Preliminary Results



For immediate release

17 March 2009

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

Preliminary Results for the Year Ended 31 December 2008

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today announces its preliminary results for the year ended 31 December 2008.

Financial Highlights:

Strong financial performance:

• Group revenue up 21% to £20.3 million (2007: £16.9 million)
• Gross margin further improved to 48% from 44%
• Pre-tax profit increased 54% to £2.9 million (2007: £1.9 million)
• EPS increased 47% to 2.3p (2007: 1.6p)
• Net cash inflow from operating activities of £2.8 million (2007: £3.7 million)
• Strong balance sheet with net funds(1) of £7.3 million (2007: £7.2 million)

Business Highlights:

Good progress with key growth drivers:

• Silver alginate market presence strengthened with additional major branded marketing and distribution partners signed for US and Europe and two new 510(k) approvals
• NHS direct woundcare business continues to build momentum with full ActivHeal® product range included on new framework agreement and products used in nearly half of all NHS Hospital Trusts throughout the UK
• FDA reclassification of topical tissue adhesives has accelerated the US regulatory approval process for the LiquiBand® range with initial product approved in February 2009
• Corpura joint venture strengthens AMS’ position in hydrophilic polyurethane foams – the largest and fastest growing segment of the advanced woundcare dressings market  
  

(1)  Net funds is defined as cash and cash equivalents plus short-term investments less financial liabilities

Commenting on the results Dr. Geoffrey Vernon, Chairman of Advanced Medical Solutions, said:

“It was another year of excellent progress for AMS with strong growth in both revenue and profit. We have broadened our global customer base and strengthened our technology portfolio. The outlook for the business is very positive, with entry into the US market of LiquiBand™ expected in the second half of 2009 delivering another key growth driver. In addition, we continue to see opportunities to accelerate growth further through potential corporate activity.“

For further information, please contact:

Advanced Medical Solutions Group plc
Don Evans, Chief Executive Officer Mary Tavener, Finance Director www.admedsol.com	On 17/03/09: +44 (0) 20 7466 5000  Thereafter : +44 (0) 1606 545508
Buchanan Communications
Mark Court / Mary-Jane Johnson / Stasa Filiplic	Tel: +44 (0) 20 7466 5000
Investec Bank plc	Tel: +44 (0) 20 7597 5970
Richard Jones/Tim Pratelli

Notes to Editors:

Advanced Medical Solutions is a leading company in the development and manufacture of products for the $15 billion global woundcare market.

Founded in 1991 and quoted on AIM, Advanced Medical Solutions is focused on the design, development and manufacture of innovative products for advanced woundcare and wound closure.  

The advanced woundcare products are based on the moist wound healing principle.  AMS uses its inhouse technology to provide a vertically integrated ‘one stop shop’ for all categories of moist wound healing products. The Company has the capability to move a product from design and development through to production and delivery for distribution and sale into customer markets.

The acquisition of a 49.4% stake in Corpura BV in May 2008 strengthened AMS’s position in hydrophilic polyurethane foam – the largest and fastest growing segment of the advanced woundcare market.

AMS’ technology in cyanoacrylate based tissue adhesives is used for the closure of small cuts and trauma wounds through to large surgical incisions, and also for protecting or sealing skin to prevent breakdown or infection. 

AMS’ products which currently serve the majority of the key global markets are sold either direct or through strategic partners and distributors. 

  CHAIRMAN’S STATEMENT

Overview

It was another excellent year of progress by AMS.

The Group broadened its global customer base, strengthened its technology portfolio with regulatory approvals and new product launches and acquired 49.4% of the Corpura medical foam business, whilst maintaining its strong financial position and cash generation.

Group revenue grew by 21% to £20.3 million, with underlying growth of 19% when adjusted for the dollar. Gross margin improved across the Group to 48% from 44% as the business benefited from increased sales of silver alginate and its ActivHeal® product range. Pre-tax profit increased 54% to £2.9 million during the period.  

The business continues to generate cash and after the Corpura acquisition, for €2.5 million including funding, net funds stood at £7.3 million compared with £7.2 million at the previous year-end.

