Interim Results
Advanced Medical Solutions Grp PLC
14 September 2004
For immediate release 14 September 2004
Advanced Medical Solutions Group plc
Results for the six months ended 30th June 2004
Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), ('AMS' or the '
Company'), the global woundcare technology company, today announces its results
for the six months ended 30th June 2004.
Highlights
• Group turnover increased 26% to £5.2 million (2003: £4.1 million) with
underlying sales growth of 29%
• Pre-tax losses halved to £0.55 million (2003: £1.1 million)
• EBITDA at break-even (2003: £0.6 million loss)
• Cash of £2.7 million sufficient to take the Group through to profitability
• Johnson & Johnson Wound Management launches silver alginate range into US
market
• Three year supply agreement signed with Cardinal Health for private label
woundcare products in the US, after the half year end
• Initial sales of ActivHealTM woundcare range into the NHS
• 510(k) clearance by FDA for sale of new range of silver alginate products in
US
• Collaborative agreement signed with Nitto Medical for Japan
Commenting on the results, Don Evans, Chief Executive of AMS, said:
'The significant improvement in our half-year results confirms the success of
our strategy of moving towards higher value products and of broadening our
global distribution base'.
For further information please contact:
Advanced Medical Solutions Group plc Tel: +44 (0) 1606 545508
Don Evans, Chief Executive
Mary Tavener, Finance Director
www.admedsol.com
Buchanan Communications Tel: +44 (0) 20 7466 5000
Mark Court/ Mary-Jane Johnson
CHAIRMAN'S STATEMENT
Overview
I am pleased to report that AMS has made significant progress during the period.
The investments made in sales and marketing and R&D during 2003, resulting in
the launch of new products and the signing of new partners, contributed to Group
turnover in the period of £5.2 million, 26% up on the first half of last year.
Growth was achieved across both business units, Advanced Woundcare and Wound
Closure, and across all geographical regions. Net losses have been halved to
£0.55 million and the Group reached EBITDA break-even at the half-year. This is
a major milestone in moving the Group towards profitability.
Operating Review
The Group's core focus remains the development and manufacture of advanced
woundcare and wound closure products for sale in hospitals and long term care
facilities.
Advanced woundcare products are marketed and distributed into the $1.5 billion
global market, through either major woundcare companies, such as 3M, Johnson &
Johnson, Smith & Nephew, Coloplast and Molnlycke under their leading brands, or
through private label distributors such as Cardinal Health. Products based upon
superglue technology address the emerging tissue adhesives segment of the $5
billion wound closure market. This market is currently accessed through a
direct sales force in the UK and through distribution partners in Europe. The
direct UK sales force also carries a full range of standard advanced woundcare
products for sale into the NHS hospital and community care markets under our
ActivHealTM brand.
The Group has made steady progress in reducing its dependence on the performance
of its major branded partners for delivering revenue growth and profit. The
strategy of broadening its routes to market by complementing these relationships
with the provision of private label standard products to major distributors and
expanding its direct sales presence in the UK home market is proving to be
successful.
Advanced Woundcare
Advanced woundcare sales of £4.2 million were up 23% which is more than double
the current woundcare market growth rate. This growth was spread across
partners in Europe and the US and provides a solid business base for the future.
The exclusive global licensing of our fibre based silver alginate technology
with subsequent 510(k) approval and launch into the US market by Johnson &
Johnson Wound Management under its SilverCelTM brand in April, is a major
milestone in upgrading our base advanced woundcare range. European regulatory
approval is taking longer than anticipated due to uncertainty over the
interpretation of clinical requirements for dressings containing silver, however
it is expected that the product will be CE marked before year-end.
Silver is a broad spectrum antimicrobial that helps to prevent infection. In
combination with alginate, a biopolymer derived from seaweed, AMS can provide
products ideally suited to treatment of a wide variety of chronic wounds.
