REG - Creo Medical Group - Final Results
15/05/2024 07:00
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RNS Number : 4464O Creo Medical Group PLC 15 May 2024
Creo Medical Group plc
("Creo" the "Company" or the "Group")
Final Results
Strong revenue growth and significant commercial progress
Creo Medical Group plc (AIM: CREO), the medical device company focused on the
emerging field of surgical endoscopy, announces its audited final results for
the 12 months ended 31 December 2023.
Financial Highlights:
● Total sales in the period of £30.8m (FY22: £27.2m)
● Creo core product sales and Kamaptive licensing income in the period of £4.0m
(FY22: £2.3m), with 2.5x increase in Creo core product sales of £2.3m (FY22:
£0.9m)
● Gross margin up 1.1 ppt to 49.6% (FY22: 48.5%), with gross profit of £15.3m
(FY22: £13.2m)
● Reduced operating loss of £24.8m for FY23 (FY22: £30.7m)
● Reduced underlying operating loss* of £16.4m for FY23 (FY22: £20.8m) in-line
with market expectations, including £2.8m (FY22: £4.5m) of R&D credits.
● Research and Development expenditure reduced to £11.8m (FY22: £13.5m) of
which 2/3rds relates to products in development with the Group's global
partners or work carried out on Speedboat UltraSlim which launched in December
2023.
● £33.7m raised through oversubscribed fundraise in March 2023.
● £17.4m cash as at 31 March 2024.
*underlying operating loss is loss after accounting for share-based payments,
depreciation and amortisation, R&D tax credit, earnout and other one-off
settlements.
Operational and Commercial Highlights (including post-period end):
● FDA clearance for Speedboat UltraSlim received in November 2023; initial
uptake has been very positive
● EU launch of Speedboat UltraSlim accelerated by 18 months, following guidance
from notified body - first sales achieved in Q4-23 with exceptional customer
feedback and growing orderbook
● Speedboat UltraSlim roll-out reached Asia Pacific and Latin America, with
first uses in these regions taking place in December 2023
● Significant progress in roll-out of Creo's core technology since start of 2023
with 119% increase in user base to 175 (FY22: 80)
● Speedboat Inject selected by the National Institute for Health and Care
Excellence ("NICE") to be scoped and routed for guidance
● In March 2023, first in-human use of MicroBlate Flex for the microwave
ablation of soft tissue lung lesions safely completed as part of a lung tissue
ablation clinical study
○ In February 2024, a robotic guided microwave ablation of lung tissue in
the same sitting as a diagnostic procedure was performed at the Royal Brompton
Hospital, with MicroBlate Flex used to perform the procedure.
● Medical Device Regulation CE clearance for Speedboat, adding upper
gastrointestinal ("GI") indications (e.g. swallowing disorders, oesophageal
and stomach cancers) in the UK and mainland Europe, with multiple upper GI
Speedboat procedures performed in Europe during H2-23.
● Most significant data set for Speedboat Submucosal Dissection ("SSD")
procedures to date, showing an 82% curative rate for lower GI lesions (e.g.
bowel and colon) with no perforations recorded.
● Speedboat Submucosal Dissection ("SSD") service at Royal Oldham immediately
implemented following training, with multiple cases completed in record time,
resulting in immediate benefits for both patients and waiting lists.
● NHS Supply Chain data announced in April 2024 demonstrated significant cost
and operational savings provided by the use of SSD procedures.
● Collaboration with Khalifa University of Science & Technology, Abu Dhabi
announced post-year end.
● Increased global reach, with first use of Speedboat in Croatia, Slovenia,
Malaysia and UAE.
FY24 Update and Outlook
Q1-24 trading has been in-line with expectations following the approvals for
UltraSlim at the turn of the year. Following a strong finish in Q4-23, sales
momentum in Creo core products has continued with core revenue in Q1-24
showing a 14% increase over the FY23 quarterly average, and the Company
expects to see this accelerate in Q2-24, driven by anticipated strong sales of
Speedboat UltraSlim and building on the strong performance in Q4-23.
Consumable sales were impacted by the early Easter compared to Q4-23, but the
Group remains on track for H1-24 targets. Tight control on costs has been
maintained, ensuring that the Group's operating expenses, to date, remain on
budget. This, together with the continuing sales momentum, gives the Board
confidence that the Group will achieve its 2024 objectives for core revenue
and deliver on the potential of Creo's technology.
Craig Gulliford, Chief Executive Officer, commented:
"2023 was a significant year for Creo, with core technology sales increasing
by c. 2.5x and a 119% increase in our global user base underpinning a
Group-wide revenue increase of 13%.
"We successfully launched Speedboat UltraSlim in December 2023, the
culmination of the work done to miniaturise our technology to be compatible
with the working channel of all commercially available endoscopes, further
broadening our market reach. The product has now been used in the UK, USA,
LATAM and APAC since launch, with exceptional feedback received from
clinicians around the world.
"Our MicroBlate brand has also seen strong progress, with increasing clinical
cases, and pioneering work performed. In combination with our robotics
partners, MicroBlate Flex was used at the Royal Brompton to ablate a cancerous
lung nodule in the same sitting as a diagnosis performed with robotic
platform. This world's-first combined procedure has the potential to not only
dramatically improve outcomes for lung cancer patients, but to remove the long
and worrying waits between diagnosis and treatment.
"We expect to launch our SpydrBlade brand during 2024 via our core sales
channel. SpydrBlade is also of great interest to our robotic partners, and we
are working hard with them to deliver the technology into the robotics space.
"The growth seen during the year throughout all key parts of the business, and
lowered costs all contributed to a reduced operating loss for the year. This,
coupled with the continued momentum we've seen to start 2024, encourages me as
we move closer towards our goal of achieving cashflow break even in 2025."
