Interim Results
Aortech International PLC
13 December 2007
13 December 2007
AorTech International plc
Interim Results For The Six Months Ended 30 September 2007
AorTech International plc (AIM: AOR) ('AorTech' or the 'Company'), the
biomaterials and medical device development company, today announces its
unaudited interim results for the six months ended 30 September 2007.
Operational Highlights
• Pacing lead insulation business with St. Jude Medical continues to expand;
• Execution of a licence agreement for a device co-development project,
incorporating provisions for potential pre-royalty payments of
US$32 million;
• Human use of AorTech's proprietary polymer technology Elast-EonTM in
gastroenterological implants, with its partner Allium-Medical, Inc.;
• Active evaluations of Elast-Eon underway in the high-growth
neuro-stimulation lead space;
• Receipt of initial orders for moulded Elast-Eon components to be used in
spinal disc development programme;
• Customer qualification of the Company's scaled-up manufacturing operations;
Technology Developments
• Elast-Eon Solution Grade ('SG') and Elast-Eon 5 were both launched in the
period. SG is formulated to meet the needs of customers wishing to coat
various devices and components in Elast-Eon; and
• The grant of a additional key heart valve patents in the EU and
Australia, maintaining the Company's firm control on its Intellectual
Property.
Financial Highlights
• Turnover up 175% to £328,000 (H1 2006: £119,000);
• Loss after tax £759,000 (H1 2006 loss: £1.0 million);
• As at 30 September 2007 cash reserves of £5.5 million;
• £4.8 million raised net of expenses via a share Placing in August 2007.
Jon Pither, Chairman, said:
'The primary strategy of the Company remains one of building shareholder value
based on our established and protected polymer technology, Elast-Eon. We are,
therefore, continuing to increase the range of Elast-Eon materials for the
design and manufacture of medical devices. However, the Directors also believe
that our polymer component production capability will provide increasing
financial returns, thus allowing us to exploit the potential of our major
development projects in heart valve and breast implant devices. We view the
recent market announcement of the second human application of Elast-Eon in a
non-vascular stent application with Allium-Medical to be an important step in
the validation of this strategy.
'We have made significant progress during the period achieving multinational
regulatory approvals, a reputation for quality and service, thousands of human
implants in various applications with our premier biostable polymer Elast-Eon
while significantly increasing operational capacity.
'While a number of significant financial goals remain dependent upon numerous
factors, including the continued performance of AorTech operations and the
progress of our commercial partners and customers, the realisation of these
goals continues satisfactorily. The management and the AorTech Board view the
future with confidence.'
- Ends -
For further information please contact:
AorTech International plc Tel: + 1 801 201 4336
Frank Maguire, Chief Executive
Evolution Securities Tel: +44 20 7071 4300
Bobbie Hilliam / Chris Clarke
Hogarth Partnership Limited Tel: +44 20 7357 9477
Melanie Toyne-Sewell / Sarah Richardson
Notes to Editors
About AorTech International plc
Listed on AIM in London, AorTech International plc wholly owns AorTech
Biomaterials based in Melbourne, Australia. 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 a decade of fundamental
research into biologically stable materials. Elast-Eon materials are patented,
high silicone content, polyurethane copolymers which exhibit unparalleled
biological and mechanical performance.
AorTech is firmly focused on the development and refinement of this material for
the medical community, 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.
Unaudited Interim Results For The Six Months Ended 30 September 2007
Chairman's Statement
I am pleased to report that the first six months of the financial year have
continued the encouraging progress made in the prior financial year.
Financial Review
Group turnover for the first six months of the financial year ended 30 September
2007 increased 175% to £328,000 (H1 2006 £119,000). Turnover booked during the
period principally came from polymer sales and up-front fees. Operating expenses
for the six months were £1.4 million (H1 2006 £1.2 million), an increase of 13%
over the comparative six months in line with the increase in turnover. The
operating expenses included £388,000 of development expenditure (H1 2006:
£371,000) and amortisation of intangible fixed assets amounting to £49,000 (H1
2006: £48,000). The loss after tax for the six months ended 30 September was
£759,000 (H1 2006: £1.0 million).
