6 March 2014

 

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

 

Preliminary Results for the year ended 31 December 2013

 

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today announces its unaudited preliminary results for the year ended 31 December 2013.

 

Financial Highlights:
•	Group revenue up 13% to £59.5 million (2012: £52.6 million), representing growth of 11% on a constant currency basis1
•	Adjusted2 profit before tax up 12% to £13.5 million (2012: £12.1 million)
	○	Profit before tax up 22% to £13.1 million (2012: £10.8 million)
•	Adjusted2 diluted earnings per share up 6.4% to 5.64p (2012: 5.30p)
	○	Fully diluted earnings per share up 17% to 5.45p (2012: 4.66p)
•	Operating cash flow before exceptional items3 of £14.2 million (2012: £13.4 million)
•	Net cash of £5.3 million (2012: net debt4 £5.5 million)
	○	Term loan repaid in full, 22 months ahead of schedule
•	Proposed final dividend of 0.41p per share, making a total dividend for the year of 0.60p (2012: 0.52p), a 15.4% increase

 

Business Highlights:
•	Business Units have performed well
	○	Branded Direct up 14% to £22.9 million (2012: £20.1 million), 11% at constant currency
	○	Branded Distributed up 30% to £8.8 million (2012: £6.8 million), 28% at constant currency
	○	OEM up 8% to £23.6 million (2012: £22.0 million), 7% at constant currency
	○	Bulk Materials up 10% to £4.2 million (2012: £3.8 million), 9% at constant currency
•	ActivHeal® continues its excellent progress in the NHS, with a 32% increase in revenues
•	Further progress in the US with the LiquiBand® tissue adhesive range, with revenues up 78% at constant currency
	○	FDA clearance obtained in June 2013 for 2-octyl cyanoacrylate tissue adhesive enhanced range
	○	Further distribution partnership agreements signed, increasing coverage of market
•	Sales of RESORBA® brands in Germany increased by 8% (3% at constant currency) to £13.8 million (2012: £13.2 million)
•	Silver alginate revenues increased by 15% to £12.1 million (2012: £10.6 million)
•	Hernia Mesh fixation device on track to launch in the EU in H1 2014
•	Board strengthened with the appointments of Peter Steinmann and Peter Allen as Non Executive Directors
	○	Peter Allen replaced Don Evans as Chairman of the Group on 1 January 2014, following Don’s retirement

 

 

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

“2013 has been another excellent year for the AMS Group. I am delighted the reorganisation into the Business Units has helped increase focus in all our varied opportunities and resulted in another year of strong double digit growth in both revenue and profits”.

 

– 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 exceptional items which were charged and, in 2013, were £nil million (2012: £0.8 million) and    before amortisation of acquired intangible assets which, in 2013, were £0.4 million (2012: £0.5 million) as defined in the    financial review

3 Before exceptional items which were charged and, in 2013, were £nil million (2012: £0.8 million)

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

 

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
John West / Chris Munden / Andrew Dunn
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$ 21 billion global wound care and wound closure market. Through a mix of organic development and a number of acquisitions, AMS now 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 collagen wound care products primarily in Europe. AMS developes innovative products from its R&D pipeline which it commercialises globally 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 450 employees operating under four distinct business units that match its multiple products and routes-to-market (Branded Direct, Branded Distributed, OEM and Bulk Materials), 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

 

Having only recently been appointed as the Chairman of Advanced Medical Solutions Group plc, I am delighted to report that 2013 was another good year of growth for the Group and that the progress that was reported in the Interim Statement has continued. We are pleased to report a 13% increase in revenue to £59.5 million (2012: £52.6 million), representing growth of 11% on a constant currency basis, and an increase in adjusted¹ profit before tax of 12% to £13.5 million (2012: £12.1 million).

 

The Group ended the year with net cash of £5.3 million (2012: net debt £5.5 million), with the €25 million of debt taken on by the Group in December 2011 to finance the acquisition of RESORBA^® having been fully repaid within 2 years.

