11th Mar 2008 07:01
Advanced Medical Solutions Grp PLC11 March 2008 For immediate release 11 March 2008 Advanced Medical Solutions Group plc ("AMS" or "the Group") Preliminary Results for the Year Ended 31 December 2007 Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the globalmedical technology company, today announces its preliminary results for the yearended 31 December 2007. Financial Highlights Step change in financial performance: •Pre-tax profit increased threefold to £1.9 million (2006: £0.6 million) •EPS trebled to 1.57p (2006: 0.52p) •Net cash inflow from operating activities of £3.7 million (2006: £1.4 million) resulting in net funds of £7.2 million at year end (2006: £4.3 million) •Group revenues up 18% to £16.9 million (2006: £14.3 million) •Gross margin further improved to 44% from 42% Business Highlights Continued progress with key growth drivers: •Continued growth of silver alginate business with further launches by strategic partners in US and Europe •NHS direct woundcare business building steadily with the number of NHS Trusts using ActivHeal(R) range more than doubling during the year to in excess of 100 •Surgical skin sealant launched in US by Kimberly-Clark Health Care •LiquiBand(R) progressing on track for US regulatory approval in 2008 Commenting on the results Dr. Geoffrey Vernon, Chairman of Advanced MedicalSolutions, said: "I am delighted to report that the Group has delivered against all of its majorobjectives for 2007. It has been an excellent year with strong revenue growthand the business moving into sustainable profit providing a solid financial baseto move forward. With a strong start to 2008 and a number of step changeopportunities on the horizon the outlook is very positive." For further information, please contact: Advanced Medical Solutions Group plc Don Evans, Chief Executive Officer On 11/03/08: +44 (0) 20 7466 5000 Mary Tavener, Finance Director Thereafter : +44 (0) 1606 545508 www.admedsol.com Buchanan CommunicationsMark Court, Mary-Jane Johnson, Stasa Tel: +44 (0) 20 7466 5000Filiplic Landsbanki Securities (UK) Ltd Tel: +44 (0) 20 7426 9000Shaun Dobson, Claes Spang Notes to Editors: Advanced Medical Solutions is a leading company in the development, manufactureand sale of products into the $15 billion global woundcare market. Founded in 1991 and quoted on AIM, Advanced Medical Solutions is focused on thedesign, development and manufacture of innovative products for advancedwoundcare and wound closure. In-house natural and synthetic polymer technology is used to provide advancedwound dressings based on the moist healing principle. AMS' 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 a product from design and development through to production and deliveryready for distribution into customer markets. AMS' technology in cyanoacrylate based tissue adhesives is used either for theclosure of small cuts and trauma wounds through to large surgical incisions, orfor protecting or sealing skin to prevent breakdown or infection. AMS' products currently serve the majority of the key global markets sold eitherdirect or through strategic partners or distributors. CHAIRMAN'S STATEMENT Overview I am pleased to inform investors that AMS continued to make excellent progressduring 2007, further strengthening its financial position and progressing keystrategic growth opportunities. Group revenues increased 18% to £16.9 million with good growth achieved in ourtwo business segments, advanced woundcare (up 12%) and wound closure andsealants (up 41%). The growth was also well spread across our key globalmarkets: UK up 27%, rest of Europe up 19% and US up 21%. Gross margins continued to improve from 42% to 44% due to a move towards highervalue products and improved manufacturing efficiencies. Pre-tax profits increased 211% to £1.9 million with maiden first half pre-taxprofits being achieved. Post-tax profits of £2.2 million resulted in earningsper share (EPS) trebling to 1.57p. The Group generated a net cash in-flow from operating activities of £3.7 millioncontributing to a robust balance sheet with cash and cash investments of £7.5million at the year-end. The balance sheet was reconstructed during 2007, tocreate a distributable reserve to allow the Group to pay dividends in thefuture. The Board currently believes that it is best able to deliver shareholderreturns by growing the business and delivering capital growth. Good progress was made during 2007 with the key identified organic growthdrivers: •Silver alginate - Further product launches were made in the first half of 2007 strengthening the Group's position in the dynamic silver alginate market. AMS has two silver technologies and a broad range of marketing and distribution partners selling into the major global markets. •NHS woundcare - The ActivHeal(R) advanced woundcare range was expanded by the introduction of four new products during the year. Sold direct to the NHS, ActivHeal(R) products are now used in more than 100 Hospital and Primary Care Trusts, offering substantial savings in woundcare budgets •Surgical skin sealant - This novel product for helping to prevent infection of surgical sites is now available in most of the major international markets following its US launch in February 2007 by Kimberly-Clark Health Care, AMS' exclusive global marketing partner for this technology. •US approval of LiquiBand(R) - The LiquiBand(R) tissue adhesive range continues to progress through the FDA approval process with clearance expected to be obtained during 2008 allowing sale of the product into the US market. The Group's strong balance sheet provides the opportunity to fund future growthboth organically and through acquisition and a number of strategic investmentopportunities have been identified that are currently under discussion. Operating Review Advanced Woundcare Advanced woundcare sales of £12.8 million were up 12% on the prior year, wellahead of market growth rates. The global advanced woundcare business isestimated at $3.2 billion and growing at around 9%. AMS has a particularly strong proprietary position with its alginate and silvertechnologies and has used this to continue to develop its silver alginatebusiness. Driven by concerns over wound infection, silver has become thepredominant anti-microbial technology, and alginate the major wound dressing,for this indication. New partner launches took place during the first half-yearinto the US hospital market, the US home care market and in a number of Europeancountries strengthening the Group's global presence in this dynamic marketcurrently estimated at $125 million and growing at 25%. Due to widespread use ofsilver alginate dressings for treatment of infected wounds, AMS has alsoexperienced continued growth of its base alginate product range. With its broadpartner base and global presence, this is a core part of the AMS business. Good progress continues to be made in penetrating the UK NHS advanced woundcaremarket with AMS' direct ActivHeal(R) offering. More than 100 NHS Trusts are nowusing these products as a first line therapy for treating routine wounds,complementing the use of the Group's new technologies such as silver alginate,for treating infected or more difficult to heal wounds sold through strategicpartners. The addition of University College London Hospital (UCLH) NHS Foundation Trustin August 2007 as a customer is a strong endorsement of the ActivHeal(R) productrange and the success AMS is now achieving with this business model. Following areview of its woundcare product formulary, this major London teaching centreadopted ActivHeal(R) as a way to manage costs without compromising patient carefor routine wounds. The ActivHeal(R) product range has been strengthened during the year with thelaunch of new foam and hydrocolloid products in June and ActivHeal(R) AquaFibrein November. The Group remains confident that it will continue to penetrate theNHS advanced woundcare market currently estimated at £110 million. Increasedcentral decision making and further integration of product usage betweenhospitals and their associated Primary Care Trusts are positive trends thatsupport timely selection and adoption of the ActivHeal(R) range. Wound Closure and Sealants The wound closure and sealants business grew 41% to £4.1 million as the Groupcontinued to develop its LiquiBand(R) business within Europe and Kimberly-ClarkHealth Care launched surgical skin sealant into the US market in February. The Group maintained its