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AMS Advanced Medical Solutions Group Plc

196.00
6.00 (3.16%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Advanced Medical Solutions Group Plc LSE:AMS London Ordinary Share GB0004536594 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  6.00 3.16% 196.00 195.00 196.00 197.40 189.20 190.20 780,056 16:35:15
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Plastics,resins,elastomers 124.33M 20.41M 0.0939 20.81 424.43M

Advanced Medical Solutions Grp PLC Interim Results (8936L)

11/09/2019 7:01am

UK Regulatory


Advanced Medical Solutions (LSE:AMS)
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TIDMAMS

RNS Number : 8936L

Advanced Medical Solutions Grp PLC

11 September 2019

 
   11 September 2019 
 

Advanced Medical Solutions Group plc

("AMS" or the "Group")

Interim Results for the six months ended 30 June 2019

Winsford, UK, 11 September 2019: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced woundcare specialist company, today announces its unaudited interim results for the six months ended 30 June 2019.

Financial Highlights:

 
 GBP million                           H1 2019   H1 2018   Reported         Growth 
                                                             change    at constant 
                                                                       currency(1) 
 Group revenue                            48.7      47.6        +2%            +1% 
                                      --------  --------  ---------  ------------- 
 Adjusted 
                                      --------  --------  --------- 
 Adjusted(2) profit before tax            12.8      13.6        -6% 
                                      --------  --------  --------- 
 Adjusted(2) diluted earnings 
  per share (pence)                       4.80      4.97        -3% 
                                      --------  --------  --------- 
 Adjusted(3) net cash inflow from 
  operating activities                    11.2      12.7       -12% 
                                      --------  --------  --------- 
 Reported 
                                      --------  --------  --------- 
 Profit before tax                        11.2      13.6       -17% 
                                      --------  --------  --------- 
 Diluted earnings per share (pence)       4.06      4.95       -18% 
                                      --------  --------  --------- 
 Net cash inflow from operating 
  activities                              10.3      12.7       -19% 
                                      --------  --------  --------- 
 Net cash(4)                              63.9      71.1       -10% 
                                      --------  --------  --------- 
 Interim dividend per share (pence)       0.50      0.42       +19% 
                                      --------  --------  --------- 
 

Business Highlights (including post period end):

   --      Group revenues up 2% to GBP48.7 million (1% at constant currency): 

o Product ranges and geographies excluding US LiquiBand(R) delivered 10% revenue growth at reported and constant currency

o 27% reduction in US LiquiBand(R) sales, as previously referenced in our trading update, due to destocking, competitor activity and delayed product launches

   --      Acquisition of Sealantis in January for US$25 million: 

o Integration and commercialisation plans progressing well

o In line with expectations, planned investment in R&D impacted Group profit and positions the Group for future growth

   --      Realigned business unit structure in place since January 2019: 

o Surgical: revenues down 3% to GBP26.5 million (2018 H1: GBP27.3 million) and by 4% at constant currency

-- LiquiBand(R) delivered strong growth in all territories, with the exception of the US:

-- US revenues down by 27% to GBP7.7 million (2018 H1: GBP10.5 million), and by 31% at constant currency

-- UK and Germany revenues up 25% at reported and constant currency to GBP3.4 million (2018 H1: GBP2.7 million)

-- Rest of World revenues up 46% to GBP2.1 million (2018 H1: GBP1.4 million) and by 45% at constant currency

-- LiquiBand(R) Fix8(TM) revenues up 20% at reported and constant currency to GBP1.2 million (2018 H1: GBP1.0 million)

-- RESORBA(R) sutures up 6% to GBP7.2 million (2018 H1: GBP6.8 million) and by 7% at constant currency

-- RESORBA(R) biosurgicals up 5% to GBP4.5 million (2018 H1: GBP4.3 million) and by 6% at constant currency

o Woundcare: revenues up 9% to GBP22.2 million (2018 H1: GBP20.3 million) and by 8% at constant currency

-- Infection Management up 14% to GBP9.4 million (2018 H1: GBP8.3 million) and by 12% at constant currency

-- Eddie Johnson appointed as CFO and Board member on 1 January 2019, following the planned retirement of Mary Tavener

-- The Board intends to pay an interim dividend of 0.50p per share (2018 H1: 0.42p), an increase of 19%, on 25 October 2019 to shareholders on the register at the close of business on 27 September 2019.

Commenting on the interim results, Chris Meredith, CEO of AMS, said: "The Group continues to perform well and I am pleased to report another period of growth. Despite disappointing trading in the US for LiquiBand, which we expect to recover next year, we are excited by the upcoming product approvals and pleased with the progress made across multiple products and markets. The Board continues to be optimistic about our long-term prospects and the potential for further organic and acquisitive growth."

- End -

Notes

1 Constant currency adjusts for the effect of currency movements by re-translating the current period's

performance at the         previous period's exchange rates 

2 All items are shown before exceptional items which, in 2019 H1 were GBP0.9 million (2018 H1: nil) and before amortisation of acquired intangible assets which, in 2019 H1, were GBP0.7 million (2018 H1: GBP0.04 million) as defined in the financial review

3 Adjusted net cash inflow from operating activities is calculated as net cash inflow from operating activities plus exceptional items of GBP0.9 million (2018 H1: GBPnil)

4 Net cash is defined as cash and cash equivalents plus short term investments less financial liabilities and bank loans

For further information, please contact:

 
 Advanced Medical Solutions Group plc             Tel: +44 (0) 1606 
                                                             545508 
 Chris Meredith, Chief Executive Officer 
  Eddie Johnson, Chief Financial Officer 
 
 Consilium Strategic Communications            Tel: +44 (0) 20 3709 
                                                               5700 
 Mary-Jane Elliott / Matthew Neal / Nicholas 
  Brown / Olivia Manser 
 Investec Bank plc (NOMAD) & Broker            Tel: +44 (0) 20 7597 
                                                               5970 
 Daniel Adams / Gary Clarence / Patrick 
  Robb 
 

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 and woundcare markets, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, and internal fixation devices, which it markets under its brands LiquiBand(R) , RESORBA(R) , and LiquiBandFix8(R) . AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal(R) brand as well as under white label. In 2019, the Group acquired Sealantis, an Israeli-based medical device company with a patent-protected internal sealant technology platform.

AMS's products, manufactured in the UK, the Netherlands, Germany, and the Czech Republic, are sold globally 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. The Group has R&D innovation hubs in the UK and Germany, as well as the recently acquired R&D facility in Israel. Established in 1991, the Group has approximately 650 employees. For more information please see www.admedsol.com.

Chief Executive's Review

Group performance

I am pleased to report another period of growth for the group despite the downturn in US LiquiBand(R) sales. Revenue increased by 2% to GBP48.7 million and by 1% at constant currency with continued good results from the majority of our geographies and product ranges. Excluding US LiquiBand(R) , Group sales increased by 10% on both a reported and constant currency basis.

As previously announced, Surgical revenues were impacted by a shortfall in US LiquiBand(R) sales and decreased by 3% (4% at constant currency) to GBP26.5 million (2018 H1: GBP27.3 million). In contrast, Woundcare revenues increased by 9% (8% at constant currency) to GBP22.2 million (2018 H1: GBP20.3 million) as a result of increased partner demand for antimicrobial dressings in Infection Management.

Realigned Business Units for 2019

At the start of 2019, we made some adjustments to our Business Unit structure to better manage our different surgical and advanced woundcare opportunities and to optimise the Group's routes to market. We are pleased this is having the desired effect on woundcare and we believe that with our two individual business units we are now optimally positioned to drive growth for the future.

Growth

Despite the challenging conditions experienced across our sector, I am pleased that the Group continues to see significant growth opportunities in our surgical and woundcare ranges. Whilst a slow-down in our progress with US LiquiBand(R) affected our overall Surgical growth during the period, the performance of our range in all other key markets and regions continues to be very strong.

