Preliminary Results

Mar 4, 2015

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

RNS Number : 4607G
Advanced Medical Solutions Grp PLC
04 March 2015
 



 

 

4 March 2015

 

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

 

Unaudited preliminary results for the year ended 31 December 2014

 

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced woundcare specialist company, today announces its unaudited preliminary results for the year ended 31 December 2014.

 

Financial Highlights

 

 

 

2014

2013

Reported growth

Growth at  constant currency ¹

Group revenue (£ million)

63.0

59.5

6%

9%

Adjusted² operating margin (%)

24.1

23.1

100bps

Adjusted² profit before tax (£ million)

15.6

13.5

15%

Profit before tax (£ million)

15.2

13.1

16%

Adjusted² diluted earnings per share (p)

6.26

5.64

11%

Diluted earnings per share (p)

6.08

5.45

12%

Net cash (£ million)

17.3

5.3

226%

 

·      New five year £30 million multi-currency revolving credit facility agreed

·      Proposed final dividend of 0.48p per share, making a total dividend for the year of 0.70p (2013: 0.60p), up 16.7%

 

Business Highlights:

·      Good revenue growth across the major Business Units

Branded Direct up 3% to £23.6 million (2013: £22.9 million), and up 6% at constant currency

Branded Distributed up 17% to £10.2 million (2013: £8.8 million), and up 24% at constant currency

OEM up 7% to £25.3 million (2013: £23.6 million), and up 9% at constant currency

Bulk Materials down 7% to £3.9 million (2013: £4.2 million), and down 4% at constant currency

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

Revenues up 43% at constant currency to £4.1 million

As at 31 December 2014, market share by volume increased to 19% (July 2014: 18%) in the non-hospital market and to 7% (July 2014: 6%) in the hospital segment

·      ActivHeal® continued to make good progress in the NHS, with an 8% increase in revenues and  increase in market share to 7% (2013: 5%)

·      Steady progress with RESORBA® brands in Germany, resulting in 4% growth at constant currency

·      Silver alginate revenues increased by 10% at constant currency to £13.1 million (2013: £12.1 million)

·      Hernia mesh fixation device LiquiBand® Fix8™ successfully launched.

 

Commenting on the results, Chris Meredith, Chief Executive Officer of AMS, said:

“2014 has been another year of good growth for AMS, with our three largest business units all delivering solid performances despite challenging currency conditions. We were particularly enouraged by strong growth in the US, where the performance, range and pricing of our LiquiBand® tissue adhesives is helping to drive gains in market share, and in the UK, where the ActivHeal® range continues to provide high performance, cost effective solutions for the NHS.  The successful launch of the LiquiBand® Fix8™ hernia mesh fixation device, marking the first use of our medical adhesives in internal applications, demonstrates our continued commitment to investing in innovation.

 

“With the continuing growth in our larger business units, the strong performance of our products and our ambitions for the Group, we are confident that AMS is well placed to drive growth as well as continued improvements in operational efficiencies and we remain excited by the prospects for our future.”

– End –

 

1      Constant currency removes the effect of currency movements by 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, were £0.4 million (2013: £0.4 million) as defined in the financial review

 

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




Consilium Strategic Communications

Tel: +44 (0) 20 3709 5700

Mary-Jane Elliott / Jonathan Birt / Matthew Neal / Ivar Milligan




Investec Bank PLC (NOMAD & Broker)

Tel: +44 (0) 20 7597 5970

Gary Clarence / Daniel Adams / Patrick Robb


 

About Advanced Medical Solutions Group plc 

 

AMS is a world-leading independent developer and manufacturer of innovative and technologically advanced products for the global surgical, wound care and wound closure markets, focused on quality outcomes for patients and value for payors. AMS has a wide range of products that include silver alginates, alginates, foams, tissue adhesives, sutures and haemostats, which it markets under its brands ActivHeal®, LiquiBand® and RESORBA® as well as supplying under white label.
AMS’s products, manufactured out of two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic, are sold in more than 70 countries via a network of multinational or regional partners and distributors, as well as via AMS’s own direct sales forces in the UK, Germany, the Czech Republic and Russia.  Established in 1991, the Company has 472 employees.  For more information please see
www.admedsol.com.

 

 



 

Chairman’s Statement

 

2014 was another year of good growth across the business – both operationally and financially.  AMS continues to progress as a leading, international provider of high quality, high value innovative and technologically advanced products for the wound care and wound closure markets.

 

Operationally, the performance of LiquiBand in the US was particularly strong and we made considerable progress towards our goal of building a 20% market share. We also launched our LiquiBand® Fix8™ hernia mesh fixation device for use as a medical adhesive inside the body. This was an important development for the Group, opening up potential new markets as we seek to extend the application of our tissue adhesives to other internal procedures. 

 

Financially, we are pleased to report a 6% increase in revenue to £63.0 million (2013: £59.5 million), representing growth of 9% on a constant currency basis and an increase in adjusted2 profit before tax of 15% to £15.6 million (2013: £13.5 million).