strong leadership position in the UK Accident &Emergency (A&E) arena in the period and has also focused the efforts of itsEuropean distributors on the A&E market where the adhesive technology has realclinical and cosmetic benefits over alternative wound closure methodologies suchas sutures, staples and adhesive strips. The Group is developing its strategyfor penetration of the European Operating Room (OR) market either throughrecruitment of specialist OR distributors or by expanding its direct salespresence in this area, together with the development of a range of productsaimed specifically at the OR with strong clinical support. The dominant segment of the $150 million topical tissue adhesive market is theUS and regulatory approval for entering this market is progressing. The FDA hasnow accepted, and is promoting, the panel recommendation of August 2006 forthese products to be reclassified from a Premarket Approval (PMA) to the lessonerous 510(k) approval route. A Federal Notice was posted on 3rd July 2007 containing draft Special Controlsto be used for 510(k) clearance, and written comments from the public wererequested. Subject to the outcome of the public comments, formalreclassification allowing 510(k) regulatory approval is anticipated during 2008.In the meantime, the Group continues to build clinical data to support a PMAroute in parallel. Kimberly-Clark Health Care is continuing its US roll out of the new surgicalskin sealant following its initial introduction in February 2007. The product isnow available in the US, Europe and other international markets. Initialreaction from the surgical community to this innovative product to help preventinfection of surgical sites is very positive, both at the institutional and atthe individual surgeon level. The product is being evaluated in a wide range ofsurgical procedures as a means to help reduce skin flora contamination of thewound. R & D The Group has continued to build on its current technology platforms byinvesting in a strategically aligned and focused R&D programme during 2007.Total R&D spend increased from £1.0 million in 2006 to £1.1 million in 2007representing 7% of sales. As well as adding line extensions to the currentadvanced woundcare range, new dressings with improved fluid handling and woundhealing characteristics are under development. Of particular interest arematerials that inhibit or negate the effect of enzymes produced by the body thatprevent healing of chronic wounds. A number of technologies are underevaluation, both through internal development and as licensing and acquisitioncandidates, that could lead to products with superior performance by modulatingenzymic activity and hence may help to accelerate wound healing. In wound closure and sealants, as well as broadening the existing productportfolio for topical skin closure and protection, the Group has started toevaluate technologies that will allow it to enter the internal adhesives andsealants market currently estimated at around $600 million. Whilst this islikely to be a medium to long term development and regulatory approvalprogramme, it will allow the Group to leverage its current cyanoacrylateadhesives platform and its expertise in applicator design to enter the surgicalarena as part of continuing to move to higher value products. Board Steve Bellamy was appointed as Non-Executive Director in February 2007 and nowchairs the Audit Committee. Steve's previous experience and strong Citybackground is of great value as the Group continues to evaluate strategiccorporate opportunities to enhance growth. Chris Meredith's role has been broadened to become Managing Director of theAdvanced Woundcare business segment in addition to his responsibility as GroupCommercial Director, as part of a programme to ensure we have the rightmanagement team to enable the Group to meet its longer term growth targets. International Accounting Standards The Group has adopted International Financial Reporting Standards (IFRS) for thefirst time in 2007. The overall effect of this has been to improve profit beforetax by £0.3 million (equivalent to EPS of 0.2p) with the main changes arisingfrom the capitalisation of qualifying R&D activities. Outlook Woundcare is an attractive market with favourable demographics and an increasingneed for products for the treatment of both chronic and acute wounds. Organic growth is set to continue due to the dynamic silver market, increasingpenetration into the NHS, the launch of surgical skin sealant and the ongoing R&D programme. Additionally, the Group has exciting step-change opportunities onthe horizon such as entry into the US market with LiquiBand(R) and throughacquisitions that leverage AMS' technology and distribution base. The outlook is very positive as trading continues to be strong at the start of2008 as the Group continues its move into sustainable profitability. I would like to thank all AMS employees for their continued efforts in 2007 inbuilding a successful medical technology business and look forward to continuingworking with the team in meeting the challenges and opportunities ahead. Dr. Geoffrey N. VernonChairman 10 March 2008 CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2006 2007 Note £'000 £'000 Revenue 3 16,856 14,322Cost of sales (9,431) (8,280)Gross profit 7,425 6,042Distribution costs (130) (107)Administration costs (6,158) (5,912)Profit/(loss) on disposal of property, 3 (11)plant & equipmentOther income 512 480Profit from operations 1,652 492Finance income 282 149Finance costs (29) (29)Profit before taxation 1,905 612Income tax 331 135Profit for the year attributable toequity holders of the parent 2,236 747Earnings per shareBasic 6 1.57p 0.52pDiluted 6 1.48p 0.50p The above results relate to continuing operations. CONSOLIDATED BALANCE SHEET At 31 December 2007 2007 2006 Note £'000 £'000AssetsNon-current assetsAcquired intellectual property rights 1,566 1,734Software intangibles 45 29Development costs 342 64Property, plant and equipment 2,910 3,094Deferred tax assets 1,421 828Trade and other receivables 200 200 6,484 5,949Current assets Inventories 1,726 1,786Trade and other receivables 3,504 3,719Tax receivable - 17Investments 6,654 3,950Cash and cash equivalents 876 602 12,760 10,074Total assets 19,244 16,023LiabilitiesCurrent liabilitiesTrade and other payables 2,909 2,415Other taxes payable 276 244Financial liabilities 15 14Obligations under finance leases 5 5 3,205 2,678Non-current liabilitiesFinancial liabilities 279 295Obligations under finance leases 14 1 293 296Total liabilities 3,498 2,974Net assets 15,746 13,049EquityShare capital 5 7,157 11,782Share based payments reserve 154 60Investment in own shares 5 (13) -Share based payments deferred tax reserve 320 67Share premium 17 37,978Other reserve 1,531 1,531Retained earnings 6,580 (38,369)Equity attributable to equity holders of 15,746 13,049the parent Dr D W Evans, Chief Executive Officer. 10 March 2008 CONSOLIDATED Statement of Changes in EquityAttributable to equity holders of the Group Share Share based Share based payments Share Other Retained capital payments deferred premium Reserves earnings Total tax £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 11,782 18 1 37,978 1,531 (39,116) 12,194 Share based 42 42payments Share basedpayments- deferred tax 66 66 Consolidatedprofit for theyear to 31 Dec 747 7472006 At 31 December 11,782 60 67 37,978 1,531 (38,369) 13,0492006 Share Investment Share based Share based in own payments Share Other Retained capital payments shares deferred premium reserves earnings Total tax £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 11,782 60 - 67 37,978 1,531 (38,369) 13,049 Share based 94 94payments Share basedpayments 253 253- deferred tax Issue of share 34 34capital Share options 19 17 36exercised Cancellation of (4,678) 4,678 -deferred shares Cancellation of (37,978) 37,978 -share premiumaccount Shares purchased (34) (34)by EBT Shares sold by EBT 21 21 Surplus on EBT 57 57 Consolidated 2,236 2,236profit for theyear to 31 Dec2007 At 31 December 7,157 154 (13) 320 17 1,531 6,580 15,7462007 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2007 +--------------------------------------+--------+------------------+-----------------+| | | Year ended| Year ended|+--------------------------------------+--------+------------------+-----------------+| | | 31 December| 31 December|+--------------------------------------+--------+------------------+-----------------+| | | 2007| 