Embargoed until: 0700

7 March 2012

 

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

 

Preliminary Results for the year ended 31 December 2011

 

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 2011.

 

Financial Highlights:

•	Revenue up 8% to £34.4 million (2010: £31.9 million) at actual currency and 9% at constant currency¹
•	Operating margin (pre-exceptional items²) up 190 basis points to 18.6% (2010: 16.7%)
	○	Operating margin (post-exceptional items²) down 20 basis points to 13.4% (2010: 13.6%)
•	Operating profit (pre-exceptional items²) up 20% to £6.4 million (2010: £5.3 million)
•	○	Operating profit (post-exceptional items²) up 6% to £4.6 million (2010: £4.3 million)
•	Basic earnings per share (pre-exceptional items²) up 11% to 4.26p (2010: 3.83p)
•	○	Basic earnings per share (post-exceptional items²) decreased 2% to 3.10p (2010: 3.17p)
•	Cash inflow from operating activities (pre-exceptional items²) of £5.5 million (2010: £8.1 million)
•	○	Cash inflow from operating activities (post-exceptional items²) of £4.9 million (2010: £7.1 million)
•	Following the acquisition of RESORBA, net debt³ was £13.4 million at 31 December 2011 (2010: net funds £3.9 million)
•	Proposed final dividend of 0.305p per share, making a total dividend for the year of 0.45p per share (2010: 0.38p), an increase of 18%

 

Business Highlights:

•	Foam revenues up 49%, driven by successful new product developments and including a customer product launch
•	Foam revenues up 49%, driven by successful new product developments and including a customer product launch
•	Silver alginate revenues up 5% excluding de-stocking by a major partner (down 2% including de-stocking)
•	LiquiBand® revenues in Europe and the UK up 13%, maintaining our significant market positions in these geographies
•	End-user sales of LiquiBand® US have increased over threefold in 2011 compared with 2010
•	Successful €63.8 million acquisition in December of RESORBA, a German  woundcare and wound closure business, financed by new debt and equity
•	New Winsford site delivers efficiency and margin gains in its first year

 

Commenting on the results Dr. Don Evans, Chairman of AMS, said:

“2011 was another year of strong revenue and profit growth for AMS. There were outstanding performances from both ActivHeal^® and foam, and we are delighted with the progress we have made with LiquiBand^® in the US after only two years. The Group has, of course, been transformed by the recent acquisition of RESORBA^® which we expect to add significant value, not just financially but also strategically. Prospects for 2012 look good and we look forward to the future with considerable optimism.”

 

– End –

1	Constant currency removes the effect of currency movements by re-translating the current year’s performance at the previous year’s  exchange rates
2	Exceptional costs of £1.8 million were incurred in relation to the RESORBA® acquisition (2010: exceptional costs of £1.0 million were incurred on the Winsford facility)
3	Net debt is defined as debt less cash, cash equivalents and 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	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$15 billion global wound care market. These products are sold in countries across the globe either directly or through strategic partners and distributors.

 

AMS’s advanced woundcare products are based on an extensive range of technologies including alginates, silver alginates and hydrophilic polyurethane foams. These and other products pioneer the concept of moist wound healing, allowing wounds to heal faster and with less pain and scarring. They protect the wound, deal with tissue fluids, provide an optimal environment for healing to occur and, in the case of silver alginates, include a safe and effective broad-spectrum anti-microbial agent for infection control. AMS’s advanced woundcare products are sold globally on an Original Equipment Manufacturer basis and, in the UK, direct to the NHS under the ActivHeal^® brand.

 

AMS’s wound closure and sealants products are based on cyanoacrylate adhesive (“superglue”) technology developed for medical applications. Tissue adhesives offer significant benefits over conventional ways of closing wounds following trauma or surgical incision. They are simple to use, non-invasive, help to reduce the risk of infection, minimise trauma to the patient and provide good clinical and cosmetic outcomes. The technology is also ideally suited to protecting skin from breakdown or for use as a skin sealant to help prevent infection of surgical sites. AMS’s wound closure and sealants products are primarily sold under the LiquiBand^® brand via a network of distributors.