Enquiries:
Creo Medical Group plc www.creomedical.com (http://www.creomedical.com)
Richard Rees (CFO) +44 (0)1291 606 005
Cavendish Capital Markets Limited +44 (0)20 7397 8900
Stephen Keys / Camilla Hume (NOMAD)
Michael Johnson (Sales)
Deutsche Numis (Joint Broker) +44 (0)20 7260 1000
Freddie Barnfield / Duncan Monteith / Euan Brown
Walbrook PR Tel: +44 (0)20 7933 8780 or creo@walbrookpr.com
Paul McManus / Sam Allen Mob: +44 (0)7980 541 893 / +44 (0)7502 558 258
Phillip Marriage +44 (0)7867 984 082
About Creo Medical
Creo Medical is a medical device company focused on the development and
commercialisation of minimally invasive electrosurgical devices, bringing
advanced energy to endoscopy.
The Company's vision is to improve patient outcomes through the development
and commercialisation of a suite of electrosurgical medical devices, each
enabled by CROMA, powered by Kamaptive. The Group has developed the CROMA
powered by Kamaptive full-spectrum adaptive technology to optimise surgical
capability and patient outcomes. Kamaptive is a seamless, intuitive
integration of multi-modal energy sources, optimised to dynamically adapt to
patient tissue during procedures such as resection, dissection, coagulation
and ablation of tissue. Kamaptive technology provides clinicians with
increased flexibility, precision and controlled surgical solutions. CROMA
currently delivers bipolar radiofrequency ("RF") energy for precise localised
cutting and focused high frequency microwave ("MW") energy for controlled
coagulation and ablation via a single accessory port. This technology,
combined with the Group's range of patented electrosurgical devices, is
designed to provide clinicians with flexible, accurate and controlled clinical
solutions. The Directors believe the Company's technology can impact the
landscape of surgery and endoscopy by providing a safer, less-invasive and
more cost-efficient option for procedures.
For more information, please refer to the website www.creomedical.com
(http://www.creomedical.com)
Chief Executive Review
2023 was a pivotal year for Creo, with considerable strides made by all areas
of the business. With a particular focus on the commercialisation of our core
technology, and continuing to maximise the value of our global distribution
business, Creo branded products represented 80% of revenues for the year.
In February 2023, despite the challenging macroeconomic backdrop and market
conditions, we executed a planned and significantly oversubscribed fundraise.
This fantastic support from existing and new shareholders has provided us with
the financial platform to achieve significant milestones during the year and
has strengthened our cash position from which we have entered the next stage
of our development. We are committed to the commercialisation of our core
technologies and driving the business to generate self-sustaining cashflows. I
thank all shareholders, new and old, for their support.
The launch of Speedboat UltraSlim in Q4, our smallest device to date, was a
significant milestone and helped us to achieve record sales for the quarter as
well as a strong orderbook for the first quarter of 2024. During the year,
core technology sales and Kamaptive licensing income increased to £4.0m (FY22
£2.3m) with core technology sales increasing c. 2.5x, despite the regulatory
clearance for UltraSlim coming later than we expected in the US, but much
earlier than planned in the EU, setting a strong foundation for 2024.
Overall Group revenues increased during the year by 13% to £30.8m with our
core product revenues increasing 2.5x from 2022 to £2.3m. We are now starting
to see our user base growth translate into significant revenues for the
business, as shown by strong and growing Q1 24 sales.
Following our cost-intensive product development cycle in prior years, we have
shifted our development efforts towards funded partnership programmes as part
of our Kamaptive brand, with a heavy focus on our robotics partners.
This shifting of the innovation cost base from us to third parties has led to
a decrease in operating costs by 7.9% year-on-year. This evolution led to some
overall headcount reductions where the phase of the programme is less resource
intensive. Despite this exercise, we were able to deliver a meaningful cost of
living corrections, primarily to staff below the median salary where the
dramatic increases in inflation have hit those the most.
Continuing this traction throughout 2024, and seeing our other key projects
and partnerships come to fruition, puts us in a great position to achieve our
goals with increasing revenues and appropriate cost management.
Product Offering
Our Speedboat UltraSlim is the ultimate miniaturisation version of our unique
Speedboat advanced energy device. Building on our applauded Speedboat
technology, this process was no mean feat as we deliver unique miniaturised
and widely adopted laparoscopic technology into user environments where no
other company has been able to do so before.
The Speedboat UltraSlim clearance and launch is a significant event for Creo
as it opens up access to all major commercially used endoscopes on the market,
allowing Creo's technology to treat more patients, collaborate with even more
doctors and provide better patient outcomes - our core aim.
FDA clearance for Speedboat UltraSlim came in November 2023. Whilst this was
just over a quarter behind our original goal, the significant additional work
required to achieve this meant that this was an outstanding performance by the
entire Creo team. Not only did we get the USA clearance, but we were also able
to clear the device for use in Europe more than a year ahead of our expected
schedule. This clearance enabled us to prepare for commercial launch in the
European market and sets us up really well for 2024.
It's really reassuring to me that the core product brands, which leverage the
Creo technology developed over the past decade, are all starting to monetise
themselves and generate traction commercially.
In 2023 our core technology improved lives in EMEA, USA and APAC. The vision
of placing laparoscopic surgical capability into the hands of interventional
flexible endoscopists and surgeons is a reality, and the next couple of years
will see us crystallising revenues across our brand portfolio, both through
our core technology sales channels as well as through our Kamaptive
partnerships.
