For immediate release

9 March 2010

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

Preliminary Results for the Year Ended 31 December 2009

 

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 2009.

 

Business Highlights

·    New, world class facility within budget and on schedule to open by end 2010

·    First US sales of LiquiBand ™

·    Cardinal Health signed as part of multi-partner distribution strategy for penetrating US tissue adhesive market

·    SilverCel* Non-Adherent launched by Systagenix

·    ActivHeal^Ò offering receives strong endorsement from UCLH

·    Acquisition of Corpura BV completed

 

 

Financial Highlights

·    Strong second half delivering market expectations

·    Revenue increased by 19% to £24.1 million (2008: £20.3 million)              

        Revenue increased 15% to £23.4 million at constant currency⁽ⁱ⁾

·    Operating profit (pre-exceptional items)⁽ⁱⁱ⁾ up 51% to £4.1 million (2008: £2.7 million)  

        Operating profit (post exceptional items) was £2.4 million (2008: £2.7 million)

·     Following investments in new facility and acquisitions, net funds⁽ⁱⁱⁱ⁾ at year-end were £1.7 million (2008: £7.3 million) with strong operating cash in-flow of £3.7 million (pre-exceptional items) (2008: £2.8 million)

Net cash inflow from operations after exceptional items £2.1 million (2008: £2.8 million)

·    Basic earnings per share (pre-exceptional items) up 34% to 3.1p (2008: 2.3p)
Basic earnings per share (post exceptional items) was 1.9p (2008: 2.3p)

 

 

(i)                 Constant currency removes the effect of currency movements by re-translating the current year’s  

                performance  at  the previous year’s  exchange rates

(ii)          Exceptional costs of £0.8 million were incurred on an aborted acquisition and £0.9 million related to the new

                Winsford facility

(iii)         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 Group plc, said:

 

” I am pleased to report that further major steps have been taken in exploiting the Group’s significant growth opportunities with key strategic new markets entered, new partners added, innovative new products launched and further regulatory approvals received. 

 

“The Board remains very optimistic about the prospects for the business in 2010 and beyond and, accordingly, intends to introduce a maiden dividend for the full year 2010.”

 

 

For further information, please contact:

 

Advanced Medical Solutions Group plc
Don Evans, Chief Executive Officer Mary Tavener, Group Finance Director Chris Meredith, Chief Operating Officer www.admedsol.com	Tel: +44 (0) 1606 545508
Buchanan Communications
Mark Court / Stasa Filiplic / Jennie Spivey	Tel: +44 (0) 20 7466 5000
Investec Bank plc	Tel: +44 (0) 20 7597 5970
Gary Clarence / Daniel Adams

 

Notes to Editors:

 

Advanced Medical Solutions develops and manufactures 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 in-house 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.

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

 

I am pleased to inform investors that, as anticipated, despite the difficult first half year, the Group achieved a strong second half which resulted in the business trading in line with expectations for the full year 2009 and maintaining its excellent year on year growth.

 

Further major steps have been taken in positioning the Group to exploit its significant growth opportunities:

 

·    key strategic new markets entered;

·    new partners added;

·    innovative new products launched; and

·    further regulatory approvals received.

 

In particular, initiation of sales of LiquiBand™ into the US market is a major milestone for the Group.  The acquisition of Corpura BV, our foam technology platform provider, was completed in September 2009 and integration is essentially complete.  The construction and fit-out of the new facility in Winsford progresses within budget and on schedule.  Manufacturing at the new facility is underway and our first products have already been shipped.  This facility is on target to be completed and fully operational by the end of 2010.

 

Financial Highlights

 

Group revenue at £24.1 million (2008: £20.3 million) was up 19% with profit from operations before exceptional items up 51% at £4.1 million (2008: £2.7 million). This was an excellent performance in a difficult economic environment.

 

Profit from operations post exceptional items was £2.4 million (2008: £2.7 million).

 

The business continues to generate cash at the operational level with net cash inflow from operations before exceptional items of £3.7 million (2008: £2.8 million).  Net cash inflow from operations after exceptional items was £2.1 million.

