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Creo Medical Group - Half-year Report

RNS Number : 7970Z
Creo Medical Group PLC
23 September 2020
 

Creo Medical Group plc

("Creo" or the "Company")

 

Half-year Report

 

Strengthened product portfolio, enhanced commercial footprint and strategic acquisition

 

Creo Medical Group plc (AIM: CREO), a medical device company focused on the emerging field of surgical endoscopy, announces its unaudited results for the six-month period ended 30 June 2020, in line with management expectations.

 

Operational and Recent Highlights

·    Strengthened product portfolio with CE marking for five new GI devices

·    US FDA 510k clearance for SlypSeal Flex (previously referred to as HS1)

·    Commercial footprint enhanced despite COVID-19 restrictions worldwide:

-    Initial commercial orders of Speedboat Inject in-line with expectations on pricing and volume at early stages of commercialisation

-    Continued focus on establishing clinical education centres in all key markets (US, Europe, South Africa, and APAC) with remote clinician training and mentoring undertaken via online workshops to continue clinician engagement across the world

 

COVID-19

·    Rapid adjustment to day to day operations to ensure employee safety; focus on strengthening product portfolio with furlough of a small number of staff

·    Pressure on health systems and the redeployment of medical staff in response to COVID-19 has delayed the short-term expansion of Creo's clinical education programme and revenue. Management expectation is that long term impact should be mitigated by a demand for cost and time saving healthcare solutions

·    ESG supporting our community with Creo and its team delivering valuable charitable support for the COVID-19 response: sourcing ventilators for NHS hospitals, providing bikes for medical staff and acquiring 3D printers for PPE manufacture by Creo employees

 

Post-period end highlights

·    Acquisition of Albyn Medical S.L. (24 July 2020) for an equity value of €24.8m plus up to €2.7m of performance related payments, adding a highly complementary product range and a direct commercial, operational and logistic presence in four key European markets: Spain, France, Germany and the UK

·    Appointment of David Woods (ex-PENTAX Medical and previously Non-Executive Director of Creo) as Chief Commercial Officer, supported by further strengthening Creo's Senior Management Team with key hires in the USA and Asia

·    Funding received from the Cardiff Capital Region to assist with the development of Creo's cool plasma sterilisation product for potential use in wound care, medical device sterilisation and COVID-19 inactivation and decontamination

 

Financial Highlights

·    Operating loss of £10.6m for H1 2020 (H1 2019: £9.4m) including £0.5m share based payments (H1 2019: £0.5m), in line with management expectations

·    Net cash outflow from operating activities of £10.4m for H1 2020 (H1 2019: £5.9m)

·    Strong Balance Sheet with cash and cash equivalents of £70.6m at 30 June 2020 (H1 2019: £38.7m)

 

Craig Gulliford, Chief Executive Officer, commented: "We continue to make progress against strategic objectives, executing on our education led commercialisation plan by targeting selected clinicians and key opinion leaders to drive clinical adoption.

 

"Like all businesses, we have been impacted by COVID-19 but we have adapted and grown during the period. The team has focused on strengthening our product portfolio by CE marking five new products and gaining FDA 510(k) clearance for our SlypSeal Flex device.  We are ready for success as the world opens back up and routine diagnostics and therapeutic treatment utilising our products begins to normalise. We have grown our talent during the period, most notably in the US and engineering and innovation.

 

"In line with the strategy set during the 2019 funding round, we were delighted to complete the strategic acquisition of Albyn Medical S.L., a European specialist in the supply and manufacturer of Gastroenterology, Urology and Endoscopy products that is highly synergistic with Creo's products.  With a sales and marketing team of 40 people and an operational footprint in Spain, France, Germany and the UK, this establishes a commercial and distribution platform to accelerate our business in Europe, adding revenue, profits and experienced talent into the business."

