Advanced Medical Solutions Group Regulatory News (AMS)

RNS Number : 2684I

Advanced Medical Solutions Grp PLC

09 March 2010

 

For immediate release

9 March 2010

Advanced Medical Solutions Group plc

("AMS" or the "Group")

Preliminary Results for the Year Ended 31 December 2009

 

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today announces its preliminary results for the year ended 31 December 2009.

 

Business Highlights

·; New, world class facility within budget and on schedule to open by end 2010

·; First US sales of LiquiBand ™

·; Cardinal Health signed as part of multi-partner distribution strategy for penetrating US tissue adhesive market

·; SilverCel* Non-Adherent launched by Systagenix

·; ActivHealÒ offering receives strong endorsement from UCLH

·; Acquisition of Corpura BV completed

 

 

Financial Highlights

·; Strong second half delivering market expectations

·; Revenue increased by 19% to £24.1 million (2008: £20.3 million)

Revenue increased 15% to £23.4 million at constant currency(i)

·; Operating profit (pre-exceptional items)(ii) up 51% to £4.1 million (2008: £2.7 million)

Operating profit (post exceptional items) was £2.4 million (2008: £2.7 million)

·;  Following investments in new facility and acquisitions, net funds(iii) at year-end were £1.7 million (2008: £7.3 million) with strong operating cash in-flow of £3.7 million (pre-exceptional items) (2008: £2.8 million)

Net cash inflow from operations after exceptional items £2.1 million (2008: £2.8 million)

·; Basic earnings per share (pre-exceptional items) up 34% to 3.1p (2008: 2.3p)Basic earnings per share (post exceptional items) was 1.9p (2008: 2.3p)

 

 

(i) Constant currency removes the effect of currency movements by re-translating the current year's

performance at  the previous year's exchange rates

(ii) Exceptional costs of £0.8 million were incurred on an aborted acquisition and £0.9 million related to the new

Winsford facility

(iii) Net funds is defined as cash and cash equivalents plus short term investments less financial liabilities

 

Commenting on the results Dr. Geoffrey Vernon, Chairman of Advanced Medical Solutions Group plc, said:

 

" I am pleased to report that further major steps have been taken in exploiting the Group's significant growth opportunities with key strategic new markets entered, new partners added, innovative new products launched and further regulatory approvals received.

 

"The Board remains very optimistic about the prospects for the business in 2010 and beyond and, accordingly, intends to introduce a maiden dividend for the full year 2010."

 

 

For further information, please contact:

 

Advanced Medical Solutions Group plc
Don Evans, Chief Executive Officer Mary Tavener, Group Finance Director Chris Meredith, Chief Operating Officer www.admedsol.com	Tel: +44 (0) 1606 545508
Buchanan Communications
Mark Court / Stasa Filiplic / Jennie Spivey	Tel: +44 (0) 20 7466 5000
Investec Bank plc	Tel: +44 (0) 20 7597 5970
Gary Clarence / Daniel Adams

 

Notes to Editors:

 

Advanced Medical Solutions develops and manufactures products for the $15 billion global woundcare market.

Founded in 1991 and quoted on AIM, Advanced Medical Solutions is focused on the design, development and manufacture of innovative products for advanced woundcare and wound closure.

The advanced woundcare products are based on the moist wound healing principle. AMS uses its in-house technology to provide a vertically integrated 'one stop shop' for all categories of moist wound healing products. The Company has the capability to move a product from design and development through to production and delivery for distribution and sale into customer markets.

AMS' technology in cyanoacrylate based tissue adhesives is used for the closure of small cuts and trauma wounds through to large surgical incisions, and also for protecting or sealing skin to prevent breakdown or infection.

AMS' products which currently serve the majority of the key global markets are sold either direct or through strategic partners and distributors.

 

Chairman's Statement

Overview

 

I am pleased to inform investors that, as anticipated, despite the difficult first half year, the Group achieved a strong second half which resulted in the business trading in line with expectations for the full year 2009 and maintaining its excellent year on year growth.

 

Further major steps have been taken in positioning the Group to exploit its significant growth opportunities:

 

·; key strategic new markets entered;

·; new partners added;

·; innovative new products launched; and

·; further regulatory approvals received.

