Interim Results

Advanced Medical Solutions Grp PLC 10 September 2002 For Immediate Release: 07:00 Tuesday 10th September 2002 Advanced Medical Solutions Group plc Results for the six months ended 30th June 2002 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 30th June 2002. Highlights • MedLogic Global Holdings Limited and related intellectual property assets acquired for £2.9m including costs. • Successful VCT Placing and Placing and Open Offer completed to raise £3.5m, net of costs. • Transfer to Alternative Investment Market. • Integration of MedLogic well advanced and on line to deliver identified post- acquisition objectives. • Turnover £4.1m, an increase of 40% over preceding six months. • Continued focus of core business on Professional Woundcare which grew 26% to £3.6m (2001 : £2.9m). • Group Gross margins improved from 18% to 26% . • Remain on track to achieve sustainable profitability in 2003 in line with market expectations. Commenting on the results, Don Evans, Chief Executive of AMS said: 'I am delighted with the progress the Group has made during the first half of 2002. The acquisition of the MedLogic business opens up exciting new opportunities for the Company by broadening our technology base into the higher value tissue adhesives area and providing additional innovative products to our blue-chip partners. I am particularly pleased that we have managed to complete this acquisition and related fund raising whilst maintaining strong growth of our core Professional Woundcare business and good progress in improving our margins'. For further information please contact: Advanced Medical Solutions Group plc On 10.09.02 Tel: 020 7466 5000 Don Evans, Chief Executive Thereafter Tel: +44 (0) 1606 863500 Mary Tavener, Finance Director www.admedsol.com Buchanan Communications Tel: +44 (0) 20 7466 5000 Nicola How / Fergus Mellon CHAIRMAN'S STATEMENT Overview The first half of 2002 was a period of considerable achievement that has transformed AMS for the future. The Group was able to raise funds in a very difficult market and to complete a key strategic acquisition whilst successfully defeating an EGM resolution to put the company up for sale. It is a great credit to the management team that this corporate activity was completed whilst still achieving 26% growth of the Company's Professional Woundcare business and maintaining good progress in its strategy of moving to higher value products. Operating Review The Group's core focus remains the development and manufacture of advanced woundcare products, which are marketed and distributed through blue-chip partners into hospital and nursing homes (Professional Woundcare) and retail pharmacies (Consumer Skincare). Compared to the second half of 2001 Group turnover increased by 40%, although reduced by 7% when compared with the same period last year with MedLogic contributing £200k . Gross margins continued to improve and increased to 26% (2001 : 18%). Professional Woundcare sales in the underlying business grew by 26% in the period driven by the continued strength of the alginate business. This was despite the uncertainty to our partners around the future of the company caused by the EGM in February. The launch in May of a range of AMS' proprietary alginate dressings by Johnson & Johnson Woundcare confirms the Company's strong competitive position in this high growth area of advanced woundcare. This new relationship, together with the continuing strength of existing relationships with major woundcare partners such as 3M, Smith & Nephew, Coloplast and Molnlycke, is expected to contribute significantly to the Group's second half-year performance. The Group continues to build a Consumer Skincare business based around higher value products supplementing the existing range with Johnson & Johnson Consumer Products, Novartis and Beiersdorf. MedLogic Acquisition MedLogic Global Holdings Limited, a leading medical grade tissue adhesives company based in Plymouth, was acquired on 1st May 2002 for £2.9m including costs. MedLogic currently provides products primarily into the UK Accident & Emergency market through a direct sales force. The response of AMS' international partners to both the MedLogic acquisition and product range has been very positive and announcements of new distribution agreements are expected over the next few months. We are pleased with the progress that has been made in achieving the key integration objectives of meeting financial targets, co-marketing AMS products, and achieving operational efficiencies. Research & Development The MedLogic tissue adhesives technology has provided another proprietary materials platform to complement AMS' core strategic areas of biopolymers, foam membrane and hydrogels. These form a strong biomaterials base to support the move to higher value medical devices. The