RNS Number:5359P
Advanced Medical Solutions Grp PLC
09 September 2003
For Immediate Release: 07:00 Tuesday 9th September 2003
Advanced Medical Solutions Group plc
Results for the six months ended 30th June 2003
Winsford, Cheshire: Advanced Medical Solutions Group plc ("AMS"), the global
producer of advanced materials for woundcare applications, today announces its
results for the six months ended 30th June 2003.
Highlights
* Group gross margins increased from 26% to 38% on turnover of #4.1 million.
* New partnerships signed with Paul Hartmann AG, PDI Inc, ASO Corporation and
Hardwood Products Company LP and with B.Braun Hospicare and Teva Medical Ltd
since period end.
* Silver alginate licensed to Johnson & Johnson Wound Management and 510
(k) clearance received in July 2003.
* Significant investments in Sales & Marketing and Research & Development to
support revenue growth in second half of the year.
* Cash of #4.2 million sufficient to take the Group through to profitability.
Commenting on the results, Don Evans, Chief Executive of AMS said:
"The Group has made significant progress during the first half-year in
establishing the fundamentals, which will generate the top line growth necessary
to move through to profitability. We continue to add new partners for our
products, gross margins have increased to 38% and cash remains strong. This is
a very exciting time for AMS as we continue to build a high value technology
company".
For further information please contact:
Advanced Medical Solutions Group plc Tel: +44 (0) 1606 863500
Don Evans, Chief Executive
Mary Tavener, Finance Director
www.admedsol.com
Buchanan Communications Tel: +44 (0) 20 7466 5000
Tim Anderson / Mary-Jane Johnson
Advanced Medical Solutions Group plc
Interim Results for period ended 30 June 2003
Chairman's Statement
Overview
Significant progress has been made during the first half of the year
establishing the fundamentals which will generate the top line growth necessary
to take the Group through to profitability. During the period, new supply and
distribution agreements have been signed which supplement existing partnerships,
new products have been launched and the Group's cash position has remained
strong. In addition, further good progress has been made in improving gross
margins to 38%.
Towards the end of the period and since 30 June 2003, a number of key licensing
agreements have been signed and the Directors believe that the Group is in a
position to achieve a strong second half-year.
Operating Review
The Group's core focus remains the development and manufacture of woundcare
products for sale into hospitals and long-term care facilities. The majority of
our products are marketed and distributed in Europe and the US, either through
major multi-national woundcare companies under their leading brands, or through
regional private label distributors. Our products are also sold in the UK
through a small direct sales force targeting the NHS hospital market. Current
marketing and distribution partners include 3M, Johnson & Johnson, Smith &
Nephew, Novartis, Molnlycke, Coloplast and Beiersdorf. Our products are
supplied in various forms, from rolls of bulk material (roll-stock) through to
fully packed, sterilised, branded cartons.
Professional Woundcare sales for the first half-year were similar to the
corresponding period of 2002, with a shortfall in the core advanced woundcare
business being compensated for by the MedLogic wound closure products which are
at a higher margin. This contributed to the significant improvement in Group
gross margins from 26% to 38%. The tough economic conditions experienced during
the second quarter of the period with the uncertainties caused by the Iraq war
resulting in reduced international travel and the disruptive impact of the
resolution put by AVRC at the AGM to seek offers for all or part of the Group,
delayed the signing of deals. This has resulted in lower sales than anticipated
in the first half of the year.
A number of partnership deals have been signed, albeit later than originally
anticipated, and we are pleased to report that further opportunities are under
negotiation. New supply and distribution partnerships have been announced with
Paul Hartmann AG, PDI Inc, B.Braun Hospicare, TEVA Medical Ltd and ASO
Corporation. A global exclusive agreement for silver alginate, using the
X-StaticTM fibres supplied by Noble Fiber Technology Inc, with Johnson & Johnson
Wound Management was also completed.
