Preliminary Results

RNS Number : 4607G

Advanced Medical Solutions Grp PLC

04 March 2015

 



4 March 2015

Advanced Medical Solutions Group plc

("AMS" or the "Group")

 

Unaudited preliminary results for the year ended 31 December 2014

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced woundcare specialist company, today announces its unaudited preliminary results for the year ended 31 December 2014.

Financial Highlights

	2014	2013	Reported growth	Growth at  constant currency ¹
Group revenue (£ million)	63.0	59.5	6%	9%
Adjusted² operating margin (%)	24.1	23.1	100bps	-
Adjusted² profit before tax (£ million)	15.6	13.5	15%	-
Profit before tax (£ million)	15.2	13.1	16%	-
Adjusted² diluted earnings per share (p)	6.26	5.64	11%	-
Diluted earnings per share (p)	6.08	5.45	12%	-
Net cash (£ million)	17.3	5.3	226%	-

·      New five year £30 million multi-currency revolving credit facility agreed

·      Proposed final dividend of 0.48p per share, making a total dividend for the year of 0.70p (2013: 0.60p), up 16.7%

Business Highlights:

·      Good revenue growth across the major Business Units

o  Branded Direct up 3% to £23.6 million (2013: £22.9 million), and up 6% at constant currency

o  Branded Distributed up 17% to £10.2 million (2013: £8.8 million), and up 24% at constant currency

o  OEM up 7% to £25.3 million (2013: £23.6 million), and up 9% at constant currency

o  Bulk Materials down 7% to £3.9 million (2013: £4.2 million), and down 4% at constant currency

·      Strong performance in the US with LiquiBand^® tissue adhesive range

o  Revenues up 43% at constant currency to £4.1 million

o  As at 31 December 2014, market share by volume increased to 19% (July 2014: 18%) in the non-hospital market and to 7% (July 2014: 6%) in the hospital segment

·      ActivHeal^® continued to make good progress in the NHS, with an 8% increase in revenues and  increase in market share to 7% (2013: 5%)

·      Steady progress with RESORBA^® brands in Germany, resulting in 4% growth at constant currency

·      Silver alginate revenues increased by 10% at constant currency to £13.1 million (2013: £12.1 million)

·      Hernia mesh fixation device LiquiBand^® Fix8™ successfully launched.

Commenting on the results, Chris Meredith, Chief Executive Officer of AMS, said:

"2014 has been another year of good growth for AMS, with our three largest business units all delivering solid performances despite challenging currency conditions. We were particularly enouraged by strong growth in the US, where the performance, range and pricing of our LiquiBand^® tissue adhesives is helping to drive gains in market share, and in the UK, where the ActivHeal^® range continues to provide high performance, cost effective solutions for the NHS.  The successful launch of the LiquiBand^® Fix8™ hernia mesh fixation device, marking the first use of our medical adhesives in internal applications, demonstrates our continued commitment to investing in innovation.

"With the continuing growth in our larger business units, the strong performance of our products and our ambitions for the Group, we are confident that AMS is well placed to drive growth as well as continued improvements in operational efficiencies and we remain excited by the prospects for our future."

- End -

¹      Constant currency removes the effect of currency movements by translating the current period's performance at the previous period's exchange rates

²      All items are shown before amortisation of acquired intangible assets which, in 2014, were £0.4 million (2013: £0.4 million) as defined in the financial review

For further information, please visit www.admedsol.com or contact:

Advanced Medical Solutions Group plc	Tel: [phone]
Chris Meredith, Chief Executive Officer Mary Tavener, Group Finance Director
Consilium Strategic Communications	Tel: [phone]
Mary-Jane Elliott / Jonathan Birt / Matthew Neal / Ivar Milligan
Investec Bank PLC (NOMAD & Broker)	Tel: [phone]
Gary Clarence / Daniel Adams / Patrick Robb

About Advanced Medical Solutions Group plc 

AMS is a world-leading independent developer and manufacturer of innovative and technologically advanced products for the global surgical, wound care and wound closure markets, focused on quality outcomes for patients and value for payors. AMS has a wide range of products that include silver alginates, alginates, foams, tissue adhesives, sutures and haemostats, which it markets under its brands ActivHeal^®, LiquiBand^® and RESORBA^® as well as supplying under white label.
AMS's products, manufactured out of two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic, are sold in more than 70 countries via a network of multinational or regional partners and distributors, as well as via AMS's own direct sales forces in the UK, Germany, the Czech Republic and Russia.  Established in 1991, the Company has 472 employees.  For more information please see www.admedsol.com.

Chairman's Statement

2014 was another year of good growth across the business - both operationally and financially.  AMS continues to progress as a leading, international provider of high quality, high value innovative and technologically advanced products for the wound care and wound closure markets.

Operationally, the performance of LiquiBand in the US was particularly strong and we made considerable progress towards our goal of building a 20% market share. We also launched our LiquiBand^® Fix8™ hernia mesh fixation device for use as a medical adhesive inside the body. This was an important development for the Group, opening up potential new markets as we seek to extend the application of our tissue adhesives to other internal procedures. 

Financially, we are pleased to report a 6% increase in revenue to £63.0 million (2013: £59.5 million), representing growth of 9% on a constant currency basis and an increase in adjusted² profit before tax of 15% to £15.6 million (2013: £13.5 million).