It was announced recently that our very first case and the first robotic
ablation clinical case took place in late 2023 with Microblate Flex. I have
had the privilege of observing one of these cases, where our technology, in
conjunction with our partner's robotic technology, presents a night and day
comparison with the current alternative patient pathway. The time, effort and
hard work from the team over the last few years; from design and development
to the team working with our partners represents a terrific achievement. There
is still a lot of work to do with the completion of our clinical studies, but
the expansion beyond this to move towards commercial activity with customers
is really exciting. This brings together commercial execution, with partner
value, innovation and most important of all, a potential opportunity to
improve the survivability of lung cancer. All this alongside the continued
work to expand the clinical data and experience with Microblate Fine in the
early treatment of pancreatic cancer, liver cancer and other conditions gives
us all a sense of real pride as we are seeing a whole new cohort of patients
whose lives are now beginning to benefit from our technology which we are
confident will be crystallised in revenue in the coming years.
Over the year, we significantly enhanced our heralded Pioneer Clinical
Education Programme, doubling the number of training centres and offering
multi-national and bespoke regional models. Most importantly, we supported the
treatment of more patients than ever before.
The process we need to execute for continued growth and to deliver a step
change in patient care across multiple areas of therapy is clear. The rapid
increase in patients treated, our growing pipeline of future users and our
international successes all validate this. In November, we held a significant
Capital Markets Event, at which several of our clinical users presented their
perspective not just on the technology but, more importantly, the significant
benefits that our technology brings to patients. One of the most pertinent
presentations to me was an example of a procedure utilising Speedboat to treat
oesophageal cancer, where patients have been known to have to endure up to 30
repeat endoscopies over three years to manage strictures. However, utilising
Speedboat and Creo's advanced energy, the clinician has seen significantly
reduced, and in some cases no need for repeat endoscopies. The impact this
will have on reduced demand for endoscopy as well as surgical resources,
waiting lists and improved patient outcomes is what motivates everyone at Creo
the most.
Additional Product and Revenue Streams
We have developed Creo's business from the outset to have a multi-tiered
revenue structure. Our successful acquisitions have allowed us to maximise the
potential of both our core technology and acquired complementary product
ranges as well as securing some of the best Microwave and RF engineering
capability in the world. With our accelerated growth and significant
international footprint, we are leveraging this growth and our economies of
scale for the benefit of our core product range.
Our SpydrBlade brand delivers laparoscopic cut and coagulate functionality
through an endoscopic device. This means that clinicians receive significant
surgical performance from a tiny instrument at the end of an endoscope. We
expect to launch this device in 2024 via our core sales channels. However, in
addition, we are also developing the same technology in partnership with
robotic partners. Our technology is unique in the world of robotic surgery as
we can deliver the energy and device performance beyond the wrist of the robot
to deliver laparoscopic surgery. Our connected Kamaptive partners, Intuitive
Surgical and CMR, both recognise that and we're working hard with them to
deliver SpydrBlade technology into this exciting arena.
Our MicroBlate programme is focussed on areas such as treatments for lung,
pancreatic, liver, kidney and bladder cancers.
We've announced early cases with MicroBlate Fine in the past. The clinical
programme has now been extended to MicroBlate Flex where we successfully
delivered first cases for the treatment of lung cancer as part of a clinical
study with the Royal Brompton Hospital in London. This study looks at the
treatment of lung cancer using bronchoscopic microwave ablation. This has also
included first cases where the device has been used in combination with
Intuitive's Ion platform, which has traditionally been utilised as a
diagnostic tool to detect cancer in a patient but, now, by using Creo's
technology, clinicians can remove tumours effectively and safely in a matter
of minutes during the same procedure.
This is both amazing for the patient and rewarding for the clinical teams and
sets us up for commercial traction going forward. As with any business, our
achievements are not without challenges. But we are positioned strongly for
2024, supported with the financial results delivered in 2023.
Kamaptive Programme
I am particularly pleased with the progress of our Kamaptive Licensing
Programme during 2023. The quality of our partners demonstrates the wide
potential of our technology, and the revenues received affirm this valuable
revenue tier for Creo.
Our focus on the optimisation and commercialisation of our product range will
maximise the impact of our Kamaptive Licensing Programme.
We now have a clear roadmap to enable our Kamaptive Licensing Programme and
additional products to work in tandem with Creo's core technology, providing a
multifaceted business capable of reaching far more patients and potential
markets than we would have imagined a few years ago. We are now bringing
laparoscopic capability to flexible endoscopy, in both large and exciting
markets underserved by advanced energy.
We have also recently announced our strategic partnership with Khalifa
University which will enable us to utilise its world class facilities and
resources to further develop our product offering and take advantage of IP
that is currently not being monetised.
The Kamaptive Licensing Programme offers significant potential beyond our
current partnerships to develop a range of potential derivatives of our
technology into other partner programmes.
The next stage of the 'tech play in medical devices' is equally exciting. As
our partnerships bear fruit, my vision is to launch the CROMA - powered by
Kamaptive developer eco-system, safely giving commercial access to our unique
core technology to a wide range of potential partners, inspired by the reality
of the current partner programmes.
Tying this all together is the continued development of CROMA and with it, the
prospect of delivering truly game changing real time tissue characterisation
software. This has the potential to add tremendous value to flexible
endoscopy. The prospect of enhanced precision and control opens up a new
frontier for patient outcomes, as well as the potential benefits to robotic
surgical programmes.
Third party validation
During 2023, Royal Oldham Hospital purchased the CROMA system for use across
their endoscopy department to launch a Speedboat Submucosal Dissection
("SSD") service. The results reported illustrate the positive impact of
Speedboat and the launch of the SSD service on patient outcomes, waiting lists
and the prevention of bowel cancer. Having attended Creo's 'Pioneer' training
programme and installed devices across multiple endoscopy rooms immediately,
the hospital performed five SSD cases in its first afternoon, with over thirty
further patients successfully treated within weeks, delivering excellent
patient outcomes and at a significantly lower cost to the Trust plus reducing
patient backlog and reducing time to be seen.
