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| Share Name | Share Symbol | Market | Type |
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RNS Number:0450Q
Corin Group PLC
23 September 2003
Corin Group PLC
Interim Results for the six months ended 30 June 2003
SIGNIFICANT BENEFITS FROM ALPHANORM ACQUISITION AND WORLDWIDE SALES OF
FLAGSHIP PRODUCTS
Interim pre-tax profit up 65%
Corin is an innovative developer, manufacturer and distributor of a wide range
of reconstructive orthopaedic devices, with particular focus on treatment of the
young and active patient.
* Sales up 42% to #11.81m (2002: #8.34m), including #2.8m from Alphanorm
* Underlying revenue up 9%
* Operating profit up 58% to #2.35m (2002: #1.49m) - operating margin up
to 20%
* Interim pre-tax profit #2.28m (2002: #1.38m) - up 65%
* Earnings per share up 42% to 3.76p (2002: adjusted 2.64p)
* Interim dividend up 33% to 0.4p (2002: 0.3p)
* Alphanorm integration nearly completed and cross-selling of products
worldwide progressing well
Ian Paling, Corin Chief Executive, said:
"Corin has delivered a strong first half performance combining organic growth
with a significant contribution from our German subsidiary, Alphanorm. The
cross-selling activities envisaged when Alphanorm was acquired in September last
year are now being substantially realised.
"Our focus on providing innovative solutions for the young, active patient will
enable Corin to deliver sustainable long-term growth. Trading in the second
half of 2003 has started well, in line with our expectations."
23 September 2003
Enquiries:
Corin Group PLC
Ian Paling, Chief Executive Tel: 020 7457 2020 (today)
Simon Hartley, Finance Director 01285 659 866 (thereafter)
College Hill Tel: 020 7457 2020
Adrian Duffield/Clare Warren
Trading Results
In the first half of 2003 Corin's sales grew by 42% to #11.8 million.
Underlying sales growth, excluding acquisitions and currency movements, was 9%.
The acquisition of Alphanorm added a further 34% increase whilst there was a 1%
reduction due to currency translation.
The Group achieved a better than expected gross profit margin of 66% due to the
continued improvement in both geographical and product mix together with further
manufacturing efficiencies.
Operating profit amounted to #2.4 million for the half year, an increase of 58%.
The improvement in operating margins to 20% in the first half of 2003,
compared to 18% in the first half of 2002, reflects both strong sales growth and
cost control.
After a reduced interest charge, pre tax profit increased by 65% to #2.3
million. Earnings per share were 3.76 pence, an increase of 42% over the
adjusted earnings per share of 2.64 pence for the first half of 2002.
The Board has declared an increased interim dividend to 0.4 pence per share
(2002: 0.3 pence per share).
Operating cash flow for the first half of 2003 was #0.9 million and net debt was
#1.8 million. The Group continues to focus on cash generation and the careful
management of working capital.
Operating Review
In the UK, sales grew by 13% to #3.5 million. The success of Corin-run
educational courses for clinicians, covering our flagship products, Cormet
metal-on-metal resurfacing hip system and the Rotaglide+ mobile bearing knee
system, continues to drive sales. The Group has also launched an innovative "
Direct to Consumer" marketing campaign for Cormet. This campaign aims to
educate appropriate patients to the benefits of Corin's resurfacing hip
technology, when compared with conventional hip replacement.
In June, Corin strengthened its operational management with the appointment of a
new Sales and Marketing Director for its UK operations.
Sales in Continental Europe were #4.3 million. Underlying sales growth was 9%.
Alphanorm contributed #2.8 million. The assimilation of Alphanorm into the
Corin Group has progressed in line with our plan. The sale of Alphanorm
products through the Corin distribution network and the sale of Corin products
by the Alphanorm sales force in Germany is increasing. The transfer of
manufacture of all Alphanorm products and instruments to Corin's production
facilities in Cirencester will be materially complete by the end of 2003. It is
anticipated that this will result in margin improvement for the Alphanorm
product range during 2004.