 

 

Creo Medical Group plc

investors.creomedical.com

Richard Rees (CFO)

+44 (0)1291 606 005

 

 

Cenkos Securities plc

+44 (0)20 7397 8900

Stephen Keys / Cameron MacRitchie

 

Michael Johnson / Russell Kerr (Sales)

 

 

 

Walbrook PR Ltd

Tel: +44 (0)20 7933 8780 or [email protected]

Paul McManus

Mob: +44 (0)7980 541 893

Lianne Cawthorne

Mob: +44 (0)7515 909 238

 

 

 

About Creo Medical

 

Creo Medical is a medical device company focused on the development and commercialisation of minimally invasive surgical devices, bringing advanced energy to endoscopy.  The Company's strategy is to bring its CROMA Advanced Energy Platform to market through a suite of medical devices which the Company has designed, initially for the emerging field of gastrointestinal ("GI") therapeutic endoscopy, an area with high unmet needs. 

 

For more information about Creo Medical please see our website, investors.creomedical.com

 

 

 

Interim results for six months ended 30 June 2020

 

Chief Executive Review

 

During the period we have continued to make progress against strategic objectives, executing on our education led commercialisation plan by targeting selected clinicians and key opinion leaders to drive clinical adoption.

 

Creo's Speedboat Inject is the first product cleared for use in a suite of tools under development by Creo to aid the endoscopist in minimally invasive surgery. Early applications focus on lower GI procedures where our technology is expected to improve patient outcomes (shorter procedures, hospital stays and recovery times), reduce risk and make procedures easier to perform. This has been supported from initial data from the UK's leading user of Speedboat Inject which demonstrated that using the device can save NHS hospitals nearly £5,000 per procedure versus a traditional surgical outcome. Health economic data analysed from a cohort of UK patient cases demonstrated savings in excess of £400,000 of NHS funding in just one hospital. Overall savings could be higher when additional follow up costs associated with surgery are factored in. 

 

We believe that Speedboat Inject, together with the suite of devices recently approved under the CE mark, remains well positioned to be the next generation solution in minimally invasive surgery.

 

Clinical Education Programme progress

Creo's Clinical Education Programme ensures leading clinicians are educated in the use of Speedboat Inject and the CROMA Advanced Energy Platform with the aim of ensuring quality control and best patient outcomes. We have continued to successfully roll out the programme to the US, EU, Asia and UK, training several leading GI endoscopists across multiple hospitals further increasing the number of clinicians trained.

 

Understandably, the Company's roll out of the programme across UK, US and EMEA regions has been impacted by the ongoing restrictions on travel across the world and a focus on caring for patients with COVID-19 delaying procedures utilising our products. However, procedures will need to begin in earnest before there is an impact on the healthcare system of more severe and advanced cancer cases arising from later diagnosis. As such, we still expect to see significant growth in commercial orders for Speedboat Inject in the medium term. The business has adjusted to new working practices as a result of COVID-19 and continues this approach via online workshops and a focus on technology and strong communication.

 

Product review

During the period, Creo successfully CE marked five new devices which form the Creo GI suite of advanced energy devices across four technology platforms, each addressing different areas of clinical need. The individual device technology platforms each have multiple potential market applications. These include open surgical applications, several laparoscopic surgical and ablation procedures, as well as the initial core focus in the therapeutic flexible endoscopy markets. The four platforms are summarised below:

 

1.    Speedboat technology - Range of unique bipolar radiofrequency blades with integrated microwave coagulation, which includes the first device launched by Creo, Speedboat Inject.

2.    SlypSeal technology - Haemostasis devices leveraging Creo's unique "Non-stick" haemostasis technology.

3.    SpydrBlade technology - Tissue resection devices combining Speedboat resection capability with precise microwave coagulation.

4.    MicroBlate technology - Tissue ablation devices including MicroBlate Fine and MicroBlate Flex.

 

Speedboat Inject is already CE marked, FDA cleared, and is being used by clinicians in the UK, EU, US, Africa and APAC. SlypSeal Flex received US FDA 510k clearance in March 2020.

