471) (8,055)
------------------------------------------------ -------- -------- ------------
Segment gross profit 10,995 28,655 39,650
------------------------------------------------ -------- -------- ------------
Selling, general and administration expenses (27,518)
------------------------------------------------ -------- -------- ------------
Selling, general and administration expenses
comprises:
------------------------------------------------ ------------
Other selling, general and administration
expenses (24,591)
------------------------------------------------ ------------
Amortisation of acquired fair valued intangible
assets (1,332)
------------------------------------------------ ------------
Share-based payment charge (742)
------------------------------------------------ ------------
Acquisition costs (853)
------------------------------------------------ -------- -------- ------------
Exceptional items -
------------------------------------------------ -------- -------- ------------
Research and development expenses (152)
Net impairment of trade receivables and
contract assets (285)
------------------------------------------------ -------- -------- ------------
Other operating income 1,839
------------------------------------------------ -------- -------- ------------
Operating profit 13,534
Finance income 8
Change in fair value of equity investments (511)
------------------------------------------------ -------- -------- ------------
Finance costs (403)
------------------------------------------------ -------- -------- ------------
Profit before tax 12,628
------------------------------------------------ -------- -------- ------------
4. Contingent consideration for acquisitions
Where contingent consideration is deemed to be employment
related the cost is recognised in the income statement as an
employment related cost over the period which it is earned.
Contingent consideration not classified on the remuneration basis
is reported as acquisition consideration.
Contingent and deferred consideration recognised at the point of
acquisition are included as a financial liability. Financial assets
and liabilities are subsequently measured at fair value through the
profit and loss.
Contingent consideration in relation to MS Clinical Services LLC
was valued at GBPnil at the date of acquisition and as at 31
December 2020.
To facilitate the full integration of MS Clinical Services, LLC
the management of the Company and MedSource agreed a revised
earn-out and settlement agreement on 23 July 2021. The revised
earn-out and settlement agreement gave rise to a charge to the
profit and loss of GBP2,949,000 ($3,800,000).
Contingent consideration charged to profit and loss
2021 2020
GBP000s GBP000s
------------------------------------------------------ -------- --------
Contingent Consideration for acquisitions - MedSource 2,949 -
------------------------------------------------------ -------- --------
Deferred consideration payable
Group Company
--------------------- ------------------ ------------------
2021 2020 2021 2020
GBP000s GBP000s GBP000s GBP000s
--------------------- -------- -------- -------- --------
Due within one year:
--------------------- -------- -------- -------- --------
MedSource - 328 - -
--------------------- -------- -------- -------- --------
- 328 - -
--------------------- -------- -------- -------- --------
The deferred consideration payable for MS Clinical Services, LLC
and its subsidiaries ('MedSource') of GBP328,000 was due upon the
verification of the net assets acquired by the Group at the
acquisition date and was settled in cash during 2021.
5. Acquisition costs
2021 2020
GBP000s GBP000s
------------------------------------------ -------- --------
Acquisition of Ashfield Pharmacovigilance - 14
Acquisition of MedSource (note 16) 406 825
------------------------------------------ -------- --------
Acquisition of ADAMAS (note 17) 240 -
------------------------------------------ -------- --------
Aborted and other acquisition costs 1,130 14
------------------------------------------ -------- --------
1,776 853
------------------------------------------ -------- --------
In line with company strategy, Ergomed has considered a number
of potential acquisitions in 2021. Costs of GBP406,000 were
incurred in relation to the acquisition of MedSource in 2021 (2020:
GBP825,000) and GBP240,000 were incurred in 2021 in relation to the
acquisition of ADAMAS which completed on 9 February 2022. Ergomed
incurred costs of GBP1,130,000 in relation to aborted
acquisitions.
6. Other operating income
Research and Development Expenditure Credit ('RDEC')
The Group is eligible, within the UK, to claim tax credits
against certain R&D expenditure under the Research and
Development Expenditure Credit ('RDEC') scheme. During the year,
the Group submitted claims in respect of the 2019 and 2020
financial years and recognised the related profit and loss charge
within other operating income in the current financial year.
