31st Aug 2006 07:02
Medical Solutions PLC31 August 2006 For further information, please contact: Medical Solutions plc Neil Johnston Tel: 0115 973 9010 www.medical-solutions.co.uk Bell Pottinger Corporate & Financial Geoff Callow/Chris Hamilton Tel: 0207 861 3232 Medical Solutions plc Interim results for the six months ended 30 June 2006 Medical Solutions plc (LSE: MLS), the provider of pathology and cytologyservices and products to the healthcare and pharmaceuticals sectors, announcesits unaudited interim results for the six months ended 30 June 2006. Financial Highlights • Turnover from continuing operations up 36% to £6.8 million (H1 2005: £5.0 million) • Achievement of maiden operating profits of £66,000 (H1 2005: operating loss of £1.0 million) • Cash generative during period; net cash of £2.7 million at 30 June 2006 (31 December 2005: £2.3 million) • Net profit for the period of £26,000 (H1 2005: net loss of £1.1 million) Operational Highlights • Advanced discussions in progress regarding the proposed sale of the Group's Dubai business • Liquid Based Cytology ("LBC") exclusive distribution agreement with Tripath Imaging, Inc. renewed until 31 December 2010 • LBC 45% target market share (England and Wales) now achieved; further contracts yet to be awarded • New products launched in UK Diagnostic Pathology and Drug Development Services divisions • Currently supporting key UK trials designed to evaluate automated cervical smear screening, a major potential growth market Board changes • Charles Green steps down as Chief Executive Officer with immediate effect; Neil Johnston appointed as Chief Executive Officer, Nick Ash appointed as Chief Financial Officer Sir Gareth Roberts, Chairman, said: "We have made an excellent start to the year and have achieved a profitable,cash generative position for the first time. Discussions regarding the proposedsale of the Dubai business have also been positive and we expect to be able tomake a further announcement on this subject in the near future. As part of a planned succession, Charles Green will be stepping down as ChiefExecutive Officer and Neil Johnston has been appointed as his successor, bothwith immediate effect. Dr Nick Ash, previously Group Financial Controller, hasbeen appointed to the Board of Directors as Chief Financial Officer. On behalfof the Board, I would like to express our thanks to Charles for all his effortsduring his time with Medical Solutions plc and wish him well in the future." Chairman's Statement Introduction During the first half of 2006, we have continued to focus on our key short termobjectives, namely profitability and cash generation. I am delighted to reportthat both objectives have been achieved for the six months ended 30 June 2006. Financial and Operational Review Financial Review Turnover for the six months ended 30 June 2006 increased by 36% to £6.8 millioncompared with £5.0 million in the first half of 2005. This is our thirdsuccessive period in which we have demonstrated strong revenue growth. Theincrease in turnover during the period has been driven primarily by growth inour Cytology division and in Dubai with revenues having increased by 90% and 55%respectively. Gross margins have improved from £1.9 million (39%) for the first six months of2005 to £2.8 million (41%) as a result of further improvements in the efficiencyof our operations during the period. Operating expenses (excluding exceptional restructuring costs and gains on salesof fixed assets) have decreased to £2.7 million for the six months ended 30 June2006 from £3.1 million during the same period in 2005. Operating expenses forthe period also include a charge of £0.1 million relating to a share optionbased compensation charge as required by IFRS 2 (H1 2005: £0.1 million). Thesesavings have been achieved through a combination of further efforts to improvethe efficiency of our operations and the ongoing effects of decisions takenduring 2005, such as the closure of the Harley Street facility. No taxationcharge has been recognised in the period (H1 2005: £nil) as the profits of theDubai operations are not subject to taxation locally and the Group has taxlosses available to offset profits in the UK. Net cash inflow from operating activities during the six months ended 30 June2006 was £0.8 million (H1 2005: cash outflow of £1.8 million). Capitalexpenditure of £0.2 million was incurred during the period (H1 2005: £0.2million) in connection with LBC machines and laboratory equipment in the UK andDubai and we have repaid borrowings (including minority interests) of £0.2million. The Group had a net cash balance of £2.7 million as at 30 June 2006 (31December 2005: £2.3 million). Operational