Interim Results

NMT Group PLC 26 September 2000 NMT GROUP PLC Interim results for the six months ended 30 June 2000 NMT Group PLC ('NMT'), the manufacturer of retractable devices to prevent needlestick injury, announces its interim results for the six months ended 30 June 2000. It also announces today that it has been awarded its first commercial-scale contract from US group purchasing organisation, Premier Inc. (see separate press release) Highlights - New management team appointed - Placing and Open Offer raised £24 million in June - Mikron machine delivered in August, for the assembly of 1cc syringe sizes - Manufacturing improvement programme continues - Group restructuring progressing - Letter of intent signed with leading pharmaceutical company for the supply of syringes for use in a clinical trial - Significant sales not expected before 2001 Commenting on the results, Roy Smith, Chief Executive Officer, said: 'Over the past three months, we have carried out an evaluation on manufacturing of our range of 3cc syringes. We are now working on significantly improving and expanding manufacturing efficiencies on this product range, as well as progressing with the production of the 1cc range. We continue to believe that there is a significant commercial opportunity for our safe syringe technology, as evidenced by our recent agreement with a leading pharmaceutical company and our first major contract from Premier, and we will be focussing heavily on improving production levels.' Enquiries: NMT Group PLC Today: 0207 831 3113 Roy Smith, Chief Executive Officer Thereafter: 01506 445000 Financial Dynamics Tel: 0207 831 3113 Sophie Pender-Cudlip An analyst presentation will be held at 10am today at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB, for further details please contact Mo Noonan on 0207 269 7116. Chairman's Statement Overview The first six months of 2000 witnessed significant change for the Group, with the appointment of a new management team. Roy Smith joined the Company as Chief Executive from 1 April 2000, with Tony Fletcher, being appointed Finance Director and Chief Operating Officer in June 2000. Additional funding amounting to £24.1m was raised from existing and new shareholders in July, to allow the Group to implement a strategy of developing its manufacturing capacity at the Livingston facility and to provide a broad range of safety products. In the course of implementing this manufacturing strategy, it has become apparent that the Group will not demonstrate substantial improvement in sales and production until 2001. Progress continues to be made in providing a broader product portfolio of safety devices to improve our competitive position. Potential partners, who are able to manufacture these products, have been identified. The Group has secured its first two major sales contracts in the USA. Legislation mandating the use of safe hollow bore needle devices continues to gain momentum in the USA and the Group is increasing investment in sales and marketing resources to maximise the opportunity within this market sector. The Board was pleased to announce the appointment of Iain Kennedy as General Manager of the Livingston facility in July, having undertaken the role on an interim management basis. Iain brings a wealth of experience from senior general management positions in blue chip, automated-assembly businesses. He was previously Managing Director of Solectron Scotland Limited. Harry Bocker (Finance Director and Deputy Chief Executive), Michael Brander (Corporate Director and Company Secretary) and Garry McGrotty (Commercial Director) resigned from the Board in May 2000. The Board would like to thank them for their contribution to the Group during its start-up phase. Review of operations Manufacturing The Group is currently manufacturing a range of 3cc syringes on two Sortimat assembly machines. Following a detailed evaluation of manufacturing over the last three months, the new management team now believes it has identified the major problems, which are preventing a significant increase in manufacturing output. These problems relate to both product and process design and multi-functional teams have been tasked with a number of projects, which will result in improvements in both these problem areas. These activities are supported by a comprehensive project management system, which has been introduced to control and regulate product design and process changes. The Group is confident that the plan of action, presently underway, will resolve these problems, with work continuing on increasing both output and manufacturing efficiencies. Significant increases in engineering resource are planned during the second half