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Final Results

23rd Sep 2005 07:01

Aortech International PLC23 September 2005 For Immediate Release 23 September 2005 AorTech International plc ("AorTech" or "the Company") Preliminary Results for the year ended 31 March 2005 AorTech International plc (AIM: AOR), the Biomaterials Intellectual Property andmaterial manufacturing Company announces its Preliminary Results for the yearended 31 March 2005. Operational Highlights • Expansion of the Elast-Eon Master technology data base• Successful bench testing of formulations for spinal disc applications• Major internal developments in next generation breast implants to include • Validation of superiority of Elast-Eon for breast implant shell, particularly in comparison with silicone • Meeting with the FDA to assess the use of Elast-Eon in breast implants • Development of specific Elast-Eon formulations suitable for minimally invasive devices, injectable in situ cure and progress in defining the regulatory road map for the ultimate approval of this product• Development of form-stable, metal-free and ultra-low extractable gels• Support for client manufacturing as part of first human use• Renaming of the Company to AorTech Biomaterials plc - to be proposed at AGM Financial Highlights • Loss After Tax for the year was £1,867,390. (2004: Profit £527,260)• Net cash position as at 31 March 2005 was £4,015,126 (2004: £5,968,200) Commenting on the results, Frank Maguire, Chief Executive of AorTech said: "Having come through a major refocus of the business, AorTech now has a numberof exciting products and applications based on Elast-Eon. Our work to developthe Masterfile for the FDA is a credit to our team as their commitment is nowbeing reflected in real commercial opportunities. "We would like to thank our shareholders for their support during this time andlook forward to reporting further progress in all of our key projects over thecoming months." For further information please contact: AorTech International plc 00 1 801 201 4336Frank Maguire, Chief Executive Buchanan Communications 020 7466 5000Ben Willey, Lisa Baderoon, Rebecca Skye Dietrich Notes to Editors: AorTech International plc is a public limited company formed under the laws ofScotland, UK and is traded on the Alternative Investment Market, a marketoperated by the London Stock Exchange plc, under the trading symbol AOR. Additional material concerning AorTech International is available on theCompany's website at www.aortech.com, or may be obtained by contacting theCompany's Investor Relations firm, Buchanan Communications Limited. CHAIRMAN'S STATEMENT RESULTS The Company had turnover in the year ended 31 March 2005 of £136,958 (2004£360,185), whilst operating expenses for the year were £2,189,908, some 13% lessthan in the preceding year. These expenses included development expenditure of£653,896 and amortization of intangible fixed assets of £94,589. The Loss onOrdinary Activities Before Tax was £1,867,390 - some £417,833 more than in 2004during which year the Company benefited from £552,856 of gains on exceptionalitems. Loss After tax for the year was £1,867,390. This compares with a Profit AfterTax of £527,260 during the year ended 31 March 2004 following receipt of£1,976,817 in tax credits in respect of development work during earlier years. The cash position as at 31 March 2005 was £4,015,126 - some £1,953,074 less thanon the corresponding day in 2004. In line with the resolution passed at the last Annual General Meeting, the SharePremium Account has been cancelled, and this is reflected in the statutoryAccounts. BUSINESS REVIEW AND ACTIVITIES The progress made at AorTech in Financial Year 2005 is a story that began withthe vigorous turnaround of FY 2003 and the foundation building in the year 2004.The turnaround comprised of a number of key strategic actions, including: • The appointment of new management• Termination of £30 million Becton Dickinson acquisition• Sale of the loss making heart valve business• Voluntary withdrawal of TruCCOMs from market• Sale of TruCCOMs intellectual property• Termination of in-house development of Tri-leaflet heart valve• Start up of Biomaterial licensing and supply business• A reduction in cash burn from £10m in FY 2003 to under £1m in 2004• Biomaterial technology licenses and supply agreements executed June 2003. Having accomplished these changes, management developed a strategy for the newbusiness. During the foundation year of 2004, the business: • generated 17 new materials evaluation programmes reflecting the expansion of Elast-Eon platform into new areas• progressed 2 step-out projects through to advanced stages of product development• increased its scientific profile through World Biomaterials Congress presentations• provided support for key client relationships, resulting from dramatic improvements in quality of materials achieved through process optimisation to facilitate higher yields in device production• submitted its first master file to FDA• developed a supplier management programme and the expansion of the supplier base • successfully completed research programmes on drug-eluting stents and spinal discs• achieved advances in breast implant potential• succeeded in developing the Melbourne manufacturing and technology centre into a key strategic asset. Frank Maguire and I would like to acknowledge the contributions made by LaurieRostron, Chairman of the Company until May 2005, to the turnaround andfoundation phases of this reincarnated business. His guidance