Half Yearly Report

Sep 10, 2014

Advanced Medical Solutions Group plc
(“AMS” or the “Group”)

RNS Number : 2495R
Advanced Medical Solutions Grp PLC
10 September 2014
 




10 September 2014

 

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

 

Interim Results for the six months ended 30 June 2014

 

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today announces its interim results for the six months ended 30 June 2014.

 

 

Financial Highlights:

 

Group revenue up 7.5% to £29.4 million (2013 H1: £27.4 million), or 11% on a constant currency basis1

Adjusted2 operating margin up 70 bps to 24.5% (2013 H1: 23.8%)

Adjusted2 profit before tax up 18% to £7.3 million (2013 H1: £6.2 million)


Profit before tax up 18% to £7.1 million (2013 H1: £6.0 million)

Adjusted2 diluted earnings per share up 13% to 2.92p (2013 H1: 2.59p)


Diluted earnings per share up 13% to 2.82p (2013 H1: 2.49p)

Net cash3 increased to £10.2 million (31 December 2013: £5.3 million)

Interim dividend of 0.22p per share (2013 H1: 0.19p), a 15.8% increase

 

Business Highlights:

 

Good revenue growth across the major Business Units:


Branded Direct up 6% to £11.6 million (2013 H1: £11.0 million) and by 8% at constant currency


Branded Distributed up 18% to £4.1 million (2013 H1: £3.5 million) and by 27% at constant currency


OEM up 10% to £11.8 million (2013 H1: £10.7 million) and by 13% at constant currency


Bulk Materials down 14% to £1.9 million (2013 H1: £2.2 million) and down by 12% at constant currency

Strong performance in the US with LiquiBand® tissue adhesive range:


Revenues up 64% at constant currency


As at July 2014, market share by volume increased to 18% (June 2013: 17%) in the alternate site segment and 6% (June 2013: 4%) in the hospital segment

ActivHeal® continues to perform well in the NHS, with an 11% increase in revenues

Steady progress with RESORBA® brands in Germany, resulting in 5% growth at constant currency

Silver alginate revenues increased by 14% at constant currency to £6.8 million (2013 H1: £6.0 million)

Hernia Mesh Fixation device LiquiBand® Fix8™ approved in the EU at the end of May 2014 and successfully used on patients for the first time

 

 

Commenting on the results Peter Allen, Chairman of AMS, said:

 

“The first half of 2014 has seen another good performance by the Group and we are confident of meeting current market expectations for the full year.”

 

– End –

 

1    Constant currency removes the effect of currency movements by re-translating the current period’s performance at the previous period’s exchange rates

2    All items are shown before amortisation of acquired intangible assets which, in 2014 H1, were £0.2 million (2013 H1: £0.2 million) as defined in the financial review

3    Net cash is defined as cash and cash equivalents plus short term investments less financial liabilities and bank loans

 

For further information, please visit www.admedsol.com or contact:

 

Advanced Medical Solutions Group plc

Tel: +44 (0) 1606 545508

Chris Meredith, Chief Executive Officer

Mary Tavener, Group Finance Director




Tavistock Communications

Tel: +44 (0) 20 7920 3150

Chris Munden / Andrew Dunn / Niall Walsh




Investec Bank plc (NOMAD) & Broker

Tel: +44 (0) 20 7597 5970

Gary Clarence / Daniel Adams / Patrick Robb


 

About Advanced Medical Solutions Group plc – see www.admedsol.com 

 

Founded in 1991, AMS is a leader in the development and manufacture of innovative and technologically advanced products for the US$20 billion global wound care and wound closure market. AMS has a wide range of products based on technologies that include alginates, silver alginates, foams, collagens, cyanoacrylate adhesives and sutures.

 

AMS manufactures wound care products for an extensive list of Original Equipment Manufacturer (“OEM”) customers around the world, but the majority of the Group’s revenues now come from its own brands – ActivHeal® wound care products in the UK to the NHS, LiquiBand® cyanoacrylate products primarily in the UK, Europe and the USA, and RESORBA® sutures and haemostat products primarily in Europe. AMS develops innovative products from its R&D pipeline which it commercialises globally, either directly or through partnerships with its OEM customers.

 

AMS’s products are sold globally via a network of regional or multinational partners and distributors, as well as via AMS’s own direct sales forces in the UK, Germany, the Czech Republic and Russia.

 

With 465 employees operating under four distinct business units (Branded Direct, Branded Distributed, OEM and Bulk Materials) that match its multiple products and routes-to-market, AMS’s products are manufactured from two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic.

 

 

 

 

 

Chairman’s Statement

 

I am pleased to report that AMS has performed well in the first half of 2014 and that we are on track to deliver another year of good growth.

 

Revenue increased by 7.5% to £29.4 million (2013 H1: £27.4 million), representing growth of 11% at constant currency and adjusted profit before tax1 increased by 18% to £7.3 million (2013 H1: £6.2 million). The Group continued with its strong cash generation and our net cash position has increased significantly to £10.2 million (31 December 2013: £5.3 million) as at 30 June 2014.

 

The Group’s portfolio of brands continued to perform well and the success of our partners is also driving growth in our OEM business unit.

 

Our Hernia Mesh Fixation device LiquiBand® Fix8™ was approved for use in the EU on 29 May 2014 and is a key development for the Group as it is the first application for our medical adhesives that allows the use of LiquiBand® within the body. This product has now been launched and the early response from users is positive.

 

The Group continues to develop new products through its Research and Development (R&D) team, building a pipeline which will support growth with our partners, distributors and our sales teams.

 

Our strong balance sheet also allows us to consider potential acquisitions that are in line with the Group’s stated strategy.  

