Final Results

RNS Number : 4936C

Advanced Medical Solutions Grp PLC

08 March 2011

 



8 March 2011

Advanced Medical Solutions Group plc

("AMS" or the "Group")

Preliminary Results for the Year Ended 31 December 2010

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today announces its unaudited preliminary results for the year ended 31 December 2010.

Business Highlights:

•	Successful US LiquiBand® launch exceeding first full year expectations
•	New facility in Winsford now fully operational, positioning the Group for strong growth
•	Integration of foam business delivering strong performance from new technology
•	ActivHeal® range continuing to gain ground following successful rebranding
•	Silver alginate continuing to gain market share

Financial Highlights:

•	Revenue increased by 32% to £31.9 million (2009: £24.1 million) at actual and constant currency¹
•	Operating profit (pre-exceptional items²) up 31% to £5.3 million (2009: £4.1 million) Operating profit (post exceptional items) up 81% to £4.3 million (2009: £2.4 million)
•	Basic earnings per share (pre-exceptional items²) up 24% to 3.83p (2009: 3.09p) Basic earnings per share (post-exceptional items²) increased 64% to 3.17p (2009: 1.93p)
•	Strong cash generation in second half of year - net funds³ of £3.9 million at 31 December 2010 (2009: £1.7 million)
•	Maiden final dividend proposed at 0.38p per share

Commenting on the results Dr. Don Evans, Chairman of AMS plc, said: "2010 was an outstanding year for AMS.  As well as delivering strong revenue and profit growth a number of key commercial and operational milestones designed to fuel future growth were achieved in the year. I am pleased to report that 2011 has started well for the Group and the outlook remains very positive."

- End -

¹        Constant currency removes the effect of currency movements by re-translating the current year's performance at the previous year's  exchange rates

²        Exceptional costs of £1.0 million were incurred on the new Winsford facility (2009: Exceptional costs of £0.8 million were incurred on an aborted acquisition and £0.9 million related to the Winsford facility)

³        Net funds is defined as cash and cash equivalents plus short term investments less financial liabilities

For further information, please visit www.admedsol.com or contact:

Advanced Medical Solutions Group plc	Tel: [phone]
Chris Meredith, Chief Executive Officer Mary Tavener, Group Finance Director
Tavistock Communications	Tel: [phone]
John West / Chris Munden / Andrew Dunn / Lydia Eades
Investec Bank plc	Tel: [phone]
Gary Clarence / Daniel Adams / Patrick Robb

Notes to Editors:

AMS' advanced woundcare products are based on an extensive range of technologies including alginates, silver alginates and hydrophilic polyurethane foams. These and other products pioneer the concept of moist wound healing, allowing wounds to heal faster and with less pain and scarring. They protect the wound, deal with tissue fluids and provide an optimal environment for healing to occur. Silver is widely recognised as a safe and effective broad-spectrum anti-microbial agent for infection control.

AMS' wound closure and sealants products are based on cyanoacrylate adhesive ("superglue") technology developed for medical applications. Tissue adhesives offer significant benefits over conventional ways of closing wounds following trauma or surgical incision. They are simple to use, non-invasive, help to reduce the risk of infection, minimise trauma to the patient and provide good clinical and cosmetic outcomes. The technology is also ideally suited to protecting skin from breakdown or for use as a skin sealant to help prevent infection of surgical sites.

Chairman's Statement

Introduction

I am delighted to inform investors that 2010 was an outstanding year in which AMS continued to make excellent progress in building a major global medical device business.  In addition to delivering strong revenue and profit growth, a number of key commercial and operational milestones, designed to fuel future growth, were achieved in the year.

Financial Highlights

Group revenue was up 32% to £31.9 million, profit from operations before exceptional items was up 31% to £5.3 milion, and profit from operations after exceptional items was up 81% to £4.3 million.

The business continues to generate strong levels of cash at the operational level, with net cash inflow from operations before exceptional items up 116% to £8.1 million.  Net cash inflow from operations after exceptional items was up 244% to £7.1 million.  Even after further investment in the new Winsford facility, plant and equipment and paying the final deferred consideration for the acquisition of Corpura B.V., net funds³ at year end were up 129% to £3.9 million. 

Key Achievements

Entry into the key $220 million US topical skin adhesive market with our LiquiBand® tissue adhesive has been a pivotal milestone for the Group.  Whilst we were confident of success due to the positive competitive performance of this product range in Europe over many years, the level of interest, clinical evaluations and subsequent initial product uptake in our first full year of US sales has exceeded our expectations.  We are well placed to continue to grow our US market share and to build a strong global brand for our LiquiBand® business. 

