Surgical Innovations Share Discussion Threads

[argyle underclap] 11/9/2015 23:54

Ken - yes, I just noticed that 200,000 too on the full ask, quite a spread too with the bid at 1.10.

as you say, sum1 fancies them. lets hope its a sign of things to come

[mandate] 09/9/2015 16:02

Still got 500k+. Like the product, let's hope they get their sales, marketing and distribution right this time around.

[gbh2] 09/9/2015 12:53

I found (what turned out to be) better things to do with my cash, sold out ca 1.5p

17 years and quite a journey of highs & lows, no regrets, wish you well guys.

[gnnmartin] 09/9/2015 12:13

I've still got 1.5m plus. I'm holding and hoping that Chris Rea can pull this round.

[kenone] 09/9/2015 08:24

200000 @ 1.35 ; someone still fancies them then.
I've got a few left but sold most a couple of months ago.

[buywell3] 08/9/2015 14:02

Nobody holding these anymore ?

OK I'll say it ''Looks like a £100k loss for 2015 then''




08 Sep 2015 10:41:57

Surgical Innovations

RNS Number : 3961Y

08 September 2015




Bank Covenant Agreement



Further to the announcement on 30 June 2015, the Board has been in discussions with Yorkshire Bank (the "Bank") in relation to resetting the profitability covenant connected to the term loan from the Bank. The covenant was previously set at EDITDA (earnings before interest, tax, depreciation and amortisation) of a minimum of £600,000 for the year ending 31 December 2015 (the "EBITDA covenant").



The Board announces that the Company has reached agreement with the Bank and that the EBITDA covenant has been reset at a loss of £100,000 for the year ending 31 December 2015. Furthermore, the Company and the Bank are planning to negotiate revised financial covenant levels for each of the quarter periods following 31 December 2015.

[buywell3] 17/8/2015 10:11

Re the latest RNS regarding the marketing agreement with Asia Cardiovascular Products

Take a look at the rubbish tiny pictures that have been put up on the website , one is out of focus and one is so dark you can't make anything out hardly , the rest are at best average

I can't see these attracting business , they look like someone bought in their camera from home along with their kid to take the pictures

[bionicdog] 11/8/2015 10:20

Please delete that last bit. We've been laughing at her inability to work it out for ages.

[alexmcdonald] 11/8/2015 09:47

The problem with hyperlinks on this site is overcome by changing one of the "t" in "http" to capital eg "hTtp".

[gbh2] 30/7/2015 08:38

Must be good for you, pig in sh*t springs to mind !

[buywell3] 30/7/2015 08:37

Is this a new low ?

[buywell3] 28/7/2015 20:11

Has anyone noticed how there does not seem to be an 'investor' area on the SUN website to click on to ?

With the usual access to past results, company presentations , reports and the like

Do you guys realise that past turnover numbers were due to several distributors taking on inventory that has not sold as thought

The SI story thus does not read too well as a result

This latest set of results is therfore worth a read/another read so a newbe can ascertain what is happening or not happening







Tuesday, 12 May, 2015

Surgical Innovations Group plc

Final Results

Surgical Innovations Group plc (AIM: SUN) today announces its preliminary results for the financial year ended 31 December 2014.
Summary
Revenue of £4.029 million (2013 restated: £7.478 million)
EBITDA loss, adjusted to exclude exceptional items, of £52,000 (2013 restated: profit of £1.681 million)
Exceptional items of £8.388 million, of which £7.797 million were non-cash impairment charges
Loss before tax of £9.829 million (2013 restated: £44,000)
Refinancing successfully completed during November 2014 comprising new investment of £1.5 million and refinancing of existing £3 million term loan
Cash balance of £678,000 at 31 December 2014, with subsequent cash generation during Q1 2015

Doug Liversidge, Non-executive Chairman, commented:
“The financial performance for 2014 was extremely disappointing. However, the Board and staff of SI have worked tirelessly over the last six months with the key objective of restructuring the business to secure a sustainable future for the Group.
“Following a turbulent 2014, the Group now has a stronger platform to support the business over the medium term. The Board remains committed to cash generation and the Directors are satisfied with the progress made since the refinancing was announced in November 2014.”

For further information please visit www.sigroupplc.com or contact:


Doug Liversidge, CBE
Non-Executive Chairman
Surgical Innovations Group Plc
Tel: [phone]



Tim Feather/Liam Gribben
Nominated Adviser and Broker
WH Ireland Limited
Tel: [phone]



Chairman’s Statement
The financial performance for 2014 was extremely disappointing. However, the Board and staff of SI have worked tirelessly over the last six months with the key objective of restructuring the business to secure a sustainable future for the Group.