 

In particular, initiation of sales of LiquiBand™ into the US market is a major milestone for the Group. The acquisition of Corpura BV, our foam technology platform provider, was completed in September 2009 and integration is essentially complete. The construction and fit-out of the new facility in Winsford progresses within budget and on schedule. Manufacturing at the new facility is underway and our first products have already been shipped. This facility is on target to be completed and fully operational by the end of 2010.

 

Financial Highlights

 

Group revenue at £24.1 million (2008: £20.3 million) was up 19% with profit from operations before exceptional items up 51% at £4.1 million (2008: £2.7 million). This was an excellent performance in a difficult economic environment.

 

Profit from operations post exceptional items was £2.4 million (2008: £2.7 million).

 

The business continues to generate cash at the operational level with net cash inflow from operations before exceptional items of £3.7 million (2008: £2.8 million). Net cash inflow from operations after exceptional items was £2.1 million.

 

Following investments in the new facility, plant and equipment and acquisitions, net funds at year-end were £1.7 million (2008: £7.3 million).

 

Organic Growth

 

The Group continues to make good progress in delivering the building blocks for continued growth.

 

In advanced woundcare, revenue was up 18% on last year, with the silver alginate range of products up 27% year on year. In wound closure and sealants, revenue was up 20% with European and ROW sales up 40%.

 

InteguSeal** Skin Sealant grew 28% and we believe that Kimberly-Clark Health Care's acquisition of I-Flow together with further publication of clinical studies will continue to drive growth.

 

Completion of the acquisition of Corpura BV strengthens our position in polyurethane foam, the largest, fastest growing segment in advanced woundcare.

 

The positive endorsement of our ActivHeal® offering by University College London Hospital (UCLH) is significant given the cost pressures facing the NHS.

 

The new facility at Winsford provides AMS with a world-class medical device facility with capacity to support its future growth plans.

 

Entry into the $200 million US tissue adhesive market with our LiquiBand™ products is a major step forward. The two products now available allow access to around 80% of the market and Cardinal Health provides us with a powerful distribution partner for commercialising our tissue adhesive technology in this key strategic market. We are very encouraged by the initial activities of their substantial sales team and by the response from clinicians to our products.

 

The launch of SILVERCEL* Non-Adherent by Systagenix is another key event for broadening our presence in the dynamic silver alginate market.

 

Licensing and Acquisitions

 

The Group continues to look at suitable licensing and acquisition opportunities to expand the business and accelerate growth.

 

The two principal areas that the Board has been considering are new material technologies that leverage existing distribution outlets and opportunities that will broaden the Group's direct sales presence for its wound closure range of products.

 

One potential acquisition opportunity was seriously considered during Q1 2009 however, in the market conditions prevailing at the time, acceptable terms could not be agreed and discussions ended.

 

The joint venture, under which AMS acquired an interest in Corpura BV in May 2008, progressed to full acquisition in September 2009 and is starting to deliver the strategic rationale behind this investment whereby the Group is looking to utilise polyurethane foam as a platform technology for incorporating additives as part of its R & D programme. The 510(k) approval for silver polyurethane foam received in August 2009 underlines this approach.

 

Dividend Policy

 

In 2007, AMS conducted a capital reorganisation enabling the Board to pay dividends. The Board continually reviews the Company's dividend policy to ensure it is appropriate for the stage of the Company's development and, to date, the Board has not recommended the payment of a dividend. While the focus remains on growing the business and delivering capital growth, with the major investment in the new facility project coming to an end during 2010 and given the cash generation in the business, the Board's intention is to recommend a maiden dividend for the year ended 31st December 2010, which will be payable in 2011, and to follow a progressive dividend policy thereafter.

 

 

Board

 

As part of strengthening the Board going forward I am pleased to welcome Penny Freer to AMS as Senior Independent Non-Executive Director and I am also pleased to see Chris Meredith's progression through to Chief Operating Officer.

 

Steve Harris has indicated that he wishes to step down as a Non-Executive Director at the next AGM. I would like to thank Steve for his significant contribution to the development of the business over the past nine years.