 

Commercial progress

Commercial orders for Speedboat Inject were received during the period from the US, South Africa, and Australia.  These initial orders are in line with expectations on pricing and volume at this early stage of commercialisation where the focus remains on establishing clinical education centres in all key markets to continue the growth in excellent clinical outcomes and adoption. 

 

The commercial team has been strengthened across the group, enabling a direct sales strategy within the US and we continue to develop our distribution network both as a result of the Albyn acquisition and via partners within regions across the world.

 

Post period end, we were delighted to announce the appointment of David Woods (previously a Non-Executive Director of Creo) as Chief Commercial Officer (CCO) with effect from 1 August 2020. David has extensive experience in the med-tech sector and joins in his new full-time executive role in the US, having previously been the President and CEO of PENTAX Americas and M&A Director of HOYA Group PENTAX Medical.

 

Pipeline update

CROMA has been designed with a single accessory port compatible with a suite of single-use devices that use the microwave and radiofrequency energy for cutting, coagulating and ablating in various procedures. The Company's development of a suite of endoscopic products for use with CROMA remains on track, with management aiming to continue to enhance and introduce new products to support its existing product portfolio. In addition, we continue to investigate other applications for our technology beyond the initial suite of devices.

 

Management and Employees

During the period we have recruited talented and experienced individuals across all business functions to bolster Creo's expertise and add capacity for growth. Following the acquisition of Albyn Medical, we now employ more than 175 people, working in a creative, innovative, and driven environment, with a shared goal of improving clinical outcomes and changing patients' lives. As we move into the next stage of our development, our management team and staff now have a clearly defined strategy based on three pillars of execution.

 

Post-period end Acquisition

On 24 July we announced the acquisition of Albyn Medical S.L. ("Albyn Medical"), a European specialist in the supply and manufacture of Gastroenterology, Urology and Endoscopy products to healthcare providers, for an equity value of €24.8m plus up to €2.7m of performance related payments.

 

Albyn Medical has a sales and marketing team of nearly 40 people and a direct presence in Spain, France, Germany, and the UK. The acquisition reinforces our commercialisation strategy, providing us with a commercial and distribution platform to accelerate the development of our business in key markets. Albyn Medical sells its own and third-party consumables and systems with the vast majority of sales coming from GI endoscopy products. The acquisition provides a direct route-to-market for our products and adds a highly complementary product range, expanding our GI product suite and providing an opportunity to broaden into Urology.

 

Current Trading and Outlook

We remain focused on execution of three core pillars which will drive our long term success, mindful that execution with diligence and care is of upmost importance.

 

Whilst COVID-19 has caused short term delays to the expansion of our Clinical Education Programme thus slowing adoption rates and revenue, our expectation that there will be limited long term impact on our strategy to deliver and commercialise a wide range of medical devices globally.

 

The Board thanks all members of the Creo team, along with our clinicians and their patients, our customers, suppliers, shareholders and other partners for all their hard work, positive contributions and support during the period as we look forward with confidence to exciting opportunities during the remainder of 2020 and beyond.

 

 

Craig Gulliford

Chief Executive

 

 

Financial Review

The Company's financial performance for the period under review was in line with management expectations.  Operating expenses reflect the increased clinical and development activities of the Company during the period, together with investment in headcount and business infrastructure to support the transition of the business to a fully integrated specialty medical device company with product origination, development, manufacturing and commercialisation capabilities. This continued investment in the business will, we believe, support its anticipated growth and development in the coming periods.

 

Total sales for the period were £50,380 (six months to 30 June 2019: £40,104) of which £2,380 was recognised as revenue in relation to direct sales and £48,000 was recognised in relation to collaboration agreements and was accounted for within Administrative expenses. Cost of sales in relation to direct sales are £1,420 and cost of sales in relation to the collaboration agreements are £55,400 which have been recognised in administrative expenses.

 

Research and development expenditure for the period was £5.0m (six months to 30 June 2019: £4.5m). Expenditure on product development and clinical costs increased during the period with continued investment in the expansion of the portfolio of products. Administrative expenses for the period were £5.6m (six months to 30 June 2019: £5.0m).