The validation of Creo's technology has gathered further momentum with the
selection of Speedboat® Inject by the National Institute for Health and Care
Excellence ("NICE") to be scoped and routed for guidance, and by an ongoing
collaboration with NHS Supply Chain. Early data collected from over 130
patients shows that we have saved a Trust 62% or over £5,000 in cash per
procedure undertaken, reduce bed stays by 87% and critical care by 100%.
Importantly, this data is only related to the SSD procedure element, and does
not include additional benefits and costs savings previously identified and
reported by the Company, which included downstream costs associated with
recurrence of lesions and procedure-related complications commonly associated
with surgical alternatives to SSD. During 2023 we continued to launch in the
USA some of our endotherapy accessories, which sit alongside the core Creo GI
products. We aim to replicate this into APAC during 2024, building on the
successes of our European model and growing the Creo brand.
Encouraging Outlook
Over the next six to 12 months, we expect to see an increasing rate of
progress with the Speedboat UltraSlim device following the limited market
release in late 2023. After carefully launching the product into the field, we
have received fantastic feedback from our clinicians. At one centre, 15 cases
were performed in two days to really evaluate and extend the capabilities of
the device. All feedback so far has been extremely positive.
We are actively obtaining the regulatory clearances in our APAC regions and
others to allow us even greater commercial and global reach. We'll be
submitting and expecting clearance for the SpydrBlade product to come through
during the course of 2024 which will be going into the GI space.
We continue to develop our relationship with our Kamaptive partners such as
Intuitive and CMR as well as the Khalifa Strategic Partnership to help utilise
our IP and ensure future development continues through funded projects
including integration of the SpydrBlade into robotic laparoscopic tools.
The most challenging period for any company is the transition from development
to commercial profitability. The strides we have made during the year keep us
on the right path. We look forward to another year of strong growth in our
core technology from both existing and new users, helping drive us towards our
goal of self-sustaining cashflows.
It is testament to the dedication and tenacity of the Creo team, many of whom
have been here since IPO, that we have been able to achieve such significant
milestones and I would like to extend my utmost thanks to the current and past
employees who have made Creo what it is today.
Building Creo into a company that can compete with well established,
multi-billion pound MedTech giants both in terms of the quality of technology
and the quality of the service it facilitates, is not the work of a moment. It
takes time. During 2023, I feel we have taken great strides towards this. From
the NHS Supply Chain data to first cases in the lung with Intuitive Surgical
and from the Cleveland Clinic to our partnership with Khalifa University, we
are seeing the realisation of our R&D and its growing impact across the
medical devices market. We know that 2024 will bring with it more cases, more
data and more partnership progress and it's exciting to know that we are in
the very best global company when it comes to tackling unmet needs for
patients across the globe.
It is both a source of great pride and satisfaction to me that we have created
a terrific team who know what we need to do in each sector to succeed. Our job
is clear: to deliver on what we have very clear sight of over the coming
months and years to become a premier, cash generative global medical device
and tech licensing business, transforming, and improving the lives of many
thousands as we do so.
Craig Gulliford
Chief Executive Officer
14 May 2024
Chair's statement
Creo's sights remain set on maturing as an international MedTech group focused
on the clinical and commercial adoption of a full suite of electrosurgical
products. 2023 had already delivered another positive year of progress when,
in November, we received 510(k) clearance from the US FDA for our Speedboat
UltraSlim device. This was pivotal because it is the ultimate version of
Speedboat, the culmination of substantial shareholder investment and a long
programme of work to miniaturise the technology to cover all foreseeable
market applications. Its reduced size makes it compatible with all endoscopes
with a 2.8mm (or larger) working channel. This accesses most GI endoscopic
procedures and therefore expands the universe of clinicians and patients who
can benefit from Creo's innovative technology.
The US clearance followed guidance from our notified body of an EU regulatory
pathway that accelerated the European UltraSlim launch by around eighteen
months. It has now been used successfully in the UK, USA, LATAM and APAC to
treat precancerous lesions in the colon, oesophagus and stomach, as well as in
oesophageal and gastric POEM procedures (to address swallowing disorders
and gastroparesis).
Following that late-in-the-year milestone, we achieved record sales in the
last quarter of 2023. More widely, we can report growth in all key parts of
the business, strong progress in our robotics partnerships, improved overall
gross margins, and reduced expenses given tight cost control - all
contributing to a reduced operating loss for the year. In March 2023, against
the backdrop of economic and geopolitical uncertainty, we completed an
oversubscribed equity raise with gross proceeds of approximately £33.7
million. This gave us the financial resources and wider confidence to execute
the vital next steps in our strategy. We remain immensely grateful to
our existing and new shareholders who supported the raise and welcome those
newcomers to the register.
Notwithstanding this technological, clinical, commercial and corporate
progress, like most companies, we faced continued global and local challenges.
The delay in FDA approval for UltraSlim by just over a quarter limited its
contribution to Group revenues during the year but has set a positive basis
for 2024. The short notice legislative changes around the UK's R&D tax
regime resulted in a materially unhelpful reduction in our R&D tax credit.
Therefore, our operating loss, while still reduced, was higher than it would
otherwise have been. And, of course, as our shareholders are well aware, the
continued volatility in the smaller cap stock market impacted the otherwise
encouraging recovery of our share price since the equity raise.
Management and Employees
Creo invests in talented and experienced individuals across the full range of
business functions needed for success. Given the intensity of our R&D
investment since our IPO, our headcount peaked during the second half of 2022.
But, since then, we have gradually reduced that headcount, wherever possible
by taking advantage of natural attrition. The Remuneration Committee, chaired
by Ivonne Cantu, aims to implement a remuneration policy that promotes
long-term success and aligned with the interests of our shareholders and other
stakeholders. As flagged in last year's report, our LTIP awards had
historically been based on pre-grant performance conditions on the same basis
as the annual bonus. Following feedback from shareholders, the committee is
now incorporating forward-looking performance targets as conditions for
vesting as the Company enters a full commercial phase.