 

Dividend

 

The Board intends to pay an interim dividend of 0.22p per share (2013 H1: 0.19p), an increase of 15.8%, on 31 October 2014 to shareholders on the register at the close of business on 3 October 2014.

 

People

 

On behalf of the Board, I would like to thank all Group employees for their continued hard work in the development of AMS as a global medical technology business, as well as our customers, suppliers, business partners and shareholders for their continued support.

 

Outlook

 

The Group continues to trade in line with current market expectations for the year ending 31 December 2014.

 

 

Peter Allen

Chairman

 

 

1    Adjusted profit before tax is adjusted for amortisation of acquired intangible assets

 

 

 

 

 

Business Review

 

Branded Direct

 

Branded Direct revenue was 6% higher at £11.6 million (2013 H1: £11.0 million) and 8% higher at constant currency.

 

ActivHeal®

Sales of our ActivHeal® range of wound care dressings into the NHS were 11% ahead at £2.7 million (2013 H1: £2.5 million). The ActivHeal® proposition of delivering significant cost savings without compromising clinical outcomes or patient care continues to appeal to NHS Trusts and hence we expect good growth to continue from this brand.  

 

LiquiBand®

UK sales of LiquiBand® into the Accident and Emergency Room (‘A&E’) grew 12% to £1.3 million (2013 H1: £1.2 million) and sales into the Operating Room (‘OR’) increased 70% to £0.3 million (2013 H1: £0.2 million). We are pleased with the continued success of LiquiBand® in the A&E, where we already have a market leadership position, and with the early success of our surgical sales team who are able to access the OR with our extended range of products that now includes haemostats and sutures from RESORBA®.

 

Sales of LiquiBand® into Germany grew by 3% to £0.7 million or 6% at constant currency. Steady growth in Germany is expected to continue.

 

RESORBA®

Sales of RESORBA® branded products into Germany and the Czech Republic grew by 2% to £6.8 million (2013 H1: £6.7 million), and by 5% at constant currency. Within this, sales of haemostats increased by 10% at constant currency to £1.9 million and sales of sutures and collagens into the dental market grew by 5% at constant currency to £2.0 million, whilst sales of sutures into hospitals grew 3%, reversing the decline reported in 2013 and making an encouraging start to the year.

 

In the UK, sales of RESORBA® sutures and haemostats are increasing but still at a low level. We expect growth to build steadily as the NHS becomes more familiar with the RESORBA® brand.

 

R&D is focusing on extending the attributes of our collagens to meet the needs of dental practitioners and oral surgeons. We are on track to launch an enhanced collagen cone in 2015, as well as making good progress in including new antibiotics in our haemostats.

 

Branded Distributed

 

Branded Distributed revenue was 18% higher at £4.1 million (2013 H1: £3.5 million) and 27% higher at constant currency.

 

LiquiBand® in the US

Sales of LiquiBand® to the US increased by 51% in the first half to £1.3 million (2013 H1: £0.8 million) and by 64% at constant currency, with the benefits of our increased spread of distribution partners helping us to gain better access, particularly into the hospital sector in the US market.

 

The latest data for July 2014 has our volume market share in the US hospital sector increasing to 6%, up from 4% at June 2013, while our volume market share in the US non-hospital or alternate site market is now an estimated 18%, up from 17% at June 2013. We are pleased with the progress that our partners are now making and that LiquiBand®‘s combination of technical superiority and price competitiveness will enable us to continue to take market share from the leading brand.

 

The clinical evaluations of our 2-octyl cyanoacrylate formulation which received FDA clearance in 2013 have now been completed and we will be launching this product into the US with at least one of our existing partners in 2014 H2.

 

LiquiBand® in the EU and ROW

Within the EU and ROW, LiquiBand® sales through our distributors have continued to perform well and sales increased by 8% to £0.6 million (2013 H1: £0.6 million) at reported currency and by 9% at constant currency.

 

The regulatory approval process for LiquiBand® in China is continuing although, due to changes in the regulatory pathway, approval is now expected in 2015.

 

Hernia Mesh Fixation device – LiquiBand® Fix8™

Approval for LiquiBand® Fix8™ for the European market was received on 29 May 2014 and the product has now been launched in both the UK and Germany. The response from surgeons has been enthusiastic and, following initial evaluations, we have already received our first orders in the UK. We have also made the product available to a few European distributors who have the sales capability to support the product. We expect to report a small level of sales in 2014 H2.

 

RESORBA® 

Sales of RESORBA® products to all export markets other than Russia grew by 11% at reported currency to £1.5 million (2013 H1: £1.3 million), and by 14% at constant currency. Growth was seen across several territories, with our French and Spanish distributors performing strongly. Sales into the Russian market, however, decreased 12% to £0.6 million (2013 H1: £0.7 million) at reported currency but increased by 7% at constant currency, reflecting the weakness of the Rouble.

 

Work is ongoing to gain approval to supply RESORBA® sutures and haemostats into the US market. We have received our first approval for the sale of one type of suture for the US market and we are hopeful that the remainder of the suture range will be approved by 2015 H1, with products being launched in 2015 H2.

 

R&D is currently focusing on improving the formulations of the base monomers that go into our adhesives as well as extending the applications of tissue adhesives for internal use.

 

OEM

 

OEM revenue increased by 10% at reported currency to £11.8 million (2013 H1: £10.7 million) and by 13% at constant currency.

 

Our silver alginate ranges of dressings continue to perform well with sales increasing by 14% at reported currency and by 15% at constant currency to £6.8 million (2013 H1: £5.8 million). We continue to support our partners with regulatory matters and marketing data.

 

Sales of our foam-based dressings continued to perform well and increased 8% to £0.7 million (2013 H1: £0.6 million) while our other woundcare products also grew 23% to £3.8 million (2013 H1: £3.1 million).  