In addition to the delays in signing new deals, two other factors affected the
Professional Woundcare sales revenue. Firstly, a planned shift from cartoned
product to lower sales value, higher margin roll-stock for one of our major
European partners, which is now completed. Secondly, the failure to finalise a
major deal for distribution of the MedLogic LiquiBandTM tissue adhesive product
range by a potential new partner. Despite successfully completing market
evaluation of the opportunity, the potential partner was unable to proceed due
to a change in its corporate strategy. Discussions with alternative partners
for this technology are well advanced. The core UK LiquiBandTM business
continues to perform strongly with the product's market leadership position
strengthened in the Accident & Emergency arena.
Encouraging signs have been seen with the Consumer business with a number of
exciting new opportunities identified in the areas of scar therapy and liquid
bandages, which should materialise in sales later this year.
Following targeted investments in sales and marketing and product development,
the Board believes that a positive impact will be seen through new product
launches and additional partnership agreements. A significant trend is being
seen in the industry, for major distributors to carry their own private label
range of standard woundcare products. AMS is well placed to fulfil this need
as well as continuing to provide new, differentiated products to the leading
international woundcare companies. These companies look to lead the market in
advanced treatments, such as in the move from passive to active tissue repair.
Research and Development
The provision of a technology pipeline is key to attracting major strategic
partners and to ensure that the group moves to higher value products.
During the period good progress has been made, including:
- The further exploitation of AMS' proprietary polyurethane foam technology
with the launch of highly absorbent foam dressings by Paul Hartmann AG and PDI
Inc for Professional Woundcare and the introduction of a scar therapy product
for the US Consumer market with ASO Corporation targeted for the fourth quarter.
- The 510(k) clearance of our silver alginate product as the first step in
upgrading the AMS product range to include active ingredients such as
anti-microbials.
- A licensing agreement with Hardwood Products Company LP for its popule
applicator technology to exploit further the MedLogic cyanoacrylate technology
in Professional Woundcare for skin protection and as a liquid bandage for
Consumer OTC and sports applications.
- The progression through development and regulatory approval of additional
novel liquid bandage products which are expected to be introduced by the end of
2003, initially into the US market.
In addition, the new LiquiBandTM Surgical tissue adhesive product allows us to
enter the operating room market for wound closure. This product has been
specifically designed for use on surgical incisions and addresses the
significant opportunity for glues in the current $3 billion suture and staple
market. Initial feedback from UK trials has confirmed that this product will be
very well received by users for a variety of surgical procedures when it
undergoes full market release following CE mark approval, which is expected by
the end of September 2003.
Financial Review
In the six months ended 30th June 2003 turnover was #4.1 million (2002: #4.1
million). In the Professional Woundcare business, turnover was affected by a
number of factors which have previously been discussed and has resulted in
unchanged sales of #3.8 million. Sales from the wound closure products
resulting from the MedLogic acquisition completed in May 2002, continue to show
good growth with a 32% increase to #0.7 million (2002: #0.5 million). Consumer
sales were #0.4 million (2002: #0.3 million).
Overall, gross margin for the Group improved to 38% from 26% with gross profit
increasing 47% to #1.6 million from #1.1 million and demonstrates the benefit of
the Group's decision to deliver higher value products into the market.
Operating expenses increased to #2.8 million (2002: #2.1 million). These now
include a full six months' spend from the MedLogic acquisition and reflects our
investment in Sales and Marketing and Research and Development which is
anticipated to deliver significant growth in turnover. The overall spend on
Sales and Marketing and Research and Development increased to #1.4 million
(2002: #0.9 million). Administration also now includes six months of patent
amortisation of #0.1 million. As a result, the Group reported an operating loss
of #1.2 million (2002: #0.9 million) and an overall loss of #1.1 million (2002:
#0.8 million).
Working capital (excluding cash) increased to #2.0 million (2002: #1.2 million).