The Board thanks all our employees for their hard work, commitment and
patience during the year which, most critically, laid the foundations for the
UltraSlim launch.
Sustainability
Creo's mission to improve lives sits at the heart of our wider ESG
responsibilities. We continue to be committed to best practice in our
environmental and social policies under the umbrella term of 'sustainability'
which emphasises our core social impact of improving clinical outcomes for
patients. Our strategy focuses on three key areas: healthcare impacts; people
and our communities; and, of course, our planet.
As we continue to gather clinical data, such as the NHS study showing reduced
inpatient stay time, it is clear that not only do our devices provide monetary
benefits but they also lead to a reduction in environmental impact that the
procedure has. We look forward to exploring the beneficial environmental
impact of using our devices as opposed to traditional surgical pathways during
the next few years.
Governance
The Company has in place a strengthened governance framework with energetic
engagement by the non-executive Directors at Board level, through the
committees, and in discussion with shareholders and advisers. The Group
continues to adopt the QCA Code of Conduct with its ten principles to deliver
growth, maintain a dynamic management framework, and build trust. The Audit
Committee, chaired by John Bradshaw, our Senior Independent Director, meets
regularly to review and monitor the financial statements, accounting
principles, internal controls and risk management systems. The Committee also
monitors the relationship with our auditors to ensure independence and
objectivity.
In addition to the regular communications and meetings with shareholders, in
November we held a gratifyingly well-attended Capital Markets Event at the
offices of Deutsche Numis, where the team provided greater detail on the
commercial and clinical progress of our products and leading NHS clinicians
gave presentations explaining their experiences in using Creo's products in
clinical practice.
As announced on 13 May 2024, and further to the 2023 AGM Statement &
Succession Planning announcement
(https://www.londonstockexchange.com/news-article/CREO/agm-statement-directorate-succession-planning/16015218)
, which set out the Company's plan to evolve its Board of Directors as it
enters a new phase of commercial growth, Kevin Crofton and Brent Boucher have
been appointed as independent Non-Executive Directors. Both Kevin and Brent
are expected to join the Board with effect from 1 July 2024, with Kevin
succeeding me as Chair. It has been a privilege to serve as Creo's Chair and
work alongside my fellow directors and our dedicated staff since our IPO in
2016. I welcome Kevin and Brent, with their invaluable skillsets and
experience, to the Board and wish them and Creo the best of luck as they
accelerate our clinical and commercial progress around the world.
The Board continues to seek guidance from our professional advisers, including
solicitors, auditors, remuneration consultants and nominated adviser on
recommended best practice for AIM companies. We thank all those advisers for
their valuable support and enthusiasm for Creo's mission.
Charles Spicer
Non-Executive Chair
14 May 2024
Financial Review
This year has seen significant growth in Creo core product revenues, with our
Speedboat UltraSlim device being cleared in November 2023 helping us achieve
record revenues for Q4 2024. These revenues along with cost savings and
operational efficiencies have reduced the underlying EBITDA loss year on year
as anticipated. Our oversubscribed fund raise of £33.7m (before expenses) in
Q1 2023 provides us with the platform to drive towards our goal of achieving
self-sustaining cashflows.
Revenue and other income
The Group has made significant progress in establishing sales channels through
new products as well as the development of our commercial footprint with our
Kamaptive Licensing Programme and associated revenues. Our European operations
have continued to be cash generative with our broader direct and indirect
sales channels for Creo across our large portfolio of products helping us to
grow sales by 9% (2022: 8%) during the year. Revenues billed in the year in
relation to Speedboat and CROMA increased almost 2.5 times to £2.3m (2022:
£0.9m), with Kamaptive licensing revenues from our strategic partners of
£1.7m (2022: £1.4m). £26.8m (2022: £24.9m) was generated through
consumable sales in Creo Europe. This 7.6% growth (2022: 4%) shows the
continued success of this business with further growth expected as we expand
into the USA, LATAM and APAC in 2024. Other operating income of £0.4m in the
12-month period to 31 December 2023 (2022: £0.1m) relates to the Welsh
government grant.
Gross Margin
Gross margin improved from 48.5% in 2022 to 49.6% in 2023 driven by strong
margins in our Creo core products and Kamaptive revenues along with stable
margin from our consumable products. As we mature as a business it is expected
that margins will continue to improve with increased sales of the core Creo
products.
Operating loss
The operating loss for the year decreased to £24.8m (2022: £30.7m). This
19.2% reduction is a result of a focus to reduce overall administrative costs
(in particular R&D spend), including baseline headcount costs throughout
the year, coupled with increasing revenue and margin. This decrease in costs
started in H2-22 and is expected to continue into 2024. The underlying
operating loss for the year was £16.4m (2022: £20.8m). This 21% fall
represents a significant reduction and includes c.£2.0m less than expected
R&D tax credit due to legislative changes following the budget in March
2023. On a like-for-like basis this would have reduced the underlying
operating loss for the year to £14.4m (2022: £20.8m), a 31% reduction. The
underlying EBITDA loss for the year was £17.6m (2022: £22.1m).
Whilst underlying EBITDA and underlying operating loss are not statutory
measures, the Board believes they are helpful to include for investors as
additional metrics to help provide a meaningful understanding of the financial
information as this measure provides an approximation of the ongoing cash
requirements of the business as it continues to pursue its future development
and pursue ongoing commercialisation focus of its approved products. The
underlying EBITDA position excludes SIP charges and Earnout charges
(contingent and deferred payments on previous acquisitions), individual items
outside of business control, expenses which are non-cash and incorporates the
recovery of research and development expenditure which the Group is able to
benefit from through R&D tax credit schemes. The underlying operating loss
position is the same as underlying EBITDA but also excludes share-based
payment expenses which are non-cash.
