Interim Results

RNS Number : 9442Y

AorTech International PLC

11 December 2017

 

AORTECH INTERNATIONAL PLC ("AorTech", "the Company" or "the Group")

Unaudited Interim Results

For the six months ended 30 September 2017

CHAIRMAN'S STATEMENT

I am pleased to set out below the key financial figures for the six months to 30 September 2017 and, more importantly, provide an update on some very positive developments at AorTech.

Unaudited results for the six months to 30 September 2017

Over the six month period to 30 September 2017, revenues increased to $271,000 from the $240,000 achieved in the corresponding period last year. Administration costs were again tightly controlled at $239,000 - a reduction of $110,000 compared to the same period last year - and at similar levels to the second half of the last financial year.

A profit of $32,000 was achieved before charging exceptional costs and amortisation, a substantial improvement on the loss of $109,000 in the corresponding period last year.

The working capital position also improved with cash increasing, as anticipated, from $114,000 at 31 March 2017 to $286,000 at 30 September 2017 (30 September 2016: $216,000).

Overall, the trading results reflect a continuation of the stabilisation of the Company's financial position reported in the audited results for the year ended 31 March 2017.

Resolution of Dispute

As previously stated, AorTech has always been keen to resolve the litigation with its former Chief Executive and related parties. I am therefore pleased that we have been able to announce that the parties have amicably resolved their dispute and the terms of settlement have been incorporated into a confidential settlement agreement. The confidentiality terms limit our ability to disclose fully the terms of the settlement, but I can say that AorTech is satisfied with the outcome.

This dispute has consumed a considerable amount of management time and resources and diverted energy that would have been better focused on developing the business. One major benefit, however, is that the litigation process has resulted in a much deeper understanding of the technical benefits of AorTech's Intellectual Property portfolio ("IP") and where efforts should in future be focused in capitalising on the core properties of Elast-Eon™ to generate value for shareholders.

Platform Technology

Elast-Eon™ polymers are now widely accepted as being the most biostable of all polyurethane materials and, as such, are being used in long term implantation. With several million implants and ten years of successful clinical use, AorTech polymers are used in cardiology and urological applications, including pacing leads, cardiac cannulae and coronary artery stents. Devices manufactured from AorTech polymers have numerous US FDA PMA approvals, 510ks, and CE Marks. Elast-Eon™ is approved for long term human implants in all major markets.

The business model has not really changed over the 15 years since AorTech withdrew from medical device manufacturing in Scotland and focused on licensing its polymer technology to medical device companies. AorTech has however simplified its operations by subcontracting polymer manufacture to Biomerics rather than operate its own polymer plant. This change has dramatically improved the fundamental economics of the business and has resulted in long term contractual revenue streams that are secure as long as the licensees continue to market the devices that have been enabled by incorporating into their designs the Elast-Eon™ technology.

Our licensees have generated considerable value by utilising Elast-Eon™. One example of this is a cardiovascular device that differs only from competing devices by having a thin Elast-Eon™ coating. This coating provides the device with superior properties and allows a sales price of many multiples of standard devices. The cost of materials and license fees, however, are less than 5% of the device's sales value.

The value added to licensees is not only greater than licence fees payable, but the value of the licence fees to our customers is significantly more than the market capitalisation of AorTech

A New Chapter

The long-running litigation dispute created a number of uncertainties for AorTech and its shareholders and at the time of announcing results for the year to 31 March 2017 the share price was implying that AorTech was likely to fail.

The recent trading results should indicate to shareholders that the business is on a more stable footing and the risk of failure diminished. The cash position improved during the six months to 30 September 2017 and at the end of November 2017 had further increased to $328,000. As a result of the conclusion of the litigation, AorTech will have certain costs to pay and make reimbursements to our insurance provider. However, we anticipate that the net cash position should improve further.

The Board has conducted a thorough review of the Company's IP and where it fits into the medical device market, leading to the conclusion that there are a number of opportunities available to grow AorTech's business.  A detailed strategic plan to allow AorTech to commercialise its platform technology is currently being considered and we will report to shareholders when the process is concluded.