 

Our brands continue to perform well and good progress has been made against the Group’s vision and strategy.

 

Operationally, we continue to generate efficiencies and have delivered a further improvement in gross margin across the Group from streamlining processes as well as working with partners to improve our service and supply.

 

The Group is in the enviable position of having several significant opportunities from its existing products and geographic markets as well as from the new developments it is currently working on. In addition to this, our balance sheet strength enables us to consider further acquisitions should they be in line with the Group’s vision and strategy and meet our required financial metrics.

 

Dividend

 

We are proposing a final dividend of 0.41p per share, making a total dividend for the year of 0.60p per share, a 15.4% increase on 2013. If approved at the Annual General Meeting on 20 May 2014, this will be paid on 28 May 2014 to shareholders on the register at the close of business on 2 May 2014.

 

Board Changes

 

Peter Steinmann was appointed as Non-Executive Director on 1 July 2013. His extensive knowledge of the global medical devices market and commercial experience will assist the Group with its market expansion strategy. Don Evans retired from the Board and as Chairman of the Group on 31 December 2013. All our thanks go to Don who has contributed so much to the growth and success of AMS over the last 17 years. I joined the Board as Non-Executive Director on 5 December 2013 and became Chairman on 1 January 2014, following Don’s retirement. I look forward to leading the Group to achieve its strategy and meet its objectives in its next stage of its development.

 

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 last year.

 

Peter Allen

Chairman

 

 

 

 

Chief Executive’s Statement

 

I am pleased to report that AMS has delivered another strong year of growth and that we are seeing the first full year of benefit from the reorganisation of the Group into Business Units.

 

Branded Direct

 

The Branded Direct Business Unit’s revenues grew 14% to £22.9 million (2012: £20.1 million) and 11% at constant currency. This Business Unit’s key growth drivers are our three brands of ActivHeal^®, LiquiBand^® and RESORBA^®.

 

Sales of our ActivHeal^® dressings into the NHS grew 32% to £5.5 million (2012: £4.2 million) as a result of the continued support to our brand and the free-of-charge training and education of NHS staff from our clinical nurse team. The product range continues to be enhanced with the regular launch of foam and fibre dressings developed by our own Research & Development (R&D) group and we continue to target new hospitals as well as improve compliance in existing accounts. With a market share of only 5%, we still have considerable opportunities and expect double-digit growth to continue in 2014.

 

UK LiquiBand^® sales into the Accident and Emergency Room (A&E) grew 5% to £2.5 million (2012: £2.4 million) and sales of LiquiBand^® into the Operating Room (OR) increased 175% to £0.4 million (2012: £0.2 million), reflecting the early success of the new UK surgical sales team which is also selling RESORBA^® haemostats and sutures alongside LiquiBand^®. We expect to see continued success from this team which is expected to deliver further growth in the OR in 2014. LiquiBand^® sales in Germany grew 3% at constant currency to £1.4 million.

 

Sales of RESORBA^® branded sutures and collagen dressings in Germany grew by 8% and by 3% at constant currency to £13.8 million (2012: £13.2 million). Within this, sales of haemostats, sutures and dental cones performed well, whilst sales of sutures to German hospitals declined slightly. Although the German hospital suture market is very competitive we are confident that sales growth is possible and with our increased focus on, and capability to deal with Group Purchasing Organisations, we expect the hospital segment to return to growth in 2014.

 

This Business Unit’s R&D continues to improve the attributes of the Group’s haemostats. In particular, we are looking to enhance our haemostat range with the inclusion of antibiotics to prevent infection following surgery, as well as developing reinforced collagens that will encourage faster regrowth of tissue following surgery.

 

Branded Distributed

 

Our Branded Distributed Business Unit reported revenue growth of 28% at constant currency to £8.8 million (2012: £6.8 million). The key growth driver is LiquiBand^® into the US which accounted for 34%, or £3.0 million (2012: £1.7 million) of the total, up by 78% at constant currency over 2012.