12 months to 12 months to
(All figures £'000) 31 December 2023 31 December 2022
Revenue 30.8 27.2
Cost of Sales (15.5) (14.0)
Gross Profit 15.3 13.2
49.6% 48.5%
Other Operating Income 0.4 0.1
Administrative Expenses (40.5) (43.9)
Operating Loss (24.8) (30.7)
SIP Charge 0.2 0.1
PPE & Other Settlements 0.3 -
Earnout 0.5 0.9
Depreciation & Amortisation 3.4 3.1
R&D expenditure recovered via tax credit scheme 2.8 4.5
Underlying EBITDA (non-statutory measure) (17.6) (22.1)
Share based payments (inc. JSOP) 1.2 1.3
Underlying operating loss (non-statutory measure) (16.4) (20.8)
Tax
The tax credits recognised in the current and previous financial year relate
mainly to R&D tax credit claims. As already noted above, this was c.£2.0m
less than expected due to legislative changes following the budget in March
2023. This has a direct detrimental impact on cash and P&L for a company
such as Creo. A deferred tax asset has been recognised in respect of the
business combination relating to our Creo Europe subsidiaries. A £0.75m
deferred tax asset has been recognised in respect of tax losses in Creo
Medical Limited which we will utilise through Group relief of the future
profits in Creo Medical UK Limited as in 2022. No further tax assets in
relation to these losses have been recognised due to the uncertainty over the
timing of future recoverability.
Expenses
Underlying administrative expenses totalled £32.1m for the year (2022:
£34.0m). This 5.6% fall (2022: 6.2% increase) represents a significant
reduction and includes c.£2.0m less than expected R&D tax credit due to
legislative changes following the budget in March 2023. On a like-for-like
basis this would have reduced the underlying administrative expenses for the
year to £30.1m (2022: £34.0m), a 11.5% reduction. The decrease was largely
driven by savings in R&D including headcount costs which decreased to
£22.2m for the year from £22.9m in following completion of certain R&D
projects. Non employment R&D costs were £3.5m in the year (2022: £6.9m)
representing our move towards funded R&D projects such as the Intuitive
agreement and our revised patent strategy. This decrease was despite an
average 6.1% rise in salaries. Total administrative expenses totalled £40.5m
for the year (2022: £43.9m). Sales and marketing costs were £4.2m (2022:
£3.8m) driven by increased travel compared to 2022 as well as costs
associated with growing our core technology sales. General and Administrative
expenses were £5.4m (2022: £5.1m) with our facility and utility costs all
increased due to inflationary pressures. Non-cash expenses comprising of SIP
charge, earnout expenses, settlement costs, share based payments and
depreciation and amortisation were £5.2m (2022: £5.2m).
Loss Per Share
Loss per share was 7 pence (2022: 15 pence) with reduction driven by reduced
EBITDA loss as well as an increased issued share capital following the fund
raise earlier in the year.
Dividend
No dividend has been proposed for the year to 31 December 2023 (2022: £nil).
Cash Flow and Balance Sheet
With the support from our shareholders, we were able to execute on a
significantly over subscribed fundraise in early 2023. This was secured
against a backdrop of economic pressures and difficult market conditions and
represents a significant achievement for the Company, providing us with the
financial platform to deliver future growth. Net cash used in operating
activities was £21.6m (2022: £24.9m), driven by the investment in
operational capacity, focusing on commercial activities and initial cash
outlay for Endotherapy consumable products in the US and Europe. Net cash used
in investing activities was £18.3m (2022: £6.0m) with the increase driven by
the £15m cash placed on deposit, final payments for the acquisition of Creo
Europe subsidiaries and investment in Creo HQ offset by interest received.
Cash generated from financing activities was £29.8m during the year with
£31.7m (net of expenses) raised from the fund raise. Total assets at the end
of the year increased to £76.7m (31 December 2022: £75.3m), a 2% increase,
reflecting the increase in cash from the fund raise offset by cash spent in
operations for the year and reduced R&D debtor. Cash and cash equivalents
at 31 December 2023 was £18.5m including cash on deposit (31 December 2022:
£13.1m). Net assets were £59.8m (31 December 2022: £49.3m), a 21% increase
due to the equity raise offset by operating loss and share based payment
expense. We began renewing debt facilities in Europe at the end of 2023 and
received £6.4m in cash post year-end from long term loans. We have a clear
strategy to ensure sufficient cash resources to get us to profitability,
however as a high growth MedTech company future revenues and future investment
are not committed and this represents a material uncertainty resulting in
significant doubt in respect of going concern as disclosed in the 2023 annual
report and accounts. However, we believe that the current revenue trajectory,
future licensing deals and operating cost flexibility provide a clear
strategy to ensure sufficient cash resources to get us to profitability.
Accounting Policies
The Group's financial statements prepared in accordance with UK-adopted
international accounting standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards. The
Group's accounting policies have been applied consistently throughout the
year.
Key Performance Indicators
As the Group continues to develop and commercialise its core technology, the
Directors consider the key financial performance indicators to be the level of
cash held in the business, sales and operating expenses controlled and
monitored. The Board performs regular reviews of actual results against
budget, and management monitors cash balances on a monthly basis to ensure
that the business has sufficient resources to enact its current strategy.
Certain KPIs concern non-financial measures, such as the number of trainees
for our Pioneer Clinical Education Programme, ESG metrics such as carbon
emissions, diversity ratios and employee engagement. All non-financial
measures are monitored monthly. The Board will continue to review the KPIs
used within the business and assess them as the business grows.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group are set out in the 2023
Annual Report and Accounts.
Directors
Details of the Directors who served during the year ended 31 December 2023 are
set out in the 2023 Annual Report and Accounts. Six of the Directors serving
on the Board at the year-end were male with one female.