The Corpura joint venture has strengthened AMS’ position in polyurethane foam, the largest, fastest growing segment of the advanced woundcare dressings market and provides an additional material platform for the delivery of new technologies currently under evaluation within Research & Development (“R&D”).

The recent 510(k) clearance for LiquiBand™ tissue adhesive allows initial entry into the key US market for topical wound closure, which is expected in the second half of 2009 via marketing and distribution partners.

The Group notes the FRC’s recent guidance on going concern given the uncertain economic climate and comments on its position in Note 7 to this announcement.

Operating Review

Advanced Woundcare

Advanced Woundcare sales of £16.4 million were up 28% on prior year (26% at constant currency), which is well ahead of the currently estimated market growth rate of around 8%, with both silver alginate and the NHS delivering strong revenue growth.

Silver alginate continues to be a major growth driver for this business segment with sales up over 30% year on year. AMS has already commercialised two silver technologies and in December 2008 received 510(k) clearance allowing sale into the US market for two additional silver products.

The Group’s presence in this dynamic market which is estimated to have a current value of around $300 million, and to be growing at 20%, was further strengthened by signing new marketing and distribution partners in the US and Europe.

Good progress continues to be made in penetrating the UK NHS with AMS’s own brand ActivHeal®. ActivHeal® is a range of woundcare dressings offered directly to the NHS as a first line therapy for treating routine wounds which offers substantial savings in woundcare budgets. The ActivHeal® range complements the use of AMS’ newer technologies, such as silver alginate, for treating infected or more difficult to heal wounds, which are sold through strategic partners.

In June 2008, the full ActivHeal® range was included on the new framework agreement negotiated by NHS Supply Chain, part of DHL Logistics, for the supply of advanced woundcare products to NHS Hospital Trusts.  Sales of the ActivHeal® range were up nearly 50% in the year and these products are now used in almost half of the NHS Foundation and Acute Hospital Trusts.

In May 2008, AMS formed a joint venture with Recticel, a Belgian-based global leader in polyurethane foam, under which it acquired 49.4% of the shares in Corpura BV, a fully owned subsidiary of Recticel. Established in 2004, Corpura develops and produces hydrophilic polyurethane foams for medical applications from a state-of-the-art, dedicated R&D and manufacturing facility in Etten Leur, Netherlands. Corpura, which is profitable, cash generative and employs 13 people supplies AMS with base polyurethane foam for inclusion into AMS’s wound dressings. The shareholding in Corpura has given the Group a strong technology position in polyurethane foams – the largest ($900 million) and fastest growing (20%) segment of the advanced woundcare dressings market – and provides an ideal platform material utilising the Group’s R&D capability and IP for delivery of higher value technologies to prevent infection and help accelerate wound healing.

This joint venture has been accounted for under the equity method and contributed £80,000 to the Group’s profit in 2008.

Wound Closure and Sealants

As expected, wound closure and sealants sales declined 4% to £3.9 million in the year compared with a 41% growth in 2007 reflecting Kimberly-Clark Health Care’s major launch and related stocking and pipeline fill of InteguSeal® Surgical Skin Sealant in 2007 following its exclusive global licensing of this technology in 2006.   Excluding InteguSeal®, the underlying business grew 14%.

InteguSeal® is currently available in key global markets and during 2008 was the subject of extensive activity by Kimberly-Clark to create market awareness and compile clinical evidence demonstrating the benefits of the product in reducing skin flora contamination of the wound site in a wide range of surgical procedures. Surgical site infections (SSIs) are a major source of concern to surgeons and healthcare providers worldwide and clinical evidence showing a statistically significant reduction of SSIs with the use of InteguSeal® will open up a major growth opportunity for AMS in the surgical arena. Initial feedback is encouraging and significant clinical papers are expected to be published and presented at surgical conferences during 2009.  In December 2008, Kimberly-Clark launched IS-50 a smaller size InteguSeal® surgical sealant which is ideally suited for orthopaedic procedures that involve small surgical incisions in  areas such as on the hands, feet and ankles.