In Advanced Woundcare, our silver alginate range, our foam based wound dressings and our ActivHeal® value range have also continued to make good progress.  The successful integration of Corpura B.V. has bolstered our position in polyurethane foam, the largest, fastest growing segment of the advanced woundcare market. 

Our new world-class Winsford facility, officially opened in January 2011, provides the Group with the capacity to support substantially increased  revenues, whilst addressing the ever more stringent demands being placed on medical device companies by the various regulatory authorities.  It also provides opportunities to enhance margins as the benefits of the new facility and investment in new equipment are realised. 

Board

A number of Board changes were made during the year. 

I stepped down as Chief Executive Officer and became Chairman of the Group, as of 1 January 2011.

Chris Meredith was appointed as Chief Executive Officer effective from 1 January 2011.  Having joined AMS in July 2005 as Commercial Director, Chris was appointed to the Board in April 2006, became Managing Director of Advanced Woundcare in 2008 and then Chief Operating Officer of the Group in January 2010. 

Dr. Geoffrey Vernon retired as Chairman at the end of 2010.  The Board would like to thank Geoffrey for his input and guidance in helping to make AMS the successful company that it is today.  We wish him all the best for the future.

In March 2010, Penny Freer joined the Board as Senior Independent Non-Executive Director, and Steve Harris stepped down from the Board at the AGM in June 2010.  The Board would like to thank Steve for his significant contribution to AMS during his nine years as a Non-Executive Director.

Dividend

As previously indicated, the Board will recommend the introduction of a maiden final dividend relating to the 2010 results.  Whilst AMS's focus remains on capital growth, the Board feels it is appropriate to propose a dividend, given the cash generative nature of the business and to reflect the stage of the Group's development.  The proposed maiden final dividend will be 0.38p per share which will be paid on 10 June 2011 to shareholders on the register at close of business on 13 May 2011.

Employees

On behalf of the Board and all our shareholders, I would like to thank all AMS employees for their considerable efforts in delivering our 2010 results, and for all their contribution in helping us to move into our new facility with so little disruption.

Outlook

I am pleased to report that 2011 has started well for the Group with both our leading brands, LiquiBand® and ActivHeal®, continuing to perform strongly.  We also continue to see growing demand from our partners for our foam and silver alginate products.

In addition to the positive prospects for our organic business, our continued investment in R&D and our strong balance sheet allows us to refresh and broaden the product range and technology base, as well as evaluate opportunities to strengthen our distribution in key markets.

Overall, the outlook for the Group remains very positive.

Dr. Don W. Evans

Chairman

Chief Executive's Statement

I am pleased to be providing this, my first Chief Executive Officer's report, on the back of another very positive year of further development for the Group.

With our broad customer base, including almost all major woundcare companies, and our multiple routes to market, we continue to occupy an enviable position in the markets within which we operate.  Enhanced by a combination of two strong emerging brands (LiquiBand® and ActivHeal®), and three major base technologies (fibres, foams and tissue adhesives), the potential for further growth remains significant.

Vision

With an increasing range of Operating Room focused products now complementing our base woundcare dressings and emergency room products, AMS continues to benefit from having diverse and plentiful growth opportunities.  As we continue the evolution of the Group, the vision is to strengthen our current position in each of the key focus areas, namely advanced woundcare dressings, tissue adhesives and surgical sealants, and ultimately become recognised as the preferred producer of innovative products and brands in the areas of:-

•	Accelerating healing and managing wounds;
•	Minimising adverse surgical outcomes; and
•	Sealing and closing tissue.

2010

Advanced Woundcare

Revenue from our advanced woundcare product range, aimed at accelerating healing and managing the complications of chronic wounds, increased 30% in 2010, with each of our key growth drivers contributing to the success.  Sales of our silver alginate product range were up 19%, the ActivHeal® brand grew 21% and foam grew by 270%. 

Ongoing technical and clinical support for our silver alginate product range has continued to drive growth in our silver dressings business and has helped our partners capture a 20% market share in just five years, second only to the dominant market leader. 

With austerity measures at the forefront of NHS plans, our ActivHeal® brand continues to deliver real savings to the NHS without any compromise on clinical outcome or patient care.  Following a re-launch of the product range in new, distinctive and easily recognisable packaging, we continue to make progress in establishing ActivHeal® as a product of first choice when it comes to cost effective dressing of non-infected wounds.

With foam revenues benefiting from a number of new product launches with key partners in 2010, it is clear we have a very well accepted base technology from which to drive further organic growth through innovation and product differentiation.