Conflicts of Interest
To address the provisions of section 175 of the Companies Act 2006 relating to
conflicts of interest, the Company's Articles of Association allow the Board
to authorise situations in which a director has, or may have, a conflict of
interest. Directors are required to give notice of any potential situations or
transactional conflicts that are to be considered at the next Board meeting
and, if considered appropriate, conflicts are authorised. Directors are not
permitted to participate in such considerations or to vote regarding their own
conflicts.
Richard Rees
Chief Financial Officer
14 May 2024
Consolidated statement of profit or loss and other comprehensive income for
the year ended 31 December 2023
12 months to 12 months to
(All figures £m) Note 31 December 2023 31 December 2022
Revenue 2 30.8 27.2
Cost of sales (15.5) (14.0)
Gross Profit 15.3 13.2
Other operating income 2 0.4 0.1
Administrative expenses 3 (40.5) (44.0)
Operating loss (24.8) (30.7)
Finance expenses (0.4) (0.3)
Finance income 0.7 0.1
Loss before tax 3 (24.5) (30.9)
Taxation 2.8 4.0
Loss for the year (21.7) (26.9)
Exchange gain/(loss) on foreign subsidiary (0.6) 1.1
Changes to the fair value of equity investments at fair value through other - 0.4
comprehensive income
Total other comprehensive income (0.6) 1.5
Total comprehensive loss for the year (22.3) (25.4)
Loss per Share
Basic and diluted (£) 4 (0.07) (0.15)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
(All figures £m) Note 31 December 2023 31 December 2022
Assets
Non-current assets
Intangible assets 7.1 8.0
Goodwill 19.1 19.6
Investments 2.1 2.1
Property, plant and equipment 9.1 10.2
Deferred tax 1.1 1.5
Other assets 0.2 0.2
38.7 41.6
Current assets
Inventories 8.1 9.3
Trade and other receivables 8.6 6.8
Tax receivable 2.7 4.5
Fixed term deposits 15.5 -
Cash and cash equivalents 3.0 13.1
37.9 33.7
Total assets 76.6 75.2
Shareholder equity
Called up share capital 5 0.4 0.2
Share premium 180.9 149.5
Merger reserve 13.6 13.6
Share option reserve 10.5 9.3
Foreign exchange reserve (1.8) (1.2)
Financial Assets at fair value through other comprehensive income 0.6 0.6
Accumulated losses (144.4) (122.7)
Total equity 59.8 49.3
Liabilities
Non-current liabilities
Interest-bearing liabilities 5.2 6.1
Deferred tax liability 1.4 2.0
Provisions 0.3 0.4
6.9 8.5
Current liabilities
Interest-bearing liabilities 3.1 4.0
Trade and other payables 5.7 9.0
Non interest-bearing loans - 1.6
Other liabilities 0.9 2.6
Provisions 0.2 0.2
9.9 17.4
Total liabilities 16.8 25.9
Total equity and liabilities 76.6 75.2
Total cash including fixed term deposits at 31 December 2023 was £18.5m
Consolidated Statement of Changes in Equity
Changes to the
fair value of
equity
instruments
at fair value
through other
comprehensive
income
(All figures £m) Note Called up share capital Accumulated losses Share premium Merger reserve Share option reserve Foreign Exchange Reserve Total equity
0.2 (95.8) 149.4 13.6 7.9 0.2 (2.3) 73.2
Balance at 1 January 2022
Total comprehensive loss for the year
Loss for the financial year - (26.9) - - - - - (26.9)
Other comprehensive loss/income - - - - - 0.4 1.1 1.5
Total comprehensive loss - (26.9) - - - 0.4 1.1 (25.4)
Transactions with owners, recorded
directly in equity
Issue of share capital 0.0 - 0.1 - - - - 0.1
Equity settled share-based payment transactions - - - - 1.4 - - 1.4
Balance at 31 December 2022 0.2 (122.7) 149.5 13.6 9.3 0.6 (1.2) 49.3
Total comprehensive loss for the year
Loss for the financial year - (21.7) - - - - - (21.7)
Other comprehensive loss/income - - - - - - (0.6) (0.6)
Total comprehensive loss - (21.7) - - - - (0.6) (22.3)
Transactions with owners, recorded
directly in equity
Issue of share capital 4 0.2 - 31.4 - - - - 31.6
Equity settled share-based payment transactions - - - - 1.2 - - 1.2
Balance at 31 December 2023 0.4 (144.4) 180.9 13.6 10.5 0.6 (1.8) 59.8
Consolidated Statement of Cash Flows
12 months to 12 months to
(All figures £m) Note 31 December 2023 31 December 2022
Cash flows from operating activities
Loss for the year (21.7) (26.9)
Depreciation/amortisation charges 3.4 3.1
Equity settled share-based payment expenses 1.2 1.4
Finance expenses 0.4 0.3
Finance income (0.7) (0.1)
Taxation (2.8) (4.0)
Increase in inventories (0.4) (0.3)
Increase in trade and other receivables (1.4) (1.6)
Decrease in trade and other payables (3.7) (0.8)
(5.5) (2.7)
Interest paid (0.4) (0.3)
Tax received 4.5 4.3
Net cash used in operating activities (21.6) (24.9)
Cash flows from investing activities
Purchase of intangible fixed assets (0.4) (0.1)
Purchase of tangible fixed assets (1.2) (3.2)
Acquisition of subsidiary net of cash acquired (2.4) (2.8)
Fixed Term Deposits (15.0) -
Interest received 0.7 0.1
Net cash used in investing activities (18.3) (6.0)
Cash flows from financing activities
Capital repaid in respect of loans (1.4) (1.6)
Proceeds of new loan 0.2 2.8
Principal elements of lease repayments (0.7) (0.8)
Share issue 4 31.7 0.0
Net cash generated from financing activities 29.8 0.4
(Decrease) in cash and cash equivalents (10.1) (30.5)
Effect of exchange rates in cash held (0.0) 0.1
Cash and cash equivalents at beginning of the year 13.1 43.5
Cash and cash equivalents at end of the year 3.0 13.1
Notes to the financial statements
1. Financial information set out in this announcement
The financial information set out above does not constitute the Company's
statutory accounts for the period ended 31 December 2023 or 31 December 2022
but is derived from those accounts. Statutory accounts for the period ended 31
December 2022 have been delivered to the registrar of companies, and those for
the period ended 31 December 2023 will be delivered in due course. The auditor
has reported on those accounts; their reports were (i) unqualified, (ii) the
auditors' report included an emphasis of matter on going concern which the
auditors drew attention to without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Going concern
For the year ended 31 December 2023 the Group made a total comprehensive loss
of £22.3m and, as at 31 December 2023, had cash and cash equivalents
including cash on deposit of £18.5 million with net assets of £59.8m. An
amount of £31.7m (after expenses) was raised in February and March 2023
through a Share Placement and Open Offer and £6.4m debt financing was raised
post year end. The financial statements have been prepared on a going concern
basis which the Directors believe to be appropriate for the following reasons:
The Directors have considered the applicability of the going concern basis in
the preparation of the financial statements. This included the review of
financial results, internal budgets, cash flow forecasts and covenant
compliance for the period of at least 12-months following the date of approval
of the financial statements ("the going concern period").