Review Pathology Services UK Diagnostic Pathology ("UKDP") Overall sales in H1 2006 have been consistent with those achieved in H1 2005 at£1.3 million. This masks the underlying improvement in this area of ourbusiness. We have seen higher volumes of specialist testing through ourReference Laboratory during the period, which has offset 2005 revenues in theVirtual Microscopy area (£0.2 million), which we have since exited. We have continued to demonstrate improvements in the profitability of this partof our business. UKDP generated an operating profit of £337,000 during theperiod (a 26% return on sales) compared with £102,000 in H1 2005, the latterincluding a £387,000 one-off profit on the sale of certain intellectual propertyrights. During the second half of 2006 we are looking to develop this area of ourbusiness through investment in new specialist testing services in the cancerarea and an increase in the size of our UK business development team. Over the next few years, we see major opportunities to grow our UKDP businessthrough partnerships with the NHS. The recent review of NHS Pathology Servicesby Lord Carter of Coles was clear in envisaging the potential for significantbenefit from further involvement of the independent sector in the provision ofpathology services in England. Dubai Diagnostic Pathology Our business in Dubai has continued to perform strongly. Sales are up by 55% to£3.6 million from £2.3 million primarily due to the continued positive impact ofthe Labour Medical Testing programme being conducted by Specialised ClinicalLaboratory ("SCL") in conjunction with the UAE Government. Operating profitshave improved from £0.7 million in H1 2005 to £1.3 million in H1 2006. In March 2006, we announced that we had reached agreement with representativesof the Varkey Group and Welcare Hospital to settle the outstanding £2.5 millioncontingent deferred consideration, recognised as a provision in the consolidatedbalance sheet, relating to the acquisition of the Welcare Laboratory in 2003 andto recover the £0.9 million owed to Medical Solutions by Welcare Hospital. InMay 2006, we announced that we believed that this transaction would be completedas part of a sale of the whole of the Group's interests in Dubai. Drug Development Services ("DDS") Sales in our DDS business have been disappointing mainly as a result of areduced level of business from AstraZeneca compared with the same period in2005. We reduced our annual direct costs significantly during 2005 and ourannual cash investment during 2006 is expected to be around £0.6 to £0.7 millionbringing a cash breakeven result within reach. We have introduced a new service offering based on Circulating Tumour Cell("CTC") technology in May and announced our first contract with an undisclosedmajor pharmaceutical company. We are hopeful of further contracts in this area. On the basis of a relatively low ongoing investment in DDS and our belief thatthis customer base will be an important part of our growth as our businessdevelops, it is our current intention to retain this part of our business. Cytology The Cytology division has performed strongly during the six months ended 30 June2006. Sales have increased to £1.7 million from £0.9 million, a 90% increase.Operating profits have improved to £262,000 in H1 2006 from a small loss of£26,000 during H1 2005. During the period we have announced an agreement withthe Hereford and Telford Processing and Screening Laboratories Network. We havealso begun to supply two other regions in the Midlands area. As a result ofthese business gains, we have achieved our targeted LBC market share in Englandand Wales of 45%. We expect further contract wins in this part of our business. We have also signed a further extension to our exclusive LBC distributionagreement for the UK and Ireland with Tripath Imaging, Inc. ("Tripath"),extending the original agreement until 31 December 2010. In partnership with Tripath, we are currently supporting two UK based trialsdesigned to evaluate an automated approach to cervical screening. Thistechnology is already being used successfully in other European countries andhas the potential to revolutionise the efficiency of the current screeningprocess. This is of particular importance in the UK at present given the severepressures faced by laboratories in achieving adequate staffing levels resultingin lengthy turnaround times for results. We are particularly excited about thefuture of automated screening and are reviewing alternative business modelsthrough which we can maximise shareholder value. Update on planned sale of Dubai Diagnostic Pathology We previously announced our decision to exit from our business