Advanced Medical Solutions Group Regulatory News (AMS)

Advanced Medical Solutions Group plc

("AMS" or the "Group")

Unaudited preliminary results for the year ended 31 December 2014

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced woundcare specialist company, today announces its unaudited preliminary results for the year ended 31 December 2014.

Financial Highlights

· New five year £30 million multi-currency revolving credit facility agreed

· Proposed final dividend of 0.48p per share, making a total dividend for the year of 0.70p (2013: 0.60p), up 16.7%

Business Highlights:

· Good revenue growth across the major Business Units

o Branded Direct up 3% to £23.6 million (2013: £22.9 million), and up 6% at constant currency

o Branded Distributed up 17% to £10.2 million (2013: £8.8 million), and up 24% at constant currency

o OEM up 7% to £25.3 million (2013: £23.6 million), and up 9% at constant currency

o Bulk Materials down 7% to £3.9 million (2013: £4.2 million), and down 4% at constant currency

· Strong performance in the US with LiquiBand® tissue adhesive range

o Revenues up 43% at constant currency to £4.1 million

o As at 31 December 2014, market share by volume increased to 19% (July 2014: 18%) in the non-hospital market and to 7% (July 2014: 6%) in the hospital segment

· ActivHeal® continued to make good progress in the NHS, with an 8% increase in revenues and increase in market share to 7% (2013: 5%)

· Steady progress with RESORBA® brands in Germany, resulting in 4% growth at constant currency

· Silver alginate revenues increased by 10% at constant currency to £13.1 million (2013: £12.1 million)

· Hernia mesh fixation device LiquiBand® Fix8™ successfully launched.

Commenting on the results, Chris Meredith, Chief Executive Officer of AMS, said:

"2014 has been another year of good growth for AMS, with our three largest business units all delivering solid performances despite challenging currency conditions. We were particularly enouraged by strong growth in the US, where the performance, range and pricing of our LiquiBand® tissue adhesives is helping to drive gains in market share, and in the UK, where the ActivHeal® range continues to provide high performance, cost effective solutions for the NHS. The successful launch of the LiquiBand® Fix8™ hernia mesh fixation device, marking the first use of our medical adhesives in internal applications, demonstrates our continued commitment to investing in innovation.

"With the continuing growth in our larger business units, the strong performance of our products and our ambitions for the Group, we are confident that AMS is well placed to drive growth as well as continued improvements in operational efficiencies and we remain excited by the prospects for our future."

- End -

1 Constant currency removes the effect of currency movements by translating the current period's performance at the previous period's exchange rates

2 All items are shown before amortisation of acquired intangible assets which, in 2014, were £0.4 million (2013: £0.4 million) as defined in the financial review

For further information, please visit www.admedsol.com or contact:

About Advanced Medical Solutions Group plc 

AMS is a world-leading independent developer and manufacturer of innovative and technologically advanced products for the global surgical, wound care and wound closure markets, focused on quality outcomes for patients and value for payors. AMS has a wide range of products that include silver alginates, alginates, foams, tissue adhesives, sutures and haemostats, which it markets under its brands ActivHeal®, LiquiBand® and RESORBA® as well as supplying under white label.AMS's products, manufactured out of two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic, are sold in more than 70 countries via a network of multinational or regional partners and distributors, as well as via AMS's own direct sales forces in the UK, Germany, the Czech Republic and Russia. Established in 1991, the Company has 472 employees. For more information please see www.admedsol.com.

Chairman's Statement

2014 was another year of good growth across the business - both operationally and financially. AMS continues to progress as a leading, international provider of high quality, high value innovative and technologically advanced products for the wound care and wound closure markets.

Operationally, the performance of LiquiBand in the US was particularly strong and we made considerable progress towards our goal of building a 20% market share. We also launched our LiquiBand® Fix8™ hernia mesh fixation device for use as a medical adhesive inside the body. This was an important development for the Group, opening up potential new markets as we seek to extend the application of our tissue adhesives to other internal procedures.

Financially, we are pleased to report a 6% increase in revenue to £63.0 million (2013: £59.5 million), representing growth of 9% on a constant currency basis and an increase in adjusted2 profit before tax of 15% to £15.6 million (2013: £13.5 million).