This is due to an increase of stock to supply two product launches in July and
an increase in other debtors for insurance, Research and Development grants and
fee income. As a consequence, operating cash outflow increased to #1.4 million
over the period (2002: #0.8 million) leaving the Group with #4.2 million of cash
at 30 June 2003 (2002: #6 million) and net funds of #3.8 million (2002: #5.5
million).
Outlook
The Board recognises that to move through to profitability strong revenue growth
is needed. This will in part be fuelled by the new partnerships that have
recently been announced with B. Braun Hospicare, TEVA Medical Ltd and a major US
private label distributor, all of whom are expected to be selling products by
the end of September 2003. Further announcements are expected to follow before
year-end. The launch of new products into the market place by these and
existing partners will drive sales growth during the second half-year, 2004 and
beyond.
Whilst the delays encountered in signing deals have put back profitability, the
Board is confident that the business will be profitable in the second half of
this year and will be profitable at EBITDA level for the full year. In line with
its stated strategy the Group has sufficient cash to take the business through
to sustainable profitability and the future prospects remain extremely positive
for building a high value technology company.
Dr Geoffrey N. Vernon
Chairman
Consolidated Profit and Loss Accounts
Unaudited Unaudited Audited
six month six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
Total Total Total
Note #'000 #'000 #'000
Turnover 2 4,134 4,115 8,372
Cost of sales (2,555) (3,042) (5,887)
1,579 1,073 2,485
Gross profit
Distribution costs (32) (48) (38)
Administration costs (2,819) (2,077) (4,406)
Other operating income 90 122 532
Operating loss (1,182) (930) (1,427)
Loss on disposal of fixed assets --- --- (249)
EGM costs --- --- (202)
Interest receivable and similar income 82 107 223
Interest payable and similar charges (18) (8) (34)
Loss on ordinary activities before taxation (1,118) (831) (1,689)
Taxation --- --- 292
Loss sustained for the period (1,118) (831) (1,397)
Basic and fully diluted loss per share 3 (0.79)p (0.76)p (1.1)p
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
2003 2002 2002
#'000 #'000 #'000
Loss for the financial period (1,118) (831) (1,397)
Currency translation differences on foreign 3 8 15
currency net investments
Total recognised losses relating to the period (1,115) (823) (1,382)
Reconciliation of Movements in Shareholders' Funds
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Opening shareholders' funds 14,107 11,994 11,994
Loss for the period (1,118) (831) (1,397)
Currency translation differences on foreign 3 8 15
currency net investments
New share capital subscribed --- 2,427 2,427
Premium on issue of shares during the period --- 1,711 1,711
Cost of share issue --- (667) (643)
Closing shareholders' funds 12,992 14,642 14,107
Consolidated Balance Sheets
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets
- goodwill --- (122) ---
- other intangibles 2,322 2,490 2,406
Tangible assets 4,624 5,270 4,901
6,946 7,638 7,307
Current assets
Stocks 1,313 1,045 918
Debtors
- due within one year 2,589 2,292 2,444
- due after more than one year 200 200 200
Cash at bank and in hand 4,218 6,058 5,558
8,320 9,595 9,120
Creditors: amounts falling due within one year (1,934) (2,130) (1,838)
Net current assets 6,386 7,465 7,282
Total assets less current liabilities 13,332 15,103 14,589
Creditors: amounts falling due after more than one (340) (461) (482)
year
12,992 14,642 14,107
Capital and reserves
Called up share capital 11,782 11,782 11,782
Share premium account 37,978 37,954 37,978
Other reserve 1,531 1,531 1,531
Profit and loss account (38,299) (36,625) (37,184)
Equity shareholders' funds 12,992 14,642 14,107
Consolidated Cash Flow Statements
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
Note #'000 #'000 #'000
Net cash outflow from operating activities (1,363) (814) (1,121)