 

In December 2011, AMS acquired RESORBA, a German based woundcare and wound closure business. RESORBA^® is a 75 year old manufacturer and distributor of sutures and collagen products for surgical disciplines, with direct sales capabilities from sites in Germany, the Czech Republic and Russia, targeting surgeons working in hospitals and private practices, and oral surgery. RESORBA^® has a range of its own technologies and brands, and also distributes a range of complementary, third-party products, including AMS’s LiquiBand^® tissue adhesive, which it has distributed in Germany for the previous eight years.

 

 

 

 

Chairman’s Statement

 

I am pleased to report another year of significant progress. We have again delivered strong revenue and profit growth, and 2011 concluded with the acquisition of RESORBA, a long established, profitable woundcare and wound closure business headquartered in Germany. As the acquisition completed on 22 December 2011, RESORBA^® had no effect on the 2011 trading results but impacted the 2011 income statement in relation to £1.8 million of exceptional costs incurred in respect of the transaction.

 

Financial Highlights

Group revenue was up 8% to £34.4 million, profit from operations before exceptional items was up 20% to £6.4 milion, and pre-tax profit before exceptional items was up 21% to £6.4 million.

 

We have again produced strong levels of operating cash, with a net cash inflow from operations (pre-exceptional items) of £5.5 million. Following the acquisition of RESORBA^® in December 2011, which was financed by a well-received placing and a new term loan, we ended 2011 with net debt of £13.4 million.

 

Key Business Achievements

We have seen further gains across all areas of our Advanced Woundcare business, including ActivHeal^® where the combined offering of quality products with significant cost savings for the NHS continue to drive strong sales growth. Our foam products are also seeing sustained, significant growth.

 

In Wound Closure and Sealants, we are very pleased with the continued progress of LiquiBand^® in the US. All too often, new product launches see a reduction in second year sales after the initial surge of evaluations and trials settles down. However, we have been able to sustain a level of ex-factory sales that was broadly similar to 2010 and, with end market sales up three-fold year-on-year, we believe we have a platform for strong growth this year.

 

Our new Winsford facility was officially opened at the beginning of 2011 and we can confirm that our target of achieving a minimum 2% gross margin improvement in Advanced Woundcare by the end of calendar 2013 is well on track.

 

Dividend

AMS remains strongly cash generative and we remain confident in our ability to continue paying dividends on a progressive basis. Given the Group’s strong performance in 2011 and the Board’s confidence in the medium to long term prospects for the Group, the proposed final dividend will be 0.305p per share, making a total dividend for the year of 0.45p per share, an 18% increase on 2010. If approved at the Annual General Meeting on 12 June 2012, this will be paid on 15 June 2012 to shareholders on the register at the close of business on 18 May 2012.

 

Employees

On behalf of the Board and our shareholders, I would like to thank AMS employees for all their hard work last year. I would also like to welcome all RESORBA^® employees to the Group.

 

Outlook

We continue to be confident about the prospects for our existing business, with the outlook for LiquiBand^® and ActivHeal^® being especially encouraging. 2012 has started well and it is also pleasing to report that the silver alginate partner that had previously been de-stocking has now returned to previous order patterns.

 

The acquisition of RESORBA^® at the end of 2011 provides us with further commercial opportunities and more direct control of our sales channels. Integration is proceeding well and RESORBA^® is expected to be earnings per share enhancing in its first full year.

 

2012 promises to be a pivotal year for us with over half of our revenue now expected to be generated from our own brands. We are very positive about the future prospects of the Group.

 

 

 

Dr. Don Evans

Chairman

 

 

 

 

Chief Executive’s Statement

 

I am delighted to report that, during my first year as Chief Executive Officer, AMS has achieved further strong organic growth. Our broadened range of foam woundcare products have performed strongly, ActivHeal^® has had another outstanding year and LiquiBand^® has performed well, both in the US and in other markets. 