The Group continues to work on a number of significant opportunities to drive growth resulting from existing products and geographic markets as well as from new products in development.

The Group ended the year with net cash of £17.3 million (2013: £5.3 million), and has taken advantage of the favourable terms available for borrowing to put in place a five-year, unsecured, new multi-currency, credit facility for £30 million. This facility is as yet unused. AMS continues to be in robust financial health and is well positioned to invest in internal development projects as well as potential licensing opportunities and acquisitions in line with the Group's strategy. 

Dividend 

The Board is proposing a final dividend of 0.48p per share, making a total dividend for the year of 0.70p per share, a 16.7% increase on 2014. If approved at the Annual General Meeting on 21 May 2015, this will be paid on 29 May 2015 to shareholders on the register at the close of business on 7 May 2015.

People

Finally, on behalf of the Board, I would like to thank all our employees, customers, suppliers, business partners and shareholders for their continued support over the past year.

Peter Allen

Chairman

² All items are show before amortisation of acquired intangible assets which, in 2014, were £0.4 million (2013: £0.4 million) as defined in the financial review

Chief Executive's Statement

I am pleased to report good growth across our major business units despite foreign exchange headwinds. With more than 75 percent of our sales outside the UK, our business is truly international and therefore affected by currency fluctuations.

Branded Direct

The Branded Direct Business Unit reports sales of our branded products through our own sales forces in the UK, Germany and Czech Republic. Its revenue grew 3% to £23.6 million (2013: £22.9 million) and by 6% at constant currency.

ActivHeal^®

ActivHeal^®, which delivers a range of woundcare dressings that offer significant cost savings without compromising on clinical outcomes or patient care, continues to be a compelling proposition for the  NHS. Sales of our ActivHeal^® range increased by 8% to £6.0 million (2013: £5.5 million). We are encouraged by the most recent data confirming that AMS had further increased its market share to 7.1% (2013: 5.5%) at the end of 2014. Encouragingly, ActivHeal^® has had a strong start to 2015 with a number of tender and formulary wins from new NHS Hospital Trusts and we expect increased growth throughout the year.

LiquiBand^®

We continue to make good progress in the UK with LiquiBand^®. In the Accident and Emergency Room ('A&E') sales grew 8% to £2.6 million (2013: £2.5 million) and sales into the Operating Room ('OR') increased 34% to £0.6 million (2013: £0.45 million).

AMS' products have been used in A&E for a number of years and the good growth we have seen reflects the progress made by our focused sales team in this sector. The UK surgical sales team, now in their second year, is accessing the OR with a growing range of products that now includes sutures and haemostats. This team will also start selling LiquiBand^® Fix8™, our hernia mesh fixation device.

Sales of LiquiBand^® in Germany were flat at £1.4 million at a reported level, but increased by 5% at constant currency. Steady progress is expected to continue in Germany.

RESORBA^®

Sales of RESORBA^® branded products in Germany and the Czech Republic were slightly lower at £13.0 million (2013: £13.1 million) at a reported level and increased by 4% at constant currency. Sales of haemostats increased by 12% at constant currency to £3.6 million (2013: £3.4 million) and sales of sutures and collagens into the dental market were unchanged at £3.8 million, whilst sales of sutures into hospitals grew 2%, reversing the decline reported in 2013.

Although the German suture market continues to be challenging and is expected to remain so over the next year, we believe we are well placed to benefit from the competitive pressures in the market with our extensive range of competitively priced products. Our German commercial operations were strengthened by the appointment of a national sales manager in February 2015. The introduction of the LiquiBand^® Fix8™ device is also expected to support progress in 2015, and we are reviewing the optimal way to service the dental market in Germany, which involves mulitple call points.

In the UK, we are actively working on a number of hospital tenders and evaluations with the goal of becoming the main suture supplier to those hospitals. We believe our ability to supply a comprehensive range of top quality sutures that provide cost savings to hospitals is compelling. Winning any one of these current evaluations would significantly increase the presence of our brand in the UK.

In R&D, our focus is on extending the attributes of our collagens to meet the needs of dental practitioners and oral surgeons. We expect to obtain approval for an enhanced collagen cone in 2015, as well as making good progress in including new antibiotics in our haemostats.

Branded Distributed

The Branded Distributed Business Unit reports the sales of our brands through distributors in territories where we do not have a national sales team.

Branded Distributed revenue was 17% higher at £10.2 million (2013: £8.8 million) and 24% higher at constant currency. The main contributor to this growth was LiquiBand^® sales in the US, which totaled £4.1 million and accounted for 40% of total sales.

LiquiBand^® in the US

Sales of LiquiBand^® in the US increased by 36% to £4.1 million (2013: £3.0 million) and by 43% at constant currency. The new distribution partner added at the end of 2013 performed well throughout the year and contributed to the growth in sales alongside existing partners. Given the high level of sales in the second half of 2013, which included some pipeline filling at the end of the year, our sales growth performance in 2014 was particularly strong. The latest data for December 2014 shows our volume market share increasing to 7%, up from 6% at July 2014, in the US hospital sector, while our volume market share in the US non-hospital, or alternate site, market is now estimated at 19%, up from 18% at July 2014. 