 

Following investments in the new facility, plant and equipment and acquisitions, net funds at year-end were £1.7 million (2008: £7.3 million).

 

Organic Growth

 

The Group continues to make good progress in delivering the building blocks for continued growth.

 

In advanced woundcare, revenue was up 18% on last year, with the silver alginate range of products up 27% year on year.  In wound closure and sealants, revenue was up 20% with European and ROW sales up 40%.

 

InteguSeal** Skin Sealant grew 28% and we believe that Kimberly-Clark Health Care’s acquisition of I-Flow together with further publication of clinical studies will continue to drive growth.

 

Completion of the acquisition of Corpura BV strengthens our position in polyurethane foam, the largest, fastest growing segment in advanced woundcare.

 

The positive endorsement of our ActivHeal^® offering by University College London Hospital (UCLH) is significant given the cost pressures facing the NHS.

 

The new facility at Winsford provides AMS with a world-class medical device facility with capacity to support its future growth plans.

 

Entry into the $200 million US tissue adhesive market with our LiquiBand™ products is a major step forward.  The two products now available allow access to around 80% of the market and Cardinal Health provides us with a powerful distribution partner for commercialising our tissue adhesive technology in this key strategic market.  We are very encouraged by the initial activities of their substantial sales team and by the response from clinicians to our products.

 

The launch of SILVERCEL* Non-Adherent by Systagenix is another key event for broadening our presence in the dynamic silver alginate market.

 

Licensing and Acquisitions

 

The Group continues to look at suitable licensing and acquisition opportunities to expand the business and accelerate growth.

 

The two principal areas that the Board has been considering are new material technologies that  leverage existing distribution outlets and opportunities that will broaden the Group’s direct sales presence for its wound closure range of products.

 

One potential acquisition opportunity was seriously considered during Q1 2009 however, in the market conditions prevailing at the time, acceptable terms could not be agreed and discussions ended.

 

The joint venture, under which AMS acquired an interest in Corpura BV in May 2008, progressed to full acquisition in September 2009 and is starting to deliver the strategic rationale behind this investment whereby the Group is looking to utilise polyurethane foam as a platform technology for incorporating additives as part of its R & D programme.  The 510(k) approval for silver polyurethane foam received in August 2009 underlines this approach.

 

Dividend Policy

 

In 2007, AMS conducted a capital reorganisation enabling the Board to pay dividends.  The Board continually reviews the Company’s dividend policy to ensure it is appropriate for the stage of the Company’s development and, to date, the Board has not recommended the payment of a dividend.   While the focus remains on growing the business and delivering capital growth, with the major investment in the new facility project coming to an end during 2010 and given the cash generation in the business, the Board’s intention is to recommend a maiden dividend for the year ended 31^st December 2010, which will be payable in 2011, and to follow a progressive dividend policy thereafter.

 

 

Board

 

As part of strengthening the Board going forward I am pleased to welcome Penny Freer to AMS as Senior Independent Non-Executive Director and I am also pleased to see Chris Meredith’s progression through to Chief Operating Officer.

 

Steve Harris has indicated that he wishes to step down as a Non-Executive Director at the next AGM.  I would like to thank Steve for his significant contribution to the development of the business over the past nine years.

 

Employees

 

On behalf of the Board and all our shareholders, I thank all AMS employees for their considerable efforts in delivering our 2009 results.  I would also like to formally welcome all the Corpura BV employees to the AMS Group.

 

Offer Period

 

On 26^th February 2010, Consort Medical plc announced that it had made an approach to AMS, which may or may not lead to an offer being made for the Group.  On the same date, AMS announced a confirmation of the approach and that the Board and its advisers had rejected it.  The Board of AMS continues to advise shareholders to take no action at this stage.  Further announcements will be made as appropriate.

 

Outlook

 

The strong trading seen in the second half of 2009 has continued into 2010 with the Group  order book substantially ahead of this time last year.  While it is anticipated that trading will be more weighted to the second half as in the previous year, the weighting is expected to be more balanced. 

