Interim Results

Advanced Medical Solutions Grp PLC 3 September 2001 For immediate release: 07.00, Monday 3rd September 2001 Advanced Medical Solutions Group plc Results for the six months ended 30 June 2001 Winsford, Cheshire: Advanced Medical Solutions Group plc ('AMS'), the global producer of advanced materials for woundcare applications, today announces its results for the six months ended 30 June 2001. Highlights * Turnover up 23% to £4.4million (2000: £3.6million) * Losses halved to £0.9million (2000: £1.8million) * Operating cash flow neutral in period, £7million in the bank at period end * Gross margins improved from -6% to 18% * Partnerships with major woundcare players strengthened Commenting on the results, Don Evans, Chief Executive of AMS said: 'Significant progress has continued to be made over the last six months. AMS continues to move forward, in line with internally set targets, towards our key objective of achieving profitability within our current cash reserves.' For further information, please contact: Advanced Medical Solutions On 03.09.01: +44 (0) 20 7466 5000 Don Evans, CEO Thereafter: +44 (0) 1606 863 500 Mary Tavener, Finance Director Buchanan Communications Tel: +44 (0) 20 7466 5000 Nicola How / Edward Cowdery Chairman's statement Overview: The last six months have seen continued progress in both the Professional Woundcare and the Consumer Skincare operations. This growth has been achieved by extending our partnership arrangements with key players in the woundcare industry including Johnson & Johnson Consumer Products and Novartis Consumer Health. Operating Review: Advanced Woundcare is the Group's core division and is focused on dressings for the professional woundcare and consumer skincare markets. Professional Woundcare - AMS sells advanced dressings and related products to sales & marketing partners who sell them on to hospitals and nursing establishments. Current internationally recognised brand owners that AMS is partnered with in this area include Smith and Nephew, Molnlycke Healthcare and 3M Healthcare. Consumer Skincare - this area involves the production of moist healing dressings for the consumer market where the brand is key. In an industry heavily dominated by the big players, it has been part of the management's strategy to move away from its smaller, lower margin partners towards major partners with strong brands such as Novartis with 'Savlon'(R) and Johnson & Johnson Consumer Products with 'Band Aid'(R). Research & Technology: AMS is focussing on two areas; tissue engineering and delivery of actives. Tissue engineering involves the use of AMS's biopolymer fibres to provide cells with a scaffold on which to grow, speeding up the healing process. This work is being funded with the help of a SMART Award for £105,000, which was announced on 27th July 2001. The second area of R & T focus is the delivery of active ingredients into tissue. A particular growth area in the Professional Woundcare market is the incorporation of anti-microbial agents, such as silver, into dressings. AMS is in the process of developing its own silver-based dressings, which it hopes to launch during the course of 2002. Financial Review: In the six months ended 30 June 2001, turnover increased 23% to £4.4 million (2000: £3.6 million) primarily due to increased alginate sales in both Professional Woundcare and Consumer Skincare. Over the period, losses were halved from £1.8 million to £0.9 million. This was mainly due to further improvements in manufacturing productivity, with 14 million dressings being produced (2000:11 million) with no increase in direct labour costs. Professional Woundcare sales increased by 34% to £2.8 million (2000: £2.1 million) and saw strong growth across all areas in Europe and the USA. As expected, the management's decision to refocus the Consumer Skincare division towards higher margin partners restricted the growth in sales over the period to 5%. The move, however, has resulted in an improvement in gross margin and will benefit AMS in the medium to long term. Overall, therefore, a combination of the shift to higher margin partners, continued cost savings in manufacturing and improved productivity have resulted in the gross margin improving from -6% to 18%. Investment continues to be made in research and technology, as this forms the basis of the Group's move into higher value products for the delivery of actives and tissue engineering devices. The spend over the period was £ 363,000 (2000: £357,000). Operating cash flow was neutral over the period (2000: £702,000 outflow). This has left the Group with over £7 million of cash as at 30 June 2001 (2000: £ 8.2 million). Outlook: Significant progress has continued to be made over the last six months, with additional positive developments having taken place since the end of the reporting period. AMS continues to move forward in line with internally set targets and is still on course to achieve profitability within its current cash reserves. Revenue growth is expected to slow during the second half of the year as AMS consciously looks to shed low margin business, particularly in Consumer Skincare, and replace it with higher value sales with major strategic partners. Capital investment is planned for the membrane operation. This will upgrade the manufacturing process of the Group's proprietary membrane technology in response to increasing demand from partners for products based on this material. Increasingly, alginate and membrane will be the strategic focus areas for AMS as these products have strong proprietary positions and form the basis of our move into higher value products for delivery of actives and tissue engineering devices. Consolidated Profit and Loss Accounts Unaudited results for the six months ended 30 June 2001 Unaudited Unaudited Audited six six twelve months months months ended ended ended 30 June 30 June 31 December 2001 2000 2000 Note £'000 £'000 £'000 2 Turnover 4,424 3,600 7,815 Cost of sales (3,634) (3,830) (7,373) Gross profit/ (loss) 790 (230) 442 Distribution costs (117) (104) (262) Administration costs (1,764) (2,019) (3,701) Other operating income 72 375 402 (1,019) (1,978) (3,119) Operating