2006|+--------------------------------------+--------+------------------+-----------------+| | | £'000| £'000|+--------------------------------------+--------+------------------+-----------------+|Cash flows from operating activities | | | |+--------------------------------------+--------+------------------+-----------------+|Profit from operations | | 1,652| 492|+--------------------------------------+--------+------------------+-----------------+|Adjustments for: | | | |+--------------------------------------+--------+------------------+-----------------+|Depreciation | | 686| 804|+--------------------------------------+--------+------------------+-----------------+|Amortisation - intellectual property | | 168| 168||rights | | | |+--------------------------------------+--------+------------------+-----------------+|- development costs | | 16| 5|+--------------------------------------+--------+------------------+-----------------+|- software intangibles | | 18| 13|+--------------------------------------+--------+------------------+-----------------+|(Profit)/loss on sale of non-current | | (3)| 11||assets | | | |+--------------------------------------+--------+------------------+-----------------+|Decrease/(increase) in inventories | | 60| (117)|+--------------------------------------+--------+------------------+-----------------+|Decrease/(increase) in trade and other| | 396| (472)||receivables | | | |+--------------------------------------+--------+------------------+-----------------+|Increase in trade and other payables | | 604| 483|+--------------------------------------+--------+------------------+-----------------+|Share based payments expense | | 94| 42|+--------------------------------------+--------+------------------+-----------------+|Net cash inflow from operating | | 3,691| 1,429||activities | | | |+--------------------------------------+--------+------------------+-----------------+| | | | |+--------------------------------------+--------+------------------+-----------------+|Cash flows from investing activities | | | |+--------------------------------------+--------+------------------+-----------------+| | | | |+--------------------------------------+--------+------------------+-----------------+|Proceeds on disposal of property, | | 3| 8||plant and equipment | | | |+--------------------------------------+--------+------------------+-----------------+|Purchase of software | | (35)| (21)|+--------------------------------------+--------+------------------+-----------------+|Research and development | | (294)| (69)|+--------------------------------------+--------+------------------+-----------------+|Purchases of property, plant and | | (502)| (288)||equipment | | | |+--------------------------------------+--------+------------------+-----------------+|Taxation | | 9| 78|+--------------------------------------+--------+------------------+-----------------+|Investment in money market deposits | | (2,704)| (964)|+--------------------------------------+--------+------------------+-----------------+|Interest received | | 101| 74|+--------------------------------------+--------+------------------+-----------------+|Net cash used in investing activities | | (3,422)| (1,182)|+--------------------------------------+--------+------------------+-----------------+| | | | |+--------------------------------------+--------+------------------+-----------------+|Cash flows from financing activities | | | |+--------------------------------------+--------+------------------+-----------------+|Finance lease | | (8)| (6)|+--------------------------------------+--------+------------------+-----------------+|Repayment of secured loan | | (15)| (13)|+--------------------------------------+--------+------------------+-----------------+|Issue of equity shares | | 70| -|+--------------------------------------+--------+------------------+-----------------+|Shares purchased by EBT | | (34)| -|+--------------------------------------+--------+------------------+-----------------+|Shares sold by EBT | | 21| -|+--------------------------------------+--------+------------------+-----------------+|Interest paid | | (29)| (28)|+--------------------------------------+--------+------------------+-----------------+|Net cash from/(used in) financing | | 5| (47)||activities | | | |+--------------------------------------+--------+------------------+-----------------+| | | | |+--------------------------------------+--------+------------------+-----------------+|Net increase in cash and cash | | 274| 200||equivalents | | | |+--------------------------------------+--------+------------------+-----------------+| | | | |+--------------------------------------+--------+------------------+-----------------+|Cash and cash equivalents at the | | | ||beginning of | | | || | | 602| 402||the year | | | |+--------------------------------------+--------+------------------+-----------------+|Cash and cash equivalents at the end | | 876| 602||of the year | | | |+--------------------------------------+--------+------------------+-----------------+ Notes Forming Part of the Consolidated Financial Statements 1. Reporting entity Advanced Medical Solutions Group plc ("the Company") is a public limited companyincorporated and domiciled in England and Wales (registration number 2867684).The Company's registered address is Road Three, Winsford Industrial Estate,Winsford, Cheshire CW7 3PD. The Company's ordinary shares are traded on the AIM market of the London StockExchange plc. The financial statements of the Company for the twelve monthsended 31 December 2007 comprise the Company and its subsidiaries (togetherreferred to as the "Group"). The Group is primarily involved in the design, development and manufacture ofnovel high performance polymers (both natural and synthetic) for use in advancedwoundcare dressings and materials and medical adhesives for closing and sealingtissue, for sale into the global medical device market. Basis of preparation In 2007 the Group has adopted International Financial Reporting Standards(IFRSs) as adopted by the EU for the first time. The Group has applied IFRS 1 First Time Adoption of International FinancialReporting Standards to provide a starting point for reporting under IFRS. TheGroup's date of transition to IFRS is 1 January 2006 and all comparativeinformation in the financial statements is restated to reflect the Group'sadoption of IFRS, except where otherwise required or permitted under IFRS 1. The accounting policies set out below have been applied consistently to allperiods presented in the financial statements. They have also been applied inpreparing an opening IFRS balance sheet at 1 January 2006 for the purposes ofthe transition to IFRSs, as required by IFRS 1. The impact of the transitionfrom UK GAAP to IFRSs on the Group's income statement and balance sheet isexplained in Note 7. The financial statements have been prepared on the historical cost basis ofaccounting except as disclosed in the accounting policies set out below. The individual financial statements for each group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). For the purpose of the consolidated financial statements,the results and financial position of each group company are expressed in poundssterling, which is the functional currency of the Company, and the presentationcurrency for the consolidated financial statements. 