Interim Results
Advanced Medical Solutions Grp PLC
05 September 2006
For immediate release 5 September 2006
Advanced Medical Solutions Group plc
('AMS' or 'the Company')
Interim results for the six months ended 30 June 2006
Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global
woundcare technology company, is pleased to announce its interim results for the
six months ended 30 June 2006.
Highlights for the year to date
• Group turnover up 11% to £6.5 million (2005: £5.9 million), with
underlying growth up 28%
• Gross margin improved to 40% from 37%
• Pre-tax losses reduced 61% to £0.2 million
• EBITDA increased 65% to £0.3 million
• Positive total cash flow resulting in cash of £3.6 million at half-year
(2005: £2.9 million)
• Continued progress on key organic growth drivers:
- Ionic silver alginate dressings approved for sale in Europe
- LiquiBand(R) approval progressing in US
- Product approvals on track in Far East
- NHS business building steadily
Commenting on the half year results, Dr. Geoffrey Vernon, Chairman of AMS, said:
'Our performance in the first half of 2006 builds on the progress made in 2005.
'This is an exciting time for AMS with growth momentum set to accelerate. Our
organic business is progressing well due to the dynamic silver market and with
our NHS direct penetration gaining traction. We also see some major step change
opportunities. The recent recommendation by the FDA Advisory Panel to
re-classify topical tissue adhesives is of enormous significance for AMS as it
accelerates approval and introduction of our wound closure product portfolio
into the US market.
'Our positive cash flow and cash position also allows us to now consider
self-funding bolt-on acquisitions to leverage the Company's technology,
manufacturing and distribution base.'
-ENDS-
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
Notes to Editors:
Advanced Medical Solutions is a leading company in the development and
manufacture of products for the $13 billion global woundcare market.
Founded in 1991 and currently quoted on AIM, Advanced Medical Solutions is
focused on the design, development and manufacture of innovative and
technologically advanced products for woundcare and other medical applications.
In-house natural and synthetic polymer technology is used to provide advanced
wound dressings based on the moist healing principle. AMS's resources ensure a
unique position as a vertically integrated 'one stop shop' to provide all
categories of moist wound healing products. The Company has the capability to
move from product design and development through to production and delivery
ready for distribution into customer markets.
The acquisition of MedLogic in 2002 has brought AMS products and technology in
cyanoacrylate based tissue adhesives that offer benefits over sutures and
staples for closing wounds sold direct to hospitals or through distributors.
AMS's technology and products currently serve the majority of the key global
markets and strategic partners.
Chairman's Statement
Overview
I am pleased to report that AMS further strengthened its financial position and
continued to progress key future growth opportunities during the period.
Turnover grew 11% with gross margins improved to 40%. Pre-tax losses reduced
61% to £0.2 million with EBITDA positive at £0.3 million. The Group continued
to generate cash and has adequate funds to meet ongoing needs and to accelerate
growth.
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 $2.6 billion
global market through either major woundcare companies under their leading
brands or through private label distributors. Products based upon cyanoacrylate
technology address the emerging tissue adhesives segment of the $5 billion wound
closure market. This market, valued at more than $100 million, 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 the ActivHeal(R) brand.
Independent technical and clinical evaluations have shown that the ActivHeal(R)
generic woundcare range offers equivalent performance to branded products but at
a significantly reduced cost thereby delivering real and immediate savings to
the NHS. These potential savings are estimated to be of the order of £25
million per year based on the current relevant spend of £60 million.
Progress continues to be made in reducing the Group's dependence on the
performance of its major branded partners for delivering revenue growth and
profit. The Group's strategy of broadening its routes to market by
complementing these relationships with the provision of private label standard
products to major distributors, and by the expansion of its direct sales
presence in the UK home market, continues to be successful.
Advanced Woundcare
Advanced woundcare sales of £5.2 million were up 9% on the prior half year.
Although this growth rate was in line with the overall advanced woundcare market
it masks a much stronger underlying performance as an element of partner
business reported in 2005 will not re-occur in 2006. This relates to the loss
of non-strategic business due to a downgrade in specification which no longer
made the product commercially viable for AMS. Taking these sales into account,
the underlying growth was 30% driven primarily by the continued success of the
silver alginate business.
The Group further strengthened its position in the dynamic silver market with
the European approval of a range of calcium alginate woundcare dressings
containing ionic silver technology. These products have already been approved
by the Food and Drug Administration (FDA) for sale in the US and were launched
by a number of AMS' US partners during 2005. This has been instrumental in AMS'
strengthening its position in the silver woundcare dressings market following
the introduction of its initial fibre-based silver alginate technology into the
US in 2004 and Europe in 2005 under an exclusive, global agreement with a
leading brand.