 

Operating costs for the period include around £0.2m of costs relating to continued efforts to enhance our Plasma sterilisation technology and COVID-19 activities, including sourcing ventilators for local NHS hospitals, providing bikes for medical staff and acquiring 3D printers for PPE manufacture by Creo employees.

 

Operating loss

The operating loss for the period of £10.6m (six months to 30 June 2019: £9.4m), reflected the increased operating expenses outlined above. The underlying operating loss for the period is £8.3m (six months to 30 June 2019: £7.2m).  This is a non-statutory measure which adjusts the operating loss as follows:

 

 

 

 

6 months to

6 months to

12 months to

 

 

 

30 June 2020

30 June 2019

31 December 2019

(All figures £)

 

 

Unaudited

Unaudited

Audited

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(10,593,406)

(9,424,175)

(18,875,378)

 

 

 

 

 

 

Underlying operating loss adjustments:

 

 

 

 

 

Share-based payments

 

 

480,000

510,000

1,554,845

Depreciation and amortisation

 

 

398,714

316,143

641,725

R&D expenditure recovered via tax credit scheme

 

 

1,425,000

1,427,500

2,710,239

Underlying operating loss (non-statutory measure)*

 

 

(8,289,692)

(7,170,532)

(13,968,569)

 

 

 

 

 

*Underlying operating loss is calculated by adjusting operating loss for share based payments, depreciation, amortisation, and R&D tax credits.

 

Tax

The Company has not recognised any deferred tax assets in respect of trading losses arising in the current financial period.  At present, the Company recognises tax assets in respect of claims under the UK research and development Small or Medium-sized Enterprise ("SME") scheme, accrued in line with costs with any adjustments being made on submission of a claim.  Where claims have been made under the RDEC scheme these are recognised as other income in line with IAS20 Accounting for government grants.

 

Earnings per share

Loss per share was 6 pence for the period (six months to 30 June 2019: 6 pence).

 

Cash flow and Balance Sheet

Net cash used in operating activities was £10.1m for the six months to 30 June 2020 (six months to 30 June 2019: £5.9m), driven by the increase in investment in research and development during the period. Net cash generated from share issues was £0.1m (six months to 30 June 2019: £0.2m) reflecting the net proceeds from the issue of new ordinary shares relating to the exercise of share options.

 

Total assets at 30 June 2020 increased to £79.9m (30 June 2019: £45.8m), reflecting the net proceeds of the share placing in December 2019 less cash used in operating activities during the period. Cash and cash equivalents at 30 June 2020 were £70.6m (30 June 2019: £38.7m). Net assets were £74.1m (30 June 2019: £40.5m).

 

At 30 June 2020, the debtor position in relation to R&D Tax Credits was £4.1m. Inventory as at 30 June 2020 increased to £0.9m (30 June 2019: £0.6m), representing the increase in stock holding to facilitate current and expected future orders.

 

Trade and other payables as at 30 June 2020 increased to £4.8m (30 June 2019: £4.4m). This increase is mainly a result of increased accruals and trade payables for ongoing regulatory work as we move future products through relevant regulatory clearance testing. 

 

 

 

Consolidated statement of profit and loss and other comprehensive income

 

 

 

 

 

 

6 months to

6 months to

12 months to

 

 

30 June 2020

30 June 2019

31 Dec 2019

(All figures £)

 

Unaudited

Unaudited

Audited

 

 

 

 

 

Revenue

 

2,380

7,699

13,473

Cost of sales

 

(1,420)

(3,082)

(8,522)

 

 

 

 

 

Gross Profit

 

960

4,617

4,951

 

 

 

 

 

Other operating income

 

49,192

75,000

126,719

Administrative expenses

 

(10,643,558)

(9,503,792)

(19,007,048)

 

 

 

 

 

Operating loss

 

(10,593,406)

(9,424,175)

(18,875,378)

 

 

 

 

 

Finance expenses

 

(15,087)

(12,800)

