6 March 2013

 

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

 

Preliminary Results for the year ended 31 December 2012

 

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 2012.

 

Financial Highlights:
•	Group revenue up 53% to £52.6 million (2011: £34.4 million), representing growth of 57% on a constant currency basis¹
	○	Underlying like-for-like Group revenue on a constant currency basis (excluding RESORBA®) up by 3% to £35.1 million (2011: £34.4 million)
•	Adjusted2 operating margin up 520 bps to 24.3% (2011: 19.1%)
•	Adjusted2 profit before tax up 85% to £12.1 million (2011: £6.6 million)
	○	Profit before tax up 135% to £10.8 million (2011: £4.6 million)
•	Adjusted2 fully diluted earnings per share up 24% to 5.30p (2011: 4.28p)
	○	Fully diluted earnings per share up 53% to 4.66p (2011: 3.04p)
•	Operating cash flow before exceptional items3 of £13.4 million (2011: £6.7 million)
•	Net debt reduced to £5.5 million (2011: £13.4 million)
	○	£3.6 million of original €25 million loan to acquire RESORBA® has been repaid ahead of schedule
•	Proposed final dividend of 0.35p per share, making a total dividend for the year of 0.52p (2011: 0.45p), a 16% increase compared with the prior year

 

Business Highlights:
•	ActivHeal® continues its excellent progress in the NHS, with a 29% increase in revenues
•	Silver alginate revenues increased by 22%
•	RESORBA® integration completed
	○	LiquiBand® sales in Germany via RESORBA®  increased by 15%
	○	Successful contract award to supply NHS with sutures, haemostats as well as tissue adhesives from October 2012
•	In the US, LiquiBand® market share by volume increased strongly to 13% (H1 2012: 10%) in the alternate site segment, although it declined to 4% (H1 2012: 6%) in the hospital segment
	○	New growth strategy launched for LiquiBand® in the US
•	New trilaminate foam range launched into the EU and to the NHS
•	Reorganisation of the Group complete to deliver growth

 

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

“2012 was an important year for AMS following the acquisition of RESORBA^® in late December 2011. Group revenues and profits both saw strong growth as a result, not just from the new business we acquired but also from many of our existing operations which continued the excellent progress of the last few years. With the Group now reorganised and more focused to deliver growth across our four new business units, we remain positive about our prospects.”

 

– 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 2012, were £0.8 million (2011: £1.8 million) and before amortisation of acquired intangible assets which, in 2012, were £0.5 million (2011: £0.2 million) as defined in the financial review

³     Before exceptional items which were charged and, in 2012, were £0.8 million (2011: £1.8 million)

 

 

 

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$15 billion global wound care 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

 

Introduction

 

2012 was an important year for the Group following the acquisition of RESORBA^® in late December 2011. Group revenues and profits both saw strong growth as a result, not just from the new business we acquired but also from many of our existing operations which continued the excellent progress of the last few years.

 

As we indicated at the interims, we have been reviewing the organisational structure of the Group to ensure that the business is best positioned to deliver growth following the acquisition. As a result of this review, we have now moved from reporting under two business units, Advanced Woundcare and Wound Closure, to four business units: Branded Direct, Branded Distributed, OEM and Bulk Materials, and will be reporting our results under these business segments.

 

Financial Highlights

 

Reported Group revenue was up 53% to £52.6 million (2011: £34.4 million) at constant currency. On a like-for-like, constant currency basis, excluding the contribution from RESORBA®, revenue grew 3% to £35.3 million (2011: £34.6 million).

 

The Group’s adjusted operating margin increased by 520 basis points (“bps”) to 24.3% (2011: 19.1%), mainly due to the change in mix of business towards more of our own brands, including the contribution from the sutures and collagen products resulting from the RESORBA^® acquisition. After net finance costs of £0.7 million (2011: £nil), adjusted profit before tax increased by 85% to £12.1 million (2011: £6.6 million).

 

Adjusted fully diluted earnings per share¹ increased by 24% to 5.30p (2011: 4.28p).