In January 2019, AMS announced the acquisition of Sealantis for US$25 million. Sealantis' products, which reduce leakage of blood or fluid in high-risk surgery, provide AMS with access to the growing $1 billion internal sealants market. Integration is progressing well and is largely complete. We expect to start clinical trials on target at around the end of 2019 to support first product launches for gastrointestinal surgery in 2021 with further innovations to follow in subsequent years.

The Group continues to explore options to acquire other businesses to accelerate growth and deliver value for our shareholders. Our selection criteria remain unchanged. The Group has disclosed an exceptional item in the period which reflects costs incurred in such business development activities.

Regulatory

In the first half of 2019, AMS successfully completed its five-year recertification process for the LiquiBand(R) range following on from the recent recertification of the RESORBA(R) portfolio. This demonstrates our capability to navigate the increasingly challenging regulatory framework as we implement our robust group wide regulatory plan. Consequently, AMS is well prepared for the stricter requirements on product safety and performance, clinical evaluation and post-market clinical evidence stipulated by the new European Medical Devices Regulation (MDR) which is currently in its transition phase.

In terms of growth and innovation, we are beginning to see the impact of the MDR on the sector and our extensive preparation is starting to provide opportunities and we remain confident in AMS's ability to exploit them.

Brexit

Having completed a comprehensive review of Brexit related risks, we continue to be well prepared for the possibility of a 'No Deal' Brexit. We have reassigned our UK product certificates to BSI Netherlands and appointed Advanced Medical Solutions BV as EU Authorised Representative for our UK manufactured products. We have increased stock holdings on all sites and continue to have extensive planning conversations with our customers.

Business Unit performance

Surgical Business Unit

The Surgical Business Unit reports tissue adhesives, sutures, biosurgical devices and internal fixation devices marketed under the AMS brands LiquiBand(R) , RESORBA(R) and LiquiBand(R) Fix8(TM). In the first half of 2019, Surgical revenue decreased by 3% to GBP26.5 million (2018 H1: GBP27.3 million) (4% at constant currency), with a slowdown in the US masking significant progress made elsewhere.

 
 Surgical Business        2019     2018   Reported         Growth 
  Unit                      H1       H1     Growth    at constant 
                                                         currency 
 Advanced closure       13,093   14,575      (10%)          (13%) 
                       -------  -------  ---------  ------------- 
 Internal Fixation 
  and Sealants           1,179      981        20%            20% 
                       -------  -------  ---------  ------------- 
 Traditional Closure     7,181    6,761         6%             7% 
                       -------  -------  ---------  ------------- 
 Biosurgical Devices     4,508    4,295         5%             6% 
                       -------  -------  ---------  ------------- 
 Topical Sealants          530      693      (24%)          (21%) 
                       -------  -------  ---------  ------------- 
 TOTAL                  26,491   27,305       (3%)           (4%) 
                       -------  -------  ---------  ------------- 
 

Advanced Closure

Advanced Closure comprises predominately the LiquiBand(R) topical skin adhesive range of products incorporating medical cyanoacrylate adhesives in combination with purpose-built applicators. These products are used to close and protect a broad variety of surgical and traumatic wounds.

 
 Advanced Closure      2019     2018   Reported         Growth 
                         H1       H1     Growth    at constant 
                                                      currency 
 Americas             7,690   10,493      (27%)          (31%) 
                    -------  -------  ---------  ------------- 
 UK/Germany           3,353    2,676        25%            25% 
                    -------  -------  ---------  ------------- 
 Rest of World        2,050    1,406        46%            45% 
                    -------  -------  ---------  ------------- 
 TOTAL               13,093   14,575      (10%)          (13%) 
                    -------  -------  ---------  ------------- 
 

Revenues grew strongly in all territories with the exception of the US where we were impacted by a combination of factors:

   --      Destocking 
   --      Competitor gains at two large Group Purchasing Organisations 
   --      Lack of combined glue and tape device for large wound closure in the AMS portfolio 

Consequently, first half revenues decreased by 10% to GBP13.1 million (2018 H1: GBP14.6 million) or by 13% at constant currency.

US LiquiBand(R) is expected to return to growth in 2020 due to an expanded product portfolio and the stabilisation of customer inventories. We expect to obtain US approval before the end of the year for the newly developed accelerated drying device and to launch with a major partner. In addition, the LiquiBand(R) XL device for closing larger wounds will significantly augment our portfolio and open new markets and customer opportunities. The LiquiBand(R) XL regulatory process is progressing slower than anticipated with US approval now expected in Q3 2020.

Internal Fixation and Sealants

This category comprises our LiquiBand(R) Fix 8(TM) devices, indicated for the internal fixation of hernia meshes using our LiquiBand(R) technology. Through the accurate delivery of individual drops of cyanoacrylate adhesive, LiquiBand(R) Fix8(TM) is used to hold hernia meshes in place within the body instead of traditional tacks and staples.

Revenue in this category increased by 20% to GBP1.2 million (2018 H1: GBP1.0 million) driven by demand for the LiquiBand(R) Fix 8(TM) laparoscopic device in particular. Open hernia surgery is also a substantial portion of the global hernia market and represents a significant opportunity for AMS. The open surgery device soft launched in late 2018 in order to gather clinical feedback and, to date, this has been very positive from surgical users with no recommended design changes and we are therefore moving forward with full promotion and sales activities in the second half of the year.

The US Premarket Approval process for LiquiBand(R) Fix8(TM) is underway with IDE patient enrolment commencing in August 2019. We continue to be excited about the long-term prospects for the LiquiBand(R) Fix8(TM) portfolio and entry into the US will be a significant milestone for the Group.

The global internal surgery market represents a significant opportunity for AMS and the acquisition of Sealantis, announced in January 2019, provides AMS with a technology platform and delivery systems to access the $1 billion internal sealant market. Premarket activities in R&D, marketing and regulatory are ongoing and following this initial work, we are implementing product design enhancements ahead of the trials starting at around the end of 2019.

Traditional Closure

The traditional closure category includes our RESORBA(R) branded Absorbable and Non-absorbable Suture ranges which include certain surgical specialties such as dental and ophthalmic and are sold in Germany and numerous other territories. Revenue increased by 6% to GBP7.2 million (2018 H1: GBP6.8 million) (7% at constant currency).

AMS will continue to explore targeted opportunities in this area and will aim to drive growth and market share by bundling sutures with other products. AMS is also investing in operational improvements and capacity to allow for improved flexibility and efficiencies.

Biosurgical Devices

The Biosurgical devices category principally comprises collagen-based materials including our RESORBA(R) Gentacoll(R) Gentamycin collagen products used in Orthopaedic and Cardiac applications, and collagen membranes and cones used in Dental applications. Revenue increased by 5% to GBP4.5 million (2018 H1: GBP4.3 million) and by 6% at constant currency due to progress with multiple distributors.

Prescription usage of our antibiotic collagen pouch for cardiovascular devices in Germany began at the end of 2018 and we are also working towards approval for this product in the US. Antibiotic loaded collagens provide local, rather than systemic, drug delivery giving significant patient benefits. This is a key product development focus for AMS and we are working on development and regulatory activities for alternative antibiotics for Orthopaedic and Cardiac applications.

Submission for CE approval for a Vancomycin-containing collagen was completed in the first half of 2019 with expected notified body and pharmaceutical body responses anticipated in the first half of 2020.

Woundcare Business Unit

The Woundcare Business Unit is comprised of our multi-product portfolio of advanced woundcare dressings and bulk materials sold under partner brands plus the AMS branded ActivHeal(R) range sold predominately to the NHS.

In the first half of 2019, revenue increased by 9% to GBP22.2 million (2018 H1: GBP20.3 million) (8% at constant currency) largely driven by increased partner demand for antimicrobial dressings (Infection Management).

 
 Woundcare Business        2019     2018   Reported         Growth 
  Unit                       H1       H1     Growth    at constant 
                                                          currency 
 Infection Management     9,407    8,273        14%            12% 
                        -------  -------  ---------  ------------- 
 Exudate Management      10,082    9,466         7%             5% 
                        -------  -------  ---------  ------------- 
 Other Woundcare          2,734    2,577         6%             6% 
                        -------  -------  ---------  ------------- 
 TOTAL                   22,223   20,316         9%             8% 
                        -------  -------  ---------  ------------- 
 

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue increased by 14% to GBP9.4 million (2018 H1: GBP8.3 million) and by 12% at constant currency, with growth being driven by demand from a number of new EU and ROW partners along with additional orders from some existing customers which did include an element of Brexit planning.