The move into the new facility in Winsford was a considerable achievement and was successfully completed without severe disruption to operations as evidenced by the 11% like-for-like growth of the Advanced Woundcare business (excluding Corpura B.V.) during the construction period. The effort and commitment shown by everyone in the Company cannot be underestimated.  With the new site operational, management has taken the opportunity to embrace the principles of lean manufacturing, positioning the Group for improved future operational efficiency.

Research and Development has been focused on our new technology platform, foam, with the launch of new sizes and shapes and the development of composite dressings that elegantly combine different layers together in one dressing. Work  has also progressed on our anti-biofilm product development programme and on our active dressings.

Wound Closure and Sealants

Our product range designed to seal and close tissue has also delivered strong growth to the Group in 2010. Revenues increased 42% to £6.7 million (2009: £4.7 million) with US market entry being a pivotal milestone for the business.

We are very pleased with the progress from our first 12 months of promotional activity in the US. As was to be expected, a high number of clinical evaluations took place in 2010 as hospitals tried the LiquiBand® product for the first time.  We are pleased with both the outcome of these evaluations and the speed with which a growing number of individual hospitals are converting to regular usage.  Whilst we still have a significant major competitor to contend with, progress in our first year has exceeded our initial expectations. It is currently too early to say whether the second year of sales will follow the trend of our previous product launches and temporarily drop back before forging ahead again in year three.

We received regulatory approvals for LiquiBand® in both Canada and Japan during 2010, and our products have since been launched in both countries via local partners.  Elsewhere, the regulatory process continues in a number of other markets.

An area for further improvement is the growth rate and sales performance for our devices aimed at minimising adverse surgical outcomes in the Operating Room. Progress with InteguSeal® through our marketing partner Kimberly Clark, has failed to meet both our and our partner's original launch expectations and as such, one of our remaining strategic challenges is how we address the routes to market and sales success for our surgically orientated Operating Room product range. This is increasingly important given we received recent confirmation that our LiquiBand® Surgical 'close and protect' tissue sealant device has just been granted approval in the US. We are now working with key surgeons to design the ideal delivery system for this surgical device and expect to launch this into the market in late 2011, which then gives us a product range covering 100% of the target market.

Strategy

Our strategy has four key elements:- 

•	Maximising the value of Group brands;
•	Strengthening our commitment to support partners and develop innovative woundcare products;
•	Improving our ability to generate growth from our Operating Room product range; and
•	Supplementing organic growth through further licensing and acquisition activity.

Brand building

We have already taken steps to enhance and simplify our corporate identity, both for major customers and employees.  We have rebranded our two acquired businesses, Medlogic Global and Corpura B.V., with all our businesses now trading under the Advanced Medical Solutions name. 

Given the potential impact of success with LiquiBand® in the US market, and ActivHeal® in our domestic UK market, developing excellence in brand management is now a very focused part of our plan and we aim to strengthen our support of these brands:-

•	LiquiBand®, our ongoing advertising and marketing investment will be enhanced through a series of clinical studies to support our marketing claims and product positioning; and
•	ActivHeal®, our rebrand has been well received and we will invest further in case studies and technical support to ensure the benefits of what the range can deliver to the NHS in terms of potential savings is better understood by all healthcare providers.

Commitment to support partners and develop innovative woundcare products

We remain  committed to the development of leading edge technology and products and to  working with strategic partners and major brands to commercialise them worldwide. Continuing investment in R&D will help us to deliver new product platforms such as differentiated polyurethane foams and active dressings to address the unmet clinical needs of chronic wounds. We will also be continuing to invest in clinical papers to support superiority claims for our silver alginate products versus the market leader and, in doing so, assist our multiple partners in capturing market share.

Our investment in our operational capability provides further evidence of our long term commitment to our woundcare partners. 

Enhanced ability to generate growth from our Operating Room product range

With opportunities for our Operating Room product range increasing, and internal applications for our tissue adhesives  potentially emerging out of R&D in the next 12-18 months, finding the right way to successfully access the Operating Room market is a high priority for the management team and remains a key challenge.

Supplement organic growth through further licensing and acquisition activity

The acquisition and integration of Corpura B.V. has successfully provided an additional technology platform from which to drive growth within the foam market, the largest and fastest growing segment of advanced woundcare.  Foam has already delivered significant value to the Group in 2010 and, given our position in the market, any similar woundcare technology acquisition would provide equal growth potential. In addition, we will continue to look for synergistic businesses that allow us to leverage our enviable customer base, bring new technologies or additional brands to complement our existing product range, and distribution opportunities to help us overcome the Operating Room challenge.

