Final Results
Advanced Medical Solutions Grp PLC
25 March 2003
For immediate release: 07.00, Tuesday 25 March 2003
Advanced Medical Solutions Group plc
Preliminary Results for the Year Ended 31 December 2002
Winsford, Cheshire: Advanced Medical Solutions Group plc ('AMS'), the global
producer of advanced materials for woundcare applications, announces its
preliminary results for the year ended 31 December 2002.
Highlights:
• Group revenues up 14% to £8.4 million (2001: £7.4 million)
• Continued progress on gross margins - increased to 30% (2001: 18%)
• EBITDA losses before exceptionals halved to £0.5 million (2001: £1.0
million) with £5.1million (2001: £6.0 million) net funds at year end
• Acquisition of MedLogic Global Holdings Ltd and related intellectual
property - successful integration and performance in line with
expectations
• Related fundraising of £3.4 million net of costs
• Key agreements signed in the year and since year end:
o Noble Fiber Technologies: to enable AMS to offer silver in its
alginate wound dressings
o Expansion of international presence with marketing and distribution
partnerships: Hartmann, Johnson & Johnson Wound Management, PDI
• FDA 510K approval for MedLogic's LiquiShieldTM product - thereby extending
use and market
Commenting on today's results, Dr. Geoffrey Vernon, Non-Executive Chairman,
said:
'These results show that Advanced Medical Solutions is continuing its move
towards achieving profitability in 2003 and has made strong progress on
improving margins and working with its global blue-chip partners.'
'The next few years look exciting for AMS as the Group continues to strengthen
all the key elements that drive value in an emerging business. I look forward to
updating the market on our progress.'
AGM Resolution
The board received yesterday a request by Advance Value Realisation Company
Limited ('AVRC') under section 376 of the Companies Act to put an ordinary
resolution at the forthcoming AGM to shareholders to request the AMS board to
invite offers for the Company. This is much the same resolution that was
defeated last year.
The principal reasons given by AVRC for this action are:
1. 'An unsatisfactory share price performance'; and
2. 'No recovery in AMS's trading' - 'Against a background of worldwide
growth in the advance dressing market of 10%-12% year on year, the
performance of AMS's core business has been extremely disappointing'.
Responding to these points, the board of AMS would like to highlight that:
1. Since AMS announced the acquisition of MedLogic on 28 March 2002, its
share price has outperformed the FTSE Small Cap Index by approximately 15
per cent; and
2. AMS's core Professional Woundcare business has grown by 26 per cent. in
2002, representing double the market growth rate that AVRC refer to in
their letter.
The board is disappointed that this request was made the day before the Company
issued its preliminary results for 2002 and the day before the Company had
meetings scheduled with its institutional shareholders, including AVRC. A copy
of the AVRC letter and a detailed response from the AMS board will be circulated
with the Annual Report and Accounts next month.
For further information, please contact:
Advanced Medical Solutions On 25.03.03: +44 (0) 20 7466 5000
Don Evans, CEO
Mary Tavener, Finance Director
Buchanan Communications Tel: +44 (0) 20 7466 5000
Nicola How / Fergus Mellon
CHAIRMAN'S STATEMENT
OVERVIEW
2002 was a year of significant achievement that has transformed AMS for the
future. The results show that the Board's decision to restructure the Group
around higher value woundcare products was the right one - this has led to
improved gross margins from 18% to 30% - a trend that we see continuing over the
coming years - with Group revenues growing by 14% to £8.4 million.
One of the highlights of 2002 for the Group was the successful acquisition of
the MedLogic medical adhesives business. I am pleased to report that this
business, acquired in May, has been successfully integrated into the Group and
has fully met the Board's expectations, both financially and strategically. The
MedLogic technology has significantly strengthened our Professional Woundcare
offering and provides exciting new opportunities upon which to rebuild a
profitable Consumer business in the future.