 

Following the disappointment with one of our distributors in 2012, our progress in the acute care or hospital sector stalled in that year. We addressed this issue by renegotiating our contract and seeking additional product approvals. As a result, we have been able to sign further distributorship agreements with other partners, broadening our access to the market while enhancing our product range. We gained FDA clearance in 2013 for our 2-octyl cyanoacrylate tissue adhesive, complementing our existing butyl and blended formulations. We are already starting to see the benefits of these developments and, with our wider distribution network and our increased portfolio of products, we continue to be optimistic about the opportunity in the US.

 

Sales of LiquiBand^® though our distributors for the EU and the Rest of the World also showed good growth, increasing to £1.3 million (2012: £0.9 million), with our distributors in France and Italy both performing well. We were also pleased to see our first sales into South Korea as a consequence of our continued geographic expansion strategy. Sales of RESORBA^® products through distributors also made good progress increasing to £2.8 million (2012: £2.2 million),  with export sales to France and China doing particularly well.

 

In Russia, as previously advised, supply of product was temporarily disrupted earlier in the year due to a requirement to re-register all products with the Russian regulatory body and this affected the overall growth for the year. As a consequence, sales grew by 3% to £1.7 million (2012: £1.6 million) but declined 2% at constant currency. We do not expect a similar challenge in 2014. Approval to sell LiquiBand^® in Russia was granted in September 2013 and has resulted in initial sales which we anticipate will show steady growth throughout 2014.

 

Regulatory approval for LiquiBand^® in China continues on track for a H2 2014 launch. Upon approval we intend to launch our products through distributors.

 

Our Hernia Mesh fixation device, which will be our first application for the use of our medical adhesives inside the body, is on plan for a launch in the EU in H1 2014. Development time took slightly longer than expected after modifications were made to one of the mechanical parts in the delivery system. This product will be sold both by the Group’s direct sales teams as well as through a distributor network.

 

In this Business Unit’s R&D, we continue to make enhancements to our existing range of topical adhesives, including improvements to the applicator and to extending the range of sizes as well as developing ways to improve the in-house synthesis of the base monomers.

 

OEM

 

This Business Unit delivered 7% growth at constant currency in 2013 and had revenues of £23.6 million (2012: £22.0 million).

 

Our silver alginate products contributed 52% of the revenue, an increase of 15% at constant currency to £12.1 million (2012: £10.5 million), and are a key growth driver within this unit. Our partners continue to grow sales both by accessing new markets and by winning market share from the market leader which we estimate still has over 70% of the available market. There is, therefore, still a large opportunity for our customers to grow further. We continue to support our partners by helping them to gain regulatory approval for new markets and by supporting their marketing campaigns with efficacy data.

 

Sales of our foam-based finished dressings increased to £1.8 million (2012: £0.9 million), with our new trilaminate dressings contributing to this growth. The collagen OEM business acquired with RESORBA^® remained flat year-on-year, while sales of our older woundcare products declined to £7.2 million (2012: £8.0 million) as customers and markets move to more modern dressings.

 

We have a strong pipeline of R&D projects for wound care applications in this Business Unit, and product launches for both new anti-microbial dressings and atraumatic foam dressings are scheduled for H2 2014. Other longer term work includes the development of a range of post-operative surgical dressings.

 

Bulk Materials

 

The Bulk Materials Business Unit grew by 9% at constant currency with revenue of £4.2 million (2012: £3.8 million). Foam rollstock is the key growth driver in this unit, with revenue of £3.3 million (2012: £3.4 million), 86% of the total. The follow-on orders from the pipeline fill in 2011 have returned but are not yet at the full expected level, and further progress was held back by below expectation ordering from an existing key customer who de-stocked. To mitigate this effect, several contracts with new customers have been agreed which will support a growth in sales in 2014.

