16th Mar 2005 07:01
Gyrus Group PLC16 March 2005 16 March 2005 Gyrus Group PLC Profits up 26% Gyrus Group PLC ("Gyrus" or "the Group"), a leading supplier of medical deviceswhich reduce trauma and complications in surgery, today announces itspreliminary results for the year ended 31 December 2004. Financial Highlights • Group revenues up 11% (22% on a constant exchange rate basis-CER), to £86.9m (2003: £78.1m) • Profit before tax and goodwill amortisation (PBTA) up 26% to £10.2m (2003: £8.1m), despite weakness of US Dollar • Reported operating profit (after goodwill amortisation) up 57% to £5.5 million (2003: £3.5 million) • Adjusted EPS* rises 20% to 11.5p (2003: 9.6p) • Strong cash generation reduced net debt by 88% to £1.8m (2003: £15.5m) * Before goodwill amortisation, deferred tax and exceptional items Operating Highlights • Surgical Division sales up 24% in local currency, driven by growth in Open Forceps and SuperPulse • Continued strong growth in Partnered Technologies - sales up 22% in local currency • ENT Division increased sales by 19% in local currency • Installed base of generators in US ENT and Surgical markets rises by 27% to 4,681 units (2003: 3,686) with 36% increase in sales of associated disposable instruments to $37.9 million (2003: $27.9 million) • R&D drives significant new product launches for Q1 2005 Brian Steer, Executive Chairman, said: "Gyrus has delivered very strong top and bottom line growth in 2004 despite thecontinued depreciation of the dollar. We are now a well-established medicaltechnology company with a clear focus on supplying the needs of the surgeon.With exciting product launches underway, we are confident of the Group'sprospects for 2005 and beyond." Enquiries: Gyrus Group PLC On 16 March 2005:Brian Steer, Executive Chairman Tel: 0207 831 3113Simon Shaw, Chief Financial Officer Tel: 0207 831 3113 Financial DynamicsDavid Yates/Ben Atwell Tel: 0207 831 3113 A meeting for analysts will be held at the offices of Financial Dynamics,Holborn Gate, 26 Southampton Buildings, London WC2A 1PB at 8.30am. Please callMo Noonan on 020 7269 7116 for further details. Overview 2004 was a year of strong performance across the Group, which was reflected in asignificant rise in revenue and profitability. Our three Divisions all madesubstantial progress and we are well set to benefit from some important newproduct launches in 2005. For the second year running Gyrus had to contend with significant depreciationin the US dollar, our principal operating currency, with the average rate forthe year being just over $1.83:£1 (2003: $1.63:£1). Despite this we were able togrow reported revenues by 11% to £86.9 million (2003: £78.1 million). Thisrepresented underlying revenue growth of 22% in local currency terms,significantly ahead of our targeted average high teens level. The Group's Profit Before Tax and Amortisation of goodwill ("PBTA") increased by26% to £10.2 million (2003: £8.1 million). We continued to meet our goal ofincreasing profits at a rate faster than our revenue growth alongside amaintained focus on working capital efficiencies and cash generation. Thisresulted in a substantial reduction in net debt during 2004. At the year end netdebt stood at approximately £1.8 million (2003: £15.5 million). Our adjusted earnings per share (excluding goodwill amortisation, deferredtaxation and exceptional items) rose 20% to 11.5p (2003: 9.6p). Business Review In 2004 we enjoyed strong performances from our Surgical and PartneredTechnologies Divisions and the ENT Division finished strongly in the lastquarter to end the year well. The following chart shows the performance of theGroup's businesses in local currency: Analysis Of Group Revenues Area* Currency 2003 2004 GrowthGynaecology US $m 26.2 32.6 24% Int £m 2.1 3.1 48%Urology US $m 2.8 6.2 121% Int £m 1.4 2.2 57%General Surgery US $m 2.0 2.1 5% Int £m 2.8 1.1 -61%Surgical Total US $m 31.0 40.9 32% Int £m 6.3 6.4 2%Surgical Division Total £m 25.3 28.8 14% Otology US $m 23.3 23.6 1% Int £m 3.0 4.9 63%Sinus & Rhinology US $m 12.6 15.2 21% Int £m 1.7 1.5 -12%Head & Neck US $m 9.8 10.4 6% Int £m 2.4 5.1 113%ENT Total US $m 45.7 49.2 8% Int £m 7.1 11.5 62%ENT Division Total £m 35.1 38.4 9% Partnered Technologies US dollar denominated n/a $m 21.5 27.7 29% Other currencies n/a £m 4.5 4.6 2%Partnered Technologies Division Total £m 17.7 19.7 11% Group Total Revenue n/a £m 78.1 86.9 11% * US =North American Free Trade Area, Int= World ex. NAFTA Surgical Division Gynaecology The Gynaecology business, specifically the hysterectomy market, representsapproximately 70% of the Surgical Division's revenues worldwide. During the yearsales in the US grew by 24% to $32.6 million, driven by the Group's range of PKTechnology products including the PK Cutting Forceps which is the market leaderin Laparoscopic Supracervical Hysterectomy (LSH). Internationally, theGynaecology business grew revenues 48% to £3.1 million as sales of PKinstruments increased, particularly in Europe and the Far East. The Groupcommenced direct sales in Benelux through its subsidiary Gyrus Medical B.V.