We launched our 2-octyl cyanoacrylate formulation with one of our existing distribution partners in the second half of 2014 and have already added additional  partners since the start of 2015. A strength of the business is the range of formulations of cyanoacrylate on offer, including very fast setting formulations with applicators allowing for quick, precision closure, and film-forming formulations that provide a barrier layer over wounds as well as closing the wound itself. With formulations that have properties in between, we have products that can accommodate the full spectrum of wound closing needs.       

LiquiBand^® in the EU and Rest Of the World

Elsewhere, within the EU and ROW, LiquiBand^® sales through our distributors continued to show good growth, with our distributors in France and Italy continuing to perform well. Overall sales increased by 15% to £1.5 million (2013: £1.3 million) at reported currency and constant currency.

The regulatory approval process for LiquiBand^® in China is progressing, however owing to changes in the regulatory pathway, we now expect approval later in 2015.

Hernia Mesh Fixation device - LiquiBand^® Fix8™

We received approval to market this product in Europe on 29 May 2014 and it has now been launched in the UK and Germany with our own sales teams as well as through some European distributors who are able to support the product.The initial response has been very positive, with a number of surgeons keen to endorse the product. We are also receiving valuable feedback about other possible applications suitable for this type of device which we are currently working on.

We do not anticipate significant sales in the first half of the yearas surgeons are individually trained on how to use the device and we wait to see the outcome of their surgery. Following positive feedback, we are confident that the product will contribute to growth in the second half of 2015 and thereafter.      

RESORBA^® 

Sales of RESORBA^® products to all export markets other than Russia grew by 6% at reported currency to £2.9 million (2013: £2.8 million), and by 10% at constant currency. Growth was seen across several territories, with our French, Italian and Chinese distributors performing strongly. Sales in Russia increased by 4% at constant currency, but decreased 18% to £1.3 million (2013: £1.6 million) at reported currency, reflecting the weakening Rouble. The Russian market is unlikely to grow in the forseeable future.

Work continues to gain approval to supply RESORBA^® sutures and haemostats into the US. We have received our first approval for the sale of one type of suture for the US market and are still on target for the remainder of the suture range to be approved in the first half of 2015, with the expectation that we can launch the products in the second half of 2015.

In R&D our focus is on continuing to improve the formulations of the base monomers that are used in our adhesives as well as extending the applications of tissue adhesives for internal use.

OEM

The OEM Business Unit reports the sales of products that are sold under third parties' brands.

OEM revenue increased by 7% at reported currency to £25.3 million (2013: £23.6 million) and by 9% at constant currency.

Our silver alginate ranges of dressings continued to perform well, with sales increasing by 8% at reported currency and by 10% at constant currency to £13.1 million (2013: £12.1 million). Our partners continued to do well with the range of silver fibre dressings we provide, gaining market share as well as accessing new geographical markets. We continue to support them with regulatory approvals and marketing data.

Sales of our foam-based dressings were flat at £1.8 million. This was due to one of our partners launching a new product range last year with sales following the typical second year post launch sales pattern reduction. Adjusting for this, sales elsewhere were encouraging and up 20% on a proforma basis. Our other woundcare and skin protectant products delivered good growth and grew 9% to £9.7 million (2013: £8.9 million), while the collagen OEM business acquired with RESORBA^® was flat year-on-year at £0.8 million, with little change expected in 2015. 

In R&D, the focus is on further developing our foam range to include both an antimicrobial and an atraumatic foam. These products are well advanced and we expect approvals in the first half of 2015, with a launch later this year.

Bulk Materials

The Bulk Business Unit reports sales of bulk materials to third party convertors.

Bulk Materials revenue decreased by 7% at reported currency to £3.9 million (2013: £4.2 million) and by 4% at constant currency.

Rollstock foam contributed around 85% of Bulk revenue and good growth was seen by one signficant customer that had destocked in 2013. However, sales by some newer and smaller partners were disappointing. Until sufficient scale of revenue is achieved with the customer base, the Bulk Materials  Unit will remain vulnerable to the ordering patterns of its partners and customers.

In R&D, the  focus is on developing new foam formulations with antimicrobials, working in conjunction with the OEM business unit. These products are expected to be launched in 2015.

Operations

Efficiency and gross margins

We continue to strive for operational improvements by reducing set up times, eliminating non-value added activities and increasing outputs. These incremental efficiencies are helping to improve gross margins acoss the Group and have helped to generate an improvement of approximately 100 basis points in 2014, offsetting some of the negative impact resulting from movements in currency. We have invested in improving our converting capability in Winsford. This equipment is still being commissioned, but we expect to increase our operational flexibility and improve efficiency in 2015 as a result.

Capacity and resource

We have also identified the need to increase the capacity of our collagen plant in Germany. We anticipate that £1.0 million of investment is required in the plant in the second half of 2015. We continue to invest in improving our ERP (Enterprise Resource Planning) management and reporting systems. Following the successful launch of our new ERP system at our Plymouth site, the system was subsequently launched in Winsford in February 2014 and in Etten Leur in the Netherlands in September 2014. We constantly monitor our systems across the Group and will invest in further improvements to systems in Germany.

Regulatory and quality assurance

With the regulatory framework gaining in complexity, we have continued to invest in both Regulatory and Quality functions and systems to ensure that we are able to support our partners with winning  approvals in new markets as well as obtaining approval for our own  products. We anticipate that we will continue to invest in these areas in 2015.