 

Strong cash flow has reduced the Group’s net debt at 31 December 2012 to £5.5 million, which compares to £13.4 million at the end of 2011 following the RESORBA^® acquisition. In this regard, we have been able to repay additional amounts of £2 million and €2 million of the original €25 million RESORBA^® related term loan ahead of schedule.

 

Key Business Achievements

 

We have now completed our restructuring of the Group so that we are appropriately organised to deliver the commercial opportunities resulting from our acquisition of RESORBA^®. The details of this are included in the Chief Executive’s Review.

 

Within our Branded Direct business, ActivHeal^® continues to perform well and achieved a 29% increase in revenues, while LiquiBand^® in the UK grew by 5% with some initial success being seen from our new Operating Room (OR) sales force. The largest part of this unit, however, comprises the direct sales of RESORBA®’s sutures, collagen and dental products into the German domestic market, which grew by 5% compared with 2011.

 

Sales of LiquiBand^® into the US are included in our Branded Distributed business, and 2012 saw a mixed performance with continued gains in the non-hospital or alternative site market partly offset by a disappointing end to the year in the hospital market due to a key partner not meeting its contractual minima. However, we have now reassessed our market approach and our various partners’ capabilities, and we are pleased to advise that we will be positioning a new LiquiBand^® product with a new partner in the US, with a launch expected in H2 2013. Elsewhere, the distributor business that we acquired with RESORBA^® grew by a satisfactory 12%.

 

Within our OEM business, it was pleasing to see the 22% growth from our silver alginate business in 2012, well ahead of market growth rates. The previous destocking effect we saw with one of our partners in now well behind us.

 

As we had previously flagged, our Bulk Materials business declined 43% compared with the prior year due to pipeline filling by partners in 2011. This business is expected to return to growth in 2013.

 

¹ Adjusted basic earnings per share and adjusted fully diluted earnings per share are described in Note 8

 

Dividend

 

We are proposing a final dividend of 0.35p per share, making a total dividend for the year of 0.52p per share, a 16% increase on 2011. If approved at the Annual General Meeting on 22 May 2013, this will be paid on 28 May 2013 to shareholders on the register at the close of business on 3 May 2013.

 

Board

 

With the opportunities available to the Group we have decided to strengthen the Board and we will be adding a further Non-Executive Director with commercial experience during this year.

 

I also intend to step down as Chairman later this year after a successor has been found. In my 16 years with AMS I have seen the complete transformation of the Group, and I know that I will be leaving a business in excellent shape for future growth. I would like to thank the Board, my colleagues and all our employees for helping to build this great Company and to wish them all continued success.  

 

Employees

 

On behalf of the Board, I would also like to thank all Group empoyees for all their hard work over the past year in ensuring the successful integration of RESORBA^® into the Group as part of the continued development of AMS as a leading global medical technology business.

 

Outlook

 

We continue to be excited by the opportunities for LiquiBand^® in the US and the benefits that our acquisition of RESORBA^® will bring. These, together with the continued growth of ActivHeal^® and silver alginate, as well as new product developments such as anti-microbial dressings and our hernia mesh device, give us confidence that the Group is well positioned for the future.

 

With our business more focused to deliver growth across the Group, we remain positive for the prospects of the Group.

 

Dr. Don W. Evans

Chairman

 

 

 

 

Chief Executive’s Statement

 

I am pleased to report that much of the progress highlighted at the interims continued through the second half of 2012, and AMS has delivered another strong year of growth. In particular, ActivHeal^®, silver alginate and our converted foam portfolios all showed solid year-on-year progress and we are also pleased that the now completed integration of RESORBA^® went to plan.

 

Business restructure

 

With AMS now having multiple product portfolios, six manufacturing sites in four countries, several routes to market, and a number of different growth opportunities to pursue, the Group has been restructured to ensure the business continues to operate efficiently whilst retaining critical focus on each of our growth drivers. This has resulted in the reorganisation of the Group into four discrete business units – Branded Direct, Branded Distributed, OEM and Bulk Materials – each responsible for two key value streams, namely a focused route-to-market and a core part of our R&D programme.