The Group continues to work on a number of significant opportunities to drive growth resulting from existing products and geographic markets as well as from new products in development.

The Group ended the year with net cash of £17.3 million (2013: £5.3 million), and has taken advantage of the favourable terms available for borrowing to put in place a five-year, unsecured, new multi-currency, credit facility for £30 million. This facility is as yet unused. AMS continues to be in robust financial health and is well positioned to invest in internal development projects as well as potential licensing opportunities and acquisitions in line with the Group's strategy.

Dividend

The Board is proposing a final dividend of 0.48p per share, making a total dividend for the year of 0.70p per share, a 16.7% increase on 2014. If approved at the Annual General Meeting on 21 May 2015, this will be paid on 29 May 2015 to shareholders on the register at the close of business on 7 May 2015.

People

Finally, on behalf of the Board, I would like to thank all our employees, customers, suppliers, business partners and shareholders for their continued support over the past year.

Peter Allen

Chairman

2 All items are show before amortisation of acquired intangible assets which, in 2014, were £0.4 million (2013: £0.4 million) as defined in the financial review

Chief Executive's Statement

I am pleased to report good growth across our major business units despite foreign exchange headwinds. With more than 75 percent of our sales outside the UK, our business is truly international and therefore affected by currency fluctuations.

Branded Direct

The Branded Direct Business Unit reports sales of our branded products through our own sales forces in the UK, Germany and Czech Republic. Its revenue grew 3% to £23.6 million (2013: £22.9 million) and by 6% at constant currency.

ActivHeal®

ActivHeal®, which delivers a range of woundcare dressings that offer significant cost savings without compromising on clinical outcomes or patient care, continues to be a compelling proposition for the NHS. Sales of our ActivHeal® range increased by 8% to £6.0 million (2013: £5.5 million). We are encouraged by the most recent data confirming that AMS had further increased its market share to 7.1% (2013: 5.5%) at the end of 2014. Encouragingly, ActivHeal® has had a strong start to 2015 with a number of tender and formulary wins from new NHS Hospital Trusts and we expect increased growth throughout the year.

LiquiBand®

We continue to make good progress in the UK with LiquiBand®. In the Accident and Emergency Room ('A&E') sales grew 8% to £2.6 million (2013: £2.5 million) and sales into the Operating Room ('OR') increased 34% to £0.6 million (2013: £0.45 million).

AMS' products have been used in A&E for a number of years and the good growth we have seen reflects the progress made by our focused sales team in this sector. The UK surgical sales team, now in their second year, is accessing the OR with a growing range of products that now includes sutures and haemostats. This team will also start selling LiquiBand® Fix8™, our hernia mesh fixation device.

Sales of LiquiBand® in Germany were flat at £1.4 million at a reported level, but increased by 5% at constant currency. Steady progress is expected to continue in Germany.

RESORBA®

Sales of RESORBA® branded products in Germany and the Czech Republic were slightly lower at £13.0 million (2013: £13.1 million) at a reported level and increased by 4% at constant currency. Sales of haemostats increased by 12% at constant currency to £3.6 million (2013: £3.4 million) and sales of sutures and collagens into the dental market were unchanged at £3.8 million, whilst sales of sutures into hospitals grew 2%, reversing the decline reported in 2013.

Although the German suture market continues to be challenging and is expected to remain so over the next year, we believe we are well placed to benefit from the competitive pressures in the market with our extensive range of competitively priced products. Our German commercial operations were strengthened by the appointment of a national sales manager in February 2015. The introduction of the LiquiBand® Fix8™ device is also expected to support progress in 2015, and we are reviewing the optimal way to service the dental market in Germany, which involves mulitple call points.

In the UK, we are actively working on a number of hospital tenders and evaluations with the goal of becoming the main suture supplier to those hospitals. We believe our ability to supply a comprehensive range of top quality sutures that provide cost savings to hospitals is compelling. Winning any one of these current evaluations would significantly increase the presence of our brand in the UK.

In R&D, our focus is on extending the attributes of our collagens to meet the needs of dental practitioners and oral surgeons. We expect to obtain approval for an enhanced collagen cone in 2015, as well as making good progress in including new antibiotics in our haemostats.

Branded Distributed

The Branded Distributed Business Unit reports the sales of our brands through distributors in territories where we do not have a national sales team.