(formerly "Entermed"). Urology In 2004 the Urology business represented approximately 19% of the SurgicalDivision's revenues, up from 12% in 2003. US revenues in this sector increasedby over 120% to $6.2 million as a result of the success of the SuperPulse systemfor Trans Urethral Resection of the Prostate (TURP) procedures, which waslaunched into the market in late 2003. In addition to the TURP market, the useof PK Technology within urology is successfully broadening into open andlaparoscopic prostatectomy and other urological procedures using the SuperPulsegenerator as a workstation. Internationally, revenues increased by 57% year on year to £2.2 million, withparticular success in direct sales in Benelux and via distributors in China andAustralia. General Surgery This business unit is designed to promote the use of Gyrus PK Technology inabdominal surgery outside the core businesses of Gynaecology and Urology. During2004, the Division's US sales grew by 5% to $2.1 million. Internationally,General Surgery sales fell by 61% to £1.1 million, principally as a result ofthe loss, in 2003, of the distributorship of a range of general surgery productsin the UK. Additional resources are being devoted to this business unit in 2005 to enableit to pursue the significant opportunity available for the Group's technologyoffering in General Surgery. ENT Division Otology The Otology business representing approximately half of the ENT Division'srevenues and comprising Vent tubes (grommets) and middle ear implants togetherwith related surgical instruments, drills and scopes, grew sales by 1% duringthe year to $23.6 million. Excluding the 83% reduction in sales of RetroXhearing enhancement products during the period, the core otology business grewby 5% year on year. As reported at the half-year, the RetroX range has proved tolie outside the surgeon call point of the ENT Division and, although regularprescribers are increasing their use of the product, it is no longer a focalproduct for the Otology business. Internationally, Otology revenues increased by 63% to £4.9 million (2003: £3.0million) principally as a result of the performance of the Group's new EUsubsidiaries. Sinus & Rhinology The Sinus and Rhinology business representing approximately 25% of the ENTDivision's revenues and comprising microdebriders, advanced nasal packingmaterials, scopes and instruments to enable surgery to be performed on the sinusand nasal passages, increased US revenues by 21% to $15.2 million, primarily asa result of the continued strong performance of the Diego Microdebrider system.Sales of this system slowed somewhat in the second half in advance of the Q12005 launch of the new PK Diego which will be Gyrus' first PK Technology derivedproduct for the ENT Division. Internationally, revenues decreased by 12% year onyear to $1.5 million as a result of limited availability of the DiegoMicrodebrider system outside the US as a lead product for the ENT range. Head & Neck The Head & Neck business successfully halted 2003's 20% loss of revenue in thesomnoplasty business, allowing other parts of the portfolio to contribute tooverall sales growth of 6% in the US to $10.4 million. This was a strongperformance under difficult circumstances. In January 2005 an experimentalreimbursement code was granted for the somnoplasty treatment. This is designedto gather information on the breadth of use of the procedure to establishwhether the Academy of Otolaryngologist's application for a full reimbursementcode should be granted. It is anticipated that, if successful, a fullreimbursement code will be granted in January 2006. The second half of 2004 wassubstantially associated with the development and early market testing of thenew Tonsil PlasmaKnife which uses the Group's novel PlasmaCision technology.This exciting product is being launched in the US in March 2005. Internationally, the business grew by 113% to £5.1 million primarily as a resultof the new EU subsidiaries acquired in 2003. Partnered Technologies Division The Partnered Technologies Division consists of development, licence, and