OPERATING REVIEW
The Group's core focus remains the development and manufacture of advanced
woundcare products to be marketed and distributed through blue-chip partners
into hospitals and nursing homes ('Professional') and retail pharmacies ('
Consumer').
Professional sales increased overall by 42% to £7.8 million. Sales from the
core AMS Professional Woundcare business increased 26% to £6.9 million, with
alginate, a natural polymer derived from seaweed, continuing to drive growth.
The addition of Johnson & Johnson Wound Management as a partner during 2002,
together with existing major partners such as 3M, Smith & Nephew, Molnlycke and
Coloplast ensures strong global distribution of AMS products.
As anticipated, sales into the Consumer market declined to £0.6 million. As
announced in our trading statement earlier this year the re-building of this
business, around higher value products, has proved challenging with progress
being slower than expected. However, the Board continues to believe that this
market offers a significant opportunity for AMS and it is receiving new focus
during 2003 with the appointment of a dedicated General Manager.
The MedLogic business, acquired in May 2002, contributed £0.9 million to the
Professional sales revenue in line with the Board's expectations. The vast
majority of this revenue was for LiquiBandTM wound closure adhesive, sold into
the UK Accident and Emergency (A&E) departments via a direct sales force.
LiquiBandTM has achieved market leadership in this A&E market for replacing
stitches. Interest in both this product, and LiquiShieldTM, the skin protection
product, from AMS partners has been extremely high and distribution deals, such
as the one recently announced with PDI, are being put in place to expand global
distribution. The PDI agreement involves the marketing and distribution of
LiquiShieldTM into the US hospital and nursing home market.
The FDA 510K clearance obtained in January 2003, for extending the use of
LiquiShieldTM to damaged skin, greatly increases the potential market for this
product, particularly in nursing homes. LiquiShieldTM works by providing a
liquid film that bonds to skin and protects it from breakdown or further damage
from friction, shear or moisture, as is common with a bed-ridden patient. It
also provides a key stepping-stone for the Group to enter the rapidly emerging
consumer liquid bandage market later this year by providing an innovative
alternative to plasters for the treatment of cuts and scrapes.
The retained loss for the year before exceptionals was reduced by £0.3 million
to £1.2 million. The exceptionals relate to three items - a credit of £242k for
negative goodwill associated with the MedLogic acquisition, a cost of £202k for
the EGM and £249k for the disposal of assets related to rationalisation of the
membrane process at Winsford.
Net cash outflow of £1.1 million from operating activities in the year leaves
the Group with net funds of £5.1 million as at 31st December 2002.
Corporate Activity
2002 saw significant corporate activity, which has improved AMS position for the
future. The Group was able to raise funds in a very difficult stock market, to
complete a key strategic acquisition, and it also transferred to the Alternative
Investment Market.
In May 2002, MedLogic Global Holdings Ltd and related intellectual property
assets were acquired for £2.9 million including costs and a successful VCT
Placing and Placing and Open Offer raised £3.4 million, net of costs.
Technology
The acquisition of the MedLogic cyanoacrylate adhesive technology has provided
AMS with another proprietary biomaterials platform to complement the core
strategic areas of biopolymers, foam, membrane and hydrogels. These form a
strong technology base to support the move from passive wound dressings to
higher value medical devices for delivery of active ingredients and for tissue
repair and engineering.
Our silver-based, anti-microbial programme has progressed well and we anticipate
launching dressings containing silver with major partners during the second half
of 2003. As a broad spectrum, anti-microbial agent, silver is increasingly
being used in wound dressings to help prevent infection.
With the assistance of a UK Government SMART award during 2002, we completed the
upgrading of our alginate manufacturing process to allow the incorporation of
active agents into our materials.
New Technologies
Our academic collaborations, aimed at underpinning the Company's science base,
were extended with the award of an Engineering and Physical Sciences Research
Council (EPSRC) grant. This grant will fund a postdoctoral position in the
Tissue Engineering Group of the School of Pharmaceutical Science at the
University of Nottingham, UK. This collaboration, utilising our biopolymer
fibre technology, is aimed at the creation of a new class of biomaterials that
control cell behaviour in addition to acting as physical scaffolds for tissue
repair and regeneration. These activities and programmes are positioning us to
provide an innovative pipeline of high value products for our partners in the
years ahead.