 

Each of the four business units will consist of a mix of sales, marketing, business development and R&D teams, led by individual business unit Directors, all of whom are appointed and in place. Linked to the above changes, our operational sites will focus on manufacturing their specialised products for any unit, with the focus being on sustained improvements in quality, efficiency, cost and service. Each operational site has a Site Manager who reports into our Group Operations Director. To complete the senior management team, a Group Quality and Regulatory Director will be starting in May 2013 to ensure that a consistent strategy and policy is adhered to throughout the Group, and a Site Manager for Germany has joined in March 2013.

 

I am pleased to report that the completion of the reorganisation marks the final stage of the integration of the RESORBA^® business and we now have the focused organisational structure to deliver on the numerous opportunities across the Group.

 

OEM

 

With revenue in 2012 of £22.0 million (2011: £18.5 million), our Original Equipment Manufacture (“OEM”) business unit is the largest in the Group and has responsibility for driving our OEM contract manufacturing sales through business-to-business partners, as well as the R&D value stream associated with advanced woundcare dressings. One of the key growth drivers within this unit, accounting for nearly 50% of its revenue in 2012, are our silver alginate technologies which delivered 22% growth compared to 2011. After the destocking effect we previously saw with one of our major partners in 2011, it was pleasing to see our sales of silver alginate products grow by 26% in the UK and Europe and by 17% in the US. The rest of this business unit consists of alginate and foam-based finished dressings for our partners, together with the collagen OEM business acquired with RESORBA^®. R&D is working on a range of new anti-microbial dressings with launches scheduled during 2013.

 

Branded Direct

 

Our Branded Direct business unit is the next largest with 2012 revenue of £20.1 million (2011: £5.7 million) and has responsibility for driving our own brand sales direct to end users in Germany, the UK and the Czech Republic, together with our suture and collagen R&D value stream as most sales based on these technologies are included in this unit. Other key growth drivers in this division are ActivHeal^® sales to the NHS, up 29% in 2012, LiquiBand^® sales into direct territories, up 5% in the UK and up 15% in Germany, and RESORBA^® branded sutures and collagen dressings which grew by 5% in 2012 to £12.3 million.

 

Branded Distributed

 

Our Branded Distributed business unit reported 2012 revenue of £6.8 million (2011: £3.6 million) and has significant potential for growth given it has responsibility for driving our own brand sales through our third party network of global distribution partners, as well as managing our adhesives and sealants R&D value stream. This unit’s key growth drivers are LiquiBand^® and sealants into the US which accounted for 29% of this unit’s total 2012 revenue (including sales to Russia), up by 10% over 2011.

 

Our progress into the US market with LiquiBand^® was mixed in 2012. Latest data shows that we now have 13% of the alternative site market, a strong improvement from the 10% we had at the end of June 2012. We are pleased with this progress which is well in line with the targets that we set on launch two years ago. Our progress in the acute care or hospital sector has, however, been disappointing with our market share slipping back to 4% from the 6% we had at the half year. In this regard, LiquiBand^® received less focus than we expected from one of our key partners in the second half of the year and this resulted in them not meeting their contractual minima in 2012. This has however given us an opportunity to reassess and refocus our US growth strategy for LiquiBand^®, as outlined elsewhere in this report, and we remain positive about LiquiBand^®‘s overall prospects in the US

 

This business unit also includes sales of RESORBA^® products into Russia, along with RESORBA^® and LiquiBand^® products into new geographies through distributors, together with any ‘co-branded’ initiatives we choose to progress in order to get any of our technologies successfully established into new markets.

 

Bulk Materials

 

Our final business unit handles our bulk materials, mainly roll-stock foam, through third-party partners who have their own converting and packaging capabilities. It also manufactures foam for AMS’s own operational requirements. Revenue in 2012 was lower at £3.8 million (2011: £6.6 million) due to the previously flagged pipeline filling from customer product launches that took place in 2011. Foam rollstock is the key growth driver in this unit, with 2012 revenue of £3.6 million (2011: £6.4 million), 86% of the total. We anticipate that revenue growth will resume in 2013.