Financial results

Revenue for the period fell by £3.449 million to £4.029 million (2013 restated: £7.478 million). The majority of the reduction arose through sales of SI branded products which fell by £2.476 million. This was principally as a result of the previously announced plan to undertake a global de-stocking of customer inventory levels. A further £0.939 million of the overall reduction was attributable to the original equipment manufacturers (OEM) segment where we have continued to experience weakening demand from historic partners.

The operating result for 2014 was a substantial loss of £9.783 million (2013 restated: profit of £52,000). This included significant exceptional items of £8.388 million of which £7.797 million were non-cash impairment charges against capitalised development costs (£5.973 million), inventory (£1.096 million) and trade debtors (£0.728 million). Other cash exceptional items included fully expensing the cost of the now terminated Regional Growth Fund project (£0.420 million) and also restructuring costs incurred in Q4 (£0.171 million).

As a consequence of the reduction in revenue, EBITDA, excluding exceptional items, fell to a small loss of £52,000 (2013 restated: profit of £1.681 million). The loss after taxation was £9.457 million (2013 restated: profit of £128,000) and the loss per share was 2.19p (2013 restated: earnings of 0.03p).

Funding

Against the backdrop of these challenging financial results, the Group secured two rounds of further funding. During June 2014 the Group secured equity funding of £1.578 million from Chris Rea who also accepted appointment as a Non-executive Director and Mr Rea was subsequently appointed as Interim Managing Director on 13 October 2014. In November 2014 the Group raised £0.526 million of equity funding and £1 million through a fixed rate convertible unsecured loan note from the Group’s largest shareholders, Mr. Rea and Getz Bros & Co (BVI) Inc. As part of the November 2014 fundraising, Yorkshire Bank also agreed to convert its £3 million revolving credit facility into a term loan due for repayment in 2017.

Outlook

During Summer 2014 the Board carried out a strategic review and concluded that the primary focus of the business should be cash generation and cost reduction. Substantial progress has since been made in addressing the cost base such that it is more proportionate to the level of ongoing revenue.

Cash flow has been our primary focus over this period and I am pleased to report that the cash position improved during the first quarter of 2015. In accordance with the November 2014 fundraising, we received the additional £500,000 of loan note funding during March 2015. The direct impact of de-stocking customer inventory positions is now also largely complete which has resulted in normalised levels of business on a month to month basis.

Notwithstanding the progress made in the last six months, trading profitability remains challenging. In particular, driving down our own inventory levels to maximise cash has a direct, negative impact on our manufacturing productivity.

Following a turbulent 2014, the Group now has a stronger platform to support the business over the medium term. The Board remains committed to cash generation and the Directors are satisfied with the progress made since the refinancing was announced in November 2014.



Doug Liversidge
Non-Executive Chairman
11 May 2015


Operating review
As reported in the Chairman’s Statement, the 2014 financial performance was very disappointing. However, substantial progress has been made in restructuring the business in the past six months which now provides a platform for moving forward.
SI Brand

SI Brand sales fell by £2.476 million (46%) to £2.949 million (2013 restated: £5.425 million). The substantial fall compared to the prior year relates to challenges in the US market and the deliberate strategy of inventory reduction throughout the distributor network.
As reported previously, the Group experienced severe challenges within the US market. During 2013 the Group added several new distributors which resulted in initial stocking orders, however projected orders for 2014 failed to materialise as a consequence of over ambitious hospital conversion rates. To put this in context, only one of these new distributors has been retained.
However, the US market remains a key focus for the Group as it is the largest market in the world for laparoscopic surgery. Notwithstanding several failed attempts to achieve national coverage, the Board remains committed to establishing an effective distribution network.
We reported in our 2014 Interim Report that the Board had taken the strategic decision to reduce global inventory levels held by distributors. Whilst this inevitably led to a period of lower sales which had a detrimental impact on 2014, the Group is now seeing the benefit of a more normalised business with relatively stable monthly sales. This has undoubtedly improved the operational effectiveness of the business and the change has been welcomed by our customers.
OEM

OEM sales fell by 53% to £0.818 million (2013: £1.757 million) due to reductions with CareFusion and Teleflex. Under the terms of an exclusive eight year distribution agreement, CareFusion exercised their right to move to a non-exclusive basis which extinguished minimum purchase obligations and resulted in lower than anticipated sales. Whilst disappointing, this contractual change allows the Group to market its SI Brand reusable retraction systems globally.
OEM continues to provide a contribution to the Group’s results; however, given that this is not at a predictable or steady rate the Board continues to work on reducing the Group’s emphasis on this part of the business whilst seeking growth from SI Brand.
Industrial

The Group’s industrial segment benefited from the award of another feasibility project to develop bespoke on-wing inspection devices with our long standing industrial partner, Rolls–Royce, with £262,000 of revenue received in 2014 (2013: £296,000). However, the contribution from this segment continues to be unpredictable and this remains a non-core activity.
Regional Growth Fund (“RGF”)

The Group has announced previously that it had secured in 2012 a £5.05 million RGF grant as part of a project to relocate to new premises. Regrettably, the Group was not successful in growing the business as the project anticipated through to 2014 and accordingly the Board concluded during November 2014 that the project should be terminated. This resulted in an exceptional write-off of costs associated with the project of £420,000 and we are in discussion with the RGF regarding potential repayment of £151,000 advanced previously under the grant.