 

This business unit’s R&D is further developing our foam range to include both an antimicrobial and an atraumatic foam. Product launches are expected to be in early 2015 as regulatory approval is not expected until the end of 2014.

 

Bulk Materials

 

Bulk Materials revenue decreased by 14% at reported currency to £1.9 million (2013 H1: £2.2 million) and by 12% at constant currency.

 

The foam rollstock business is now starting to see repeat orders following the pipeline-filling that occurred in 2011, but the level of re-ordering is lower than expected. The new contracts that we signed in 2013 have been slow to grow and our bulk alginate business has been lower than expected in H1. We expect in time that our new customers for foam will develop but we expect that sales in this business unit will be flat overall in 2014.

 

In terms of R&D, this business unit continues to focus on developing new foam formulations with antimicrobials, working in conjunction with the OEM business unit. 

 

Operations

 

Operational improvements are ongoing with a continuous improvement cycle of reducing set up times, eliminating non-value added activities and increasing outputs. These incremental changes are helping to improve gross margins across the Group. We have also identified some areas where additional capital is needed to provide equipment for extra operational flexibility or to improve efficiency. This equipment, with an associated spend of approximately £1.0 million, is scheduled to be commissioned in 2014 H2. We have also been investing in improving our ERP (Enterprise Resource Planning) management and reporting systems. Following a successful launch at our Plymouth site, our new ERP system was launched in Winsford in February 2014 and is scheduled to launch in Etten Leur in the Netherlands in 2014 Q3.

 

Financial Review

 

Summary

 

Revenue increased by 7.5% to £29.4 million (2013 H1: £27.4 million). At constant currency, revenue growth would have been 11%.

 

Amortisation of acquired intangible assets was £0.2 million in the period (2013 H1: £0.2 million).

 

Comparisons with 2013 are made on a pre-amortisation of acquired intangible asset cost basis, as we believe that this provides a more relevant representation of the Group’s trading performance. To aid comparison, the Group’s adjusted income statement is summarised in Table 1 below.

 

Table 1

Six months ended

30 June 2014

Six months ended

30 June 2013


Adjusted Income Statement

£’000

£’000

Change

Revenue

29,440

27,392

7.5%

Gross profit

16,840

15,644

7.7%

Distribution costs

(381)

(324)


Administrative expenses2

(9,377)

(8,882)


Other income

142

90


Adjusted operating profit

7,224

6,528

10.7%

Net finance income/(costs)

27

(361)


Adjusted profit before tax

7,251

6,167

17.6%

Amortisation of acquired intangibles

(197)

(200)


Profit before tax

7,054

5,967

18.2%

Tax

(1,090)

(778)


Profit for the period

5,964

5,189

14.9%

Adjusted earnings per share – basic3

2.97p

2.63p

13.0%

Earnings per share – basic3

2.88p

2.53p

13.6%

Adjusted earnings per share – diluted3

2.92p

2.59p

12.6%

Earnings per share – diluted3

2.82p

2.49p

13.2%

2    Administration expenses exclude amortisation of acquired intangible assets

3    See Note 4 Earnings per share for details of calculation

 

Across the Group gross margins improved by 10 bps to 57.2% (2013 H1: 57.1%).

 

Adjusted operating profit increased by 10.7% to £7.2 million (2013 H1: £6.5 million) and the adjusted operating margin increased by 70 bps to 24.5% (2013 H1: 23.8%).

 

Adjusted diluted earnings per share increased by 12.6% to 2.92p (2013 H1: 2.59p) and diluted earnings per share increased by 13.2% to 2.82p (2013 H1: 2.49p).

 

The Group generated a profit from operating activities of £7.0 million (2013 H1: £6.3 million) and had net cash of £10.2 million at the half year end (2013 H1: net debt of £2.6 million).

 

The Group has a strong balance sheet, enabling financing of further organic growth and appropriate acquisitions.

 

Income Statement

 

The operational performance of the business units is shown in Table 2 below. The adjusted profit from operations and the adjusted operating margin are shown after excluding amortisation of acquired intangibles.

 

Table 2

Operating result by business segment

Six months ended 30 June 2014

Branded direct

Branded distributed

OEM

Bulk materials


£’000

£’000

£’000

£’000

Revenue

11,648

4,089

11,831

2,2694

Profit from operations

3,317

702

3,194

223

Amortisation of acquired intangibles

126

61

10

Adjusted profit from operations5

3,443

763

3,204

223

Adjusted operating margin5

29.6%

18.7%

27.1%

9.8%

Six months ended 30 June 2013





Revenue

11,001

3,465

10,743

2,571

Profit from operations

2,906

574

2,541

518

Amortisation of acquired intangibles

125

56

19

Adjusted profit from operations5

3,031

630

2,560

518

Adjusted operating margin5

27.6%

18.2%

23.8%

20.1%

4    Revenue includes intersegment sales

5    Excludes amortisation of acquired intangible assets

Note: Expenses relating to non-executive Directors are not allocated to business units and are included within unallocated expenses.

 

Branded Direct

Branded Direct revenues increased by 5.9% to £11.6 million (2013 H1: £11.0 million) and by 8.0% at constant currency, with sales of ActivHeal® and LiquiBand® driving growth in the UK, and RESORBA® brands supporting growth in Germany and Czech Republic. Fee income of £0.1 million was received from the licensing of Intellectual Property to third parties (2013 H1: £0.1 million).

 

Adjusted operating margin increased by 200 bps to 29.6%, due partly to a change in sales mix but mainly as a result of overhead costs remaining at a similar level compared with the prior year. R&D expense in this segment was 2.9% of revenue (2013 H1: 3.4%) on projects to develop improved collagens.