 

This time last year, I set out my vision for AMS together with an overview of the strategy we have put in place to build a significant, global medical devices business. The key parts of the strategy that I outlined were to build on our brand portfolio, to increase our penetration of the Operating Room, and to supplement organic growth through further licensing and acquisition activities.

 

We had expected to progress these aims through several steps over a number of years but the acquisition of RESORBA^® in December 2011 has enabled us to address many key elements in a single deal. Amongst other benefits, we now have direct access to the Operating Room segment in Europe’s largest surgical market (Germany), additional technologies that we can leverage into other markets using our regulatory and global distribution expertise, and a greatly enhanced own-brand portfolio that significantly increases the Group’s direct control over its sales channels.

 

2011

 

Advanced Woundcare

 

Revenues from our Advanced Woundcare range of products increased by 10% in 2011 to £27.7 million (2010: £25.2 million). This compares very favourably with advanced woundcare market growth rates which are generally estimated to have been less than 3% in 2011.

 

We have continued to provide technical and clinical support to our silver alginate product partners, and the growth in the US that we reported at the interims has continued. However, the de-stocking by one major partner in the UK and Europe that we previously highlighted did continue in the second half of 2011 and has only recently started to unwind. Nevertheless, overall, our partners’ global market share continues to close the gap to the market leader.

 

We are seeing clear benefits from the capital investment in our medical foam plant in the Netherlands, which has not only increased capacity but will also enable us to further develop our foam technology base. A number of new foam product designs were launched in 2011, and these will be supplemented later this year by the launch of a major upgrade to our foam product range, involving trilaminate dressings.

 

Our strategy of increasingly focusing on higher margin business across the Group means that sales of some lower margin woundcare products were down in 2011, and this trend will continue to some extent in 2012. Partly offsetting these reductions were a number of new customer launch orders for roll stock foam.

 

The attractions of our ActivHeal^® range of products continue to resonate within the NHS with its combined messages of cost-savings without any compromise to clinical outcome or patient care. The rebrand in late 2010 has helped to successfully establish ActivHeal^® as a product of first choice for an increasing number of nurses. All of these factors combined to deliver an impressive performance in 2011.

 

2011 was the first full year of operations at the Winsford facility and I am particularly pleased by the seamless transition and by the clear efficiency and margin benefits that we are already seeing.

 

 

Wound Closure and Sealants

 

Overall Wound Closure and Sealants revenues were flat at £6.7 million (2010: £6.7 million).

 

2010 saw the first 12 months of LiquiBand^® sales in the US and we were delighted to have achieved a volume market share of 5% by the end of that year. It is, however, fair to say that, notwithstanding the extremely positive response from end-users, we were cautious about 2011 as many new product launches see a dip in their second year when the numbers of evaluations and trials naturally decrease after the initial surge.

 

We are therefore very pleased to report that LiquiBand^® revenues in the US in 2011 were largely unchanged from the year before, reflecting not only the absolute and comparative quality of our products but also their price competitiveness against the market leader. All of these factors have led to a large proportion of evaluation and trial sales being followed up with firm orders, and end-user sales increased over threefold in 2011 compared with 2010. As a result, LiquiBand^® now has a full year market volume share of 5% in the US hospital market and 8% in the non-hospital or alternative site market.

 

In our other markets, 2011 was another good year for LiquiBand®, with non-US revenues up 13%. We have maintained our market leading positions in the UK and Europe Emergency Room, and our partners in both Canada and Japan are gradually gaining a position in those markets, albeit at small levels.

 

As we have previously flagged, sales of InteguSeal®, through our marketing partner Kimberly-Clark, have been disappointing but they only account for about 1% of total revenues.

 

Research & Development

 

A key focus of our in-house R&D last year was on our new foam technology platform. We launched a number of new sizes and shapes in 2011, which have been well received, and we will shortly be launching a total range upgrade, involving modern, market leading, three-layer (trilaminate) dressings.

