Surgical Innovations Regulatory News (SUN)

22 Apr 2005 06:00

Surgical Innovations Group plc Preliminary results for the year ended 31 December 2004 22 April 2005 Chairman's Statement Trading Review I am delighted to report another year of progress in your Group's overall performance in 2004. Group turnover increased from ‚£2.75 million in 2003 to ‚£3.03 million in 2004,an increase of 10%, which resulted in a 28% increase in pre-tax profit to ‚£ 174,000 compared with ‚£136,000 in the previous year. Earnings before interest, taxation and depreciation ("EBITDA") increased by 55% to ‚£445,000 in 2004 (2003: ‚£287,000). This reflects our significant investment in tooling and infrastructure in recent years to support our growing manufacturing requirements. EBITDA of ‚£445,000 is stated after research and development costs of ‚£330,000, continuing our prudent approach of writing off these costs as incurred. An exciting feature of your Group's performance in 2004 is the continuing growth in products for minimally invasive surgery (MIS), our core business. Sales of these products accounted for 82% of Group turnover in 2004, comparedwith 69% in 2003. This reflects our continually developing relationships withkey internationally renowned strategic partners: Aesculap, Teleflex Medical and Cardinal Health. Sales Strategy As part of our sales strategy, during the last 12 months we have addressed the need to increase the UK presence of our own branded products. The strategy has been to instigate a collaborative sales agreement with established regional independent agents, enabling the Group to sell directly into all UK hospitals. This also provides an opportunity to promote additional third-party complementary products. In addition, we have strengthened our relationships with our two major UK distributors, B Braun Medical and Mantis Surgical, by enhancing our contractual arrangements. We are seeking to increase sales through the expansion of our worldwide distribution network and recently we have signed exclusive distribution contracts in the Benelux countries and Australia. The Group also continues tobuild on its position in the Middle Eastern markets. Design and Development As previously reported, the Group is committed to ongoing investment in product design and development as a key part of maintaining its position at the forefront of the MIS market. This enables the Group to maintain a strategic advantage and support valuable relationships with major international healthcare companies. The Design Team, by utilising their undoubted skills, has been tasked to seek external projects that contribute to the growth of the Group. I am pleased to report that in the current year this initiative has already produced results. For example, the Group has beenawarded development contracts for the use of its technology in aero-engine maintenance, which could potentially open up a new income stream. An area that is receiving ever-growing media and government attention is thatof obesity and its social and economic costs to society. As the pressure to aid the morbidly obese increases, there will be growth in the number of bariatric ("anti-obesity") cases which involve gastric banding or stomach stapling. We provide specialist products in this field and are examining waysin which we can increase our product portfolio in this potentially lucrative area. Increasing Profile Your Board does not feel that the Group's value and growth record over the past six years is reflected in its share price. Therefore we are investing ina financial public relations campaign, targeted at the financial investment community, particularly institutions that operate in the small-cap marketplace. We continue to actively seek strategic alliances, mergers and acquisitions and are aware of the need to have our progress reflected in increased shareholder value. Prospects Last year, I concluded by saying that we approach 2004 with optimism for future growth in sales and profitability. I am delighted that my optimism wasjustified and 2005 has commenced with a strong order book. I am confident of further growth throughout the year. Finally, on your behalf, I wish to thank my Board colleagues and employees for their continued dedication and commitment. Doug Liversidge CBE 21 April 2005 Consolidated Profit and Loss Account For the year ended 31 December 2004 Notes 2004 2003 ‚£'000 ‚£'000 Turnover (including Royalties) 3,032 2,750 Cost of sales (1,432) (1,312) Gross profit 1,600 1,438 Administrative expenses (1,358) (1,255) Operating profit 242 183 Interest payable (68) (47) Profit on ordinary activities before taxation 174 136 Tax on profit on ordinary activities 38 3 Retained profit 212 139 Earnings per ordinary share 2 0.08p 0.05p Consolidated Balance Sheet As at 31 December 2004 2004 2003 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Fixed assets Tangible assets 