In August this year, the Company raised £4.8 million net of expenses. As at 30
September 2007, the Group had cash reserves of £5.5 million (31 March 2007: £1.5
million). The Company intends to use the proceeds of the share Placing to assist
with the expansion of its US commercial efforts with new hires in marketing and
sales, and investment within the Company's technology and manufacturing facility
in order to reduce ongoing costs and provide capital for new machinery.
The remainder of this statement focuses on the commercial and technical progress
that has been and continues to be achieved.
Operational Review
Manufacturing and Supply of Elast-Eon bulk material
Following the share Placing in August 2007, the Directors invested approx £0.5
million in order to double the capacity of the factory. Plans for in-house
manufacturing of a key raw material are on target and new injection moulding
equipment is scheduled for delivery in Q1 2008. Elast-Eon Solution Grade ('SG')
and Elast-Eon 5 are both new products launched in the period. SG is formulated
to meet the needs of customers wishing to coat various devices and components in
Elast-Eon. Elast-Eon 5 represents the next step in the technology's development
and is the result of our continued efforts to produce polymers with improved
physical properties and stability.
The Board is particularly pleased that as the manufacturing operations have been
scaled up and new products launched, key customer qualifications have grown in
number and perfect customer quality and delivery performance has been
maintained.
Markets and Customers
The Company continues to pursue joint venture projects and licensing agreements
with major medical device companies. The Board also continues to see the market
for its Elast-Eon polymer to be large and growing. We believe that our customers
have recognised Elast-Eon as a top quality silicone-urethane material for soft,
long-term, high fatigue, blood-contacting implants.
The Company is also pleased to confirm it has received initial orders for its
moulded Elast-Eon components to be used in one of its spinal disc development
programmes. This is a new area of use for the Elast-Eon product and we believe
indicates the wide range of potential applications in which Elast-Eon can be
used. For example, the Company has active evaluations of Elast-Eon underway in
the high-growth neuro-stimulation lead market.
Device Development Programme
The key agreement for the Company during the financial period was the execution
of a licence agreement for the co-development of one of the Company's device
projects incorporating provisions for potential pre-royalty payments of US$32
million. This programme is proceeding according to plan. As previously stated,
while the agreement is not expected to have a material impact on the Company's
financial position in the short term, the Company will receive milestone
payments plus potential material supplies revenue.
The Company has succeeded in producing Elast-Eon breast implant shells for
customer evaluation.
Summary
We have made significant progress during the past two years culminating in the
key agreement with a global medical device company. During this time, we have
achieved multinational regulatory approvals, a reputation for quality and
service, thousands of human implants in various applications of our premier
biostable polymer Elast-Eon, and a significantly increased operational capacity.
A number of significant financial goals remain dependent upon numerous factors
including the continued performance of AorTech operations, technology and
factors outside the Company's control such as the activities of its partners and
customers. The AorTech management and Board are of the view that the bulk of
these activities are progressing in line with expectations.
The share Placing has provided us with the necessary resource to carry through
our development plans, as we seek to deploy our proven technology within further
large scale and life sustaining markets. The Board is confident that AorTech has
the technology, resources, partners and commitment to fully realise the
potential of our unique Elast-Eon polymer and thereby build shareholder value
over the coming years.