 

Our development work with Sinclair IS Pharma on their Delmopinol^® ‘anti-biofilm’ technology is continuing. Results so far confirm its potential efficacy in breaking down biofilms in chronic wounds but there is still more work to do. Nevertheless, we remain optimistic that, subject to no unforeseen or insurmountable issues being identified, a first product could be ready for launch in 2013.

 

Our development agreement with Surgical Innovations on a laparoscopic device for delivering adhesive internally has moved on apace, and we now have a working prototype device that takes our internal adhesive programme a step nearer to market launch, which we are still targetting for 2013 in Europe.

 

Outlook

 

The acquisition of RESORBA^® has key strategic benefits on a number of fronts, including:

 

•	substantially increasing our own-brand portfolio, giving us far more direct control over our own sales channels whilst improving our gross margins;
•	acquiring a direct sales force focused on the operating room which gives us an in-house distribution channel for our growing portfolio of surgically focused products, including InteguSeal®, a number of LiquiBand® products, our internal adhesive programme (when it launches) and a range of surgical dressings that are in plan to develop;
•	adding a number of RESORBA® products (e.g. sutures) and technologies (e.g. collagen) where we expect to be able to use our regulatory expertise to gain relevant approvals in the US and elsewhere, and distribute through our global partner base;
•	adding a new opportunity in dental/oral surgery where we have already begun the process of preparing for regulatory approval for LiquiBand®; and
•	giving us increasing leverage in targeting customers, both via partners and directly, with our significantly expanded product portfolio.

 

All of these are in line with our previously stated strategic aims and, although we have much to do to fully integrate RESORBA, we are excited about the additional opportunities we now have to accelerate the growth of AMS.

 

Advanced Woundcare

 

All indications are that ActivHeal^® will continue its strong progress in 2012 and, with the launch of a trilaminate range of foam products later this year, we also anticipate further significant sales improvement in this segment. We are confident that this upgrade will move us up the value curve, while bringing the added future benefit of being an excellent delivery system for a number of actives.

 

In our silver alginate range, prospects in the US continue to be good, the de-stocking we saw last year in Europe and the UK has ended, and we are optimistic about the prospects for a number of product upgrades we expect to launch through our partners.

 

However, with an increasing emphasis on the higher margin products in our woundcare business, we anticipate further falls in revenue from some lower margin products. We would also not expect the level of foam roll-stock launch orders we received in 2011 to be repeated in 2012.

 

With the new woundcare products that we now have from RESORBA, together with the  trilaminate range of foam products that we plan to launch later this year, and the continuing efficiency benefits of the Winsford site, we are confident that our overall woundcare profitability will improve.

 

Wound Closure and Sealants

 

In the US adhesive market, there have been a number of developments in recent months involving initiatives by both AMS and others which were to be expected. We are confident that our overall competitive position remains unaffected and we continue to be very optimistic about our ability to increase our share of this key market.

 

•	The US market leader launched a new closure product at the end of 2011 which now involves a single application but still has a much longer setting time than LiquiBand®. Whilst somewhat later than anticipated we had always expected this competitive response to the arrival of LiquiBand® in the US market but we remain confident of the continuing technical superiority and price competitiveness of our product for wound closure.
•	Given the significant market opportunity and the competition’s increasing focus on the liquid bandage application for tissue adhesives, we launched LiquiBand® Flex into the US market at the beginning of 2012. This addition to our range meets the need for a protective, anti-microbial liquid bandage, to ‘paint’ over wounds that have been closed by sutures or staples, expanding our offering and strengthening our competitive position.
•	Two major distributors have recently launched or are about to launch their own liquid bandage products based on existing technology they have licensed in. One of these has been available for a few years in the US market under its original brand and was ‘re-launched’ in 2011 under the distributor’s own brand. The other, involving one of our partners, has not yet launched but is expected to do so this year. Notwithstanding these developments, we are as confident of the technical superiority and price competitiveness of LiquiBand® Flex as we are of our other LiquiBand® wound closure products. It is too early for market data to record the level of initial LiquiBand® Flex sales but initial responses from users have been very positive.
•	As part of our strategy to increase our penetration of the operating room, and maximise value through retained ownership of the brand, we have expanded on our strategy to target the surgical segment of the US adhesive market by establishing partnerships with a number of smaller, specialised regional distributors whose sales teams have an operating room focus. We have already established four such relationships with distributors for LiquiBand® Flex and we expect to add a few more in the coming months to complete our US geographic access. We believe this approach will not only deliver greater control and higher margins but should also enable us to channel more of our products through this more specialised route in the future as our surgically focused product list increases.