 

Prospects for 2013

 

I believe we have significant growth opportunities across all four of our new business units. Our strategic focus remains unchanged on our goal of establishing a leading global position in the woundcare, wound closure and sealants arenas, and the work done in 2012 ensures we have an organisation fit for purpose, with the RESORBA^® business fully integrated.

 

Our silver alginate partners continue to make gains in the anti-microbial market segment, and planned product upgrades in 2013 will help strengthen our proposition in this area.

 

Our ActivHeal^® success is expected to continue to build and deliver another year of solid double digit growth as we convert more hospitals and improve compliance in existing Trusts.

 

Our trial investment in a direct UK OR sales team is starting to deliver results with some notable recent LiquiBand^® gains. This team will be strengthened further in 2013 and has also been trained on the RESORBA^® products. With the tender awards that were granted in Q4 2012, we are well placed to grow our UK direct business in 2013.

 

The failure of a key US LiquiBand^® partner to meet their contractual commitments in 2012 has allowed us to re-think our growth strategy in the US. Our alternate site partner has demonstrated what can be achieved with our formulations and designs. We have carved out individual areas of focus for our existing partners and will allow these to progress in 2013. Over and above these, we are seeking approval for a new formulation and plan to launch this by July 2013 with an additional new partner, giving them their own unique position and product and thereby further strengthening our ability to capture market share in the US tissue adhesive space.

 

Regulatory approvals are progressing for LiquiBand^® in Russia and China, and we have a strategy that could see us introducing RESORBA^® sutures into the US market for the first time, by the end of 2013.

 

On the new product front, we are still on track to gain approval for our Hernia Mesh Fixation device before the end of 2013 and will launch this initially through our own teams in the UK and Germany.

 

We are confident 2013 will be another strong year for the Group.

 

 

 

 

Financial Review

 

Reported revenue increased by 53% to £52.6 million (2011: £34.4 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 57%.

 

The Group had £0.8 million of exceptional items in 2012 (2011: £1.8 million) relating to integration and restructuring costs associated with the acquisition of the RESORBA^® business. Amortisation of acquired intangible assets was £0.5 million (2011: £0.2 million).

 

Comparisons with 2011 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	Year ended 31 December 2012	Year ended 31 December 2011
Adjusted Income Statement	£’000	£’000	Change
Revenue	52,589	34,353	53.1%
Gross profit	28,643	16,200	76.8%
Distribution costs	(543)	(314)
Administration expenses¹	(15,625)	(9,546)	63.7%
Other income	312	226
Adjusted operating profit	12,787	6,566	94.7%
Net finance costs	(662)	(40)
Adjusted profit before tax	12,125	6,562	84.8%
Amortisation of acquired intangibles	(480)	(168)
Exceptional items	(849)	(1,807)
Profit before tax	10,796	4,587	135.4%
Tax	(1,104)	263
Profit for the year	9,692	4,850	99.8%
Adjusted earnings per share – basic²	5.40p	4.36p	23.9%
Earnings per share – basic²	4.75p	3.10p	53.0%
Adjusted earnings per share – diluted²	5.30p	4.28p	23.8%
Earnings per share – diluted²	4.66p	3.04p	53.0%

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 730 bps to 54.5% (2011: 47.2%), reflecting the higher margins resulting from a direct, branded business.

 

Administration expenses¹ increased by 64% to £15.6 million (2011: £9.5 million) with increased costs resulting from the direct sales teams in Germany, the Czech Republic and Russia.

 

Total spend on R&D, both expensed and capitalised, was £2.8 million (2011: £1.5 million), however £0.8 million (2011: £0.3 million) was capitalised reflecting the progress of a number of projects.

 

Adjusted operating profit increased by 95% to £12.8 million (2011: £6.6 million) and the adjusted operating margin increased by 520 bps to 24.3% (2011: 19.1%).

 

Profit before tax for the period was 135% higher at £10.8 million (2011: £4.6 million).

