5th Sep 2006 07:01
Advanced Medical Solutions Grp PLC05 September 2006 For immediate release 5 September 2006 Advanced Medical Solutions Group plc ("AMS" or "the Company") Interim results for the six months ended 30 June 2006 Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the globalwoundcare technology company, is pleased to announce its interim results for thesix months ended 30 June 2006. Highlights for the year to date • Group turnover up 11% to £6.5 million (2005: £5.9 million), with underlying growth up 28%• Gross margin improved to 40% from 37%• Pre-tax losses reduced 61% to £0.2 million• EBITDA increased 65% to £0.3 million• Positive total cash flow resulting in cash of £3.6 million at half-year (2005: £2.9 million)• Continued progress on key organic growth drivers: - Ionic silver alginate dressings approved for sale in Europe - LiquiBand(R) approval progressing in US - Product approvals on track in Far East - NHS business building steadily Commenting on the half year results, Dr. Geoffrey Vernon, Chairman of AMS, said: "Our performance in the first half of 2006 builds on the progress made in 2005. "This is an exciting time for AMS with growth momentum set to accelerate. Ourorganic business is progressing well due to the dynamic silver market and withour NHS direct penetration gaining traction. We also see some major step changeopportunities. The recent recommendation by the FDA Advisory Panel tore-classify topical tissue adhesives is of enormous significance for AMS as itaccelerates approval and introduction of our wound closure product portfoliointo the US market. "Our positive cash flow and cash position also allows us to now considerself-funding bolt-on acquisitions to leverage the Company's technology,manufacturing and distribution base." -ENDS- For further information, please contact: Advanced Medical Solutions Group plc Tel : +44 (0) 1606 545508Don Evans, Chief ExecutiveMary Tavener, Finance Directorwww.admedsol.com Buchanan Communications Tel: +44 (0) 20 7466 5000Mark Court, Mary-Jane Johnson Notes to Editors: Advanced Medical Solutions is a leading company in the development andmanufacture of products for the $13 billion global woundcare market. Founded in 1991 and currently quoted on AIM, Advanced Medical Solutions isfocused on the design, development and manufacture of innovative andtechnologically advanced products for woundcare and other medical applications. In-house natural and synthetic polymer technology is used to provide advancedwound dressings based on the moist healing principle. AMS's resources ensure aunique position as a vertically integrated 'one stop shop' to provide allcategories of moist wound healing products. The Company has the capability tomove from product design and development through to production and deliveryready for distribution into customer markets. The acquisition of MedLogic in 2002 has brought AMS products and technology incyanoacrylate based tissue adhesives that offer benefits over sutures andstaples for closing wounds sold direct to hospitals or through distributors. AMS's technology and products currently serve the majority of the key globalmarkets and strategic partners. Chairman's Statement Overview I am pleased to report that AMS further strengthened its financial position andcontinued to progress key future growth opportunities during the period.Turnover grew 11% with gross margins improved to 40%. Pre-tax losses reduced61% to £0.2 million with EBITDA positive at £0.3 million. The Group continuedto generate cash and has adequate funds to meet ongoing needs and to accelerategrowth. Operating Review The Group's core focus remains the development and manufacture of advancedwoundcare and wound closure products for sale in hospitals and long-term carefacilities. Advanced woundcare products are marketed and distributed into the $2.6 billionglobal market through either major woundcare companies under their leadingbrands or through private label distributors. Products based upon cyanoacrylatetechnology address the emerging tissue adhesives segment of the $5 billion woundclosure market. This market, valued at more than $100 million, is currentlyaccessed through a direct sales force in the UK and through distributionpartners in Europe. The direct UK sales force also carries a full range ofstandard advanced woundcare products for sale into the NHS hospital andcommunity care markets under the ActivHeal(R) brand. Independent technical