AorTech Announces Year End Preliminary Results

RNS Number : 4412L

Aortech International PLC

01 August 2011

 



AorTech International plc

("the Company" or "the Group")

Preliminary Results for the year ended 31 March 2011

AorTech International plc (AIM: AOR), the biomaterials and medical device development company, today announces its preliminary results for the year ended 31 March 2011.

Highlights (vs. prior year)

· Group turnover increased from £1.4m to £1.6m

· Pre-tax loss increased from £1.9m to £2.5m

· Cash reserves decreased from £2.9m to £1.4m

· Research and manufacturing consolidation in the USA

· Strong commercial progress

- Ends -

For further information contact:

AorTech International plc 

Frank Maguire, Chief Executive                                                   Tel: + 1 801 201 4336 

AorTech International plc 

Sarah Price, Media Relations                                                      Tel: + 1 801 550 4349 

e-mail [e-mail]

Evolution Securities Limited

Bobbie Hilliam / Chris Clarke                                                       Tel: [phone] 

Note to Editors:

About AorTech International plc

Listed on AIM in London, AorTech International Plc wholly owns AorTech Biomaterials in Melbourne, Australia and AorTech Medical Devices in Salt Lake City, UT, USA.  AorTech Biomaterials was formed in July 1997 to develop and commercialise Elast-Eon™, a highly useful and biostable co-polymer in the medical device and drug delivery fields.

AorTech's Elast-Eon technology is the product of more than a decade of fundamental research into biologically stable materials.  Elast-Eon materials are patented, high silicone content, polyurethane co-polymers which exhibit unparalleled biological and mechanical performance.

AorTech is firmly focused on the development of this material with the aim of providing a wide range of high performance Elast-Eon materials in a variety of application specific formulations and densities, for use in medical devices.

CHAIRMAN'S STATEMENT

I am pleased to report to you that the year ended 31 March 2011 was another period of advancement for the Group.

Results and Key Performance Indicators

Group revenue for the year to 31 March 2011 was £1.6m, thereby reflecting an increase from the £1.4m recorded in the twelve months to 31 March 2010. Licensing fees, royalties, bulk material and components are reflected in this year's reported revenues. Operating expenses increased by £757,000 from £3,727,000 in the corresponding period last year to £4,484,000, reflecting an exceptional impairment charge of £455,000 and the considerable strengthening of the Australian Dollar, being the currency of the manufacturing cost base, against both the Pound Sterling currency of the financial results reporting and the sales revenues in US Dollars. This exceptional impairment charge relates to the residual assets in Australia with no further use following the relocation of manufacturing operations to the USA referred to below. As a consequence, the loss before taxation was increased from £1.9m in the previous year to £2.5m. 

The cash position as at 31 March 2011 was £1.4m, being some £1.5m less than on the corresponding day in 2010. I would emphasise, however, that our cash position is expected to improve during the course of this year as a result of recently completed restructuring of certain customer licences which will result in additional licence revenue of US$4.2m in the financial year to 31 March 2012.

Operational Review

The Group has experienced a very dynamic, but on the whole, positive recent history in the events that lead up to this Statement.

During the first half of 2011, it became increasingly clear that the business was losing out on commercial opportunities with existing and potential customers based in the US because of its distant factory location in Australia. This was a significant factor impacting the medium to long term business outlook of the Group: our customers had indicated this to us directly.  Additionally, as a consequence of the significant 2-year fall of the US Dollar against the Australian Dollar and the resultant loss of certain new business opportunities, subsequent to the year end in 2011 the Group decided to put into action a strategic plan developed during the previous year.  In the 5 years since the commencement of the commercial phase of the business on July 24 of 2006 with the first human implant of a device constructed from Elast-Eon™ polymer, the pro rata expense of running the Australian factory had doubled against the US Dollar, the primary currency of the Group's sales receipts.

In mid-2010, Management had developed a two-stage plan for the relocation of the Group's factory from Melbourne, Australia to the Minneapolis / St. Paul area in the United States. As stated above, the two primary factors driving this strategy were the significant appreciation of the Australian Dollar against the US Dollar and the proximity of the business to our customers. The original plan was to first move the location-sensitive component business and follow this up at a later date with a cost-driven consolidation of the polymer business in the same location. After careful consideration of these factors earlier this year, subsequent to the year end the Group executed its plan in one step and moved expediently to restructure certain licences to produce the funds necessary to move the majority of factory operations from Australia to the US. One-time, non-dilutive revenues from this restructuring amounted to US$4.2M of which US$1.8M was used to finance the move of the factory and certain employees. This process is ongoing but as of the time of writing it is on schedule and on budget. The Group plans to produce its first batch of polymer in the new US factory during the final quarter of 2011.  New business initiatives that have commenced since the announcement of the move to the USA provide a strong indication that this analysis was correct and that the move will bring tangible benefits in the short to medium term.