supplyrelationships with Johnson & Johnson (Depuy Mitek, Ethicon Endo-Surgery,Gynecare and Guidant), Conmed and, most recently, Rhytec. Overall, the PartneredTechnologies business grew revenue by 11% to £19.7 million in 2004 (2003: £17.7million) with all partners experiencing growth. The majority of these revenues(77%) are denominated in US Dollars and, on a constant currency basis, ourrevenue growth was 22%. The end of 2004 saw the addition of a new partner, Rhytec Ltd, which iscommercialising Gyrus's Plasma Skin Resurfacing (PSR) technology in the cosmeticand dermatological surgery market. During 2004 our Cardiff plant receiveddevelopment fees of £0.6 million for its work on the development of Rhytec'sfirst product, which is scheduled for launch into the cosmetic surgery market in2005. The Partnered Technologies Division will work closely with Rhytec on thedevelopment and supply of products into this sector over the coming years. Installed Base of Generators Placed assets comprise generators placed on loan free of charge upon which,together with those that have been sold outright, the Group makes profitablerevenues from the sale of disposable surgical instruments. In 2004 the installedbase of generators in the Surgical and ENT markets in the US grew by 27% to4,681 units (2003: 3,686 units). The value of the associated revenues fromdisposable instruments increased by 36% to $37.9 million (2003 $27.9 million).During 2004, in addition to the placement of generators the Group substantiallyincreased the number of generators, particularly the SuperPulse model, whichwere sold into the market. Partly as a result of the increasing sales of generators, and partly throughcontinued manufacturing cost reductions, the cost of the Group's investment inplacing generators in the year, reduced by 48% to £1.3 million (2003: £2.5million). The net book value of placed assets at 31 December 2004 was £2.9 million (2003:£3.5 million). Gross Margin The Group's reported gross margin declined slightly to 59.1% in 2004 (2003:59.3%). However, the underlying gross margin, excluding the effect of currency,increased by 0.5% during the first year of our three year operationalimprovement programme. The Surgical Division improved its margin substantiallyto over 72% (2003:68%) and the Partnered Technologies Division improved to 42%(2003: 41%). Gross margin in the ENT Division declined to 58% (2003: 62%) as aresult of accounting for a full year of Gyrus Medical B.V. and Explorent GmbH,both of which had gross margins below 43%. The principal currency impact came about as a result of sales from our Cardiffplant to partners and Group companies in US Dollars, the effect of which was toreduce the Group gross margin by 0.5%. Sales and Marketing Gyrus's strategy is to focus on the surgeon and the operating room environment.Accordingly we are creating a global sales and marketing structure to promoteand deliver our innovative products to this market. During the year, we continued to invest in and develop our sales and marketingcapabilities. In the US, which represents the majority of the Group's sales, wehave built a sales force by identifying and supporting independent individuals,rather than distributor groups, who fit the Gyrus profile. As our business hasprogressed we have gradually increased the number of dedicated full time Gyrussales representatives, who remain commission based but sell exclusively Gyrusproducts. By the year-end 46% of the full line ENT sales force and 11% of theSurgical sales force were dedicated representatives. At the same time we haveincreased our investment in the formal training of our sales people and haveimproved the focus and training of our field management team. Internationally, we have commenced direct sales in Benelux, through GyrusMedical B.V., formerly known as Entermed, which we acquired in 2003, and weintend to open up direct sales and marketing positions in certain targetcountries over the next few years. Research & Development Research and development remains an important driver of our business and wecontinue to invest substantially in creating future growth opportunities for theGroup. In 2004 the Group increased its R&D spend 12% to £7.3 million (2003: £6.5million), representing 8.4% of sales (2003: 8.3%). Approximately £0.6 millionof this expense was incurred in the development of the cosmetic surgerytechnology on behalf of Rhytec Limited and was reimbursed in full as adevelopment fee (recognised as other operating income in the profit and lossaccount). This expenditure produced innovative products for launch by