and clinical evaluations have shown that the ActivHeal(R)generic woundcare range offers equivalent performance to branded products but ata significantly reduced cost thereby delivering real and immediate savings tothe NHS. These potential savings are estimated to be of the order of £25million per year based on the current relevant spend of £60 million. Progress continues to be made in reducing the Group's dependence on theperformance of its major branded partners for delivering revenue growth andprofit. The Group's strategy of broadening its routes to market bycomplementing these relationships with the provision of private label standardproducts to major distributors, and by the expansion of its direct salespresence in the UK home market, continues to be successful. Advanced Woundcare Advanced woundcare sales of £5.2 million were up 9% on the prior half year.Although this growth rate was in line with the overall advanced woundcare marketit masks a much stronger underlying performance as an element of partnerbusiness reported in 2005 will not re-occur in 2006. This relates to the lossof non-strategic business due to a downgrade in specification which no longermade the product commercially viable for AMS. Taking these sales into account,the underlying growth was 30% driven primarily by the continued success of thesilver alginate business. The Group further strengthened its position in the dynamic silver market withthe European approval of a range of calcium alginate woundcare dressingscontaining ionic silver technology. These products have already been approvedby the Food and Drug Administration (FDA) for sale in the US and were launchedby a number of AMS' US partners during 2005. This has been instrumental in AMS'strengthening its position in the silver woundcare dressings market followingthe introduction of its initial fibre-based silver alginate technology into theUS in 2004 and Europe in 2005 under an exclusive, global agreement with aleading brand. Silver is a broad spectrum anti-microbial that helps to prevent infections suchas MRSA. In combination with alginate, a biopolymer derived from seaweed, AMScan provide products ideally suited to the treatment of a wide variety ofchronic wounds. The ionic silver technology allows AMS to provide selected partners an entryinto the expanding silver woundcare market, which is currently estimated at $100million worldwide and growing in excess of 20% per year. In parallel with theEuropean approval process, AMS has been working with a number of key partners onproduct launch plans. Initial market introductions are now expected to followduring the second half of 2006. Steady progress continues to be made with the Company's direct ActivHeal(R)offering to the NHS. Fourteen NHS Hospital and Primary Care Trusts acrossEngland and Scotland have now adopted the ActivHeal(R) range of advancedwoundcare products allowing them to achieve substantial cost savings at a timeof severe funding pressures without compromising patient care. Many morecentres are currently evaluating the product offering. The addition of the Oxford Radcliffe Hospital NHS Trust at the end of March is amajor step forward for the business. This Trust, which comprises four hospitals- the John Radcliffe and Churchill Hospitals, Headington, the RadcliffeInfirmary, Oxford, and the Horton Hospital in Banbury, is now using theActivHeal(R) range as its first choice dressings. Significant changes to theTrust's formulae for woundcare dressings were introduced under the direction ofthe Chief Nurse working in conjunction with Pharmacy to implement the ActivHeal(R) range. The move to ten Strategic Health Authorities within the NHS should be a positivedevelopment for the business as this should result in a more streamlined,centralised approach being adopted for product evaluation and selection. Underthe present system each Trust independently evaluates the product range beingoffered, which delays the process of introducing generic substitutes orreplacement new products. We remain confident that our strategy of delivering both innovation to the NHSthrough our R&D activities with major branded companies, and offering real costsavings through the ActivHeal(R) range, will be successful, enabling us tocapture a significant share of the £100 million UK advanced woundcare market. The Group continues to fund the development of new differentiated products forlicensing to its branded partners for sale