 

The Group continues to work on a number of significant opportunities to drive growth resulting from existing products and geographic markets as well as from new products in development.

 

The Group ended the year with net cash of £17.3 million (2013: £5.3 million), and has taken advantage of the favourable terms available for borrowing to put in place a five-year, unsecured, new multi-currency, credit facility for £30 million. This facility is as yet unused. AMS continues to be in robust financial health and is well positioned to invest in internal development projects as well as potential licensing opportunities and acquisitions in line with the Group’s strategy. 

 

Dividend 

 

The Board is proposing a final dividend of 0.48p per share, making a total dividend for the year of 0.70p per share, a 16.7% increase on 2014. If approved at the Annual General Meeting on 21 May 2015, this will be paid on 29 May 2015 to shareholders on the register at the close of business on 7 May 2015.

 

People

 

Finally, on behalf of the Board, I would like to thank all our employees, customers, suppliers, business partners and shareholders for their continued support over the past year.

 

Peter Allen

Chairman

 

2 All items are show before amortisation of acquired intangible assets which, in 2014, were £0.4 million (2013: £0.4 million) as defined in the financial review

 

 

 

 

 

 



 

Chief Executive’s Statement

 

I am pleased to report good growth across our major business units despite foreign exchange headwinds. With more than 75 percent of our sales outside the UK, our business is truly international and therefore affected by currency fluctuations.

 

Branded Direct

 

The Branded Direct Business Unit reports sales of our branded products through our own sales forces in the UK, Germany and Czech Republic. Its revenue grew 3% to £23.6 million (2013: £22.9 million) and by 6% at constant currency.

 

ActivHeal®

ActivHeal®, which delivers a range of woundcare dressings that offer significant cost savings without compromising on clinical outcomes or patient care, continues to be a compelling proposition for the  NHS. Sales of our ActivHeal® range increased by 8% to £6.0 million (2013: £5.5 million). We are encouraged by the most recent data confirming that AMS had further increased its market share to 7.1% (2013: 5.5%) at the end of 2014. Encouragingly, ActivHeal® has had a strong start to 2015 with a number of tender and formulary wins from new NHS Hospital Trusts and we expect increased growth throughout the year.

 

LiquiBand®

We continue to make good progress in the UK with LiquiBand®. In the Accident and Emergency Room (‘A&E’) sales grew 8% to £2.6 million (2013: £2.5 million) and sales into the Operating Room (‘OR’) increased 34% to £0.6 million (2013: £0.45 million).

 

AMS’ products have been used in A&E for a number of years and the good growth we have seen reflects the progress made by our focused sales team in this sector. The UK surgical sales team, now in their second year, is accessing the OR with a growing range of products that now includes sutures and haemostats. This team will also start selling LiquiBand® Fix8™, our hernia mesh fixation device.

 

Sales of LiquiBand® in Germany were flat at £1.4 million at a reported level, but increased by 5% at constant currency. Steady progress is expected to continue in Germany.

 

RESORBA®

Sales of RESORBA® branded products in Germany and the Czech Republic were slightly lower at £13.0 million (2013: £13.1 million) at a reported level and increased by 4% at constant currency. Sales of haemostats increased by 12% at constant currency to £3.6 million (2013: £3.4 million) and sales of sutures and collagens into the dental market were unchanged at £3.8 million, whilst sales of sutures into hospitals grew 2%, reversing the decline reported in 2013.

 

Although the German suture market continues to be challenging and is expected to remain so over the next year, we believe we are well placed to benefit from the competitive pressures in the market with our extensive range of competitively priced products. Our German commercial operations were strengthened by the appointment of a national sales manager in February 2015. The introduction of the LiquiBand® Fix8™ device is also expected to support progress in 2015, and we are reviewing the optimal way to service the dental market in Germany, which involves mulitple call points.

 

In the UK, we are actively working on a number of hospital tenders and evaluations with the goal of becoming the main suture supplier to those hospitals. We believe our ability to supply a comprehensive range of top quality sutures that provide cost savings to hospitals is compelling. Winning any one of these current evaluations would significantly increase the presence of our brand in the UK.

 

In R&D, our focus is on extending the attributes of our collagens to meet the needs of dental practitioners and oral surgeons. We expect to obtain approval for an enhanced collagen cone in 2015, as well as making good progress in including new antibiotics in our haemostats.

 

 

Branded Distributed

 

The Branded Distributed Business Unit reports the sales of our brands through distributors in territories where we do not have a national sales team.

 

Branded Distributed revenue was 17% higher at £10.2 million (2013: £8.8 million) and 24% higher at constant currency. The main contributor to this growth was LiquiBand® sales in the US, which totaled £4.1 million and accounted for 40% of total sales.