 

The Group’s effective rate of tax for the year was 10.3%. This is reflective of the utilisation of previously unrecognised brought forward tax losses in the UK and R&D relief. It also reflects the impact of blending profits and losses from different countries and the different tax rates associated with these countries. The effective tax rate is lower than that reported at the half year due to the change in mix of sales in the second half of the year with LiquiBand^® sales being lower than expected.

 

A reconciliation between the standard rate of taxation in the UK and the effective rate is summarised in the following table.

 

Table 2
Taxation	%
Standard taxation rate	24.5
Loss utilisation and recognition	(15.1)
Impact of differential between UK and overseas tax rate	0.5
R&D relief	(2.6)
Expenses not deductible and prior year adjustments	3.0
Effective taxation rate	10.3

 

Earnings (excluding exceptional items and amortisation of acquired intangible assets) increased by 61% to £11.0 million (2011: £6.8 million), resulting in a 24% increase in adjusted basic earnings per share to 5.40p (2011: 4.36p) and a 24% increase in fully diluted adjusted earnings per share to 5.30p (2011: 4.28p).

 

Profit after tax (after exceptional items and amortisation) increased by 100% to £9.7 million (2011: £4.9 million), resulting in a 53% increase in basic earnings per share to 4.75p (2011: 3.10p) and a 53% increase in fully diluted earnings per share to 4.66p (2011: 3.04p).

 

The Board is proposing a final dividend of 0.35p per share, to be paid on 28 May 2013 to shareholders on the register at the close of business on 3 May 2013. This follows the interim dividend of 0.17p per share that was paid on 2 November 2012 and would make a total dividend for the year of 0.52p per share (2012: 0.45p), a 16% increase on 2011.

 

The Group generated net cash from operating activities before exceptional items of £13.4 million (2011: £6.7 million) (see Table 3) and had net debt of £5.5 million (2011: £13.4 million) at the end of the year.

 

OEM

 

This business unit’s revenues grew by 18% to £22.0 million (2011: £18.5 million), partly as a result of the £0.8 million collagen partner business acquired with RESORBA^® and partly from the 22% growth of the silver alginate business.

 

The operating margin of this segment increased to 24% (2011: 19%) due to the contribution from both silver alginate and from collagen sales.

 

Branded Direct

 

Revenues in this unit increased by 255% to £20.1 million (2011: £5.7 million), largely due to sales into the German and Czech domestic markets of £12.3 million (2011: £nil) resulting from the RESORBA^® acquisition.

 

Also in this division, ActivHeal^® sales into the NHS continued to perform well, up by 29% compared to 2011, while LiquiBand^® sales into the UK and Germany grew by 5% and 15% respectively, the latter resulting from the increased focus of the German sales team.

 

The operating margin from this segment was 30% (2011: 20%) reflecting the contribution of the higher margin suture business in Germany and the growth of the underlying ActivHeal^® and LiquiBand^® businesses in the UK.

 

Branded Distributed

 

This unit’s revenues grew by 89% to £6.8 million (2011: £3.6 million), with sales resulting from the RESORBA^® acquisition contributing £3.9 million to this growth, including £1.6 million from our Russian subsidiary. LiquiBand^® and sealants in the US grew by 10% despite one of our LiquiBand^® distributors failing to meet its contractual minima for the year. Elsewhere, sales of LiquiBand^® in Europe (excluding the UK and Germany) increased by 13% but small sales in early stage ROW markets such as Canada and Japan did not increase as further clinical data is needed locally to develop these new markets. This data is now being prepared.  

 

The operating margin for this segment declined to 17% (2011: 24%) as the indirect business acquired from RESORBA^® attracts a lower margin than the existing LiquiBand^® business.

 

Bulk Materials

 

Revenue from this business unit declined by 43% to £3.8 million (2011: £6.6 million) due to the previously flagged pipeline effect of product launches that occurred in 2011.

 

The operating margin of this division declined to 8% (2011: 21%) reflecting the sensitivity of this business segment to the reduced sales and production volumes.

 

Segment comparison

 

Table 3 below presents 2012 revenues under the previous business segments to aid comparison with the prior year.