811 892 Current assets Stocks 881 721 Debtors 1,215 1,245 Cash at bank 1 - 2,097 1,966 Creditors: amounts falling due (1,043) (1,111) within one year Net current assets 1,054 855 Total assets less current 1,865 1,747liabilities Creditors: amounts falling due (215) (352)after more than one year Net assets 1,650 1,395 Capital and reserves Called up share capital 2,580 2,559 Share premium account 16,070 16,048 Capital reserve 329 329 Accumulated losses (17,329) (17,541) (930) (1,164) Shareholders' funds 1,650 1,395 Consolidated Cash Flow Statement For the year ended 31 December 2004 Notes 2004 2003 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Net cash inflow from operating 3 130 265activities Returns on investments and servicing of finance Interest payable on finance (29) (23) leases Interest payable on bank (32) (17) overdrafts Interest payable on (7) (7) convertible loan notes Net cash outflow from returns (68) (47)on investments and servicing of finance Taxation 18 37 Capital Expenditure: purchases (21) (158)of tangible fixed assets Net cash inflow before 59 97financing Financing Issue of share capital 21 - Receipts from borrowings 22 - Capital repayments under bank (7) (3) loans Capital repayment under (96) (63) finances Net cash outflow from (60) (66)financing (Decrease)/increase in cash 4 (1) 31 Notes For the year ended 31 December 2004 1. Accounting policies The principal accounting policies which remain unchanged from the previous year, are as follows: a) Basis of accounting The financial statements have been prepared under the historical cost basis of accounting and in accordance with applicable Accounting Standards in the United Kingdom. b) Basis of consolidation The Group financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31 December 2004. The results of subsidiaries accounted for under the acquisition accounting method are included in the consolidated profit and loss from the date of their acquisition. The results of subsidiaries, accounted for under the merger accounting method, are included in the consolidated profit and loss account as if they had always been part of the Group. Intra-Group sales and results are eliminated on consolidation and all sales and results relate to external transactions only. 2. Earnings per ordinary share The earnings per ordinary share has been calculated by dividing the profit attributable to ordinary shareholders for the year ended 31 December 2004 of ‚£212,000 (2003 : ‚£139,000) by the weighted average number of ordinary shares in issue during the year of 256,955,941 (2003 : 255,659,894) and amounted to 0.08p per share (2003 : 0.05p per share). The Group has two categories of dilutive potential ordinary shares, those share options granted where the exercise price is less than the average price of the Company's ordinary shares during the year and the remaining convertible loan notes. The dilution has no effect on basic earnings per share. 3. Reconciliation of operating profit to net cash inflow from operating activities 2004 2003 ‚£'000 ‚£'000 Operating profit 242 183 Depreciation of tangible fixed assets 203 104 Increase in stocks (160) (159) Decrease/(increase) in debtors 50 (206) (Decrease)/increase in creditors (205) 343 Net cash inflow from operating activities 130 265 4. Reconciliation of net cash flow to movement in net debt 2004 2003 ‚£'000 ‚£'000 (Decrease)/increase in cash in the year (1) 31 Cash outflow from finance leases and loans 103 66 Change in net debt resulting from cash flows 102 97 New finance leases and loans (101) (178) Movement in net debt 1 (81) Net debt at beginning of year (640) (559) Net debt at end of year (639) (640) 5. Analysis of changes in net debt At Cash flow Non-cash At 1 January changes 31 December 2004 2004 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Cash at bank and in hand - 1 - 1 Bank overdrafts (173) (2) - (175) (1) Bank loan (5) 7 (22) (20) Finance leases (352) 96 (79) (335) 103 Convertible loan notes (110) - - (110) (640) 102 (101) (639) 6. The Annual General Meeting of the Company will be held at the Village Hotel and Leisure Club, 186 Otley Road, Headingley Leeds LS16 5PR at 3.00pm on Tuesday, 28 June 2005. 7. The foregoing statements do not constitute the Group's statutory accounts. The Group's statutory accounts, on which the Group's auditors, Grant Thornton LLP, have given an unqualified opinion in accordance with Section 235 of the Companies Act 1985, are to be delivered to the Registrar of Companies and will be posted to shareholders shortly. Additional copies of the annual report and of this announcement will be available at the Company's registered office: Clayton Park, Clayton Wood Rise, Leeds, LS16 6RF. Enquiries: Surgical Innovations Group plc Graham Bowland, Finance Director Tel: +44 (0) 113 230 7597 Westhouse Securities LLP Tim Feather Tel: +44 (0) 161 838 9140 ENDSURGICAL INNOVATIONS GROUP PLC