Jon Pither
Chairman
Condensed Consolidated Interim Income Statement
Six months ended 30 September 2007
(Unaudited) Six months to Six months to Twelve months to
30 Sept 2007 30 Sept 2006 31 March 2007
£000 £000 £000
Revenue 328 119 276
Other income - grants received 234 - 213
Cost of sales (187) (79) (158)
Administrative expenses (742) (707) (1,589)
Other expenses - development
expenditure (388) (371) (821)
Other expenses - amortisation
of intangible
assets (49) (48) (148)
-------- -------- --------
Operating loss (804) (1,086) (2,227)
Finance cost (2) (1) (3)
Finance income 47 53 109
-------- -------- --------
Loss before taxation (759) (1,034) (2,121)
Taxation - - -
-------- -------- --------
Loss for the financial period (759) (1,034) (2,121)
======== ======== ========
Loss per share (basic and
diluted) - pence (18.82) (27.14) (55.67)
Condensed Consolidated Interim Balance Sheet
As at 30 September 2007
(Unaudited) 30 Sept 2007 30 Sept 2006 31 March 2007
£000 £000 £000
Assets
Non current assets
Property, plant and equipment 536 537 472
Intangible assets 1,280 1,269 1,262
-------- ------- --------
Total non
current assets 1,816 1,806 1,734
-------- ------- --------
Current assets
Inventories 217 91 89
Trade and other receivables 310 315 374
Cash and cash equivalents 5,462 2,336 1,480
-------- ------- --------
Total current assets 5,989 2,742 1,943
-------- ------- --------
Total assets 7,805 4,548 3,677
-------- ------- --------
-------- ------- --------
Liabilities
Current liabilities
Trade and other payables (399) (283) (469)
Current tax payable - - -
-------- ------- --------
Total current liabilities (399) (283) (469)
-------- ------- --------
Non current liabilities
Other non current liabilities (233) (279) (247)
-------- ------- --------
Total non current liabilities (233) (279) (247)
-------- ------- --------
Total liabilities (632) (562) (716)
-------- ------- --------
Net assets 7,173 3,986 2,961
======== ======= ========
Equity
Issued capital 12,026 9,526 9,526
Share premium 2,340 - -
Other reserve (2,003) (2,003) (2,003)
Foreign exchange reserve 106 (87) (25)
Profit and loss account (5,296) (3,450) (4,537)
-------- ------- --------
Equity shareholders' funds 7,173 3,986 2,961
======== ======= ========
Condensed Consolidated Interim Cash Flow Statement
Six months ended 30 September 2007
(Unaudited) Six months to Six months to Twelve months
30 Sept 2007 30 Sept 2006 to 31 March 2007
£000 £000 £000
Cash flows from operating activities
Group loss after tax (759) (1,034) (2,121)
Adjustments for:
Depreciation of property, plant and equipment 44 53 133
Amortisation of intangible assets 49 48 148
Foreign exchange profit/(loss) on consolidation 62 (43) (75)
Decrease in trade and other receivables 64 989 930
(Increase)/decrease in inventories (128) 49 51
(Decrease)/increase in trade payables (84) (91) 63
-------- -------- -------
Net cash flow from operating activities (752) (29) (871)
-------- -------- -------
Cash flows from investing activities
Purchase of property, plant and equipment (109) (351) (420)
Proceeds of sale of property, plan and equipment 3 - 55
-------- -------- -------
Net cash flow from investing activities (106) (351) (365)
-------- -------- -------
Cash flows from financing activities
Proceeds from issue of share capital, net of issue costs 4,840 - -
-------- -------- -------
Net cash flow from financing activities 4,840 - -
-------- -------- -------
Net increase/(decrease) in cash and cash equivalents 3,982 (380) (1,236)
Cash and cash equivalents at beginning of period 1,480 2,716 2,716
-------- -------- -------
Cash and cash equivalents at end of period 5,462 2,336 1,480
======== ======== =======
Condensed Consolidated Interim Statement Of Changes In Equity
