Final Results

Surgical Innovations Group plc                                               
                                                                             
Preliminary results for the year ended 31 December 2004                      
                                                                             
22 April 2005                                                                
                                                                             
Chairman's Statement                                                         
                                                                             
Trading Review                                                               
                                                                             
I am delighted to report another year of progress in your Group's overall    
performance in 2004.                                                         
                                                                             
Group turnover increased from £2.75 million in 2003 to £3.03 million in 2004,
an increase of 10%, which resulted in a 28% increase in pre-tax profit to £  
174,000 compared with £136,000 in the previous year.                         
                                                                             
Earnings before interest, taxation and depreciation ('EBITDA') increased by  
55% to £445,000 in 2004 (2003: £287,000). This reflects our significant      
investment in tooling and infrastructure in recent years to support our      
growing manufacturing requirements. EBITDA of £445,000 is stated after       
research and development costs of £330,000, continuing our prudent approach  
of writing off these costs as incurred.                                      
                                                                             
An exciting feature of your Group's performance in 2004 is the continuing    
growth in products for minimally invasive surgery (MIS), our core business.  
Sales of these products accounted for 82% of Group turnover in 2004, compared
with 69% in 2003. This reflects our continually developing relationships with
key internationally renowned strategic partners: Aesculap, Teleflex Medical  
and Cardinal Health.                                                         
                                                                             
Sales Strategy                                                               
                                                                             
As part of our sales strategy, during the last 12 months we have addressed   
the need to increase the UK presence of our own branded products. The        
strategy has been to instigate a collaborative sales agreement with          
established regional independent agents, enabling the Group to sell directly 
into all UK hospitals. This also provides an opportunity to promote          
additional third-party complementary products. In addition, we have          
strengthened our relationships with our two major UK distributors, B Braun   
Medical and Mantis Surgical, by enhancing our contractual arrangements.      
                                                                             
We are seeking to increase sales through the expansion of our worldwide      
distribution network and recently we have signed exclusive distribution      
contracts in the Benelux countries and Australia. The Group also continues to
build on its position in the Middle Eastern markets.                         
                                                                             
Design and Development                                                       
                                                                             
As previously reported, the Group is committed to ongoing investment in      
product design and development as a key part of maintaining its position at  
the forefront of the MIS market. This enables the Group to maintain a        
strategic advantage and support valuable relationships with major            
international healthcare companies. The Design Team, by utilising their      
undoubted skills, has been tasked to seek external projects that contribute  
to the growth of the Group. I am pleased to report that in the current year  
this initiative has already produced results. For example, the Group has been
awarded development contracts for the use of its technology in aero-engine   
maintenance, which could potentially open up a new income stream.            
                                                                             
An area that is receiving ever-growing media and government attention is that
of obesity and its social and economic costs to society. As the pressure to  
aid the morbidly obese increases, there will be growth in the number of      
bariatric ('anti-obesity') cases which involve gastric banding or stomach    
stapling. We provide specialist products in this field and are examining ways
in which we can increase our product portfolio in this potentially lucrative 
area.                                                                        
                                                                             
Increasing Profile                                                           
                                                                             
Your Board does not feel that the Group's value and growth record over the   
past six years is reflected in its share price. Therefore we are investing in
a financial public relations campaign, targeted at the financial investment  
community, particularly institutions that operate in the small-cap           
marketplace. We continue to actively seek strategic alliances, mergers and   
acquisitions and are aware of the need to have our progress reflected in     
increased shareholder value.                                                 
                                                                             
Prospects                                                                    
                                                                             
Last year, I concluded by saying that we approach 2004 with optimism for     
future growth in sales and profitability. I am delighted that my optimism was
justified and 2005 has commenced with a strong order book. I am confident of 
further growth throughout the year.                                          
                                                                             
Finally, on your behalf, I wish to thank my Board colleagues and employees   
for their continued dedication and commitment.                               
                                                                             
