MedaPhor Group plc (AIM: MED), the global provider of advanced ultrasound education simulators for medical professionals, announces its preliminary results for the year ended 31 December 2016.

Financial highlights
· Revenues increased 49% to £3.3m (2015: £2.2m)
· UK sales up 27%, North America sales up 7% and Rest of World sales up 166%
· Loss before tax and exceptional items £1.8m (2015: Loss, £1.7m)
· Raised £3.0m net of costs by way of placing of shares
· Year-end cash at £1.8m (2015: £1.3m)

Operational highlights
· Acquired Inventive Medical Limited (HeartWorks) bringing complementary products and resources using MedaPhor shares as consideration
· Placing funds enabled further investment in overseas operations and product development
· Global network increased to 30 resellers (2015: 20 resellers)
· Settled US litigation, which is expected to enable US sales growth to recover in 2017

Post year-end events
· Overseas sales are up on last year, but UK sales are down due to NHS spending constraints
· Funding options to finance future growth are under review

Commenting on the results, Riccardo Pigliucci, Chairman of MedaPhor said: 'This has been an up and down year for the Group, but we have now settled the IP litigation in the US and are benefitting from the acquisition of both the Inventive Medical personnel and the HeartWorks brand. We are currently pursuing future potential funding options and look forward to building our global simulator business in 2017 and beyond.'

This announcement contains inside informationwhich, prior to its disclosure, was inside information for the purposes of the Market Abuse Regulation (Article 7 of Regulation (EU) No 596/2014

A copy of this announcement is available on the Company's website:www.medaphor.com

Enquiries:

MedaPhor Group plc

www.medaphor.com

Stuart Gall, CEO

Tel: +44 (0)29 2075 6534

Cenkos Securities

Tel: +44 (0)20 7397 8900

Bobbie Hilliam (Nominated Adviser)

Julian Morse (Corporate Broking)

Walbrook PR

Tel: +44 (0)20 7933 8780 ormedaphor@walbrookpr.com

Paul McManus / Anna Dunphy

Mob: +44 (0)7980 541 893 / Mob: +44 (0)7876 741 001

About MedaPhor -www.medaphor.com

MedaPhor (AIM: MED) is a global provider of advanced ultrasound skills training simulators for medical professionals. Founded in 2004, the Company is headquartered in Cardiff, UK and Alpharetta, USA, with customers in over 20 countries across the world.

Following its acquisition of Inventive Medical in August 2016, the company now has three of the world's leading ultrasound training and examination simulators - ScanTrainer, ScanTrainer Examine and HeartWorks:

ScanTraineris a world-leading ultrasound skills training simulator and Continuing Professional Development platform offering an immersive, 24/7 self-learning experience. Features include real feel haptic feedback, real full anatomy scans, real-time expert guidance, structured curriculum learning, metric-based assessment and an extensive cloud pathology library with the unique ability to add your own patient scans. ScanTrainer's flexible education platform empowers faster and better learning at any stage of a doctor or sonographer's medical career.

ScanTrainer Examineis MedaPhor's new ultrasound skills examination simulator for hospitals and examination boards, which offers examiners a library of pathologies and normal patient scans, combined with a realistic, virtual reality based scanning experience, with which to comprehensively test a clinician's ultrasound skills.

HeartWorks, developed by leading cardiac anaesthesiologists at University College London Hospitals, the HeartWorks simulators and online training materials are recognised as one of the most true-to-life and comprehensive educational tools for Transthoracic and Transoesophageal echocardiography. Medical practitioners can learn the complete anatomy of the heart, practise acquiring ultrasound images though correct probe positioning on a simulator, interpret those images to determine correct diagnosis and treatment, and finally be tested to ensure that all required competencies have been achieved to the highest standard.

CHAIRMAN'S STATEMENT

INTRODUCTION

I am pleased to present MedaPhor's Preliminary Results for the year ended 31 December 2016.

FINANCIAL AND OPERATIONAL REVIEW

Summary results from continuing operations were:

2016

2015

£m

£m

Revenue

3.3

2.2

Gross profit

2.1

1.4

Gross margin

64%

65%

Loss before tax and exceptional items

(1.8)

(1.7)

Loss after tax and exceptional items

(2.4)

(1.6)

Cash at bank

1.8

1.3

Revenues increased by 49% compared to the prior year (2015: 22%). ScanTrainer sales increased by 12% (2015: 22%) to £2.47m for the year to 31 December 2016. Following the acquisition of Inventive Medical Limited in August 2016 (see below), HeartWorks training simulators contributed £0.8m to sales in the post-acquisition period. Across the board, sales in the UK grew by 27% to £1.20m (2015: £0.94m), US sales grew by 7% to £0.86m (2015: £0.81m) and Rest of World sales by 166% to £1.22m (2015: £0.46m).