2. Accounting policies Use of estimates and judgments The preparation of financial statements requires management to make judgments,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expense. Actual resultsmay differ from these estimates. Estimates and underlying assumptions arereviewed on an ongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimate is revised and in any future periodsaffected. Classification of leases The Group utilises assets subject to operating and finance leases. Theclassification of these leases is based on a number of factors such as risk andreward, length of use and the fair value of minimum lease payments. Leaseclassification is made at the inception of the lease. Share based payment The charge to the income statement in relation to options and incentive plans isbased on the Black Scholes Merton valuation technique. This technique requires anumber of assumptions to be made such as those in relation to share pricevolatility, movement in interest rates, dividend yields and staff behaviouralpatterns. Notes Forming Part of the Financial Statements 2. Use of estimates and judgments (continued) Inventory impairment provisions The Group makes provisions for inventory deemed to be irrecoverable. Thisprovision is established on each individual stock keeping unit (SKU's) based onthe age of the stock, the forward order book, management's experience and itsassessment of the present value of estimated future cash flows. Receivables impairment provisions The amounts presented in the balance sheet are net of allowances for doubtfulreceivables, estimated by the Group's management based on prior experience andtheir assessment of the present value of estimated future cash flows Deferred tax A deferred tax asset is recognised when it is judged probable that the Groupwill generate taxable profits which can be offset against tax losses. Transition to IFRSs An explanation of how the transition to IFRSs has affected the reportedfinancial position, financial performance and cash flows of the Group isprovided in note 7. IFRS 1 grants certain exemptions from the full requirements of IFRSs in thetransition period. The following exemptions have been taken in theseconsolidated financial statements: • Business combinations that took place prior to 1 January 2006 have notbeen revisited under IFRS 3 'Business Combinations'. IFRS 3 has been appliedprospectively from the date of transition. • Land and buildings at the date of transition to IFRSs have been measuredat fair value. This fair value has been adopted as deemed cost at the date oftransition. • Cumulative translation differences for all foreign operations have beendeemed to be zero at 1 January 2006. • IFRS 2 'Share based payment' has not been applied to share-based paymentsgranted before 7 November 2002 nor those granted after 7 November 2002 that hadvested prior to 1 January 2006. The Group has adopted IFRS 2 for share options granted after 7 November 2002which had not vested at 1 January 2006. The adoption of IFRS 2 has not requirednumerical adjustments to be made to the balance sheet at 1 January 2006 nor tothe income statement for the year ended 31 December 2006. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Grouphas the power to govern the financial and operating policies of an entity so asto retain benefits from its activities. The financial statements of thesubsidiaries are included in the consolidated financial statements on the basisof both acquisition and merger accounting, from the date that control commencesuntil the date that control ceases. Intercompany transactions and balances between Group entities are eliminatedupon consolidation. Goodwill Goodwill written off to reserves under UK GAAP prior to 1998 of £5,586k has notbeen reinstated and is not included in determining any subsequent profit or losson disposal. Revenue recognition Revenue represents the fair value of sales of the Group's products to externalcustomers at amounts less value added tax, and is recognised when the productshave been delivered and title has passed. Revenue is recognised to the extentthat it is probable that the economic benefits will flow to the Group and therevenue can be reliably measured. Revenue from royalty income receivable under licence agreements from externalcustomers at amounts less value added tax is recognised as the products underlicence are sold and the revenue can be reliably measured. Other Income This represents non-refundable upfront licence payments received for the grantof rights for the development and marketing of products, contributions receivedto research and development, and other sundry income. The income is recognisedin the income statement, over the life of each development project, inproportion to the stage of completion for each project. Finance Income Finance income relates to interest earned on cash, cash equivalents andinvestments. Interest income is accrued on a time basis, by reference to theprincipal outstanding and at the effective interest rate applicable. Finance Costs Finance costs relate to finance payments associated with financial liabilities.They are recognised in the income statement as they accrue using the effectiveinterest method. Provisions Provisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligationand a reliable estimate can be made of the amount of the obligation. Foreign currencies The presentation currency for the consolidated financial statements is poundssterling. The financial statements for each of the Group's subsidiaries are prepared usingtheir functional currency. The functional currency is the currency of theprimary economic environment in which an entity operates. Transactions in foreign currencies are translated at the foreign exchange rateruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated atthe foreign exchange rate ruling at that date. Foreign exchange differencesarising on translation are recognised in the income statement. Non-monetaryassets and liabilities that are measured in terms of historical cost in aforeign currency are translated using the exchange rate at the date of thetransaction. Non-monetary assets and liabilities denominated in foreigncurrencies that are stated at fair value are translated at foreign exchangerates ruling at the date the fair value was determined. The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated at foreign exchangerates ruling at the balance sheet date. The revenue and expenses of foreignoperations are translated at an average rate for the year where this rateapproximates to the foreign exchange rates at the dates of the transactions. Taxation Taxation expense includes the amount of current income tax payable and thecharge for the year in respect of deferred taxation. The income tax payable is based on an estimation of the amount due on thetaxable profit for the year. Taxable profit is different from profit before taxas reported in the income statement because it excludes items of income orexpenditure which are not taxable or deductible in the year as a result ofeither the nature of the item or the fact that it is taxable or deductible inanother period. The Group's liability for current tax is calculated by using taxrates that have been enacted or substantially enacted by the balance sheet date. Deferred tax is accounted for on a basis of temporary differences, except to theextent where it arises from the initial recognition of goodwill or of an assetor liability in a transaction that is not a business combination. Deferred taxassets are recognised only to the extent that it is probable that future taxableprofits will be available against which temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when itrelates to items charged or credited directly to equity, in which case it isdealt with within equity. It is calculated at the tax rates that are expected toapply to the period when the asset is realised or the liability is settled. Notes Forming Part of the Consolidated Financial Statements Intangible assets Acquired intellectual property rights Intellectual property rights that are acquired in a business combination areinitially recognised at their fair value. Intellectual property rights purchasedoutright are initially recognised at cost. Intellectual property rights arecapitalised and amortised over their estimated useful economic lives, usuallynot exceeding 18 years. In determining the useful economic life each asset isreviewed separately and consideration given to the period over which the Groupexpects to derive economic benefit from the asset. Development costs Expenditure on research activities, undertaken with the prospect of gaining newscientific or technical knowledge, is recognised in the income statement as anexpense in the period in which it is incurred. Expenditure on development activities where research findings are applied to aplan or design for the production of new or substantially improved products andprocesses is capitalised once it can be demonstrated that the product or processis clearly identifiable, technically and commercially feasible, will generatefuture economic benefits, that the development costs of the asset can bemeasured reliably and the Group has sufficient resources to completedevelopment. Expenditure capitalised is stated as the cost of materials, directlabour and an appropriate proportion of overheads less accumulated amortisation. Where development expenditure results in new or substantially improved productsor processes and it is probable that recovery will take place, it is capitalisedand amortised