 

The Board remains very optimistic about the prospects for the business in 2010 and beyond.  Over the past few years the management team have been putting in place a number of the key building blocks to achieve the Board’s strategic objectives and in the past few months these have been coming to fruition including:

 

·    a new facility to provide additional capacity and deliver operational  efficiencies from late 2010 and beyond;

 

·    the launch of new innovative products such as SilverCel* Non-Adherent, which was launched by Systagenix in October 2009.  Initial indications on this product have been very positive;

 

·    the introduction of LiquiBand™ into the US in December 2009 with 2010 being the first full year of sales into this key strategic market.  Initial orders have been in line with expectations and are growing in line with the underlying expected demand.  Furthermore, initial responses from clinicians in the US have been very positive;

 

·    the first major US distribution partner for LiquiBand™, Cardinal Health was announced in January 2010 and has now begun selling product through its substantial sales force.  Further distribution agreements are expected to be signed in 2010;

 

·    the endorsement of the cost saving potential of ActivHeal^® is likely to stimulate demand from the NHS given the recent and anticipated cost pressures facing the UK health system;

 

·    the strengthening of the Group’s position in the polyurethane foam market which is the largest, fastest growing segment in advanced woundcare; and

 

·    the maintenance of a strong pipeline of new products and regulatory approvals.

 

Given these developments, and the organic growth the Group is anticipating from its existing products, the outlook for 2010 remains very positive and accordingly, as mentioned earlier, the Board is intending to introduce a maiden dividend for the full 2010 financial year, payable in 2011.

 

 

 

 

 

 

Dr. Geoffrey N. Vernon

Chairman

 

 

 

 

*    Trademark of Systagenix Wound Management

** Trademark of Kimberly-Clark Worldwide, Inc ©2007 KCWW

 

 

Financial Review

 

Revenue for the Group grew 19% to £24.1 million (2008: £20.3 million).  Adjusting for constant currency, the underlying growth was 15%.

 

Advanced woundcare sales increased 18% to £19.4 million (2008: £16.4 million). The advanced woundcare business includes three months’ revenue from the Corpura acquisition which was  completed on  30^th September 2009. This contributed £0.7 million to revenues.  Strong growth was seen in the silver alginate range of products which grew 27% compared with last year and are now approximately 40% of the advanced woundcare business.  Sales of ActivHeal™, the Group’s value range of woundcare products for the NHS market, increased 5%.

 

The wound closure and sealants business grew 20% to £4.7 million (2008: £3.9 million). Good growth of just over 40% was seen from our European and ROW distributors as increased sales penetration is seen in these markets. Sales of InteguSeal**, our surgical skin sealant product licensed to Kimberly-Clark Health Care also increased by 28%. 

 

Gross margin across the Group was 48% (2008: 48%). Excluding the Corpura acquisition the existing business would have delivered a gross margin of 49%. Adjusting for constant currency the underlying gross margin was 48%. 

 

Profit from operations pre-exceptional items increased by 51% to £4.1 million (2008: £2.7 million) and operating margin (pre-exceptional items) increased to 17% from 13% in 2008. Administration costs which include the Group’s continuing property costs, plc costs and administrative functions increased to £7.8 million pre-exceptional items (2008: £7.7 million).  Investment was made in sales and marketing ahead of supporting the launch of LiquiBand™ into the US and has been maintained at 11% of revenue (2008: 11%). Spend on Research and Development across the Group is around 6% of Group revenue (2008: 7%) split fairly evenly across the businesses. The Group benefited from the reversal of marking currency hedging derivatives to market through the income statement which, net of other foreign exchange differences, was a benefit of £0.1 million (2008: (£0.1) million).   The acquisition of Corpura BV contributed nil to profit from operations.

 

The Group incurred £1.7 million of exceptional costs in the year. The Group is well advanced in moving from its two existing manufacturing sites in Winsford into a new building that will accommodate manufacturing, warehousing, laboratories and offices. There are costs associated with this project such as the transfer and re-validation of manufacturing equipment, additional rent and staff dedicated to the project which are deemed exceptional. £0.9 million of such costs were incurred in the period. As previously indicated the Group is budgeting a further £1 million of costs to be incurred in 2010. The majority of these costs are expected to be incurred in the first six  months.