Chris Meredith

Chief Executive Officer

Financial Review

Income Statement

Revenue for the Group grew 32% in 2010 to £31.9 million (2009: £24.1 million).  

Advanced Woundcare sales increased 30% to £25.2 million (2009: £19.4 million), benefiting in part from a full year's contribution from the Corpura B.V. acquisition, which was completed on 30 September 2009.  Adjusting for this, like-for-like growth was still 11%, well ahead of market growth rates which are estimated to have been about 4% in 2010.

The Group's key growth drivers in Advanced Woundcare performed well, with sales of our silver alginate range of products growing 19% compared with last year and sales of ActivHeal®, the Group's value range of woundcare products for the NHS market, increasing 21%.  Foam is now also a very important part of the business and contributed 29% of Advanced Woundcare revenues.

Wound closure and sealants sales grew 42% to £6.7 million (2009: £4.7 million), with the main contributor being the first full year of sales of LiquiBand® in the US.  US revenue benefited from sampling and customer evaluations, but has nevertheless exceeded our expectations with Quarter 4 annualised end user sales of over 250,000 units.  InteguSeal® had a disappointing year with sales down by 8% but we believe that it remains an excellent product with considerable potential that requires a focused sales drive.  We are considering options as to how to exploit this opportunity more effectively.

Geographically, the strength of ActivHeal® and partner business has contributed to the growth of sales in the UK, which increased 15%.  Sales in Europe grew 35%, mainly due to the foam business in The Netherlands, but overall, market conditions in Europe have been difficult and we are expecting pricing challenges in 2011 as austerity measures start to bite. Sales into the US grew 55% due to the launch of LiquiBand® and the Advanced Woundcare business is also performing well.

Profit from operations (pre-exceptional items) increased by 31% to £5.3 million (2009: £4.1 million) and our operating margin (pre-exceptional items) remained at 17%. Advanced woundcare contributed £4.7 million (pre-exceptional items of £1.0 million) to this, (2009: £4.4 million, pre-exceptional items of £0.9 million), with an operating margin of 18.8%, down by 390 basis points (bpts) compared with 2009. There was a 430 bpts of decline from a change of mix, primarily as a result of the previously mentioned lower margin foam business while the Winsford site move caused an estimated 60 bpts reduction in margin due to the temporary but anticipated disruption effect.  Operating expenses were, however, leveraged across the entire business and reduced as a percentage of revenue, partially offsetting the declines.

Wound closure and sealants contributed £1.6 million (2009: £0.8 million) to profit from operations, with an operating margin that improved by 720 bpts to 24.2% (2009: 17%) resulting from the increased volumes through this business. 2011 will see some additional marketing  spend being incurred to support the LiquiBand® opportunity in the US which may impact margin.

Across the Group, administration costs (pre-exceptional items) increased 19% to £9.3 million (2009: £7.8 million), including support and integration for the new Dutch entity, and investment in sales and marketing, in particular supporting the launch of LiquiBand® into the US. This increased spend reflects the needs of a larger Group and, overall, operating expenses as a percentage of revenue have decreased 330 bpts compared with last year.  Research and Development spend was lower than normal at 4.0% of sales (2009: 6.7%), partly due to the growth of the Group but also as a result of the timing of some projects.  Annual rent costs relating to our new facility in Winsford are £0.3 million higher than the old facilities.   

The Group incurred £1.0 million of exceptional costs in the year, all within the Advanced Woundcare division.  These costs are associated with the move into the new facility in Winsford and result from the transfer and re-validation of manufacturing equipment, additional, duplicated rent and staff dedicated to the project.  There will be no further exceptional costs associated with this project.

Profit from operations (post-exceptional items) was £4.3 million, an increase of 81% compared with 2009 (2009: £2.4 million).

The Group works with existing and new partners on development projects and earns income through these projects.  This is, however, becoming a less important part of the business, with the Group looking to secure more value by developing products alone.  £0.2 million of other income was earned in the period (2009: £0.5 million) from these activities.

The Group achieved pre-exceptional profit before tax of £5.3 million in the period, an increase of 30% compared with 2009 (£4.1 million).  Profit before tax after exceptionals was up 79% to £4.3 million (2009: £2.4 million). 

The Group recognised a tax credit of £0.5 million (2009: £0.4 million), £0.3 million of which resulted from deferred tax reflecting the extent to which recoverability of tax losses can be forseen with reasonable certainty.  The Group holds a deferred tax asset in respect of tax losses on the balance sheet of £2.3 million (2009: £1.8 million) and has a further £19.1 million (2009: £24.0 million) of tax losses that have not been recognised.  Corpura B.V., when acquired, had accumulated a small amount of tax losses and, with this business performing strongly, the Group anticipates that it will pay tax in The Netherlands ahead of the businesses in the UK.