2021 2020
GBP000s GBP000s
--------------------- -------- --------
Foreign grant income 629 574
RDEC income 956 1,188
--------------------- -------- --------
Other income 8 77
--------------------- -------- --------
1,593 1,839
--------------------- -------- --------
7. Finance costs
2021 2020
GBP000s GBP000s
-------------------------------- -------- --------
Loan and other interest payable 170 158
-------------------------------- -------- --------
Interest on lease liabilities 191 245
-------------------------------- -------- --------
361 403
-------------------------------- -------- --------
8. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
2021 2020
GBP000s GBP000s
--------------------------------------------------- -------- --------
Profit for the purposes of earnings per share -
net profit attributable to owners of the Company 12,674 9,682
--------------------------------------------------- -------- --------
Adjust for:
Amortisation of acquired fair valued intangible
assets (note 11) 1,605 1,332
Share-based payment charge 817 742
Acquisition-related contingent consideration (note
4) 2,949 -
Acquisition costs (note 5) 1,776 853
Pay in lieu and non-compete compensation 211 232
Change in fair value of equity investments - 511
RDEC income (2017) - (527)
Employment creation grants - Serbia - (307)
--------------------------------------------------- -------- --------
Tax effect of adjusting items (102) (41)
--------------------------------------------------- -------- --------
Adjusted earnings for the purposes of adjusted
earnings per share (unaudited) 19,930 12,477
--------------------------------------------------- -------- --------
Number of shares
2021 2020
Number Number
------------------------------------------------ ---------- ----------
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 48,466,740 48,323,814
------------------------------------------------ ---------- ----------
Incremental shares in respect of employee share
schemes 2,102,588 2,176,170
------------------------------------------------ ---------- ----------
Weighted average number of Ordinary Shares for
the purposes of diluted earnings per share 50,569,328 50,499,984
------------------------------------------------ ---------- ----------
Earnings per share (EPS)
2021 2020
pence pence
-------- ------ ------
Basic 26.1 20.0
-------- ------ ------
Diluted 25.1 19.2
-------- ------ ------
Adjusted earnings per share (Adjusted EPS)
2021 2020
Unaudited pence pence
---------- ------ ------
Basic 41.1 25.8
---------- ------ ------
Diluted 39.4 24.7
---------- ------ ------
9. EBITDA and Adjusted EBITDA
2021 2020
Unaudited GBP000's GBP000's
------------------------------------------------------- --------- ---------
Operating profit 14,624 13,534
------------------------------------------------------- --------- ---------
Adjusted for:
------------------------------------------------------- --------- ---------
Depreciation and amortisation charges within selling,
general & administration expenses 3,447 3,511
------------------------------------------------------- --------- ---------
Amortisation of acquired fair valued intangible
assets 1,599 1,332
------------------------------------------------------- --------- ---------
EBITDA 19,670 18,377
------------------------------------------------------- --------- ---------
Adjusted for:
------------------------------------------------------- --------- ---------
Share-based payment charge 817 742
------------------------------------------------------- --------- ---------
Acquisition related contingent compensation (note
4) 2,949 -
------------------------------------------------------- --------- ---------
RDEC income - (527)
------------------------------------------------------- --------- ---------
Employment creation grants - Serbia - (307)
------------------------------------------------------- --------- ---------
Acquisition costs (note 5) `1,776 853
------------------------------------------------------- --------- ---------
Pay in lieu and non-compete compensation 211 232
------------------------------------------------------- --------- ---------
Adjusted EBITDA 25,423 19,370
------------------------------------------------------- --------- ---------
10. Goodwill
Goodwill GBP000s
------------------------------------------------------- -------
Cost
------------------------------------------------------- -------
At 1 January 2020 15,523
------------------------------------------------------- -------
Arising on business combinations 11,261
------------------------------------------------------- -------
Translation movement (36)
------------------------------------------------------- -------
At 31 December 2020 26,748
Fair value adjustment arising on business combinations (477)
------------------------------------------------------- -------
Translation movement (225)
------------------------------------------------------- -------
At 31 December 2021 26,046
------------------------------------------------------- -------
Impairment losses
------------------------------------------------------- -------
At 1 January 2020 and 2021 2,143
------------------------------------------------------- -------
At 31 December 2020 and 2021 2,143
------------------------------------------------------- -------
Net book value
------------------------------------------------------- -------
At 31 December 2021 23,903
------------------------------------------------------- -------
At 31 December 2020 24,605
------------------------------------------------------- -------
The fair value adjustment arising on business combinations
during the year ended 31 December 2021 relates to the acquisitions
of MS Clinical Services, LLC ('MedSource') (note 17).