 

Operations

 

Improvements continue throughout the business, enabling the Group to meet the increased production volumes needed for growth without significant capital investment being required. We estimate that 120 bps of gross margin improvements were achieved in 2013 through lean management techniques and process improvements. The major capital projects in 2014 will be focused on delivering further efficiency improvements, particularly to our foam conversion process.

 

Our Quality and Regulatory processes have been reviewed and our teams restructured to ensure that they are aligned to give full support to the Business Units. Our processes have been stream-lined and are now operating under one Quality Management Standard across the Group.

 

We have also been investing in improving our business systems. Following a successful launch at our Plymouth site, our Enterprise Resource Planning (ERP) system has been launched in Winsford in February 2014 and is expected to launch in Etten Leur, Netherlands in Q3 2014. The benefits are that we will have business systems in place that are more robust and suitable for a growing Group, aiding decision-making and ensuring that information is reported in a consistent and timely fashion across the Group.

 

Outlook

 

We have significant growth opportunities across all our Business Units and are continuing to make progress on our strategy to be recognised as a leading global manufacturer and developer of innovative products in the advanced woundcare, wound closure and surgical markets.

 

We will continue to invest in growing our ActivHeal^®, LiquiBand^® and RESORBA^® brands and, with relatively low market share, we are confident there are still large opportunities available to us.

 

Our OEM partners remain key to our business and we will continue to support their efforts with our products, service and regulatory know-how.

 

We are excited by our product pipe-line. Our Hernia Mesh fixation device is due for launch in H1 2014. This will be our first product where our medical adhesives will be used internally and we believe further applications for the use of medical adhesives internally will follow. We are also enhancing our existing range of medical adhesives through improvements in applicators and developments in our base monomers. We expect that our new anti-microbial and atraumatic foam dressings will provide a significant enhancement to our advanced woundcare offering and that development of our collagen technology will improve our surgical portfolio.

 

With sound business systems and a strong balance sheet, we are in an excellent position to make selective acquisitions that provide commercial and technological synergies for the Group.

 

With our innovative products, together with prospects of capturing increased market share in our existing markets and our continued support of our OEM partners, we are confident that 2014 will be another good year of growth.

 

 

 

 

Financial Review

 

Reported revenue increased by 13% to £59.5 million (2012: £52.6 million). At constant currency (that is re-translating the current period’s performance at the previous period’s exchange rates), revenue growth would have been 11%.

 

The Group had no exceptional items in 2013 (2012: £0.8 million). Amortisation of acquired intangible assets was £0.4 million (2012: £0.5 million).

 

Comparisons with 2012 are made on a pre-exceptional, 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

Adjusted Income Statement
Year ended 31 December	2013	2012
	£’000	£’000	Change
Revenue	59,499	52,589	13.1%
Gross profit	34,268	28,643	19.6%
Distribution costs	(744)	(543)
Administration expenses1	(19,679)	(15,625)	25.9%
Other income	281	312
Adjusted operating profit	14,126	12,787	10.5%
Net finance costs	(582)	(662)
Adjusted profit before tax	13,544	12,125	11.7%
Amortisation of acquired intangibles	(400)	(480)
Exceptional items	–	(849)
Profit before tax	13,144	10,796	21.7%
Tax	(1,778)	(1,104)
Profit for the year	11,366	9,692	17.3%
Adjusted earnings per share – basic2	5.72p	5.40p	5.9%
Earnings per share – basic2	5.52p	4.75p	16.2%
Adjusted earnings per share – diluted2	5.64p	5.30p	6.4%
Earnings per share – diluted2	5.45p	4.66p	17%

¹ administration expenses exclude exceptional items and amortisation of acquired intangible assets

² see Note 8 Earnings per share for details of calculation

 

Across the Group, gross margins increased by 310 bps to 57.6% (2012: 54.5%), 190 bps resulting from mix and currency and 120 bps from operational improvements.