The loss for the year before tax and exceptional items was £1.8m (2015: £1.7m). Exceptional items for the year of £0.7m (2015: £Nil) related to litigation, acquisition and integration costs and are detailed in note 4 of these Preliminary Results. The loss for the year after tax and exceptional items was £2.4m (2015: Loss, £1.6m).

In April the Company raised £3.2m (£3.0m net of costs) by way of a placing of 7,111,112 new Ordinary Shares at 45 pence each with certain existing and new shareholders. The proceeds allowed the Group to invest in its overseas sales activities and in some significant new product development projects in the second half of 2016. These included new Probe Manipulation Skills, Echo in Life Support and Nuchal Translucency modules, the addition of over 300 new pathology cases for the ScanTrainer Cloud Library (renamed ScanTrainer Examine) and, in the latter part of the year, the completion of the new ScanTrainer 2017 Edition software.This latest version includes a range of software enhancements to ScanTrainer, for ultrasound skills learning and practice, and ScanTrainer Examine, for case learning and diagnostic skills assessment and examination, including an improved Learning Management System. We have also, in part through the acquisition of IML discussed further below, increased our global sales network to 30 resellers selling our ScanTrainer and HeartWorks products.

Cash at 31 December 2016 stood at £1.8m (2015: £1.3m).

ACQUISITION OF INVENTIVE MEDICAL LIMITED

In August 2016 the Group acquired Inventive Medical Limited (IML),a UK company which is the global supplier of the HeartWorks cardio ultrasound simulation suite of products. The HeartWorks simulator is used in cardiology related ultrasound training, which perfectly complements the ScanTrainer simulator which specialises in female pelvis (obstetrics and gynaecology) and upper abdomen (general medical and emergency medicine) ultrasound training.

This acquisition has brought a complementary, but not competing, suite of products that will allow us to leverage a combined direct sales force and reseller network and has provided an immediate boost to sales growth for the combined group.

The £3.0m consideration for IML was satisfied by the issue of 6,976,745 new Ordinary Shares at 43 pence each, representing 26% of the existing and 20% of the enlarged share capital of the Company, including the effect of shares to be issued in 2017. The issue of one third of the consideration shares was deferred for 12 months with the actual number of deferred shares to be issued dependent on any vendor warranty or indemnity breaches (as specified in the Sale and Purchase Agreement) arising during that 12 month period. Currently, we are not aware of any such breaches and so the deferred consideration of £1.0m has been provided for in full.

Goodwill of £1.3m arising on the acquisition has been reviewed for impairment. IML has been incorporated into the MedaPhor business and the two enterprises have therefore been assessed as one cash-generating unit (CGU) for the impairment test. The net present value of the CGU based upon the Group's budgets does not indicate any impairment. However, the achievement of the Group's budgets and related cash flows is uncertain and is highly dependent on the growth of our global business. If this growth does not materialise, the net present value calculations on the revised budgets would indicate that the carrying value of goodwill and other intangibles might require provision for impairment at a future date. In addition, we are cognisant that current trading (see below) needs to be closely monitored and the Board will continue to review the position as we progress into the second quarter of the year. If the conclusion of this review is that goodwill is permanently impaired, an appropriate fair value adjustment will be made to the assets of the Group.

PATENT INFRINGEMENT SETTLEMENT

MedaPhor and SonoSim Inc. and The Regents of the University of California have reached an agreement on a patent license and patent infringement settlement. As a result, the lawsuit between the parties was dismissed with prejudice on 7 February 2017.

CURRENT TRADING AND FUNDING

The costs of the US patent infringement proceedings and the consequent impact on trading, particularly in North America, had a significant negative impact on the Group's results for 2016. Although the well-publicised constraints on NHS funding have impacted on NHS related sales in the UK during the first quarter of the current year, most of our simulator sales in the UK are in the medical teaching schools sector and the pipeline for these sales in 2017 remains encouraging. Sales in the US and other overseas territories have shown encouraging growth and with the patent litigation now settled, we have justified optimism for the remainder of this year, based on our current pipeline of potential orders.

The Group is currently pursuing a number of fund raising options to take the Group through the next stage of growth. Subject to this, the Board has a reasonable expectation that the Group will be able to continue to be solvent for the foreseeable future.

Riccardo Pigliucci
Chairman
21 March 2017

For the full announcement, please click here.

IP Group plc published this content on 22 March 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 22 March 2017 10:59:11 UTC.

Original documenthttp://www.ipgroupplc.com/media/portfolio-news/2017/2017-03-22

Public permalinkhttp://www.publicnow.com/view/5D3E154C7C640861285F6DB6487C4992CCC487FF