Good progress continues to be made in penetrating the European market with the LiquiBand^® tissue adhesive range with a particularly strong presence being built in the Emergency Room (“ER“). AMS maintained its market leadership position in the UK for the use of topical adhesives for closure of small trauma wounds in the ER. The Group is actively looking to improve its penetration of the European Operating Room (“OR“) market, where it currently has limited presence through specialist OR distributors. This activity includes evaluating opportunities to expand its direct sales presence, currently limited to the UK ER arena, together with the development of a range of OR products with strong clinical support such as LiquiBand® Laparoscopic, developed specifically for closing small surgical incisions such as port sites following laparoscopic procedures.  The Group is evaluating acquisition opportunities to support this strategy.

Whilst good progress continues to be made in growing the European business, the dominant segment of the global topical tissue adhesives market, currently estimated to be worth $200 million and growing at a rate of 15%, is the US estimated at $170m. Regulatory approval for entering this market with the full LiquiBand®  range is progressing well.

In May 2008, the FDA completed its review of a petition submitted by AMS for reclassification of tissue adhesives for topical approximation of skin. The FDA concluded that these devices should be reclassified from Class III to Class II. This means that topical tissue adhesives will now be cleared for commercial distribution via a Pre-market Notification 510(k) submission rather than the more onerous Pre-market Approval application (PMA).  The additional costs of obtaining this approval have been taken as an expense within R&D.

510(k) submissions have been submitted and the first product, LiquiBand® Tissue Adhesive, which is ideally suited to the ER market, was cleared in February 2009, with market entry expected in the second half of 2009 via marketing and distribution partners.  Further submissions are in progress covering products targeted at surgical wounds and the OR and these are expected to be approved throughout the year.  

Research & Development

The Group has continued to invest in a strategically aligned and focused R&D programme to deliver future profitable growth.  Significant investment has been made in R&D with total spend, including capitalised R&D, increasing to 8% of total revenue (2007: 7%) with the main expenditure being incurred in obtaining regulatory approval for LiquiBand™ in the US, together with a number of silver projects in advanced woundcare.

Short to medium term developments (2009 – 2010) are focused on fully exploiting silver technologies in advanced woundcare and upgrading the LiquiBand® product range with indication-specific devices.

Longer term research activities are focused on new technology platforms to access new market opportunities or address unmet clinical needs.

In advanced woundcare, a wide range of new technologies with the potential to accelerate wound healing has been assessed and potential licensing opportunities identified. Of particular interest are technologies that inhibit the formation of bacterial biofilms or that modulate excess protease activity as both factors are associated with delayed wound healing. These technologies would be incorporated into AMS‘s woundcare materials and regulated as medical devices. In wound closure and sealants, longer term R&D efforts are focused on entering the $600 million internal adhesives and sealants market. A development programme is now underway for an implantable adhesive for fixation of surgical materials and devices utilising the Group’s expertise in cyanoacrylate chemistry and applicator design. These products are being developed to fit with the trend towards procedures being conducted via laparoscopic surgery.

New premises

In July 2008, AMS announced that it had agreed a pre-let for the lease of a 138,500 sq. ft bespoke building in Winsford, Cheshire, for development into a new facility comprising offices, R&D laboratories, manufacturing and warehousing. This facility is now available for commencement of fit-out and will allow rationalisation of AMS’ two existing facilities in Winsford into the new building during 2009 and 2010.

A 15 year lease, with an option to extend for a further 10 years, has been agreed for the new facility, which is sized to accommodate AMS’ existing operations and to allow future expansion. Costs associated with this project have been fairly modest in 2008 and have been included under administration costs.

In 2009, the costs of the site move will be identified as exceptional items. These costs will include the validation of the plant and additional lease costs while the new facility is being fitted out. Capex for the new facility has been budgeted at £4.6m.

Outlook

The Group remains well placed to continue to deliver organic growth, driven by silver alginate sales through multiple partners, increased penetration into the NHS, access to polyurethane foam technology and a strong R&D pipeline. With entry into the US market of LiquiBand® expected in second half 2009 delivering another key growth driver, the outlook for the business remains very positive. In addition, the Group is continuing to evaluate acquisition opportunities that fit with its strategy. 