Silver is a broad spectrum anti-microbial that helps to prevent infections such
as MRSA. In combination with alginate, a biopolymer derived from seaweed, AMS
can provide products ideally suited to the treatment of a wide variety of
chronic wounds.
The ionic silver technology allows AMS to provide selected partners an entry
into the expanding silver woundcare market, which is currently estimated at $100
million worldwide and growing in excess of 20% per year. In parallel with the
European approval process, AMS has been working with a number of key partners on
product launch plans. Initial market introductions are now expected to follow
during the second half of 2006.
Steady progress continues to be made with the Company's direct ActivHeal(R)
offering to the NHS. Fourteen NHS Hospital and Primary Care Trusts across
England and Scotland have now adopted the ActivHeal(R) range of advanced
woundcare products allowing them to achieve substantial cost savings at a time
of severe funding pressures without compromising patient care. Many more
centres are currently evaluating the product offering.
The addition of the Oxford Radcliffe Hospital NHS Trust at the end of March is a
major step forward for the business. This Trust, which comprises four hospitals
- the John Radcliffe and Churchill Hospitals, Headington, the Radcliffe
Infirmary, Oxford, and the Horton Hospital in Banbury, is now using the
ActivHeal(R) range as its first choice dressings. Significant changes to the
Trust's formulae for woundcare dressings were introduced under the direction of
the Chief Nurse working in conjunction with Pharmacy to implement the ActivHeal
(R) range.
The move to ten Strategic Health Authorities within the NHS should be a positive
development for the business as this should result in a more streamlined,
centralised approach being adopted for product evaluation and selection. Under
the present system each Trust independently evaluates the product range being
offered, which delays the process of introducing generic substitutes or
replacement new products.
We remain confident that our strategy of delivering both innovation to the NHS
through our R&D activities with major branded companies, and offering real cost
savings through the ActivHeal(R) range, will be successful, enabling us to
capture a significant share of the £100 million UK advanced woundcare market.
The Group continues to fund the development of new differentiated products for
licensing to its branded partners for sale worldwide.
Good progress continues to be made in accessing the Far East market with the
first product launch into the $300 million Japanese advanced woundcare market
expected by the end of 2006.
Wound Closure
The wound closure business grew 19% to £1.3 million in the period as the Group
maintained its strong market leadership position in the UK Accident & Emergency
arena and strengthened its European partner business.
The LiquiBand(R) tissue adhesives product portfolio has been broadened by the
addition of a 0.25g mini version for closure of small topical skin wounds.
Based on cyanoacrylate medical adhesive technology, the LiquiBand(R) range now
covers products for closure of small cuts and trauma wounds particularly to the
face and scalp, through to large surgical incisions such as caesarean sections
and hip replacements. These products are approved and on sale throughout Europe
for use in Accident and Emergency (A&E) and in Operating Rooms. A number of NHS
Ambulance Trusts in the UK have also now adopted LiquiBand(R) to close trauma
wounds at the scene of injury, thus potentially reducing the number of A&E
admissions.
The Intellectual Property protection around these products has been strengthened
by the granting of a European patent covering the Laparoscopic wound closure
device. LiquiBand Laparoscopic(TM) offers real clinical and patient benefits in
infection control and cosmetic outcomes that supports the growing trend to
conduct surgical procedures by key hole surgery. The patent covers a
multi-tipped device used to initially close and seal the wound and then used to
apply a secondary liquid bandage. The liquid bandage is used to protect the
wound from bacteria, dirt and moisture during healing without the need for
secondary dressings. A patent covering this device has previously been granted
in the US.
Approval of the LiquiBand(R) product range continues on track in the US and Far
East for 2007, areas which we believe will be of significant value creation in
the future. The US tissue adhesives market is currently estimated to be around
$70 million. The Group is anticipating entry into this market in 2008.
Development activity to extend the cyanoacrylate adhesive technology into new
areas has resulted in an exciting strategic partnership with Kimberly-Clark for
a novel surgical skin sealant to help control the risk of skin flora
contamination throughout a surgical procedure, a key factor in the development
of surgical site infections. These occur in 2-5% of all surgical procedures and
can lead to serious complications and increased morbidity to the patient with
significant incremental costs to health care providers. It is generally accepted
that contamination by the patient's endogenous skin flora is a key factor in the
development of surgical site infection and despite standard preventative steps,
these remain an area of concern.