The new atraumatic Silicone PHMB variant which received US approval, post-period end, in July 2019 gives AMS and its commercial partners much greater access to the attractive US silicone antimicrobial foam market, which is worth in excess of $100m and growing at 6% year-on-year. We expect to start shipping orders for Silicone PHMB dressings around the end of 2019. The first US partner for our existing PHMB range, which was approved in late 2018, is working through its launch inventories and is expected to reorder in the second half of 2019.

Post-period end, in July 2019, we also obtained US approval for our Silver High Performance Dressing; the Group's next generation antimicrobial gelling fibre technology with excellent performance and patent protected construction and expect to receive launch orders in the second half of 2019.

In August 2019, we gained US and EU approval for our Moisture Wicking Fabric with silver, indicated for use in the management of skin folds and skin-on-skin friction. This gives AMS and its partners access to a $25 million US market as well as the nascent EU market with orders expected in the second half of 2019.

We expect a second major US partner launch for our silver post-operative dressings in the first half of 2020 whilst the initial partner is expected to reorder in the second half of 2019.

Looking forward, the Group is working on developing next generation high-gelling products with differentiated antibiofilm claims.

Exudate Management

Exudate management comprises advanced woundcare dressings and gels which do not incorporate any antimicrobial elements. Following our business unit alignment in January 2019, this category includes the majority of our ActivHeal(R) range. Revenue increased by 7% to GBP10.1 million (2018 H1: GBP9.5 million) (5% at constant currency).

AMS launched the new Lite foam range for wounds with low to medium exudate at the end of 2018. It now incorporates a range of shapes and sizes for the acute post-surgery market and it is being distributed by a number of our partners in the US, EU and ROW.

At around the end of 2019, we expect to be able to extend the claims on our silicone foam range to include pressure ulcer prevention and to add further customers in new territories.

We are confident that the above actions, coupled with our ability to meet the demands of MDR, will continue to counteract the ongoing challenging market conditions in the advanced woundcare market.

Other Woundcare

Other woundcare comprises royalties, fees and woundcare sealants. Revenue increased by 6% at reported and constant currency to GBP2.7 million (2018 H1: GBP2.6 million).

Summary and outlook

AMS has delivered another period of growth, notwithstanding the previously reported unexpected slow down with US LiquiBand(R) . With continued strong performance elsewhere in the Group and our new product launches in the second half, trading is in line with the Board's expectations for the full year. US LiquiBand(R) is expected to return to growth in 2020, especially given the planned launches of our new accelerated drying device which will widen our product range and Liquiband(R) XL device which will open new markets and customer opportunities.

The Group continues to execute on its strategy of delivering consistent growth through exploiting multiple routes to market, ensuring our products add value to patients and payors, and diversifying through our product mix and innovation.

Financial Review

IFRS reporting

To provide the clearest possible insight into our performance, the Group uses alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and, therefore, are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate. We use such measures consistently at the half year and full year and reconcile them as appropriate. The measures used in this statement include constant currency revenue growth, adjusted operating margin, adjusted profit before tax and adjusted net cash inflow from operating activities, allowing the impacts of exchange rate volatility, exceptional items and amortisation to be separately identified. Net cash is an additional non-GAAP measure used.

Overview

Revenue increased by 2% to GBP48.7 million (2018 H1: GBP47.6 million). At constant currency, revenue growth would have been 1%.

Exceptional items of GBP0.9 million in the six month period (2018 H1: GBPnil) relate to the integration costs of the Sealantis acquisition as well as other business development activities.

Amortisation of acquired intangible assets was GBP0.7 million in the six-month period (2018 H1: GBP0.04 million). On the acquisition of Sealantis, we recognised a technology-based intangible asset of GBP15.0 million, which will be amortised over the next nine years ending 31 December 2027.

Adjusted operating profit which excludes amortisation of acquired intangibles and exceptional costs, decreased by 5.2% to GBP13.0 million (2018 H1: GBP13.7 million) whilst the adjusted operating margin decreased by 210 bps to 26.7% (2018 H1: 28.8%) due to the change in sales mix and the impact of the first period of investment in Sealantis operating costs which were GBP0.5 million in the first half (2018 H1: GBPnil).

Excluding exceptional items, administration expenses increased by 5% to GBP16.6 million (2018: GBP15.8 million) inclusive of losses arising from foreign exchange movements. The Group incurred GBP2.9 million of gross R&D, regulatory and clinical spend in the period (2018 H1: GBP2.4 million), representing 5.9% of sales (2018 H1: 5.0%) reflecting ongoing investment in innovation and in accommodating the heightened regulatory environment.

The Group generated adjusted profit before tax of GBP12.8 million (2018 H1: GBP13.6 million) and profit before tax of GBP11.2 million (2018 H1: GBP13.6 million).

The Group adopted IFRS 16 (Leases) in 2019 and the comparative periods have been restated, which reduced profit before tax by GBP0.1 million in the period (2018 H1: GBP0.1 million). There is no overall impact on the Group's cash and cash equivalents as a result of IFRS 16.

 
 Reconciliation of profit before tax to adjusted profit before 
  tax 
------------------------------------------------------------------- 
                                             Unaudited    Unaudited 
                                            Six months   Six months 
                                                 ended        ended 
                                             30-Jun-19    30-Jun-18 
                                               GBP'000      GBP'000 
----------------------------------------  ------------  ----------- 
 Profit before tax                              11,219       13,552 
 Amortisation of acquired intangibles              682           40 
 Exceptional items                                 920            - 
----------------------------------------  ------------  ----------- 
 Adjusted profit before tax                     12,821       13,592 
----------------------------------------  ------------  ----------- 
 

The Group's effective tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased to 21.8% (2018 H1: 21.1%) mainly due to some of the exceptional items in the period not being deductible for tax purposes and to Sealantis operating losses not being offset against profits elsewhere in the group.

Adjusted diluted earnings per share decreased by 3.5% to 4.80p (2018 H1: 4.97p) and diluted earnings per share decreased by 18.1% to 4.06p (2018 H1: 4.95p).

The Board intends to pay an interim dividend of 0.50p per share on 25 October 2019 to shareholders on the register at the close of business on 27 September 2019. This is an increase of 19% compared to the first half of 2018 and reflects the Board's confidence in the future growth of the Group.

 
 Operating result by business segment 
 Six months ended 30 June              (Unaudited)   (Unaudited) 
  2019                                    Surgical     Woundcare 
                                           GBP'000       GBP'000 
 Revenue                                    26,491        22,223 
 Profit from operations                      8,251         4,309 
 Amortisation of acquired 
  intangibles                                  678             4 
 Adjusted profit from operations(5)          8,929         4,313 
 Adjusted operating margin(5)                33.7%         19.4% 
 Six months ended 30 June 
  2018 
 Revenue                                    27,305        20,316 
 Profit from operations                      9,914         4,029 
 Amortisation of acquired 
  intangibles                                   38             2 
 Adjusted profit from operations(5)          9,952         4,031 
 Adjusted operating margin(5)                36.4%         19.8% 
 

(5) Adjusted for exceptional items and for amortisation of acquired intangible assets

Table is reconciled to statutory information in note 7 of the financial information.

Surgical

Surgical revenues decreased by 3% to GBP26.5 million (2018 H1: GBP27.3million) and by 4% at constant currency due to a reduction in sales of LiquiBand(R) into the US. Adjusted operating margin decreased 270 bps to 33.7% (2018 H1: 36.4%) mainly due to the change in sales mix, exchange rate movements and increased investment in R&D, clinical and regulatory affairs.

Woundcare

Woundcare revenues increased by 9% to GBP22.2 million (2018 H1: GBP20.3 million) at reported currency and by 8% at constant currency. Adjusted operating margin decreased by 40 bps to 19.4% (2018 H1: 19.8%).