(51,291)

Finance income

 

133,959

160,692

311,288

 

 

 

 

 

Loss before tax

 

(10,474,534)

(9,276,283)

(18,615,381)

 

 

 

 

 

Taxation

 

1,425,000

1,427,500

2,704,231

 

 

 

 

 

Loss for the period/year

 

(9,049,534)

(7,848,783)

(15,911,150)

 

 

 

 

 

Other comprehensive income

 

-

-

 

 

 

 

 

 

Total comprehensive loss for the period/year

 

(9,049,534)

(7,848,783)

(15,911,150)

 

 

 

 

 

Consolidated statement of financial position

 

 

 

6 months to

6 months to

12 months to

 

 

30 June 2020

30 June 2019

31 December 2019

(All figures £)

Note

Unaudited

Unaudited

Audited

 

 

 

 

 

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

835,230

398,528

                       865,241

Property, plant and equipment

 

1,378,764

1,158,022

                    1,295,818

Other financial assets

 

-

6,829

                                -  

Other non-current receivables

 

60,130

8,400

                           8,400

 

 

 

 

 

 

 

2,274,124

1,571,779

2,169,459

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

894,730

647,333

                       727,158

Trade and other receivables

 

1,940,663

814,022

                    1,616,319

Tax receivable

 

4,127,198

3,997,131

                    2,702,198

Cash and cash equivalents

 

70,628,175

38,696,957

                  81,048,448

 

 

 

 

 

 

 

77,590,766

44,155,443

                  86,094,123

 

 

 

 

 

Total assets

 

79,864,890

45,727,222

                  88,263,582

 

 

 

 

 

Shareholder equity

 

 

 

 

Called up share capital

3

157,520

121,543

                       150,378

Share premium

 

115,199,065

66,003,010

                115,111,506

Merger reserve

 

13,602,735

13,602,735

                  13,602,735

Share option reserve

 

5,127,915

3,603,070

                    4,647,915

Retained earnings

 

(59,898,724)

(42,786,823)

(50,849,190)

 

 

 

 

 

 

 

74,188,511

40,543,535

                  82,663,344

 

 

 

 

 

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Interest bearing liabilities

 

431,515

534,813

                       543,892

 

 

 

 

 

 

 

431,515

534,813

                       543,892

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

4,757,835

4,373,338

                    4,883,153

Interest bearing liabilities

 

487,030

275,536

                       173,193

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

5,676,379

5,183,687

                    5,600,238

 

 

 

 

 

Total equity and liabilities

 

79,864,890

45,727,222

                  88,263,582

 

 

 

Consolidated statement of changes in equity

 

 

 

 

 

Called up

 

 

 

Share

 

 

 

share

Retained

Share

Merger

option

Total

(All figures £)

 

capital

earnings

premium

reserve

reserve

equity

 

 

 

 

 

 

 

 

Balance at 31 December 2018

 

120,495

(34,938,040)

65,835,555

13,602,735

3,093,070

47,713,815

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit or loss

 

-

(7,848,783)

-

-

-

(7,848,783)

 

 

 

 

 

 

 

 

Total comprehensive income

 

-

(7,848,783)

-

-

-

(7,848,783)

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

Issue of share capital

 

1,048

-

167,455

-

-

168,503

Equity settled share-based payment transactions

 

-

-

-

-

510,000

510,000

 

 

 

 

 

 

 

 

Balance at 30 June 2019

 

121,543

(42,786,823)

66,003,010

13,602,735

3,603,070

40,543,535

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit or loss

 

-

(8,062,367)

-

-

-

(8,062,367)

 

 

 

 

 

 

 

 

Total comprehensive income

 

-

(8,062,367)

-

-

-

(8,062,367)

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

Issue of share capital

 

28,835

-

49,108,496

-

-

49,137,331

Equity settled share-based payment transactions

 

-

-

-

-

1,044,845

1,044,845

 

 

 

 

 

 

 

 

Balance at 31 December 2019

 

150,378

(50,849,190)