Profit after tax but before exceptional items for the period was £5.8 million (2009: £4.5 million). On this basis, adjusted basic earnings per share increased by 24% to 3.83p (2009: 3.09p).  Fully diluted earnings per share before exceptional items were 3.77p (2009: 2.87p).  

The Group profit after tax and exceptional items was £4.8 million (2009: £2.8 million) resulting in a basic earnings per share of 3.17p (2009: 1.93p) and fully diluted earnings per share of 3.12p (2009: 1.79p).

The Board is proposing a maiden final dividend of 0.38p per share (2009: nil) which will be paid on 10 June 2011 to shareholders on the register at close of business on 13 May 2011. 

Cash flow and balance sheet

The Group had a cash inflow from operating activities, before exceptional items, of £8.1 million (2009: £3.7 million), and £7.1 million (2009: £2.1 million), after exceptional items of £1.0 million (2009: £1.7 million), reflecting a very strong second half year performance.  The cash conversion ratio^⁴ was 79% for the year (2009: negative due to Winsford capital expenditure, now completed).

Working capital increased in the period by £0.5 million but decreased as a percentage of sales to 14.9% (2009: 17.6%).  As expected, inventory decreased by £0.7 million to £2.5 million (2009: £3.2 million) as the Winsford move completed. Trade and other receivables reduced by £0.9 milion to £6.0 million (2009: £6.9 million) with debtor days reducing to 52 (2009: 54). Trade and other payables decreased by £2.1 million.  The deferred payment for Corpura B.V. of £1.3 million was included in other payables in 2009.

During 2010, the Group invested £3.6 million in capital equipment and paid the remaining £1.3 million of consideration for the Corpura B.V. business. £2.9 million (2009: £3.0 million) of goodwill has been recognised on the balance sheet following the acquisition of Corpura B.V. in 2009. There has been no impairment in value to goodwill upon review as at December 31 2010.

In August 2009 the Group entered into a three year Revolving Credit Facility with Lloyds TSB Bank for £5.0 million, including a £1.0 million overdraft facility at market rate.  As a consequence of this, the Group's going concern position has been strengthened as more fully described in Note 9.  The Group drew down £1.0 million of the revolving credit facility during 2010 due to the timing of investment in the new site and payments for the Corpura B.V. business but it was not being used at the end of the year.

The Group had net funds of £3.9 million as at 31 December 2010.  The strong balance sheet  provides options to support future growth of the business.

Mary Tavener

Group Finance Director

_⁴    cash conversion ratio is defined as cash generated from operating activities before exceptional items including spend on property, plant and equipment, software and capitalised research and development but excluding spend on acquisitions as a ratio of Profit from Operations before exceptional items

CONDENSED CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2010

		(Unaudited) Year ended 31 December 2010			(Audited) Year ended 31 December 2009
		Before  exceptional  items	Exceptional   Items  (note 7)	Total	Before  exceptional  items	Exceptional  items  (note 7)	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Revenue from continuing operations	4	31,881	-	31,881	24,091	-	24,091
Cost of sales		(17,144)	-	(17,144)	(12,482)	-	(12,482)
Gross profit		14,737	-	14,737	11,609	-	11,609
Distribution costs		(307)	-	(307)	(157)	-	(157)
Administration costs		(9,263)	(1,001)	(10,264)	(7,799)	(1,672)	(9,471)
Other income		173	-	173	488	-	488
Share of result of joint venture		-	-	-	(66)	-	(66)
Profit from operations	4,5	5,340	(1,001)	4,339	4,075	(1,672)	2,403
Finance income		12	-	12	21	-	21
Finance costs		(60)	-	(60)	(30)	-	(30)
Profit before taxation		5,292	(1,001)	4,291	4,066	(1,672)	2,394
Income tax		542	-	542	390	-	390
Profit for the year attributable  to equity holders of the parent		5,834	(1,001)	4,833	4,456	(1,672)	2,784
Earnings per share
Basic	6	3.83p	(0.66)p	3.17p	3.09p	(1.16)p	1.93p
Diluted	6	3.77p	(0.65)p	3.12p	2.87p	(1.08)p	1.79p

The above results relate to continuing operations.