Currency

More than one third of Group revenues are invoiced in US Dollars and approximately one quarter are invoiced in Euros. The Group hedges significant currency transaction exposure by using forward contracts, and aims to hedge approximately 80% of its estimated transactional exposure for the next 12 to 18 months. The Group estimates that a 10% movement in the GBP:US$ or GBP:EUR exchange rate will impact Sterling revenues by approximately 3.3% and 2.8% respectively and in the absence of any hedging this would have an impact on profit of 2.7% and 1.1%.

Cash Flow

Adjusted net cash inflow from operating activities reduced by 12% to GBP11.2 million (2018 H1: GBP12.7 million) predominately due to increased payments of corporation tax. Net cash inflow from operating activities was further impacted by exceptional items and therefore reduced by 19% to GBP10.3 million (2018 H1: GBP12.7 million).

 
 Reconciliation of Net cash inflow from operating activities 
  to Adjusted net cash inflow from operating activities 
-------------------------------------------------------------------- 
                                    Unaudited    Unaudited 
                                   Six months   Six months 
                                      ended        ended      Change 
                                    30-Jun-19    30-Jun-18 
                                      GBP'000      GBP'000 
--------------------------------  -----------  -----------  -------- 
 Net cash inflow from operating 
  activities                           10,261       12,709   -19.3% 
 Exceptional items                        920            - 
--------------------------------  -----------  -----------  -------- 
 Adjusted net cash inflow from 
  operating activities                 11,181       12,709   -12.0% 
--------------------------------  -----------  -----------  -------- 
 

At the end of the period, the Group had net cash of GBP63.9 million (31 December 2018: GBP76.4 million) with outflows in the first half of 2019 relating to Sealantis including the acquisition (GBP18.4 million), integration costs (GBP1.2 million) and operating costs (GBP0.5 million).

In the first half of 2019, receivables reduced by GBP2.2 million (2018 H1: GBP1.7 million) with debtor days at 41 (2018 H1: 43 days) and payables reduced by GBP2.8 million (2018 H1: GBP1.8 million) with creditor days at 26 (2018 H1: 29 days). Inventory increased by GBP1.4 million in the period (2018 H1: GBP2.2 million) or 5.0 months of supply (2018 H1: 4.6 months of supply) as we continue to hold higher stocks to mitigate possible Brexit supply risks and further increased RESORBA(R) inventory in preparation for anticipated incremental demand in the second half of 2019.

In the period, we invested GBP2.6 million in capital equipment, R&D and regulatory costs including investment in converting and packaging machines (2018 H1: GBP2.3 million).

Tax payments increased to GBP2.9 million (2018 H1: GBP1.7 million) which is GBP0.5 million higher than tax in the income statement due to the timing of tax payments on account.

In June 2019, the Group paid its final dividend for the year ended 31 December 2018 of GBP1.9 million (2018 H1: GBP1.6 million).

In December 2018, the Group secured a new GBP80 million, multi-currency credit facility provided jointly by HSBC and The Royal Bank of Scotland, which is in place until December 2023. It is unsecured and undrawn. This facility carries an annual interest rate of LIBOR or EURIBOR plus a margin that varies between 0.60% and 1.70% depending on the Group's net debt to EBITDA ratio.

Financial Outlook

Despite the good overall performance, the downturn in US LiquiBand(R) , investment in Sealantis and adverse foreign exchange contracts have affected profitability and cash flow in the period. However, trading for the full year is in line with the Board's expectations and as these items unwind, the outlook for the future remains strong.

 
 CONDENSED CONSOLIDATED INCOME STATEMENT 
                                        (Unaudited)                      (Unaudited) Restated(6)                (Unaudited) Restated(6) 
                                      Six months ended                       Six months ended                    Year ended 31 December 
                                        30 June 2019                           30 June 2018                               2018 
                                 Before   Exceptional                   Before   Exceptional                   Before   Exceptional 
                            Exceptional         Items              Exceptional         Items              Exceptional         Items 
                                                 Note                                   Note                                   Note 
                                  Items             9      Total         Items             9      Total         Items             9      Total 
                     Note       GBP'000       GBP'000    GBP'000       GBP'000       GBP'000    GBP'000       GBP'000       GBP'000    GBP'000 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Revenue from 
  continuing 
  operations          7          48,714             -     48,714        47,621             -     47,621       102,598             -    102,598 
 Cost of sales                 (19,500)             -   (19,500)      (17,626)             -   (17,626)      (39,192)             -   (39,192) 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Gross profit                    29,214             -     29,214        29,995             -     29,995        63,406             -     63,406 
 Distribution 
  costs                           (459)             -      (459)         (614)             -      (614)       (1,316)             -    (1,316) 
 Administration 
  costs                        (16,607)         (920)   (17,527)      (15,778)             -   (15,778)      (33,318)         (402)   (33,720) 
 Other income                       157             -        157            59             -         59           104             -        104 
 Profit from 
  operations                     12,305         (920)     11,385        13,662             -     13,662        28,876         (402)     28,474 
 Finance income                     200             -        200           157             -        157           378             -        378 
 Finance costs                    (366)             -      (366)         (267)             -      (267)         (581)             -      (581) 
 Profit before 
  taxation                       12,139         (920)     11,219        13,552             -     13,552        28,673         (402)     28,271 
 Income tax           10        (2,446)             -    (2,446)       (2,866)             -    (2,866)       (5,784)             -    (5,784) 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Profit for 
  the period 
  attributable 
  to equity 
  holders 
  of the parent                   9,693         (920)      8,773        10,686             -     10,686        22,889         (402)     22,487 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Earnings per 
  share 
 Basic                6           4.53p       (0.43p)      4.10p         5.02p             -      5.02p        10.74p       (0.19p)     10.55p 
 Diluted              6           4.48p       (0.42p)      4.06p         4.95p             -      4.95p        10.59p       (0.18p)     10.41p 
 Adjusted(7) 
  diluted             6           4.80p       (0.43p)      4.37p         4.97p             -      4.97p        10.63p       (0.19p)     10.44p 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 
 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE 
  INCOME 
                                        (Unaudited)                        (Unaudited) Restated                   (Unaudited) Restated 
                                      Six months ended                       Six months ended                    Year ended 31 December 
                                        30 June 2019                           30 June 2018                               2018 
                                              GBP'000                                GBP'000                                GBP'000 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Profit for 
  the year                                      8,773                                 10,686                                 22,487 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Exchange 
  differences 
  on translation 
  of foreign 
  operations                                      930                                    (4)                                    466 
 Gain/(loss) 
  arising on 
  cash flow hedges                                284                                (1,613)                                (3,064) 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Other 
  comprehensive 
  income/(expense) 
  for the period                                1,214                                (1,617)                                (2,598) 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Total 
  comprehensive 
  income for 
  the period 
  attributable 
  to equity 
  holders 
  of the parent                                 9,987                                  9,069                                 19,889 
------------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 

(6) See note 4 in the notes to the consolidated financial statements

(7) Adjusted for exceptional items and for amortisation of acquired intangible assets