 

Branded Distributed

Branded Distributed revenues increased by 18.0% to £4.1 million (2013 H1: £3.5 million) and by 26.8% at constant currency, with sales of LiquiBand® into the US being the main driver of growth.

 

Adjusted operating margin increased by 50 bps to 18.7% from the increase in sales, while investment in our US sales and marketing team to support our partners has continued. R&D expense was 8.0% of revenues (2013 H1: 5.9%) with expenditure in this segment being incurred on our Hernia Mesh Fixation device prior to launch, as well as work on a new project to improve our base monomer formulation for our tissue adhesives.

 

OEM

OEM revenues increased by 10.1% to £11.8 million (2013 H1: £10.7 million) and by 12.6% at constant currency. R&D expense was 4.0% of revenues (2013 H1: 3.3%) with spend being incurred on projects to improve our range of foams, with a particular focus on products with antimicrobial properties. These projects are being worked on jointly with the Bulk Materials division.

 

Adjusted operating margin improved by 325 bps to 27.1% (2013 H1: 23.8%) mainly as a result of sales mix.

 

Bulk Materials

Bulk material revenues, excluding intercompany sales, reduced by 14% to £1.9 million (2013 H1: £2.2 million) at reported currency and decreased by 12% at constant currency. The adjusted operating margin including intercompany sales decreased to 9.8% (2013 H1: 20.1%), resulting from the reduced volume of business as well as the change in sales mix.

 

Geographic breakdown of revenues

The geographic breakdown of Group revenues in 2014 is set out in note 5. Overall, less than 40% of revenues are in Euros as the UK companies still invoice in Sterling to most of its European partners, and nearly all sales to the US are invoiced in US Dollars. The Group’s policy is to set up natural hedges where possible and to hedge significant transactional risk. The Group estimates that a 10% movement in the £:US$ or £:Euro exchange rate will impact Sterling revenues by approximately 2% and 4% respectively and, in the absence of any hedging, this would result in an impact on profit of 1.3% and 0.6% respectively.

 

Profit before tax

Profit before tax for the period was 18% higher at £7.1 million (2013 H1: £6.0 million).

 

The Group’s effective rate of tax for the six months was 15.5% (2013 H1: 13.0%). This is reflective of the recognition of previously unrecognised brought forward tax losses in the UK, R&D relief and the continued impact of the phased introduction of the patent box relief scheme. It also reflects the impact of blending profits and losses from different countries and the different tax rates associated with these countries.

 

Profit after tax and earnings per share

Adjusted profit after tax increased by 14% to £6.2 million (2013 H1: £5.4 million), resulting in a 13% increase in adjusted basic earnings per share to 2.97p (2013 H1: 2.63p) and a 13% increase in diluted adjusted earnings per share to 2.92p (2013 H1: 2.59p).

 

Profit after tax increased 15% to £6.0 million (2013 H1: £5.2 million), resulting in a 14% increase in basic earnings per share to 2.88p (2013 H1: 2.53p) and a 13% increase in diluted earnings per share to 2.82p (2013 H1: 2.49p).

 

Dividend per share

The Board intends to pay an interim dividend of 0.22p per share on 31 October 2014 to shareholders on the register on 3 October 2014. This is an increase of 15.8% compared with 2013 H1.

 

Cash Flow and Balance Sheet

 

Table 3 summarises the Group cash flows.

 

Table 3

Six months ended

30 June 2014

Six months ended

30 June 2013

Cash Flow

£’000

£’000

Adjusted operating profit (Table 1)

7,224

6,528

Non-cash items

1,360

1,501

EBITDA6

8,584

8,029

Working capital movement

(1,423)

(2,946)

Operating cash flow

7,161

5,083

Capital expenditure and capitalised R&D

(866)

(1,181)

Net Interest

25

(210)

Tax

(929)

351

Free cash flow

5,391

4,043

Financing

(6,764)

Dividends paid

(850)

(712)

Proceeds from share issues

9

266

Exchange losses

364

(55)

Net increase/(decrease) in cash and cash equivalents

4,914

(3,222)

6    EBITDA is earnings before interest, tax, depreciation, intangible asset amortisation and share based payments

 

The Group had an operating cash flow of £7.2 million (2013 H1: £5.1 million) and a conversion of adjusted operating profit into free cash flow of 75% (2013 H1: 62%).

 

Working capital increased by £1.4 million in the period. Inventory increased by £0.3 million to 4.7 months of supply (2013 H1: 4.6 months). Trade receivables increased by £0.3 million with debtor days at 45 (2013 H1: 42 days) in line with the growth of the business. Trade payables reduced by £0.8 million.

 

We have invested £0.6 million in capital equipment and software in the first six months (2013 H1: £0.8 million). The major areas of spend have been in developing our ERP business information system for launch in Etten Leur and in upgrading equipment around the Group. £0.2 million of R&D spend has been capitalised (2013 H1: £0.4 million). No development costs were impaired in the period (2013 H1: £0.3m).

 

Given the repayment of our €25 million term facility in September 2013, finance costs were £nil in the period (H1 2013: £0.2 million). In December 2011, the Group also entered into an £8 million revolving credit facility with HSBC, with a final maturity of 31 July 2015. This facility is for general working capital purposes, and carries an annual interest rate of LIBOR plus a margin of 1.5% to 2.5% depending on the Group’s net debt to EBITDA ratio. At 31 October 2013, this facility was reduced to £4.0 million and was undrawn as at 30 June 2014.

 

Net taxation of £0.8 million has been paid as a result of the fiscal merger of the German group of companies completed in 2012, with payments relating to both 2012 and 2013 being made in the period. Further tax payments of £0.1 million were made in other jurisdictions in which the Group operates.

 

The Group paid its final dividend for the year ended 31 December 2013 of £0.9 million (2013 H1: £0.7 million) on 28 May 2014.