115,111,506

13,602,735

4,647,915

82,663,344

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit or loss

 

-

(9,049,534)

-

-

-

(9,049,534)

 

 

 

 

 

 

 

 

Total comprehensive income

 

-

(9,049,534)

-

-

-

(9,049,534)

 

 

 

 

 

 

 

 

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

 

Issue of share capital

 

7,142

-

87,559

-

-

94,701

Equity settled share-based payment transactions

 

-

-

-

-

480,000

480,000

 

 

 

 

 

 

 

 

Balance at 30 June 2020

 

157,520

(59,898,724)

115,199,065

13,602,735

5,127,915

74,188,511

 

 

 

 

 

 

 

 

 

Consolidated statement of cash flows

 

 

 

 

6 months to

6 months to

12 months to

 

 

30 June 2020

30 June 2019

31 December 2019

(All figures £)

 

Unaudited

Unaudited

Audited

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Total comprehensive loss for the period

 

(9,049,534)

(7,848,783)

(15,911,150)

Depreciation/amortisation charges

 

398,714

316,142

641,725

Increase in share option reserve

 

480,000

510,000

1,554,845

Fair value adjustment to derivatives

 

17,038

4,028

27,894

Finance expenses

 

15,087

12,800

23,397

Finance income

 

(150,996)

(164,720)

(311,288)

R&D expenditure credit

 

-

-

(5,362)

Taxation

 

(1,425,000)

(1,427,500)

(2,704,231)

 

 

 

 

 

 

 

(9,714,692)

(8,598,033)

(16,684,170)

 

 

 

 

 

Increase in inventories

 

(167,572)

(344,861)

(424,686)

Increase in trade and other receivables

 

(376,075)

242,772

(552,696)

Increase in trade and other payables

 

165,608

2,773,718

3,283,533

 

 

 

 

 

 

 

(10,092,731)

(5,926,404)

(14,378,019)

 

 

 

 

 

Interest paid

 

(15,087)

(12,800)

(51,291)

Tax received

 

-

-

2,577,026

 

 

 

 

 

Net cash from operating activities

 

(10,107,818)

(5,939,204)

(11,852,284)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchase of intangible fixed assets

 

(9,135)

(133,675)

(633,795)

Purchase of tangible fixed assets

 

(442,514)

(55,202)

(484,006)

Interest received

 

133,959

160,692

311,288

 

 

 

 

 

Net cash from investing activities

 

(317,690)

(28,185)

(806,513)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Capital repaid in respect of lease liabilities

 

(89,466)

(16,232)

(187,310)

Capital received in respect of long-term borrowings

 

                                  -  

(76,647)

-

Share issue

 

94,701

168,503

49,305,833

 

 

 

 

 

Net cash from financing activities

 

5,235

75,624

49,118,523

 

 

 

 

 

(Decrease)/increase in cash and cash equivalents

 

(10,420,273)

(5,891,765)

36,459,726

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

81,048,448

44,588,722

44,588,722

 

 

 

 

 

Cash and cash equivalents at end of period

 

70,628,175

38,696,957

81,048,448

 

 

 

 

 

 

 

 

 

 

 

Notes to the interim financial statements

 

1. Basis of preparation

This interim financial report, which is unaudited, does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. These interim financial statements have been prepared in accordance with the AIM rules and the IAS 34.

 

The accounts of Creo Medical Group plc for the period ended 31 December 2019, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("adopted IFRSs"), have been delivered to the Registrar of Companies.  Those accounts were prepared and audited as required by the Companies Act 2006. 

 

This interim financial report for the six-month period ended 30 June 2020 (including comparatives for the 6 months ended 30 June 2019) was approved by the Board of Directors on 22 September 2020. 

 

Going Concern

The business is continually monitoring the development of COVID-19 and the current and possible future impacts it may have. We are poised with a range of devices ready to re-launch into our key markets, this time is allowing us to strengthen our approach and adapt to what will inevitably be a different world and are confident Creo will re-emerge from the lock-down, stronger, ready to drive through our global Clinical Education Programme with our network of distributors and direct sales teams.