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units ('CGUs') that are
expected to benefit from that business combination. The carrying
amount of goodwill has been allocated as follows:
2021 2020
Cash-generating unit GBP000s GBP000s
--------------------- -------- --------
CRO 10,190 10,859
--------------------- -------- --------
PV 13,713 13,746
--------------------- -------- --------
23,903 24,605
--------------------- -------- --------
11. Other intangible assets
Customer Customer In-process
Software contracts relationships Brands R&D Technology Total
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Cost
At 1 January 2020 3,478 1,258 3,395 817 15,200 419 24,567
Acquisitions through
business combinations - 1,739 6,075 916 - - 8,730
Additions 542 - - - - - 542
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Translation movement 120 (23) (149) (11) - - (63)
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
At 31 December
2020 4,140 2,974 9,321 1,722 15,200 419 33,776
IFRS3 Revaluation - 90 240 38 - - 368
Additions 30 - - - - - 30
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Disposals (211) - - - - - (211)
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Translation movement (7) 6 2 (21) - - (20)
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
At 31 December
2021 3,952 3,070 9,563 1,739 15,200 419 33,943
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Amortisation
At 1 January 2020 1,675 1,258 2,826 434 15,200 419 21,812
Charge for the
year 934 553 675 104 - - 2,266
Translation movement 42 - 33 5 - - 80
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
At 31 December
2020 2,651 1,811 3,534 543 15,200 419 24,158
Charge for the
year 577 425 906 267 - - 2,175
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Translation movement (6) (5) (20) (12) - - (43)
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
At 31 December
2021 3,222 2,231 4,420 798 15,200 419 26,290
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
Net book value
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
At 31 December
2021 730 839 5,143 941 - - 7,653
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
At 31 December
2020 1,489 1,163 5,787 1,179 - - 9,618
----------------------- -------- ---------- -------------- -------- ---------- ---------- --------
12. Trade and other receivables
2021 2020
GBP000s GBP000s
--------------------------- -------- --------
Trade receivables 20,234 19,079
Other receivables 869 1,241
Prepayments 1,818 1,482
--------------------------- -------- --------
Corporation tax receivable 2,222 422
--------------------------- -------- --------
25,143 22,224
--------------------------- -------- --------
13. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term
deposits.
2021 2020
GBP000s GBP000s
Cash at bank 31,243 18,994
Cash net of borrowings 31,243 18,994
----------------------- -------- --------
The carrying amount of cash and cash equivalents approximates to
their fair value at the reporting date and are denominated in the
following currencies:
2021 2020
GBP000s GBP000s
------ -------- --------
GBP 15,083 1,598
Euro 3,118 5,732
USD 11,757 10,213
------ -------- --------
Other 1,285 1,451
------ -------- --------
31,243 18,994
------ -------- --------
14. Trade and other payables
2021 2020
GBP000s GBP000s
----------------------------------- -------- --------
Trade payables 3,102 4,197
Amounts payable to related parties 3 55
Social security and other taxes 1,302 1,112
Other payables 1,802 1,295
Customer advances 47 408
----------------------------------- -------- --------
Accruals 8,951 8,635
----------------------------------- -------- --------
15,207 15,702
----------------------------------- -------- --------
Customer advances relate to deposits made by customers as
security over future services and third-party costs incurred in
relation to those services.
15. Ordinary share capital
Group and Company
2021 2020
--------------------------------- ------------------- -------------------
Number GBP000s Number GBP000s
--------------------------------- ---------- ------- ---------- -------
Ordinary shares of GBP0.01 each
At 1 January 48,719,526 487 47,286,289 473
Exercise of share options 418,545 4 1,433,237 14
--------------------------------- ---------- ------- ---------- -------
Shares to be issued for non-cash
consideration 155,558 2 155,558 2
--------------------------------- ---------- ------- ---------- -------
At 31 December 49,263,629 493 48,875,084 489
--------------------------------- ---------- ------- ---------- -------
16. Acquisition of subsidiary - MedSource
On 11 December 2020, the Group acquired all of the issued share
capital in MS Clinical Services, LLC, MedSource UK Ltd and MS
Clinical Services (Canada) Inc. ('MedSource'") for $16,200,000 in
cash, adjusted for net debt, and paid at the closing of the
transaction, with further consideration of $1,800,000 payable in
Ergomed plc equity issued at a price based on the average daily
closing price for 30 days preceding the acquisition (155,558 shares
at a price of GBP8.76) upon the satisfaction of certain
representations and warranties.