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
                                             (Unaudited)    (Unaudited)    (Unaudited) 
                                            30 June 2019   30 June 2018    31 December 
                                                            Restated(8)           2018 
                                                                           Restated(8) 
                                     Note        GBP'000        GBP'000        GBP'000 
 Assets 
 Non-current assets 
 Acquired intellectual property 
  rights                                           9,654          9,622          9,673 
 Intangible assets                                14,875              -              - 
 Software intangibles                              2,983          2,876          2,548 
 Development costs                                 3,696          2,506          3,204 
 Goodwill                                         52,333         41,746         42,145 
 Property, plant and equipment                    27,563         27,694         27,850 
 Loans and other financial assets                     30              -              - 
 Deferred tax assets                                 179            244            208 
 Trade and other receivables                         321             19            415 
----------------------------------  -----  -------------  -------------  ------------- 
                                                 111,634         84,707         86,043 
 Current assets 
 Inventories                                      16,298         13,232         14,800 
 Trade and other receivables                      23,288         18,830         27,172 
 Current tax assets                                   22              -            813 
 Cash and cash equivalents                        63,888         71,129         76,391 
----------------------------------  -----  -------------  -------------  ------------- 
                                                 103,496        103,191        119,176 
----------------------------------  -----  -------------  -------------  ------------- 
 Total assets                                    215,130        187,898        205,219 
----------------------------------  -----  -------------  -------------  ------------- 
 Liabilities 
 Current liabilities 
 Trade and other payables                         11,086          8,856         14,642 
 Current tax liabilities                           2,267          3,310          3,863 
 Lease liabilities                                   983            931            976 
                                                  14,336         13,097         19,481 
 Non-current liabilities 
 Trade and other payables                          3,540          1,262            655 
 Deferred tax liabilities                          5,934          3,126          3,303 
 Lease liabilities                                 8,567          9,317          9,055 
                                                  18,041         13,705         13,013 
----------------------------------  -----  -------------  -------------  ------------- 
 Total liabilities                                32,377         26,802         32,494 
----------------------------------  -----  -------------  -------------  ------------- 
 Net assets                                      182,753        161,096        172,725 
----------------------------------  -----  -------------  -------------  ------------- 
 Equity 
 Share capital                        13          10,738         10,672         10,674 
 Share premium                                    36,072         35,148         35,192 
 Share-based payments reserve                      8,343          5,562          7,333 
 Investment in own shares                          (159)          (156)          (156) 
 Share-based payments deferred 
  tax reserve                                        729            815            708 
 Other reserve                                     1,531          1,531          1,531 
 Hedging reserve                                 (2,122)          (955)        (2,406) 
 Translation reserve                               4,219          2,819          3,289 
 Retained earnings                               123,402        105,660        116,560 
----------------------------------  -----  -------------  -------------  ------------- 
 Equity attributable to equity 
  holders of the parent                          182,753        161,096        172,725 
----------------------------------  -----  -------------  -------------  ------------- 
 

(8) See note 4 in the notes to the consolidated financial statements

CONDENSED CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

 
                                        Share-   Investment   Share-based 
                    Share     Share      based       in own      payments     Other   Hedging   Translation   Retained 
                  capital   premium   payments       shares      deferred   reserve   reserve       reserve   earnings     Total 
                                                                      tax 
                  GBP'000   GBP'000    GBP'000      GBP'000       GBP'000   GBP'000   GBP'000       GBP'000    GBP'000   GBP'000 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 1 January 
  2019 
  (Unaudited)      10,674    35,192      7,333        (156)           708     1,531   (2,406)         3,289    116,560   172,725 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Consolidated 
  profit 
  for the 
  period to 
  30 June 2019          -         -          -            -             -         -         -             -      8,773     8,773 
 Other 
  comprehensive 
  income                -         -          -            -             -         -       284           930          -     1,214 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Total 
  comprehensive 
  income                -         -          -            -             -         -       284           930      8,773     9,987 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Share-based 
  payments              -         -      1,065            -             -         -         -             -          -     1,065 
 Share options 
  exercised            64       880       (55)            -            21         -         -             -          -       910 
 Shares 
  purchased by 
  EBT                   -         -          -        (603)             -         -         -             -          -     (603) 
 Shares sold by 
  EBT                   -         -          -          600             -         -         -             -          -       600 
 Dividends paid         -         -          -            -             -         -         -             -    (1,931)   (1,931) 
 At 30 June 
  2019 
  (unaudited)      10,738    36,072      8,343        (159)           729     1,531   (2,122)         4,219    123,402   182,753 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
                                        Share-   Investment   Share-based 
                    Share     Share      based       in own      payments     Other   Hedging   Translation   Retained 
                  capital   premium   payments       shares      deferred   reserve   reserve       reserve   earnings     Total 
                                                                      tax 
                  GBP'000   GBP'000    GBP'000      GBP'000       GBP'000   GBP'000   GBP'000       GBP'000    GBP'000   GBP'000 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Balance at 1 
  January 
  2018 - 
  Restated(9)      10,632    34,778      4,676        (152)           815     1,531       658         2,823     96,565   152,326 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Consolidated 
  profit 
  for the 
  period to 
  30 June 2018          -         -          -            -             -         -         -             -     10,686    10,686 
 Other 
  comprehensive 
  income                -         -          -            -             -         -   (1,613)           (4)          -   (1,617) 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Total 
  comprehensive 
  income                -         -          -            -             -         -   (1,613)           (4)     10,686     9,069 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Share-based 
  payments              -         -        907            -             -         -         -             -          -       907 
 Share options 
  exercised            40       370       (21)            -             -         -         -             -          -       389 
 Shares 
  purchased by 
  EBT                   -         -          -        (600)             -         -         -             -          -     (600) 
 Shares sold by 
  EBT                   -         -          -          596             -         -         -             -          -       596 
 Dividends paid         -         -          -            -             -         -         -             -    (1,591)   (1,591) 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 30 June 
  2018 
  (Unaudited)      10,672    35,148      5,562        (156)           815     1,531     (955)         2,819    105,660   161,096 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 
 
                                        Share-   Investment   Share-based 
                    Share     Share      based       in own      payments     Other   Hedging   Translation   Retained 
                  capital   premium   payments       shares      deferred   reserve   reserve       reserve   earnings     Total 
                                                                      tax 
                  GBP'000   GBP'000    GBP'000      GBP'000       GBP'000   GBP'000   GBP'000       GBP'000    GBP'000   GBP'000 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Balance at 1 
  January 
  2018 - 
  Restated(1)      10,632    34,778      4,676        (152)           815     1,531       658         2,823     96,565   152,326 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Consolidated 
  profit 
  for the year 
  to 31 
  December 2018         -         -          -            -             -         -         -             -     22,487    22,487 
 Other 
  comprehensive 
  income                -         -          -            -             -         -   (3,064)           466          -   (2,598) 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Total 
  comprehensive 
  income                -         -          -            -             -         -   (3,064)           466     22,487    19,889 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Share-based 
  payments              -         -      1,659            -         (107)         -         -             -          -     1,552 
 Share options 
  exercised            42       414        998            -             -         -         -             -          -     1,454 
 Shares 
  purchased by 
  EBT                   -         -          -        (600)             -         -         -             -          -     (600) 
 Shares sold by 
  EBT                   -         -          -          596             -         -         -             -          -       596 
 Dividends paid         -         -          -            -             -         -         -             -    (2,492)   (2,492) 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 31 December 
  2018 
  (unaudited)      10,674    35,192      7,333        (156)           708     1,531   (2,406)         3,289    116,560   172,725 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 

(9) See note 4 in the notes to the consolidated financial statements

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 
                                          (Unaudited)    (Unaudited)    (Unaudited) 
                                                        Restated(10)   Restated(10) 
                                           Six months     Six months           Year 
                                                ended          ended          ended 
                                            30-Jun-19      30-Jun-18      31-Dec-18 
                                              GBP'000        GBP'000        GBP'000 
---------------------------------------  ------------  -------------  ------------- 
 Cash flows from operating activities 
 Profit from operations                        11,385         13,662         28,474 
 Adjustments for: 
 Depreciation                                   1,603          1,590          3,180 
 Amortisation - intellectual property 
  rights                                          682             40             81 
  - development costs                             244            128            325 
  - software intangibles                          218            244            593 
 Increase in inventories                      (1,361)        (2,174)        (3,707) 
 Decrease/(increase) in trade 
  and other receivables                         2,162          1,714        (6,813) 
 (Decrease)/increase in trade 
  and other payables                          (2,798)        (1,752)          1,692 
 Share-based payments expense                   1,065            907          1,659 
 Taxation                                     (2,939)        (1,650)        (3,810) 
 Net cash inflow from operating 
  activities                                   10,261         12,709         21,674 
---------------------------------------  ------------  -------------  ------------- 
 Cash flows from investing activities 
 Purchase of software                           (662)           (58)          (304) 
 Capitalised research and development           (730)          (498)        (1,392) 
 Purchases of property, plant 
  and equipment                               (1,231)        (1,752)        (3,062) 
 Disposal of property, plant and 
  equipment                                         -              6             78 
 Interest received                                199            157            377 
 Acquisition of subsidiary                   (18,408)              -              - 
 Net cash used in investing activities       (20,832)        (2,145)        (4,303) 
---------------------------------------  ------------  -------------  ------------- 
 Cash flows from financing activities 
 Dividends paid                               (1,931)        (1,591)        (2,492) 
 Repayments of principal under 
  lease liabilities                             (486)          (428)          (858) 
 Issue of equity shares                           907            385            430 
 Shares purchased by EBT                        (603)          (600)          (600) 
 Shares sold by EBT                               600            596            596 
 Interest paid                                  (366)          (267)          (581) 
 Net cash used in financing activities        (1,879)        (1,905)        (3,505) 
---------------------------------------  ------------  -------------  ------------- 
 Net (decrease)/increase in cash 
  and cash equivalents                       (12,450)          8,659         13,866 
 Cash and cash equivalents at 
  the beginning of the period                  76,391         62,454         62,454 
 Effect of foreign exchange rate 
  changes                                        (53)             16             71 
 Cash and cash equivalents at 
  the end of the period                        63,888         71,129         76,391 
---------------------------------------  ------------  -------------  ------------- 
 