 

Employees

 

On behalf of the Board and all our shareholders, I thank all AMS employees for their considerable efforts in delivering our 2009 results. I would also like to formally welcome all the Corpura BV employees to the AMS Group.

 

Offer Period

 

On 26th February 2010, Consort Medical plc announced that it had made an approach to AMS, which may or may not lead to an offer being made for the Group. On the same date, AMS announced a confirmation of the approach and that the Board and its advisers had rejected it. The Board of AMS continues to advise shareholders to take no action at this stage. Further announcements will be made as appropriate.

 

Outlook

 

The strong trading seen in the second half of 2009 has continued into 2010 with the Group order book substantially ahead of this time last year. While it is anticipated that trading will be more weighted to the second half as in the previous year, the weighting is expected to be more balanced.

 

The Board remains very optimistic about the prospects for the business in 2010 and beyond. Over the past few years the management team have been putting in place a number of the key building blocks to achieve the Board's strategic objectives and in the past few months these have been coming to fruition including:

 

·; a new facility to provide additional capacity and deliver operational efficiencies from late 2010 and beyond;

 

·; the launch of new innovative products such as SilverCel* Non-Adherent, which was launched by Systagenix in October 2009. Initial indications on this product have been very positive;

 

·; the introduction of LiquiBand™ into the US in December 2009 with 2010 being the first full year of sales into this key strategic market. Initial orders have been in line with expectations and are growing in line with the underlying expected demand. Furthermore, initial responses from clinicians in the US have been very positive;

 

·; the first major US distribution partner for LiquiBand™, Cardinal Health was announced in January 2010 and has now begun selling product through its substantial sales force. Further distribution agreements are expected to be signed in 2010;

 

·; the endorsement of the cost saving potential of ActivHeal® is likely to stimulate demand from the NHS given the recent and anticipated cost pressures facing the UK health system;

 

·; the strengthening of the Group's position in the polyurethane foam market which is the largest, fastest growing segment in advanced woundcare; and

 

·; the maintenance of a strong pipeline of new products and regulatory approvals.

 

Given these developments, and the organic growth the Group is anticipating from its existing products, the outlook for 2010 remains very positive and accordingly, as mentioned earlier, the Board is intending to introduce a maiden dividend for the full 2010 financial year, payable in 2011.

 

 

 

 

 

 

Dr. Geoffrey N. Vernon

Chairman

 

 

 

 

* Trademark of Systagenix Wound Management

** Trademark of Kimberly-Clark Worldwide, Inc ©2007 KCWW

 

 

Financial Review

 

Revenue for the Group grew 19% to £24.1 million (2008: £20.3 million). Adjusting for constant currency, the underlying growth was 15%.

 

Advanced woundcare sales increased 18% to £19.4 million (2008: £16.4 million). The advanced woundcare business includes three months' revenue from the Corpura acquisition which was completed on 30th September 2009. This contributed £0.7 million to revenues. Strong growth was seen in the silver alginate range of products which grew 27% compared with last year and are now approximately 40% of the advanced woundcare business. Sales of ActivHeal™, the Group's value range of woundcare products for the NHS market, increased 5%.

 

The wound closure and sealants business grew 20% to £4.7 million (2008: £3.9 million). Good growth of just over 40% was seen from our European and ROW distributors as increased sales penetration is seen in these markets. Sales of InteguSeal**, our surgical skin sealant product licensed to Kimberly-Clark Health Care also increased by 28%.

 

Gross margin across the Group was 48% (2008: 48%). Excluding the Corpura acquisition the existing business would have delivered a gross margin of 49%. Adjusting for constant currency the underlying gross margin was 48%.

 

Profit from operations pre-exceptional items increased by 51% to £4.1 million (2008: £2.7 million) and operating margin (pre-exceptional items) increased to 17% from 13% in 2008. Administration costs which include the Group's continuing property costs, plc costs and administrative functions increased to £7.8 million pre-exceptional items (2008: £7.7 million). Investment was made in sales and marketing ahead of supporting the launch of LiquiBand™ into the US and has been maintained at 11% of revenue (2008: 11%). Spend on Research and Development across the Group is around 6% of Group revenue (2008: 7%) split fairly evenly across the businesses. The Group benefited from the reversal of marking currency hedging derivatives to market through the income statement which, net of other foreign exchange differences, was a benefit of £0.1 million (2008: (£0.1) million). The acquisition of Corpura BV contributed nil to profit from operations.

