Final Results

Mar 6, 2014

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

RNS Number : 6391B
Advanced Medical Solutions Grp PLC
06 March 2014
 




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

 

 


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 2012 (audited)

10,176

31,704

779

(40)

631

1,531

32

(141)

21,540

66,212

Consolidated profit for the year to 31 Dec 2012

9,692

9,692

Other comprehensive income

(79)

(1,258)

(1,337)

Total comprehensive income

(79)

(1,258)

9,692

8,355

Share based payments

 –

 –

363

(451)

(88)

Share options exercised

54

183

(20)

 –

 –

 –

 –

217

Shares purchased by EBT

 –

 –

 –

(81)

 –

 –

 –

 –

(81)

Shares sold by EBT

 –

 –

 –

 44

 –

 –

 –

 –

44

Dividends paid

 –

 –

 –

 –

 –

 –

 –

 –

(961)

(961)

At 31 December 2012 (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 (unaudited)

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 (unaudited)

10,343

32,364

1,326

(144)

158

1,531

651

(667)

40,526

86,088

 

 

 


CONSOLIDATED STATEMENT OF CASH FLOWS

 


(Unaudited)

(Audited)

Year ended 31 December

2013

2012


£’000

£’000

Cash flows from operating activities



Profit from operations

13,726

11,458

Adjustments for:



Depreciation

1,783

1,633

Amortisation

intellectual property rights

400

480


development costs

204

125


software intangibles

91

62

Impairment of development costs

337

(Increase) / decrease in inventories

(1,510)

258

(Increase) / decrease in trade and other receivables

(1,931)

923

Increase / (decrease) in trade and other payables

653

(2,740)

Share based payments expense

400

363

Taxation

(83)

(669)

Net cash inflow from operating activities

14,070

11,893

Cash flows from investing activities



Purchase of software

(618)

(380)

Capitalised research and development

(612)

(802)

Purchases of property, plant and equipment

(836)

(1,572)

Disposal of PPE

64

Interest received

1

35

Net cash used in investing activities

(2,001)

(2,719)

Cash flows from financing activities



Dividends paid

(1,111)

(960)

Finance lease 

(5)

(20)

Repayment of secured loan

(14,385)

(5,564)

Issue of equity shares

395

217

Shares purchased by EBT

(277)

(81)

Shares sold by EBT

210

44

Interest paid

(583)

(692)

Net cash from financing activities

(15,756)

(7,056)

Net (decrease) / increase in cash and cash equivalents

(3,687)

2,118

Cash and cash equivalents at the beginning of the year

8,841

7,122

Effect of foreign exchange rate changes

103

(399)

Cash and cash equivalents at the end of the year

5,257

8,841

 

 



 

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 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, 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 2012.

 

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 2014.

 

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2013 or 31 December 2012. The financial information for the year ended 31 December 2012 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 2013 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 2012.

 

With regards to the Group’s financial position, it had cash and cash equivalents at the year end of £5.3 million. The Group also has in place a revolving credit facility of £4 million, which was partly drawn down during 2013 but is currently not drawn down and expires on 31 July 2015.

 

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 applied IFRS 13 Fair Value Measurement, IAS 19 Employee Benefits (2011), IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of interests and Other Entities. 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

 

The principal activities of the Business Units are as follows:

·     Branded Direct

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

·     Branded Distributed

Distribution, marketing and innovation of the Group’s brands sold by distibutors in markets not serviced by the Group’s sales teams

·     OEM

Selling and innovation of products supplied to the Group’s global and national partners

·     Bulk Materials

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

 

Segment information about these businesses is presented below.

 

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

 

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

Unallocated  assets





Consolidated total assets





97,147

Liabilities






Segment liabilities

5,629

1,675

3,156

599

11,059

Consolidated total liabilities





11,059



 

 

Year ended

31 December 2012

Branded Direct

Branded Distributed

OEM

Bulk Materials

Eliminations

Consolidated


£’000

£’000

£’000

£’000

£’000

£’000

Revenue







External sales

20,105

6,758

21,954

3,772


52,589

Inter-segment sales




468

(468)

Total revenue

20,105

6,758

21,954

4,240

(468)

52,589

 

Result







Segment result

6,092

1,133

5,152

313

12,690

Unallocated expenses






(1,232)

Profit from operations






11,458

Finance income






35

Finance costs






(697)

Profit before tax






10,796

Tax






(1,104)

Profit for the year






9,692

 

Unallocated expenses include £849,000 of exceptional costs incurred in respect of the acquisition of RESORBA®.