 

The Group had a free cash flow of £5.4 million in the period (2013 H1: £4.0 million), with a net increase in cash equivalents of £4.9 million (2013 H1: £3.2 million decrease).

 

At the end of the period, the Group had net cash7 of £10.2 million (2013 H2: net cash7 of £5.3 million). The movement in net cash during 2014 H1 is reconciled in Table 4 below:

 

Table 4


Movement in net cash7

£’000

Net cash as at 1 January 2014

5,257

Exchange rate impacts

364

Free cash flow

5,391

Dividends paid

(850)

Proceeds from share issues

9

Net cash as at 30 June 2014

10,171

7    Net cash is defined as cash and cash equivalents plus short term investments less financial liabilities and bank loans

 

The Group’s going concern position is fully described in note 11 and the Group had no borrowings in the period.

 

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2014

 



(Unaudited)

(Unaudited)

(Audited)



Six months ended

Six months ended

Year ended



30 June 2014

30 June 2013

31 December 2013


Note

£’000

£’000

£’000

Revenue from continuing operations

5

29,440

27,392

59,499

Cost of sales


(12,600)

(11,748)

(25,231)

Gross profit


16,840

15,644

34,268

Distribution costs


(381)

(324)

(744)

Administration costs


(9,574)

(9,082)

(20,079)

Other income


142

90

281

Profit from operations


7,027

6,328

13,726

Finance income


30

1

1

Finance costs


(3)

(362)

(583)

Profit  before taxation


7,054

5,967

13,144

Income tax

7

(1,090)

(778)

(1,778)

Profit for the period attributable to equity holders of the parent


5,964

5,189

11,366

Earnings per share





Basic

4

2.88p

2.53p

5.52p

Diluted

4

2.82p

2.49p

5.45p

Adjusted diluted

4

2.92p

2.59p

5.64p

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

5,964

5,189

11,366

Exchange differences on translation of foreign operations

(2,375)

2,439

732

(79)

(193)

698

(2,454)

2,246

1,430

3,510

7,435

12,796

 

 

 

CONDENSED STATEMENT OF FINANCIAL POSITION

 


(Unaudited)

(Unaudited)

(Audited)


30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

Assets




Non-current assets




Acquired intellectual property rights

9,688

10,739

10,256

Software intangibles

1,637

1,468

1,662

Development costs

1,782

1,574

1,702

Goodwill

37,761

40,379

39,278

Property, plant and equipment

16,182

17,472

16,707

Deferred tax assets

1,355

2,446

21,728

Trade and other receivables

18

19

14


68,423

74,097

71,347

Current assets




Inventories

8,229

8,760

8,042

Trade and other receivables

11,696

10,492

12,158

Current tax assets

63

343

Cash and cash equivalents

10,171

5,619

5,257


30,159

24,871

25,800

Total assets

98,582

98,968

97,147

Liabilities




Current liabilities




Trade and other payables

5,477

4,650

6,298

Current tax liabilities

752

1,144

1,220

Other taxes payable

254

736

260

Other loans

8,256

Obligations under finance leases

5

4

4


6,488

14,790

7,782

Non-current liabilities




Trade and other payables

504

546

520

Deferred tax liabilities

2,617

2,873

2,754

Obligations under finance leases

2

5

3


3,123

3,424

3,277

Total liabilities

9,611

18,214

11,059

Net assets

88,971

80,754

86,088

Equity




Share capital

10,385

10,291

10,343

Share premium

32,517

32,092

32,364

Share-based payments reserve

1,395

1,295

1,326

Investment in own shares

(148)

(77)

(144)

Share-based payments deferred tax reserve

121

74

158

Other reserve

1,531

1,531

1,531

Hedging reserve

572

(240)

651

Translation reserve

(3,042)

1,040

(667)

Retained earnings

45,640

34,748

40,526

Equity attributable to equity holders of the parent

88,971

80,754

86,088

 

 


CONDENSED CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

 





Investment

Share-based







Share

Share

Share-based

in own

payments

Other

Hedging

Translation

Retained



capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total


£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

At 1 January 2014 (audited)

10,343

32,364

1,326

(144)

158

1,531

651

(667)

40,526

86,088

Consolidated profit for the period to 30 June 2014

5,964

5,964

Other comprehensive income

(79)

(2,375)

(2,454)

Total comprehensive income

(79)

(2,375)

5,964

3,510

Share-based payments

250

(37)

213

Share options exercised

42

153

(181)

14

Shares purchased by EBT

(190)

(190)

Shares sold by EBT

186

186

Dividends paid

(850)

(850)

At 30 June 2014 (unaudited)

10,385

32,517

1,395

(148)

121

1,531

572

(3,042)

45,640

88,971

 





Investment

Share-based







Share

Share

Share-based

in own

payments

Other

Hedging

Translation

Retained



capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total


£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

At 1 January 2013 (audited)

10,230

31,887

1,122

(77)

180

1,531

(47)

(1,399)

30,271

73,698

Consolidated profit for the period to 30 June 2013

5,189

5,189

Other comprehensive income

(193)

2,439

2,246

Total comprehensive income

(193)

2,439

5,189

7,435

Share-based payments

173

(106)

67

Share options exercised

61

205

266

Shares purchased by EBT

Shares sold by EBT

Dividends paid

(712)

(712)

At 30 June 2013 (unaudited)

10,291

32,092

1,295

(77)

74

1,531

(240)

1,040

34,748

80,754

 

 

 





Investment

Share-based







Share

Share

Share-based

in own

payments

Other

Hedging

Translation

Retained



capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total


£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

At 1 January 2013 (audited)

10,230

31,887

1,122

(77)

180

1,531

(47)

(1,399)

