Surgical Innovations Regulatory News (SUN)

30 Apr 2007 07:02

Surgical Innovations Group PLC30 April 2007 Press Release 30 April 2007 Surgical Innovations Group plc ("Surgical Innovations" or "the Group") Final Results Surgical Innovations Group plc ("Surgical Innovations" or the "Group") (AIM:SUN), the designer and manufacturer of innovative surgical devices, todayreports its final results for the twelve months ended 31 December 2006. Highlights • Eighth successive year of record sales, profit and earnings per share • Pre-tax profits increased substantially, up 98% to £696,000 (2005: £352,000) • Revenue up by 11% to £4.46 million (2005: £4.02 million) • Basic earnings per share (EPS) increased by 69% to 0.27p (2005: 0.16p) • Significant growth in sales of Minimally Invasive Surgery devices (up by 36%) • US sales focus aided by additional patent clearance and FDA approval • R&D expenditure increased by 18% to £292,000 (2005: £248,000), representing a significant investment in the Group's future product range • Simplification strategy implemented, improving production efficiencies for 2007 and beyond • Significant contracts already signed in 2007 with Teleflex Medical and Elemental Healthcare Commenting on the outlook, Doug Liversidge, Non-executive Chairman, said: "Afterour eighth successive year of record performance, we approach 2007 and beyondwith both enthusiasm and excitement. Fuelled by an ever-strengthening innovationand intellectual property base, combined with significant new distributionagreements, the Group looks forward to achieving further improvements inoperating margins and continued business growth." - ends - For further information: Surgical Innovations Group plcGraham Bowland, Joint Managing Director Tel: +44 (0) 113 230 7597graham.bowland@surginno.co.uk www.sigroupplc.com Hanson Westhouse LimitedTim Feather / Matthew Johnson Tel: +44 (0) 113 246 2610tim.feather@hansonwesthouse.com www.hansonwesthouse.com Media enquiries: AbchurchJustin Heath / Gareth Mead Tel: +44 (0) 20 7398 7700gareth.mead@abchurch-group.com www.abchurch-group.com CHAIRMAN'S STATEMENT Introduction I am delighted to be able to report another year of excellent progress forSurgical Innovations Group Plc (the Group). For the eighth successive year theGroup achieved a record level of sales, profit and earnings per share (EPS). The Group's reported sales revenue grew by 11% to £4.46m (2005: £4.02m).Significantly, sales within our core business of Minimally Invasive Surgery(MIS) devices rose by 36%. This has encouraged your Board to invest additionalresources in potentially lucrative internal development projects for newsurgical devices. Importantly, we have been able to deliver an improvement in our MIS operatingmargins as a result of our focus on manufacturing processes relating to ourstrategic product lines. The Board has taken the view to capitalise £190,000, of research and developmentcosts, net of specific grants, as they fulfil the requirements of the relevantaccounting standards. As a result, pre-tax profits have increased by 98% to £696,000 (2005: £352,000)which translates into basic EPS growth of 69% to 0.27p (2005: 0.16p). Business Review Instrument Division revenue increased by 36% to £3.65m (2005: £2.68m). Thisperformance is testament to our key product lines; the YelloPort port accesssystem and the Logic single use scissors range. We are currently focusing ourefforts on the United States laparoscopic market and substantial work has beenundertaken during the year to establish clear routes to market. Product Development Division revenue totalled £313,000 (2005: £535,000). Thisincome was generated from clients in both the medical device and industrialsectors. New customers were secured building upon our success with Rolls-Roycein 2005. This type of work from external customers can be extremely profitable,although it remains unpredictable, usually driven by urgent customer needs.Therefore, we took the decision to invest heavily in the year in internal MISproduct development. Our aim is to build upon our international network of MISdistributors, with its high demand and enthusiasm for new innovative products. Royalties from the licensing of EndoFlex to Cardinal Health totalled £249,000, adecrease of 11% on last year (2005: £281,000). After allowing for adversecurrency exchange rates during 2006, the actual sales value of our licensedproducts fell by only 2%. We