 

LiquiBand® in the US

Sales of LiquiBand® in the US increased by 36% to £4.1 million (2013: £3.0 million) and by 43% at constant currency. The new distribution partner added at the end of 2013 performed well throughout the year and contributed to the growth in sales alongside existing partners. Given the high level of sales in the second half of 2013, which included some pipeline filling at the end of the year, our sales growth performance in 2014 was particularly strong. The latest data for December 2014 shows our volume market share increasing to 7%, up from 6% at July 2014, in the US hospital sector, while our volume market share in the US non-hospital, or alternate site, market is now estimated at 19%, up from 18% at July 2014. 

 

We launched our 2-octyl cyanoacrylate formulation with one of our existing distribution partners in the second half of 2014 and have already added additional  partners since the start of 2015. A strength of the business is the range of formulations of cyanoacrylate on offer, including very fast setting formulations with applicators allowing for quick, precision closure, and film-forming formulations that provide a barrier layer over wounds as well as closing the wound itself. With formulations that have properties in between, we have products that can accommodate the full spectrum of wound closing needs.       

 

LiquiBand® in the EU and Rest Of the World

Elsewhere, within the EU and ROW, LiquiBand® sales through our distributors continued to show good growth, with our distributors in France and Italy continuing to perform well. Overall sales increased by 15% to £1.5 million (2013: £1.3 million) at reported currency and constant currency.

 

The regulatory approval process for LiquiBand® in China is progressing, however owing to changes in the regulatory pathway, we now expect approval later in 2015.

 

Hernia Mesh Fixation device – LiquiBand® Fix8™

We received approval to market this product in Europe on 29 May 2014 and it has now been launched in the UK and Germany with our own sales teams as well as through some European distributors who are able to support the product.The initial response has been very positive, with a number of surgeons keen to endorse the product. We are also receiving valuable feedback about other possible applications suitable for this type of device which we are currently working on.

 

We do not anticipate significant sales in the first half of the yearas surgeons are individually trained on how to use the device and we wait to see the outcome of their surgery. Following positive feedback, we are confident that the product will contribute to growth in the second half of 2015 and thereafter.      

 

RESORBA® 

Sales of RESORBA® products to all export markets other than Russia grew by 6% at reported currency to £2.9 million (2013: £2.8 million), and by 10% at constant currency. Growth was seen across several territories, with our French, Italian and Chinese distributors performing strongly. Sales in Russia increased by 4% at constant currency, but decreased 18% to £1.3 million (2013: £1.6 million) at reported currency, reflecting the weakening Rouble. The Russian market is unlikely to grow in the forseeable future.

 

Work continues to gain approval to supply RESORBA® sutures and haemostats into the US. We have received our first approval for the sale of one type of suture for the US market and are still on target for the remainder of the suture range to be approved in the first half of 2015, with the expectation that we can launch the products in the second half of 2015.

 

In R&D our focus is on continuing to improve the formulations of the base monomers that are used in our adhesives as well as extending the applications of tissue adhesives for internal use.

 

 

OEM

 

The OEM Business Unit reports the sales of products that are sold under third parties’ brands.

 

OEM revenue increased by 7% at reported currency to £25.3 million (2013: £23.6 million) and by 9% at constant currency.

 

Our silver alginate ranges of dressings continued to perform well, with sales increasing by 8% at reported currency and by 10% at constant currency to £13.1 million (2013: £12.1 million). Our partners continued to do well with the range of silver fibre dressings we provide, gaining market share as well as accessing new geographical markets. We continue to support them with regulatory approvals and marketing data.

 

Sales of our foam-based dressings were flat at £1.8 million. This was due to one of our partners launching a new product range last year with sales following the typical second year post launch sales pattern reduction. Adjusting for this, sales elsewhere were encouraging and up 20% on a proforma basis. Our other woundcare and skin protectant products delivered good growth and grew 9% to £9.7 million (2013: £8.9 million), while the collagen OEM business acquired with RESORBA® was flat year-on-year at £0.8 million, with little change expected in 2015. 

 

In R&D, the focus is on further developing our foam range to include both an antimicrobial and an atraumatic foam. These products are well advanced and we expect approvals in the first half of 2015, with a launch later this year.

 

Bulk Materials

 

The Bulk Business Unit reports sales of bulk materials to third party convertors.

 

Bulk Materials revenue decreased by 7% at reported currency to £3.9 million (2013: £4.2 million) and by 4% at constant currency.

 

Rollstock foam contributed around 85% of Bulk revenue and good growth was seen by one signficant customer that had destocked in 2013. However, sales by some newer and smaller partners were disappointing. Until sufficient scale of revenue is achieved with the customer base, the Bulk Materials  Unit will remain vulnerable to the ordering patterns of its partners and customers.

 

In R&D, the  focus is on developing new foam formulations with antimicrobials, working in conjunction with the OEM business unit. These products are expected to be launched in 2015.

 

Operations

 

Efficiency and gross margins

We continue to strive for operational improvements by reducing set up times, eliminating non-value added activities and increasing outputs. These incremental efficiencies are helping to improve gross margins acoss the Group and have helped to generate an improvement of approximately 100 basis points in 2014, offsetting some of the negative impact resulting from movements in currency. We have invested in improving our converting capability in Winsford. This equipment is still being commissioned, but we expect to increase our operational flexibility and improve efficiency in 2015 as a result.