in Dubai in orderto focus on and invest in, our UK operation and maximise its potential. Since welast reported, we have continued discussions with a number of different partieswho have expressed interest in our Dubai operation. We are currently in advanceddiscussions with our preferred purchaser and expect to make a furtherannouncement on this subject in the near future. Board Changes With immediate effect, Mr Charles Green will step down as Chief ExecutiveOfficer. As part of the planned succession, Dr Neil Johnston has been appointedas Chief Executive Officer and Dr Nick Ash, who joined the Group during 2005 asGroup Financial Controller, will become Chief Financial Officer. Mr Green willremain with the Dubai business on a consultancy basis for an interim period. Prospects During the six months ended 30 June 2006, we have made further progress and haveachieved our immediate targets of profitability and cash generation. We are notcomplacent about the challenges that lie ahead but we look forward to the futurewith renewed optimism based upon the continued improvement in our financialperformance and the significant market opportunities which await. Sir Gareth RobertsChairman31 August 2006 Unaudited Consolidated Income StatementFor the six months ended 30 June 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000 Revenue 2 6,761 4,975 10,672Cost of sales (3,959) (3,026) (6,536) ---------------------------------Gross profit 2,802 1,949 4,136 Selling and distribution expenses (341) (458) (833) Administrative expenses:- normal (2,214) (2,380) (4,460)- share-based compensation (83) (124) (304)- restructuring costs - (287) (347)- aborted acquisition - - (64) Administrative expenses (2,297) (2,791) (5,175)Research and development (100) (109) (207)Gain on sale of fixed assets 2 383 383 ---------------------------------Operating profit/(loss) 66 (1,026) (1,696)Interest receivable 44 51 108Interest payable and similar charges (84) (148) (251) --------------------------------Profit/(loss) before tax 26 (1,123) (1,839)Taxation - - - --------------------------------Profit/(loss) for the period 26 (1,123) (1,839) ================================ Attributable to:Equity holders of the parent company 5 (1,141) (1,890)Minority interest 21 18 51 --------------------------------Profit/(loss) for the period 26 (1,123) (1,839) ================================ Basic profit/(loss) per ordinary share 3 0.002p (0.60)p (0.96)pDiluted profit/(loss) per ordinary share 3 0.002p (0.60)p (0.96)p ================================ The results are all generated from continuing operations. Unaudited Consolidated Statement of Changes in Shareholders' EquityAs at 30 June 2006 Attributable to equity holders of the Company Merger and Profit Share Share other Translation and loss Minority Total capital premium reserves reserve reserve interest Equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2005 1,960 27,912 4,608 (190) (22,317) - 11,973Currency translation adjustments - - - 13 86 1 100 -------------------------------------------------------------Net expense recognised directly to equity - - - 13 86 1 100Loss for the period - - - - (1,141) 18 (1,123) -------------------------------------------------------------Total recognised income/ (expense) for the period - - - - (1,141) 18 (1,123)Shares issued 2,044 4,170 - - - - 6,214Employee share optionscheme:- value of services provided - - - - 124 - 124 -------------------------------------------------------------Balance at 30 June 2005 4,004 32,082 4,608 (177) (23,248) 19 17,288 =============================================================Balance at 1 July 2005 4,004 32,082 4,608 (177) (23,248) 19 17,288Currency translation adjustments - - - 294 (86) - 208 -------------------------------------------------------------Net expense recognised directly to equity - - - 294 (86) - 208Loss for the period - - - - (749) 33 (716) -------------------------------------------------------------Total recognised expense for the period - - - - (749) 33 (716)Shares issued 71 202 - - - - 273Employee share optionscheme:- value of services provided - - - - 180 - 180 -------------------------------------------------------------Balance at 31 December 2005 4,075 32,284 4,608 117 (23,903) 52 17,233 =============================================================Balance at 1 January 2006 4,075 32,284 4,608 117 (23,903) 52 17,233Currency translation adjustments - - - (255) - (1) (256) -------------------------------------------------------------Net income recognised directly to equity - - - (255) - (1) (256)Profit for the period - - - - 5 21 26 -------------------------------------------------------------Total recognised income