 

The Company has prepared detailed forecasts and projections for its planned activities up to and beyond December 2023. On the basis of these financial projections the Directors are satisfied that the Company will have adequate resources to continue in operational existence for the foreseeable future and for a period of not less than 12 months from the date of signing this interim financial report. Thus, they continue to adopt the going concern basis of accounting in preparing the interim financial report.

 

Accounting policies

The same accounting policies and basis of measurement are followed in this interim financial report as published by Creo Medical Group plc in its statutory accounts for the period ended 31 December 2019, as delivered to the registrar of companies.

 

Changes in accounting policy and disclosures

The following new standards, amendments and interpretations have been adopted by the Group for the first time for the financial year beginning on 1 January 2020:

 

·    Amendments to References to Conceptual Framework in IFRS Standards

·    Definition of a Business (Amendments to IFRS 3)

·    Definition of Material (Amendments to IAS 1 and IAS 8)

·    Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

 

Critical accounting judgments and key sources of estimation uncertainty

The Group is required to make estimates and assumptions concerning the future. These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. Accounting estimates and judgements have been required for the production of these Financial Statements.

 

Principal risks and uncertainties

The principal risks and uncertainties impacting the Group are described in our 2019 Annual Report and remain unchanged at 30 June 2020. We continue to monitor the uncertainty around the UK's exit from the European Union as well as the impacts and effects of Covid-19.

 

Share-based payments

Equity-settled share options are granted to certain officers and employees. Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. Fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model or the Monte Carlo method where appropriate.  Compensation expense is recognised over the tranche's vesting period based on the number of awards expected to vest, through an increase to equity. The number of awards expected to vest is reviewed over the vesting period, with any forfeitures recognised immediately.

 

Research and development costs

Capitalisation of development costs requires analysis of the technical feasibility and commercial viability of the project concerned. Capitalisation of the costs will only be made where there is evidence that an economic benefit will flow to the Company.

 

Our products remain in various stages of development and no further costs have been capitalised in relation to the products during the first half of the year. We have CE marked five new devices in June 2020 in addition to FDA clearance achieved for our SlypSeal Flex product in March 2020. This demonstrates the technical feasibility of these devices and allows us to progress them commercially going into the second half of the year.

 

The Group has determined that although technical feasibility has been achieved, the commercial viability is still to be achieved and therefore all the recognition criteria of IAS 38 to capitalise an internally generated intangible asset has not been met as at the period end.

 

Segmental reporting

Operating segments are identified on the basis of internal reporting and decision making. The Company has one reportable segment, which is being the research and development of electrosurgical medical devices relating to the field of surgical endoscopy. As there is only one reportable segment whole profit, expenses, assets, liabilities and cash flows are measured and reported on a basis consistent with the financial statements, no additional disclosures are necessary.

 

 

2. Earnings per share

 

 

 

 

 

6 months to

6 months to

12 months to

 

 

 

 

30 June 2020

30 June 2019

31 December 2019

(All figures £)

 

 

 

Unaudited

Unaudited

Audited

 

 

 

 

 

 

 

Loss

 

 

 

 

 

 

Loss attributable to equity holders of Company (basic)

 

 

 

9,049,534

7,848,783

15,911,150

 

 

 

 

 

 

 

Shares (number)

 

 

 

 

 

 

Weighted average number of ordinary shares in issue during the period

 

 

 

155,133,600

121,142,149

121,343,612

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

Basic and diluted

 

 

 

(0.06)

(0.06)

(0.13)

 

Earnings per share has been calculated in accordance with IAS 33 - Earnings Per Share using the loss for the period after tax, divided by the weighted average number of shares in issue.

 

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. The potential ordinary shares are considered to be antidilutive on the basis that they reduce the loss per share and as such are not included in the Company's EPS calculation, meaning that diluted EPS is the same as basic EPS.