of the year which, coupled with additional technical support from our equipment suppliers, should result in a progressive improvement in manufacturing capability. The full results of these actions will not become evident until the end of 2001. Delivery of the Mikron machine, which assembles 1cc syringe sizes, took place during August 2000. Production is planned to commence during the final quarter of 2000. The build of the third Sortimat machine is progressing well. In order to underpin manufacture of the 3cc product, delivery of this machine is now planned, without modification to produce 5cc syringes, for the first quarter of 2001. It is proposed to install new semi-automated equipment for the assembly of 5cc and 10cc syringes during 2001. Sales and Marketing The Group continues to invest in the US market and is currently working with major providers of hospital care, in order to secure key contracts for 2001 and beyond. During the first six months of 2000, further enhancements in syringe design were required to ensure acceptable performance levels across the full range of 3cc products. As these changes will not come into effect until the final quarter, sales will be below expectations in the current year. Efforts are being focused to secure the supply of safety syringes for major vaccine programmes in the USA, which will be commencing during the last quarter of 2000. Product will also be supplied to the non-hospital market (e.g. prisons, private physicians etc.), with the aim of achieving substantial sales volumes from these sectors during 2001. A two-year, non-exclusive contract has been awarded to New Medical Technology Inc. by Premier Purchasing Partners L.P ('Premier'), the largest group purchasing organisation in the USA. Premier serves approximately 1900 hospitals and health care systems. This represents the first major sales contract awarded to the Group. The Group is pleased to announce that it has also signed a legally-binding letter of intent to supply a leading pharmaceutical company with syringes, for a clinical trial during the next two years. The trial involves a newly developed drug, which will be self-injected by the patient to combat a blood- borne pathogenic disease. If the clinical trial is successful, the sales volume opportunity will be significant. The Group is also approaching other pharmaceutical companies who have a commercial interest in the supply of drugs in such high-risk environments (e.g., HIV, Hepatitis B and Hepatitis C, etc.). The search continues for new technology and products, which will broaden the Group's safety portfolio and provide additional revenue and profit streams during 2001 and beyond. Investment in sales and marketing within Europe will continue, although on a smaller scale than was originally envisaged. The Group intends to locate the European Sales and Marketing office in the South East of England by the close of 2000. As a result of regulatory requirements, the Zero-Stik brand cannot be used in the US market. The Group's products will be re-launched in the US and Europe in Autumn 2000, under a new, single global brand. Research and Development The Group continues to build its technical expertise in the field of safety needle technology. Technology within the pre-fill syringe area is being developed, which the Group hopes to be able to commercialise in the future. Legal The trial, relating to a claim by MedSafe Technologies LLC and Syringe Development Partners LLC for patent infringement, is scheduled for November of this year. A second claim for patent infringement, which is linked to the initial claim, was filed in July. Legal motions have been submitted for both of these actions to be dealt with at the same trial. The Directors remain confident that these claims can be successfully defended and will have no material impact on the business. Accordingly, no provision has been made for any potential legal settlements. Financial A retained loss for the six months to June 2000 of £7.5m compares with £2.9m for the first half of last year and is stated after exceptional administration expenses of £2.8m (note 3 to the accounts). The exceptional charges include a provision for the impairment to the value of existing intellectual property rights, amounting to £1.7m, which has been made as a result of product design changes and the global re-branding programme. This has reduced intangible assets to £nil value at 30 June 2000. The loss per share was 11.8p, compared with a loss of 6.1p for the same period last year. Net assets of £8.0m at the end of June 2000 compare with £14.7m at December 1999. The reduction of £6.7m results principally from a fall in net cash/funding. A net cash outflow