(10) See note 4 in the notes to the consolidated financial statements

Notes Forming Part of the 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 six months ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as the "Group").

The Group is primarily involved in the design, development and manufacture of surgical and advanced woundcare products for sale into the global medical device market.

   2.      Basis of preparation 

The information for the period ended 30 June 2019 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2018 has been delivered to the Registrar of Companies. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters of emphasis without qualifying the report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The individual financial statements for each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

   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 with the exception of IFRS 16 - Leases (see note 4). With the exception of IFRS 16 Leases, no other new or revised standards adopted in the current period have had a material impact on the Group's financial statements, including IFRS9 financial instruments.

The unaudited condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. These condensed interim accounts should be read in conjunction with the annual accounts of the Group for the year ended 31 December 2018. 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.      Changes in accounting policies - IFRS 16 

From 1 January 2019, the Group has adopted IFRS 16 (Leases).

The Group is not party to any material leases where it acts as a lessor, but the Group does have a number of material property leases relating to operating sites as well as equipment and vehicle leases.

Details of the Group's accounting policies under IFRS 16 are set out below, followed by a description of the impact of adopting IFRS 16. Significant judgements applied in the adoption of IFRS 16 included determining the lease term for those leases with termination or extension options and determining an incremental borrowing rate where the rate implicit in a lease could not be readily determined.

Approach to transition

The Group has applied IFRS 16 using the full retrospective approach, with restatement of the comparative information. In respect of those leases the Group previously treated as operating leases, the Group has elected to measure its right of use assets arising from property leases using the approach set out in IFRS 16.C8(b)(i). Under IFRS 16.C8(b)(i) right of use assets are calculated as if the Standard applied at lease commencement but discounted using the borrowing rate at the date of initial application.

Financial impact

The application of IFRS 16 to leases previously classified as operating leases under IAS 17 resulted in the recognition of right-of-use assets and lease liabilities. Provisions for onerous lease contracts have been derecognised and operating lease incentives previously recognised as liabilities have been derecognised and factored into the measurement of the right-to-use assets and lease liabilities.

The Group has chosen to use the table below to set out the adjustments recognised at the date of initial application of IFRS16.

 
                                   As previously                As restated 
                                        reported 
                                  At 31 December   Impact of   At 1 January 
                                            2018      IFRS16           2019 
                                         GBP'000     GBP'000        GBP'000 
-------------------------------  ---------------  ----------  ------------- 
 Assets 
 Non-current assets 
 Property, plant and equipment            18,124       9,726         27,850 
 Deferred tax asset                          177          31            208 
-------------------------------  ---------------  ----------  ------------- 
 Total impact on assets                   18,301       9,757         28,058 
 
 Liabilities 
 Current liabilities 
 Lease liabilities                             -         976            976 
 
 Non-current liabilities 
 Lease liabilities                             -       9,055          9,055 
-------------------------------  ---------------  ----------  ------------- 
 Total impact on liabilities                   -      10,031         10,031 
 
 Retained earnings                       116,833       (273)        116,560 
-------------------------------  ---------------  ----------  ------------- 
 

Additional Property, plant and equipment recognised at 31 December 2018 as part of the transition includes GBP9.0 million of Leasehold property, GBP0.5 million of Plant and machinery and GBP0.2 million of Motor vehicles.

In terms of the income statement impact, the application of IFRS 16 resulted in a decrease in other operating expenses and an increase in depreciation and interest expense compared to IAS 17. During the six months ended 30 June 2019, in relation to leases under IFRS 16 the Group recognised the following amounts in the consolidated income statement:

 
                               Six months   Six months 
                                    ended        ended 
                                  30 June      30 June 
                                     2019         2018 
                                  GBP'000      GBP'000 
----------------------------  -----------  ----------- 
 Depreciation                       (562)        (510) 
 Operating leases                     702          636 
 Finance cost                       (196)        (208) 
----------------------------  -----------  ----------- 
 Net impact on Group profit          (56)         (82) 
----------------------------  -----------  ----------- 
 

The table below presents a reconciliation from operating lease commitments disclosed at 31 December 2018 under IAS 17 to lease liabilities recognised at 1 January 2019 under IFRS 16.

 
                                               GBP'000 
                                               30 June 
                                                  2018 
                                               GBP'000 
--------------------------------------------  -------- 
 Operating lease commitments disclosed 
  under IAS 17 at 31 December 2018              15,181 
 Short-term and low value lease commitments 
  straight-line expensed under IFRS 16           (300) 
 Effect of discounting                         (2,775) 
 Effect of different rent calculations 
  between IAS 17 and IFRS 16                   (2,075) 
--------------------------------------------  -------- 
 Lease liabilities recognised at 1 January 
  2019                                          10,031 
--------------------------------------------  -------- 
 
   5.      Acquisition of Sealantis 

On 31 January 2019 the Group acquired the entire issued share capital of Sealantis Limited, an Israeli based developer of an alginate-based tissue adhesive technology platform.

 
                                      GBP'000 
-----------------------------------  -------- 
 Identifiable net assets acquired 
 Technology-based intangible asset     15,012 
 Property, plant and equipment             21 
 Other receivables                         59 
 Cash and cash equivalents                999 
 Trade and other payables               (804) 
 Deferred tax on Intangible asset     (2,552) 
 Grant liability                      (1,694) 
 Goodwill                               9,765 
 Total net assets acquired             20,806 
-----------------------------------  -------- 
 
 
 Satisfied by                GBP'000 
--------------------------  -------- 
 Cash consideration           19,407 
 Contingent consideration      1,399 
--------------------------  -------- 
                              20,806 
--------------------------  -------- 
 

Contingent consideration reflects the fair value of a royalty due to the sellers in each financial year up to 31st December 2027.

 
 Net cash flow on acquisition    GBP'000 
------------------------------  -------- 
 Cash consideration               19,407 
 Cash acquired                     (999) 
------------------------------  -------- 
                                  18,408 
------------------------------  -------- 
 

None of the goodwill on the acquisition is expected to be deductible for income tax.

   6.      Earnings per share 
 
 
                                      (Unaudited)     (Unaudited)     (Unaudited) 
                                       Six months      Six months            Year 
                                            ended           ended           ended 
                                          30 June         30 June     31 December 
                                             2019            2018            2018 
 Number of shares                            '000            '000            '000 
-----------------------------------  ------------  --------------  -------------- 
 Weighted average number of 
  ordinary shares for the purposes 
  of basic earnings per share             213,876         212,836         213,146 
-----------------------------------  ------------  --------------  -------------- 
 Effect of dilutive potential 
  ordinary shares: share options, 
  deferred share bonus, LTIPs               2,452           3,057           2,911 
-----------------------------------  ------------  --------------  -------------- 
 Weighted average number of 
  ordinary shares for the purposes 
  of diluted earnings per share           216,328         215,893         216,057 
-----------------------------------  ------------  --------------  -------------- 
 

Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the period.