for the period - - - - 5 21 26Employee share optionscheme:- value of services provided - - - - 83 - 83Minority interest settled in cash - - - - - (52) (52) -------------------------------------------------------------Balance at 30 June 2006 4,075 32,284 4,608 (138) (23,815) 20 17,034 ============================================================= Unaudited Consolidated Balance SheetAs at 30 June 2006 As at As at As at 30 June 30 June 31 2006 2005 December 2005 £'000 £'000 £'000Non-current assetsGoodwill 14,641 14,348 14,808Other intangible assets 154 273 181Property, plant and equipment 1,983 2,484 2,041 ----------------------------- 16,778 17,105 17,030 -----------------------------Current assetsInventories 726 749 773Trade and other receivables 3,287 3,322 3,212Financial assets- cash and cash equivalents 2,688 2,737* 2,313 ---------------------------- 6,701 6,808 6,298Current liabilitiesTrade and other payables 3,429 3,349 3,058Financial liabilities- borrowings 240 319* 301Provisions 2,489 2,533 2,443 ----------------------------- 6,158 6,201 5,802 -----------------------------Net current assets 543 607 496 -----------------------------Total assets less current liabilities 17,321 17,712 17,526 -----------------------------Non-current liabilitiesFinancial liabilities- borrowings 287 424 293 -----------------------------Net assets 17,034 17,288 17,233 ============================= EquityIssued share capital 4,075 4,004 4,075Share premium 32,284 32,082 32,284Other reserves 4,470 4,431 4,725Profit and loss reserve (23,815) (23,248) (23,903) -------------------------------Total equity attributable to equity holders of the parent company 17,014 17,269 17,181Minority interest 20 19 52 -------------------------------Total equity 17,034 17,288 17,233 =============================== * in the Interim Report for the six months ended 30 June 2005, cash and cashequivalents were stated gross of an overdraft of £720,000 which was recognisedwithin Financial liabilities - borrowings. The Group's banking facility containsa right of set off across its UK bank accounts and therefore this overdraft hasbeen netted off the balance of cash and cash equivalents previously reported asat 30 June 2005 Unaudited Consolidated Cash Flow StatementFor the six months ended 30 June 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000Cash flows from operating activitiesCash generated from/(used in) operations 4 776 (1,694) (2,064)Interest paid (23) (35) (78)Tax paid - (29) - -----------------------------Net cash generated from/(used in) operating activities 753 (1,758) (2,142) ---------------------------- Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired - (450) (491)Purchases of property, plant and equipment (195) (155) (262)Purchases of intangible assets (11) (30) (30)Proceeds from sale of property, plant and equipment 2 21 29Proceeds from sale of intangible assets - 225 405Interest received 44 51 108 -----------------------------Net cash used in investing activities (160) (338) (241) -----------------------------Cash flows from financing activitiesProceeds from the issue of share capital - 6,365 6,365Repayment of borrowings (143) (2,121) (2,937)Payment of accrued minority interest (52) - -Payment of transaction costs - (695) (695)Finance lease principal repayments (12) (37) (48) -----------------------------Net cash (used in)/generated from financing activities (207) 3,512 2,685 ----------------------------- Net increase in cash and cash equivalents 386 1,416 302Cash and cash equivalents at beginning of period 2,313 1,312 1,990*Exchange (losses)/gains on cash and cash equivalents (11) 9 21 ------------------------------Cash and cash equivalents at end of period 2,688 2,737 2,313 ============================== *including a £2 million restricted cash deposit Notes to the Consolidated Interim Financial StatementsFor the six months ended 30 June 2006 1. Basis of preparation These 30 June 2006 consolidated interim financial statements do not constitutestatutory financial statements within the meaning of section 240 of theCompanies Act 1985. Our auditor, PricewaterhouseCoopers LLP, has issued anunqualified opinion on the Group's IFRS financial statements for the year ended31 December 2005 and has not included a statement under section 237(2) or (3) ofthe Companies Act 1985. These consolidated interim financial statements have been prepared in accordancewith IAS 34 Interim Financial Reporting. They have been prepared in accordancewith IFRS and the accounting policies applied are consistent with those appliedin the preparation of the Group's consolidated financial statements for the yearended 31 December 2005, except for the adoption of the