on a straight line basis over the product's useful life startingfrom the date on which serial production commences which is between one and tenyears. Patents and trademarks are measured initially at purchase cost and areamortised on a straight-line basis over their estimated useful lives which isbetween three and twenty years. Software intangibles Where computer software is not integral to an item of property, plant orequipment its costs are capitalised and categorised as intangible assets.Amortisation is provided on a straight line basis over its economic useful lifewhich is in the range of three to five years. Property, plant and equipment Land and buildings and plant and equipment held for use in the production ofgoods and services or for administrative purposes are carried in the balancesheet at cost less any subsequent accumulated depreciation and subsequentaccumulated impairment losses. The Group has elected to use the fair value as the deemed cost in respect ofland and buildings at the date of transition to IFRS. Fair value has beencalculated by reference to their existing use at the date of transition. Depreciation is provided to write off the cost, less estimated residual values,of all property, plant and equipment, over the expected useful life of the assetfrom the date that the asset is brought into use. It is calculated at thefollowing rates: • Freehold property - 4% per annum on cost • Leasehold improvements - over the length of the lease • Plant and machinery - 6.67% to 33.3% per annum on cost • Fixtures and fittings - 33.3% per annum on cost • Motor vehicles - 25% per annum on cost No depreciation is provided on freehold land. Impairment The carrying amount of the Group's assets other than inventories and deferredtax assets, are reviewed at each balance sheet date to determine whether thereis any indication of impairment. If any such indication exists, the asset'srecoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. Impairment losses arerecognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocatedto reduce the carrying amount of the assets in the unit on a pro rata basis. Acash generating unit is the smallest identifiable group of assets that generatescash inflows that are largely independent of the cash inflows from other assetsor groups of assets. Notes Forming Part of the Consolidated Financial Statements Impairment (continued) Calculation of recoverable amount The recoverable amount of Group's receivables carried at amortised cost iscalculated as the present value of estimated future cash flows. As the Group'sreceivables are of short duration they are not discounted. Reversal of impairment An impairment loss in respect of a receivable carried at amortised cost isreversed if the subsequent increase in recoverable amount can be relatedobjectively to an event occurring after the impairment loss was recognised. In respect of other assets, an impairment loss is reversed when there is anindication that the impairment loss may no longer exist and there has been achange in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carryingamount does not exceed the carrying amount that would have been determined, netof depreciation or amortisation, if no impairment loss had been recognised. Inventory Inventory is valued at the lower of cost or net realisable value. Cost iscalculated as follows; Raw materials - cost of purchase on first in, first out basis Work in progress and finished goods - cost of raw materials and labour andattributable overheads Net realisable value is based on estimated selling price less further costs tocompletion and disposal. The Group makes provision for inventory deemed to be irrecoverable or where thenet realisable value is lower than cost. This provision is established on astock keeping unit (SKU) basis by reference to the age of the stock, the forwardorder book and management's experience. Financial Instruments Classification of financial instruments Financial instruments are classified as financial assets, financial liabilitiesor equity instruments. Following the adoption of IAS 32 'Financial Instruments: Presentation',financial instruments issued by the Group are treated as equity only to theextent that they meet the following two conditions • They include no contractual obligations upon the Group to deliver cash orother financial assets that are potentially unfavourable to the Group; and • Where the instrument will or may be settled in the Group's own equityinstruments, it is either a non-derivative that includes no obligation todeliver a variable number of the Group's own equity instruments or is aderivative that will be settled by the Group exchanging a fixed amount of cashor other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue areclassified as a financial liability. Recognition and valuation of financial assets Cash and cash equivalents Cash and cash equivalents comprise cash in hand and cash deposits and amountsunder short term guarantees usually three months or less that are held for thepurpose of meeting short term cash commitments and are subject to insignificantrisk in change in value which are readily convertible to a known amount of cash. Investments Cash held in accounts with more than 90 days' notice that are not required tomeet short term cash commitments are shown as an investment. The Group investsfunds which are surplus to requirements in fixed rate deposits operating withinparameters for credit ratings and credit limits for individual institutions thatare approved and monitored by the Board. Under IAS 39 "Financial instruments; recognition and measurement", suchinvestments are classified as loans and receivables and are recognised at fairvalue on initial recognition and subsequently measured at amortised cost usingthe effective interest. Notes Forming Part of the Consolidated Financial Statements Recognition and valuation of financial assets (continued) Trade and other receivables Trade receivables are recognised and carried at the lower of their originalinvoiced value and recoverable amount. An impairment is made when it is likelythat the balance will not be recovered in full. The recoverable amount iscalculated as the present value of estimated future cash flows. Estimated futurecash flows are not discounted due to the relatively short period of time betweenrecognition of trade receivables and receipt of cash. Recognition and valuation of equity instruments Equity instruments are stated at par value. Premiums on issue are taken to ashare premium reserve. Ordinary share capital Equity instruments are recorded initially at fair value. For ordinary sharecapital, the par value is recognised in share capital and the premium in theshare premium reserve. Recognition and valuation of financial liabilities Financial liabilities are classified according to the substance of thecontractual arrangements entered into. Trade payables Trade payables are initially recognised at fair value and are subsequentlyrecognised at amortised cost using the effective interest method. Other loans Other loans are initially recognised at fair value and are subsequentlyrecognised at amortised cost. Leased assets Leases are classified as finance leases when the terms of the lease transfersubstantially all the risks and rewards of ownership to the Group. All otherleases are classified as operating leases. Assets held as finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease paymentsduring the lease term at the inception of the lease. Lease payments areapportioned between the reduction of the lease liability and finance charges inthe income statement so as to achieve a constant rate of interest in theremaining balance of the liability. Assets held under finance leases aredepreciated over the shorter of the estimated useful life of the assets and thelease term. Assets leased under operating leases are not recorded on the balance sheet.Rental payments are charged directly to the income statement. Lease incentives,primarily up-front cash payments or rent-free periods, are capitalised andspread over the period of the lease term. Payments made to acquire operatingleases are treated as prepaid lease expenses and amortised over the life of thelease. Pensions The Group operates a money purchase pension scheme. The assets of the scheme areheld separately from those of the Group in an independently administered fund.The amount charged against the income statement represents the contributionspayable to the scheme in