 

Capacity and resource

We have also identified the need to increase the capacity of our collagen plant in Germany. We anticipate that £1.0 million of investment is required in the plant in the second half of 2015. We continue to invest in improving our ERP (Enterprise Resource Planning) management and reporting systems. Following the successful launch of our new ERP system at our Plymouth site, the system was subsequently launched in Winsford in February 2014 and in Etten Leur in the Netherlands in September 2014. We constantly monitor our systems across the Group and will invest in further improvements to systems in Germany.

 

Regulatory and quality assurance

With the regulatory framework gaining in complexity, we have continued to invest in both Regulatory and Quality functions and systems to ensure that we are able to support our partners with winning  approvals in new markets as well as obtaining approval for our own  products. We anticipate that we will continue to invest in these areas in 2015.

 

 

 

R&D

 

The Group continues to develop new products through its R&D teams. We are well advanced in the approval process for our antimicrobial and atraumatic foams and, whilst external regulatory pathways are out of our control resulting in unclear timings, we expect to obtain several product approvals in 2015, enabling these products to be launched thereafter.      

 

Summary and Outlook

 

We delivered revenue growth of 6% (at constant currency this would have been 9%) and significantly improved profitability and cash generation during the year.

 

Our three largest business units all delivered solid performance despite challenging currency conditions. We were particularly encouraged by strong growth in the US, where the competitive quality, range and pricing helped to drive gains in our market share.  The successful launch of the LiquiBand® Fix8 hernia mesh fixation device demonstrates our continued commitment to investing in innovation and during the year ahead we expect further product launches and advancements in our R&D activities. 

 

With continuing growth across our major business units, due to the strong performance of our products, new products progressing well and our anticipated broadening into new geographies, we are confident that the Group is well placed to drive growth as well as continued improvements in efficiencies and we remain excited by the prospects for our future.

 

 

Financial Review

 

Summary

 

Group revenue increased by 6% to £63.0 million (2013: £59.5 million). At constant currency, revenue growth would have been 9%.

 

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. Amortisation of acquired intangible assets was £0.4 million in the period (2013: £0.4 million).

 

To aid comparison, the Group’s adjusted income statement is summarised in Table 1 below.

 

Table 1

   Year ended

31 Dec 2014

Year ended

31 Dec 2013


Adjusted Income Statement

£’000

£’000

Change

Revenue

63,010

59,499

6%

Gross profit

35,843

34,268

5%

Distribution costs

(853)

(744)


Administration expenses3

(19,681)

(19,679)


Other income

250

281


Adjusted operating profit

15,559

14,126

10%

Net finance income/(costs)

48

(582)


Adjusted profit before tax

15,607

13,544

15%

Amortisation of acquired intangibles

(389)

(400)


Profit before tax

15,218

13,144

16%

Tax

(2,354)

(1,778)


Profit for the period

12,864

11,366

13%

Adjusted earnings per share – basic4

6.39p

5.72p

12%

Earnings per share – basic4

6.20p

5.52p

12%

Adjusted earnings per share – diluted3

6.26p

5.64p

11%

Earnings per share – diluted3

6.08p

5.45p

12%

3    Administration expenses exclude amortisation of acquired intangible assets

4    See Note 7 Earnings per share for details of calculation

 

Revenues were negatively impacted by approximately £1.8 million due to the effects of currency movements in the year. This also had an impact on Group gross margins which were reduced by 50 bps as a result. Gross margins were also negatively impacted by sales mix effect by 120bps, however, this was partially offset by the 100bps improvement made from operational eficiences.

 

Adjusted operating profit increased by 10% to £15.6 million (2013: £14.1 million) and the adjusted operating margin increased by 100 bps to 24.7% (2013: 23.7%). At a reported level, administration costs were flat year on year, helped  by currency effects. Adjusting for currency, administration costs would have increased by 5%. Within this, the Group expensed to the income statement £2.1 million on R&D (2013: £2.2 million). Spend as a percentage of sales reduced to 3.3% (2014: 3.7%), mainly as a result of timing of projects.

 

Profit before tax for the year was 16% higher at £15.2 million (2013: £13.1 million).

 

The Group’s effective rate of tax for the year was 15.5% (2013: 13.5%). This is reflective of the utilisation of previously unrecognised brought-forward tax losses in the UK, together with patent box and R&D relief. It also reflects the impact of blending profits and losses from different countries and the different tax rates associated with these countries. The effective tax rate of the Group is expected to increase as a result of the tax losses being used up.

 

A reconciliation between the standard rate of taxation in the UK and the Group’s effective rate is summarised in Table 2 below.

 

 

 

Table 2

Taxation

%

Standard taxation rate

21.50

Loss utilisation and recognition

(3.61)

Impact of differential between UK and overseas tax rate

1.70

Patent box relief

(3.58)

R&D relief

(1.89)

Expenses not deductible, prior year adjustments, depreciation & share based payments

1.38

Effective taxation rate

15.50

 

Earnings (excluding amortisation of acquired intangible assets) increased by 13% to £13.3 million (2013: £11.8 million), resulting in a 12% increase in adjusted basic earnings per share to 6.39p (2013: 5.72p) and a 11% increase in diluted adjusted earnings per share to 6.26p (2013: 5.64p).