Management
At the beginning of 2003, the Company was reorganised into focussed business
groups and the existing management was strengthened significantly with the
appointments of Tom Donovan and Godfrey Axten.
Tom joined the Group as Managing Director of the Professional Woundcare
business, with responsibility for all related Winsford functions. He has a
wealth of experience gained internationally in sales, marketing and operations
in the medical and related industries.
Godfrey has been appointed to run a focussed Consumer Division addressing the
retail pharmacy, sports and grocery market for first aid, footcare and skincare.
He has previously worked with Welcome, Warner Lambert and Novartis Consumer
Health in Europe, USA and Japan. His experience will be invaluable in helping
to rebuild a Consumer business based around high value products.
Tom and Godfrey join Richard Stenton as part of the senior management team.
Richard joined AMS from MedLogic, where he remains as its Managing Director,
based in Plymouth.
These three executives report directly into the CEO, Dr. Don Evans, and bring
relevant experience and leadership skills to deliver the necessary growth to
bring the Company through to profitability. Graeme Brookes, Sales & Marketing
Director resigned from the Board in January 2003, and I would like to thank him
for his contribution to the Business over the last 4 years.
PROSPECTS
AMS remains well positioned in the international arena, with global distribution
of its products through major blue-chip partners, which in turn delivers
revenues from a range of proprietary products sold into the attractive, growing
woundcare market.
The continued growth of the Professional business, re-emergence of a profitable
Consumer division and further improvements in gross margins are expected to lead
to the Group achieving profitability in 2003 within current cash in line with
market expectations.
This is a very exciting time for AMS as it pursues many new opportunities and
continues to strengthen all the key elements that drive value in an emerging
business. With the expertise of the recently strengthened management team I
have no doubt that we have the industry and corporate experience to take the
company forward and I look forward to updating the market on our progress.
Consolidated Profit and Loss Account
For the year ended 31 December 2002
Year ended
31 December Year ended
2002 31 December Year ended Year ended
before 2002 31 December 31 December
exceptional Exceptional 2002 2001
items Items Total Total
£'000 £'000 £'000 £'000
Turnover
Continuing operations 7,495 - 7,495 7,373
Acquisitions 877 - 877 -
8,372 - 8,372 7,373
Cost of sales (5,887) - (5,887) (6,075)
Gross profit 2,485 - 2,485 1,298
Distribution costs (38) - (38) (136)
Administration costs (4,648) 242 (4,406) (3,322)
Other operating income 532 - 532 222
Operating loss
Continuing operations (1,508) - (1,508) (1,938)
Acquisitions (161) 242 81 -
(1,669) 242 (1,427) (1,938)
Loss on disposal of fixed assets - (249) (249) -
EGM Costs - (202) (202) -
Loss on ordinary activities before
interest and taxation (1,669) (209) (1,878) (1,938)
Interest receivable and similar income 223 - 223 369
Interest payable and similar charges (34) - (34) (30)
Loss on ordinary activities before
taxation (1,480) (209) (1,689) (1,599)
Taxation 292 - 292 129
Loss sustained for the year (1,188) (209) (1,397) (1,470)
Basic loss per share: (0.9)p (0.2)p (1.1)p (1.6)p
The above results relate to continuing operations.
There is no difference between reported and historical profits and losses.