We have the opportunity of putting past issues behind us and building on the core IP within the business. As part of this "fresh start", I am delighted to welcome Stockdale Securities as our new Nominated Adviser and broker and look forward to working with them to help AorTech reach its true potential.

Bill Brown, Chairman                                                                                                      11 December 2017

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
Six months ended 30 September 2017			Unaudited			Unaudited		Audited
	Note		Six months to 30 Sept 2017			Six months to 30 Sept 2016		Twelve months to 31 March 2017
			US$000			US$000		US$000
Revenue			271			240		614
	Administrative expenses		(239)			(349)		(571)
	Exceptional administrative expenses                                               2		(1)			(49)		12
	Other expenses - amortisation of intangible assets                         4		(146)			(152)		(292)
Operating loss			(115)			(310)		(237)
Loss attributable to owners of the parent company			(115)			(310)		(237)
	Taxation		-			-		-
Loss attributable to equity holders of the parent company			(115)			(310)		(237)
Loss per share (basic and diluted) - US cents			(2.07)			(5.58)		(4.27)
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
			Unaudited			Unaudited		Audited
			Six months to 30 Sept 2017			Six months to           30 Sept 2016		Twelve months to         31 March 2017
			US$000			US$000		US$000
Loss for the period			(115)			(310)		(237)
Other comprehensive income:
	Exchange differences		85			(122)		(204)
	Income tax relating to other comprehensive income		-			-		-
Other comprehensive income for the period, net of tax			85			(122)		(204)
Total comprehensive income for the period, attributable to equity holders of the parent company			(30)			(432)		(441)

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
Unaudited						Unaudited				Audited
			30 Sept 2017			30 Sept 2016				31 March 2017
			US$000			US$000				US$000
Assets
Non current assets
		Intangible assets	828			1,093				914
Total non current assets			828			1,093				914
Current assets
		Trade and other receivables	249			145				392
		Cash and cash equivalents	286			216				114
Total current assets			535			361				506
Total assets			1,363			1,454				1,420
Liabilities
Current liabilities
		Trade and other payables	(75)			(127)				(102)
Total current liabilities			(75)			(127)				(102)
Net assets			1,288			1,327				1,318
Equity
		Issued capital	16,235			15,769				15,189
		Share premium	3,349			3,253				3,133
		Other reserve	(2,684)			(2,607)				(2,511)
		Foreign exchange reserve	7,748			8,230				8,752
		Profit and loss account	(23,360)			(23,318)				(23,245)
Total equity attributable to equity holders of the parent company			1,288			1,327				1,318
CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT
Unaudited								Unaudited			Audited
				Six months to 30 Sept 2017				Six months to 30 Sept 2016			Twelve months to 31 March 2017
				US$000				US$000			US$000
Cash flows from operating activities
	Group loss after tax			(115)				(310)			(237)
Adjustments for:
	Amortisation of intangible assets			146				152			292
	Decrease / (increase) in trade and other receivables			143				98			(149)
	Decrease in trade and other payables			(2)				(38)			(106)
Net cash flow from operating activities				172				(98)			(200)
Cash flows from investing activities
	Purchase of intangible assets			-				-			-
Net cash flow from investing activities				-				-			-
Net increase / (decrease) in cash and cash equivalents				172				(98)			(200)
Cash and cash equivalents at beginning of period				114				314			314
Cash and cash equivalents at end of period				286				216			114

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
(Unaudited)		Share capital		Share premium account		Other reserve		Foreign exchange reserve		Profit and loss account			Total equity
		US$000		US$000		US$000		US$000		US$000			US$000
Balance at 1 April 2016		17,426		3,595		(2,881)		6,627		(23,008)			1,759
Transactions with owners		-		-		-		-		-			-
Loss for the period		-		-		-		-		(310)			(310)
Other comprehensive income
Exchange difference		(1,657)		(342)		274		1,603		-			(122)
Income tax relating to components of other comprehensive income		-		-		-		-		-			-
Total comprehensive income for the period		(1,657)		(342)		274		1,603		(310)			(432)
Balance at 30 September 2016		15,769		3,253		(2,607)		8,230		(23,318)			1,327
Transactions with owners		-		-		-		-		-			-
Profit for the period		-		-		-		-		73			73
Other comprehensive income
Exchange difference		(580)		(120)		96		522		-			(82)
Income tax relating to components of other comprehensive income		-		-		-		-		-			-
Total comprehensive income for the period		(580)		(120)		96		522		73			(9)
Balance at 31 March 2017		15,189		3,133		(2,511)		8,752		(23,245)			1,318
Transactions with owners		-		-		-		-		-			-
Loss for the period		-		-		-		-		(115)			(115)
Other comprehensive income
Exchange difference		1,046		216		(173)		(1,004)		-			85
Income tax relating to components of other comprehensive income		-		-		-		-		-			-
Total comprehensive income for the period		1,046		216		(173)		(1,004)		(115)			(30)
Balance at 30 September 2017		16,235		3,349		(2,684)		7,748		(23,360)			1,288