respect of the accounting period. Share based payments The Group has applied the requirements of IFRS 2 Share-based payments. IFRS hasbeen applied to all options granted after 7 November 2002 that were unvested asof 1 January 2006. The group issues equity-settled share based payments to certain employees.Equity settled share-based payments are measured at fair value at the date ofgrant. The fair value as determined at the grant date of equity-settled sharebased payments is expensed on a straight-line basis over the vesting period,based on the Group's estimate of options that will eventually vest. Fair value is measured by use of a Black-Scholes Merton model. The expected lifeused in the model has been adjusted, based on management's best estimate, forthe effect of non-transferability, exercise restrictions and behaviouralconsiderations. Notes Forming Part of the Consolidated Financial Statements Capital management For the years ended 31 December 2006 and 31 December 2007, the Group has had netfunds with minimal borrowings. Capital is managed by maximising retainedprofits. Working capital is managed in order to generate maximum conversion ofthese profits into cash and cash equivalents thereby maintaining capital. Theshare capital of the Group has increased as noted above. Capital includes share capital, share premium, investment in own shares, sharebased payments reserve, share based payments deferred tax reserve, other reserveand retained earnings reserve. There are no externally imposed capitalrequirements on the Group. Cash flow Cash and cash equivalents comprise cash at banks and in hand and short termdeposits with an original maturity of three months or less that are held for thepurpose of meeting short term cash commitments and are subject to insignificantrisk in change in value. Cash held in accounts with more than 90 day's noticethat are not required to meet short term cash commitments are shown as aninvestment. Employee Benefit Trusts The Group operates an Employee Benefit Trust (EBT): 'Advanced Medical SolutionsGroup plc UK Employee Benefit Trust'. The Group has de facto control of the assets, liabilities and shares held by theTrust and bear their benefits and risks. The Group records certain assets andliabilities of the Trust as its own. In compliance with Standing Interpretations Committee 12 (SIC 12) 'Consolidation- Special Purpose Entities', Group shares held by the EBT are included in theconsolidated balance sheet as a reduction in equity. Gains and losses on Groupshares are recognised directly in reserves. IFRSs adopted early The Group has elected to adopt the following in advance of its effective dates IFRS 8 operating segments - effective for accounting periods beginning on orafter 1 January 2009. IFRS 8 is a disclosure standard which has resulted in a redesignation of theGroup's reportable segments (see note 3), but has had no impact on the reportedresults or financial position of the Group. IFRSs not yet effective and not adopted early The following IFRSs have been issued but have not been adopted by the Group inthese financial statements as they are not yet effective. • IFRIC 11 'IFRS 2 - Group and treasury share transactions' givesguidance on the accounting treatment of share based payment within a group andis effective for periods beginning on or after 1 March 2007. As the adoptionwill require intra-group transfers which will be eliminated on consolidation,there will be no effect on the results or net assets of the Group. • IFRIC 12 'Service concession arrangements' gives guidance on theaccounting treatment relating to service arrangements over publicinfrastructures and is effective for periods beginning on or after 1 January2008. As the Group does not enter into such arrangements, the adoption will haveno impact upon the results or net assets of the Group. • IFRIC 13 ' Customer loyalty programs' give guidance on thetreatment of the grant of award credits under a customer loyalty program and iseffective for periods beginning on or after 1 July 2008. As the Group does notoperate such schemes, the adoption will have no impact upon the results or netassets of the Group. • IFRIC 14 'IAS 19 - the limit on a defined benefit asset, minimumfunding requirements and their interaction' gives guidance on accounting for apension surplus and is effective for periods beginning on or after 1 January2008. As the Group does not have a pension surplus, the adoption will have noimpact upon the results or net assets of the Group. Notes Forming Part of the Consolidated Financial Statements IFRSs not yet effective and not adopted early (continued) • IAS 1 'Presentation of financial statements' - Revision. This revisionaims to assist users in their ability to analyse and compare the informationgiven in the financial statements. Changes include changes to titles of some ofthe financial statements and changes to the components of financial statements.The revision is effective for periods commencing on or after 1 January 2009. • IAS 23 'Borrowing costs' - Revision. This revision eliminates the optionto expense borrowing costs to the income statement as incurred and is effectivefor periods commencing on or after 1 January 2009. As the group does not haveany borrowings the adoption of this standard is not anticipated to have animpact. • IAS 27 'Consolidated and separate financial statements' - Revision. Therevision is part of the second phase of the business combinations projectbetween the International Accounting Standards Board and the US FinancialAccounting Standards Board. The main amendments relate to the accounting forminority interests and the loss of control of a subsidiary. The revision iseffective for periods commencing on or after 1 July 2009. The directors do notbelieve the adoption of this revision will have a significant impact on thebusiness. • IAS 32 'Financial Instruments: Presentation' - Revision. The revisionrequires certain puttable financial instruments and certain financialinstruments that impose an obligation on the entity to deliver a pro rata shareof the net assets of the entity on liquidation, to be classified as equity. Therevision is effective for periods commencing on or after 1 January 2009. Thedirectors do not believe the adoption of this revision will have a significantimpact on the business. • IFRS 3 'Business combinations' - Revision. The revision is part of thesecond phase of the business combinations project between the InternationalAccounting Standards Board and the US Financial Accounting Standards Board. Themain changes include the scope, accounting for acquisition costs and postacquisition changes to contingent consideration, accounting for goodwill andaccounting for business combinations achieved in stages. There is additionalguidance on recognition and measurement of fair values and on determining whatis part of the business combination transaction. There are also a number ofchanges to disclosure requirements. The revision is effective for periodscommencing on or after 1 July 2009. The directors will consider the requirementsof the revision on any future business acquisitions. • Amendment to IFRS2 - Share-based payment vesting conditions andcancellations. The guidance provides more information on the amendment to theguidance regarding cancellation, amendment to the definition of 'vest' and'vesting conditions' and clarification of the accounting treatment of non-vesting conditions. An entity shall apply these amendments respectively inannual periods commencing on or after 1 January 2009. Earlier application ispermitted as long as the entity discloses the fact. The Directors will apply therules in the amendment to any future employee or employer cancellations. 