 

In a similar vein but on a direct basis, we have also established a small UK team of our own surgically focused sales representatives who will take direct responsibility for promoting LiquiBand^® surgical products, together with RESORBA’s^® range of surgical sutures and collagen-based dressings.

 

Outside our existing markets, we have started the process of getting regulatory approval for LiquiBand^® in China and are in early stage discussions with potential partners. We expect to use RESORBA’s^® expertise to initiate the same process in Russia.

 

In relation to InteguSeal®, we remain confident about its potential and we continue to investigate options for delivering this product more effectively to the market. In this regard, we now have a direct surgically focused sales channel that we can exploit in Germany through RESORBA, and we hope to advise on other initiatives during 2012.

 

Licensing and Acquisitions

 

While the acquisition of RESORBA^® is a significant transaction that will take time to fully integrate, and we are focused on this, we will continue to examine other acquisition opportunities which would add value to our overall business. We also continue to evaluate complementary technology licensing opportunities, particularly in woundcare, where we can take advantage of our innovation and manufacturing expertise.

 

Prospects for 2012

 

AMS has been significantly enhanced by the acquisition of RESORBA^® at the end of 2011. Integration is progressing well and we are excited about the potential that RESORBA’s^® operating room access brings for a number of our existing products, together with a range of their brands and technologies that we intend to leverage across our global distribution channels. RESORBA^® also produces a significant shift in our business mix, where more than half of our revenues will now come from direct sales of our own brands.

 

2012 has started well across all our existing businesses and we are confident of achieving another year of strong progress.

 

 

Chris Meredith

Chief Executive Officer

 

 

 

 

Financial Review

 

The acquisition of RESORBA^® was completed on 22 December 2011. With only three days of trading between completion and the end of the year and with no significant one-off events occurring in this period, the results for RESORBA^® for this three day period have not been included in the consolidated results for the Group for 2011. The income statement was, however, impacted by £1.8 million of exceptional expense relating to the costs of the acquisition, and the balance sheet and the cash flow statement are also affected.

 

Income Statement

 

Revenues

 

Total Group revenue increased by 8% in 2011 to £34.4 million (2010: £31.9 million) at actual currency, and by 9% at constant currency.

 

Total advanced woundcare revenues increased by 10% to £27.7 million (2010: £25.2 million).

 

The main drivers of growth were ActivHeal®, which increased sales by 73%, and our foam products which increased by 49%. The latter benefited from a large launch order from one customer which we do not anticipate will be repeated in 2012.  

 

Sales of our silver alginate range of products increased by 7% in the US compared with last year, although this was countered by a similar decrease in Europe and the UK due to continued de-stocking by one of our partners. Our overall silver alginate sales fell by 2% although this would have been an increase of 5% without the de-stocking effect.

 

Total wound closure and sealants revenues were flat at £6.7 million (2010: £6.7 million).

 

As discussed earlier, sales of LiquiBand^® in the US were similar to the 2010 level while, outside the US, LiquiBand^® continues to perform well in the UK and Europe, where sales increased by 13%.

 

Sales of InteguSeal^® declined by 37% and are now approximately 1% of revenues.

 

Geographic breakdown of revenues

 

Europe (excluding the UK) is our largest market and, following the acquisition of RESORBA, this weighting will increase further. In 2011, European revenues increased by 13%, mainly due to the sales of foam. In the UK, revenues rose by 11% due to the strong performance of ActivHeal^® and LiquiBand^® while, in the US, sales of LiquiBand^® held firm and were at a similar level to last year. Revenues from the Rest of the World remain small and are at a slightly lower level compared to last year.