AMS has developed an innovative film-forming solution that bonds to the skin
sealing off the spaces where bacteria can grow. Based upon patented
cyanoacrylate technology, the product immobilises endogenous pathogens thereby
reducing the risk of skin flora contamination. A novel applicator has been
developed that allows the solution to be effectively applied even on irregular
and contoured areas of the body, such as shoulders and knees, which are
generally difficult to drape.
AMS has entered into an exclusive global agreement with Kimberly-Clark Health
Care for the marketing and distribution of the product under the Kimberly-Clark*
InteguSeal Microbial Sealant brand. The product has now been launched into
Europe, cleared for sale in other geographies and is currently under review for
market clearance in the United States.
Financial Review
Group sales increased 11% to £6.5 million (2005: £5.9 million) for the six
months ending 30 June 2006. Due to consolidation in the healthcare industry and
a change in direction in one of its partners, the Group experienced a loss of
business for one of its non-core products in its advanced woundcare sector in
2006. This business will not be recurring. Adjusting for this, the Group's
underlying growth was 28%.
The advanced woundcare sector grew 9% to £5.2 million (2005: £4.8 million) and
on an underlying basis at 30%. The wound closure business grew at 19% to £1.3
million (2005: £1.1 million).
Turnover continued to grow in the UK through both branded partners and directly
to the NHS with sales increasing by 27% to £2.0 million (2005: £1.5 million).
Sales to the US also grew strongly to £1.5 million, reflecting the continued
success of silver alginate, an increase of 46% over the prior year (2005: £1.0
million). Sales into Europe through branded partners declined by 13% to £2.6
million but on an underlying basis increased by 17%. We are anticipating
continued growth with our ongoing partners.
The gross margin for the Group was 40% which was 3 percentage points better than
the previous year. This margin improvement results from the Group selling higher
value products and from continuing improvements in manufacturing efficiency.
Net operating expenses increased by £0.2 million to £2.8 million compared with
last year. Most of this increase was incurred in sales and marketing. Other
operating income includes payments received from partners to cover clinical
trials and other milestone payments. The Group reported an operating loss before
tax for the half year of £0.2 million, an improvement of £0.2 million compared
with the corresponding period in the prior year whilst EBITDA was £0.3 million
(2005: £0.1 million). The overall loss for the Group reduced to £0.2 million
(2005: £0.4 million).
Net working capital, excluding cash, increased by £0.1 million to £2.8 million.
Stock remained at a similar level at £1.8 million while debtors reduced to £2.8
million (2005: £3.2 million) mainly as a result of an unexpected early payment
by one of our customers which reduced trade debtors to £2.1 million (2005: £2.3
million) and trade debtor days to 54 (2005: 58 days). Creditors reduced to £1.9
million (2005: £2.5 million).
The Group generated a net cash inflow from operating activities of £0.4 million
compared with an outflow in the prior half year of £0.1 million. Capital
expenditure was at a similar level to the prior year at £0.1 million but is
anticipated to increase in the second half of the year. The Group ended the six
months with £3.6 million in cash (2005: £2.9 million) and net funds of £3.3
million (2005: £2.5 million).
Outlook
The outlook for the Group remains positive with trading continuing in line with
full year market expectations.
A strong financial platform is being established to support a number of
significant organic growth opportunities covering products, partners and
territories. US approval of LiquiBand(R) allowing entry into this major market,
anticipated in 2008, is expected to be a major driver of future growth.
The Group's cash position now allows it to consider self-funding acquisitions
that fit its business and technology strategy.