worldwide. Good progress continues to be made in accessing the Far East market with thefirst product launch into the $300 million Japanese advanced woundcare marketexpected by the end of 2006. Wound Closure The wound closure business grew 19% to £1.3 million in the period as the Groupmaintained its strong market leadership position in the UK Accident & Emergencyarena and strengthened its European partner business. The LiquiBand(R) tissue adhesives product portfolio has been broadened by theaddition of a 0.25g mini version for closure of small topical skin wounds.Based on cyanoacrylate medical adhesive technology, the LiquiBand(R) range nowcovers products for closure of small cuts and trauma wounds particularly to theface and scalp, through to large surgical incisions such as caesarean sectionsand hip replacements. These products are approved and on sale throughout Europefor use in Accident and Emergency (A&E) and in Operating Rooms. A number of NHSAmbulance Trusts in the UK have also now adopted LiquiBand(R) to close traumawounds at the scene of injury, thus potentially reducing the number of A&Eadmissions. The Intellectual Property protection around these products has been strengthenedby the granting of a European patent covering the Laparoscopic wound closuredevice. LiquiBand Laparoscopic(TM) offers real clinical and patient benefits ininfection control and cosmetic outcomes that supports the growing trend toconduct surgical procedures by key hole surgery. The patent covers amulti-tipped device used to initially close and seal the wound and then used toapply a secondary liquid bandage. The liquid bandage is used to protect thewound from bacteria, dirt and moisture during healing without the need forsecondary dressings. A patent covering this device has previously been grantedin the US. Approval of the LiquiBand(R) product range continues on track in the US and FarEast for 2007, areas which we believe will be of significant value creation inthe future. The US tissue adhesives market is currently estimated to be around$70 million. The Group is anticipating entry into this market in 2008. Development activity to extend the cyanoacrylate adhesive technology into newareas has resulted in an exciting strategic partnership with Kimberly-Clark fora novel surgical skin sealant to help control the risk of skin floracontamination throughout a surgical procedure, a key factor in the developmentof surgical site infections. These occur in 2-5% of all surgical procedures andcan lead to serious complications and increased morbidity to the patient withsignificant incremental costs to health care providers. It is generally acceptedthat contamination by the patient's endogenous skin flora is a key factor in thedevelopment of surgical site infection and despite standard preventative steps,these remain an area of concern. AMS has developed an innovative film-forming solution that bonds to the skinsealing off the spaces where bacteria can grow. Based upon patentedcyanoacrylate technology, the product immobilises endogenous pathogens therebyreducing the risk of skin flora contamination. A novel applicator has beendeveloped that allows the solution to be effectively applied even on irregularand contoured areas of the body, such as shoulders and knees, which aregenerally difficult to drape. AMS has entered into an exclusive global agreement with Kimberly-Clark HealthCare for the marketing and distribution of the product under the Kimberly-Clark*InteguSeal Microbial Sealant brand. The product has now been launched intoEurope, cleared for sale in other geographies and is currently under review formarket clearance in the United States. Financial Review Group sales increased 11% to £6.5 million (2005: £5.9 million) for the sixmonths ending 30 June 2006. Due to consolidation in the healthcare industry anda change in direction in one of its partners, the Group experienced a loss ofbusiness for one of its non-core products in its advanced woundcare sector in2006. This business will not be recurring. Adjusting for this, the Group'sunderlying growth was 28%. The advanced woundcare sector grew 9% to £5.2 million (2005: £4.8 million) andon an underlying basis at 30%. The wound closure business grew at 19% to £1.3million (2005: £1.1 million). Turnover continued to grow in the UK through both branded partners and directlyto the NHS with sales increasing by 27% to £2.0 million (2005: £1.5 million).Sales to the US also grew