 

Table 3
Year ended 31 December	2012	2011
	£’000	£’000
Advanced woundcare	31,711	27,688
Wound closure & sealants	20,878	6,665
Consolidated	52,589	34,353

 

It is not possible to restate the current results, other than revenue, under the previous segments.

 

Geographic breakdown of revenues

 

Following the acquisition of RESORBA®, the geographic breakdown of Group revenues in 2012 is shown in Table 4 below:

 

Table 4
£’000	2012	% of total	2011	% of total
Europe (excluding UK & Germany)	16,855	32.1	12,438	36.2
Germany	13,944	26.5	3,222	9.4
UK	10,721	20.4	9,225	26.9
USA	10,013	19.0	9,005	26.2
Rest of World	1,056	2.0	463	1.3

 

Although nearly 60% of the Group’s sales are in Europe (excluding UK), only around 36% of sales are denominated in Euros. Approximately 75% of all sales to the US are denominated in US Dollars.

 

Cash Flow

 

Table 5 summarises the Group cash flows.

 

Table 5	Year ended 31 December 2012	Year ended 31 December 2011
Cash Flow	£’000	£’000
Adjusted operating profit (Table 1)	12,787	6,566
Non-cash items	2,183	1,549
Adjusted EBITDA	14,970	8,115
Working capital movement	(1,559)	(1,391)
Operating cash flow before exceptional items	13,411	6,724
Exceptional items	(849)	(1,807)
Operating cash flow after exceptional items	12,562	4,917
Capital expenditure and capitalised R&D	(2,754)	(2,539)
Interest	(677)	(13)
Tax	(669)	–
Free cash flow	8,462	2,365
Repayment of loan	(5,564)	(251)
Dividends paid	(960)	(816)
Proceeds from share issues	180	33,899
Acquisition	–	(53,130)
Net increase in cash and cash equivalents	2,118	2,932

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

 

The Group had an operating cash flow before exceptional items of £13.4 million (2011: £6.7 million) and a conversion of adjusted operating profit into free cash flow of 66% (2011: 36%).

 

Exceptional items are the £0.8 million of integration and restructuring costs associated with the acquisition of the RESORBA^® business. In 2011, £1.8 million of exceptional costs were associated with the acquisition of RESORBA^®.

 

Working capital decreased by £1.6 million in the period. Inventory decreased by £0.3 million to £6.5 million or 3.2 months of supply (2011: 2.3 months of supply excluding inventory acquired through the acquisition). Inventory is now higher in the Group due to levels of inventory acquired with RESORBA^®. Trade receivables decreased by £0.9 million with debtor days at 43 (2011: 61 excluding debtors acquired with the acquisition), helped by collection in Germany averaging less than 30 days. Trade payables have reduced by £2.7 million since the end of 2011 when expenses associated with the acquisition were still outstanding.

 

We invested £2.8 million in capital equipment and software in the year (2011: £2.5 million). The major areas of spend have been in upgrading equipment and business information systems.

 

Finance costs of £0.7 million have been paid on our €25 million term loan facility and the availability of the £8 million revolving credit facility with HSBC.

 

Taxation of £0.7 million is a payment on account made against the liabilities of the German subsidiaries.

 

The Group paid its final dividend for the year ended 31 December 2011 of £0.6 million (2011: £0.6 million) on 15 June 2012, and its interim dividend for the six months ended 30 June 2012 of £0.3 million (2011: £0.2 million) on 2 November 2012.

 

The Group generated a free cash flow of £8.5 million in the period (2011: £2.4 million).

 

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 carries 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 22 June 2012 the Group repaid €2 million of this facility ahead of the agreed schedule, leaving €23 million drawn down as at 30 June 2012.

 

On 13 July 2012, the Group converted half of the then outstanding €23 million term loan into Sterling. The resulting £9.4 million facility 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. With cash being generated in both Sterling and Euros, this restructuring of the Group’s debt better aligns the cash flows generated with the repayment of the term loan.

 

On 20 December 2012, a further payment of £2.0 million was made ahead of schedule together with the €1.2 million and £1 million scheduled payments that were required to be paid. At 31 December 2012, £6.3 million and €10.3 million of the respective Sterling and Euro term loan facilities were outstanding.