 

 

3. Share capital

 

 

Balance at 31 December 2018

 

120,495

 

 

 

Issue of share capital

 

 

Number of shares

 

1,048,200

Price per share (£)

 

0.001

Share value (£)

 

1,048

 

 

 

Balance at 30 June 2019

 

121,543

 

 

 

Issue of share capital

 

 

Number of shares

 

28,835,173

Price per share (£)

 

0.001

Share value (£)

 

28,835

 

 

 

Balance at 31 December 2019

 

150,378

 

 

 

Issue of share capital

 

 

Number of shares

 

7,141,263

Price per share (£)

 

0.001

Share value (£)

 

7,142

 

 

 

Balance at 30 June 2020

 

157,520

 

 

 

 

4. Cash from share issue

 

 

 

 

6 months to

6 months to

12 months to

 

 

30 June 2020

30 June 2019

31 December 2019

(All figures £)

 

Unaudited

Unaudited

Audited

 

 

 

 

 

Share issue:

 

 

 

 

Share options exercised

 

87,701

168,503

168,503

Share options Employee Benefit Trust

 

7,000

-

-

Share placing AIM 23 December 2019

 

-

-

51,903,311

Transaction costs AIM 23 December 2019

 

-

-

(2,765,981)

 

 

 

 

 

 

 

94,701

168,503

49,305,833

 

 

5. Post balance sheet events

 

Albyn Acquisition

On 23 July 2020 the Creo Medical Group plc completed the acquisition of Albyn Medical S.L. ("Albyn Medical"), a European specialist in the supply and manufacture of Gastroenterology, Urology and Endoscopy products to healthcare providers, for an equity value of €24.8m plus up to €2.7m of performance related consideration payable over the next two years.

 

With a sales and marketing team of nearly 40 people and a direct presence in Spain, France, Germany and the UK, the acquisition of Albyn Medical fits with the strategy set out by Creo at the time of its fundraising last year and provides a commercial and distribution platform to accelerate the development of its business in key markets in mainland Europe and the UK. Albyn Medical focuses on gastrointestinal ("GI") products and the acquisition provides a direct route-to-market for Creo's full suite of CE marked GI advanced energy devices.

 

Albyn Medical's product range covers diagnostic, therapeutic and hygiene/cross-contamination control to customers including hospitals, hospital groups and doctors' offices across both state and private sectors. Its own brand of GI products includes a range of biopsy forceps, snares, catheters, tubes and valves, as well as distributing a wide range of diagnostic and therapeutic endoscopy devices. Albyn Medical also has a range of endoscope cleaning, sterilisation, and storage products, as well as endoscopic accessories for hospitals.

 

Further information on Albyn, the acquisition synergies and transaction highlights and financials can be found in the RNS 9510T dated 24 July 2020.

 

Development loan for plasma sterilising product

On 2 July 2020, the Group secured a £2m loan from the Cardiff Capital Region to develop Creo's Cool Plasma technology as a method to kill bacteria and viruses and for sterilisation purposes. Creo's technology has both medical and non-medical applications and initial testing has demonstrated that it can be effective for COVID-19 inactivation and decontamination. The Company believes that the technology has the potential for use in wound care, medical device sterilisation, PPE sterilisation, endoscope sterilisation to kill the bacteria associated with urinary tract infections, as well as general sterilisation and cleaning of enclosed environments within the service and transport sectors.

 

Appointment of David Woods as Executive Director (previously Non-Exec)

David Woods, previously Non-Executive Director, has been appointed as Chief Commercial Officer ('CCO'), with effect from 1 August 2020. David has extensive experience in the med-tech sector and joins the Company in his new full-time executive role based in the USA, having previously been the President and CEO of PENTAX Americas and M&A Director of HOYA Group PENTAX Medical.

 

6.    Responsibility statement of the directors in respect of the interim report

We confirm that to the best of our knowledge:

·    the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·    the interim management report includes a fair review of the information required by:

 

(a)  DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b)  DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

 

 

Richard Rees

CFO

 

22 September 2020

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
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