 

Profit from operations

 

Profit from operations (pre-exceptional items) increased by 20% to £6.4 million (2010: £5.3 million) and our operating margin (pre-exceptional items) improved by 190 basis points to 18.6% (2010: 16.7%).

 

Advanced woundcare contributed £6.2 million (pre-exceptional items of nil) (2010: £4.7 million pre-exceptional items of £1.0 million), with an operating margin of 22.4%, up by 360 basis points (2010: 18.8%). Approximately 180 basis points of this improvement resulted from operational efficiencies at the new Winsford site, with the remainder coming from improvements in sales mix.

 

Wound closure and sealants contributed £1.4 million (2010: £1.6 million) to profit from operations, with an operating margin that decreased by 310 basis points to 21.1% (2010: 24.2%). This was largely due to the investment made to support the sale of LiquiBand^® in the US with clinical studies and marketing papers.

 

Administration costs for the Group (pre-exceptional items) increased by 5% to £9.7 million (2010: £9.3 million), mainly due to investment in marketing LiquiBand^® and in supporting our partners with clinical papers on our silver alginate products.

 

Research and Development spend as a percentage of sales was unchanged from 2010 at 4%, and is expected to be over 5% in 2012, although some of this spend will be capitalised. This increased level of spend, together with the capitalisation of costs, reflects the timing of projects.

 

Exceptionals

 

There were exceptional costs of £1.8 million in 2011 associated with the RESORBA^® acquisition, compared to £1.0 million in 2010 associated with the move into the Winsford facility. An additional £0.5 million of exceptional costs are anticipated in 2012 as a result of the integration of RESORBA.

 

Profit from operations (post-exceptional items) was £4.6 million, an increase of 6% (2010: £4.3 million).

 

Other income

 

£0.2 million of other income was earned in the year (2010: £0.2 million). This was associated with fees earned on development projects.

 

Profit before tax

 

The Group’s 2011 profit before tax (pre-exceptionals) was £6.4 million, an increase of 21% (2010: £5.3 million). Profit before tax (post-exceptionals) was 7% higher at £4.6 million (2010: £4.3 million).

 

Tax

 

A corporation tax charge of £0.3 million, calculated at the statutory rate of 25.5%, has been recognised in the accounts for the year in respect of the taxable profits of our Dutch company. Profits generated in the Group’s UK companies in the year were covered by surplus tax losses brought forward.

 

The Group holds a deferred tax asset on the balance sheet in respect of tax losses incurred in the UK of £2.8 million (2010: £2.3 million), and has a further £10.5 million (2010: £19.1 million) of tax losses that have not been recognised.

 

It is currently anticipated that corporation tax in the UK will start to be recognised on one of our UK entities in 2012 but, due to surplus tax losses elsewhere in the Group, corporation tax is not expected to be paid across the whole of our UK operations until 2014.

 

Our newly acquired business, RESORBA, pays tax in Germany at 31.5% and this will be reflected in our 2012 accounts.

 

In 2012 we anticipate that the blended rate of tax for the Group will be approximately 16%.

 

Profit after tax, earnings per share and dividends

 

Profit after tax (pre-exceptional items) was £6.7 million (2010: £5.8 million) and, on this basis, fully adjusted basic earnings per share increased by 11% to 4.26p (2010: 3.83p). Fully diluted earnings per share (pre-exceptional items) also increased by 11% to 4.17p (2010: 3.77p).

 

On 20 December 2011 the Group issued 47.2 million new ordinary shares to finance the acquistion of RESORBA. Excluding the impact of the new share issue, adjusted basic earnings per share would have increased by 12% to 4.29p (2010: 3.83p) and fully diluted earnings per share (pre-exceptional items) would have increased 11% to 4.20p (2010: 3.77p).