The customer reaction to this move has been universally positive. New licences in Blood Glucose monitoring and Plastic Surgery (breast implants) have been accelerated by this move. Additionally existing accounts are being further developed from basic polymer supply agreements into added value component business. Many of our customers prefer that AorTech produces their components but in the past the engineering intensity of these component business development programmes and the logistics associated with the requirement for frequent and recurring routine delivery of products precluded our ability to effectively develop these opportunities from Australia.

With the acceleration of the polymer and component businesses and an anticipated significant reduction in operating expenses associated with the new Minnesota factory, Management projects that 2012 will be a year of cash generation, and thereafter, the highly leverageable characteristics of our business, coupled with new accounts, should result in a stable business capable of generating returns for shareholders.

In the past, I have spoken of the commercial development of the Group's heart valve technology portfolio. While we remain optimistic regarding the potential for this technology, the continued improvement of biological heart valve clinical outcomes alongside the rapidly growing market for trans-catheter heart valves is causing us to reconsider our strategy in this space. We expect our technology to continue to move ahead into the commercial phase but it is increasingly likely that the trans-catheter application and the surgical manifestation of this technology will target different markets.

In addition to the aortic percutaneous heart valve ('PHV'), our mitral repairs licensee continues to make progress and is projecting human use of this royalty-bearing application before the end of calendar year 2012.

Our device portfolio now also includes a peripheral vascular graft project Joint Venture in the negotiation stage and breast implant project with four definable phases.

Growth of the Polymer Business

Elast-Eon™, now with 5 years of clinical experience and millions of implants, is a proven material and useful for many applications.  Our ECSiL™ polymer, essentially a super silicone, is in late stage evaluations for a number of demanding long-term implant applications. We expect to see the first human implantation of ECSil™ before the second half of 2012.

In general, the Elast-Eon™ clinical experience continues to be completely trouble free. Each of our licences requires notification of an adverse clinical event. There have been none. More specifically, our polymers are providing advantages for our customers' products; namely cardiac cannulae that are free from thrombus; pacemaker leads that are the most reliable in the industry; implantable sensors that can be injected without damage; urology catheters that carry anti-bacterial and anti-inflammatory agents, and biliary and prostatic stents that remain free from blockage.

Components

Our ability to provide a high strength, low profile header for neurostimulation use will provide direct financial returns in addition to attracting attention of companies in the much larger cardiac rhythm management sector. This first use of our polymers with our proprietary small part reaction injection moulding process is now moving ahead into early stage trials with a novel orthopaedic device. We believe that with our new US presence, we will be in a significantly better position to exploit our manufacturing process know-how in conjunction with our polymer technology for both low and high volume catheters, catheter over-moulding, a variety of header components and anywhere a biostable polymer needs to be effectively bonded to commonly used implant materials, including metals, ceramics and other engineered polymers.

Outlook

The physical move from Melbourne to Minneapolis has been most positively welcomed by our essential US customer base.  Indeed, we can already point to additional business the move has secured, and it is expected that this will result in more business wins; the prime goal of the decision to relocate to the US.  Once our move to the USA is completed we will consider whether it may be more appropriate to move our listing to a US market, also depending on economic conditions and Group performance at that point.

The new and supplementary products and commercial opportunities covered in this Statement are realistically expected to come to fruition during the current financial year. Thanks to the dedication and skill of our management and staff in the USA and Australia the first vital step is nearing completion.  This paves the way for future far-reaching structural advance.  Your Board therefore anticipates the future with enthusiasm and confidence.

Jon Pither

Chairman

Consolidated Income Statement

			Year ended  31 March 2011		Year ended  31 March 2010
			£000		£000
Revenue			1,570		1,362
Other income - grants received			328		306
Cost of sales			(357)		(382)
Administrative expenses			(2,187)		(2,082)
Other expenses - development expenditure			(1,333)		(1,121)
Other expenses - impairment of property, plant and equipment			(455)		-
Other expenses - amortisation of intangible assets			(152)		(142)
Operating loss			(2,586)		(2,059)
Finance income			85		136
Loss before taxation			(2,501)		(1,923)
Taxation			-		-
Loss attributable to equity holders of the parent company			(2,501)		(1,923)
Loss per share
Basic and diluted - (pence per share)			(51.75)		(39.79)

Consolidated Statement of Comprehensive Income

		Year ended  31 March 2011		Year  ended  31 March 2010
		£000		£000
Loss for the year		(2,501)		(1,923)
Other comprehensive income:
Exchange differences on translating foreign operations		210		1,204
Income tax relating to other comprehensive income		-		-
Other comprehensive income for the year, net of tax		210		1,204
Total comprehensive income for the year, attributable
to equity holders of the parent		(2,291)		(719)