Six months ended 30 September 2007
(Unaudited) Share Foreign Profit and
Share premium Other exchange loss Total
capital account reserve reserve account equity
£000 £000 £000 £000 £000 £000
Balance at 31 March 2006 9,526 - (2,003) - (2,416) 5,107
Changes in equity for first half of
FY 2006/07
Exchange difference on translation
of foreign operations - - - (87) - (87)
------- -------- ------- -------- ------- -------
Net income/(expense) recognised
directly in equity - - - (87) - (87)
Loss for the period - - - - (1,034) (1,034)
------- -------- ------- -------- ------- -------
Total recognised income and expense
for the period - - - (87) (1,034) (1,121)
------- -------- ------- -------- ------- -------
Balance at 30 September 2006 9,526 - (2,003) (87) (3,450) 3,986
Changes in equity for second half of
FY 2006/07
Exchange difference on translation
of foreign operations - - - 62 - 62
------- -------- ------- -------- ------- -------
Net income/(expense) recognised
directly in equity - - - 62 - 62
Loss for the period - - - - (1,087) (1,087)
------- -------- ------- -------- ------- -------
Total recognised income and expense
for the period - - - 62 (1,087) (1,025)
------- -------- ------- -------- ------- -------
Balance at 31 March 2007 9,526 - (2,003) (25) (4,537) 2,961
Changes in equity for first half of
FY 2007/08
Exchange difference on translation
of foreign operations - - - 131 - 131
------- -------- ------- -------- ------- -------
Net income/(expense) recognised
directly in equity - - - 131 - 131
Loss for the period - - - - (759) (759)
------- -------- ------- -------- ------- -------
Total recognised income and expense
for the period - - - 131 (759) (628)
Issue of share capital 2,500 2,600 - - - 5,100
Share issue costs - (260) - - - (260)
------- -------- ------- -------- ------- -------
Balance at 30 September 2007 12,026 2,340 (2,003) 106 (5,296) 7,173
======= ======== ======= ======== ======= =======
IFRS transition note
These condensed consolidated interim financial statements form part of the first
period that will be prepared under IFRS. An explanation of how the transition
from UK GAAP to IFRS has affected the Group is set out on pages 10 - 13. The
IFRS accounting policies of the Group are detailed later in this Interim Report.
The Group's date of transition to IFRS was 1 April 2006. The main items
contributing to the change in financial information compared with that reported
previously under UK GAAP are shown below.
IAS 20 - 'Accounting for government grants and disclosure of government
assistance'.
In accordance with IAS 20, grants received are recognised as a credit in the
Income Statement under the category 'Other income', whereas under UK GAAP these
were shown as part of Revenue.
IAS 21 - 'The effects of changes in foreign exchange rates'.
Under UK GAAP, the Group reported differences in exchange rates on consolidation
within the profit and loss account reserve. Under IFRS, the Group has claimed
the exemption from retrospective application of IAS 21. The Group is now
required to show all post transition differences on consolidation as a separate
item within Equity, being the foreign exchange reserve.
Explanation of material adjustments to the cash flow statement
Application of IFRS has resulted in reclassification of an item in the cash flow
statement as follows:
Under UK GAAP, payments to acquire tangible fixed assets were classified as part
of 'Capital expenditure and financial investment'. Under IFRS, payments to
acquire property, plant and equipment have been classified as part of 'Investing
activities'. There are no other material differences between the cash flow
statement presented under IFRS and the cash flow statement presented under UK
GAAP.