Doug Liversidge CBE                                                          
                                                                             
21 April 2005                                                                
                                                                             

Consolidated Profit and Loss Account                                         
                                                                             
For the year ended 31 December 2004                                          
                                                                             
                                                  Notes        2004      2003
                                                                             
                                                              £'000     £'000
                                                                             
Turnover (including Royalties)                                3,032     2,750
                                                                             
Cost of sales                                               (1,432)   (1,312)
                                                                             
Gross profit                                                  1,600     1,438
                                                                             
Administrative expenses                                     (1,358)   (1,255)
                                                                             
Operating profit                                                242       183
                                                                             
Interest payable                                               (68)      (47)
                                                                             
Profit on ordinary activities before taxation                   174       136
                                                                             
Tax on profit on ordinary activities                             38         3
                                                                             
Retained profit                                                 212       139
                                                                             
Earnings per ordinary share                         2         0.08p     0.05p
                                                                             

Consolidated Balance Sheet                                                   
                                                                             
As at 31 December 2004                                                       
                                                                             
                                            2004                 2003        
                                                                             
                                         £'000      £'000      £'000    £'000
                                                                             
Fixed assets                                                                 
                                                                             
Tangible assets                                       811                 892
                                                                             
Current assets                                                               
                                                                             
Stocks                                     881                   721         
                                                                             
Debtors                                  1,215                 1,245         
                                                                             
Cash at bank                                 1                     -         
                                                                             
                                         2,097                 1,966         
                                                                             
Creditors: amounts falling due         (1,043)               (1,111)         
within one year                                                              
                                                                             
Net current assets                                  1,054                 855
                                                                             
Total assets less current                           1,865               1,747
liabilities                                                                  
                                                                             
Creditors: amounts falling due                      (215)               (352)
after more than one year                                                     
                                                                             
Net assets                                          1,650               1,395
                                                                             
Capital and reserves                                                         
                                                                             
Called up share capital                             2,580               2,559
                                                                             
Share premium account                   16,070                16,048         
                                                                             
Capital reserve                            329                   329         
                                                                             
Accumulated losses                    (17,329)              (17,541)         
                                                                             
                                                    (930)             (1,164)
                                                                             
Shareholders' funds                                 1,650               1,395
                                                                             

Consolidated Cash Flow Statement                                             
                                                                             
For the year ended 31 December 2004                                          
                                                                             
                               Notes         2004                2003        
                                                                             
                                           £'000    £'000      £'000    £'000
                                                                             
Net cash inflow from operating   3                    130                 265
activities                                                                   
                                                                             
Returns on investments and                                                   
servicing of finance                                                         
                                                                             
Interest payable on finance                 (29)                (23)         
leases                                                                       
                                                                             
Interest payable on bank                    (32)                (17)         
overdrafts                                                                   
                                                                             
Interest payable on                          (7)                 (7)         
convertible loan notes                                                       
                                                                             
Net cash outflow from returns                        (68)                (47)
on investments and servicing                                                 
of finance                                                                   
                                                                             
Taxation                                               18                  37
                                                                             
Capital Expenditure: purchases                       (21)               (158)
of tangible fixed assets                                                     
                                                                             
Net cash inflow before                                 59                  97
financing                                                                    
                                                                             
Financing                                                                    
                                                                             
Issue of share capital                        21                   -         
                                                                             
Receipts from borrowings                      22                   -         
                                                                             
Capital repayments under bank                (7)                 (3)         
loans                                                                        
                                                                             
Capital repayment under                     (96)                (63)         
finances                                                                     
                                                                             
Net cash outflow from                                (60)                (66)
financing                                                                    
                                                                             
(Decrease)/increase in cash      4                    (1)                  31
                                                                             

Notes                                                                        
                                                                             
For the year ended 31 December 2004                                          
                                                                             
1.  Accounting policies                                                      
                                                                             
    The principal accounting policies which remain unchanged from the        
    previous year, are as follows:                                           
                                                                             
    a)   Basis of accounting                                                 
                                                                             
         The financial statements have been prepared under the historical    
         cost basis of accounting and in accordance with applicable          
         Accounting Standards in the United Kingdom.                         
                                                                             
    b)   Basis of consolidation                                              
                                                                             
         The Group financial statements consolidate those of the Company and 
         of its subsidiary undertakings drawn up to 31 December 2004. The    
         results of subsidiaries accounted for under the acquisition         
         accounting method are included in the consolidated profit and loss  
         from the date of their acquisition. The results of subsidiaries,    
         accounted for under the merger accounting method, are included in   
         the consolidated profit and loss account as if they had always been 
         part of the Group. Intra-Group sales and results are eliminated on  
         consolidation and all sales and results relate to external          
         transactions only.                                                  
                                                                             