In response to demand from existing partners for the addition of silver to their
current alginate range, a new product has been developed utilising a different
silver technology. 510(k) clearance by the Food and Drug Administration for the
US market was obtained in August and this product is expected to be introduced
by a number of partners by year-end. The product will be progressed through
European regulatory approval during 2005. With two distinct silver technologies
the Company is in a strong position to address the dynamic silver market.
The three year agreement with Cardinal Health announced in July is a major step
forward in building our private label business. AMS will provide a full range
of advanced woundcare products for Cardinal Health for US distribution under its
Allegiance brand. With turnover of more than $50 billion, Cardinal Health is a
leading provider to the healthcare industry and is ranked 17 on the Fortune 500
(2004).
A full range of standard advanced woundcare products is now being offered to the
NHS through our direct UK sales and marketing infrastructure. Our efforts
during 2004 are aimed at creating interest and obtaining user acceptance of our
products, which offer performance equivalent to the branded products at a
substantial saving to the NHS, prior to their being included in central
contracts as they come up for renewal. In the meantime sales are achievable
through Hospital Trusts which buy off-contract and these are being targeted.
The response to our offering from management, purchasing officers and
pharmacists has been very positive and initial orders have been taken. Demand
is also being created from prescribing nurses and GPs following listing of our
products on the Drug Tariff. This is encouraging as it is building acceptance of
our products at grass roots level in the large community care market.
Good progress has been made in accessing the Far East market. A collaboration
agreement signed with Nitto Medical has allowed us to move through market
evaluation and regulatory approval for a number of woundcare products for
introduction into Japan from 2005 onwards. New marketing and distribution
agreements were signed with InterPharma for Australia and Diethelm Keller Siber
Hegner for Malaysia, Hong Kong, Vietnam and Pakistan.
We continue to develop our technology pipeline to support new and existing
partners and move to higher value products. New alginate and foam technologies
have been developed that provide superior absorbency and the ability to lock
away excess wound fluid. Discussions are in progress for commercialising these
technologies in 2005.
Wound Closure
The tissue adhesives business continues to show strong growth with sales up 40%
in the period to £1 million maintaining our market leadership position in the
use of adhesives in the UK Accident and Emergency (A&E) arena. Adhesives are
routinely used for closing facial and scalp wounds, particularly children's, and
our LiquiBandTM product is being used to close around 30,000 wounds per month
in the UK.
The launch of LiquiBand SurgicalTM for closure of surgical incisions in the
Operating Room has taken the technology into the largest segment of the $5
billion wound closure market. This product comprises a fast setting adhesive for
closing the incision and a liquid bandage which is painted over the wound to
protect it against moisture and infection. Clear benefits over stitches and
staples have been demonstrated to the surgeon, post-operative nursing staff and
patients, particularly with large incisions such as caesarean sections, breast
surgery and total hip replacement where prevention of infection and cosmetic
outcome are key considerations. Two dedicated sales specialists have been added
to the UK direct team to focus on this opportunity and we have partnered with
EndoPlus UK, a specialist orthopaedic company whose sales team is selling the
product into Orthopaedic theatres alongside their joint replacement products.
LiquiBandTM and LiquiBand SurgicalTM products continue to be rolled out in
Europe. A distribution deal was signed with Resorba Clinica GmbH who launched
into the German market in June and regular business is now being achieved from
distributors in Italy, Denmark and Norway. Further deals are under discussion
with distributors in other European countries. Opportunities for collaborating
with strategic partners for approval and introduction of these products into the
US and Japanese markets are under discussion.
A number of product upgrades are under development to broaden the applications
for tissue adhesives in topical and surgical non-invasive wound closure. These
involve tailoring the properties of the adhesive and the design of the
applicator to suit the particular use. Products are expected to come to market
over the next 18 months that will address the majority of such wounds currently
closed by stitches, sutures and adhesive strips.
Development of products for protecting skin from breakdown and for treating
minor cuts and grazes continue to progress, with potential partners and launch
plans identified for 2004 / 2005 subject to regulatory approvals.