Branded Distributed revenue was 17% higher at £10.2 million (2013: £8.8 million) and 24% higher at constant currency. The main contributor to this growth was LiquiBand® sales in the US, which totaled £4.1 million and accounted for 40% of total sales.

LiquiBand® in the US

Sales of LiquiBand® in the US increased by 36% to £4.1 million (2013: £3.0 million) and by 43% at constant currency. The new distribution partner added at the end of 2013 performed well throughout the year and contributed to the growth in sales alongside existing partners. Given the high level of sales in the second half of 2013, which included some pipeline filling at the end of the year, our sales growth performance in 2014 was particularly strong. The latest data for December 2014 shows our volume market share increasing to 7%, up from 6% at July 2014, in the US hospital sector, while our volume market share in the US non-hospital, or alternate site, market is now estimated at 19%, up from 18% at July 2014.

We launched our 2-octyl cyanoacrylate formulation with one of our existing distribution partners in the second half of 2014 and have already added additional partners since the start of 2015. A strength of the business is the range of formulations of cyanoacrylate on offer, including very fast setting formulations with applicators allowing for quick, precision closure, and film-forming formulations that provide a barrier layer over wounds as well as closing the wound itself. With formulations that have properties in between, we have products that can accommodate the full spectrum of wound closing needs.

LiquiBand® in the EU and Rest Of the World

Elsewhere, within the EU and ROW, LiquiBand® sales through our distributors continued to show good growth, with our distributors in France and Italy continuing to perform well. Overall sales increased by 15% to £1.5 million (2013: £1.3 million) at reported currency and constant currency.

The regulatory approval process for LiquiBand® in China is progressing, however owing to changes in the regulatory pathway, we now expect approval later in 2015.

Hernia Mesh Fixation device - LiquiBand® Fix8™

We received approval to market this product in Europe on 29 May 2014 and it has now been launched in the UK and Germany with our own sales teams as well as through some European distributors who are able to support the product.The initial response has been very positive, with a number of surgeons keen to endorse the product. We are also receiving valuable feedback about other possible applications suitable for this type of device which we are currently working on.

We do not anticipate significant sales in the first half of the yearas surgeons are individually trained on how to use the device and we wait to see the outcome of their surgery. Following positive feedback, we are confident that the product will contribute to growth in the second half of 2015 and thereafter.

RESORBA®

Sales of RESORBA® products to all export markets other than Russia grew by 6% at reported currency to £2.9 million (2013: £2.8 million), and by 10% at constant currency. Growth was seen across several territories, with our French, Italian and Chinese distributors performing strongly. Sales in Russia increased by 4% at constant currency, but decreased 18% to £1.3 million (2013: £1.6 million) at reported currency, reflecting the weakening Rouble. The Russian market is unlikely to grow in the forseeable future.

Work continues to gain approval to supply RESORBA® sutures and haemostats into the US. We have received our first approval for the sale of one type of suture for the US market and are still on target for the remainder of the suture range to be approved in the first half of 2015, with the expectation that we can launch the products in the second half of 2015.

In R&D our focus is on continuing to improve the formulations of the base monomers that are used in our adhesives as well as extending the applications of tissue adhesives for internal use.

OEM

The OEM Business Unit reports the sales of products that are sold under third parties' brands.

OEM revenue increased by 7% at reported currency to £25.3 million (2013: £23.6 million) and by 9% at constant currency.

Our silver alginate ranges of dressings continued to perform well, with sales increasing by 8% at reported currency and by 10% at constant currency to £13.1 million (2013: £12.1 million). Our partners continued to do well with the range of silver fibre dressings we provide, gaining market share as well as accessing new geographical markets. We continue to support them with regulatory approvals and marketing data.

Sales of our foam-based dressings were flat at £1.8 million. This was due to one of our partners launching a new product range last year with sales following the typical second year post launch sales pattern reduction. Adjusting for this, sales elsewhere were encouraging and up 20% on a proforma basis. Our other woundcare and skin protectant products delivered good growth and grew 9% to £9.7 million (2013: £8.9 million), while the collagen OEM business acquired with RESORBA® was flat year-on-year at £0.8 million, with little change expected in 2015.