30,271

73,698

Consolidated profit for the year to 31 December 2012

11,366

11.366

Other comprehensive income

698

732

1,430

Total comprehensive income

698

732

11,366

12,796

Share-based payments

400

(22)

378

Share options exercised

113

477

(196)

394

Shares purchased by EBT

(277)

(277)

Shares sold by EBT

210

210

Dividends paid

(1,111)

(1,111)

At 31 December 2013 (audited)

10,343

32,364

1,326

(144)

158

1,531

651

(667)

40,526

86,088

 

 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

Cash flows from operating activities




Profit from operations

7,027

6,328

13,726

Adjustments for:




Depreciation

868

924

1,783

Amortisation   – intellectual property rights

197

200

400

                       – development costs

151

103

204

                       – software intangibles

91

15

91

Impairment of development costs

286

337

Increase in inventories

(334)

(2,127)

(1,510)

Increase in trade and other receivables

(282)

(196)

(1,931)

(Decrease)/increase in trade and other payables

(807)

(623)

653

Share-based payments expense

250

173

400

Taxation

(929)

351

(83)

Net cash inflow from operating activities

6,232

5,434

14,070

Cash flows from investing activities




Purchase of software

(76)

(375)

(618)

Capitalised research and development

(237)

(397)

(612)

Purchases of property, plant and equipment

(553)

(409)

(836)

Disposal of property, plant and equipment

64

Interest received

30

1

1

Net cash used in investing activities

(836)

(1,180)

(2,001)

Cash flows from financing activities




Dividends paid

(850)

(712)

(1,111)

Finance lease

(2)

(3)

(5)

Repayment of secured loan

(6,761)

(14,385)

Issue of equity shares

13

266

395

Shares purchased by EBT

(190)

(277)

Shares sold by EBT

186

210

Interest paid

(3)

(211)

(583)

Net cash (used in) financing activities

(846)

(7,421)

(15,756)

Net increase/(decrease) in cash and cash equivalents

4,550

(3,167)

3,687

Cash and cash equivalents at the beginning of the period

5,257

8,841

8,841

Effect of foreign exchange rate changes

364

(55)

103

Cash and cash equivalents at the end of the period

10,171

5,619

5,257

 

 

 

Notes Forming Part of the Consolidated Financial Statements

 

1.    Reporting entity

 

Advanced Medical Solutions Group plc (“the Company”) is a public limited company incorporated and domiciled in England and Wales (registration number 2867684). The Company’s registered address is Premier Park, 33 Road One, Winsford Industrial Estate, Cheshire, CW7 3RT.

 

The Company’s ordinary shares are traded on the AIM market of the London Stock Exchange plc. The consolidated financial statements of the Company for the twelve months ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the “Group”).

 

The Group is primarily involved in the design, development and manufacture of novel high performance polymers (both natural and synthetic) for use in advanced woundcare dressings and materials, medical adhesives for closing and sealing tissue, and sutures and haemostats for sale into the global medical device market.

 

2.    Basis of preparation

 

The information for the year ended 31 December 2013 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters of emphasis without qualifying the report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The individual financial statements for each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the Consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the Consolidated financial statements.

 

3.    Accounting policies

 

The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest annual audited financial statements. The unaudited condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the International Accounting Standard 34 ‘Interim Financial Reporting’, as adopted by the European Union. These condensed interim accounts should be read in conjunction with the annual accounts of the Group for the year ended 31 December 2013. The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

 

Changes in accounting policies

 

The adoption of the following standards, at 1 January 2014, has had no material impact on the Group’s financial statements:

 

·     IFRS 10 ‘Consolidated Financial Statements’

·     Amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’

·     Amendments to IAS 36 ‘Recoverable Amount Disclosures for Non-Financial Assets’

·     Amendments to IAS 39 ‘Novation of Derivatives and Continuation of Hedge Accounting’

 

4.    Earnings per share

 


(Unaudited)

(Unaudited)

(Audited)


Six months

Six months

Year


ended

ended

ended


30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

Earnings

Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent

5,964

5,189

11,366

Number of shares

‘000

000

000

Weighted average number of ordinary shares for the purposes of basic earnings per share

207,302

204,930

205,795

Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs

3,978

3,080

2,869

Weighted average number of ordinary shares for the purposes of diluted earnings per share

211,280

208,010

208,664

 

Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the period.

 

Diluted EPS is calculated on the same basis as basic EPS but with the further adjustment to the weighted average shares in issue to reflect the effect of all potentially dilutive share options. The number of potentially dilutive share options is derived from the number of share options and awards granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the period.

 

Adjusted earnings per share

 

The calculation of adjusted EPS excluding amortisation of associated intangible assets and is based on earnings of:

 


(Unaudited)

(Unaudited)

(Audited)


Six months

Six months

Year


ended

ended

ended


30 June 2014

30 June 2013

31 December 2013


£’000

£’000 

£’000

Earnings

Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent

5,964

5,189

11,366

Amortisation of acquired intangible assets

197

200

400

Earnings excluding amortisation of acquired intangible assets

6,161

5,389

11,766

 

The denominators used are the same as those detailed above for both basic and diluted earnings per share.

 

Adjusted EPS after adding back amortisation of acquired intangible assets:

 


(Unaudited)

(Unaudited)

(Audited)


Six months

Six months

Year


ended

ended

Ended


30 June 2014

30 June 2013

31 December 2013


pence

pence 

Pence

Adjusted basic EPS

2.97p

2.63p

5.72p

Adjusted diluted EPS

2.92p

2.59p

5.64p

 

The adjusted diluted EPS information is considered to provide a fairer representation of the Group’s trading performance.