of £0.6m in the six months to June 2000, compares with a net cash inflow of £5.2m in the first half of 1999, which included £15.3m cash inflow arising from the issue of shares. Operating cash outflow of £4.8m compares with an outflow of £3.0m for the same period last year. Expenditure on fixed assets for six months to June 2000 was £1.1m. A term loan of £1.5m from the Royal Bank of Scotland was repaid during the period. Share options exercised resulted in a cash inflow of £0.6m. Outlook The recent fund raising programme has created a stable financial platform on which to turn around the Group. A new and strengthened management team is in place and implementing the strategy outlined at the last fundraising. Shareholders will be aware that the Group is in the process of a major restructuring. The year 2000 will be a difficult year, as the transformation of the Group continues, but is far from complete. An improvement in financial performance will not be evident before 2001. However, the Directors remain confident that significant progress is being made and high volume manufacturing is achievable. The market opportunity is large and, with a broader product offering, strong sales growth should be achieved. The Directors also believe that the skill base within the Group has the appropriate expertise to deliver its planned business strategy. Roger Gilmour Chairman CONSOLIDATED PROFIT & LOSS ACCOUNT for the six months ended 30 June 2000 Unaudited Unaudited Audited six months six months Year ended ended Ended 30 June 30 June 31 December 2000 1999 1999 £'000 £'000 £'000 Turnover (note 2) 82 43 66 Cost of sales (1,859) (475) (2,388) _____ _____ _____ Gross loss (1,777) (432) (2,322) ______ _____ _____ Normal administration expenses (2,951) (2,708) (5,708) Exceptional Administration expenses (note 3) (2,792) - - _____ _____ _____ Total administration expenses (5,743) (2,708) (5,708) Other operating income - 6 612 _____ _____ _____ Operating loss (7,520) (3,134) (7,418) Interest receivable 162 207 509 Interest payable (108) (20) (150) _____ _____ _____ Retained loss (7,466) (2,947) (7,059) _____ _____ _____ Loss per share Basic and diluted loss per share (note 4) (11.8)p (6.1)p (12.6)p _____ _____ _____ The Group has no recognised gains or losses other than the losses above and therefore no separate statement of total recognised gains and losses has been prepared. There is no difference between loss on ordinary activities before taxation and the retained loss for the year stated above and their historical cost equivalents. RECONCILIATION OF SHAREHOLDERS' FUNDS for the six months ended 30 June 2000 Unaudited Unaudited Audited six months six months Year ended ended Ended 30 June 30 June 31 December 2000 1999 1999 £'000 £'000 £'000 Share options - application of UITF 17 140 27 55 Share options exercised 614 - - Share capital issued - 16,025 16,025 Share issue costs - (679) (679) Loss for period (7,466) (2,947) (7,059) _____ _____ _____ Total movement in the period (6,712) 12,426 8,342 Shareholders' funds at 1 January 14,667 6,325 6,325 _____ _____ _____ Shareholders' funds at the period end 7,955 18,751 14,667 _____ _____ _____ CONSOLIDATED BALANCE SHEET at 30 June 2000 Unaudited Unaudited Audited 30 June 30 June 31 December 2000 1999 1999 £'000 £'000 £'000 FIXED ASSETS Intangible assets (note 3) - 1,823 1,810 Tangible assets 8,177 3,783 7,064 _____ _____ _____ 8,177 5,606 8,874 _____ _____ _____ CURRENT ASSETS Stocks 673 531 520 Debtors 868 433 742 Cash at bank and in hand 1,797 15,419 8,868 _____ _____ _____ 3,338 16,383 10,130 CREDITORS: Amounts falling due within one year (1,807) (1,069) (2,555) _____ ______ _____ Net current assets 1,531 15,314 7,575 _____ _____ _____ Total assets less current liabilities 9,708 20,920 16,449 CREDITORS: amounts falling due after more than one year (1,753) (2,169) (1,782) _____ _____ _____ NET ASSETS 7,955 18,751 14,667 _____ _____ _____ CAPITAL AND RESERVES Called up share capital 3,220 3,142 3,142 Share premium account (note 5) 24,320 23,811 23,784 Profit and loss account (note 5) (19,585) (8,202) (12,259) _____ _____ _____ 7,955 18,751 14,667 _____ _____ _____ The unaudited interim financial statements on pages 5 - 11 were approved by the Board of Directors on 26 September 2000. CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2000 Unaudited Unaudited Audited six months Six months Year ended ended ended 30 June 30 June 31 December 2000 1999 1999 £'000 £'000 £'000 Net cash outflow from operating activities (4,796) (3,045) (7,140) Returns on investments & servicing of finance Interest received 203 135 472 Interest paid (108) (20) (150) Capital expenditure & financial investment Purchase of tangible fixed