In order to facilitate the full integration of all CRO
activities under the Ergomed CRO brand and management, and fully
realise the benefit of a wider CRO operational base in North
America before the originally planned and anticipated earn-out and
handover period at the end of 2021, the management of the Company
and MedSource agreed a revised earn-out and settlement agreement on
23 July 2021. The revised earn-out and settlement agreement gave
rise to final payments totaling GBP2,949,000 ($3,800,000) in 2021
(note 4).
MedSource is a full-service CRO with a focus on complex diseases
and study designs. The acquisition greatly expands the geographical
presence of Ergomed's CRO service offering in the US whilst
complementing the current business specialism in oncology and rare
disease.
Fair
Book value Final
value adjustments valuation
GBP000s GBP000s GBP000s
---------------------------------------- -------- ------------ ----------
Intangible assets 475 6,072 6,547
Property, plant and equipment 89 - 89
---------------------------------------- -------- ------------ ----------
Right-of-use assets - 131 131
---------------------------------------- -------- ------------ ----------
Deferred tax asset - 3,393 3,393
---------------------------------------- -------- ------------ ----------
Total non-current assets 564 9,596 10,160
---------------------------------------- -------- ------------ ----------
Trade and other receivables 3,062 - 3,062
---------------------------------------- -------- ------------ ----------
Cash and cash equivalents 4,346 - 4,346
---------------------------------------- -------- ------------ ----------
Current assets 7,408 - 7,408
---------------------------------------- -------- ------------ ----------
Trade and other payables (2,348) - (2,348)
Lease liability - (131) (131)
Deferred Revenue (6,528) (3,208) (9,736)
---------------------------------------- -------- ------------ ----------
Deferred tax liability - (1,683) (1,683)
---------------------------------------- -------- ------------ ----------
Financial liabilities (8,876) (5,022) (13,898)
---------------------------------------- -------- ------------ ----------
Total identifiable net assets (904) 4,574 3,670
---------------------------------------- -------- ------------ ----------
Goodwill 6,773
---------------------------------------- -------- ------------ ----------
Total consideration 10,443
---------------------------------------- -------- ------------ ----------
Satisfied by:
Cash 9,092
---------------------------------------- -------- ------------ ----------
Equity 1,351
---------------------------------------- -------- ------------ ----------
Total consideration 10,443
---------------------------------------- -------- ------------ ----------
Net cash outflow arising on acquisition
Cash consideration 8,764
Less: cash and cash equivalent balances
acquired (4,346)
Add: deferred consideration 328
---------------------------------------- -------- ------------ ----------
Add: Earn-Out and settlement agreement 2,949
---------------------------------------- -------- ------------ ----------
Transaction expenses 1,231
---------------------------------------- -------- ------------ ----------
8,926
---------------------------------------- -------- ------------ ----------
The fair value of intangible assets relates to customer
relationships of GBP4,317,000, brand of GBP954,000 and contracted
order book of GBP1,276,000. The Group incurred acquisition related
costs of GBP825,000 related to due diligence and legal activities
in the year ended 31 December 2020 and GBP406,000 in the period to
31 December 2021. These costs have been included in acquisition
costs within selling and administrative expenses in the Group's
consolidated income statement.
The Company has a 12-month measurement period from the date of
acquisition and the measurement period ended on 11 December
2021.
17. Post-year end acquisition of subsidiary - ADAMAS
On 9 February 2022, the Group acquired all the issued share
capital in ADAMAS Consulting Group Limited. The acquisition has
been completed for a cash consideration of GBP25.6 million,
representing an enterprise value of GBP24.2 million and cash
acquired of GBP1.4 million. Ergomed Plc drew down on its GBP15
million multi-currency rolling credit facility ('RCF) on 1 February
2022 and utilised the funds and existing Group cash reserves to
fund the acquisition.
ADAMAS is an international specialist consultancy offering a
full range of independent quality assurance services and
specialising in the audit of pharmaceutical manufacturing
processes, as well as auditing clinical trials and
pharmacovigilance systems. The subsidiary acquisition was post-year
end and has not contributed to the consolidated profit of the Group
for the year ended 31 December 2021.
Ergomed plc has a 12-month measurement period from the date of
acquisition ending on 9(th) February 2023.
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END
FR SEWEEAEESESD
(END) Dow Jones Newswires
March 29, 2022 02:01 ET (06:01 GMT)
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