Interim Results

Press Release                                                28 September 2005
                                                                              
                          Surgical Innovations Group plc

                                 Interim Results

Surgical Innovations Group plc ('Surgical') ('AIM: SUN'), the designer and
manufacturer of innovative surgical devices, today reports its Interim Results
for the six months ended 30 June 2005.

Highlights

• Turnover of £1.432m (2004: £1.425m)                                         
                                                                              
• Operating profit of £117,000 (2004: £74,000)                                
                                                                              
• Pre-tax profit 120% higher at £90,000 (2004: £41,000)                       
                                                                              
• Overall net debt reduced by £92,000 to £547,000                             
                                                                              
• Earnings per share increased by 54% to 0.035p (2004: 0.016p)                
                                                                              
• Strategic supply agreement with Aesculap (Germany) extended for a further 2 
  years                                                                       
                                                                              
• Core patent successfully protected against infringement, strengthening      
  royalty revenue                                                             
                                                                              
• MIS technology successfully transferred to engineering sector via 2004/5    
  development projects with Rolls-Royce (and subsequent ten-year deal,        
  announced on 19 September)                                                  
                                                                              

Commenting on the outlook, Doug Liversidge, Non-executive Chairman, said:

 

'Not only has financial performance continued to improve due to sales of our
core surgical products, but the Company is also poised for significant growth
in an entirely new sector - engineering.  Development projects successfully
completed in the period to 30 June 2005, and a ten-year agreement with
Rolls-Royce, have established a platform for substantial increases in operating
profit for the second half of the year and beyond.'

                                                                               

                                   - Ends -                                    

 
For further information:

 

Surgical Innovations Group plc                                         
                                                                       
Doug Liversidge CBE, Chairman                 Tel: [phone]
                                                                       
Stuart Moran, Technical Director              Tel: [phone]
                                                                       
[e-mail]                          www.sigroupplc.com
                                                                       
                                                                       
                                                                       
Westhouse Securities                                                   
                                                                       
Tim Feather                                   Tel: [phone]
                                                                       
[e-mail]         www.westhousesecurities.com
                                                                       
                                                                       
Media enquiries:

Abchurch                                                               
                                                                       
Sarah Hollins                                 Tel: [phone]
                                                                       
Justin Heath                                                           
                                                                       
[e-mail]                 www.abchurch-group.com
                                                                       

Chairman's Statement

 

I am pleased to report that, for the six months to 30 June 2005, the Group made
an operating profit of £117,000 on turnover of £1.432 million.  Allowing for
net interest payable of £27,000, the retained profit for the period was 120%
higher at £90,000 (2004: £41,000).

 

Our financial performance continues to improve.  This has been enhanced by the
repayment of the remaining £110,000 of the 6.5% convertible loan notes through
a combination of share issues and cash payments.  Overall, net debt has reduced
by £92,000 in the six months to June 2005 and we anticipate a further reduction
in the second half as cash inflows from operating activities continue to
improve.

 

During this period, significant work has been undertaken to establish a
platform for substantial increases in operating profit for the second half of
the year and beyond.  Last week we announced the signing of a ten-year
agreement with Rolls-Royce to develop instruments that incorporate our advanced
surgical device technology for use within the aero engine maintenance field,
which will contribute towards our turnover and earnings over the second half of
the year.  Because of this, we have increased the resources in our design
function.

 

Sales of our core Minimally Invasive Surgery (MIS) products were 16% lower than
last year at £993,000, albeit 12% higher than our budget.  This decrease has
been caused by sales of YelloPort to Cardinal Health in the US being
significantly lower than in the comparable period in 2004, as a result of
over-ambitious forecasting within Cardinal's own business model.  Our budget
reflected the Cardinal position and this improvement on budget gives us
confidence in our ability to further improve our performance to December 2005.

 

The growth of our MIS business is dependent on the relationships with our key
strategic partners.  In this respect, in June, we importantly signed an
extension to our contract with Aesculap for the continued supply of single use
instrumentation, including a new range of fully disposable instruments.

 

We take our responsibilities to defend our intellectual property extremely
seriously.  During the first half of the year, we incurred costs of £53,000 in
a successful pursuit against infringement of our EndoFlex patent.  This success
further strengthens the EndoFlex licence agreement, now assigned to Cardinal
Health, and safeguards our future royalty stream.  Since its inception in 1998,
the EndoFlex licence agreement has provided royalties and licence fees in
excess of £2 million. 

 

As a consequence of our increased emphasis on manufacturing, we have taken the
opportunity to more accurately reflect relevant overheads, which were
previously shown under administrative expenses, in the cost of sales.  The
effect on the 2004 results for the equivalent period if these expenses had been
treated in the same way, would have resulted in gross profit of £679,000 and
operating profit of £74,000.

 

We expect to see further improvement in the Group's profitability during the
second half of the year through the development of our core business and our
new relationship with Rolls-Royce.