 

The Group incurred £1.7 million of exceptional costs in the year. The Group is well advanced in moving from its two existing manufacturing sites in Winsford into a new building that will accommodate manufacturing, warehousing, laboratories and offices. There are costs associated with this project such as the transfer and re-validation of manufacturing equipment, additional rent and staff dedicated to the project which are deemed exceptional. £0.9 million of such costs were incurred in the period. As previously indicated the Group is budgeting a further £1 million of costs to be incurred in 2010. The majority of these costs are expected to be incurred in the first six months.

 

The Group also incurred £0.8 million of costs on an aborted acquisition that had reached an advanced stage of discussion. These costs are also classified as exceptional.

 

Profit from operations post-exceptional items was £2.4 million, a decrease of 11% compared with 2008 (2008: £2.7 million).

 

The Group continues to work with existing and new partners on development projects and earns income through these projects. £0.5 million of other income was earned in the period (2008: £0.7 million).

 

The Group achieved pre-exceptional profit before tax of £4.1 million in the period. An increase of 39% compared with 2008 (£2.9 million). Profit before tax was £2.4 million (2008: £2.9 million).

 

The Group recognised a tax credit of £0.4 million resulting from deferred tax (2008: £0.4 million) reflecting the extent to which recoverability of tax loses can be forseen with reasonable certainty. The Group holds a deferred tax asset on the balance sheet of £2.4 million (2008: £2.0 million). The Group additionally has a further £24.0 million (2008: £25.0 million) of tax losses that have not been recognised.

 

Profit after tax but before exceptional items for the period was £4.5 million (2008: £3.3 million). On this basis, basic earnings per share was 3.09p (2008: 2.31p) and fully diluted earnings per share was 2.87p (2008: 2.16p). The Group profit after tax and exceptional items was £2.8 million (2008: £3.3 million) resulting in a basic earnings per share of 1.93p (2008: 2.31p) and fully diluted earnings per share of 1.79p (2008: 2.16p).

 

Cash flow

The Group had a cash inflow from operating activities and before exceptional items of £3.7 million (2008: £2.8 million) and £2.1 million after exceptional items of £1.7 million. Working capital increased in the period by £1.6 million. Inventory increased by £0.8 million in line with the factory move and would be expected to reduce at the end of 2010 when the factory move is completed. Trade and other receivables increased by £1.6 million reflecting the increased sales within the Group. Debtor days were 54 (2008: 53). Trade and other payables increased £0.8 million reflecting the growth of the Group.

 

The Group invested £4.5 million in the fit out of the new facility in line with the budgeted spend and spent a further £2.2 million in capital equipment for the Group.

 

On 30th September 2009 the Group acquired the remaining 50.6% of the shares of Corpura BV from Recticel for a total of €2.3 million. Part of this payment was deferred and is included in trade and other payables on the balance sheet.

 

As a result of this investment the Group had net funds of £1.7 million at the end of the year (2008: £7.3 million).

 

The Group entered into a 3 year Revolving Credit Facility with Lloyds TSB Bank for £5million which includes a £1 million overdraft facility at market rate in August 2009. The Group anticipates that it will draw down on this facility during 2010 but it is not forecast to be fully utilised at any point over the next 3 years.

 

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group's financial position and cash flow forecasts for the next 12 months and have reached a conclusion that the Group is well placed to manage its business risks in the current economic environment as is more fully described in Note 10.