Diluted EPS is calculated on the same basis as basic EPS but with the further adjustment to the weighted average shares in issue to reflect the effect of all potentially dilutive share options. The number of potentially dilutive share options is derived from the number of share options and awards granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period.

Adjusted earnings per share

Adjusted EPS is calculated after adding back exceptional items and amortisation of acquired intangible assets and is based on earnings of:

 
                                           (Unaudited)   (Unaudited)   (Unaudited) 
                                                            Restated      Restated 
                                            Six months    Six months          Year 
                                                 ended         ended         ended 
                                               30 June       30 June   31 December 
                                                    19            18            18 
                                               GBP'000       GBP'000       GBP'000 
----------------------------------------  ------------  ------------  ------------ 
 Earnings 
 Profit for the year being attributable 
  to equity holders of the parent                8,773        10,686        22,487 
 Exceptional items                                 920             -           402 
 Amortisation of acquired intangible 
  assets                                           682            40            81 
 Adjusted profit for the year being 
  attributable to equity holders of the 
  parent                                        10,375        10,726        22,970 
----------------------------------------  ------------  ------------  ------------ 
 
                                                 pence         pence         Pence 
----------------------------------------  ------------  ------------  ------------ 
 Adjusted basic EPS                              4.85p         5.04p        10.78p 
 Adjusted diluted EPS                            4.80p         4.97p        10.63p 
----------------------------------------  ------------  ------------  ------------ 
 

The denominators used are the same as those detailed above for both basic and diluted earnings per share.

The adjusted diluted EPS information is considered to provide a fairer representation of the Group's trading performance.

   7.      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, exceptional items, income tax assets and the Group's external borrowings. These are the measures reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance. As announced in our annual financial statements for the year ended 31 December 2018, we have renamed our business units from Branded and OEM to Surgical and Woundcare respectively as we believe this better reflects that nature of the business. Comparative segment information has been restated to align with the new business unit structure.

Business segments

The principal activities of the business units are as follows:

Surgical

Selling, marketing and innovation of the Group's surgical products either sold directly by our sales teams or by distributors.

Woundcare

Selling, marketing and innovation of the Group's advanced woundcare products supplied under partner brands, bulk materials and the ActivHeal brand predominantly to the UK NHS.

Segment information about these Business Units is presented below:

 
 Six months ended 
  30 June 2019                           Surgical   Woundcare   Consolidated 
 (Unaudited)                              GBP'000     GBP'000        GBP'000 
--------------------------------------  ---------  ----------  ------------- 
 Revenue                                   26,491      22,223         48,714 
--------------------------------------  ---------  ----------  ------------- 
 
 Result 
--------------------------------------  ---------  ----------  ------------- 
 Adjusted segment operating profit          8,929       4,313         13,242 
 Amortisation of acquired intangibles       (678)         (4)          (682) 
 Segment operating profit                   8,251       4,309         12,560 
 Unallocated expenses                                                  (255) 
 Exceptional items                                                     (920) 
                                                               ------------- 
 Profit from operations                                               11,385 
 Finance income                                                          200 
 Finance costs                                                         (366) 
--------------------------------------  ---------  ----------  ------------- 
 Profit before tax                                                    11,219 
 Tax                                                                 (2,446) 
--------------------------------------  ---------  ----------  ------------- 
 Profit for the period                                                 8,773 
--------------------------------------  ---------  ----------  ------------- 
 
 
 At 30 June 2019 
  (Unaudited)                      Surgical   Woundcare   Consolidated 
 Other information                  GBP'000     GBP'000        GBP'000 
--------------------------------  ---------  ----------  ------------- 
 Capital additions: 
 Software intangibles                   293         369            662 
 Development                            455         275            730 
 Property, plant and equipment          734         497          1,231 
 Depreciation and amortisation      (1,817)       (930)        (2,747) 
--------------------------------  ---------  ----------  ------------- 
 Balance sheet 
 Assets 
 Segment assets                     151,021      63,656        214,677 
 Unallocated assets                                                453 
--------------------------------  ---------  ---------- 
 Consolidated total assets                                     215,130 
--------------------------------  ---------  ----------  ------------- 
 Liabilities 
 Segment liabilities                 19,267      13,110         32,377 
--------------------------------  ---------  ----------  ------------- 
 Consolidated total liabilities                                 32,377 
--------------------------------  ---------  ----------  ------------- 
 
 
 Six months ended 
  30 June 2018 (restated) (11)           Surgical   Woundcare   Consolidated 
 (Unaudited)                              GBP'000     GBP'000        GBP'000 
--------------------------------------  ---------  ----------  ------------- 
 Revenue                                   27,305      20,316         47,621 
--------------------------------------  ---------  ----------  ------------- 
 
 Result 
--------------------------------------  ---------  ----------  ------------- 
 Adjusted segment operating profit          9,952       4,031         13,983 
 Amortisation of acquired intangibles        (38)         (2)           (40) 
 Segment operating profit                   9,914       4,029         13,943 
 Unallocated expenses                                                  (281) 
 Profit from operations                                               13,662 
 Finance income                                                          157 
 Finance costs                                                         (267) 
--------------------------------------  ---------  ----------  ------------- 
 Profit before tax                                                    13,552 
 Tax                                                                 (2,866) 
--------------------------------------  ---------  ----------  ------------- 
 Profit for the period                                                10,686 
--------------------------------------  ---------  ----------  ------------- 
 

(11) Restated on transition to IFRS 16 (see note 4) and to align to the new business structure.

 
 At 30 June 2018 
  (Unaudited)                      Surgical   Woundcare   Consolidated 
 Other information                  GBP'000     GBP'000        GBP'000 
--------------------------------  ---------  ----------  ------------- 
 Capital additions: 
 Software intangibles                    20          38             58 
 Development                            279         219            498 
 Property, plant and equipment        1,319         433          1,752 
 Depreciation and amortisation        (929)     (1,073)        (2,002) 
--------------------------------  ---------  ----------  ------------- 
 Balance sheet 
 Assets 
 Segment assets                     127,059      60,778        187,837 
 Unallocated assets                                                 61 
--------------------------------  ---------  ---------- 
 Consolidated total assets                                     187,898 
--------------------------------  ---------  ----------  ------------- 
 Liabilities 
 Segment liabilities                 16,399      10,403         26,802 
--------------------------------  ---------  ----------  ------------- 
 Consolidated total liabilities                                 26,802 
--------------------------------  ---------  ----------  ------------- 
 
 
 Year ended 
  31 December 2018 (restated) (11)                          Surgical               Woundcare          Consolidated 
  (Unaudited)                                                GBP'000              GBP'000                  GBP'000 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Revenue                                                      57,492                  45,106               102,598 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 
   Result 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Adjusted segment operating profit                            18,619                  10,898                29,517 
 Amortisation of acquired intangibles                           (76)                     (5)                  (81) 
 Segment operating profit                                     18,543                  10,893                29,436 
 Unallocated expenses                                                                                        (560) 
 Exceptional items                                                                                           (402) 
                                                                                              -------------------- 
 Profit from operations                                                                                     28,474 
 Finance income                                                                                                378 
 Finance costs                                                                                               (581) 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Profit before tax                                                                                          28,271 
 Tax                                                                                                       (5,784) 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Profit for the year                                                                                        22,487 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 
 (11) Restated on transition to IFRS 16 (see note 4) and to align to the new business structure. 
 