 

Profit after tax increased by 13% to £12.9 million (2013: £11.4 million), resulting in a 12% increase in basic earnings per share to 6.20p (2013: 5.52p) and a 12% increase in diluted earnings per share to 6.08p (2013: 5.45p).

 

The Board is proposing a final dividend of 0.48p per share, to be paid on 29 May 2015 to shareholders on the register at the close of business on 7 May 2015. This follows the interim dividend of 0.22p per share that was paid on 31 October 2014 and would make a total dividend for the year of 0.70p per share (2013: 0.60p), a 17% increase on 2013.

 

The operational performance of the Business Units is shown in Table 3 below. The adjusted profit from operations and the adjusted margin are shown after excluding amortisation of acquired intangibles. In determining, and to aid comparison of the operational margins of the individual Business Units, the revenue of the Bulk Materials Business Unit sales made to other Business Units, £0.7 million (2013: £0.8 milllion) are included. 

 

 

 

 

 

 

 

 

Table 3

Operating Result by Business Unit

Year ended 31 December 2014

Branded Direct

Branded Distributed

OEM

Bulk Materials


£’000

£’000

£’000

£’000

Revenue

23,610

10,247

25,275

4,580

Profit from operations

6,241

2,770

6,225

485

Amortisation of acquired intangibles

227

135

27

Adjusted profit from operations5

6,468

2,905

6,252

485

Adjusted operating margin5

27.4%

 28.3%

24.7%

10.6%

Year ended 31 December 2013





Revenue

22,918

8,785

23,629

4,933

Profit from operations

6,023

1,654

5,790

668

Amortisation of acquired intangibles

235

130

35

Adjusted profit from operations1

6,258

1,784

5,825

668

Adjusted operating margin1

27.3%

20.3%

24.7%

13.5%

5 excludes amortisation of intangible assets

 

Branded Direct

The adjusted operating margin of this Business Unit remained at a similar level to the prior year at  27.4% (2013: 27.3%) and lower than the position at H1 2014 (29.6%). As indicated at the half year we are investing in sales and marketing in our increasing direct sales teams.

 

Branded Distributed

The adjusted operating margin of this Business Unit increased to 28.3% (2013: 20.3%), reflecting the improved profitability from the increase in sales in this Business Unit and in particular from sales to the US. The growth in sales to the US mitigated the impact in margin from sales made into Russia and continued the improvement in margin seen at H1 2014 (18.7%).  

 

OEM

The adjusted operating margin of this Business Unit was at a the same level to the prior year at 24.7% (2013: 24.7%), and lower than the margin reported at H1 2014 (27.1%). Margins are dependent on the mix of business, which at the half year had a greater percentage of silver alginate sales than at the full year.

 

Bulk Materials

The adjusted operating margin of this Business Unit decreased to 10.6% (2013: 13.5%), but improved from the position in H1 2014 (9.8%). Margins were affected by the lower volumes of production as well as the different sales mix.

 

 

Geographic breakdown of revenues

 

The geographic breakdown of Group revenues in 2014 is shown in Table 4 below:

 

Table 4

Geographic Breakdown of Group Revenues

£ millions

2014

% of total

2013

% of total

Europe (excluding UK & Germany)

18.7

29.7

17.3

29.1

Germany

14.0

22.3

15.7

26.4

UK

15.3

24.3

13.2

22.2

USA

13.8

21.9

11.8

19.9

Rest of World

1.1

1.8

1.4

2.4

 

Although nearly 52% of the Group’s sales are in Europe (excluding the UK), only around 34% of sales are denominated in Euros. Approximately 80% of all sales to the US are denominated in US Dollars. The Group hedges significant transaction exposure by using forward contracts and options and aims to have 70% of its estimated transactional exposure for the next twelve months hedged. The foreign currency hedges put in place in 2013 mitigated the effect of the adverse effects of currency in 2014 by around £1million.

 

 

Cash Flow

 

Table 5 summarises the Group cash flows.

 

Table 5

Group Cash Flows

Year ended 31 December

2014

2013


£’000

£’000

Adjusted operating profit (Table 1)

15,559

14,126

Non-cash items

2,993

2,815

EBITDA

18,552

16,941

Working capital movement

(104)

(2,788)

Net cash from operating activities

18,448

14,153

Capital expenditure and capitalised R&D

(2,406)

(2,002)

Net interest received

45

(587)

Tax paid

(1,876)

(83)

Free cash flow

14,211

11,481

Repayment of loan

(14,385)

Dividends paid

(1,307)

(1,111)

Proceeds from share issues

65

328

Net increase/ (decrease) in cash and cash equivalents

12,969

(3,687)

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

 

EBITDA increased by 10% to £18.6 million (2013: £16.9 million).