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2009

 

		(Unaudited) Year ended 31 December 2009			(Audited)
		Before Exceptional items	Exceptional items (see note 7)	Total	Year ended 31 December 2008
	Note	£'000	£'000	£'000	£'000
Revenue	4	24,091	-	24,091	20,316
Cost of sales		(12,482)	-	(12,482)	(10,562)
Gross profit		11,609	-	11,609	9,754
Distribution costs		(157)	-	(157)	(160)
Administration costs		(7,799)	(1,672)	(9,471)	(7,666)
Profit on disposal of property, plant & equipment		-	-	-	35
Other income		488	-	488	656
Share of results of joint venture		(66)	-	(66)	80
Profit from operations	4,5	4,075	(1,672)	2,403	2,699
Finance income		21	-	21	265
Finance costs		(30)	-	(30)	(37)
Profit before taxation		4,066	(1,672)	2,394	2,927
Income tax		390	-	390	382
Profit for the year attributable to equity holders of the parent		4,456	(1,672)	2,784	3,309
Earnings per share
Basic	6	3.09p	(1.16)p	1.93p	2.31p
Diluted	6	2.87p	(1.08)p	1.79p	2.16p

The above results relate to continuing operations.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2009

		(Unaudited) 2009	(Audited) 2008
		£'000	£'000
Assets
Non-current assets
Acquired intellectual property rights		1,230	1,398
Software intangibles		34	40
Development costs		725	520
Property, plant and equipment		10,284	3,199
Deferred tax assets		2,422	2,045
Investment in joint venture		-	1,749
Loans and receivables		-	662
Goodwill		2,978	-
Trade and other receivables		6	209
		17,679	9,822
Current assets
Inventories		3,179	2,231
Trade and other receivables		6,945	4,894
Investments		-	5,730
Cash and cash equivalents		1,992	1,882
		12,116	14,737
Total assets		29,795	24,559
Liabilities
Current liabilities
Trade and other payables		5,887	4,008
Other taxes payable		463	308
Financial liabilities		18	17
Obligations under finance leases		16	14
		6,384	4,347
Non-current liabilities
Trade and other payables		278	-
Financial liabilities		244	262
Obligations under finance leases		39	58
		561	320
Total liabilities		6,945	4,667
Net assets		22,850	19,892
Equity
Share capital		7,248	7,169
Share premium		99	23
Share-based payments reserve		502	300
Investment in own shares		(27)	(18)
Share-based payments deferred tax reserve		576	571
Other reserve		1,531	1,531
Translation reserve		248	427
Retained earnings		12,673	9,889
Equity attributable to equity holders of the parent		22,850	19,892

 

CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

 

				Share
		Share	Investment	based
	Share	based	in own	payments	Share		Other				Retained
	capital	payments	shares	deferred tax	premium		reserves		Translation		earnings	Total
	£'000	£'000	£'000	£'000	£'000		£'000		£'000		£'000	£'000
At 1 January 2009 (audited)	7,169	300	(18)	571		23		1,531		427	9,889		19,892
Share-based payments	-	202	-	5		-		-		-	-		207
Issue of share capital	8	-	-	-		-		-		-	-		8
Share options exercised	71	-	-	-		76		-		-	-		147
Shares purchased by EBT	-	-	(114)	-		-		-		-	-		(114)
Shares sold by EBT	-	-	105	-		-		-		-	-		105
Exchange differences on translation of foreign operations	-	-	-	-		-		-		(179)	-		(179)
Consolidated profit for the year to 31 December 2009	-	-	-	-		-		-		-	2,784		2,784
At 31 December 2009 (unaudited)	7,248	502	(27)	576	99		1,531		248		12,673	22,850

 

 

 

CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

 

 

		Share	Investment	Share based
	Share	based	in own	payments	Share	Other		Retained
	capital	payments	shares	deferred tax	premium	reserves	Translation	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2008 (audited)	7,157	154	(13)	320	17	1,531	-	6,580	15,746
Share based payments	-	146	-	251	-	-	-	-	397
Issue of share capital	5	-	-	-	-	-	-	-	5
Share options exercised	7	-	-	-	6	-	-	-	13
Shares purchased by EBT	-	-	(89)	-	-	-	-	-	(89)
Shares sold by EBT	-	-	84	-	-	-	-	-	84
Exchange differences on translation of foreign operations	-	-	-	-	-	-	427	-	427
Consolidated profit for the year to 31 Dec 2008	-	-	-	-	-	-	-	3,309	3,309
At 31 December 2008 (audited)	7,169	300	(18)	571	23	1,531	427	9,889	19,892