 

The Group also incurred £0.8 million of costs on an aborted acquisition that had reached an advanced stage of discussion. These costs are also classified as exceptional.

 

Profit from operations post-exceptional items was £2.4 million, a decrease of 11% compared with 2008 (2008: £2.7 million).

 

The Group continues to work with existing and new partners on development projects and earns income through these projects. £0.5 million of other income was earned in the period (2008: £0.7 million).

 

The Group achieved  pre-exceptional profit before tax of £4.1 million in the period. An increase of 39% compared with 2008 (£2.9 million). Profit before tax  was £2.4 million (2008: £2.9 million). 

 

The Group recognised a tax credit of £0.4 million resulting from deferred tax (2008: £0.4 million) reflecting the extent to which recoverability of tax loses can be forseen with reasonable certainty. The Group holds a deferred tax asset on the balance sheet of £2.4 million (2008: £2.0 million). The Group additionally has a further £24.0 million (2008: £25.0 million) of tax losses that have not been recognised.

 

Profit after tax but before exceptional items for the period was £4.5 million (2008: £3.3 million). On this basis, basic earnings per share was 3.09p (2008: 2.31p) and fully diluted earnings per share was 2.87p (2008: 2.16p). The Group profit after tax and exceptional items was £2.8 million (2008: £3.3 million) resulting in a basic earnings per share of 1.93p (2008: 2.31p) and fully diluted earnings per share of  1.79p (2008: 2.16p).

 

Cash flow

The Group had a cash inflow from operating activities and before exceptional items of £3.7 million (2008: £2.8 million) and £2.1 million after exceptional items of £1.7 million. Working capital increased in the period by £1.6 million. Inventory increased by £0.8 million in line with the factory move and would be expected to reduce at the end of 2010 when the factory move is completed. Trade and other receivables increased by £1.6 million reflecting the increased sales within the Group. Debtor days were 54 (2008: 53). Trade and other payables increased £0.8 million reflecting the growth of the Group.

 

The Group invested £4.5 million in the fit out of the new facility in line with the budgeted spend and spent a further £2.2 million in capital equipment for the Group.

 

On 30^th September  2009 the Group  acquired the remaining 50.6% of the shares of Corpura BV from Recticel for a total of €2.3 million. Part of this payment was deferred and is included in trade and other payables on the balance sheet.

 

As a result of this investment the Group had net funds of £1.7 million at the end of the year (2008: £7.3 million).

 

The Group entered into a 3 year Revolving Credit Facility with Lloyds TSB Bank for £5million which includes a £1 million overdraft facility at market rate in August 2009.  The Group anticipates that it will draw down on this facility during 2010 but it is not forecast to be fully utilised at any point over the next 3 years. 

 

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 and have reached a conclusion that the Group is well placed to manage its business risks in the current economic environment as is more fully described in Note 10.

 

 

 

               

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2009

 

		(Unaudited)                 Year ended 31 December 2009			(Audited)
		Before Exceptional items	Exceptional  items (see note 7)	Total	Year ended 31 December 2008
	Note	£’000	£’000	£’000	£’000
Revenue	4	24,091	–	24,091	20,316
Cost of sales		(12,482)	–	(12,482)	(10,562)
Gross profit		11,609	–	11,609	9,754
Distribution costs		(157)	–	(157)	(160)
Administration costs		(7,799)	(1,672)	(9,471)	(7,666)
Profit on disposal of property, plant & equipment		–	–	–	35
Other income		488	–	488	656
Share of results of joint venture		(66)	–	(66)	80
Profit from operations	4,5	4,075	(1,672)	2,403	2,699
Finance income		21	–	21	265
Finance costs		(30)	–	(30)	(37)
Profit before taxation		4,066	(1,672)	2,394	2,927
Income tax		390	–	390	382
Profit for the year attributable to equity holders of the parent		4,456	(1,672)	2,784	3,309
Earnings per share
Basic	6	3.09p	(1.16)p	1.93p	2.31p
Diluted	6	2.87p	(1.08)p	1.79p	2.16p

The above results relate to continuing operations.