The Directors have prepared a base case scenario which is based on the Board
approved forecast and assumes an increase in revenues particularly from its
core revenue streams and Kamaptive licensing programme for the year to 31
December 2024 compared to the year ended 31 December 2023. In addition, the
Directors have modelled a severe but plausible downside scenario for the going
concern period. This scenario includes sensitivity analysis to delay a
proportion of future expected but not contracted growth in revenue and assumes
no savings in expenditure are made. This downside scenario indicated that the
cash resources of the Group would be exhausted in around 12 months from the
date of approval of the financial statements, and a breach of loan covenants
will occur within 12 months, before taking account of mitigating actions. The
Directors have identified several areas where a reduction in expenditure on
the Group's research and development programme and other areas could be made
if such a scenario were to occur to ensure the Group would be able to meet its
liabilities as they fall due for the going concern period, without needing to
obtain waivers on the debt covenants.
The Group continues to make progress towards profitability as we continue to
seek to ramp up commercialisation. The Directors have identified several
potential sources of funding which could provide sufficient cash to the
business to reach positive cash generation, should a downside scenario arise.
At present these sources of funding remain uncommitted and a substantial
proportion of the forecast revenues remains uncommitted for the going concern
period and beyond. The Directors recognise that if no additional funding is
secured during the next 12 months or if the Group fails to secure additional
revenue contracts as forecast then the Group may breach debt covenants and may
not have sufficient resources to meet its liquidity requirements and be unable
to continue as a going concern. The Directors recognise that these conditions
indicate the existence of a material uncertainty which may cast significant
doubt about the Group's and the Parent Company's ability to continue as a
going concern. The 2023 annual report and accounts do not include the
adjustments that would result if the Group and the Parent Company were unable
to continue as a going concern.
2. Revenue and other operating income
The revenue split between the Group was as follows (based on where the sale
originated):
12 months to 12 months to
(All figures £m) 31 December 2023 31 December 2022
UK 7.8
9.5
Europe 19.1
20.7
RoW 0.3
0.6
Total 27.2
30.8
Segmental reporting
Operating segments are identified on the basis of internal reporting and
decision making. Creo currently has one operating segment which is the
research, development and distribution of electrosurgical medical devices
relating to the field of surgical endoscopy.
The Group has started the process of integrating the previous Albyn and
Boucart brands into the Creo brand and offering customers our full suite of
products. As such the Group is still operating in a single segment. As the
Group continues to grow we expect the internal reporting structure to change
to meet the changing goals and objectives of the business and additional
operating segments may be identified in future reporting periods.
As there is only one reportable operating segment whole profit, expenses,
assets, liabilities and cashflows are measured and reported on a basis
consistent with the financial statements, with no additional disclosures
necessary.
Other operating income
Other operating income relates to research grants. Income is recognised as
necessary to match it with the related costs in the profit or loss on a
systematic basis over the periods in which the entity recognises expenses for
the related costs for which the grants are intended to compensate.
Furthermore, income is recognised only when there is reasonable assurance that
the Company will comply with any conditions attached to the grant and the
grant will be received. Grant income received during the year
was £0.4m (2022: £0.1m).
3. Loss before tax
The loss before income tax is stated after charging/(crediting):
12 months to 12 months to
(All figures £m) 31 December 2023 31 December 2022
Depreciation - owned assets 1.6 1.3
Depreciation - right of use assets 0.6 0.7
Amortisation 1.2 1.1
Research and development expenditure 11.8 13.5
Staff costs 22.7 23.1
4. Loss per share
Loss 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.
12 months to 12 months to
(All figures £) 31 December 2023 31 December 2022
Loss
Loss attributable to equity holders of Company (basic) (21,720,908) (26,936,464)
Shares (number)
Weighted average number of ordinary shares in issue during the year 313,004,399 181,335,216
Loss per share
Basic and diluted (0.07) (0.15)
31 December 31
December
2023 2022
Balance at start of the year (£m) 0.2 0.2
Issue of share capital
Number of shares 179,705,533 446,699
Price per share (pence) 0.1 0.1
Share value (£m) 0.2 0.0
Balance at 31 December (£m) 0.4 0.2
6. Subsequent events
On 13 May 2024 Creo announced the appointment of Kevin T. Crofton and Brent J.
Boucher as independent Non-Executive Directors. Both Kevin and Brent are
expected to join the Board with effect from 1 July 2024, with Kevin succeeding
Charles Spicer as Chair.
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