From an operational perspective, the current Leeds manufacturing site is leased under an agreement which expires in April 2018. Whilst the Group’s property strategy will now need to be revisited, there are no immediate concerns regarding the existing facility which is considered adequate for the Group’s requirements.

Restructuring
During the second half of 2014 we commenced a period of intense restructuring in order to reduce costs and stabilise the cash position. Whilst this has resulted in substantial annualised cost savings and secured an immediate future for the Group, there were unfortunately many redundancies within the business. The programme of headcount reduction was completed in February 2015 with 50 staff now being employed by the Group.
A fundamental impact of the focus on cash generation was a reduction in manufacturing output from September 2014 onwards. This has had a positive impact on cash as it allows the Group to consume the excess inventory that it had built previously. However, there is also a negative impact on profitability as manufacturing activity was and remains lower. Despite the profit impact, the Board considers cash generation to be the primary objective for 2015.
As stated above, cash flow is a key performance indicator and our progress is evident with reference to the first quarter of 2015 where the cash generated by the Group was just over £100,000. We expect this trend to continue throughout 2015 as we seek to reduce the level of reliance on debt funding. In addition to the cash generated from trading, a further £0.5 million was injected into the business during March 2015 via the convertible unsecured loan note instrument.
Outlook

In our 2014 Interim Report we explained that we had to implement radical reform to rebalance the business through increasing our focus on cash generation and through de-stocking customer inventory levels. With the support of our major shareholders, we are pleased that substantial progress has been made in both of these areas and that the Group now has greater financial stability compared to six months ago.

Our products continue to be relevant and well positioned within the global laparoscopic market where cost pressure continue to be downwards. Whilst we continue to work with existing and new dealers with the intention of growing the SI branded business, the marketplace is challenging as we compete with much larger, global, organisations with far greater resource.

Notwithstanding the bitter disappointment of 2014, the Group now has a more stable platform and the Board is satisfied with the progress that has been made in recent months. More focus can now be dedicated to growing the business, and we hope that this will bring better news for our shareholders in the future.



Doug Liversidge
Non-Executive Chairman
11 May 2015

Financial review
Revenue

Reported revenue for 2014 reduced 46% to £4.029 million (2013 restated: £7.478 million). A segmental analysis of revenue is provided below which reflects the substantial decline in revenues explained in the Operating Review.



2014
£’000
Restated
2013
£’000

% change
SI Brand
2,949
5,425
(45.6)%
OEM
818
1,757
(53.4)%
Industrial
262
296
(11.5)%
Total
4,029
7,478
(46.1)%

Restatement of comparative results

On 22 October 2014 the Group announced that revenue recorded in 2013 of £0.6 million would need to be reversed in 2014. In response to this issue, and in conjunction with our auditors, the Board conducted a comprehensive review of revenue recognition policies adopted historically by the Group.

As a result, the Board has amended Group policy to exclude “bill and hold” sales and to revise certain aspects of revenue recorded in respect of long-term sales. Consequently, comparative figures have been restated resulting in 2014 revenue being £1.075 million, and 2014 operating profit being £833,000 lower than previously reported. Further detail is provided in note 8 to this preliminary announcement.

Gross margin

Gross margin reduced to 29.4% (2013 restated: 39.5%) as a direct consequence of changing our strategic focus to cash generation. In particular, manufacturing activity in the final quarter of 2014 was minimal which substantially reduced manufacturing overhead recovery.

Operating expenses

Excluding exceptional items, operating expenses reduced by £128,000 during the year to £2.581 million (2013: £2.709 million). The reduction resulted from reduced amortisation of product development intangible assets (£118,000). Following substantial cost reduction activity operating expenses are expected to reduce in 2015.

Exceptional items

The results for 2014 include substantial exceptional costs of £8.388 million (2013: £196,000), of which £7.797 million were non-cash. As announced on 11 March 2015, annual impairment testing of capitalised product development costs revealed a total impairment for the year of £5.973 million (of which £1.736 million was recorded at the Interim stage). On that date we also announced a significant write down in inventory carrying value and exceptional items includes a total inventory provision of £1.096 million.