 

5.    Segment information

 

In the latter stages of the year to December 2012 the Group was re-organised into four business units: Branded Direct, Branded Distributed, OEM and Bulk Materials. These divisions are the basis on which the Group reports its segment information.

 

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments, and related revenue, corporate assets, head office expenses, income tax assets and the Group’s external borrowings. These are the measures reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

 

Business segments

The principal activities of the business units are as follows:

 

Branded Direct

Selling, marketing and innovation of the Group’s branded products sold directly by the Group’s sales teams.

 

Branded Distributed

Selling, marketing and innovation of the Group’s branded products sold by distributors in markets not serviced by the Group’s sales teams.

 

OEM

Distribution, marketing and innovation of the Group’s products supplied to partners under their brands.

 

Bulk Materials

Distribution, marketing and innovation of bulk materials to medical device partners and convertors.

 

Segment information about these businesses is presented below:

 

Six months ended

30 June 2014

(unaudited)

Branded Direct

Branded Distributed

OEM

Bulk Materials

Eliminations

Consolidated


£’000

£’000

£’000

£’000

£’000

£’000

Revenue







External sales

11,648

4,089

11,831

1,872


29,440

Inter-segment sales




397

(397)

Total revenue

11,648

4,089

11,831

2,269

(397)

29,440

Result







Segment result

3,317

702

3,194

223


7,436

Unallocated expenses






(409)

Profit from operations






7,027

Finance income






30

Finance costs






(3)

Profit before tax






7,054

Tax






(1,090)

Profit for the year






5,964

 

At 30 June 2014

(unaudited)

Branded Direct

Branded Distributed

OEM

Bulk Materials

Consolidated

Other Information

£’000

£’000

£’000

£’000

£’000

Capital additions:






Software intangibles

27

7

34

8

76

Development

42

56

139

237

Property, plant and equipment

215

67

214

57

553

Depreciation and amortisation

419

171

586

131

1,307

Balance sheet






Assets






Segment assets

54,803

15,134

24,468

4,177

98,582

Unallocated assets





Consolidated total assets





98,582

Liabilities






Segment liabilities

5,018

1,334

2,844

415

9,611

Consolidated total liabilities





9,611

 

Six months ended 30 June 2013 (unaudited)

Branded Direct

Branded Distributed

OEM

Bulk Materials

Eliminations

Consolidated


£’000

£’000

£’000

£’000

£’000

£’000

Revenue







External sales

11,001

3,465

10,743

2,183


27,392

Inter-segment sales




388

(388)

Total revenue

11,001

3,465

10,743

2,571

(388)

27,392








Result







Segment result

2,906

574

2,541

518


6,539

Unallocated expenses






(211)

Profit from operations






6,328

Finance income






1

Finance costs






(362)

Profit before tax






5,967

Tax






(778)

Profit for the year






5,189

 

At 30 June 2013

(unaudited)

Branded Direct

Branded Distributed

OEM

Bulk Materials

Consolidated

Other Information

£’000

£’000

£’000

£’000

£’000

Capital additions:






Software intangibles

75

6

258

36

375

Development

103

46

172

76

397

Property, plant and equipment

187

60

156

6

409

Depreciation and amortisation

445

125

575

97

1,242

Balance sheet






Assets






Segment assets

55,451

15,351

23,688

4,478

98,968

Consolidated total assets





98,968

Liabilities






Segment liabilities

5,034

1,540

2,779

605

9,958

Unallocated liabilities





8,256

Consolidated total liabilities





18,214

 

Year ended

31 December 2013 (audited)

Branded Direct

Branded Distributed

OEM

Bulk Materials

Eliminations

Consolidated


£’000

£’000

£’000

£’000

£’000

£’000

Revenue







External sales

22,918

8,785

23,629

4,167

59,499

Inter-segment sales




766

(766)

Total revenue

22,918

8,785

23,629

4,933

(766)

59,499

Result







Segment result

6,023

1,654

5,790

668


14,135

Unallocated expenses






(409)

Profit from operations






13,726

Finance income






1

Finance costs






(583)

Profit before tax






13,144

Tax






(1,778)

Profit for the year






11,366

 

At 31 December 2013

(audited)

Branded Direct

Branded Distributed

OEM

Bulk Materials

Consolidated

Other Information

£’000

£’000

£’000

£’000

£’000

Capital additions:






Software intangibles

131

15

400

72

618

Development

168

70

369

5

612

Property, plant and equipment

330

117

197

192

836

Depreciation and amortisation

872

310

1,037

259

2,478

Balance sheet






Assets






Segment assets

54,470

15,196

23,172

4,309

97,147

Consolidated total assets





97,147

Liabilities






Segment liabilities

5,629

1,675

3,156

599

11,059

Consolidated total liabilities





11,059

 

Geographical segments

 

The Group operates in the UK, Germany, the Netherlands and the Czech Republic, with sales offices located in Russia and the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

 

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services, based upon location of the Group’s customers:

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

United Kingdom

7,406

6,119

13,225

Germany

7,652

7,599

15,687

Europe excluding United Kingdom and Germany

7,510

7,742

17,331

United States of America

5,984

5,105

11,819

Rest of World

888

827

1,437


29,440

27,392

52,589

 

The following table provides an analysis of the Group’s total assets by geographical location.

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

United Kingdom

37,839

32,895

34,271

Germany

54,410

59,634

56,522

Europe excluding United Kingdom and Germany

6,074

6,266

6,315

United States of America

259

173

39


98,582

98,968

97,147

 

6.    Financial Instruments’ fair value disclosures

 

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts.