appointment of Dr. Richard Freeman to head up a strengthened R & D Group brings additional relevant expertise to help drive the future business towards the use of these materials for active delivery and tissue engineering. Financial Review On 1st May 2002 the company acquired MedLogic Global Holdings Limited for £0.4m including costs, and the associated intellectual property for £2.5m including costs. £0.2m of negative goodwill was created, as the acquisition cost of MedLogic Global Holdings Limited was less than the fair value of the net assets acquired. The acquisition was funded by £3.5m of new equity, net of costs. Turnover for the underlying business in the 6 months reduced by 12% to £3.9m (2001 : £4.4m) due to a continuing sacrifice of low margin Consumer business. Gross profit on the underlying business increased to £1.0m (2001 : £0.8m) as a consequence of the gross margin improvement to 25% (2001 : 18%). Over the period, losses before exceptional items were reduced to £0.8m (2001 : £0.9m) and includes an amount for the amortisation of the intellectual property acquired with the acquisition. The exceptional charge of £0.1m related to the £0.2m costs involved in defending the special resolution to put the company up for sale and £0.1m of negative goodwill related to the MedLogic Global Holdings Limited acquisition. In common with many other companies and sectors, AMS is facing significantly higher insurance costs and some adverse currency effects due to the dollar exchange rate. Operating cash outflow for the period was £0.8m (2001 : £ nil) as a result of working capital increases. The Group had cash of £6.1m (2001 : £7.0m) at 30th June 2002 and net funds of £5.6m (2001: £6.8m). Outlook The continued strength of the Professional business and a full period's contribution by the MedLogic business are expected to drive top line revenue, gross margin and net earnings improvements during the second half of the year and the Group continues to trade in line with market expectation. The Group is well positioned to achieve profitability in 2003 and beyond, thus establishing a solid financial platform for delivering its stated strategy of building a larger business and making AMS a more attractive investment opportunity. Dr. Geoffrey N. Vernon, Chairman Consolidated Profit and Loss Accounts Unaudited Unaudited Unaudited Unaudited Audited six six six six twelve months ended months ended months ended months ended months ended 30 June 2002 30 June 2002 30 June 2002 30 June 2001 31 December 2001 Before exceptional Exceptional items items Total Total Total Note £'000 £'000 £'000 £'000 £'000 Turnover Continuing operations 2 3,912 --- 3,912 4,424 7,373 Acquisitions 203 --- 203 --- --- 4,115 --- 4,115 4,424 7,373 Cost of sales (3,042) --- (3,042) (3,634) (6,075) Gross profit 1,073 --- 1,073 790 1,298 Distribution costs (48) --- (48) (117) (136) Administration costs (1,998) (79) (2,077) (1,764) (3,322) Other operating income 122 --- 122 72 222 Operating loss Continuing operations (759) (79) (838) (1,019) (1,938) Acquisitions (92) --- (92) --- --- (851) (79) (930) (1,019) (1,938) Interest receivable and similar income 107 --- 107 188 369 Interest payable and similar charges (8) --- (8) (19) (30) Loss on ordinary activities before taxation (752) (79) (831) (850) (1,599) Taxation --- --- --- --- 129 Retained loss for the year (752) (79) (831) (850) (1,470) Basic loss per share: 3 (0.69)p (0.07)p (0.76)p (0.91)p (1.6)p Statement of Total Recognised Gains and Losses Unaudited results for the six months ended 30 June 2002 Unaudited Unaudited Audited six six twelve months ended months ended months ended 30 June 2002 30 June 2001 31 December 2001 £'000 £'000 £'000 Loss for the financial period (831) (850) (1,470) Currency translation differences on foreign currency net investments 8 6 10 Total recognised losses relating to the period (823) (844) (1,460) Reconciliation of Movements in Shareholders' Funds Unaudited results for the six months ended 30 June 2002 Unaudited Unaudited Audited six six twelve months ended months ended months ended 30 June 2002 30 June 2001 31 December 2001 £'000 £'000 £'000 Opening shareholders' funds 11,994 13,454 13,454 Loss for period (831) (850) (1,470) Currency translation differences on foreign currency net investments 8 6 10 New share capital subscribed 2,427 --- --- Premium on issue of shares during the period 1,711 --- --- Cost of share issue (667) --- --- Closing shareholders' funds 14,642 12,610 11,994 Consolidated Balance Sheets Unaudited Unaudited Audited six six twelve months ended months ended months ended 30 June 2002 30 June 2001 31 December 2001 Note £'000 £'000 £'000 Fixed assets Intangible assets --- --- - goodwill (122) --- --- - other intangibles 2,490 --- --- Tangible assets 5,270 5,108 4,809 7,638 5,108 4,809 Current assets Stocks 1,045 853 