R&D

The Group continues to develop new products through its R&D teams. We are well advanced in the approval process for our antimicrobial and atraumatic foams and, whilst external regulatory pathways are out of our control resulting in unclear timings, we expect to obtain several product approvals in 2015, enabling these products to be launched thereafter.      

Summary and Outlook

We delivered revenue growth of 6% (at constant currency this would have been 9%) and significantly improved profitability and cash generation during the year.

Our three largest business units all delivered solid performance despite challenging currency conditions. We were particularly encouraged by strong growth in the US, where the competitive quality, range and pricing helped to drive gains in our market share.  The successful launch of the LiquiBand^® Fix8^™ hernia mesh fixation device demonstrates our continued commitment to investing in innovation and during the year ahead we expect further product launches and advancements in our R&D activities. 

With continuing growth across our major business units, due to the strong performance of our products, new products progressing well and our anticipated broadening into new geographies, we are confident that the Group is well placed to drive growth as well as continued improvements in efficiencies and we remain excited by the prospects for our future.

Financial Review

Summary

Group revenue increased by 6% to £63.0 million (2013: £59.5 million). At constant currency, revenue growth would have been 9%.

Comparisons with 2013 are made on a pre-amortisation of acquired intangible asset cost basis, as we believe that this provides a more relevant representation of the Group's trading performance. Amortisation of acquired intangible assets was £0.4 million in the period (2013: £0.4 million).

To aid comparison, the Group's adjusted income statement is summarised in Table 1 below.

Table 1	Year ended 31 Dec 2014	Year ended 31 Dec 2013
Adjusted Income Statement	£'000	£'000	Change
Revenue	63,010	59,499	6%
Gross profit	35,843	34,268	5%
Distribution costs	(853)	(744)
Administration expenses3	(19,681)	(19,679)
Other income	250	281
Adjusted operating profit	15,559	14,126	10%
Net finance income/(costs)	48	(582)
Adjusted profit before tax	15,607	13,544	15%
Amortisation of acquired intangibles	(389)	(400)
Profit before tax	15,218	13,144	16%
Tax	(2,354)	(1,778)
Profit for the period	12,864	11,366	13%
Adjusted earnings per share - basic4	6.39p	5.72p	12%
Earnings per share - basic4	6.20p	5.52p	12%
Adjusted earnings per share - diluted3	6.26p	5.64p	11%
Earnings per share - diluted3	6.08p	5.45p	12%

3    Administration expenses exclude amortisation of acquired intangible assets

4    See Note 7 Earnings per share for details of calculation

Revenues were negatively impacted by approximately £1.8 million due to the effects of currency movements in the year. This also had an impact on Group gross margins which were reduced by 50 bps as a result. Gross margins were also negatively impacted by sales mix effect by 120bps, however, this was partially offset by the 100bps improvement made from operational eficiences.

Adjusted operating profit increased by 10% to £15.6 million (2013: £14.1 million) and the adjusted operating margin increased by 100 bps to 24.7% (2013: 23.7%). At a reported level, administration costs were flat year on year, helped  by currency effects. Adjusting for currency, administration costs would have increased by 5%. Within this, the Group expensed to the income statement £2.1 million on R&D (2013: £2.2 million). Spend as a percentage of sales reduced to 3.3% (2014: 3.7%), mainly as a result of timing of projects.

Profit before tax for the year was 16% higher at £15.2 million (2013: £13.1 million).

The Group's effective rate of tax for the year was 15.5% (2013: 13.5%). This is reflective of the utilisation of previously unrecognised brought-forward tax losses in the UK, together with patent box and R&D relief. It also reflects the impact of blending profits and losses from different countries and the different tax rates associated with these countries. The effective tax rate of the Group is expected to increase as a result of the tax losses being used up.

A reconciliation between the standard rate of taxation in the UK and the Group's effective rate is summarised in Table 2 below.

Table 2

Taxation	%
Standard taxation rate	21.50
Loss utilisation and recognition	(3.61)
Impact of differential between UK and overseas tax rate	1.70
Patent box relief	(3.58)
R&D relief	(1.89)
Expenses not deductible, prior year adjustments, depreciation & share based payments	1.38
Effective taxation rate	15.50

Earnings (excluding amortisation of acquired intangible assets) increased by 13% to £13.3 million (2013: £11.8 million), resulting in a 12% increase in adjusted basic earnings per share to 6.39p (2013: 5.72p) and a 11% increase in diluted adjusted earnings per share to 6.26p (2013: 5.64p).

Profit after tax increased by 13% to £12.9 million (2013: £11.4 million), resulting in a 12% increase in basic earnings per share to 6.20p (2013: 5.52p) and a 12% increase in diluted earnings per share to 6.08p (2013: 5.45p).

The Board is proposing a final dividend of 0.48p per share, to be paid on 29 May 2015 to shareholders on the register at the close of business on 7 May 2015. This follows the interim dividend of 0.22p per share that was paid on 31 October 2014 and would make a total dividend for the year of 0.70p per share (2013: 0.60p), a 17% increase on 2013.

The operational performance of the Business Units is shown in Table 3 below. The adjusted profit from operations and the adjusted margin are shown after excluding amortisation of acquired intangibles. In determining, and to aid comparison of the operational margins of the individual Business Units, the revenue of the Bulk Materials Business Unit sales made to other Business Units, £0.7 million (2013: £0.8 milllion) are included. 