 

Re-presented at 31 December 2012

Branded Direct

Branded Distributed

OEM

Bulk Materials

Consolidated

Other Information

£’000

£’000

£’000

£’000

£’000

Capital additions:






Software intangibles

106

18

249

7

380

Research & development

134

129

539

802

Property, plant and equipment

479

123

783

187

1,572

Depreciation and amortisation

795

279

989

237

2,300

Balance sheet






Assets






Segment assets

53,060

14,820

25,077

4,601

97,558

Unallocated  assets





Consolidated total assets





97,558

Liabilities






Segment liabilities

4,291

1,362

3,104

718

9,475

Unallocated liabilities





14,385

Consolidated total liabilities





23,860

 

Unallocated liabilities consist of the Group’s borrowings.

 

The goodwill and intangible assets with indefinite useful economic life at 31 December 2012 were allocated to the relevant business units in proportion to profit from operations on a consistent basis for all four segments.

 

However, it has since become apparent that the allocation did not represent a true representation of the goodwill and intangible assets utilised by each segment. This was due to a number of one-off transactions occurring which distorted the allocation.

 

The 31 December 2012 comparative information has been re-presented to reallocate £1.4 million of goodwill and £0.4 million of intangibles assets from Branded Distributed to Branded Direct, such that these assets are ascribed to the appropriate business segment. The adjustments result in no impact upon profit.

 

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

2013

2012


£’000

£’000

United Kingdom

13,225

10,721

Germany

15,687

13,944

Europe excluding United Kingdom and Germany

17,331

16,855

United States of America

11,819

10,013

Rest of World

1,437

1,056


59,499

52,589

 

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

 

As at 31 December

2013

2012


£’000

£’000

United Kingdom

34,271

36,444

Germany

56,522

55,132

Europe excluding United Kingdom and Germany

6,315

5,923

United States of America

39

59

Rest of World


97,147

97,558

 

5.      Profit from operations

 

Year ended 31 December

2013

2012


£’000

£’000

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



Depreciation of property, plant and equipment

1,783

1,633

Amortisation of:



–  acquired intellectual property rights

400

480

–  software intangibles

91

62

–  development costs

204

125

Operating lease rentals – plant and machinery

235

174

                                      – land and buildings

835

810

Research and development costs expensed to the income statement

2,196

1,996

Cost of inventories recognised as expense

24,601

23,572

Staff costs

18,241

15,971

Net foreign exchange loss / (gain)

164

(417)

 

6.     

During 2013, there were no exceptional costs. In the previous year, £849,000 of exceptional costs were incurred relating to the integration of RESORBA® into the Advanced Medical Solutions Group which attracted tax deductions of £96,000 and resulted in an impact on net profit of £753,000.

 

7.     

 

Year ended 31 December

2013

2012


£’000

£’000

a) Analysis of charge for the year



Current tax:



Tax on ordinary activities – current year

1,010

759

Tax on ordinary activities – prior year

(134)


876

759

Deferred tax:



Tax on ordinary activities – current year

494

(110)

Tax on ordinary activities – prior year

72

236

Effect of reduction in UK corporation tax rates to 20% (2012: 23%)

336

219


902

345

Tax charge for the year

1,778

1,104

 

The tax assessed for the year is lower than the standard rate of corporation tax in the UK (23.25%) as explained below:

 

Year ended 31 December

2013

2012


£’000

£’000

b) Factors affecting tax credit for the year



Profit before taxation

13,144

10,796

Profit multiplied by the standard rate of corporation tax in the UK of 23.25% (2012: 24.5%)

3,056

2,645

Effects of:



Overseas tax rate versus UK corporate tax rate

140

55

Expenses not deductible for tax purposes and other timing differences

346

120

Depreciation for period (less) than capital allowances

(72)

Patent box relief

(510)

Utilisation and recognition of trading losses

(577)

(1,771)

Research and development relief

(439)

(192)

Share-based payments

(104)

9

Adjustments in respect of prior year – current tax

(134)

236

Adjustments in respect of prior year – deferred tax

72

Taxation

1,778

1,104

 

Legislation to reduce the main rate of UK corporation tax to 21% and 20% was passed by parliament on 18 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 and other comprehensive income, 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 £22,000 surplus (2012: surplus £451,000).

 

8.     

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

 

Year ended 31 December

2013

2012


£’000

£’000

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



– pre exceptional items

11,366

10,541

– post exceptional items

11,366

9,692

 

Number of shares

‘000

‘000

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

205,795

204,059

Effect of dilutive potential ordinary shares:



– share options, deferred share bonus, LTIPs

2,869

3,945

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

208,664

208,004

 


£’000

£’000

Profit for the year attributable to equity holders of the parent

11,366

9,692

Amortisation of acquired intangible assets

400

480

Exceptional items

849

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

11,766

11,021

 

Earnings per share

pence

pence

Basic – pre exceptional items

5.52p

5.17p

Basic – post exceptional items

5.52p

4.75p

Diluted – pre exceptional items

5.45p

5.07p

Diluted – post exceptional items

5.45p

4.66p

Adjusted basic

5.72p

5.40p

Adjusted diluted

5.64p

5.30p

 


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

END

 
 

FR SSWEFIFLSEED

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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