following amendmentswhich are mandatory for annual periods beginning on or after 1 January 2006: •IAS 39 Financial Instruments: Recognition and Measurement - amendment for financial guarantee contracts. This has amended the scope of IAS 39 to include financial guarantee contracts issued. The amendment addresses the treatment of financial guarantee contracts by the issuer. Under IAS 39, as amended, financial guarantee contracts are recognised initially at fair value and generally remeasured at the higher of the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue; •IAS 39 - amendment for hedges of forecast intragroup transactions. This has amended IAS 39 to permit foreign currency risk of a highly probable intragroup transaction to qualify as a hedged item in a cash flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity entering into the transaction and that the foreign currency risk will affect the financial statements; and •IAS 39 - amendment for the fair value option. This has restricted the use of the option to designate any financial asset or any financial liability to be measured at fair value through profit and loss. The adoption of these amendments did not affect the Group results of operationsor financial position. 2. Segmental analysis Primary reporting format - operating divisions At 30 June 2006, the Group is organised on an international basis into two mainoperating divisions: • Pathology Services • Cytology Pathology Services comprises the business units of UK Diagnostic Pathology,Dubai Diagnostic Pathology and Drug Development Services. During the period there were immaterial sales between business segments (sixmonths ended 30 June 2005: immaterial; year ended 31 December 2005: immaterial)and, where these do occur, are at arm's length pricing. Unallocated costs represent corporate expenses and common operating costs.Segment assets include goodwill, plant and equipment, stocks and debtors.Unallocated assets include property, central debtors and prepayments andoperating cash. Segment liabilities comprise operating liabilities and exclude borrowings. Capital expenditure represents additions to both tangible fixed assets,comprising additions to plant and equipment, and intangible fixed assets,comprising capitalised development expenditure. Six months ended 30 June 2006 Pathology Services UK Dubai Drug Diagnostic Diagnostic Development Pathology Pathology Services Cytology Unallocated Group £'000 £'000 £'000 £'000 £'000 £'000 Revenue 1,289 3,604 156 1,712 - 6,761 ----------------------------------------------------------Segment result 337 1,262 (293) 262 (1,502) 66 ----------------------------------------------------------Interest expense (84) (84)Interest income 44 44(Loss)/profit before tax 26Taxation -(Loss)/profit for the year from continuing operations 26Profit attributable to minority interests (21) (21) ----------------------------------------------------------Net profit attributable to equity shareholders 5 ---------------------------------------------------------- Segment assets 1,114 16,707 475 1,750 - 20,046Unallocated assets- property, plant and equipment 658 658- debtors and prepayments 514 514- cash and cash equivalents 2,261 2,261 ---------------------------------------------------------Total assets 1,114 16,707 475 1,750 3,433 23,479 --------------------------------------------------------- Segment liabilities 155 3,160 385 809 - 4,509Unallocated liabilities- corporate borrowings 347 347- creditors and accruals 1,589 1,589 ---------------------------------------------------------Total liabilities 155 3,160 385 809 1,936 6,445 --------------------------------------------------------- Other segment itemsCapital expenditure- tangible fixed assets 38 54 88 93 10 283- intangible fixed assets - - 11 - - 11Depreciation 32 25 48 142 85 332Amortisation of intangible assets 26 - 11 - - 37Other non-cash expenses- share option scheme - - - - 83 83 ========================================================== Six months ended 30 June 2005 Pathology Services UK Dubai Drug Diagnostic Diagnostic Development Pathology Pathology Services Cytology Unallocated Group £'000 £'000 £'000 £'000 £'000 £'000 Revenue 1,258 2,318 498 901 - 4,975 -----------------------------------------------------------Segment result 102* 667 (245) (26) (1,524) (1,026) -----------------------------------------------------------Interest expense (148) (148)Interest income 51 51Loss before tax (1,123)Taxation -Loss for the year from continuing operations (1,123)Profit attributable to minority interests (18) (18) ------------------------------------------------------------Net loss attributable to equity shareholders (1,141) ------------------------------------------------------------ Segment assets 2,021 15,395 1,181 1,497 - 20,094Unallocated assets- property, plant and equipment 820 820- debtors and prepayments 427 427- cash and cash equivalents 2,572 2,572 ----------------------------------------------------------Total assets 2,021 15,395 1,181 1,497 3,819 23,913 ---------------------------------------------------------- Segment liabilities 679 2,648 388 446 - 4,161Unallocated liabilities- corporate borrowings 628 628- creditors and accruals 1,836 1,836 ----------------------------------------------------------Total liabilities 679 2,648 388 446 2,464 6,625 ---------------------------------------------------------- Other segment itemsCapital expenditure- tangible fixed assets 1 2 1 95 42 141- intangible fixed assets 3 - 27 - - 30Acquisition of subsidiaries - 3,452 - - - 3,452Depreciation 56 25 40 122 96 339Amortisation of intangible assets 32 - - - - 32Other non-cash expenses- share option scheme - - - - 124 124 ============================================================ * Includes one-off profit of £387,000 from sale of intellectual property assetsto Hamamatsu Photonics KK Year ended 31 December 2005 Pathology Services UK Dubai Drug Diagnostic Diagnostic Development Pathology Pathology Services Cytology Unallocated Group £'000 £'000 £'000 £'000 £'000 £'000 Revenue 2,415 5,017 773 2,467 - 10,672 ----------------------------------------------------------Segment result 121* 1,617 (740) 183 (2,877) (1,696) ----------------------------------------------------------Interest expense (251) (251)Interest income 108 108Loss before tax (1,839)Taxation -Loss for the year from continuing operations (1,839)Profit attributable to minority interests (51) (51) ----------------------------------------------------------Net loss attributable to equity shareholders (1,890) ---------------------------------------------------------- Segment assets 1,392 16,399 719 1,678 - 20,188Unallocated assets- property, plant and equipment 737 737- debtors and prepayments 322 322- cash and cash equivalents 2,081 2,081 ----------------------------------------------------------Total assets 1,392 16,399 719 1,678 3,140 23,328 ---------------------------------------------------------- Segment liabilities 240 2,839 420 603 - 4,102Unallocated liabilities- corporate borrowings 490 490- creditors and accruals 1,503 1,503 ----------------------------------------------------------Total liabilities 240 2,839 420 603 1,993 6,095 ---------------------------------------------------------- Other segment itemsCapital expenditure- tangible fixed assets 2 3 2 169 86 262- intangible fixed assets 3 - 27 - - 30Acquisition of subsidiaries - 3,761 - - - 3,761Depreciation 115 54 80 254 197 700Amortisation of intangible assets 58 - 3 - - 61Impairment of development costs 64 - - - - 64Other non-cash expenses- share option scheme - - - - 304 304 ========================================================== * Includes one-off profit of £387,000 from sale of intellectual property assetsto Hamamatsu Photonics KK Secondary reporting format - geographical segments The Group manages its business segments on a global basis. The operations arebased in two main geographical regions. The UK is the home country of the ParentCompany and the main operations in the principal territories are as follows: Region ActivityUK Diagnostic pathology, cytology and drug development services Middle East Diagnostic pathology and cytology The Middle East segment operations are based in Dubai, UAE. The sales analysis in the table below is based on the location of the customer,which is not materially different from the location where the order is receivedand where the assets are located. All revenues arose from continuing operations. Six months ended 30 June 2006 and 30 June 2005 Revenue Segment Capital assets expenditure Six Six Six Six Six Six months months months months months months ended ended ended ended ended ended 30 June 30 June 30 June 30 June 30 June 30 June 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 UK 3,133 2,632 6,772 8,518 240 169Middle East 3,604 2,318 16,707 15,395 54 2European (non-UK) 22 20 - - - -North America 2 5 - - - - --------------------------------------------------------Total 6,761 4,975 23,479 23,913 294 171 ======================================================== Year ended 31 December 2005 Revenue Segment Capital assets expenditure Year Year Year ended ended ended 31 31 31 December December December 2005 2005 2005 £'000 £'000 £'000 UK 5,607 6,929 289Middle East 5,017 16,399 3European (non-UK) 40 - -North America 8 - - ------------------------------------Total 10,672 23,328 292 ==================================== Analysis of revenue by category The Group's revenue from continuing operations is analysed as follows: Six Six Year months months ended ended ended 31 30 June 30 June December 2006 2005 2005 £'000 £'000 £'000 Revenue from the provision of services 4,881 3,830 7,796Revenue from the sales of goods 1,664 1,072 2,617Revenue from operating lease rentals 216 73 259 -----------------------------------Total 6,761 4,975 10,672 =================================== 3. Earnings per share Basic earnings/(loss) per share amounts are calculated by dividing net profit/(loss) for the period attributable to ordinary equity shareholders of the ParentCompany by the weighted average number of shares outstanding during the period.Diluted earnings/(loss) per share amounts are calculated by dividing the netprofit/(loss) attributable to ordinary equity shareholders by the weightedaverage number of ordinary shares outstanding during the period adjusted for theeffects of dilutive options. The calculation of basic and diluted earnings per share for the six months ended30 June 2006 is based on the profit attributable to ordinary shareholders of£5,000 (six months ended 30 June 2005: loss of £1,141,000; year ended 31December 2005: loss of £1,890,000) and on the weighted average number ofordinary shares in issue of 203,765,232 (30 June 2005: 190,205,933; 31 December2005: 196,780,731). For the six months ended 30 June 2006 the weighted average number of shares usedin the calculation of diluted earnings per share is 4,875,000 ordinary shares. IAS 33 Earnings Per Share requires presentation of diluted earnings per sharewhen a company could be called upon to issue shares that would decrease netprofit or increase net loss per share. Net loss per share in a loss-makingcompany would only be increased by the exercise of share options which wereout-of-money. Assuming that option holders will not exercise out-of-moneyoptions, no adjustment has been made to the diluted loss per share forout-of-money share options for the six months ended 30 June 2005 and the yearended 31 December 2005. No adjustment been made to the diluted earnings pershare for out-of-money options for the six months ended 30 June 2006. 4. Cash generated from/(used in) operations Six months Six months Year ended ended ended 30 June 30 June 31 2006 2005 December 2005 £'000 £'000 £'000 Profit/(loss) for the period from operations 26 (1,123) (1,839) Depreciation of tangible fixed assets 332 339 700Recognition of grant income (37) - (67)Impairment of tangible fixed assets - - 140Amortisation of capitalised development costs 37 32 61Impairment of capitalised development costs - - 64Profit on sale of property, plant and equipment (2) (383) (383)Interest payable 84 148 251Interest receivable (44) (51) (108)Share-based payments - value of employee service 83 124 304Decrease in inventories 42 195 175(Increase)/decrease in trade and other (164) (709) (684)receivablesIncrease/(decrease) in creditors 419 (266) (678) ----------------------------Cash generated from/(used in) operations 776 (1,694) (2,064) ============================ All of the cash generated in the six months ended 30 June 2006 was fromcontinuing operations, as was that used in the six months ended 30 June 2005 andthe year ended 31 December 2005. 5. Interim results Copies of the interim results for the six months ended 30 June 2006 will be sentto all shareholders and will be posted on the Company's website,www.medical-solutions.co.uk. In addition, copies may be obtained from theCompany Secretary at 1 Orchard Place, Nottingham Business Park, Nottingham NG86PX. Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises, the consolidated incomestatement, the consolidated statement of changes in shareholders' equity, theconsolidated balance sheet as at 30 June 2006 and the consolidated cash flowstatement for the six months then ended and related notes. We have read theother information contained in the Interim Report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the Directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with IAS 34 Interimfinancial reporting. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the UK. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for theCompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PricewaterhouseCoopers LLPChartered AccountantsEast Midlands31 August 2006 Notes: (a) The maintenance and integrity of the Medical Solutions plc website is theresponsibility of the Directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the website. (b) Legislation in the UK governing the preparation and dissemination offinancial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SBS.L