Statement of total recognised gains and losses
Group
Year ended Year ended
31 December 31 December
2002 2001
£'000 £'000
Loss for the financial year (1,397) (1,470)
Currency translation differences on foreign currency net investments 15 10
Total losses recognised since last annual report (1,382) (1,460)
Reconciliation of movements in shareholders' funds
At 31 December 2002
Group Company
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2002 2001 2002 2001
£'000 £'000 £'000 £'000
Opening shareholders' funds 11,994 13,454 12,140 17,068
Loss for the financial year (1,397) (1,470) (1,205) (4,928)
Currency translation differences on
foreign currency net investments 15 10 - -
New share capital subscribed 2,427 - 2,427 -
Premium on issue of shares during
the year 1,711 - 1,711 -
Costs of share issue (643) - (643) -
Closing shareholders' funds 14,107 11,994 14,430 12,140
The loss for the Company includes an exceptional write-down in the value of
investments of £1,372k (2001:£5,144k).
Balance Sheets
At 31 December 2002
Group Company
2002 2001 2002 2001
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 2,406 - - -
Tangible assets 4,901 4,809 - -
Investments - - 9,138 5,941
7,307 4,809 9,138 5,941
Current assets
Stocks 918 887 - -
Debtors - due within one year 2,444 1,844 44 42
- due after more than one year 200 200 200 200
Cash at bank and in hand 5,558 6,238 5,098 5,963
9,120 9,169 5,342 6,205
Creditors: amounts falling due within
one year (1,838) (1,778) (50) (6)
Net current assets 7,282 7,391 5,292 6,199
Total assets less current liabilities 14,589 12,200 14,430 12,140
Creditors: amounts falling due after
more than one year (482) (206) - -
14,107 11,994 14,430 12,140
Capital and reserves
Called up share capital 11,782 9,355 11,782 9,355
Share premium account 37,978 36,910 37,978 36,910
Other reserve 1,531 1,531 - -
Profit and loss account (37,184) (35,802) (35,330) (34,125)
Equity shareholders' funds 14,107 11,994 14,430 12,140
Dr. D.W. Evans
Chief Executive Officer
21 March 2003
Consolidated Cash Flow Statement
For the year ended 31 December 2002
Year ended Year ended
31 December 31 December
2002 2001
£'000 £'000
Net cash outflow from
operating activities (1,121) (764)
Returns on investments and
servicing of finance
Interest received 229 395
Interest element of finance lease
rental and hire purchase payments (13) (30)
Interest paid (21)
Net cash inflow from returns on
investments and servicing of finance 195 365
Taxation 129 -
Capital expenditure and financial investment
Purchase of tangible fixed assets (354) (353)
Sale of tangible fixed assets 15 204
Net cash outflow for capital expenditure
financial investment. (339) (149)
Acquisition and disposals
Purchase of subsidiary undertaking (2,789) -
Net cash acquired with subsidiary undertaking (27) -
Net cash outflow for acquisitions and disposals (2,816) -
Cash outflow before use of liquid resources and
financing (3,952) (548)
Management of liquid resources
Sales of term deposits 739 805
Financing
Issue of shares 4,018 -
Share issue expenses (643) -
Repayment of long-term borrowing (6) -
Net movement of capital element of finance
lease rental and hire purchase payments (114) -
Net cash inflow/(outflow) from financing 3,255 (237)
Increase in cash 42 20
Notes to the Accounts:-
1. No dividend has been proposed.
2. The basic loss per share has been calculated on a weighted average
number of shares in issue during the year, namely 126,127,749 (2001 :
93,553,394) and loss of £1,397k (2001 : £1,470k) .
3. This statement was approved by the Directors and agreed with the
Group's auditors on 21st March 2003. A copy can be obtained from the
Secretary at the Company's Head Office, Road Three, Winsford
Industrial Estate, Winsford, Cheshire, CW7 3PD.
4. The figures and financial information for the year 2002 do not
constitute the statutory financial statements for that year.
5. The figures and financial information for the year 2001 do not
constitute the statutory financial statements for that year. Those
financial statements have been delivered to the Registrar and included
in the auditors report which was unqualified.
6. The Annual General Meeting will be held at the Blue Cap, 520 Chester
Road, Sandiway, Northwich, Cheshire, CW8 2DN at 11:00am on 29th May 2003.
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