Financial Review
Turnover increased 26% to £5.2 million (2003: £4.1 million) for the six months
ending 30 June 2004. Sales into the US were affected by the weak dollar which
depreciated 13% against sterling year on year. Adjusting for this effect,
underlying sales growth was 29%. The advanced woundcare business grew by 23%
to £4.2 million (2003: £3.4 million) or 27% on an underlying basis while the
wound closure business increased by 40% to £1 million (2003: £0.7 million).
The gross margin for the Group was 37%, which was 1% less than the previous half
year but 1% better than the margin for the full year. Adjusting for the
exchange effect, the gross margin would have shown an improvement to 39%.
Net operating expenses decreased by £0.3 million to £2.5 million, reflecting the
reduction of sales and marketing expense supporting the Consumer business and
reduced patent spend. As a result the operating loss for the six months was
£0.6 million, 49% of the previous year (2003: £1.2 million) and the Group was
EBITDA neutral (2003: £0.6 million loss). The overall loss for the Group was
£0.55 million (2003: £1.1 million).
Working capital increased to £3.0 million from £2.2 million. Stock increased by
£0.2 million to £1.5 million to meet increased demand. There will be a need to
hold buffer stock to supply Cardinal in the US, however, it is not anticipated
that stock will increase above its present level in the current year. Trade
debtors increased to £2.2 million (2003: £1.7 million) with 64 debtor days
outstanding (2003: 55 days).
Primarily due to the increase in working capital, operating cash flow, being the
net of earnings before interest, tax, depreciation and amortisation and working
capital movements amounted to an outflow in the period of £1.0 million. This
leaves the Group with £2.7 million of cash at 30 June 2004 (2003: £4.2 million)
and net funds of £2.3 million (2003: £3.8 million).
Outlook
The outlook for the Group remains positive with the progress made during the
first six months continuing into the second half of the year. The new product
pipeline is strong and partners continue to be signed which will continue to
drive growth during 2004 and 2005.
Whilst the prime focus remains taking the Group through to profitability within
current cash, the Board continues to review all corporate options to increase
shareholder value.
Dr Geoffrey N. Vernon
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
Unaudited Unaudited Audited
six months six months ended twelve months
ended 30 June 2003 ended
30 June 2004 31 December 2003
Note £'000 £'000 £'000
Turnover 2 5,206 4,134 9,015
Cost of sales (3,294) (2,555) (5,809)
Gross profit 1,912 1,579 3,206
Distribution costs (51) (32) (86)
Administration costs (2,599) (2,819) (5,859)
Other operating income 154 90 304
Operating loss (584) (1,182) (2,435)
Interest receivable and similar 52 82 152
income
Interest payable and similar (16) (18) (35)
charges
Loss on ordinary activities before (548) (1,118) (2,318)
taxation
Taxation --- --- 234
Loss sustained for the period (548) (1,118) (2,084)
Basic and fully diluted loss per 3 (0.39)p (0.79)p (1.5)p
share
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
six months six months ended twelve months
ended 30 June 2003 ended
30 June 2004 31 December 2003
£'000 £'000 £'000
Loss for the financial period (548) (1,118) (2,084)
Currency translation differences on
foreign currency net investments (7) 3 (19)
Total recognised losses relating to the (555) (1,115) (2,103)
period
Reconciliation of Movements in Shareholders' Funds
Unaudited Unaudited Audited
six months six months ended twelve months
ended 30 June 2003 ended
30 June 2004 31 December 2003
£'000 £'000 £'000
Opening shareholders' funds 12,004 14,107 14,107
Loss for the period (548) (1,118) (2,084)
Currency translation differences
on foreign currency net investments (7) 3 (19)
Closing shareholders' funds 11,449 12,992 12,004
CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
six months six months twelve months ended
ended ended 31 December 2003