887 Debtors - due within one year 2,292 2,161 1,844 - due after more than one year 200 200 200 Cash at bank and in hand 6,058 7,037 6,238 9,595 10,251 9,169 Creditors: amounts falling due within one year (2,130) (2,452) (1,778) Net current assets 7,465 7,799 7,391 Total assets less current liabilities 15,103 12,907 12,200 Creditors: amounts falling due after more than one year (461) (297) (206) 14,642 12,610 11,994 Capital and reserves Called up share capital 11,782 9,355 9,355 Share premium account 37,954 36,910 36,910 Other reserve 1,531 1,531 1,531 Profit and loss account (36,625) (35,186) (35,802) Equity shareholders' funds 14,642 12,610 11,994 Consolidated Cash Flow Statements Unaudited Unaudited Audited six six twelve months ended months ended months ended 30 June 2002 30 June 2001 31 December 2001 Note £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (814) 48 (764) Returns on investments and servicing of finance --- --- --- Interest received 125 176 395 Interest element of finance lease rental and hire purchase payments (8) (19) (30) Net cash inflow from returns on investments and servicing of finance 117 157 365 Taxation 129 --- --- Capital expenditure and financial investment Purchase of tangible fixed assets (95) (227) (353) Sale of tangible fixed assets --- 197 204 Net cash outflow for capital expenditure financial investment (95) (30) (149) Acquisition and disposals Purchase of subsidiary undertaking (2,909) --- --- Net cash acquired with subsidiary undertaking (27) --- --- Net cash outflow for acquisitions and disposals (2,936) --- --- Cash (outflow)/inflow before use of liquid resources and financing. (3,599) 175 (548) Management of liquid resources Sale of term deposits 191 43 805 Financing Issue of shares 4,138 -- -- Share issue expenses (667) -- -- Repayment or long-term borrowing (1) -- -- Net movement of capital element of finance lease rental and hire purchase payments 5 (59) (157) (237) Net cash inflow/(outflow) from financing 3,411 (157) (237) Increase in cash 4 3 61 20 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 2001. The results for the six months ended 30 June 2002 and 30 June 2001 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 2001 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 months six months six months ended ended ended 30 June 2002 30 June 2001 31 December 2001 £'000 £'000 £'000 Turnover by geographical region: United States of America 800 1,544 2,399 Rest of Europe 2,568 2,566 4,145 United Kingdom 742 312 825 Rest of World 5 2 4 4,115 4,424 7,373 Turnover by business unit: £'000 £'000 £'000 Consumer 278 1,534 1,887 Professional 3,837 2,890 5,486 4,115 4,424 7,373 It is not possible to identify loss before taxation and net assets by business unit because of the use of common services. The turnover of MedLogic is included under Professional. Turnover, loss before tax and net assets by origin £'000 £'000 £'000 Turnover United Kingdom 4,115 4,424 7,373 United States --- --- --- 4,115 4,424 7,373 Loss before tax United Kingdom (764) (736) (1,436) United States (67) (114) (163) (831) (850) (1,599) Net assets United Kingdom 14,608 12,533 11,975 United States 34 77 19 14,642 12,610 11,994 The turnover and loss before taxation is wholly attributable to the principal activity of the Group. 3. Loss per share The basis loss per share has been calculated on a weighted average number of shares in issue for the six months ended 30 June 2002, namely, 109,372,285 (2001 : 93,553,394) and losses of £831,000 (2001 : £850,000). 4. Reconciliation of net cash flow to movement in net debt/funds (note 5) Unaudited Unaudited Audited six months six months six months ended ended ended 30 June 30 June 31 December 2002 2001 2001 £'000 £'000 £'000 Increase in cash funding the period 3 61 20 Cash outflow to repay debt and finance leases and long term borrowing. 60 157 237 Cash (inflow) to (decrease) liquid resources (191) (43) (805) Change in net funds resulting from cash flows (128) 175 (548) Loans and finance leases acquired with subsidiaries (361) --- --- New finance leases --- (30) (30) Translation difference 8 6 10 Movement in net funds in the period (481) 151 (568) Net funds at 1 January 2002 6,032 6,600 6,600 Net funds at 30 June 2002 5,551 6,751 6,032 5. Analysis of net debt/funds Acquisitions excluding 1 January Cash cash & Exchange 30 June 2002 flows overdrafts movements 2002 £'000 £'000 £'000 £'000 £'000 Cash 403 3 --- 8 414 Term deposits 5,835 (191) --- --- 5,644 Cash in bank and in hand 6,238 (188) --- 8 6,058 Debt due within one year --- --- (10) --- (10) Debt due after one year --- 1 (351) --- (350) Finance leases (206) 59 --- --- (147) Total 6,032 (128) (361) 8 5,551 This information is provided by RNS The company news service from the London Stock Exchange KLFBLKBZBBK

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