CONSOLIDATED STATEMENT OF CASH FLOW

For the year ended 31 December 2009

 

 

		(Unaudited) Year ended	(Audited) Year ended
		31 December 2009	31 December 2008
		£'000	£'000
Cash flows from operating activities
Profit from operations		2,403	2,699
Adjustments for:
Share of results of joint venture		66	(80)
Depreciation		678	673
Amortisation - intellectual property rights		168	168
- development costs		96	160
- software intangibles		26	24
Profit on sale of non-current assets		-	(35)
Increase in inventories		(826)	(505)
Increase in trade and other receivables		(1,583)	(1,613)
Increase in trade and other payables		826	1,140
Share based payments expense		202	146
Net cash inflow from operating activities		2,056	2,777
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment		-	56
Purchase of software		(20)	(19)
Capitalised research and development		(301)	(343)
Purchases of property, plant and equipment		(6,735)	(894)
Movements in investments in money market deposits		5,730	924
Interest received		74	487
Investment in joint venture		-	(1,376)
Acquisition of subsidiary		(69)	-
Movement in loans and receivables		(711)	(531)
Net cash used in investing activities		(2,032)	(1,696)
Cash flows from financing activities
Finance lease		(17)	(17)
Repayment of secured loan		(17)	(29)
Issue of equity shares		155	13
Shares purchased by EBT		(114)	(89)
Shares sold by EBT		105	84
Interest paid		(30)	(37)
Net cash from/(used in) financing activities		82	(75)
Net increase in cash and cash equivalents		106	1,006
Cash and cash equivalents at the beginning of the year		1,882	876
Effect of foreign exchange rate changes		4	-
Cash and cash equivalents at the end of the year		1,992	1,882

 

 

1. Reporting Entity

Advanced Medical Solutions Group plc ("the Company") is a public limited company incorporated and domiciled in England and Wales (registration number 2867684). The Company's registered address is Premier Park, 33 Road One, Winsford Industrial Estate, Cheshire, CW7 3RT.

 

The Company's ordinary shares are traded on the AIM market of the London Stock Exchange. The financial statements of the Company for the twelve months ended 31 December 2009 comprise the Company and its subsidiaries (together referred to as the "Group").

 

The Group is primarily involved in the design, development and manufacture of novel high performance polymers (both natural and synthetic) for use in advanced woundcare dressings and medical adhesives for closing and sealing tissue, for sale into the global medical device market.

 

2. Basis of Preparation

These preliminary statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2008 and those to be adopted at 31 December 2009 (see note 3).

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in April 2010.

 

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 December 2009 or 31 December 2008. The financial information for the year ended 31 December 2008 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s237(2) or (3) Companies Act 1985. The audit of the statutory accounts for the year ended 31 December 2009 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group's annual general meeting.

 

The financial statements have been prepared on the historical cost basis of accounting except as disclosed in the accounting policies set out below.

 

The individual financial statements for each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

 

3. Accounting policies

The same accounting policies, presentations and methods of computation are followed in the preliminary financial information as applied in the Group's latest annual audited financial statements, with the exception of the presentation of exceptional items and the adoption of IAS1 (revised). The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

Exceptional items are those items that are unusual because of their size, nature or incidence or that the directors consider should be disclosed separately to enable a full understanding of the Group's results. This includes non-recurring transaction abort costs and site relocation costs (see note6,7). Exceptional items have been presented separately on the face of the income statement. The directors consider that this presentation gives a fairer presentation of the results of the Group.

 

In addition, the Group has adopted IAS1 (revised) 'Presentation of financial statements'. There has been no effect on the presentation or disclosure in the preliminary announcement.

 

4. Segment information

 

For management purposes, the Group is organised into two business units, advanced woundcare and wound closure and sealants. These divisions are the basis on 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 a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments and related revenue, corporate assets, head office expenses and income tax assets. These are the measures reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance.

 

Business segments

The principal activities of the advanced woundcare business unit are the research, development, manufacture and distribution of novel, high performance polymers for use as wound dressings.

 

The principal activities of the wound closure and sealants business unit is the research, development, manufacture and distribution of medical adhesives and products for closing and sealing tissue.

