Interim Results & CEO Statement

ADVANCED MEDICAL SOLUTIONS GROUP PLC 27 October 1999 ADVANCED MEDICAL SOLUTIONS PLC., Interim Results for the Six Months Ended 30 June 1999 Winsford, 27 October 1999, Advanced Medical Solutions Group plc., (AMS), announces interim results for the six months ended 30 June 1999. Highlights for the year to date: * Investment in establishing a Consumer Woundcare business resulted in the launch of 15 new products including additions to the ActivHealTM and SpyroflexTM ranges. * Turnover increased to £2.8 million and losses before tax rose to £3.1 million as investment to build the consumer business increased. * Novartis Consumer Healthcare signs marketing and distribution agreement for Consumer Woundcare products in UK and the Republic of Ireland. Equity fund-raising possible in the final quarter of 1999. Review Roy Smith, Chief Executive Officer of AMS said: 'Our business continues to make good progress as the strategy of investing to build a Consumer Woundcare business is implemented. The launch of 15 new products has tripled Consumer Woundcare sales.' 'Our confidence in the potential of this business was confirmed by the recent signing of an agreement with Novartis Consumer Healthcare UK (Novartis). Under the agreement Novartis will market and distribute the ActivHealTM range of products as SavlonTM ActivHealTM to consumer markets in the UK and the Republic of Ireland. AMS will manufacture finished product for Novartis and will receive an initial up-front payment and ongoing royalties. The agreement also specifies minimum volumes over a five year period. We look forward to working with Novartis to maximise the benefits of this agreement for both parties.' 'We will focus on obtaining additional agreements similar to that with Novartis, as we recognise that our investment in marketing and promotion is better served through relationships with larger organisations such as Novartis. Other leading pharmaceutical organisations have shown interest in marketing our Consumer Woundcare product range in various countries, and more agreements are expected to be signed in the coming months.' For further information, please contact: Advanced Medical Solutions Group plc Roy Smith, Chief Executive Mary Tavener, Finance Director Tel: 01606 863500 Gavin Anderson & Company Philip Ward Tel: 0171 457 2345 ADVANCED MEDICAL SOLUTIONS GROUP PLC., Unaudited Interim Results for the Six Months Ended 30 June 1999 Chairman's Statement Results In the six months ended 30 June 1999, turnover increased to £2.8 million (1998: £2.7 million), although the loss (before and after tax) increased to £3.1 million (1998: £1.9 million). The increased loss reflects the heavy investment needed to launch new consumer brands, as well as substantial revenue costs incurred in improving manufacturing processes. In the October 1998 rights issue document, the Group stated its intention to start a new business in the consumer woundcare market which would incur significant start-up investment costs. The additional costs relating to the required changes in manufacturing processes and the additional sales, marketing and promotional expenditure necessary to promote the ActivHealTM and SpyroflexR brands were significant and contributed to the increased loss for the period. The Group has achieved the launch of 15 new products within Consumer Woundcare in the first six months of 1999. The benefit of this investment can already be seen, with Consumer Woundcare sales for the first six months of 1999 being £710,000 (324 per cent) ahead of the same period last year, and while the investment in launching ActivHealTM and SpyroflexR has proved to be more costly than anticipated, the demand for our Consumer Woundcare products continues to increase. Professional Woundcare sales of approximately £1.8 million in the first six months of 1999 have been disappointing, largely as a result of a major shortfall in sales of foam, primarily MitraflexTM and FlexzanTM in the very difficult US market. Excluding these two products, Professional Woundcare sales in the first six months of 1999 were £213,000 (14 per cent) ahead of last year. The Board expects an improvement in this business segment during the second half of 1999. The Group also continues to invest in its core technologies in Advanced Healthcare to provide future, long-term development for the business. Management Focus The senior management team is now in place; this will allow the Group to focus on reducing the operating costs within the business. It is clear that further cost reductions are necessary, with overheads being a priority going forward. The Group remains confident that improvements in manufacturing productivity will be realised in the second half of 1999, although some efficiencies will not be evident until the early part of 2000. Year 2000 Compliance The Directors believe that the majority of computer systems critical to the business operation of the Group are now Year 2000 compliant, having been the subject of a comprehensive testing programme and that the remaining critical systems will be compliant by November 1999. The Directors anticipate that the total costs of achieving Year 2000 compliance will not be material. Such costs are being charged to the profit and loss account as incurred. Board Changes In July, the Board appointed Mary Tavener as Finance Director. Prior to joining the Group, Mary held positions with BTP plc as group financial controller and Churchill Tableware Ltd as finance director. This manufacturing-based experience will be invaluable in the continued transformation of the Group. Outlook Significant progress has been made during the first six months of 1999. The investment in Consumer Woundcare has resulted in an agreement being signed with Novartis Consumer Health Limited under which Novartis will market and distribute our current ActivHealTM range as SavlonR ActivHealTM to the consumer market