 

Administration expenses¹ increased by 26% to £19.7 million (2012: £15.6 million), with investment being made across the Group to ensure that the business has the infrastructure for future growth. Extra costs of £0.5 million were incurred in the sales teams in Germany and the UK, £0.3 million in Quality and Regulatory, and £0.2 million in other professional services such as internal audit, transfer pricing and tax. Salary and bonus costs increased by £1.0 million. Administration costs were also inflated by £1.0 million due to the forex effect of translating overseas subsidiary costs in Euros to Sterling as well as the translation of outstanding debtor balances at the year end.

 

Total spend on R&D, both expensed and capitalised, was £2.8 million (2012: £2.8 million). Following a review of development, £0.3 million of impairments were taken in 2013 against two projects.

 

Adjusted operating profit increased by 10.5% to £14.1 million (2012: £12.8 million) and the adjusted operating margin decreased by 60 bps to 23.7% (2012: 24.3%).

 

Profit before tax for the period was 22% higher at £13.1 million (2012: £10.8 million).

 

The Group’s effective rate of tax for the year was 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.

 

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	23.25
Loss utilisation and recognition	(4.39)
Impact of differential between UK and overseas tax rate	1.06
Patent box relief	(3.88)
R&D relief	(3.33)
Expenses not deductible, prior year adjustments, depreciation & share based payments	0.82
Effective taxation rate	13.53

 

Earnings (excluding exceptional items and amortisation of acquired intangible assets) increased by 6.8% to £11.8 million (2012: £11.0 million), resulting in a 5.9% increase in adjusted basic earnings per share to 5.72p (2012: 5.40p) and a 6.4% increase in diluted adjusted earnings per share to 5.64p (2012: 5.30p).

 

Profit after tax (after exceptional items and amortisation) increased by 17.7% to £11.4 million (2012: £9.7 million), resulting in a 16.2% increase in basic earnings per share to 5.52p (2012: 4.75p) and a 17% increase in fully diluted earnings per share to 5.45p (2012: 4.66p).

 

The Board is proposing a final dividend of 0.41p per share, to be paid on 28 May 2014 to shareholders on the register at the close of business on 2 May 2014. This follows the interim dividend of 0.19p per share that was paid on 1 October 2013 and would make a total dividend for the year of 0.60p per share (2012: 0.52p), a 15.4% increase on 2012.

 

The Group generated net cash from operating activities before exceptional items of £14.2 million (2012: £13.4 million) (see Table 5) and had net cash of £5.3 million (2012: net debt £5.5 million) at the end of the year.

 

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 includes sales that are made to other Business Units.

 

Table 3

Operating Result by Business Unit
Year ended 31 December 2013	Branded Direct	Branded Distributed	OEM	Bulk Materials
	£’000	£’000	£’000	£’000
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%
Year ended 31 December 2012
Revenue	20,105	6,758	21,954	4,240
Profit from operations	6,092	1,133	5,152	313
Amortisation of acquired intangibles	309	128	43	–
Adjusted profit from operations1	6,401	1,261	5,195	313
Adjusted operating margin1	31.8%	18.7%	23.7%	7.4%

¹ excludes amortisation of intangible assets

 

Branded Direct

 

Revenues increased 14% in this Business Unit to £22.9 million (2012: £20.1 million), with growth of £1.25 million from ActivHeal^®, £0.3 million from LiquiBand^® and £1.25 million from RESORBA^®.

 

The adjusted operating margin of this Business Unit decreased to 27.3% (2012: 31.8%), reflecting the investment made in the sales teams as well as the translation effect of overseas costs.

 

Branded Distributed

 

This Business Unit’s revenues grew by 30% to £8.8 million (2012: £6.8 million), with LiquiBand^® in the US contributing £1.3 million of the growth, LiquiBand^® in EU and ROW contributing £0.35 million and RESORBA^® contributing £0.35 million.

 

The adjusted operating margin of this Business Unit increased to 20.3% (2012: 18.7%), reflecting the improved profitability from the increased sales to the US.