Table 3

Operating Result by Business Unit
Year ended 31 December 2014	Branded Direct	Branded Distributed	OEM	Bulk Materials
	£'000	£'000	£'000	£'000
Revenue	23,610	10,247	25,275	4,580
Profit from operations	6,241	2,770	6,225	485
Amortisation of acquired intangibles	227	135	27	-
Adjusted profit from operations5	6,468	2,905	6,252	485
Adjusted operating margin5	27.4%	28.3%	24.7%	10.6%
Year ended 31 December 2013
Revenue	22,918	8,785	23,629	4,933
Profit from operations	6,023	1,654	5,790	668
Amortisation of acquired intangibles	235	130	35	-
Adjusted profit from operations1	6,258	1,784	5,825	668
Adjusted operating margin1	27.3%	20.3%	24.7%	13.5%

⁵ excludes amortisation of intangible assets

Branded Direct

The adjusted operating margin of this Business Unit remained at a similar level to the prior year at  27.4% (2013: 27.3%) and lower than the position at H1 2014 (29.6%). As indicated at the half year we are investing in sales and marketing in our increasing direct sales teams.

Branded Distributed

The adjusted operating margin of this Business Unit increased to 28.3% (2013: 20.3%), reflecting the improved profitability from the increase in sales in this Business Unit and in particular from sales to the US. The growth in sales to the US mitigated the impact in margin from sales made into Russia and continued the improvement in margin seen at H1 2014 (18.7%).  

OEM

The adjusted operating margin of this Business Unit was at a the same level to the prior year at 24.7% (2013: 24.7%), and lower than the margin reported at H1 2014 (27.1%). Margins are dependent on the mix of business, which at the half year had a greater percentage of silver alginate sales than at the full year.

Bulk Materials

The adjusted operating margin of this Business Unit decreased to 10.6% (2013: 13.5%), but improved from the position in H1 2014 (9.8%). Margins were affected by the lower volumes of production as well as the different sales mix.

Geographic breakdown of revenues

The geographic breakdown of Group revenues in 2014 is shown in Table 4 below:

Table 4

Geographic Breakdown of Group Revenues
£ millions	2014	% of total	2013	% of total
Europe (excluding UK & Germany)	18.7	29.7	17.3	29.1
Germany	14.0	22.3	15.7	26.4
UK	15.3	24.3	13.2	22.2
USA	13.8	21.9	11.8	19.9
Rest of World	1.1	1.8	1.4	2.4

Although nearly 52% of the Group's sales are in Europe (excluding the UK), only around 34% of sales are denominated in Euros. Approximately 80% of all sales to the US are denominated in US Dollars. The Group hedges significant transaction exposure by using forward contracts and options and aims to have 70% of its estimated transactional exposure for the next twelve months hedged. The foreign currency hedges put in place in 2013 mitigated the effect of the adverse effects of currency in 2014 by around £1million.

Cash Flow

Table 5 summarises the Group cash flows.

Table 5

Group Cash Flows
Year ended 31 December	2014	2013
	£'000	£'000
Adjusted operating profit (Table 1)	15,559	14,126
Non-cash items	2,993	2,815
EBITDA	18,552	16,941
Working capital movement	(104)	(2,788)
Net cash from operating activities	18,448	14,153
Capital expenditure and capitalised R&D	(2,406)	(2,002)
Net interest received	45	(587)
Tax paid	(1,876)	(83)
Free cash flow	14,211	11,481
Repayment of loan	-	(14,385)
Dividends paid	(1,307)	(1,111)
Proceeds from share issues	65	328
Net increase/ (decrease) in cash and cash equivalents	12,969	(3,687)

Note: EBITDA is earnings before interest, tax, depreciation, intangible asset amortisation and share based payments

EBITDA increased by 10% to £18.6 million (2013: £16.9 million).

Working capital reduced slightly in the year but this was mainly due to the effects of translating overseas working capital balances held in euros into sterling. 4.2 months of supply of inventory was held across the Group, slightly increased compared with the prior year (2013: 4.0 months of supply). Trade debtor days remained at the same level to the prior year at 43 (2013: 43) while trade payable days decreased to 36 (2013: 42).

The Group generated net cash from operating activities of £18.4 million (2013: £14.2 million) (see Table 5) and had net cash of £17.3 million (2013: £5.3 million) at the end of the year.

We invested £2.4 million in capital equipment, software and capitalised R&D in the year (2013: £2.0 million). We have invested in equipment around the Group that improves converting and packaging as well as in business systems.

The Group generated a free cash flow of £14.2 million in the year (2013: £11.5 million). The conversion of adjusted operating profit into free cash flow was 91% (2013: 81%).

The Group paid its final dividend for the year ended 31 December 2013 of £0.85 million (2013:for the year ending 2012, £0.71 million) on 28 May 2014, and its interim dividend for the six months ended 30 June 2014 of £0.46 million (2013: £0.40 million) on 31 October 2014.

In December 2014 the Group entered into a new, five-year, £30 million, multi-currency revolving credit facility with an accordion option under which AMS can request up to an additional £20 million on the same terms. The previous facility for £4 million was due to expire in 2015.  The Group chose to take advantage of favourable credit conditions to put in place a more suitable facility to support the Group's growth ambitions. The new facility is provided jointly by the Group's existing bankers, HSBC, as well as The Royal Bank of Scotland PLC. It is unsecured on the assets of the Group and has not been drawn down. This facility carries an annual interest rate of LIBOR or EURIBOR plus a margin that varies between 0.65% and 1.75% depending on the Group's net debt to EBITDA ratio.