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2010

	(Unaudited)	(Audited)
	Year ended	Year ended
	31 December 2010	31 December 2009
	£'000	£'000
Profit for the year	4,833	2,784
Exchange differences on translation of foreign operations	(257)	(153)
Loss arising on cash flow hedges	(76)	(26)
Other comprehensive income for the year	(333)	(179)
Total comprehensive income for the year attributable to equity holders of the parent	4,500	2,605

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2010

		(Unaudited) 2010	(Audited) 2009
		£'000	£'000
Assets
Non-current assets
Acquired intellectual property rights		1,062	1,230
Software intangibles		16	34
Development costs		771	725
Goodwill		2,878	2,978
Property, plant and equipment		12,828	10,284
Deferred tax assets		2,756	2,422
Trade and other receivables		19	6
		20,330	17,679
Current assets
Inventories		2,498	3,179
Trade and other receivables		6,035	6,945
Cash and cash equivalents		4,122	1,992
		12,655	12,116
Total assets		32,985	29,795
Liabilities
Current liabilities
Trade and other payables		3,798	5,887
Other taxes payable		424	463
Financial liabilities		18	18
Obligations under finance leases		19	16
		4,259	6,384
Non-current liabilities
Trade and other payables		677	278
Financial liabilities		226	244
Obligations under finance leases		23	39
		926	561
Total liabilities		5,185	6,945
Net assets		27,800	22,850
Equity
Share capital		7,740	7,248
Share premium		306	99
Share-based payments reserve		442	502
Investment in own shares		(37)	(27)
Share-based payments deferred tax reserve		397	576
Other reserve		1,531	1,531
Translation reserve		(85)	248
Retained earnings		17,506	12,673
Equity attributable to equity holders of the parent		27,800	22,850

CONDENSED CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

					Share
			Share	Investment	based
	Share	Share	based	in own	payments	Other				Retained
	capital	premium	payments	shares	deferred tax	reserve		Translation		earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000		£'000		£'000	£'000
At 1 January 2010 (Unaudited)	7,248	99	502	(27)	576		1,531		248	12,673		22,850
Share-based payments	-	-	282	-	-		-		-	-		282
Issue of share capital	5	-	-	-	-		-		-	-		5
Share options exercised	487	207	(342)	-	(179)		-		-	-		173
Shares purchased by EBT	-	-	-	(191)	-		-		-	-		(191)
Shares sold by EBT	-	-	-	181	-		-		-	-		181
Exchange differences on translation of foreign operations	-	-	-	-	-		-		(257)	-		(231)
Movement on cash flow hedges	-	-	-	-	-		-		(76)	-		(102)
Consolidated profit for the year to 31 December 2010	-	-	-	-	-		-		-	4,833		4,833
At 31 December 2010 (Unaudited)	7,740	306	442	(37)	397	1531		(85)		17,506	27,800

CONDENSED CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

			Share	Investment	Share based
	Share	Share	based	in own	payments	Other		Retained
	capital	premium	payments	shares	deferred tax	reserve	Translation	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2009 (Audited)	7,169	23	300	(18)	571	1,531	427	9,889	19,892
Share based payments	-	-	202	-	5	-	-	-	207
Issue of share capital	8	-	-	-	-	-	-	-	8
Share options exercised	71	76	-	-	-	-	-	-	147
Shares purchased by EBT	-	-	-	(114)	-	-	-	-	(114)
Shares sold by EBT	-	-	-	105	-	-	-	-	105
Exchange differences on translation of foreign operations	-	-	-	-	-	-	(153)	-	(153)
Movement on cash flow hedges	-	-	-	-	-	-	(26)	-	(26)
Consolidated profit for the year to 31 December 2009	-	-	-	-	-	-	-	2,784	2,784
At 31 December 2009 (Audited)	7,248	99	502	(27)	576	1,531	248	12,673	22,850

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2010

		(Unaudited) Year ended	(Audited) Year ended
		31 December 2010	31 December  2009
		£'000	£'000
Cash flows from operating activities
Profit from operations		4,339	2,403
Adjustments for:
Share of results of joint venture		-	66
Depreciation		1,077	678
Amortisation - intellectual property rights		168	168
- development costs		121	96
- software intangibles		23	26
Decrease / (increase)  in inventories		676	(826)
Decrease / (increase)  in trade and other receivables		880	(1,583)
(Decrease) / increase in trade and other payables		(500)	826
Share based payments expense		280	202
Net cash inflow from operating activities		7,064	2,056
Cash flows from investing activities
Purchase of software		(5)	(20)
Capitalised research and development		(167)	(301)
Purchases of property, plant and equipment		(3,685)	(6,735)
Movements in investments in money market deposits		-	5,730
Interest received		12	74
Acquisition of subsidiary		(1,255)	(69)
Movement in loans and receivables		-	(711)
Net cash used in investing activities		(5,100)	(2,032)
Cash flows from financing activities
Finance lease		(19)	(17)
Repayment of secured loan		(18)	(17)
Issue of equity shares		359	155
Shares purchased by EBT		(191)	(114)
Shares sold by EBT		181	105
Interest paid		(54)	(30)
Net cash from financing activities		258	82
Net increase in cash and cash equivalents		2,222	106
Cash and cash equivalents at the beginning of the year		1,992	1,882
Effect of foreign exchange rate changes		(92)	4
Cash and cash equivalents at the end of the year		4,122	1,992