Sales in the USA were #0.8 million. Revenues were held back by the loss of a
major spinal customer. The US operation has been strengthened significantly by
the appointment in April of a new Vice President of Sales from Smith and Nephew.
He is already developing further distribution channels to optimise the
potential for Corin's core products.
In the USA, the Cormet FDA-approved clinical trial is now complete and as
expected, continued access to the device, for existing surgeons, has been
granted. The Group remains on target for full approval to be granted in 2006.
The Rotaglide+ Knee clinical trial continues to progress, although the slower
than anticipated recruitment of surgeons means that full approval for this
device is not now expected to be achieved before 2007. The 510k application for
a large diameter metal-on-metal articulation utilising a conventional stemmed
femoral prosthesis (Stemmed Cormet), has not been approved by the FDA. Corin is
continuing discussions with the FDA concerning the route to market for this
innovative product.
Corin Japan had a strong first half of 2003, with sales growing 45% to #1.5
million, primarily due to a broader product offering and greater geographical
coverage through an enlarged independent sales force.
Cormet continued to grow strongly over the prior period, with worldwide sales up
94% to #2.1 million. Sales of all Corin's hip systems grew 78% to #5.9 million.
The European launch of Stemmed Cormet was enthusiastically received and is now
contributing to total Cormet hip replacement growth.
Sales of knee systems grew 41% to #4.0 million. The Group anticipates continued
strong growth of knee products with the on-going introduction to the Corin sales
organisation of the AMC Total and Uni-condylar Knees from Alphanorm.
Strategy
Corin's strategy continues to be the exploitation of the Group's proprietary
technology by focussing on the fast growing reconstructive orthopaedic devices
market for the young and active patient. Product development is concentrated in
these areas and significant progress is being made in the field of navigated
surgical techniques and the development of minimally invasive surgical
instrumentation for Cormet and Rotaglide+ product ranges.
The Group continues to pursue the conversion of overseas territories to direct
sales operations with the aim of increasing both sales and profitability.
Direct sales are now being made in France using an exclusive commission agent
with the conversion of other countries being progressed.
Board Changes
On 30 July 2003, the Group announced that Graeme Hart, who has been a
Non-Executive Director since May 2001, will become Non-Executive Chairman with
effect from 1 October 2003. Ian Paling, Corin's Chief Executive Officer,
remains responsible for all operational matters. Peter Gibson, Corin's founder,
will be stepping down as Chairman with effect from 30 September 2003. The Board
would like to put on record its deep and sincere gratitude to Peter Gibson for
his outstanding contribution to the success of Corin.
Outlook
Corin has delivered a strong first half performance and the Group is confident
that the focus on providing innovative solutions for the young, active patient
will enable it to deliver sustainable long-term growth. In the second half of
2003 Corin is trading in line with expectations.
Summarised Consolidated Profit and Loss Account
For the period ended 30 June 2003
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
Note #'000 #'000 #'000
Turnover 2 11,807 8,338 17,344
Gross profit 7,786 5,507 11,631
Operating profit
Continuing operations 2,351 1,485 3,021
Net interest (70) (105) (187)
Profit on ordinary activities before taxation 2,281 1,380 2,834
Tax on profit on ordinary activities 3 (791) (460) (991)
Profit on ordinary activities after taxation 1,490 920 1,843
Equity minority interests (48) (58) (147)
Profit for the period 1,442 862 1,696
Dividends 4
- Preference shares - (1,712) (1,712)
- Ordinary shares (153) (105) (335)
Profit/(loss) transferred to reserves 1,289 (955) (351)
Earnings per share 5
- Basic (pence) 3.76 (4.35) (0.06)
- Diluted (pence) 3.73 (4.35) (0.06)
- Adjusted Basic (pence) n/a 2.64 5.00
- Adjusted Diluted (pence) n/a 2.59 4.83
Adjusted basic earnings per share and adjusted diluted earnings per share are
calculated using the capital structure resulting from the flotation and adding
back the preference share dividends.