and steady handwere instrumental in setting this new business off in a positive direction. The accomplishments of the past year reflect the beginnings of commercial aswell as strategic, regulatory and technical progress. Milestones of noteinclude: • Expansion of the Elast-Eon Master technology data base• Maintenance of high quality and stable supply of Elast-Eon• Development of new abrasion resistant, low creep grades for orthopaedic applications, in particular the rapidly growing spinal disc segment• Major internal developments in next generation breast implants that address material selection and preliminary toxicity and biostability results• Validation of superiority of Elast-Eon for breast implant shell, particularly in comparison with silicone• Completion of sterilization feasibility for the Elast-Eon breast implant• Meeting with the FDA to assess the use of Elast-Eon in breast implants• Development of specific Elast-Eon formulations suitable for minimally invasive devices, injectable in situ cure and progress in defining the regulatory road map for the ultimate approval of this product• Development of form-stable, metal-free and ultra-low extractable gels• Successful bench testing of formulations for spinal disc applications• Support for client manufacturing as part of first human use project OUTLOOK The Company believes that first human use of Elast-Eon and the generation of thefirst royalty income for the business will occur within one year. The effectthat this event will have on the biomaterial licensing and supply business willbe positive and manifest itself along with steadily growing revenue streams - interms of an increasing number of licensing deals and projects and the individualvalue of these projects to AorTech. It will be the result of the consistent diligent and expert work by all of ourvalued employees. It will be the point in time where the work of the past three years can beacknowledged and the 'new' AorTech will have been launched. After consideringthe feedback from the investment community and a number of key shareholders, theBoard has reached a decision to propose a re-naming of the Company to AorTechBiomaterials plc. This will be subject to approval at the Annual General Meetingof the Company. I am delighted at the progress we have made with both our "generation 5", safersurgical type breast implant and the breakthroughs we are experiencing with thedevelopment of a true minimally invasive breast implant. The AorTech Board is looking forward to increasingly positive commercial resultsin the coming year. There are a number of new applications, licensees and theprospect of clinical use of Elast-Eon for a number of long-term implants wherethere is a high demand for extraordinary fatigue performance, abrasionresistance, blood compatibility and general physical strength. BOARD CHANGES We announced at the end of October 2004 that Ian Cameron was stepping down fromhis position as Finance Director but would remain as a Non Executive Directorand Company Secretary in the short term. Ian retired from the Board with effectfrom 20th December 2004. Having contributed substantially to AorTech during hissix years with the Company. He has been succeeded as Company Secretary byDavid Parsons, ACIS. In May 2005, my predecessor as Chairman, Laurie Rostron, and Peter Gibson,Non-Executive Director of the Company, retired from the Board. Earlier in thisStatement I have acknowledged the contribution made by Laurie Rostron, but Iwould also take this opportunity to express my warm thanks to both colleaguesfor their considerable efforts and input during a difficult, transitional periodfor the Company. In May 2005, we also announced the appointment of Dr Stuart Rollason as aNon-Executive Director. Dr Rollason brings a wealth of experience, both medicaland corporate, to the Board and it has become clear that his input will prove ofmuch value in the months ahead. AUDITORS The Company's current auditors, PricewaterhouseCoopers LLP, have resigned witheffect from the forthcoming Annual General Meeting. PricewaterhouseCoopers LLPhave confirmed to us that there are no circumstances connected with theirresignation that they consider should be brought to the attention of members.Grant Thornton UK LLP have confirmed that they would be pleased to acceptappointment as the Company's auditors. I am grateful to the partners and staff of PricewaterhouseCoopers LLP for theprofessionalism and services they have provided during their tenure. CONCLUSION The task ahead remains challenging, but I believe that the credibility attainedfrom the successful completion of the long, arduous process of qualifyingElast-Eon for human use will provide a substantive boost for our heart valve andbreast implant projects with investors, regulators and potential industrypartners. My sincere thanks go to Frank Maguire, and his highly skilled team, for theirconsiderable achievements, efforts and support during the past year. Jon PitherChairman23 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 2005 Notes 2005 2004 £ £ Turnover 2 136,958 360,185 Cost of Sales 3 (31,339) (30,649) Gross Profit 105,619 329,536 Net operating expenses 3 (2,189,908) (2,527,045) Net operating expenses include: Development expenditure (653,896) (559,032) Amortisation of intangible fixed assets (94,589) (97,863) Group operating loss 3 (2,084,289) (2,197,509) Exceptional items 4 - 552,856 Loss on ordinary activities before interest (2,084,289) (1,644,653)Interest receivable 216,899 195,096 Loss on ordinary activities before taxation (1,867,390) (1,449,557)Taxation 5 - 1,976,817 (Loss)/Profit for the financial year (1,867,390) 527,260 (Loss)/Profit per ordinary shareBasic 6 (49.01p) 13.84pDiluted (49.01p) 13.84p There is no difference between the losses stated above and their historical cost equivalent.All results are derived from continuing operations. STATEMENT OF TOTAL RECOGNISED GAINS/(LOSSES)for the year ended 31 March 2005 2005 2004 £ £ (Loss)/Profit for the financial year (1,867,390) 527,260Currency translation differences arising on consolidation (45,215) 130,024 Total (losses)/gains recognised since last annual report (1,912,605) 657,284 BALANCE SHEET as at 31 March 2005 2005 2004Fixed assetsIntangible assets 1,449,366 1,565,806Tangible assets 189,678 235,608Investment in subsidiary undertakings - - 1,639,044 1,801,414Current assetsStocks 68,852 48,853Debtors 278,948 185,848Cash at bank 4,015,126 5,968,200 4,362,926 6,202,901 Creditors: amounts falling due within one year (348,460) (438,200) Net current assets 4,014,466 5,764,701Total assets less current liabilities 5,653,510 7,566,115Net assets 5,653,510 7,566,115 Capital and reservesCalled up share capital 9,525,695 9,525,695Share premium account - 63,359,594Other reserve (2,003,143) (2,003,143)Profit & Loss account (1,869,042) (63,316,031)Equity shareholders' funds 5,653,510 7,566,115 CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 March 2005 Note 2005 2004 £ £Net cash outflow from operating activitiesNet cash outflow before exceptional items 7 (2,139,103) (1,898,890) (2,139,103) (1,898,890)Outflow related to exceptional items - (1,335,862) Net cash outflow from operating activities (2,139,103) (3,234,752) Returns on investment and servicing of financeInterest received 216,899 188,359 TaxationResearch and development tax credits received - 2,075,716 Capital expenditure and financial investmentPurchase of intangible fixed assets - -Purchase of tangible fixed assets (28,000) (14,908)Sale of tangible fixed assets - 136,440 Net cash inflow/(outflow) from capital expenditure and (28,000) 121,532financial investment DisposalsDisposal of commercial valve operations - (50,000) Cash outflow before management of liquid resources and (1,950,204) (899,145)financing Management of liquid resourcesCash released from short term deposit 1,994,364 734,983 Increase/(decrease) in cash in the year 44,160 (164,162) Note 1.The financial statements for AorTech International plc have been approved buthave yet to be signed for the year ended 31 March 2005. The financialinformation set out in the announcement does not constitute the Company'sstatutory Accounts for that year nor for the year ended 31 March 2004. Thefinancial information for the year ended 31 March 2004 is derived from thestatutory accounts for that year which have been delivered to the Registrar ofCompanies. The auditors reported on those Accounts; their report wasunqualified and did not contain a statement under either Section 237 (2) orSection (3) of the Companies Act 1985. The statutory Accounts for the yearended 31 March 2005 have been finalised on the basis of the financialinformation presented by the Directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. Note 2 Segmental analysis by class of business and geographical area(a) Class of business - The Group operates one class of business (b) Geographical area - The analysis by geographical area of the Group's turnover is set out below: 2005 2004 sales by sales by sales by sales by destination origin destination origin £ £ £ £Geographical segment:United Kingdom 13,024 - - -Rest of Europe - - - -Rest of World 123,934 136,958 360,185 360,185 136,958 136,958 360,185 360,185 Note 3 - Cost of sales, gross profit, selling and marketing costs and administrative expenses 2005 2004 £ £ Turnover 136,958 360,185Cost of Sales (31,339) (30,649)Gross Profit 105,619 329,536 Selling and marketing costs (185,384) (296,492) Administrative expenses:Development expenditure (653,896) (559,032)Amortisation of intangible fixed assets (94,589) (97,863)Other (1,256,039) (1,573,658) Total administrative expenses (2,004,524) (2,230,553) Net operating expenses (2,189,908) (2,527,045) Group operating loss (2,084,289) (2,197,509) Note 4 - exceptional items 2005 2004 (nil) £ Gain on termination of truCCOMS operations 307,660Gain on disposal of commercial valve 111,581operationsFundamental restructuring costs 133,615 552,856Cash consideration 87,660held in Escrow for 12 months 220,000 307,660Gain on disposal 307,660 The gain during the year ended 31 March 2004 for fundamental restructuring costsarose from the overprovision of estimated costs at 31 March 2003 Note 5 - TaxationThe tax credit of £1,976,817 in 2004 relates to research and development creditsreceived in respect of expenditure incurred in previous years. Note 6 - (Loss) / Profit on Ordinary ShareThe basic (loss) per ordinary share is calculated on the loss of the Group of£1,867,390 (2004: profit of £527,260) and on 3,810,278 (2004 : 3,810,278) equityshares, being the weighted average number of shares deemed to be in issue. Theexercise of share options would not have been dilutive and accordingly the basicand diluted (loss)/profit per share are the same. Note 7 - Net cash outflow from operating activitiesNet cash outflow from operating activities for the year to 31 March 2004included expenditure of £636,518 which was not incurred in the current year. This information is provided by RNS The company news service from the London Stock Exchange

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