Other exceptional items which have been reported previously comprise provisions against trade debtors of £728,000 and £420,000 provided against all costs incurred on the terminated RGF project. Exceptional items also include cash costs of £171,000 incurred during Q4 2014 restructuring.

EBITDA and operating loss

EBITDA (excluding exceptional items) reduced from £1.681 million to a loss of £52,000 reflecting the combined effect of the reduced revenue and gross margin. The substantial operating loss of £9.783 million (2013 restated: profit of £52,000) was largely attributable to the exceptional items described above.

Finance costs

As noted below, we utilised bank borrowings for the majority of 2014 resulting in interest payable of £97,000 (2013: £57,000). We also incurred £86,000 (2013: £62,000) of finance charges in respect of finance lease obligations. Whilst the borrowing rate on the new £3 million term loan is higher than the previous facility, we expect overall finance costs to reduce in the medium term as the overall level of indebtedness is driven down.

Taxation

The Group recorded a tax credit of £372,000 (2013 restated: £172,000) reflecting a deferred tax credit of £256,000 and a corporation tax credit of £116,000. In overall terms the Group has substantial tax losses which have cautiously not been recognised which results in the very low overall effective rate of tax of 3.8%. During 2014 the Group submitted enhanced Research and Development claims in respect of 2013 and elected to exchange tax losses for a cash refund of £116,000 (2013: £197,000) which was received during the year.

Intangible and tangible assets

As noted above, in light of the current trading performance the Board conducted an impairment review of capitalised product development costs and concluded that an impairment charge of £5.973 million was necessary. As a result, the level of capitalised development costs at 31 December 2014 is substantially reduced at £1.999 million (2013: £7.341 million). Due to the restructuring undertaken during the past six months the level of research and development expenditure will reduce in future periods.

Capital expenditure on tangible assets during the year was very low at £94,000 (2013: £236,000) and there are no major capex plans currently under consideration.

Working capital

Working capital reduced by £1.464 million to £4.699 million (2013 restated: £6.163 million). This reduction masks several substantial movements which arose as a result of the strategic drive to focus on cash and to rebalance the business. In particular, there was a significant increase in inventory of £0.689 million and a reduction in trade creditors of £0.826 million offset by a major decline in trade debtors of £2.440 million.

Cashflow and net debt

The Group suffered a cash outflow from operations of £0.686 million (2013: inflow of £1.171 million) primarily as a result of a significant increase in gross inventories of £1.945 million. Cash used in investment reduced to £1.601 million (2013: £2,043 million) resulting in a cash outflow before financing of £2.086 million (2013: £0.775 million).

This shortfall was funded by a combination of two equity fund-raisings totalling £2.112 million and the issue of new convertible unsecured loan notes of £0.5 million. The £3 million bank facility provided by Yorkshire Bank was restructured to a term loan during November 2014 and its ongoing availability is dependent upon covenant compliance. At 31 December 2014, net debt was £3.298 million (2013: £3.488 million) and headroom against available facilities was £0.678 million.

Following the year end, and as a result of the change in strategic focus, the Group has generated cash and it is expected that net debt will reduce further. In accordance with the terms announced previously, a further £0.5 million was injected into the business on 31 March 2015 via the convertible unsecured loan note instrument.





Mike Thornton
Chief Financial Officer
11 May 2015

[the stigologist] 28/7/2015 14:36

"covenants the increased"

not sure what happened there

[the stigologist] 28/7/2015 14:35

given that the Company is in breach of covenaneased scrutiny may be from Yorkshire Bank whether to continue to fund this shower

given these revelations and no doubt more skeletons in the closet surely Yorkshire will determine that they are unprepared to do so unless they can extract greater compensation for the heightened risk if at all

[gnnmartin] 28/7/2015 14:20

Not significantly bad news is it? An error, but not one that has financial or commercial implications.

[leadingladies] 27/7/2015 17:20

I take your point mandate. Flushing out the previous problems. I presume Mike Thornton was FD when this happened?

[mandate] 27/7/2015 16:03

Is it bad news? Looks like someone is doing due diligence on past transactions and reporting what they've found. Agree that some good (sales) news would be welcome.

[leadingladies] 27/7/2015 14:17

Another "bad news" announcement ! Would love to know when this is all going to stop and we get some good news - Flying pigs and all that !!

[bionicdog] 27/7/2015 09:43

I try to help her Max , but she just shouts. In my experience , people don't want to read a thread where it's just a lady shouting. You have to make friends with people and not shout at them , then more fiends will come.

[maxk] 26/7/2015 19:51

Probably a froot with a sore bum.

[bionicdog] 26/7/2015 19:07

I keep trying to help you , but you are a very angry lady.
Is it because your links don't work? It is good that you edited your angry post away.
Empathetic Dog.