Notes Forming Part of the Condensed Consolidated Financial Statements

1.         Reporting Entity

            Advanced Medical Solutions Group plc ("the Company") is a public limited company incorporated and domiciled in England and Wales (registration number 2867684). The Company's registered address is Premier Park, 33 Road One, Winsford Industrial Estate, Cheshire, CW7 3RT.

The Company's ordinary shares are traded on the AIM market of the London Stock Exchange. The financial statements of the Company for the twelve months ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as the "Group").

The Group is primarily involved in the design, development and manufacture of novel high performance polymers (both natural and synthetic) for use in advanced woundcare dressings and medical adhesives for closing and sealing tissue, for sale into the global medical device market.

2.         Basis of Preparation

These condensed consolidated financial statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2009 and those to be adopted at 31 December 2010 (see note 3). 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in April 2011.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 December 2010 or 31 December 2009. The financial information for the year ended 31 December 2009 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s498 (2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2010 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group's annual general meeting.

The financial statements have been prepared on the historical cost basis of accounting except as disclosed in the accounting policies set out in the annual report for the year ended 31 December 2009.

3.         Accounting policies

The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except for the adoption in the period of IFRS3 ' Business Combinations' (revised 2008) and IAS 27 'Consolidated and Separate Financial Statements' (revised 2008). These have had no significant impact on this set of financial information.  The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

4.         Segment information

For management purposes, the Group is organised into two business units, advanced woundcare and wound closure and sealants.  These divisions are the basis on which the Group reports its segment information.

Inter-segment pricing is determined on an arm's length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.  Unallocated items comprise mainly investments and related revenue, corporate assets, head office expenses and income tax assets.  These are the measures reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance.

Business segments

The principal activities of the advanced woundcare business unit are the research, development, manufacture and distribution of novel, high performance polymers for use as wound dressings.

The principal activities of the wound closure and sealants business unit are the research, development, manufacture and distribution of medical adhesives and products for closing and sealing tissue.

Notes Forming Part of the Condensed Consolidated Financial Statements

4.         Segment information (continued)

Segment information about these businesses is presented below.

(Unaudited) Year ended 31 December 2010	Advanced woundcare £'000	Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Revenue
External sales	25,197	6,684	-	31,881
Inter-segment sales	-	-	-	-
Total revenue	25,197	6,684	-	31,881

Inter-segment sales are charged at prevailing market prices.

Result
Segment result	3,735	1,620	-	5,355
Unallocated  expenses				(1,016)
Profit from operations				4,339
Finance income				112
Finance costs				(60)
Profit before tax				4,291
Tax				542
Profit for the year				4,833

(Unaudited) At 31 December 2010 Other Information	Advanced woundcare £'000	Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Capital additions:
Software intangibles	5	1	-	6
Research & development	162	5	-	167
Property, plant and equipment	3,514	144	-	3,658
Depreciation and amortisation	1,021	369	-	1,390
Balance sheet
Assets
Segment assets	25,856	6,053	-	31,909
Unallocated  assets				1,076
Consolidated total assets				32,985
Liabilities
Segment liabilities	3,946	944	-	4,890
Unallocated liabilities				295
Consolidated total liabilities				5,185

                The advanced woundcare segment's results include £1,001,000 of exceptional spend in respect of the site move.

Notes Forming Part of the Condensed Consolidated Financial Statements

4.         Segment information(continued)

(Audited) Year ended 31 December 2009	Advanced woundcare £'000	Wound closure & sealants £'000	Eliminations  £'000	Consolidated £'000
Revenue
External sales	19,391	4,700	-	24,091
Inter-segment sales	43	-	(43)	-
Total revenue	19,434	4,700	(43)	24,091

Inter-segment sales are charged at prevailing market prices.