worked closely with Cardinal Health during the yearto develop an international presence for EndoFlex, utilising our establisheddistribution partners with a view to sustaining future royalty income. Inaddition, we continue to receive a licence fee from Rolls Royce whilst exploringarrangements for future licence fees and development work from other industrialcompanies where our technology may have possible applications. Our Autologous Blood business was adversely affected during the year by changesto our external manufacturing arrangements. I am pleased to report that we havenow resolved these issues and we are actively seeking partners to develop acoherent strategy for both our intra operative and post operative product lines. Overall the Group has enjoyed a successful year, laying a further platform forgrowth in profitability and new product development. Product Development 2006 saw a renewed focus on the development of devices to complement ourexisting MIS product portfolio. During the year our expenditure on research anddevelopment, before government grants of £46,000, increased by 18% to £292,000(2005: £248,000), representing 6.5% of sales (2005: 6.2%). The creation of intellectual property is a key element of our investment inproduct development. I am delighted that we successfully filed patents ontechnology intrinsic to one of our products positioned for launch in 2007. Ourcurrent patent portfolio has enabled us to generate over £2.7m in royalties andlicence fees. It is our intention to aggressively grow and defend ourintellectual property portfolio. Board of Directors Our Group Board has worked diligently as a team during the year, andimportantly, the level of support provided by the Non-executives to theExecutive Directors continues to develop in line with the growth of thebusiness. The Operations Board is now well established and has significantlevels of expertise in all areas of operation of the business. Employees The Group is committed to the development and retention of its high calibrestaff, which we believe is the key to achieving the Group's ambitious growthplans. I am delighted to report that we have recently recruited an experiencedclinical specialist to oversee forthcoming product launches in the United Statesand our other overseas markets. I would like to take this opportunity to thank all staff for their dedicationand support during the year in which we again continued to provide high qualityinnovative devices to the surgical profession. Outlook Our immediate plans focus on the launch of our products developed during 2006.The United States is a key market for us and with US Food and DrugAdministration (FDA) approval now received, together with patent clearance, weare well placed to establish a presence in this dynamic and growing market. Although I have to report that Aesculap has decided not to renew its OEMscissors contract with us, such a situation is always a possibility with thistype of business and plans are in hand to mitigate the effects. We recentlysigned a £1.15m three year extension to our contract with Teleflex Medical fordistribution of our products in Europe. Furthermore, as part of a review of ourdistribution arrangements, we have appointed Elemental Healthcare, through a£1.74m four year contract, as our distributor in the UK. Negotiations are alsounderway with regard to establishing a master dealer for all our business in theFar East and Indian sub continent, where we believe there is a major opportunityfor our products. We approach 2007 and beyond with both enthusiasm and excitement. We lookforward to achieving further improvements in our operating margins and thecontinuation of growth in the business. Doug Liversidge CBE Non-executive Chairman April 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 2006 2005 Notes £'000 £'000Turnover 4,460 4,018Cost of sales (2,593) (2,295)Gross profit 1,867 1,723Administrative expenses (1,132) (1,322)Operating profit 735 401Interest payable (39) (49)Profit on ordinary activities before taxation 696 352Tax on profit on ordinary activities - 50Retained profit 696 402Basic and diluted earnings per ordinary share 2 0.27p 0.16p CONSOLIDATED BALANCE SHEET As at 31 December 2006 2006 2005 Notes £'000 £'000 £'000 £'000Fixed assetsTangible fixed assets 784 668Intangible fixed assets 190 - 974 668Current assetsStocks 1,215 852Debtors 1,729 1,605Cash at bank 4 25 2,948 2,482Creditors: amounts falling due within one (1,022) (940)yearNet current assets 1,926 1,542Total assets less current liabilities 2,900 2,210Creditors: amounts falling due after more (101) (116)than one yearNet assets 2,799 2,094 Capital and reservesCalled up share capital 2,595 2,591Share premium account 16,106 16,101Capital reserve 329 329Accumulated losses (16,231) (16,927) 204 (497)Shareholders' funds 2,799 2,094 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2006 2006 2005 Notes £'000 £'000 £'000 £'000Net cash inflow from operating 3 661 279activitiesReturns on investments andservicing of financeInterest payable on finance (22) (22)leasesInterest payable on bank (17) (24)overdraftsInterest payable on convertible - (3)loan notesNet cash outflow from returns on (39) (49)investments and servicing of financeTaxation 3 -Capital expenditure - purchases of tangible fixed (191) (64) assets - purchases of intangible fixed (190) - assetsNet cash outflow from capital (381) (64)expenditureNet cash inflow before financing 244 166FinancingIssue of share capital 9 -Receipts from borrowings 66 -Capital repayments under bank (23) (9)loansCapital repayments under finance (152) (109)leasesRedemption repayments of - (68)convertible loan notesNet cash outflow from financing (100) (186)Increase/(decrease) in cash 4 144 (20) NOTES TO THE FINANCIAL STATEMENTS 1. Accounting policies The principal accounting policies, which remain unchanged from the previousyear, are as follows: (a) Basis of accounting The financial statements have been prepared under the historical cost basis ofaccounting and under United Kingdom Generally Accepted Accounting Practice.FRS20 has been adopted for the first time this year. (b) Basis of consolidation The Group financial statements consolidate those of the Company and of itssubsidiary undertakings drawn up to 31 December 2006. The results ofsubsidiaries accounted for under the acquisition accounting method are includedin the consolidated profit and loss account 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 alwaysbeen part of the Group. Intra-Group sales and results are eliminated onconsolidation 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 profitattributable to ordinary shareholders for the year ended 31 December 2006 of£696,000 (2005: £402,000) by the weighted average number of ordinary shares inissue during the year of 259,300,058 (2005: 258,612,616) and amounted to 0.27pper share (2005: 0.16p per share). The Group has one category of dilutive potential ordinary shares, those shareoptions granted where the exercise price is less than the average price of theCompany's ordinary shares during the year. The dilution has no effect on basicearnings per share. 3. Reconciliation of operating profit to net cash inflow from operatingactivities 2006 2005 £'000 £'000Operating profit 735 401Depreciation of tangible fixed assets 229 216(Increase)/decrease in stocks (363) 29Increase in debtors (127) (340)Increase/(decrease) in creditors 187 (27)Net cash inflow from operating activities 661 279 4. Reconciliation of net cash flow to movement in net debt 2006 2005 £'000 £'000Increase/(decrease) in cash in the year 144 (20)Cash outflow from finance leases and loans 109 118Cash outflow from loan note redemption - 68Change in net debt resulting from cash flows 253 166New finance leases (154) (9)Issue of shares on conversion of loan notes - 42Movement in net debt 99 199Net debt at beginning of year (440) (639)Net debt at end of year (341) (440) NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5. Analysis of changes in net debt At At 1 January Non-cash 31 December 2006 Cash flow changes 2006 £'000 £'000 £'000 £'000Cash at bank and in hand 25 (21) - 4Bank overdrafts (219) 165 - (54)Bank loan (11) (43) - (54)Finance leases (235) 152 (154) (237) (440) 253 (154) (341) 6. The foregoing statements do not constitute the Group's statutory accounts.The Group's statutory accounts, on which the Group's auditor, Grant ThorntonLLP, have given an unqualified opinion in accordance with Section 235 of theCompanies Act 1985, are to be delivered to the Registrar of Companies and willbe posted to shareholders shortly. Additional copies of the annual report andof this announcement will be available at the Company's registered office:Clayton Park, Clayton Wood Rise, Leeds, LS16 6RF This information is provided by RNS The company news service from the London Stock Exchange