3. Segment information For management purposes, the Group is organised into two business units,advanced woundcare and wound closure and sealants. These divisions are the basison which the Group reports its segment information. Intersegment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated items comprise mainly investments, and related revenue, corporateassets, head office expenses and income tax assets. Business segments The principal activities of the advanced woundcare business unit are theresearch, development, manufacture and distribution of novel, high performancepolymers for use as wound dressings. The principal activities of the wound closure and sealants business unit is theresearch, development, manufacture and distribution of medical adhesives andproducts for closing and sealing tissue. Notes Forming Part of the Consolidated Financial Statements 3. Segment information (continued) Segment information about these businesses is presented below. Advanced Wound closure Eliminations Consolidated woundcare & sealants year ended year ended year ended year ended 31 Dec 2007 31 Dec 2007 31 Dec 2007 31 Dec 2007 £'000 £'000 £'000 £'000 2007 RevenueExternal sales 12,799 4,057 - 16,856Inter-segment sales 28 - (28) - Total revenue 12,827 4,057 (28) 16,856 Inter-segment sales are charged at prevailing market prices. ResultSegment result 1,363 715 - 2,078Unallocated (426)expensesProfit from 1,652operationsFinance income 282Finance costs (29)Profit before tax 1,905Tax 331Profit for the 2,236year Other information Advanced Wound closure Eliminations Consolidated woundcare & sealants year ended year ended year ended year ended 31 Dec 2007 31 Dec 2007 31 Dec 2007 31 Dec 2007 £'000 £'000 £'000 £'000 Capital additions:Software intangibles 33 2 35Research & development 187 107 294Property, plant and 335 167 502equipmentDepreciation and 644 244 888amortisation Balance sheet AssetsSegment assets 7,084 4,377 - 11,461 Unallocated assets - - 7,783 Consolidated total assets 19,244 LiabilitiesSegment liabilities 2,213 1,061 3,274 Unallocated liabilities 224 Consolidated total 3,498liabilities Notes Forming Part of the Consolidated Financial Statements 3. Segment information (continued) 2006 Advanced Wound closure Eliminations Consolidated woundcare & sealants year ended year ended year ended year ended 31 Dec 2006 31 Dec 2006 31 Dec 2006 31 Dec 2006 £'000 £'000 £'000 £'000 RevenueExternal sales 11,445 2,877 - 14,322Inter-segment sales 9 - (9) -Total revenue 11,454 2,877 (9) 14,322 Inter-segment sales are charged at prevailing market prices. ResultSegment result 805 28 833Unallocated expenses (341)Profit from operations 492Finance income 149Finance costs (29)Profit before tax 612Tax 135Profit for the year 747 Advanced Wound closure & Eliminations Consolidated woundcare year sealants year year ended year ended ended ended 31 Dec 2006 31 Dec 2006 31 Dec 2006 31 Dec 2006 £'000 £'000 £'000 £'000 Other information Capital additions:Software intangibles 18 3 21Research & development 24 45 69Property, plant and 243 45 288equipment Depreciation and 750 240 990amortisation Balance sheet AssetsSegment assets 7,090 4,594 11,684 Unallocated assets 4,339 Consolidated total 16,023assets LiabilitiesSegment liabilities 2,067 820 2,887 Unallocated liabilities 87 Consolidated total 2,974liabilities Notes Forming Part of the Consolidated Financial Statements Geographical segments The advanced woundcare and wound closure and sealants segments operate mainly inthe UK, with a sales office located in the USA. In presenting information on thebasis of geographical segments, segment revenue is based on the geographicallocation of customers. Segment assets are based on the geographical location ofthe assets. The following table provides an analysis of the group's sales by geographicalmarket, irrespective of the origin of the goods/services based upon location ofthe Group's customers: Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000United Kingdom 5,731 4,524Europe excluding United Kingdom 6,686 5,600United States of America 4,217 3,480Rest of World 222 718 16,856 14,322 All assets are classified as under the United Kingdom due to the immaterialityof the carrying value of all assets held in the United States of America. 4. Profit from operations Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000Profit from operations is arrived at aftercharging/(crediting):Depreciation of property, plant and equipment 686 804Amortisation of;- acquired intellectual property rights 168 168- software intangibles 18 13- Development costs 16 5Operating lease rentals - plant and machinery 90 90- land and buildings 294 294Research and development costs expensed to the 784 909income statementNet foreign exchange (gains)/losses (36) 105 Auditors' remuneration The analysis of auditors' remuneration is as follows: Amounts payable to Baker Tilly UK Audit LLP and their associates (2006: BakerTilly and their associates) in respect of both audit and non-audit services: Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000Audit services- Statutory audit of parent and consolidated 21 10financial statements- Statutory audit of subsidiary companies 30 28Tax services- Compliance services 6 8- Advisory services 48 4Other services- Other costs 6 11 111 61 Notes Forming Part of the Consolidated Financial Statements 5. Share capital Number of ordinary shares of 5p each Allotted, called up Authorised and fully paid '000 '000At 1 January 2006 206,447 142,083At 31 December 2006 206,447 142,083New issues in the year - 683Share options exercised - 375At 31 December 2007 206,447 143,141 The following share movements occurred during the year: During the year, employees exercised share options of 375k shares at a range ofoption prices from 9p to 12p. On 12 April 2007 683k shares were issued under the Deferred Share Bonus Schemeat the nominal value of 5p per share. 249k of shares (£13k) are retained by thescheme to meet the matching requirements of the scheme. Number of deferred shares of 5p each Allotted, called up Authorised and fully paid '000 '000At 1 January 2006 93,553 93,553At 31 December 2006 93,553 93,553Shares cancellation- capital (93,553) (93,553)reconstructionAt 31 December 2007 - - The following share movements occurred during the year: Value of ordinary shares of 5p each Allotted, called up Authorised and fully paid £'000 £'000At 1 January 2006 10,322 7,104At 31 December 2006 10,322 7,104New issues in the year - 34Share options exercised - 19At 31 December 2007 10,322 7,157 Notes Forming Part of the Consolidated Financial Statements 5. Share capital (continued) Value of deferred shares of 5p each Allotted, called up Authorised and fully paid £'000 £'000At 1 January 2006 4,678 4,678At 31 December 2006 4,678 4,678Shares cancelled - capital reconstruction (4,678) (4,678)At 31 December 2007 - - 6. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: Year Year ended ended 31 Dec 2007 31 Dec 2006 £'000 £'000 Earnings for the purposes of basic and diluted 2,236 747earnings per share being net profit attributableto equity holders of the parent Number of shares Year Year ended ended 31 Dec 2007 31 Dec 2006 '000 '000 Weighted average number of ordinary shares in 142,535 142,082issue for the purposes of basic earnings pershare (excluding ordinary share in the companyheld by the EBT) Effect of dilutive potential ordinary shares: 8,684 4,032share options, deferred share bonus, LTIPs Weighted average number of ordinary shares in 151,219 146,114issue for the purposes of diluted earnings pershare (excluding ordinary share in the companyheld by the EBT) Notes Forming Part of the Consolidated Financial Statements 7. TRANSITION TO IFRS Reconciliation of CONSOLIDATED balance sheetat 31 December 2005 from UK GAAP to IFRS UK GAAP 31 Dec 2005 restated in Reclassification IFRS IFRS IFRS adjustments format 31 Dec 2005 31 Dec 2005 31 Dec 2005 £'000 £'000 £'000 £'000Note: Assets Non-current assets Acquired intellectual 1,902 - 1,902 property rights 1 Software intangibles - 14 14 Development costs - - - 2,3 Property, plant and 3,403 233 3,636 equipment 4,5,8 Deferred tax assets 547 100 647 Trade and other 200 - 200 receivables 6,052 347 6,399 Current assets Inventories 1,669 - 1,669 Trade and other 3,230 - 3,230 receivables Tax receivable 17 - 17 Investments - 2,986 - 2,986 Cash and cash 3,388 (2,986) - 402 equivalents 8,304 - - 8,304 Total assets 14,356 347 14,703 Liabilities Current liabilities Trade and other payables 1,945 - 1,945 Other taxes payable 230 - 230 Financial liabilities 13 - 13 Obligations under 5 - 5 finance leases 2,193 - 2,193 Non-current liabilities Financial liabilities 309 - 309 Obligations under 7 - 7 finance leases 316 - 316 Total liabilities 2,509 - 2,509 Net assets 11,847 347 12,194 Equity Share capital 11,782 - 11,782 6 Share based payments' - 18 18 reserve 8 Share based payments' deferred tax Reserve - 1 1 Share premium 37,978 - 37,978 Other reserve 1,531 - 1,5313,4,5,7,8 Retained earnings (39,444) 328 (39,116) Equity attributable to 11,847 347 12,194 equity holders of the parent 7. TRANSITION TO IFRS (continued) RECONCILIATION OF GROUP BALANCE SHEET At December 2005 from UK GAAP to IFRS +------+---------+-----------------------------------+--------------+-----------------+| | | | Non