Doug Liversidge CBE
Chairman
28 September 2005


Surgical Innovations Group plc

Consolidated Profit and Loss Account

                                                                                              
                                                                                              
                                                        Unaudited     Unaudited        Audited     
                                                      6 months to   6 months to   12 months to
                                                          30.6.05       30.6.04       30.12.04
                                                                                              
                                                                                              
                                                                                              
                                                             £000          £000           £000
                                                                                              
                                                                                              
                                                                                              
Turnover                                                     1432          1425           3032
                                                                                              
Cost of sales                                               (716)         (652)         (1432)
                                                                                              
Gross Profit                                                  716           773           1600
                                                                                              
                                                                                              
Administrative expenses                                     (599)         (699)         (1358)
                                                                                              
                                                                                              
Operating profit                                              117            74            242
                                                                                              
Net interest payable                                         (27)          (33)           (68)
                                                                                              
Profit on ordinary activities before taxation                  90            41            174
                                                                                              
Tax on profit on ordinary activities                            0             0             38
                                                                                              
Retained profit attributable to ordinary shareholders          90            41            212
                                                                                              
                                                                                              
Earnings per ordinary share                                0.035p        0.016p          0.08p
                                                                                              
                                                                                              
                                                                                              
Surgical Innovations Group plc

Consolidated Balance Sheet

                                                                                                        
                                                                                                        
                                                              Unaudited        Unaudited         Audited
                                                                  As at            As at           As at
                                                                30.6.05          30.6.04        30.12.04
                                                                                                        
Fixed Assets                                                                                            
                                                                                                        
Tangible Assets                                                     724              827             811
                                                                                                        
Current Assets                                                                                          
                                                                                                        
Stock                                                             1,270              751             881
                                                                                                        
Debtors                                                           1,152            1,267           1,215
                                                                                                        
Cash at bank and in hand                                            -                -                 1
                                                                                                        
                                                                  2,422            2,018           2,097
                                                                                                        
                                                                                                        
                                                                                                        
Creditors:                                                                                              
                                                                                                        
amounts falling due within one year                             (1,199)          (1,029)         (1,043)
                                                                                                        
Net current assets                                                1,223              989           1,054
                                                                                                        
Total assets less current liabilities                             1,947            1,816           1,865
                                                                                                        
Creditors:                                                                                              
                                                                                                        
amounts falling due after more than one year                      (164)            (350)           (215)
                                                                                                        
Net assets                                                        1,783            1,466           1,650
                                                                                                        
                                                                                                        
Capital and reserves                                                                                    
                                                                                                        
Called up share capital                                           2,591            2,573           2,580
                                                                                                        
Share premium account                                            16,102           16,064          16,070
                                                                                                        
Capital Reserve                                                     329              329             329
                                                                                                        
Accumulated Losses                                             (17,239)         (17,500)        (17,329)
                                                                                                        
                                                                                                        
Equity shareholders' funds                                        1,783            1,466           1,650
                                                                                                        
                                                                                                        
                                                                                                        
Note:                                                                                                   
                                                                                                        
The balance sheet at 30th June 2005 reflects the issue of 1,136,294 shares in                           
the period                                                                                              
                                                                                                        
                                                                                                        
Surgical Innovations Group plc

Consolidated Cash Flow Statement

                                                                                                
                                                                                                
                                                          Unaudited     Unaudited        Audited
                                                        6 months to   6 months to   12 months to
                                                            30.6.05       30.6.04       30.12.04
                                                                                                
                                                                                                
                                                                                                
Net cash inflow from operating activities                       115            49            130
                                                                                                
Returns on investments and servicing of finance                (27)          (33)           (68)
                                                                                                
Taxation                                                          0            18             18
                                                                                                
Capital Expenditure                                            (38)           (9)           (21)
                                                                                                
Cash inflow before financing                                     50            25             59
                                                                                                
Financing                                                     (127)             7           (60)
                                                                                                
(Decrease) / increase in cash in the period                    (77)            32            (1)
                                                                                                
                                                                                                
Reconciliation of net cash flow to movement in net debt                                         
                                                                                                
(Decrease) / increase in cash in the period                    (77)            32            (1)
                                                                                                
Cash outflow from finance leases and loans                       59            45            103
                                                                                                
Cash Outflow from Loan Note redemption                          110             0              0
                                                                                                
Change in net debt resulting from cash flows                     92            77            102
                                                                                                
Conversion of loan notes                                          0             0              0
                                                                                                
New finance leases                                                0          (61)          (101)
                                                                                                
Movement in net debt in the period                               92            16              1
                                                                                                
Net (debt) at the beginning of the year                       (639)         (640)          (640)
                                                                                                
Net (debt) at the end of the period                           (547)         (624)          (639)
                                                                                                
                                                                                                
Net cash inflow/(outflow) from operating activities                                             
                                                                                                
Operating profit                                                117            74            242
                                                                                                
Depreciation                                                    125           113            203
                                                                                                
(Increase) in stocks                                          (388)          (30)          (160)
                                                                                                
(Increase) / decrease in debtors                                 63          (40)             51
                                                                                                
(Decrease) / increase in creditors                              198          (68)          (206)
                                                                                                
                                                                                                
                                                                                                
Net cash inflow from operating activities                       115            49            130
                                                                                                

 


Notes:
                                                                                                

                                                                                                           

1.   The consolidated financial information does not constitute full accounts
within the meaning of the Companies Act 1985 and has not been reported on by
the auditors or delivered to the Registrar of Companies. The figures for the
year ended 31 December 2004 have been extracted from the full accounts for that
year, on which the auditors gave an unqualified report and which have been
filed with the Registrar of Companies.                           

                                                                                               

2.   The directors have not declared an interim
dividend.                                                      

                                                                                               

3.   The earnings per share is based on the weighted average number of shares in
issue during the period. The total number of shares in issue at 30 June 2005
was 259,151,188 at 31 December 2004 was 258,014,894 and at 30 June 2004 was
257,338,914.