 
 
 
 
 
 
 At 31 December 2018 
  (Unaudited)                                               Surgical               Woundcare          Consolidated 
 Other Information                                           GBP'000                 GBP'000               GBP'000 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Capital additions: 
 Software intangibles                                            170                     134                   304 
 Development                                                     815                     577                 1,392 
 Property, plant and equipment                                 1,730                   1,332                 3,062 
 Depreciation and amortisation                               (2,281)                 (1,898)               (4,179) 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Balance sheet 
 Assets 
 Segment Assets                                              137,208                  67,492               204,700 
 Unallocated assets                                                                                            519 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Consolidated total assets                                                                                 205,219 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Liabilities 
 Segment liabilities                                          19,349                  13,145                32,494 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 Consolidated total liabilities                                                                             32,494 
-------------------------------------------------------  -----------  ----------------------  -------------------- 
 
 

Geographical segments

The Group operates in the UK, Germany, the Netherlands, the Czech Republic, with a sales office located in Russia and a sales presence in the USA. As a result of the acquisition of Sealantis, the Group now has an office in Israel. 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 or services, based upon location of the Group's customers:

 
                                                     (Unaudited)        (Unaudited)        (Unaudited) 
                                                Six months ended   Six months ended         Year ended 
                                                    30 June 2019       30 June 2018   31 December 2018 
                                                         GBP'000            GBP'000            GBP'000 
---------------------------------------------  -----------------  -----------------  ----------------- 
 United Kingdom                                            8,971              9,190             18,447 
 Germany                                                  10,437              9,653             23,987 
 Europe excluding United Kingdom and Germany              12,826             10,957             19,416 
 United States of America                                 14,473             16,060             37,317 
 Rest of World                                             2,007              1,761              3,431 
---------------------------------------------  -----------------  -----------------  ----------------- 
                                                          48,714             47,621            102,598 
---------------------------------------------  -----------------  -----------------  ----------------- 
 

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

 
                                                     (Unaudited)        (Unaudited)        (Unaudited) 
                                                Six months ended   Six months ended         Year ended 
                                                    30 June 2019       30 June 2018   31 December 2018 
                                                         GBP'000            GBP'000            GBP'000 
---------------------------------------------  -----------------  -----------------  ----------------- 
 United Kingdom                                          138,405            116,641            129,340 
 Germany                                                  69,024             64,630             66,505 
 Europe excluding United Kingdom and Germany               4,912              6,143              6,663 
 United States of America                                  2,439                484              2,711 
 Rest of World                                               350                  -                  - 
---------------------------------------------  -----------------  -----------------  ----------------- 
                                                         215,130            187,898            205,219 
---------------------------------------------  -----------------  -----------------  ----------------- 
 
 
   8.      Financial Instruments' fair value disclosures 

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts.

The Group held the following financial instruments at fair value at 30 June 2019. The Group has no financial instruments with fair values that are determined by reference to significant unobservable inputs i.e. those that would be classified as level 3 in the fair value hierarchy, nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

The following table details the forward foreign currency contracts outstanding as at the period end:

 
                    Ave. exchange rate                   Foreign currency                       Fair value 
             30-Jun-19   30-Jun-18   31-Dec-18   30-Jun-19   30-Jun-18   31-Dec-18   30-Jun-19   30-Jun-18   31-Dec-18 
              USD:GBP1    USD:GBP1    USD:GBP1     USD'000     USD'000     USD'000     GBP'000     GBP'000     GBP'000 
 Cash flow 
 hedges 
 Sell US 
 dollars 
 Less than 
  3 months       1.406       1.284       1.319       9,500       7,500      10,400       (690)         163       (230) 
 3 to 6 
  months         1.444       1.282       1.432       7,500       7,300       7,500       (665)         187       (589) 
 7 to 12 
  months         1.363       1.374       1.423      16,000      15,900      17,000       (705)       (343)     (1,175) 
 Over 12 
  months         1.338       1.443       1.407       5,000      20,000       7,000       (140)       (955)       (397) 
----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
                                                    38,000      50,700      41,900     (2,200)       (948)     (2,391) 
----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 
                    Ave. exchange rate                   Foreign currency                       Fair value 
             30-Jun-19   30-Jun-18   31-Dec-18   30-Jun-19   30-Jun-18   31-Dec-18   30-Jun-19   30-Jun-18   31-Dec-18 
              EUR:GBP1    EUR:GBP1    EUR:GBP1     EUR'000     EUR'000     EUR'000     GBP'000     GBP'000     GBP'000 
 Cash flow 
 hedges 
 Sell 
 Euros 
 Less than 
  3 months       1.112     1.146       1.114        960         650         600          2          (8)          - 
 3 to 6 
  months         1.108     1.134       1.116        960        1,150        960          2          (7)         (4) 
 7 to 12 
  months         1.137     1.115       1.110       1,820       1,560       1,920        46           5          (9) 
 Over 12 
  months         1.139     1.109       1.110        900        2,240        320         28           3          (2) 
----------              ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
                                                   4,640       5,600       3,800        78          (7)        (15) 
----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
   9.      Exceptional items 

During the six months ended 30 June 2019, the Group incurred exceptional items of GBP0.9 million (2018 H1: GBPnil) in relation to the acquisition and integration of Sealantis as well as the transaction costs to participate in another potential process which was ultimately unsuccessful.

   10.    Taxation 

The weighted average tax rate for the Group for the six month period ended 30 June 2019 was 21.8% (first half of 2018: 20.7%, year ended 31 December 2018: 21.1%). The Groups effective tax rate for the full year is expected to be 21.8%, which has been applied to the six months ended 30 June 2019 (first half of 2018: 20.7%, year ended 31 December 2018: 21.1%) after the impact of some disallowable expenditure offset to some extent by the application of patent box and research and development tax relief.

   11.    Dividends 
 
                                                                     (Unaudited)        (Unaudited)        (Unaudited) 
 
                                                                Six months ended   Six months ended         Year ended 
                                                                    30 June 2019       30 June 2018   31 December 2018 
                                                                         GBP'000            GBP'000            GBP'000 
 Amounts recognised as distributions to equity holders in the 
 period: 
 Final dividend for the year ended 31 December 2017 of 0.75p 
  per ordinary share                                                           -              1,591              1,591 
 Interim dividend for the year ended 31 December 2018 of 
  0.42p per ordinary share                                                     -                  -                901 
 Final dividend for the year ended 31 December 2018 of 0.90p               1,931                  -                  - 
 per ordinary share 
-------------------------------------------------------------  -----------------  -----------------  ----------------- 
                                                                           1,931              1,591              2,492 
-------------------------------------------------------------  -----------------  -----------------  ----------------- 
 
   12.    Contingent liabilities 

The Directors are not aware of any contingent liabilities faced by the Group as at 30 June 2019 (30 June 2018: GBPnil, 31 December 2018: GBPnil).

   13.    Share capital 

Share capital as at 30 June 2019 amounted to GBP10,738,000 (30 June 2018: GBP10,672,000, 31 December 2018: GBP10,674,000). During the period the Group issued 1,442,313 shares in respect of exercised share options, LTIPS, Deferred Annual Bonus Scheme and the Deferred Share Bonus Scheme.

   14.    Going concern 

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group's financial position and cash flow forecasts for the next 12 months. These have been based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment.

With regards to the Group's financial position, it had cash and cash equivalents at 30 June 2019 of GBP63.9 million and a five-year, GBP80 million, multi-currency, revolving credit facility, obtained in December 2018, with an accordion option under which AMS can request up to an additional GBP20 million on the same terms. The credit facility is provided jointly by HSBC and The Royal Bank of Scotland PLC. It is unsecured on the assets of the Group and is currently undrawn.

While the current economic environment is uncertain, AMS 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.

After taking the above into consideration, the Directors have reached the 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 condensed consolidated financial statements.

   15.    Principal risks and uncertainties 

Further detail concerning the principal risks affecting the business activities of the Group is detailed on pages 32 and 33 of the Annual Report and Accounts for the year ended 31 December 2018. There have been no significant changes since the last annual report.

   16.    Seasonality of sales 

There are no significant factors affecting the seasonality of sales between the first and second half of the year.

   17.    Events after the balance sheet date 

There has been no material event subsequent to the end of the interim reporting period ended 30 June 2019.

   18.    Copies of the interim results 

Copies of the interim results can be obtained from the Group's registered office at Premier Park, 33 Road One, Winsford Industrial Estate, Winsford, Cheshire, CW7 3RT and are available on our website "www.admedsol.com".

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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