2.  Earnings per ordinary share                                              
                                                                             
    The earnings per ordinary share has been calculated by dividing the      
    profit attributable to ordinary shareholders for the year ended 31       
    December 2004 of £212,000 (2003 : £139,000) by the weighted average      
    number of ordinary shares in issue during the year of 256,955,941 (2003 :
    255,659,894) and amounted to 0.08p per share (2003 : 0.05p per share).   
                                                                             
    The Group has two categories of dilutive potential ordinary shares, those
    share options granted where the exercise price is less than the average  
    price of the Company's ordinary shares during the year and the remaining 
    convertible loan notes. The dilution has no effect on basic earnings per 
    share.                                                                   
                                                                             

3.  Reconciliation of operating profit to net cash inflow from operating     
    activities                                                               
                                                                             
                                                             2004        2003
                                                                             
                                                            £'000       £'000
                                                                             
    Operating profit                                          242         183
                                                                             
    Depreciation of tangible fixed assets                     203         104
                                                                             
    Increase in stocks                                      (160)       (159)
                                                                             
    Decrease/(increase) in debtors                             50       (206)
                                                                             
    (Decrease)/increase in creditors                        (205)         343
                                                                             
    Net cash inflow from operating activities                 130         265
                                                                             
4.  Reconciliation of net cash flow to movement in net debt                  
                                                                             
                                                             2004        2003
                                                                             
                                                            £'000       £'000
                                                                             
    (Decrease)/increase in cash in the year                   (1)          31
                                                                             
    Cash outflow from finance leases and loans                103          66
                                                                             
    Change in net debt resulting from cash flows              102          97
                                                                             
    New finance leases and loans                            (101)       (178)
                                                                             
    Movement in net debt                                        1        (81)
                                                                             
    Net debt at beginning of year                           (640)       (559)
                                                                             
    Net debt at end of year                                 (639)       (640)
                                                                             
5.   Analysis of changes in net debt                                         
                                                                             
                                       At  Cash flow   Non-cash            At
                                                                             
                                1 January               changes   31 December
                                                                             
                                     2004                                2004
                                                                             
                                    £'000      £'000      £'000         £'000
                                                                             
   Cash at bank and in hand             -          1          -             1
                                                                             
   Bank overdrafts                  (173)        (2)          -         (175)
                                                                             
                                                 (1)                         
                                                                             
   Bank loan                          (5)          7       (22)          (20)
                                                                             
   Finance leases                   (352)         96       (79)         (335)
                                                                             
                                                 103                         
                                                                             
   Convertible loan notes           (110)          -          -         (110)
                                                                             
                                    (640)        102      (101)         (639)
                                                                             
6. The Annual General Meeting of the Company will be held at the Village     
   Hotel and Leisure Club, 186 Otley Road, Headingley Leeds LS16 5PR at      
   3.00pm on Tuesday, 28 June 2005.                                          
                                                                             
7. The foregoing statements do not constitute the Group's statutory accounts.
   The Group's statutory accounts, on which the Group's auditors, Grant      
   Thornton LLP, have given an unqualified opinion in accordance with Section
   235 of the Companies Act 1985, are to be delivered to the Registrar of    
   Companies and will be posted to shareholders shortly. Additional copies of
   the annual report and of this announcement will be available at the       
   Company's registered office: Clayton Park, Clayton Wood Rise, Leeds, LS16 
   6RF.                                                                      
                                                                             
Enquiries:                                                                   
                                                                             
Surgical Innovations Group plc                                               
                                                                             
Graham Bowland, Finance Director      Tel: [phone]              
                                                                             
Westhouse Securities LLP                                                     
                                                                             
Tim Feather                           Tel: [phone]