At the end of the period, the Group had net cash of £17.3 million (2013: £5.3 million). The movement in net cash from the start of the year to net cash at the end of the year is reconciled in Table 6 below:

Table 6

Movement in net cash	£'000
Net cash as at 1 January 2014	5,257
Exchange rate impacts	(946)
Free cash flow	14,211
Dividends paid	(1,307)
Proceeds from share issues	65
Net cash as at 31 December 2014	17,280

The Group's going concern position is fully described in note 2.

CONSOLIDATED INCOME STATEMENT

			(Unaudited)		(Audited)
Year ended 31 December			2014		2013
			Total		Total
		Note	£'000		£'000
Revenue from continuing operations		4	63,010		59,499
Cost of sales			(27,167)		(25,231)
Gross profit			35,843		34,268
Distribution costs			(853)		(744)
Administration costs			(20,070)		(20,079)
Other income			250		281
Profit from operations		4,5	15,170		13,726
Finance income			49		1
Finance costs			(1)		(583)
Profit before taxation			15,218		13,144
Income tax		6	(2,354)		(1,778)
Profit attributable to equity holders of the parent			12,864		11,366
Earnings per share
Basic		7	6.20p		5.52p
Diluted		7	6.08p		5.45p
Adjusted diluted		7	6.26p		5.64p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	(Unaudited)	(Audited)
Year ended 31 December	2014	2013
	£'000	£'000
Profit for the year	12,864	11,366
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations	(4,200)	732
(Loss) / gain arising on cash flow hedges	(1,173)	698
Other comprehensive (expense)/income for the year	(5,373)	1,430
Total comprehensive income for the year attributable to equity holders of the parent	7,491	12,796

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
At 31 December	2014	2013
	£'000	£'000
Assets
Non-current assets
Acquired intellectual property rights	9,238	10,256
Software intangibles	1,835	1,662
Development costs	1,850	1,702
Goodwill	36,696	39,278
Property, plant and equipment	16,003	16,707
Deferred tax assets	1,108	1,728
Trade and other receivables	22	14
	66,752	71,347
Current assets
Inventories	7,532	8,042
Trade and other receivables	12,969	12,158
Current tax assets	-	343
Cash and cash equivalents	17,280	5,257
	37,781	25,800
Total assets	104,533	97,147
Liabilities
Current liabilities
Trade and other payables	7,649	6,298
Current tax liabilities	584	1,220
Other taxes payable	259	260
Obligations under finance leases	2	4
	8,494	7,782
Non-current liabilities
Trade and other payables	472	520
Deferred tax liabilities	2,513	2,754
Obligations under finance leases	1	3
	2,986	3,277
Total liabilities	11,480	11,059
Net assets	93,053	86,088
Equity
Share capital	10,393	10,343
Share premium	32,742	32,364
Share-based payments reserve	1,563	1,326
Investment in own shares	(148)	(144)
Share-based payments deferred tax reserve	278	158
Other reserve	1,531	1,531
Hedging reserve	(522)	651
Translation reserve	(4,867)	(667)
Retained earnings	52,083	40,526
Equity attributable to equity holders of the parent	93,053	86,088

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Group

			Share	Investment	Share based
	Share	Share	based	in own	payments	Other	Hedging	Translation	Retained
	capital	premium	payments	shares	deferred tax	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2013 (audited)	10,230	31,887	1,122	(77)	180	1,531	(47)	(1,399)	30,271	73,698
Consolidated profit for the year to 31 Dec 2013	-	-	-	-	-	-	-	-	11,366	11,366
Other comprehensive income	-	-	-	-	-	-	698	732	-	1,430
Total comprehensive income	-	-	-	-	-	-	698	732	11,366	12,796
Share based payments	-	-	400	-	(22)	-	-	-	-	378
Share options exercised	113	477	(196)	-	-	-	-	-	-	394
Shares purchased by EBT	-	-	-	(277)	-	-	-	-	-	(277)
Shares sold by EBT	-	-	-	210	-	-	-	-	-	210
Dividends paid	-	-	-	-	-	-	-	-	(1,111)	(1,111)
At 31 December 2013 (audited)	10,343	32,364	1,326	(144)	158	1,531	651	(667)	40,526	86,088
Consolidated profit for the year to 31 Dec 2014	-	-	-	-	-	-	-	-	12,864	12,864
Other comprehensive income	-	-	-	-	-	-	(1,173)	(4,200)	-	(5,373)
Total comprehensive income (unaudited)	-	-	-	-	-	-	(1,173)	(4,200)	12,864	7,491
Share based payments	-	-	592	-	120	-	-	-	-	712
Share options exercised	50	378	(355)	-	-	-	-	-	-	73
Shares purchased by EBT	-	-	-	(190)	-	-	-	-	-	(190)
Shares sold by EBT	-	-	-	186	-	-	-	-	-	186
Dividends paid	-	-	-	-	-	-	-	-	(1,307)	(1,307)
At 31 December 2014 (unaudited)	10,393	32,742	1,563	(148)	278	1,531	(522)	(4,867)	52,083	93,053