assets (1,127) (68) (2,575) _____ _____ _____ Cash outflow before management of liquid resources and financing (5,828) (2,998) (9,393) Management of liquid resources Cash withdrawn from/ (placed on) term deposit 6,500 (6,800) (4,300) Financing Repayment of term loan (1,500) - - Finance lease - repayment of principal (228) (340) (496) Issue of shares - 15,346 15,346 Expenses in advance of Placing and Open Offer (129) - - Share options exercised 614 - - _____ _____ _____ (Decrease) increase in cash in the period (571) 5,208 1,157 _____ _____ _____ NOTES TO THE INTERIM RESULTS 1 Basis of preparation The financial information in this report does not comprise statutory accounts for the purposes of Section 240 of the Companies Act 1985. The figures for the full year to 31 December 1999 are an abridged version of the accounts for that period, which, together with an unqualified audit report have been filed with the Registrar of Companies. The financial information included in this interim report has been produced on a consistent basis with the financial statements contained within the annual report and accounts for the year ended 31 December 1999. 2 Segmental analysis by class of business Turnover Unaudited Unaudited Audited six months six months Year ended ended ended 30 June 30 June 31 December 2000 1999 1999 Geographical segment £'000 £'000 £'000 Europe 15 25 34 United States 67 18 32 _____ _____ _____ 82 43 66 _____ _____ _____ Loss on ordinary activities Unaudited Unaudited Audited six months six months Year ended ended ended 30 June 30 June 31 December 2000 1999 1999 Geographical segment £'000 £'000 £'000 Europe (6,498) (2,566) (5,748) United States (1,022) (568) (1,670) _____ _____ _____ Operating loss (7,520) (3,134) (7,418) Interest receivable 162 207 509 Interest payable (108) (20) (150) _____ _____ _____ Retained loss (7,466) (2,947) (7,059) _____ _____ _____ 3 Exceptional administration expenses Following the appointment of the new Chief Executive and the adoption of a new business strategy in May 2000, exceptional restructuring charges were incurred. These comprised the termination of the service contracts of three directors, other redundancy costs and the write off of certain deferred charges. In addition, as a result of product design changes and the global re- branding programme, the Directors determined that the value of the intangible assets was impaired and accordingly the carrying value has been written down to £nil. Unaudited Six months ended 30 June 2000 £'000 Restructuring costs 1,061 Impairment of intangible assets 1,731 _____ 2,792 _____ 4 Loss per ordinary share Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 December 2000 1999 1999 '000 '000 '000 Loss per ordinary share is calculated as follows: Loss attributable to members of NMT Group PLC £7,466 £2,947 £7,059 Weighted average number of ordinary shares in issue 63,516 48,651 55,805 Loss per ordinary share (11.8)p (6.1)p (12.6)p As a loss has been incurred during the six months ended 30 June 2000 the exercise of share options would not have been dilutive. 5 Movements on reserves Share Premium Profit & Total account loss £'000 £'000 £'000 At 1 January 2000 23,784 (12,259) 11,525 Share options - application of UITF 17 - 140 140 Share options exercised 536 - 536 Retained loss for six months ended 30 June 2000 - (7,466) (7,466) _____ _____ _____ At 30 June 2000 24,320 (19,585) 4,735 _____ _____ _____ On 15 March 2000 Dr John Campbell, former Chief Executive of NMT Group PLC exercised options over 316,762 ordinary shares at an issue price of 7.88p per share. On 17 April 2000 WestLB Panmure Limited exercised options over 1,232,294 ordinary shares at an issue price of 47.76p per share. 6 Post balance sheet events On 19 and 20 July 2000, 169,767,627 ordinary shares were issued in a Placing and Open Offer on the Alternative Investment Market, at an issue price of 15p per share. Funds raised were £24.1 million, net of expenses. On 18 July 2000 at an Extraordinary General Meeting the authorised share capital of the Company was increased to 360 million ordinary shares of 5p each. INDEPENDENT REVIEW REPORT BY THE AUDITORS To NMT Group PLC We have been instructed by the company to review the financial information set out on pages 5 to 11 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim financial information should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. On the basis of our review we are not aware of any material modifications that should be made to the interim financial information as presented for the six months ended 30 June 2000. PricewaterhouseCoopers Chartered Accountants Glasgow 26 September 2000

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