Reconciliation Of Income Statement
(Unaudited) Six months to 30 September 2006
----------------------
UK GAAP Adjustments IFRS
IAS 20
£000 £000 £000
Revenue 119 - 119
Grants received - - -
-------- -------- --------
Group revenue 119 - 119
Other income - grants received - - -
Cost of sales (79) - (79)
Administrative expenses (707) - (707)
Other expenses - development
expenditure (371) - (371)
Other expenses - amortisation of
intangible assets (48) - (48)
-------- -------- --------
Operating loss (1,086) - (1,086)
Finance costs (1) - (1)
Finance income 53 - 53
-------- -------- --------
Loss before taxation (1,034) - (1,034)
Taxation - - -
-------- -------- --------
Loss for the financial period (1,034) - (1,034)
======== ======== ========
Twelve months to 31 March 2007
----------------------
UK GAAP Adjustments IFRS
IAS 20
£000 £000 £000
Revenue 276 - 276
Grants received 213 (213) -
-------- -------- --------
Group revenue 489 (213) 276
Other income - grants received - 213 213
Cost of sales (158) - (158)
Administrative expenses (1,589) - (1,589)
Other expenses - development
expenditure (821) - (821)
Other expenses - amortisation of
intangible assets (148) - (148)
-------- -------- --------
Operating loss (2,227) - (2,227)
Finance costs (3) - (3)
Finance income 109 - 109
-------- -------- --------
Loss before taxation (2,121) - (2,121)
Taxation - - -
-------- -------- --------
Loss for the financial period (2,121) - (2,121)
======== ======== ========
Reconciliation Of Equity
(Unaudited) 1 April 1 April
2006 2006
UK GAAP Adjustments IFRS
Assets £000 £000 £000
Non current assets
Property, plant and equipment 240 - 240
Intangible assets 1,360 - 1,360
-------- -------- --------
Total non current
assets 1,600 - 1,600
-------- -------- --------
Current assets
Inventories 140 - 140
Trade and other receivables 1,304 - 1,304
Cash and cash equivalents 2,716 - 2,716
-------- -------- --------
Total current assets 4,160 - 4,160
-------- -------- --------
Total assets 5,760 - 5,760
-------- -------- --------
Liabilities
Current liabilities
Trade and other payables (509) - (509)
Current tax payable - - -
-------- -------- --------
Total current liabilities (509) - (509)
-------- -------- --------
Non current liabilities
Other non current liabilities (144) - (144)
-------- -------- --------
Total non current liabilities (144) - (144)
-------- -------- --------
Total liabilities (653) - (653)
-------- -------- --------
Net assets 5,107 - 5,107
======== ======== ========
Equity
Issued capital 9,526 - 9,526
Share premium - - -
Other reserve (2,003) - (2,003)
Foreign exchange reserve - - -
Profit and loss account (2,416) - (2,416)
-------- -------- --------
Equity shareholders' funds 5,107 - 5,107
======== ======== ========
Reconciliation Of Equity
(Unaudited) 30 Sept 30 Sept
2006 2006
UK GAAP Adjustments IFRS
IAS 21
Assets £000 £000 £000
Non current assets
Property, plant and equipment 537 - 537
Intangible assets 1,269 - 1,269
-------- -------- --------
Total non current assets 1,806 - 1,806
-------- -------- --------
Current assets
Inventories 91 - 91
Trade and other receivables 315 - 315
Cash and cash equivalents 2,336 - 2,336
-------- -------- --------
Total current assets 2,742 - 2,742
-------- -------- --------
Total assets 4,548 - 4,548
-------- -------- --------
Liabilities
Current liabilities
Trade and other payables (283) - (283)
Current tax payable - - -
-------- -------- --------
Total current liabilities (283) - (283)
-------- -------- --------
Non current liabilities
Other non current liabilities (279) - (279)
-------- -------- --------
Total non current liabilities (279) - (279)
-------- -------- --------
Total liabilities (562) - (562)
-------- -------- --------
Net assets 3,986 - 3,986
======== ======== ========
Equity
Issued capital 9,526 - 9,526
Share premium - - -
Other reserve (2,003) - (2,003)
Foreign exchange reserve - (87) (87)
Profit and loss account (3,537) 87 (3,450)
-------- -------- --------
Equity shareholders' funds 3,986 - 3,986
======== ======== ========
Reconciliation Of Equity
(Unaudited) 31 March 31 March
2007 2007
UK GAAP Adjustments IFRS
IAS 21
Assets £000 £000 £000
Non current assets
Property, plant and equipment 472 - 472
Intangible assets 1,262 - 1,262
-------- -------- --------
Total non current assets 1,734 - 1,734
-------- -------- --------
Current assets
Inventories 89 - 89
Trade and other receivables 374 - 374
Cash and cash equivalents 1,480 - 1,480
-------- -------- --------
Total current assets 1,943 - 1,943
-------- -------- --------
Total assets 3,677 - 3,677
-------- -------- --------
Liabilities
Current liabilities
Trade and other payables (469) - (469)