Consolidated Balance Sheet
			31 March 2011		31 March 2010
			£000		£000
Assets
Non current assets
	Intangible assets		1,365		1,424
	Property, plant and equipment		216		718
Total non current assets			1,581		2,142
Current assets
	Inventories		146		150
	Trade and other receivables		674		859
	Cash and cash equivalents		1,381		2,885
Total current assets			2,201		3,894
Total assets			3,782		6,036
Liabilities
Current liabilities
	Trade and other payables		(660)		(623)
Total current liabilities			(660)		(623)
Total liabilities			(660)		(623)
Net assets			3,122		5,413
Equity
	Issued capital		12,082		12,082
	Share premium		2,340		2,340
	Other reserve		(2,003)		(2,003)
	Foreign exchange reserve		2,072		1,862
	Profit and loss account		(11,369)		(8,868)
Total equity attributable to equity holders of the parent			3,122		5,413

Consolidated Cash Flow Statement
		Year ended  31 March 2011		Year     ended  31 March 2010
		£000		£000
Cash flows from operating activities
	Group loss after tax	(2,501)		(1,923)
Adjustments for:
	Depreciation of property, plant and equipment	226		258
	Impairment of property, plant and equipment	455		-
	Amortisation of intangible assets	152		142
	Interest income	(85)		(136)
	Deferred income released	-		(79)
	Decrease in trade and other receivables	185		(423)
	Decrease in inventories	4		-
	Increase in trade and other payables	37		111
Net cash flow from operating activities		(1,527)		(2,050)
Cash flows from investing activities
	Purchase of property, plant and equipment	(132)		(102)
Interest received		85		136
Net cash flow from investing activities		(47)		34
Net decrease in cash and cash equivalents		(1,574)		(2,016)
Foreign exchange movements on cash held in foreign currencies		70		723
Cash and cash equivalents at beginning of year		2,885		4,178
Cash and cash equivalents at end of year		1,381		2,885

Consolidated Statement of Changes in Equity
		Share capital		Share premium account		Other reserve			Foreign exchange reserve			Profit and loss account			Total equity
		£000		£000		£000			£000			£000			£000
Balance at 31 March 2009		12,082		2,340		(2,003)			658			(6,945)			6,132
Transactions with owners		-		-		-			-			-			-
Loss for the year		-		-		-			-			(1,923)			(1,923)
Other comprehensive income
Exchange difference on translating foreign operations		-		-		-			1,204			-			1,204
Income tax relating to components of other comprehensive income		-		-		-			-			-			-
Total comprehensive income for the year		-		-		-			1,204			(1,923)			(719)
Balance at 31 March 2010		12,082		2,340		(2,003)			1,862			(8,868)			5,413

Transactions with owners	-		-		-		-		-		-
Loss for the year	-		-		-		-		(2,501)		(2,501)
Other comprehensive income
Exchange difference on translating foreign operations	-		-		-		210		-		210
Income tax relating to components of other comprehensive income	-		-		-		-		-		-
Total comprehensive income for the year	-		-		-		210		(2,501)		(2,291)
Balance at 31 March 2011	12,082		2,340		(2,003)		2,072		(11,369)		3,122

1.   Basis of preparation

The financial information in this preliminary announcenent has been prepared under the historical cost convention and in compliance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the European Union as at 31 March 2011.

2.   Loss per share

The basic loss per Ordinary share of 51.75p (2010: 39.79p) is calculated on the loss of the Group of £2,501,000 (2010: £1,923,000) and on 4,832,778 (2010: 4,832,778) equity shares, being the number of shares in issue during the year.  The diluted loss per share does not differ from the basic loss per share as the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.

3.   Preliminary announcement

The summary accounts set out above do not constitute statutory accounts as defined by Section 434 of the UK Companies Act 2006. The summarised consolidated balance sheet at 31 March 2011, the summarised consolidated income statement, the summarised consolidated statement of comprehensive income, the summarised consolidated statement of changes in equity and the summarised consolidated cash flow statement for the year then ended have been extracted from the Group's statutory financial statements for the year ended 31 March 2011 upon which the auditors' opinion is unqualified and did not contain a statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit reports for the year ended 31 March 2010 did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2010 have been delivered to the Registrar of Companies. The 31 March 2011 accounts were approved by the Directors on 28 July 2011, but have not yet been delivered to the Registrar of Companies.

4.   Notice of Annual General Meeting

Notice is hereby given that the fourteenth Annual General Meeting of AorTech International Plc will be held in the Mansfield Suite of the Renaissance London Chancery Court Hotel, 252 High Holborn, London, WC1V 7EN on Thursday, 8 September 2011 at 2:00pm.

5.   Posting and availability of accounts

The annual report and accounts for the year ended 31 March 2011 will be sent by post to all registered shareholders on 15 August 2011.  Additional copies will be available for a month thereafter from the Company's Weybridge office.  Alternatively, the document may be viewed on, or downloaded from, the Company's website: www.aortech.com.

 

END

 

 

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