Dr. Geoffrey N. Vernon
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
Note 2006 2005 2005
£'000 £'000 £'000
Turnover 2 6,478 5,857 12,892
Cost of sales (3,875) (3,675) (7,753)
Gross profit 2,603 2,182 5,139
Distribution costs (53) (76) (123)
Administration costs (2,969) (2,632) (5,604)
Other operating income 220 78 546
Operating loss (199) (448) (42)
Interest receivable and similar income 55 57 101
Interest payable and similar charges (14) (16) (32)
(Loss)/profit on ordinary activities before taxation (158) (407) 27
Taxation - - 249
(Loss sustained)/profit retained for the period (158) (407) 276
(Loss)/earnings per share
Basic 3 (0.11)p (0.29)p 0.19p
Diluted (0.11)p (0.29)p 0.19p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2005 2005 2006
£'000 £'000 £'000
(Loss)/profit for the financial period (158) (407) 276
Currency translation differences on
foreign currency net investments 3 (8) (3)
Total recognised gains and losses relating to
the period (155) (415) 273
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2005 2005 2006
£'000 £'000 £'000
Opening shareholders' funds 11,847 11,574 11,574
(Loss)/profit for the financial period (158) (407) 276
Currency translation differences on
foreign currency net investments 3 (8) (3)
Closing shareholders' funds 11,692 11,159 11,847
CONSOLIDATED BALANCE SHEETS
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Fixed assets
Intangible assets 1,818 1,986 1,902
Tangible assets 3,123 3,402 3,403
4,941 5,388 5,305
Current assets
Stocks 1,837 1,895 1,669
Debtors
- due within one year 2,764 3,232 3,247
- due after more than one year 747 638 747
Cash at bank and in hand 3,607 2,859 3,388
8,955 8,624 9,051
Creditors: amounts falling due within one year (1,898) (2,528) (2,193)
Net current assets 7,057 6,096 6,858
Total assets less current liabilities 11,998 11,484 12,163
Creditors: amounts falling due
after more than one year (306) (325) (316)
11,692 11,159 11,847
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 (39,599) (40,132) (39,444)
Equity shareholders' funds 11,692 11,159 11,847
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
Note £'000 £'000 £'000
Net cash inflow/(outflow) from operating
activities 4 336 (122) 534
Returns on investments and servicing
of finance
Interest received 37 21 131
Interest element of finance lease rental
and hire purchase payments (1) (1) (2)
Interest paid (13) (15) (30)
Net cash inflow from returns on
investments and servicing of finance 23 5 99
Taxation - - 189
Capital expenditure and financial investment
Purchase of tangible fixed assets (134) (168) (575)
Net cash outflow for capital expenditure
and financial investment (134) (168) (575)
Cash inflow/(outflow) before use of
liquid resources and financing 225 (285) 247
Management of liquid resources
Sale/(purchase) of term deposits 598 297 (342)
Financing
Repayment of secured loan 6 (6) (6) (13)
Net movement of capital element of finance
lease rental and hire purchase payments 6 (3) (2) (3)
Net cash outflow from financing (9) (8) (16)
Increase/(decrease) in cash 5 814 4 (111)
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 2005. The
results for the six months ended 30 June 2006 and 30 June 2005 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 2005 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 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Turnover by geographical region:
United States of America 1,451 993 2,288
Rest of Europe 2,643 3,042 6,098
United Kingdom 1,967 1,543 3,731
Rest of World 417 279 775
6,478 5,857 12,892
Turnover by business unit:
Advanced woundcare 5,177 4,766 10,535
Wound closure 1,301 1,091 2,357
6,478 5,857 12,892
It is not possible to identify (loss)/profit before taxation and net assets by
business unit because of the use of common services.
Turnover, (loss)/profit before tax and net assets by origin
£'000 £'000 £'000
Turnover
United Kingdom 6,478 5,857 12,892
United States - - -
6,478 5,857 12,892
(Loss)/profit before tax
United Kingdom (112) (356) 137
United States (46) (51) (110)
(158) (407) 27
Net assets
United Kingdom 11,691 11,159 11,845
United States 1 - 2
11,692 11,159 11,847
The turnover and (loss)/profit before taxation is wholly attributable to the
principal activity of the Group.
3. (Loss)/earnings 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 2006, namely 142,082,536
(2005: 142,082,536) and losses of £158k (2005: £407k).
4. Reconciliation of operating loss to net cash inflow/(outflow) from
operating activities.
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Operating loss (199) (448) (42)
Depreciation 414 472 877
Amortisation of intangible fixed assets 84 84 168
Loss on sale of fixed assets - - 1
Increase in stocks (168) (389) (163)
Decrease/(increase) in debtors 501 (442) (567)
(Decrease)/increase in creditors (296) 601 260
Net cash inflow/(outflow) from operating activities 336 (122) 534
5. Reconciliation of net cash flow to movement in net funds (note 6)
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Increase/(decrease) in cash during the period 814 4 (111)
Cash outflow to repay debt and finance leases 9 8 16
Cash (inflow)/outflow from (decrease)/increase
in liquid resources (598) (297) 342
Change in net funds resulting from cash flows 225 (285) 247
Translation difference 3 (8) (3)
Movement in net funds in the period 228 (293) 244
Net funds at 1 January 2006 3,054 2,810 2,810
Net funds at 30 June 2006 3,282 2,517 3,054
6. Analysis of net funds
1 January Cash Exchange 30 June
2006 flows movements 2006
£'000 £'000 £'000 £'000
Cash 402 814 3 1,219
Term deposits 2,986 (598) - 2,388
Cash at bank and in hand 3,388 216 3 3,607
Debt due within one year (13) (1) - (14)
Debt due after one year (309) 7 - (302)
Finance leases (12) 3 - (9)
Total 3,054 225 3 3,282
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