Dr. Geoffrey N. Vernon

Chairman

17 March 2009

  CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

		Year ended	Year ended
		31 December 2008	31 December 2007
	Note	£’000	£’000
Revenue	4	20,316	16,856
Cost of sales		(10,562)	(9,431)
Gross profit		9,754	7,425
Distribution costs		(160)	(130)
Administration costs		(7,666)	(6,158)
Profit on disposal of property, plant & equipment		35	3
Other income		656	512
Share of results of joint venture		80	–
Profit from operations	4,5	2,699	1,652
Finance income		265	282
Finance costs		(37)	(29)
Profit before taxation		2,927	1,905
Income tax		382	331
Profit for the year attributable to equity holders of the parent		3,309	2,236
Earnings per share
Basic	6	2.31p	1.57p
Diluted	6	2.16p	1.48p

The above results relate to continuing operations.

CONSOLIDATED BALANCE SHEET 

At 31 December 2008

		2008	2007
		£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights		1,398	1,566
Software intangibles		40	45
Development costs		520	342
Property, plant and equipment		3,199	2,910
Deferred tax assets		2,045	1,421
Investment in joint venture		1,749	–
Loans and receivables		662	–
Trade and other receivables		209	200
		9,822	6,484
Current assets
Inventories		2,231	1,726
Trade and other receivables		4,894	3,504
Investments		5,730	6,654
Cash and cash equivalents		1,882	876
		14,737	12,760
Total assets		24,559	19,244
Liabilities
Current liabilities
Trade and other payables		3,409	2,909
Derivative financial instruments		599	–
Other taxes payable		308	276
Financial liabilities		17	15
Obligations under finance leases		14	5
		4,347	3,205
Non-current liabilities
Financial liabilities		262	279
Obligations under finance leases		58	14
		320	293
Total liabilities		4,667	3,498
Net assets		19,892	15,746
Equity
Share capital		7,169	7,157
Share based payments reserve		300	154
Investment in own shares		(18)	(13)
Share based payments deferred tax reserve		571	320
Share premium		23	17
Other reserve		1,531	1,531
Translation reserve		427	–
Retained earnings		9,889	6,580
Equity attributable to equity holders of the parent		19,892	15,746

  CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

				Share
		Share	Investment	based
	Share	based	in own	payments	Share			Retained
	capital	payments	shares	deferred tax	premium	Other	Translation	earnings	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 1 January 2008	7,157	154	(13)	320	17	1,531	–	6,580	15,746
Share based payments	–	146	–	–	–	–	–	–	146
Share based payments – deferred tax	–	–	–	251	–	–	–	–	251
Issue of share capital	5	–	–	–	–	–	–	–	5
Share options exercised	7	–	–	–	6	–	–	–	13
Shares purchased by EBT	–	–	(89)	–	–	–	–	–	(89)
Shares sold by EBT	–	–	84	–	–	–	–	–	84
Exchange differences on translation of foreign operations	–	–	–	–	–	–	427	–	427
Consolidated profit for the year	–	–	–	–	–	–	–	3,309	3,309
At 31 December 2008	7,169	300	(18)	571	23	1,531	427	9,889	19,892

 

  

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

 

		Year ended	Year ended
		31 December	31 December
		2008	2007
		£’000	£’000
Cash flows from operating activities
Profit from operations		2,699	1,652
Adjustments for:
Share of results of joint venture		(80)	–
Depreciation		673	686
Amortisation – intellectual property rights		168	168
– development costs		160	16
– software intangibles		24	19
Profit on sale of non-current assets		(35)	(3)
(Increase)/decrease in inventories		(505)	60
(Increase)/decrease in trade and other receivables		(1,613)	396
Increase in trade and other payables		1,140	603
Share based payments expense		146	94
Net cash inflow from operating activities		2,777	3,691
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment		56	3
Purchase of software		(19)	(35)
Development costs capitalised		(343)	(294)
Purchases of property, plant and equipment		(894)	(502)
Taxation		–	9
Returns from investment in money market deposits		924	(2,704)
Interest received		487	101
Investment in joint venture		(1,376)	–
Movement in loans and receivables		(531)	–
Net cash used in investing activities		(1,696)	(3,422)
Cash flows from financing activities
Finance lease		(17)	(8)
Repayment of secured loan		(29)	(15)
Issue of equity shares		13	70
Shares purchased by EBT		(89)	(34)
Shares sold by EBT		84	21
Interest paid		(37)	(29)
Net cash (used in)/from financing activities		(75)	5
Net increase in cash and cash equivalents		1,006	274
Cash and cash equivalents at the beginning of    the year		876	602
Cash and cash equivalents at the end of the year		1,882	876

 

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 Road Three, Winsford 

            Industrial Estate, Winsford, Cheshire CW7 3PD.  