Returns on investments and servicing of finance ---
Interest received 99 125 229
Interest element of finance lease rental and (3) (8) (13)
hire purchase payments
Interest paid (15) --- (21)
Net cash inflow from returns on investments and 81 117 195
servicing of finance
Taxation 137 129 129
Capital expenditure and financial investment
Purchase of tangible fixed assets (192) (95) (354)
Sale of tangible fixed assets 4 --- 15
Net cash outflow for capital expenditure and (188) (95) (339)
financial investment
Acquisitions and disposals
Purchase of subsidiary undertaking --- (2,909) (2,789)
Net cash acquired with subsidiary undertaking --- (27) (27)
Net cash outflow for acquisitions and disposals --- (2,936) (2,816)
Cash outflow before use of liquid resources and (1,333) (3,599) (3,952)
financing
Management of liquid resources
Sale of term deposits 1,471 191 739
Financing
Issue of shares --- 4,138 4,018
Share issue expenses --- (667) (643)
Repayment of long-term borrowing 5 (5) (1) (6)
Net movement of capital element of finance 5 (55) (59) (114)
lease rental and hire purchase payments
Net cash (outflow)/inflow from financing (60) 3,411 3,255
Increase in cash 4 78 3 42
Notes
1. Basis of Preparation
The interim statements have been prepared in accordance with the
accounting policies set out in the annual report for the year ended 31 December
2002. The results for the six months ended 30 June 2003 and 30 June 2002 have
not been audited and do not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985.
The results for the year ended 31 December 2002 are extracted from the
audited annual financial statements on which the auditors reported without
qualification. Full financial statements for that year have been filed with the
Registrar of Companies.
2. Segmental information
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Turnover by geographical region:
United States of America 1,106 800 1,330
Rest of Europe 2,120 2,568 5,243
United Kingdom 880 742 1,765
Rest of World 28 5 34
4,134 4,115 8,372
Turnover by business unit:
Consumer 368 278 594
Professional 3,766 3,837 7,778
4,134 4,115 8,372
It is not possible to identify loss before taxation and net assets by business
unit because of the use of common services.
Turnover, loss before tax and net assets by origin
#'000 #'000 #'000
Turnover
United Kingdom 4,134 4,115 8,372
United States --- --- ---
4,134 4,115 8,372
Loss before tax
United Kingdom (1,026) (764) (1,475)
United States (92) (67) (214)
(1,118) (831) (1,689)
Net assets
United Kingdom 12,976 14,608 14,098
United States 16 34 9
12,992 14,642 14,107
The turnover and loss before taxation is wholly attributable to the
principal activity of the Group.
3. Loss per share
The basis loss per share has been calculated on a weighted average
number of shares in issue for the six months ended 30 June 2003, namely,
142,082,536 (2002 : 109,372,285) and losses of #1,118k (2002 : #831k).
4. Reconciliation of net cash flow to movement in net funds (note 5)
Unaudited Unaudited Audited
six months six months twelve months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Increase in cash during the period 78 3 42
Cash outflow to repay debt and finance leases 60 60 120
Cash inflow from decrease in liquid resources (1,471) (191) (739)
Change in net funds resulting from cash flows (1,333) (128) (577)
Loans and finance leases acquired with subsidiaries --- (361) (361)
Translation difference 3 8 15
Movement in net funds in the period (1,330) (481) (923)
Net funds at 1 January 2003 5,109 6,032 6,032
Net funds at 30 June 2003 3,779 5,551 5,109
5. Analysis of net funds
1 January Cash Exchange 30 June
2003 flows movements 2003
#'000 #'000 #'000 #'000
Cash 462 128 3 593
Bank overdrafts (2) (50) --- (52)
Term deposits 5,096 (1,471) --- 3,625
5,556 (1,393) 3 4,166
Debt due within one year (10) --- --- (10)
Debt due after one year (345) 5 --- (340)
Finance leases (92) 55 --- (37)
Total 5,109 (1,333) 3 3,779
This information is provided by RNS
The company news service from the London Stock Exchange
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