In R&D, the focus is on further developing our foam range to include both an antimicrobial and an atraumatic foam. These products are well advanced and we expect approvals in the first half of 2015, with a launch later this year.

Bulk Materials

The Bulk Business Unit reports sales of bulk materials to third party convertors.

Bulk Materials revenue decreased by 7% at reported currency to £3.9 million (2013: £4.2 million) and by 4% at constant currency.

Rollstock foam contributed around 85% of Bulk revenue and good growth was seen by one signficant customer that had destocked in 2013. However, sales by some newer and smaller partners were disappointing. Until sufficient scale of revenue is achieved with the customer base, the Bulk Materials Unit will remain vulnerable to the ordering patterns of its partners and customers.

In R&D, the focus is on developing new foam formulations with antimicrobials, working in conjunction with the OEM business unit. These products are expected to be launched in 2015.

Operations

Efficiency and gross margins

We continue to strive for operational improvements by reducing set up times, eliminating non-value added activities and increasing outputs. These incremental efficiencies are helping to improve gross margins acoss the Group and have helped to generate an improvement of approximately 100 basis points in 2014, offsetting some of the negative impact resulting from movements in currency. We have invested in improving our converting capability in Winsford. This equipment is still being commissioned, but we expect to increase our operational flexibility and improve efficiency in 2015 as a result.

Capacity and resource

We have also identified the need to increase the capacity of our collagen plant in Germany. We anticipate that £1.0 million of investment is required in the plant in the second half of 2015. We continue to invest in improving our ERP (Enterprise Resource Planning) management and reporting systems. Following the successful launch of our new ERP system at our Plymouth site, the system was subsequently launched in Winsford in February 2014 and in Etten Leur in the Netherlands in September 2014. We constantly monitor our systems across the Group and will invest in further improvements to systems in Germany.

Regulatory and quality assurance

With the regulatory framework gaining in complexity, we have continued to invest in both Regulatory and Quality functions and systems to ensure that we are able to support our partners with winning approvals in new markets as well as obtaining approval for our own products. We anticipate that we will continue to invest in these areas in 2015.

R&D

The Group continues to develop new products through its R&D teams. We are well advanced in the approval process for our antimicrobial and atraumatic foams and, whilst external regulatory pathways are out of our control resulting in unclear timings, we expect to obtain several product approvals in 2015, enabling these products to be launched thereafter.

Summary and Outlook

We delivered revenue growth of 6% (at constant currency this would have been 9%) and significantly improved profitability and cash generation during the year.

Our three largest business units all delivered solid performance despite challenging currency conditions. We were particularly encouraged by strong growth in the US, where the competitive quality, range and pricing helped to drive gains in our market share. The successful launch of the LiquiBand® Fix8™ hernia mesh fixation device demonstrates our continued commitment to investing in innovation and during the year ahead we expect further product launches and advancements in our R&D activities.

With continuing growth across our major business units, due to the strong performance of our products, new products progressing well and our anticipated broadening into new geographies, we are confident that the Group is well placed to drive growth as well as continued improvements in efficiencies and we remain excited by the prospects for our future.

Financial Review

Summary

Group revenue increased by 6% to £63.0 million (2013: £59.5 million). At constant currency, revenue growth would have been 9%.

Comparisons with 2013 are made on a pre-amortisation of acquired intangible asset cost basis, as we believe that this provides a more relevant representation of the Group's trading performance. Amortisation of acquired intangible assets was £0.4 million in the period (2013: £0.4 million).

To aid comparison, the Group's adjusted income statement is summarised in Table 1 below.

3 Administration expenses exclude amortisation of acquired intangible assets

4 See Note 7 Earnings per share for details of calculation

Revenues were negatively impacted by approximately £1.8 million due to the effects of currency movements in the year. This also had an impact on Group gross margins which were reduced by 50 bps as a result. Gross margins were also negatively impacted by sales mix effect by 120bps, however, this was partially offset by the 100bps improvement made from operational eficiences.

Adjusted operating profit increased by 10% to £15.6 million (2013: £14.1 million) and the adjusted operating margin increased by 100 bps to 24.7% (2013: 23.7%). At a reported level, administration costs were flat year on year, helped by currency effects. Adjusting for currency, administration costs would have increased by 5%. Within this, the Group expensed to the income statement £2.1 million on R&D (2013: £2.2 million). Spend as a percentage of sales reduced to 3.3% (2014: 3.7%), mainly as a result of timing of projects.