 

Working capital reduced slightly in the year but this was mainly due to the effects of translating overseas working capital balances held in euros into sterling. 4.2 months of supply of inventory was held across the Group, slightly increased compared with the prior year (2013: 4.0 months of supply). Trade debtor days remained at the same level to the prior year at 43 (2013: 43) while trade payable days decreased to 36 (2013: 42).

 

The Group generated net cash from operating activities of £18.4 million (2013: £14.2 million) (see Table 5) and had net cash of £17.3 million (2013: £5.3 million) at the end of the year.

 

We invested £2.4 million in capital equipment, software and capitalised R&D in the year (2013: £2.0 million). We have invested in equipment around the Group that improves converting and packaging as well as in business systems.

 

The Group generated a free cash flow of £14.2 million in the year (2013: £11.5 million). The conversion of adjusted operating profit into free cash flow was 91% (2013: 81%).

 

The Group paid its final dividend for the year ended 31 December 2013 of £0.85 million (2013:for the year ending 2012, £0.71 million) on 28 May 2014, and its interim dividend for the six months ended 30 June 2014 of £0.46 million (2013: £0.40 million) on 31 October 2014.

 

In December 2014 the Group entered into a new, five-year, £30 million, multi-currency revolving credit facility with an accordion option under which AMS can request up to an additional £20 million on the same terms. The previous facility for £4 million was due to expire in 2015.  The Group chose to take advantage of favourable credit conditions to put in place a more suitable facility to support the Group’s growth ambitions. The new facility is provided jointly by the Group’s existing bankers, HSBC, as well as The Royal Bank of Scotland PLC. It is unsecured on the assets of the Group and has not been drawn down. This facility carries an annual interest rate of LIBOR or EURIBOR plus a margin that varies between 0.65% and 1.75% depending on the Group’s net debt to EBITDA ratio.

 

At the end of the period, the Group had net cash of £17.3 million (2013: £5.3 million). The movement in net cash from the start of the year to net cash at the end of the year is reconciled in Table 6 below:

 

 

 

Table 6

Movement in net cash

£’000

Net cash as at 1 January 2014

5,257

Exchange rate impacts

(946)

Free cash flow

14,211

Dividends paid

(1,307)

Proceeds from share issues

65

Net cash as at 31 December 2014

17,280

 

 

The Group’s going concern position is fully described in note 2.

 

 



 

CONSOLIDATED INCOME STATEMENT

 




(Unaudited)


(Audited)

Year ended 31 December



2014


2013




Total


Total



Note

£’000


£’000







Revenue from continuing operations


4

63,010


59,499

Cost of sales



(27,167)


(25,231)

Gross profit



35,843


34,268

Distribution costs



(853)


(744)

Administration costs



(20,070)


(20,079)

Other income



250


281

Profit from operations


4,5

15,170


13,726

Finance income



49


1

Finance costs



(1)


Profit before taxation



15,218


13,144

Income tax


6

(2,354)


(1,778)

Profit attributable to equity holders of the parent



12,864


11,366

Earnings per share






Basic


7

6.20p


5.52p

Diluted


7

6.08p


5.45p

Adjusted diluted


7

6.26p


5.64p

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 


(Unaudited)

(Audited)

Year ended 31 December

2014

2013


£’000

£’000

Profit for the year

12,864

11,366

Items that may be reclassified subsequently to profit and loss:



Exchange differences on translation of foreign operations

(4,200)

732

(Loss) / gain arising on cash flow hedges

(1,173)

698

Other comprehensive (expense)/income for the year

(5,373)

1,430

Total comprehensive income for the year attributable to equity holders of the parent

7,491

12,796

 

 



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 


(Unaudited)

(Audited)

At 31 December

2014

2013


£’000

£’000

Assets



Non-current assets



Acquired intellectual property rights

9,238

10,256

Software intangibles

1,835

1,662

Development costs

1,850

1,702

Goodwill

36,696

39,278

Property, plant and equipment

16,003

16,707

Deferred tax assets

1,108

1,728

Trade and other receivables

22

14


66,752

71,347

Current assets



Inventories

7,532

8,042

Trade and other receivables

12,969

12,158

Current tax assets

343

Cash and cash equivalents

17,280

5,257


37,781

25,800

Total assets

104,533

97,147

Liabilities



Current liabilities



Trade and other payables

7,649

6,298

Current tax liabilities

584

1,220

Other taxes payable

259

260

Obligations under finance leases

2

4


8,494

7,782

Non-current liabilities



Trade and other payables

472

520

Deferred tax liabilities

2,513

2,754

Obligations under finance leases

1

3


2,986

3,277

Total liabilities

11,480

11,059

Net assets

93,053

86,088

Equity



Share capital

10,393

10,343

Share premium

32,742

32,364

Share-based payments reserve

1,563

1,326

Investment in own shares

(148)

(144)

Share-based payments deferred tax reserve

278

158

Other reserve

1,531

1,531

Hedging reserve

(522)