Result
Segment result		3,492	801	-	4,293
Unallocated  expenses					(1,890)
Profit from operations					2,403
Finance income					21
Finance costs					(30)
Profit before tax					2,394
Tax					390
Profit for the year					2,784

(Audited) At 31 December 2009 Other Information		Advanced woundcare £'000	Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Capital additions:
Software intangibles	10		10	-	20
Research & development	297		4	-	301
Property, plant and equipment	6,570		165	-	6,735
Depreciation and amortisation	626		342	-	968
Balance sheet
Assets
Segment assets	22,868		5,710	-	28,578
Unallocated  assets					1,217
Consolidated total assets					29,795
Liabilities
Segment liabilities	4,413		988	-	5,401
Unallocated liabilities					1,544
Consolidated total liabilities					6,945

Exceptional items of £909,000 incurred in respect of the site move are also included within the advanced woundcare segment.

Exceptional items of £763,000 incurred in respect of the aborted transactions are included in unallocated expenses.

Notes Forming Part of the Condensed Consolidated Financial Statements

4.            Segment information(continued)

Geographical segments

The advanced woundcare and wound closure and sealants segments operate mainly in the UK, with a sales office located in the USA.  In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.  Segment assets are based on the geographical location of the assets

The following table provides an analysis of the group's sales by geographical market, irrespective of the origin of the goods/services, based upon location of the Group's customers:

	(Unaudited)	(Audited)
	Year ended	Year ended
	31 December 2010	31 December  2009
	£'000	£'000
United Kingdom	8,323	7,268
Europe excluding United Kingdom	13,819	10,269
United States of America	9,154	5,888
Rest of World	585	666
	31,881	24,091

All assets are classified as under the United Kingdom with the exception of assets held in The Netherlands of £2,555,000; the carrying value of assets held in the United States of America is immaterial.

5.            Profit from operations

		(Unaudited) Year ended	(Audited) Year ended
		31 December	31 December
		2010	2009
		£'000	£'000
Profit from operations is arrived at after charging/(crediting):
Depreciation of property, plant and equipment		1,077	678
Amortisation of:
-  acquired intellectual property rights		168	168
-  software intangibles		23	26
-  development costs		121	96
Operating lease rentals	-   plant and machinery	184	131
	-   land and buildings	1,023	575
Research and development costs expensed to the income statement		1,289	1,613
Cost of inventories recognised as expense		16,427	11,646
Staff costs		9,941	8,467
Fair value loss / (gain) on derivative financial instruments		179	(599)
Net foreign exchange (gain) / loss		(63)	513

Notes Forming Part of the Condensed Consolidated Financial Statements

6.         Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

		(Unaudited) Year ended 31 December 2010 £'000	(Audited) Year ended 31 December 2009 £'000
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent
-       pre exceptional items		5,834	4,456
-       post exceptional items		4,833	2,784
Number of shares		'000	'000
Weighted average number of ordinary shares for the purposes of basic earnings per share		152,366	144,166
Effect of dilutive potential ordinary shares:
share options, deferred share bonus, LTIPs		2,538	11,200
Weighted average number of ordinary shares for the purposes of diluted earnings per share		154,904	155,366
Earnings per share
Basic	pre exceptional items	3.83p	3.09p
	post exceptional items	3.17p	1.93p
Diluted	pre exceptional items	3.77p	2.87p
	post exceptional items	3.12p	1.79p

7.         Exceptional items

             During 2010 the Group completed the rationalising of its two existing sites in Winsford into a new facility. During the year ended 31 December 2010 expenditure of £1,001,000 was incurred in respect of the site move (year ended 31 December 2009: £909,000).

             On 9 April 2009, the Board announced that it had been pursuing an acquisition opportunity that had reached an advanced stage of discussions but which had now been terminated. The costs incurred in the year ended 31 December 2009 in respect of this aborted transaction amounted to £763,000.

8.          Dividends

             The Company is proposing a maiden final dividend of 0.38p per share.

9.          Going Concern

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group's  financial position and cash flow forecasts for the next 12 months. These have been based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment.

With regards to the Group's financial position, it had cash and cash equivalents at the year-end of £4.1 million.  The Group also has in place a revolving credit facility of £5 million, inclusive of a £1 million overdraft facility, which expires in July 2012.

While the current economic environment is uncertain, AMS operates in a market whose demographics are extremely favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, strong market growth is predicted. The Group has a number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies.

Having taken the above into consideration the Directors have reached a conclusion that the Group is well placed to manage its business risks in the current economic environment.  Accordingly, they continue to adopt the going concern basis in preparing the preliminary announcement.

Notes Forming Part of the Condensed Consolidated Financial Statements

10.        Approval

This statement was approved by the Directors on  7 March 2011.  A copy can be obtained from the Secretary at the Company's Head Office, Premier Park,  33 Road One, Winsford Industrial Estate, Winsford, Cheshire CW7 3RT.

 

END

 

 

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