Summarised Consolidated Balance Sheet
At 30 June 2003
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Fixed assets 4,590 1,734 4,166
Current assets
Stocks 5,931 3,602 5,548
Debtors 5,484 3,536 4,143
Cash at bank and in hand 2,019 1,297 3,753
13,434 8,435 13,444
Creditors: amounts falling due within one year (6,655) (5,130) (7,926)
Net current assets 6,779 3,305 5,518
Total assets less current liabilities 11,369 5,039 9,684
Creditors: amounts falling due after more than one year (2,764) (1,872) (2,370)
Provisions for liabilities and charges (22) (2) (2)
8,583 3,165 7,312
Capital and reserves
Shareholders' funds 8,224 2,611 7,001
Equity minority interests 359 554 311
8,583 3,165 7,312
Summarised Consolidated Cash Flow Statement
For the period ended 30 June 2003
6 months to 6 months to 12 months to
30 June 30 June 31 December
Note 2003 2002 2002
#'000 #'000 #'000
Net cash inflow from operating activities 7 906 949 3,089
Returns on investments and servicing of finance
Net interest paid (70) (105) (187)
Dividends paid to preference shareholders - (750) (750)
Net cash outflow from returns on investments and
servicing of finance (70) (855) (937)
Taxation (799) (412) (940)
Capital expenditure and financial investment (872) (555) (1,408)
Acquisitions and disposals (1,039) - (2,019)
Equity dividends paid (230) - (115)
Financing 368 1,172 6,369
(Decrease)/increase in cash 7 (1,736) 299 4,039
Statement of Total Recognised Gains and Losses
For the period ended 30 June 2003
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Profit on ordinary activities after taxation 1,490 920 1,843
Currency differences of foreign currency net investments (66) 55 (29)
Total recognised gains and losses for the period 1,424 975 1,814
Notes to the Interim Report
For the period ended 30 June 2003
1. Principal Accounting Policies
Basis of preparation
The interim financial statements have been prepared in accordance with
applicable United Kingdom accounting standards and under the historical cost
convention.
The principal accounting policies of the Group are stated below. They have
remained unchanged from those set out in the Group's 2002 annual report and
financial statements.
The interim financial statements have been reviewed by the Group's auditors. A
copy of the auditors' review report is attached to this interim report.
2. Segmental Analysis
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Turnover by location of customer:
United Kingdom 3,462 3,055 6,236
Europe (other than the United Kingdom) 4,345 1,414 4,179
Rest of the world 4,000 3,869 6,929
11,807 8,338 17,344
3. Tax on profit on ordinary activities
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
The tax charge is made up as follows:
United Kingdom corporation tax at 30% 350 302 851
Group relief - - (241)
Overseas tax 462 158 381
812 460 991
Adjustments in respect of prior periods:
Overseas tax (42) - -
770 460 991
Origination and reversal of timing differences:
Deferred tax 21 - -
791 460 991
4. Dividends
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
'A' preference dividend of 13.38p per share - 1,712 1,712
Equity dividend interim 0.4p per ordinary share
(2002: 0.3p) 153 105 105
Equity dividend final 0.6p per share - - 230
153 1,817 2,047
All preference shares were redeemed subsequent to flotation in May 2002.
The interim dividend of 0.4p per share will be paid on 31 October 2003 to
shareholders registered at the close of business on 3 October 2003.
5. Earnings per Share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders of #1,442,000 (June 2002: loss of
#850,000, December 2002: loss of #16,000) divided by the weighted average number
of shares in issue during the period being 38,303,811 (June 2002: 19,534,357,
December 2002: 28,169,808). Shares held in employee share trusts are treated as
cancelled for the purposes of this calculation.
Adjusted basic earnings per share represents the adjusted earnings, after adding
back the preference dividend of #nil (June 2002 and December 2002: #1,712,000),
divided by the number of ordinary shares issued on flotation for the redemption
of the preference shares and the conversion of the preference dividend arrears,
as if they had been in issue throughout the whole period.
At June 2002 and December 2002, the loss attributable to ordinary shareholders
and weighted average number of ordinary shares for the purpose of calculating
the diluted earnings per ordinary share are identical to those used for basic
earnings per ordinary share. This is because the exercise of share options
would have the effect of reducing the loss per ordinary share and is therefore
not dilutive under the terms of FRS 14 Earnings per Share.