loss Interest receivable and similar income 188 228 470 Interest payable and similar charges (19) (20) (37) Loss on ordinary activities before taxation (850) (1,770) (2,686) Taxation --- --- --- Loss for the period (850) (1,770) (2,686) Loss per share Restated including effects of rights 3 issue (0.91p) (1.9p) (2.9p) Statement of Total Recognised Gains and Losses Unaudited results for the six months ended 30 June 2001 Unaudited Unaudited Audited six six twelve months months months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Loss for the financial period (850) (1,770) (2,686) Currency translation differences on foreign currency net investments 6 2 24 Total recognised losses relating to the period (844) (1,768) (2,662) Reconciliation of Movements in Shareholders' Funds Unaudited results for the six months ended 30 June 2001 Unaudited Unaudited Audited six six twelve months months months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Opening shareholders' funds 13,454 9,590 9,590 Loss for period (850) (1,770) (2,686) Currency translation differences on foreign currency net investments. 6 2 24 New share capital subscribed --- 3,184 3,184 Premium on issue of shares during the period --- 3,822 3,822 Cost of share issue --- (480) (480) Closing shareholders' funds 12,610 14,348 13,454 Consolidated Balance Sheets Unaudited results for the six months ended 30 June 2001 Unaudited Unaudited Audited six six twelve months months months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Fixed assets Tangible assets 5,108 5,504 5,403 Current assets Stocks 853 1,656 1,021 Debtors - due within one year 2,161 1,946 2,385 - due after more than one year 200 --- 200 Cash at bank and in hand 7,037 8,170 7,013 10,251 11,772 10,619 Creditors: amounts falling due within one year (2,452) (2,667) (2,228) Net current assets 7,799 9,105 8,391 Total assets less current liabilities 12,907 14,609 13,794 Creditors: amounts falling due after more than one year (297) (261) (340) 12,610 14,348 13,454 Capital and reserves Called up share capital 9,355 9,355 9,355 Share premium account 36,910 36,910 36,910 Other reserve 1,531 1,531 1,531 Profit and loss account (35,186) (33,448) (34,342) Equity shareholders' funds 12,610 14,348 13,454 Consolidated Cash Flow Statements Unaudited results for the six months ended 30 June 2001 Unaudited Unaudited Audited six six twelve months months months ended ended ended 30 June 30 June 31 December 2001 2000 2000 Note £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 48 (702) (1,705) Returns on investments and servicing of finance Interest received 176 96 452 Interest element of finance lease rental and hire purchase payments (19) (20) (37) Cash inflow from returns on investments and servicing of finance 157 76 415 Capital expenditure and financial investment Purchase of tangible fixed assets (227) (384) (660) Sale of tangible fixed assets 197 82 6 Cash inflow/(outflow) before use of liquid resources and financing 175 (928) (1,944) Management of liquid resources Sale of term deposits 43 --- --- Purchase of term deposits --- (5,204) (4,362) Financing Issue of shares --- 7,006 7,006 Share issue expenses --- (480) (480) Capital element of finance lease rental and hire purchase payments 5 (157) (151) (316) Net cash (outflow) / inflow from financing (157) 6,375 6,210 Increase/(decrease) in cash 4 61 243 (96) Notes 1. Basis of Preparation The interim statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2000. The results for the six months ended 30 June 2001 and the 30 June 2000 have not been audited and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The results for the year ended 31 December 2000 are extracted from the audited annual financial statements on which the auditors reported without qualification. Full financial statements for that year have been filed with the Registrar of Companies. 2. Segmental information Unaudited Unaudited Audited six six twelve months ended months ended months ended 30 June 30 June 31 December 2001 2000 2000 Note £'000 £'000 £'000 Turnover by geographical region: United States of America 1,544 1,502 3,382 Rest of Europe 2,566 1,603 3,465 United Kingdom 312 478 945 Rest of World 2 17 23 4,424 3,600 7,815 Turnover by business unit: Consumer 1,534 1,450 3,380 Professional 2,890 2,150 4,435 4,424 3,600 7,815 It is not possible to identify loss before taxation and net assets by business unit because of the use of common services. Turnover, loss before tax and net assets by origin £'000 £'000 £'000 Turnover United Kingdom 4,424 3,502 7,682 United States -- 98 133 4,424 3,600 7,815 Loss before tax United Kingdom (736) (1,691) (2,600) United States (114) (79) (86) (850) (1,770) (2,686) Net Assets United Kingdom 12,533 14,251 13,380 United States 77 97 74 12,610 14,348 13,454 The turnover and loss before taxation is wholly attributable to the principal activity of the Group 3. Loss per share The basic loss per share has been calculated on a weighted average number of shares in issue for the six months ended 30 June 2001, namely 93,553,394 (2000 : 92,806,373 after adjusting for the effects of the rights issue) and losses of £850,000 (2000 : £1,770,000). 4. Reconciliation of net cash flow to movement in net debt/funds (note 5) Unaudited Unaudited Audited six six twelve months months months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £'000 £'000 £'000 Increase / (decrease) in cash during the period 61 243 (96) Cash outflow to repay finance leases 157 151 316 Cash (inflow) / outflow to (decrease) / increase liquid resources (43) 5,204 4,362 Change in net funds resulting from cash flows 175 5,598 4,582 New finance leases (30) (84) (291) Translation difference 6 2 24 Movement in net funds in the period 151 5,516 4,315 Net funds at 1 January 2001 6,600 2,285 2,285 Net funds at 30 June 2001 6,751 7,801 6,600 5. Analysis of net debt/funds 1 January Cash Other Exchange 30 June 2001 flows changes movements 2001 £'000 £'000 £'000 £'000 £'000 Cash 373 61 --- 6 440 Term deposits 6,640 (43) --- --- 6,597 Cash at bank and in hand 7,013 18 --- 6 7,037 Finance leases (413) 157 (30) --- (286) Total 6,600 175 (30) 6 6,751

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