651

Translation reserve

(4,867)

(667)

Retained earnings

52,083

40,526

Equity attributable to equity holders of the parent

93,053

86,088

 

 


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Group

 




Share

Investment

Share based







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 Dec 2013

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

Consolidated profit for the year to 31 Dec 2014

12,864

12,864

Other comprehensive income

(1,173)

(4,200)

(5,373)

Total comprehensive income (unaudited)

(1,173)

(4,200)

12,864

7,491

Share based payments

 –

 –

592

120

712

Share options exercised

50

378

(355)

 –

 –

 –

 –

73

Shares purchased by EBT

 –

 –

 –

(190)

 –

 –

 –

 –

(190)

Shares sold by EBT

 –

 –

 –

 186

 –

 –

 –

 –

186

Dividends paid

 –

 –

 –

 –

 –

 –

 –

 –

(1,307)

(1,307)

At 31 December 2014 (unaudited)

10,393

32,742

1,563

(148)

278

1,531

(522)

(4,867)

52,083

93,053

 

 

 


CONSOLIDATED STATEMENT OF CASH FLOWS

 


(Unaudited)

(Audited)

Year ended 31 December

2014

2013


£’000

£’000

Cash flows from operating activities



Profit from operations

15,170

13,726

Adjustments for:



Depreciation

1,750

1,783

Amortisation  –   intellectual property rights

389

400

                         –   development costs

331

204

                         –   software intangibles

228

91

Impairment of development costs

92

337

Decrease / (increase) in inventories

221

(1,510)

Increase in trade and other receivables

(1,623)

(1,931)

Increase in trade and other payables

1,298

653

Share based payments expense

592

400

Taxation

(1,876)

(83)

Net cash inflow from operating activities

16,572

14,070

Cash flows from investing activities



Purchase of software

(408)

(618)

Capitalised research and development

(581)

(612)

Purchases of property, plant and equipment

(1,478)

(836)

Disposal of PPE

61

64

Interest received

50

1

Net cash used in investing activities

(2,356)

(2,001)

Cash flows from financing activities



Dividends paid

(1,307)

(1,111)

Finance lease 

(4)

(5)

Repayment of secured loan

(14,385)

Issue of equity shares

69

395

Shares purchased by EBT

(190)

(277)

Shares sold by EBT

186

210

Interest paid

(1)

(583)

Net cash used in financing activities

(1,247)

(15,756)

Net increase / (decrease) in cash and cash equivalents

12,969

(3,687)

Cash and cash equivalents at the beginning of the year

5,257

8,841

Effect of foreign exchange rate changes

(946)

103

Cash and cash equivalents at the end of the year

17,280

5,257

 

 



 

Notes Forming Part of the Condensed 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 2014 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, and medical adhesives and sutures for closing and sealing tissue, for sale into the global medical device market and dental market.

 

2.      Basis of preparation

These condensed unaudited consolidated financial statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2013.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in April 2015.

 

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2014 or 31 December 2013. The financial information for the year ended 31 December 2013 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s498 (2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2014 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group’s annual general meeting.

 

The financial statements have been prepared on the historical cost basis of accounting except as disclosed in the accounting policies set out in the annual report for the year ended 31 December 2013.

 

With regards to the Group’s financial position, it had cash and cash equivalents at the year end of £17.3 million. The Group also has in place a five-year, unsecured, new multi-currency, credit facility for £30 million  which was undrawn in during 2014.

 

While the current economic environment is uncertain, the Group 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.

 

Having taken the above into consideration the Directors have reached a 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 preliminary announcement.

 

The Group has not yet adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements,  IAS 28 Investments in Associates and Joint Ventures (2011), IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2011), IAS 32 Amendments to IFRS 7 and IAS 32, Amendments to IAS 36 Impairment of Assets, Amendments to IAS 39 Financial Instruments: recognition and measurement, Amendments to IFRS 10, IFRS12 and IAS 27. These have had no significant impact on this set of financial information.

 

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 annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

 

4.      Segment information

As referred to in the Chief Executive’s Report, the Group is organised into four business units: Branded Direct, Branded Distributed, OEM (original equipment manufacturer) and Bulk Materials. These business units 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 and income tax assets. These are the measures reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

 

Business segments

 

Segment information about these businesses is presented below.