The Company’s ordinary shares are traded on the AIM market of the London Stock Exchange plc. The financial statements of the Company for the twelve months ended 31 December 2008 comprise the Company and its subsidiaries and joint venture (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 medical adhesives for closing and sealing tissue, for sale into the global medical device market.

2.         Basis of Preparation

These preliminary statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2007 and those to be adopted at 31 December 2008.  

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 2009.

The financial information set out in the announcement does not constitute the Group‘s statutory accounts for the years ended 31 December 2008 or 31 December 2007. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors 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 s237(2) or (3) Companies Act 1985. The audit of the statutory accounts for the year ended 31 December 2008 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 below.

The individual financial statements for each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

3.         Accounting policies

Details of the accounting policies applied are those set out in Advanced Medical Solutions Group plc annual report and accounts 2007, with the exception of the following accounting policies that have been adopted during the year ended 2008.

Basis of consolidation

         Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control; that is, when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

The Group reports its interests in jointly controlled entities using the equity method of accounting where it is considered that the Group is able to exercise joint control over the operating and financial decisions of the investee.

Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is recognised as part of the investment and reviewed for impairment when there is objective evidence of impairment.

  

            Derivative financial instruments

The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risk. 

Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. The resulting gain or loss is recognised in profit or loss immediately.

Derivatives with remaining maturity of less than 12 months are presented as current assets or current liabilities.

4.         Segment information

For management purposes, the Group is organised into two business units, advanced woundcare and wound closure and sealants. These divisions are the basis on which the Group reports its segment information.

Intersegment pricing is determined on an arm’s length basis.

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.

Business segments

The principal activities of the advanced woundcare business unit are the research, development, manufacture and distribution of novel, high performance polymers for use as wound dressings.

The principal activities of the wound closure and sealants business unit is the research, development, manufacture and distribution of medical adhesives and products for closing and sealing tissue.

            Segment information about these businesses is presented below. 

2008	Advanced woundcare year ended 31 Dec 2008 £‘000	Wound closure & sealants year ended 31 Dec 2008 £‘000	Eliminations year ended  31 Dec 2008 £‘000	Consolidated year ended  31 Dec 2008 £‘000
Revenue
External sales	16,415	3,901	–	20,316
Inter-segment sales	33	–	(33)	–
Total revenue	16,448	3,901	(33)	20,316

Inter-segment sales are charged at prevailing market prices.

Results
Segment result		3,036	848	–	3,884
Unallocated expenses					(1,185)
Profit from operations					2,699
Finance income					265
Finance costs					(37)
Profit before tax					2,927
Tax					382
Profit for the year					3,309

  4.    Segment information (continued)

Other information	Advanced woundcare year ended 31 Dec 2008 £‘000		Wound closure & sealants year ended 31 Dec 2008 £‘000	Eliminations year ended  31 Dec 2008 £‘000	Consolidated year ended  31 Dec 2008 £‘000
Capital additions:
Software intangibles		15	4	–	19
Research & development		294	49	–	343
Property, plant and equipment		727	251	–	978
Depreciation and amortisation		721	304	–	1,025
Balance sheet
Assets
Segment assets		10,596	5,019	–	15,615
Unallocated assets					8,944
Consolidated total assets					24,559
Liabilities
Segment liabilities		2,847	1,079	–	3,926
Unallocated liabilities					741
Consolidated total liabilities					4,667

    Note: Included in the advanced woundcare segment are assets (£1,749k) and results (£80k) in respect of Corpura BV, the Group’s joint venture.