Current tax payable - - -
-------- -------- --------
Total current liabilities (469) - (469)
-------- -------- --------
Non current liabilities
Other non current liabilities (247) - (247)
-------- -------- --------
Total non current liabilities (247) - (247)
-------- -------- --------
Total liabilities (716) - (716)
-------- -------- --------
Net assets 2,961 - 2,961
======== ======== ========
Equity
Issued capital 9,526 - 9,526
Share premium - - -
Other reserve (2,003) - (2,003)
Foreign exchange reserve - (25) (25)
Profit and loss account (4,562) 25 (4,537)
-------- -------- --------
Equity shareholders' funds 2,961 - 2,961
======== ======== ========
Notes To The Condensed Consolidated Interim Financial Statements
1. Preparation of the Accounts
These condensed consolidated interim financial statements are for the six months
ended 30 September 2007, and have been prepared with regard to the requirements
of IFRS 1 'First Time Adoption of International Financial Reporting Standards'
relevant to interim reports because they are part of the period covered by the
Group's first IFRS financial statements for the year ending 31 March 2008. They
do not include all of the information required for full financial statements,
and should be read in conjunction with the consolidated financial statements
(under UK GAAP) of the Group for the year ended 31 March 2007.
These condensed consolidated interim financial statements (the interim financial
statements) have been prepared in accordance with the accounting policies set
out below which are based on the recognition and measurement principles of IFRS
in issue as adopted by the European Union (EU) and effective at 31 March 2008 or
are expected to be adopted and effective at 31 March 2008, our first annual
reporting date at which we are required to use IFRS accounting standards adopted
by the EU. They were approved for issue by the Board of Directors on 12 December
2007.
AorTech International Plc's consolidated financial statements were prepared in
accordance with United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) until 31 March 2007. The date of transition to
IFRS was 1 April 2006. The comparative figures in respect of 2006 have been
restated to reflect changes in accounting policies as a result of the adoption
of IFRS. The disclosures required by IFRS 1 concerning the transition from UK
GAAP to IFRS are given in the reconciliation schedules included within this
report.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these condensed consolidated interim financial
statements.
The financial information for the six months ended 30 September 2007 and the
comparative figures for the six months ended 30 September 2006 and the twelve
months ended 31 March 2007 are unaudited and have been prepared on the basis of
the accounting policies set out in the notes to this financial information. This
financial information does not constitute statutory accounts as defined in
Section 240 of the Companies Act 1985. The financial statements for the year
ended 31 March 2007, prepared under UK GAAP, received an unqualified audit
report, did not contain statements under sections 237(2) and 237(3) of the
Companies Act 1985 and have been delivered to the Registrar of Companies.
2. Segmental reporting
The principal activity of AorTech International plc Group currently is the
development and exploitation of a range of innovative biomaterials.
All revenue originated in Australia, with the exception in the first six months
of financial year 2007/08 when an upfront payment of £146,700 in respect of a
medium term contractual arrangement was received by the UK company.
(Unaudited) Six months to Six months to Twelve months
30 Sept 2007 30 Sept 2006 to 31 March
2007
£000 £000 £000
Analysis of revenue
Geographical segments
United Kingdom 147 - -
Australia 181 119 276
United States of America - - -
-------- ------- --------
328 119 276
======== ======= ========
Analysis of result - operating loss
Geographical segments
United Kingdom (241) (318) (681)
Australia (433) (752) (1,409)
United States of America (130) (16) (137)
-------- ------- --------
(804) (1,086) (2,227)
======== ======= ========
3. Loss Per Share
Loss per share has been calculated on the basis of the result for the period
after tax, divided by the weighted average number of ordinary shares in issue in
the period of 4,034,322. The comparatives are calculated by reference to the
weighted average number of ordinary shares in issue which were 3,810,278 for the
period to 30 September 2006 and 3,810,278 for the year ended 31 March 2007.
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