The calculation of adjusted diluted earnings per share represents the adjusted
earnings after adding back the preference dividend, divided by the number of
ordinary shares issued on flotation for the redemption of the preference shares
and the conversion of the preference dividend arrears, as if they had been in
issue throughout the whole period, adjusted to allow for the issue of shares and
the post tax effect of dividends and/or interest, on the assumed conversion of
all dilutive options.
5. Earnings per Share (continued)
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
pence pence pence
Basic earnings/(loss) per share 3.76 (4.35) (0.06)
Adjustment for preference dividends - 8.76 6.08
Adjusted basic earnings per share 3.76 4.41 6.02
Adjustment of shares in issue - (1.77) (1.02)
Adjusted basic earnings per share 3.76 2.64 5.00
Diluted earnings/(loss) per share 3.73 (4.35) (0.06)
Adjustment for preference dividends - 8.76 6.08
Adjusted diluted earnings per share 3.73 4.41 6.02
Adjustment of shares in issue - (1.82) (1.19)
Adjusted diluted earnings per share 3.73 2.59 4.83
6. Reconciliation of Movements in Shareholders' Funds
6 months 6 months to 12 months to
to 30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Profit for the financial period 1,442 862 1,696
Dividends and other appropriations (153) (1,817) (2,047)
1,289 (955) (351)
Issue of shares (net of issue costs) - 4,628 8,498
Exchange difference arising on consolidation (66) 55 (29)
Net increase in shareholders' funds 1,223 3,728 8,118
Shareholders' funds at 1 January 2003 7,001 (1,117) (1,117)
Shareholders' funds at 30 June 2003 8,224 2,611 7,001
7. Notes to the Cash Flow Statement
Reconciliation of operating profit to net cash inflow from operating activities
6 months 6 months to 12 months to
to 30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Operating profit 2,351 1,485 3,021
Depreciation and amortisation 524 380 727
Increase in stocks (335) (88) (2,039)
Increase in debtors (1,320) (541) (1,171)
(Decrease)/increase in creditors (313) (286) 2,371
Provision utilised in the period (1) (1) (1)
Other non-cash items - loss on disposal of fixed assets - - 181
Net cash inflow from operating activities 906 949 3,089
Reconciliation of net cash flow to movement in net debt
6 months 6 months to 12 months to
to 30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
(Decrease)/increase in cash in the period (1,736) 299 4,039
Net cash (inflow)/outflow from financing in the period (404) 1,162 (253)
Net cash outflow/(inflow) from finance leases in the period 36 21 (113)
(2,104) 1,482 3,673
Exchange differences 1 24 (25)
Movement in debt (2,103) 1,506 3,648
Net funds/(debt) at 1 January 2003 341 (3,307) (3,307)
Net (debt)/funds at 30 June 2003 (1,762) (1,801) 341
8. Publication of non-statutory accounts
The financial information set out in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
figures for the period ended 31 December 2002 have been extracted from the
statutory financial statements which have been filed with the Registrar of
Companies. The auditors' report on those financial statements was unqualified
and did not contain a statement under Section 237(2) of the Companies Act 1985.
Independent Review Report to Corin Group PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2003 which comprise the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement, the statement of total recognised gains and losses and related notes.
We have read the other information contained in the interim report which
comprises only the chief executive's statement and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information. Our responsibilities do not extend to any other
information.
This report is made solely to the company, in accordance with guidance contained
in APB Bulletin 1999/4 "Review of Interim Financial Information". Our review
work has been undertaken so that we might state to the company those matters we
are required to state to it in a review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company, for our review work, for this report or for the
conclusions we have formed.
Directors' responsibilities
The interim report including the financial information contained therein is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
"Review of Interim Financial Information" issued by the Auditing Practices Board
for use in the United Kingdom. A review consists primarily of making enquiries
of Group management and applying analytical procedures to the financial
information and underlying financial data and based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
GRANT THORNTON
Registered Auditors
Chartered Accountants
Cheltenham
23 September 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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