 

 

Segment information about these businesses is presented below.

 

Year ended 31 December 2009 (unaudited)	Advanced woundcare £'000	Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Revenue
External sales	19,391	4,700	-	24,091
Inter-segment sales	43	-	(43)	-
Total revenue	19,434	4,700	(43)	24,091

Inter-segment sales are charged at prevailing market prices.

Result
Segment result		3,492	801	-	4,293
Unallocated expenses					(1,890)
Profit from operations					2,403
Finance income					21
Finance costs					(30)
Profit before tax					2,394
Tax					390
Profit for the year					2,784

 

Exceptional costs are allocated as follows: site move expenditure (£909,000) is included in Advanced Woundcare's result; and, aborted transaction costs (£763,000) are included in unallocated expenses.

 

 

Notes Forming Part of the Consolidated Financial Statements

4. Segment information(continued)

 

At 31 December 2009 (unaudited) Other Information	Advanced woundcare £'000		Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Capital additions:
Software intangibles		10	10		20
Research & development		297	4		301
Property, plant and equipment		6,570	165		6,735
Depreciation and amortisation		626	342		968
Balance sheet
Assets
Segment assets		22,868	5,710		28,578
Unallocated assets					1,217
Consolidated total assets					29,795
Liabilities
Segment liabilities		4,413	988		5,401
Unallocated liabilities					1,544
Consolidated total liabilities					6,945

 

 

 

Year ended 31 December 2008 (audited)	Advanced woundcare £'000	Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Revenue
External sales	16,415	3,901	-	20,316
Inter-segment sales	33	-	(33)	-
Total revenue	16,448	3,901	(33)	20,316

Inter-segment sales are charged at prevailing market prices.

Result
Segment result		3,036	848	-	3,884
Unallocated expenses					(1,185)
Profit from operations					2,699
Finance income					265
Finance costs					(37)
Profit before tax					2,927
Tax					382
Profit for the year					3,309

 

Notes Forming Part of the Consolidated Financial Statements

 

4. Segment information (continued)

 

At 31 December 2008 (unaudited) Other Information	Advanced woundcare £'000		Wound closure & sealants £'000	Eliminations £'000	Consolidated £'000
Capital additions:
Software intangibles		15	4	-	19
Research & development		294	49	-	343
Property, plant and equipment		727	251	-	978
Depreciation and amortisation		721	304	-	1,025
Balance sheet
Assets
Segment assets		10,596	5,019	-	15,615
Unallocated assets					8,944
Consolidated total assets					24,559
Liabilities
Segment liabilities		2,847	1,079	-	3,926
Unallocated liabilities					741
Consolidated total liabilities					4,667

Included in the advanced woundcare segment for the year ended 31 December 2008 are assets of £1,749,000 and results of £80,000 in respect of Corpura B.V., the Group's joint venture.

 

Geographical segments

The advanced woundcare and wound closure and sealants segments operate mainly in the UK, with a sales office located in the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

 

The following table provides an analysis of the group's sales by geographical market, irrespective of the origin of the goods/services, based upon location of the Group's customers:

		(Unaudited) Year ended	(Audited) Year ended
		31 December 2009	31 December 2008
		£'000	£'000
United Kingdom		7,268	7,023
Europe excluding United Kingdom		10,269	7,991
United States of America		5,888	4,810
Rest of World		666	492
		24,091	20,316

All assets are classified as under the United Kingdom due to the immateriality of the carrying value of all assets held in the United States of America.

 

5. Profit from operations

	(Unaudited) Year ended	(Audited) Year ended
	31 December	31 December
	2009	2008
	£'000	£'000
Profit from operations is arrived at after charging/(crediting):
Profit on sale of non-current assets	-	(35)
Depreciation of property, plant and equipment	678	673
Amortisation of:
- acquired intellectual property rights	168	168
- software intangibles	26	24
- development costs	96	160
Operating lease rentals - plant and machinery	131	90
- land and buildings	575	315
Research and development costs expensed to the income statement	1,613	1,534
Cost of inventories recognised as expense	11,646	9,993
Staff costs	8,397	6,929
Fair value(gain)/ loss on derivative financial instruments	(599)	599
Net foreign exchange loss/(gain)	513	(474)

6. Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

	(Unaudited) Year ended 31 December 2009 £'000	(Audited) Year ended 31 December 2008 £'000
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	2,784	3,309
Number of shares	'000	'000
Weighted average number of ordinary shares for the purposes of basic earnings per share	144,166	143,284
Effect of dilutive potential ordinary shares:
share options, deferred share bonus, LTIPs	11,200	9,979
Weighted average number of ordinary shares for the purposes of diluted earnings per share	155,366	153,263

 

7. Exceptional items

 

The Group is in the process of rationalising its two existing sites in Winsford into a new facility. During the year ended 31 December 2009 expenditure of £909k was incurred in respect of the site move.

 

On 9 April 2009, the Board announced that it had been pursuing an acquisition opportunity that had reached an advanced stage of discussions but which had now been terminated. The costs incurred in the year ended 31 December 2009 in respect of this aborted transaction amounted to £763k.

 

During the year ended 31 December 2008, profit of £35,000 was recognised on disposal of property, plant and equipment.

 

 

8. Dividends

 

No dividend has been proposed.

 

9. Acquisition of subsidiary

 

On 30 September 2009 the Group acquired the remaining 50.6% of the issued share capital of Corpura B.V., having acquired 49.4% on 30 May 2008. Corpura B.V. develops and produces hydrophilic polyurethane foams in Etten Leur, the Netherlands. This transaction has been accounted for by the purchase method of accounting.

 

	Book value	Fair value
	£	£
Net assets acquired
Intellectual property	137	-
Property, plant and equipment	1,278	1,104
Inventories	214	122
Trade and other receivables	272	272
Cash and cash equivalents	169	169
Trade and other payables	(202)	(202)
Loans	(1,403)	(1,403)
	465	62
Goodwill		3,062
Total consideration		3,124

Goodwill is denominated in Euros in line with Corpura's functional currency and the currency of consideration. Re-translation of the goodwill at the closing Euro rate on 31 December 2009 lead to a reduction in the goodwill recorded on the balance sheet to £2,978,000. This translation difference of £84,000 is recognised within the Group's translation reserve.

Satisfied by:
Cash		1,687
Deferred consideration		1,302
Directly attributable costs		135
		3,124

 

The above consideration includes amounts paid in 2008 in respect of the formation of the joint venture totalling £1,376,000 (cash of £1,276,000; directly attributable costs £100,000) together with exchange on these Euro-denominated transactions at 30 September 2009 amounting to £277,000.

Net cashflow arising on acquisition
Cash consideration, including directly attributable costs		238
Cash acquired		(169)
		69

 

 

The goodwill arising on the acquisition of Corpura B.V. is attributable to the anticipated improved profitability of the Company and the development of new products utilising the Company's platform material for delivering new technologies that can help accelerate wound healing, neither of which relate to separately identifiable intangible assets.

 

Corpura B.V. contributed £701,000 to revenue and £21,000 to profit before tax for the period between the date of acquisition and the balance sheet date.

 

If the acquisition of Corpura B.V. had been completed on the first day of the financial year, group revenues for the period would have been £25,468,000 and the group profit attributable to equity holders of the parent would have been £2,711,000.

 

10. Going Concern

 

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group's financial position and cash flow forecasts for the next 12 months. These have been based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment.

 

With regards to the Group's financial position, it had cash and cash equivalents at the year-end of £2.0 million. The Group also has in place a revolving credit facility of £5 million inclusive of a £1 million overdraft facility which expires in July 2012.

 

While the current economic environment is uncertain, AMS operates in a market whose demographics are extremely favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, strong market growth is predicted. The Group has a number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies.

 

Having taken the above into consideration the Directors have reached a conclusion that the Group is well placed to manage its business risks in the current economic environment. Accordingly, they continue to adopt the going concern basis in preparing the preliminary financial information.

 

11. Approval

 

This statement was approved by the Directors on 9 March 2010. A copy can be obtained from the Secretary at the Company's Head Office, Premier Park, 33 Road One, Winsford Industrial Estate, Winsford, Cheshire CW7 3RT.

 

This information is provided by RNS

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