Profit before tax for the year was 16% higher at £15.2 million (2013: £13.1 million).

The Group's effective rate of tax for the year was 15.5% (2013: 13.5%). This is reflective of the utilisation of previously unrecognised brought-forward tax losses in the UK, together with patent box and R&D relief. It also reflects the impact of blending profits and losses from different countries and the different tax rates associated with these countries. The effective tax rate of the Group is expected to increase as a result of the tax losses being used up.

A reconciliation between the standard rate of taxation in the UK and the Group's effective rate is summarised in Table 2 below.

Table 2

Earnings (excluding amortisation of acquired intangible assets) increased by 13% to £13.3 million (2013: £11.8 million), resulting in a 12% increase in adjusted basic earnings per share to 6.39p (2013: 5.72p) and a 11% increase in diluted adjusted earnings per share to 6.26p (2013: 5.64p).

Profit after tax increased by 13% to £12.9 million (2013: £11.4 million), resulting in a 12% increase in basic earnings per share to 6.20p (2013: 5.52p) and a 12% increase in diluted earnings per share to 6.08p (2013: 5.45p).

The Board is proposing a final dividend of 0.48p per share, to be paid on 29 May 2015 to shareholders on the register at the close of business on 7 May 2015. This follows the interim dividend of 0.22p per share that was paid on 31 October 2014 and would make a total dividend for the year of 0.70p per share (2013: 0.60p), a 17% increase on 2013.

The operational performance of the Business Units is shown in Table 3 below. The adjusted profit from operations and the adjusted margin are shown after excluding amortisation of acquired intangibles. In determining, and to aid comparison of the operational margins of the individual Business Units, the revenue of the Bulk Materials Business Unit sales made to other Business Units, £0.7 million (2013: £0.8 milllion) are included.

Table 3

5 excludes amortisation of intangible assets

Branded Direct

The adjusted operating margin of this Business Unit remained at a similar level to the prior year at 27.4% (2013: 27.3%) and lower than the position at H1 2014 (29.6%). As indicated at the half year we are investing in sales and marketing in our increasing direct sales teams.

Branded Distributed

The adjusted operating margin of this Business Unit increased to 28.3% (2013: 20.3%), reflecting the improved profitability from the increase in sales in this Business Unit and in particular from sales to the US. The growth in sales to the US mitigated the impact in margin from sales made into Russia and continued the improvement in margin seen at H1 2014 (18.7%).

OEM

The adjusted operating margin of this Business Unit was at a the same level to the prior year at 24.7% (2013: 24.7%), and lower than the margin reported at H1 2014 (27.1%). Margins are dependent on the mix of business, which at the half year had a greater percentage of silver alginate sales than at the full year.

Bulk Materials

The adjusted operating margin of this Business Unit decreased to 10.6% (2013: 13.5%), but improved from the position in H1 2014 (9.8%). Margins were affected by the lower volumes of production as well as the different sales mix.

Geographic breakdown of revenues

The geographic breakdown of Group revenues in 2014 is shown in Table 4 below:

Table 4

Although nearly 52% of the Group's sales are in Europe (excluding the UK), only around 34% of sales are denominated in Euros. Approximately 80% of all sales to the US are denominated in US Dollars. The Group hedges significant transaction exposure by using forward contracts and options and aims to have 70% of its estimated transactional exposure for the next twelve months hedged. The foreign currency hedges put in place in 2013 mitigated the effect of the adverse effects of currency in 2014 by around £1million.

Cash Flow

Table 5 summarises the Group cash flows.

Table 5

Note: EBITDA is earnings before interest, tax, depreciation, intangible asset amortisation and share based payments

EBITDA increased by 10% to £18.6 million (2013: £16.9 million).

Working capital reduced slightly in the year but this was mainly due to the effects of translating overseas working capital balances held in euros into sterling. 4.2 months of supply of inventory was held across the Group, slightly increased compared with the prior year (2013: 4.0 months of supply). Trade debtor days remained at the same level to the prior year at 43 (2013: 43) while trade payable days decreased to 36 (2013: 42).