theindividual businesses such as the PK Diego for Sinus and Rhinology. However,substantial investment has been made into an important evolutionary developmentof our proprietary PK Technology, which is known as "PlasmaCision". This is astep forward for our technology platform and I am confident that, over the nextfew years, we will see it as core technology for many new PK products within theGyrus portfolio. The unique feature of PlasmaCision is that it successfully cutsand seals tissue at the same time. This capability will allow us to developinstruments that have utility across the spectrum of laparoscopic and opensurgical procedures. During March 2005 we will launch the firstPlasmaCision-derived instrument, the "Tonsil PlasmaKnife" into the Head & Neckmarket and, shortly thereafter, the "PlasmaSpatula" into the laparascopicGynaecology sector. In the longer term we believe that this technology will havegreat utility in General Surgery; the market with the largest potential in whichwe operate. At the end of 2004 we announced the formation of Rhytec Limited, in which theGroup has a minority 19.7% equity stake. Rhytec has raised private equitycapital to pursue the acquisition, development and commercialisation of Gyrus'sPlasma Skin Resurfacing (PSR) technology in the cosmetic and dermatologicalsurgery market. Gyrus assigned its PSR technology rights to Rhytec inconsideration for a small initial payment and royalties on future sales of PSRproducts. Over the next few years Rhytec and Gyrus' Partnered TechnologiesDivision will work closely on the development and supply of products into thissector. Goodwill In advance of the adoption of International Financial Reporting Standards forthe financial year to 31 December 2005 and beyond, the Group conducted a reviewof its accounting policies and the appropriateness of their implementation inthe context of "best practice". This review identified that the goodwillacquired on the acquisitions of the Surgical and ENT Divisions in 2000 and 2001respectively had not been accounted for in the currency of the transaction, ashas now become best practice under UK GAAP (FRED 24, now implemented as FRS 23)and mandatory under IAS. In order to correct this position the Group has amendedits accounting policy to account for goodwill in the originating currency and toretranslate the asset to sterling at each balance sheet date. As a result ofrecent periods of significant US dollar depreciation, it has been necessary torecord a prior year adjustment to reduce the net book value of goodwill byapproximately £12m at 1 January 2003 and by a further £9m at 31 December 2003with an equal reduction in reserves. Note 2 to the Financial Statements analysesthis adjustment in detail. The effect on 2004 is to reduce the amount charged to the profit and lossaccount in respect of goodwill amortisation by approximately £1.3 million to£5.5 million (adjusted 2003: £6.0 million). This has no effect upon thepreferred measure of profitability, Profit Before Tax and Amortisation ofgoodwill ("PBTA"), which has been consistently calculated through the company'shistory. The Board reviewed the carrying value of goodwill at 31 December 2004 andconfirmed that no provision for impairment was necessary. Exceptional Items During the year the Group recorded an exceptional gain of £0.37 million on thesale of surplus land at its ENT Division in Memphis USA. This was offset by anexceptional loss on the termination of an operation which was conductingresearch into a novel biological product with surgical applications. As a resulta licence fee of £0.4 million, paid by the Group to secure exclusive access tothe potential product, was written off as an exceptional item. The net effect ofthese exceptional items was a reduction in profits of £0.03 million. Adoption of International Accounting Standards From 1 January 2005 Gyrus is required to adopt EU-adopted InternationalFinancial Reporting Standards (IFRS) for future financial statements.Considerable work has been conducted during 2004 to prepare the Group for thisnew accounting regime. In order to help shareholders and potential investorsassess the effect of IFRS on the Group's results, at the end of thisannouncement there is a section entitled "Guidance on the effect ofInternational Financial Reporting Standards on Gyrus Group PLC" which reconcilesthe 2004 profit and loss account and balance sheet under UK GAAP to theirequivalents under IFRS as if adoption of IFRS had occurred at the beginning ofthe year. In summary, under IFRS the Group's basic earnings per share would havebeen 10.2p compared