current| Shareholders'|+------+---------+-----------------------------------+--------------+-----------------+| | | | assets| Equity|+------+---------+-----------------------------------+--------------+-----------------+| | | | £'000| £'000|+------+---------+-----------------------------------+--------------+-----------------+|+-------+------------------------------------------+| | |||Note: |Conversion effect comprise: || | ||+-------+------------------------------------------+| | |+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 1 |IAS 38 - |Reclassification of software from | | || | |property, plant and equipment to | | || | |intangible assets | 14| |+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 2 |IAS 38 - |Reclassification of software from | | || | |property, plant and equipment to | | || | |intangible assets | (14)| |+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 3 |IFRS 1 - |Revaluation of land and buildings | | || | |to fair value | | |+------+---------+-----------------------------------+--------------+-----------------+| | |at date of transition at deemed | 247| 247|| | |cost. | | |+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 4 |IAS 12 - |Deferred tax - revaluation of land | (74)| (74)|| | |and buildings | | |+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 5 |IAS 12 - |Reversal of discount on deferred | 168| 168|| | |tax | | |+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 6 |IFRS 2 - |Share based payments reserve | | 18|+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 7 |IFRS 2 - |Profit and loss | | (18)|+------+---------+-----------------------------------+--------------+-----------------+| | | | | |+------+---------+-----------------------------------+--------------+-----------------+| 8 |IAS 12 - |Deferred tax - share based payments| 6| 1|+------+-+-------+-----------------------------------+--------------+-----------------+| | |Profit and loss | | 5|+--------+-------+-----------------------------------+--------------+-----------------+| | | | | |+--------+-------+-----------------------------------+--------------+-----------------+|Net movement | | 347| 347|+------+-+-------+-----------------------------------+--------------+-----------------++------+-+-------+-----------------------------------+--------------+-----------------+ 7. TRANSITION TO IFRS (continued)RECONCILIATION OF GROUP INCOME STATEMENT For 12 months ended 31 December 2006 from UK GAAP to IFRS IFRS UK GAAP adjustments IFRS 31 Dec 2006 31 Dec 2006 31 Dec 2006 Note £'000 £'000 £'000 Revenue 14,322 - 14,322Cost of sales 1 (8,279) (1) (8,280)Gross profit 6,043 (1) 6,042Distribution costs (107) - (107)Administration costs 2,3,7 (6,011) 99 (5,912)Loss on disposal of property, plant & (11) - (11)equipmentOther income 480 - 480Profit from operations 394 98 492Finance income 4 204 (55) 149Finance costs (29) - (29)Profit before taxation 569 43 612Income tax 5,6 167 (32) 135Profit for the year attributable toequity holders of the parent 736 11 747Earnings per shareBasic 0.52p 0.52pDiluted 0.50p 0.50p Note: Conversion effects comprise: 1 IFRS 1 - Depreciation of revaluation of land (1) and buildings2 IAS 38 - Expenditure on development activities and patents which have met the criteria to be capitalised less amortisation. 643 IFRS 2 - Reversal of share based payments included in year ended 31 December 2005 187 Adjustment in respect of exchange 17 differences Operating profit 98 4 IAS 12 - Reversal of unwinding of discount on (55) deferred tax asset5 IAS 12 - Reversal of discount on deferred tax (45) 6 IAS 12- Deferred tax on share based payments 13 Profit attributable to equity shareholders 11 7. TRANSITION TO IFRS (continued) RECONCILIATION OF GROUP BALANCE SHEETAt 31 December 2006 from UK GAAP to IFRS UK GAAP 31 Dec 2006 Reclass- IFRS restated in ification adjustments IFRS IFRS format 31 Dec 2006 31 Dec 2006 31 Dec 2006 £'000 £'000 £'000 £'000Note: Assets Non-current assets Acquired intellectual 1,734 - 1,734 property rights 1 Software intangibles - 29 29 3 Development costs - 64 64 2,4 Property, plant and 2,877 217 3,094 equipment 5,6,8 Deferred tax assets 749 79 828 Trade and other receivables 208 (8) - 200 5,568 (8) 389 5,949 Current assets Inventories 1,786 - 1,786 Trade and other receivables 3,711 8 - 3,719 Tax receivable 17 - 17 Investments - 3,950 - 3,950 Cash and cash equivalents 4,552 (3,950) - 602 10,066 - - 10,074 Total assets 15,634 389 16,023 Liabilities Current liabilities Trade and other payables 2,415 - 2,415 Other taxes payable 244 244 Financial liabilities 14 14 Obligations under finance 5 5 leases 2,678 - 2,678 Non-current liabilities Financial liabilities 295 - 295 Obligations under finance 1 - 1 leases 296 - 296 Total liabilities 2,974 - 2,974 Net assets 12,660 389 13,049 Equity Share capital 11,782 - 11,782 Share based payments 60 - 60 reserve 8 Share based payments deferred tax reserve - 67 67 Share premium 37,978 - 37,978 Other reserve 1,531 - 1,5313,4,5,6,7,8 Retained earnings (38,691) 322 (38,369) Equity atributable to 12,660 389 13,049 equity holders of the parent 7. TRANSITION TO IFRS (continued)RECONCILIATION OF GROUP BALANCE SHEETAt 31 December 2006 from UK GAAP to IFRS +-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| | | | Non current| Shareholders'|+-------+-------+-------------------------------------+-------------+----------------+| | | | Assets| Equity|+-------+-------+-------------------------------------+-------------+----------------+| | | | £'000| £'000|+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+|Note: Conversion effects comprise: | | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 1 |IAS 38 |Reclassification of software from | | || |- |property, plant and | | |+-------+-------+-------------------------------------+-------------+----------------+| | |equipment to intangible assets |29 | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 2 |IAS 38 |Reclassification of software from | | || |- |property, plant and | | |+-------+-------+-------------------------------------+-------------+----------------+| | |equipment to intangible assets |(29) | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 3 |IAS 38 |Recognition of development activities| | || |- |less | | |+-------+-------+-------------------------------------+-------------+----------------+| | |amortisation |64 |64 |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 4 |IFRS 1-|Revaluation of land and buildings to | | || | |fair value at | | |+-------+-------+-------------------------------------+-------------+----------------+| | |date of transition less depreciation |246 |246 || | |- deemed cost | | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 5 |IAS 12 |Deferred tax - revaluation of land |(74) |(74) || |- |and buildings | | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 6 |IAS 12 |Reversal of discount on deferred tax |68 |68 || |- | | | |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+| 8 |IAS 12 |Deferred tax - share based payments |85 |67 || |- | | | |+-------+-------+-------------------------------------+-------------+----------------+| | |Profit and loss | |18 |+-------+-------+-------------------------------------+-------------+----------------+| | | | | |+-------+-------+-------------------------------------+-------------+----------------+|Net movement | |389 |389 |+---------------+-------------------------------------+-------------+----------------+ 8. No dividend has been proposed. 9. This statement was approved by the Directors and agreed with the Group'sauditors on 10 March 2008. A copy can be obtained from the Secretary at theCompany's Head Office, Road Three, Winsford Industrial Estate, Winsford,Cheshire CW7 3PD. 10. The figures and financial information for the year 2006 do not constitutethe statutory financial statements for that year. Those financial statementshave been delivered to the Registrar and include an auditor's report which wasunqualified. 11. The above financial information for the period ended 31 December 2007 isaudited but does not constitute statutory accounts within the meaning of section240 of the Companies Act 1985. Statutory accounts for the year ended 31 December2007 will be delivered to the Registrar of Companies. 12. The Annual General Meeting will be held at 11:00am on 3 June 2008 at PortalHotel, Cobbler's Cross Lane, Tarporley, Cheshire CW6 0DJ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Advanced Medical Solutions Group