2007	Advanced woundcare year ended 31 Dec 2007 £‘000	Wound closure & sealants year ended 31 Dec 2007 £‘000	Eliminations year ended  31 Dec 2007 £‘000	Consolidated year ended  31 Dec 2007 £‘000
Revenue
External sales	12,799	4,057	–	16,856
Inter-segment sales	28	–	(28)	–
Total revenue	12,827	4,057	(28)	16,856

Inter-segment sales are charged at prevailing market prices.

Result
Segment result		1,363	715	–	2,078
Unallocated expenses					(426)
Share of results of joint venture					–
Profit from operations					1,652
Finance income					282
Finance costs					(29)
Profit before tax					1,905
Tax					331
Profit for the year					2,236

  4.    Segment information (continued)

Other information	Advanced woundcare year ended 31 Dec 2007 £‘000		Wound closure & sealants year ended 31 Dec 2007 £‘000	Eliminations year ended  31 Dec 2007 £‘000	Consolidated year ended  31 Dec 2007 £‘000
Capital additions:
Software intangibles		33	2	–	35
Research & development		187	107	–	294
Property, plant and equipment		335	167	–	502
Depreciation and amortisation		645	244	–	889
Balance sheet
Assets
Segment assets		7,084	4,377	–	11,461
Unallocated assets					7,783
Interest in joint venture					–
Consolidated total assets					19,244
Liabilities
Segment liabilities		2,213	1,061	–	3,274
Unallocated liabilities					224
Consolidated total liabilities					3,498

Geographical segments

The advanced woundcare and wound closure and sealants segments operate mainly in the UK, 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	Year ended
			31 Dec 2008	31 Dec 2007
			£’000	£’000
United Kingdom			7,023	5,731
Europe excluding United Kingdom			7,991	6,686
United States of America			4,810	4,217
Rest of World			492	222
			20,316	16,856

All assets are classified as under the United Kingdom due to the immateriality of the carrying value of all assets held in the United States of America.

  5.    Profit from operations

	Year ended	Year ended
	31 Dec 2008	31 Dec 2007
	£’000	£’000
Profit from operations is arrived at after charging/(crediting):
Profit on sale of non-current assets	(35)	(3)
Depreciation of property, plant and equipment	673	686
Amortisation of:
–    acquired intellectual property rights	168	168
–    software intangibles	24	19
–    development costs	160	16
Operating lease rentals    –    plant and machinery	90	90
–    land and buildings	315	294
Research and development costs expensed to the income statement	1,534	784
Cost of inventories recognised as expense	9,993	9,119
Staff costs	6,883	5,900
Fair value loss on derivative financial instruments	599	–
Net foreign exchange gains	(474)	(36)

6.    Earnings per share

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

	Year ended 31 Dec 2008 £‘000	Year ended 31 Dec 2007 £‘000
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	3,309	2,236

Number of shares
	Year ended 31 Dec 2008 ‘000	Year ended 31 Dec 2007 ‘000
Weighted average number of ordinary shares for the purposes of basic earnings per share	143,284	142,535
Effect of dilutive potential ordinary shares:
share options, deferred share bonus, LTIPs	9,979	8,684
Weighted average number of ordinary shares for the purposes of diluted earnings per share	153,263	151,219

7.    Going Concern

    In carrying out their duties in respect of going concern, the Directors have carried out a review of the     Group’s financial position and cash flow forecasts for the next 12 months. These have been based on a     comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks     and the current economic environment. With regards to the Group’s financial position, it had cash and cash equivalents at the year end of £1.9m and investments totalling £5.7m, with a maturity not exceeding 3 months, while having no reliance on banking facilities.

    While the current economic environment is uncertain, AMS operates in a market whose demographics are     extremely favourable, underpinned by an increasing need for products to treat chronic and acute wounds.     Consequently, strong 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 despite the current uncertain economic outlook. Accordingly, they     continue to adopt the going concern basis in preparing the annual report and accounts.
    

 

8.    No dividend has been proposed.     

 

9.    This statement was approved by the Directors and agreed with the Group’s auditors on 16 March 2009. A copy can be

       obtained from the Secretary at the Company’s Head Office, Road Three, Winsford Industrial Estate, 

       Winsford, Cheshire CW7 3PD.

END

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