CONSOLIDATED STATEMENT OF CASH FLOWS

	(Unaudited)	(Audited)
Year ended 31 December	2014	2013
	£'000	£'000
Cash flows from operating activities
Profit from operations	15,170	13,726
Adjustments for:
Depreciation	1,750	1,783
Amortisation  -   intellectual property rights	389	400
-   development costs	331	204
-   software intangibles	228	91
Impairment of development costs	92	337
Decrease / (increase) in inventories	221	(1,510)
Increase in trade and other receivables	(1,623)	(1,931)
Increase in trade and other payables	1,298	653
Share based payments expense	592	400
Taxation	(1,876)	(83)
Net cash inflow from operating activities	16,572	14,070
Cash flows from investing activities
Purchase of software	(408)	(618)
Capitalised research and development	(581)	(612)
Purchases of property, plant and equipment	(1,478)	(836)
Disposal of PPE	61	64
Interest received	50	1
Net cash used in investing activities	(2,356)	(2,001)
Cash flows from financing activities
Dividends paid	(1,307)	(1,111)
Finance lease	(4)	(5)
Repayment of secured loan	-	(14,385)
Issue of equity shares	69	395
Shares purchased by EBT	(190)	(277)
Shares sold by EBT	186	210
Interest paid	(1)	(583)
Net cash used in financing activities	(1,247)	(15,756)
Net increase / (decrease) in cash and cash equivalents	12,969	(3,687)
Cash and cash equivalents at the beginning of the year	5,257	8,841
Effect of foreign exchange rate changes	(946)	103
Cash and cash equivalents at the end of the year	17,280	5,257

Notes Forming Part of the Condensed Consolidated Financial Statements

1.      Reporting entity

Advanced Medical Solutions Group plc ("the Company") is a public limited company incorporated and domiciled in England and Wales (registration number 2867684). The Company's registered address is Premier Park, 33 Road One, Winsford Industrial Estate, Cheshire, CW7 3RT.

The Company's ordinary shares are traded on the AIM market of the London Stock Exchange plc. The consolidated financial statements of the Company for the twelve months ended 31 December 2014 comprise the Company and its subsidiaries (together referred to as the "Group").

The Group is primarily involved in the design, development and manufacture of novel high performance polymers (both natural and synthetic) for use in advanced woundcare dressings and materials, and medical adhesives and sutures for closing and sealing tissue, for sale into the global medical device market and dental market.

2.      Basis of preparation

These condensed unaudited consolidated financial statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2013.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in April 2015.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 December 2014 or 31 December 2013. The financial information for the year ended 31 December 2013 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s498 (2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2014 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group's annual general meeting.

The financial statements have been prepared on the historical cost basis of accounting except as disclosed in the accounting policies set out in the annual report for the year ended 31 December 2013.

With regards to the Group's financial position, it had cash and cash equivalents at the year end of £17.3 million. The Group also has in place a five-year, unsecured, new multi-currency, credit facility for £30 million  which was undrawn in during 2014.

While the current economic environment is uncertain, the Group operates in markets whose demographics are favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, market growth is predicted. The Group has a number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies.

Having taken the above into consideration the Directors have reached a conclusion that the Group is well placed to manage its business risks in the current economic environment. Accordingly, they continue to adopt the going concern basis in preparing the preliminary announcement.

The Group has not yet adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements,  IAS 28 Investments in Associates and Joint Ventures (2011), IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2011), IAS 32 Amendments to IFRS 7 and IAS 32, Amendments to IAS 36 Impairment of Assets, Amendments to IAS 39 Financial Instruments: recognition and measurement, Amendments to IFRS 10, IFRS12 and IAS 27. These have had no significant impact on this set of financial information.

3.      Accounting policies

The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

4.      Segment information

As referred to in the Chief Executive's Report, the Group is organised into four business units: Branded Direct, Branded Distributed, OEM (original equipment manufacturer) and Bulk Materials. These business units are the basis on which the Group reports its segment information.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments, and related revenue, corporate assets, head office expenses and income tax assets. These are the measures reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance.

Business segments

Segment information about these businesses is presented below.

Year ended 31 December 2014	Branded Direct	Branded Distributed	OEM	Bulk Materials	Eliminations	Consolidated
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
External sales	23,610	10,247	25,275	3,878	-	63,010
Inter segment sales				702	(702)	-
Total revenue	23,610	10,247	25,275	4,580	(702)	63,010

Result
Segment result	6,241	2,770	6,225	485	-	15,721
Unallocated expenses						(551)
Profit from operations						15,170
Finance income						49
Finance costs						(1)
Profit before tax						15,218
Tax						(2,354)
Profit for the year						12,864

At 31 December 2014	Branded Direct	Branded Distributed	OEM	Bulk Materials	Consolidated
Other Information	£'000	£'000	£'000	£'000	£'000
Capital additions:
Software intangibles	88	11	272	37	408
Research & development	200	113	262	6	581
Property, plant and equipment	586	179	617	96	1,478
Depreciation and amortisation	(903)	(356)	(1,188)	(251)	(2,698)
Balance sheet
Assets
Segment assets	55,456	17,207	27,200	4,462	104,325
Unallocated  assets					208
Consolidated total assets					104,553
Liabilities
Segment liabilities	5,257	2,159	3,531	533	11,480
Consolidated total liabilities					11,480