within the UK and Republic of Ireland. The agreement provides for an initial payment, future royalty streams and minimum quantities over a five-year period. The Board will focus on agreements similar to that with Novartis, as it recognises that the investment in marketing and promotion is better served through relationships with larger organisations such as Novartis. Other leading pharmaceutical organisations have also shown interest in marketing our Consumer Woundcare product range in various countries and more agreements are expected to be signed in the coming months. The Board is well aware of the progress required to meet Shareholder expectations; the focus going forward will be to increase revenue streams, to improve manufacturing productivity and operating efficiencies and to ensure that the development of the core technology continues within Professional and Consumer Woundcare, Advanced Healthcare and Research and Technology. The Group critically depends for its success in generating sufficient revenues coupled with a level of manufacturing efficiency which would allow it to achieve profitability. To reach this position, the Group is likely to require extra funding and the Board is currently discussing with its advisers a possible equity fund-raising in the final quarter of 1999. James Noble Non-Executive Chairman Consolidated Profit and Loss Accounts Unaudited Unaudited Audited Six Six Twelve months ended months ended months ended 30 June 30 June 31 December 1999 1998 1998 Note £'000 £'000 £'000 Turnover 2,806 2,692 5,387 Cost of Sales (3,452) (2,508) (5,801) Gross(loss)/profit (646) 184 (414) Administrative expenses including exceptional items (2,748) (2,239) (5,807) Other operating income 162 100 155 Operating loss before exceptional items (3,232) (1,955) (4,901) Abortive acquisition costs ----- ----- (747) Reorganisation costs ----- ----- (417) Operating Loss (3,232) (1,955) (6,066) Interest receivable and similar income 1 145 81 1,288 Interest payable and similar charges (46) (74) (145) 99 7 1,143 Loss on ordinary activities before taxation (3,133) (1,948) (4,923) Taxation ----- ----- ----- Loss for the period (3,133) (1,948) (4,923) Loss per ordinary share (basic and fully diluted) 2 (5.1p) (5.3p) (12.2p) Consolidated Balance Sheets Unaudited Unaudited Audited Six Six Twelve months ended months ended months ended 30 June 30 June 31 December 1999 1998 1998 Note £'000 £'000 £'000 Fixed Assets ----- 39 ----- Intangible Assets 5,715 5,885 5,969 Tangible Assets 5,715 5,924 5,969 Current Assets Stocks 2,243 2,756 2,420 Debtors - due within one year 1,933 1,843 1,905 - due after more than one year 132 132 132 Cash at bank and in hand 3,977 1,204 7,372 8,285 5,935 11,829 Creditors: amounts falling due within one year (2,180) (1,898) (2,645) Net Current Assets 6,105 4,037 9,184 Total Assets Less Current Liabilities 11,820 9,961 15,153 Creditors: amounts falling due after more than one year (202) (2,825) (421) 11,618 7,136 14,732 Capital and Reserves Called up share capital: - Shares issued 6,170 3,691 6,170 - Shares to be issued 3 ------ 41 ----- Share premium account - Shares issued 33,568 25,438 33,568 - Shares to be issued 3 ----- 2,651 ----- Other Reserve 1,531 1,531 1,531 Profit and loss account (29,651) (26,216) (26,537) Equity Shareholders Funds 11,618 7,136 14,732 Consolidated Cash Flow Statements Unaudited Unaudited Audited Six Six Twelve months ended months months ended 30 June ended 31 December 1999 30 June 1998 1998 £'000 £'000 £'000 Net cash outflow from operating activities (3,010) (2,312) (4,867) Returns on investments and servicing of finance Interest paid ----- (4) (8) Interest received 145 81 145 Interest element of finance lease rental and higher purchase payments (46) (70) (137) Cash inflow from returns on investments and servicing of finance 99 7 ----- Capital expenditure and financial investment Purchase of tangible fixed assets (233) (438) (741) Cash outflow before use of liquid resources and financing (3,144) (2,743) (5,608) Management of liquid resources Sale of term deposits 2,750 ----- ----- Purchase of term deposits ----- ----- (6,500) Financing Issue of shares ----- ----- 11,553 Share issue expenses ----- ----- (943) Repayment of promissory note ----- ----- (1,289) Capital element of finance lease rental and hire purchase payments (271) (258) (546) Net cash (outflow)/inflow from financing (271) (258) 8,775 Decrease in cash (665) (3,001) (3,333) Notes 1. Interest receivable and similar income. Interest receivable and similar income for the year ended 31 December 1998 included a gain of £1.1 million relating to the prepayment of a promissory note. 2. Loss per share The basic loss per share has been calculated on the weighted average number of shares in issue for the six months ended 30 June 1999, namely 61,705,779 (1998: 36,913,995) and losses of £3,133,000 (£1,948,000). Loss per share on a fully diluted basis is not materially different from that on an undiluted basis. 3. Shares to be issued On 27 February 1999 the Company redeemed, for US$80,000, two convertible notes relating to contingent deferred consideration for an acquisition. This was reflected in the balance sheet at 31 December 1998. The effect was to eliminate share capital and share premium to be issued and included in the unaudited balance sheet at 30 June 1998. 4. Basis of Preparation This interim report has been prepared using accounting policies consistent with those set out in the 1998 Annual Report and Accounts. The comparative figures for the year ended 31 December 1998 do not constitute statutory accounts. These figures have been extracted from the audited accounts for that year, which have been delivered to the Registrar of Companies and on which the auditors issued an unqualified report, which did not contain a statement under either section 237(2) or (3) of the Companies Act 1985.

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