with 5.0p under UK GAAP. The principal difference arises onthe amortisation of goodwill, which is no longer allowed under IFRS. Management During the last 18 months we have restructured both the Board and operatingmanagement in order to deliver the future growth of the business. At Grouplevel, the Operating Board now comprises the Executive Chairman and the ChiefOperating and Financial Officers, who are Head Office-based, together with theheads of the Surgical and ENT Divisions and the US and International salesorganisations respectively. This group is responsible for the creation andimplementation of the Group's strategy. The Gyrus Group Board, which comprisespredominantly non-executive directors, is responsible for approving strategy andthe governance of the business. In August 2004, Mark Goble became a non-executive director of Gyrus Group inadvance of the creation of Rhytec Limited. He continues to provide the Groupwith advice on clinical development strategy under a consultancy agreement. Inhis place the Board has invited Roy Davis, Chief Operating Officer, to become anexecutive director of Gyrus commencing on 1 April 2005. The Board has invited me to extend my tenure as Executive Chairman byapproximately 2 years to the AGM in 2007. This is designed to ensure managementstability during a period of important growth for the Group, whilst allowing theNominations Committee of the Board to undertake an orderly plan for mysuccession. A resolution to approve this contract extension will be consideredat the forthcoming Annual General Meeting on 25 April. Outlook The strong trading of 2004 has continued into 2005. With the launches of ourfirst PlasmaCision-derived products into the ENT and Surgical markets to befollowed by further new products in the next twelve to eighteen months, weremain confident in our ability to achieve our targeted high-teens underlyingrevenue growth. We continue to pursue our growth strategy, both organically andby acquisition, in order to expand our product portfolio and build our presencein the world market for surgical devices. Brian Steer Executive Chairman Consolidated Profit and Loss Account Year ended 31 December Year ended 2003 31 December as restated 2004 - note 2 Note £'000 £'000 £'000 £'000Turnover 3 86,930 78,132 Cost of sales (35,551) (31,795) _____ _____Gross profit 51,379 46,337 Other operating income 641 - Selling and distribution expenses (23,089) (22,001)Research and development expenses (7,262) (6,467)General and administrative expenses - before goodwill amortisation (10,622) (8,440) - goodwill amortisation (5,505) (5,965)Total general and administrative expenses (16,127) (14,405) _____ _____Total operating expenses (46,478) (42,873)Operating profit 5,542 3,464 Exceptional itemsProfit on sale of land 4 373 -Loss on termination of operation 4 (400) - _____ _____ (27) - _____ _____Profit on ordinary activities before interest 5,515 3,464and taxation Interest receivable 170 64Interest payable and similar charges (988) (1,398) _____ _____Profit on ordinary activities before taxation 4,697 2,130Taxation (charge)/credit 5 (485) 4,544 _____ _____Profit on ordinary activities after taxation 4,212 6,674 _____ _____ Earnings per ordinary share 6Basic 5.0p 8.0pDiluted 5.0p 8.0pAdjusted basic, excluding goodwill 11.5p 9.6pamortisation, deferred taxation and exceptionalitems _____ _____ £'000 £'000Profit before tax and goodwill amortisation 10,202 8,095 _____ _____ Consolidated Statement of Total Recognised Gains and Losses Year ended 31 December Year ended 2003 31 December as restated 2004 - note 2 £'000 £'000Profit on ordinary activities after taxation 4,212 6,674Currency translation differences arising on foreign currency net (8,561) (13,175)investmentsShare related awards - 9 ____ _____Total recognised gains and losses relating to the year (4,349) (6,492)Prior year adjustment (21,421) _____Total recognised gains and losses since last annual report (25,770) _____ Consolidated Balance Sheet As at 31 December As at as restated 31 December - note 2 2004 2003 Note £'000 £'000Fixed assetsIntangible assets 85,365 97,550Tangible assets 10,396 12,097Investments - - _____ _____ 95,761 109,647 Current assetsStocks 13,434 16,814 _____ _____Debtors - due within one year 16,314 14,243Deferred tax asset 6,082 6,160 _____ _____Debtors 22,396 20,403Cash at bank and in hand 7,263 5,392 _____ _____ 43,093 42,609 Creditors: Amounts falling due within one year (21,002) (11,221) _____ _____ Net current assets/(liabilities) 22,091 31,388 _____ _____ Total assets less current liabilities 117,852 141,035Creditors: Amounts falling due after more than one year (134) (19,448) _____ _____Net assets 117,718 121,587 _____ _____ Consolidated Balance Sheet continued As at 31 December As at 2003 31 December as restated 2004 Note - 2 Note £'000 £'000Capital and reservesShare capital 7 2,160 2,156Share premium account 7 152,447 151,971Merger reserve 7 3,860 3,860Profit and loss account 7 (40,749) (36,400) _____ _____Equity shareholders' funds 117,718 121,587 _____ _____ Consolidated Cash Flow Statement Year ended Year ended 31 December 31 December 2004 2003 Note £'000 £'000Net cash inflow from operating activities 8 16,306 12,959Returns on investment and servicing of finance 10 (616) (1,188)Taxation 10 (185) (288)Capital expenditure 10 (2,240) (4,260)Acquisitions 10 - (4,125) _____ _____Cash inflow 13,265 3,098Financing 10 (10,013) (1,667) _____ _____Increase in cash in the year 9 3,252 1,431 _____ _____ Reconciliation of Net Cash Flow to Movement in Net Debt Year ended Year ended 31 December 31 December 2004 2003 Note £'000 £'000Increase in cash in the year 9 3,252 1,431Cash outflow from decrease in debt and lease financing 9 10,493 1,361 _____ _____Changes in net debt resulting from cash flows 9 13,745 2,792Inception of new finance leases 9 - (160)Translation difference 9 (123) (179) _____ _____Changes in net debt 13,622 2,453Net debt at beginning of year 9 (15,471) (17,924) _____ _____Net debt at end of year 9 (1,849) (15,471) _____ _____ Notes to the Financial Information 1. Basis of preparation The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2003 or 2004. The financialinformation for 2003 is derived from the statutory accounts for 2003 which havebeen delivered to the registrar of companies. The financial information for 2004has been prepared under the same accounting policies as 2003, except in relationto the treatment of goodwill acquired in foreign currencies as disclosed in note2. The auditors have reported on the 2003 accounts; their report was unqualifiedand did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The financial information for 2004 presented by the directors in thisstatement is derived from the statutory accounts for 2004. The accounts havebeen audited and the audit report is unqualified and does not contain astatement under section 237 (2) or (3) of the Companies Act. The accounts willbe delivered to the registrar of companies following the company's annualgeneral meeting. 2. Prior Year Adjustment The accounts have been prepared on the same basis as the prior year except thatgoodwill arising on consolidation of foreign subsidiaries held in sterling hasbeen restated to local currency and translated to sterling at closing rate inaccordance with best practice under UK GAAP FRED 24 (now implemented as FRS 23).As a result of recent periods of US dollar depreciation, it has been necessaryto record a prior year adjustment to reduce the net book value of goodwill byapproximately £12 million at 1 January 2003 and by a further £9 million at 31December 2003 with an equal reduction in reserves. The effect on 2004 is toreduce the amount charged to the profit and loss account in respect of goodwillamortisation by approximately £1.3 million to £5.5 million (2003: adjusted £6.0million). Further depreciation in the US dollar during 2004 has increased theloss on foreign currency translation taken to reserves as a result of thischange in policy by approximately £5.9 million. There was no impact on theCompany only numbers as a result of the restatement. The effect of therestatement is as follows: Year ended Year ended 31 December 31 December 2003 2004 as restated £'000 £'000Goodwill amortisationAs previous policy (6,848) (6,682)Effect of retranslation of goodwill to local currency 1,343 717 _____ _____As restated (5,505) (5,965) _____ _____ Year ended Year ended 31 December 31 December 2003 2004 as restated £'000 £'000Profit on ordinary activities after taxationAs previous policy 2,869 5,957Effect of retranslation of goodwill to local currency 1,343 717 _____ _____As restated 4,212 6,674 _____ _____ Year ended Year ended 31 December 31 December 2003 2004 as restated £'000 £'000Net assetsAs previous policy 143,730 143,008Effect of retranslation of goodwill to local currency (26,012) (21,421) _____ _____As restated 117,718 121,587 _____ _____ Year ended Year ended 31 December 31 December 2003 2004 as restated £'000 £'000Loss on foreign currency translation taken to reservesAs previous policy (2,627) (2,860)Effect of retranslation of goodwill to local currency (5,934) (10,315) _____ _____As restated (8,561) (13,175) _____ _____Earnings per share (basic)As previous policy 3.4p 7.2pEffect of retranslation of goodwill to local currency 1.6p 0.8p _____ _____As restated 5.0p 8.0p _____ _____Earnings per share (diluted)As previous policy 3.4p 7.1pEffect of retranslation of goodwill to local currency 1.6p 0.9p _____ _____As restated 5.0p 8.0p _____ _____Earnings per share (excluding goodwill amortisation, deferred tax andexceptional items)As previous policy 11.5p 9.6pAs restated 11.5p 9.6p _____ _____ Earnings on which EPS is based are disclosed in note 6 of this financialinformation. 