 

The Group’s profit after tax (post-exceptional items) was unchanged at £4.8 million (2010: £4.8 million), resulting in adjusted basic earnings per share of 3.10p (2010: 3.17p) and fully diluted earnings per share of 3.04p (2010: 3.12p).

 

The Board is proposing a final dividend of 0.305p per share, to be paid on 15 June 2012 to shareholders on the register at the close of business on 18 May 2012. This follows the interim dividend of 0.145p per share that was paid on 4 November 2011, and makes the total dividend for the year 0.45p per share (2010: 0.38p), an 18% increase on 2010, reflecting the confidence of the Board in the Group’s prospects.

 

Cash flow and balance sheet

 

The Group had a cash inflow from operating activities (pre-exceptional items) of £5.5 million (2010: £8.1 million), and £4.9 million (2010: £7.1 million) post-exceptional items of £0.6 million which had been paid in 2011 (2010: £1.0 million). The cash conversion ratio^⁴ (pre-exceptional items) was 47% for the year (2010: 79%) reflecting the higher levels of working capital in the business at the end of the year.

 

Working capital, excluding the effect of assets acquired from RESORBA, increased in the year by £2.2 million, reflecting the phasing of business in the last quarter of the year. Inventory increased by £0.9 million to £3.4 million (2010: £2.5 million). Trade and other receivables increased by £3.0 milion to £9.0 million (2010: £6.0 million), with debtor days increasing to 65 (2010: 52). Trade and other payables increased by £1.7 million with creditor days of 62 (2010: 71). The Group’s debtor days have increased as result of the business mix in the US and generally slower payments in the UK. The Group had insignificant bad debts in 2011.

 

The Group invested £2.2 million in capital equipment and software in 2011 (2010: £3.7 million). Investments have been made in upgrading our woundcare dressings converting capability and on our business information systems, and a similar level of capital expenditure is expected in 2012. £0.3 million of Research and Development was capitalised in 2011 (2010: £0.2 million). With a number of projects well developed, there will be an increased level of capitalisation in 2012.

 

£2.9 million (2010: £2.9 million) of goodwill has been recognised on the balance sheet in relation to Corpura B.V. which was acquired in 2009. There was no impairment in goodwill upon review as at 31 December 2011.

 

The balance sheet acquired with the acquisition of RESORBA^® has been recognised at fair value in line with IFRS. An exercise has been undertaken to value the intangible assets acquired which has resulted in a value of £11.8 million for brands, intellectual property (IP), know-how and contracts which will be amortised over periods of 1-15 years relating to IP acquired. Some of the acquired IP is considered to have an indefinite life, and this will be subject to an annual impairment review.

 

The provisional goodwill resulting from the acquisition of RESORBA^® is £36.5 million which will be subject to annual impairment tests. Formal valuations on the land and properties are to be undertaken which may result in further adjustments to the valuation of goodwill.

 

In December 2011, in connection with the acquisition of RESORBA, the Group entered into a €25 million amortising term loan facility with HSBC with a final maturity of 31 July 2015. This facility carries an annual interest rate of EURIBOR plus a margin of 1.5-2.5% depending on the Group’s net debt to EBITDA ratio. All of the €25 million was drawn down as at 31 December 2011.

 

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 1.5-2.5% depending on the Group’s net debt to EBITDA ratio. This facility replaces the Group’s previous revolving credit facility with Lloyds TSB Bank. As at 31 December 2011, and at the date of this report, this new facility was undrawn.

 

To partly finance the acquisition of RESORBA, the Group issued 47.2 million new ordinary shares in December 2012 at a price of £0.72 per share, raising £34.0 million before acquisition and placing expenses of £3.2 million. £1.8 million of the latter has been expensed to the income statement as an exceptional item, £0.4 million has been capitalised as a cost of debt and £1.0 million has been debited to share premium. In addition, a combined total of 1.0 million new ordinary shares were subscribed for by a Director of AMS and by senior management of both AMS and RESORBA, raising an additional £0.7 million.