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

These condensed consolidated interim financial statements are for the six months ended 30 September 2017, and have been prepared with regard to the requirements of IAS 34 on "Interim Financial Reporting".  They do not include all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2017.

These condensed consolidated 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 2017. They were approved for issue by the Board of Directors on 11 December 2017.

After considering the period end cash position, making appropriate enquiries and reviewing budgets and profit and cash flow forecasts for a period of at least twelve months from the date of signing these interim financial statements, the Directors have formed a judgement at the time of approving the interim financial statements that there is a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. For this reason the Directors consider the adoption of the going concern basis in preparing the condensed consolidated interim financial statements is appropriate.

The financial information for the six months ended 30 September 2017 and the comparative figures for the six months ended 30 September 2016 are unaudited and have been prepared on the basis of the accounting policies set out in the consolidated financial statements of the Group for the year ended 31 March 2017. 

These extracts do not constitute statutory accounts under section 434 of the Companies Act 2006. The financial statements for the year ended 31 March 2017, prepared under IFRS, received an unqualified audit report, did not contain statements under sections 498(2) and 498(3) of the Companies Act 2006 and have been delivered to the Registrar of Companies. 

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

The functional currency of AorTech International Plc is GB£ as this is where all sales arise. However, to reflect the substance of transactions Directors have chosen to use US$ as their presentational currency. Exchange differences therefore arise in each period representing the retranslation of reserves from a functional currency of GB£ to their presentational currency of US$.

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 5,557,695.  The comparatives are calculated by reference to the weighted average number of ordinary shares in issue which were 5,557,695 for the year ended 31 March 2017.

2.  EXCEPTIONAL ADMINISTRATIVE EXPENSES

This comprises the exceptional administrative expense represented by the ongoing 10% cost of litigation against the Company's former CEO.

3.  SEGMENTAL REPORTING
The Company is an Intellectual Property (IP) holding company whose principal activity is exploiting the value of its IP and know-how.
All revenue and operating result originated in the United Kingdom.
			Unaudited		Unaudited			Audited
			Six months to 30 Sept 2017		Six months to 30 Sept 2016			Twelve months to  31 March 2017
			US$000		US$000			US$000
Analysis of revenue by products and services
	Licence fees - services		70		52			125
	Royalty revenue		201		188			489
			271		240			614

4. INTANGIBLE ASSETS

The following table shows the impact of additions, exchange rate adjustments and amortisation on intangible assets.
		Intellectual property		Development costs		Total
		US$000		US$000		US$000
	At 1 April 2016	1,052		315		1,367
	Exchange rate adjustment	(94)		(28)		(122)
	Amortisation	(109)		(43)		(152)
	At 30 September 2016	849		244		1,093
	Exchange rate adjustment	(31)		(8)		(39)
	Amortisation	(100)		(40)		(140)
	At 1 April 2017	718		196		914
	Exchange rate adjustment	47		13		60
	Amortisation	(105)		(41)		(146)
	At 30 September 2017	660		168		828

5. INTERIM ANNOUNCEMENT

The interim results announcement was released on 11 December 2017.  A copy of this Interim Report is also available on the Company's website www.aortech.net.

AorTech International Plc

Bill Brown, Chaiman and Chief Executive

Tel:  [phone]

Stockdale Securities Ltd as Nominated Advisor

Tom Griffiths / El Hanan Lee

Tel:  [phone]

 

END

 

 

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