30 June 2004 30 June 2003
£'000 £'000 £'000
Fixed assets
Intangible assets
- other intangibles 2,154 2,322 2,238
Tangible assets 4,030 4,624 4,373
6,184 6,946 6,611
Current assets
Stocks 1,536 1,313 1,279
Debtors
- due within one year 3,189 2,589 2,793
- due after more than one year 200 200 200
Cash at bank and in hand 2,665 4,218 3,608
7,590 8,320 7,880
Creditors: amounts falling due (1,973) (1,934) (2,139)
within one year
Net current assets 5,617 6,386 5,741
Total assets less current 11,801 13,332 12,352
liabilities
Creditors: amounts falling due after (352) (340) (348)
more than one year
11,449 12,992 12,004
Capital and reserves
Called up share capital 11,782 11,782 11,782
Share premium account 37,978 37,978 37,978
Other reserve 1,531 1,531 1,531
Profit and loss account (39,842) (38,299) (39,287)
Equity shareholders' funds 11,449 12,992 12,004
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 2004 30 June 2003 31 December 2003
Note £'000 £'000 £'000
Net cash outflow from (967) (1,363) (1,708)
operating activities
Returns on investments and servicing
of finance
Interest received 33 99 158
Interest element of finance lease rental (1) (3) (5)
and hire purchase payments
Interest paid (15) (15) (30)
Net cash inflow from returns on 17 81 123
investments and servicing of finance
Taxation 167 137 153
Capital expenditure and financial
investment
Purchase of tangible fixed assets (146) (192) (400)
Sale of tangible fixed assets 1 4 7
Net cash outflow for capital expenditure (145) (188) (393)
and financial investment
Cash outflow before use of liquid (928) (1,333) (1,825)
resources and financing
Management of liquid resources
Sale of term deposits 656 1,471 2,249
Financing
Repayment of secured loan 5 (6) (5) (10)
Net movement of capital element of finance 5 (2) (55) (94)
lease rental and hire purchase payments
Net cash outflow from financing (8) (60) (104)
(Decrease)/increase in cash 4 (280) 78 320
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 2003.
The results for the six months ended 30 June 2004 and 30 June 2003 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 2003 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 twelve months
ended ended ended
30 June 2004 30 June 2003 31 December 2003
£'000 £'000 £'000
Turnover by geographical region:
United States of America 1,014 962 2,167
Rest of Europe 2,863 2,264 4,789
United Kingdom 1,155 880 1,918
Rest of World 174 28 141
5,206 4,134 9,015
Turnover by business unit:
Advanced woundcare 4,245 3,446 7,412
Wound closure 961 688 1,603
5,206 4,134 9,015
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 5,206 4,134 9,015
United States --- --- ---
5,206 4,134 9,015
Loss before tax
United Kingdom (495) (1,026) (2,217)
United States (53) (92) (101)
(548) (1,118) (2,318)
Net assets
United Kingdom 11,446 12,976 11,996
United States 3 16 8
11,449 12,992 12,004
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 2004, namely,
142,082,536 (2003 : 142,082,536) and losses of £548k (2003 : £1118k)
4. Reconciliation of net cash flow to movement in net funds (note 5)
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2003 2003
£'000 £'000 £'000
(Decrease)/increase in cash during the period (280) 78 320
Cash outflow to repay debt and finance leases 8 60 104
Cash inflow from decrease in liquid resources (656) (1,471) (2,249)
Change in net funds resulting from cash flows (928) (1,333) (1,825)
New finance leases --- --- (19)
Translation difference (7) 3 (19)
Movement in net funds in the period (935) (1,330) (1,863)
Net funds at 1 January 2004 3,246 5,109 5,109
Net funds at 30 June 2004 2,311 3,779 3,246
Analysis of net funds
1 January Cash Exchange 30 June
2004 flows movements 2004
£'000 £'000 £'000 £'000
Cash 761 (280) (7) 474
Term deposits 2,847 (656) --- 2,191
Cash at bank and in hand 3,608 (936) (7) 2,665
Debt due within one year (11) --- --- (11)
Debt due after one year (334) 6 --- (328)
Finance leases (17) 2 --- (15)
Total 3,246 (928) (7) 2,311
This information is provided by RNS
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