 

Year ended

31 December 2014

Branded Direct

Branded Distributed

OEM

Bulk Materials

Eliminations

Consolidated


£’000

£’000

£’000

£’000

£’000

£’000

Revenue







External sales

23,610

10,247

25,275

3,878

63,010

Inter segment sales




702

(702)

Total revenue

23,610

10,247

25,275

4,580

(702)

63,010

 

Result







Segment result

6,241

2,770

6,225

485

15,721

Unallocated expenses






(551)

Profit from operations






15,170

Finance income






49

Finance costs






(1)

Profit before tax






15,218

Tax






(2,354)

Profit for the year






12,864

 

At 31 December 2014

Branded Direct

Branded Distributed

OEM

Bulk Materials

Consolidated

Other Information

£’000

£’000

£’000

£’000

£’000

Capital additions:






Software intangibles

88

11

272

37

408

Research & development

200

113

262

6

581

Property, plant and equipment

586

179

617

96

1,478

Depreciation and amortisation

(903)

(356)

(1,188)

(251)

(2,698)

Balance sheet






Assets






Segment assets

55,456

17,207

27,200

4,462

             104,325

Unallocated  assets





208

Consolidated total assets





104,553

Liabilities






Segment liabilities

5,257

2,159

3,531

533

11,480

Consolidated total liabilities





11,480

 



 

 

Year ended

31 December 2013

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

 

 

As at 31 December 2013

Branded Direct

Branded Distributed

OEM

Bulk Materials

Consolidated

Other Information

£’000

£’000

£’000

£’000

£’000

Capital additions:






Software intangibles

131

15

400

72

618

Research & 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

 

 

Geographic segments

 

The Group operates mainly in the UK, the Netherlands, Germany, the Czech Republic and Russia, with a sales office located in 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:

 

Year ended 31 December

2014

2013


£’000

£’000

United Kingdom

15,308

13,225

Germany

14,042

15,687

Europe excluding United Kingdom and Germany

18,747

17,331

United States of America

13,786

11,819

Rest of World

1,127

1,437


63,010

59,499

 

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

 

As at 31 December

2014

2013


£’000

£’000

United Kingdom

46,049

34,271

Germany

52,887

56,522

Europe excluding United Kingdom and Germany

5,506

6,315

United States of America

91

39


104,533

97,147

 

5.      Profit from operations

 

Year ended 31 December

2014

2013


£’000

£’000

Profit from operations is arrived at after charging / (crediting):



Depreciation of property, plant and equipment

1,750

1,783

Amortisation of:



–  acquired intellectual property rights

389

400

–  software intangibles

228

91

–  development costs

331

204

Operating lease rentals – plant and machinery

228

235

                                      – land and buildings

912

835

Research and development costs expensed to the income statement

2,120

2,196

Cost of inventories recognised as expense

26,286

24,601

Staff costs

19,342

18,241

Net foreign exchange (gain) / loss

(1,029)

164

 

 

 

 

6.      Taxation

 

Year ended 31 December

2014

2013


£’000

£’000

a) Analysis of charge for the year



Current tax:



Tax on ordinary activities – current year

1,482

1,010

Tax on ordinary activities – prior year

194

(134)


1,676

876

Deferred tax:



Tax on ordinary activities – current year

678

494

Tax on ordinary activities – prior year

72

Effect of reduction in UK corporation tax rates

336


678

902

Tax charge for the year

2,354

1,778

 

The tax assessed for the year is lower (2013: lower) than the standard rate of corporation tax in the UK (21.5%) as explained below:

 

 

 

Year ended 31 December

2014

2013


£’000

£’000

b) Factors affecting tax charge for the year



Profit before taxation

15,218

13,144

Profit multiplied by the standard rate of corporation tax in the UK of 21.5% (2013: 23.25%)

3,272

3,056

Effects of:



Overseas tax rate versus UK corporate tax rate

259

140

Net (income) / expenses not (taxable) / deductible for tax purposes and other timing differences

(26)

346

Depreciation for year less than capital allowances

(9)

(72)

Patent box relief

(545)

(510)

Utilisation and recognition of trading losses

(550)

(577)

Research and development relief

(287)

(439)

Share-based payments

46

(104)

Adjustments in respect of prior year – current tax

194

(134)

Adjustments in respect of prior year – deferred tax

72

Taxation

2,354

1,778

 

Legislation to reduce the main rate of UK corporation tax to 21% and 20% was passed by parliament on 2 July 2013 to take effect from 1 April 2014 and 1 April 2015 respectively. The reduction in the main rate to 20% had been substantively enacted at the balance sheet date and, therefore, the deferred tax assets and liabilities are calculated in these financial statements at this rate.

 

In addition to the amount charged to the income statement the Group has recognised directly in equity:

 

·      excess tax deductions related to share-based payments on exercised options, together with

·      changes in excess deferred tax deductions related to share-based payments, totalling £120,000 deficit (2013: surplus £22,000).

 

7.      Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

 

Year ended 31 December

2014

2013


£’000

£’000

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

12,864

11,366

 

Number of shares

‘000

‘000

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

207,528

205,795

Effect of dilutive potential ordinary shares:



– share options, deferred share bonus, LTIPs

3,991

2,869

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

211,520

208,664

 


£’000

£’000

Profit for the year attributable to equity holders of the parent

12,864

11,366

Amortisation of acquired intangible assets

389

400

Adjusted profit for the year attributable to equity holders of the parent

13,253

11,766

 

Earnings per share

pence

pence

Basic

6.20p

5.52p

Diluted

6.08p

5.45p

Adjusted basic

6.39p

5.72p

Adjusted diluted

6.26p

5.64p

 

 

 

 

 


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

END

 
 

FR EAADDEALSEAF

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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