 

The Group held the following financial instruments at fair value at 30 June 2014. The Group has no financial instruments with fair values that are determined by reference to significant unobservable inputs i.e. those that would be classified as level 2 or 3 in the fair value hierarchy, nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

 

The following table details the forward foreign currency contracts outstanding as at the period-end:

 


Ave. exchange rate

Foreign currency

Contract value

Fair value


30 June 2014

31 Dec 2013

30 June 2014

31 Dec 2013

30 June 2014

31 Dec 2013

30 June 2014

31 Dec 2013


USD:£1

USD:£1

USD’000

USD’000

£’000

£’000

£’000

£’000

Cash flow hedges









Sell US dollars









Less than 3 months

1.540

1.547

3,150

3,500

2,045

2,262

199

144

3 to 6 months

1.525

1.519

2,400

2,250

1,573

1,481

167

118

7 to 12 months

1.614

1.534

2,200

5,550

1,363

3,618

69

251

Over 12 month

1.663

1.595

1,000

1,600

  601

1,003

11

 31




8,750

12,900

5,582

8,364

446

544

 


Ave. exchange rate

Foreign currency

Contract value

Fair value


30 June 2014

31 Dec 2013

30 June 2014

31 Dec 2013

30 June 2014

31 Dec 2013

30 June 2014

31 Dec 2013


EUR:£1

EUR:£1

EUR’000

EUR’000

£’000

£’000

£’000

£’000

Cash flow hedges









Sell Euros









Less than 3 months

1.157

1.157

   950

1,100

   821

   951

60

34

3 to 6 months

1.163

1.164

1,150

1,100

   988

   945

66

24

7 to 12 months


1.164


2,300


1,977


49




2,100

4,500

1,809

3,873

126

107

 

7.    Taxation

 

UK Corporation Tax for the six month period is charged at 22% (six months ended June 2013: 23.5%, year ended 31 December 2013: 23.25%). The effective rate of current tax for the six months ended 30 June 2014 was 15.5% (six months ended 30 June 2013: 13%, year ended 31 December 2013: 13.5%) after the application of losses brought forward, patent box and research and development tax relief, with some off-set for disallowable expenditure. The rate of tax is reflective of the impact of blending profits and losses from different countries and the different tax rates associated with those countries.

 

8.    Dividends

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended

Amounts recognised as distributions to equity holders in the period:

30 June 2014

30 June 2013

31 December 2013


£’000

£’000

£’000

Final dividend for the year ended 31 December 2012 of 0.35p per ordinary share

712

712

Interim dividend for the year ended 31 December 2013 of 0.19p per ordinary share

399

Final dividend for the year ended 31 December 2013 of 0.41p per ordinary share

850


850

712

1,111

 

9.    Contingent liabilities

 

The directors are not aware of any contingent liabilities faced by the Group as at 30 June 2014 (30 June 2013: £nil, 31 December 2013: £nil).

 

10.   Share capital

 

Share capital as at 30 June 2014 amounted to £10,385,000 (30 June 2013: £10,291,000, 31 December 2013: £10,343,000). During the period, the Group issued 540,602 shares in respect of exercised share options and 283,721 shares in respect of the Deferred Share Bonus Scheme.

 

11.   Going concern

 

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group’s financial position and cash flow forecasts for the next 12 months. These have been based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment.

 

With regards to the Group’s financial position, it had cash and cash equivalents at 30 June 2014 of £10.2 million. The Group also has in place a revolving credit facility of £4 million, which has not been drawn down and is available until 31 July 2015.

 

While the current economic environment is uncertain, AMS operates in markets whose demographics are favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, market growth is predicted. The Group has a number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies.

 

After taking the above into consideration, the Directors have reached the conclusion that the Group is well placed to manage its business risks in the current economic environment. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

 

12.   Principal Risks and uncertainties

 

Further detail concerning the principal risks affecting the business activities of the Group is detailed on page 3 of the Annual Report and Accounts for the year ended 31 December 2013. There have been no significant changes since the last annual report.

 

13.   Seasonality of sales

 

There are no significant factors affecting the seasonality of sales between the first and second half of the year.

 

14.   Events after the balance sheet date

 

The directors are not aware of any material event subsequent to the end of the interim reporting period ended 30 June 2014.

 

15.   Copies of the interim results

 

Copies of the interim results can be obtained from the Group’s registered office at Premier Park, 33 Road One, Winsford Industrial Estate, Winsford, Cheshire, CW7 3RT.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 

END

 
 

IR UGUWCBUPCGRB

For further information, please contact:

Advanced Medical Solutions Group plc

Tel: 44 (0) 1606 545508

Chris Meredith, Chief Executive Officer

Eddie Johnson, Chief Financial Officer

Michael King, Investor Relations

Consilium Strategic Communications

Tel: 44 (0) 20 3709 5700

Matthew Neal / Lucy Featherstone

Investec Bank PLC (NOMAD & Broker)

Tel: 44 (0) 20 7597 5970

Gary Clarence / David Anderson

HSBC Bank PLC (Broker)

Tel: 44 (0) 20 7991 8888

Sam McLennan / Joe Weaving / Stephanie Cornish

About Advanced Medical Solutions Group plc

AMS is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand®, RESORBA®, LiquiBandFix8® and Seal-G®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal® brand as well as under white label. Since 2019, the Group has made five acquisitions: Sealantis, an Israeli developer of innovative internal sealants; Biomatlante, a French developer and manufacturer of surgical biomaterials, Raleigh, a leading UK coater and converter of woundcare and bio-diagnostics materials, AFS Medical, an Austrian specialist surgical business and Connexicon, an Irish tissue adhesives specialist.

AMS's products, manufactured in the UK, Germany, France, the Netherlands, the Czech Republic and Israel, are sold globally via a network of multinational or regional partners and distributors, as well as via AMS's own direct sales forces in the UK, Germany, Austria, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, Ireland, Germany, France and Israel. Established in 1991, the Group has more than 800 employees. For more information, please see admedsol.com.

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