3. Segmental Information i) Geographic Year ended 31 December Year ended 2003 31 December as restated 2004 - note 2 £'000 £'000Turnover by destinationNorth America 58,427 56,048United Kingdom and rest of Europe 21,747 19,647Rest of World 6,756 2,437 _____ _____ 86,930 78,132 _____ _____Turnover by originNorth America 55,146 53,571United Kingdom and rest of Europe 29,976 24,561Rest of World 1,808 - _____ _____ 86,930 78,132 _____ _____Profit before interest and taxation by originNorth America 2,918 3,470United Kingdom and rest of Europe 2,566 (6)Rest of World 31 - _____ _____ 5,515 3,464 _____ _____ Year ended 31 December Year ended 2003 31 December as restated 2004 - note 2 £'000 £'000Operating net assetsNorth America 108,323 123,505United Kingdom and rest of Europe 18,238 17,008Rest of world 269 270 _____ _____ 126,830 140,783 _____ _____Finance leases (184) (308)Bank loans (8,928) (18,888) _____ _____Net assets 117,718 121,587 _____ _____ ii) Business Segment Partnered ENT Surgical Technologies TotalYear ended 31 December 2004 £'000 £'000 £'000 £'000Turnover 38,369 28,822 19,739 86,930Cost of sales (16,261) (7,795) (11,495) (35,551)Other operating income - - 641 641Sales and marketing (12,550) (10,539) - (23,089)Research and development (1,995) (1,184) (3,703) (6,882)General and administration before goodwill (5,171) (2,634) (2,698) (10,503)amortisationExceptional item: Profit on sale of land 373 - - 373 _____ _____ _____ _____Segment profit before goodwill amortisation 2,765 6,670 2,484 11,919Amortisation of goodwill (4,095) (1,127) (283) (5,505) _____ _____ _____ _____Segment (loss)/profit (1,330) 5,543 2,201 6,414Expenses not allocated- Central research and development (380)- Exceptional item: Loss on termination of (400)operation- General and administration (119) _____Profit before interest and taxation 5,515 _____ Partnered ENT Surgical Technologies TotalYear ended 31 December 2003 as restated - note 2 £'000 £'000 £'000 £'000Turnover 35,099 25,282 17,751 78,132Cost of sales (13,179) (8,141) (10,475) (31,795)Sales and marketing (13,368) (8,633) - (22,001)Research and development (1,910) (1,301) (2,928) (6,139)General and administration before goodwill (3,304) (1,412) (1,490) (6,206)amortisation _____ _____ _____ _____Segment profit before goodwill amortisation 3,338 5,795 2,858 11,991Amortisation of goodwill (4,386) (1,263) (316) (5,965) _____ _____ _____ _____Segment (loss)/profit (1,048) 4,532 2,542 6,026Expenses not allocated:- Central research and development (328)- General and administration (2,234) _____Profit before interest and taxation 3,464 _____ 4. Exceptional Items 2004 2003 £'000 £'000Profit on sale of land 373 -Loss on termination of operation (400) - _____ _____ (27) - _____ _____ During the year the Group decided to discontinue its operations in thebiotechnology sector resulting in a loss of £400,000 on the disposal of itsinvestment. The effect on the taxation charge for the year of the exceptional itemsrecognised below operating profit is disclosed in note 5 of this financialinformation. 5. Taxation (charge)/credit Analysis of (charge)/credit for the year Year ended Year ended 31 December 31 December 2004 2003 £'000 £'000Current taxUK corporation tax charge on profit for the year (286) -Adjustments in respect of previous periods - 130 _____ _____ (286) 130Foreign tax on profits for the year (359) (308)Adjustments in respect of previous periods - 88 _____ _____ (359) (220)Total current tax charge (645) (90)Deferred taxOrigination/reversal of timing differences 160 4,634 _____ _____Tax (charge)/credit on profit on ordinary activities (485) 4,544 _____ _____ Tax (charge)/credit as profit on ordinary activities classified as:- Trading (605) 4,544- Exceptional items 120 - _____ _____ (485) 4,544 _____ _____ Analysis of deferred taxation: Year ended 31 December 2004 £'000At 1 January 2004 6,160Credit to profit and loss account in the year 160Loss on foreign currency translation (238)Related Shares:
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