 

The Group had net debt of £13.4 million as at 31 December 2011 (2010: net funds of £3.9 million). Within these balances, cash and cash equivalents were £7.1 million (2010: £4.1 million).

 

Mary Tavener

Group Finance Director

 

⁴   cash conversion ratio is defined as cash generated from operating activities before exceptional items including spend on property, plant and equipment, software and capitalised research and development but excluding spend on acquisitions as a ratio of profit from operations before exceptional items

 

 

 

 

CONSOLIDATED INCOME STATEMENT

 

		(Unaudited) Year ended 31 December 2011			(Audited) Year ended 31 December 2010
		Before exceptional items	Exceptional items (note 6)	Total	Before exceptional items	Exceptional items (note 6)	Total
	Note	£’000	£’000	£’000	£’000	£’000	£’000
Revenue from continuing operations	4	34,353	–	34,353	31,881	–	31,881
Cost of sales		(18,153)	–	(18,153)	(17,144)	–	(17,144)
Gross profit		16,200	–	16,200	14,737	–	14,737
Distribution costs		(314)	–	(314)	(307)	–	(307)
Administration costs		(9,714)	(1,807)	(11,521)	(9,263)	(1,001)	(10,264)
Other income		226	–	226	173	–	173
Profit from operations	4, 5	6,398	(1,807)	4,591	5,340	(1,001)	4,339
Finance income		75	–	75	12	–	12
Finance costs		(79)	–	(79)	(60)	–	(60)
Profit before taxation		6,394	(1,807)	4,587	5,292	(1,001)	4,291
Income tax	9	263	–	263	542	–	542
Profit attributable to equity holders of the parent		6,657	(1,807)	4,850	5,834	(1,001)	4,833
Earnings per share – basic	7	4.26p	(1.16p)	3.10p	3.83p	(0.66p)	3.17p
Earnings per share – diluted	7	4.17p	(1.13p)	3.04p	3.77p	(0.65p)	3.12p

 

The above results relate to continuing operations.

 

 

Consolidated Statement of Comprehensive Income

 

	(Unaudited) Year ended 31 December 2011	(Audited) Year ended 31 December 2010
	£’000	£’000
Profit for the year	4,850	4,833
Exchange differences on translation of foreign operations	(158)	(257)
Gain / (loss) arising on cash flow hedges	134	(76)
Other comprehensive income for the year	(24)	(333)
Total comprehensive income for the year attributable to equity holders of the parent	4,826	4,500

 

 

 

Consolidated Statement of Financial Position

 

At 31 December 2011	(Unaudited)   2011	(Audited) Restated 2010
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	12,658	1,062
Software intangibles	816	16
Development costs	951	771
Goodwill	39,259	2,878
Property, plant and equipment	16,954	12,828
Deferred tax assets	3,524	2,756
Trade and other receivables	21	19
	74,183	20,330
Current assets
Inventories	6,714	2,498
Trade and other receivables	11,098	6,035
Current tax assets	408	–
Cash and cash equivalents	7,122	4,122
	25,342	12,655
Total assets	99,525	32,985
Liabilities
Current liabilities
Trade and other payables	8,300	3,798
Current  tax liabilities	264	–
Other taxes payable	272	424
Other loans	–	18
Obligations under finance leases	21	19
	8,857	4,259
Non-current liabilities
Trade and other payables	625	677
Other loans	20,472	226
Deferred tax liabilities	3,353	–
Obligations under finance leases	6	23
	24,456	926
Total liabilities	33,313	5,185
Net assets	66,212	27,800
Equity
Share capital	10,176	7,740
Share premium	31,704	306
Share-based payments reserve	779	442
Investment in own shares	(40)	(37)
Share-based payments deferred tax reserve	631	397
Other reserve	1,531	1,531
Hedging Reserve	32	(102)
Translation reserve	(141)	17
Retained earnings	21,540	17,506
Equity attributable to equity holders of the parent	66,212	27,800

For 2010 the translation reserve of 2010 has been re-stated to reclassify the impact of hedging