 

OEM

 

This Business Unit’s revenues grew by 8% to £23.6 million (2012: £22.0 million), with silver alginate sales contributing £1.5 million of the growth.

 

The adjusted operating margin of this Business Unit increased to 24.7% (2012: 23.7%), reflecting the change of mix of sales.

 

Bulk Materials

 

Revenue from both third party and internal customers in this Business Unit increased by 16% to £4.9 million (2012: £4.2 million).

 

The adjusted operating margin of this Business Unit increased to 13.5% (2012: 7.4%), resulting from improvements in the foam production process.

 

Geographic breakdown of revenues

 

The geographic breakdown of Group revenues in 2013 is shown in Table 4 below:

 

Table 4

Geographic Breakdown of Group Revenues
£ millions	2013	% of total	2012	% of total
Europe (excluding UK & Germany)	17.33	29.1	16.86	32.1
Germany	15.69	26.4	13.94	26.5
UK	13.23	22.2	10.72	20.4
USA	11.82	19.9	10.01	19.0
Rest of World	1.44	2.4	1.06	2.0

 

Although nearly 60% of the Group’s sales are in Europe (excluding the UK), only around 36% of sales are denominated in Euros. Approximately 80% of all sales to the US are denominated in US Dollars.

 

Cash Flow

 

Table 5 summarises the Group cash flows.

 

Table 5

Group Cash Flows
Year ended 31 December	2013	2012
	£’000	£’000
Adjusted operating profit (Table 1)	14,126	12,787
Non-cash items	2,815	2,183
EBITDA	16,941	14,970
Working capital movement	(2,788)	(1,559)
Operating cash flow before exceptional items	14,153	13,411
Exceptional items	–	(849)
Operating cash flow after exceptional items	14,153	12,562
Capital expenditure and capitalised R&D	(2,002)	(2,754)
Interest	(587)	(677)
Tax	(83)	(669)
Free cash flow	11,481	8,462
Repayment of loan	(14,385)	(5,564)
Dividends paid	(1,111)	(960)
Proceeds from share issues	328	180
Net (decrease) / increase in cash and cash equivalents	(3,687)	2,118

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

 

EBITDA increased by 13% to £16.9 million (2012: £15.0 million).

 

Working capital increased by £2.8 million in the period. Inventory increased by £1.5 million to £8.0 million or 4.0 months of supply (2012: 3.2 months of supply) in anticipation of Q1 2014 sales and to build some additional inventory ahead of the change to the new ERP system. Trade and other receivables increased by £1.9 million, with trade debtor days at 44 (2012: 43) in line with the growth of the business.

 

The Group generated net cash flow from operating activities before exceptional items of £14.2 million (2012: £13.4 million).

 

We invested £2.0 million in capital equipment, software and capitalised R&D in the year (2012: £2.8 million). The major areas of spend have been in developing our ERP business information system for launch in Winsford and in upgrading equipment around the Group.

 

Finance costs of £0.6 million have been paid on our €25 million term loan facility and the availability of the £8 million revolving credit facility with HSBC.

 

The first payment of taxation in the UK of £0.4 million has been made. A refund of £0.3 million of tax in Germany was received.

 

The Group generated a free cash flow of £11.5 million in the period (2012: £8.5 million) The conversion of adjusted operating profit into free cash flow was 81% (2012: 66%).

 

The Group paid its final dividend for the year ended 31 December 2012 of £0.75 million (2012: £0.65 million) on 28 May 2013, and its interim dividend for the six months ended 30 June 2013 of £0.35 million (2012: £0.31 million) on 4 October 2013.

 

In December 2011, the Group entered into a €25 million amortising term loan facility with HSBC, with a final maturity of 31 July 2015. This facility carried an annual interest rate of EURIBOR plus a margin of 1.5% to 2.5% depending on the Group’s net debt to EBITDA ratio.