strongly to £1.5 million, reflecting the continuedsuccess of silver alginate, an increase of 46% over the prior year (2005: £1.0million). Sales into Europe through branded partners declined by 13% to £2.6million but on an underlying basis increased by 17%. We are anticipatingcontinued growth with our ongoing partners. The gross margin for the Group was 40% which was 3 percentage points better thanthe previous year. This margin improvement results from the Group selling highervalue products and from continuing improvements in manufacturing efficiency. Net operating expenses increased by £0.2 million to £2.8 million compared withlast year. Most of this increase was incurred in sales and marketing. Otheroperating income includes payments received from partners to cover clinicaltrials and other milestone payments. The Group reported an operating loss beforetax for the half year of £0.2 million, an improvement of £0.2 million comparedwith the corresponding period in the prior year whilst EBITDA was £0.3 million(2005: £0.1 million). The overall loss for the Group reduced to £0.2 million(2005: £0.4 million). Net working capital, excluding cash, increased by £0.1 million to £2.8 million.Stock remained at a similar level at £1.8 million while debtors reduced to £2.8million (2005: £3.2 million) mainly as a result of an unexpected early paymentby one of our customers which reduced trade debtors to £2.1 million (2005: £2.3million) and trade debtor days to 54 (2005: 58 days). Creditors reduced to £1.9million (2005: £2.5 million). The Group generated a net cash inflow from operating activities of £0.4 millioncompared with an outflow in the prior half year of £0.1 million. Capitalexpenditure was at a similar level to the prior year at £0.1 million but isanticipated to increase in the second half of the year. The Group ended the sixmonths with £3.6 million in cash (2005: £2.9 million) and net funds of £3.3million (2005: £2.5 million). Outlook The outlook for the Group remains positive with trading continuing in line withfull year market expectations. A strong financial platform is being established to support a number ofsignificant organic growth opportunities covering products, partners andterritories. US approval of LiquiBand(R) allowing entry into this major market,anticipated in 2008, is expected to be a major driver of future growth. The Group's cash position now allows it to consider self-funding acquisitionsthat fit its business and technology strategy. Dr. Geoffrey N. VernonChairman CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December Note 2006 2005 2005 £'000 £'000 £'000 Turnover 2 6,478 5,857 12,892Cost of sales (3,875) (3,675) (7,753) Gross profit 2,603 2,182 5,139Distribution costs (53) (76) (123)Administration costs (2,969) (2,632) (5,604)Other operating income 220 78 546 Operating loss (199) (448) (42)Interest receivable and similar income 55 57 101Interest payable and similar charges (14) (16) (32) (Loss)/profit on ordinary activities before taxation (158) (407) 27Taxation - - 249 (Loss sustained)/profit retained for the period (158) (407) 276 (Loss)/earnings per shareBasic 3 (0.11)p (0.29)p 0.19pDiluted (0.11)p (0.29)p 0.19p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2005 2005 2006 £'000 £'000 £'000 (Loss)/profit for the financial period (158) (407) 276Currency translation differences onforeign currency net investments 3 (8) (3) Total recognised gains and losses relating tothe period (155) (415) 273 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2005 2005 2006 £'000 £'000 £'000 Opening shareholders' funds 11,847 11,574 11,574(Loss)/profit for the financial period (158) (407) 276Currency translation differences onforeign currency net investments 3 (8) (3) Closing shareholders' funds 11,692 11,159 11,847 CONSOLIDATED BALANCE SHEETS Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Fixed assetsIntangible assets 1,818 1,986 1,902Tangible assets 3,123 3,402 3,403 4,941 5,388 5,305 Current assetsStocks 1,837 1,895 1,669Debtors- due within one year 2,764 3,232 3,247- due after more than one year 747 638 747Cash at bank and in hand 3,607 2,859 3,388 8,955 8,624 9,051Creditors: amounts falling due within one year (1,898) (2,528) (2,193) Net current assets 7,057 6,096 6,858 Total assets less current liabilities 11,998 11,484 12,163 Creditors: amounts falling dueafter more than one year (306) (325) (316) 11,692 11,159 11,847 Capital and reservesCalled up share