 

In December 2011, the Group also entered into a £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. This facility was undrawn as at 31 December 2012.

 

At the end of the period, the Group had net debt¹ of £5.5 million (2011: £13.4 million), a reduction of £7.9 million since 31 December 2011. The movement in net debt during 2012 is reconciled in Table 6 below:

 

Table 6
Movement in net debt	£’000
Net debt as at 1 January 2012	(13,350)
Exchange rate impacts	124
Free cash flow	8,462
Dividends paid	(960)
Proceeds from share issues	180
Net debt as at 31 December 2012	(5,544)

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 and the Group remains comfortably within its lending covenants.

 

 

 

CONSOLIDATED INCOME STATEMENT

 

		(Unaudited)			(Audited)
		Year ended 31 December 2012			Year ended 31 December 2011
		Before	Exceptional		Before	Exceptional
		exceptional	items		exceptional	items
		items	(note 6)	Total	items	(note 6)	Total
	Note	£’000	£’000	£’000	£’000	£’000	£’000
Revenue from continuing operations	4	52,589	–	52,589	34,353	–	34,353
Cost of sales		(23,946)	–	(23,946)	(18,153)	–	(18,153)
Gross profit		28,643	–	28,643	16,200	0	16,200
Distribution costs		(543)	–	(543)	(314)	–	(314)
Administration costs		(16,105)	(849)	(16,954)	(9,714)	(1,807)	(11,521)
Other income		312	–	312	226	–	226
Profit from operations	4, 5	12,307	(849)	11,458	6,398	(1,807)	4,591
Finance income		35	–	35	75	–	75
Finance costs		(697)	–	(697)	(79)	–	(79)
Profit before taxation		11,645	(849)	10,796	6,394	(1,807)	4,587
Income tax	7	(1,104)	–	(1,104)	263	–	263
Profit attributable to equity holders of the parent		10,541	(849)	9,692	6,657	(1,807)	4,850
Earnings per share
Basic	8	5.04p	(0.42p)	4.62p	4.26p	(1.16p)	3.10p
Diluted	8	4.94p	(0.41p)	4.53p	4.17p	(1.13p)	3.04p
Adjusted diluted	8	5.30p			4.28p

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

Year ended 31 December	2012	2011
	£’000	£’000
Profit for the year	9,692	4,850
Exchange differences on translation of foreign operations	(1,258)	(158)
(Loss) / gain arising on cash flow hedges	(79)	134
Other comprehensive expense for the year	(1,337)	(24)
Total comprehensive income for the year attributable to equity holders of the parent	8,355	4,826

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

	(Unaudited)	(Audited)
		Restated
At 31 December	2012	2011
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	10,435	11,227
Software intangibles	1,134	816
Development costs	1,628	951
Goodwill	38,420	39,419
Property, plant and equipment	17,599	17,819
Deferred tax assets	2,651	3,524
Trade and other receivables	17	21
	71,884	73,777
Current assets
Inventories	6,456	6,714
Trade and other receivables	10,179	11,098
Current tax assets	172	408
Cash and cash equivalents	8,867	7,122
	25,674	25,342
Total assets	97,558	99,119
Liabilities
Current liabilities
Bank overdraft	26	–
Trade and other payables	5,605	8,300
Current tax liabilities	250	264
Other taxes payable	249	272
Other loans	2,796	1,965
Obligations under finance leases	5	21
	8,931	10,822
Non-current liabilities
Trade and other payables	572	625
Other loans	11,589	18,507
Deferred tax liabilities	2,761	2,947
Obligations under finance leases	7	6
	14,929	22,085
Total liabilities	23,860	32,907
Net assets	73,698	66,212
Equity
Share capital	10,230	10,176
Share premium	31,887	31,704
Share-based payments reserve	1,122	779
Investment in own shares	(77)	(40)
Share-based payments deferred tax reserve	180	631
Other reserve	1,531	1,531
Hedging Reserve	(47)	32
Translation reserve	(1,399)	(141)
Retained earnings	30,271	21,540
Equity attributable to equity holders of the parent	73,698	66,212