The Group generated net cash from operating activities of £18.4 million (2013: £14.2 million) (see Table 5) and had net cash of £17.3 million (2013: £5.3 million) at the end of the year.

We invested £2.4 million in capital equipment, software and capitalised R&D in the year (2013: £2.0 million). We have invested in equipment around the Group that improves converting and packaging as well as in business systems.

The Group generated a free cash flow of £14.2 million in the year (2013: £11.5 million). The conversion of adjusted operating profit into free cash flow was 91% (2013: 81%).

The Group paid its final dividend for the year ended 31 December 2013 of £0.85 million (2013:for the year ending 2012, £0.71 million) on 28 May 2014, and its interim dividend for the six months ended 30 June 2014 of £0.46 million (2013: £0.40 million) on 31 October 2014.

In December 2014 the Group entered into a new, five-year, £30 million, multi-currency revolving credit facility with an accordion option under which AMS can request up to an additional £20 million on the same terms. The previous facility for £4 million was due to expire in 2015. The Group chose to take advantage of favourable credit conditions to put in place a more suitable facility to support the Group's growth ambitions. The new facility is provided jointly by the Group's existing bankers, HSBC, as well as The Royal Bank of Scotland PLC. It is unsecured on the assets of the Group and has not been drawn down. This facility carries an annual interest rate of LIBOR or EURIBOR plus a margin that varies between 0.65% and 1.75% depending on the Group's net debt to EBITDA ratio.

At the end of the period, the Group had net cash of £17.3 million (2013: £5.3 million). The movement in net cash from the start of the year to net cash at the end of the year is reconciled in Table 6 below:

Table 6

The Group's going concern position is fully described in note 2.

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Group

CONSOLIDATED STATEMENT OF CASH FLOWS

Notes Forming Part of the Condensed Consolidated Financial Statements

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 plc. The consolidated financial statements of the Company for the twelve months ended 31 December 2014 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 materials, and medical adhesives and sutures for closing and sealing tissue, for sale into the global medical device market and dental market.

2. Basis of preparation

These condensed unaudited consolidated financial statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2013.

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 2015.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 December 2014 or 31 December 2013. The financial information for the year ended 31 December 2013 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditor 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 s498 (2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2014 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 in the annual report for the year ended 31 December 2013.

With regards to the Group's financial position, it had cash and cash equivalents at the year end of £17.3 million. The Group also has in place a five-year, unsecured, new multi-currency, credit facility for £30 million which was undrawn in during 2014.

While the current economic environment is uncertain, the Group operates in markets whose demographics are favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, 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 announcement.

The Group has not yet adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures (2011), IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2011), IAS 32 Amendments to IFRS 7 and IAS 32, Amendments to IAS 36 Impairment of Assets, Amendments to IAS 39 Financial Instruments: recognition and measurement, Amendments to IFRS 10, IFRS12 and IAS 27. These have had no significant impact on this set of financial information.

3. Accounting policies

The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. 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.

4. Segment information

As referred to in the Chief Executive's Report, the Group is organised into four business units: Branded Direct, Branded Distributed, OEM (original equipment manufacturer) and Bulk Materials. These business units are the basis on which the Group reports its segment information.

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 purposes of resource allocation and assessment of segment performance.

Business segments

Segment information about these businesses is presented below.

Geographic segments

The Group operates mainly in the UK, the Netherlands, Germany, the Czech Republic and Russia, 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:

The following table provides an analysis of the Group's total assets by geographical location.

5. Profit from operations

6. Taxation

The tax assessed for the year is lower (2013: lower) than the standard rate of corporation tax in the UK (21.5%) as explained below:

Legislation to reduce the main rate of UK corporation tax to 21% and 20% was passed by parliament on 2 July 2013 to take effect from 1 April 2014 and 1 April 2015 respectively. The reduction in the main rate to 20% had been substantively enacted at the balance sheet date and, therefore, the deferred tax assets and liabilities are calculated in these financial statements at this rate.

In addition to the amount charged to the income statement the Group has recognised directly in equity:

· excess tax deductions related to share-based payments on exercised options, together with

· changes in excess deferred tax deductions related to share-based payments, totalling £120,000 deficit (2013: surplus £22,000).

7. Earnings per share

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