 

On 13 July 2012, the Group converted half of the then outstanding €23 million term loan into Sterling to align the cash flows generated by the business with the repayment of the term loan. The resulting £9.4 million Sterling facility carried 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. The Group made several repayments of the term loan ahead of schedule and, on 30 September 2013, the Group repaid these outstanding term loans in full.

 

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 million and was undrawn as at 31 December 2013.

 

At the end of the period, the Group had net cash of £5.3 million (2012: net debt¹ £5.5 million). The movement in net debt¹ 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 (debt) / cash	£’000
Net debt1 as at 1 January 2013	(5,544)
Exchange rate impacts	103
Free cash flow	11,481
Dividends paid	(1,111)
Proceeds from share issues	328
Net cash as at 31 December 2013	5,257

¹ net debt is defined as financial liabilities and bank loans less cash and cash equivalents plus short term investments

 

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

 

 

CONSOLIDATED INCOME STATEMENT

 

		(Unaudited)			(Audited)
Year ended 31 December		2013			2012
		Total	Before exceptional  items	Exceptional  items (note 6)	Total
	Note	£’000	£’000	£’000	£’000
Revenue from continuing operations	4	59,499	52,589	–	52,589
Cost of sales		(25,231)	(23,946)	–	(23,946)
Gross profit		34,268	28,643	–	28,643
Distribution costs		(744)	(543)	–	(543)
Administration costs		(20,079)	(16,105)	(849)	(16,954)
Other income		281	312	–	312
Profit from operations	4, 5	13,726	12,307	(849)	11,458
Finance income		1	35	–	35
Finance costs		(583)	(697)	–	(697)
Profit before taxation		13,144	11,645	(849)	10,796
Income tax	7	(1,778)	(1,104)	–	(1,104)
Profit attributable to equity holders of the parent		11,366	10,541	(849)	9,692
Earnings per share
Basic	8	5.52p	5.17p	(0.42p)	4.75p
Diluted	8	5.45p	5.07p	(0.41p)	4.66p
Adjusted diluted	8	5.64p	5.30p

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

	(Unaudited)	(Audited)
Year ended 31 December	2013	2012
	£’000	£’000
Profit for the year	11,366	9,692
Exchange differences on translation of foreign operations	732	(1,258)
Gain / (loss) arising on cash flow hedges	698	(79)
Other comprehensive income / (expense) for the year	1,430	(1,337)
Total comprehensive income for the year attributable to equity holders of the parent	12,796	8,355

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

	(Unaudited)	(Audited)
At 31 December	2013	2012
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	10,256	10,435
Software intangibles	1,662	1,134
Development costs	1,702	1,628
Goodwill	39,278	38,420
Property, plant and equipment	16,707	17,599
Deferred tax assets	1,728	2,651
Trade and other receivables	14	17
	71,347	71,884
Current assets
Inventories	8,042	6,456
Trade and other receivables	12,158	10,179
Current tax assets	343	172
Cash and cash equivalents	5,257	8,867
	25,800	25,674
Total assets	97,147	97,558
Liabilities
Current liabilities
Bank overdraft	–	26
Trade and other payables	6,298	5,605
Current tax liabilities	1,220	250
Other taxes payable	260	249
Other loans	–	2,796
Obligations under finance leases	4	5
	7,782	8,931
Non-current liabilities
Trade and other payables	520	572
Other loans	–	11,589
Deferred tax liabilities	2,754	2,761
Obligations under finance leases	3	7
	3,277	14,929
Total liabilities	11,059	23,860
Net assets	86,088	73,698
Equity
Share capital	10,343	10,230
Share premium	32,364	31,887
Share-based payments reserve	1,326	1,122
Investment in own shares	(144)	(77)
Share-based payments deferred tax reserve	158	180
Other reserve	1,531	1,531
Hedging reserve	651	(47)
Translation reserve	(667)	(1,399)
Retained earnings	40,526	30,271
Equity attributable to equity holders of the parent	86,088	73,698