capital 11,782 11,782 11,782Share premium account 37,978 37,978 37,978Other reserve 1,531 1,531 1,531Profit and loss account (39,599) (40,132) (39,444)Equity shareholders' funds 11,692 11,159 11,847 CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000 Net cash inflow/(outflow) from operatingactivities 4 336 (122) 534 Returns on investments and servicingof financeInterest received 37 21 131Interest element of finance lease rentaland hire purchase payments (1) (1) (2)Interest paid (13) (15) (30) Net cash inflow from returns oninvestments and servicing of finance 23 5 99 Taxation - - 189 Capital expenditure and financial investmentPurchase of tangible fixed assets (134) (168) (575) Net cash outflow for capital expenditureand financial investment (134) (168) (575) Cash inflow/(outflow) before use ofliquid resources and financing 225 (285) 247 Management of liquid resourcesSale/(purchase) of term deposits 598 297 (342) FinancingRepayment of secured loan 6 (6) (6) (13)Net movement of capital element of financelease rental and hire purchase payments 6 (3) (2) (3) Net cash outflow from financing (9) (8) (16) Increase/(decrease) in cash 5 814 4 (111) NOTES 1. Basis of Preparation The interim statements have been prepared in accordance with the accountingpolicies set out in the annual report for the year ended 31 December 2005. Theresults for the six months ended 30 June 2006 and 30 June 2005 have not beenaudited and do not constitute statutory accounts within the meaning of section240 of the Companies Act 1985. The results for the year ended 31 December 2005 are extracted from the auditedannual financial statements on which the auditors reported withoutqualification. Full financial statements for that year have been filed with theRegistrar of Companies. 2. Segmental information Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Turnover by geographical region:United States of America 1,451 993 2,288Rest of Europe 2,643 3,042 6,098United Kingdom 1,967 1,543 3,731Rest of World 417 279 775 6,478 5,857 12,892 Turnover by business unit:Advanced woundcare 5,177 4,766 10,535Wound closure 1,301 1,091 2,357 6,478 5,857 12,892 It is not possible to identify (loss)/profit before taxation and net assets bybusiness unit because of the use of common services. Turnover, (loss)/profit before tax and net assets by origin £'000 £'000 £'000TurnoverUnited Kingdom 6,478 5,857 12,892United States - - - 6,478 5,857 12,892 (Loss)/profit before taxUnited Kingdom (112) (356) 137United States (46) (51) (110) (158) (407) 27 Net assetsUnited Kingdom 11,691 11,159 11,845United States 1 - 2 11,692 11,159 11,847 The turnover and (loss)/profit before taxation is wholly attributable to theprincipal activity of the Group. 3. (Loss)/earnings per share The basic loss per share has been calculated on a weighted average numberof shares in issue for the six months ended 30 June 2006, namely 142,082,536(2005: 142,082,536) and losses of £158k (2005: £407k). 4. Reconciliation of operating loss to net cash inflow/(outflow) fromoperating activities. Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Operating loss (199) (448) (42)Depreciation 414 472 877Amortisation of intangible fixed assets 84 84 168Loss on sale of fixed assets - - 1Increase in stocks (168) (389) (163)Decrease/(increase) in debtors 501 (442) (567)(Decrease)/increase in creditors (296) 601 260 Net cash inflow/(outflow) from operating activities 336 (122) 534 5. Reconciliation of net cash flow to movement in net funds (note 6) Unaudited Unaudited Audited six months six months twelve months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Increase/(decrease) in cash during the period 814 4 (111)Cash outflow to repay debt and finance leases 9 8 16Cash (inflow)/outflow from (decrease)/increasein liquid resources (598) (297) 342 Change in net funds resulting from cash flows 225 (285) 247Translation difference 3 (8) (3) Movement in net funds in the period 228 (293) 244Net funds at 1 January 2006 3,054 2,810 2,810 Net funds at 30 June 2006 3,282 2,517 3,054 6. Analysis of net funds 1 January Cash Exchange 30 June 2006 flows movements 2006 £'000 £'000 £'000 £'000 Cash 402 814 3 1,219Term deposits 2,986 (598) - 2,388 Cash at bank and in hand 3,388 216 3 3,607Debt due within one year (13) (1) - (14)Debt due after one year (309) 7 - (302)Finance leases (12) 3 - (9) Total 3,054 225 3 3,282 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Advanced Medical Solutions Group