Year ended 31 December 2013	Branded Direct		Branded Distributed	OEM		Bulk Materials	Eliminations	Consolidated
	£'000		£'000	£'000		£'000	£'000	£'000
Revenue
External sales	22,918		8,785	23,629		4,167	-	59,499
Inter-segment sales						766	(766)	-
Total revenue	22,918	8,785			23,629	4,933	(766)	59,499

Result
Segment result	6,023	1,654	5,790	668	-	14,135
Unallocated expenses						(409)
Profit from operations						13,726
Finance income						1
Finance costs						(583)
Profit before tax						13,144
Tax						(1,778)
Profit for the year						11,366

As at 31 December 2013	Branded Direct	Branded Distributed	OEM	Bulk Materials	Consolidated
Other Information	£'000	£'000	£'000	£'000	£'000
Capital additions:
Software intangibles	131	15	400	72	618
Research & development	168	70	369	5	612
Property, plant and equipment	330	117	197	192	836
Depreciation and amortisation	(872)	(310)	(1,037)	(259)	(2,478)
Balance sheet
Assets
Segment assets	54,470	15,196	23,172	4,309	97,147
Consolidated total assets					97,147
Liabilities
Segment liabilities	5,629	1,675	3,156	599	11,059
Consolidated total liabilities					11,059

Geographic segments

The Group operates mainly in the UK, the Netherlands, Germany, the Czech Republic and Russia, with a sales office located in the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods/services, based upon location of the Group's customers:

Year ended 31 December	2014	2013
	£'000	£'000
United Kingdom	15,308	13,225
Germany	14,042	15,687
Europe excluding United Kingdom and Germany	18,747	17,331
United States of America	13,786	11,819
Rest of World	1,127	1,437
	63,010	59,499

The following table provides an analysis of the Group's total assets by geographical location.

As at 31 December	2014	2013
	£'000	£'000
United Kingdom	46,049	34,271
Germany	52,887	56,522
Europe excluding United Kingdom and Germany	5,506	6,315
United States of America	91	39
	104,533	97,147

5.      Profit from operations

Year ended 31 December	2014	2013
	£'000	£'000
Profit from operations is arrived at after charging / (crediting):
Depreciation of property, plant and equipment	1,750	1,783
Amortisation of:
-  acquired intellectual property rights	389	400
-  software intangibles	228	91
-  development costs	331	204
Operating lease rentals - plant and machinery	228	235
- land and buildings	912	835
Research and development costs expensed to the income statement	2,120	2,196
Cost of inventories recognised as expense	26,286	24,601
Staff costs	19,342	18,241
Net foreign exchange (gain) / loss	(1,029)	164

6.      Taxation

Year ended 31 December	2014	2013
	£'000	£'000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities - current year	1,482	1,010
Tax on ordinary activities - prior year	194	(134)
	1,676	876
Deferred tax:
Tax on ordinary activities - current year	678	494
Tax on ordinary activities - prior year	-	72
Effect of reduction in UK corporation tax rates	-	336
	678	902
Tax charge for the year	2,354	1,778

The tax assessed for the year is lower (2013: lower) than the standard rate of corporation tax in the UK (21.5%) as explained below:

Year ended 31 December	2014	2013
	£'000	£'000
b) Factors affecting tax charge for the year
Profit before taxation	15,218	13,144
Profit multiplied by the standard rate of corporation tax in the UK of 21.5% (2013: 23.25%)	3,272	3,056
Effects of:
Overseas tax rate versus UK corporate tax rate	259	140
Net (income) / expenses not (taxable) / deductible for tax purposes and other timing differences	(26)	346
Depreciation for year less than capital allowances	(9)	(72)
Patent box relief	(545)	(510)
Utilisation and recognition of trading losses	(550)	(577)
Research and development relief	(287)	(439)
Share-based payments	46	(104)
Adjustments in respect of prior year - current tax	194	(134)
Adjustments in respect of prior year - deferred tax	-	72
Taxation	2,354	1,778

Legislation to reduce the main rate of UK corporation tax to 21% and 20% was passed by parliament on 2 July 2013 to take effect from 1 April 2014 and 1 April 2015 respectively. The reduction in the main rate to 20% had been substantively enacted at the balance sheet date and, therefore, the deferred tax assets and liabilities are calculated in these financial statements at this rate.

In addition to the amount charged to the income statement the Group has recognised directly in equity:

·      excess tax deductions related to share-based payments on exercised options, together with

·      changes in excess deferred tax deductions related to share-based payments, totalling £120,000 deficit (2013: surplus £22,000).

7.      Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Year ended 31 December	2014	2013
	£'000	£'000
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	12,864	11,366

Number of shares	'000	'000
Weighted average number of ordinary shares for the purposes of basic earnings per share	207,528	205,795
Effect of dilutive potential ordinary shares:
- share options, deferred share bonus, LTIPs	3,991	2,869
Weighted average number of ordinary shares for the purposes of diluted earnings per share	211,520	208,664

	£'000	£'000
Profit for the year attributable to equity holders of the parent	12,864	11,366
Amortisation of acquired intangible assets	389	400
Adjusted profit for the year attributable to equity holders of the parent	13,253	11,766

Earnings per share	pence	pence
Basic	6.20p	5.52p
Diluted	6.08p	5.45p
Adjusted basic	6.39p	5.72p
Adjusted diluted	6.26p	5.64p

 

END

 

 

FR EAADDEALSEAF